My hon. Friend is a powerful advocate for the people in his constituency who are bearing the brunt of the Government’s policies, and he is absolutely right. It is important that there is no further widening of that gap. This is not just about the money in people’s pockets, important though that is, but the fabric of society and the relationships that people build in their local communities.
It is important to consider the impact on our high streets. For generations, local businesses have offered jobs and the convenience of shopping in the local high street, and have been involved in providing services there. They are now under pressure from the flatlining economy. Consumer spending has been constrained by high inflation and stagnant wages, leading to a 6% fall in real disposable income in 2008, with a devastating impact on our local high streets. Shops are lying empty, with a threefold increase in that trend since 2008. Household names such as HMV, JJB Sports, Blockbusters and Comet have been forced to close a large number of stores or to shut up shop completely. It is estimated that last year 1,800 shops were forced to close—a staggering tenfold increase on the year before. We have heard about the impact on the pub industry, and there has been a call for the VAT rate to be considered in that context.
Not only is retail suffering, but businesses of all kinds up and down the country are feeling the impact of the Government’s failed economic policies and the flatlining economy. That has led, and is still leading, to a lack of confidence, particularly in the construction sector, with many arguing that more must be done to get people back to work and to get projects under way. Sadly, Project Merlin did not deliver the new era of loans that it was supposed to. We learned this week that lending to UK businesses fell by £2 billion in December alone, and it is down by £18.6 billion over the past year, while businesses continue to suffer. The Business Secretary seems perhaps finally to be recognising this failure. He boasted at his party conference that he would set up a Government-backed bank to get billions of pounds to businesses that need it, but we are still awaiting the fine detail of what that bank will do and when and how businesses will be helped. They may well have to wait some time for it to be up and running.
I shall draw my remarks to a conclusion because I want to give other hon. Members the opportunity to raise issues on behalf of their constituents and put the case to the Government. There are things we can do to help businesses and individuals through these tough times. We could reform the funding for lending scheme so that banks can access the lowest rates of funding only if they increase lending to businesses as well as overall lending, and extend it beyond the end of 2013, as currently envisaged by the Government, to the end of 2014. Let us do what every other G8 economy has done and set up a state-backed investment institution to provide credit to small businesses where others will not by establishing a proper British investment bank. As we
have argued, that could be done through a new network of regional banks like the German Sparkassen. That would also help to return SMEs to a local relationship with banking, with managers who know what is needed on the ground and have the discretion to make local lending decisions. Regional banks are committed to their regions and in touch with local business. We have called for, and will continue to call for, the Government to bring forward these measures to help boost our businesses and get our economy moving again.
Even if the Government accepted all those proposals and they were acted on today, the benefits would take some time to come to the fore and to be felt. However, the one step we could take now that would immediately make a difference would be for the Government to agree to reduce VAT to 17.5% to put money back into the pockets of hard-working people and give a stimulus to local economies. That would put something back into the pot to help the local businesses we have talked about, whether by reducing fuel costs or stimulating the economy such that people feel that they are able to spend again. We need to get consumers back out there spending their money, supporting our high streets and businesses, and helping our economy to grow again. It is for the Government to explain to the people of the UK why they will not listen to the arguments that have been advanced and are not prepared to take this action as a stimulus to the economy and to help to get things moving again.