Without those three little helpers-those three legs of the stool-we do not get the economic support or growth that, under the plans being put forward by the coalition Government, are essential if we are to mitigate the worst excesses of the proposed cuts, beyond the Red Book. What we do get is all the pain of savage cuts, and absolutely none of the gain. That will go on for years.
In fact-I hate to say this, but I am not alone in doing so-we could well go backwards. If, in a year, we are slipping backwards or limping along like some invalid at the bottom of an economic cycle, it will not be because people such as me failed to stand up and make the opposing case. It is important that someone does that, alongside the economists outside the House.
Jacob Rees-Mogg: I am grateful to the hon. Gentleman for giving way, but I do not quite understand his logic. Two of the three legs of the stool to which he refers-the loose monetary policy and the devaluation-remain in place, to the benefit of British industry. It is only the third leg that is absent.
Huw Irranca-Davies: Indeed. Those two legs have been put in place already, but Sweden and Canada actively used both of them during the period of the cuts in order to make the cuts work. We can no longer do that, and we certainly do not have economic growth.
I put that to the Chancellor in this Chamber on two occasions last week. On the first, he dealt with what I said as a purely party-political matter, and swatted me down. I understand: we do that in this place. On the second occasion, however, he did not have an answer, saying merely that this was a matter of judgment-and that is what I am worried about.
This is a very important issue. All our funding for health, education, social services, local authorities, transport, and the attack on poverty is entirely dependent on one big macro-decision about how we go forward from this recession. If the coalition Government are right, I say good luck to them: they will get my praise in one, two, or five years. However, if they are wrong-and no one on the coalition Benches is willing to accept that there is even a scintilla of a possibility that they could be wrong-they must recognise that some people told them so in advance, and with good reason.
The scenario may have been different in the 1980s, but we saw the effect that the approach adopted by the Government had then. We saw it in a very personal way, as friends who used to have jobs became unemployed. They would knock on our doors asking to clean windows or do other odd jobs just to make ends meet. We knew what was happening, because our children went to the same schools, and that is why I ask the Government please to accept that there is an alternative.
What do others say? Economic commentators such as Will Hutton, Paul Krugman and David Blanchflower have all pointed out that the proposed cuts are about twice as extreme as those undertaken in Canada and threaten the recovery. The cuts seem to be motivated not by a good examination of the alternatives, but by ideology.
I return to my opening comments to the hon. Member for Bournemouth East. The Financial Times suggests that the emergency Budget will affect Wales-my home patch-disproportionately. I know that. As many as 50,000 to 60,000 jobs could be lost in the public sector,
but that is not all. The knock-on effect of the loss of between 50,000 and 60,000 public sector jobs, in my constituency or in that of my hon. Friend the Member for Pontypridd (Owen Smith), will be the loss of jobs in the private sector and the loss of retail confidence. High street shops will go and the bottom will be knocked out of our communities. Unemployment, and regional inequality, will grow and grow.
"No country has ever volunteered such austerity. It is as tough a package of retrenchment as the IMF imposed on Greece, a country on the brink of bankruptcy."
The economist David Blanchflower noted that the effects of the Budget will hit young people disproportionately, and that a double-dip recession is almost inevitable. A double-dip recession is the spectre in the room-a Government Member urged us not to use that phrase but it would be remiss of me not to mention it. Of the forthcoming comprehensive spending review, David Blanchflower says:
"If the young are first, I fully expect the disabled, the old and the weak to be the next target."
There is an alternative way forward and I genuinely ask the Government to consider it. Will they also consider a new version of the Tobin tax, or Robin Hood tax-much derided for many years? It is good to see a bank levy, but it could have been more ambitious. An open letter to the Chancellor was signed by many Members, including our Green party representative, the hon. Member for Brighton, Pavilion (Caroline Lucas), Welsh MPs, cross-party civic organisations, Save the Children Wales, Christian Aid Wales, the secretary of the Public and Commercial Services Union Wales, the National Association of Probation Officers Wales and GMB Wales. It states:
"We are pleased that you support a bank tax, but a truly ambitious bank tax would mean those with the broadest shoulders bear the brunt of the cost of the economic recovery, whereas a rise in Value Added Tax or premature cuts to public services would hit the poorest hardest."
That letter was genuinely cross-party. Some of the greatest advocates of that approach sat in the Liberal Democrat camp on the Opposition Benches, and we tried very hard to get a signature from a Welsh Liberal Democrat. It seems that the lines about premature cuts are now out of date.
I say to the Government, please be right. We often pull at the emotional heartstrings about the 1980s, but if the Budget damages my communities as I think it will, when there is an alternative, I shall certainly never forget or forgive, and nor will my communities, because we have seen it all before. I hope we are not seeing old-style 1980s Tory cuts. I hope that the measures that the coalition Government say will mitigate the worst excesses for the lowest deciles and quintiles are well judged, but I fear they are not. Why are the coalition Government not even considering an alternative way forward that minimises the risks to communities such as mine?
Geoffrey Clifton-Brown (The Cotswolds) (Con):
It is a privilege to make my first speech in this Parliament and to do so from the Government Benches. May I
congratulate you, Madam Deputy Speaker, on your election? It is great to see you in the Chair. I also congratulate my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) on a splendid maiden speech. He will obviously go on to represent his constituents with great poise and ability.
I should like to pay tribute to my new right hon. Friend the Secretary of State for Business, Innovation and Skills. Far from being the damascene conversion that Opposition Members have mentioned, his ability to meet the top officials in the Treasury and the Bank of England, study the evidence and conclude that he had been wrong in his assessment of how quickly we need to deal with the deficit shows a man of huge stature, to be honest. It is incredible that the shadow Chancellor, who must have been in possession of the same advice, came to a completely different conclusion.
Today's debate has been fairly predictable, and I am certain that if Opposition Members were true to themselves they would say that they know perfectly well that, if they had been elected-God forbid-as the Government of this country, they would have had to take some pretty severe measures to deal with the deficit that we have inherited. I pay tribute to the coalition Government, frankly, for being as brave as they have been. This is an austere and difficult Budget, and every person-rich or poor-in the country will take pain. There is no getting away from that.
Owen Smith: Does the hon. Gentleman think that the volte-face performed by the Secretary of State for Business, Innovation and Skills reflects perhaps more on his inconsistency and shifting values, as opposed to the position adopted by Labour Front Benchers that has been consistent either side of the election?
Geoffrey Clifton-Brown: I rather wish that I had not given way for that intervention, but, frankly, it says more about the hon. Gentleman than about the Secretary of State for Business, Innovation and Skills, whom I regard as having the greater stature because of what he has done.
I am amazed that the shadow Chancellor can conclude that severe action did not need to be taken to deal with our deficit. If we had not begun to take such action, the international markets would have taken the lead. Spot interest rates and bond rates would rise sharply. The cost of financing the huge deficit that we inherited would rise substantially. Business failures would accelerate. Unemployment would rise. Ultimately, by not taking the action that we have taken, we would return to recession. I completely take the opposite view from that of Opposition Members, who have said that we do not need to deal with deficit in the way we have now done.
Those siren voices of the Opposition would have led us into greater trouble than we are in now. What we see from the Opposition is a legacy where the gap between the rich and the poor grew in their 13 years in government. I would be bitterly disappointed if the Government's actions do not lead to the economy being immeasurably stronger in five years' time. We can then start to reduce that gap and put money into poor communities, exactly as the hon. Member for Ogmore (Huw Irranca-Davies) wants us to do, so that we can start to benefit some of the poorest people in society.
It was a huge tribute to the Chancellor that he said time after time yesterday that he wanted to bring the bottom of this country nearer to the top, with some of the measures that underlie the Budget-for example, how he will deal with the state pension. Opposition Members had 13 years to deal with the state pension. More than 1 million pensioners had to go grovelling to the Government and to fill in huge forms to get pension credit. We have now promised that everyone will receive a pension increase linked to earnings, prices or 2.5%, whichever is higher. That is real promise. Pensioners can now look forward to receiving at least a 2.5% increase from 2011.
Angela Smith: I remind the hon. Gentleman that the Labour Government legislated to make the link between pensions and earnings possible in 2008, and that we were timetabled to introduce that in 2012. Will he confirm his Government's intention to pay the winter fuel allowance next year at the same level as we paid it to our pensioners last year?
Geoffrey Clifton-Brown: I remind the hon. Lady that the Labour party won the election in 1997. The Labour Government had between 1997 and 2008 to do something about that, but meanwhile more than 1 million pensioners had to go through means-testing and fill out huge forms to get pension credit. A considerable number did not want to claim the credit, because they were too proud to do so, and they therefore lived in poverty. In the first few weeks of this new Government, pensioners have got a better deal than at any point under the 13 years of the previous Labour Government.
Gordon Birtwistle (Burnley) (LD): Does the hon. Gentleman agree that the Labour Government's 75p increase for pensioners a number of years ago, which was reduced to 50p after tax, was an insult not only to pensioners, but to the people of this country, which is supposed to be one of the modern countries of the world?
Geoffrey Clifton-Brown: I entirely agree with my hon. Friend. Many pensioners have told me exactly that-that it was an insult-so I hope that we can move away from treating our elderly people in such a way. As I have said before in the House-I remember raising this point with the then right hon. Member for Sedgefield during Prime Minister's questions-the way in which a society treats its elderly people is a mark of that society's civilisation. I hope that we will treat our elderly people with respect.
In an excellent, sober speech, my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) put his finger on an interesting yet under-mentioned aspect of our economic problems. It is demonstrated by the table on page 7 of the Red Book, which shows that private debt has doubled in the past 13 years. It is, of course, up to members of households to make their personal decisions, but it is also up to the Government of the day to regulate the totality of private debt. The level of private debt has become unsustainable, something on which I often chased the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) in Budget debates. As the Red Book shows, the savings ratio was lower by the end of the Labour Government than at any time since the 1950s. It is incumbent on any Government of the day not only to encourage savings, but to ensure
that the savings culture exists in a stable regime in which inflation is not completely out of control. If we did not take the action outlined in the Budget, interest rates would rise, thus putting inflationary pressure on the economy.
Mark Durkan: Given the hon. Gentleman's concern to ensure that the Government always encourage a strong savings culture, what does he think will be the impact of removing child trust funds and abandoning the saving gateway?
Geoffrey Clifton-Brown: No Government would willingly take such action, as my hon. Friend the Member for Caithness, Sutherland and Easter Ross said. My right hon. Friend the Chancellor had to set out a host of tough choices yesterday, but I do not think that the Budget was ideological. The hon. Gentleman has to be honest with himself when he thinks about ways to deal with the deficit. We should not underestimate the scale of the problem. This year's public sector net borrowing requirement of £149 billion is almost the equivalent of the combined budget for health and education. The scale of the deficit explains why my right hon. Friend the Chancellor had to make really difficult and brave decisions, but by taking such action now, I hope that we will be able to return to a situation in which we can start to help some of the poorest and most vulnerable people in our society, which is what any responsible Government ought to be about.
We will get out of this mess by promoting growth in the private sector and rebalancing our economy. We need to get Britain innovating and making things, and to sell our goods and services to the rest of the world. All the calculations in the Budget are predicated on a rate of growth, and it is the private sector that will deliver that growth. By taking the right measures in the Budget and concentrating on the right things, we might be able to exceed the growth targets set out by my right hon. Friend the Chancellor yesterday. Labour Chancellors have been pretty bad at forecasting growth rates. My right hon. Friend, in line with the Office for Budget Responsibility, has given very prudent forecasts of growth rates. I sincerely hope that we will be able to exceed those forecasts.
Until the election, I served as the shadow Minister for international trade and development, and I know that the actions of the Chancellor in supporting exporters will be critical to how our country moves forward in the coming months and years. After all, in the years from 1996 to 2004, firms that were new to exporting achieved, on average, a 34% increase in productivity in their year of entry-the very fact of their going into exporting made them increase their productivity-and 60% of the UK's productivity growth was attributable to exporting firms. It is therefore welcome that the Chancellor mentioned exports twice in his speech yesterday.
UK Trade & Investment is the Government's arm that encourages exports and foreign direct investment. Its chief executive, Andrew Cahn, worked under seven different Trade Ministers in the previous Government. I hope that we will not have that revolving door in the present Government and that we will have consistency of Ministers, who will be able to look at our exports problem and achieve considerable improvement. In the years of Labour Government, UKTI's budget was cut consistently.
Manufacturing accounts for more than half of our country's exports. Labour Members will not like the figures I give, but they are absolutely true. In 1997, manufacturing employed 4.19 million people, but by December 2009, under Labour's stewardship, that number had fallen to only 2.592 million. In other words, there had been a significant decline in the number of people employed in the manufacturing sector. That happened despite the value of sterling falling 24% between July 2007 and the present day. Perhaps one of the most devastating of figures pertaining to the period of Labour stewardship is on our trade deficit in goods, which has increased from £3.1 billion to more than £21 billion.
If Labour Members want to know the reason why we had our longest and deepest recession of our post-war history, it is that the Labour Government failed to support sectors of our economy that provide sustainable economic growth. If we are to exit the grips of recession, cushion the impact of austerity and have a sustainable future, exporters will be the engine room and will need to be given priority in the Chancellor's thoughts and, indeed, across all Departments.
In his Budget statement, the Chancellor said that departmental budgets will be set out in the spending review later this year-quite rightly, he set a date for that of 20 October-with an average real reduction for unprotected Departments of 20%. Let me say to my right hon. Friend the Chancellor and my hon. Friend the Economic Secretary, who is on the Treasury Bench, that UKTI-our trade promotion body-is a rare thing: it is one of the few parts of Government that actually makes this country money. To meet the challenges of the future, to provide adequate support for our exporters and to attract FDI into this country, its budget must be protected, so that it can continue to support private sector growth and job creation in the UK.
We must also recognise that real reforms are needed to how we support our exporters and attract FDI to adapt to an ever-changing global marketplace. Those changes cannot be made without the correct budgetary support for UKTI, but the rewards for successful implementation are there. We appreciate the opportunities presented to us by having Europe on our doorstep and through our close relationship with north America. Currently, 70% of our exports go to the traditional developed markets of north America and the EU, but the financial support available for firms seeking to export to the wider and increasingly accessible world beyond that must be maintained, because estimates suggest that, by 2020, the EU and USA share of global gross domestic product will have declined to less than 40%. As was correctly identified-I tried to intervene on the shadow Chancellor-we have turbulence in our European markets and EU growth is expected to be sluggish for some time. That is why it is important that we pay due attention to rapidly expanding global markets elsewhere, which cost proportionately more to service than the easier markets of Europe and north America.
We must be proactive, not reactive. British firms must be backed to head for the second-tier cities in larger markets such as India and China. They must also look for unrealised potential in other countries first, before our competitors have won all the contracts. I looked at that problem around the world, and I found country after country where there was huge potential. The British were welcomed, our business men went out there and
expressed interest, but somehow it was the Japanese, the Germans, the Americans and the Chinese who popped in and got the contracts. We must provide better support for our companies.
We must benchmark the performance of UKTI against the best of other countries, so that our trade efforts match or exceed those of our competitors. With our overseas network of embassies, we have a fantastic platform for developing British business, and we cannot afford to let departmental cuts affect their work. We need a widely respected senior figure-a FTSE ex-chairman -to go out banging the drum for the UK, selling the country around the world, and consistently to visit those markets to build up contracts.
Nationally, we must concentrate our efforts away from the regional structure introduced by the previous Government. What nonsense that was. Different regional assemblies had offices in the same city, such as Shanghai or Mumbai, all competing with one another for the same business. What a waste of taxpayers' money, and what confusion it caused to those countries in which they were located.
Claire Perry: I am interested in my hon. Friend's important proposal for a roving ambassador for British business. Does he agree that there might be potential to retread Sir Digby Jones in that role, particularly as he said yesterday after the Budget: