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John McDonnell: Yes. Let me press on because time is limited in this debate.

We need to be realistic in recognising that our economy faces severe challenges. I warned in September that many of the factors that contributed to the last economic crisis are re-emerging. This is the slowest recovery in living memory. It is based on rising house prices and unsecured consumer lending rising at record rates. The Government’s own forecasters expect household debt shortly to surpass even the level reached before the crash. We have an increasingly unbalanced economy, based more than ever on insecure jobs in the service sector and an over-reliance on the finance sector.

Michael Tomlinson (Mid Dorset and North Poole) (Con): Will the hon. Gentleman give way?

John McDonnell: I will press on because time is limited. I will come back to the hon. Gentleman if I have time.

Regrettably, all the predictions are that manufacturing is likely to go into recession next month. The UK’s current account deficit on the balance of payments was at an all-time high last year. That deficit is driven by a slump in British investors earning abroad, while those in the rest of the world continue to profit from the assets that we sell and the loans that we take out.

There are warning signs in the rest of the world, yet the Chancellor is bequeathing us an economy even more poorly prepared than it was on entering the storm in 2008. Back then, we had room to manoeuvre. The Bank of England was able to cut interest rates to rock bottom, sustaining the economy as the global recession hit. It hit us hardest of all because our financial system was appallingly over-exposed to risks that it did not or, in some instances, would not understand. At least at that time, the Government could take action. They slashed interest rates and introduced quantitative easing. Seven years on, the Bank of England base rate remains jammed at the lowest level in history. The room for manoeuvre in conventional monetary policy is essentially zero.

Michael Tomlinson: Does the hon. Gentleman welcome the jobs figures in my constituency for the past year, which show that the number of people claiming jobseeker’s allowance is down 30%, showing that Government Members are on the side of working people?

John McDonnell: Of course we welcome any increase in employment or reduction in unemployment. The problem is that the economy is unsustainable because it is based on rising house prices, borrowing and debt. My fear is that the jobs that have been gained in the past year may be lost in the forthcoming crisis, if we do not take avoidance action.

Andrew Haldane, the chief economist at the Bank of England, has warned that the third wave of the financial crisis, which is breaking out in the emerging markets, centred on China, could have an impact on Britain. Why? Because Britain is the country with the largest exposure to Chinese debt, at $500 billion. Any upset in the rest of the world will, thanks to our extraordinarily large financial system, rapidly make its way here. That is exactly how the last crisis happened, when failures to repay mis-sold mortgages by some people in American society turned into the failure of the entire banking system in this country.

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We cannot know what will happen over the next few years. The Chancellor has warned repeatedly of trouble ahead, but surely these challenges are better faced if we have a more balanced and resilient economy that provides real security for all of us. Instead, we have a single-minded fixation on a single target: the 2020 surplus, which no credible economist supports. By clinging on to that so tenaciously, it appears that the Chancellor is putting the needs of his political career ahead of the prosperity of the country.

Jeremy Quin: The hon. Gentleman refers to the balance of trade. Part of the impact of that is that our country has been growing. Dividends have gone up 30%. Those who are investing in the UK are taking more money out of the UK because it is growing. We could be investing in places such as China, which are growing faster. Would he ban investment in China? Is that what he is saying? Should that be the result of his concerns?

John McDonnell: Part of the problem is that growth has not been high enough. In addition, we have sold off so many of our assets that money is pumping out of this country, rather than being invested in it. We are not making home-grown investments in our own economy, so the money is flowing abroad. That is causing our balance of payments deficit. In addition, our trade, particularly in manufacturing, has unfortunately not picked up on the scale it should have done.

Let me press on, because a large number of Members want to speak. We know, from the drip-feed of announcements, that the Chancellor intends to make swingeing and potentially devastating cuts to Government Departments and welfare spending. Let me make it clear that austerity is a political choice, not an economic necessity. The record of this Government shows that the Chancellor’s political choices are having a devastating impact on people across the United Kingdom. In many cases, his cuts are falling on the heads of those who are least able to afford them. [Interruption.] The Exchequer Secretary is asking for examples, so let us look at local government.

Since 2010, councils have dealt with a 40% real-terms cut in their core Government grant. In adult social care alone, funding reductions and demographic pressures have resulted in a £5 billion funding gap. Where are the cuts falling? According to the Institute for Fiscal Studies, the 10 most deprived local authority areas have lost £782 per household, while the 10 wealthiest areas have lost just £48 per household. Choices have consequences for people’s incomes and lives and the services upon which they rely. As a consequence of the Chancellor’s choices, ordinary people are being left worse off. He has made those choices and still failed to meet his self-imposed fiscal targets, so I pose this question: are the choices that are being made right, moral and fair? If the answer to any of these questions is no, it is self-evident he needs to rethink, and rethink fast.

Suella Fernandes (Fareham) (Con): Is the hon. Gentleman seriously preaching about making the right choices, given that his party was responsible for the highest level of public sector borrowing? Is that the choice he is recommending—more borrowing and a greater burden on British men and women, just to feed the coffers of Government?

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John McDonnell: We have to explain again: the deficit did not cause the crisis; the crisis caused the deficit. When Gordon Brown was Chancellor of the Exchequer and intervened with quantitative easing and by reducing interest rates, he was supported across the House, because that was the way to save what was left of the financial system in this country.

There is an alternative to the cuts. The Chancellor could, within the five-year timeframe of the spending review, lay out a long-term vision for the economy and how the Government can help to deliver it. He says he wants a high-wage, low-tax and low-welfare economy. We all want people in secure high-paid work, because it is the surest way to bring down the deficit—that is what we have been arguing all these months—but the Chancellor has no proposals on where the high-wage jobs are to come from. All he has had to offer in recent months is the national living wage, but it is set below the official living wage, so it is a national living wage that no one can live on, and it is nowhere near high enough to compensate for the proposed cuts to tax credits.

The Chancellor cannot deliver high wages unless he delivers investment. Investment is the fuel of future growth. Spending today on new equipment, new technology and infrastructure will deliver well-paid, secure jobs in the future. Yet investment in the UK is still below its pre-crash level as a share of GDP, and that level of investment is itself far below that in France, Germany and the US. Failure to invest has a dramatic impact. Every hour worked in Germany is, on average, a third more productive than every hour worked here. Productivity has flatlined for years in this country. Instead of investing in capital, too many businesses have relied on cheap labour. Our flexible labour market has made it too easy for employers to rely on low pay, and the Chancellor’s response has been woeful.

Mrs Anne Main (St Albans) (Con): I am listening carefully to the hon. Gentleman’s speech. If he is so set against any form of welfare reform, why did he and his party not vote against the Second Reading of the Welfare Reform and Work Bill? Why the road to Damascus now?

John McDonnell: Some of us did vote against it. As we argued in that debate, there is a way to reform welfare while making sure people do not lose out. For example, we have proposed reducing housing benefit by building the homes people need to make sure they have roofs over their heads. In that way, we reduce rent levels as well.

Instead of investing in the future, using the Government’s powers to borrow carefully and invest wisely, the Chancellor has allowed Government spending on our vital infrastructure to fall from 3.3% of GDP in the last year of the last Labour Government to just 1.6% today. It is set to fall further to 1.4% over the next few years—less than half what the OECD thinks is necessary in a developed economy to sustain a decent standard of living. A lack of investment is why National Grid is warning of electricity shortages this winter and why too many businesses suffer from poor broadband connections and transport delays. His response to growing calls from business has been to run to the Chinese Government and hope they will get him out of this mess. We have been presented with the extraordinary sight of a British

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Chancellor refusing to use his own Government’s powers of investment but more than happy to exploit those of the Chinese.

While every other major developed country is pushing up its research and development spending, recognising the future value of science and technology, our Government have cut spending by £l billion in real terms.

Lucy Frazer: The coalition Government set up a £160 million fund for agri-tech investment, and that investment has continued under this Government through the regional growth funds. It is really helping the east of the country, particularly my constituency. What ideas does the hon. Gentleman have for investment in agri-tech?

John McDonnell: We should increase the amount invested. So far, so little has been invested, it is not having the impact it should have.

On investment in training, research from the House of Commons Library has shown that the budget for sixth-form and further education colleges could fall by at least £1.6 billion under the Government’s spending plans. This is the equivalent of four in 10 sixth-form and further education colleges being closed. Local councils, often the engines for investment-led growth in their communities, are having their budgets cut to ribbons, and even statutory services are now at risk. All this confirms that there is no long-term economic plan. It is a short-term quick fix from a Chancellor who cannot think beyond the Conservative leadership election.

Mr Graham Allen (Nottingham North) (Lab): This is the first occasion on which I need to disagree with my hon. Friend. I think there is a long-term economic plan: to drive down the amount of money spent by Government as a share of GDP to 1920s levels. Is that not the real agenda, and a not very hidden one at that?

John McDonnell: The Chancellor’s agenda is to shrink the state and privatise most of what is left.

Instead, Labour would seek to use Government powers to invest to deliver world-class infrastructure across the whole country. The northern powerhouse will only become a reality when it is matched by real spending commitments. We would build on our country’s history of science, technology and innovation to deliver real increases in funding for research and development, seeking to match the commitments made by our neighbours; and we would work alongside the private sector to ensure that our businesses, rather than hoarding cash to the tune of at least £400 billion, would be seeking out opportunities to invest in the future. That is the role of a strategic state.

Margaret Greenwood (Wirral West) (Lab): The Green Investment Bank has been a real success, generating investment in renewable energy projects. In just three years it has invested in 58 projects, committing £2.3 billion of its own money and leveraging more than £10 billion in additional private capital. It has done this despite Government policies working against investor confidence in the renewables energy sector. What are my hon. Friend’s thoughts on the Government’s plan to privatise the bank?

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John McDonnell: Just as we are about to take off with regard to renewables, the Government are impeding and undermining their future. My hon. Friend, like me, will have spoken to some of the companies. Some have gone to the wall and others are struggling. It is a devastating blow.

Labour would also tackle the large-scale tax evasion and avoidance that the Chancellor is so reluctant to address. Let me say what many working in our economy want to hear from the Chancellor next week. First and most importantly, he must reverse, fairly and in full, his cuts to tax credits. That should be his absolute priority. Secondly, there should be a plan to support investment to well beyond the minimum 3.5% of GDP recommended by the OECD, in terms of both infrastructure and training investment. Thirdly, we need a plan to address the balance of payments crisis, so that we can pay our way in the world once more. The Government are focusing on one deficit while ignoring another possibly more serious one. Fourthly, we want a realistic plan to tackle the deficit, based on sustainable economic growth and fair and wise judgments. Finally, we want an end to the self-defeating cuts and a serious programme to address tax evasion and avoidance and improve the overall efficacy of our tax system. If the Chancellor fails to take these steps, he places in jeopardy the long-term health of our economy. The choice next week is his to make.

1.59 pm

The Economic Secretary to the Treasury (Harriett Baldwin): I start by associating myself with the sentiments expressed by the hon. Member for Hayes and Harlington (John McDonnell) about the French atrocities and the importance of our security forces. I and other Treasury Ministers yesterday signed the book of condolence at the French embassy.

The economic policy of Her Majesty’s Opposition is now represented by a man who wants to overthrow capitalism, nationalise businesses without compensation, and who answers to Len McCluskey. He is a man who thinks that printing money, and triggering the inflation that hurts the poor and the elderly the most, is a good thing. He thinks that a budget surplus is “barmy”, and that we can balance the books by avoiding “any cuts whatsoever”. He is a high-tax, high-inflation, high-unemployment socialist who draws his economic inspiration from the Venezuelan economy and Syriza in Greece. The Government will not take economic lectures from him on how to run our policies, and we will do everything in our power to keep him in opposition.

George Kerevan (East Lothian) (SNP): Will the Minister remind the House how many pound notes the Bank of England has printed through quantitative easing?

Harriett Baldwin: Monetary policy has been run by the Bank of England independently, and I am sure that the Scottish National party will continue to support the Bank’s independence against the inflationary tendencies of the hon. Member for Hayes and Harlington. I am pleased to have the opportunity to remind the House once again of how this Government’s long-term economic plan is delivering for the working people of the United Kingdom.

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Mr Hanson: May I bring the Minister back to reality? Reality for my constituents is the £1,300 cut to working families tax credits which, if it goes ahead in April next year, will mean that £58 million is taken out of our local economy from the poorest people in my constituency, three quarters of whom are in work. Does she think that is right, and will she commit to review that today?

Harriett Baldwin: The right hon. Gentleman will have to wait until my right hon. Friend the Chancellor announces his autumn statement next week. Because of the difficult decisions that we have been prepared to take since 2010, the country’s economy for the right hon. Gentleman’s constituents in north Wales is going from strength to strength, and the overall UK economy is now 12% larger than it was when we took over from the Labour Government. As we reach calmer economic waters, it is worrying that some seem to have forgotten the lessons that the crash of 2008 taught us.

In recent months we have seen the resurgence of familiar but dangerous ideas. First—we heard it here today—is the idea that the deficit does not really matter, that it should not be a priority to rein in unsustainable public spending, and that it is fine to kick difficult decisions down the line. Those views were put to the British electorate in May, and the electorate rejected them overwhelmingly. People looked at the 1,000 jobs that the UK economy had created every day since 2010, and at the highest growth figure in the G7 for the last two years in a row. They looked at rising wages, rising living standards, and falling inequality, and they said, “Your long-term economic plan is working, so we want you to continue the job.” Since the election, national debt has been forecast to fall this year as a share of GDP for the first time in more than a decade.

Wayne David (Caerphilly) (Lab): Is the Minister pleased with the appalling level of productivity in this country under her Government?

Harriett Baldwin: The hon. Gentleman knows that productivity has been a long-term issue for the British economy, and I shall be talking in more detail about our productivity plans in a moment.

Mrs Main: Does my hon. Friend have any figures associated with the cost of renationalisation that the Labour party seems to want to embark on? I have not heard any figure recently.

Harriett Baldwin: My hon. Friend is right. The bottomless pit of money from the magic money tree has been brought into service a lot over recent days, and we should focus instead on the good news about the UK economy. The employment rate has reached a record high—

Geraint Davies rose—

Harriett Baldwin: Is the hon. Gentleman going to welcome that fact? I do not think he is. Wages have risen by more than 3% this year. Will he welcome that? For people in continuous employment, wages are up by more than 4%—[Interruption.]

Mr Speaker: Order. We cannot have hon. Members freelancing, or at least not any more than they are already accustomed to doing. The hon. Member for Swansea West (Geraint Davies) can seek to intervene, and the Minister must decide whether to respond. However,

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since the hon. Gentleman claims to have a point of order, I am keen to discover whether it is a point of order or a point of frustration, so perhaps we can hear from him.

Geraint Davies: On a point of order, Mr Speaker. When the Minister exhibits such massive ambiguity by seeming to say “Yes, yes, yes,” to my intervention, so that then I am getting up and down, does that not cause great confusion in the Chamber and among the greater public? Would you like to make a ruling on that?

Mr Speaker: My ruling on that, for the benefit of the hon. Gentleman and the House, is that any Member who has the Floor should indicate clearly whether he or she is giving way, and if so, to whom. Any gesticulation that obscures rather than clarifies, although not disorderly, is unhelpful.

Harriett Baldwin: I will give way to the hon. Gentleman when he starts to welcome some of the positive economic facts that I was mentioning, but if he does not know whether he is coming or going, I have a hunch that he is in the right party.

The Government absolutely reject the Opposition’s accusation that we are failing to deliver for working people. Not only have we brought greater economic security, we have also delivered more growth, more jobs, and higher wages. That is what people working across this country asked us to deliver, and that is what we are doing.

Suella Fernandes: I echo and salute the track record and results that the Minister is outlining. A former Prime Minister, who is credited with reviving a failing economy, once said:

“The problem with socialism is that you eventually run out of other people’s money.”

Does my hon. Friend agree that what we are hearing from the Opposition Benches is a reheating of simple 1980s socialism where the results are only failure?

Harriett Baldwin: My hon. Friend is right to remind us of two important facts. First, no Labour Government have ever left office with the public finances in a better state than when they came to power, and secondly, no Labour Government have left office without leaving more people unemployed than there were when they came to office.

Do we agree with the other points made by the Labour party?

Geraint Davies rose

Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op) rose

Harriett Baldwin: I will not give way because I want to make a bit of progress and take each of the points in the motion in turn.

I am delighted that the Labour party has remembered to mention the deficit in the motion, although it is not the budget deficit but the current account deficit. Let me remind the House about progress on the budget deficit which, as a share of the economy, has fallen by more than half from its peak in 2009-10 to 4.9% at the

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end of last year. We forecast that we will be in surplus by the end of this Parliament. That is what the British people asked for, and that is what we are doing.

Jonathan Reynolds rose

Harriett Baldwin: Will the hon. Gentleman welcome progress on the deficit and suggest further progress?

Jonathan Reynolds: I love being given way to with caveats based on what I might say in my intervention. Let me ask the Minister a serious point in all this silliness. Since the end of the second world war, this country has been in surplus for only 12 financial years. Of those 12 years, 10 have had Labour Governments. Conservative Governments have hardly ever run a surplus. Is the Minister telling us that the Governments of Thatcher, Macmillan, Anthony Eden and Churchill were all spendthrift and socialist, or will she be a little more serious when addressing these issues?

Harriett Baldwin: The hon. Gentleman is right to say that this is a serious issue, and I hope that, as one of the more moderate and sensible members of his party, he will be able to convince those on the Labour Front Bench that this is an important issue to tackle.

The Opposition motion also mentions tax credits.

Alan Brown (Kilmarnock and Loudoun) (SNP): The Minister mentioned the fall in unemployment, but is there not a paradox? We are considering closing Her Majesty’s Revenue and Customs offices and reducing the number of people who work for it, when its official figures show a £34 billion tax gap. If we collected that money, it would go a long way towards eating into the deficit. If we then scrapped Trident and the other place we would be nearly there, and we would not need to make cuts.

Harriett Baldwin: I would listen more to the advice of the SNP on the economy if it had not projected that the oil price would remain at over $100 forever and fought last year’s referendum on that basis.

Various hon. Members have mentioned tax credits. The British people want to see a lower welfare, lower tax and higher wage economy, and that is what they voted for in May. In the summer Budget, we set out a package of reforms for working people, which included the introduction of the new national living wage, continued increases in the personal allowance and the doubling of free childcare worth up to £5,000 a year for working parents. Of course, we will listen to the concerns raised about the transition period, and my right hon. Friend the Chancellor will set out our response to those concerns next week. But make no mistake, creating a low-welfare, low-tax, high-wage economy is one of the most progressive goals a Government can have, and one that we will continue to work towards.

Richard Fuller (Bedford) (Con): As my hon. Friend analyses the Opposition motion to decide whether she will support it—I think we are fairly clear on that—is she as surprised as I am that it does not mention the new national living wage? That is probably the most significant change in our economy over the next five years—[Interruption.] Well, there are issues with tax

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credits—I am not making a speech, Mr Speaker—but the fundamental point is that we will ask companies to pay our poorest paid workers what is effectively a 38% increase in their wages over five years, plus 3% on their pensions. Does she agree that that needs more attention from Members on both sides of the House?

Harriett Baldwin: My hon. Friend is right to highlight that progressive move, and it gives me a chance to emphasise the fact that yesterday’s data on earnings showed that the lowest earning 10% in our society saw a wage increase of 3.4% over the last 12 months, and that is before these changes have even taken place.

The Opposition motion also mentions child poverty. The best route out of child poverty is for a parent or parents to work. On our watch, the number of children growing up in workless families is at a record low, down almost 500,000 from 16.2% of all children to 11.8%.

Catherine West (Hornsey and Wood Green) (Lab): Is the Economic Secretary aware that 500,000 children have fallen below the poverty line since 2010? What does she intend to do about that?

Harriett Baldwin: The hon. Lady is wrong about that. Since 2010, in terms of relative poverty, some 300,000 fewer children are living in poverty. The Government losing control of public finances and not being able to do anything about that would be the worst thing that could possibly happen for the opportunities for those children. The people who suffer when the country loses control of its public finances are the low-paid, and the people who get turned out of work are the ones who suffer the most—

Geraint Davies rose—

Lucy Frazer rose—

Mr Speaker: Order. May I say gently to the House that it is reasonable for the Economic Secretary to be given the opportunity to respond to one intervention before immediately being pressed to accept another? Some level of orderliness in the conduct of this debate needs to be restored, with the help of all willing parties.

Harriett Baldwin: In that spirit, I shall try to make some progress, Mr Speaker.

The richest do not suffer most when the economy suffers. It is not the trade union barons who lose their jobs when that happens: it is the poorest in the country. We are making sure that it never happens again.

The motion also mentions the impact of our policies on women. There are now more women working than ever before, the gender pay gap is at the lowest level since records began, and 56% of the people we have taken out of income tax, by raising the personal allowance, are women. Of course, 27.5 million working men and women have had a tax cut since 2010, and 58% of those receiving a much stronger, triple-lock state pension are women. Almost two thirds of the people benefiting from the introduction of the national living wage are women. In fact, since 2010, women have moved faster into jobs in the UK than in any other G7 country, and women’s employment rate has increased more since 2010 than during the previous three Parliaments combined.

Margaret Greenwood rose—

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Harriett Baldwin: The hon. Lady may be about to comment on this, and we live in hope that the wish of the right hon. and learned Member for Camberwell and Peckham (Ms Harman) that senior jobs in her party go to women will be granted soon. Does the hon. Lady welcome some of this good economic news for women?

Margaret Greenwood: Does the Economic Secretary share my real concern that 29% of women earn less than the living wage? That is not a success story for women—far from it.

Harriett Baldwin: That is exactly my point: they will be disproportionately helped by the increase in the national minimum wage through the national living wage from next year.

The motion mentions productivity, and it was also raised by the hon. Member for Caerphilly (Wayne David), who is no longer in his place. Productivity has been a long-standing issue since well before 2010, and we accept that. But rather than grandstanding, we have set out a wide-ranging productivity plan. We are delivering the infrastructure projects we need, through our infrastructure pipeline, and we have set up the national infrastructure commission to take a long-term, depoliticised approach to major projects. We have seen a recent strengthening in productivity growth. Output per hour rose by 0.9% in the last quarter, and the Office for Budget Responsibility forecasts that productivity will pick up by 1.7% next year, and 2.4% in the year after that.

The motion also questions our long-term commitment to science, technology and green growth.

Sammy Wilson (East Antrim) (DUP): Does the Minister agree that the freezing in cash terms of money spent on science and research and development has had an impact on productivity growth and the potential for increasing productivity in the UK economy?

Harriett Baldwin: We agree that maintaining the science budget is incredibly important. As part of the £100 billion of infrastructure investment that we have already committed to, £6.9 billion will be going towards research infrastructure.

Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP): If the Economic Secretary believes what she has just said about maintaining the science budget, why have the Government cut it in real terms by 10% in the past five years? They have made no commitment thus far to increase the science budget either, to such an extent that the UK is bottom in the G8 for investment in science.

Harriett Baldwin: The hon. Gentleman will know, and has just reiterated, that we have maintained the science budget, which has been one of the choices that we have made. We have secured £7 billion of investment per year for UK-based renewable energy projects. We are investing in major research facilities such as the new Turing Institute, the UK’s national institute for data science. Our science and innovation strategy sets out our long-term vision for the sector’s contribution to national prosperity.

Lucy Frazer: Does my hon. Friend welcome the comments by Sir Paul Nurse, the president of the Royal Society, who said recently that the UK is excellent on

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the world stage and that, in terms of effective research, we are probably top? Most people rank us second to the United States, and we lose out merely on size.

Harriett Baldwin: My hon. and learned Friend is right to highlight the effectiveness of our science spending. Earlier, she mentioned agri-tech, and my constituency has fantastic skills in cyber-security. Those are all important and we will continue to make sure that they are a Government priority.

Steve McCabe: Does the Economic Secretary accept that one of the problems is the contradictory nature of Government policy? It may well be true that they are investing in the science budget, but simultaneously—as the Coalition for a Digital Economy, or Coadec, revealed in its recent letter to the Prime Minister—they are strangling the digital industries through their immigration policy, which denies entry to tier 2 skilled workers and entrepreneurial visas to people who could boost our industries.

Harriett Baldwin: I welcome the opportunity to clarify that there is no cap on inter-company transfers at tier 2 or on people who will earn a substantial amount. I am aware that Tech City keeps very close tabs on this and informs me about its importance. The hon. Gentleman will welcome its continued success in attracting investment from around the world.

The motion also mentions the Department for Business, Innovation and Skills budget. I obviously cannot pre-empt what the Chancellor will say next week, but every single decision on spending has been based on our productivity plan to focus on world-beating productivity, to drive the next phase of our growth and to raise living standards.

People should never underestimate this Government’s commitment to helping British businesses and workers succeed in the global economy. We know that businesses drive growth and create jobs, and we work with them so that they continue to do so. In marked contrast, the Labour party could not get a single business even to host an event with its leader last week.

Is the economy perfect? No economy is ever perfect. We need to export more, work more productively and eliminate the gender pay gap altogether. It takes time for a country to recover from a significant economic crash, such as the one inflicted on us by the last Labour Government. But thanks to the hard work of the British people, the economy has recovered. We have more growth, more jobs and higher wages. We know that there is still much more to do, but there is no economic security, no national security and no opportunity when control of the public finances is lost. I urge hon. Members to reject the economic views of the Labour party, to reject the advice of the shadow Chancellor and to reject the motion.

2.21 pm

Stewart Hosie (Dundee East) (SNP): I start by agreeing with what the shadow Chancellor said in opening his remarks—that cost should be no obstacle to providing the necessary security and intelligence to protect the people from the kind of threats that we are now seeing and that we saw in Paris. I therefore say to the Economic Secretary that if the Government wish to increase spending in those areas, there will certainly be no resistance from

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the SNP. I agreed with her, too, when she said that we need to cut out unnecessary and wasteful spending. I think that is absolutely right, and no one with any common sense would say that we should spend money on things that we do not need. So we will offer up a starter for 10, which is £167 billion on Trident and its replacement.

We will back the Opposition motion today. There is no doubt at all that this Tory Government and their coalition predecessor have failed, and we have seen the evidence of that failure, which I shall come on to develop. We essentially have an austerity programme from an austerity Government who have failed to deliver the growth the economy needs and are instead committed to making precisely the same mistakes all over again.

When I say that this Government have failed, we should remember precisely what the Chancellor promised when he became Chancellor in 2010. He said that debt would begin to fall as a share of GDP by 2014-15; that the current account would be in balance this year; and that public sector net borrowing would be £20 billion. We know now—many of us warned of it in the last Parliament—that debt did not fall as a share of GDP as planned; that the current account will not be back in the black until 2017-18 at the earliest; and that public sector net borrowing is not the £20 billion promised, but over three times that, at £70 billion. The key point is that the Chancellor failed to meet every single one of the targets he set for himself. In the eyes of any reasonable man or woman in the street, that is failure.

Jeremy Quin: The man in the street and the woman in the street have already spoken; they spoke five months ago, and they want more of the same. They want the deficit to continue to be brought down. We have halved the deficit and done so while maintaining one of the best levels of growth of any country in the G7.

Stewart Hosie: Growth was strangled throughout the early part of the recovery in the last Parliament. If it has picked up since, that might say more about the weakness of our major competitors than any inherent goodness or sense in the Tory plan, which, as I say, has actually failed. This is an austerity programme that saw £121 billion-worth of cuts, tax rises and discretionary consolidation in the last Parliament that strangled the recovery. With an extra £37 billion to come, we are now on track for a full decade of austerity.

It is worse than that, however. With the Government changing the ratio of tax rises to cuts from 4:1 to 9:1 during the last Parliament, we have the clearest indication not simply of failure, but of failure delivered by trying to balance the books in a way that was never going to succeed and on the backs of the poor. That is a situation that will only get worse, as the motion mentions, through changes to tax credits.

John Stevenson (Carlisle) (Con): Does the hon. Gentleman not think that the creation of 2 million jobs is a success?

Stewart Hosie: I think that the creation of every job is welcome for the person who gets it, and I think that the creation of well-paid, permanent and secure jobs is fantastic, as those provide not only the income that

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families need, but the security with which to build strong and stable communities. Of course I welcome jobs as they are created, but we need to look at every single part of the economy, not simply single metrics—whether they be good or bad. The Government’s record in the round is lamentable.

I mentioned the plan to cut tax credits. Of course change may be announced next week, but few believe that the stubborn Chancellor and his Government will actually stray too far from the plans originally announced. Those plans have a quite horrendous impact on households in Scotland and throughout the UK. For many real people, real families and real communities, the erosion of household income is quite extraordinary. The average figures of £1,200 a year or £100 a month is routinely used, and it is an accurate figure, but for some households the annual loss is around £4,000 a year. [Interruption.] The Tories may find this funny, but a loss of that amount of cash implies a marginal tax rate of 90% on some of the poorest working households in the country. If the Government were to propose that, the Tory Back Benchers would be up in arms, but because they are taking what they see as benefits from poor people, it is suddenly okay, because that is the way smirking Tories always think.

Catherine West: Does the hon. Gentleman agree that part of the problem with working tax credit cuts is that they are concentrated in certain areas, which means that there is a double effect on the local economy, where that money is no longer going into the high street or into the pockets of children and others and the poverty effect is multiplied?

Stewart Hosie: The scenario whereby pockets of poverty exist in communities that have been more reliant on tax credits or other benefits is well known. Of course, those communities always suffer disproportionately when this sort of cut is made, so the hon. Lady is absolutely right. That is an argument for having not simply an economic policy, but some form of regional industrial strategy that will deliver not just any old job, but good jobs in every part of the country.

The real failure of this Government’s so-called “long-term economic plan” is the absence of any real strategy to deliver inclusive growth, and that is what concerns me most. To the SNP, inclusive growth is essential if we are to narrow the inequality gap and absolutely vital to deliver the overall economic growth we need. The UK lost 9% in GDP growth between 1990 and 2010 due to rising inequality, so it is unforgivable to see the same mistake being made all over again.

Let us look at the big picture of the UK’s economic record in the Chancellor’s own words:

“We don’t export enough; we don’t train enough; we don’t save enough; we don’t invest enough; we don’t manufacture enough; we certainly don’t build enough, and far too much of the economic activity…is concentrated…in the centre of London.”

He went on to say in his Mansion House speech:

“We will tackle each and every one of these weaknesses with the same determination we have brought to tackling the deficit—and we’ll draw the whole government effort together in a single plan for productivity”.

The problem is that, on productivity, which is an essential prerequisite, very little has been done. The UK still lags behind the US, Germany, France and even Italy in

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GDP per hour worked. Even on a GDP per worker basis, the UK is still not competitive. The position in Scotland is broadly similar: both Scotland and the UK sit at the top for the third quartile. We should both be doing so much better than that.

The focus should be on productivity, innovation, internationalisation, and investment in infrastructure, skills and inclusive growth, which I have mentioned. To be fair, the Minister talked about investment and infrastructure. I will come back to that, however, because I am not sure whether her version of the world really matches up either to reality or to what was announced in the summer Budget. For example, on innovation, the 2014 Budget increased the amount available for research and development tax credits—which is to be welcomed—but the UK Government simultaneously reduced the qualifying expenditure.

On exports—I am glad this is back on the political agenda—the deficit in trading goods for 2014 was £124 billion. The deficit on the current account was £93 billion, up from £77 billion the year before. These numbers are all going in the wrong direction. In the Red Book, the contribution to GDP from net trade is negative for the entire forecast period. For the entire period of this Parliament, the contribution to GDP from net trade is negative in every single year. Where is the plan to actually encourage innovation and to support more companies to export and to drive up productivity?

We know that productivity requires investment. The Economic Secretary mentioned that and I said I would come back to it. In particular, we need investment in infrastructure. That is vital for the future. The Economic Secretary is right that the Chancellor and the Government have announced yet another review, but in terms of cold hard cash, capital expenditure forecasts were down for every single year in the Parliament between the spring budget and the summer Budget. That is not the way, if any Government are serious about infrastructure.

When we talk about investment to grow the economy, it is also vital to include investment in education. That will, of course, be the subject of the second debate today, but may I put on record, because it is important to this debate, our view that the Tory approach to education in England runs contrary to the investment approach needed? May I also put on record, because it is in context, my pride at what the Scottish Government have achieved: better school results, a record 119,000 full-time college places, a record 33,000 young Scots going to university, a move towards 30,000 apprenticeships every year and more children than ever from poorer backgrounds going on to further and higher education? This is the investment in education that will deliver the economic growth of the future. [Interruption.] If the Minister wants to chunter or defend the position of the Government in England, I will happily take an intervention.

Today’s motion talks about green jobs. There is much to commend an approach that supports the green economy and investment in it, because of the export potential that goes with those jobs. Like so much else, however, the Tory failure on the economy has been replicated in its approach to the green economy. We saw that with decisions on onshore wind farms, the calculation of the renewable strike price compared to nuclear, and the shorter contract length, all of which sucked investment from that important industry. We have seen it with the

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failure of successive UK Governments to address the inequity of connectivity charges to the grid over many years.

Any real economic plan should correct the imbalance of a £25 kW charge to connect to the grid in the north of Scotland, against a £5.20 subsidy in London to allow maximising the opportunity of investment. Indeed, the International Energy Agency has suggested that the stop-go political support for renewables is detrimental to establishing a more secure energy system, and that Governments

“must remove the question marks over renewables.”

Even the UN’s chief environment scientist highlighted the damage the UK Government’s “reckless, regressive and irrational” cuts are doing to the support that is necessary to the renewables sector.

Catherine West: Does the hon. Gentleman agree with the CBI, which said in a recent all-party meeting that the Government’s policy on the solar industry has severely affected investor confidence?

Stewart Hosie: I do agree. I thought it was telling that when the announcement in relation to onshore wind farms was made in this place to remove any support for those that had not passed every single hurdle, Tory Back Benchers were on their feet making the first attack on the solar sector as well. I agree with the hon. Lady entirely.

Sammy Wilson: Does the hon. Gentleman not see the contradiction, however, between some of the comments made by his own party colleagues last week when we were discussing the decline in the steel industry and the high energy prices and his support for renewables? Does he not accept that in Spain, for every one job created in the renewables industry, 2.2 jobs are lost in traditional industries?

Stewart Hosie: I have heard that argument before. I am not sure about its efficacy and I am not going to comment on it. On the substantive point, however, there is absolutely no contradiction at all between a general attempt to decarbonise, which is the right thing to do, and a clear recognition of the costs of high energy-using industries that are of strategic importance. There is no contradiction there whatsoever.

There is one final point of failure in the UK Government’s mismanagement of the economy: last week’s announcement of HMRC closures. If the UK Government are serious about clamping down on avoidance, evasion, fraud and even error, if they are serious about reducing the £16.5 billion tax gap from small and medium-sized enterprises, if they are serious about reducing the £14 billion tax gap from income tax, national insurance and capital gains tax, and if they are serious about maximising tax yield for investment, then closing 137 HMRC offices, including almost every single one in Scotland, is a catastrophic mistake.

Chris Evans (Islwyn) (Lab/Co-op): I draw the hon. Gentleman’s attention to the Public Accounts Committee report, which said that HMRC is answering less than 50% of the calls put through to it. He, like me, is a constituency MP, so he will know that the biggest frustration for businesses is that they cannot get through

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to HMRC on the phone. This is a real problem for small, medium and large-sized businesses. Does he condemn the cuts to HMRC as much as I do?

Stewart Hosie: I absolutely condemn them. That point is extremely well made. Most individuals and businesses want to be honest. They want to pay their tax. They want to go to a counter, face to face, to make sure everything is absolutely as it should be and then pay the bill. If less than half the calls are being answered now, it will only get worse. Given that in Scotland there will be no face-to-face point of contact north of Edinburgh and Glasgow—Dundee, Aberdeen, Inverness and the whole of the highlands—or south of Edinburgh and Glasgow, including the whole of the borders, this is an idiotic and counterproductive thing to do.

What are the Tories’ plans all about? As the shadow Chancellor hinted, it is ideological to insist, as the Chancellor has done, that the economy not simply breaks even but runs a current surplus hitting £40 billion by 2019-20. It is economically foolish. To do that by delivering additional welfare cuts totalling £33 billion in this Parliament, alongside £5 billion of cuts to essential capital investment—announced in the summer Budget—is, frankly, vindictive, nasty and counterproductive. In short, to cut £40 billion more than is necessary to run a balanced current budget, with almost all of it paid for by punishing the poorest and stripping the capital budget by another £5 billion, is a policy we reject. It is a policy we have already seen fail. It is most certainly a policy the people of Scotland did not vote for.

Several hon. Members rose

Madam Deputy Speaker (Natascha Engel): Order. Before I call the next hon. Member to speak, I am going to start by imposing a five-minute limit on speeches. That may have to come down if there are too many interventions, but right now, to get all hon. Members in, the limit will be five minutes.

2.39 pm

Alex Chalk (Cheltenham) (Con): The core message in the motion is that the Government have somehow failed to stand up for working people. I must tell the Opposition, with respect, that that message is misconceived.

Let us look at the context. The position in 2010, as we recall it, was that this country was staring into the abyss. Make no mistake: borrowing was over £150 billion a year. What does that mean, in concrete terms? We were bringing in about £600 billion, but we were spending £750 billion. It is perfectly true to say, as was said by the hon. Member for Hayes and Harlington (John McDonnell), that the crisis came and therefore the deficit became larger, but it should not be forgotten that on the eve of the crisis—as was pointed out by the Institute for Fiscal Studies—this country had one of the largest structural deficits in the developed world. That made us vulnerable, and it meant that when the crisis hit, the cupboard was bare. The point has been made—and it bears re-emphasis—that there can be no economic security, no national security and no opportunity when a country loses control of its public finances, and this country did that spectacularly in 2010.

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The hon. Gentleman may not be interested in those figures, but the truth is that unemployment was up—unemployment, which has an impact on working people’s lives—and youth unemployment was up. What has happened since then, during the period in which the hon. Gentleman would have us believe the economy has gone to hell in a handcart? Well, last year more jobs were created in Yorkshire alone than were created in the whole of France, more jobs were created for young people in this country than in the rest of the European Union put together, and there were more women in jobs than ever before. Since 2010, 2,000 jobs have been created each day. That matters, because jobs bring dignity, self-worth and fulfilment. But if the hon. Gentleman is not interested even in jobs, what about living standards? Well, living standards are up as well: we are better off by £900 per household than we were in 2010.

There is also a suggestion that our growth is anaemic by comparison with that of other countries. How can that possibly be the case, when it is recognised that ours has been the fastest-growing major developed economy in the world, together with that of the United States? That is an achievement of which—I hope—Members on both sides of the House can be proud, because it is by securing that stability, that growth and that prosperity that we assist the most vulnerable in our society.

We recognise, of course, that there is more to do, but when the hon. Gentleman makes the point that the deficit is not closed—which he is perfectly entitled to do—the response should not be, “Let us widen it and make it bigger.” Instead, we should ask what we can do, in a constructive, sensible and, dare I say it, patriotic way, to close that deficit and thus secure our resilience. If we do not have a resilient economy and put money aside for a rainy day, we shall not be in a good position to weather the storm when it hits, as hit it will. The time will come when there is a global downturn, because that is the nature of events, but we must be prepared to weather it. I am sorry to say that the policies of the hon. Gentleman—if, indeed, there are any—seem to take us nowhere towards achieving that resilience.

Today we have a deficit of some £70 billion, which is not an inconsiderable figure: it is about double the defence budget. [Interruption.] I hear noises off from Opposition Members. On the one hand they say that the deficit is too large, and on the other hand they say, “Let us make it larger still.”

Suella Fernandes: I echo the point that my hon. Friend is making. The only way we can get to grips with debt is by tackling the deficit, and, thanks to the difficult decisions made by this Government, we have already cut it by more than half. As my hon. Friend says, there is more to do, but that is why we must carry on with the plan and finish the job.

Alex Chalk: I entirely agree. We must carry on in a way that is proportionate—of course—and fair—of course—but which focuses, ultimately, on the prize that is living within our means. I am sorry to say that Labour Members do not seem to be ready to adopt that approach, not least because they opposed the cap on welfare. In an article published in New Statesman in March, the hon. Member for Hayes and Harlington said that he would avoid any cuts whatsoever, and that—as we have heard again today—he thought that running a surplus was “barmy”.

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I believe that there is an issue not just for our times, but for future times. There is an issue of generational justice, because we owe it to the next generation to bequeath to them an economy that can pay its way. Make no mistake: someone born this week—a young lady, say—will knock on the door of the state in 30 years’ time, having been turfed out of her home by an abusive husband, and will ask for help. It is up to this generation to ensure that we have not left the cupboard bare; otherwise, what will that young lady say to us in 30 years’ time? “She will ask, “Why didn’t you deal with the problem then?”, and if we answer, “Well, it was all too difficult”, that will be no answer at all.

Let me say again, respectfully, that the motion is misconceived, and lacks credibility. It is our duty to our country and the future to have a stable economy, and the motion should be roundly rejected.

2.45 pm

Bill Esterson (Sefton Central) (Lab): Let me begin by responding to what was said about the deficit by the hon. Member for Cheltenham (Alex Chalk). We should judge the Conservatives by their own record. In 2010, the Chancellor said that he would get rid of the deficit in one term; that target rapidly disappeared. He then said that he would halve the deficit in one term, a plan that was clearly shown to have failed when it was down by only a third at the time of the election. He then moved the target to 2019, and then to 2020. When it suits him, the Chancellor changes his mind and his measure as much as he can on the deficit, so it is clearly not as important as Conservative Members claim.

Jeremy Quin: Surely the hon. Gentleman welcomes the flexibility shown by my right hon. Friend the Chancellor. After all, Opposition Members are always asking him to show flexibility. He makes certain that he stays on course and we get to the right place. The deficit has been halved to date, and that will continue, but it is happening in a measured and effective way.

Bill Esterson: Of course we need to get rid of the deficit so that we can start reducing the debt, but it must be done in a way that is sustainable, and that can only happen if we grow the economy.

The Government have presided over the slowest recovery on record. Tax receipts are an indicator of the health and productivity—[Interruption.]

Madam Deputy Speaker (Natascha Engel): Order. A conversation is taking place across the two Front Benches while a Member is speaking. Let us listen to him.

Bill Esterson: Thank you, Madam Deputy Speaker.

As I was saying, the Government have presided over the slowest recovery on record. Tax receipts are an indicator of the health and productivity of the economy, and they fell as a result of the financial crisis. In the United States, Germany, France and Canada, they had returned to pre-crisis levels by 2013, while in the United Kingdom they remained 15% below those levels.

Meanwhile, the Tories have claimed that the financial crisis was the result of public spending—the result of recruiting nurses and doctors, and building new schools and hospitals. In fact, spending in this country was below the average among similar advanced western economies. The crisis was caused by an actual financial

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crisis, not by Government spending. The fact that the current Chancellor supported Labour spending plans before the crisis says what needs to be said about the claims that have been made ever since. Conservative Members know that the crisis was a financial one, not a Government one. They also know that the Chancellor was calling for less regulation of the banks, not more, in the run-up to that same crisis.

The fact is that in 2010 we had half the level of unemployment, half the number of home repossessions, and half the number of business bankruptcies that we saw during the Tory recessions of the 1980s and 1990s, precisely because the Labour Government intervened to support and protect people, businesses and jobs. The economy was recovering strongly in 2010 as a result of the stimulus injected by that Government, but it came to a juddering halt with the emergency Budget of June 2010, when investment in capital infrastructure projects was stopped. In 2010, other countries continued their stimulus package for far longer, and businesses, jobs and the wider economies of those countries saw the benefits.

So what should happen now? Let us look at what businesses say. They say that they want to see investment in infrastructure, energy, transport, broadband and, especially, skills. They say that they need those skills so that they can grow and pay good wages. That is what the CBI says, it is what the EEF says, and it is what the Federation of Small Businesses says. When businesses want to grow, they invest. They understand the need to invest in new equipment, property and skills. They develop a business plan. They invest capital and pay it back from the proceeds of growth. Households do something similar, whether through student loans to invest in skills or borrowing money to buy a house; they invest for the future. We take out a mortgage typically over about 25 years and the bank or building society works out whether we can afford the interest payments and the capital repayment over the term of the mortgage. Government should invest in the future, just as business does, and just as homeowners do.

The lack of an industrial strategy is clear in how the steel industry has been abandoned. The Government do not seem to believe in having a business plan for the economy at all. They do not believe in investing for the long term or in following the good practice of businesses in seeking a return on investment in the form of growth and increased tax receipts as the way to higher living standards and deficit reduction. The Government say that they will not borrow money at all and won a vote in this House to confirm their view. The Chancellor used to say that fiscal responsibility charters were the mark of a lack of confidence in a Government’s own policies; not any more, however, because they forced that through the House. The “fiscal irresponsibility charter”, as it is better known, is the equivalent of the Government saying that if they were a householder they would not take out a mortgage to buy a home and they would have to buy a house out of their annual salary. If this Government ran a business, they would not take out a loan to buy a new van or a new piece of machinery.

The Government have signed deals with the Chinese Government to build and run our new nuclear industry. They are happy for foreign Governments to invest in this country, but not for our own to do so. That is a strange way to do business, because in the end these

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sums of money will have to be repaid, it seems, through much higher energy prices paid by those very same people the Government say they worry about in terms of the deficit. This is a Chinese form of private finance initiative by any other name.

Let us have a debate about borrowing, the best value for money and the best way of investing in the future of this country. Let us not rely on a charter that is economically illiterate and undermines economic success and prosperity.

2.52 pm

Mike Wood (Dudley South) (Con): As a fan of “Yes, Minister”, I shall start by congratulating the Opposition on their brave decision to choose this subject; given the Labour party’s abysmal record in this area, that is perhaps courage verging on chutzpah.

In May, voters in a majority of constituencies around the country endorsed the difficult decisions taken by the previous coalition Government to get the economy back on track, and placed their faith in the Conservative party to secure the economy and to take the further difficult decisions in a fair way to secure that recovery.

It is disappointing that the Opposition motion omits the real progress that has been made over the past five years in improving people’s opportunities and giving a brighter outlook for working people in Britain. We have 2 million more people now in work; that is many, many more families with the security of a job and a steady income. We have secured 2 million more apprenticeships since 2010, with 3 million planned for this Parliament, meaning that ever more young people will have the skills that they need for future work. The Government are also doubling free childcare to 30 hours a week and introducing the national living wage.

David Rutley (Macclesfield) (Con): Earlier in the debate, the hon. Member for Hayes and Harlington (John McDonnell) was quick to say that the £9 national living wage was inadequate, but did not point out that the Labour manifesto set a target of only £8. Did my hon. Friend find that outrageous?

Mike Wood: I certainly did not find it surprising. As we knew at the time of the election, the £8 that the Opposition were proposing was probably lower than the minimum wage was scheduled to be by 2020 anyway, but the additional national living wage will mean a real increase in the incomes of the lowest paid families in Britain.

I am sure many of us remember the times when those on the Opposition Front Bench were making funny hand gestures to indicate that somehow the economy was flatlining. They are not doing that so much any longer, because the only thing that is now flat is inflation. With inflation at close—

Several hon. Members rose

Mike Wood: I had better continue, as a number of Members wish to speak.

With inflation close to, or even under, 0%, the household budgets of families in my constituency and elsewhere in the country are going further, meaning further security. This benefits the whole country, including my constituents in Dudley South.

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I represent a west midlands constituency and I have in the past heard many people in Dudley South say that it has seemed that the midlands has been ignored. It certainly felt like that under the last Labour Government. For every 10 private sector jobs created in London and the south, only one was created in the midlands and the north. There was no hope for millions left languishing on benefits; in fact, many people on certain benefits were, sadly, more likely to stop claiming those benefits because they had died than because they had found a job that meant they no longer qualified for them. That was unacceptable, and the action taken by this Government has meant that has been turned around, so people can have more hope and better opportunities.

The Economic Secretary rightly said that the country has faced low productivity for many years. I hope we would all agree that the key to tackling the productivity gap is rebalancing the economy so that it is not over-reliant on any one region. The Government’s devolution and cities agenda is essential to unlocking the full potential of the whole country and closing that productivity gap.

I was delighted that only yesterday the Chancellor and the Business Secretary were in the west midlands announcing a new £1 billion devolution deal—a devolution revolution that will mean the west midlands has the budgets and powers to make a real difference for people in the county and can tackle the productivity challenge and the skills gap that has held it back for many decades. That should be commended, rather than prompting the condemnatory motion tabled by the Opposition. This is not just about creating jobs; it is about hopes and opportunity, and that is why I will be opposing this motion.

2.58 pm

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): The Chancellor is known for being a very political operator. Economic historians will pay tribute to the manner in which, following the 2010 election, he successfully framed the economic debate by focusing on the deficit. This enabled the Conservative party to challenge the economic competence of its predecessors while also allowing it the political space to pursue its ideological obsession with reducing the size of the state. The Chancellor has endeavoured to portray the economic recovery as one made in No. 11 Downing street. This ignores the fact that the last recession was the longest in economic history and was most certainly exacerbated by the deep contraction in public spending at the beginning of the last Parliament.

What is often conveniently ignored in debates such as this is the role of monetary policy. As I have said in the past, the UK economy continues to be on the life support of ultra-loose monetary policy. Central bank interest rates continue to be at an historically low level of 0.5% and the economy has been kept afloat with £375 billion-worth of quantitative easing. One of the perverse side-effects of QE has been to increase wealth inequalities as assets increase in value, a theme I will return to later. Monetary policy by the central bank filled the void left by the Treasury’s fiscal cuts, but it has led to a greater imbalance in the UK economy, where economic performance is now even more reliant on consumer spending, as opposed to public investment, exports and business investment. According to the House of Commons Library, household consumption now

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accounts for over 60% of the UK economy, and it should be an urgent Treasury priority to rebalance and boost business investment and exports.

The Bank for International Settlements—or, to give it its other name, the central bank of central banks—has warned that the danger with the current ultra-loose monetary policy is that the western economies will become hooked on low interest rates and that any normalisation will lead to significant economic headwinds. In other words, there is a danger that the abnormal in monetary policy will become the new norm. The obvious consequence, if there is no normalisation of monetary policy, is that the central bank will be impotent when the next downturn comes. Let us remember that, since the second world war, the average economic cycle has lasted between seven and 10 years, which means that we might be due another downturn very soon.

Jeremy Quin: I am not certain what the hon. Gentleman is asking for. Is he suggesting that we should be hiking interest rates now? No one likes the extent of unconventional monetary policy, but hiking interest rates would come as a shock to many.

Jonathan Edwards: I am grateful to the hon. Gentleman for that intervention, because I was about to make the point that the Treasury needs to be very careful with our fiscal policy.

A study by Credit Suisse shows that since the turn of the century the UK has been alone among the G7 members in seeing its wealth inequality grow. Even the International Monetary Fund argues that reducing wealth inequalities is a key economic growth strategy. Unfortunately, the recent Budget, with its assault on tax credits, is likely to lead to an increase in income inequalities and wealth inequalities. Considering the pressure faced by the public finances and the cuts being imposed on support for the poorest in society, we oppose the intention to end inheritance tax on family homes worth up to £1 million. Inheritance tax raised more than £4 billion in 2015-16 and it should be an important element of a more balanced approach to fiscal consolidation, as opposed to the Tory obsession with cuts. The decision to scrap maintenance grants for the poorest students at the same time as introducing the regressive changes to inheritance tax will not solve the major social mobility problems in the UK.

The Chancellor has eased what the Office for Budget Responsibility had described as a “rollercoaster” fiscal policy, whereby cuts would be front-loaded, with a spending splurge at the end of the political cycle. However, spending on public services by the end of this Parliament as a percentage of GDP will be at its lowest level since 1964-65, according to the OBR.

The economy faces several major challenges. The first involves the grotesque geographical wealth inequalities within the British state and the over-reliance on London and the south-east of England. This problem has built up under successive Governments, to the degree that the UK is now by far the most unequal state in the European Union. Regrettably, the communities I represent are at the bottom of the pile. To be fair, the current UK Government at least acknowledge that there is an issue. Their response has been to devolve significant taxation powers to Northern Ireland and Scotland, which have received powers over

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corporation tax and full income tax powers respectively. Significant powers are also being devolved to English city regions.

In the case of Wales, however, we are getting minor taxes and an income tax sharing arrangement pending a referendum many years down the line. The key question that the UK Government need to answer is this: what economic disadvantage do they envisage Wales facing as a result of our second-class settlement? Direct economic control from Westminster is clearly failing my country. We deserve equal respect with the other constituent parts of the UK and we need the same job creation levers that are being devolved elsewhere.

Secondly, the UK faces major challenges in relation to chronic levels of business investment and productivity. The Treasury Budget briefing note itself acknowledges that business investment levels in the UK are the worst of all major economies apart from Italy. To address this, the Treasury needs to return infrastructure investment to pre-recession levels, as advocated by the IMF. That would equate to around an extra 1% of GDP—£19 billion of extra investment across the UK with a share for Wales of around £1 billion. That is what we will be looking for when the Chancellor stands up next week to deliver his comprehensive spending review in his autumn statement.

3.4 pm

Mims Davies (Eastleigh) (Con): I am delighted to speak on the record from the Government side of the House on our growing economy. I oppose the motion.

More than 2.1 million more people are now in work, and income tax has been cut for 27 million people. Those are numbers that fall easily from the lips, but they have been much harder to achieve. In addition, 3.8 million people have been taken out of tax altogether. The state pension has been increased by £950 since 2010, and more than 120,000 families now have a home to call their own as a result of our Help to Buy scheme. Many Members have mentioned apprenticeships, and more than 2.3 million have been created since 2010. This Government have a proud record. It has been a good news story for me locally, and I congratulate Eastleigh college on its leading role in delivering those apprenticeships locally. I also want to thank all the businesses and companies that are part of the apprenticeship revolution.

In many ways, this economic revival has been hard won, against the best efforts of the Opposition to block any progress. We have cut fuel duty, and by the end of 2016 it will have remained frozen for five years. That puts more money in the motorist’s pocket for the school run and for getting to work. It is also saving our hauliers money, keeping people in jobs and keeping our economy growing.

This Government’s economic success represents the building blocks, but of course more needs to be done. We are proud of what we have achieved, but in each constituency we can all look to the extra measures and steps that we can take to move forward. Unemployment in Eastleigh is down by 199 people since this time last year and there are 45 fewer younger claimants. Those are numbers, but they are also people who now have a regular pay packet and the positivity and stability that work brings. That means a move from dependence to independence. Paying people to go away and not helping

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them to thrive is cruel and unacceptable. We are proud to be bringing in the national living wage, which is forecast to be more than £9 by 2020. This shows that we are the true party of the workers. It is wrong that we in Britain spend more on family benefits than do Germany, France or Sweden, with 7% of the world’s welfare spending. That needs controlling.

There are blocks on our economy that we need to address. In Eastleigh, our local council is failing to provide a local plan that would help to deliver strategic progression and economic development in our area. Instead of a strong plan for delivering houses and helping our local economy, we have been left with piecemeal, hostile planning applications. The council is not seizing the opportunities that localism has been bringing to Eastleigh and, sadly, those powerful tools are not being used. The Liberal-led local council lacks a brownfield-first focus. It also lacks a local town centre focus, and some businesses have approached me to express concern for their future.

I am looking forward to an important event in the local calendar this weekend: the switching on of the Christmas lights. The event is important in promoting local shopping and encouraging people to think local, act local and play a part in the local economy. I hope to come back with some full shopping bags.

We need to continue to push for the infrastructure projects that affect all our constituencies. This will help with our productivity. Locally, I have clogged roads and poor east-west rail links. There is also a lack of by-passes in Eastleigh. However, I am working with the local enterprise partnership and we are battling for an enterprise zone to support Eastleigh and Southampton airport and bring in much needed infrastructure. The Government also need to focus on how we can level the playing field for carers and parents who are coming back into the workplace. I have been encouraged by my meetings with Ministers to discuss that subject.

We have heard today that, without a strong economy, we will not be able to deliver the police and security services we need, or to react to the troubled times in which we find ourselves, here and abroad. There is a great need to succeed economically so that this Government can continue to do their job in keeping us safe. I conclude by saying again that I oppose the motion.

3.9 pm

Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab): First, may I apologise to the House for having to leave the debate halfway through to attend a meeting, Madam Deputy Speaker?

I wish to use this debate to talk about my community. Teesside and East Cleveland have suffered huge economic challenges since mid-September. I have tried to use other tools within the House to raise this before, but the situation in Paris at the weekend meant that it was right and proper that that took precedence. This, however, still needs to be put on the record: 2,000 direct jobs have been lost at SSI-Teesside Cast Products in Redcar—a plant I know very well as a former trade union officer there—following its liquidation, with 900 jobs lost downstream; 700 jobs have been lost at Air Products; 70 jobs have been lost at Johnson Matthey; 200 jobs

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have been lost at Caparo, Hartlepool; 300 have gone at the Tees tax office; and last Thursday it was announced that 350 jobs are to go at Boulby potash in my constituency, with another 350 following that—that represents three quarters of the workforce there, and all of them are miners, so these are well-paid jobs. By any estimation, those statistics are truly dreadful. The direct impact on local people puts them in jeopardy, with their families and friends profoundly affected. It is hard to give proper representation to every single one of those people because of the massive effects on them. I know SSI steelworkers whose partners and sons worked at Boulby potash, and their ability to earn has been completely destroyed.

Those redundancies and potential redundancies are primarily in the private sector and are industrial. I cannot overstate the feeling of abandonment that my communities feel in the face of this onslaught. The all-party group on steel and metal related industry has for a long time made the five industrial asks, but they remain unanswered. I have written to the Chancellor demanding a response on those industrial asks in the affirmative to help not only the steel industry, but all energy-intensive industries. We know that the previous coalition Government reduced the carbon capture and storage programmes from four down to one. I have also written to the Chancellor about that in relation to the Teesside Collective, and my hon. Friend the Member for Middlesbrough (Andy McDonald) raised the issue in Prime Minister’s questions today. We are trying to turn this negative into an opportunity—to seize this bad publicity about industry in our area—and have a profound impact within the Tees economy by giving the Teesside Collective prime candidacy in terms of carbon capture and storage. I believe, and industrialists in the area know there is a means by which, we can not only revive steelmaking, but give a renaissance to process industries in the area if we have a state that is directly involved and provides a CCS scheme there. It has been four weeks since the steel summit and none of the asks by industry, the unions or MPs has been properly responded to.

One of those asks is about the profound issue of Chinese dumping. Some 94% of all Chinese steel that enters the EU enters the UK. There is something seriously wrong with that. We as an individual state can take action and there are lessons for us both within the European Union and with our partner nations and allies; we could act not only protectively together, but as an individual state. That means having a Government who are proactive about trade defence. I cannot go into that now because of time constraints, but the Government should take it far more seriously.

Another big issue is our need for cheaper energy, and we should be supporting coal gasification. The Tees area is right next to the Durham coalfields and there are years and years, if not decades, of coal still under there which can be gasified. That syngas is 50% cheaper than conventional gas. Make no mistake: the United States will turn off the tap of the current shale gas exports we receive at the moment. The only reason we get that gas is because the US does not have enough container vessels to contains its own shale gas. When it does, that tap will be turned off, which will have profound effects on our economy and our ability to keep the lights on. We should be using that syngas to prioritise the steel industry and other manufacturing.

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We have also seen our economy exposed to the Chinese economy, with the relevant figure being $500 billion. In terms of steel, energy-intensive industries and manufacturing, China cannot, with its current subsidised practices, get market status from the EU. Ministers need to raise this issue over and over again: market status for China would end the conversation about whether we can maintain our manufacturing whatsoever.

Finally, let me make a point about defence. Unless this country looks at renewing the four Trident boats, there will be no viable way of saving the Dalzell steel site.

Several hon. Members rose

Madam Deputy Speaker (Natascha Engel): Order. I am sorry, but before I call the next speaker I am going to have to drop the speech limit to four minutes.

3.14 pm

Luke Hall (Thornbury and Yate) (Con): First, I wish to associate myself with the call made by my hon. Friend the Member for Eastleigh (Mims Davies) for people to shop locally. Before coming to this House, I worked in retail from the age of 16, so I would say to people that the next time they are in south Gloucestershire, they should go to the high streets in Chipping Sodbury or Thornbury, which are two of the most beautiful in the UK.

I also wish to clarify a point. It was said earlier that the deficit was cut by just a third before the election, not a half, but figures released by the Office for National Statistics on 22 September demonstrate that public sector net borrowing fell between 2009-10 and 2014-15 from 10.2% to 5%, which is a fall of more than half in the last Parliament.

Managing a country’s finances and responsibly managing taxpayers’ money is one of the most important tasks of any Government. When the Government came to power in 2010, the country was borrowing more than £150 billion a year and unemployment had increased by nearly half a million. We had the second biggest structural deficit of any advanced economy. There have been some huge achievements over the past six years: as I have said, the deficit is down by more than half; there are over 900,000 more businesses, which have contributed to creating 2.5 million more private sector jobs; employment is up by over 2.1 million ; there are more women in work than ever before; unemployment in my constituency is down by over 60%; and there are more women in work there than ever before, too. But the job is not done, and I urge the Minister to remind this House that there is more to do.

There are risks in the global economy that are threatening this country. I urge the Minister to stick to the plan and principles that have got us this far. I want to see those 2 million more jobs delivered, so that unemployment in my constituency can continue to fall. I want to see the 3 million more apprenticeships delivered, so that South Gloucestershire and Stroud College in my constituency can continue the excellent work it is doing by training more apprentices. I want to see taxes cut so that when those young people start apprenticeships or go into work they will be keeping more of their own money. I want to see us reform welfare, so that we can assure those young people that work always pays. I do not

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want to explain to my children, grandchildren and great-grandchildren why my generation has burdened them with more debt than they can ever hope to repay.

Positive economic news has continued to come in the past few weeks. The OECD has forecast that we will be the joint-fastest-growing major advanced economy this year. The CBI has forecast that the UK economy will grow by 2.4%. The UK’s trade deficit narrowed in September, construction grew in October and manufacturing growth accelerated in October. A World Bank report has ranked the UK sixth for “ease of doing business”, so we are up two places from last year. I know that there will be more difficult decisions to come in the years ahead, but this Government will work tirelessly to continue to tackle them. It is clear from what we have seen over the past five years that markets, manufacturers and businesses around our country and in my constituency have confidence in this Government. I congratulate the Government on their fiscal management and policy, and ask that we plough ahead with our long-term economic plan.

3.18 pm

Chris Evans (Islwyn) (Lab/Co-op): It is interesting to hear speeches in this House. Since I was elected five years ago, I have been hearing the same thing from Conservative Members. The word “conservative” means to preserve a way of life. The Conservatives live in the past, they look back to the past and they are trying to preserve it, but the old certainties have changed. Globalisation is here to stay. Whether we like it or not, the way people go about their daily lives has changed for ever. Nobody will have a job for life any more. People will work in the same job all day and then come home to trade on Gumtree, eBay or Amazon. They will not see themselves as entrepreneurs but they will live an entrepreneurial life. It is up to Government to ensure that people can achieve their opportunities and ambitions.

The No.1 problem that anybody has in this country, whether or not they go to work, and whether or not they are in high-intensive industries, is climate change. Today’s motion is actually talking about green industry. Green technology is the last best chance for this country. Highly labour-intensive jobs go where cheap labour is, and that is not here. That is why we must invest in green technology.

As is often the case, it is America that is providing the most innovative solutions. In 2006, the Californian Global Warming Solutions Act set some of the most ambitious targets for carbon reduction anywhere in the world. Emissions were to be reduced by 30% by 2020 and by 80% by 2050. It was not just the targets that mattered, because the Californian Government attacked greenhouse gases from every angle—from industry, cars, households, cities, motorways and even farms. The law impacted on them all and provided the base on which to reduce emissions. We often talk about how Government action can only go so far, and that is true, but the Global Warming Solutions Act not only changed the approach of Government, but shifted the market.

California is one of the most polluting and car-crazed cultures in the world. Its most popular car for two years running was the Toyota Prius, which lost its crown last year to another hybrid, the Honda Accord. The California example is one the UK must begin to follow. It is a

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fallacy to say that there is a trade-off between tackling climate change and economic growth. The Act aimed—and it is succeeding—to create a whole new clean-tech industry. It created jobs, developed cutting-edge technology, supported established companies and helped entrepreneurs.

Nearly 10 years on from the passing of that Act, California has become the developed world’s second least carbon-intensive economy. For every dollar of goods and services, it emits less carbon than any nation except France. California is a living example of what research tells us to be true—that we can tackle climate change and dramatically boost our economy.

In 2011, Google.org compared a “business as usual approach” to the American economy pursuing a clean-tech approach. The report found that such a shift would do the following: grow the economy by $244 billion a year; create 1.9 million jobs; save consumers nearly $1,000 a year; and reduce total US greenhouse gas emissions by 21% before 2030 and by 63% by 2050. We have the ultimate opportunity to develop a carbon-neutral economy that creates jobs.

In my final 30 seconds I wish to focus on graphene. It was developed by British scientists, but it is the Chinese and Americans who are forging ahead with it. Of the patents on it, 24% come from either China or America. Only 1% comes from Britain. We must encourage our firms to ensure that when we make breakthroughs such as that, they have every opportunity to develop them for commercial purposes. That is the point that I really want to make to the Government.

3.22 pm

David T. C. Davies (Monmouth) (Con): In the light of the disgraceful and shocking attacks in Paris, there have been calls from our constituents and from Members for the Government to spend more money on policing and security. Those calls are perfectly understandable. As someone who has spent nine years working as a special constable in the United Kingdom, I have enormous respect for the work of the police and for the role that they play in combating terrorism. None the less, it would be a huge mistake to think that we can increase our security on the back of borrowed money. The lessons of history tell us, over and again, that that would be a mistake.

Let us look back at a few examples in recent history. A nation that has an unsound economy is unable to project itself militarily, to guarantee its own existence and to guarantee the security of its borders. Suez is perhaps seen as the last military defeat for the United Kingdom. However, it was not a military defeat at all, but an economic defeat. We were unable to continue in Suez—I make no comment as to whether we were right or wrong to be there—because our nation, already mired in debt as a result of the second world war, could not secure further borrowing from the IMF, as the Americans were threatening to devalue our economy.

The history of the DDR— Deutsche Demokratische Republik—is something that has always been of interest to me, because of my wife’s eastern European nationality. The writing was on the wall for the Communist bloc and for East Germany in the early 1980s, although nobody saw it coming, when the East Germans had to go off and negotiate emergency borrowing from their

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competitors and their apparent enemy, West Germany. Anyone could have seen what was eventually going to happen as a result of that.

A few years ago, when I was on the Council of Europe with my hon. Friend the Member for Hornchurch and Upminster (Dame Angela Watkinson), I went to visit Greece and was shocked by the state of the economy and the impact that it had had on its border control. It has lost complete and utter control of its borders, because its economy is in ruins. I am sure that I do not need to remind the Government of that. It is vital that we continue in the direction that we are going to reduce our dependency on borrowed money. When we came into power, we were borrowing £160 billion. As we know, that figure is down to about £70 billion. It is still too high but it is going in the right direction. I very much hope that, despite the challenges that we face, we will be able to protect police funding to as great an extent as possible.

I very much welcome the Government’s announcement that there will be thousands of extra people recruited into the intelligence agencies. I know that the Government understand the pressures that the police are under and that they will be looking at how we can get more police officers on the streets without spending extra money. I am talking about cutting bureaucracy around things such as the stop and search forms. I would be very happy to give a few suggestions of my own as well.

The fact of the matter is that our long-term economic plan is not just about raising living standards for people in this country or controlling inflation and increasing growth, but about underpinning the long-term security of everyone in this nation.

3.25 pm

Geraint Davies (Swansea West) (Lab/Co-op): It is always a hilarious pleasure to follow the hon. Member for Monmouth (David T. C. Davies). I am very sorry that the Economic Secretary to the Treasury, the hon. Member for West Worcestershire (Harriett Baldwin), who is so brightly coloured in her UKIP blazer, has left the Chamber after giving her black and white comedy speech. A part of that speech was about how Labour has caused the problems and misery of the current day, but that is completely false. In fact, in the 10 years to 2008 under Labour, the economy grew by 40%, which is why we could double the size of the health service and the education service and lift millions of people out of poverty.

In 2008, we saw the financial crisis caused by the bankers and the sub-prime debt crisis. The then Labour Government under Gordon Brown along with Barack Obama provided a fiscal stimulus that got us back to growth by 2010. The key strategic issue in this debate is the balance between growth and cuts to get down the deficit. Labour errs on the side of growth, and George Osborne, when he arrived in 2010, decided to revert to cuts—I am talking about half a million job cuts. People stopped spending and we have had flatlining growth until relatively recently. What that has meant is that, while we have had more jobs, the overall production per job has gone down.

Kevin Hollinrake (Thirsk and Malton) (Con): Does the hon. Gentleman not recognise that, in 2008, the UK was in the deepest recession that it had been in since the

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second world war, and that we are now the fastest growing economy in the G7? Will he acknowledge those facts today?

Geraint Davies: The fact that I do recognise is that, when we left office in 2010, debt as a percentage of GDP was 55%, and now it is 80%. The Labour party borrowed less in 13 years than the Conservatives have in five years. There has been a complete failure to invest in strategic growth, productivity, and wealth creation. Instead, debt has been used as a cover to attack the welfare state and public services, which are part of the public-private partnership on which Britain relies.

James Cartlidge (South Suffolk) (Con): I do not know what planet the hon. Gentleman is on. I was a mortgage broker who was running a business leading up to the crunch. I can safely say that the Financial Services Authority, which was created by Gordon Brown in May 1997, completely and utterly failed to regulate the banks. He cannot just walk away from responsibility. Labour has massive culpability for the unsustainable nature of the boom that led up to the massive crash in 2008.

Geraint Davies: The Labour party’s spending plans were all agreed to by the Conservatives. We introduced regulation through the FSA and greater freedom for the Bank of England. The Conservatives opposed greater regulation, yet the lack of regulation led to the awful situation we are in now.

Returning to the current, ridiculous attempt to reduce the deficit and the debt by cutting tax credits, the fact is that, in simple terms, poor people spend all their money in the economy, whereas rich people tend to save it, often offshore. Robbing 3 million people of £1,300 to try to balance the books will therefore massively undermine regional economies, when we already have regional imbalances. Taking money from people who would spend it and giving it to those who will not, through changes to inheritance tax, is economically loopy and, in my view, quite wrong morally. Rather than lifting millions of people out of poverty, we are thrusting millions into poverty, in particular the extra 400,000 children who will be put into poverty.

Tax credits are an American instrument to encourage people to work. They are targeted at working families, so that people with children, who have greater needs, can afford to work. If you ran a business, Madam Deputy Speaker, and you could only afford to pay £10,000 to employ someone and make it viable, and if they needed £15,000 and the difference was made up by the Government, we would end up with a job and a viable business. If we withdraw tax credits, we destroy small businesses, destroy incomes, impoverish families and generate inter-generational poverty. It is disgraceful and quite wrong.

The situation with housing benefit is also ridiculous. Seventy per cent of the growth in housing benefit has been paid into private sector rents. Why? It is because the Government have not built enough social housing. Instead of building more social housing, they are basically selling it off to give the right to buy in housing associations. That is not the way forward.

As for procurement, with HS2 construction we are giving something like a £50 billion contract to the Chinese. If a British consortium had, for example,

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a £55 billion contract, it would pay corporation tax, income tax and national insurance and would have local supply chains and build capacity in Britain—our steel would be going into the construction, rather than Chinese steel. Why have the Government failed to demand carbon tariffs on the cheap steel coming from China, which is produced more cheaply because China does not have the environmental controls that we demand in Britain?

We need more investment in city regions such as Swansea Bay city region, where the local authorities, industry and universities are working together. If we are going to have a national tax hub for Wales, which I am against, why is it being put in Cardiff, which can look after itself? It should be in Swansea Bay city region, a more deprived area. In terms of the trade deficit—[Interruption.] The point is that, as with the Driver and Vehicle Licensing Agency put in Swansea, if the Government can use the investment as an instrument of economic power, they should do so to help relatively deprived areas, not just London and the south-east.

The trade deficit is a massive 5%. We need to think more about emerging massive markets, such as China and India, whose middle classes are approaching 20%. Why are we not actively engaging to unite the creative and manufacturing industries to provide high-value products that we can sell in those markets, rather than moaning that we cannot produce spoons any more?

We also need to have an eye towards the Transatlantic Trade and Investment Partnership—obviously people will have heard of the free trade agreement with America—as well as the Comprehensive Economic and Trade Agreement with Canada, CETA, which is coming immediately. People are barricading the front door because of TTIP, while CETA is going through the back door—and will give companies powers to fine democratically elected Governments if we pass laws that impact on their future profits. We need to sort that out, but we also need to ensure that TTIP works towards a sustainable future for the world. My hon. Friend the Member for Islwyn (Chris Evans) mentioned global warming, and unless we embrace the need to ensure human rights, workers’ rights and sustainable development within the constraints of TTIP, which will be the blueprint for global trading, we will not have a sustainable world or a sustainable economy.

We need to think more clearly about growth in a focused way, rather than always looking to cut things. As a constituent in Swansea said to me, if a company is making a loss, it has two options: sack the workers and sell the tools, or invest in growth, productivity and products. That is the focus of the Labour party.

3.33 pm

Suella Fernandes (Fareham) (Con): There are three main points that I wish to make about the motion. First, it is frankly absurd and reflects an Opposition who are totally out of step with the vast majority of the British people. I say that because its principles were robustly tested at the last general election in May and unequivocally rejected by the British people. The Labour party lacked all credibility on managing the economy and its proposals in May failed to persuade the country otherwise. Today we are simply seeing a defiant continuation of those principles and that attitude. Nothing has changed.

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Labour Members do not seem to have learned anything from the result in May. Instead, their approach has become increasingly intransigent.

The British people’s lack of confidence in Labour reflects the economic situation it left the country in 2010, including a record budget deficit. At 10.2% of GDP, public sector borrowing was at its highest since records began—£1 in every £4 spent by Government was borrowed. On welfare, Labour left us with a benefits system that was so complicated that some people saw no point in working, because they would lose more in benefits than they would earn in work. Who pays the bill for welfare spending? It is the hard-working men and women of Britain. In Labour’s last term in office, unemployment increased by about 1 million. The number of households with no one in work almost doubled. That is a shameful record for a party called Labour. That is the past and those are the facts, and that is why the British public did not trust Labour with the economy.

The motion has no substance. The picture it paints is simply not backed up by the evidence. This Government have a proud record so far. The deficit has been cut by more than a half as a share of national income. Income tax has been cut for more than 27 million people, and 3 million people have been taken out of tax altogether. In my constituency of Fareham, the jobseeker’s allowance claimant count has fallen by about 100 in the past 12 months and by about 60% in the past five years. Unemployment in this country is lower than that in Italy, France, Ireland and Spain. Productivity is rising and hundreds of thousands of people have the chance to own their own home.

Those are the statistics and numbers, but this is about our values as a country. This Government’s economic record reflects the values of the country that we want to be. It is about taking the difficult decisions so that we can safeguard our long-term security, and reinstating the relationship between effort and reward, work and dignity, and endeavour and aspiration. It is about the belief that people can get on in life through hard work, diligence and enterprise, and about making it easier for them to start their own business. Ours is an attitude of optimism and prudence. That is the country we want to build. The Conservative party gets that and we are delivering on that aim.

3.37 pm

Sammy Wilson (East Antrim) (DUP): I accept that the Government have done a number of things right for the economy, and the fact that they were elected indicates that many people across the United Kingdom take that view. That is not to say, however, that there are no flaws or faults in their current strategy.

The hon. Member for Cheltenham (Alex Chalk) accused us of saying that economic growth has been anaemic. The growth rate is as good as, and possibly better than, most other developed countries in western Europe. However, it is fragile growth. The Government and the Chancellor promised us that growth would be export-led, but that has not been the case. In fact, our exports have dropped dramatically. He promised that we would not go back to the days of boom and bust, with high consumer borrowing, and yet most of the growth is determined by consumer

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spending based on borrowing. The Government cannot be complacent. There must be recognition that there are difficulties ahead and that there is a fragility to the improvements in the economy.

I want to make two points. As the shadow spokesman said, this debate is a prelude to what we want to hear in the autumn statement next week. First, there must be an element of fairness in the difficult decisions that need to be taken because of the economic problems that we still face. I implore the Minister to take back the message that has come not only from the Opposition Benches, but increasingly from his own Back Benchers, that the burden cannot be placed on the shoulders of the working poor. There have to be substantial changes to the proposals made for the tax credit regime. The proposals will be contradictory anyhow, because for many people the Government’s aim of making work pay will not be realised.

Secondly, when we talk about borrowing, we have to distinguish between borrowing for the kind of spending that the TaxPayers Alliance has highlighted in the past couple of weeks, which is wasteful, and spending which is productive and gives a return. Spending on infrastructure and on science and technology has fallen by 14%, yet it has been proved we are one of the countries with the most effective spending on science and technology and on research and development. Why do we not concentrate on borrowing for those purposes?

On infrastructure, I think of my constituency. One road costing £46 million has removed almost entirely the traffic jams that cost local businesses millions of pounds a year. The development at The Gobbins has attracted thousands of tourists and bed and breakfast bookings have helped the local economy. There has been a good return on those investments. If the Government are looking for ways of spending money and if there is to be borrowing, let us make sure that it is for such infrastructure investments, which will increase productivity, give a return, improve our competitiveness, contribute to the export-led growth that we want to see, and give us strong growth for the future.

3.41 pm

Jeremy Quin (Horsham) (Con): It is a pleasure to follow the thoughtful speech of the hon. Member for East Antrim (Sammy Wilson). He referred at the outset to the growth that we are currently achieving and I take his comments about that. The Office for Budget Responsibility suggests that we will have growth higher than 2.4% for each year in this Parliament. As has been said by many hon. Members, that puts us in the best cohort among all those in the G7. It is not a jobless recovery. We have 2 million more people in employment—that is, 1,000 extra per day. As the Minister said from the Dispatch Box, finally average wages are increasing in real terms, a trend that is extended by the national living wage introduced by my right hon. Friend the Chancellor.

That is a remarkable performance for any Government, but it is particularly remarkable in the context of what we inherited back in 2010. Here I respectfully draw a distinction between myself and the remarks of the hon. Member for Hayes and Harlington (John McDonnell). We can all remember wise people saying back in 2010 that if anybody came in to take the actions required to sort out our economy, they would be out in opposition

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for a generation; that if people came in to tackle the problems that our country faced back in 2010—the legacy that we were taking on—that would be politically impossible. Those wise people underestimated the British people and the Government. They did not underestimate the hon. Member for Hayes and Harlington, whose comments suggested that austerity was a political choice to sort out the deficit. It was not a political choice; at the time it was economic necessity.

Imran Hussain (Bradford East) (Lab): I have heard from the hon. Gentleman and many others on the Government Benches today about the hundreds of thousands of new jobs, the increase in wages, and this road that leads to economic prosperity. Can he answer one simple question? Why is it, then, that under this Government half a million more children have been pushed into absolute poverty?

Jeremy Quin: In relative terms, there are fewer children in poverty than ever before, and I am delighted that half a million children have adults in their families who are working. That is the route to success and long-term prosperity.

I take issue with the suggestion made by the hon. Members for Swansea West (Geraint Davies) and for Hayes and Harlington that our fiscal problems resulted solely from the recession. It is easy to forget the golden legacy bequeathed by my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke). When the Labour party came into government, it had the third best structural position of any country in the OECD. When it left government—in fact, before that, on the eve of the financial crisis—it had the fourth worst. The hon. Member for Hayes and Harlington cited Gordon Brown. I have no confidence that the same sort of pattern would not emerge if Labour Members were ever again to grace the Treasury Bench. Despite the huge work being done and the pressure that is being exerted by the Government, we are still increasing our deficit by £3,300 a year per household, and still spending £1 billion a week to service that debt. That is why we need a Government who are going to continue to get this under control.

The motion before the House is very long—I counted nearly 300 words—but it does not seem to contain any ideas as to how we should be cutting the deficit. It does, though, contain a couple of aspects that I would like to mention, one of which was referred to by the hon. Member for East Antrim: spend on research and development. It is a pleasure to be able to remind the House that with 1% of the world’s population, we are responsible for 3% of R and D spend and 16% of the most important research; he was absolutely right about that. My hon. and learned Friend the Member for South East Cambridgeshire (Lucy Frazer) mentioned the report by the Royal Society, and the hon. Member for Islwyn (Chris Evans) raised the old bugbear of the inability to get our universities and our businesses working together. We seem to be getting on top of that. We are supposedly now fourth best in the world at getting that linkage, as well as being the second-best economy in the world in terms of global innovation. I welcome what the Government are doing through the global challenge fund in preserving the capital budget for R and D spending at, for example, the International Centre for Advanced Materials in Manchester.

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James Cartlidge: Ultimately, my hon. Friend is talking about the importance of investment. It is necessary to reduce the deficit, and therefore eventually the long-term debt, in order to build an economic policy that is credible to outside investors and gives them the confidence to invest in this country. That is the key reason.

Jeremy Quin: I thank my hon. Friend, who is absolutely right. He is not the only wise person to make such remarks; the head of the CBI did so only recently. That fiscal rule gives companies the confidence they need that they can invest in this country and will continue to see long-term progress being delivered by this country.

The hon. Member for Dundee East (Stewart Hosie) talked about the need to have export-led growth. One of the problems we have with our balance of trade—I mentioned it in an intervention on the hon. Member for Hayes and Harlington—is that we are growing while our major markets are shrinking or teetering on the edge of recession. That is the sad aspect of the position we are in. While I am delighted that we have one of the best rates of growth of any country in the G7, it would be a lot easier if the whole of Europe were growing at the same pace. Whereas other countries are taking strong dividends out of this country from the investments they have made—dividends have gone up by 30% in the UK economy since 2010—we are not getting the same capital returns from the investments that we are making overseas. Nor are they in a position to buy the goods that we are manufacturing. There are many good stories to be told about our export business, particularly in the automotive sector, but if our customers cannot afford to buy our goods, that will inevitably come through in the statistics.

The answer is that we should be investing more and expending more effort on the growth markets of the world. I have to say to the hon. Member for Dundee East, and to other hon. Members, that we see the growth in China and in India, and we know how important they are. One would have needed the sleeping prowess of a Rip Van Winkle not to have noticed the efforts that the Government are making in India and in China to ensure that we are opening up those markets for our exports in future. I oppose the motion.

Several hon. Members rose

Madam Deputy Speaker (Natascha Engel): Order. I am sorry to say that I have to reduce the time limit for speeches to three minutes for the final Back-Bench speakers. I would be grateful if interventions were kept to zero or were very short.

3.50 pm

George Kerevan (East Lothian) (SNP): Where does growth come from? Government Members have made much of their claim to fame of having delivered growth, but if we want growth to be sustainable, where does it come from? Does it come from investment? There has been only a slight uptake in investment in the UK in the past 18 months. It will certainly not be the driver of growth, looking to the future. Does growth come from trade? Many speakers have said that trade has not added to growth since 2010, if not since 2008, when the recession began. In fact, trade in goods and services has been a negative—a drawback on growth—because imports have increased faster than exports. The Office for Budget

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Responsibility predicts that that will continue through the spending period to 2020. We have not rebalanced the economy—the Chancellor’s claim in his emergency Budget in 2010 and at the beginning of this year—towards manufacturing exports. That has not happened and will not happen until, if we are lucky, the mid-2020s. That is the Government’s palpable failure.

So where has growth come from? It has come from shifting public debt on to private debt, and from a growth in consumer spending, which is unsustainable because, the moment interest rates go up, it will turn into a huge negative as consumer debt piles up and consumers stop spending. The Government have created growth, but it is short term and unsustainable. The moment America starts to put up interest rates, we are in trouble.

Let us contrast that with the response to the previous recession in 1992. We had a devaluation in 1992, which boosted trade. We do not have that now. We need a real, not a paper focus—not rhetoric—on economic development, industrial investment and boosting our trade pattern. We should not cut science spending, which has happened, or subsidy and support for industrial investment. We need a real industrial plan and we do not have that. I predict that we will come back in a few years when interest rates start to go up and the drive from consumers that underpins growth goes, and the Government will be smiling on the other side of their face.

3.52 pm

Cat Smith (Lancaster and Fleetwood) (Lab): I want to speak briefly about the reference in the motion to 85% of the money saved from tax and benefit changes coming out of the pockets of women. Women and children are hit especially hard by the choices that the Government have made. With 4.1 million children now living in absolute poverty—an increase of 500,000 since 2009-10—and the Resolution Foundation projecting that a further 200,000 families will fall into poverty by 2020, it is clear that those who are paying the price of the economic crash in 2008 are not those who caused it.

My hon. Friends have pointed out that working families will be, on average, £1,300 a year worse off because of the tax credit changes. Young workers are also paying a high price. The so-called living wage does not kick in until someone is 25. Does it cost those who are under 25 less to buy a loaf of bread or a pint of milk? Does a landlord charge less rent because someone is under 25? A living wage should be enough to live on, and people under 25 have many of same living costs as those of us who are over 25. A worker who is under 25, has one child and works a 35-hour week on the national minimum wage will not get the £910 a year pay increase next April, but will still lose £1,754.20 because of the tax credit changes. Housing benefit is no longer paid until people are 21, and with one in four homeless people being lesbian, gay, bisexual and transgender, that is hitting hardest those who identify as LGBT.

According to today’s figures from the Office for National Statistics, the gender pay gap has fallen by 0.2% to 9.4% in the full-time median gender pay gap category. I welcome that fall, but progress is painfully slow. We are

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looking at another 50 years before we achieve gender pay equality. Our pay gap is well above the European average. That has to do with many things—the segregated workforce, women working predominately in part-time jobs, women balancing caring responsibilities and the fact that maternity discrimination costs women £1,200 for an employment tribunal. It was not women, children or young people who caused the financial crisis, but they are absolutely paying the price for it.

The Chancellor has not closed the deficit, as he said he would. Borrowing is £200 billion higher than he planned in 2010, the productivity gap is widening and housing investment is falling. It gives me great pleasure to support the motion.

3.55 pm

Seema Malhotra (Feltham and Heston) (Lab/Co-op): I acknowledge all the speeches made during our debate on the Government’s record on the economy. Among Conservative Members, the hon. Members for Cheltenham (Alex Chalk), for Eastleigh (Mims Davies), for Fareham (Suella Fernandes) and for Dudley South (Mike Wood) all have more than 3,000 families in their constituencies currently receiving working tax credits who will not have been reassured by their contributions today.

The hon. Member for Dundee East (Stewart Hosie) raised a range of issues about the unfairness of tax credits. My hon. Friend the Member for Sefton Central (Bill Esterson) spoke about the Chancellor changing his mind on his own fiscal target and the slowest recovery on record, as well as about concerns expressed by the business community. We heard a very passionate speech by my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on the devastating impact on families—thousands of jobs have been lost—of the Government’s lack of support for the steel industry and their lack of response to the steel industry’s five asks.

The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) talked about the impact of the Government’s policies on Wales. My hon. Friend the Member for Islwyn (Chris Evans) spoke about the demise of the green industry. My hon. Friend the Member for Swansea West (Geraint Davies) talked very eloquently about the business case for our economy of stronger investment in Britain. In the final Back-Bench speech, my hon. Friend the Member for Lancaster and Fleetwood (Cat Smith) spoke about the impact of the Government’s policies on women and young people.

This has been an important debate, as we move into the final week before the publication of the spending review and the autumn statement. Given the repeated calls from the police, the shadow Chancellor, the shadow Home Secretary and the Leader of the Opposition warning about the scale of potential cuts to the police service and the impact of those cuts at this time, it is a shame that the Chancellor has so far not committed to funding the policing we need, including the community policing that generates vital intelligence on the frontline.

What we have seen from the Chancellor is a record of failure in building the productive economy that we need. He has failed to meet his own deficit target, borrowing £200 billion more than he planned in the last Parliament. He has failed on productivity, with the gap between UK productivity per hour worked and that of the rest of the G7 being 20 percentage points last year,

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the widest productivity gap since 1991. He has failed on infrastructure investment, about which the British Chambers of Commerce recently stated:

“Britain’s infrastructure investment remains woefully inadequate”.

Progress on the Chancellor’s flagship infrastructure pipeline has stalled, with just 9% of its projects having started.

We know that British businesses still cannot access the finances that they need, with lending having fallen in nearly every month since 2011 and the latest figures showing an annual fall in lending to SMEs of 0.9%. Manufacturing is struggling, and Britain’s export market share is falling relentlessly. The Government’s target of doubling exports to £1 trillion by 2020 is now being met with ridicule. There is no better example of the Chancellor’s failure to support manufacturing than his inaction on the British steel industry. That high-tech, high-skill, high-paid industry is now in crisis, with thousands of jobs already lost and tens of thousands at risk.

We have seen that public services are not safe in the Government’s hands. In the NHS, waiting lists have increased by almost 1 million on their watch. The impending care crisis will heap even further pressure on our hospitals. The Government have failed to address the housing crisis. Local government is set to see a new wave of cuts to local services, leading to the closure of children’s services and putting social care under huge pressure. The proposed public health cuts could mean cuts to school nurses, sexual health services and other essential services—the vital prevention work that saves so much through early intervention.

The Chancellor’s policies are hurting not helping Britain’s businesses and working families. The tax credit cuts are yet another example of the Chancellor making the wrong choices. He is hurting not helping the people of Britain and holding back the British economy instead of building a better future. Last weekend, Labour campaigners went out across the country campaigning for a full and fair reversal of the Chancellor’s proposed tax credit cuts; standing up for the working families in their constituencies; and spreading the word that the Tories’ plans will make working families poorer, while making a few thousand families richer by cutting inheritance tax for the most wealthy.

It is not just those working families who will lose out. Millions of pounds will be lost to local economies as that money is sucked out from next April. That is cash that local people need to pay their rent or mortgages and their fuel and food bills. The Trussell Trust has warned today that the tax credit cuts will lead to a substantial rise in food bank use.

The hon. Member for Stevenage (Stephen McPartland), who last week boycotted a meeting in his constituency with a Tory Treasury Minister because the Minister thought it would be okay to turn up and refuse to discuss the burning issue of tax credits, has shown, through the publication of House of Commons figures, that child tax credits will be cut for many families—something that the Prime Minister denied at the time of the election. Only last week, the distinguished Financial Times columnist Martin Wolf said that this was “bad policy, dishonestly presented.”

In his 2011 Budget, the Chancellor promised to rebalance our economy. What has happened? Manufacturing employment has decreased by 10% since he has been Chancellor. He is hurting not helping our renewable energy industries. The Chancellor’s Britain is out of

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touch with other nations. This is the only country cutting the support for renewables in favour of non-renewables. The Chancellor is hurting not helping Britain by cutting research and development investment. The last Labour Government had a target to increase private and public sector R and D to 2.5% of GDP by 2014. The latest official figures show that it is at 1.67%, which is behind the OECD and EU averages.

Even the British Chambers of Commerce is calling on the Chancellor to change his latest fiscal charter and deficit target so that spending on infrastructure is not included. A wide range of economists are starting to speak up against the Chancellor’s economic choices, saying why they are wrong for Britain.

Labour’s starting point is that we need to do much more to ensure that there is a prosperous and secure future, with a fair deal for everyone and a chance for all to get on. That means the state working in partnership with the private sector to invest for the growth and jobs of the future. If people are to be able to access those jobs, we must get our education system right. Schools should not be struggling to recruit and retain teachers, and we must recognise that cuts in further education are a false economy because people leave education even less equipped to succeed. The best way to build jobs for the future, rebalance our economy and spread prosperity is to invest in skills, infrastructure and technology. We must invest in the support that companies need to take a good idea from being local to being global. That is the kind of economic ambition that Britain needs, backed up by practical help to make British people more prosperous and secure.

The Labour party is committed to balancing the books, but to doing so in a fair way by building a bigger and stronger economy based on investing in our future. Creating better skilled, better paid jobs is good for British workers and, when they spend their money, good for British businesses. It also means higher tax receipts for the Treasury. The Chancellor’s interventions may appear to be good politics, but all too often they turn out to be wrong economics. His policies are hurting, not helping Britain’s businesses and working families, and his short-term cuts will prove a false economy for British taxpayers. Labour will offer a real alternative, with positive choices to support Britain’s businesses and workers and equip people for the jobs of the future. The Chancellor’s short-term choices will leave our economy more vulnerable. There is an alternative, in the long-term interests of Britain, and I urge hon. Members to vote with us in the Aye Lobby today.

4.5 pm

The Exchequer Secretary to the Treasury (Damian Hinds): Protecting the economic security of working people in Britain is precisely what we set about doing in 2010, it is what we fought the general election on earlier this year, and it is what the British electorate asked us to continue to do following the decisive result at the May election, as we were reminded of by my hon. Friends the Members for Dudley South (Mike Wood) and for Fareham (Suella Fernandes) and, graciously, by the hon. Member for East Antrim (Sammy Wilson), who speaks for the DUP.

Our programme for working Britain stands on four interlocked pillars. The first is a stable economy, backed by a credible long-term economic plan. Low inflation

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and low interest rates support productive investment. The second is to back business. It is firms that give people jobs and families economic security, and it is innovation that generates economic growth. We know that only business can create the wealth that affords us the quality public services we all value so much. The third is the right incentives to work and the support to do so as we strive towards our goal of full employment. The fourth is a fiscal plan to eliminate our deficit and face up to the challenges of this generation, in this generation, instead of leaving an even bigger mountain of debt to our children and their children, as we were reminded by my hon. Friend the Member for Thornbury and Yate (Luke Hall).

We have made important strides on all these fronts. We are cutting the jobs tax, cutting red tape for business and creating record numbers of apprenticeships—my hon. Friend the Member for Eastleigh (Mims Davies) talked about the apprenticeship revolution. Since 2010, the private sector has created almost 2.5 million jobs. We have record levels of employment—indeed, more employment growth in the UK since 2010 than in the rest of the EU put together—and more women in work than before. Real wages have risen by almost 3% on the year, and we are leaving more cash where it belongs—in the pockets of hard-working people. Through our increases in the personal allowance, we are making the typical basic rate taxpayer £905 a year better off. We extended childcare support, and are doing so again, with tax-free childcare extensions under universal credit and free entitlement for pre-schoolers worth £5,000 per child per year. We have also set out a path for sustainable but solid deficit elimination so that we can live within our means and start paying down the debt.

Geraint Davies: What would the Minister say to Ben Bernanke, the former chairman of the US Federal Reserve, who has basically said he disagrees with the primary legislation that states we should always run a budget surplus because it provides no flexibility to respond to another crisis? In other words, is it inept?

Damian Hinds: At the present time, I have no particular message for the former head of the Federal Reserve, except to say that we inherited the most enormous deficit. We will continue to bring it down, which the British people gave us a mandate to do, and we will pay down the debt, because if we do not do that in the good times, when will we ever?

My hon. Friend the Member for Cheltenham (Alex Chalk) reminded us that when the financial crisis hit, the cupboard was bare, because of the structural deficit the Labour Government allowed to build up. In 2010, we immediately began the programme to bring that down. Since then, despite the oil price spike and the eurozone crisis, we have made great progress and have halved the deficit, but much more remains to be done. We set out what that would entail before the election and in the summer Budget: a combination of departmental spending reductions, tax measures and reductions to the welfare bill. Importantly, however, we are maintaining our commitment to the institutions on which Britons most rely: our schools and our world-leading national health service.