I should like to address the comments of the hon. Member for Redcar (Ian Swales) about capital allowances. I, too, welcome the Government’s capital allowance proposals, but they are a U-turn—the Government reduced pre-2010 Labour levels of capital allowances to 25% of what they were, but have since returned them to pre-2010 levels.
The north-east leads the way on exports. Government Members have said that the export recovery has not occurred, but the north-east already had very good exports from industry. Compared with other regions in the country, the north-east leads the way. For example, Cleveland Potash at Boulby in my constituency today announced a £300 million investment, which will create 120 new jobs and secure more than 1,000 existing jobs in the potash pit. That occurs on the one-year anniversary of the recommencement of iron and steel production at the Redcar blast furnace at the Teesside Cast Products site, which is under the joint operation of Sahaviriya Steel Industries and Tata. That is a victory for the campaign of local people on Teesside, of which I was proud to be a part, as was the hon. Member for Redcar. Success is now synonymous with Teesside, and people in Teesside are proud to say that they are a success. We look forward to a future built upon the industrial development and manufacturing legacy of the 13 years under Labour.
Organisations such as the North East of England Process Industry Cluster were created in conjunction with the Labour Government and One North East. NEPIC centred on the north-east’s assets, particularly in the chemical and steel industries, and the heritage of shipbuilding—TAG Energy uses the Haverton Hill site, formerly a shipyard and dock, to produce monopile construction units for the offshore wind turbine market.
In contrast, the words “double dip”, “double debt” and “credit rating downgrade” are synonymous with the Prime Minister, the Chancellor and the Government. Since the autumn statement, growth, which was estimated to be poor, has halved in just over three months from 1.2% to 0.6%. The accrual of debt by this downgraded Chancellor from 2010 to 2015 is more than the total debt accrued by the previous Labour Government in their entire 13 years. Despite that and the overwhelming evidence, the Chancellor affirmed in his Budget that borrowing is falling. Public borrowing shows that the Government books were in the red to the tune of £121 billion last year. They are forecast to improve only marginally to £120.9 billion in 2012-13.
Tax revenues have fallen £5.1 billion short of the predictions in the autumn statement, despite the hailed employment figures. That is largely owing to the fact that, despite increases in nominal employment, productivity has fallen massively. That is matched by a huge fall in tax take. The irony is that we have always been told that the private sector is more efficient. Supposedly, we have 1 million more private sector workers, and gross domestic product is falling, so more people are doing less. That is a re-unbalancing of the economy if I ever saw one.
Similarly, the increase in the number of employed women is largely due to the fact that fewer women between the ages of 60 and 64 have retired. Women are working to a later age because state old age pensions
have changed. That has undoubtedly helped employment figures. The Chancellor was able to massage his borrowing down only by persuading the OBR that Government Departments would spend £3.4 billion less than their allocated budgets this year. Only three months after the previous forecast, the budget deficit is expected to be an average £11 billion worse throughout the five-year forecast period. In cash terms, the problem lies with poor tax receipts, which have been hit by disappointing revenues this year, and vastly reduced forecasts for nominal gross domestic product, which is now at one seventh of the original growth expectations set in June 2010.
On the other hand, Robert Chote and the OBR assume the economy has the scope for rapid catch-up growth of 2.3% of national income even after April 2018. But with so much slack in the economy to be assumed for the rest of this decade, it is strange that the OBR does not show inflation falling below its target level of 2% at any time. Are Ministers concerned by that? If the OBR admitted this to be the case, it could no longer live within the Chancellor’s demands and would probably have to admit not £9 billion, but something more in the region of £17 billion a year of tax rises or spending cuts, as a result of earlier Government inaction.
The nation’s debt and the Government’s borrowing are completely dependent upon the Chancellor’s “monetary activism”. However, minutes of the Bank of England’s latest meeting show that the new Governor, Mark Carney, failed to win any support for his case for further quantitative easing. Most of the MPC look worried about the potential damage of a run on sterling, and the effectiveness in any case of further asset purchases as banks and households look to clear debts. However, without further QE, the Chancellor cannot keep his borrowing rates down, as the borrowing at low rates to buy gilts in order to borrow at low rates is the true reason for low interest rates, not the heavily front-ended, growth-strangling cuts we have witnessed to date.
Furthermore, big businesses continual deleveraging will not be turned into sudden investment with further corporation tax cuts. Corporation tax cuts will just aid business to further deleverage debt. It has never been so cheap for the state to borrow, and the Chancellor is neither using this cheap accessible capital to pump-prime the economy nor persuading banks and big business to free up their substantial reserves and corporate funds. The Chancellor’s language and tone set the mood music for the economy, and his constant message of national deleveraging has sent everyone into a deleveraging frenzy. Banks are hoarding excess capital and large corporate companies are simultaneously paying out large dividends to shareholders while sitting on excess capital, with the explicit purpose of holding it in case they need to make future debt clearances rather than investments.