Pre-Budget Report

The pre-Budget report safeguards vital investment in schools, hospitals and policing, and more importantly helps to create employment and training opportunities across the country as we prepare for the return of economic growth this year, after what was, in 2009, the most difficult year for the UK economy since 1922. No country has been insulated from the devastating effects of the collapse in the derivative markets, which has been the root cause of the recession. This has been the first global recession of a globalised financial system. However, the Government have taken strong action to recapitalise the banks and save the financial system through £850 billion in recapitalisations, loans and other guarantees. They have also shown strong leadership at a time of economic crisis. The Bank of England has also taken decisive action in monetary policy in maintaining interest rates at 0.5 per cent., and in my view the policy of quantitative easing has been broadly successful in injecting almost £200 billion into the economy through asset purchases. As the Japanese recession of 1990s and early 2000s has shown, interest rate reductions on their own cannot generate a lasting recovery. On that point, I take issue with the shadow Chief Secretary, the hon. Member for Runnymede and Weybridge (Mr. Hammond). In Japan, quantitative easing was used too late and too weakly to produce a strong stimulus for recovery. To produce a strong recovery here, fiscal policy is as important as monetary policy, which is why we need to maintain an equally bold direction in fiscal policy in 2010, to make it a steady year of recovery that benefits everyone. The real issue dividing the House is whether that stimulus should continue this year to allow for stronger growth in 2011 or whether we should engage in fiscal retrenchment through deficit reduction now. In my view, taking the latter approach this year would be disastrous for our prospects and run the risk of a double-dip recession. I take issue with the right hon. Member for Hitchin and Harpenden (Mr. Lilley) on this point: despite her many mistakes, which generated great hardship for my constituents in the 1980s, the noble Lady Thatcher did at least not cut public spending in the immediate aftermath of a recession, which the Conservative party is proposing to do now. Time is marching on and the wind-up speeches are about to begin. I urge the Government to continue the fiscal stimulus this year. It is a policy that will promote much-needed employment in my constituency and those of many right hon. and hon. Members. I commend the pre-Budget report to the House.