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Economic Growth

Volume 490: debated on Thursday 26 March 2009

Well, a lot of jobs will be lost between now and then. Over the last several weeks, since the recession began, 6,500 jobs in east Lancashire have gone, and the chamber of commerce predicts that another 5,000 jobs will go. In my constituency, between Fort Vale Engineering, Fraser Eagle and Ultraframe, 200 jobs have either gone or are under threat of the axe. Will the Chancellor tell us how many jobs he believes will go in east Lancashire simply because of the business rate increase now facing many small to medium-sized enterprises? Does he not see the absurdity of pumping huge sums of money into the banks that will then have to be borrowed by some of those small to medium-sized enterprises—if they can do so—simply to pay for the business rate increases he is imposing on them?

The hon. Gentleman said that he was concerned about people who lose their jobs, and he is right to be concerned about them. That is why we have allocated just over £1 billion to the Jobcentre Plus network to help people who lose their jobs to get back into work as quickly as possible. It is still the case that most people who lose their jobs manage to get back into work within three months. Of course, that means spending money—something that he and his colleagues are against. I am aware of the concerns that have been expressed about business rates, but again, what the hon. Gentleman is asking for involves spending money, and his Front-Bench colleagues give the distinct impression that they would not spend any more money at all.

The Chancellor mentioned unemployment; in my constituency, it has risen by 18 per cent., according to the last set of figures. There are very few jobs advertised in the jobcentre, and there are 21 jobseekers for every job that it advertises, so my constituents will be looking very closely at the Budget. Did the Governor of the Bank of England not let the cat out of the bag when he pointed out that our fiscal position is so bad, our debt so high, and the Chancellor’s inheritance from his predecessor so bad, that the Chancellor’s hands are tied, and he will not be able to deliver a substantial fiscal stimulus in that Budget?

That actually was not what the Governor said. Indeed, he made the point, in his evidence to the Treasury Committee, that he thought that measures to help people get back into work were a good thing, and ought to be supported. The point that I was making—I will make it to the hon. Gentleman as well—was that if we are to help people get back into work and retrain, and if we are to help them match with jobs in the economy, it will mean spending money. The lesson from the recessions of the 1980s and 1990s is that if we do not spend the money—if we do not intervene for two or three years—an entire generation will effectively be wiped out. We must avoid that at all costs. That is why the Governor and I are totally agreed that the stimulus that I announced last November was necessary. That is why both of us agreed, at the G20 meeting of Finance Ministers and central bank governors a couple of weeks ago, that we needed to do whatever was necessary, for as long as is necessary, to support the economy.

Of course, as I have said on many occasions, substantial sums of money are being put into the economy through the measures that I announced in the pre-Budget report, and through the additional fire-power that I have given the Bank of England to get credit going in the economy. Both those things are absolutely essential, and we have to make sure that they work their way through. As the Governor himself said—and I agree—we also have to make sure that, if it is necessary, we continue to do more when it comes to measures such as putting people back into work. It is nice to have the support of the hon. Members for Ribble Valley (Mr. Evans) and for Forest of Dean (Mr. Harper); perhaps they could have a word with their Front-Bench colleagues.

May I agree wholeheartedly with what the Chancellor said? I was on the Treasury Committee when the Governor said the words that my right hon. Friend has just repeated. May I commend to my right hon. Friend the submission produced by Professor “Danny” Blanchflower and David Bell of Stirling university, which puts forward suggestions to address youth unemployment? In the summer, 700,000 young people will leave school and university; we need to tackle those numbers. Will my right hon. Friend look at the report, because it suggests good ways of tackling the problem of growing youth unemployment?

I have indeed seen Professor “Danny” Blanchflower’s suggestions, and I have spoken to him as well. [Laughter.] Rather than laughing about the matter, most people in the House ought to be concerned, at a time when we can see that the unemployment figures have been rising, that we do everything possible to get people back into work. The lesson from the past is that that is necessary not just for the long-term unemployed. It is especially necessary for young people, to ensure that they get back into the workplace as quickly as possible. However, I repeat that it means that at some stage we have to be prepared to spend the money to back that up. My view is that it is money well spent, because the cost of doing nothing, which is what the Opposition urge us to do, would be far, far greater.

One consideration is the dramatic drop in world trade over the past six months. What action will my right hon. Friend be taking at the G20 to try to reassure the international community, so that we can get world trade moving again?

I agree with my hon. Friend. The fall in world trade is one reason why industrial production is falling. It is interesting that, in the exchange of letters that I had with the Governor of the Bank of England, he made the point that in 54 of the 57 countries for which we have data, falls in industrial output were seen over the last quarter of 2008. That has had a devastating effect on economies, particularly in the far east.

We need to make sure that we get world trade going, which is why the resumption and conclusion of the Doha round of trade talks is important—and that will feature next week at the G20. It is also necessary for countries around the world to do everything that they think is right and appropriate to boost their own economies. Nobody is saying that they need to turn up next Wednesday with a budget on the table, but we are saying that if countries act together the effect will be far greater. When recession is affecting or threatening countries across the world, the need for countries to act together is essential, which is why next week is an important step along the way.

Why did it take the Governor to warn the Prime Minister that this country simply cannot afford to borrow any more money? Why does the Chancellor not stand up for taxpayers’ interests, resist the banging on the wall from his neighbour next door, and start the long haul of getting our public finances under proper control?

I would say two things to the hon. Gentleman. First, the International Monetary Fund noted in its recent report that many countries entered this problem

“with greater fiscal space to expand”.

It noted that Canada, China, France, the UK and the US were such countries, so we are in a place where we can provide help for the economy. To put it another way, if we had not done so—if we had taken £20 billion out and withdrawn the power that we have given to the Bank of England to ease credit—the effect on the economy would have been absolutely harmful and very damaging, especially to jobs and the future prosperity of businesses.

I made the point in the pre-Budget statement last year that, just as it is necessary to support our economies now, all countries need to live within their means over the medium term. That is why I announced measures to raise money in the pre-Budget report. It is important—and no one should be in any doubt about this—that, yes, we need to take measures now, as I have said, as the Governor has said, as the Prime Minister has said, to support our economy, but all of three of us have also made the point that it is necessary to make sure that in the longer term we have a sustainable position and that all countries live within their means. That may mean making some hard choices, but it is necessary.

My right hon. Friend is well aware of the difficulties. He has heard about manufacturing in Lancashire, and we have just lost more jobs at Leyland Trucks. We ought to look at how we can protect manufacturing for when the economy goes into growth, and the best way of doing so is through a short-term working subsidy. Will he look at that, and if he is looking at how we can fund it, he can always end the VAT cut early so that that much-needed measure can put the impetus back into manufacturing?

I agree with my hon. Friend that we need to do whatever we can to protect jobs or, where jobs are lost, to get people back into work. I also agree that it is necessary as far as possible to do what we can to help where we think that businesses have a viable future. I do not agree with the point that he made in relation to VAT, but I do not think that he expected me to do so.

Earlier this week, the former Cabinet Minister, the right hon. Member for North Tyneside (Mr. Byers), said that the VAT cut had “run its course” and should be reversed. Does the Chancellor agree?

No, I do not, because I think that putting £12.5 billion into the economy and doing it immediately was necessary. We are also—and I am grateful to the hon. Gentleman for allowing me to say this—taking other steps that will help the wider economy. Basic rate taxpayers will see a reduction in their tax, starting on 6 April. We have increased child benefit for the oldest child, and for other children as well. We have brought forward, too, a payment of £60 for pensioners, and the state pension itself will go up in April, so we are taking a range of measures to help. As for VAT, perhaps the hon. Gentleman should have a word with the shadow Business Secretary, who supported the reduction in VAT. Increasingly we are hearing a lot more sense and a lot more experience from that direction than we are from the shadow Treasury Front Bench.