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Budget Resolutions and Economic Situation

There seems to be agreement across the House that one of the main lessons of the global financial crisis is that we need to rebalance the economy. In my view, the major objective for the Budget should have been precisely that, because it is the only way to drive sustainable growth and job creation. There are two major ways to do that, and correspondingly two tests that I set the Budget. First, it should rebalance the economy away from an over-reliance on financial services, and secondly it should reduce the regional economic disparities in our country. On the first test, we should recognise that our country has a proud history of making things, and we remain the sixth-largest manufacturing country in the world. Manufacturing growth is currently outstripping growth in the service sector. In my constituency, which is part of the black country—once the beating heart of the industrial revolution—manufacturing still accounts for one fifth of jobs. The aerospace cluster in my constituency is thriving, although against a backdrop of a worrying overall rate of 8% unemployment. One company in that sector, Goodrich, is currently on a recruitment drive, creating 100 new jobs. At the end of his Budget speech, the Chancellor said that he wanted to give meaning to the words, ““Made in Britain””, but if the Chancellor wants goods to be made in Britain, why did he slash capital allowances in his emergency Budget in June and use the £2.7 billion to deliver a cut in corporation tax, as set out on page 44 of the Red Book? This transfer will disproportionately benefit the banks at the expense of manufacturing. How is that consistent with the Chancellor's desire to prioritise manufacturing? The tax reliefs that the Chancellor announced last week are a flimsy sticking plaster for the much deeper wound he left in June. In the words of the Institute for Fiscal Studies, the Chancellor is"““giving with one hand and taking away with many others””." The same is true of the Government's local enterprise partnerships, which they trumpet as an innovative scheme. I want to pay tribute to those businesses in the black country that have successfully formed an LEP, but again the Government have given a false prospectus to these businesses. They tell people to apply for the regional growth fund, but it is a tiny pot of money—one third of what was available for regional development agencies—and is said to be over-subscribed by 10 to one. The Government know that it will leave many more disappointed than successful among those who have applied. The regional growth fund comes nowhere near filling the hole left by the very successful regional development agency, Advantage West Midlands, which was mentioned by my hon. Friend the Member for Birmingham, Erdington (Jack Dromey). Once again, the Government give with one hand, but take away with the other. I would like to think that the enterprise zones will in reality deliver what the Government claim they will deliver, but I am worried because even the Conservative Chairman of the Treasury Select Committee, the hon. Member for Chichester (Mr Tyrie), warned last week that they risk distorting activity and adding no new jobs. The risk is that they will simply incentivise existing businesses to move into a low-tax zone without employing more people. Britain needs job creation, not job relocation. On the second test, there needs to be a rebalancing of economic wealth across our nation as a whole to reduce growing regional disparities. Globalisation has brought many opportunities to the UK, but all too often the communities in the midlands and the north have borne the brunt of the risks and insecurities of globalisation, while the rewards have tended to flow to London and the south-east. Unemployment in my constituency is 8%—double what it is in the south-east—and we are losing 300 jobs at New Cross hospital and 500 jobs at Wolverhampton city council. And this is just the tip of the iceberg. The Chancellor is taking a reckless gamble by expecting the private sector to pick up the pieces of his massive public sector cuts. He is driven by an ideological commitment to a smaller state. The Budget crucially fails to redress the growing economic disparity between the south-east and the rest of the UK. Areas such as the west midlands need more stimuli for the private sector than other areas. For example, the decisions about the regional growth fund need to prioritise areas hit hardest by the global financial crisis. The Budget fails both my tests: of rebalancing the economy towards manufacturing, and of redressing growing regional disparities. We want to see more goods made in Britain, but the Chancellor's actions do not match his rhetoric, and in fact run contrary to it. With growth down, unemployment rising, youth unemployment at a record high and consumer confidence sinking, households are seeing their living standards falling as prices outstrip wage increases. The Chancellor should have had the humility to realise that his cuts are too deep and too fast, and that his massive private sector gamble simply is not working. My constituents are bearing the brunt of his reckless Budget.