William Bain
Main Page: William Bain (Labour - Glasgow North East)
Mr William Bain (Glasgow North East) (Lab)
Several weeks ago, the Business Secretary revealed publicly to The Guardian something that the country already knew to be true: that the Government have no convincing narrative when it comes to running the country. That is particularly true in relation to the disastrous state of our economy. The Office for Budget Responsibility has downgraded the forecast for the growth in business investment in the wake of this year’s Budget from 7.7% to a pitiful 0.7%, which is well below the forecast for Germany and the United States, while in Scotland, the Bank of Scotland’s purchasing managers index revealed only this morning that private sector growth was at a 17-month low.
The Bill should therefore have presented an opportunity for a radical change of course. It should have started the process of dealing with the crisis of lack of economic demand, as well as the shortage of work in our country, which means that 20 people chase every job advertised in my constituency, and the lack of business investment, particularly in the green economy. With youth unemployment standing at over 1 million, the Bill should have made it easier to hire young people through an employers’ national insurance holiday, and have started to tackle the crisis of underemployment in our country, with 6.3 million people crying out for full-time work but unable to find it, rather than promoting a failed ideology by making it easier to fire people.
The Bill fails to acknowledge that the Government promised they would grow the economy and cut debt, yet since the 2010 spending review they have shrunk the economy and grown national debt. They choked off the economic recovery that was taking root under the previous Government in early 2010, and have instead presided over the slowest emergence from a slump since the long depression of the 1870s.
We were told that, by slashing the public sector quickly and deeply, the invisible hand of the private sector would be free to guide a strong recovery. Who among Members on the Government Benches would credibly make that claim today, when in this financial year, with the cuts in public spending due to start biting hard, the OBR has downgraded its projected growth for the economy from 2.5% to 0.7%, followed by the OECD and the Bank of England?
Our financial system is failing to generate credit to stimulate sufficient private sector activity. Lending to small and medium-sized businesses has fallen for five consecutive quarters, while, even at the height of the recession, in Germany, with its more balanced banking system, bank lending by the Sparkassen, or local savings banks, continued to rise.
The Business Secretary trumpeted Project Merlin and then credit easing as the answers, but the truth is that British businesses face a shortfall in available finance of £190 billion over the next decade, while £700 billion of private sector capital is failing to be put to sufficiently productive use in our economy.
The Bank of England has printed £325 billion through quantitative easing for use in its asset purchase scheme, and that has provided some monetary stimulus for growth, but this money has mainly been used to purchase gilts and to prop up bank balance sheets, instead of finding its way directly to SMEs or into the real economy on our high streets. Only today, Adam Posen, the external member of the Bank of England’s Monetary Policy Committee, has reiterated his call for that money to be used to purchase private sector assets, by emphasising the argument that a lack of economic confidence can feed on itself. That shows the scale of the missed opportunity in this Bill.
In the 1930s, the lost output was restored within 48 months of the beginning of the economic crisis. Now, under the business policies followed by this Government—which are not reversed by this Bill—as the National Institute of Economic and Social Research suggests, it may take 72 months, and counting, to restore the lost output, as the economy has spluttered to a halt in the last two years.
Real wages have fallen every month that this Government have been in office, amidst the biggest squeeze in living standards since the 1920s. This Bill should have marked a turning point away from what even the credit rating agencies have described as an entirely self-defeating policy of austerity.
Some of the Bill’s measures are welcome in so far as they go, but even with the establishment of the green investment bank, the whole is less than the sum of its parts and fails to meet the scale of the challenge in respect of the potential for green growth, as stated by the UN Environment Programme in its report of last autumn. WWF UK has estimated that infrastructure investment on a scale of between £220 billion and £330 billion is needed to create the number of green jobs required over the next decade, yet the bank will have start-up public capital of only £3 billion, which is just 0.2% of GDP, with no likelihood of borrowing powers by 2016. That is a result of the Chancellor’s failure on growth, leading to borrowing being £150 billion higher than he forecast in June 2010.
The Bill presented a real opportunity for the Government to consider the Opposition’s proposal to establish a proper national investment bank and make use of the UK’s current low long-term interest rates. In 2008, business investment in the US, Germany and France was 11.7%, 12.3% and 12.7% respectively, whereas in this country it was only 10.2%. As Gerald Holtham demonstrated in a report for the Institute for Public Policy Research last year, a properly capitalised national investment bank could be achieved, increasing investment in manufacturing and the green economy without breaching even this Government’s fiscal rules.
This Bill should also have marked a shift towards restoring the link between economic growth, living standards and productivity. As the Resolution Foundation showed last year, in the 30 years from 1977 the share of every £1 of GDP going into the wage packets of people in the lower half of the income scale fell from 33p to just 12p. There should have been policies to establish a proper living wage as well, given that the Resolution Foundation has also shown that the costs, even to big business, of such a move would be in the order of less than 1%.
It is especially alarming that the Government are considering watering down their extremely modest proposals to tackle the inequality gap between top pay and the pay received by rest of the country. Given both that and their attitude on rights of work, the Government show in this Bill that they have no plan to stimulate demand. This is the no-change Bill from the no-growth Government.