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Economic Growth

Volume 541: debated on Tuesday 6 March 2012

9. What assessment he has made of the effect of fiscal policy on the level of economic growth in 2011. (98007)

Tackling the deficit is necessary for supporting sustainable economic growth. The Government’s credible consolidation plan has restored confidence in the UK’s fiscal position, helped avoid a rise in market interest rates, and allowed a more activist monetary policy to support the economy.

We know that this Government’s Ministers think they are always right and everyone else is always wrong, but how do they explain why growth in America, which took a more balanced approach to dealing with the deficit, was twice the rate here in the UK, and if it is, as they insist, all the eurozone’s fault, why was it only exports that prevented the British economy from lurching back into recession last year?

If the hon. Gentleman wants an explanation for the country’s current economic position, he need look no further than the Office for Budget Responsibility report published at the time of the autumn statement. It highlighted three factors: the problems in the eurozone; high inflation and commodity prices over the past year; and the depth of the crisis that was caused in part by the hon. Gentleman’s Government and the damage that did to the British economy. If he is looking for people who should be asked to apologise, he should look to himself, and perhaps he should apologise not least to the people of the west midlands, as that region fell behind the rest of the economy during Labour Government’s period in office.

Given the amount of Budget lobbying now going on, will the Chief Secretary remind those who want to add even more to our borrowing by proposing wholly irresponsible and unfunded tax cuts of the Institute for Fiscal Studies advice that

“there is a strong case for the Budget not to contain a significant permanent net giveaway”?

I would certainly remind them of that, and of the fact that the need to maintain the credibility of this country’s fiscal position should override any such considerations.

In the assessment the Chief Secretary is undertaking, will he let us know about the extent of the income tax and national insurance losses that will result from the sacking of between 7,000 and 10,000 public servants? Does he expect the benefit bill to go up, and if so, by how much?

As the hon. Gentleman knows, we have had to make some very difficult decisions in order to deal with the enormous Budget deficit left to this country by Labour. If his party had not left a mess, we would not have to clean it up.

One direct economic stimulus would be to allow people to keep more of their own money from the proceeds of work. The Government have already taken a great step forward in implementing the Liberal Democrat policy of raising the income tax threshold to £10,000. Will the Chief Secretary and the Chancellor seriously consider going further and faster in the Budget and achieving in this Parliament the goal of all our constituents having £10,000-worth of tax-free pay?

Such decisions are, of course, for the Chancellor to announce on Budget day, but, as my hon. Friend will know, the coalition agreement commits this Government to real-terms increases in the personal allowance every year in order to reach the goal of a £10,000 tax allowance, which the Liberal Democrats set out in our election manifesto. As a result of the substantial steps we have already taken, there will be a further tax reduction of £126 for all basic rate taxpayers in this country from April this year.