Policy for Growth

Stella Creasy Excerpts

Thursday 11th November 2010 Commons Chamber

[Stella Creasy (Walthamstow) (Lab/Co-op)]

It is with some trepidation that Labour Members listen to the economic forecasters who speak of their uncertainty about the future of our economy. That is because for us growth has always been a priority. We know that it is both the foundation of economic prosperity and the motor for social change. For us, growth should be a central objective of Government, because without that determination, aspiration—as we see with the present Government—is just that, rather than achievement.

Economic growth depends on both supply and demand: supply of goods and services that people want to buy, and demand for those products. At times of economic upturn as well as downturn, Government, alongside the private sector, can be a key player in ensuring the flow of demand. It was no accident that the last Government decided to invest in capital projects to help to keep the economy moving in the midst of the global recession. It was not a case of money down the drain or a short-term fix; that investment provided real schools, real roads, real hospitals and real services to serve generations of people to come. It was a savvy outlay, as we saw in the earlier part of the year, because the growth that it brought back to our economy is helping to reduce the cost of the investment.

We know that the present Government take a very different view. Just as we are tipping back into a growing economy they wish to pull the plug, taking investment out and looking to the private sector to keep the bath filling up. That may make sense in monetarist theory books, but history has shown us that pulling investment out of an economy in the fragile stages of recovery is damaging to that recovery, especially in an economy in which the public and private sectors are so intertwined. Anyone who doubts that the public sector can generate private sector investment should go to Newport and see what the Office for National Statistics has done for the area, or go to Salford and see what the BBC has done there.

It is hard for economies to grow when businesses see contracts abandoned, workers see redundancy looming, and families see spending as dangerous. Rather than freeing the private sector to blossom, that approach to growth could cause both sectors to shrivel.

The legal judgment against the Secretary of State for Communities and Local Government is not a simple matter of procedure. Construction companies in the private sector are losing building contracts, which is affecting their balance sheets, their businesses and their ability to borrow. Will a construction company be able to go to its financiers and honestly say that it believes that Government contracts are a safe investment? It also makes little sense for those who seek to use the private sector to encourage growth to cut investment in the infrastructure that it needs in order to thrive. This is not just about new schools or university places; it is also about investment in becoming the world leader in new jobs and new economies such as our creative industries or the green industries. It is also about the human investment that an economy needs in order to grow.

The work of Professor Paul Gregg of the university of Bristol shows that unemployment at an early age is not just a waste of resource in our economy, but permanently scars the life chances of people who, in later life, experience much lower wages as a result of that early setback. The last Government understood that very well. They understood that the cost of unemployment was not only the spiralling price of the dole queue, but the long-term waste of potential. That is why they established the future jobs fund. The decision to cancel the fund—along with the falling opportunities for young people in universities, the lack of support enabling young people to benefit from training and education, and the cuts in education maintenance allowance—represents more than a passing shortage of funds. It increases the prospect that we shall have a generation of young people who find themselves less experienced, less skilled, and therefore less attractive to potential employers, sandwiched between their younger and older peers. Even if the economy picks up they will always be damaged goods, destined to earn less and do less as a result.

Let me be clear. The country needs a strategy for economic growth that sees public investment as just one tool for fiscal stimulus. There is no doubt that getting the tempo of spending right is the most difficult challenge that we face. If we spend too much, inflation will rocket; if we spend too little, our economy will shrink into recession. We Labour Members also know this, however: take away the support that our economy has had—to proven effect—too quickly and both the public and private sectors will fail. We can pay down the public debt and achieve fiscal consolidation through cutting spending, raising taxes and, above all, concentrating on growth. Each of those must take the strain, but without growth, cutting spending becomes its own driver of deficit.