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The Economy

It is a pleasure and a privilege to take part in this debate. When I looked at the Conservative motion, I thought it was somewhat lightweight and out of touch, that it did not address the issues and that it was politically provocative. I have to say that the speeches that we have heard, including those from Conservative Members, have not been like that. A number of them have been very thoughtful and interesting. I have not agreed with all of them, although I have found myself in agreement with certain elements. During the speech made by the hon. Member for Twickenham (Dr. Cable), we were getting into a debate about what was good debt and what was bad debt. I had thought about that before, but I began to focus on it in a way that I hope is a bit more effective. In debates such as this in the past, we have all had strong views about what levels of deficits on borrowing are sustainable in the economy, what level of long-term debt we could live with and the role of automatic stabilisers, which is a big issue between the United States and Europe. We have all had views about regulation, and most of us who have taken part in these debates over the years have words to say about it. The conclusion that I am coming to is that it is actually best for us to forget about what we have said in the past. Perhaps it will be relevant when history is written, but we will not move forward as a nation if all we do is throw abuse at each other about what we have said about these and other issues over the 10 or 20 years for which some of us have been in the House. Some of us have been in the House a little longer and have doubtless thrown the abuse for longer. I got things badly wrong in a speech that I made in my constituency about 14 months ago, when I said I did not believe that there would be a severe world recession. I believed that the Chinese and Indian economies would be sufficiently buoyant to ensure that the rest of the world did not get dragged into a deepening recession. When I campaigned for the then Senator Obama in Illinois in June, I took the opportunity of visiting a banking friend in the United States, and he said, "You’ve got this wrong. This is pretty serious—we don’t know how bad it is, but it’s grim." That is where we are now. I do not know whether the recession is the equivalent of what we had to endure in the 1990s or the 1980s, or something that we experienced in recent history only in the 1920s and the 1930s. The right hon. Member for Haltemprice and Howden (David Davis) quoted Keynes. I do that occasionally, but I would like to cite a neo-Keynesian this afternoon—J. K. Galbraith. When he gave evidence to the congressional committee on the economy in 1954, when the Americans believed that another fairly deep recession might be beginning, he said that the problem in 1929 and, to some extent, in 1954, was where the wise got their wisdom. That is our position in 2009. We are all in territory of which we have little experience and where we have little background on which to draw. In many ways, we are making a stab in the dark. President Obama recognised that when he told the United States Congress that the Administration would give unprecedented amounts of money to try to stimulate the economy, but that it might not be enough and that they might have to go far further in future. We are all in that position, and it is not easy. I am supposed to be a little party political in my contributions. Conservative Front Benchers did not do justice to the debate about where we are as a nation and where the international economy is. Some Conservative Back Benchers did justice to it, but Front-Bench Members did not address the matter. Why? Are they frightened to tackle the real issues because the drift is against the ideological one that they want to offer the country? Are they unprepared to face up to the new economic situation? The hon. Member for Twickenham reminded us of historical debt and that it is not especially high at the moment. It has been much higher in wartime. If one is trying to build consensus in the nation, which requires a policy of economic stimulus that depends on building up long-term debt—there is no other way for any nation in the world; although debt has been 40 per cent. of GDP in the recent past, all the predictions that I have seen are that, in the United States, Germany, Japan and other countries, it will increase to 60 and 80 per cent., and we will be with the rest of world—one cannot rubbish the concept of national debt. One cannot have an economic stimulus, which has an immediate effect, unless one runs a higher deficit than in the recent past. Broadly speaking, according to exchange rate mechanism rules, recent deficits have had to be within 3 per cent. They are moving ahead of that in all European Union countries, and that will happen in Britain. If Conservative Front Benchers believe that an economic stimulus under some international agreement is essential to get Britain out of the economic recession—or depression—they cannot rubbish deficit financing, which is a crucial part of it.