Economic Growth and Employment

Chuka Umunna Excerpts

Wednesday 23rd November 2011 Commons Chamber

[Mr Chuka Umunna (Streatham) (Lab)]

I beg to move,

That this House notes with concern that UK economic growth is flatlining and was choked off well before the recent Eurozone crisis, that youth unemployment is now more than one million and that Government borrowing is therefore expected to be £46 billion higher than forecast over the Parliament; further notes with regret that the Government has failed to deliver a credible growth plan, is undermining critical industries in which the UK must compete, is failing to use strategically procurement and other tools to drive growth and innovation, and is holding back regional growth with its flagship projects mired in inertia and with most business still waiting for Regional Growth Fund money seven months after the recipients were announced; therefore calls on the Government to deliver a growth plan that provides an immediate boost to the economy to increase demand and growth, including a £2 billion tax on bank bonuses to fund 100,000 jobs for young people and build 25,000 more affordable homes; and further calls on the Government to bring forward long-term investment projects to get people back to work, to reverse the damaging VAT rise of January 2011 for a temporary period giving families a £450 boost and providing immediate help for the UK’s high streets, to provide a one-year cut in VAT to five per cent. on home improvements, repairs and maintenance to help home owners and small businesses, and to provide a one-year national insurance tax break for small firms to help them grow and create jobs.

In his Conservative party conference speech last October, the Chancellor said he would stick to his plan to cut faster than any other Chancellor in our history, regardless of the consequences, because, he said, it was necessary to put our economy on a sound footing. With reference to the Business Secretary he said:

“Together, Vince and I have started to open Britain for business.”

A year later, what do we find? The economy has grown by just 0.5% in the past 12 months. This compares with growth of 1.5% in the US over the same period and is significantly down from the 2.6% growth in the previous 12 months, thanks to the measures taken by the Labour Government. Have the Chancellor and the Business Secretary opened Britain for business? The figures tell a different story. The number of UK enterprises fell by 20,000 in the year to March 2011, with decreases in business numbers in every region except London and Scotland, and business confidence nose-dived following the announcement of the Chancellor’s spending review.

What effect is this having on the people of this country? More than 2.6 million people are out of work, the highest rate in 17 years. More than 1 million young people are now out of work, the highest since comparable records began in 1992. Let me be clear: these are not our statistics. They are those of the Office for National Statistics. They are the facts.

How have the Government responded to the facts? Last week, when we learned of the youth unemployment figures, the Prime Minister and the Chancellor were nowhere to be seen. Instead, the Minister with responsibility for employment took to the airwaves. He told us that the 1 million figure for youth unemployment was “a distraction.” The 1 million figure for youth unemployment is not a distraction. It is a disgrace. What a tragic waste of talent. He not only described the figure of 1 million as a distraction, but attempted to blame it on the eurozone crisis. Does he really think that the British people will fall for that?

In fairness to the Business Secretary, when the figures came out his unofficial spokesperson, the noble Lord Oakeshott, told The Guardian:

“It’s ridiculous to blame this rise in unemployment on the crisis in the eurozone. All economists know it’s a lagging indicator, so this is the result of what has been happening in our economy over the past year”.

I could not put it better myself. Despite that view, the Business Secretary remains resolutely wedded to the Government’s economic strategy, however disastrous it is turning out to be. He does so in the name of deficit reduction, yet the independent forecasts published last week show that the Government are projected to borrow, on average, more in each remaining year of this Parliament than we would have done under our more balanced deficit reduction plan. Those are neither the Opposition’s figures, nor those published by the Office for National Statistics; the summary of independent forecasts was published last week by the Government themselves. Of course, the Office for Budget Responsibility has already forecast borrowing to be £46 billion higher than previously thought. The evidence is clear: the Government’s strategy is not working because reducing borrowing requires growth, which they choked off by cutting spending and raising taxes too far and too fast, and long before the eurozone crisis.

[Richard Fuller (Bedford) (Con)]

I welcome the hon. Gentleman to his place on the Front Bench, which gives the Opposition the opportunity for a fresh start in putting forward their policies. He noted that according to later assessments the deficit will be higher than originally estimated, but does he accept that the key thing the Government got right was to set the tone for interest rates so that this country’s businesses can benefit from much lower interest rates than those in other countries, and would not the policies that his party proposes put that at risk?

[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.

[Mr Julian Brazier (Canterbury) (Con)]

I am most grateful to the hon. Gentleman, who has shown considerable courtesy already in giving way. Does he accept that the markets set long-term interest rates, whatever the MPC does, and that the problems in countries that have let their fiscal position get out of hand with interest rates have been driven not by a choice given by the European Central Bank, but by the markets setting the prices for their medium and long-term bonds?

[Mr Umunna]

The market is not irrational, as the Government seem to suggest. The suggestion is that if they move their direction and course by even one millimetre, even if economic circumstances justify such a change, they will be hammered by the market, but that is clearly not the case. I invite the hon. Gentleman to read the numerous articles and speeches by the former adviser to the Chancellor and the Prime Minister and former chief economist of the Cabinet Office, Mr Jonathan Portes, now director of the National Institute of Economic and Social Research, who makes that very point.

[Stephen Timms (East Ham) (Lab)]

Does my hon. Friend recall, as I do, the Prime Minister telling the House in June of last year that employment would rise in every year of this Parliament, and did he notice in last week’s unemployment figures that employment fell by more than 100,000 in the year after that pledge was made? Is it not absolutely clear that the policy is not working and must now change?

[Mr Umunna]

I completely agree with my right hon. Friend. Of course, another question for the Government is why they will not listen to business organisations that have been calling for action. The CBI is calling for infrastructure spending to be brought forward, the Federation of Small Businesses is calling for a one-year national insurance break for every small firm taking on extra workers, and the Federation of Master Builders would like a targeted cut in VAT to 5% for home improvements, maintenance and repairs. Business organisations, from those representing the food and beverage sectors to those representing businesses on our high streets, which are suffering, are calling for a reversal of this year’s hike in VAT. What do all those measures have in common? They are all part of Labour’s plan for growth and jobs. As our motion stated, the Government must take action now to increase demand and growth and give immediate help to the high street—[Interruption.] The Minister of State, the hon. Member for Hertford and Stortford (Mr Prisk), chunters from a sedentary position. If he wishes to ignore all the various business organisations, people might put a big question mark over his judgment. It is clear that the Government need to back our plan and that they must do so now.

[Julian Smith (Skipton and Ripon) (Con)]

Does the hon. Gentleman not agree that the Government have been listening to businesses organisations with regard to employment law and deregulation? I am surprised that he, as a former employment lawyer, has not included in the motion a single proposal to make it easier for small businesses in Britain to take on staff.

[Mr Umunna]

I will move on later in my speech to the Government’s employment proposals, which I might add were announced this morning to a conference rather than to this House.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

When businesses get in touch to tell me about the problems they are suffering from, none of them tells me about problems with employment law. They tell me about the lack of public procurement and problems with VAT and financing from the banks. Those are the concerns that need to be tackled, rather than the side issues that Government Members are pursuing.

[Mr Umunna]

I agree with my hon. Friend. We all know what is holding back business in taking on workers: the forecast economic projections for this country. That is the real problem. What has been the centrepiece of the Business Secretary’s alternative offer? How will he turn things around? The answer is the regional growth fund. The aim of the fund is to unlock private sector investment, support areas that are dependent on the public sector and help them become more balanced economies. Good. We take no issue with those objectives. We want that money to get to business and to create the jobs that will support growth, yet the scheme has been managed shambolically. It has been an utter fiasco. The fund is a third of the size of the moneys distributed through the regional development agencies, which have been scrapped without effective replacement, so it has been hugely over-subscribed, which demonstrates businesses’ craving for capital. Of the 956 bids received, only 50 were successful in the first round and 119 in the second round. There have been many more losers than winners. It is difficult for the losers, but what of the winners?

Of course, due diligence is needed to ensure the proper use of public funds. The permanent secretary at the Department for Business, Innovation and Skills told the Business, Innovation and Skills Committee that due diligence on successful bids tends to take between two and six weeks, and that until it is complete the successful bidder is not given its money. Yet, clearly, very few successful bidders have received what was promised, because it has taken so long for due diligence to be completed.

I have written to the Secretary of State and tabled parliamentary questions, and in fact the Minister of State, the hon. Member for Hertford and Stortford, who has continually chuntered from a sedentary position today, provided the answers. I tabled those questions to get the answers, to get the facts and to get to the bottom of the delays and mess.

On Monday I received answers to those parliamentary questions, indicating that 30 weeks—30 weeks—after the original announcement just nine of the 50 first-round winners have completed due diligence. When I asked why due diligence has taken so long, I was told:

“It is for successful bidders to initiate due diligence upon receipt of a conditional offer letter from the Department.”—[Official Report, 21 November 2011; Vol. 536, c. 154W.]

Usually, the Government blame us for all the mistakes; now, it seems that they are seeking to pass on blame to the very businesses that they claim to want to help—and the bidder has to pay for the due diligence cost, too.

As it happens, I met—[Interruption.] Ministers shake their heads—

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

Will the hon. Gentleman give way?

[Mr Umunna]

I will in a moment.

Last week I met one of the first-round bidders, who told me that on learning of their successful bid in April they immediately sought to progress due diligence but, despite chasing the Secretary of State’s Department, received no further documentation for four months. When they got it, they immediately responded but, again, heard nothing for another three months—until around the time that my right hon. Friend the Leader of the Opposition raised the issue of the regional growth fund at Prime Minister’s questions. I am sure that the timing was totally coincidental.

Even now, formal due diligence is not complete, and the matter is due to go to the permanent secretary’s committee for approval on 2 December.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

On that important point, the Institute of Chartered Accountants believes that one reason for the length of time taken on due diligence is the disappearance of the RDAs’ expertise in following up the process, and the efficiency savings within the Department, meaning that the skills base there has evaporated, too. Is that not the case?

[Mr Umunna]

It is clearly the case, as we saw from the evidence of the Department’s permanent secretary to the Business, Innovation and Skills Committee a couple of weeks ago.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

I reiterate the point about the expertise that has been lost due to the abolition of the RDAs. The European regional development fund is another vital source of money for businesses. Millions of pounds, particularly in the north-east, remain unspent, and only one fund, from the regional growth fund in Manchester, has been used as match funding for ERD funding. That is a huge waste of important business support that could be going to people throughout the country.

[Mr Umunna]

Perhaps the Secretary of State will address that comment in his response.

Almost one year after the regional growth fund was announced, and six months after due diligence should have been completed, the winning bidder to which I have referred has still not received any money from the regional growth fund. It is clear to me, in that case, where the blame lies for the delay: it is not with the successful bidder. That organisation provides onward distribution of fund awards to businesses that desperately need it. As a result of the chaos, confusion and delay, the bidder in that case tells me that between 3,000 and 4,000 businesses are being deprived of the moneys they need, putting an estimated 11,800 jobs at risk.

What about the other bidders that provide the onward distribution of funds, and the businesses that could support jobs and growth? As I have said, the situation is a fiasco. It is no way to run a Department, and it is no way to treat our businesses or grow our economy. The Secretary of State and his Department are not doing enough to get our economy growing; what little they are doing, they are doing badly.

[Andrew Percy (Brigg and Goole) (Con)]

The hon. Gentleman makes a reasonable point about ERDF delays, one of which I have drawn to the attention of Ministers myself, but, having spent 10 years a councillor in the city of Hull dealing with organisations such as Yorkshire Forward, I must say that the nirvana picture of the RDAs that he tries to paint is certainly not my experience. The points he makes now are exactly the same points that we could have made about Yorkshire Forward and its processes for the past 10 years. The problem is the systems, not, as he outlines, how we structure them.

[Mr Umunna]

With the greatest respect to the hon. Gentleman, the question is whether the Department is doing what it promised to do for those businesses, which is to give them money and to carry out due diligence in a quick and timely way. It has failed to do so. I do not claim that there was a nirvana in relation to RDAs, but we are talking about the regional growth fund, and we actually want it to succeed.

The Government’s latest attempt to grow the economy consists of making it easier to fire, not hire, people. Today, to great fanfare, the Secretary of State said that the service required to claim for unfair dismissal should be increased from one to two years. He said this morning that

“this will mean that business can once again have the confidence to hire the staff they need to grow and thrive.”

That is a retrograde step for a Government who think that watering down employees’ rights is a substitute for a proper growth plan.

[Mr Denis MacShane (Rotherham) (Lab)]

Even at the height of the Thatcher years, there was no attempt to target individual workers—their unions, yes, because industrial tribunals were a Conservative Government invention, but the measure under discussion is utterly shameless. The efficient European economies are partnership economies, but targeting weaker workers and, particularly, women workers is to the utter and contemptible shame, above all, of a Liberal Democrat Business Secretary.

[Mr Umunna]

I am glad that my right hon. Friend brings up the Thatcher era, because a well known noble Lord was asked on Sunday whether such initiatives, which seek to make it easier to fire as opposed to hire people, act as a stimulus to job creation. He told the BBC what he thought of that, saying:

“I’ve been responsible for one of those deregulation initiatives for many years and I would be quite frank in telling you that I don’t think we achieved much.”

He went on to say that

“you want to be very careful in political terms that you don’t get the reputation that all you’re trying to do is make life rougher and tougher for large numbers of people.”

Those are the words of the noble Lord Heseltine, and, if a Conservative-led Government are unable to persuade him to buy into the concept, why should the rest of us do so?

[Bill Esterson (Sefton Central) (Lab)]

My hon. Friend makes an excellent point about what Lord Heseltine said, and the evidence is that, when we create uncertainty for workers by attacking their rights, we find that their behaviour changes in relation to the economy. They stop spending money in the economy, and that undermines the opportunity for growth and the support for businesses, so any Government Member who thinks that cutting workers’ rights is a way to grow the economy is sadly mistaken.

[Mr Umunna]

My hon. Friend is right, and when the Chartered Institute of Personnel and Development looked at the economic effects of the proposal to increase the service requirement from one to two years, the chief economist, Dr John Philpott, said that

“any positive effect on hiring is likely to be offset by a corresponding increase in the rate of dismissals. Increasing the qualifying period for obtaining unfair dismissal rights thus runs the risk of reinforcing a hire and fire culture in UK workplaces. Although the policy change will undoubtedly be welcomed by the de-regulation lobby, it isn’t the way to boost growth and jobs.”

[Nadhim Zahawi]

The hon. Gentleman is now quoting selectively. Will he tell us what the Federation of Small Businesses, which he quoted earlier, or the chambers of commerce think of that policy?

[Mr Umunna]

First, I am not quoting selectively. If the hon. Gentleman would like to go and inspect the CIPD press release, he will see that what I have said is the case.

[Nadhim Zahawi]

What did the FSB say?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The hon. Gentleman has had his intervention, and he should please wait for the answer. We do not need comments from the side.

[Mr Umunna]

There we have a Government Member hungry to fire, as opposed to hire, workers.

[Nadhim Zahawi]

Withdraw.

[Mr Umunna]

I withdraw that comment.

The hon. Gentleman asked whether business organisations were in favour of increasing the unfair dismissal service requirement from one to two years. That policy may sound good on the face of it, but what will happen—I say this as a former employment lawyer—is that we will simply end up with more employees making spurious discrimination claims, because there is no service requirement for them. When we put that to businesses, they take quite a different point of view of the policy.

[Nick de Bois (Enfield North) (Con)]

rose—

[Julian Smith]

rose—

[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.

[Julian Smith]

Will the hon. Gentleman clarify the top five deregulatory measures that his party took in the 13 years it was in government?

[Mr Umunna]

I cannot name the top five, but the whole reason the Better Regulation Executive and the Regulatory Policy Committee were set up was to reduce regulations by a huge number and improve their quality.

In government, we also conceived the technology and innovation centres, to promote innovation. The Government are now rolling them out across the country, and they have sought to build on the measures that we put in place to reduce the bureaucracy of Government procurement and increase SMEs’ access to it.

In many other areas, however, there has been a disorderly retreat from an active approach. The Government have undermined certainty for investment, cut the science and research funding budget by 15% in real terms and abandoned the 10-year funding plan, and they have abandoned sector strategies such as the defence industrial strategy. The Automotive Council continues, but the RDAs, which could have helped make a reality of the ambition to strengthen companies’ supply chains, no longer exist.

The Government have undermined new industries, such as green industries, as my right hon. Friend the Member for Don Valley (Caroline Flint) will outline in the debate that will follow this one. They have delayed the roll-out of universal broadband and undermined the collaborative institutions that we set up to work with businesses, such as the Office for Life Sciences and the Technology Strategy Board, which are widely respected. The higher education sector, the seventh-largest export industry, has been put in disarray by the Government’s visa changes. Support for the digital, creative and educational sectors has been scaled back. Then there is the decision to award the £1.5 billion contract for new Thameslink trains to a manufacturer that will make them in Germany, which means that Bombardier is reviewing its activities in Britain.

The Government have retreated from action, undermined confidence, failed to unlock investment, failed to deliver a credible plan for growth and failed to use action to back business. They need to back our five-point plan for growth now and put in place a credible plan to build for our long-term success. These are difficult and challenging times for businesses and people in this country. They deserve better from a Government who say, “We are all in it together”, but who, time and again, show that they have absolutely no understanding of the concept.

--- Later in debate ---

[Vince Cable]

Let me just finish this argument. Some of us have argued for a long time that the underlying problem is that, since the beginning of the crisis, the British economy has suffered—I use my own metaphor— the economic equivalent of a heart attack. There is a profound problem, and what lies behind it is the fact that, more than any other developed country, we have quite extraordinary levels of debt.

There are different kinds of debt. Household debt is 160% of gross domestic product and, after the boom that took place under the previous Government, it is higher than in other developed countries. Banks’ balance sheets are more than 400% of GDP, after they were allowed to run out of control. Government debt is 180% and rising as a result of the deficit financing we had to undertake. If we put those things together, as McKinsey has done, they show that the position we inherited is one where total debt in the UK is approaching 500% of our GDP. The only other country with a problem of that scale is Japan. That is the inheritance we are now seeking to manage.

[Mr Umunna]

First, on borrowing, does the Business Secretary accept that the average of the independent forecast that his Government published last week shows that, for all his claims to be working to a strategy to reduce our debts, his Government could end up borrowing more in every single year remaining of this Parliament than under Labour’s more sensible deficit reduction plan? Secondly, does he accept that confidence indicators when he took office and took charge of his Department were not too bad and were improving until the comprehensive spending review was announced, after which it nosedived?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We must have shorter interventions.

[Vince Cable]

On the level of borrowing, let us wait until next week and see what the independent forecast is in the Chancellor’s statement. Of course, the reason why borrowing rises when the economy slows down is the flexibility that is built in—the so-called counter-cyclical stabilisers that we employ as part of our fiscal policy. Unlike the United States and other countries, we allow slow-downs to be accommodated in that way, supporting the economy.

The hon. Gentleman asked me what our strategy is to deal with this problem. I will summarise it. There are three parts. First, we have to stick to fiscal discipline to maintain the confidence of the people who lend to us. That is a very simple proposition that is very difficult to realise and it is something we have done. He quoted various comments from business organisations around the country. I keep in touch with such organisations regularly and go around the country to the regions and nations of the UK. I have yet to meet a single representative of the business community who has asked us to slacken our process of deficit reduction—not a single one. They all make it absolutely clear, including the CBI, that they regard plan A, as it is called, which is deficit reduction, as an absolutely necessary pre-condition to stabilising the economy.

The second element relates to the first. Precisely because we have a large amount of debt in our economy, the priority for Government has to be to preserve an environment in which there are low interest rates. The stimulus we get in our economy—the source of demand—comes primarily through monetary policy. Through the Bank of England acting on short-term interest rates, through long-term interest rates related to bond yields, through quantitative easing at the Bank of England—now credit easing—and through a competitive exchange rate, we have a monetary policy that supports growth and demand. Given the massive debt we have inherited, it is only through monetary policy—relatively low interest rates—that we can possibly support the economy.

[Mr Umunna]

On that point, the Business Secretary talks about monetary policy as if it is somehow a good thing that we are having to resort to quantitative easing. Does he agree that quantitative easing is a last resort of a desperate Government?

[Vince Cable]

It is certainly a last resort in a major economic crisis. I am sure he appreciates that we are living through an economic crisis that is unparalleled in our lifetimes. That is why not only Britain, but the United States and other countries are having to resort to unorthodox monetary policy. That is a reflection of the desperation of many western countries. Our Bank of England has been comfortable with our fiscal policy and, to that extent, has been willing to support it through monetary means.

Those are two of the three elements of the strategy. The third is rebalancing the economy. We inherited an economy that was horribly unbalanced in favour of debt-supported consumption and banking, and we are now rebalancing the economy towards exports and trade. Rapid growth is taking place at the moment in British exports. That is the strategy on which we will proceed and on which we will be judged. The alternative we have been offered is something called plan B, which I think has been renamed the “Antiques Roadshow” in respect of the shadow Chancellor. No serious business organisation is arguing that such financial irresponsibility has any prospect of success.

--- Later in debate ---

[Vince Cable]

No, I cannot do that, because the projects are under construction. When they are fully completed and fully staffed and their supply chains are established, it will be possible to come up with a meaningful number.

The third area of criticism and questioning of the hon. Member for Streatham related to the banks. The motion recycles the idea of a bank bonus tax, so let us go over what that involves. The current estimate from the CBI, which has carried out research on this in the City, suggests that the yield from bonuses this year—the bonus pool—is likely to be something in the order of £4.2 billion. Of that £4.2 billion, £2.5 billion goes to Her Majesty’s Revenue and Customs in tax because of high tax rates on bonuses, and rightly so. That leaves £1.7 billion in bonuses paid out, assuming that the projection is correct. The Opposition are suggesting that they will have a £2 billion tax on bank bonuses. Where is this £2 billion going to come from? It is considerably more than the total bonuses paid out. Even if they applied 100% tax, which is implausible, what would happen, obviously, is that pay would be consolidated. They have not thought this through. Perhaps that is why the hon. Gentleman did not bother to raise it. Can he can tell us how it will work?

[Mr Umunna]

I am happy to do so. I am slightly bemused that the Secretary of State should quote those figures from the CBI. It represents all the banks, so would he expect it to say anything different? Of course, the bonus round has not yet been completed, so we have absolutely no idea what the final figure will be.

[Vince Cable]

I see that the hon. Gentleman is playing for time.

Apart from this slightly mysterious bank bonus tax, what is extraordinary is that we are being lectured on the banking system by a party which in government allowed the banking system to run completely out of control. There was no regulation on cash bonuses. Despite the fact that the banks had an implicit Government guarantee, they were not required to pay any tax for it. We have introduced the banking levy. Labour allowed tax avoidance on an industrial scale and did absolutely nothing about it, yet the hon. Gentleman now presumes to lecture me on banking. I really do think that Labour Members need to reflect a little on what happened in the banking system.

Finally, the hon. Gentleman made various references to spending commitments—or our damaging spending cuts, as he saw them—and tax cuts. This is the time of year when my grandchildren write letters to the north pole addressed to Santa Claus. I have to say that compared with what we are hearing, those letters from my five-year-old grandson are a model of financial discipline and economic literacy. The hon. Gentleman’s predecessor was very eloquent in criticising the cuts to the university teaching grant. The hon. Gentleman has adopted other targets—for example, he has criticised the cuts in the regional development agencies. He has also criticised cuts in the science budget. Last week, he made a very eloquent statement on this, despite the fact that the scientific establishment had been very complimentary about the fact that we had protected the cash budget for science.

When I came into my current job, the one thing I knew was that my Labour predecessors were planning to cut the Department’s budget by 25%, and that is what we have done, because that was the economic reality. I am therefore left with a question to which I have been trying to get an answer. Perhaps the hon. Gentleman can be more forthcoming and economically rounded than his predecessor in telling me how the Opposition are going to achieve their plans. Where is the money going to come from? We have a whole lot of spending commitments in every area of our Department, but not a single suggestion about where those heroic cuts are going to come from. Of course we would like to spend more money on science and other things, and of course some of the tax cut proposals are very attractive, such as the VAT rate on building repairs, which would cost £1 billion, but where does the money come from? This gets to the heart of the problem, which is that the Labour Opposition’s proposal is financially irresponsible. It deals with the problem of Government borrowing by adding to it and deals with the problem of Government debt by adding to it.

[Mr Umunna]

The various commitments that we have made are all costed and fund themselves. The Business Secretary has said a lot about banking. If he is so fiscally responsible, will he join us in committing to use all the proceeds from the sales of the public stakes in the banks towards reducing the deficit?

[Vince Cable]

The hon. Gentleman’s numbers may have been costed but they do not add up—that is the problem. As for the banks, it will be quite some years before the sales take place. The Northern Rock sale has gone ahead—that is a small bank—but for the major banks, it is likely to be some years ahead. We do not know whether it will be in this Parliament or the next; we have no idea what the economic conditions will be. It would be ludicrous for me to hypothecate about revenue receipts at this stage.

I will move on to my final passage, because I would like colleagues to have an opportunity to speak. I will summarise some of the positive things that we are doing, albeit within a very constrained budget, to support growth. Of course, fiscal discipline and monetary policy have to be supported by interventions. The hon. Gentleman is absolutely right that there is a role for state intervention. I am not in favour of laissez-faire. There are things that we can do.

Our concentration is on export growth. There has been 13% export growth over the past year. We are outward looking. The motion does not even mention trade. It is unbelievably parochial. I spend a lot of my time in emerging markets with British exporters—I have been to all of them—to support export growth. I do not claim personal credit for the growth, but we have acted as a catalyst for export growth in Brazil, Russia, India and China—the BRIC countries—of 26%, in India of 34% and in Turkey of 30%. I keep in touch with our exporters by working with them and alongside them to deal with overseas Governments. That is where the recovery is going to take place. It is on the back of those exports that we are getting rapid growth in manufacturing in certain sectors such as the automobile sector, which has attracted big inward investment from Jaguar Land Rover and others.

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[Richard Fuller (Bedford) (Con)]

As this is a business debate, I draw Members’ attention to my entry in the Register of Members’ Financial Interests.

I start by congratulating the hon. Member for Streatham (Mr Umunna) on introducing this debate and on the thoughtful way in which he presented his case. As I said in an intervention, he offers an opportunity for a fresh approach. What a contrast this debate is to the one on the economy called by his colleague the shadow Chancellor a couple of weeks ago, which turned into an episode of “Romper Room”—some hon. Members are old enough to remember that—with childish comments being made left, right and centre. The hon. Member for Streatham presented a much more cogent case today, but that is the root of his problem. He is the fresh new hope, but unfortunately he is held back by sad and discredited ideas, the core policy of which, as the Prime Minister has said, has been reheated and resold at least eight times already.

I encourage the hon. Member for Streatham to be a little bolder in setting out his ideas. I know that he agrees—his speech lasted 31 minutes, but only in the 30th did he get round to talking about Labour’s so-called five-point plan. I ask him to spend more time developing his ideas, and not to be held back by the discredited Labour past.

[Mr Umunna]

Back-handed compliments aside, it is unfair of the hon. Gentleman to say that I did not talk about the different elements of the five-point plan. I remind him that I cited a list of the different business organisations that have called in different ways for parts of that plan to be implemented—from the Federation of Master Builders to the Federation of Small Businesses and the CBI.

[Richard Fuller]

I appreciate that, and I shall continue to listen intently to all the hon. Gentleman says.

The challenge that this country faces to restore growth is immense. It needs good ideas from both sides of the House and full commitment to the task. On that point, may I say gently to my right hon. Friend the Secretary of State, who is a noble individual and a good gentleman, that sometimes people feel that commitment may not be there 100% of the time from the Department, and that is a commitment to the role of the free market and business. It is as though we have at times a literary equivalent of Dr Cable and Mr Hyde. There is one part of the personality of the Secretary of State that embraces the idea of business and likes the approach of free markets, and then there is the other side of the personality that likes to hang out with a bunch of people on a camping holiday outside a well-known church musing on the merits of capitalism.

--- Later in debate ---

[The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes)]

First, the previous Government inherited a boom, and then they bequeathed a bust and a massive deficit, so our top priority must be to deal with the consequences of that and keep out of the downward spiral into which countries such as Greece and Italy have fallen.

As my hon. Friends the Members for Bedford (Richard Fuller), for Solihull (Lorely Burt), for South Basildon and East Thurrock (Stephen Metcalfe), and for Aberconwy (Guto Bebb) have argued, more than ever we need a plan to give confidence to markets, businesses and our people. This debate was introduced by the shadow Secretary of State, the hon. Member for Streatham (Mr Umunna). It was his first major outing, and I thought that his speech was fair. It was better on structure than on presentation—but then again, I suppose the 11 advisers write the speeches; they do not deliver them. [Interruption.] No, I am a fan of the hon. Gentleman. It has become orthodox to say that he has been over-promoted, but I think that that is a welcome change from the self-promotion that has characterised his career so far. We can therefore be grateful that he is at the Dispatch Box, as he predicted he would be for so long.

The problem with the hon. Gentleman and other Opposition Members—in fairness, we heard some good speeches from them—is that they still refuse to acknowledge that reducing the deficit is central to any credible plan. We only have to look at the continuing crisis on the continent to see what would happen if we do not do so. To be analytical about it, the hon. Gentleman made a speech about cyclical problems in a structural context. The issues around debt and deficit in this country are structural, and they will not be solved by cyclical solutions.

[Mr Umunna]

The Minister seeks to give me a lecture on reducing the deficit. Can he explain why, as I asked the Secretary of State earlier, in the average of the independent forecasts, his Government are forecast to borrow more in every remaining year of this Parliament than we were under our more responsible deficit reduction strategy?

[Mr Hayes]

That was the ponderous exaltation of a basic economic fact: when tax yields fall because there is less growth than expected, and welfare payments go up, of course that is a result, but it is not a reason not to have a credible fiscal policy. The hon. Gentleman remains in denial, just as the shadow Chancellor remains in denial, but the OECD—