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George Osborne: Labour's recession initiatives are not working

Madam Deputy Speaker, today we have seen, as we heard at Prime Minister's Questions, the fastest monthly rise in unemployment on record - worse than any month of the 1980s or 1990s. 

Vacancies are at a record low, which used to the government's excuse on days like this, and two millions people are out of work.

We also see today that the IMF has produced new growth forecasts for the world that show that Britain is set to be in recession for longer than any other major economic area. 

Indeed they predict that the British economy will be only major economy contracting next year, 2010, when the economies of America, the eurozone and Japan are all forecast to be growing again by then.

And today Lord Turner has published his Report. the first part of it.
It says something about the coordination of the tripartite committee that they couldn't get the report to Hon members in this House.

The report offers a pretty devastating critique not just of the regulatory system created by the Prime Minister in 1997 - but also of the model of economic growth that was based on unsustainable debts, overleveraged banks and a huge macroeconomic imbalance.

You would have thought, Madam Deputy Speaker, that the Chancellor of the Exchequer who commissioned that report and whose policies are deepening this recession would be here to debate the economy and defend his approach.

But apparently not. 

We have not had a debate on the economy in government since December and the government have known about this debate for two weeks.

When we suggested it, we were told there was no pressing international summit or unbreakable commitment that would require the Chancellor's absence.

There is only one conclusion.  The Chancellor is running away from the debate because he knows he is losing the debate.

A confident Government, and a Prime Minister who meant what he said about restoring the primacy of Parliament, would have relished the chance for the Chancellor to appear before us today.

Can I say that our motion talks about the various unemployment and employment schemes that are not operational so instead of just taking the whips handout he might read the order paper.

Can I give this advice to the Hon member. I know he has been in government since 1997 and has been taking these handouts since then. He is still not on the ministerial rung. Why doesn't he change take and become more of a critic of the government?

The difference between this recession and the last recession is that we have seen the highest rise in unemployment on record and it happened today.

As ever my Rt Hon's friend's razor sharp attention to detail makes a killing point.

So today we don't have the Chancellor of the Exchequer and instead we have the Chief Secretary.

Now I know she is not exactly busy these days.

I am not sure what the role is of a Chief Secretary in a Treasury that seems to have entirely given up on any attempt to control public expenditure.

Indeed, yesterday the Prime Minister announced in his Guardian interview, not to the House of Commons of course, that there would be no spending review this year at all this year.

The whole panoply of comprehensive reviews and three year plans that the Prime Minister made the centre of his approach to spending junked without a word of explanation to the public or Parliament.

If you don't review spending when you've got the biggest budget deficit in this country's history then you really must have abandoned the most basic responsibilities of government.

But on the plus side, it means the Chief Secretary has more time on her hands, more time to plan her budding leadership campaign, which we read about in the newspapers, and to join us here today, so we welcome her to her place. 

Madam Deputy Speaker,

The case we make today is simple.

First, that the government's policies to tackle the recession are not simply working - quite literally in the case of the many schemes that still exist only as a press release.

And second, that the government have still not faced up to the fundamental failure of the debt-fuelled model of economic growth their Prime Minister pursued for a decade and which has led us to the longest recession in the world and the deepest recession in our recent history. 

Or as the Rt Hon member for Norwich, always a friend of the Prime Minister, put it at lunchtime on TV, there are many aspects of our economy that have put us in a worst position.

That is a really staggering poor intervention. Firstly, the leader of the Opposition said the economy had not been growing for a year, I think he will find the Q2 last year had 0% growth, and secondly the Prime Minister said the US had entered the recession before the UK, when in fact they had positive growth in Q2 of last year, so no doubt he will be writing to his Rt Hon friend to correct him too.

A lot of attention has been given in recent weeks, in this House and especially in the media, to the repeated bailout of the banks.

And a lot of attention will be given in the coming weeks to the G20 meeting.

I want this afternoon to draw attention to is the failure of the policies that are supposed to be providing 'real help now' to families and businesses struggling with the recession.

That slogan of 'real help now' is a cruel joke to thousands of people who have lost their jobs, and who continue to lose their jobs, while this government dithers and delays.

My memory of the Autumn of 2007 is that I proposed some change to inheritance tax which his government then copied a few weeks later. From memory I was sent a cartoon by a Labour MP showing his chancellor and Prime Minister stealing them through an open window to steal my policy from my office. If he has a complaint could he please take it up with the Prime Minister.


The answer is that in a recession government debt increases because tax receipts fall off and welfare payments increase - those are the fiscal stabilisers which provide a fiscal stimulus, which is a long held debate held in this country and many others since the 1930s. We have not proposed in any way to tamper with any of the stabilisers. What we opposed was the debt funded discretionary cut in VAT. Hon members should ask themselves is this - have they got any evidence that this has in any way done anything to stimulate the economy, or encourage anyone to spend any more money? We have had every single major retailer come out and say this is waste of money and hasn't worked. The one thing we can be sure of is that it has in a discretionary way added to a very significant borrowing problem. And the shocking figure we will get on budget day is the size of the fiscal deficit which this government is saddling this country with for many many years to come. It will be the highest in our history. The Labour Party's reputation for economic competence is not only there for all to see but it will be hung round their neck for a decade to come.

The Hon gentleman would do well to look at what we have proposed. We have proposed to reduce the real growth in spending from 3.4% to 2.6% . The public expenditure will grow by £25bn instead of £30bn and we will use that £5bn to help the millions of savers and pensioners who have been penalised in this recession. They have done the right thing over the last ten years and have been punished for it and I think that is a perfectly sensible way to allocate resources.

The tale of Lord Myners and Sir Fred Goodwin's pensions should ring  around this country of an example of how this government are completely incapable of looking after taxpayers money, and it is a miracle lord miners survives in government  and it says something about this Prime Minster's judgement that he put him there in the first place.

Well it does sounds a bit inconsistent with the Prime Minister's line on British jobs for British workers.

Four months ago we argued from this Dispatch Box that the urgent priority was to get credit flowing to businesses, large and small, so that they stayed afloat and people were kept in work.

We proposed a National Loan Guarantee Scheme as a big, simple and bold answer to the problem which everyone from the Governor of the Bank of England to the head of the CBI had identified as the most important facing British business.

And we said that to help with the cash flow of smaller businesses while they wait for that credit, we should allow them to defer their VAT bills and we should reverse the rise in their small companies tax rate.

To help the unemployed get back to work, we suggested a national insurance rebate for any employer who took them on.

At the time, the government, particularly the Prime Minister, dismissed every single initiative out of hand- now, four months later, they are struggling to introduce them.

That delay has made the recession worse.

It has directly cost jobs.

It has led to the collapse of good businesses.

And the scandal of inaction continues.

Let us take the most important support needed, the support for loan guarantees.

Finally, two months after we proposed it, on 14th January, the government launched in a blaze of publicity their scheme to guarantee credit lines to small and medium sized businesses - the Working Capital Scheme.

The Business Secretary said at the time: "there will be real results coming from these schemes going live today"

Two months later that scheme does not exist.

The date when it was supposed to be up and running has come and gone.

The negotiations with the banks are still continuing.

And all the while good businesses are going bust, and good people are losing their jobs.

I wish it were an isolated example of incompetence.  But it is not.

There is the Automotive Assistance Programme which is supposed to help the car industry.

Two months after it was launched there is no evidence yet that a single car manufacturer has been helped.

Earlier this week the Government proposed a car scrappage scheme. Today the Treasury is briefing the media that they are not in favour of that particular scheme. That one didn't even last a week.

Then there is the Homeowners Mortgage Support Scheme, announced by the Prime Minister back at the beginning of December.

Here we are in March and it simply doesn't exist.

Repossessions are rising, thousands are losing their homes, and not a single homeowner has received support.

And what about the National Internship Scheme announced three months ago? It has completely disappeared from trace.

They can't distinguish between getting the headline on the Today programme and actually making sure the help they promise is delivered and working.

But the public can.  And it is causing widespread disillusion and despair.

We are facing a very very severe rise in unemployment. The tragedy is that had these schemes been implemented earlier and been in place then some of these businesses could have been saved and job losses prevented.
For once I agree with the SNP although maybe there will be other occasions for us to agree in the future. The Hon gentleman is right - the Prime Minister said he wanted to debate the economy but he wont even send his Chancellor to debate it here today.

I know this debate today many members will raise the cases of their constituents.

So let me read a letter I received earlier this month from my constituent


The Hon gentleman is making light of the fact that thousands of people are losing their jobs, making light of someone who has lost their job and has gone to a jobcentre clutching an article they noted in the Times about a government scheme that was launched and that is why in a year's time he'll be the one losing his job.

That brings me on to the second major question today.

Do the government understand that the model of debt-fuelled growth that they pursued for ten years is fundamentally broken and needs to be fixed?

Judging by the Prime Minister's increasingly contorted answers to the question of blame, the answer is 'no'.

He still maintains, alone in the country, that there was nothing wrong with the British economy, nothing wrong with the way he regulated financial services in the country, that we are simply the unwitting victims of a recession that came from America.

That is his argument, although I note he left it out of his speech to the American Congress.  I guess that won't be a speech that will be appearing in the next edition of his book Courage.

The problem with this argument that recession came from America is that it doesn't explain some basic facts.

Yes, of course, there has been turmoil in the world financial system and huge problems in America.

But was it America that caused British families to become more indebted than American families, or British house prices to rise twice as fast US house prices?

Was it America that caused British banks to leverage up 37 times their capital, almost double the leverage of their US counterparts?

Was it America that gave Britain the largest government deficit in the developed world?

Was it an American politician who said with the hubris of 'peace in our time' that he had abolished 'boom and bust' - no, it was a British politician.

The Turner Report, published at midday, blows apart the Prime Minister's claim that all was well with the British economy until we were hit by a transatlantic recession.

It supports the Conservative argument that the problems in British economy are deep-seated and that the model of growth pursued over the last decade is fundamentally broken.

It talks on page 29 of the 'rapid credit growth in the UK household sector in the decade running up to 2007"

It speaks of the "major and continued macroimbalances" that built up in the UK (page 32).

It says that 'the UK experienced a credit and property cycle similar to that seen in the US' (page 29).

The trigger may have been pulled by US sub-prime, but the gun was loaded here in the UK.

And the failure to fix the roof when the sun was shining was a British failure - and a Labour failure.

And until the Prime Minister understands the mistakes that he made in creating this economy built on debt then there is no prospect of the government leading a lasting and meaningful recovery.

Let us look at what needs to be done. We need to shift the corporate tax system away from encouraging debt to supporting equity and new investment. Not a word from the government on that.

To create a new 3i to provide the start-up capital for the new businesses we need to see emerge from the ashes of this recession. Not a word from the government on that.

To make changes to the personal tax system, so that pensions and savings are supported not penalised. Not a word from the government on that.

And I would urge on the government to act in this coming Budget to help pensioners and savers by abolishing basic rate income tax on saving altogether and increasing the personal allowance for pensioners so they are helped at a time when they are innocent victims.

And we have an answer to what takes the place of the busted fiscal rules - an Office of Budget Responsibility, so never again can a government borrow recklessly in a boom and leave our country so exposed when the Economy turns.

The government have no answers to any of these things.
Indeed, the Prime Minister won't even accept that the system he created twelve years ago for regulating banks needs changing.

When we asked James Sassoon, the man who was his own envoy to the City for years, the Treasury official who actually sat as his representative on the tripartite committee for years, to reflect on those experiences and look at what had gone wrong, to propose reforms to the system of regulation - the Prime Minister rejected them out-of-hand, without even reading the man's report.

Today, Lord Turner too has proposed major changes to the system of financial regulation, some of which support and about some of which I have doubts. The PM isn't engaging in this debate. He won't even allow parliament to discuss an issue of such fundamental importance.

The Hon gentleman is right. There is a particular unfairness about the burden of the levy that is falling on the building societies rather than investment banks. They are paying a very heavy price which I saw in Swindon, and I will be going again several times, to discuss these issues with Nationwide.
Of course there is a contingent liability but it doesn't add to public borrowing today. The scheme would be administered by the banks as they have the commercial judgment. I am not suggesting that the government should be engaging in loans to businesses - the banks should do that with the support of the government, with the guarantees provided by the government. I don't know why Labour MPs are so surprised - this is actually supposed to be the scheme they are setting up, which hasn't happened.

Of course like a good commercial loan there would be collateral but the point is that these businesses can get commercial loans at the moment. There is no credit following because it is a credit crunch.


The Government cannot engage fully in this debate about making good the mistakes or learning the lessons of the past because they are led a man who thinks no mistakes were made at all.

No mistakes in the system of regulation.

No mistakes in the wanton destruction of savings and pensions.

No mistakes in allowing an economy to built on debt.

He said it clearly when he was on that plane to Washington. He said I have nothing to apologise for.

We can picture the scene.  Standing in the aisle of the plane.  His hand tightening its grip on the headrest of seat.  Trying hard to control his rage as he says with menace:  "I have nothing to apologise for".

It is the "Je ne regrette rien" moment of this recession.

The moment when the hubris is exposed.

When we realise just how out of touch this Prime Minister has become.

And, of course, those around him realise it.

So the Chancellor is urging him to apologise.

The Children's Secretary, one of the closest allies of the Prime Minister, we understand, is urging him too.

And because the Prime Minister believes that it betrays such a deep misunderstanding of what has happened to the British economy in the long years he has been in charge of it, it shows that he cannot possibly be the man to learn the mistakes of the past and lead our country into a better and more sustainable future.

If they wont listen to us they should listen to a member of the Cabinet, the member for Salford.

This is what she said about the Prime Minister in a newspaper today:

"You can't just pretend you weren't there ... if you don't have any acknowledgment of anything...then where do you get permission to give them a vision of where the future needs to be?"

Madam Deputy Speaker,

Britain is in deepest recession it has known for a generation.

The IMF predicts that alone in the world, our economy will still be shrinking next year as well.

We have the highest budget deficit in our peacetime history.

And we are storing up such debts that it will be our children and grandchildren who end up paying them off.

The economic model this government pursued for ten years as a country was built on debt and it has failed.

Now the blizzard of schemes announced by the government to tackle the recession are failing too.

Ministers have confused a headline in the newspaper with real help now for their constituents.

And we have a Prime Minister who will apologise for nothing, deeply disconnected from the reality of the economic mess he has created.

The country desperately needs change.

And it is the weakness of a government that dares not call a General Election and stands in the way of that change.

The sooner it goes the better.

For the sooner then we can begin the recovery.

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