The Economy

Gordon Birtwistle Excerpts

Tuesday 11th December 2012 Commons Chamber

[Rachel Reeves]

I will let the good people of Scotland make their decision when the time comes, but I believe that we are stronger together—stronger united than divided.

The worst aspect of the Chancellor’s two wasted years is the long-term damage being done to our economy. Every month of inaction, every failed initiative and every growth forecast downgraded is another hammer blow to the work force, our businesses and our national infrastructure. The skills and motivation of British workers are going to waste, with one in three of our 2.5 million unemployed out of work for more than a year and 3 million of those with jobs wanting to work more hours, but unable to find the work. In reality, we are falling behind, and the Chancellor has nobody to blame—not the snow, not the royal wedding, not the eurozone.

I agree with the chief economist of UBS, George Magnus—[Interruption.] [Hon. Members: “He’s gone!”] Obviously the hon. Member for Spelthorne (Kwasi Kwarteng) does not want to hear what the chief economist of UBS has to say. I will send him a copy of Hansard. George Magnus said that the Chancellor’s excuse

“falls under the category of ‘Sorry Miss, the dog ate my homework’”.

He also said that

“the problem I think that the Chancellor has with the eurozone is that we are just like them. We have this single-minded focus on austerity and the lack of growth is basically crippling our ability to meet our fiscal targets.”

I agree that the Chancellor and his economic plan are to blame. Two and a half years of austerity, two and a half years of this Chancellor, and what do we have to show for it? We have no growth, more borrowing and a tragic waste of time. [Interruption.] It is good to see the hon. Member for Spelthorne in his place again.

A year ago the IMF warned:

“If activity were to undershoot current expectations and risk a period of stagnation or contraction, countries that face historically low yields (for example…the United Kingdom) should also consider delaying some of their planned consolidation.”

At that time the IMF was predicting 1.6% growth this year; now the OBR tells us that the economy is more likely to shrink by 1.6% this year.

[Gordon Birtwistle (Burnley) (LD)]

Would the hon. Lady like to comment on the 6.4% collapse in GDP in 2008, and at the end of her speech will she enlighten us all on what her economic policy will be?

[Rachel Reeves]

Like other countries around the world, our GDP contracted during the global financial crisis. Germany and the United States have managed to recover that growth; we have not, because our Chancellor chose a different course—austerity—when jobs and growth are needed to get the economy moving and the deficit down. Unlike this Government, we recognise that we need to take action to stimulate jobs and growth. That is why we have said there should be a national insurance holiday for small businesses taking on new workers and a bank bonus tax to fund a programme of youth jobs, and that we should genuinely bring forward infrastructure investment and temporarily cut VAT to 17.5%. Those are the policies that would get the economy moving, get jobs back in our economy and help to bring the deficit down in a sustainable way.

--- Later in debate ---

[Gordon Birtwistle (Burnley) (LD)]

I congratulate the new hon. Member for Middlesbrough (Andy McDonald) on his interesting and excellent maiden speech.

I listened to the autumn statement with a lot of interest because I, a simple mere Back Bencher, was able to put forward a proposal to the Chancellor of the Exchequer and the Chief Secretary to the Treasury, suggesting that industry would blossom and grow if we included in the autumn statement something to help with capital allowances. I was delighted to see that such a measure was included in it. Industry needs confidence to grow and it needs confidence to start to invest. I believe that this major part of the autumn statement has not much been picked up around the country. Companies in Burnley, to which I spoke prior to the autumn statement, assured me that such a measure would help them to invest in brand-new plant and equipment, so I shall follow up to see if they have delivered on that.

Some plant and equipment could be made mainly in the UK, but some of it will come from abroad. The main point, however, is that the companies investing in this plant and equipment will need more people to work on the new pieces of kit. They will also become more efficient and deliver more profits—and hence provide more tax. That will obviously help the country along.

Another interesting feature of the autumn statement that was not published anywhere else was the increase from 100% to 120% in the Government Actuary’s Department rate for self-invested personal pensions. We have tied pensions to the triple lock, so that the vast majority of old age pensioners will receive an increase that is way above the inflation rate. However, this is a major step that will benefit those who have made their own arrangements through various SIPP and self-administered pension schemes. They will now be able to spend more of what they have invested in pension funds, rather than the Government’s holding it back, and that will create growth because they will start to enjoy spending money that they have saved over many years.

The main thing that we must do is invest in manufacturing. I used to be in manufacturing myself: I worked in the aerospace industry. Over the next 20 years, the airlines of the world will spend some $7 trillion on new aeroplanes and helicopters, and, as the second-biggest manufacturer in aerospace equipment, we must get involved. That will mean a growth of 5% in the industry every year, so over 20 years we will have to double our capacity to produce aerospace components. Well over 100,000 people already work directly in the industry, and the supply chain employs even more. The country must get involved, and in order to do that we must expand.

Another aspect of the autumn statement that was not picked up by any of the newspapers was the £100 million that the Chancellor has put into the aerospace supply chain. In Lancashire, the North West Aerospace Alliance has bid for a national aerospace supply chain centre to be built somewhere in the north-west. I hope that it is built in Burnley, but as long as it is built somewhere in the north-west, I shall be delighted. I am sure that you would love to see it built in Chorley, Mr Deputy Speaker, but I suspect that it will go to BAE’s new industrial park in Samlesbury.

We need a massive investment in the aerospace industry, but one of the big problems with the doubling of the industry over the next 20 years is the provision of staff with the necessary skills. Over the last 30 years, various Governments ignored apprenticeships—and the last Government were just as bad as their predecessors. I am glad that the coalition Government are investing in apprenticeships, but the wreckage of 20 or 30 years cannot be turned around in two years. Apprentices need to be given more time in which to learn the job, and I am delighted that that is happening.

The last Government wanted 50%, of students, or even more, to go to university and study subjects which, in the main, were no longer applicable. What we want is for young people either to go into apprenticeships or jobs or to go to university to study the subjects of the future rather than the past: subjects such as high-tech manufacturing, including high-tech food manufacturing.

When I visited the British Aerospace apprentice school in Warton, I met the apprentice of the year, a young lady who had been on BAE’s apprentice scheme. She had been told by her college not to be an engineer but to go to university and study something else, because she was far too clever to be an engineer. It refused even to advise her on what an engineer was.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

I have been at a meeting of the all-party parliamentary apprenticeships group in the last couple of hours. About 30 apprentices were present. One of them, a woman who is now at Vauxhall, said that her school had spent all its time trying to persuade her to try to get into university rather than becoming an apprentice. It was clear from what she was saying that those at the school thought that it would be higher in the league table if people passed A-levels and went to university rather than entering what that woman said was a very fulfilling career. That seems to be the pattern in many schools today.

[Gordon Birtwistle]

I am grateful for that intervention, and I entirely agree with the hon. Gentleman. I am the chairman of the all-party group on apprenticeships. Unfortunately, I have been sat here in the Chamber today waiting to speak, instead of being at that all-party group meeting, and I am sorry I missed hearing from those apprentices.

The hon. Gentleman may recall that two Airbus apprentices came to a previous meeting. Both of them had turned down the chance to go to Oxford university in order to be apprentices at Airbus. Both of them said, “We’ve come to Airbus, and it has taken us through its apprenticeship programme and paid for us to go to university.” Both of them were proud to say they had bought new cars and were happy to pick up their friends, who had gone to university and now had not got jobs, and to take them out on a Friday night.

We must encourage young people to go to university via companies such as Airbus, Rolls-Royce and BAE Systems. I agree with the hon. Gentleman that it is wrong for schools to advise young people to go to university just to ensure that their figures for pupils attending university go up. That is outrageous, and it needs to be looked at. I have argued that case for quite some time.

[Mr Brian Binley (Northampton South) (Con)]

First, may I apologise for not having been in the Chamber for long?

I urge the hon. Gentleman to pick up on the issue of how schools deal with people who want to be apprentices. The Business, Innovation and Skills Committee has just undertaken a report on the subject, and that theme came up time and again. It is in all our interests to ensure that what has been described does not happen. We had too much elitism in the past, and we do not want it continuing in the future.

[Gordon Birtwistle]

Once again, I agree with the right hon. Gentleman. It is always a great moment when the right hon. Gentleman rises and speaks in this Chamber—even though he has only just turned up.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

On a point of clarification, Mr Binley is not a right hon. Member. He has been in the Chamber a little longer than suggested, too.

[Gordon Birtwistle]

I apologise. The hon. Member for Northampton South (Mr Binley) must have been so quiet that I had not seen him in his place.

I agree that the schools and colleges in this country must no longer downgrade apprenticeships, and must no longer say to students, “If you don’t pass, you’ll be an apprentice.” That is an outrageous statement for schools to make. It is time they woke up. I must say that it is also time that this Government’s Department for Education woke up to the fact that going to university is no longer the be-all and end-all, because there is far more to life than going to university.

I am a little upset that the Secretary of State for Education does not think a right lot about careers advice, because I believe that careers advice in schools is crucial. Young people need to be told about, and shown, what is available these days outside the school gates. The Secretary of State and his Department must realise that and advise schools that careers advice is crucial to young people’s futures. Perhaps even more importantly, it is crucial to the economy of this country, because if we do not train people for the jobs of the future, we will all go down the pan.

--- Later in debate ---

[Mr Meacher]

Of course I believe that there is a problem with the level of debt and the level of the public sector deficit; everyone accepts that. The issue is how it should be dealt with. I believe that the way this Government are dealing with it is profoundly self-defeating.

The Chancellor has failed in the sense that, according to the OBR, despite an output gap that remains incredibly high at 3.7%, the net effect of all his measures in the autumn statement will be to raise the general growth rate by a footling 0.1%. That is an extraordinary judgment on the Chancellor.

The Chancellor also failed his second test, which was to shift the economy on to a more sustainable long-term footing, moving away from his over-dependence on finance—a move we all agree with—and towards a much stronger industrial and manufacturing base. Eighteen months ago, he announced with great fanfare the march of the makers. That never happened, however. He has now promised a £40 billion guarantee for private infrastructure investment, but the problem is not one of too little credit; it is one of too little demand for credit. The latest figures show construction plummeting ominously, largely because of its great dependence on the public sector, which the Chancellor is shrinking. Moreover, UK manufacturing will this year suffer the biggest deficit in traded goods in its entire history—a deficit of roughly £110 billion, or 7.5% of gross domestic product. That is utterly unsustainable, and if that trend is not reversed, it will inevitably lead to an almighty crash in British living standards before long.

[Gordon Birtwistle]

rose—

[Mr Meacher]

I will not give way again, as I do not have much time left.

Why is the Chancellor not meeting his own tests? It is because he is obsessed with a neo-liberal ideology that forbids any public sector lead role in the economy. In fact, the Chancellor is crucifying Britain today on a cross of dogma. What should a sensible steward of the British economy do now? He should do two things: reinstate the capital spending programmes cancelled in the great drive towards deficit reduction, with special priority given to house building, energy and transport renewal and green technology; and set up a national investment bank with its own portfolio of investment projects, focused on key infrastructure and cutting-edge technology.

How will that be paid for? There are three options. Instead of any further £50 billion tranche of quantitative easing being used to consolidate bank balance sheets, as has happened every time up till now, the Chancellor should divert at least a portion of it towards generating 1 million or more jobs by investing it directly in industrial and manufacturing projects. Or he could levy a capital gains tax charge—I know that this would not be welcome on the Government Benches—on the colossal gains made by a minuscule proportion of the mega-rich, which The Sunday Times, a Murdoch paper, believes to have been in the order of £155 billion in the past three years. Or he could justify—yes, I think he could—a temporary increase in borrowing, of, say, £150 million to raise £30 billion at an interest rate of 0.5% on the reasonable grounds that with such a weak economy but cyclically adjusted net borrowing forecast at only 3% this year, he has given himself enough leeway to delay tightening. Those are the three options, and not to do any of them is a culpable negligence for which he will not be forgiven.

On the Chancellor’s second objective of rebalancing the economy, several measures need to be taken urgently. First, British manufacturing clearly needs a larger flow of qualified skilled workers. The academic underpinning of the STEM subjects—science, technology, engineering and maths—should be steadily increased; a viable and effective post-14 vocational route, with a much stronger work component, should be established in schools; and employers should be made to take responsibility for on-site training. Secondly, the bane of short-termist bank lending to British manufacturing must be tackled by giving incentives to develop a long-term ongoing relationship between banks and their customers, as is done very successfully in the German Mittelstand. Thirdly, the supply chains, which are crucial to any successful manufacturing economy but which have been broken up by privatisation and foreign sell-offs over the past 30 years, urgently need to be restored to achieve a secure base for SMEs. Fourthly, the sacrifice of key industrial sectors and companies to uninhibited acquisition in the international markets—Pilkington, P&O, Corus, BT, O2, Smith Electronics, Cadbury and BA; it is a very long list and a laissez-faire policy that no other major country in the west would ever allow—should be reversed if Britain’s economy and its survival are to be secured.

All those things need to be done, because the alternative under present policy is semi-permanent continuation of a condition of semi-slump.