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Economy: Growth

Volume 739: debated on Wednesday 18 July 2012


Asked By

To ask Her Majesty’s Government what steps they are taking to encourage demand to promote growth in the United Kingdom economy.

My Lords, the Government have set out a comprehensive strategy to deal with the challenges we face. Fiscal, monetary, financial, tax and structural reform all play a role to deliver our objective of lasting economic recovery and sustainable public finances. That strategy has reduced the deficit and helped to deliver near record low interest rates.

I am grateful to my noble friend for that reply. I am sure that the entire House would like to welcome the 65,000 fall in unemployment, which was announced today. Welcome as that news is, we must face the fact that demand for goods and services is slackening, if not falling, worldwide. It is reducing growth prospects in many countries, including our own. Does my noble friend agree that in these circumstances the best that we can do is concentrate on those sectors of industry that have full order books, especially of exports, and on the key areas of housing and infrastructure at home where we can be sure of a return in the longer term? Can we get on with it as soon as possible?

I agree with my noble friend: each of these is vital and we are taking important steps in these areas of exports, housing and infrastructure. However, our strategy goes further. What we need to do is encourage the private sector through a competitive tax system; make the UK the best place to start, finance and grow a business; encourage investment in infrastructure; and improve the flexibility and skills of our workforce. As my noble friend will be aware, we have put in place a range of measures to achieve each of these.

Despite the excellent news that the noble Lord is pleased to give, would he agree that growth at the moment is near zero? Although increases in capital expenditure would be excellent, especially under some kind of loan guarantee scheme that was announced outside the House this morning, can he tell us more about that loan guarantee scheme? How will it work in practice? Will the Government be guaranteeing 100% of project?

I cannot give the noble Lord the details that he asks for here because it would take too long, but I will write to him.

My Lords, we all want to see a strong business and growth strategy legacy from the Olympics, particularly looking beyond the next few weeks, and we want to sell our capabilities internationally. However, does not the insistence by the IOC that some 75,000 of our businesses cannot associate themselves as having been suppliers to the Olympics rather militate against that?

My Lords, my noble friend raised this point in a debate the other day. The building of the Olympic park and other Games venues for London 2012 has been a great success story for the UK. In order to secure over £1 billion of sponsorship, restrictions on marketing rights have had to be put in place. The many thousands of suppliers for both the build and the staging of the Games have received a full commercial rate for their goods and services. However, the Government are committed to working with the British Olympic Association and others, and through them the IOC, to find a way to ensure that contractors and subcontractors can seek a form of recognition of their superb contribution to the Games.

My Lords, does the Minister accept that the nub of the Question asked by the noble Lord, Lord Roberts, was about how to encourage demand and promote growth, and that those questions were the very ones that he did not really address in his reply? Would he take note that there is serious concern, not only on both sides of this House but in the country, about the failure to do those two things and that that is manifested in today’s Ipsos MORI poll, which shows Labour on 44%, the highest since the last general election, with the Government—the Conservatives —slumping to 31%?

I congratulate the noble Lord on his performance; we are more focused on the economy. Of course growth is of concern but unemployment is falling. In the three months to May, the number of unemployed fell by 65,000 and 181,000 new jobs were created. Since the coalition took office in May 2010, more than 840,000 private sector jobs have been created, manufacturing output is up and exports of goods to outside the EU are up by 35% quarter on quarter from the first quarter of 2010 to 2012. Noble Lords will also know that inflation has fallen.

Does my noble friend agree that we will only get growth from businesses being able to sell goods and services competitively throughout the globe? Would it be a good idea for the Secretary of State, Mr Cable, to spend his Summer Recess thinking of ways in which he can reduce the cost of doing business for our firms throughout the country? That, not demand, is the key to getting further employment and further tax revenues for the Treasury.

Given that the IMF has downgraded our growth forecast from 0.8% to 0.2%—the lowest for any major economic power—will the Minister give his very full support to the Chancellor of the Exchequer, who would like to allow more private sector investment, specifically for the expansion of Heathrow? Will the Minister confirm his support for the Chancellor on that issue?

My Lords, my support for the Chancellor of the Exchequer is unstinting. On the subject of the IMF forecast that the noble Lord raised, I point out that the forecast for the eurozone, where 40% of our exports go, is a contraction of 0.3%. It is of course concerning but hardly surprising that our forecast has been affected, so it is all the more impressive that the private sector jobs figures that I referred to earlier have outstripped so substantially the job losses in the public sector. Furthermore, as I said, manufacturing output is up, and exports to countries outside the EU are substantially up. All that must be good news, as is the news on inflation, which is good for both businesses and families. The director of the IMF’s fiscal affairs department said, following the announcement, that we should not change course on deficit reduction.

My Lords, is my noble friend aware that the north-east of England is the only region of the country that exports more than it imports? Is he further aware that figures for the past quarter show that those exports are now at record levels? Is he further aware that today unemployment in the north-east fell for the first time in two quarters? Does he recognise that this is a welcome progression, and will he ensure that the Government continue to make sure that they back winners rather than pick winners?

Yes, my Lords, I agree with my noble friend. The issue is one of confidence. I will tell noble Lords who else thinks that we are doing the right thing. Last month BMW announced a £250 million investment to increase production of Minis, on top of the £500 million investment it announced last June. Ford is putting £1.5 billion into R and D and manufacturing over the next five years. Nissan is building the electric Leaf car, with an associated battery factory, in Sunderland. Toyota is producing Europe’s first mass-produced fully hybrid car and engine in the UK.