Angela Eagle, shadow secretary of state for business,innovation and skills, is in a bullish mood, declaring she is always willing to listen to business and that the financial services industry is key to the UK’s growth.
She also believes she has a recipe that will tackle the UK’s productivity problem: investment in skills, training and business. In her view, chancellor George Osborne has neglected all three, leaving him with a £55bn hole in his arithmetic.
Her comments come as Labour is fighting an uphill battle when it comes to regaining economic credibility; it is recognised as one of the reasons behind last year’s election defeat. The party is still grappling with how to win back confidence – a task made no easier by talk of renationalisation and “the people’s quantitative easing”.
As we sit in her office overlooking Victoria Embankment, Eagle says: “The financial sector is an important part of our economy. You can’t grow an economy without having reasonable banks and insurance and all of the financial services that come with being part of a modern economy.
“My door is always open to listen to their views on what the government policy is, what the implications are for them, and by definition also our general economy health. I do that day in, day out.”
She adds: “We all know that we’ve got to listen to what all of those companies think would be best to develop our economy.”
As you might expect, she is scathing of Osborne’s economic track record. “Osborne’s now got a £55bn hole in his arithmetic because of the downgrades from the Office for Budget Responsibility. If you look at the OBR report and the Red Book, it’s clear that the huge downgrades in prospects for growth are down to home-grown problems – that is, our productivity problem.”
Specifically, she says Osborne has neglected skills, training and huge falls in business investment. She says: “He hasn’t done enough to ensure business can invest properly so we can improve our productivity. They’ve put out a productivity plan that the select committee said is just a list of things they’re already doing – and none of which are having any effect.
“So we’re now faced with an economy where the productivity gap between us as a G7 country and every other G7 country apart from Japan is growing and that means the potential for future growth is smaller. The way you tackle that isn’t about complaining about global conditions, it’s about sorting out these structural imbalances in our own economy – he’s had six years, where are the successes in these important areas? Nowhere to be seen.”
Indeed, just last month the Organisation for Economic Cooperation and Development warned that Britain must fix its productivity problem to secure future economic growth, drawing attention to the productivity gap with the other G7 nations.
Eagle is now getting into her stride, stating: “Where was the help for steel? Nowhere to be seen. Where was the industrial strategy that could have helped us generate more growth? Why are they only pursuing a dash for three million apprenticeships of whatever quality rather than having a higher quality approach to skills training?
“Why are a third of the vacancies in our economy down to skills shortage? Why aren’t we generating within our own system the people that can fill those vacancies? He’s had six years to deal with some of this and he’s making no progress. That is an indictment of him.”
So what would she do differently? Eagle thinks that the state needs to be “enabling”, making the right interventions in science, innovation and skills to create a more vibrant economy. But that means public spending which could stand in contrast to Labour’s hunt for economic credibility.
How does Eagle square this apparent contradiction? She says she cannot lay out an “alternative Budget” as she says she hasn’t seen the government’s books. But, she says Labour “won’t fetishise the deficit to such an extent to cut off our noses to spite our faces”.
“We’ve been saying you have to get growth as well and that is an important part of how you deal with the deficit.
“Productivity is so low and not improving – its half of what it was during the Labour years – that means the potential of the economy to grow has had to be downgraded so you’ve had downgrades to 2.4 per cent to closer to two for the rest of the parliament, which means you end up with a smaller GDP level, a smaller economy, which means paradoxically that your deficit goes up.
“Some of the deteriorations in the forecasts demonstrate that this government is becoming self-defeating in the way in which it is running the economy: low wage, low productivity low skills, it’s not a way to make a modern economy grow.”
Eagle believes the problem has been exacerbated by Osborne being named as a potential successor to Prime Minister David Cameron. She says: “The Budget demonstrated the chancellor is more interested in his succession strategy to become Prime Minister than in what is in the best interests of the country. And I think he’s been found out.”