My Lords, returning the UK to sustainable, balanced economic growth is the Government’s overriding priority. Although considerable external risks remain, the Government’s actions to reduce the deficit and rebuild the economy have secured stability and positioned the UK as a relatively safe haven, with interest rates near record lows benefiting families, businesses and the taxpayer.
I am glad that we are no longer expected to thank Ministers for their replies. I am becoming increasingly concerned about the gap between what Ministers say about the economy and what is actually the case. In the debate on the Queen’s Speech, the Minister told the noble Lord, Lord Skidelsky, that sustainable recovery was underway. When I asked him on 29 May how he squared that with the fact that we were in double-dip recession, he palmed me off with references to the success of the private sector in generating jobs and exports. No sooner were the words out of his mouth than manufacturing output plummeted. It is up a bit in June, but yesterday we learnt that activity in the construction sector had fallen at the fastest rate for two and a half years. We are probably heading towards a third-quarter recession.
The noble Lord, Lord Low of Dalston, raises some important points. Let me try to summarise. On the one hand, the public sector deficit has already been reduced from 11% to 8% of GDP. Public sector employment is down more than 400,000 from the unsustainable levels that it had reached. That is very real progress and we are on track on that dimension.
On the other side, we should not underplay the real success of the private sector in the most difficult and challenging conditions. Some 800,000 new jobs have been created since the election—166,000 new private sector jobs in the past quarter. Unemployment is down by 51,000 in the latest quarter. The private sector is doing a fantastic job to get this country out of the mess that we were left with. That is what it is all about.
My Lords, last week, the noble Lord misled the House in a reply to a question from my noble friend Lord Peston. He said that the IMF supported the Government's “fiscal course”. May I quote directly from what the IMF said? It said that although it endorsed the deficit cutting plans of the Government, if growth failed to pick up it would help to consider delaying cuts in expenditure and also,
“focus on temporary tax cuts and greater”,
infrastructure expenditure. The noble Lord likes the IMF. Will he take its advice?
I did not bring my IMF quote book today to trade on this one, because the Question is about the Government's assessment of the success of their economic policies, not what the IMF is saying about them. I am sure that we will come back to that on another occasion.
My Lords, although reducing the deficit, and even more so the debt, is important, is not relying exclusively on reducing the deficit a bit like playing golf with only one club? Do we not have to have more emphasis on supply-side measures that will encourage the private sector to create the jobs and wealth that the country desperately needs?
My noble friend is completely right, and it would be a one-club game if we were not doing all sorts of things on the supply side, such as reducing corporation tax from 28% to 22%, the national loan guarantee scheme of £20 billion, cutting red tape for the first time in living history, enterprise zones, the Regional Growth Fund, the largest number of apprenticeships ever funded by any Government and completely overhauling the planning system, to name a few supply-side reforms.
My Lords, the latest report from the Federation of Small Businesses shows, in the second quarter of this year, an increase to 73% in the number of small businesses finding access to credit difficult and an increase to 41% in refusals of credit applications. Given the Government’s efforts to provide funding for the banks to lend to businesses, can the Minister explain why this is so?
My Lords, even though the latest business surveys show that private sector employment is significantly up and that manufacturing and service sector sales continue to grow, it is certainly the case that that is happening in the face of very tough financing conditions. That is why, among other things, the national loan guarantee scheme and the announcements from the Chancellor and the governor about the new funding for lending scheme, details of which will be put out in the coming weeks, were very important.
My Lords, will my noble friend cast his mind back to the memoirs of the last Labour Chancellor—and how good those words sometimes sound—in which he described the situation at the end of his tenure of office as being “brutal and volcanic”? It is not clear to me whether he was talking simply about the economic situation that he passed on or his relationship with the Prime Minister, but when my noble friend looks at the sea of outrage opposite, does he not think that, even for them, it comes a bit rich?
My Lords, as but one little wavelet on the sea of outrage, may I ask the noble Lord whether, when he referred to the Government achieving stability for the British economy, he was referring to their achievement of reducing the growth rate from 2% to zero?