Policy for Growth

Chris Leslie Excerpts

Thursday 11th November 2010 Commons Chamber

[Chris Leslie (Nottingham East) (Lab/Co-op)]

There have been some excellent and increasingly succinct contributions to this welcome debate on growth. It is a fantastic initiative and a tribute to the reforms led by the Backbench Business Committee. Important aspects of economic policy have been covered. My hon. Friends the Members for Glasgow North East (Mr Bain) and for Edinburgh East (Sheila Gilmore) talked about the Scottish economy and the importance of investment in their cities. My hon. Friend the Member for Stoke-on-Trent North (Joan Walley), and the hon. Members for Redcar (Ian Swales) and for Brighton, Pavilion (Caroline Lucas), talked about environmental jobs and new eco-technologies. The hon. Member for Hove (Mike Weatherley) talked about the music industry, the hon. Member for Warrington South (David Mowat) talked about energy pricing and the hon. Member for Watford (Richard Harrington) talked about the film industry. The hon. Member for Warwick and Leamington (Chris White) talked about the role of the voluntary sector in the economy and the hon. Member for Battersea (Jane Ellison) talked about tax increment financing in an important contribution.

As my hon. Friends the Members for Wirral South (Alison McGovern) and for Derby North (Chris Williamson) both pointed out, Labour did a great deal to support our economy and, until the general election, we had seen growth return and borrowing begin to fall and we were emerging from one of the gravest worldwide economic crises in generations. Clearly action is needed now more than ever to boost growth and jobs.

The Bank of England’s inflation report yesterday pointed out that nobody could predict the course of the economic environment in the years ahead, and some dangerous clouds are gathering. Yesterday’s report from the National Institute of Economic and Social Research calculated that growth was slowing further in the three months to October and claimed that it was 0.5% weaker than the official third quarter figure. Today’s G20 gathering in Seoul has to grip the serious imbalances facing the world economy, but, as my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) said in a very powerful speech, the Prime Minister and the Chancellor seem yet again on the margins of the debate rather than in a leadership position. We should be wary, of course, of a return to protectionism, but also of a slowdown in the eurozone, and we should therefore be doing more to encourage exports, jobs and growth here at home.

The doctrinaire approach by the Chancellor threatens the return to strong economic growth. He is ignoring those who say that the Government should proceed with caution and is instead rushing full speed ahead, risking the fragile recovery with his ideological zeal for cuts in public investment, as my hon. Friend the Member for Copeland (Mr Reed) said. Even Ministers have to accept that public sector spending cuts will undermine the return to growth. My hon. Friends the Members for Barnsley East (Michael Dugher) and for Pontypridd (Owen Smith) pointed out that we know from the analysis by the Office for Budget Responsibility that the Government’s budget and spending review shows that the choices they are making will cut our growth prospects rather than enhance them. Growth is essential to rebuilding our fiscal position and if we are to fund vital improvements in public services—as my hon. Friend the Member for Ealing, Southall (Mr Sharma) pointed out, with particular reference to infrastructure, and as did my hon. Friend the Member for Bolton South East (Yasmin Qureshi)—with no strategy for growth, the Chancellor has no viable strategy for investment in schools, hospitals or our future prosperity as a nation.

The spending review will hit the economy hard just at the wrong time, and the Government admit, as my hon. Friend the Member for Luton North (Kelvin Hopkins) pointed out, that they intend to slash half a million jobs in the public sector. We know that PricewaterhouseCoopers has predicted that the same number of jobs will also be lost in the private sector. The hon. Member for North West Leicestershire (Andrew Bridgen) talked about the mood music playing, and we can see that consumer spending is already shaken and confidence is being battered by the tune played by the Chancellor. My hon. Friend the Member for Edinburgh South (Ian Murray) mentioned that other factors will affect that confidence, including the impact of the VAT rise on businesses and consumers.

We have to boost employment, not pull the rug from beneath our own economic prospects. As my hon. Friend the Member for Walthamstow (Stella Creasy) pointed out, the abandonment of the future jobs fund was a major mistake. As my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) said, every 100,000 people out of work costs the taxpayer £0.5 billion in benefit payments alone.

We heard today from the Department for Work and Pensions that it is winding down all its current welfare-to-work projects ahead of its new scheme, which will not be ready until next summer at the earliest, yet new referrals to the current programme are to be halted from December in half of the country and stopped completely from March. That is complete madness at a time when we need to be working our hardest to get people into employment.

As we have heard time and again from all sorts of hon. Members, business investment is a key driver of growth, but that is at risk, I would contend, from the Government’s approach. I have bad news for the hon. Members for East Surrey (Mr Gyimah) and for Northampton South (Mr Binley) when it comes to the net lending targets that should be placed on the banks, as was promised in the coalition agreement. I am talking, of course, about those banks that are state owned and should be encouraged to lend more readily to businesses. Not only was any reference to those net lending targets in last week’s Green Paper conspicuous by its absence; the Prime Minister himself said in his speech in Hertfordshire last week that net lending targets are difficult to achieve. The Minister, who has responsibility for small businesses, has also seemed to row back from those net lending target commitments in the coalition agreement. I would be grateful if he could clarify where the Government stand on those targets.

The Government have taken an axe to some of the key foundations that have been supporting business investment in recent years. For example, they have cut back the capital allowances that have supported reinvestment in new plant and technology for industry. My hon. Friend the Member for Leeds West (Rachel Reeves) highlighted the cancellation of the loan to Sheffield Forgemasters. We heard this week about the scrapping of the grants for the business investment programme that have helped to create 50,000 jobs since 2004. That decision was criticised this week by Nissan, which saw that help as an essential and crucial factor in its decision to invest and in the rebalancing of the UK economy to help manufacturing.

As my hon. Friends the Members for Gateshead (Ian Mearns) and for Wigan (Lisa Nandy) said, the abolition of the regional development agencies, and more importantly the budgets they had to invest in the regional industrial economy, is a tragedy. This is compounded by any number of small changes that the Government are making that are not necessarily being noticed by our constituents, although gradually they will be. One such change that will be noticed now is the 80% cut in the undergraduate teaching budgets, which sends a clear signal that Ministers are failing to invest in the long term. The pace of private sector expansion will need to be record breaking, as my hon. Friend the Member for West Bromwich West (Mr Bailey) said, if they are genuinely going to take up the slack left by the Government’s austerity. Yet there are already signs, as in today’s Financial Times, that the business investment to GDP ratio is starting to fall short of the trend, compared with previous recoveries.

My hon. Friend the Member for Great Grimsby (Austin Mitchell) and the hon. Member for Stafford (Jeremy Lefroy) mentioned exports, which are essential to this picture. Unfortunately, they look like they will weaken because of the economic climate, and the Governor of the Bank of England said yesterday that with more than 60% of UK exports going to the eurozone—for example, 7% to Ireland alone—there are big risks to growth if our trading partners contract. The Treasury states clearly that it needs growth in exports at a rate only last achieved in 1974. Achieving that rate is a tall order.

As we see it, Ministers have very little strategy for growth, and are relying too much on monetary policy coming to the rescue. That is a dangerous approach. We say that jobs and growth need to come first, and the Government need to wake up and end their recklessness.