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Government Capital Expenditure

I beg to move,"That this House notes that the International Monetary Fund believes that the UK will suffer the worst economic contraction among advanced countries; notes with alarm that the Pre-Budget Report 2008 announced an effective 16.5 per cent. decrease in public sector net investment from 2012-13; further notes with concern that the Learning and Skills Council has decided to halt funding decisions for college rebuilding; expresses concern that there are currently 1.77 million people on the social housing waiting list, an increase of 100,000 on last year; further notes that only £400 million has been brought forward out of £8 billion to spend on social housing; notes how little investment the Government has made to ensure that homes are energy efficient and well-insulated; believes that the Government has neglected the current opportunity to invest in expanding the rail network; and calls on the Government to immediately bring forward funding for capital projects, particularly for schools, colleges, social housing, public transport and environmental works, all of which will create assets for the taxpayer and generate future income as well as countering recession in the short run." The ministerial statement set out the chilling context in which this debate takes place. We are dealing with rapidly rising unemployment, much of it centred on the construction industry, and the situation is bitter and divisive. We shall try to suggest a positive approach to the problem through fiscal stimulus from capital spending. I wish to make three simple points. First, fiscal stimulus is necessary, and the best way of providing it is through properly targeted public investment. Secondly, despite the Government's claim to be bringing forward capital investment, that is not happening. There are severe problems in the public investment area, and the situation is complicated by the virtually complete collapse of private finance initiative projects. Thirdly, if we are to have public investment in an environment where there are growing anxieties about public debt, we need a mechanism for proper evaluation of such things in a way that does not happen now, because much of it takes place in the framework of the commercial secrecy that surrounds PFI projects. Let me develop each of the points in turn. First, like most western Governments, we believe—and the Government say that they believe—in the need for a fiscal stimulus. Despite the severe financial constraints on the public sector, we believe that such a stimulus is right and necessary, and that the best way of bringing it about is through properly targeted public investment rather than, as has happened, the value added tax reduction. A few weeks ago, we proposed in the House that, assuming a belief in the fiscal stimulus, a much better use of that £12.5 billion would have been to introduce a series of public investment measures aimed at, for example, home insulation, social housing projects and public transport. We remain of the view that that would have been the correct way forward. Why is public investment so important in a recession? Partly because it creates employment. There is a big opportunity cost to the alternative of not investing: people remain unemployed. Some 100,000 construction workers have already been laid off in this recession. The figure was 300,000 at the peak of the last recession in the early 1990s, and there is a reasonable expectation that the number of unemployed construction workers in this recession will be even bigger than that.