The Economy

David Rutley Excerpts

Tuesday 11th December 2012 Commons Chamber

[David Rutley (Macclesfield) (Con)]

There is one form of climate change that would be welcomed on both sides of the House, and that is the creation of a climate in which enterprise can thrive and flourish. The autumn statement reconfirmed that this Government are committed to ensuring that those conditions are in place and have made positive strides in that direction.

The statement builds on the sound economic platform that has been in place for some time now. The deficit has been cut by a quarter and because of the tough action that had to be taken, the cost of borrowing is at historically low levels. What is more, 1.2 million jobs have been created in the private sector—something that was not mentioned by the hon. Member for Leeds West (Rachel Reeves)—and more jobs are being created in the private sector than are being lost in the public sector. That is true in the north-west, where I live, and across the whole country.

Last week’s policy announcements were well received by businesses and it is easy to see why. There was a further reduction in corporation tax from 28% to 21% in 2014 and a rise in the additional investment allowance from £25,000 to a whopping £255,000 for two years. That shows that, under this Government, Britain is definitely open for business.

The Government’s strategy for enterprise has strong foundations, much stronger than the so-called industrial strategies that have been debated for decades. Between the end of the second world war and the 1970s, Governments in this country and France tried to pick winners only to fail spectacularly. West Germany and the reunified Germany were much more resistant to that temptation. As Sir Geoffrey Owen of the London School of Economics recently wrote:

“The German economic miracle that began in the 1950s was not the result of industrial policy, but underpinned by a broader set of policies of which the promotion of competition and openness to foreign trade were probably the most important.”

He went on to advocate a “horizontal” approach in which competition is promoted, innovation is encouraged and industrial change is positively facilitated—as this Government are doing.

Hon. Members may have noticed how Sweden, which was so bedevilled by high taxes, high spending and massive inflation in the 1980s has coped well with the current global economic challenges. Rather than picking winners, the Swedish Government, who have driven forward a sector-by-sector approach, focused on deregulation, and that has spurred on their success. They have identified ways to deregulate banking, transport, power production, telecommunications, postal services and even food retailing.

Sweden’s Anders Borg is not the most conventional of Finance Ministers. While I would not advise the Chief Secretary to follow Mr Borg’s lead in sporting a ponytail and an earring, I think we can learn from Sweden’s approach. In a recent speech, Mr Borg explained:

“There was a very, very broad-based deregulation. Today, if you go to the OECD, going for growth report, they are looking at 8 different sectors, 6 out of those…have less regulatory burden than the US. So we have gone from being one of the heaviest regulated economies of Europe to one of the least regulated when it comes to product markets.”

As a result, Sweden’s economy is going from strength to strength.

In the UK, in “The Plan for Growth” published in March 2011, the Government set out actions to clear pathways in a number of important key sectors, including advanced manufacturing, digital and creative sectors and, importantly for Macclesfield and north-east Cheshire, life sciences. Both the Macclesfield and Tatton constituencies are home to AstraZeneca’s largest operations in the UK, which account for an amazing 2% of UK exports. I am delighted that, working together with my constituency neighbour the Chancellor, Cheshire East council and AstraZeneca, we were able to secure funding from the regional growth fund to create a bioscience park at the Alderley Park site, which is a positive step for the highly skilled work force in the area and a huge priority for the local economy.

As with Sweden, deregulation is a critical step for our enterprise agenda. Sadly, under the last Government, Britain fell from fourth to 89th in the World Economic Forum’s league table for countries with the lowest burden of regulation. Their lasting legacy was not just the deficit, as it was also the burden of regulation. I am proud that, under this Government, we have been able to claw back 17 places in those rankings—but we are not complacent. The Minister of State, Department for Business, Innovation and Skills, my right hon. Friend the Member for Sevenoaks (Michael Fallon) is leading the deregulatory charge. The autumn statement has built on that momentum and taken the deregulatory agenda to a much higher level. The innovative one-in, one-out strategy is being replaced with a one-in, two-out approach from January. In the spring, the second phase of the red tape challenge will be launched. This will give businesses another chance to highlight those regulations that are holding them back from delivering more for the economy.

The Government’s continuing commitment, refreshed with the energy of a new ministerial team, will be vital in making progress in engaging Whitehall Departments in this critical task. Again, there are lessons to be learned from overseas—whether it be from New Zealand, the Netherlands or even from Bosnia. My favourite example is looking at what has been happening with the “Bulldozer” deregulation initiative in Bosnia, which was particularly progressive. After the Bosnian war, the bulldozer programme was instigated by no less than Paddy Ashdown—one of our coalition colleagues—who was serving as a high-level diplomat in Bosnia at the time. The programme identified 50 roadblocks or regulations that were holding back the economy, and changes were pushed through in 150 days. The bulldozer committee, working with local entrepreneurs and businesses prioritised the areas for reform and worked with the Government to see them through.

I think that we can learn from others who have advocated intervention on behalf of business. I am not usually favourable towards that, but I think we can take a lesson from the Bosnian bulldozer approach, breaking down barriers to business—not intervening, but breaking down barriers before breakfast, before lunch, before tea and before dinner. I am pleased that the Government are taking a clear lead in that direction.

While the present Government are actively proceeding with their strategy for enterprise, the Labour party has offered no apology for their shocking record in office, and has certainly offered no alternative. The truth is that Labour has no clear plans for the economy, which is the single biggest issue facing the current Parliament. However, we can get a sense of what life would be like under a Labour Government by observing what is going on across the channel. President Hollande’s socialist economic policy is one that the Labour party would be proud to call its own, but matters have gone from challenging to absolutely disastrous. The Economist recently described France as a

“time-bomb at the heart of Europe.”

This Government are right to take a different course, and the autumn statement is an important step on that journey. Putting the public finances in order and implementing a strategy for enterprise by breaking down barriers for business and opening the doors to new opportunities in export markets is the right approach, and I commend it to the House.

--- Later in debate ---

[Kwasi Kwarteng (Spelthorne) (Con)]

Thank you, Mr Deputy Speaker. You have not been in the Chair for the whole of the afternoon, but I am pleased to see you there now.

Clearly, we have stated our positions at the beginning of this debate. The Labour Opposition have spoken eloquently about the need for growth and Government Members have commented on the mess in our public finances that we inherited in 2010. The gravity of the situation in 2010 should not be underestimated: our deficit to GDP ratio in 2010 was higher than it had ever been in peacetime conditions. That was a function of probably the worst management of public finances that this country ever had the misfortunate to live under.

I am very pleased to follow the right hon. Member for Edinburgh South West (Mr Darling), who served at the tail end of that Administration as Chancellor of the Exchequer. To use a cricketing metaphor, he was very much like the night-watchman who is sent in when the team has collapsed to 70-8 and the light is pretty dim. He did well in trying to steady the ship, but we have to look at the damage that had been caused in the public finances before he took over his post and at what the Labour Administration did not only from 1997, but in particular from 2001 to 2007, during which time they ran a deficit in each consecutive year for seven or eight years before the crisis happened. No academic textbook and no economic school of thought thinks that it is a good idea to run a deficit when the economy is growing. In 2004, the economy was growing at 3%; it was going at full rate, jobs were being created and investment was taking place. What was the deficit then? It was 3%; even under the Maastricht criteria, the previous Government would have failed. No Keynesian in his right mind, and certainly not John Maynard Keynes himself, would have ever contemplated running a deficit of more than 3% when the economy was growing at 3%.

[David Rutley]

Will my hon. Friend confirm that even former Prime Minister Tony Blair felt, on reflection, that Labour was spending too much when it was in office?

[Kwasi Kwarteng]

Absolutely. The former Prime Minister has said that on a number of occasions. I have been on record as saying that the first Labour Administration between 1997 and 2001 was, I freely admit, a very conservative fiscal Government. As the right hon. Member for Edinburgh South West well knows, during those four years the budget was never in deficit. We ran two years of surpluses and the budget in the other years was balanced. It was only after 2001 that the disaster occurred, that the wheels spun off the car and we suffered under a profligate traditional Labour tax and spend regime. I use the phrase “tax and spend” very gingerly, because the taxation never covered the spending.

That was precisely the reason why the Government ran those deficits—to pay for their projects, to pay for greater spending. They were required to borrow money. I remember that in 2001 one of their favourite columnists, Polly Toynbee, said that Labour would have to tax more in order to spend the money. At least that was an honest position. She was suggesting that Labour should try and balance the budget at a higher level of spending. I and my colleagues might want to balance the budget at a lower rate of spending, but both Polly Toynbee and those on the Government Benches would accept is that it is a road to disaster to borrow yet more money in order to spend on grand projects or whatever utopia the Government want to build in this country. We now have the consequence of this recklessness—of Government Ministers at the time spending more and more money and running 3% deficits.