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It is now going to get one, because on Monday we launched the Office for Budget Responsibility. We now have believable and independent growth numbers on which to construct a budget strategy, and next week the Budget will spell that out in more detail.

Toby Perkins (Chesterfield) (Lab): The Secretary of State will know that he is viewed, in his own party at least, as an economic Nostradamus. Does he seriously expect us to believe that the Office for Budget Responsibility report told him something of which, even with that huge brain of his, he was previously unaware? Most serious financial journalists are saying that the report showed that the previous Government's forecasts were accurate, so is he seriously telling the House that it led him to a policy so totally different from the one he had been campaigning on for all those months?

Vince Cable: That was starting to morph from an intervention into a speech. It did not require a great genius to see the fallacies in the bubble economy that was being created, and I was one of many people who saw the problem. However, the hon. Gentleman is getting to the issue of my position, which was also raised from the Opposition Front Bench, so let me deal with the question of cuts, the timing and what the sensible response is. The motion refers to a

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and talks about recovery being fragile, and it is fragile. There are risks in both directions. If there are rapid cuts in public spending, they of course run the risk of having an impact on growth; we all understand that, but there is the risk on the other side that if we did nothing or delayed taking action, there would be a serious crisis of confidence in the economy because of the sovereign risk crisis that is rolling around Europe.

I was specifically challenged to say why I had changed my mind on the subject, and I will tell the hon. Gentleman when I changed my mind. Before I entered this Government, I spoke at some length to some of the key decision makers in the UK, including the head of the Treasury, and we also had advice from the Governor of the Bank of England. Their advice was unequivocal: in the circumstances that we entered, we had absolutely no alternative but to act decisively and quickly. I always made it clear in opposition that we had to act rationally. We had to take account of growth on the one hand and sovereign risk on the other. Those factors had to be balanced. We have balanced them, and we came to the decision that early action was essential in the light of the circumstances that exist. That was objectively based on the evidence in the economy.

Rachel Reeves (Leeds West) (Lab): The right hon. Gentleman also met the permanent secretary at the Treasury and the Governor of the Bank of England before the election, so I am still not clear how his mind was changed between the election campaign and when he became the Secretary of State. Can he clarify what it was between those dates that made him change his mind?

Vince Cable: I do not know whether the hon. Lady was reading the newspapers when she was campaigning for election to this House, but there was a major sovereign debt crisis emerging in Europe. [Hon. Members: "Oh, come on!"] Well, I am sorry, but the gasps from Opposition Members suggest how utterly and completely out of touch they are with the realities of financial markets. We are talking about a very serious crisis, and the Government had to respond to it, as other Governments are doing now.

I congratulate the Opposition spokesman on being honest enough to acknowledge, in a rare departure from tradition, that he had been forward in accepting the need for cuts. Those on the Benches behind him who are so anxious about early cuts need to be aware-the Institute for Fiscal Studies pointed this out-that the previous Government were already engaged in a fiscal tightening of £23 billion for this financial year. We are now being accused of making cuts in the current circumstances, but the previous Government were planning that too.

That was on the record, and it was not just a theoretical abstraction; rather, many of us saw it happening. It happened in the Department for Business, Innovation and Skills, which the right hon. Member for Wolverhampton South East was responsible for. Lord Mandelson was the first Minister to put his Department forward for early cuts, which was why, in the run-up to the election, I attended a meeting of further education college lecturers in my constituency, 70 of whom were going to be made redundant. The reason for that was that those early cuts, introduced by the right hon. Gentleman, were working their way through to the
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front line of teaching. I then went to one of the leading science laboratories in my constituency, where 40 members of staff were being made redundant because of cuts made by the right hon. Gentleman and Lord Mandelson this financial year, so please let us not have any more of this pious nonsense about early cuts.

Mr Hanson: Whatever may or may not be the case with regard to early cuts, one decision that the previous Government did make was on contracts signed between 1 January and the election involving Vauxhall at Ellesmere Port, Airbus, Sheffield Forgemasters and many others. Will the right hon. Gentleman tell the House when he is going to decide whether those grants can proceed, in order to end the blight on those industries?

Vince Cable: If I get fewer interventions, I will be able to get to that point shortly. I am trying to develop the argument and respond to the perfectly valid points that the Labour spokesman made.

Andrew George (St Ives) (LD): Will my right hon. Friend give way?

Vince Cable: Okay; once more.

Andrew George: I am grateful to my right hon. Friend. I appreciate that he is concerned about interventions, but given that he is saying that his response has been rational, as I believe it has been, he will be aware that my part of the world-Cornwall-is the poorest region in the UK. By the Government's own admission, it receives less than the Government say it deserves in health funding and for many other public services. The Government rightly propose to abolish the RDAs, but what impact will that have on the poorest regions in the UK, if match money is not available for the convergence programme, for example, and those regions-the most impoverished and the most in need of investment-carry a disproportionate burden of the cuts?

Vince Cable: I am heartily relieved that my hon. Friend did not ask me an awkward question about the retail ombudsman, but he is right about Cornwall: it has special problems. As it happens, it has not been well served by the RDA. The South West of England Regional Development Agency covered areas such as Bristol and more prosperous parts of the country, which received an undue share of its attention. In the new structure, which I shall describe shortly, his county, and its county council and businesses, will be in a much better position to advance their cause.

Mr George Mudie (Leeds East) (Lab): Will the right hon. Gentleman give way?

Vince Cable: I have taken a lot of interventions. I am always generous, but may I come back to the hon. Gentleman?

I want to pursue the issue of cuts. I have dealt with the issue of immediate cuts; however, the question is where they were going to lead. I know that we have gone quite far in the modernisation of the House, but we have not got as far as PowerPoint projections, so I am a bit limited in what I can show. However, the right hon. Member for Wolverhampton South East will be familiar with the work that the IFS did before the election
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showing where cuts were going to appear in different Departments, had the Labour party been returned to power. I have here one of its charts, which shows what would have happened to the Department that I now lead. It shows a projection of cuts in the order of £4.4 billion, or 20%. That is what the right hon. Gentleman and his colleagues were planning.

Mr McFadden indicated dissent.

Hon. Members: You were.

Vince Cable: Indeed they were, although I do not think that the right hon. Gentleman can quite make up his mind whether to apologise or deny.

The IFS is an independent body-it has nothing to do with the Government-and I am talking about what it anticipated. It would be useful to contrast the scale of the cuts that the right hon. Gentleman and Lord Mandelson and his friends were planning to make in their area of government with what we have already done. In the first week of office we had to find cuts, and we found £830 million-we got £200 million back in recycled money and we have made a cut of £630 million. That is a large sum of money, but it is about an eighth of what we know a Labour Government would have taken out of my Department's spending. [ Interruption. ] We can quibble about the number, but very large cuts were being planned by the Labour Government, had they been returned to office. Let us be clear about that.

It would be useful to know what Labour was planning to do. The right hon. Gentleman objects to cuts in RDAs and cuts in industrial support, and he objects to the fact that student numbers are not rising by as much as he wanted, but where are the cuts going to come from? All from the science budget? All from FE colleges? I do not know. Perhaps he is too embarrassed to stand up and tell his colleagues on the Benches behind him what he was planning to do, but I would like to know, because we are in the middle of a very difficult spending exercise. I would like his advice, so perhaps I can set up a private meeting with him and Lord Mandelson, so that they can tell me what they were going to do. I would find that instructive.

Mr Mudie: Many of us have admired the right hon. Gentleman's pragmatism and judgment over the years, yet we remember what he said during the election campaign about the danger of clearing the structural deficit within the lifetime of this Parliament, which is a policy of his coalition partners. The Office for Budget Responsibility has now indicated that the structural deficit is much worse, yet the Chancellor is sticking to the same timetable. If the Secretary of State worried about that approach during the election, will he share with the House his worries about the deeper and worse situation that we now face, and the effect that it will have in pushing us back into another recession and increasing unemployment steeply?

Vince Cable: Of course there are dangers, and I spelled out earlier the twin dangers that we have to balance very carefully. Lest the hon. Gentleman imagine that I have suddenly developed an enthusiasm for strict
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public sector discipline, I suggest that he read the pamphlet that I wrote the best part of a year ago, in which I made the case for dealing with the structural deficit rapidly and in a radical way. That is entirely compatible with the strategy that we are now adopting.

Geraint Davies (Swansea West) (Lab/Co-op): Will the right hon. Gentleman give way?

Vince Cable: May I just finish this point?

It is clear that the Opposition's response in the motion to the budget cuts and to the issue of imbalance is really not very serious. Let us examine a couple of other fragments from it. It talks about the "business-led recovery" that they seem to want. I wonder how many people are aware that 21,000 new regulations affecting British companies were introduced in the past 10 years-that is six per working day. How on earth were the previous Government hoping to achieve a business-led recovery when businesses were being prevented from growing? A survey published today by Infotec shows that one in 10 British entrepreneurs were contemplating leaving the country for tax and regulatory reasons. That is the legacy that we now have to address.

The motion also states that the previous Government were

During their period in office, the competitiveness league tables-which are generally accepted-showed that this country fell from seventh to 13th. So that is what they meant by laying the foundations for us to be competitive.

Let me now turn to the vital industrial decisions about which several Labour Members are quite rightly exercised. A significant number of projects were signed up to before the election. Some were good; some were questionable. Many of them raised issues regarding value for money, affordability and other factors. Quite rightly and prudently, we are carrying out due diligence on those projects; we are working our way through them.

I can make one announcement today, however. It is right and proper that we should examine the decisions taken by the previous Government since 1 January, to ensure that they offer good value for money and are in line with the Government's priorities. That is entirely legitimate. This need for re-examination is something that the automotive industry, in particular, understands and accepts. Equally, however, it has urged us to reach our decisions quickly, given the time that has already elapsed in considering the loan guarantee projects.

The Prime Minister confirmed this week that the Government's support for the Nissan electric vehicle and associated battery plants would go ahead, and I am today able to announce that the Government have confirmed that a loan guarantee of £360 million will be offered to Ford, and one of £270 million to General Motors Vauxhall. This confirmation is, of course, subject to appropriate pre-conditions for our support being met, and to final decisions by the companies. We understand that GM is considering its next steps in the light of progress in obtaining funding from Germany, and I believe that it might not wish to proceed with our offer. However, the offer has been made and it is now confirmed. That is all I can say today. Decisions will be announced shortly on other specific projects.

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Ian Mearns (Gateshead) (Lab): The Secretary of State mentioned the due diligence being conducted on particular projects. The Prime Minister has referred to Lord Mandelson going round the country with a massive cheque book, handing out hundreds of millions of pounds, two thirds of which he said went into Labour marginal constituencies. Will the due diligence also involve taking a close look at where that money is being spent, particularly where those Labour marginal seats are now held by members of the coalition parties?

Vince Cable: Yes, indeed; we are looking at all the projects in a completely practical way. As I said, some of them are good, and some of them are not. It is as simple as that.

Mark Tami: The Government are obviously fond of reviews. We are about to have a defence review, which will involve the 400M military transport aircraft project. That will have an important effect on all wing production in the UK. How long does the right hon. Gentleman's Department think that review will take? Clearly, those companies could make the choice to site the work elsewhere, which would have a dramatic impact on the work force in this country.

Vince Cable: That was not part of this exercise. The A400M is clearly a very important project, and we are looking at it using the same kind of criteria-value for money, affordability-and decisions will be made on that, but it was not part of this review.

Andrew Miller (Ellesmere Port and Neston) (Lab): I, too, have received the news from General Motors that it might choose not to proceed, because of the current situation. However, if GM is to succeed as a business-as the Prime Minister said he wanted it to-it is important that we should have confirmation from the Government here and now that they will be ready to come back to the table and talk to the company, especially in relation to the next-generation vehicles such as the Ampera.

Vince Cable: Of course we are happy to talk to the company any time, and my door is open, but if the hon. Gentleman is saying "Can we have more money?"-

Andrew Miller: I did not say that.

Vince Cable: Well, the hon. Gentleman said that he wanted to support a new-generation project-

Andrew Miller: Oh, come on!

Vince Cable: The hon. Gentleman is showing some indignation. I am so used to hon. Members asking for more money, and I am sorry if I have underestimated him- [ Interruption. ] Okay, if it is simply a question of encouraging a valuable new project, I would be delighted to do that, and I hope that he will arrange an appointment.

Andrew Miller: The company is to make a statement in three quarters of an hour. Will the Secretary of State retain his current position and confirm that, should General Motors want that loan guarantee, it will remain open to the company to pursue it?

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Vince Cable: I cannot negotiate across the debating Chamber on the basis of announcements that are being made outside this place. It would be ridiculous to ask me to do so. I am, however, happy to keep in close contact with that project and with the people involved. It is clearly an important one, and we have confirmed today that we were willing to support the continuation of the loan. That is all I can say, but I am happy to talk to the hon. Gentleman and others about how we can take this forward constructively.

Gavin Shuker (Luton South) (Lab/Co-op): Will the Secretary of State give way?

Vince Cable: I have taken an enormous number of interventions; I will take one from the hon. Gentleman later.

Before I leave the car industry, I must point out that these projects were part of an assistance scheme for the industry, and I think that the Opposition Front-Bench spokesman would acknowledge that they were time limited. Other projects have already made applications, which are being properly considered, but we cannot have a situation in which the car industry, or any other, assumes that it can come to the Government for money, just because it has an interesting project.

It is worth underlining the point that, in large parts of the British car industry, brilliant companies have got through the recession without Government support. My first visit as a Minister was to the Bentley factory in Crewe- [ Laughter. ] Hon. Members might laugh, but that factory provides thousands of highly skilled jobs and a high-quality product. It is a subsidiary of BMW. It was very badly hit by the recession-it lost half its output-but it kept going. The management took a big pay cut, and the workers joined them, accepting that they had joint responsibility for the company. The company survived; it is now flourishing-it has some of the most sophisticated technology in Britain-and it did all that without a Government guarantee.

Lorely Burt: Land Rover, in my constituency, is another brilliant example of a company that has weathered the economic storm. It is now surging forward, and it is investing in research and development. I welcome the decision on GM and Ford, and we should all be concerned about having a level playing field in relation to the UK economy and those in other parts of the world. Can we use R and D investment and capital investment in advanced manufacturing plants such as these to provide at least a level playing field in relation to other countries, and to secure investment for the United Kingdom?

Vince Cable: I know that my colleague takes a close interest in these matters. She has represented the interests of Solihull and the factory extremely well over the past few years. I am very happy to talk about her proposal, but I want to emphasise the fact that the automotive assistance scheme does not have a permanently open door. Applications have been made, and they will be dealt with on their merits.

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