Pre-Budget Report

Part of the debate – in the House of Commons at 5:04 pm on 7 January 2010.

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Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury) 5:04, 7 January 2010

I shall return to the Dundee aspect.

A great deal of public money is to be spent on that centre, but I wrote to the Minister or one of his colleagues to suggest that they needed not only to be very careful of unintended consequences, but to ensure that the vast amount of public money being invested in the new centre did not have a detrimental effect on the sector and on employment in the city. I am very well aware of the centre and the potential risks that follow it.

The Chancellor spoke about the need to invest in the digital and other dynamic sectors of the economy, but for those at the coal face of the digital economy there was little but let-down in the PBR. The reason I cite the software and games sector is not just because it is important to Dundee, but because it is an export business; it generates revenue for the UK. In the PBR the Chancellor said that export trade had been hit hard, and boy was he right.

We had a total trade deficit of £37 billion last year, and a colossal £93 billion deficit in the trade in goods-all that, as others have said, at a time when sterling was down massively against the dollar and the euro. As a result, GDP growth was suppressed by about 1.5 per cent., but there was nothing in the PBR specifically to stimulate export activity other than the statement's vain hope that demand from the US and the euro area might pick up.

The Red Book suggested that GDP would be enhanced by about 0.5 per cent.-that there would be a 0.5 per cent. contribution to GDP growth from 2010 onwards. But, given that, on average, the balance of trade deficit suppressed such growth between 2000 and 2007, I hope that that is not Government wishful thinking.

I am conscious that other people want to speak, so I shall make three final brief points. First, the Chancellor said:

"We must continue to support the economy until recovery is established."-[ Hansard, 9 December 2009; Vol. 502, c. 359-60.]

But on Tuesday he said that we are still in recession, yet the cuts have already been announced, so that makes no sense.

Secondly, the Chancellor said:

"To cut support now could wreck the recovery. That is a risk that I am not prepared to take."-[ Hansard, 9 December 2009; Vol. 502, c. 360.]

However, the International Monetary Fund has confirmed that the UK will be the only G7 economy fully to withdraw its fiscal stimulus measures in 2010.

Finally, on the low-carbon economy, the Chancellor said that he was determined to build on strengths today by maintaining what he called the UK's

"leadership in the low-carbon sector".-[ Hansard, 9 December 2009; Vol. 502, c. 364.]

However, we have heard it all before. The 2005 Budget stated:

"The Government is...examining how it might support the development of CCS"- carbon capture and storage. The 2005 pre-Budget report stated:

"Carbon capture and storage protects the environment from carbon emissions by containing them at source."

In the 2006 Budget statement, the Chancellor said that following a joint study with the Norwegian Government, the Government were going to take measures on carbon capture and storage, and the same thing was repeated in the 2006 pre-Budget report and the 2007 Budget statement. We had one such statement after another up until early 2007, and by 23 May BP had pulled out its £500 million investment in Peterhead and taken it to Abu Dhabi because this Government could not make a decision. That shows the systemic problems that we have. There is talk about investing in digital, and then disappointment for those in the sector; talk about not withdrawing the stimulus before the recovery, and then doing precisely that; and talking a good game on the low-carbon economy, and then failing to deliver. That has been the hallmark of this Government over many years.

At its heart-this is a tragedy, because there is a big job of work to be done to tackle the problems in the economy-the PBR was an invented political dividing line whereby the Government pretended that one party was not cutting and that another one or two parties might do so. The truth is that whether it is a Labour cut, a Liberal cut or a Tory cut, making it too early and too quickly will damage everybody's chances of recovery.