Amendment of the Law

Part of the debate – in the House of Commons at 5:45 pm on 30 March 2010.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury) 5:45, 30 March 2010

I too came along this afternoon under the impression that this was to be an economic debate. I am pleased to see that the first detachment of cavalry from the Treasury has arrived, and maybe there are others to come.

As this is the end of the Budget debate, many of the arguments have been aired already, either in the Chamber or outside. One useful aspect of coming in at the end of the debate is that we have a chance to compare the arguments that we are having here with what is happening in the real world in our constituencies, as I tried to do over the weekend.

Essentially, our debate has centred on when cuts will be made, which the shadow Business Secretary characterised a few moments ago. Should we make them now? The Government view, which I broadly support, is that the economy is rather too fragile for us to embark on cuts at this stage, whereas the Conservatives tend to argue that the cuts should be made more rapidly. That is the debate that we are having: right or wrong, there are arguments on both sides, but I find it very difficult to reconcile that debate with what is happening on the ground.

When I left Parliament last Thursday, my first port of call was a mass meeting of teachers and lecturers at my local further education college. The problem is that 70 front-line staff have been told they will be sacked over the Easter recess, and they do not understand why. The college is a top-quality, academic establishment for post-16 year olds., and the staff have been told that the Government attach enormous importance to post-16 education. As far as I know, there is no fault with the college, but people have been told that there are going to be cuts. Those cuts are happening now, and people will get their redundancy notices in a few weeks.

I thought that that may be some kind of strange outlier that was not typical, but I went to the local university the following day and it too is grappling with a completely new set of budget numbers that will almost certainly mean very substantial cuts in student numbers and teachers. Then on Monday morning I had an opportunity to go to the National Physical Laboratory, which happens to be in my constituency. It is one of the country's leading science centres, and it is where Greenwich mean time is based.

I spoke to a staff union meeting there, and again it appears that Lord Mandelson's Department has decided that this very productive corner of British science must have cuts. The Government have suggested that it generates £25 of benefit for UK plc for every £1 that it spends, but 40 or 50 members of staff have been given redundancy notices already and others are to follow.

This is what is actually happening, in the real world. We are talking theoretically about making cuts now or later, but the environment in which some sectors of the economy are operating is one in which cuts are being made already. Coming back from that contact with the real world, I had a fresh look at the Budget in a bid to understand what is going on.

When we read the Budget, we think it appears to have absolutely no impact on the economy at all. We are talking about a change in revenue worth about £1.5 billion, or one tenth of 1 per cent. of the economy. The fiscal changes in the Budget therefore have absolutely no effect on the economy at all, but the report published at the end of last week by the Institute for Fiscal Studies showed that 2010-11, the next financial year, will see a very big fiscal contraction of about 2.5 per cent. of GDP. That is because the fiscal stimulus that the Government supplied is being withdrawn, and it is also due to the big cuts in capital spending.

Again, back in the real world, I was reminded of what that actually means. I was invited to one of the big rooms at Twickenham rugby stadium to speak to a group of roofing contractors-500 of them. They had various experiences, and many of them had had a tough time in the recession. They told me that all their business plans are being affected by the fact that the Government are drastically reducing capital spending. This is happening and it is affecting their businesses. That, combined with the severe contraction of credit from the banks, means that many of those companies are finding it extremely difficult to operate. The artificial debate around the Budget has little connection with the real world in which those companies work.