The Economy

I will take the intervention later, if I may. We are now at the stage where we have to make up our minds whether the Government's economic policies are going to work or not. In a very good article published in today's The Guardian, Robert Skidelsky argues that the choice between the two economic policies has to be made by anyone wanting to make a serious stand on these issues. He says that the theories or sets of policies have been set out by all the famous, much-lauded figures in the Bank of England, the International Monetary Fund and all the rest of them. If we are dealing with what economists think—it is not the only thing that matters—we should also mention people like Stiglitz and Krugman who say that the policy is wrong. If we look at the history, we find that it tends to be the people who are not part of the conventional wisdom or not part of the establishment, so to speak, who get it right and that the establishment nearly always gets it wrong. There is no attempt to get out of the box into which the Government have so constrained their policies—they like it and feel it is their comfort zone. I am talking about bankers and international organisations that are intent on deflation, which they are inflicting in the present crucifixion of the Greek economy—where they effectively continue to throw good money into failed policies. Let me briefly read from the article:"““The Keynesians…among whom I number myself””—" and I am happy to be there, too—"““will have to eat their words if growth picks up and unemployment falls in the next 12 months””." That is to say, if the Government's policy comes right, the debt falls and deficit crisis is met, we could then celebrate the success of the policy. On the other hand, it might not work—and it is time for Members to decide where they stand on this. I happen to believe that there is no evidence to suppose that it will, much as I would like it to work: it will not work; it never has worked in history. It is not working in Greece or in Ireland. Greece has had two further doses of deflation and two goes at decreasing VAT, and it is still not working. It is getting worse, because they are not dealing with the root of the problem, as the shadow Chancellor made clear in his speech. What could be done? Given that the Government will not want to change their policy, they have only one way out: another heavy incidence of quantitative easing. This time, the Government will have to stand up to the Bank of England for once in their life, and say, ““We want this money to be put to productive ends.”” We create the money, but nobody knows where it goes, except to make bankers' profits in overseas investment markets. The Government should say, ““We want the money to be made available through a bank””—such as the green investment bank, which could be much expanded—““to the British economy for, above all, investment in small and medium-sized enterprises.”” The argument from the Governor of the Bank of England will be, ““We can't distort capital markets, you know. This is interfering in the market.”” Of course it is; it is an attempt to avert the wastefulness that we have seen from so many of the policies so far. Where should that money be channelled? In a very good contribution earlier, my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) said that the housing market is dead on its feet at the moment. The new housing market is, I think, at an all-time low. The money, therefore, should go into housing, and into transport, which is desperate not for HS2 but for sensible things such as the four-tracking of the line between Coventry and Birmingham, about which I know something, and at other points such as in Wales. The other good thing would be that the railway policy could be executed much more quickly and fully. Will the Government change course? No. Will their policy work? No. Are there alternatives? Yes. I understand why they do not want to touch VAT, but they could at least get the Governor of the Bank of England to do quantitative easing of a large scale, £200 billion, and ensure that, instead of being dissipated into overseas markets, a good part of that money is used for the productive sectors of the British economy. That would make a big difference and be a start to the change of policy that we need from the Government.