Jobs and Growth

Ian C. Lucas Excerpts

Wednesday 12th October 2011 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

It is a privilege to wind up this debate as shadow Chief Secretary to the Treasury. I may be new to the job, but after five hours of debate today I am still no clearer on this Government’s plan for jobs and for growth. Even on the day when unemployment has reached a 17-year high, the Government have no plan for jobs and for growth. Today’s numbers are proof that plan A has failed.

While Government Members say that there is no alternative to the policies being pursued by the Government, the Opposition have put forward a five-point plan for jobs and growth which was set out by my right hon. Friend the Member for Morley and Outwood (Ed Balls), the shadow Chancellor, and supported by Opposition Members. My right hon. Friend the Member for Edinburgh South West (Mr Darling) reminded us that a year and a half ago, the economy was growing and unemployment was falling. How different from today. My hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) gave a vivid account of the impact that the Government’s policies are having on constituents in Hackney.

We heard about plans for jobs and growth rooted in the constituency experience from my hon. Friends the Members for Leeds East (Mr Mudie) and for Gateshead (Ian Mearns), my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson), my hon. Friends the Members for Middlesbrough (Sir Stuart Bell), for Wolverhampton North East (Emma Reynolds), for Coventry North West (Mr Robinson), for Bassetlaw (John Mann) and for Great Grimsby (Austin Mitchell), my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) and my hon. Friend the Member for Bristol East (Kerry McCarthy).

From the Government Benches we also heard some constructive speeches, particularly from the hon. Members for Chichester (Mr Tyrie), for Sevenoaks (Michael Fallon) and for Aberconwy (Guto Bebb). Some Government Members, however, defended plan A 100% but none of them, remarkably, wanted to talk about unemployment in their constituencies. One hon. Member gave a speech not even knowing that unemployment in his constituency was up 29.2% in a year. If that is not proof that plan A has failed, I do not know what is.

Let me rebut some of the Greek myths that we heard from the hon. Members for Spelthorne (Kwasi Kwarteng), for Rossendale and Darwen (Jake Berry) and for Bromsgrove (Sajid Javid), which they use as a smokescreen for their austerity programme. First, UK debt is just over 60% of GDP; in Greece it is over 150%. Secondly, the average maturity of our debt is roughly 13 years, compared with around six years in Greece. Thirdly, bond yields were falling in the UK ahead of the general election, but they were rising in Greece. Fourthly, Greece is part of the eurozone and so, unlike the UK, cannot devalue its currency. This is a story of two very different economies. The Greek defence for austerity simply does not add up.

I urge hon. Members to look at the facts. We have great British businesses, great British industries, great universities and people in all our constituencies who want to work hard and get on. Let us celebrate and build upon our successes, rather than talking Britain down. Instead of the mantra of resignation and defeat from Government Members, the shadow Chancellor has set out practical policies for jobs and growth. What a contrast and what a different message on how to support families feeling the impact of rising energy and food prices. What a different message to businesses worried about sales and accessing finance. What a different message to young people looking at the prospect of enormous debts when they leave university, with less and less hope of getting a job.

When Labour left office unemployment was falling, but today’s figures show that unemployment, at 2.57 million, is higher now than at any point during the recession, at a level last seen under a Tory Government. Youth unemployment, at 991,000, is the highest ever on record and is inching ever closer to 1 million. Unemployment for women has increased by 40,000 since May and is now above 1 million, the highest level since 1988. Last week’s GDP revisions show that GDP estimates for the second quarter had halved to just 0.1%.

Households are feeling the biggest squeeze on their income for 35 years, but our out-of-touch Prime Minister lectures hard-pressed families to pay off their credit card bills right now. Tell that to the ordinary families coping with the effects of the Government’s VAT hike. Tell that to the struggling small businesses trying to access credit from the banks. Tell that to the anxious young person who cannot even get a job. It is also crazy economics. Of course we all need to be prudent, but the Institute for Public Policy Research has calculated that if everyone were to pay off their credit card debts, consumer spending would be reduced by 6% and GDP would fall by 4%.

Growth has flatlined for nine months, starting before the European debt crisis. We have heard the Chancellor’s excuses. First he blamed the snow, then the royal wedding and now Europe. When will the Government stand up and take responsibility for their actions? The managing director of the IMF, Christine Lagarde, says growth is necessary for fiscal credibility, and she is right. It is because the economy has ground to a halt and unemployment is at 2.57 million that the Office for Budget Responsibility now forecasts that we will borrow £46 billion more over this Parliament than planned.

It is not possible to reduce the budget deficit while paying more in benefits and getting less through taxation. Austerity alone will not reduce the budget deficit without a plan for jobs and growth. As my right hon. Friend the Member for Edinburgh South West reminded us, 18 months ago unemployment was falling, and as my right hon. Friend the shadow Chancellor noted, John Maynard Keynes once said:

“When the facts change, I change my mind.”

John Maynard Keynes was a Liberal, and so too was the Chief Secretary to the Treasury. When he was a Liberal he said:

“We are in real danger of condemning a generation of young people to a cycle of unemployment and low expectations.”

How very prescient—on the day when figures reveal that youth unemployment has gone up to 991,000 under his watch. The Liberal Democrats were once progressives, but now they just represent failed economics, implementing the reckless policies that they said before the election would not work.

There has been much debate this afternoon about the growth strategy that the Government promised, instead of which we have simply had a strategy for failure. They increased VAT, costing families £450 a year, and cancelled the loan to Sheffield Forgemasters so that high-skilled jobs are now going to South Korea rather than south Yorkshire. They scrapped the regional development agencies and replaced them with a regional growth fund that is yet to spend a single penny. The Government have introduced what the Governor of the Bank of England described as the “weakest possible measures” to get banks lending—a ringing endorsement of their Project Merlin. Today the Government have announced the guarantee of a job interview for 50,000 young people, but young people want not just an interview but a guaranteed job or training—a real opportunity, which they had under a Labour Government before the general election and before the future jobs fund was scrapped by this Government. With policies such as these from the Government, no wonder the economic recovery has ground to a halt.

[Ian Lucas (Wrexham) (Lab)]

One of the most dreadful things that this Government are doing is that when they do spend money, for example on the rail or helicopter contracts, they do not support British businesses such as Bombardier and AgustaWestland but spend money on jobs and growth abroad. Should we not be spending British taxpayers’ money to preserve British jobs?

[Rachel Reeves]

I could not agree more with my hon. Friend, with 1,000 jobs going at Bombardier and Government policies putting people out of work and businesses out of business.

While the Government offer no relief, at least the Bank of England is offering some leadership, with an extra £75 billion through quantitative easing, which the Chancellor described just two years ago as

“the last resort of desperate governments when all…other policies have failed”.

Let me be frank. The last Labour Government were desperate to avoid a global recession becoming a global depression; desperate to ensure that unemployment did not hit the 3 million mark, as it did in the recessions of the 1980s and 1990s; and desperate to avoid the business failures and home repossessions that scarred our country in Tory recessions. Government Members should be desperate today, because unemployment is at a 17-year high, because borrowing in August reached a record high, because growth has stalled, and because plan A has failed.

Today, as we see the unemployment numbers, it would be nice to have a Government who reacted and said they have got it wrong. Instead, it takes Labour to come to the Chamber with a five-point plan: a £2 billion tax on bank bonuses and a guarantee of a job for young people; bringing forward long-term investment projects to get people back to work; cutting VAT temporarily to give immediate help to our high streets and to struggling families and pensioners; cutting VAT to 5% on home improvement repairs; and a one-year national insurance tax break for every small firm taking on extra workers. That is a five-point alternative that offers hope and unlocks opportunity.

We can call it what we will—plan A-plus, plan B, or the five-point plan—but this Government must come up with an alternative to help families struggling with rising prices and stagnant wages, to help businesses that cannot get a loan and are scared to take on new workers, to help young people who are facing record youth employment, and to help pensioners facing higher gas and electricity bills this winter. This Government must act for every struggling family, for every struggling business, and for every pensioner. They must act, with Labour’s five-point plan, to unlock the potential of every young person in Britain, to create jobs, and to get our economy growing. Their plan has failed. I urge hon. Members to support this motion.

--- Later in debate ---

[Danny Alexander]

I will not give way because I have little time to get through the points made in the debate.

Standard & Poor’s warned that our rating would come under pressure if the Government faltered in their commitment to fiscal consolidation. The markets have also backed us. When we came into government our gilt yields were tracking the likes of Spain and Italy. Since then, our yields have fallen to follow those of Germany.

Our plan makes a real difference to households and businesses. It allows families to stay in their homes and businesses to refinance their debt. As the Chancellor said, without a credible plan, interest rates would rise. A 1% rise in interest rates would take £10 billion out of the pockets of British families through higher mortgage costs, leading to higher repossessions and more job losses. That is the Opposition’s plan.

[Ian Lucas]

I am very grateful to the right hon. Gentleman for giving way. Given that youth unemployment is today approaching 1 million and that as a Liberal Democrat he touted for votes by offering the abolition of fees and by pursuing the policy of the Labour party, rather than the policy he is now pursuing, does he not think that it is entirely understandable that young people have no faith in politics? Should he not say sorry?

[Danny Alexander]

No, the hon. Gentleman should say sorry, and of course we are supporting Airbus, in his part of the country, as part of our strategy for creating jobs.

We have only to look across the eurozone to see the costs of political indecision and the price that comes from consolidating at the behest of the market rather than taking charge of one’s own destiny, as the Government have. We have seen the problems in the eurozone and are working to help, but we already have flexibility in our own plan. By taking the tough decisions that we have on fiscal policy, we have provided the space in which the Bank of England can act. In the Governor’s own words,

“monetary policy is the right way to take the strain of changes in the world economy.”

As we have already said, we are considering credit easing options as a way to inject money directly into the business sector. We will provide further details in the autumn statement, and I am grateful for the welcome given to that policy on both sides of the House.

Of course, today’s unemployment figures are a reminder of the difficult task that we face. Unemployment is not merely a statistic; it is a high cost for the individuals and families concerned. It is not a price worth paying, and that is why we will be relentless in our pursuit of growth.