Like everybody in the House, I welcome the Chancellor’s statement, and I think it is worth considering that we have a twofold economic problem here, which we will have to deal with over the next few months. The first difficulty is one of demand, as there is a chronic demand shortage. The Government have done their best to stoke and increase demand over the summer and autumn, and I think those measures will be successful, but there are other fundamental structural problems with the economy that this crisis has shown us.
One is accelerated technological change on the high street in retail, and in automation in the industrial sector. The second is skills. We talk about building infrastructure, building back better and a green recovery. None of those will matter—all the money from the Government will not deal with the problem—if we do not have people with the right skills who can do the work.
The third structural problem we have is within our financial sector, with companies not having sufficient equity, or rather having too much debt, so that when the crisis is behind us they will not be able to grow sufficiently fast. Again, that is a structural problem with the economy.
There are three things that the Government and the House should consider over the coming months. First, while the crisis is here, we should maintain a loose fiscal policy and loose monetary policy. That is very important, because there needs to be sufficient demand growth over a sustained period of time for businesses to expand with confidence and not think that it will be pulled away in a couple of months’ time. For them to expand with confidence, there needs to be sufficiently loose monetary and fiscal policy. If they can do that, spending will grow robustly enough for there to be demand to create private sector jobs without subsidy from the public sector over the medium term.
The second thing we can do is adapt our financial system to make sure we can get more equity into businesses and reduce the debt burden. I have proposed certain things in work I have done. The Chancellor referred earlier to my work “Unlocking Britain”, which discussed how we can recapitalise the SME sector. Something like that needs to happen within our financial system so that we can reduce the debt burden for companies to give them equity so that they can grow.
The third thing, which connects with skills directly, is that we need to improve the ability of labour—people—and capital, money, to move from sectors and companies that are declining into those that are growing and have the potential to power forward our recovery. Those are the measures that the Government need to consider in the months to come.