I beg to move,
That this House
has considered the matter of securing economic recovery.
The world economy is forecast to shrink by 11/4 per cent. in 2009-the first time it has contracted in 60 years. To fight the global downturn, we, with countries around the world, have stepped in to support our economy. In the 1930s, Governments failed to act, with disastrous consequences. Unlike the Bourbon monarchy and today's Conservative party, we have learned the lessons of the past, which is why we took unprecedented action to put more money into the economy, to help to support families and businesses now, to protect jobs and to ensure a sustainable recovery.
When the recovery starts-I hope it is starting even now-one of the principal difficulties faced by small businesses will be the need for working capital. The Economic Secretary will be aware that the Chancellor has already announced means by which small businesses' cash-flow difficulties can be addressed during the recession, in particular, through the deferment of taxes. The right hon. Gentleman made it clear that that included national insurance and other payroll taxes, but I can think of no other payroll tax than pay-as-you-earn. Is PAYE included in those provisions?
The hon. Gentleman will be aware that more than 150,000 businesses have already benefited from the flexibilities operated through the business payment support system. That system, which covers payroll taxes and deferment of VAT payments, has been widely welcomed by industry and is a major success.
In the terms of today's debate on securing the recovery, the fact that the downturn is global has meant that we need global action, as well as action on the home front. That is why the Prime Minister and the Chancellor have led the G20 in taking action to stop banks failing, agreeing to strengthen the international financial system, and taking other measures to help to secure the global recovery. Politics is about judgment. Government is about taking decisions. As a Government, we could have allowed Northern Rock to fail; we could have decided not to take powers through the Banking (Special Provisions) Act 2008 to manage the crisis and not saved Bradford & Bingley; and we could have made the political judgment that what was needed was the complete deregulation of all mortgage markets. They would have been the wrong decisions to make in order to protect jobs and people's savings, yet they were the exact policies that the Opposition advocated at the time.
The right hon. Gentleman cannot get away from the fact that his party would have allowed Northern Rock to fail, because that was its stated view at the time; that it opposed the 2008 Act, which gave us the measures that were required to intervene in the case of Bradford & Bingley; and that, as he knows, just before the financial crisis his party made statements about the need for the complete deregulation of the mortgage market. They were not responsible judgments, and, overall, this is a matter of judgment.
The Minister really should withdraw his remark about mortgages; the economic advice given was that we did not need the process regulation on mortgages, but needed tougher regulation of cash and capital, because we could see the tragedy coming. Now, will he apologise?
Does my hon. Friend agree with the reports by the Treasury Select Committee, which scrutinised the issue? Although we on the Committee found that complex considerations were at play, we did not find that people had given advance warning of the crisis, and we supported the Government's measured approach to many of the issues-in particular, their support for the banking industry.
My hon. Friend is absolutely right to refer to the Treasury Committee's work, and to the fact that its considered judgment supported the actions that we took. The powers that we took through the 2008 Act, and the actions that we took on Northern Rock and subsequently, were right.
Politics is about judgment and government is about making decisions, and the Government's judgment now is that it is right to support businesses and people through these difficult times. That is why we have taken action, for instance, on cutting VAT, putting an additional £1 billion each month into the pockets of shoppers and retailers; it is why we are spending £5 billion more on helping people get back to work; and why we are helping 300,000 people with their mortgages, helping them to stay in their homes. We have supported the car industry through the scrappage scheme, provided additional support for business generally and, as I said earlier, given 150,000 companies more time to pay their bills.
The Minister threw out a large number of accusations about the Opposition's policies and said that we had not learned from the past. Will he therefore tell us which mistake he learned from when he decided to embark on a Government borrowing programme of £500 million a day?
I have not finished explaining how the Conservatives have absolutely failed to make the right judgments to help people and businesses in Britain through these difficult economic times.
I shall move on, however, and discuss borrowing and fiscal consolidation, because they are important issues. When we discuss them, we expose the fact that the Opposition have failed to make the basic judgments that are in the best long-term interests of the British people. We could have taken the decision to do nothing and let the recession run its course, which the Opposition, given their stance against the fiscal stimulus, consistently say they want us to do. However, that would have led to far higher unemployment and far more business failures. Our choices and actions are working, and, as the Chancellor has consistently maintained, they will help to deliver a return to growth around the turn of this year.
The Minister will recall that on Monday we had a very similar debate, tabled by the Opposition, in which Opposition Members spoke at some length and in some detail about our genuine concerns for business and enterprise in our constituencies. At the time, the Secretary of State for Work and Pensions conceded my point to her that she had not listened to the debate and was out of the Chamber. I asked her directly whether she would come back to us with written responses to the direct problems that we are suffering from in constituency by constituency.
Order. I say to right hon. and hon. Members that, in any event and in all circumstances, an intervention should be brief, but, when we are talking about a topical debate, there is a particular onus and responsibility on Members to keep it short.
I am certainly aware of Monday's Opposition day debate, which focused on welfare and its role in securing the recovery. Today, we are talking about securing our economic future, and our measures to achieve that, which the Opposition opposed, are working. The International Monetary Fund, the National Institute of Economic and Social Research and a majority of City forecasters agree that the economy should begin to grow by the end of the year. However, there are still uncertainties and risks to confront, and no country can be complacent. Unemployment is rising here and throughout the world, and we have to see the problem through. I think that it was Churchill who said, "When you are going through hell, you must keep going," and that is why at the Pittsburgh summit the G20 agreed that it was too soon to withdraw fiscal support-support that the Opposition do not even want to provide. Yet again, that agreement is in stark contrast to the Conservatives' argument today.
Given the unprecedented challenge that we face in dealing with climate change, what are the Government doing, as we go through the recession and try to restore employment, to ensure that we have a green economy and sustainable environmental growth alongside the economic recovery?
My hon. Friend is absolutely right to point out the need to create green jobs in supply chains and to tackle the major climate change issues that the world faces, while providing employment opportunities in the United Kingdom. I hope to explain in more detail how we will address that. It is important that, until the recovery is entrenched, we continue to help businesses and families who are struggling to deal with the impact of the downturn.
This is an apposite moment for my hon. Friend to give way, because I did not want to leave the subject of the stimulus without recording the horror of all independent commentators at the thought that the priority of any incoming Conservative Government would be the deficit, rather than securing the growth that is absolutely necessary if Britain's economy is to survive and thrive in the future.
My hon. Friend is absolutely right. We need to focus on the future and the steps that we need to take not only to get us through the recovery in the best possible shape, but to ensure that we lay firm foundations so that the UK can be competitive in the future.
As the world's economy emerges from the downturn, major new opportunities for British businesses will emerge, including, as my hon. Friend Joan Walley said, initiatives to green our economy. However, global competition is getting tougher, technological change is always accelerating and, as other countries invest and raise their skill levels in high-value sectors, we cannot afford to stand back. That is why we must continue to invest to ensure a sustainable future and to build our future economic strength, as my hon. Friend Mr. Love rightly said.
The Minister, like me, is a west midlands MP. What is he doing to try to stimulate the west midlands economy, particularly manufacturing? To give him credit, I must say that he has done a lot for the car industry, but will he say something about small businesses and so forth?
The west midlands is an important part of the UK economy, and the fiscal stimulus measures that the Government are taking are all helping our industry. My hon. Friend will be aware of the scrappage scheme, which has been widely welcomed in the west midlands. The region has had a very tough time during the economic recession, suffering more than many others in the economy, and that is why it is fundamentally important that we continue to up our skill levels in the west midlands and, more broadly, throughout the United Kingdom. That is also why we continue to support our companies. Those policies and spending decisions-the judgments that we are making-would be placed under threat if we followed the judgments of the Conservatives, who just want to cut, cut and cut again.
Will the Minister expand on his earlier statement about helping some 150,000 small businesses by allowing them time to pay their bills? Does that also apply to Her Majesty's Revenue and Customs, which is pursuing companies in my constituency that are keen to pay their taxes but are experiencing short-term cash-flow problems? Does HMRC go out of its way to help those small businesses?
Yes, HMRC has been extremely active in wanting to work with companies and defer payments where that can help a company and provide it with the breathing space that it needs. As I said, more than 150,000 businesses have benefited, and a figure in excess of £2.3 billion has been deferred in the way of tax. If my hon. Friend has specific examples of companies with problems and wants to talk to me about them, I will ensure that they are investigated. If support can be provided to viable businesses through deferring tax payments, that is what should be happening. I am happy to take that forward with him directly.
The Minister is talking about what can be done to get us through the current difficulties. Was he alarmed by the comments made by Mervyn King the other day when he said that the lessons have not been learned by the banking sector and that we could find ourselves in this situation again? Getting through this banking crisis is one thing, but what has been done to ensure that we do not get into another one in future?
The Government have already taken steps internationally and domestically, through regulation by the Financial Services Authority, to deal with the banking crisis. The Governor of the Bank of England, the Treasury and the FSA-the tripartite authorities-are absolutely committed to ensuring that we do not return to the past. We have said very publicly that it cannot be business as usual for the banks. In his speech on Monday, the Governor posed some interesting questions as part of a general debate. We have some differences of opinion on separation, but in essence there is not a lot of difference between what he is saying and what the Government believe in terms of the actions that are already taking place-and there is more action in the pipeline, as the hon. Gentleman will be aware.
As the House will be aware, we have significant stakes in Royal Bank of Scotland and Lloyds Banking Group. We have clearly stated that we want those entities to be returned to the private sector, and I am sure that that will happen in due course. However, there must be an orderly process. We must first sort out the problems in those banks, and we will then ensure that they are returned to the private sector at a time and in a way that delivers best value for the taxpayer.
Looking to the future, we have ambitious plans for investing in skills in our work force, boosting research and development, and rolling out high-speed broadband. Among a range of actions, we have said that we will guarantee a job or training place to 18 to 24-year-olds out of work for a year.
I want to stress to the House that we are continuing to invest in Britain's critical national infrastructure at this crucial time as we recover from the current crisis. That will be fundamental to underpinning our country's economic future. As we set out in the Budget, following almost a decade of rising capital investment, net investment next year-£36 billion-is close to that spent in 2008-09; and in 2011-12, well into what we hope will be a recovery, it will be close to that spent in 2007-08. That investment, which would be cut if the shadow Chancellor had his way, is providing much-needed support to thousands of UK construction workers. Meanwhile, the Conservatives have a warped sense of priorities in wanting to give a £200,000 tax cut to the 3,000 wealthiest estates.
It was, and continues to be, the right judgment to support families, businesses and jobs to get through the downturn as soon as possible and in the best possible shape. It was also the right decision to prevent the collapse of the banking system, because the impact of a collapse on households and businesses would have been catastrophic. It is right, too, to invest in Britain's future. But we also have to make the tough decisions to take action on the deficit once the recovery is secured. We must live within our means, because money will be tighter in the years to come, and that means that choices will be even more important. We have already set out a responsible reduction plan to halve the deficit over four years, we have announced tax increases for those on the highest incomes that will take effect once the economy is growing again, and we will take the tough decisions on public spending for the years ahead. We are determined to take a responsible approach to reducing the fiscal deficit that will not damage the public services on which people rely. We will cut costs and unnecessary programmes, but continue to invest in front-line services. These decisions will be based on our values of fairness and responsibility. We will continue to make the right choices for recovery and for Britain's future.
The shadow Chancellor's judgment has been wrong throughout the financial crisis: wrong on deregulation, wrong on Northern Rock, and wrong on the fiscal stimulus. Now his policies would kill the recovery, cutting support at the worst possible time for the economy and for people in Britain. Winston Churchill once said:
"Success is the ability to go from one failure to another with no loss of enthusiasm."
Judged by that yardstick, the shadow Chancellor is a success. However, I think that the general public will increasingly want to question his judgment over the coming months, and we certainly relish that debate.
That was an extraordinary speech from the Minister, full of quotes from Winston Churchill without quite the style to match them. He provided an incredible example of retro-politics. It is as though he has gone back to the position that the Government held back in the spring, which was to deny the fact that there were any problems with public sector borrowing and the public sector deficit. Indeed, his only mention of the C-word-cuts-was in relation to Conservative policies rather than his own. As was confirmed by the Prime Minister's conference speech, we seem to have gone back in time to when the Government's own figures strongly laid out the fact that cuts would have to be made.
Conservative Members very much welcome this opportunity to debate the economy. Too often in the past 18 months, the Chancellor and his helpers have sought to avoid debate or tried not to be here for the debates held in Opposition time. My right hon. Friend the shadow Leader of the House noted earlier that only four Labour Members spoke in the full Opposition day debate on the economy on Monday. I await with interest how many we will have today.
I think that my hon. Friend is rather harsh. I can understand Labour Members' unwillingness to attend given that when Ministers are asked perfectly straightforward questions they do not give an answer. I asked the Minister a perfectly straightforward question about PAYE, and he avoided answering it. Why should Labour Members turn up? They have got the message and gone elsewhere.
My hon. Friend makes the point precisely. Labour Members are so disheartened by the Government's performance in the spring, during the party conference season and in the debate on Monday that they have voted with their feet.
Let us be clear about one thing: the Government arranged this debate because they think that there is light at the end of the tunnel. We would welcome that, so let us hope they are right, but we should also be absolutely clear that until now the tunnel has been very long and dark indeed.
My hon. Friend makes an interesting point, and I shall discuss unemployment in due course. The Government prepared us poorly for the recession that was coming. The Prime Minister boasted of having abolished boom and bust, but I am afraid that we have now had the biggest bust of the lot.
The third quarter gross domestic product figures, which will come out tomorrow, may well show quarter-on-quarter growth, and we very much hope so, but we should still bear it in mind that Britain will have come out of recession much later than our economic partners and competitors. Germany, France and Japan all showed growth in the second quarter of this year, and the UK remains the only economy for which the OECD is predicting no growth at all this calendar year, although we hope that it is wrong about that.
Unemployment has risen faster here than in Germany, France, Japan and 16 other OECD countries, and Members will be aware of rising unemployment in their constituencies. We have already heard from one Member about that. Members will be especially aware of the appalling level of youth unemployment, which features prominently in the House Library briefing on economic indicators published earlier this month. It is massively higher than in the previous recession. In the early 1990s, 19 per cent. of those aged 16 to 17 were unemployed. Now that figure is 34 per cent. The figures are higher today also for those aged 18 to 24. As we have said in previous debates, the cost of this recession in youth unemployment has been severe, and getting young people into work will be one of the priorities for the next Conservative Government.
I thank the hon. Gentleman for that perfectly reasonable question. I shall come on to describe how we can both put the public finances back in order, or on the right path, and do something to help the economy along.
Regionally, the unemployment picture varies. According to the Library, the biggest percentage rises in unemployment have occurred in the west midlands and the south-west, by 71 and 72 per cent. respectively year on year. Those of us who remember the past two recessions will find it interesting that the west midlands now has the highest rate of unemployment of any nation or region of this country, at 10.5 per cent. The north-east is at 9.5 per cent., and London is third at 9.2 per cent. The latter two regions have shown smaller increases, meaning that both are suffering from the longer-term blight of unemployment during the years of economic growth of the 1990s and this decade-yet another sign that Labour failed to fix the roof when the sun was shining.
To return to the question of when the economy will start to grow again, we have always said that we expect growth in 2009. Nevertheless, even the predicted quarterly growth of 0.1 or 0.2 per cent.-we will know the figure for sure tomorrow-would mean that the economy has contracted by 4.7 per cent. year on year. That is no cause for celebration. Moreover, whether or not there is small quarterly growth tomorrow, the figures are already overshadowed by the appalling Government borrowing numbers that reached us on Tuesday. Britain borrowed £14.8 billion in September, the highest total ever for that month, capping off a third quarter of astonishing profligacy by the Exchequer. That is overspending of almost £500 million a day. That is like each taxpayer in Britain coming home every day and saying that they have just gone and borrowed another £20, without any sense of when the previous day's £20 will ever be repaid, let alone the interest on the previous borrowing.
Government borrowing rose to £77.3 billion in the first six months of this financial year, more than double the already high level of debt racked up in the same period the year before. Over the 12 months to September, net borrowing was a massive £128 billion, up from an already high £47 billion in the year to September 2008. The public finances have been whacked by a double whammy of falling tax receipts and rising Government spending. Tax revenues have fallen 10 per cent. to £219 billion from £244 billion in the past six months, while Government spending has risen by an inflation-busting 4.8 per cent. from £266 billion to £279 billion.
Labour Members may claim that those appalling figures are not relevant to the question of economic recovery. I believe the Minister was saying that the deficit was somehow an entirely separate matter from whether Britain will have a proper economic recovery, but the two are very much linked, as I shall explain in a moment.
How can we secure a sustainable recovery? As we have said repeatedly this year, there are three essential aspects of any recovery: fiscal responsibility, monetary activism and supply-side reform. First, on fiscal responsibility, we need urgently to get a grip on our public finances. That much is obvious, except to the Prime Minister and Labour Front Benchers. That is vital in its own right, but it is also important when considering how to keep interest rates down, which will be a crucial part of our economic recovery. Huge Government borrowing will eventually push up interest rates, and the most recent figures that I have seen for the quantitative easing programme suggest that far more gilts and other fixed-income securities have been bought back than issued so far this year. Once QE has been wound up, as it must be in due course, we will need to keep a careful eye on the gilt market and other markets in which the UK might find investors for Government debt.
Our deficit is the worst of any major country. The Government sometimes say that we do not need to worry, as Government debt in the UK as a percentage of GDP at 59 per cent. and rising is still below that of Japan at 188 per cent., Italy at 116 per cent., Germany at 78 per cent. and France at 77 per cent., and only marginally above the rate of the United States at 54 per cent.
I am not saying that, I am saying that QE will have to come to an end when the timing is right. Some of the tactical and practical details of QE are best left to the Bank of England.
To return to the deficit as a percentage of overall GDP, the crucial point is that if we divide the percentages that I mentioned by each country's domestic savings ratio, we find that we are actually in a far worse position than other countries, and possibly even than Japan. All that is before we consider any of the off-balance-sheet stuff. For some time we have had the problem that the UK gilt market is greatly exposed to weak domestic savings. Unless British households can start saving in a way that they have never done before, gilt issuance will depend on foreign demand.
In the short term, both official and market interest rates are low at the moment, but enormous care is needed. Forward interest rates such as forward rate agreements-in other words, where the market thinks rates are headed-are much higher than short-term rates. In fact, the multiplier of long-term rates, at about eight times the level of short-term rates, may be at a record level. As I have said before from the Dispatch Box, it is worth remembering that a 0.5 per cent. increase in interest rates is far more significant when rates are low than when they are high.
The market has already anticipated substantial rises in interest rates, and even before any such rises have taken effect, the Treasury itself projects that debt interest will rise from £22 billion to £67 billion per annum. Obviously that bill will rise substantially if interest rates rise significantly. That is another reason why fiscal responsibility is so important for our economic recovery. If the Government continue to borrow uncontrollably, not only will the interest rate bill rise substantially and potentially unsustainably but the public sector will crowd the private sector out of the credit market. Members of all parties rightly urge the giving of more credit to small and medium-sized enterprises, but that will be made much harder if we do not get a grip on the public finances, because the state will crowd the private sector out of the market.
The hon. Gentleman mentioned the possibility of increased unemployment. Does he accept that if his party were elected and carried out the cuts to public services that it proposes, that would create unemployment in the public sector?
No, I do not accept that at all. In fact, we have laid out a quite extensive set of proposals to get Britain working again that are perfectly compatible with doing something about the appalling condition of our public finances. We have to recognise that we can do both-we need to do more with less.
Does my hon. Friend agree that businesses not Governments create jobs? The simple fact is that Governments must create the environment in which business can thrive, and not create artificial jobs just to massage the figures.
No, I am going to make a little progress.
Specific measures to help us out of the recession have been outlined by the shadow Chancellor for some months now. A few weeks ago, we published our proposals to do something about Labour's jobs crisis: "Get Britain Working" offers a new, integrated welfare-to-work initiative. This year has seen the highest increase in unemployment on record, with more than 2,000 people a day losing their jobs. We have a comprehensive programme, including tax incentives for micro and small businesses to take on new staff, which we believe will incentivise businesses to create around 60,000 new jobs.
The shadow Chancellor announced two weeks ago a set of proposals to get the public finances in better order. At the same time, we remain committed to real help now in the form of our £50 billion national loan guarantee scheme and funded cuts in corporation tax.
The shadow Chancellor's speech to the Conservative party conference laid out savings of the order, I think, of £7 billion. In the context of the debt figures that the hon. Gentleman has been giving, that is a pinprick. We hear all this talk about fiscal responsibility. Will he lay out for us today where that fiscal responsibility will impact?
I thank the hon. Gentleman for that, but it was not as good as his last question. He is being a bit churlish, because the Government have failed to outline more than a tiny amount of savings that might be made in public finances. The shadow Chancellor-
If the hon. Gentleman will let me speak, the shadow Chancellor laid out pretty clearly a menu of different things that a new Conservative Government will introduce. He did not at any point say that it was an exclusive list, but it was intended to give a direction of travel and to show the rough, overall approach that a Conservative Government would take. It is too early to lay out one's plans in full, not least because we do not know what appalling inheritance we are likely to have. That is partly a result of the Government's failing to face up to the simple facts of the budget deficit.
As I said, we have also published longer-term proposals for the economy, entitled "Reconstruction: Plan for a Strong Economy". When it comes to supply-side reform, no single policy can achieve everything, but we have begun to set out a programme of reform that I believe will be no less radical than the one that restored the UK's economic competitiveness in the 1980s and in the 1990s.
We need to save and invest more for the longer term, and achieve a model that is both greener and more sustainable. Most of all, we need to send a powerful signal that Britain is still open for business. With the right combination of monetary activism, fiscal responsibility and supply-side reform, we can rebuild confidence in the British economy and take full advantage of recovery.
That is the Conservative strategy for the recovery. It is the only sustainable route from austerity to prosperity. The other choice-the Government's choice-is a recovery built on yet more debt and yet more Government spending, which is just like an economic boom built on debt. It is living on borrowed time; a course which, in the name of patriotic duty, must be rejected.
Those of us who were working or in business during the recessions in the '70s, '80s and '90s will remember not only the immense damage that was done to our businesses and the time it took to recover and get back to growth, but the social evils that followed from the unemployment caused at those times. Therefore, to me, securing economic recovery is of the first importance, not simply so that businesses can get back to business, but so that the social evils that follow from unemployment and other effects of the recession can be minimised and mitigated.
In the short time available to me in the debate, I shall look at three matters. First, as has already been discussed, a precursor to any attempt at securing a recovery is the restoration of financial stability: creating a banking system that is effective and fair, with the minimum of systemic risk. The second issue is restoring growth in the economy, which is about the financial stimulus and the right moment to put the brake on; and the third issue is restoring order to the public finances and dealing with the deficit.
As is often the case, my party is represented by quality rather than quantity, which I might say.
To return to financial stability and banking, the recession is a direct result of a financial crisis. The Government were absolutely right to launch a rescue. That is not to say that they are not culpable for the reasons we arrived in that position-that is not today's debate-but they were right to restore stability in the financial system. The real test now is whether that simply leads back to business as usual, and after being rescued the banks go back to big bonuses and ever more innovative instruments, and we start the whole merry-go-round again, or whether we come out of this with a refreshed banking system that is more responsive to the needs of commerce and industry.
I have a strong belief, which I stated at greater length in Monday's debate, that one impact of what happened in the banking system was the use of the resource of capital in unproductive speculation rather than investment in either equity or debt in commerce and industry. I would like that to change under a rejuvenated banking system.
I was interested to hear the comments made by the Governor of the Bank of England in Edinburgh, because they happened to mirror what I have felt for some time. We need a return to a narrower form of banking and to segregate banks whose principal role is the provision of prudent lending for commercial purposes from those whose primary role is to take appropriate risk in investment. My argument is not about utility versus casino, but about the two separate cultures that are required in such institutions. If they are mixed together, one simply gets the worst of all worlds.
Is not the real problem with the Governor's proposal the same as that highlighted by the Opposition-namely, that there is no international agreement on a return to Glass-Steagall or something approximating it? Without such international agreement, it will be impossible for the UK to go ahead.
The hon. Gentleman, who is my colleague on the Treasury Committee, tempts me into a debate for which I do not have time. Suffice it to say that I believe it possible to construct institutions in this country that can compete very effectively internationally. I think Glass-Steagall is old language. "Narrow bank" is also difficult language, but such banks would have a separation of functions and would be more commercially viable. I would start-I encourage the Treasury to think about this-by taking Bank of Scotland out of the Lloyds group and putting competition into Scotland by making it independent. I suspect that Europe may well ask the Treasury to do that anyway.
On my second point-restoring growth-the Government have given us a blizzard of schemes throughout the recession, ranging from the rank failures of the automotive assistance scheme and the credit insurance scheme, through to the enterprise finance guarantee scheme, which is muddling along, and up to some quite good schemes such as scrappage. However, the characteristics of the schemes have been headlines and public relations, with money not effectively getting out to the companies that need it.
I reiterate what I said on Monday: the single biggest factor in rejuvenating the economy-the one thing that businesses in my constituency have cited as a real help to them-is the devaluation of the currency and the fact that we are now that much more competitive in our exports. That is of course nothing to do with the Government and carries its own risks in the future. We have seen the first minuscule shoots of hope appearing, but there is a real danger of a double dip. I remember the recession in the early 1980s, when the brakes went back on in 1981. That was too soon, and we went back into recession. It would therefore be wrong to end the fiscal stimulus too early. There is a balance of risk, but there is a larger risk in ending the financial stimulus too early than in ending it too late.
The deficit problem is worse than it was in the 1940s, when we came out of the second world war. The deficit then was larger, but it was mostly dealt with by being inflated away, and that is not an option that is open to us this time. It is clear that cuts, and quite large cuts, are needed in public spending, but there is a difference between cuts in public spending that have a direct impact on front-line services and cuts in expenditure planned for the future, such as ID cards-an expenditure that we do not need to make. My hon. Friends have suggested that the Trident programme is another area for cuts.
The hon. Gentleman makes the point that I am coming to in a moment.
We will be living beyond our means, and cuts in public expenditure are inevitable. We need a grown-up debate to decide where they should fall. Increases in taxation will almost certainly also be necessary.
The really important thing is to get the recovery going to improve the employment situation. We need employment that comes from sustainable jobs, and such jobs will be grown by business, not created by the Government. The Government's job is to create the conditions under which business can flourish, but it will be business that actually creates the jobs. As we move to recovery, we need to put in place the mechanisms to assist businesses to grow, and I outlined some of those in the debate on Monday. The creation of mechanisms by which small businesses in particular can obtain access to affordable finance and capital rank at the very top of what is required. The Government have a track record of ineffective schemes for business. Businesses, especially SMEs, want a properly functioning, fair and well-regulated banking system. We would create the fertile conditions that would enable British business to lead us into a secure recovery.
I remind the House that I have business interests in manufacturing and investment management, but I am obviously not speaking on their behalf today.
In the debate on Monday, I said that we needed to make the banks more competitive and change banking regulation at the bottom of the cycle, which is where we are now. Unless we make the banks work, we will not have a sustainable recovery. I drew attention to the grotesque distortion in the economy, in that we have very easy money at very low rates of interest for the public sector, created by quantitative easing, but a dreadful shortage of money, and high interest rates for those who can get money for the private sector. That is why we will not have a vigorous and sustained recovery such as those in China and some other big economies around the world. I hope that the Minister will bear that in mind and that the Government will do something about it, because we all want to see more jobs, more prosperity and a quicker return to the levels of economic activity of a couple of years ago. We will not get that unless we fix the banks.
There is another huge imbalance in the British economy that has to be adjusted in the years ahead if we are to have a return to prosperity and sustainable growth. The big imbalance that the Government's policies have allowed to occur is that we are borrowing too much, consuming too much and importing too much, but saving too little, investing too little, making too little and exporting too little.
Let us start by looking at the parlous plight of manufacturing. The sector has been squeezed and squeezed under this Government. They came to power with the best of intentions. They said that they wished to reverse the long-term trend downwards of manufacturing as a proportion of our economy. They said that they wished to reverse the balance of payments difficulties that had been experienced from time to time under Governments of both political persuasions in the previous 30 years. The Prime Minister, as an Opposition spokesman, used to specialise in going through the balance of payments figures every month and drawing attention to what he thought were unsatisfactory levels of excess imports over exports, especially in manufacturing. Well, the deficits that we were then running were tiny in comparison with the monumental deficits that we are now seeing month after month. We cannot go on like this. It is most important that activity is shifted away from consuming, importing and spending into producing, making and selling abroad.
The Government have not been good for manufacturing, which is now only 13 per cent. of our total economy. However, I am pleased to say that we have some fine companies and good performance in certain sectors. Two sectors in which British performance has been good are pharmaceuticals and aerospace and defence engineering. Those two sectors have some characteristics in common: they employ a lot of talented people, they spend a lot on research and development, they have high returns on sales in normal times, and they have a lot of public purchasing, providing them with demand and activity for their factories. NHS purchasing is an important element of the demand for the leading pharmaceutical companies that have come here, expanded here or grown here. We also have a monopoly purchaser of defence hardware in the UK.
One of the things that is most disappointing is how little intelligent purchasing there is in other areas to provide that kind of enthusiastic support-not a free lunch or subsidised purchasing-to sustain more industries on the back of the huge sums that the Government are spending. For example, we have had a substantial train investment programme in recent years, much of it financed by public subsidy. Much of that work has gone abroad. Was it not possible for Ministers to apply competitive purchasing but ensure, as other countries do, that those purchases benefit domestic manufacturers and create opportunities for people to set up and make things here in the UK? Why is it that so many quango chiefs, civil service chiefs and Ministers run around in foreign-manufactured cars? Surely competitive products can be found from the extremely good British factories. Many of them are owned by foreign companies, but that does not matter. The important point is that they employ people in this country and the value is added here. Why are we not able to make more intelligent use of our purchasing?
Does my right hon. Friend accept that apprenticeship schemes are enormously important as a source of training for businesses and to enable young people to enter the work force? Because of the bureaucracy that businesses, especially manufacturing businesses, are under, they are unable to take on vital new apprentices to do the jobs that my right hon. Friend describes so accurately.
I am sure that that is one of the constraints. Businesses always need more skilled people at all levels. A better system for apprenticeships might well help. One of the additional constraints at the moment is that businesses cannot raise money. They cannot borrow cash or get working capital out of the banks because we have a lopsided banking system that is channelling huge sums of money into the public sector, but not into the private sector. They cannot borrow the money from the commercial banks because of the mistaken policy, and they are not getting the money in turnover because they are not getting the benefit of the orders. Every time that public sector cash is spent on an import, it is not doing the good that it could do if it was spent on a domestically produced product, because it means that we are still keeping people on the dole, untrained and unable to produce that good.
The right hon. Gentleman's exposition of what he thinks should be done is interesting, but when he was a member of the previous Government, we had similar problems with apprenticeships. During the last recession, under the previous Government-I worked for Rolls-Royce at the time, so I know a little about this-the first casualty was always the apprenticeships. We talk about companies such as Rolls-Royce, and aid for them. The previous Government talked about lift-off aid-or something like that-but this Government brought in tax credits for companies such as Rolls-Royce and so helped them with research and development.
I am sure that we could improve on the apprenticeship schemes in place under the Conservatives, but the lamentable truth is that they are not working now. We have had 12 years of this Government. We have less manufacturing as a proportion of our economy. We have a worse situation for manufacturing orders than I have ever seen in my life, affecting most manufacturing business that I talk to. I was at a Royal Society event last night, meeting a lot of manufacturers and talking from the platform. They all reported dire situations for orders a few months ago. I am pleased to say that there is some evidence that the situation is beginning to lift off the very bottom, but it is still way behind what it reached at peak levels.
I do not want to get into a ding-dong with the right hon. Gentleman, but there were very few apprenticeships under his Government, particularly in the 1980s. All the apprenticeships budgets were cut. I notice that he did not really go into the issue of tax credits for companies such as Rolls-Royce. I can remember taking a delegation to meet one of his Ministers in the 1980s. I also remember the works convener saying, "You're going to have a lot of very expensive shelf-stackers because of how you are trying to assist companies such as Rolls-Royce." That is why we brought in tax credits.
I want to live in the present and look forward to the future, not wallow in the past, but if we are talking about the past, I must say that there was a lot more manufacturing then than there is today. Many factories have closed on this Government's watch. There has been a massive jobs haemorrhage out of the manufacturing sector.
The primary reason for that haemorrhaging, not just over the past 11 or 12 years, but over a much longer period, was an over-inflated exchange rate for the pound. We now have a more competitive pound. We need to sustain that competitive element in the value of the pound. How does the right hon. Gentleman, as a liberal laissez-faire economist-if I may call him that-believe that we can achieve that?
That is the nearest to flattery that I am going to get from Labour Members. I was about to say that the sharp devaluation of the pound last year and the little wobble in the pound in recent weeks are positive for those who wish to export, but negative in many other ways. They are causing much more price inflation in this country than anywhere else in the free world and have, of course, cut our living standards massively, because if we import a third of all that we need, and our currency falls in value by one fifth, we can see immediately that we will have lost an awful lot of purchasing power and will all be much worse off.
We need, however, to find the silver lining in this rather nasty cloud, and Mr. Love has rightly pointed to one: it is now possible to compete much more aggressively on price, as well as on quality and product, off a British manufacturing base, because of the devaluation. It would be a tragedy if we threw that away.
So far, the export recovery is not nearly as vigorous as one might hope for, or expect, given that we had a devaluation of more than one fifth about a year ago. We are not seeing the follow-up that we would like to see. Why is that? I think that it is because of the points that I am making: manufacturers are not getting the orders or the financial support from the banks because the system is so skewed and asymmetrical.
Many businesses and manufacturers, because they cannot get the banking cash and are having to conserve and generate their own, are saying, "I'm not going to get many orders anyway, so I'm going to keep my prices up. I'm going to take advantage of the falling pound and will not go for volume, because I am not sure I'm going to get it and I certainly can't get the working capital."
In addition to that, does my right hon. Friend agree that the problem is with the red tape that businesses in this country suffer from as a result of this Government focusing not on jobs and prosperity, but on bureaucracy?
I was going to come to that; it is on my list of things that need fixing. We need access to working capital and more domestic orders to provide the volume that lowers the unit cost. We also need to keep control over the tax and regulatory burdens because most international businesses now look globally and do so on the numbers. They look at the costs, the cash flows and how easy it is to do business in each location. They do not have a romantic attachment to one country. I wish that they did-I wish that they shared my romantic attachment to my country and wanted to see success here-but they do not. They will look at the numbers and put the plant, the new jobs and the new projects in the place where they think that the numbers make sense. If the regulatory burden is too high, they will score that against the particular country-and regulation is a cost.
Labour Members like to portray me as the man who would have no regulation at all, but that is a grotesque distortion. I have strongly urged stronger regulation of certain things in banking, and of course we need strong safety regulations in manufacturing. However, the overall balance is wrong. There is too much regulation overall. It means that there is too much cost and that we have fewer jobs as a direct result.
Some voices on the Labour Benches have taken up an idea that I have launched into the public debate in recent years, which is that we should have regulatory budgets here. They have been adopted in Holland very successfully. The Dutch budgets do not go as far as I would like, because they just concentrate on the Government and regulation costs, whereas I also want them to include the impact cost on the businesses being targeted. However, the model is there and I urge the Government to do it, even at this late stage in this Parliament, because the sooner the signal is sent out that we want to start to curb and limit regulatory costs on businesses, the better it will be for generating new jobs here.
The first impact of a competitive exchange rate will be on import substitution. Then we would hope that, as the economies of Europe, in particular, but also the United States, recover, we will be able to export. My concern-this was the question I asked the right hon. Gentleman originally-is this: when our economy begins to recover, it is likely that the exchange rate will appreciate, losing the advantage that we have had, so how do we prevent that from happening?
Given the amount being printed and the amount that the Government want to borrow, we are in for a weak currency, unfortunately. I do not think that that is the worry; the worry is whether we get the response. That is the issue that I am trying to address. That was a good way for the hon. Gentleman to influence my speech. The answer is that we will not get enough of a response for import substitution or direct export unless we get these things right.
People have to have access to capital and land with planning permission, and to the right kind of factory space, with the right kind of floors, loadings and eaves heights, so that they can do modern manufacturing in a good environment. They need access to the skilled people, young and old, and they need very high-quality engineers and other such people to go in, take the risks and develop the products.
The world's manufacturers know how to drive a process for quality. We can make expensive items out of a high-cost labour base, and I am not one who wants to drive down wages. I want staff on high wages who are well rewarded and motivated because they are skilled. We do not need many of them, but we need to use them intelligently in successful manufacturing. In good manufacturing, labour costs might be only 10 or 15 per cent. of total selling price, so it is not the main driver. It is not impossible to run really good manufacturing out of a UK, US or German base, as we can see in many examples.
I am conscious that others wish to join in this very short debate. My conclusions are that we need to give every sensible incentive so that we can have this massive shift out of consuming and borrowing and into producing and making to tackle the balance of payments deficit and the very large deficits across the economy. We have the groundwork for that, with the large devaluation brought about by an incredibly sloppy money policy and by printing so many pounds. We must not throw that away or waste it.
The early evidence is that the reaction is not strong enough. That implies that the Government need to look at the availability of people, of buildings and land, of planning permission and of orders. If, for example, the Government had an energy policy that they could announce and activate, that would trigger a large number of orders for all kinds of things in the energy sector, but we have had dither and delay. If we had a proper transport policy that was more clearly defined, that could also trigger the sort of orders that we need.
I urge the Government not to rest on their lack of laurels or think that because they are printing so much money, the economy will suddenly come miraculously right. Printing money without things happening on the ground just causes inflation and far worse mess and distress. If we are to make anything out of the mess, we need now to put in place policies that create orders and create a sensible level of regulation and low taxation, so that people will want and be able to make things here and so that we can get people back into jobs.
I am rather bemused by this debate. It needs to be understood that the subjects for topical debates on Thursdays are chosen by the Leader of the House-that is, by the Government. On Monday, my right hon. Friend Mr. Redwood and I spoke in a full-day debate on employment and industry. Tragically, by halfway through that debate there were only three Labour Members in the Chamber. They included the Minister, the Parliamentary Private Secretary and the Whip on duty-in other words, no Labour Back Bencher was present for the debate. However, in the course a full day's debate, at least four Labour MPs managed to speak. Today, unless something dramatic happens between now and the conclusion of this debate, not a single Labour MP will have come into the Chamber to support the Minister. I find that extraordinary.
I suspect that we know why this debate has been held today: because between now and the first Thursday in May next year, the Government will be desperate to try to create some kind of litany to give the impression that a recovery is taking place. However, one would have thought that a much more appropriate subject for a topical debate today would be the future of Royal Mail and what is happening in the postal dispute.
It was only a passing reference because I have had only a sentence on that subject. However, on securing the recovery, there are many businesses in my constituency that will not have a recovery if they cannot get their goods and invoices out through the post.
Reading yesterday's Hansard, I found it rather curious that the Prime Minister said about the postal dispute that he would
Surely trying to ensure that everyone goes to ACAS without precondition to try to resolve such disputes must always be the right thing to do. I am not entirely sure what the Prime Minister meant by the rather curious line that he took.
I am also surprised that the Government have not chosen to have a debate today on the dispute between the Chancellor and the Governor of the Bank of England. How we can have an economic recovery when the Chancellor and the Governor of the Bank of England are at loggerheads?
Behind this debate is an assumption that a recovery is beginning. However, the Library has placed in the Vote Office the economic indicators for October 2009, a publication that makes worthwhile reading because it contains the Library's figures. They are not partisan figures from a political party or independent commentator, but the Library's figures. The economic indicators for October show that full-time employment has fallen by almost 700,000 over the year. There have never been so few people under 25 in employment in recent times. The UK economy has now been in recession since the third quarter of 2008. Also, the economy contracted in the second quarter of this year, compared to the first quarter, which was the fifth successive quarter of negative growth. However, the research paper shows that, although we are still in negative growth, France, Germany and Japan have emerged from recession.
The paper also shows that manufacturing output decreased by 12.4 per cent. in the second quarter of this year, compared with the same quarter in 2008. As my right hon. Friend the Member for Wokingham mentioned, manufacturing industry has been getting into a desperate plight year on year. Total business investment decreased by 10.2 per cent. in the second quarter of 2009, compared with the previous quarter, and was 21.8 per cent. lower than in the second quarter of 2008. Productivity across the whole economy, measured by output per head, is estimated to have fallen in 2008, as compared with growth in 2007. In the three months to July 2009, total employment was 600,000 lower than a year earlier.
May I suggest a little more humility from a member of a Government who oversaw two-I repeat, two-internally generated recessions? We all recognise the current difficulties in the economy, but does the hon. Gentleman accept that action by this Government at least had the consequence of not allowing a recession to develop into a depression?
I thank the hon. Gentleman for his intervention because it shows the Labour party's two desperate alibis. When Labour Members get desperate, they say, "Well, you know, it was even worse when there was a Conservative Government," which is a bit like saying to the Liberals, "Things were desperate when Campbell-Bannerman was Prime Minister." That approach just does not wash after 12 years in government. The second alibi is, "If we hadn't intervened, it would've been even worse." The hon. Gentleman has to acknowledge that, as I will demonstrate in a second, the deficit-the black hole that the Government have got us into-is monumental. However, let me first conclude my point about unemployment.
The change in the unemployment rate has hit everyone. A comparison of the period from May to July in 2009 with the same period a year earlier gives an indication of just how desperate the increase in unemployment in this country has become. In the south-west of England, the seasonally adjusted increase in unemployment from the same period in the previous year was 72 per cent. In the west midlands the figure was 71 per cent., and even in the south-east it was 36 per cent.
All that leads us to the fact that the Government have got our public finances into a complete mess. The Library reports that the Treasury forecasts that borrowing will be £175 billion in 2009-10, which is 12.4 per cent. of gross domestic product. Debt is forecast to rise to £1.4 trillion by 2013-14, which is 76.2 per cent. of GDP, excluding the impact of measures to support the banks. Those are truly horrifying statistics and they show why we can have no recovery until we have some fiscal responsibility.
That is why my hon. Friend the shadow Chancellor of the Exchequer is right to make it clear that the Government have borrowed too much and that £1 in every £4 that the state spends now goes straight on the national debt. More of our taxes go on paying the interest on that debt than go on educating our children or ensuring that our armed forces are properly equipped. It is tragic to see the training of the Territorial Army being cut for the next six months, as many of its young men and women are now serving on the front line. I wonder just how many days' debt interest would be needed to ensure that that commitment could otherwise be met-it would probably be only one or two.
There is no recovery for the Government to secure. They really need to address how to get the public finances back into kilter and where to make the savings in public spending to ensure that that happens. This is clearly an issue that Ministers are unwilling to address. The shadow Chancellor addressed it in Manchester, but the Government are unwilling to do so. They are simply hoping that they can get from now to the first Thursday in May next year without addressing it, and hoping upon hope that if they keep on talking about some mythical recovery, the electors will be lulled into thinking that life can go on just as it is now. The reality is that responsible, serious measures will have to be taken by whoever is elected to Government at the next general election, and that only we are showing the responsibility of measuring up to that task.
I shall keep my comments brief, as I should like to hear the Minister respond to the perfectly straightforward points that have been made in the debate. As it is due to finish at 1.46 pm, I should like to give him five or 10 minutes in which to do that.
We covered a lot of these matters in our debate on Monday, in which the Secretary of State for Work and Pension conceded, in response to my intervention, that she had not listened to the debate in full. There was, however, a tacit agreement that she would respond directly to the points made by Opposition Members. I hope that the Minister will give me an assurance today that the genuine points made on a constituency basis by my Conservative colleagues will be addressed directly, by mail-as soon as we can get letters through the post, that is-or via the Letterboard in the next couple of days. That will help us to deal with the problems that we have today, as well as those that we had on Monday, and those that we will have in future.
I want to put a couple of points to the Minister. First, will the Government commit to applying the small business rate relief automatically to firms across the country? This relief is a significant help to companies struggling through the recession and can save small businesses more than £1,000 a year. That might not sound like a lot, but small businesses and enterprises have been the backbone of the economic success of this country for many years, and unless we build from the grass roots up, we will not have the success or the recovery that this debate purports to be about.
Many businesses are not claiming the relief, either because they are not aware that they might be eligible, or because the procedure for claiming it is too burdensome. That just adds another layer of red tape to a small business or enterprise that is trying to do its bit for the recovery. Does the Minister agree that applying rate relief automatically would overcome this problem? Small businesses and enterprises have been an integral part of our success in the past, and we must recognise that for the future.
Recent figures show a discrepancy between the value of loans offered to businesses by banks and the value of loans actually drawn down by them. Does the Minister agree that the two should not be confused? Surely the recovery of the economy can be secured only if Government schemes-many of which were described in our debate earlier this week-are working effectively. If they are not, there is no point in putting out a press release suggesting that they are going to happen. That merely pays lip service to a problem without actually dealing with it.
Mention has been made of apprenticeships. Does the hon. Gentleman fear, as I do, that the recessions of the 1980s and 1990s, and now this recession, might well have pushed a critical mass of employees in manufacturing-and in engineering, in particular-down to a level at which we are no longer able to regenerate and reskill ourselves? Does he agree that it will take direct Government involvement to re-establish our manufacturing base?
At the moment, 1 million 16 to 24-year-olds are out of work. As I said earlier, apprenticeship schemes are an enormously important way of training people to get back into the work force. However, the red tape and bureaucracy that we are now suffering from are stifling companies and preventing them from dealing with their problems. The hon. Gentleman must accept that there are now 2 million fewer jobs in manufacturing in this country. That has happened over the past 12 years, and it is not good news. There has not been the necessary investment by this Government in the backbone of British industry and the manufacturing sector that we rely on now and will rely on in the future.
Thetford, in my constituency, is a great manufacturing and engineering base. The businesses there want to work and to make a contribution, but every time they take a step forward, they have to take two steps back because of the way the Government treat them over employment, bureaucracy and the regulations with which they have to comply in order to get their products into the marketplace. Of course that adds a burden of cost to those businesses and makes them uncompetitive. The Government have not walked up to that problem, and I do not believe that they will do so. We need a change of Government-we need a Government who understand the dynamics of business and how that affects the economy.
If we are going to get out of this recession, businesses need to know that the Government are listening. I do not believe that they are. Businesses are being stifled. I believe that there is now adequate time for the Minister to address these problems. At the end of the day, the people of this nation need to know that they are being listened to. Alas, that did not happen in Monday's debate. The Minister is an honourable and decent man, and I hope that he will address these issues today. If he cannot answer all our questions, because there are not enough officials in the Box to give him the necessary responses, will he, having read Hansard at the end of the day, have the courtesy to come back to us on every point that we have made? These are serious issues that need to be dealt with, constituency by constituency, as a matter of urgency now, and not by another topical debate in a few weeks' time.
With the leave of the House, I should like briefly to respond to the debate.
We have heard the usual contributions from the two Opposition Front Benchers, as well as speeches by Mr. Redwood and the hon. Members for Banbury (Tony Baldry) and for South-West Norfolk (Christopher Fraser). I did not hear any specific references to his constituency in the speech of the hon. Member for South-West Norfolk, but I will say something in a moment about the automation of small business rate relief.
The topical debate today was chosen by the Leader of the House, presumably in consultation with others on the Government Front Bench. Can the Minister tell us why not a single Labour Member has spoken in support of the debate? Does the recovery simply not matter to his colleagues, or have they just abandoned him to be a one-man show?
I just wish that, rather than engaging in juvenile debating points, the Opposition would engage with the real issues. They cannot deny the fact that they called it wrong when it came to bailing out the banks and to the fiscal stimulus, or that, at the moment, they are calling it wrong when it comes to the recovery. People need to understand that the Tories' policies, as they are at the moment, would kill our recovery in this country. They have a dangerous set of policies, and the public need to understand that.
Let me respond first to the point about small business rate relief, which was the subject of quite a lot of debate some months ago. There is now a greater understanding among small business organisations about what is in place at the moment. Steps have been taken to make it easier for small businesses to claim rate relief. The systems in Wales and Scotland are not necessarily automated in the way that some of us are led to believe. It is very easy indeed for businesses to get this relief-as I understand it, it is automatically rolled over once they qualify for it. The evidence I have seen suggests that the vast majority of businesses do actually claim the small business rate relief. If I can provide any further information on that issue, I would be happy to do so, as I agree with those who say that small businesses are an important part of the UK economy. It is right that we, the Government, are seen to support them.
I do not have time to go into the detail of all the things that the Government have done over the last 12 years to support small businesses and, indeed, manufacturing, but I would like to have a go at describing at least some of them. The first thing I have to say, however, is that those of us who have a memory-those who actually remember the previous Government-find it very difficult to stomach hearing Conservative Members talk about the importance of manufacturing.
I accept what the hon. Member for Banbury said-that we now live in different times-so if the Conservative party has really changed its spots when it comes to wanting to support manufacturing and apprenticeships, I, for one, welcome that. The more we can reach a consensus around the key long-term decisions that need to be taken in the strategic interest of the UK, the better it will be for all of us.
I remind the House that we had to rescue apprenticeships; the Conservatives said little or nothing about manufacturing throughout all the period they were in power. People might criticise us for not doing enough to support manufacturing, but we have done a darn sight more than any previous Government.
Will the Minister please look at the critical mass of skilled engineers now available to us and working in the manufacturing industries to see whether we can regenerate ourselves? However, will he please use Government time and Government money to look at that scheme and perhaps invest in that idea?
My hon. Friend is absolutely right to point out that this country needs skilled engineers. There are continuing issues about skills at all levels of the skill range. One of the few points made by the right hon. Member for Wokingham with which I agree was that we need to address skills issues. I agree that we need the right skills and that access to capital is a fundamental issue, as are planning and land issues. These are all important if we are to get it right and ensure that the UK is competitive in the future.
When it comes to access to capital, I hope that the right hon. Gentleman will welcome the lending commitments that the Government have negotiated with the RBS and Lloyds Banking Group as part of the recapitalisation programme. I hope he will welcome the Government's enterprise finance guarantee and the work we have done with the European Investment Bank to ensure that additional loans are available to small and medium-sized businesses in this country. All those are important steps.
If the hon. Gentleman will allow me, I would like to respond in the two minutes remaining to some of the other points that he and others raised in the debate.
Let me update the House on the deferral of business taxes, which, as I said in my opening remarks, is benefiting 150,000 businesses. The latest figures say that £3.8 billion in business taxes has been deferred. To provide clarification for Members who asked about it, this includes corporation tax, VAT and PAYE.
It is also important to recognise that the UK has responded, as have other countries, by introducing a fiscal stimulus. We have had previous debates on whether the VAT cut is working, and I find it surprising that some of the same people who criticised us and said that the VAT cut has not made a difference are now making representations asking us to extend it because they really want it.
People need to accept the fact that government is about making decisions on the basis of good political judgment. Our judgment was that it was right to recapitalise the banks and right to provide a fiscal stimulus-and we believe that it is right now to continue to ensure that we secure the recovery, without undertaking the huge cuts in expenditure that the Conservative party is now advocating. The Conservatives were wrong on the recession and they are wrong now about the recovery. They have a very dangerous set of policies indeed, so I hope the general public will wake up to the fact that they need to exercise their judgment very carefully over the next few months.
Question put and agreed to.
That this House has considered the matter of securing economic recovery.