The Economy

Lord Clarke of Nottingham Excerpts

Thursday 4th June 2015 Commons Chamber

[Mr Kenneth Clarke (Rushcliffe) (Con)]

I congratulate the right hon. Member for Doncaster North (Edward Miliband) on his forceful and good speech, and on his resilience in coming here and facing the House with such dignity and distinction. I, too, pay tribute to the way in which he fought for his principles and his cause in the election. Indeed, it causes me slight annoyance that in the leadership election that has broken out in the Labour party, some of the people who a month ago were his greatest admirers, his most loyal colleagues and those closest to his cause are now busily detaching themselves and attempting to scapegoat him for the problems that the Labour movement experienced.

In my opinion, for what it is worth, the right hon. Gentleman fought a very good election campaign. It was much better than anybody expected, because of the expectations that the tabloid press had raised. I thought he put the message across very well. I thought the message was wrong, and that was the judgment of the majority of constituents in my constituency and my part of the world. It is not the case that his performance had anything to do with the result. Apart from the great events in Scotland—[Hon. Members: “Hear, hear!”] Apart from the remarkable, almost bizarre, events in Scotland—the SNP is equalled only by Syriza in Greece on economic policy—and the very welcome events in the south-west, which were also very unkind because I lost many good colleagues in government as a result, the underlying basis of the majority that we won, to most people’s surprise, was the judgment of sensible people on economic competence and our record on the economy.

I do not think the election campaign made very much difference to the result one way or the other. My part of the country, the east midlands, is thick with marginal seats. We won all of them and added gains by taking back Derby North. In the end, people saw what we had inherited economically and what we had done over the previous five years. They recognised our economic competence and accepted the message that the job had to be completed. When listening to the Labour party’s message, however it was presented, they simply decided that they could not take the risk of changing the Government. When the problem arose that the SNP would apparently be able to hold a Labour Government to ransom in what was bound, because of the tsunami in Scotland, to be a hung Parliament if Labour won, that made a little bit of difference, but the result was mainly down to economic competence.

[Tom Brake (Carshalton and Wallington) (LD)]

Does the right hon. and learned Gentleman feel that in individual constituencies, particularly Liberal Democrat-Conservative marginals, the fact that his party was often outspending my party by a factor of perhaps five to one made any difference to the election result?

[Mr Clarke]

I look forward to a little party political debate with the right hon. Gentleman again. As I have said, what decided the election was the coalition Government’s extraordinary record. It was a particular tribute to my right hon. Friend the Chancellor, closely assisted, as he said, by Danny Alexander, the former Member for Inverness, Nairn, Badenoch and Strathspey, who was an excellent Chief Secretary, in getting the affairs of the nation back in order and steering us to some of the most successful economic results in the western developed world, which is what we have now.

What concerns us now, in this Parliament, is what judgment the public and history will make of this Government when they look back in five years’ time, or whenever. That will crucially depend on whether we finish the job and deliver the modern, more balanced, competitive economy that will give our children and grandchildren greater security and a better quality of life. That is the task we have set ourselves, and it is not going to be easy.

At the moment we are all enjoying the hubris of victory, as far as my party is concerned, or the relief of being back here just opposing, as far as the Opposition parties are concerned. On the surface the task looks easy, because at the moment our economy is growing more strongly than almost any other in the western world, employment is soaring because of our flexible labour market, which we should keep that way, our inflation is low, and real pay is at last beginning to rise as the benefits of recovery get through to every level of society. However, it would be a false assumption to think that it is plain sailing from now on, that everything will continue in that way and that the risks have vanished domestically and abroad, so we can take easy measures to reward those who voted for us. The world is not like that.

I take encouragement from what I took to be the Chancellor’s message. He has announced a July Budget, because he wants to take the opportunity while the economy is growing to take some of the tough and difficult decisions that the Government still have to take. I certainly encourage him to do so. In my part of the world—Nottinghamshire, Derbyshire, the east midlands—the people who voted for us knew that there were still tough and difficult decisions to take. They were not seduced by the speeches of those whose only examples of what they intended to do were ways of spending money or rather short-term popular things. The sooner we get on with tackling the underlying problems—including, as my right hon. Friend the Chancellor has reassuringly just confirmed, the debt and the deficit—the better we will be able to get on with all the other things that need to be done, which will enable our economy steadily to get back on to a stronger and more secure footing.

[Neil Carmichael (Stroud) (Con)]

Will my right hon. and learned Friend give way?

[Mr Clarke]

I will, but this is the last time I will do so, because a lot of other Members want to speak.

[Neil Carmichael]

I thank my right hon. and learned Friend. Does he agree that one of the key tasks is to keep up the pressure to improve our skills agenda, so that we can ensure that our young people continue to contribute to a productive economy and increase our capacity to develop, innovate, research and develop and manufacture?

[Mr Clarke]

My hon. Friend anticipates some of the points I wish to make. I agree with everything he has just said. Tackling the deficit and debt, together with what he has just described and the other measures that we have committed ourselves to, is a genuinely one nation Conservative approach. Ever since I became active in politics, I have declared myself a one nation Conservative. The phrase has moved in and out of fashion a little in my time, but I have remained boringly consistent. In my view, it means free market economics combined with a social conscience, as well as a forceful internationalism that looks after Britain’s interests in the world and helps to spread our values.

On the economic front, the combination of fiscal discipline and economic competence, with measures such as taking the very lowest-paid out of tax altogether, easing the tax burden on the lower-paid, not taking people on ordinary incomes into higher rates of tax that should affect only the very wealthy, and the right to buy from those giant landlords the housing associations, which should be unlocking their resources to invest in more new social housing, gives the right one nation balance to the proposals we have put forward. As I have said, it is important that we get on with it, because this Session of Parliament is probably the best time to get some of the most formidable challenges out of the way and under our belt.

If I am sounding a little foreboding about what could go wrong, I should say that I do not foresee anything going wrong, but we will be lucky if no global shocks hit us. We have had five years of growth since 2010, with only a minor blip—not a recession—in 2012, and 10 years of uninterrupted growth would be pretty well a post-war miracle. It does not happen in the real world. We are doing better than any other western European nation, but that is based on the fact that we devalued by 25% when we had the crash—that has done us a bit of good, but not a great deal—and on a US recovery that is now looking rather feeble, as it was stimulated by quantitative easing, which is a dangerous thing. Our own recovery is not forcefully strong, and it was based on quantitative easing when that was necessary. Of course, we rely on interest rates, and they are the lowest they have been for 300 years, which is good for indebted countries.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

Will the right hon. and learned Gentleman give way?

[Mr Clarke]

I will not, because other Members want to speak. I enjoyed what the hon. Gentleman said yesterday, and I would like to give way to him, but not at the moment.

It will be surprising if we do not face difficult times. My right hon. Friend the Chancellor has taken the deficit down to a little under 5% of GDP—far too high, and quite unsustainable, but practically half what we inherited. He paced it pragmatically, because five-year forecasts of where we will be are a complete waste of time, although people always produce them. So long as we have growth, we should press on with taking the deficit down now, because if we ever have a slowdown we will have no weapons to do anything about it. If the Chinese turn out not to have a soft landing, or if America goes wrong, we will not be able to help ourselves by having a fiscal stimulus when we have a 5% deficit. We will not be able to ease monetary policy with interest rates at practically zero. Now is the time to get on the with the task.

There is much more that I would like to say along the lines of the intervention by my hon. Friend the Member for Stroud (Neil Carmichael), because cutting the debt and deficit is not in itself a complete economic policy. It is the essential precondition for all the structural reforms that we still have to make so that we can make our economy modern and competitive. We have a long way to go, because as Members have said, our productivity performance is dreadful, our investment performance is recovering but remains rather poor, our trade and export performance is pretty dismal and we have an appalling current account deficit. In this modern, balanced economy, we have a long way to go.

We therefore require the right kind of European reform. The European Union has been the essential basis on which we have established our voice in the world and our current economic base. In my lifetime, it has had the most beneficial effect on both those things, which were in a pretty dreadful state until we joined, but it does require changes.

When the Prime Minister announced his referendum, in a very pro-European speech at Bloomberg, he set out an economic agenda for change. That remains the most essential reform that we require and desire, and it would benefit the rest of Europe, as well as us. That means completing the single market, which we have talked about and never done. It means an EU-US trade treaty, which we have an opportunity to get and which would boost investment, trade, jobs and activity on both sides of the Atlantic.

It means deregulation. The Barroso Commission talked about deregulation and got no support whatever from member states. The Governments of all member states, including Britain, tend to send people to Councils from various Departments who advocate more regulation—on transport, road safety, food safety, environmental standards, pollution and all the rest of it. Vice-President Timmermans wants to deregulate. We should compete with deregulating there by deregulating here to stimulate our economy.

Of course we can stop people coming here just to claim benefit—we have always been able to do so. There are other things we can do. The economic reforms, however, were the basis on which we started the negotiations and they remain the most important to us.

Beyond that, skills training and education reforms are still required. We have immigrants because we have to go Romania to recruit nurses—we do not train enough nurses of our own. Our construction industry would come to an end if Poles did not come here in the numbers they do. Skills training, education and higher education—every innovative business I know complains they cannot recruit people with the necessary skills to expand their business. It is one of their major constraints. We do not train and produce enough engineers. We need to get somewhere with giving STEM subjects a higher priority and so on.

I could go on. [Hon. Members: “Go on.”] No, no. This is an agenda for a Parliament. It is tough agenda. Now that we have been re-elected, we have the ability to deliver it. The precondition is that we start well, and we start with getting rid of the deficit and debt restraints while we can. In July, we need an iron Chancellor. We need a bold and radical Government. We need a Government who are going to repeat the success of the past five years, measuring up to these enormous international challenges, to show that the United Kingdom can again have one of the strongest global economies in a totally changed globalised economy and a new world.