Budget Resolutions and Economic Situation — House of Commons, 2015-07-14
Topic: Macroeconomics
Stephen Nathan Kinnock (Labour, Centre-left): The Chancellor’s Budget, far from fixing the roof while the sun is shining, will send roof tiles flying while the storm clouds gather. Economic growth is crucial. It brings tremendous benefits. Between 1997 and 2008 it lifted millions of people out of poverty. An economy that is not growing is failing, but the question is: what kind of growth do we need The fact is that Britain in 2015 is more unequal, divided and insecure than it has been at any time since 1945. We know that inequality between rich and poor in the United Kingdom has widened in recent years. We also know that inequality is bad for economic growth because the majority of the population are not feeling the recovery at all and so are unable to contribute to it If the Chancellor wishes to do away with state support for the working poor, he must commit to investing in a genuine, broad-based and deep recovery that works for everyone, based on a real industrial strategy and a plan for long-term economic growth. That has to start with a renaissance in our manufacturing sector. In 1970 manufacturing accounted for one third of the British economy, and now it accounts for barely 10% The need to drive such a renaissance is imperative for three reasons. First, the manufacturing sector achieves far higher levels of productivity than the service sector. Secondly, it produces much higher quality and higher-income skilled jobs than the rest of the economy, as well as a far greater geographical spread of skills and jobs than the financial sector produces. Thirdly, it enables us to pay our way in the world. Our balance of trade deficit is currently higher than it has ever been since the 1830s. That is a huge drag on our economy, and it can be dealt with only by increasing manufacturing for export Given the central part that manufacturing has to play in building that new kind of growth, it is absolutely imperative that the Chancellor now sets out a new industrial strategy, which I think should be based on six key pillars. First, we must produce highly motivated and skilled young people who are capable and willing to enter manufacturing, engineering and wider industry Secondly, the UK has a strong research capability, but we struggle when it comes to driving our new ideas and technologies into the business sector. A proper industrial strategy would provide enhanced support to the Catapult centres, which have provided a welcome boost to the commercialisation of research and development, but much remains to be done and they need more resources Thirdly, on energy, there is a pressing need for a 10-year plan that lays out the investment path required to build a secure, competitively priced and clean energy supply. The growth of clean energy is a huge opportunity for the UK economy, with projects such as the Swansea Bay tidal lagoon promising to deliver thousands of high-paid, high-productivity jobs Fourthly, there is the UK’s inadequate transport and digital infrastructure. This is particularly important, as it contributes to the chasm that exists between London and the rest of the country. There is a pressing need for a long-term infrastructure plan that would properly connect the country and provide a launch pad for a nationwide manufacturing renaissance Fifthly, on finance, the UK’s banking system is fundamentally skewed towards the stimulation of private consumption, asset value inflation, and personal debt. It is essential to create a new financial support system for manufacturing that is geared towards enabling the growth of the manufacturing sector. Germany’s Sparkassen should be the model—truly local banking that is an integral part of the regional economy, focused exclusively on lending to start-ups and small and medium-sized manufacturing businesses Finally, on procurement, the Government manage a multi-billion-pound budget for the procurement of everything from care services to steel for major infrastructure projects, and their approach is far too laissez-faire. Far more can and should be done to ensure that UK products and services are prioritised for procurement. This can be done without violating EU competition rules simply through tighter definition of value-for-money clauses in tender documents. It is right that contracts funded by the British taxpayer should be won and delivered by British companies This industrial strategy sounds wonderful on paper, but it is worthless if not underpinned by strong support for the steel industry, which is the critical foundation industry for our manufacturing renaissance. Steel plays into every aspect of the long-term strategy we need. As the Member of Parliament for Aberavon, which hosts the largest steelworks in the country, I must draw the House’s attention to the importance of the steel industry. No longer can Government-tendered projects such as the refurbishment of the Severn bridge be allowed to go ahead using French steel when the best steel in the world is British This Government also need to take into consideration the importance of compensating heavy industries such as steel for the cost of the carbon tax, which eats into productivity. Going back on promises that were made in the previous Parliament would leave steel companies exposed to 70% of the cost of the EU renewable levy policies. That would be seriously detrimental to the steel sector and wider manufacturing, and ultimately harmful to the UK economy The time has come for a Government who are prepared to plan for a new type of long-term, sustainable growth that produces high-wage, high value-added jobs and gets the country making and exporting rather than perpetuating the agenda for the status quo of growth fuelled by debt and consumption. Until we have such a plan, I cannot support this Budget. I exhort the Chancellor to go back to the drawing board, roll up his sleeves, and come back with a strategy for a new kind of growth that will build a United Kingdom of strength, purpose and resilience.