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The Chancellor tried to explain why the recession has been particularly deep here and what it was that caused it to be so bad, making us lag behind the field in getting out of recession and into growth. There are some very good reasons. He gave one himself-that the financial services industry was a particularly large part of our economy-but that is only part of the story. The other feature here, as others have said, is that the housing market went through a bigger bubble here even than in places like Ireland, Spain or the United States, which also suffered from the problem. The level of household debt in proportion to gross domestic product was higher here than it was in the United States, but all that was tolerated and all the warnings were ignored by the Government.
The level of public debt in this country is more severe than that of most other countries in the developed world because our public finances were in a mess under the previous Chancellor before the credit crunch was even thought of or had even started. It is on top of that that the vast sums of money had to be put in to rescue the banks. That is why the rest of the field is moving away from us, with everyone else moving into feeble growth. We are still behind and the debt remains one of the handicaps around our neck that makes this country move forward slower; it will make our growth more feeble and slower unless it starts to be tackled now. There is a direct link between the two.
Other Members have talked about the problem. My hon. Friends the Members for Gainsborough (Mr. Leigh) and for Mid-Worcestershire (Peter Luff) touched on it, and the problems of financing it were graphically described by several hon. Members. At the moment, we are financing this debt because the Governor of the Bank of England is printing money and is the principal purchaser of the debt. We are monetising the new debt, which we would never have dreamed of doing. The Governor of the Bank of England would never have dreamed of doing it either unless the crisis had been so bad. That cannot go on indefinitely.
As was said earlier, foreigners will eventually have to finance the debt. As my hon. Friend the Member for Cities of London and Westminster explained clearly, with the level of debt being run up by other developed countries, we have to persuade people to have confidence in this country to buy sterling-denominated assets and to finance our debt at an affordable price. Several Members warned about the rising level of debt interest as part of the public debt. Of course, as interest rates are brought back to a more normal level, if we are driven to higher interest rates because we have to sell our gilts and have to get somebody to accept the risk of financing our debt, we will find our economy slowed down by rising interest rates and the cost of servicing the debt will go up, perhaps leading us into a debt trap. I will not go on.
It is against that background that we have seen the utterly comic complacency of a Prime Minister who would not accept that we were going into recession, who told us we were better prepared than any other country and who then said that talk of drastic measures boldly set out by my hon. Friend the Member for Tatton (Mr. Osborne) at the Conservative party conference was somehow a threat to the country's future. All that is irresponsible in the extreme.
I strongly suspect that the Chancellor of the Exchequer, doing his best when he started, knows that perfectly
well. There was a bit of a contrast between the emphasis he put in his speech and what is meant to be the main thrust of the election campaign being masterminded by my opposite number, when he has time between his other duties in another place, and that being put together skilfully by the Secretary of State for Children, Schools and Families, the Prime Minister and the people who rather resent the Chancellor still being in his role. Perhaps that explains the difference, shall we say, in tone.
The other big problem, to which I have no time to do justice, but to which Members from all parties referred, is the overwhelming one of credit, which, in the short term, has not been solved. It is perceived rightly as the biggest threat to the continued existence of some of our medium and small-sized businesses, and certainly to any prospect of growth for most of them in the near future. At the beginning of the year, the Government brought out streams of schemes and measures to tackle the credit markets. I refer Members only to that part of the speech of my hon. Friend the Member for Tatton in which he named some of those schemes, which turned out, in practice, to be trivial in their consequence, in contrast to the fanfare surrounding them when they were the initiative of the day.
We put forward our broad-brush loan guarantee scheme, which would have been a bolder, simpler approach. When and if we take office, depending on the state of the credit markets at the time, some bold action to get the credit markets going and to encourage banks to take more risk than they are taking at present with small and medium-sized business, will be essential. The Government have failed.
On the wider front, we have touched on the key subjects. When the Minister for Business, Innovation and Skills winds up, I hope that he will give some explanation of why the Government have abandoned deregulatory budgeting, which we propose, alongside sunset clauses for the regulatory bodies. In my opinion, Tony Blair was genuinely enthusiastic about deregulation when he took office, and wanted to reduce the costs and burdens for business. He had been sold on that policy. As Prime Minister, however, he had no time and was not a great man for detail, and the matter got away from him. It has totally fizzled out, and the Government have no deregulatory proposals, but we will have such proposals, because lifting the burdens from business will be essential.
Tax proposals have been put forward by my hon. Friend the Member for Tatton. On employment and skills, we are addressing the comprehensive programme put together by David Freud and developed by all teams on the shadow Front Bench, in order to ensure that the huge problem, especially for the 1 million young people who are in a labour market that have no jobs, can be tackled effectively by the incoming Government.
Lastly, I will touch on the one matter to which the Chancellor hardly referred, and which sums up the cynical approach of the leadership of the Labour party, and such part of the party that still follows that leadership, in presenting this Queen's Speech. I refer to the fiscal responsibility Bill. My hon. Friends the Members for Clwyd, West (Mr. Jones) and for Ludlow (Mr. Dunne) were rather kind in their strictures on the matter. I think it is quite the most preposterous measure brought before the House for a very long time. A Government who have absolutely no policy proposals to control the largest deficit in the developed world, with a huge structural
deficit at its heart, give us the reassuring news that if they have not halved the deficit in four years' time, somebody will be summonsed. It is not even clear who will be held responsible. Will it be whichever hapless soul is the Chancellor of the Exchequer? Could it be the present Chancellor of the Exchequer, who, I think, would be entitled to say that his predecessor, if anybody, should be the person subject to legal sanction? The Bill is a ludicrous proposition, and is designed to give reassurance where there is no substance. This Government-new Labour-came in on the basis of all style and no substance. They still have no substance, and the style has become shoddier as we near the end.
I am a great fan of Benjamin Disraeli, and I looked up a passage that I often quote slightly inaccurately. Denouncing the dying Government of Mr. Gladstone in the early 1870s, Disraeli-he was about my age then, and sustained himself with a very large amount of liquor while making his three-hour speech in Manchester; only water is sustaining me-used a very grand phrase. He said:
"The ministers remind me of one of those marine landscapes not very unusual on the coast of South America. You behold a range of exhausted volcanoes. Not a flame flickers on a single pallid crest."
That quotation is not really suitable for today's debate, however. These Ministers could not be described as volcanoes. They were merely foothills when they started. The Queen's Speech shows that they are finished, and it is a pity that they go out on such a low note.
The Minister for Business, Innovation and Skills (Mr. Pat McFadden): Let me begin by congratulating the right hon. and learned Member for Rushcliffe (Mr. Clarke) on what, as we learned earlier, was his first winding-up speech in a debate of this kind for some 20 years. I believe that he was recently awarded the "Best Newcomer" award by The Spectator, and I congratulate him on that as well. Perhaps the Department for Business, Innovation and Skills is the arena for comeback kids. If so, the right hon. and learned Gentleman is most welcome.
Today's debate has focused on the parts of the Gracious Speech that are about recovery from the recession and establishing the foundations of future prosperity and economic growth. A number of Members have spoken, raising issues relating to Government debt, banks and access to credit for small businesses, and Government support schemes. I shall deal with those issues later, but one or two Members also raised issues specifically involving their constituencies.
My right hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth) spoke with great passion about a planning application in his constituency that has been turned down. I hesitate to comment on individual planning applications, but I am sure that the attention of the Secretary of State for Communities and Local Government has been drawn to my right hon. Friend's speech. The one thing that I will say, and I hope I am not going too far in saying it, is that when such circumstances arise-and I understand that the Secretary of State's recommendation was made on the advice of inspectors, not against it-sometimes an altered, or amended, application can present a way through the logjam. I hope that discussions will continue between my right hon. Friend, his local council and the Department.
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I am sorry to interrupt the Minister, but there is far too much conversation going on. This is the climax of the debate on the Queen's Speech, and the Minister should be heard.
Mr. McFadden: Labour Members, at least, believe that how we secure future prosperity and growth is important. It matters to every family and every community in the country. People in the country have felt the pain of the downturn, and now they want to know about the economic future. They want to know how our industries are to recover, and how people are to be equipped for the jobs of tomorrow.
My right hon. Friend the Chancellor set out the response that the Government had made to the crisis. My right hon. Friend the Member for Stirling (Mrs. McGuire) drew our attention to the enormity of the decisions that were made, particularly just over a year ago when the banks were nearing collapse. I think that we are in danger of taking that for granted. One of my hon. Friends referred to timidity and a limited response. I really do not think that the unprecedented intervention in the banking system a year ago can be characterised as a timid or limited response. The decision to intervene on such a scale to shore up the banking system was a huge decision, and whatever the consequences and the difficulties now are for businesses and home owners-and they do exist-the consequences of not taking such action and allowing the system to collapse, which was the alternative, would have been absolutely catastrophic for the people we represent.
"We were against the fiscal stimulus".
The taxpayer has saved the financial system, and the Financial Services Bill focuses on the need for responsibility in the financial services industry in return for the commitment given by the taxpayer. The Bill will make it clear that we want a strong financial services sector, but also that it has to behave in a way that acknowledges the support given by taxpayers and the obligation to them, rather than in a way that flouts that support or acts irresponsibly with other people's money.
Like my right hon. Friend the Chancellor, my noble Friend the Secretary of State for Business, Innovation and Skills has welcomed the Walker report and has asked the Financial Reporting Council to take forward the work on engagement by institutional investors. However, our response to the recession has not just been about
the financial services sector; we have also looked beyond the recession to the jobs and industries of the future, to ensure that there is national capability in key areas and to equip people to do the jobs that the changes will bring.
A number of Members, particularly those on the Labour Benches, spoke about the importance of manufacturing and the digital economy. Time after time in recent months, we have made announcements and allocated funds in these areas of future opportunity. The low-carbon industrial strategy, launched with our colleagues in the Department of Energy and Climate Change, set out support of up to £120 million for offshore wind, up to £60 million for wave and tidal power and £19 million for the nuclear supply chain. There is support, too, for aerospace, printed electronics and electric vehicle-charging infrastructure, and today my noble Friend the Secretary of State announced over £20 million to establish a national composites centre in Bristol and a competition to make sure we succeed in these technologies that are so important to our economy. None of this would have come from a Government determined to cut support in the middle of a recession.
Mr. Graham Stuart: May I take the Minister back to the issue of the Lloyds-HBOS merger? It was right to make the covert loans, but it was wrong for the Government to lean on the directors of Lloyds and encourage them to merge with the other company when they could not tell their shareholders the truth about the financial state of the other company.
There is all this emphasis on industry as well as finance because we on this side of the House believe the best way out of the recession is to foster pro-growth policies. Growth is the best antidote to debt. Growth will get industry back on its feet, will get orders moving again for services and manufacturing alike and, crucially, will get people back to work. However, throughout the entire economic downturn, the official Opposition said we could not afford to take the action we took. The Leader of the Opposition called this a new age of austerity. He said the Government should have started reducing their spending plans last year; he said that should happen
"right now. Not next year, not after the election-now."
The problem for the Conservative party is that ideologically it cannot see a role for Government in fostering growth. Even after the events of the past two years-after the recession has hurt communities across the country and after all that has happened with the banks-the Conservatives have identified the biggest problem facing the country not as the irresponsibility in the banking system or the consequences that followed, but as "big government". They told us that the age of austerity was dawning.
The Tories told us that big government was the problem, and that it must be cut down to size. The nation could only wonder where the Tory axe would fall. That was true until last weekend, when suddenly, faced with the public's emerging view of this age of austerity, it dimmed from our view. It was obscured by the desperate screeching of brakes as the Leader of the Opposition made a hand-brake turn to talk about growth, after all those months of silence. That desperate change of direction did not communicate a genuine desire for growth; all the switching around has simply communicated confusion, uncertainty and risk in relation to the Conservative party's plans. That matters, because getting the judgment on this wrong could set back growth and cost the country even more in the future. Having got it wrong on the recession the Tories are now getting it wrong on the recovery. Their obsession with seeing government as the problem has hobbled them and prevented them from forming a coherent response to the crisis that we have been going through.
Of course the country wants to reduce debt incurred as a result of the recession, and the Bill that we set out on this subject in the Queen's Speech commits us to doing so. However, we have to do so at a time and in a manner that fosters growth and supports recovery, not that threatens to kill it off before it gets off the ground. That was the precise point made this week by Mr. Dominique Strauss-Kahn of the International Monetary Fund, who said of the timetable for stimulus withdrawal:
"We recommend erring on the side of caution, as exiting too early is costlier than exiting too late".
In the same vein, the Engineering Employers Federation said this week that a squeeze on public spending should not start until there is "demonstrable evidence" that economic recovery is secure, and that premature action would risk
"pulling the rug out from companies just as growth looks set to return".
If the Tories' problem on fiscal policy is one of judgment, their problem on industrial policy is one of silence. Again, the right hon. and learned Member for Rushcliffe had nothing to say about future industrial opportunities for the country, nothing to say about the shift from a high-carbon economy to a low-carbon one, and nothing to say about the digital information revolution. The only two policies that I have heard from the Conservative party in two years of debating with him about this are getting rid of the regional development agencies, which are business led and are having an effect in our regions, and cutting capital allowances to companies seeking to invest for recovery.
Can the Conservatives confirm that their policy on capital allowances would mean that a company investing £l million per year would get almost £90,000 more tax relief on that investment in the first year under the current Government system than under the plans that they want to introduce? Can they further confirm that a small firm investing £50,000 would get £9,000 more tax relief on that investment in the first year under this Government's system than under the proposals that they advocate? Theirs is not a plan to support recovery; it is a plan to withdraw tax relief from the investments necessary for a recovery.
Apart from that, all we get is the scorecard on our initiatives. We have launched a number of schemes to get lending moving and to support manufacturing, such as the enterprise finance guarantee, which has provided £660 million to 6,500 businesses. Some 150,000 businesses have been helped by the time-to-pay tax initiative.
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