I welcome the opportunity to speak in this debate about growth. As my hon. Friend George Freeman pointed out, if the Government had not taken such prompt action on the deficit, kept our triple A credit rating status and ensured that our interest rates remained low so that our businesses could expand and consumer expenditure could be protected, there would be little point in talking about any form of growth.
I want to speak briefly about our fiscal consolidation. I am pleased that the Government have struck a balance between expenditure reductions and tax increases, with a weighting more towards the former. As my hon. Friend Richard Fuller, who is sporting a splendid haircut, has pointed out, the importance of getting taxation on business down is absolutely key. I welcome the fact that tax will fall from 28% to 24% for larger corporates and to 20% for small businesses. That is important not only for growing our companies here but for attracting inward investment. In the Republic of Ireland, for example, the headline rate is just 12.5% and it has secured inward investment of about 2.5 times the EU average given the size of its economy.
Mr Reed suggested that we on the Government Benches are anti-public sector. We are not, but we do recognise that productivity rates in the private sector are considerably greater than in the public sector. As the public sector slims down and the private sector expands, we can expect growth to come through that route.
Monetary policy and the dangers of quantitative easing formed a major part of the speech of my right hon. Friend Mr Redwood, and I fully subscribe to his concerns. Various questions must be asked about injecting the economy in that way-by printing money, using electronic money to buy gilts, bonds and to some degree commercial paper-and the first of which is whether it works. We can look at the experience in Japan, where interest rates hit 0% in 2000-01 and a lot of quantitative easing was put into the system over the following six years. Although growth occurred, there was consensus among many economists that it was due to the approach of recapitalising the banks and getting them lending rather than to the money that had been put in and the creation of dishonest money in the system. When quantitative easing is being considered, almost by definition the economy is slowing down and there are deflationary and recessionary pressures on it. It is at such a moment that the banks are least likely to start lending the money that is being put into the system.
We need to be very careful about where we are in the cycle with inflation when we talk about quantitative easing. In the past two years, inflation has gone above 5% and down as low as 1.1%. It is now above 3% and, according to the Bank of England, is heading further north. We need to be absolutely certain that some of the temporary effects of low sterling and the costs of energy and oil coming through are not mistaken for a considerable rise in inflation going forward in the longer term. Other issues, such as the level of capacity in the economy and the low wage rate increases of about 2% that we have had recently, are equally important.
My final point on quantitative easing is that it would not be advisable to take away the authority of the Monetary Policy Committee to make such decisions. It should be exactly as it is with interest rate policy: the MPC should have the final say. I know that I differ from my right hon. Friend the Member for Wokingham on that, but I firmly believe it.