Budget Resolutions and Economic Situation

Debate between Tobias Ellwood and Matt Hancock

Friday 23rd March 2012 Commons Chamber

[Matthew Hancock (West Suffolk) (Con)]

It is a great pleasure to serve under your enlightened chairmanship of this debate, Mr Deputy Speaker.

The debate has focused much on the immediate challenges and some specific measures, but I want to focus on the big picture. This Budget has seen a tax cut for 24 million working people and a wide range of measures to help Britain earn its way in the world. After all, this Budget was part of a series of Budgets to tackle the challenge of how to turn this country around after years of economic mismanagement. Some of that requires difficult and controversial decisions to be taken, but the fruits of these labours are not in the next day’s headlines, but in preparing our country for the world we live in.

My generation does not have the certainties of an economic world in which our main competitors were in the west—indeed, in the north-west of the globe and centred around the north Atlantic. We must compete against the growing tigers of the east and the growing and rapidly developing economies of the south, yet our economy was left unprepared for that. We all know that the fiscal situation was dire. Action has been taken over the past two years to deal with our debts, but we also need to ensure that we can earn our way in the world.

Understanding the international context might be helped by a few facts and figures, showing that we cannot any longer rely simply on trading with the old world to earn our living. Over the latest period, demand for UK exports by the European Union has been falling. Compared with January last year, the value of our trade with the EU is down £300 million, while exports to France fell by 14% and by 3.5% to Ireland. Those falls were more than offset by increases in exports to the rest of the world, however. Exports to the rest of the world are up 16% since January last year. Trade with China is up 30%, and trade to India is up 15%. There have also been rises in respect of economies with which we do not have much of a history of trade; our trade with South Korea, for instance, is up 145%. Our trade with our Commonwealth partner, South Africa, is up 57%, too. It is clear that our international trade patterns are changing rapidly, and we can no longer simply rely on Europe and north America to pull us through.

[Mr Ellwood]

My hon. Friend is making a powerful speech. Will he join me in congratulating both UK Trade and Investment on its work in promoting British industry and the Foreign Office on expanding our embassy empire, which had shrunk under the last Government?

[Matthew Hancock]

I compliment UKTI on the turnaround it is undergoing under Lord Green, the exceptional new trade Minister, who has vast experience and extensive contacts across the world. I commend the work he is doing both in the Department for Business, Innovation and Skills and with the Foreign Office, which is putting resources into the effort to increase our trade with the rest of the world, which has languished for so long.

I shall focus now on certain measures that I believe should be taken. Some of them might be controversial in the short term, but in the long term they will all prove to be beneficial and will change views. We must better inform people about the taxes they pay and the effects of those taxes. We also need a simpler and more attractive tax regime, to ensure that people want to create jobs in our country and international companies want to expand here.

We also need an active industrial policy. That is considered a controversial proposal by some of my party colleagues, but my argument is that the Government already put their imprint on the different sectors of the economy. Our financial services regulations are different from our pharmaceutical regulations, for instance. Also, Government decisions on where to put the roads that Opposition Members are happy to welcome has an impact on the rates of development in different parts of our country, and the development of High Speed 2 will, we hope, reduce the north-south divide. The Government have a sector-by-sector stamp, therefore, so we should use the power of Government where it can be a positive force, rather than simply say, “Government must get out of the way.”