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Finance (No. 4) Bill

This Government are borrowing an extra £150 billion because of the costs of their economic failure. The reality is that, with more people out of work and therefore claiming benefits, and with fewer businesses succeeding and paying taxes, this Government are ending up borrowing more, because their risky gamble with their economic policies has failed. Instead of continuing on the downward path begun under the previous Government, total unemployment has mounted to new highs. It is now at the highest level since 1997. Some 2.67 million people are out of work. More than 1 million young people are out work. We have the highest level of youth unemployment on record. That is a cruel fate to be inflicting on people leaving school, college and university. Instead of going on to get a job or training, they are being left to rot on the dole queue. The truth is that—just as we on this side of the House, along with numerous independent economists, warned—the Government's attempts to cut too far and too fast have choked off the economic recovery, squeezing households and businesses and sending unemployment soaring, with the result that, as I said to the hon. Member for Dover (Charlie Elphicke), the Government are now forced to borrow £150 billion more than they had planned. This lesson is being learned around the world, as over-ambitious austerity plans founder. Last year the OECD warned credit rating agencies which press for rapid fiscal consolidation but"““react negatively later, when consolidation leads to lower growth—which it often does.””" Sure enough, Standard & Poor's decision earlier this year to downgrade nine of the eurozone's 17 member states was accompanied by the warning that"““fiscal austerity alone risks becoming self-defeating.””" The International Monetary Fund's sharp downward revisions of its global growth forecasts—including for the UK—for 2012 was accompanied by a call to ““reconsider the pace”” of fiscal consolidation. Indeed, the IMF's chief economist has said:"““Substantial fiscal consolidation is needed, and debt levels must decrease. But it should be…a marathon rather than a sprint””" and cited the proverb"““slow and steady wins the race””." Our economic performance did not have to be this way. We need only look across the Atlantic to see the benefits of a more balanced approach to deficit reduction, with the US now enjoying steady falls in unemployment and accelerating economic growth. Let me quote the opinion of Adam Posen of the Bank of England's Monetary Policy Committee. His forensic comparison of the US and UK experiences concluded:"““Fiscal policy…played an important role as well. Cumulatively, the UK government tightened fiscal policy by 3% more than the US government did…and this had a material impact on consumption. This was particularly the case because a large chunk of the fiscal consolidation in 2010 and in 2011 took the form of a VAT increase, which has a high multiplier for households.””" In other words, by hitting households as hard as they did, sapping confidence and sucking demand out of the economy, the Chancellor and his ready accomplice, the Chief Secretary, have got the UK stuck in the slow lane while other key players in the global economy are overtaking us.