Pre Budget Report

In extraordinary times, we have a clear choice – act now to come out of the downturn sooner and stronger or sit back and watch as it gets deeper and longer. This Government will not abandon people to sink or swim in the face of the global downturn.

‘Letting the recession run its course’ is exactly what David Cameron set out this week, ruling out providing extra support to people and businesses through the tough time ahead. The Tories needs to start being straight with people. The ‘do nothing’ party, and their ‘No Action’ plan would mean a deeper, longer and more painful recession. Their ideology means that they are isolated, when the rest of the world is taking the co-ordinated action needed to help get us through.

In the 80s and 90s, the Tory Government stood by as businesses and families suffered. The 1981 Geoffrey Howe budget was a case in point.

There is a widespread consensus across the world that a fiscal stimulus to help the economy is the right thing to do. It is backed by the major countries of the world, the international institutions, business groups like the CBI and Institute of Directors, parties on the left and right, the Bank of England and many more.

Opposing it, completely isolated, is David Cameron and the Tories.

The responsible thing to do is to put money into supporting the economy now – it will mean a shorter downturn rather than the longer and deeper recession that doing nothing would entail. A prolonged recession means people out of work for longer, more repossessions, businesses taking longer to start growing again and a country scarred, as happened following the home-grown recessions of the 80’s and 90’s. For example in previous recessions:

• people losing their jobs risked losing skills and touch with the workforce, which meant they stayed unemployed for longer.

• many viable small businesses went under because they faced short-term cashflow problems. Once they have been made bankrupt it is more difficult for entrepreneurs to raise the money necessary to get started from scratch.

• when the public finances have come under pressure, the first spending to be cut has been long-term investment in skills and public infrastructure, the investment we need to ensure our economy is stronger for the future. Instead of cutting this necessary investment we must keep it going.

The reason we are in a position to support the economy at this time is that over the last ten years, we have cut debt to one of the lowest levels among the world’s major economies. Lower than that of the USA, France or Germany.

Of course as everyone recognises, the public finances are being affected now by the global credit crunch as we have seen in the latest figures out today. The global financial crisis has particularly hit the banking and finance sector which used to contribute around £40 billion a year in tax revenues. And there is uncertainty too about how long the financial sector will take to recover. But as our economy grows again in the future, then, as the Chancellor has said, borrowing must come back down again and we must live within our means.