Economic Affairs and Work and Pensions

Geraint Davies Excerpts

Tuesday 8th June 2010 Commons Chamber

[Mr Darling]

I think that the word “savage” was used by the Deputy Prime Minister, of whom the hon. Gentleman now finds himself a great admirer. It was not a word that I used.

It is important in the task that confronts the whole country and the Government that we do not get ourselves into a situation of almost competitive austerity, in which Governments and countries become blind to the need to secure growth. There is a substantial risk, as I have said for a long time, that if the Government take action prematurely without considering its consequences as a whole, they will choke off the recovery. We have to get borrowing down, but we also have to get growth and recovery firmly established.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Will my right hon. Friend give way?

[Mr Darling]

No, I will not. If we are to maintain jobs and ensure that borrowing does indeed come down, we need to have growth. Policies to achieve that are notable by their absence both in this country and the rest of continental Europe. It is no use Government Members citing what happened in Canada and Sweden. Yes, Canada reduced its structural deficit, but it did so at a time when its next door neighbour, which happened to be the biggest economy in the world, was growing strongly. So the Canadians benefited from a strong US economy. Equally, when Sweden was going through its retrenchment, Europe was starting to grow again. So the comparisons are not entirely appropriate.

We must realise that we need to put in place policies that ensure growth, get our borrowing down and, critically, equip this country to compete in the markets that are going to be opened for it and take advantage of the opportunities that will be here.

As I said during the election campaign and have said since, I believe that the Conservative party remains a risk to the recovery. I believe too that no matter how they dress it up, and how they seek to blame other people, even if they use the Liberal Democrats to cover their true intentions, what they are about is ensuring that they cut exactly the same expenditure as they have always wanted to, and they are using this as an excuse for doing so.

I believe that action does need to be taken, but crucially I believe that we need to ensure that we secure the recovery, and I hope that this Government have got the sense to see that now, before it is too late.

--- Later in debate ---

[Mr Osborne]

The hon. Gentleman makes a good point. What happened with the miners compensation scheme was a tragedy, and we will certainly seek to learn the lessons of what went wrong. He is more than welcome to correspond with us—I am going to volunteer, if he wants, a meeting with one of my colleagues to discuss the issue—because we are determined to introduce the legislation and help those people who lost everything. We hope that that will command support on both sides of the House.

Finally, we will introduce a Bill to give the independent Office for Budget Responsibility statutory authority and to bring transparency and honesty to our nation’s finances. I cannot work out whether the shadow Chancellor now supports that proposal, which he opposed in government, but it is a revolutionary step in budget making, removing forever the historic power that Chancellors have had to make the official forecasts. It is based, however, on a very simple idea—perhaps completely alien to the thinking of the previous Government—that in future, we fit the Budget to fit the figures, instead of fixing the figures to fit the Budget.

With the help of Sir Alan Budd, we have established the Office for Budget Responsibility on a non-statutory basis. Today I am publishing in a written ministerial statement the terms of reference that I have agreed with Sir Alan. With his consent, I can confirm in the House for the first time that the office will produce its independent assessment of the growth forecast and other forecasts next week, on Monday 14 June. The Budget will be presented just over a week later, well within 50 days of the election, as we promised.

[Geraint Davies]

On the figures, the Chancellor will remember that in February last year the unemployment rate was 2.5 million. Independent forecasters and economists were predicting that unemployment would now be between 3.5 million and 4 million. Does he accept that we do not have those levels of unemployment because of the fiscal stimulus from the previous Government? Furthermore, he will know that the cost of an extra 1 million unemployed is £6 billion, which would wipe out the savings that have just been announced. Will he therefore be extremely careful not to make cuts that will undermine the economic capacity for growth in future?

[Mr Osborne]

Unemployment is rising. We have the highest youth unemployment in Europe. We have the highest proportion of children growing up in workless households of any country on the European continent—that is not a record of which I would be particularly proud if I were a Labour MP. We are going to introduce a comprehensive work programme, and reform welfare to create genuine incentives to make work pay. One of the issues that came up time and again in the general election—for me at least, and perhaps for other Members—was the frustration felt by working people on low incomes who go out to work every single day and find that their next-door neighbour has been sitting on out-of-work benefits for years. That is going to be part of the reform that we introduce in our welfare Bill.

I was discussing the Budget, which needs to address the immediate debt situation that the country faces. However, it will also begin the long-term task of moving an economy based on debt—too much consumer debt, too much banking debt, too much Government debt—to an economy in which we save, invest and export in future. If anyone needs to be reminded why the immediate debt situation we have inherited is so serious, I suggest that they read the report on the UK produced by one of the world’s three credit-rating agencies today, which warns of

“a rise in public debt... faster than any other AAA rated sovereign”

country, and points to

“the largest cyclically-adjusted budget deficit in Europe”.

The rating agency says that the previous Government’s plans to reduce the deficit are “distinctly weak” and lack “credibility”. It says that we are the only European economy set to run a budget deficit above 3% in five years’ time. That is all at a time when, as it points out, the fiscal crisis in Greece and other eurozone countries has caused a major shift in investors’ attitude to sovereign risk.