Budget Resolutions and Economic Situation

Jack Dromey Excerpts

Thursday 21st March 2013 Commons Chamber

[Vince Cable]

I accept the hon. Gentleman’s congratulations. Life sciences are a key area. It is a difficult sector, because the business model of pharmaceutical companies is changing—they are taking much of their R and D to spin-off companies rather than having it at their headquarters. That has been painful, but my colleague the Chancellor of the Exchequer intervened to help to make the process in his constituency less painful than it otherwise would have been. However, the decision of that large company to have its headquarters and R and D centre in the UK in East Anglia is a vote of confidence in Britain.

I want to make one more point on the industrial strategy. Apart from supporting successful sectors, we must reinforce those elements of the economy that drive long-term growth—meaning, basically, innovation and skills. That is why I and the Under-Secretary of State for Skills who is responsible for apprenticeships are driving enormous growth in apprenticeships, particularly in key areas such as advanced manufacturing skills. It is also why we must invest significantly in innovation. We have therefore established the chain of catapults, and we have the excellent proposal that my colleague the Chancellor made yesterday for the small business research initiative for small business innovation.

[Jack Dromey (Birmingham, Erdington) (Lab)]

The Secretary of State is right that it was a mistake to cut investment in affordable house building. The £4 billion cut in 2010 brought about a collapse in affordable house building. Housing starts were down 11% last year, 70,000 more construction workers are on the dole, and there has been an 8% contraction in construction. If capital investment is key to getting house building and the economy moving, why did the Government not accept the proposal of my right hon. Friend the shadow Chancellor of the Exchequer for investment to build 100,000 affordable homes, which would have added 1% to GDP, put 100,000 construction workers back to work, and got the economy moving?

[Vince Cable]

Why did the Labour party not do that when it was in government? Why was its first proposal for stabilising the budget to cut capital spending, including on affordable housing? If the hon. Gentleman had read the Budget, he would have discovered that, in addition to the housing policies that will affect private mortgages, it included a significant increase in support for affordable housing in the social sector.

The second long-term change relates to money and banking. One of the big features of the post-crisis economies has been the way in which Governments have had to pursue fiscal consolidation—because of the inheritance they received, and ours was worse than most—alongside supportive monetary policy. I made my maiden speech in 1997 in support of the then Chancellor when he made the Bank of England operationally independent. That was an important and good reform. But we have realised over the years that the world has changed. Inflation took no account of the massive asset bubbles that grew up, and the regime was not prepared for the collapse of the financial system and the difficulties we have had rectifying it. That is why it is right that, following on from the very successful, improvised monetary policies that we have experienced, the Chancellor is now consulting on a changed regime, which will be more flexible and take account of the level of unemployment, the level of nominal GDP and other variables that are crucial to long-term growth.