The Economy

Geoffrey Robinson Excerpts

Tuesday 6th December 2011 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)]

I do not think anyone doubts the serious economic challenges facing the UK, Europe and the wider world. The serious tone of today’s debate reflects that. So it is important in such a crucial debate that we can agree on the economic and financial figures and forecasts, not least because in the past, Parliament, commentators and the markets have questioned Governments’ forecasts. In the past, Governments jealously guarded control of the forecasts and used that control to tweak, fiddle and fix the figures. As we can read in the previous Chancellor’s memoirs, the pressure to fiddle the figures is never greater than in the tough times. By giving responsibility for forecasts to the Office for Budget Responsibility, this Government have changed all that. The OBR figures are independent; the OBR figures tell it straight; so these figures command respect. I challenge Labour Members to say so now if they do not accept the OBR’s figures.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

It is not a question of not accepting the integrity of the Office for Budget Responsibility. The question is the reliability of the figures stemming from the credibility of the organisation. Why does it get everything so wrong all the time? Is it not up to the job? Does it have a lack of expertise, or is it just that it is being asked to fix figures that have no meaning in the real world?

[Mr Davey]

Given that that comes from a former Treasury Minister in a Government who often got their figures wrong, I do not think that the OBR needs to listen to that. It is absolutely clear that the Labour party is taking the OBR’s figures seriously. It is significant that we can at last have a debate without the numbers being the issue—without the spin and the game playing that so debased the House’s deliberations in the past. The Labour party’s acceptance—grudging or otherwise—of our or the OBR’s forecasts presents Labour Members with a problem. Why do they not accept the underlying explanation of the OBR’s forecasts?

This House has heard that the OBR’s forecasts changed not because the Government’s policy has gone wrong, but because of three reasons outside this Government’s control: imported inflation, with higher oil and commodity prices; the huge uncertainty caused by problems in the eurozone; and, finally, the boom and bust that Labour once arrogantly told us they had abolished, which was worse under Labour than anyone had previously thought. The Labour party has to face up to this reality, yet the shadow Chancellor did not. This Government have, and have made the difficult choices in doing so.

Our strategy of loose monetary policy and fiscal consolidation, backed with some of the most ambitious supply-side reforms in generations, was not just right when we first announced it after the election; it is right now. Indeed, recent events have given even stronger confirmation that it is right. That is why, despite the changed forecast, our interest rates remain so low while countries all around us have seen their credit rating slashed, downgraded or put on negative watch. The markets have shown their confidence in the UK with the interest on our debt falling to historic lows.

In what was probably the most remarkable part of today’s debate, the shadow Chancellor was astonishingly dismissive of the low interest rates and our achievements. Never mind that Italy and Spain have seen their rates shoot above 6% while ours have fallen towards 2%; never mind the benefit to mortgage holders, businesses and taxpayers of that achievement. The shadow Chancellor seems to believe that the UK is in a liquidity trap—despite the fact that we have a credible central bank, despite the fact that quantitative easing has been judged effective and despite the major credit easing announced in the autumn statement. In the early 1930s, ahead of Keynesian rearmament, a monetary expansion with low rates combined with fiscal consolidation produced a significant recovery. Is that not the lesson from history that the shadow Chancellor simply has not learned?

Of course, we could have opted for another growth policy—some call it plan B—involving unfunded tax cuts, more borrowing and more spending. The details of that are never clear, but the consequences are higher interest rates. [Interruption.] Labour positions itself as the party of high interest rates, although a 1% rise in market interest rates adds £10 billion to mortgage bills—meaning that the average family with a mortgage will pay £1,000 more—and increases business rates by £7 billion and taxpayers’ costs by £21 billion. That would be the price of Labour government. [Interruption.]

I have looked around Europe for Governments or mainstream political parties that have opted for a policy such as plan B, but they are in short supply. Other Governments are now having to address their budget deficits—[Interruption.]