Amendment of the Law

Steve Rotheram Excerpts

Thursday 24th March 2011 Commons Chamber

[Vince Cable]

Yes, indeed. There is clearly a close link between the level of the budget deficit and interest rates, both long-term interest rates in the markets and short-term interest rates set by the Bank of England. That is why maintaining a monetary policy that is supportive of growth—which is what we are doing—requires fiscal discipline.

Let me now deal with how we can achieve sustainable, balanced growth, and what “sustainable, balanced growth” actually means.

[Steve Rotheram (Liverpool, Walton) (Lab)]

It has taken the Secretary of State 20 minutes to reach this stage.

[Vince Cable]

I have been dealing with a great many interventions from members of the hon. Gentleman’s party. I am always happy to do that.

I must begin by acknowledging that the task is a massive one, although there are some encouraging signs. Manufacturing is growing at its fastest pace for 16 years, the car industry is growing by 12% a year, and we are seeing a real-terms growth of 5.5% in exports. However, when it comes to rebalancing the economy, I do not pretend that we are anywhere other than at the beginning of a very long march. It is a long march because we inherited a structure that was horribly unbalanced and unsustainable.

Let me remind Opposition Members of some of the things that we inherited, quite apart from the deficit. There was a hollowed-out manufacturing sector that, under the last decade of Labour government, declined by more than the manufacturing sector in any other western country, from 21% to 12% of GDP. Exports were growing at half the rate of growth of world trade. As we were reminded by the shadow Chancellor himself, household debt was running at 170% of GDP, a higher rate than in any country in the world as far as our statistics can establish. We had a property bubble that was more extreme than that in the United States, and banks were encouraged to grow until their balance sheets amounted to more than 400% of the British economy. We had grotesquely distorted pay structures and lending behaviour, and a financial vulnerability of Irish and Icelandic proportions.