Jobs and Growth

Michael Fallon Excerpts

Wednesday 12th October 2011 Commons Chamber

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

I beg to move,

That this House notes that there has been no growth in the UK economy over the last nine months, compared to 1.8 per cent. growth in the previous nine months; further notes that families are feeling the squeeze, unemployment is rising again and the recovery was choked off last autumn, well before the eurozone crisis of recent months; agrees with the International Monetary Fund’s managing director that ‘growth is necessary for fiscal credibility’ and the IMF’s recent report which warned that ‘if activity were to undershoot current expectations and risk a period of stagnation’ the Government should ‘consider delaying some of their planned consolidation’; further notes that borrowing is forecast to be £46 billion higher than planned because of the slower growth and higher unemployment arising from the Government’s policy of cutting spending and raising taxes too far and too fast; further believes that the Government need a plan for jobs and growth if the deficit is to be reduced in a sustainable way; and calls on the Government to implement a steadier deficit plan and the Opposition’s five point plan for jobs, which includes a tax on bank bonuses to fund 100,000 jobs for young people, bringing forward long-term investment projects, reversing temporarily the VAT increase to provide an average £450 increase for a couple with children, implementing a one-year cut in VAT on home improvements, repairs and maintenance to five per cent, and a one-year national insurance tax break for small firms taking on extra workers.

In opening this Opposition debate on the economy and moving our motion urging the Government to kick-start Britain’s choked-off recovery and adopt Labour’s five-point plan for jobs and growth, I shall start by setting out the facts for the House and for the country. Over the past year the British economy has ground to a complete halt. The latest figures show no growth at all since last autumn. Consumer and business confidence has slumped. For three months manufacturing output has been falling. More than 16,000 companies have gone out of business. Employment is falling and today’s chilling news is that unemployment has risen by 114,000 in the past three months alone.

Unemployment here in Britain now stands at 2.57 million people out of work—the highest level since 1994. Unemployment is rising across the country. We have the highest level of unemployment among women since 1988. Most worryingly of all, youth unemployment, which a year ago was falling, is now rising again, up 74,000 in the past three months, with 991,000—more than one in five—young people out of work. There has been a 60% rise in youth long-term unemployment since February, and the overall level of youth long-term unemployment is at its highest for 19 years. What a waste of talent, what a waste of money and what a betrayal of this young generation.

[Michael Fallon (Sevenoaks) (Con)]

The former Home Secretary, Charles Clarke, said yesterday:

“I think the economic proposition that Labour puts at the moment is unconvincing.”

How can the right hon. Member for Morley and Outwood (Ed Balls) convince the House and the country when he cannot convince his former Cabinet colleague?

--- Later in debate ---

[Michael Fallon (Sevenoaks) (Con)]

I remind the House of my interest recorded in the register.

There is some common ground on both sides of the House. Growth is the key, and although the Government cannot create jobs and businesses, they can set the conditions for sustainable growth through sound money, a fair and competitive tax system, an infrastructure in which businesses can flourish and, above all, keeping control of their side of the economy—the public finances. The previous Government clearly failed to do that. They failed to balance their budget for nine successive years after 2001 and they doubled then redoubled the national debt, leaving us with the largest structural deficit in the G20. Worse still, for the longer term, they left us a rate of growth that simply was not sustainable because it depended on ever-increasing public expenditure—now, I note, more than 50% of GDP for the third year running—on a boom in commercial and residential property prices that simply was not viable in the longer term, and on an over-blown banking and financial sector. We are now dealing with the consequences of the collapse of that sector.

In the end, it was all an illusion. The previous Government created a pyramid of debt and called it investment. They spent all our money on an unreformed public sector without bringing the improvements in productivity that we saw over the same period in the private sector. On the capital side, they spent it on a whole series of expensively engineered, private finance arranged schools, hospitals and the rest. Above all, as was sadly confirmed yet again today, they left us a lost generation of nearly 1 million youngsters under the age of 25 who were under-educated, underskilled and under-equipped for the needs of modern business. That is why I support a Government who are now laying the proper foundations for genuine growth on top of their fiscal consolidation plan by encouraging bank lending, cutting taxes on business and cutting regulation.

I particularly welcome the announcement made by the Chancellor in Manchester, which he repeated today, about reforming the rules regarding employment tribunals, which will make employment easier. That is one reason why I support it—another is because it will reduce the huge cost to business not only of the awards themselves but of the time taken to manage and handle cases that businesses would prefer not to get to tribunal. I also support it because it is fundamentally, as the Chancellor has emphasised this afternoon, a deregulatory measure that recognises the rights of non-workers—those who are currently frozen out of the labour market but would be prepared to work if businesses found it easier to take them on.

[Sheila Gilmore (Edinburgh East) (Lab)]

We are being asked to accept that all small businesses that might take on employees have as their first consideration the possibility of being faced with an industrial tribunal, but, of course, if they are good employers, that is most unlikely to happen. Surely, the fact that they cannot sell their products if there is no demand for them because so many people are unemployed or feel at risk of unemployment, rather than whether they might be faced with an industrial tribunal, is the most important consideration for an employer in deciding whether to take on another employee.

[Michael Fallon]

Employers in my constituency tell me that they will do almost anything to avoid taking on any single additional member of staff. The hon. Lady has to recognise that the number of cases jumped to a quarter of a million in 2009-10. I welcome the change.

I hope that there might be agreement across the House on my next point. The two things that seem to be missing at the moment in our quest for growth are cash and confidence. I fully support what the Government are doing to encourage bank lending. It beggars belief that there was no agreement in place with the banks to stimulate lending to small businesses before the Merlin agreement was concluded this year. I support that agreement, but I also share the scepticism of the Chancellor and the former Chancellor about the stimulus that the first round of quantitative easing may or may not have given to bank lending. The jury seems to be out on that, but what it does seem to have stimulated is inflation. The Bank now admits, I think, that it may have added between 0.75% and 1.5% to consumer price inflation. Two years ago, consumer price inflation was 1.1%, whereas today it is four times that. I hope that the Bank will be mindful, if there is an inflationary effect, that inflation is already higher than we would like. If there is a squeezed middle, inflation is doing quite a bit of the squeezing, and I hope that the Bank will not forget its core task of getting inflation back on target.

In the end, confidence is the key. I hope that the Government will do everything that they can to back the companies that are successful, and to learn from their success.

[John Mann]

Will the hon. Gentleman give way?

[Michael Fallon]

I will not, if the hon. Gentleman will excuse me.

I visited a small business in my constituency that I want to tell the House about. It is called Rotosound and—I say this for colleagues who play guitar or other stringed instruments—it is the prime maker of guitar strings. It sells them not only throughout the United Kingdom, but to 60 countries around the world, and it is one of our great success stories. It sold guitar strings that were used by Jimi Hendrix, The Who and many other bands. It sells them to China, which could quite easily make its own guitar strings, probably more cheaply. People in China choose to buy our guitar strings because they are associated with one of our most successful industries—popular music—and because they are British. We need to distil the essence of successful exporters such as that company. The Government need to find the secret of those companies and do everything possible to back more of them if we are to deliver the jobs that our young people need.

It is clear from the debate so far, and certainly from the Chancellor’s speech, that only this Government can help to deliver the growth that the economy needs by laying the proper foundations for our fiscal consolidation, so that we get the modern economy that we need growing successfully again.