Budget Resolutions and Economic Situation

May I preface my remarks by paying tribute to my right hon. Friend the Member for West Dunbartonshire (John McFall) and echoing his comments about the staff? Like him, I am standing down at the next election, and I should like to thank all the staff of the House of Commons, especially the ladies in the Tea Room. I hope that that will get me a few more chips the next time I go in. I shall attempt to put the Budget into a wider political and economic context. The Chancellor made the point that we are not alone in our situation. The world is suffering the deepest recession since 1929-31, and tens of millions of lives are being affected all around the world. No country is immune to the shock waves that the capitalist system has generated. It is important to get our heads around the figures. In the UK, we have witnessed six quarters of economic decline, which is the longest period since records began, and the economy has contracted by more than 6 per cent. About 800,000 people are unemployed and—this is an important point—many more are being forced to take on part-time work or to take lower pay while working longer hours. At the end of last year, we saw what many hope will be the beginning of a recovery, with growth of 0.3 per cent. in the last quarter. That was a small step forward, but a step forward nevertheless. The Budget is important because the economic policies flagged up today and in the coming weeks could determine the scale and pace of the economic recovery—or, indeed, if there is to be a substantial recovery at all. There are some key questions swimming around in the atmosphere. Will we now return to the path of sustained growth and see the past 18 months or so as just a blip—that is the business-as-usual school of thought—or will we enter a long period of anaemic growth, taking years to recover to pre-crisis levels of national income? That is roughly where the Japanese economy is. Worse still, could we face a double-dip recession with the economy plunging back into crisis? The very real threat of undermining the fragile recovery that I have mentioned brings me to the policies that have been discussed in the House today. Time spent poring through the columns produced by all the talking heads who tell us about the economy shows that there are two ways of dealing with the downturn—broadly speaking, they are cuts versus investment. We have heard from the Leader of the Opposition about the need to make cuts to get the economy back on track. That, in short, is roughly where they are with their broad economic strategy. They are totally clear about the scale of cuts they want. The shadow Secretary of State for Business, Innovation and Skills has said that the Conservatives would be much tougher on public spending than "Margaret Thatcher ever was", but those policies would be devastating to the economy and to families across the country. In my home city of Leeds, the public sector plays a significant role. I recently worked out the figures for a debate on my great city, so I know that there are more than 110,000 jobs in public services in the Leeds region. The Conservative plans for cuts in the public sector would hit those employees and their families hard, as people would lose their jobs. That is what we have to understand. We can talk high economics here, but I am really interested in the impact that those policies would have on ordinary people. Indeed, the potential for job losses goes further. A recent study showed that 64p of every £1 that public sector workers earn is spent in the local economy, so those cuts would hit areas of the wider Leeds economy that depend on spending by public sector employees. The idea that we can separate the public from the private is ridiculous. On top of all that, there would be the cost of paying benefits to those who were unemployed as a result of the cuts. A recent study showed that those costs would be about £16,000 per redundancy, so that policy would not be not easy or pain-free. I argue, as would millions of others, that it is unfair and perverse that the price for a crisis caused by bankers and the financial system should be paid by millions of ordinary people—nurses, teachers, pensioners or whatever—through public sector slash-and-burn policies. Perhaps the Conservative party's desire to go down that road has something to do with the fact recently noted by my union, the GMB, that 63 of those selected by that party to stand at the forthcoming general election are drawn from the banking and finance industries. I am reminded of something said by President Roosevelt during his sixth fireside chat in 1934:""Those, fortunately few in number, who are frightened by boldness and cowed by the necessity for making decisions, complain that all we have done is unnecessary and subject to great risks. Now that these people are coming out of their storm cellars, they forget that there ever was a storm."" I would add that those people have forgotten not only that there was a storm, but who actually caused it. I take the view, which is common outside the Chamber, that it is unfair that ordinary people should pay for a crisis that they did not create. However, as well as being morally and politically wrong, a cuts agenda advocated by any party—even my own; I have a tendency to go off message—would be economically illiterate. That is not just my argument, because calls for immediate cuts in the economy have been met with a growing chorus of criticism by some of the world's leading economists. Those esteemed people warn that the cuts policy risks sending the economy back into recession, so they have called for the very opposite and stated that the fragile nature of the economy means that it is necessary to continue the fiscal stimulus. A letter to the Financial Times on 18 February that was signed by Professor Stiglitz, the former World Bank chief economist and a winner of the Nobel prize for economics, along with another 60 economists, said that those who call for immediate cuts""seek to frighten us with the present level of the deficit"." The letter went on to ask what would happen""if implementing fierce spending cuts tips the economy back into recession"."