Economic Growth and Employment

Charlie Elphicke Excerpts

Wednesday 23rd November 2011 Commons Chamber

[Mr Umunna]

With the greatest respect to the hon. Gentleman, the reason the Monetary Policy Committee has set our interest rates so low is that we are struggling to find growth in this country. Without growth, we will be unable to reduce our borrowing. Our not being in the eurozone is another reason we are able to adopt lower interest rates.

[Charlie Elphicke (Dover) (Con)]

I, too, congratulate the hon. Gentleman on his much-deserved elevation and on his speech, which has been very interesting so far. I put it to him that the Opposition’s plan would have been to borrow about £100 billion more than the Government plan to borrow in the current Parliament, which would lead to higher interest rates and push us closer to the situation Italy and Greece find themselves in and to what is happening in the eurozone, which would be irresponsible and reckless.

[Mr Umunna]

I thank the hon. Gentleman for welcoming me to my post. First, if he looks at page 22 of the Government’s summary of independent forecasts, he will see that they are projected to borrow, on average, over £100 billion more than the Government thought they would. Secondly, when he returns to his constituency he might wish to explain to his constituents, particularly the young people—youth unemployment there is up by 155% since January this year—why he cannot get his Government to change course.

--- Later in debate ---

[Mr Umunna]

I have given way several times, and I want to make a bit of progress.

Instead of reverting to the tired old mantras and doing over the people who work in this country, perhaps the Secretary of State could tell us what he will do to get banks lending to small and medium-sized businesses that are, by his and the Chancellor’s own admission, currently being starved of credit. We know that the Project Merlin accord between the banks and the Government failed. The Secretary of State more or less admitted as much when he said:

“Merlin was necessary but it was never going to be sufficient. I don’t think any of us pretended it was enough.”

We know that the figures published under Merlin are entirely misleading, because under the agreement between the banks and the Government a gross lending measure was adopted, not the more meaningful net figure used by the Bank of England. The truth is that Project Merlin was really no more than a public relations gimmick designed to get the Government out of a hole when banks’ declarations of bonuses were in full flow earlier this year.

For real businesses, the failure is real. The Bank of England’s “Trends in Lending” publication for last month showed the stock of lending to UK businesses contracting overall in the three months to August. The Bank’s latest agents’ summary, for this month, stated that small businesses were still reporting that credit conditions

“remained tight, and in some cases had become tighter.”

That is supported by the figures released this morning by the British Bankers Association, showing lending by the high street banking groups to non-financial businesses contracting this month.

To resolve that problem, the Government first need to change their overall economic strategy, to give businesses the confidence to borrow and grow. The small and medium-sized enterprise finance monitor published last week showed that the main barrier to future borrowing by SMEs was the economic climate, but that the other major barrier was the lending practices of the banks. The Government need to use their influence with the banks, particularly through United Kingdom Financial Investments in the case of the banks in which the state has a stake, to insist that they get money out of the door to responsible businesses that have sound business models but are struggling to access finance. In addition, they must urge those banks to adopt a better lending culture—for example, by ensuring that they have local relationship managers on the ground who get to know the business concerned.

[Charlie Elphicke]

I am sure the whole House has considerable sympathy with the hon. Gentleman’s position. Unfortunately, the Government’s hands are somewhat tied, because UKFI was set up on the basis that it was at arm’s length. When the original deal was done with the banks, the then Government did not force any lending targets on them. This Government have been trying their best to undo that damage through Merlin and other measures, but the previous Government should have got it right in the first place and have made it harder now.

[Mr Umunna]

When will Government Members take responsibility? I wish that we were still in government, but we have not been for 18 months now. It is about time that they got used to the fact that they are in government and took responsibility.

Business is crying out not for a Government who step aside and fail or refuse to act but for one who adopt an active approach, using all the tools at their disposal to create the conditions for private sector growth. For all their claims about our record, such as the ones that we have just heard, the Government have kept in place some of the support measures for business that we left them on leaving office. I should point out that under Labour, 1.1 million businesses were created. When we left office, the UK was rated fourth by the World Bank for the ease of doing business, and first in Europe. Under this Government, the UK has dropped to seventh in the global rankings. We will take no lectures from the Government on support for business.

In government, we set up the Better Regulation Executive and the Regulatory Policy Committee to improve the quality, and where appropriate reduce the quantity, of regulation on business. I note that the Government have continued with them.