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Economic Growth

Volume 525: debated on Tuesday 22 March 2011

15. What recent assessment he has made of the effect on economic growth of the spending reductions set out in the June 2010 Budget. (47932)

16. What recent assessment he has made of the effect on economic growth of the spending reductions set out in the June 2010 Budget. (47933)

The independent Office for Budget Responsibility’s November economic and fiscal outlook takes into account the spending plans set out in the 2010 spending review. The hon. Gentlemen ask about a recent assessment, and I can tell them that the OBR will publish an updated forecast alongside tomorrow’s Budget.

Durham university’s economic model shows that between 45,000 and 50,000 individuals will lose their jobs in the north-east of England as a direct result of public expenditure cuts, including 20,000 in the private sector. What message does the Minister have for those individuals and also for the 10.2% of the north-east population who find themselves unemployed?

Coming from a Labour Member, given that unemployment rose during his party’s time in government, people will find that pretty hypocritical. The only way in which we will get sustainable jobs and a sustainable economy that is not as reliant on the public sector will be to carry out our deficit reduction plan. The hon. Gentleman will hear more about our growth review tomorrow.

Is not the Minister aware that all the independent indicators and forecasters suggest that there will be a sustained period of low growth below forecast, and that almost every single economic indicator is going in the wrong direction? Can she not therefore see that the Chancellor’s plan is simply not working? Why are the Government in denial about that?

I simply do not agree. As we have heard, every independent forecaster is backing our fiscal consolidation plan. The hon. Gentleman talks about evidence, but the retail sales volume grew strongly in January. The Chartered Institute of Purchasing and Supply purchasing managers index grew faster in January than analysts expected, while manufacturing reached a record high. Only today, the CBI industrial sector survey says that orders are going up. Our economy is rebalancing over time, and although the hon. Gentleman says that there is no evidence for that, there is such evidence. There is job creation, and that is what we will need if we are to turn our public finances around.

Is it not the case that the Government’s debt reduction plan is absolutely right, as we see in the gilt market and the country’s credit rating? Is it not also true that, throughout history, coalition and Conservative Governments clean up the economic mess left by socialists?

My hon. Friend is right. The consequence of that economic mess is that Labour Governments always leave unemployment higher than when they came into office. It is always that that we seek to tackle. He is right that there is no alternative plan. We have heard about a defunct plan for VAT and petrol, but we have not heard from the Opposition any plan to tackle the deficit. They said they would have some thoughts. Clearly, they are totally thoughtless.

The Government inherited the largest budget deficit of any major country, yet today the UK enjoys one of the lowest interest rates of any major country. Does the Minister have an explanation for that?

My hon. Friend is right to point out that the previous Government maxed out the country’s credit card. Worse still, they want us to hand on those debts—their debts—to our children and grandchildren. The reason that we have been able to enjoy lower interest rates for our borrowing than countries such as Ireland is that the markets know that we have a plan to get our public finances back into shape. That is benefiting this country every day.