Sajid Javid: Labour would wreck the economic recovery

The economy is finally recovering, but Labour would borrow more and drive up
interest rates, says Sajid Javid

If the July momentum of the PMI indicators were representative of underlying trends in the economy, this would suggest an acceleration beyond Q2's 0.6pc ratePhoto: Christopher Pledger

9:00PM BST 09 Aug 2013

Growing up in Bristol on one of the country’s roughest streets was pretty tough.  I lived with my parents and four brothers in a two-bed flat above my dad’s shop.  I remember how hard he worked as a bus driver, and then shopkeeper, to provide for our family.  So I know what it’s like for many families who are finding times tough right now.  That’s why in government, I’m determined – and Conservatives are determined – to create an economic recovery for hardworking people. 

Three years ago, we set out our plan to rescue our economy and turn Britain around.  It involved difficult decisions to cut spending and raise taxes to tackle the record budget deficit we inherited from Labour, while allowing monetary policy to support the economy in the meantime.  We have stuck firmly to this plan. 

And while there is still a long way to go, the plan is working.  The economy has moved out of intensive care and into recovery.  The deficit is down by a third, private sector employment is at an all-time high and there are over 300,000 more small businesses.  And our plan has ensured that we have kept mortgage rates low, while preventing a bond market crisis that would have destroyed businesses and jobs.  We only have to look to our European neighbours to see what that would have been like. 

Yes, growth was slower than expected over the last two years, but the eurozone was in a mess and our economy was hit by a temporary oil price spike.  Since those problems have abated – and subsequent monetary support by the Bank of England and the European Central Bank has taken effect – momentum has returned to our economy. 

Yet, over the last three years, Labour have been saying that we should have abandoned our plan.  They argued the only way to guarantee a recovery was through even more government borrowing.  They claimed that if we didn’t take their advice, growth would halt and jobs would be lost. 

But their predictions haven’t come to pass.  Only in May, Ed Balls said that the government had “choked off recovery”.  But the economy is growing.  Ed Miliband claimed we had “a programme that will clearly lead to the disappearance of a million jobs”.  Instead, the private sector has created 1.3 million more jobs.  Labour got it wrong.  There has been no need to rip up our plan and adopt their disastrous policy of more borrowing and more debt – exactly the same policy that got us into this mess in the first place.  That’s why, as he tours the television studios, Ed Balls cannot hide his disappointment that the economy is showing signs of recovery.  His argument has been blown apart. 

Yet Ed Miliband and Ed Balls are still clinging on to this same old Labour policy.  They still think, bizarrely, we could borrow less by borrowing more.  And for all Ed Miliband’s promises of spending “discipline”, he’s been too weak to stop his frontbenchers from making unfunded spending commitments that would mean even more borrowing than he admits. 

In fact, just this year alone, Labour have racked up a staggering £50 billion of spending commitments without saying how they would pay for them.  That would mean £2,960 more borrowing and more debt for every working family in the country.  If we were to adopt Labour’s policy, we would send a message to the financial markets that we weren’t serious about paying our way.  It would spark a market crisis.  Mortgage rates would soar – Bank of England figures show that if they rose by just one per cent, homeowners’ debt service bills would rise by £1,000 on average.  Job losses and business insolvencies would follow.  Hardworking people would pay the price for a Labour Party that hasn’t changed. 

So while Labour remain stuck in the past, Conservatives are focussed on the future – ensuring that all hardworking people benefit from the recovery.  That’s why we are fixing the tax and benefit system so that it rewards hard work.  We’ve cut income tax for 25 million people and taken 2.7 million out of income tax altogether.  At the same time, we’re capping benefits so no household out-of-work can claim more than the average family earns in work.  If you aspire to own a home, but can’t afford the deposit, our new Help to Buy scheme will help you do so.  Want to start a business and take on that first employee?  We’re removing a huge barrier by taking the first £2,000 off your employer National Insurance bill – a tax off jobs. 

So if you want to work hard, do the right thing and get on in life, we are for you. 

Sajid Javid is the Conservative MP for Bromsgrove and Treasury Minister