The last Labour Prime Minister will be remembered in the economic history books as the man who in 2008, alongside President Obama, averted a depression of a 1930s quantum by invoking a fiscal stimulus. The current Prime Minister may well be remembered as the Prime Minister who prematurely used his veto to stop Europe putting together a plan to promote economic stability and growth, and avert a crisis in the euro and a national sovereign debt crisis across Europe. We all know that we did not want the financial transaction tax, but that could have been vetoed at a later date.
We have a deficit, as we all know, two thirds of which was the responsibility of the international financial markets and the banks. The remaining third was due to the excess investment over earnings of the Labour Government. There should be no apology for that, because that investment was in lower VAT, the car scrappage scheme and so on, which stimulated growth on the back of what could have been the worst depression since the ’30s, and reduced the deficit forecasts by some £22 billion. With the change of Government there was a change of focus, from growth to cuts. Growth has now stopped. The immediate judgment of the new Chancellor was to announce 500,000 job cuts and, for instance, 7% cuts in local government for four years. That meant that everyone in local government thought they were bound to lose their jobs and therefore stopped spending. The reduction in consumption and spending has meant a depression in growth. Now the deficit forecasts are not going down, but going up. They went up to £46 billion, and now they are £158 billion.
As for business and inward investment, the Chinese are coming to Cardiff tomorrow. They are concerned about a country whose growth is flatlining, which has strikes and riots provoked by the Government parties’ policies, where crime is rising for the first time and waiting lists are going up—again, through cuts—and where the educational standards of those going to university are beginning to fall off. In other words, this dualist idea—that if we get rid of the public sector, the private sector will be all right—is completely fallacious. The Labour party has a five-point plan. For example, the VAT change would stimulate £46 million in the local economy in Swansea, helping to create new jobs, while lower national insurance rates would also be helpful in stimulating building businesses.
I should mention that the interest rates that we now enjoy are thanks to the Labour Government making the Bank of England independent. We remember the last time the Tories were in, when interest rates hovered between 10% and 15%, so I will take no lessons from the Conservatives about how the austerity plans and unemployment are the reason for low interest rates. In fact, since the summer, interbank borrowing rates—that is, wholesale rates—have increased by 1%, so small businesses are suffering.
Finally, there is a glimmer of hope for the future in Swansea and Wales, thanks to the standard and quality of research and development in both our universities, which are working with UK Trade & Investment to network into international markets. However, with an enterprise zone in Bristol, parked on the gateway to Wales, we are not helped, frankly, by the continuation of rising tolls on the Severn bridge, especially when we see them being cut on the Humber. That is basically leading to disinvestment in many investment projects, whether in St Athan or the Severn barrage. There is hope, but we need a refocus on growth, instead of an endless focus on cuts. Anyone who runs a business that is making a loss needs to focus on revenue, not just cutting everything. The Government need to think again and remember the success of the previous Labour Government.