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Economic Growth

Volume 537: debated on Tuesday 6 December 2011

12. What assessment he has made of the reasons for the Office for Budget Responsibility’s forecast of lower economic growth in 2012. (84792)

The OBR is independent, so we accept its numbers, its forecasts and, of course, its analysis. The OBR attributes the lower growth prospects in 2012 to higher than expected inflation, as a result of recent global commodity price shocks, revisions to the depth of the financial crisis and the crisis in the euro area.

Does my right hon. Friend agree that the OBR is a key participant in ensuring the UK’s economic recovery and that its establishment by this Government marked a step change in the transparency and openness of our economic and fiscal policy making? Further—[Interruption.] I have more. Does he share my view that if Labour had won the last election, we would still be without that independent assessment and thus, crucially, still in the dark about just how bad Labour’s recession is?

May we have a brief reply to what was rather a lengthily constructed essay-question? I know that the Chief Secretary will respond pithily.

The creation of the OBR is a marked improvement, as my hon. Friend says, to fiscal credibility in this country. That is why other countries are looking to our example, to see whether they can follow it. Other countries are not looking to the example of Labour, whose prescription for more borrowing in answer to a borrowing crisis is the one policy that no country in Europe or the world is following.

Since the spending review, which the Chief Secretary took part in, the economy has grown by just 0.5%. In the year before that, it grew five times as quickly, and in Europe it has grown three times as fast, so is it not the case that what has brought economic growth to a standstill and pushed up unemployment is the utter failure of the policies that he and the Government have pursued?

The hon. Gentleman should have read the OBR’s report, which analysed the depth of the economic crisis during his time in office and found that the size of the boom and the bust—which he claimed to have abolished—was larger than forecast. As a result, for every £8 that we thought we would have as a country, we have only £7. [Interruption.] It is an appalling legacy for this country, and he ought to be apologising, not chuntering from the Back Benches.

Does my right hon. Friend recognise that export-led growth will not reach the levels needed to match our growth projections by 2015? Will he consider other measures, over and above those already taken, to stimulate demand in the home market, especially to help the small and medium-sized enterprise sector, on which he is so reliant?

The hon. Gentleman is absolutely right to support initiatives to support the SME sector. I hope that he will therefore welcome the continuation of the small business rate relief holiday and the credit easing package, which is aimed at supporting lending and reducing the cost of lending to small businesses—one of many things that we are doing to help that vital sector of our economy.