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Geraint Davies (Croydon, Central): Does the hon. Gentleman accept that the slight reduction in the rate of increase in employment is matched by an increase in the growth and productivity that would be expected as we approach full employment? On the point about German growth, does he accept that the International Monetary Fund's latest forecasts show a 40 per cent. reduction in German growth and a halving in United States growth and that, in fact, our growth is holding up very well at about 2.6 per cent., compared with Treasury forecasts of 2.5 per cent.? The basic point is that we are very strong indeed in the world scenario and that we need no lectures from the Germans.
Mr. Letwin: I shall soon come to some lectures, given by some Englishmen, although I do not share the hon. Gentleman's xenophobia. Had he been present at the beginning of my remarks he would have heard
Mr. Letwin: Had the hon. Gentleman not been moving between the one and the other, he would have heard me acknowledge the truth of his remark that there has been a huge slowdown in many other parts of the world and that, so far, we have been remarkably insulated. The whole tenor of my arguments is that there are worrying signs that we may not sustain that magnificent isolation from world events. I do not predict that we cannot; we do not know. I hope that we can and, as the hon. Gentleman suggests, we have so far. I am portraying the worrying signs.
Mr. Letwin: My hon. Friend is right and, to be serious about the issue of xenophobia, the UK has always depended heavily on a large amount of external investment. It is one of our proudest achievements that, in our period in office, we reached the stage that more was invested externally in the UK than in the whole of the rest of continental Europe. I do not know, but I suspect that that may still be the case. We certainly depend on external investment.
This country also depends on internal investment and what attracts the external investor attracts the internal investorthe entrepreneur within the UKand vice versa. The regulations and red tape that have been introduced are beginning to have a serious effect in eroding confidence in small and medium-sized enterprises and the people who are thinking of investing in them. That is a worrying sign. That problem is not being imposed on us from without nor has it grown within the market or the private sector. It has been imposed on the market by the Government.
There are many other sources from which one can glean the same picture. In the past year, the House passed 3,865 new regulations which, I think, is the highest figure on record. In March this year, an edition of Forbes contained a damning article on the present Government's fondness for regulation under the title "Tony Blair's Red Tape Factory". In a survey of Institute of Directors' members after the pre-Budget statement, 90 per cent. said that the Chancellor had not done much to reduce the regulatory burden on business and 44 per cent. of companies cited the regulatory burden as a barrier to growth. One can go on and on.
What the Government have done, continue to do andfrom all one cam tell from the Economic Secretary's remarksare happy to do is to continue regulating ever increasingly the small and medium sector, which is the sector that gives rise to employment growth. They ignore regional and trade imbalances and imbalances between production and services, between the domestic and corporate sectors and between savings and the creation of extra jobs. They adopt no strategy to deal with the imbalances but a positive strategy to worsen the difficulties that small firms face in generating new jobs at the rate that we require.
I am glad to say that I am nearing the end of my remarks. The Government are serious about their fiscal strategy and they have allowed the Bank of England to be serious about the control of the money supply. However,
Mr. Edward Davey (Kingston and Surbiton): We need to remember the purpose of this debate, on which the hon. Member for West Dorset (Mr. Letwin) touched at the beginning of his remarks. Our job is to scrutinise the documents that the United Kingdom sends to the European Commission. The ability to do so is the result of a Eurosceptic amendment to the European Communities (Amendment) Act 1993 on the Maastricht treaty tabled by Conservative Back Benchers who were not terribly happy with their Government, who they thought were too Euro-friendly.
We must question why the amendment was tabledit is a fairly good oneand why we should be scrutinising such documents. Presumably, we wanted to ensure that the UK's contributions to the debate about the eurozone and the European Union economy are well founded. That is an important part of what Ministers do at ECOFIN. We wanted to ensure that the information that our EU partners have about the UK economy is sound, so that we can improve their knowledge and understanding of it. One would have thought also that we wanted to ensure that the information that we send to our European partners would assist and enhance the UK's negotiating position in the different EU economic forums.
Mr. Letwin: Does the hon. Gentleman agree that almost certainly those who tabled the amendment did not imagine that the Red Book would be re-labelled "the assessment" and we would find ourselves debating the same item twice?
Mr. Davey: The hon. Gentleman, not for the first time, anticipates what I was about to say. The Red Book is certainly not written for such purposes; it is written for a domestic audience. In the last Parliament, it was not really an account of what was going on in the UK economy and public finances. Increasingly, it is becoming a document of Government spin and propaganda. The Budget 2001 document was a Panglossian pre-election propaganda sheet. It was hardly a detailed addition to economic analysis of the UK economy and public finances. That was pointed out at the time, it was a shame at the time, and to try several months later to send it off to Brussels and Strasbourg as a fair reflection of what is going on in the UK economy is total nonsense. The idea that we should approve the motion is also nonsense.
Let us consider how the document performs the three roles to which I have referred. Does it contribute to the debate on the EU economy? The EU economy is hardly mentioned in the document. We have analysis of Group of Seven activity and analysis of the United States economy, which is understandable and one of the better parts of the document, but nothing to do with the EU.
If we are bothered about influencing debates and the positions of our EU partners, surely we should be sending documents that give our view on what they are doing. This House should be debating what the Government are proposing to tell our EU partners about how their economies are performing and the eurozone is going. We are not given such information or a chance to debate a very important matter. As the hon. Gentleman said, the Government should be writing those documents, presenting them to the House and sending them to Brusselsnot this absolute nonsense.
Does the document improve the knowledge of our EU partners of the UK economy? Clearly it does not, as the hon. Gentleman set out in great detail. For obvious reasons, it is out of date. Presumably it was written in January or February and many changes have taken place in the United Kingdom and the world economies since then. For example, paragraph 2.26 on page 24 of the Red Book states:
The Chancellor used to go on about manufacturing when he was in opposition. An evening did not seem to go by without him appearing before a television camera telling us about the importance of that industry. He seems to have forgotten that now that he is in government. His policies do not seem to be developing the manufacturing sectorthe document is clearly remiss on that.
I shall not go on about the imbalances, as the hon. Member for West Dorset (Mr. Letwin) did. I share his analysisit is good that the Conservatives and Liberal Democrats have that in common. However, the document clearly failed to improve our EU partners' knowledge and understanding of the UK economy. At the summit after its publication, the forecasts for the UK's public finances for 2005-06 were available and the Chancellor was rapped over the knuckles by our EU partners in the Commission for running a sustained deficit of 1 per cent. of gross domestic product. His remarks when he returned were terse. He said that our EU partners had got it wrong; they did not understand that his approach was cautious and prudent and that the deficit related only to investment.
I think that the Chancellor was right. I understand why he was so annoyed by the EU partners and the UK press coverage of what they said. It goes to show that the document does not properly explain the UK position. It is not written for that purpose. If we want to ensure that our EU partners understand the UK strategy, we should write a document that tries to do that. The Government are failing in their mission.
The third reason why we might want to send the document to the Commission and our EU partners is to enhance the UK's position in future negotiations and discussions about what is in the interests of the UK economy, perhaps because we are thinking of negotiations in the run-up to a possible entry to the single currency. The most important negotiations in the next few years are those on UK entry, except that the document is almost silent on that. There is a box on EMU preparations taken solely by the UK Treasury within the domestic economy, but it has nothing to do with negotiations or the exchange rate. That is where the document is most lacking.
I spent an interesting 15 minutes prior to the debate trying to find references to the exchange rate. They were difficult to find. Perhaps I missed a few references in my brief flick through the document, but the first mention of the exchange rate that I found was on page 163. One might have thought that the exchange rate would be rather more important in the assessment of economic policy, but it merited no earlier mention than that.