Economy, Pensions and Welfare

Part of Debate on the Address – in the House of Commons at 8:52 pm on 15th December 2008.

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Photo of Adrian Bailey Adrian Bailey PPS (Rt Hon Bob Ainsworth, Minister of State), Ministry of Defence 8:52 pm, 15th December 2008

It is a pleasure to follow Mr. Pelling, who gave a short, reasonable and measured speech.

I shall concentrate on the economy and the impact on my constituency and region, the west midlands. Economic historians will debate for many years the culpability for the current international economic crisis. The central problem seems to be that international finance and the mechanisms and tools used to move money round the world have outstripped the national and international supervisory and regulatory bodies. It ill behoves Opposition Members to criticise the Government for not regulating the finance market properly, when the Opposition were advocating total deregulation of the market.

In the end the public will judge us not on who is culpable, because it clearly is an international crisis, but on what the Government do about it and what mechanisms they are prepared to adopt to deal with the problem—interest rate monetary policy, or monetary policy plus fiscal stimulus. From my discussions with electors and above all with local manufacturers, it is clear that a combination of the two is needed.

People in my constituency and the black country as a whole remember the monetary policies of the early '80s, which were devastating—and happened within an international economic context far more benign than the problems with which we are dealing at the moment. The manufacturers whom I meet do not talk about balanced budgets. They talk about the availability of credit and needing loans, as well as about needing rate relief on empty properties which the Government have now delivered. Above all, however, those manufacturers say that there is no point in providing companies easier access to credit if those companies do not have an order book to respond to. Order books can be built up only if the economy in general is stimulated. I believe that the VAT £12.5 billion stimulus will provide that stimulation, as will the public works that are being brought forward.

At the end of the day, small companies face diminishing order books and the necessity of laying off workers. The only legacy of the 1980s that the manufacturers remember with any regard is, ironically, the one interventionist Thatcherite measure—the short-time working directive, when workers were subsidised for not leaving the employment of a small company. It is absolutely essential that we preserve our manufacturing base. If we do not have any industry when the upturn comes, we will not be able to take full advantage of it. Areas such as mine in the west midlands are in many ways a litmus test of the sort of policies needed to keep our industrial base intact.

I turn briefly to the car industry, which represents about a quarter of the manufacturing output of the west midlands. Land Rover-Jaguar alone employs 13,000 people, and including the automotive components industry, car industry employees make up a huge section of the west midlands work force. The Government have rightly intervened in providing money for the banks; that was essential to stop our national finance system seizing up. However, over and above that, we have to recognise that vital industrial sectors may need supporting in a way that has not so far been envisaged. We have tried to get cheaper credit through the banking system, and we may need to consider industry-specific measures designed to provide cheap loans from the finance arms of the car companies, to stimulate the purchase of cars, which are such a vital and strategic part of our industrial base. Similarly, we may have to look to measures to preserve the cutting-edge research and development in our car industry.

Although I praise the Government for their work so far, I finish by reminding them that that work is not over. The issue is about saving not just the banking sector but our industrial sector; so much of the work done with banks will be lost unless we do the latter. I ask the Government to take that on board, and—if necessary—to be bold.

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