Geoffrey Robinson
Main Page: Geoffrey Robinson (Labour - Coventry North West)Department Debates - View all Geoffrey Robinson's debates with the HM Treasury
(13 years ago)
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Mr Geoffrey Robinson (Coventry North West) (Lab)
It is a pleasure to follow the hon. Member for South West Norfolk (Elizabeth Truss). Her points about competitiveness in the long term and the immediate future are valid. However, all of us who have been in industry know without a doubt that long periods of deflation, inactivity, insufficiency of demand and cuts hurt competitiveness. That is the trouble with the Government’s policy.
By sleight of hand and cleverness in debate, the Chancellor seems to have turned the debate from being about what the Government’s plan originally aimed to do into being about debt and interest rate management. We are all pleased that there has been some success in those areas, but at what cost has that success come? It has come at the cost of missing the central aim of the plan that the Chancellor set out when he came into office in June last year: to reduce the deficit within this Parliament. It is quite obvious that we are not getting anywhere near that. Indeed, every single indicator in the plan is going into reverse and being missed. The unemployment figures that came out today are disastrous and will make the plan cost a lot more. We are overshooting the borrowing requirement, which was meant to be reduced, by £46 billion before we even come on to the increased costs of higher unemployment and the benefits that go with it.
Mr Robinson
I will give way in a moment.
Inherent in the plan are further unnecessary deflation and cuts in the economy. The growth plan was essential to the original plan of stabilising and reducing the deficit. I agreed with that entirely, as I am sure did all Members, particularly the Government Members who speak about the private sector. However, it relied on the private sector getting going and increasing investment, output and net exports. Every one of those things is going into reverse.
After I have given way to my hon. Friend, I will come back to that point and deal with this week’s National Institute of Economic and Social Research report.
Robert Flello
My hon. Friend is making a very good point about growth in the private sector. His constituency, like mine, will have businesses that could export because they have order books for three years, but cannot because the banks will not lend them any money to solve their cash-flow issues. They cannot do the work or fulfil their contractual orders because they do not have the working capital to do so due to the nonsense that is going on.
Mr Robinson
I could not agree more with my hon. Friend. I will come to the problem of bank lending towards the end of the few minutes that I have.
To see the central failure of the plan and why it is so obviously not working, one must just look at what the NIESR has said about the progress of manufacturing, on which the plan relies:
“manufacturing output—the biggest contributor to industrial production—fell for the third month in a row, suggesting the engine of the economic recovery had shifted into reverse.”
I do not think that anybody can doubt that. The plan is not working, like it or not. Manufacturing output fell 0.3% between July and August, meaning that it has fallen for three months in a row. At the beginning of this year it was increasing by 6.1%, but that has dropped to 1% on an annual basis. We are looking at a catastrophe.
The Government attempt to blame all this on the previous Labour Government, as if we created the world crisis, which we did not. We have to find a way of yanking them out of that mindset. It is quite clear to anybody looking at the situation as we go into the second year of their plan that they own this economic policy. It is their economic policy and their plan that are on trial, not what the Labour Government did or did not do five, six, seven or eight years ago. It is their plan that is not working. I do not know why everybody on the Government Benches cannot see that that is a simple fact. Whether we did the right thing is totally irrelevant to the present situation. The question is: is the Government’s plan working? It is quite clear that it is not. I will willingly give way to the Chief Secretary if he wants to intervene on that point. Realising that, the Government are trying to move the debate to another issue, which is not the central issue.
The Government are also trying to introduce some measures that will help, and they have gone for monetary easing and credit easing. The trouble is, the history of monetary easing does not suggest that it gets into the real economy. Indeed, when the Governor of the Bank of England gave that remarkable interview to two economic journalists following the announcement of the £75 billion increase in monetary easing, he could not say that it would get into the real economy. He said, “That’s none of my business,” but of course it is. He said, “I will lend it to the banks, what they do with it is up to them.” We know as a fact from previous experience that it does not get to the high street or into the real economy. Unless measures are taken to direct that money effectively in some way or another, against the Governor’s explicit policy of not interfering in capital markets at all, it will not work. We know that Project Merlin similarly failed.
The Chancellor has now come up with a great plan for credit easing, but who is going to administer it and dress up the bonds involved? Will there be a composite element of different companies? Who will decide who gets the money and who does not? Perhaps the Chief Secretary will enlighten us when he winds up the debate, but there is nothing concrete about the plan. It is just an idea that has been floated, like Merlin or monetary easing. It sounds good—if we could get small companies in my constituency and that of my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) back working with money, it would be great. We would all back it, as we are in principle.
It is no good the Government believing that they cannot embark on capital investment right throughout the economy. Of course the plans will take time to introduce, although if they had been started a year and a half ago, when we pointed out to the Government what they should be doing, they would be ready now. Every time we have gone to the Treasury we have been told, “Oh, that won’t have any effect immediately.” That argument just puts off the day on which plans are implemented. The Government’s plan is not working, and we can put forward plans that would get the country back to work and also help to reduce the deficit much more effectively than the Government’s failed plans are.