I hope that there might be agreement across the House on my next point. The two things that seem to be missing at the moment in our quest for growth are cash and confidence. I fully support what the Government are doing to encourage bank lending. It beggars belief that there was no agreement in place with the banks to stimulate lending to small businesses before the Merlin agreement was concluded this year. I support that agreement, but I also share the scepticism of the Chancellor

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and the former Chancellor about the stimulus that the first round of quantitative easing may or may not have given to bank lending. The jury seems to be out on that, but what it does seem to have stimulated is inflation. The Bank now admits, I think, that it may have added between 0.75% and 1.5% to consumer price inflation. Two years ago, consumer price inflation was 1.1%, whereas today it is four times that. I hope that the Bank will be mindful, if there is an inflationary effect, that inflation is already higher than we would like. If there is a squeezed middle, inflation is doing quite a bit of the squeezing, and I hope that the Bank will not forget its core task of getting inflation back on target.

In the end, confidence is the key. I hope that the Government will do everything that they can to back the companies that are successful, and to learn from their success.

John Mann: Will the hon. Gentleman give way?

Michael Fallon: I will not, if the hon. Gentleman will excuse me.

I visited a small business in my constituency that I want to tell the House about. It is called Rotosound and—I say this for colleagues who play guitar or other stringed instruments—it is the prime maker of guitar strings. It sells them not only throughout the United Kingdom, but to 60 countries around the world, and it is one of our great success stories. It sold guitar strings that were used by Jimi Hendrix, The Who and many other bands. It sells them to China, which could quite easily make its own guitar strings, probably more cheaply. People in China choose to buy our guitar strings because they are associated with one of our most successful industries—popular music—and because they are British. We need to distil the essence of successful exporters such as that company. The Government need to find the secret of those companies and do everything possible to back more of them if we are to deliver the jobs that our young people need.

It is clear from the debate so far, and certainly from the Chancellor’s speech, that only this Government can help to deliver the growth that the economy needs by laying the proper foundations for our fiscal consolidation, so that we get the modern economy that we need growing successfully again.

3.51 pm

Mr George Mudie (Leeds East) (Lab): I am delighted to see the Chancellor still in his place. Oh, he is just going. I have that effect on him. I think he has heard enough in the previous four speeches, three of which were by members of the Treasury Committee—its best members; the rest are coming now. The last four speeches were very thoughtful, in contrast with what happened when the two Front Benchers had a go at one another. The public must see that as the Chamber at its worst; it was described as vaudeville. That is not the fault of the individuals concerned; it is the way this place is.

Following on from the speeches of the Front Benchers were speeches from the former Chancellor, my right hon. Friend the Member for Edinburgh South West (Mr Darling); the Chairman of the Select Committee; the hon. Member for Dundee East (Stewart Hosie), who represents the seat in which I was born; and my

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good friend from the Treasury Committee, the hon. Member for Sevenoaks (Michael Fallon). They were very good speeches, but that contrasts with what we heard before them, which is sad, in a way.

Two kinds of people watch the parliamentary channel during the day. There are people who will find the Front-Bench speeches lovely, because they are party animals of either party, and they like the cut and thrust, but there are also 100,000-odd additional people who are, or could be, looking at that channel: those who, in the last year—in the last quarter or month—have lost their job. Almost a million youngsters between 16 and 24 are out of work; they could be watching that channel, hoping that they will see that action will be taken to get them a job. They will have been despairing, until the last four speeches.

The hon. Member for Sevenoaks said that he saw some common ground. I think that there is some, inasmuch as whatever the bluster, something is clear after 15 months: cutting the deficit at the speed first suggested, backed up by a lack of a coherent growth policy—there was no growth policy; a document was hatched and brought forward six months later as an autumn statement—meant that the people watching knew that we were going to have a hard time. This debate will be an achievement if there is any acceptance in the Chamber that we cannot do what we have been doing for the past 15 months, but must do something additional—something different—because what we have been doing is not working. There are signs of that. The fact that the Chancellor went to the Bank of England and asked for credit easing to be done through the Bank, which was refused, and the fact that he is now taking the steps to do it himself, is good—

Mr Deputy Speaker (Mr Nigel Evans): Order. Will the hon. Gentleman please make his comments through the Chair?

Mr Mudie: Shall I start again, Mr Deputy Speaker? You have put me off. Can you remind me where I was?

The Chancellor was turned by the Governor, but he was treated very well by the House because he had spent half an hour saying that he would not spend money. He now has the job for the next two months, until the autumn statement, of making a reality of credit easing, which means that because the Governor will not do it from the Bank of England, it will have to be done by the Government through public expenditure. And that, from a man who was saying that there is too much public expenditure and the only way is to cut, is a major achievement and a major philosophical breakthrough.

There are clear signs that the Chancellor realises that he boxed himself in. It was described three or four months ago on a radio programme as flexibility—“I have flexibility in my programmes”. That would give him the ability to move off plan A, but it is now clear that he is moving off with a vengeance because he sees the danger. When we in the House speak about growth, that means a lot to politicians, but the ordinary person does not realise that it means their job, the security of their home and their income. If the Chancellor is moving on that, it is very good.

I shall put three suggestions on the table for the Chancellor. First, he could reconsider the disastrous decision to abolish regional development agencies and

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the disgraceful decision to give the local enterprise partnerships that he set up in their place less money, no staff, no powers, no authority and no influence. They have pulled together in every area in the country schemes that have been presented to Lord Heseltine to filter out and put forward for funding. As only one scheme has come from each area, there is a whole list of good schemes sitting on the table that could be put into operation.

Secondly, when we speak about infrastructure, we invariably go to roads. The key, however, is housing because it triggers so many additional jobs and so much additional expenditure. There is one thing the Chancellor could do without spending any money. I know there is a balance. An average two-bedroom house costs £160,000. To get a mortgage requires a deposit of £32,000. Need we look any further to understand why youngsters are not buying houses? I know we have to protect people from being irresponsible, but such a value-to-loan ratio has knocked house purchase off the table. As we are not building social housing, it is a real block. Perhaps the Chancellor could speak to the Financial Services Authority and to the banks and say, “Ease off and look at each case on its merits.”

Finally, during the 1980s recession we had some very good community programmes—youth training schemes and so on. They were sometimes derided but they kept youngsters at work and gave them some self-belief and purpose. Youngsters got up and turned up on time. The schemes prepared them for work and kept them intact as individuals. In Leeds we had 2,500 places and we did enormous work across the city with unemployed people who, to this day, pay tribute to the fact that such schemes kept them going when they would have disintegrated as personalities if they had not had that discipline and chance. I should like the Chancellor to think about those.

3.59 pm

David T. C. Davies (Monmouth) (Con): I confess that as I listened to the shadow Chancellor this afternoon, I almost felt a growing sense of admiration for the sheer effrontery of the man. This man who came to deliver a lesson to the Chancellor was personally responsible for much of the economic mess that the country now finds itself in. He, of course, is no longer in his place, but I wonder whether I might give a quick economic history lesson to those Members on the Opposition Front Bench who have hung around to listen to the debate.

In 1997 this country had a national debt of £350 billion and was basically spending what it earned. By May 2008, well before the collapse of Lehman Brothers and the banking problems, the national debt had already increased to £629 billion and the Government, during the boom times, had run a deficit of around £30 billion a year. I am yet to hear any Opposition Member explain why, when the country was booming, they spent £30 billion a year more than the country was taking in taxes. Once we hit the banking problems, which the previous Government successfully blamed all the economic problems on, the debt skyrocketed to £1 trillion.

Of course, even that is not the full story, because many sensible economists claim that the national debt is at least twice as large, as the figures used do not take into account the PFI contracts used for all the schools and hospitals that the previous Government built but

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never paid for. It does not take account of the liabilities for organisations such as Railtrack and Metronet, and of course it takes no account of public sector pensions. The reality is that we must now deal with a debt of at least £1 trillion and the deficit of £160 billion that we inherited.

Opposition Members like to blame it all on the banks. “It was all the fault of the wicked bankers”, they say. I have done a little checking with the House of Commons Library, and as far as I can ascertain the banks received £100 billion. That money was given out not simply in cash, but in shares and the rest of it, so a lot of it might come back to us. If we take the best-case scenario for the national debt, which is £1 trillion, rather than the £2 trillion suggested by many economists, and the worst-case scenario for the £100 billion that was given to the banks, which is that nothing will come back, even then that money accounts for only 10% of the national debt. What about the other £900 billion? When will the Opposition start accounting for that?

One trillion pounds is a lot of money. I was thinking about it earlier and trying to put it in perspective. If we were to create a graph and used 1 cm to show £1 million, it would have to stretch all the way from here to Highgate cemetery to show the scale of the wanton spending for which Opposition Members are responsible—I do not know whether it is relevant, but that is the burial place of Karl Marx.

Debbie Abrahams (Oldham East and Saddleworth) (Lab): I wonder whether the hon. Gentleman knows what the public sector debt was in 1997 and in 2007 before the recession.

David T. C. Davies: Yes, in 1997—

Debbie Abrahams: Does he know what it was as a percentage of GDP?

David T. C. Davies: Has the hon. Lady finished now, and may I continue? I am always fascinated by the fact that comparisons are made between levels of debt as a percentage of GDP. I will certainly give way again if someone can explain why we compare national debt with GDP. Why do we not do what any company would do and compare it with revenue? If we look at a comparison with 2010, when this Government took over and when the national debt was £1 trillion, we will see that the revenue coming in was £520 billion. The country had a national debt that was almost twice the revenue it was taking. Anyone who has run a company—most Opposition Members have not, but I have—will know that any company that found itself in such a situation would be declared bankrupt immediately.

Kwasi Kwarteng: Will my hon. Friend remind the House why the previous Labour Government ran a deficit for nine consecutive years from 2001 to 2010, despite having a boom?

David T. C. Davies: My hon. Friend asks a very good question. They managed to come up with an excuse after 2008, following the collapse of the banks, but as I said earlier, I am yet to hear an answer on why they ran a deficit from 2001 to 2008. Perhaps we will get one later.

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What I did hear from the shadow Chancellor was some rather mealy-mouthed insults directed towards my right hon. Friend the Chief Secretary to the Treasury, who had a proper job outside politics and Government, as I did, which the shadow Chancellor seems to think is worth mocking him for. My right hon. Friend was not the man who was responsible for the £1 trillion-worth of debt, for selling gold at a fraction of the price, or for running up deficits in boom years. [ Interruption. ] I will not say anything about the euro at the moment, but there are many Labour Members who were urging us to the join the euro during those times and are now trying to give us a lesson in economics. I notice that they have all now gone very quiet.

The reality is that Labour Members never, ever learn their lesson. For them, it is not a case of plan A or plan B; there is only one plan: “Let’s tax people as highly as we can, and when we’ve finished squeezing every penny out of them, we’ll borrow more money.” They do not remember the words of one Labour Chancellor of the Exchequer during a Labour conference: “Comrades, you may think that we can tax and spend our way out of a recession, but I tell you that is no longer an option.” They still have not learned the lesson.

Clement Attlee failed in the 1940s when he tried to build his welfare state on the back of American war loans. There was Harold Wilson in the 1960s telling the public that the pound in their pocket was worth the same when he was rapidly devaluing it. Then there was Jim “Crisis, what crisis?” Callaghan, who, just like his successors, brought the country to the brink of utter bankruptcy, and did not even seem to think that he had done anything wrong. It was 18 years before they got another chance, and they have done exactly the same thing again: tax and spend, borrow and spend, just keep on doing it and do not worry about it.

I am glad that we have a Government who are not going to go for the easy option, which would be to borrow a whole load more money now in the hope of winning an election, which is exactly what Labour Members were doing for a couple of years. We are going to take some tough decisions, and that means getting our books in order. Unlike the shadow Chancellor, I know, having run a small family haulage business, that one cannot carry on spending more money than one gets indefinitely. I welcome the fact that the Chancellor is going to encourage real growth by making it easier for businesses to take people on and not have to worry about employment tribunals, which anyone who has run a small business does worry about all the time because of the number of spurious claims.

John Mann: Rubbish!

David T. C. Davies: I wonder whether the hon. Gentleman has ever had any experience of running a business or dealing with spurious employment tribunals—I very much doubt it.

I am also glad that the Chancellor has recognised that reducing our carbon emissions at a time when the economy is facing problems is not necessarily the wisest thing to do, particularly when the Government are now having to accept that our winters are getting colder, that more people are dying through cold than through heat, and that the link between carbon dioxide and global warming is not quite as clear-cut as many people say.

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John Mann rose

David T. C. Davies: I will not give way again, because I have done so twice and I do not want to cut myself off.

I congratulate the Chancellor and all his colleagues in the Conservative and Liberal Democrat parties and urge them to stay the course, to ensure that we spend what we earn, and not to listen to Labour Members or take any notice of people such as the former Prime Minister. Even he did not seem to know the difference between debt and deficit, because anyone who looks at the YouTube video of him abusing Mrs Duffy and calling her a bigot will notice that halfway through he said, “We will cut the debt in half.” Did he not know the difference between debt and deficit, or was he planning much deeper cuts than the coalition Government? Perhaps someone will answer that question.

All Back Benchers on this side of the House are supportive of the Government because we recognise, as we always have, that it is not possible to carry on spending money that one does not have because that merely creates a bigger problem further down the line for our children. That is why I urge my colleagues to stay the course.

4.8 pm

Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): As ever, it gives me great pleasure to follow the hon. Member for Monmouth (David T. C. Davies), who talks about learning lessons. Following the erudite economic contributions that we have heard from many hon. Members, I am going to talk about the real lessons of human life in my constituency.

First, let me give some numbers. Over the past year, claims for jobseeker’s allowance in London increased by 10%, compared with the UK as a whole at 8%. Those figures are pretty bad, and today’s unemployment statistics underline the general trend. In my constituency, the figure increased by 18%. If one looks more closely, it gets worse. The number of claimants under the age of 24 increased by 18.1% in the past year, and for someone who is over 50 the outlook is bleak. The increase in the number of claimants in that group was 29.2%. That is right—nearly a third more over-50s are seeking work than a year ago.

I will focus on people and their lives, and on the families who are affected by this Government’s policies. About one in three residents in the borough of Hackney, which I represent with my hon. Friend the Member for Hackney North and Stoke Newington (Ms Abbott), are under the age of 24. Therefore, as well as the percentage increases, a significant number of young people in both constituencies are affected by the Government’s reckless programme.

Andrew Bridgen (North West Leicestershire) (Con): Will the hon. Lady explain how abandoning our deficit reduction plans, losing our triple A credit rating, and forcing up interest rates to UK plc, homeowners and business will lower unemployment?

Meg Hillier: That question demonstrates the detachment of this Government and their Back Benchers from the reality of human lives. If the hon. Gentleman will let me develop my argument, I will point out that there are real challenges for people. There is an alternative plan, which my right hon. Friend the shadow Chancellor and his colleagues have laid out, and I back it.

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I have met young people who have already been made redundant in their early 20s and others who have done everything that the Government have asked of them, such as working hard at school. Our borough has seen huge improvements in schools and education, and its results are improving. Our young people are increasingly going to university, which was pie in the sky for many young people when I was first selected for my seat. And still, there are no jobs. We risk having a lost generation, although not like the lost generation that the hon. Member for Sevenoaks (Michael Fallon) spoke about, because we made great strides in government, although there is still more to do on skills. We risk a lost generation of young people who have achieved a lot and still cannot get a job.

Ms Diane Abbott (Hackney North and Stoke Newington) (Lab): Does my hon. Friend agree that one of the most alarming consequences of the Government’s economic policies for those of us in inner-city communities is how hard the cuts hit the public sector and women workers in the public sector? Particularly in inner-city London, disproportionate numbers of public sector workers are black and minority ethnic, and there are no private sector jobs for them to go into. Those people are often the head of their household and the only earner in their household. They are the sacrifices of this misconceived economic policy.

Meg Hillier: I could not put it better than my hon. Friend and I will not try. She is absolutely right.

Young people who have never worked are now desperately seeking even unpaid work experience. What have this Government done in response? They have cut the future jobs fund so that there is no more chance of employment and no more try-before-you-buy for employers. They have cut education maintenance allowance and increased student tuition fees. Just as young people in Hackney are emerging from school, ready and qualified for university, they are losing the help that they had.

The cuts programme is so deep and so fast that it gives no hope. It does exactly what my hon. Friend the Member for Hackney North and Stoke Newington said: it cuts the jobs that were providing for so many households in my constituency and keeping our local economy going.

Although the Chancellor is not in his seat, let me tell him about real people. Last week, I met a 16-year-old who said to me, “I really want a Saturday job because I want to grow from a boy into a man and this will help me.” He also told me that he wants and needs to contribute to his household’s increasingly squeezed income. He is losing the education maintenance allowance that he would have been entitled to and he is very worried.

There is the sixth-former who used her education maintenance allowance to top up the family’s electricity key on a Thursday so that she could keep the lights and heating on until the end of the week for the basics of study and existence. There is the teenager who attended school on alternate days because he and his brother had to share a pair of school trousers. Thanks to EMA, he is now at university, where he has escaped from his chaotic family background and is ready to succeed. I hope that there will be a job for him when he leaves.

There is the woman who is working to bring up her children and is using an expensive prepay meter key.

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Kwasi Kwarteng: Will the hon. Lady give way?

Meg Hillier: I am afraid that I will not.

That woman told me that she uses the prepay meter key because of her fear of a large quarterly bill at the end of the autumn, even though she knows that it costs more. She is doing what the Government tell her to do. She is a single parent with four children who is working to support her family, but she lives in fear of the bills every day. There is the man who came to my surgery on Monday. He has a job offer, but he faces the choice between a job and a home because of the Government’s short-sighted approach to housing benefit.

Where are the private sector jobs? In my constituency and that of my hon. Friend the Member for Hackney North and Stoke Newington, most small businesses employ fewer than six people and they are struggling. I have been up and down my high street many times since the events of 8 August, but it is not just those events that have caused problems. Businesses are struggling with footfall and because people do not have disposable income to spend. They are worried about what will be down the road.

The Federation of Small Businesses has been very critical of the Government’s approach, as my right hon. Friend the Member for Morley and Outwood (Ed Balls) indicated. Businesses on the high street need quantitative easing, including those that are being incubated by entrepreneurs in my constituency. The Prime Minister is very fond of talking about creating a silicon valley when it suits him, but those high-street businesses are exactly the sort that could be creating jobs for young and older people in my constituency. However, they risk being throttled at birth, or if they do survive—I wish them well and hope they do—they risk not growing at the rate that they could with the right support from Government.

Richard Fuller: Will the hon. Lady give way?

Meg Hillier: I am afraid I will not.

Families are being squeezed. Prices are going up, with food prices having increased by 6.1% in the past year. For those who drive, petrol has gone up. Energy prices have gone up, VAT is at 20% and we are seeing a huge hike in fare prices thanks to the Tory Mayor of London. If people have a job, they are worried that they will not have it in future, and they are worried because they will not be getting pay rises. Families in my constituency have nowhere to go to get the extra money: not for them the easy credit that is available to many or the bank overdraft that is available at the end of a phone call; not for them the rich family member who can help them out or a cushion that they have saved over years of work, because they have been living a difficult existence as it is and are now squeezing until the pips squeak. They cannot squeeze any more out of their household budgets.

This Government are cutting too far, too fast, and it is not working for families, for young people or for businesses. It is not working at all, nor, sadly, are far too many of my constituents.

Several hon. Members rose

Mr Deputy Speaker (Mr Nigel Evans): Order. This debate is very popular and I want to accommodate as many Members as I possibly can, so the time limit is being reduced to six minutes, with the usual injury time for two interventions.

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4.16 pm

Jake Berry (Rossendale and Darwen) (Con): I am delighted to see that the reshuffle of the shadow Cabinet has had a real effect on its sense of humour. Government Members are of course used to the fake outrage all the time, but the terms of the motion suggest that the Opposition seem to have discovered irony.

I will not support the motion, because it demonstrates the Opposition’s fundamental failure to have any credible economic policy whatever. This five-point plan is a nationalised Ponzi scheme on steroids. Even in itself it would add £3.1 billion to our deficit. The Opposition probably do not understand what a Ponzi scheme is, but they should look at their own manifesto. People in my constituency do not believe that the way out of debt is to take on more debt. They do not believe that the way to reduce their personal liability is to spend more money.

Alison McGovern: The hon. Gentleman is incorrect, because if there were investment it would not be a fake Ponzi scheme—the assets would be real, unlike in an actual Ponzi scheme.

Jake Berry: I never said it was a fake Ponzi scheme, I said it was a real Ponzi scheme. That is the basis of the Opposition’s entire policy.

The markets believe in our plan and want us to stick to plan A: actually, so does every hard-working family in my constituency. They are struggling with personal loans and do not want interest rates to go up. Like so many of us, they are struggling with mortgages and cannot afford that to happen. The Prime Minister has offered real leadership throughout this, and the Chancellor of the Exchequer has been honest. That is in stark contrast to the Labour party’s constant line of “too far, too fast”.

What is the Opposition’s alternative? This five-point plan is simply too little, too late. They believe, “Why repay borrowing today when we can have business as usual and bankrupt Britain tomorrow?”

Andrew Bridgen: Does my hon. Friend agree that, like a compulsive gambler believes that one more big bet will solve all his problems, the shadow Chancellor and the Labour party believe that one more credit splurge will get us out of a debt crisis?

Jake Berry: I do, and for all addicts the hardest thing to do is admit that they have a problem. When this Government came to power in May 2010, we admitted that we had a problem with debt. Even if we fall off the wagon temporarily, we know we have that problem and so we get straight back on it. The Labour party has not even admitted it—it thinks it gave us a golden economic inheritance.

Chris Leslie (Nottingham East) (Lab/Co-op): Can the hon. Gentleman tell us by how much unemployment has risen in Rossendale and Darwen in the past 12 months?

Jake Berry: I am sure that the hon. Gentleman will provide me with the figures—

Rachel Reeves (Leeds West) (Lab): Do you not know?

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Jake Berry: I do know. However, I can guarantee my constituents one thing, and one thing only: unemployment has not gone up by as much as it would have done if we had had Labour’s Ponzi scheme.

Several hon. Members rose

Jake Berry: I am sorry, but I will not give way again because I am running out of time and I have many points to make.

Let us look at the facts. Back in May 2010, when we came to power, we had 0.1% less debt than Greece as a proportion of GDP. Labour Members can criticise us and say that making cuts damages growth, but let us look at their alternative. Their alternative—too little, too late—would mean, as in Greece, a 15% pay cut for every doctor, nurse and policeman, and every public sector worker; and a cut of up to 40% in pensions. That is what too little, too late means.

Emma Reynolds (Wolverhampton North East) (Lab): Will the hon. Gentleman give way?

Jake Berry: I am sorry, but I will not give way. I want to make progress.

The Labour party opposes the Government’s public spending cuts, but its alternative—the too little, too late alternative—would mean that our economy, like Greece’s, would shrink by 5% this year, and that mortgage rates would rocket. One of the things that Government Members are most proud of is our desire and aspiration to increase the tax threshold to take many of the lowest paid in our society out of tax altogether. Had we followed the too little, too late approach, as Greece did, we would have had to cut our tax-free allowance by 50%.

The Chancellor has been frank about the choppy waters ahead, yet businesses in my constituency of Rossendale and Darwen still strive to succeed. Businesses such as J&J Ormerod, the largest employer in my constituency, B&E Boys, Crown Paints and WEC engineering, are doing their best to manufacture proper products and to rebalance the UK economy, despite tough times. Those businesses know about the Labour party’s economic illiteracy. That is why, before the general election, some of them signed a letter opposing Labour’s jobs tax. Businesses in my constituency will not forget that the previous Government were the enemy of enterprise and industry, and that Labour is the party of the jobs tax.

Rachel Reeves: Will the hon. Gentleman give way?

Jake Berry: Sorry, I will not.

How ironic it is that the Opposition motion calls for a cut in national insurance. That is too little, too late, and business in my constituency knows that the Labour party is not the solution but, in fact, the problem.

Rachel Reeves: Will the hon. Gentleman give way?

Jake Berry: Sorry, but I will not.

Looking at today’s job figures, including the increase in unemployment in my constituency—

Rachel Reeves: The increase was 29.2%.

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Jake Berry: The Opposition Front Bencher says from a sedentary position that the increase is 29.2%. I have real sympathy for those experiencing the increase in unemployment. People are facing an unbelievably tough time. These are uncertain times for all of us. However, if we are to have a successful economy in Rossendale and Darwen, and if we are to get people back into work, we must keep low borrowing rates and support the new enterprise zone in Lancashire, which will create jobs. Our manufacturing businesses are not thriving, but they are still growing. Companies such as Linemark in my constituency, which has just won the Queen’s award for enterprise, are growing through innovation.

The key to our success in east Lancashire in business, jobs and families is low interest rates, so we must stick to plan A. We must enable jobs and growth in Rossendale and Darwen.

4.25 pm

Ian Mearns (Gateshead) (Lab): In March, the Government launched their much-heralded plan for growth, and in a document signed off by the Business Secretary and the Chancellor of the Exchequer, the foreword read:

“This Plan for Growth is an urgent call for action. Britain has lost ground in the world’s economy, and needs to catch up. If we do not act now, jobs will be lost, our country will become poorer and we will find it difficult to afford the public services we all want. If we do not wake up to the world around us, our standard of living will fall, not rise.”

Those are fine words, but the Government’s actions since have only inflicted more damage. Since May last year, they have systematically dismantled and reduced the UK economy’s capacity. Ideologically driven by a quest to reduce the public sector, they have relentlessly pressed one single policy button—deficit reduction. In the northern region and my constituency, the Government’s policy is looking very much like a scorched-earth strategy.

While imposing draconian and disproportionate spending cuts, which this year alone have reduced grants to the 12 local authorities in the north-east of England by an average of £84 per head of population—compared with only £5 per head of population in the 12 least-deprived local authorities in the south of England—the Government have reduced resources for regional development in our region by at least two thirds. Before the election, the Prime Minister identified the northern region, along with Northern Ireland, as an area that would require special support to rebalance its economy—we all know what that “special support” really resembles. From my perspective, it looks like the support given to a hanged man—a rope.

Mrs Jenny Chapman (Darlington) (Lab): I must correct my hon. Friend. The Prime Minister said—on “Newsnight”, I think—that the north-east was over-dependent on the public sector and would be hit the hardest.

Ian Mearns: I was being kind to the Prime Minister, but he did actually use the words “rebalance the economy”. One North East, the regional development agency set up by the previous Government, is being abolished and replaced by as-yet-unfunded and as-yet-totally-impotent local enterprise partnerships in the north, including in Teesside.

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Richard Fuller: The hon. Gentleman says “the Government this” and “the Government that”, but if we are talking about jobs, he ought to be talking, as I am sure that he is, to small business owners in his constituency. In those conversations, how many of them have said that they would put at risk low interest rates in this country to pursue some of the policies in the five-point plan, and how many said that they would welcome the job tax that the previous Government said that they would impose on businesses up and down the country?

Ian Mearns: Many of the businesses that I speak to in areas such as the Team Valley trading estate, which employs about 20,000 people in the private sector, complain about the pace and depth of the Government cuts. They are impacting on their order books because many of them provide for the public sector. Unemployment in the region now stands at 142,000, which means that 11.3% of the working population in the north-east are now unemployed. The only conclusion that we can draw from the rationale of the parties in government is that, for them, unemployment in the north-east is a price worth paying.

David Mowat (Warrington South) (Con): The hon. Gentleman is making some powerful points about the north-east and the gap in gross value added per head between it and London and the south-east. However, does he accept that over the past two decades that gap reached its widest in the last year of the previous Government?

Ian Mearns: I was critical, in many respects, of the previous Government’s regional development policy, and I admit that I never understood the rationale for spending regional development money in the south-east when it would have been better spent in areas such as the north-east to rebalance the British economy. Having said that, however, I am not going to criticise my colleagues in the south-east—they have voters as well.

The regional growth fund, which stands at only £1.4 billion over three years, is being used to plug the gap left by the RDAs, which helped significantly in areas such as the north-east and collectively had a budget of £1.4 billion every year. In areas such as the north-east of England, the RDAs were vital. So much for the words of the Deputy Prime Minister last June, when he said that the regional growth fund would

“make a real difference to companies during difficult times.”

We have yet to see a single penny of the regional growth fund being spent in any company in the north-east of England. Oh, what it must be like to have responsibility for Government policy without having any real influence over it! The Secretary of State for Communities and Local Government said that he did not want to

“strangle business with red tape,”

but wanted “urgent action,” which was needed to

“rebuild and rebalance local economies…across the country.”

What we are actually seeing in response is the infliction of savage cuts that are sucking money, spending power and potential demand out of the economies of regions such as the north-east.

The north-east is part of England and part of the United Kingdom, but we are being treated disproportionately badly by this Government’s economic policies. If they ever get round to paying out money

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from the regional growth fund, we will frankly struggle to notice the impact because of the unemployment that already exists in the north-east after the deficit reduction strategy. The regional growth fund is taking on the appearance of a pathetic fig leaf that cannot hide the stark truth that the Government do not have a real growth strategy for Britain or a region such as the north-east of England. As we know, the local enterprise partnerships have no start-up funding, no core funding, no guaranteed access to the regional growth fund and no new legal powers. The case against the Government’s policy in the north has been eloquently set out by the Smith Institute of all people—hardly an organisation renowned for its left-leaning attitudes towards public policy—in its report “Rebalancing the economy: prospects for the North”.

The Government’s plan is simply not working, but is inflicting enormous damage on the economic capacity of the north. It is stifling and strangling our economy, not rebalancing it. Oblivious to the consequences of their actions, the Government press on blindly with plan A: deficit reduction. Tens of thousands of jobs destroyed, 1 million young people unemployed, the poorest and most vulnerable in our communities paying the most for the cuts—it is quite clear that we are not all in this together. Over the past 17 months the Government have been absolutely clear that deficit reduction has been their priority above all other considerations. Everything that has been said by the Chancellor and his supporters in the Chamber this afternoon adds to the one simple sentence: “It’s a price worth paying.” To those in the coalition Government, Tory and Lib Dem alike, I ask this. Unemployment of 2.5 million, with 1 million unemployed people under 25—is it a price worth paying? I do not think so.

4.32 pm

Gavin Williamson (South Staffordshire) (Con): It is a pleasure to be able to speak in this debate, but sometimes I listen to Opposition Members and just cannot understand where they have been for the last 10 or 12 years. If my constituents have been listening to some of the Opposition speeches, they will be equally shocked. They will remember a Chancellor who once used to speak of prudence and financial stability creating an economy where the books were balanced. Well, prudence was jettisoned a long time ago and it is certainly not a friend of the new shadow Chancellor. Until Opposition Members understand that they have to have a sensible, balanced economic approach, they will never have credibility with the people of South Staffordshire or, I am sure, the people of this country.

We often hear Opposition Members talk of a lost decade of low growth, low employment and low private sector employment. Well, we had a lost decade—a lost 13 years—in the west midlands between 1997 and 2010. You probably often sit there, Mr Deputy Speaker, wondering how many private sector jobs were created in the west midlands between 1998 and 2008. You were probably thinking it was perhaps 250,000—in those halcyon days, when house prices were booming and the economy was growing—but I am afraid to say that you would be wrong if you thought that. If you thought that the figure was 100,000, I am afraid that you would also be wrong. In fact, there was not a single net private sector

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job created between 1998 and 2008 in the west midlands. We saw a decline of more than 60,000 private sector jobs in the region.

Chris Leslie: Can the hon. Gentleman tell us whether unemployment has risen or fallen in his constituency since he was elected?

Gavin Williamson: The hon. Gentleman makes an interesting point. Between September 2010 and September 2011, 74 additional people became unemployed in my constituency. That is a tragic situation, but this Government are doing something about it. Unlike the previous Government, who did little or nothing for my constituency, this Government are delivering. I will explain how. We are out there creating and delivering jobs, and making things happen in South Staffordshire. Already, thanks to the actions of this Government, we have been able to save 400 jobs there by ensuring that the investment was delivered for Moog, an important employer in my constituency, which is relocating to a new factory on the i54 business park.

What is more, this Government are committed to delivering more jobs, not only in my constituency but right across the west midlands. Through the Government’s actions, we have secured an enormous investment of £350 million from Jaguar Land Rover to build a new engine plant on the i54, which has been designated an enterprise zone.

Emma Reynolds: I live about 300 metres from the i54 site. Will the hon. Gentleman admit that, were it not for the Labour Government and the regional development agency, which decontaminated the site, invested in it and made it a strategic site, we would never have had that investment in the first place?

Gavin Williamson: I thank the hon. Lady for making that point, but let me explain something. Having run a manufacturing business for many years before entering the House, I quickly discovered that when considering relocating a factory to a new site, two core ingredients are needed. They are electricity and gas, but no funding had been provided by Advantage West Midlands to install either on that site. If that is far-sighted policy from a regional development agency, I do not think it is particularly great.

The investment from Jaguar Land Rover will create 750 jobs in my constituency and the wider area, as well as many thousands more. This country is now investing in manufacturing again. It is no longer a country with a declining manufacturing base, in which manufacturing declined from 21% to 12% of our gross domestic product. We are now ensuring that that percentage will grow, because that is what we need. I believe that this Government will deliver that.

This is not just about encouraging manufacturing; it is about encouraging the service sector and all the other sectors. We are supporting small businesses as well as big ones. We have already seen a massive increase in the research and development tax credits available to small businesses. I recently visited Squire, the makers of some of the finest padlocks in the country. I suggest that Members purchase one for their garden shed. The R and D tax credits introduced at the last Budget for small and medium-sized enterprises are encouraging businesses

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such as Squire to invest in research and development and in innovation to provide them with a secure, prosperous and healthy future.

Those are the initiatives that South Staffordshire needs, and that the whole country needs. The Government have a difficult legacy to deal with, thanks to Labour, but they are helping Jaguar Land Rover, Moog and all those other businesses through the creation of enterprise zones and the lowering of corporation tax. They are supporting those businesses at every level, and that is what will deliver growth for this country.

4.40 pm

Sammy Wilson (East Antrim) (DUP): I will not tax your brain, Mr Deputy Speaker, by getting you to guess about job creation or anything like that; I would like to make just a couple of points.

First, I sometimes approach a debate such as this with a degree of unease. There is always a tendency either to pretend that there is no problem because the existing policy has to be defended or else to magnify the existing problems and in doing so to have an impact on confidence. One thing I have found from speaking to business people in Northern Ireland is that although we are going through difficult circumstances, which everyone recognises, there is no point in further impacting on consumer and investment confidence by, through political point scoring, making the situation appear worse. We need to try to avoid that in a debate such as this.

Secondly, I have looked at the statistics on Northern Ireland and found that we have seen no growth in the economy over the past 24 months. We have had an increase in unemployment and, of course, given our heavy dependence on the public sector, the public spending cuts of £4 billion over the next four years—40% of the capital budget—are bound to have a deflating impact on the economy.

In listening to today’s debate, to the Chancellor’s reaction and to some of the Opposition’s proposals, we have to consider whether the rigid battle lines that have been drawn are of benefit to the economy in the long term. I accept what the Chancellor has said today—there is considerable risk in changing position—but any economic strategy is bound to carry risk with it, as it involves trying to project and look into the future on the basis of many different variables, such as how markets will react and what will be the impact of a decision. We do not have perfect knowledge about those things, so sticking rigidly to the current plan carries a risk.

We do not know how the markets are going to react to the increased borrowing that will be required as tax revenues fall and spending on unemployment and other benefits rises. Currently, the markets seem prepared to accept that there might well be an increase in the deficit because of what is happening, but that the Government are still on plan to reduce the deficit. Where is the tipping point when the markets begin to say, “Do we really have a credible plan?” Equally, if we go down the path of increasing spending and reducing taxation, at what stage will the markets say, “You are deviating from the plan”?

One thing that I suppose has come out of the debate so far—at least from the IMF, the OECD and even some of the credit agencies—is an acceptance that there can be some flexibility. Even the Chancellor is beginning

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to accept that demand in the economy needs to be stimulated. I suppose his attitude and approach to quantitative easing is an indication that he sees demand stimulated by monetary policy but equally that good fiscal policies and ideas may also be considered as a means of trying to stimulate growth. I am not so sure, when I look at what is happening to bank lending in Northern Ireland, that quantitative easing is having an impact. The British Bankers Association has published its quarterly figures. From the last quarter of last year to the second quarter of this year, bank lending to small businesses fell by 30% in Northern Ireland. With the Chancellor telling us that there is sufficient liquidity in the banking system, one has to ask whether simply making money available is going to be the answer.

Some fiscal measures have been suggested here today. It has been suggested that we need not increase spending and reduce taxes to create extra demand. Instead, we could direct extra spending towards the activities that create the biggest multiplier effect—for instance, spending on housing and reductions in VAT, whether for extensions to houses or for the tourist industry. There are measures that do not cost a penny, such as reducing regulation. I welcome the Chancellor’s announcement that he will not stick to the carbon reduction targets. As one who voted against the Climate Change Act 2008, I am pleased to observe that some reality is now entering that debate. Why should we impose a 40% increase in energy costs on our industry when that is not being done elsewhere, with the aim of reducing carbon emissions into the atmosphere and thereby somehow or other affecting the climate?

There are many suggestions to be considered. I believe that the Chancellor has more leeway than he claims, and I hope that we shall see some movement as a result of today’s debate.

4.46 pm

Kwasi Kwarteng (Spelthorne) (Con): I am grateful for the opportunity to speak in the debate.

I am pleased and interested to learn that the shadow Chancellor recognises that the problem we face is an international problem. He spoke eloquently about the deepening eurozone crisis, and also about the prospects for Greece and Portugal, which frankly are not too good. I am also pleased to speak having heard the speech of the hon. Member for Hackney South and Shoreditch (Meg Hillier), who gave a graphic account of the difficulties that we face from the point of view of her constituents. What we have not heard from the Opposition is an admission that they were in any way responsible for the difficulties that we face today. What we have heard, from Members on both sides of the House, is the expression of a desire for a bipartisan approach and a civilised debate, and I am all for that. However, if we are to understand the challenges that we face today, we must understand how we got into this mess in the first place.

It is true that every country in the OECD and in the economically developed world faces similar challenges, but it is not true that those countries managed their public finances as badly as we did in the years between 1997 and 2010. Let us rehearse some of the facts. We entered this period of our national life with a higher deficit-to-GDP ratio than any other OECD country: 12%, when the German ratio was 3.3%. That was a

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direct consequence of decisions made by those on the Treasury Bench between 1997 and 2010. As my hon. Friend the Member for Sevenoaks (Michael Fallon) pointed out, the then Government ran a deficit in every year between 2001 and 2010—for nine straight years. Even when the economy was booming, we ran deficits of £30 billion a year in 2002, 2003 and 2004. The shadow Chancellor referred to Lord Keynes—

Emma Reynolds: Will the hon. Gentleman give way?

Kwasi Kwarteng: I should be happy to do so.

Emma Reynolds: I should prefer the hon. Gentleman to speak about debt-to-GDP ratios. Does he accept that on the eve of the world recession we had the second lowest ratio in the G7, second only to Canada’s?

Kwasi Kwarteng: What the markets were looking at was the deficit. The hon. Lady may remember what happened to the gilt market as her party’s Government were being shunted out. The price of British Government debt rose and yields fell in direct anticipation of Labour leaving power. The markets made their own decision. In the last 18 months, the price of British Government debt—that is, the interest rates that we pay—has fallen. It has managed to remain at the same level, precisely because markets realise that the Chancellor and his team are doing the right thing in tackling the deficit. We have been told repeatedly that if we were to show any relaxation of our deficit reduction programme, the markets would dump our bonds and interest rates would rise, which would cause immense damage to the hon. Lady’s constituents as well as mine.

Rachel Reeves: Does the hon. Gentleman accept that before the last general election—between January and May 2010—yields on Government bonds were falling and they have stayed at low rates since the general election? The markets did not know which party would win the election because the campaign was so close. Therefore, the hon. Gentleman cannot argue that those yields were falling in anticipation of an incoming Conservative Government, because nobody knew that.

Kwasi Kwarteng: The yields were not falling in anticipation of a Conservative Government, but they were certainly falling in anticipation of the then Labour Government going out. Markets anticipate events—that is how people make money—and the markets had, in their wisdom, decided that Labour would not be re-elected. I assure the House that if Labour had been re-elected, the markets would have dumped British debt and we would be facing a much tougher interest rate environment than we currently face.

I always enjoy listening to the shadow Chancellor’s speeches, as they are very entertaining, and I enjoyed his speech today—I think one Member even mentioned vaudeville, which I think does vaudeville discredit. However, I was staggered by the shadow Chancellor’s assertion that the fact that we have low interest rates is somehow a reflection of our having a weak economy. That was an extraordinary claim. People in my constituency are very grateful indeed that we have low interest rates, because that enables them to pay their mortgage liabilities. It

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seemed extremely arrogant for a supposedly responsible politician to say on the Floor of the House that low interest rates were a bad thing, which was essentially what the shadow Chancellor was arguing.


He was suggesting that they were a symptom of a weak economy, which is a bad thing.

On the contrary, however, our low interest rates are a signal that the markets have confidence in this Government. They have absolute belief that the current Government are going to deal with the deficit that was created, almost deliberately, by the Labour Government. We in the House of Commons have to understand why this deficit arose, so we can explain that to the country. It was not just handed down to us by some Moses figure—although the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) probably thinks of himself in that way. It was not handed down from on high; rather, it was created by Governments and by the Members who then sat on the Treasury Bench, and it was created for the simple reason that they, in their arrogance, honestly believed that they had abolished boom and bust. We all remember those statements, and it is an arrogant misrepresentation of the past to suggest that they did not think that. The last Prime Minister believed that he had solved the key economic question of our time, but he was wrong, and it is as a direct consequence of his mistake that our Government have had to introduce the policies we are pursuing.

Many people will ask why we do not have a different plan. They will ask: “Why don’t you suddenly borrow and spend more money in the time-honoured Labour fashion?” That would be a road to disaster, however. It would create a massive lack of confidence and lack of credibility in the British Government’s programme, leading to the markets dumping our Government debt and our interest rates rising. It would lead to people in our constituencies having to face higher payments every month. They would be squeezed even more if we were not as focused and committed as we are to reducing the deficit.

I have tried to inject some reality into this debate. We have heard consistent denials from Labour Members, and we have heard no admission of guilt or wrongdoing and no ideas as to how we might get out of the situation we are in. We have also heard no real arguments to attempt to explain why what the last Labour Government did was right. Interestingly, no Labour Member has said in this debate, “We did a marvellous job; we gave you a golden inheritance.” I would grant them more credit if any of them would be bold enough to stand up and say that, but they will not do so. That is because, as everyone in this country knows, Labour is bereft of ideas, and it would be a disaster if we were ever to leave our future in its hands again.

4.54 pm

Frank Dobson (Holborn and St Pancras) (Lab): I recall taking part in a number of debates on the economy before the general election and saying on several occasions that there were four ways to deal with the deficit: by cutting spending; by increasing taxation; through economic growth, which would be the most important way by far; and through inflation, the method that dare not speak its name. Since then we have seen the cuts, we have seen people losing their jobs and we have seen the economy undermined. The thing to remember is that when someone

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is thrown out of work we lose the output of their goods and services and, on average, they cost us £12,000 in tax not taken in and benefits paid out. We now have the highest jobless total since the one under the previous Tory Government. Some of us—not just Tories—have memories about what went on before.

Gareth Johnson (Dartford) (Con) rose—

Frank Dobson: I am not going to give way to anybody because it takes up time from everybody else’s speeches.

VAT has been increased, and that hits the worst-off most. There has also been what is, in effect, a tax increase on everybody who has to commute to work: the massive fare increases that have been pushed through, which are far above the rate of inflation. We have certainly seen inflation. One of the reasons why Governments quite like inflation is that if they borrow £1 and there is 5% inflation, they pay back 95p instead of £1. That is why the Government have not taken any notice of the problems caused by the rate of inflation, but it certainly hits people’s pensions and wages.

As for growth, there simply isn’t any. Growth is needed both in this country and worldwide. Growth was the theme of the London G20 summit. I know that it is very unfashionable to praise the former Prime Minister, Gordon Brown, but the fact is that at that summit, and in the run-up to it, he did more than anybody in the world to convince all the Governments that they had to start investing more in the world economy. I have heard from someone else that it is Sarkozy’s private view that Gordon Brown’s intellect and drive—

Mr Deputy Speaker (Mr Nigel Evans): Order. The right hon. Gentleman should refer to the former Prime Minister by his constituency.

Frank Dobson: I am sorry, Mr Deputy Speaker. It is Sarkozy’s view that it was the intellect and drive of my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) that virtually saved the world from a total disastrous slump.

Since then, the new UK Government have joined the backsliders; they are not going for growth, either here or worldwide. They have let the bankers and speculators back in charge, blaming public spending everywhere in the world and blaming public services for what has gone wrong. This Government have been delighted to wheel on witnesses defending their policy, but I ask people to look at who these famous witnesses are. They are the bankers, the financiers and the speculators—the people who caused the worldwide problem in the first place.

About two days before its recent unfortunate fraud case, a very distinguished person from UBS said that we needed austerity for all and then everything would be okay. Unfortunately, the interviewer did not ask, “Are you one of the people who lost £44 billion in the crash?” A couple of days later, someone from Citigroup was advocating austerity for all. Unfortunately, the interviewer did not say, “You are from the company that lost £60 billion in the crash. Why should we take a shred of notice of someone with your track record?” Then, my favourite, Ernst and Young, said that we needed austerity for all, but never mentioned being the auditors of Lehman Brothers. One would think that a period of silence—a decade of silence—would have been appropriate.

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Frankly, we have seen that the bankers, financiers and speculators have far too much power in this world. We have the Alice in Wonderland situation where the banks cause a recession; the Greek economy declines; the banks in effect charge the Greeks exorbitant rates of interest; the banks, who created the crisis, then threaten the ability of the Greeks to pay them back, meaning that the Greeks might default; and, if the Greeks default, the banks default. The banks start it off, and in the end might default—and what happens? They do not rely on the private sector or market forces. They come grovelling to taxpayers all over Europe to ask them to bail them out of their stupidity—for that is what their policies are. We hear about social security scroungers, but the worst social security scrounger in the world does not compare to the scrounging banks when they get things wrong.

5 pm

Sajid Javid (Bromsgrove) (Con): It is always a pleasure to follow the right hon. Member for Holborn and St Pancras (Frank Dobson). Before I begin, may I, too, congratulate the hon. Member for Leeds West (Rachel Reeves) on her promotion?

I am glad that the right hon. Member for Holborn and St Pancras mentioned Alice in Wonderland, because that is exactly where Labour is. What we have heard from the shadow Chancellor today suggests that it believes that we can solve a debt crisis by taking on more debt. Let us remind ourselves of the position that this country was in when the Government changed 18 months ago. We had a national debt of £940 billion, up from £350 billion when the Labour Government entered power.

The hon. Member for Wolverhampton North East (Emma Reynolds) mentioned the debt to GDP ratio, and in terms of net debt that is at 62% today. She is right that it was lower—it gradually went up as the previous Government came to their end—but she missed out the fact that the markets do not just look at the official national debt but take into account the unofficial national debt. The good thing is that now this Government are in power we have started to have a transparent process to assess what that debt is. Before the market was all based on estimates.

I can tell the hon. Lady that the £940 billion is not even half the story. In fact, it is one third of the story because it represents one third of the total national debt of this country. The whole of Government accounts published in July by the independent Office for Budget Responsibility said that the public pension liability of the UK is £1,100 billion. PFI liabilities increased tenfold over the 13 years of the previous Government to £40 billion according to the OBR. The Office for National Statistics reported in the summer that the cost of financial interventions because of the bank bail-outs is £1,300 billion of additional debt. If we add all those numbers up, they come to £3,380 billion—a mind-boggling number equal to 225% of GDP.

Let us look at the five-point scam suggested by the shadow Chancellor. Four of those five policies would lead to a direct increase in our debt and one, the bankers’ bonus tax, would raise less than the levy that the Government have already imposed. I spent 20 years trading Government bonds. I advised Mexico, Brazil, Indonesia, Russia and Argentina when they were at default or close to default and I can tell anyone who

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cares to know that the way out of a debt crisis is not to borrow more money. Investors have a choice. They do not have to buy anyone’s bonds. They can look at any country or corporation in the world and there is no way to force those bonds down their throat. That was exactly the point we had reached before the last election and if the Government had not changed, we could very well have been in the same predicament as countries such as Greece, Portugal, Ireland and Iceland.

It is not just our triple A rating that shows that the Government’s policy in dealing with the debt is the right one. It is not just the gilt deals, as my hon. Friend the Member for Spelthorne (Kwasi Kwarteng) mentioned, although our 10-year gilt yield is at 2.6%.

Andrew Bridgen: My hon. Friend might recall that the previous Government created £200 billion-worth of quantitative easing just prior to the general election. However, that money was not pumped into the banking market to give liquidity—98% of it was used to buy Government debt because nobody else wanted to buy it at that stage.

Sajid Javid: I quite agree with my hon. Friend. The 10-year gilt yield today is 2.6%—one of the lowest we have ever had in our history—versus 3.8% when this Government came to power. That number is not just important to the financial markets: it makes a big difference to the amount of money this Government have to spend on servicing our national debt, to the amount that corporations have to spend when they borrow and then invest, and to the amount that ordinary households need to spend on things such as their mortgages. It makes a real difference to the cost of living.

Let us consider another indicator. I always like to look at the credit default swap spread, which is the amount that the markets charge for insurance against a potential sovereign default. Today, Britain has, for the first time, the lowest CDS spread of any large European country. According to Bloomberg, of the 157 sovereigns that trade in the CDS market, Britain has the fifth-lowest CDS spread in the world. That, again, is a reflection of the policies of this Government.

I should like to finish by picking up one positive point that the shadow Chancellor made to his party conference, which was the only thing I heard with which I agreed. He said

“we will set out for our manifesto tough fiscal rules that the next Labour government will have to stick to”.

I am glad that he has recognised the need for tough fiscal rules that are independently monitored by the Office for Budget Responsibility, as that is exactly what I suggested in a private Member’s Bill in July, the National Debt Cap Bill, which will have its Second Reading on 20 January 2012.

My proposal is that we should have an independent, tough cap on the net outstanding national debt as a proportion of GDP, monitored by the OBR. That would not be a magic bullet for dealing with potential future debt problems, but it would force the House to have a national conversation every time any Government wanted to increase debt beyond a certain point. If they had a good reason for doing that, the House could support them and Members might have an opportunity to discuss

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the issue with their constituents. If the House did not accept the Government’s reasons, it could prevent our country from becoming more indebted. I say to the shadow Chancellor that there is no point waiting for the next Labour manifesto because there may not be another Labour Government—at least, not any time soon. It would be far better for him to take action now, put his money where his mouth is and support my Bill, which is coming to the House in just a few months.

In conclusion, there is nothing in the motion that would help to generate investment and create jobs. In fact, if it were implemented in any form, it would destroy jobs. I urge the House to vote against it.

5.7 pm

Sir Stuart Bell (Middlesbrough) (Lab): I am grateful for the opportunity to follow the hon. Member for Bromsgrove (Sajid Javid), who has real knowledge and experience of the bond markets, as he has revealed today. He obviously knows a lot about the ratings agencies and he has a Bill before the House on debt ceilings. He is also an expert on credit default swaps. I share his great enthusiasm for that, but he will have to explain, on the basis of what he has said and what the Government’s policy is, why, if this is about deficit reduction and debt reduction, £46 billion more is going to have to be borrowed and spent in the next few years to cover their policies.

I want to mention Teesside because we have had the good news in the past few days that the insurance company, AXA, proposes to create 450 jobs in Middlesbrough, adding to the 300 staff it employs at Teesdale in Stockton. A great deal of comment—indeed, criticism, I would say—has come from my hon. Friends the Members for Leeds East (Mr Mudie) and for Gateshead (Ian Mearns) about the creation of enterprise zones and about the regional growth fund. In all my years in the House of Commons, I have had to deal with the Government of the day and although we might have liked to keep the regional development agencies, the reality is that we now have enterprise zones and the regional growth fund. We on Teesside have benefited from the regional growth fund and we also have an enterprise zone that we worked very hard to achieve—and now we will work very hard with the Government. There is also the good news that 1,000 staff are being taken on at the former Teesside Cast Products plant, with 100 already beginning the induction programme.

The Prime Minister, in Question Time today, ventured to say, in his feisty exchange with the Leader of the Opposition, that 300,000 new apprenticeships had been created in our country. I visited Carillion in my constituency last week to see the sterling work that it does in training apprentices in the real-life work of bricklaying, concrete mixing, pneumatic drilling, and other such skilled tasks. That is the kind of work that we see being done across the land on rainy and windy days—precisely the conditions under which those young men were working. Those young apprentices are a credit to themselves and to their future. I welcome the Prime Minister’s comments on the apprenticeship scheme.

If we take an overall look at what the Government are doing, we find the law of unforeseen consequences. There is a lack of compatibility in their objectives. Unemployment rises, so benefits have to rise. Benefits

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have gone up by £12 billion. We have heard a lot about the Welfare Reform Bill; the Prime Minister referred at Question Time to universal credit, and the Chancellor referred to the Bill today; he said that our amendments to it would add to the deficit. Of course, amendments can be reasoned, substantive or probing. Until we see them when they come before the House and know how we will vote, they have no great significance.

We see in our country, and we saw in Greece, that a too-rapid deficit reduction will lead to reduced growth. The classic example of Greece, to which my right hon. Friend the Member for Edinburgh South West (Mr Darling) referred, shows that if deficit reduction is too steep, there will be zero growth. That is the situation in our country: we have been reducing far too quickly. We talk as though my right hon. Friend never had a deficit reduction programme. We had one: we would have reduced the deficit by half over four years—a policy that even Mervyn King supported before the Government changed; then he changed to a different policy.

We were compared with Greece, which I always find very offensive to the Greeks, never mind to ourselves. The fifth largest economy in the world was being compared with a nation state of 12 million people in the Mediterranean—a state that cheated on its accounts with the European Union. Not only was that comparison offensive, but it distorted our country’s entire policy on deficit reduction.

Kwasi Kwarteng: Will the hon. Gentleman give way?

Sir Stuart Bell: I am not giving way; it is too late in the day. The unforeseen consequence of a too-rapid reduction in the deficit and no growth is that confidence has gone from our system. The hon. Member for Sevenoaks (Michael Fallon) referred to that. We have lost confidence. We say that we have the confidence of the markets, and of course we do; why would we not? We do not have the confidence of the people—of those trying to find jobs, of the young who have lost their jobs, and of other unemployed people. We do not have the confidence of the ordinary person in the street, who looks at the Government and sees the failure of their policies, so I would be cautious if I were a Government Member.

I come back to a statement made by my right hon. Friend the Member for Edinburgh South West, and I invite the House to remember it. There will be a change in policy. It will not be plan B or plan C. It will come in the autumn statement or the next Budget. The policy needs to change if we are to get growth. There is no future in a steep deficit reduction that will never lead to growth—not now, and not in the future.

Several hon. Members rose

Mr Deputy Speaker (Mr Nigel Evans): Order. To assist in enabling a greater number of Members to take part in the debate, the time limit is reduced to five minutes.

5.14 pm

Guto Bebb (Aberconwy) (Con): I hope that the five-minute time limit was not brought in because I was the next speaker. It is a pleasure to follow the considered comments of the hon. Member for Middlesbrough (Sir Stuart Bell). In particular, I welcome his comments about enterprise zones, which were also mentioned by

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my hon. Friend the Member for South Staffordshire (Gavin Williamson). The Jaguar Land Rover investment that he mentioned was bid for by Wales, too. It is a great shame that, as Tim Williams from the Welsh Automotive Forum stated, one reason why Wales lost out on that investment was the foot-dragging of the Labour Welsh Assembly Government, who refused to implement the enterprise zone process in Wales because it was a Westminster Government proposal.

The comments of the hon. Member for Middlesbrough were much more positive and balanced than those of the right hon. Member for Holborn and St Pancras (Frank Dobson), who decided to attack the credibility of bankers. He might be right, but when one is making a point in the House about the credibility of individuals, one should ask about the credibility of the shadow Chancellor, who advised the former Prime Minister to sell our gold reserves at a very low price. If we want to talk about credibility, we should remember the actions of Members on our own side as well.

This debate is about jobs and growth. I represent a constituency in north Wales where we have a significant small business community. That means that we have a lower dependency on public sector jobs in the Aberconwy constituency than in most of north Wales and most of Wales. That is not to say that the public sector is not important. I regret every single job lost in the public sector, but we have to acknowledge the fact that we must live within our means. The small business community in my part of north Wales has broadly welcomed the actions of the coalition Government. It has seen a credible approach to reducing debt, dealing with the financial crisis that we are facing, and creating a stable economic environment that will allow it to invest and create real employment opportunities for the people I represent.

However, in the context of the debate it is important to point out that there are issues that cause concern for small businesses. When I mention small businesses, I am talking about what most Members would describe as micro-businesses. In the 1980s, when we saw Wales recover so dramatically from the loss of the heavy industries, that recovery was based on the fact that Wales created more new businesses than any other part of the United Kingdom. I am certain that there are businesses in Wales that are willing to take that challenge forward, but there are issues that we need to deal with.

Those issues might not look very important to people dealing with swaps in the market in London and so forth. For example, one of the issues that small businesses in the tourism sector in my constituency resent is the VAT threshold. Most people would say, “What’s he going on about?”, but the VAT threshold is a barrier to growth. Someone setting up a small business in the tourism sector reaches a turnover level of £73,000 and faces a cliff edge—the fact that if they go on to turn over more than £73,000 a year, they are penalised by the system. Anyone who visited Llandudno this week would see cafes that have closed for the winter, bed and breakfast businesses—

Mel Stride (Central Devon) (Con): My hon. Friend is making a powerful point about VAT and tourism. Does he accept that it is wrong that our tourist businesses, particularly those offering accommodation, are handicapped because VAT rates are higher in this country than in many of our continental competitors?

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Guto Bebb: I am grateful for that intervention. It is my next point.

Let me finish on the subject of the threshold. When small businesses hit a turnover of £70,000, they are about to reach the point where they need to start employing staff. A system that penalises growth is something that we need to re-examine. I know that we have to do so in the context of the current financial situation, but small businesses in my constituency would be delighted if we could do something about the VAT threshold.

On the tourism sector, I am told I have more hotel beds in my constituency than the rest of Wales put together, so I am occasionally accused of pleading on behalf of the tourism sector when I say that it is a real concern that VAT rates on hotel bedrooms, for example, are being reduced to 7% or 6% in other parts of Europe, such as Ireland, Germany and France, yet in Wales we still have a 20% VAT rate. I have spoken with members of the Government about this and I have been told that we need to provide proof that a reduction in the VAT rate in the tourism sector would be beneficial.

A report that I have obtained from Deloitte indicates that if, for example, the VAT rate on hotel bedrooms was reduced from 20% to 5%, there would be an immediate cost of about £1.2 billion in the short term, but over the period of a Parliament, there would be a net benefit of £2.4 billion to the UK economy. When we recall that the Prime Minister stated that tourism should be a driver for growth in our economy and that tourism is a sector that employs people on a very large scale, we need to consider that. I would be grateful if we could receive some comment from the Treasury in due course on the issue and the need to examine it.

Finally, in the spirit of cross-party co-operation, which some Members have mentioned, the fact that Labour Front Benchers have decided to take on board the concerns of the construction sector is not a reason to dismiss the option of changing the rate of VAT charged on work to existing buildings. Many small construction companies argue that the current situation, in which there is a zero rate of VAT on new build but a 20% rate on refurbishment, is an anomaly that we must look at. There are figures that indicate that reducing VAT on refurbishment would be economically beneficial, and the fact that the Labour party has adopted it is not a reason to say no.

5.20 pm

Emma Reynolds (Wolverhampton North East) (Lab): It is a great pleasure to speak in this debate. Today’s shocking unemployment figures are only the latest confirmation that the Government’s economic policy is in tatters. When they came to power last May, the economy was growing and unemployment was falling. Only 16 months later there is a growth crisis in our country. Growth is flatlining. Unemployment is rising and is at its highest level since 1994. Youth unemployment is rising and is at its highest level since records began. Women’s unemployment is rising and is at its highest level since 1988. In my constituency the claimant rate has increased by 10% over the past year and we have an unemployment rate that is double the national average.

What do the Government say? They try to blame the eurozone. That is a completely fatuous claim, because unemployment in the eurozone and in the US is falling.

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The fatuous comparison with Greece really makes me angry, because Greece’s debt-to-GDP ratio has been double ours for quite some time and over 100% since the early ’90s. The truth is that the Government’s economic policy is politically motivated. Let us face it: the Chancellor is their chief political strategist and his calculation last year was to get the pain out of the way early in this Parliament so that he could offer some sweeteners towards the end, when the economy will hopefully be growing again, so that they can try to win a majority and will not have to tolerate the Lib Dems in government. Their plan is hurting, but it is not working.

The Government’s political motivation and their ideological commitment to a much smaller state is blinding them to the reality that their policies are actually making it more difficult to cut the deficit. They are now set to borrow £46 billion more than they planned. They have created a vicious circle, with massive public sector job cuts, fewer people paying taxes, more people claiming jobseeker’s allowance, less revenue in Government coffers and therefore higher than expected borrowing. They should face up to the fact that these deep cuts are self-defeating.

It is not just the Labour party that is telling the Government that their economic policy is dangerously wrong. Businesses, commentators and economists are lining up to urge them to develop a credible plan for growth. Even the Conservative Chair of the Treasury Committee, the hon. Member for Chichester (Mr Tyrie), who is not in his place, has criticised the Government for lacking a growth plan. He recently said that the

“piecemeal policies for growth need radical improvement. In places it is inconsistent, even incoherent.”

In fact, the Tory leadership was so worried about his forthright opinions that he was literally bundled into a private room for a quiet chat after the Prime Minister’s speech to his party conference. The Chancellor’s good friend, the managing director of the International Monetary Fund, Christine Lagarde, has also warned that the Government should be prepared to change course if the economy is headed for weak growth and high unemployment. Surely that is exactly where we are now.

Jim Shannon (Strangford) (DUP): The Opposition’s motion recognises the need for a one-year cut in VAT on home improvements. Does the hon. Lady feel that such an initiative, by its own nature, will motivate the construction industry, give opportunities to apprentices in particular and ensure that the economy grows, rather than stagnates?

Emma Reynolds: I could not agree more, and I was just moving on to the interdependence between the public and private sectors, which the Government seem to be totally unaware of. According to an independent study, at least 2.3 million private sector jobs are now at risk from public spending cuts. Some parts of the country are being hit harder than others. Oxford Economics forecasts that in the west midlands, between 2010 and 2016, 310,000 jobs are at risk in private sector firms that are directly or indirectly reliant on public sector spending. That is on top of a net loss of 50,000 public sector jobs across the west midlands.

The victims of this Government’s policy are mostly the young and women. Young people are the future of our country. For the first time in decades, parents are

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pessimistic about their children’s futures, wanting them to do better than they did but fearing that their opportunities will be worse than their own.

It is time for the Chancellor to put aside his original political strategy of getting the pain in early in this Parliament and admit that his economic plan is not working. He needs to change direction. There is an alternative. Of course we need to reduce the deficit, but with deep and fast cuts, his plan is not working. Without economic growth, it will not be possible to bring the deficit down.

5.25 pm

Elizabeth Truss (South West Norfolk) (Con): We have heard eloquent speeches about the western debt crisis, but underlying that we have a competitiveness crisis, because the west has built up debt while the east has saved, and there is a gross imbalance.

The legacy of 13 years of Labour Government is one of red tape, meddling and taxation. We are now 83rd in the world for our burden of regulation and 94th for our burden of taxation. We are 28th in terms of infrastructure. In maths, we are 28th, and in science, we are 16th. We have the highest child care costs in the world. Labour made the labour market much more inflexible and made life much more difficult for working parents. In 1997, there were 100,000 child minders in the market; by 2010, that figure had reduced to 55,000 because of the burden of regulation on the sector. Child minders were the cheapest and most flexible way of providing child care. A lot of people have struggled to get child care because of the costs that Labour imposed on the market.

In education, we saw a denigration of traditional subjects such as maths, science and languages. Whereas those in the rest of the world were encouraging students to do those subjects, in Britain the numbers dropped, as did the quality. We have the lowest proportion of 16 to 18-year-olds studying maths in the OECD. Labour Members have talked about youth unemployment, but what about their appalling record in education, which means that many of our young people have left school without the skills they need to work in today’s workplace? Many employers care most about languages, yet the proportion of those studying languages at GCSE dropped from 79% to 44%. The shadow Chancellor used to be the Education Secretary; he did nothing in that job to improve the skills of young people.

Then we move on to infrastructure. Huge amounts of money were wasted on wasteful schemes such as Building Schools for the Future. Meanwhile, in 1997 Labour cancelled the road building programme, leaving roads such as the A11 undualled and the economies of counties such as Norfolk held back. Luckily we have a new Government who are putting in that infrastructure, and that work is starting next week.

The Opposition talk about living standards, but how are we to get our living standards up if we cannot produce goods competitively with the rest of the world? At the moment, we are buying more goods and services from those in the rest of the world than they are buying from us. That is a legacy of the previous Government’s supply-side policies.

What do we need to do? First, we need to reduce regulation. The Chancellor is absolutely right about lengthening the period for applying for unfair dismissal.

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We heard nothing from the Opposition about their view of this crucial issue; they have not made up their minds about employment regulation. I want parents, not bureaucrats, to be in charge of systems such as child care. We need to get rid of the bureaucracy that has raised the costs and limited the supply of child care. No new places have been provided since 2005, and that is a Labour party legacy.

We need a massive focus on improving maths and science in our schools. All the leading countries—Germany, Canada and many Asian countries—insist on rigorous subjects until the age of 16, including languages, history and sciences. The Opposition have done nothing but oppose the English baccalaureate that brings those subjects in.

It is going to be a long, hard slog to get our country back on track after the huge misuse of capital, the inflexibility and the regulation of our labour market of the past 13 years, but we must do it. Britain has to stop comparing itself just with other countries in Europe; we have to compare ourselves with rising countries across the world. We have to be humble enough to learn lessons from those countries, rather than just looking over our shoulders.

5.30 pm

Mr Geoffrey Robinson (Coventry North West) (Lab): It is a pleasure to follow the hon. Member for South West Norfolk (Elizabeth Truss). Her points about competitiveness in the long term and the immediate future are valid. However, all of us who have been in industry know without a doubt that long periods of deflation, inactivity, insufficiency of demand and cuts hurt competitiveness. That is the trouble with the Government’s policy.

By sleight of hand and cleverness in debate, the Chancellor seems to have turned the debate from being about what the Government’s plan originally aimed to do into being about debt and interest rate management. We are all pleased that there has been some success in those areas, but at what cost has that success come? It has come at the cost of missing the central aim of the plan that the Chancellor set out when he came into office in June last year: to reduce the deficit within this Parliament. It is quite obvious that we are not getting anywhere near that. Indeed, every single indicator in the plan is going into reverse and being missed. The unemployment figures that came out today are disastrous and will make the plan cost a lot more. We are overshooting the borrowing requirement, which was meant to be reduced, by £46 billion before we even come on to the increased costs of higher unemployment and the benefits that go with it.

Robert Flello: Will my hon. Friend give way?

Mr Robinson: I will give way in a moment.

Inherent in the plan are further unnecessary deflation and cuts in the economy. The growth plan was essential to the original plan of stabilising and reducing the deficit. I agreed with that entirely, as I am sure did all Members, particularly the Government Members who speak about the private sector. However, it relied on the private sector getting going and increasing investment, output and net exports. Every one of those things is going into reverse.

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After I have given way to my hon. Friend, I will come back to that point and deal with this week’s National Institute of Economic and Social Research report.

Robert Flello: My hon. Friend is making a very good point about growth in the private sector. His constituency, like mine, will have businesses that could export because they have order books for three years, but cannot because the banks will not lend them any money to solve their cash-flow issues. They cannot do the work or fulfil their contractual orders because they do not have the working capital to do so due to the nonsense that is going on.

Mr Robinson: I could not agree more with my hon. Friend. I will come to the problem of bank lending towards the end of the few minutes that I have.

To see the central failure of the plan and why it is so obviously not working, one must just look at what the NIESR has said about the progress of manufacturing, on which the plan relies:

“manufacturing output—the biggest contributor to industrial production—fell for the third month in a row, suggesting the engine of the economic recovery had shifted into reverse.”

I do not think that anybody can doubt that. The plan is not working, like it or not. Manufacturing output fell 0.3% between July and August, meaning that it has fallen for three months in a row. At the beginning of this year it was increasing by 6.1%, but that has dropped to 1% on an annual basis. We are looking at a catastrophe.

The Government attempt to blame all this on the previous Labour Government, as if we created the world crisis, which we did not. We have to find a way of yanking them out of that mindset. It is quite clear to anybody looking at the situation as we go into the second year of their plan that they own this economic policy. It is their economic policy and their plan that are on trial, not what the Labour Government did or did not do five, six, seven or eight years ago. It is their plan that is not working. I do not know why everybody on the Government Benches cannot see that that is a simple fact. Whether we did the right thing is totally irrelevant to the present situation. The question is: is the Government’s plan working? It is quite clear that it is not. I will willingly give way to the Chief Secretary if he wants to intervene on that point. Realising that, the Government are trying to move the debate to another issue, which is not the central issue.

The Government are also trying to introduce some measures that will help, and they have gone for monetary easing and credit easing. The trouble is, the history of monetary easing does not suggest that it gets into the real economy. Indeed, when the Governor of the Bank of England gave that remarkable interview to two economic journalists following the announcement of the £75 billion increase in monetary easing, he could not say that it would get into the real economy. He said, “That’s none of my business,” but of course it is. He said, “I will lend it to the banks, what they do with it is up to them.” We know as a fact from previous experience that it does not get to the high street or into the real economy. Unless measures are taken to direct that money effectively in some way or another, against the Governor’s explicit policy of not interfering in capital markets at all, it will not work. We know that Project Merlin similarly failed.

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The Chancellor has now come up with a great plan for credit easing, but who is going to administer it and dress up the bonds involved? Will there be a composite element of different companies? Who will decide who gets the money and who does not? Perhaps the Chief Secretary will enlighten us when he winds up the debate, but there is nothing concrete about the plan. It is just an idea that has been floated, like Merlin or monetary easing. It sounds good—if we could get small companies in my constituency and that of my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) back working with money, it would be great. We would all back it, as we are in principle.

It is no good the Government believing that they cannot embark on capital investment right throughout the economy. Of course the plans will take time to introduce, although if they had been started a year and a half ago, when we pointed out to the Government what they should be doing, they would be ready now. Every time we have gone to the Treasury we have been told, “Oh, that won’t have any effect immediately.” That argument just puts off the day on which plans are implemented. The Government’s plan is not working, and we can put forward plans that would get the country back to work and also help to reduce the deficit much more effectively than the Government’s failed plans are.

5.36 pm

David Rutley (Macclesfield) (Con): Thank you, Mr Deputy Speaker, for giving me the chance to speak in this important debate.

Our economy continues to face challenging times, with the crisis in the eurozone and ongoing problems in the global capital markets. The Government’s plan for recovery is therefore more important than ever, and entrepreneurs play a vital role in taking it forward. Our everyday entrepreneurs are critical to the agenda of innovation, job creation and economic growth; it is not just down to the Government.

In Macclesfield we have been doing all we can to support our vital small and medium-sized enterprises, with bi-monthly breakfasts at which up to 130 businesses come together to work out what can be done to strengthen the local economy. We also have an economic forum to implement the action plans that are needed, but it is clear that what entrepreneurs in Macclesfield and across the country want is a sound economic framework and sound economic policies to support them in their work.

Sadly, entrepreneurs are living with the legacy of not just the previous Government’s deficit but the £90 billion a year cost of new regulations on businesses that have been put in place over the past 13 years. That additional cost makes the difference between profit and loss for small businesses. My hon. Friend the Member for South West Norfolk (Elizabeth Truss) has already pointed out that our regulatory burden puts us 89th out of 139 countries in the perception of the weight of regulation. That has to change.

It is not just domestic regulation that is entangling our entrepreneurs, because the European Union has become a major source of red tape. Since 1997 the EU has produced 100,000 pages of new regulations that tie the hands of our SMEs and damage our economic potential. That must change.

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There are several important priorities in building the entrepreneurial economy that Government Members want to see. We want to see a reversal of the regulatory tide, the simplification of UK employment law and the realisation of our SMEs’ export potential. The Government are already working very hard in those areas and have introduced a one-in, one-out approach to regulation, which will be vital. We have already seen the removal of 257 regulations in the retail sector alone. The new three-year moratorium on new regulation for the smallest firms will help to protect start-ups during their most vulnerable phase, and the red tape challenge will encourage businesses to identify the regulations that are preventing them from doing the things they need to do. Those are positive steps in stemming the tide of regulation.

In addition, we need to do more to simplify employment law, which, given that job creation is vital to our economic recovery, is a huge priority. As has been said, the Chancellor has done a great job in introducing an extension of the qualification period for unfair dismissal. That is a way of reducing risk for employers when they are taking on new staff, and it has been welcomed by many SME trade bodies.

Another area that needs to be worked on is realising the potential abroad of our entrepreneurial talent. A report by the Select Committee on Business, Innovation and Skills found that only one third of our SMEs are involved in international trade. Germany has a much higher percentage. The role of UK Trade & Investment is vital in that respect. It is extending its reach to more businesses, but when we look at the potential and the entrepreneurial flare of the 5 million SMEs in this country, it is clear that more needs to be done in communicating those great opportunities in overseas markets. We need to do more to help small businesses to do that.

The Government are working to improve the conditions for economic growth, but, as in a human body, not all growth in the economy is good, which the record of the previous Government shows very clearly. We had unprecedented growth in the deficit, the burden of debt and the weight of business regulation. In the good times, they could have created the economic equivalent of an entrepreneurial athlete, but they instead created an economy that was more like a couch potato, bloated on debt and ill prepared for the downturn. We are changing that.

The Government clearly cannot and should not seek to build an entrepreneurial economy by themselves. They are working with small businesses to create the conditions that will unlock the potential of our entrepreneurial, everyday heroes. Our SMEs also have a responsibility in that task. Now is the time for them to demonstrate the same energy, commitment and creativity that is required in the marketplace to help constructively to shape Government policy.

5.41 pm

John Mann (Bassetlaw) (Lab): Having listened for an hour and a half to the two Front Benchers, I suggest that we put them in a ring in Westminster Hall the next time we debate the economy—we could charge the public a little fee, which would be a modest contribution to deficit reduction—and allow the rest of us a little more time to discuss the economy.

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First, I want to make some points that might be of particular interest to Labour Front Benchers—I trust that they will be noted in detail. I congratulate Labour Front Benchers on two major changes in the past three weeks. I mentioned the first change earlier—the change of policy on VAT. The previous policy, which I disagreed with in the Chamber, was that the Labour party was in favour of a permanent VAT reduction. Now, the policy is for a temporary reduction—from what the shadow Chancellor said, it appears that there would be a 12-month temporary reduction.

The figures are huge. Just in the next Parliament, that change in policy will mean that £50 billion will be available to a new Labour Government from revenues to the Exchequer. In the context of a snap election, potentially £20 billion extra would go into the Exchequer in the next three years. Those are major sums, and I therefore congratulate Labour Front Benchers on that huge change in policy.

That is not the only change in policy—I would recommend the second policy change to the Government, and I should like to hear in the winding-up speeches whether they are prepared to adopt it. Labour’s policy now is that all moneys from the privatisation of the more recently part-nationalised banks will go 100% to offset the debt. That ought explicitly to be the policy of the Government. I trust that they are not thinking of creating youth unemployment now to delay for give-away Budgets just before the election. The electorate, as well as business, will not forgive them for that.

This Government have adopted an economic policy of Japanisation. They are adopting the Japan Government’s approach, and anyone who wants to see precisely where they are going needs to look at the economic history of Japan over the past 20 years.

Jacob Rees-Mogg: It is not the Japanese approach. The Japanese Government have enormously increased their national debt, while we are going to reduce it.

John Mann: On inflation and monetary policy, this is precisely the Japanese model, but it does not work, which is why there is already £46 billion in additional debt. The lesson from Japan is that we cannot deal with the debt without growth. That is the lesson that the Government are not listening to. I recommend that Members on both sides of the House read up on the economic history of Japan.

I say to the Labour Front-Bench team that we need to be more specific about the cuts that we would make. I realise that on welfare, for example, we cannot be specific. Like the Government, we are in favour of major change, but we do not know whether that will be successful. The fact is that the state will shrink over the next few Parliaments—there is no other way to pay for our deficit reduction plans or the Government’s less coherent plans. We have to pay back the debt. The Government want to pay it all back now, while we are saying, in essence, “No, we wouldn’t pay back as much now, but it would be paid back in future years.” That is the key difference. Either way, it means that the state will have to shrink in future years, and I can suggest some things that we should be stating.

What about Government Departments? Housing costs nine times as much in London as in Bassetlaw. I am not suggesting that a major Department should move to

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Bassetlaw—although we have the land—but there are Sheffield, Leeds, Nottingham and many other places. Let us see the Department for Culture, Media and Sport shifted to Manchester with the BBC. Let us see the Department for Business, Innovation and Skills shifted. Let us see the Department for Environment, Food and Rural Affairs shifted. Let us see huge Departments, in their entirety, shifted out to the regions of England. That would give a boost to economic growth and bring permanent savings to the Exchequer. That ought to be part of our policy.

There are other smaller things that we could do. What about the British Council? What a nonsense of an organisation to sustain! We could take some of that money and give it to British universities to do English-language training abroad and build their business base in emerging markets. At the same time, that would reduce costs. What about unitary authorities? Of course, many Members, being ex-councillors, do not want to get rid of unitary authorities. What nonsense! There are 27 press officers in Nottinghamshire and 10 chief executives, with head offices all over the place. Scrap them! Scrap large numbers of councils! What about the police? We cannot merge the police, but we can merge their headquarters. We could rationalise NHS buildings across the county. There is a vast array of things that we could do. There are the British Army bases in Germany. We could reduce the size of the base in Cyprus. We should be levying at least 5% on the UK Crown dependencies to which we provide security. We should offer a permanent reduction in national insurance for small businesses to get young people into apprenticeships and back into work.

5.48 pm

Jackie Doyle-Price (Thurrock) (Con): It is a great pleasure to follow the hon. Member for Bassetlaw (John Mann). I was rather shocked to find myself agreeing with a number of his constructive suggestions, which highlights the fact that this debate has been one of contrasts. There have been some very constructive contributions from Members on both sides of the House on how we can do more to encourage growth, but some have been disappointingly partisan. Our constituents expect us to give wise counsel when discussing important issues such as job creation and economic growth, not to engage in party political spats.

I think that we would all agree that the contraction of the economy and the financial crisis were inevitably going to impact on economic growth. The major fault line between the two sides of the House appears to be the role that the Government can play in addressing that. The Opposition keep repeating their call that the Government must slow the rate at which we are cutting, but the irresponsible thing to do was to spend more than the country could afford in the first place. Trying to right that wrong by spending more money that we do not have is not the way to fuel growth. At the heart of the Opposition’s motion is the notion that Government spending can pull us out of the recession, but again that is simply not the case. It is time the Labour party learned that it is people and businesses that generate wealth, not the Government. It is our job as a Government to facilitate and enable private businesses, not to try to

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spend our way out of recession and load those businesses and individual owners with higher tax bills to meet that spending and to service the inevitable debt.

Some Opposition Members have done their best to highlight everything that is ill in the world, but we also have to recognise that a lot is going well in this country. Only last week my right hon. Friend the Secretary of State for Business, Innovation and Skills and the Under-Secretary of State for Transport, my hon. Friend the Member for Hemel Hempstead (Mike Penning), the Minister responsible for shipping, came down to the borough of Thurrock to celebrate the investment in Britain’s new global shipping port and logistics centre. That investment of more than $1 billion represents the largest job-creation project in this country at present, with the potential to create up to 36,000 jobs in what will be Europe’s largest logistics park and, in the short term, 1,000 jobs as the next phase of the project kicks off.

However, the port’s contribution to the economy does not end there. Rather, it is a great illustration of how private investment in one place has a positive effect throughout the local economy. Businesses around the region—27 million people will be within half a day of the port—will be able to take advantage of a more cost-effective way of getting goods into and out of the country. The facility will transform our maritime port infrastructure and play a massive role in helping Britain’s economy over the coming years. It is a real force for competitiveness and illustrates the impact of good private investment.

That is not the only investment taking place in my area. The port of Tilbury, now in its 125th year, is also investing in expansion. There is also massive investment at Tilbury power station to create the world’s largest dedicated biomass power station, which will be contributing to the national grid before the end of the year. Those are just a few examples of how private business is generating the investment that will create more jobs and add more wealth to the bottom line of the UK economy. The answer is not Government spending; it is private sector investment. Those examples show that Britain is open for business and that private sector companies have the confidence to invest in the UK.

When the Opposition highlight what is going wrong, they are talking our economy down. We have a lot to offer in this country and we should be encouraging it. One thing that has been mentioned is access to finance for small and medium-sized businesses. Only last week I visited Barclays bank in my constituency, where I was told how much money the bank had been able to lend to businesses. However, the complaint was that although money was still available in the pot, small businesses were not coming for finance because of the narrative coming from the Opposition Benches about how it was not available. Let me say this to Opposition Members. Please stop talking our economy down. What they say will become a self-fulfilling prophesy. We have a lot to offer in this country; it is about time we encouraged it, not beat it up.

5.52 pm

Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab): Today we are talking about this Government’s 18 months of turning growth into stagnation and how they are essentially borrowing to cut. “A

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manufacturing export-led recovery” is the Government’s phrase—something I agree with—but those words sound as hollow as the Tory conference floor during the Prime Minister’s conference speech. The industrial production numbers for August coupled with a quarterly poll from the British Chambers of Commerce point to the reality of long economic stagnation. Industrial output was up 0.2% between July and August, but that was entirely due to volatile energy and utility sector prices. Manufacturing output was down 0.3% month on month—much worse than predicted—with export order prospects at their worst for two years according to the BCC.

In retail, consumers are spending less than a year ago, as domestic spending runs below inflation. For all the talk of an export-led manufacturing policy, the Government are still completely reliant on an ever-falling pound in relation to the dollar. However, that is by no means an industrial strategy, and it is certainly not industrial activism, especially as LEPs—another Government growth policy—still have no discernible powers. Nor do they have budgets or money, making them easy to organise, as they do not need accounts departments. Enterprise zones are vague, while funding for the regional growth fund nationally in England is, as we all know, lower than the pot of cash for the Post Office mutualisation fund. Indeed, we have waited six months for the RGF to be financed, but we have still received no answer from the Government Front Benchers about when that money will come through.

Gavin Williamson: Will the hon. Gentleman give way?

Tom Blenkinsop: I am sorry, but I am not taking any interventions because of the time.

Those on the Government Front Bench talk about an employee having to work for 24 months before being eligible for employment rights, but that might give the Government some difficulty, because it would run counter to the interests of new starters—young people seeking work, as well as apprentices. If the Government elongate the time to 24 months, it will be easier for a company to sack an apprentice.

Today in the north-east, we have seen a reduction in employment of 17,000, an increase in unemployment of 19,000 and a 1,500 increase in those claiming jobseeker’s allowance. We have seen the highest UK unemployment since 1994. What is the cost to the Treasury and the taxpayer in benefits? The situation also damages demand in the economy.

Chris Heaton-Harris (Daventry) (Con): Will the hon. Gentleman give way?

Tom Blenkinsop: I am sorry, but I am going to continue.

Industry is withholding spending. Small businesses seeking capital cannot get it except at exorbitant rates, and those that do have capital are holding it as cash and not investing. Large industries with access to the money markets are still holding off, as there is no national state capital underwriting or guarantees. This all comes down to confidence. In an article in The Times yesterday entitled “Here comes the double-dip, say finance chiefs”, Ian Stewart, Deloitte’s chief economist, was quoted as saying:

“Although corporates have the firepower to expand, at the moment their trepidation is with growth, so they are cycling back to exactly what they were doing in late 2008, which is cutting costs and building up cash.”

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The most troubling factor is the Chancellor’s deficit reduction plan. It was predicated on 3% growth, but we have had less than 0.2% growth since May 2010. This means that his plan is out of kilter with reality. The Office for Budget Responsibility predicted £46 billion extra borrowing by this Government, but that figure is now rising. Sure enough, this Tory-Lib Dem Government will have to borrow half a trillion pounds. However, unlike the Labour Government, who borrowed for growth, this Government are borrowing to cut, and they are cutting too fast and too deep.

The hon. Member for South West Norfolk (Elizabeth Truss) referred to savings surplus economies such as China, Germany and Japan. They are also manufacturing surplus economies. We were one of those, back in the 1980s, until the decimation of the coal, steel and chemical industries, all of which used to exist in my area. Under the 13 years of Labour government, we saw record investment in industry. I speak as someone who worked, and got his hands dirty, in industry. That Government invested in industry at record levels. We set up organisations such as NEPIC—the North East of England Process Industry Cluster—and One North East, which had a budget of £2 billion. We gave businesses leadership, and we gave those organisations the cash to bring businesses in. We saw more than 60 chemical companies come to Teesside, but now we have seen the closure of the Teesside Beam Mill and the loss of 1,500 jobs in the steel industry from Scunthorpe to Teesside. Job losses at BAE Systems and Bombardier are also just round the corner. This Government need to reassess their policy very fast.

5.57 pm

John Hemming (Birmingham, Yardley) (LD): I will not take any interventions, as that would leave less time for others to speak.

The Opposition are complaining that the forecasts show that the Government will have to borrow £46 billion more than was previously forecast. Their solution is to borrow more money. They are proposing to borrow an additional £31 billion in any one year—I think that that is the precise figure. I asked the shadow Chancellor what he thought the limit on borrowing should be, but he did not answer the question. One presumes therefore that he has no idea what the limit is. Well, the limit on borrowing is called the International Monetary Fund, when it has to come to the rescue when the markets will not fund a country’s deficit.

The reality is that the interest rates on deficits matter, because they represent a perception of the risk of non-repayment, and of the possibility that a Government will become insolvent. The difficulty is that, as a country increases its deficit, it also increases that interest rate. Gradually, the interest rate increases on the whole of Government debt, not just that borrowed in one year. If the whole of Government debt is in the order of £1 trillion, 1% of that is £10 billion. That £10 billion has to be found either from additional taxes over time, or from additional cuts. Labour’s strategy would lead to greater cuts or greater taxes in the long term—probably greater cuts.

Let us look at how we have got into this situation. An interesting person to turn to for quotations on this is Lord Turnbull, who was the Cabinet Secretary at the

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start of the third Blair Government. He said that excessive borrowing started to be a problem from 2005. I quote him:

“It kind of crept up on us in 2005, 2006, 2007, and we were still expanding public spending at 4.5% a year”,

and he argued that the Treasury should have put more money aside. He said last year that the primary reason Britain was

“in the mess that we’re in”

was that

“public spending got too big relative to the productive resources of the economy, by error”.

He added that a loss of output caused by the financial crisis also contributed to the Budget deficit. The mistake is thinking that the problem is caused by one thing alone. There are a number of factors: one is the banking problem; another is overspending by the previous Labour Government.

What we have before us is a motion to deal with a problem caused partly by overspending, to which the proposed solution is yet more spending. In this instance, that means borrowing by the Government for private spending, to be fair, although a cut in VAT on a temporary basis does not generally feed into people’s pockets, but into those of the corporations that do not reduce their prices and do not have to pay so much tax.

In his memoirs, Tony Blair proposed what should have been done. On page 679, we can read him reflecting on what should have been done, consistent with his analysis of the economy:

“In my view, we should have taken a New Labour way out of the economic crisis: kept direct tax rates competitive, had a gradual rise in VAT and other indirect taxes to close the deficit, and used the crisis to push further and faster on reform.”

Tony Blair was clear that Labour should have put up VAT.

I kept my ballot paper for the Labour leadership election; I did not think it was right for me to fill it in. One interesting thing about that ballot paper was that it came along with the manifestos of the candidates. I looked at the entry for the shadow Chancellor, who said that he had been “leading the fight” against the VAT rise. Last year, he led the fight against the VAT rise; now he says, “Yes, we need the VAT in the long term”, as at least the hon. Member for Bassetlaw (John Mann) recognises; he must have managed to persuade him.

What question needs to be asked? The Government have a strategy, and the strategy is reducing the deficit. There are obviously difficulties, given that the solution must be worldwide. Is it therefore right to follow the Labour party’s example and borrow yet more money—another £31,000 million a year—increasing the debt and potentially increasing the need for rescue in the long term, or should we keep on with the strategy we have? My view is that we should keep to the strategy that we have got.

6.2 pm

Austin Mitchell (Great Grimsby) (Lab): I knew something was desperately wrong with Government economic policy when I heard last week that the Prime Minister had to be forcibly restrained from telling us all to pay off our credit card debts. It was as though he had never taken a degree at Oxford in PPE—politics, philosophy and

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economics—with first-class honours or had learned nothing from it. I think his father would be well qualified to ask for his money back from Oxford, because that goes directly against Keynes’s advice on the savings fallacy, which is “The more you save, the more you compound recession.” It also runs against the advice of the Office for Budget Responsibility, which predicated what pathetic growth is going to occur the next year on consumers building up consumer debt to pay for products, increasing demand.

I cannot launch the same accusation against the Chancellor because he took a history degree. He does understand economics, but as far as I can see he thinks he is the reincarnation of Montagu Norman: he has the same policy and economics as him. Neither of them, in their obsession with debt and borrowing—also well exemplified in the last speech—shows any consideration, or knowledge, of demand. Because demand is so weak in our economy, there will be no investment, and if there is no investment, there is no increase in production and no increase in employment. If there is no increase in either of them, there is no growth, yet it is only growth that will allow us to pay off the debt we have accumulated. Demand is the key problem, and the obsession with debt obscures it. Instead, the Government compound the problem by cuts that are going to kill recovery.

The folly of that is that we are freer than any other country to act for ourselves and to take measures to expand the economy and boost demand. Europe is locked into the euro crisis—a self-generated crisis—from which we were saved by my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), who, thank heavens, kept us out of the euro. Greece and the other Club Med economies, which must include Ireland now that the gulf stream is warming up the Irish economy, cannot devalue or escape from the crisis by reducing interest rates, so they are trapped. We are not. We can reduce interest rates, and we can devalue; indeed, we have devalued. We can use all the weapons of economic management that the euro prevents.

Nor are we in the same trap as America. Its President is effectively trapped by a Republican Congress whose members have “Tea Party economics” embossed on their foreheads, and can neither increase taxation nor boost spending. We are free to act—yet that freedom has been abused by action that is directly counter-productive, and based on piggy-bank economics rather than any manifestation of economic sense. Such a policy would be appropriate for a Government of millionaires who could sit comfortably on the piles of their money and say, “A few more sacrifices from the working class, a few more unemployed, a few more public servants fired, and we’ll all be better off: Britain will win through thanks to the sacrifices of other people.” However, it bears no relation to economic sense, so it will not work.

Our recovery was always going to be slower. The recession hit harder here because of the exaggerated financial sector that has resulted from the destruction of so much of our manufacturing—particularly the Thatcher destruction of the 1980s—and the fact that so much of it is now foreign-owned. However, we must not compound our difficulty and make recovery even slower by dragging out a period of low growth. Unless policy is reversed and we have a plan B—I have a name for the great day when policy is reversed; I am going to call it

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national B-Day—we shall be doomed to a winter that will be hard, miserable and tough, in which unemployment will increase, more people will be put out of work to increase Government borrowing and Government debt, and more small businesses will be destroyed.

6.7 pm

Chris Heaton-Harris (Daventry) (Con): I welcome the hon. Member for Leeds West (Rachel Reeves) to her Front-Bench position, and wish her all the best in it. It has been fascinating to listen to some of the speeches made by Members sitting behind her. We heard, for instance, the “Tale of One City”, the wonderful city of Middlesbrough. The hon. Member for Middlesbrough (Sir Stuart Bell) emphasised the importance of the enterprise zone in securing jobs in the new businesses coming to the city, while the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) essentially “dissed” the whole project. I hope that Middlesbrough has the future predicted by the hon. Member for Middlesbrough rather than that predicted by the hon. Member for Middlesbrough South and East Cleveland.

In discussing this motion about jobs and growth, Opposition Members have tended to refer to public sector jobs and growth while those on our Benches have understandably referred more to the private sector. We know that every penny spent by the state must be created by those who are demonised by a number of Opposition Members, especially the Leader of the Opposition, as those nasty, awful people, the wealth creators of the nation. As my hon. Friend the Member for Thurrock (Jackie Doyle-Price) reminded us, it is people and businesses who generate wealth, not the Government.

Businesses such as Cummins, Ford, Tesco, DHL and hundreds of smaller manufacturing businesses are all creating jobs in my constituency at this moment. I note that the hon. Member for Leeds West has not tried to intervene to remind me about the job statistics in my constituency. Under Labour between August 2006 and August 2010, soon after the present Government came to office, the number of jobseekers nearly doubled. Under this Government it has fallen by a small handful, and the number of people claiming jobseeker’s allowance for more than 12 months has dropped by a third. That is because we have a healthy private sector that we are trying to encourage in the best ways available to us.

I wonder which of the businesses whose names I read out earlier—Cummins, Ford, Tesco and DHL, those horrible big businesses—are among the predatory businesses that the Leader of the Opposition said, in his conference speech, that he or his civil servants would blacklist: businesses such as the awful AA, those terrible people from Saga, McVities, or—my God, even worse than that—the people from Boots!

I am lucky, as my constituency has a dynamic district council that is doing its best on planning and encouraging growth. We have also been lucky in that our bid to have a university technical college based in the constituency was successful. We know that future jobs growth must be sustainable; it needs to be for the local market, and it needs to provide relevant jobs for relevant industries.

This strategy is working in Daventry. When people driving up the M1 reach junction 18 they see big sheds

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on the left. That is DERFT—the Daventry international rail freight terminal. Some 9,000 new jobs will be created if DERFT 3 goes ahead.

We want to encourage small business. The Labour party has always had a plan for that, too—it has a good reputation in encouraging small business—but our plan is different. Labour’s plan was to take a big business and add a shed-load of regulation—in which case, sure enough, we will absolutely get a small business—whereas our plan is to make sure we encourage people to take that tiny bit of risk required in business by deregulating as much as possible and having a flexible job market that enables them to create jobs.

My background is not the same as that of the hon. Member for Middlesbrough South and East Cleveland, as I did run my own business. I worked nights for 11 years importing and wholesaling fruit and veg. Alas, however—the hon. Member for Great Grimsby (Austin Mitchell) is wrong about this—I am not a millionaire. I do not even aspire to be one. What I want to do is make sure that my constituents who do aspire to be millionaires get the opportunity to achieve that, and running a small business is a very good way to start.

If we want to encourage jobs and growth, we need to make small businesses more successful. Therefore, we need to reduce regulation, so I welcome the national insurance measures we have introduced, but I think the Government can do much better on relaxing procurement rules to enable small businesses to bid for county council contracts without having to go through pages of needless paperwork. To allow small businesses to succeed, therefore, we need more flexible labour markets and less regulation, and we also need to sort out Her Majesty’s Revenue and Customs.

6.12 pm

Mr Michael Meacher (Oldham West and Royton) (Lab): Today, we were once again treated to a typically knockabout speech from the Chancellor. It was founded on the entirely specious notion that the cost of implementing the five points put forward by my right hon. Friend the Member for Morley and Outwood (Ed Balls) would be £27 billion, of which £15 billion is supposed to represent speculative market response. In fact, however, if any Government were to come forward with a plausible growth policy, it would almost certainly be greeted with a positive market reaction.

The key problem for the British economy today is not indebtedness; rather, it is lack of demand. The UK debt-to-GDP ratio is, in fact, quite modest, but Government cuts are clearly worsening the problem of lack of demand while hardly reducing the deficit at all because of falling tax revenues and rising unemployment. At present, for every 2.7 jobs lost in the public sector, only one is being created in the private sector.

The alternative policy is a public sector-driven jobs and growth strategy. That is the only way to get out of slump when the private sector contracts, which it is doing at present. We must get people off the dole, thus reducing the enormous cost of benefits, and get them into work where they can contribute to tax revenues as well as regain their independence. Keeping 1 million people on the dole costs £7 billion a year. For the same amount of money, 400,000 jobs could be created.