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Economic Growth

Volume 455: debated on Thursday 25 January 2007

As was confirmed yesterday, growth in 2006 was, as the Government forecast, 2.7 per cent. Exports are rising at a rate of 4.5 per cent. a year, investment by 5 per cent. a year and business investment by more than 8 per cent. I call on work forces in the public sector to recognise that discipline on pay settlements, founded on our inflation target of 2 per cent., will be central to stable and sustained growth in the future.

Do not those figures illustrate the underlying and long-term strength of the British economy, in sharp contrast to the predictions of the Conservative party? Whether they are giving us doom and gloom or boom and bust, the Conservatives have demonstrated once and for all that they cannot be trusted with the reins of government.

My hon. Friend is just repeating what the shadow Chancellor himself has said, which is:

“The Labour party had become in the public’s mind the party of economic competence.”

We would all say that the economic growth figures are positive. In large part, however, they are due to the effect of migration. Given the skills gap and increasing unemployment among the UK’s indigenous population, what does the Chancellor suggest to ensure that not just the 50 per cent. who go to university but, perhaps more importantly, the many who will never aspire to go to university, have proper skills so that they can do the jobs that are being taken by Poles, Lithuanians and the like, and get back into the workplace at the earliest opportunity?

I agree with the hon. Gentleman that we should invest more in education and skills in the economy. We have doubled expenditure per pupil in our schools and achieved higher standards, and we have now published the Leitch report on adult skills. I think that he is really referring to vocational skills, which we can expand, first through the national employer training programme, and secondly through other measures to help people at school get apprenticeships and vocational qualifications. The dividing line between the two parties is that we are prepared to make the investment, but the Conservatives’ third fiscal rule would mean a cut in investment in education. That is the difference.

May I praise my right hon. Friend for doing a great job? He is one of the greatest Chancellors ever, and he has ensured that my region has benefited from great policies, unlike the boom and bust polices of the Conservative party. May I tell him the good news that manufacturing industry in the north-east, which accounts for 20 per cent. of employment, has increased its output by 2.5 per cent. in 2006? What policies does he have in the pipeline to ensure that that growth continues in 2007 and for many years to come?

The answer is the stable economic growth into an 11th and a 12th year that we have achieved under this Labour Government. I am glad that my hon. Friend said what he did. He was simply repeating what the Conservative higher education spokesman said only a few days ago—that young people

“have no trouble getting a job…We have almost full employment in this country, and they will go on to do fantastic things in this vibrant low-inflation economy.”

That means that those on the Front Bench of the Conservative party, as well as those on the Back Benches, disagree with the shadow Chancellor.

When the Chancellor was in India, did he notice that one thing we have in common with that country—apart from steady and respectable rates of economic growth—is an utterly abysmal infrastructure, as we were all reminded yesterday? How do the Government and the Chancellor propose to achieve the very high level of investment in British transport infrastructure that will be required, given that the debt-to-GDP ratio he has set is already very close to the 40 per cent. limit?

By the hon. Gentleman’s party acquiring a sensible economic policy that is line with ours, so that we can support sensible levels of investment in infrastructure and the economy. When we came to power in 1997, public sector net investment was 0.7 per cent. of GDP. It is now nearly 2¼ per cent. of GDP, it has risen every year, and it will continue to rise in the next few years. Investment in infrastructure and transport is running at £18 billion, investment in schools is running at £6 billion, and investment in the health service is running at more than that. It is possible to produce such figures only by achieving the right balance between tax, spending and borrowing, and by having a sensible economic policy. I urge the hon. Gentleman to go back to the drawing board with his.

My right hon. Friend will be aware that the very same people who opposed the policies that have led to this economic growth now believe that the economic growth in India is a threat. Leaving aside an unhealthy interest in “Big Brother”, what opportunities does the economic growth in India give the United Kingdom?

I said in India that we wished to double our exports to the country in the next few years and quadruple them by 2020, and I believe that that is possible. We signed a number of agreements in India, including public-private partnership agreements. As my hon. Friend suggests, by investing in infrastructure India will benefit from the expertise that we have built up in the United Kingdom. Greater collaboration between India and Britain on science and technology and universities, and, I believe, the strength of the relationship that we are building with India again, will serve both economies well—but both countries realise that economic strength can only be built on a basis of stability. And my hon. Friend is absolutely right: the Conservative party opposed the independence of the Bank of England.

As the Chancellor is no doubt aware, while the Treasury is right to measure aggregate growth rates, growth is not uniform throughout the United Kingdom. It is highly likely that growth in the Dundee economy will be seriously dented by the recent announcement of more than 1,100 job losses. Is the Chancellor prepared to undertake an assessment of the impact on growth of job losses in the Dundee economy, and in other economies that are blighted in a similar way, to establish what targeted measures might be introduced in such circumstances?

If any redundancies happen, as they have at NCR, it is to be regretted, but I think the hon. Gentleman is giving us only one side of the picture. Unemployment in Dundee has more than halved under this Government, and in recent years there has been a phenomenal expansion in jobs created around the university, in life sciences and in new technology. Dundee is benefiting from winning money from United Kingdom research councils and United Kingdom research budgets. The policy that would be most damaging for Dundee is the hon. Gentleman’s policy of separating Scotland from the rest of the United Kingdom, which the leader of his party now believes could happen without the need for a Scottish pound. That is completely unrealistic. I think the that hon. Gentleman, like the Liberal Democrats, should go back to the drawing board and think again.