Jobs and Growth

Michael Meacher Excerpts

Wednesday 12th October 2011 Commons Chamber

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

Today, we were once again treated to a typically knockabout speech from the Chancellor. It was founded on the entirely specious notion that the cost of implementing the five points put forward by my right hon. Friend the Member for Morley and Outwood (Ed Balls) would be £27 billion, of which £15 billion is supposed to represent speculative market response. In fact, however, if any Government were to come forward with a plausible growth policy, it would almost certainly be greeted with a positive market reaction.

The key problem for the British economy today is not indebtedness; rather, it is lack of demand. The UK debt-to-GDP ratio is, in fact, quite modest, but Government cuts are clearly worsening the problem of lack of demand while hardly reducing the deficit at all because of falling tax revenues and rising unemployment. At present, for every 2.7 jobs lost in the public sector, only one is being created in the private sector.

The alternative policy is a public sector-driven jobs and growth strategy. That is the only way to get out of slump when the private sector contracts, which it is doing at present. We must get people off the dole, thus reducing the enormous cost of benefits, and get them into work where they can contribute to tax revenues as well as regain their independence. Keeping 1 million people on the dole costs £7 billion a year. For the same amount of money, 400,000 jobs could be created.

The Chancellor always says at this point, “Yes, but how’s it going to be paid for?” Well, I will tell him. It need not be paid for by borrowing at all. First, the growth dividend even from a miserable 1.5% growth a year still yields an extra £40 billion in Government revenues over four years. A financial activities tax in the City at even the modest rate of 0.05% would raise about £20 billion a year. The Chancellor changed the controlled foreign company rules and those for capital gains tax, capital allowances and inheritance tax. The only beneficiaries of those changes are corporations and the very rich, and they will deprive the Exchequer of a further £2 billion a year over the next few years. That money could have been used to create jobs. The reason the Government are not going to do any of those things is, of course, that they have an ideological hang-up about the public sector. The whole point about the massive cuts programme is that it provides the opportunity that the Conservative party has been awaiting for so long to squeeze the welfare system, shrink the state and make, once and for all, the transition from the public sector to a fully privatised economy.

The Chancellor has two answers to the important question about from where we get future growth. He says that it is by returning as quickly as possible to the pre-financial crash neo-liberalism City dominance. That is not tenable and it is not sustainable after what has happened. Secondly, he says that it is through private borrowing. Extraordinarily, the Chancellor, who rightly said before the election that private borrowing was out of control, is now proposing—this is the last resort of a pretty desperate man—to rack it up from its current level of £1.5 trillion to more than £2 trillion by 2015, which is an increase of 35%, according to the Office for Budget Responsibility. Of course that probably will not happen, but if it did it would certainly lay the foundations for an even bigger financial crash next time around.

My final point is that the elephant in the room, the state of manufacturing industry, is simply being ignored and neglected by the Government. Last year, the UK deficit on trade in goods was £100 billion—6.8% of GDP. That is simply not sustainable. We need a smaller City, and a bigger and more robust manufacturing sector. That means putting far more resources into improving manufacturing productivity; skills training; protecting strategic sectors of our economy from foreign takeovers; restoring supply chains in key sectors, which have been broken up by over-ready selling up; incentivising an increase in market share over short-term profiteering; and helping small and medium-sized enterprises to upgrade to be higher tech, so that they are less exposed to Asian competition. The Opposition do have a plan for growth. Until the Government come forward with a plan for growth, they do not have an economic policy worth the name.