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Economic Recovery

I thank the hon. Gentleman for that perfectly reasonable question. I shall come on to describe how we can both put the public finances back in order, or on the right path, and do something to help the economy along. Regionally, the unemployment picture varies. According to the Library, the biggest percentage rises in unemployment have occurred in the west midlands and the south-west, by 71 and 72 per cent. respectively year on year. Those of us who remember the past two recessions will find it interesting that the west midlands now has the highest rate of unemployment of any nation or region of this country, at 10.5 per cent. The north-east is at 9.5 per cent., and London is in third at 9.2 per cent. The latter two regions have shown smaller increases, meaning that both are suffering from the longer-term blight of unemployment during the years of economic growth of the 1990s and this decade—yet another sign that Labour failed to fix the roof when the sun was shining. To return to the question of when the economy will start to grow again, we have always said that we expect growth in 2009. Nevertheless, even the predicted quarterly growth of 0.1 or 0.2 per cent.—we will know the figure for sure tomorrow—would mean that the economy has contracted by 4.7 per cent. year on year. That is no cause for celebration. Moreover, whether or not there is small quarterly growth tomorrow, the figures are already overshadowed by the appalling Government borrowing numbers that reached us on Tuesday. Britain borrowed £14.8 billion in September, the highest total ever for that month, capping off a third quarter of astonishing profligacy by the Exchequer. That is overspending of almost £500 million a day. That is like each taxpayer in Britain coming home every day and saying that they have just gone and borrowed another £20, without any sense of when the previous day’s £20 will ever be repaid, let alone the interest on the previous borrowing. Government borrowing rose to £77.3 billion in the first six months of this financial year, more than double the already high level of debt racked up in the same period the year before. Over the 12 months to September, net borrowing was a massive £128 billion, up from an already high £47 billion in the year to September 2008. The public finances have been whacked by a double whammy of falling tax receipts and rising Government spending. Tax revenues have fallen 10 per cent. to £219 billion from £244 billion in the past six months, while Government spending has risen by an inflation-busting 4.8 per cent. from £266 billion to £279 billion. Labour Members may claim that those appalling figures are not relevant to the question of economic recovery. I believe the Minister was saying that the deficit was somehow an entirely separate matter from whether Britain will have a proper economic recovery, but the two are very much linked, as I shall explain in a moment. How can we secure a sustainable recovery? As we have said repeatedly this year, there are three essential aspects of any recovery: fiscal responsibility, monetary activism and supply-side reform. First, on fiscal responsibility, we need urgently to get a grip on our public finances. That much is obvious, except to the Prime Minister and Labour Front Benchers. That is vital in its own right, but it is also important when considering how to keep interest rates down, which will be a crucial part of our economic recovery. Huge Government borrowing will eventually push up interest rates, and the most recent figures that I have seen for the quantitative easing programme suggest that far more gilts and other fixed-income securities have been bought back than issued so far this year. Once QE has been wound up, as it must be in due course, we will need to keep a careful eye on the gilt market and other markets in which the UK might find investors for Government debt. Our deficit is the worst of any major country. The Government sometimes say that we do not need to worry, as Government debt in the UK as a percentage of GDP at 59 per cent. and rising is still below that of Japan at 188 per cent., Italy at 116 per cent., Germany at 78 per cent. and France at 77 per cent., and only marginally above the rate of the United States at 54 per cent.