Jobs and Growth

John Stevenson Excerpts

Thursday 17th May 2012 Commons Chamber

[Paul Uppal (Wolverhampton South West) (Con)]

The right hon. Member for Barking (Margaret Hodge) used the term “victim”, and also spoke of a lack of hope. That is a theme to which I shall return later. I think that we should be very careful in our choice of words, given how corrosive they may be in the world out there—the real world, not the Westminster bubble.

In difficult economic times, we should not be seeking quick fixes. It is important that we continue to build the foundations that are necessary for economic recovery. The solution to a debt crisis should never be more debt.

[John Stevenson (Carlisle) (Con)]

Does my hon. Friend agree that part of the Government’s problem is the fact that the last Government borrowed in good years, and had borrowed some £40 billion before we even entered the recession?

[Paul Uppal]

That is an excellent point, and it is not made only by Members of Parliament. Hamish McRae, the acclaimed journalist, made it in The Independent during 2003 and 2004. He regularly asked readers what had happened to those golden economic rules—but that is by the by, and we cannot change it.

I want to raise an issue which I spoke about during the Budget debate. We are right not to allow protectionist rhetoric to creep into our political system, and continually to challenge protectionism abroad. That is crucial to the rebalancing of our economy to change it from an economy that spends on imports to one that earns through exports. I am encouraged to note that British exports rose by £50 billion last year, and that unemployment has fallen by over 45,000 in the first quarter.

I believe that there are two areas in which the Gracious Speech can make a real difference: the creation of the right conditions for private sector investment, and investment in our work force and the work force of tomorrow. Analysts have estimated that UK businesses have cash assets of more than £750 billion, equating to nearly half our GDP, and that investing just £20 billion of that in the UK could deliver a 1% increase in growth. We need to ask the difficult question: why are these cash-rich institutions not investing domestically?

The answer begins with the boom that preceded the recession. Unlike booms preceding earlier recessions, that boom was financed by public and private debt, which has continued to depress household borrowing and spending. The IMF’s analysis of advanced economies over the past 30 years concluded that recessions preceded by an unsustainable increase in household debt tended to be more severe and protracted. That is because as long as households pay down debts and increase savings, demand will remain weak.

One explanation for the weakness of private investment is concern among companies about the future availability of bank finance. They are becoming more reticent in their investment strategies, and are using cash as an insurance against a crisis. The situation is not helped by fears of contagion, or by the lack of liquidity in the banking sector. A solution to the problem would be the creation of a banking system that improved lending and the supply of credit. The introduction of a ring fence around retail banking separating retail banking services—such as deposit holdings and lending—from investment would pave the way for a more competitive banking system.

Tellingly, the removal in 1999 of the Glass-Steagall Act, which separated deposit holdings and lending from investment, changed the landscape of banking in America. It allowed larger investment institutions to enter the deposit and loan markets, creating a grab for small banks. In 1999, there were 19 significant large banks in America; today there are four. The picture in the UK is similarly worrying. Although there are smaller banks in the UK and the US, large banks have consolidated their position, creating market dominance. The consolidation of banking on such a scale is bad for businesses and bad for lending. With only a handful of lenders, concern arises about the availability of credit. We often talk about how banks are too big to fail, but rarely do we talk about banks being too big to be effective. Banks can only be described as quasi-public institutions, and will be accountable to the public long after they are sold. They are the engine of any economy, as they provide credit, investment and savings. We need a banking sector that not only serves shareholders, but benefits the wider economy.

I would also like to discuss how investing in the UK should involve our work force today and the work force of tomorrow. On a personal note, I recently held a jobs fair in Wolverhampton. We had more than 1,500 young people attending and more than 30 employers. One conversation I had on that day still sticks in my mind. It was with a young person from Wolverhampton who said, “I want to thank you, Mr Uppal, for organising this. You’ve given me hope.” When the Leader of the Opposition stands up and says that there is no hope in the Budget or the Queen’s Speech, the effect is deeply corrosive. I know that the situation in places such as Wolverhampton is challenging, but to dismiss people and just wipe away their dreams so quickly and flippantly is very damaging. Sometimes politicians in this House need to think carefully about the terminology they use.

We all appreciate that the Opposition have a job to do in holding us to account. However, it is important that we do not respond with knee-jerk reactions, but instead always look at the broader picture of what we are doing for the economy and not look to make political capital out of the situation. Investing in the work force of tomorrow means preparing young people for work today. Careers events in schools, inviting local companies to speak at schools, and lessons on interview and presentation skills could all help, and not just in year 11, but early on, when children are starting to think about options and subjects. It is not about getting young people to pick a career early on; it is about them knowing that their options will help them to make the right choices and give them goals for the future. If young people know that maths and science are essential for accessing the type of job they are considering, such subjects will seem more beneficial.

Ensuring a skills base for the future to drive Britain’s industry and manufacturing is evidently important, and recent reports point to a skills gap. It is disappointing to hear companies say that they cannot find the skilled people they need, especially when that is coupled with high unemployment. The west midlands is a great base for manufacturing, and, with the introduction of the i54 site, we can only improve on this. Taking the long-term view on jobs and growth—helping young people to get the best possible start early on—can only be beneficial in preventing them from ending up not in work, training or education.

Let me finish by saying, for the second time in this Chamber, that when it comes to the difficult decisions, at least those of us on the Government Benches are walking the walk, whereas Opposition Members are just talking the talk.