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"Lord Mandelson has raised the prospect of an age of austerity...in Britain under Labour...In the gloomiest assessment to date...the Business Secretary said there would be 'constraints for the next decade'".
Mr. Darling: My noble Friend Lord Mandelson talks about growth in speeches about three or four times a week. Like the rest of us, he has been making the case for the need for the Government to take action to get growth, for example by ensuring we get more broadband and we have the right infrastructure in this country. He has been making the case.
Mr. Jeremy Browne: The record of economic growth during the current Chancellor's tenure in office is far from impressive. However, the leader of the Conservative party has been explicit on this point: during his time as leader of the Conservative party-not when he was a student politician-he said GDP was no longer the party's priority and that what mattered now was GWB, or general well-being. We know the position of the Conservative party, therefore: the Chancellor is potentially inadvertently misleading us, because we know it is not a party that has growth as its main economic priority.
Mr. Darling: I have said that I am not convinced by the Conservative party's proposals. Its policy changes very often-two focus groups and it changes. It is going for growth now because it discovered its message on austerity was not going down too well with the public. All the parties will be judged on what policies we have to help people now, to ensure we get our borrowing down and to secure growth in the future. What people want to know is how the Government can intervene to make a difference so we get long-term sustainable growth, because that is what our ability to protect jobs and secure new jobs for the future will depend upon.
Mr. Darling: If the hon. Gentleman sits down nicely, I will let him back in later. I am mindful of what his ancestor did to a former Prime Minister when he fell out with him, so I will be very careful and make sure that I come back to him.
We need to be reminded of the recent action we have taken. That has made a difference, and people will look at how we reacted to what has turned out to be one of the deepest recessions ever and make a judgment on that. Let us compare what happened in the last big recession of the 1990s with current events. The extent to which Government intervention has made a difference is remarkable. It has made the downturn less painful than it otherwise would have been. In the 1990s, relative to GDP figures, twice as many households were repossessed, and about two and half times more businesses became insolvent. Crucially, relative to the fall in GDP, almost four times as many people would no longer be employed
if we had followed now the policies that were adopted then. It should also be remembered that in the 1990s and 1980s interest rates were not 0.5 per cent., as they are today. In the 1990s they were 15 per cent., and they were higher still in the 1980s. As a result of that difference between then and now, at present someone paying a mortgage of about £100,000 is saving over £200 a month, whereas in the 1990s they would have been paying over £900 more a month. That demonstrates the difference that is made when a Government are prepared to take action to help people and businesses.
Mr. Redwood: Is the Chancellor aware that most private businesses either cannot get any credit at all or are paying 10 to 20 per cent. in order to secure less credit than they actually need? He should be in the real world. It is only the public sector that borrows at somewhere near 0.5 per cent., because they are printing the money for themselves. The private sector is still in a credit crunch.
Mr. Darling: I will talk about bank lending in a moment, but let me point out something that the right hon. Gentleman will remember, because he was a Minister in the 1990s and also, I think, in the 1980s-in both those recessions. There is no doubt that one of the economic problems we faced at that time was very high interest rates that held back our economy. That was undoubtedly painful and it had to be dealt with.
Mr. Bellingham: The Chancellor was speaking about enterprise and wealth creation a moment ago. Can he tell the House what good the agency workers directive will do for small businesses, job creation and enterprise?
Mr. Darling: At every stage in relation to the directives that have come from the European Union, we have tried to do everything we can to ensure that we protect British jobs and have a vibrant labour market. Although unemployment in this country is too high and, unfortunately, will continue to rise for a while, one of the successes over the past few years is that because our labour market is more flexible than it used to be, unemployment here is lower than in America, France and many other countries. That is a very important factor.
Our support for individuals-whether we are talking about the cut in VAT, which the Institute for Fiscal Studies estimates has had the same effect as a 1 per cent. interest rate cut, the 22 million basic rate taxpayers who are paying less tax, the pensioners who have seen the benefit of our increasing the amount of capital that they can hold before they lose eligibility for pension credit, or the increase in pensions-shows that we have done everything we can to help people through this downturn. For home owners, we have managed to reduce
the level of repossessions that was expected. The "time to pay" scheme has helped more than 150,000 businesses spread their payments of £4 billion-worth of tax, and at the end of the day, 95 per cent. of that is still repaid to the Revenue. The numbers involved in the scrappage scheme might be small, but it has had a tremendous effect in boosting confidence. For example, Honda has announced that production of one of its models will be moved to Swindon from Japan, and Nissan has been able to take on more people. The outlook at the beginning of this year for the automotive industry was pretty grim, but the measures that we have taken have made a difference in improving and lifting the level of confidence. None of that would have happened had the Conservative party been in power.
Mr. George Osborne: Would the Chancellor please give me his answer to the simple question that I pose: why is Britain still in recession when almost every other country in the world has come out of recession? The Prime Minister said that he would lead the world out of recession, so why has Britain lagged behind the world in coming out of recession?
Mr. Darling: First-I shall come directly to the question-I should say that I have always been of the view that we would not see positive growth until the turn of the year; I have said that on many occasions in this Chamber and elsewhere. I have always been clear that I was not expecting, even in the revision we saw yesterday-it is good that the revision is in the right direction and that the rate of contraction was less than the Office for National Statistics had thought-to see us return to growth until the turn of the year. It was inevitable that countries would come out of recession at different rates. This country has a very large financial services sector, which in the long run will be of benefit to us, provided that the sector is properly supervised and regulated. That sector has patently had to go through some very difficult conditions, and that is bound to affect the rate at which we enter recovery. I do not think there is any great mystery about that; I would have thought that that was rather an obvious point.
The hon. Gentleman made great play of the fact that we have still to come out of recession. I think it is a good thing that other countries are coming out of recession, and I should say to him that every country that has done so has one thing in common: they all put in place a stimulus to their economy. That is something that he opposed, and when America came out of recession he tried somehow to pretend that nothing had been done-even the Republican Administration took a different view, let alone President Obama and his subsequent work. The stimulus is one of the reasons why America has come out of recession, and that is a very good thing, which I support.
Mr. Osborne: The Chancellor says that it was always obvious to him that because Britain had such a large financial sector we would be among the worst affected and our recovery would be delayed. Why then did the Prime Minister say that Britain would be leading the world out of recession? What did he mean by that?
The Prime Minister has given an extraordinary lead in getting international co-operation, which has helped a great deal. I would like to think that
I have been fairly consistent on this. When the hon. Gentleman and I were on our respective boating trips two years ago-my boat is somewhat smaller than the one on which he was spending his time, and it does not seem to have quite the same facilities-I said, when I came ashore briefly, that I thought this downturn was going to be quite long lasting and more profound than many people thought. And that is how it has turned out.
However, I also say-I stand by this-that I am confident that we are coming out of this, and I believe that we will see growth around the turn of the year. I have been absolutely confident about that. One of the reasons for that confidence is that we have taken the action necessary to stop the pain being greater, as it would otherwise have been. Furthermore, we are prepared to take the action to ensure that as recovery is established we not only strengthen our fiscal position, but get growth for the future. We need to remember what happened in the 1980s, when we came out of recovery only to go back into recession again. It is important to try to avoid that problem.
Mr. Jeremy Browne: The Chancellor said that he had always predicted that the British economy would return to growth at the turn of this year-presumably he was talking about the first quarter of 2010. However, my recollection is that the initial prediction under his Chancellorship was that the economy would return to growth in the third quarter of 2009-in July 2009-so that was not always the forecast. The forecast was revised backwards six months in the light of events. Is that not his recollection too?
Mr. Darling: If the hon. Gentleman looks at the forecasts that I made at the time of the Budget, he will see exactly what I said. I was making the point that there is no doubt that this downturn has been substantial, but I believe that the measures we are adopting are helping. One of the big things making a difference is that we have been able to get people who have lost their jobs back into work far more quickly than in the past. More than half the people who lose their jobs are back in work within three months, and almost three quarters are back in work after six months. Let us compare that with what happened in the past, when a whole generation went on the dole and stayed on it, many people finding that they were always last into jobs and first out when there was ever any difficulty. We were never prepared to accept that as an inevitable consequence of a downturn.
May I ask my right hon. Friend to stress the issue of unemployment more? I believe that in his 30-minute speech the shadow Chancellor mentioned it once, in the penultimate minute. That surely shows that the Conservative party still does not care about unemployment, and still seems to think it is a price worth paying. Secondly, I should say that almost all the
countries mentioned by the shadow Chancellor as starting to come out of recession have considerably higher unemployment than the United Kingdom.
Mr. Darling: That is the case: unfortunately, unemployment is 10 per cent. in America, 10 per cent. in France, 8.6 per cent. in Canada, 7.6 per cent. in Germany and 7.4 per cent. in Italy. Unemployment is higher in many other countries. This is about not just the economic responsibility of a Government, but their social responsibility to do everything possible to get people, particularly young people, back into work.
Mr. Russell Brown (Dumfries and Galloway) (Lab): My right hon. Friend mentioned that the shadow Chancellor talked about the level of unemployment among young people, stating that one in five were unemployed. Does my right hon. Friend have the figures to hand on youth unemployment under the Conservative Government?
Mr. Darling: My hon. Friend is right to say that youth unemployment in the 1980s and 1990s was one of the reasons why not only were we held back economically, but whole communities were scarred. That was especially so because a lot of the people who had lost their jobs were from particular communities that had very high unemployment. It is really important that we spend this money. The Conservative party's stance right from the start has been to oppose the action that we have taken and oppose the money that we put into the economy, including the £5 billion to help people get back into work.
Mr. Darling: Not just now. The shadow Chancellor was keen to quote people, but as we move towards a situation in which recovery is established he and his party are calling not only for opposition to the proposals that we put in last year, but for a start in cutting public expenditure now. I remind him that Dominique Strauss-Kahn of the International Monetary Fund said at the CBI earlier this week that it was
"too early for a general exit...We recommend erring on the side of caution, as exiting too early is costlier than exiting too late."
"the fall in the deficit will come about as a consequence of the recovery of the economy and will not be the cause of it. If you try to cut the deficit now in the mistaken idea that it will boost confidence, you will simply be adding to unemployment. Do Messrs Cameron and Osborne want to hand the Government the slogan, 'If you want higher unemployment vote Conservative'? That is what their pronouncements can fairly lead people to expect."
His point was that if we get ourselves into a situation where we start cutting expenditure and damaging the economy now, before recovery is established, we will all
pay a heavy price. I wonder why Baroness Noakes, who wound up for the Conservative party in the other place last night, said:
"There is no settled view on when and how fast to cut the deficit."-[ Official Report, House of Lords, 25 November 2009; Vol. 715, c.390, 459.]
That is not the policy of the Conservative party-its policy is to start cutting now. The Leader of the Opposition has made that clear, not least this week. Clearly, the Conservative spokesman in the other place takes a completely different view.
Mr. David Chaytor (Bury, North) (Lab): To return to the question of the deficit and the CBI conference, is not the strange paradox of the CBI's position, quoted by the shadow Chancellor earlier, the fact that it is simultaneously calling for deeper and quicker cuts to the deficit while being the most passionate advocate for big expansion in infrastructure? When it comes to Heathrow, Crossrail, high speed rail or the vast public subsidies that would go into nuclear power, the CBI wants more spending. It wants more spending on skills training and investment. Is there not some contradiction?
Mr. Darling: I noted that point when I last met the director general of the CBI. As I understand it, it is the policy of many of its members that we should maintain public expenditure, not least in the areas in which they have an interest. It is certainly the CBI's view that infrastructure spending is important. It is important, not just now but in the future.
Mr. Mark Field (Cities of London and Westminster) (Con): Given that the United Kingdom is lagging behind all other major industrial nations in coming out of this recession, does the Chancellor feel that he would have liked to have put even more money into a fiscal stimulus? If so, why did he not do so?
Mr. Darling: I announced the measures to support the economy at the pre-Budget report 12 months ago and in the Budget this year. I believed that it was necessary for us to support the economy. Some measures will cease at the end of this calendar year, such as the end to the reduction in VAT, and others, such as those governing the time to pay, which I mentioned earlier and which has been hugely beneficial to business, will continue.
The hon. Member for Cities of London and Westminster (Mr. Field) raises an important point that is worth reflecting on. Just as I think that we were right to support the economy as we did, and as we are doing at the moment, I believe that to withdraw the support now would be utter madness and completely damaging.
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