Business and the Economy

Rachel Reeves Excerpts

Monday 14th May 2012 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

This has been a valuable debate on Her Majesty’s Gracious Speech, with 44 speeches from the Back Benches, which reflects the concerns raised in all our constituencies about jobs, business and growth. We heard 26 speeches from the Opposition and 18 from Government Members. My hon. Friend the Member for Wansbeck (Ian Lavery) said about 20 minutes ago that at this stage in the evening it is difficult to say anything new, given that so many people have made the points already. We have heard several thoughtful and provoking interventions. We even had a song from my hon. Friend the Member for Blyth Valley (Mr Campbell), which livened up our afternoon.

[Mr Ronnie Campbell]

rose—[Laughter.]

[Rachel Reeves]

I am happy to take an intervention if my hon. Friend wants.

The Chief Secretary to the Treasury and the Government have serious questions to answer after this debate, because there remains concern about the stewardship of the economy. As my hon. Friends said, particularly my hon. Friends the Members for Bethnal Green and Bow (Rushanara Ali) and for Huddersfield (Mr Sheerman), my right hon. Friend the Member for Birkenhead (Mr Field) and my hon. Friend the Member for City of Durham (Roberta Blackman-Woods), there is a lack of vision, leadership and imagination in the Queen’s Speech on the economy and business. The hon. Member for Cleethorpes (Martin Vickers), too, said that the Government needed a new narrative.

The facts are undisputed. Our economy is in recession—the first double-dip in four decades—with unemployment rates too high and business investment too low, although to listen to some speeches from Government Members we would think that the economy was booming, with businesses spoilt for choice over whether to invest. In contrast, we have heard excellent speeches from Members on both sides of the House about the concerns raised by our constituents. We heard particularly powerful contributions from my hon. Friends the Members for Llanelli (Nia Griffith), for Houghton and Sunderland South (Bridget Phillipson), for Newcastle upon Tyne North (Catherine McKinnell) and for Edinburgh East (Sheila Gilmore)—on the human stories behind the raw statistics, sound and successful businesses shutting up shop because no one is buying, families facing rising bills, rents and mortgage payments while wages are not keeping pace, school leavers and university graduates losing hope as months on the dole turn into years.

However, the Government’s legislative programme seems utterly disconnected from those realities. There was no mention of the new jobs that we need, and nothing to turn round the crisis of more than 1 million young people being out of work. The modest measures that the Government have claimed will help struggling families and businesses are turning out, under examination, to be woefully inadequate to the task with which we are confronted. Perhaps it is because, as the Foreign Secretary said yesterday, the Government think that it is just not their responsibility and that the reasons for the recession are to be found not in their own failure, but in the fact that the rest of the country is just not working hard enough. That is a view backed up by the Business Secretary, who referred to the Foreign Secretary’s remarks as “commercial diplomacy”, and by the hon. Member for Salisbury (John Glen), who criticised businesses for their ill-advised criticism of Government policy. I am not surprised that the Foreign Secretary’s comments have been met with incredulity by small business owners, who are working every hour of the day to keep their books in balance.

[Julian Smith]

Does the shadow Minister welcome the £50 billion increase in exports in 2011 from the UK to international destinations?

[Rachel Reeves]

I am sure that businesses welcome the fact that sterling has depreciated, which has made it easier to export, but that is because of the Bank of England’s decision to cut interest rates, under the last Government, and quantitative easing, also under the last Government.

We have seen another example of how out of touch Government Members seem to be with the reality facing businesses, families and young people. School leavers and graduates are filling out dozens of job applications week after week—should they be working harder? Millions of people who would work extra hours if the work was available; families feeling more squeezed by the month, worried sick about how to make ends meet—is it their fault that we are back in recession? Should they be working harder?

Let us remind ourselves—for the Government seem to be in denial—that the backdrop to this debate is the first double-dip recession that the UK has experienced in 37 years, an outcome that the Government assured us would not happen. However, less than two years after boasting that the British economy was

“out of the danger zone”—[Official Report, 15 December 2010; Vol. 520, c. 901]

and was now a “safe haven” from the storms raging through the global economy, the Government have succeeded in steering us into a recession of their own making. They have tried to blame the instability of the eurozone, but I point them to the European Commission’s spring forecast, which says of the UK economy:

“The main cause of weakness in 2011 was household consumption, which contracted for four consecutive quarters…Investment, which had been expected to contribute positively to growth, actually fell by 0.6% in the final quarter of 2011 and by 1.2% over the year.”

Indeed, contrary to Government claims that storm winds from the continent blew their plan off course, the European Commission confirms that for the UK:

“Net exports were the main source of growth in 2011, contributing 1% to GDP growth.”

We should therefore be in no doubt and under no illusion: this is a recession made in Downing street.

With the eurozone now teetering on the brink of another downward spiral, the real worry is that we have yet to feel the full effect on the UK of the economic turbulence on the continent. The Business Secretary is right to warn that the worst may be yet to come, which makes it all the more serious a failure to have put the UK economy in such a weak position to withstand further deteriorations in financial market confidence and export demand. As my right hon. Friend the shadow Chancellor warned over a year ago, when a hurricane is brewing, we do not rip out the foundations of the house, but that is exactly what the Government have done, and the hurricane is now gathering force.

Let us look at what this recession means for jobs and business in our country. The latest jobs figures show that unemployment remains at a 17-year high. Youth unemployment is at more than 1 million—an issue raised in today’s debate by my hon. Friends the Members for Birmingham, Selly Oak (Steve McCabe) and for Birmingham, Erdington (Jack Dromey) and by my right hon. Friend the Member for Knowsley (Mr Howarth). The number of 18 to 24-year-olds claiming dole for more than six months has gone up by 115% over the past year. The number of those claiming for more than 12 months is up by 213%. In the Prime Minister’s latest desperate dissimulation, the austerity he is inflicting on the country is now called simple efficiency. However, I do not see anything efficient about presiding over rising youth unemployment, as my hon. Friend the Member for Walthamstow (Stella Creasy) also pointed out.

There is surely no greater waste than the waste of youth unemployment. It is a waste of talent and of life chances that will cost our economy and our Exchequer for decades to come, as the commission headed by my right hon. Friend the Member for South Shields (David Miliband) set out so lucidly in its report. There is no more egregious an example of Government mis-spending than the billions that they are spending on benefits—the cost of their own economic failure. They are now borrowing £150 billion more to cover rising benefit bills and the loss of tax revenues as businesses go out of business.

[Julian Smith]

Will the hon. Lady give way?

--- Later in debate ---

[Rachel Reeves]

I have already given way to the hon. Gentleman once this evening.

Meanwhile, caught between the pincers of a squeeze on lending and horrendous trading conditions, more and more businesses are going under. The Government cannot create jobs, but, as hon. Members on both sides of the House have said, they can and should do more to create the right environment for job creation. That is what has been so lacking in the Budget and in the Queen’s Speech.

Figures released by the Bank of England last month show that, in February, bank lending to companies fell by £4 billion—the sharpest drop for more than two years. Meanwhile, the Nationwide consumer confidence index fell by nine points last month. The inevitable result is that insolvencies are rising and rising. In the last three months, we saw 4,303 insolvencies in England and Wales alone—an increase of 4.3% on the same period a year ago, and the highest figure since 2009. The lack of policies for growth were highlighted today in thoughtful contributions from my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) and my hon. Friends the Members for Blyth Valley and for Wansbeck.

The businesses that are staying afloat are doing so by battening down the hatches. The latest industrial production numbers show a further decline, and we now know that construction output fell by 4.8% in the first quarter of this year, suggesting that the initial estimates of first quarter GDP, if anything, understated the extent of the economy’s contraction. But the truth is that, whether they are revised up a decimal point or two, or down, the statistics only confirm what we should already know from talking to families, businesses and young people in our constituencies.

Families and businesses desperately need the Government to get a grip and get us out of the deep hole that they have dug us into. Instead, we have a programme of Bills that lack any sense of urgency or, indeed, relevance to the reality of life for most people in this country right now. The Prime Minister and his Cabinet seem to be living in a parallel universe. Indeed, the only person whose employment prospects the Prime Minister seemed to care about was the head of News International. I can tell him that the million people who have lost their jobs since he came to power do not need a text message telling them to keep their heads up. They need a real plan for jobs and growth, and a Government working night and day to find ways to help them to get by and to get on in life.

This Government give the impression that there is nothing they can do, and that we should just resign ourselves to years of hardship while waiting for something to turn up, but the reality is that a Government who really cared could do so much more to make a difference to the lives of our constituents. Labour Members have made proposals that could help to turn our economy around, and that could help businesses struggling to break even and families struggling to make ends meet. Why will the Government not implement a national insurance holiday for small firms taking on extra workers, to help businesses struggling to survive and young people desperate to get into work? Why will they not bring forward investment in vital infrastructure projects, so that we could create new jobs in the construction sector at the same time as securing our future economic strength?

Why will the Government not reverse their damaging VAT rise? That would boost business and consumer confidence, and kick-start the growth that we need to get the deficit down. Why have they refused to repeat the tax on bank bonuses, so that money squandered on bonuses by banks that are not doing their bit to get our economy growing could be clawed back and put to better use, funding 100,000 jobs for young unemployed people and the construction of 25,000 new and affordable homes?

Why have the Government not taken the opportunity of this Queen’s Speech to announce legislation that could protect and improve the living standards of families feeling the squeeze—for example, by creating a more competitive energy market, with guaranteed low tariffs for 4 million people over the age of 75, by stopping train operators clobbering commuters with high fares, and by empowering consumers with new rights against rip-off surcharges by banks, airlines and pension providers? As my hon. Friends the Members for West Bromwich West (Mr Bailey) and for Stoke-on-Trent Central (Tristram Hunt) have said, why was there no Bill in the Queen’s Speech on higher education or on co-operatives? What do we get from this Government? Just the hope that something will turn up—a hope that their own inaction and inadequacy will spur the British people to greater efforts.

This is a legislative programme that falls well short of what is needed. We need investment flowing into energy-efficient infrastructure and green technologies. Instead, we get a green investment bank that has nothing to invest. We need action to bring responsibility and restraint to the boardroom, ending unjustifiable pay packages that reward failure, but the Government’s proposals fall far short of what is needed. While this Government state that the priorities of the Queen’s Speech are economic growth, deficit reduction and help for businesses, there is nothing to boost bank lending to small businesses, nothing to help hard-pressed families and nothing to turn around the tragic rise in youth unemployment.

In conclusion, we heard great claims for this legislative programme—a Queen’s Speech that was supposed to mark the re-launch of this coalition, a plan of action that the Prime Minster said was about supporting growth and business, and giving a helping hand to families and those he called the “strivers”. The reality is, however, that people are striving to find anything in this programme that lives up to the rhetoric. This is a Government whose idea of a growth strategy is giving a tax break to millionaires, while cutting tax credits for those working for modest wages.

Having choked off the recovery and taken our economy back into recession, the Government who first blamed the snow, then the royal wedding and the eurozone now seem to be blame everyone but themselves for not working harder. The truth is that it is this Government who need to work harder. It is time the Prime Minister started taking responsibility for the recession he has created. It is time the Prime Minister started taking responsibility for turning our economy around. Yet there is precious little in this legislative programme to suggest that the lessons have been learned, and precious little to stop the economy from sinking further into recession. There is no sign that the Government understand the scale of the task before them, and nothing to reassure the businesses and working people of this country that we have a Government who are up to the job that now confronts us.

--- Later in debate ---

[Danny Alexander]

I was about to come on to the mess that the Labour party made of our economy, but the right hon. Gentleman’s question causes me to bring those remarks forward. One of the most calamitous failures of the last Labour Government was the complete failure to regulate the financial sector and to control the excesses that built up in the banking system, and the figures he gave are just one example of that. The banking Bill will implement the reforms that are necessary to deal with some of the excesses and, more importantly, to protect the taxpayer and the British economy from the sorts of problems that previously arose. It was very striking that in neither Labour Front-Bench speech did we hear any apology for the previous Government’s failure to regulate the banks properly, just as we heard no apology for the mess they made of our public finances and the many other mistakes they made, too.

[Rachel Reeves]

Will the Chief Secretary give way?

[Danny Alexander]

No. I have given way to the hon. Lady’s Front-Bench colleague three times, and I am now going to press on. I have only two minutes left, and she used up plenty of time.

There were a number of speeches about the groceries code adjudicator, including by the hon. Member for Macclesfield (David Rutley) and my hon. Friend the Member for St Ives (Andrew George), who played an important role in promoting the idea of the GCA and rightly welcomed the fact that the Government will take that forward. A number of comments were made, especially by Opposition Members but also from the Government Benches, on the enterprise and regulatory reform Bill. By and large, its measures on directors’ pay were welcomed, although concerns were expressed, particularly by Labour Members, about the proposals on employment law. The hon. Member for Bolton West (Julie Hilling) made that a key point in her speech, although I noticed that she welcomed the substance of the measures in the Bill, which are to do with providing more options before a tribunal is reached to enable complainants to resolve their case without the need to go through what she rightly describes as an often painful and expensive process. It is important that those measures are carried forward, and they will make a difference for many small businesses.

The economic context was an important theme in this debate, and Members on the Government Benches are fully aware that addressing the key issues is no easy task in the current economic climate, not least because of the crippling legacy the last Government left to us: a decade of unbalanced growth that left the UK one of the most indebted countries in the world; a decade that resulted in our having the most highly leveraged financial system of any major economy; and a decade that meant the UK entered the economic crisis with the highest structural deficit in the G7. All that meant that the UK was one of the hardest hit countries in the world when the crisis came.

Our recession was among the deepest and our deficit among the largest, which means that our challenge to deliver a sustainable recovery is among the greatest. Let me remind the House that when this Government came into office we inherited the largest peacetime Budget deficit this country has ever faced and the largest forecast deficit in the G20—larger than those of many of the countries mired in the sovereign debt storm in the euro area. It is only because of the decisive and immediate action we took that we have sheltered the UK from the worst of that debt storm.

The measures in the Queen’s Speech represent part of a bold and wide-ranging programme of economic reform: a strategy to rid the economy of the debt burden left by the previous Government; a strategy to secure our stability at a time of global instability; and a strategy that puts private sector enterprise, ambition and innovation at the heart of our recovery. It is the right recipe to clean up the mess that the Labour party left us and to bring this country back to sustainable prosperity.