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As the Minister for Climate Change and the Environment, I saw compelling evidence on global warming and how it will affect our planet if we do not take action, but I also saw the tremendous opportunities available to businesses that can become the first movers in helping to build the low-carbon economies of the future. As the Minister for Science and Innovation, I saw the world-class research expertise in our universities and the opportunities for innovation it presents for UK
companies with the skills and the imagination to help us respond to the challenges of climate change in a globalising world.
As the world economy emerges from the downturn, there will be major new opportunities for British business, but global competition is getting tougher and technological change is always accelerating. We cannot afford to stand back as other countries invest and raise skill levels in high-value sectors.
I consider it vital for the United Kingdom to continue to invest in infrastructure in the economy, and to have an active industrial policy. In April the Government outlined their vision for Britain’s economic and industrial future in a document called “Building Britain's Future - New Industry, New Jobs”, which explains where Government action can have the most impact. We need to invest in growth to speed recovery and support the manufacturing and services that are essential to ensuring that British people and businesses can compete successfully for the jobs of the future.
If we are to succeed in the high-tech, low-carbon economy that lies ahead, we need to act wherever we can to remove the barriers that hold business back. In April, in the Budget, we announced a £750 million strategic investment fund to support advanced industrial projects of strategic significance, £250 million of which will be earmarked for low-carbon investments. The statement that we heard earlier demonstrates the need for us to continue to take action on the low-carbon agenda. A further £50 million will be spent on expanding the Technology Strategy Board’s budget and its programme of support for business innovation, which is also vital to our long-term economic prosperity. It will help to drive future growth in areas such as low-carbon technologies, but also advanced manufacturing more generally in the life sciences. Those funds will help to turn more bright ideas into products that can succeed in the marketplace and improve our ability to identify the skills that are needed for future success.
As I have said, infrastructure—our energy infrastructure, water, transport and telecommunications—is vital to our future. I believe that, in that future, Britain will compete with other countries in the quality of infrastructure it can provide for its people and its businesses. Preparing for that future means adapting to the changes that are transforming the world in which our people and businesses operate. The digital revolution is one such transformation. The “Digital Britain” report that was published this week sets out clear plans for an active industrial policy to maximise the benefits of the digital revolution.
Mr. Tobias Ellwood (Bournemouth, East) (Con): The Minister talks of the importance of the infrastructure of Great Britain, and Members on both sides of the House agree that that is paramount, but why is it taking so long to create a common gas market in Europe? The security of energy supply that the infrastructure is supposed to bring is as important as the infrastructure itself. At present we are seeing the problems created by Russia’s turning the taps on and off and sending ripples throughout Europe. We must address that problem. It does not matter how robust our infrastructure is if no gas is coming through.
Ian Pearson:
I agree with the hon. Gentleman about the importance of an integrated European infrastructure when it comes to gas markets. He will know of the work
that the Government have done in seeking to promote open energy markets in Europe. It is important not only for Britain to have a 21st-century infrastructure but for Europe to modernise, and we recognise the interconnections involved in that.
Life sciences are also important to the UK economy. That is one of the reasons we created the Office for Life Sciences, which is working with industry to make further improvements in the operating environment for the pharmaceutical, medical biotechnology and health care technology sector in the United Kingdom.
In my view, there has never been a more important time at which to look to the future. Conditions will improve and confidence will return, in the United Kingdom, in Europe and globally. We are absolutely determined that when that happens, we shall be ready to take full advantage of the opportunities that the upturn will bring in a changing global economy. By setting out our vision for the long term, we are laying strong foundations for a prosperous and sustainable future. We will continue to work to deliver on that agenda to provide the support for new industry and new jobs that the UK economy needs and the British people want and expect a Government to deliver on their behalf.
1.25 pm
Tony Baldry (Banbury) (Con): When the Government’s business managers tabled today’s debate, I do not suppose they expected it to take place immediately after a very public spat between the Chancellor of the Exchequer and the Governor of the Bank of England. At last night’s Mansion House dinner there was more back-stabbing than back-slapping. The Governor made it clear that
“fiscal policy... will have to change”.
Very wisely, Mervyn King pointed out that in five years the national debt would be more than double its current level of around 40 per cent. of GDP. He said, without any ambiguity,
“it is also necessary to produce a clear plan to show how prospective deficits will be reduced during the next Parliament”.
The spat was all the more stark as a result of the Prime Minister’s very strange performance yesterday at Question Time. He seemed to find it impossible to give a straight answer on budget deficits, an issue to which I shall return shortly.
I am vice-chairman of the all-party parliamentary group on China, and last week I attended a conference about Hong Kong which had been organised by the Hong Kong trade office here in London. The message—the same message that we hear from the excellent Chinese ambassador to London—is that China is moving out of recession. Similar signals are coming from India. Some confidence is beginning to return to the London stock exchange, although it is probably too early to assert that the worst economic storm since the 1930s is over.
Professor Robert Shiller was in London a couple of weeks ago. It was Professor Shiller who predicted the end of the dotcom boom in March 2000. He was also one of the first to warn that the United States housing market was seriously over-valued, and that its collapse would have a huge impact on the world’s largest economy. When he was in London, he warned that the recent stock market bounce should be treated with caution. He and others think that we could be in for a W-shaped
recession, with recovery so fragile that we could be plunged into another slowdown as soon as we emerge from the present one.
There are still a number of issues that threaten any long-term recovery for the British economy. Rising unemployment, mortgage defaults and a possible further wave of company failures could surprise us yet. Today’s unemployment figures make grim reading. The ranks of the unemployed are now swollen to 2.26 million, the worst figure for 13 years. We seem to be losing jobs at a rate of 100,000 a month. There is every indication that unemployment will continue to rise, and will end up a great deal higher: an unemployment rate above 10 per cent. is almost certain. To put it more bluntly, unemployment may well reach more than 3 million.
As a result of the recession, Jobcentre Plus is becoming bigger by the day. It now has 70,000 employees. It is already the Government’s biggest agency, and it is seeking to employ an extra 10,000 staff. Even if the economy does start to turn up, the prospects for the jobless do not immediately look good. In my constituency, local unemployment is at a 13-year record high. The number of jobseeker’s allowance claimants continues to increase, a number of major local employers have had to make redundancies, and the local unemployment rate has trebled since March 2008. Locally, as a community, we are determined that no one should be left behind in the recession. We have set up two job clubs, one in Banbury and one in Bicester, to give every possible support to those who have lost their jobs: to support them while they are out of work, and to help them back into the world of work as soon as possible.
If the economy is starting to show some signs of sunshine, the clouds have yet to pass. As The Economist noted last week,
“another cloud already looms on the financial horizon: massive public debt.”
The simple truth is that our budget deficit is the highest in our peacetime history, and the highest in any G20 country. The reality is that we face a debt crisis. As I made clear in the debate on this year’s Budget, the reality is that existing Government plans show that whoever wins the next general election, Government spending will have to be cut. The figures are all there in this year’s Budget Red Book.
The Institute for Fiscal Studies says that the Government’s plans imply a cash freeze on Government Departments for three years from 2011 after debt interest and other unavoidables. Allowing for inflation, that becomes a 2.3 per cent annual real-terms cut, or 7 per cent over three years. Both the Conservatives and the Government have said that they want to protect health spending; that is obviously appropriate as we have a fast-growing population. As a former chairman of the International Development Committee, I am glad that we have made it clear that we will honour the promise we made to increase the development budget to 0.7 per cent. of gross national income. Given the reality of the Government’s Budget figures, and given the bills of rising unemployment and the huge interest costs of soaring national debt, many Departments will inevitably face budget cuts.
I think that everyone is now pretty much agreed that we have reached the limits of our abilities to take on ever more debt without risking the economy as a whole.
“We need”
said The Independent in a recent editorial
“this acceptance of economic reality so that our political system can move on to the serious debate about where those public sector cuts should or should not fall. If there is to be a reshaping of the public realm, it must be enacted with serious thought.”
In short, the debate that we need to have for the foreseeable future is how we tackle the debt crisis and deliver quality public services when spending is tight. Ministers—in particular the Prime Minister—seem incapable of acknowledging that reality. Let me give one example.
Even in the Department of Health things will be tough. Nobody is more respected on NHS research than the King’s Fund, and in its briefing on the Budget it says that
“from 2011 this period of growth will end. Treasury forecasts issued with the Budget suggest that the NHS is set to receive low or zero real growth in funding after 2011. The Institute for Fiscal Studies’ forecasts suggest real term reductions from 2011 are a strong possibility...the poor state of the public finances means that the NHS must prepare at best for very low or zero growth in funding from 2011 onwards. The government’s forecasts for annual real increases in total government spending on public services and benefits from 2011/12 were 0.7 per cent. However, the Institute for Fiscal Studies has calculated that once debt pressures and growth in spending such as unemployment benefits are taken into account, this 0.7 per cent. growth translates into an average real reduction of around 2.3 per cent. a year between 2011 and 2014 for the public sector as a whole...the scale of the challenge is magnified further by rising demand for health services with an ageing population and a higher incidence of chronic disease. Recent falls in NHS productivity are also a concern. Productivity must rise significantly if the NHS is to sustain and improve performance.”
David Nicholson, the NHS chief executive, put it even more starkly last week when addressing senior NHS managers. He told them to plan for spending cuts even more drastic than those already suggested. He says that NHS trusts will have to deliver between £15 billion and £20 billion-worth of financial savings over the three years from 2011 to 2014. Such cuts will be the equivalent of up to 6 per cent. of the current NHS budget. That is of very real concern to my constituents and myself. The most serious constituency campaign that I have had to wage during my time as a Member of Parliament in North Oxfordshire is to keep the Horton hospital a general hospital, to maintain all key services at the Horton and to ensure that we continue to have 24/7 maternity and children’s services.
I put the King’s Fund points to the then Health Secretary, the right hon. Member for Kingston upon Hull, West and Hessle (Alan Johnson), on 12 May. I asked:
“The King’s Fund advises that the poor state of the public finances means that the NHS must prepare, at best, for very low or zero growth in funding from 2011 onwards. I would like to know what the Secretary of State is doing to advise strategic health authorities that they must now start planning for zero or very low growth within the NHS from 2011 onwards”.
The answer from the right hon. Gentleman, who some say may be the next Prime Minister, was one of complete denial. He said:
“What we have done since the allocations that took place last December—it was a two-year allocation of 5.5 per cent. each year and included the ability to draw down £800 million of surplus—is
to say that there is a message here. It comes from the chief executive of the NHS as well, and it is that the NHS has to prepare for a time when we will not have such spectacular increases in growth...We cannot say at this stage what the expenditure will be in the NHS but we can say that it will continue to be our absolute priority. As the Prime Minister told the Royal College of Nursing yesterday, we hope very much to ensure that there are real-terms increases over the coming years, although they may not be at the same levels as in the past.”—[ Official Report, 12 May 2009; Vol. 492, c. 678.]
One wonders what sort of planet the right hon. Gentleman is on. I cannot believe that the Secretary of State for Health had not at least read the research from the King’s Fund. I am sure that the Secretary of State must have been talking to the chief executive of the NHS. It is depressing that when everyone is talking about more honesty from politicians, there seems to be collective denial from Ministers because at best this is waffle and, at worst and in reality, it is a collective denial by the Prime Minister and Ministers to face up to the facts.
According to the Government’s own figures, public spending in 2011 will see only a 0.7 per cent. increase. We have to start talking now in an adult and responsible way about how we can deliver more with less. We need some basic honesty, otherwise we know from experience what happens. We get a Treasury-led salami-slice approach to departmental budgets. Every Department regardless is told that they will simply have a smaller budget. We have been there before. All that happens is that it tends to harm front-line services as managers and mandarins push the pain away from them to those who are delivering services.
There are a number of ways in which we can make some easy savings. We certainly do not need to waste billions of pounds on ID cards. We need a sensible and grown-up debate on defence. We need to ask, importantly, how our public services can be made more efficient. Recent figures from the Office for National Statistics show that productivity levels across the public sector have fallen over the past 10 years. A cause for concern is that average public sector output in 2007 was 3.2 per cent. lower than in 1998. We have had increases in public spending but falling productivity from the public sector.
I have a simple plea. I suspect that, whoever wins the next general election, the next Parliament will be the hardest, toughest, most difficult and grimmest that any of us have lived through, but may we please have an honest and grown-up debate about how our public services do more with less, and may we please have an honest and grown-up debate about what the real figures are? Please can we cease this insane and mindless denial by the Prime Minister that what the Government have said in their Budget is the reality and the truth? If we can all acknowledge that, perhaps the public policy will be all the better for it. Otherwise all that will happen is that the country will waste a year between now and the general election. That is not in the country’s interest and it is certainly not in the interests of our constituents.
1.38 pm
Mr. David Anderson (Blaydon) (Lab): I will speak on three areas: supporting the good work that is going on in the economy, stopping some failures in the economy, and suggesting something that should be positive for the banking system.
In the north-east we have had good support over the last few years from the regional development agency—something I understand that the Tory party would do away with. If that is the case, and if the Tories were to get into power at any time in the future, that would be bad news for the north-east. The north-east, with One NorthEast working for it, has been successful in supporting manufacturing industry. We have set up the manufacturing advisory service, which has worked closely with north-east business. Some of the examples of successful interventions include support to a Tyneside brush manufacturer that reduced its energy bills by 35 per cent., and productivity improvements of almost £1 million at a Northumberland electronics company. A Teesside chemical company has saved £360,000 per annum by reducing equipment downtime following advice from the MAS. MAS North East Energy alone has assisted 240 companies, helping them to save £3.7 million in the past two years by giving them advice on how to eliminate waste, and guidance on energy costs. Overall, its work has helped to cut CO2 emissions by more than 25,000 tonnes in the last two years.
We are developing a range of new industries in the north-east, and we need the support of the regional development agency to keep that going, by taking both the opportunities given by carbon capture and storage and the chance to have a large offshore wind system; that is there for the taking, if we are prepared to go for it. To help in that, One NorthEast has set up the New and Renewable Energy Centre in Blyth in Northumberland, which has given support for those taking these measures forward. Ultra low carbon vehicles are also being developed; electric vehicles are being produced by Nissan. Companies in my constituency such as Tegrel and Romag in Consett are delivering charging canopies that will use photovoltaic cells so that cars can be charged in areas such as public car parks. That is a positive step for the future; this could be a huge development for this country, and it is being led and supported by One NorthEast.
We are also leading the way in plastic electronics, industrial biotechnology, and health care. In particular, One NorthEast has given support to the Centre for Life in Newcastle; I am the chair of the all-party group on muscular dystrophy, and I have been involved in work on neuro-muscular diseases at the centre, which is leading the world on that. I hope that, regardless of what happens at the next election, the RDAs will carry on supporting businesses in the north-east and throughout the country.
I now want to talk about a policy that has been a total failure for this country ever since it was first announced in the early 1990s: the private finance initiative. It has let this country down. I agree that we have delivered projects: we have built new schools and hospitals—but at what cost? According to a recent report, the cost at present is that we have had £64 billion-worth of PFI projects built, but we owe £217 billion-worth of repayments between now and 2033-34. Therefore, we will pay in almost four times the value of what we have got out: for every brick we have laid, we are paying for four; for every pound of value we have got, we have given £4, which does not sound like a good deal to me now. It did not sound like a good deal in 1992, and it certainly has not proved to be a good deal.
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