Jobs and Growth

Harriett Baldwin Excerpts

Wednesday 12th October 2011 Commons Chamber

[Ed Balls]

The hon. Gentleman would know the answer if he listened. I said that attempting to go £40 billion faster in deficit reduction than the plan the Chancellor inherited is not working, but pushing borrowing up. The right thing to do now is to expand demand—[Interruption.] Look, a one-year cut in VAT in its own terms would cost £12 billion. The question is what would be the impact on jobs, growth and deficit reduction. I am afraid that the Chancellor is borrowing not £12 billion more, but £46 billion more. The flatlining economy and rising unemployment mean that his deficit reduction plans are going off track. He should take the advice of the IMF and the OECD and change course.

[Harriett Baldwin (West Worcestershire) (Con)]

rose—

[Charlie Elphicke]

rose—

[Ed Balls]

I will make a little more progress, but I will take interventions from people who have not intervened. Good grief, I have given the hon. Member for Dover (Charlie Elphicke) enough of the wrong type of publicity already and do not want to do his career any more damage.

There is a credible alternative. Why will the Chancellor not act? He used to be so confident that his plan was working. It is patently not working. He and his cheerleaders on the Government Benches claim that however bad things get, he is trapped by the financial markets. He cannot take the advice of the IMF and the OECD and change course because it would lead to higher interest rates and recession. However, the IMF has said that we cannot have credibility without growth.

The markets know that rising unemployment and zero growth are undermining the Chancellor’s deficit reduction plan. One chief economist in the City at Baring Asset Management said last week:

“Growth is essential if the UK is to be able to finance new debt, repay old debt and convince the markets and credit rating agencies there is a modicum of competency in policymaking. The longer we pursue current policies, the more likely it becomes that the UK will be the next target”.

That is the real market view. We know that the credit rating agencies put out their press releases, but the real view, as the IMF has told us, is that having a flatlining economy and rising unemployment is the wrong way to get the deficit down. As I said, even the Chancellor’s friend at the IMF has said that

“growth is necessary for fiscal credibility”.

Britain has no growth. That is why our Chancellor is losing credibility.

[Harriett Baldwin]

Will the shadow Chancellor confirm that cutting VAT to 17.5% would cost £12.5 billion a year? Would that not simply shift demand from one year to the next?

[Ed Balls]

The Chancellor’s whipping team really must tell people to listen to the answers before they intervene.

The Nobel prize winner himself, Chris Pissarides, says in the New Statesman tomorrow that a temporary VAT cut is the right way—[Interruption.] I say to Government Members that Nobel prize winners who give good advice to the Chancellor should be listened to. Given that 70 more people are unemployed in the constituency of the hon. Member for West Worcestershire (Harriett Baldwin) than a year ago, perhaps she should start to listen too.