THE BLOG

The People of Britain Have Proved Labour Wrong - Our Economy Is Turning a Corner

05/12/2013 19:08 GMT | Updated 04/02/2014 10:59 GMT

In the recession of 2008/09 we lost 7.2% of our national income, experiencing one of the sharpest contractions of any major economy. By 2010 Labour were borrowing £158billion a year, meaning one pound in every four they spent was raised by issuing debt. This explains why the last few years have been so tough and why many difficult decisions have had to be made.

Thankfully the evidence is starting to show that Britain is turning a corner. The Office for Budget Responsibility - which independently monitors government spending - has revised its growth forecast for 2013 up from 0.6% to 1.4% and from 1.8% to 2.4% in 2014. We're now one of the fastest growing advanced economies in the world. Labour said this couldn't be done without growing the deficit too, but the British people have proved them wrong.

Thursday's Autumn Statement sets out what more needs to be done to secure that recovery.

Real household disposable incomes are on the rise again, but many people are still squeezed between low wage growth and higher prices. The most direct thing government can do to help with the cost of living is to take less of your money in tax, so I'm delighted that the Chancellor announced that council tax and fuel duty will continue to be frozen. Employer national insurance contributions (NICs) are effectively a tax on jobs, so the announcement that NICs will be abolished for under-21s is very welcome news. This will make it easier for employers to take on young people, cutting the cost of hiring an employee on £16,000 a year by £1,000.

Labour's only idea on household incomes is to freeze energy prices, but this would never work because governments can't control the international price of coal and gas. What we can do is reduce the cost of the levies and charges which government energy policies add on to household bills and that's just what we're doing. Making the schemes supported by these levies more cost-effective will deliver an average saving of £50 on domestic energy bills. In addition, we're capping rail fares in real terms and the Government will be providing free school meals for all children in reception, year one and year two.

What's driving this recovery is not government spending but the private sector.. There are 400,000 new businesses in the economy since 2010, business has created three new jobs for every one lost in the public sector with small businesses in particular responsible for the vast majority of those jobs. Supporting them is vital. Many of my colleagues have campaigned hard for action on business rates and their work has paid off: at the Autumn Statement the Chancellor announced a 2% cap in the increase in business rates from next year. For the smallest firms there was especially good news. Any business with premises valued at less than £50,000 will be offered a rates discount worth £1,000 for the next two years: more money in the till for the small, independent shops and cafes which are the life and soul of Britain's high streets.

Letting people and businesses keep more of what they earn is a good start, but in the longer term the only way we can increase Britain's prosperity is to become more economically productive as a nation. When China is growing so fast that it creates an economy the size of Greece every three months, it's crucial that we retain our comparative advantage as a developed Western economy. This means investment in our skills base.

We've already added 1.5million apprenticeships since the election, and at the Autumn Statement the Chancellor announced the funding of 20,000 new higher apprenticeships which teach high level skills in the most advanced sectors of the economy. We're also funding 30,000 more university places next year and the cap on student numbers will be abolished altogether the year after, enabling around 60,000 more people to go to university.

Finally, this year's Autumn Statement affirmed our commitment to Plan A: dealing with the deficit and ensuring that we can pay our way in the world. We've brought the deficit down from £158billion to £111billion but this is still too high. We need to bring more of government spending under tighter control. At the start of each Parliament the welfare budget will now be subject to an overall cap. Any future government which wishes to the raise the cap will then have to justify its decision to Parliament and hold a vote. Crucially, state pensions will be excluded from this and will remain affordable by increasing the state pension age in line with life expectancy. This is not an easy decision, but it does mean we can afford to keep increasing the state pension every year. Next April for example it will rise by £2.95 a week, worth around £800 per pensioner per year.

This year's Autumn Statement was all about delivering a responsible recovery: supporting families and businesses, dealing with our debts and investing in the skills we need to compete with the best of the rest of the world. I am glad to support to it.