Jobs and Growth

Debate between David T C Davies and Ian Mearns

Thursday 17th May 2012 Commons Chamber

[Ian Mearns (Gateshead) (Lab)]

If I had been standing in this House a month or even a fortnight ago to speak about the prospects for jobs and growth, I might have expressed the opinion that the entire credibility of the Government now stood at a crossroads. A month on, however, I believe that we are well beyond that point. The Budget, followed by the local government elections and the collection of sideshows that make up the Queen’s Speech, have made it clear that the Government have abdicated any responsibility for trying to generate any real growth in our economy.

As Labour Members warned when the coalition came to power, the policies adopted by the Government were effectively an enormous gamble with the future of our nation’s economy. We also warned that whereas the richest and most privileged in our society would be spared the costs of that gamble, the poorest and most vulnerable would be expected to pay the costs. We predicted that the experiment—the gamble—was doomed to failure. However, heedless of the warnings, and driven by an ideological desire to shrink the state, the Government pressed ahead, determined to use the excuse of the budget deficit to drive through their political agenda, oblivious to the damage to our economy.

[David T. C. Davies]

Is the hon. Gentleman simply following the mantra that we should have borrowed even further, on top of the £160 billion that we were already borrowing when his colleagues left office?

[Ian Mearns]

I can tell the hon. Gentleman what I would do: invest to save to grow, and then reap the benefits of that growth through the taxation system.

We warned that the Government’s policy was wrong, but I do not think any of us predicted just how wrong, just how disastrous its impact would be and just how much more difficult things would become in regions such as the north-east of England. The impacts on the young, as so clearly outlined by my right hon. Friend the Member for South Shields (David Miliband), are much greater in regions such as the north-east, yet Government Members seem completely oblivious to what is happening in these regions.

The UK economy has returned to recession, after shrinking by 0.2% in the first three months of 2012. A sharp fall in construction output is said to be behind the contraction, but it is not the only factor. BBC economics editor Stephanie Flanders says that the situation

“adds to the picture that the economy is bumping along the bottom”.

At Prime Minister’s questions, the Prime Minister has said the figures were “very, very disappointing”—that is perhaps the understatement of this Parliament. He went on to say:

“I do not seek to excuse them, I do not seek to try to explain them away…there is no complacency at all in this Government in dealing with what is a very tough situation that, frankly, has just got tougher.”—[Official Report, 25 April 2012; Vol. 543, c. 944.]

He said it was “painstaking, difficult work”, but the Government would stick with their plans and do “everything” that they “can” to generate growth.

I am surprised that the Prime Minister was disappointed —what did he expect? The economic outcome of his policies was completely expected by many commentators. The outcome was highly predictable. The Prime Minister needs to recognise that it is his Government who have caused this recession in Britain and that it is his policy that has taken us back into recession. He needs to accept responsibility, and to accept that cutting deeper and deeper is the problem, not the solution and that to continue blindly will only damage our economic prospects yet further.

The Leader of the Opposition hit the nail on the head when he said the economic figures were “catastrophic”. He said that

“this is a recession made by”—

the Prime Minister—

“and the Chancellor in Downing street.”

He went on to say that it is their

“catastrophic economic policy…that has landed us back in recession”.—[Official Report, 25 April 2012; Vol. 543, c. 944.]

The Office for National Statistics has said that the output of production industries decreased by 0.4%; construction decreased by a full 3%; and output of the services sector, which includes retail, increased by only 0.1%, after falling a month earlier. Those figures are slightly worse than many expected, but the fact that the UK is now technically back in recession should not detract from the underlying reality, which is very much as predicted.

The UK economy has been bumping along the bottom for more than a year and is struggling to gain any momentum. The preliminary figures from the ONS are consistent with the messages coming from official and private data, which say that the UK was once again relying heavily on services and consumption by households. That suggests that the recovery will continue to be weak. Demand is very weak. UK business is sitting on a cash mountain but will not invest because there is no demand in the domestic market. So we very much welcome the growth of exports in the car sector, but the fact that such exports are outstripping the domestic market is not really that great news, because the depression of the domestic market is the real problem. We do not have demand.

The ONS figures also demonstrate clearly that the fall in Government spending has contributed to the particularly large fall in the construction sector. Some Government Members have tried to question the ONS figures and argue that the position is not so bleak, but they are burying their heads in the sand. Joe Grice, chief economic adviser to the ONS, has vigorously defended the figures. He said the construction data were based on a survey of 8,000 companies and had been carefully checked and double-checked.

We are in a very difficult situation. All across Britain and Europe people are rallying to challenge the consensus on austerity, because it is nonsense. The election of the new President in France, who is committed to a policy focused on growth, challenges the failed orthodoxy of austerity; the election and protests in Greece, the protests in Spain and the state elections in North-Rhine Westphalia in Germany last Sunday are shouting to us that a change of direction is absolutely necessary.

The Government could, if they so chose, focus on growth, but they do not do so. The fact that they choose austerity—that they choose destruction rather than investment—is wilful, and it is clearly a political choice. But there is an alternative and I beg them, on behalf of regions such as the north-east and on behalf of my constituents, to change tack—we need growth.