So, last Thursday saw me at the School for Social Entrepreneurs, run by the incredible Alistair Wilson. For some time now I’ve argued we need something in our civic life that brings political activists and social entreprenuers together. Talking to some of the School’s students and fellows made me more convinced than ever.
On the one hand, a closer relationship helps people in politics understand better the kind of services and reform that works much better than the kind of things we do today. On the other, a stronger relationship creates for entrepreneurs a platform on which they can attract resources that enlarge their chances of success. More – much more – on this in the weeks to come.

Liam with some of School for Social Entrepreneurs' alumni

So, Friday saw the FTSE 100 hit its highest mark,  since September 2008 – up 4.6 percent on the week and 11 percent since Feb. 5. And in the US, February’s unemployment held at 9.7 percent – some 2pc higher than in the UK –  (see Bloomberg). US payrolls dropped by 36,000 last month but the jobless rate has now been stable since October.

Against this backdrop, I saw three interesting comments on the risks of beginning to cut the deficit too soon.

President Obama’s chief economic advisor Dr Christina Romer (Statement on the Employment Situation in February) argued:

‘[A]n unemployment rate of 9.7 percent is unacceptably high and we need to achieve robust employment growth in order to recover from the terrible job losses that began over two years ago.  That is why it is essential that Congress pass additional responsible measures to promote job creation.  It is also vital that we continue to support those struggling with unemployment…’

A few economists have been underlining this argument for continued government support for the economy. Jospeh Stiglitz this week argued (Commentary, NY Times):

‘Most economists … agree that it is a mistake to look at only one side of a balance sheet (whether for the public or private sector). One has to look not only at what a country or firm owes, but also at its assets. This should help answer those financial sector hawks who are raising alarms about government spending. … Spending, especially on investments in education, technology, and infrastructure, can actually lead to lower long-term deficits. …

And earlier in the week, James Galbraith made a similiar point;

‘the deficit phobia of Wall Street, the press, some economists and practically all politicians is one of the deepest dangers that we face. It’s not just the old and the sick who are threatened; we all are. To cut current deficits without first rebuilding the economic engine of the private credit system is a sure path to stagnation, to a double-dip recession–even to a second Great Depression. To focus obsessively on cutting future deficits is also a path that will obstruct, not assist, what we need to do to re-establish strong growth and high employment. …’

Cutting the deficit too soon – as the Tories here propose, would simply be an economic disaster.

Below, the text of my remarks to today’s Scottish Economy Seminar, hosted by the Secretary of State for Scotland in Edinburgh.

Introduction

• I’m very glad to be have some time with you in Scotland today

• And I’m especially grateful to Jim Murphy for organising today’s excellent event, and for inviting me to speak to you.

• With me today is Dave Ramsden, the Treasury’s chief economist, who will be able to talk through the details of the macroeconomic position

• But before he does, I want to say a few words about how I see the economic situation, and what the UK needs to do next.

CONTEXT

• If 2009 is remembered for recession, then 2010 must be marked by recovery

• And, in the UK, we have good reason to be confident

• We’ve taken unprecedented action to support the banks – including here in Scotland

• Our fiscal stimulus has protected jobs and kept people in their homes through the global downturn – ensuring fewer bankruptcies and repossessions than in previous recessions

• And, while risks remain to the world’s economy, its in much better shape now than 12 months ago

• The new questions of modern political economy are now becoming clearer:

o Who will give us economic growth that is fastest and best rebalanced towards investment and exports?

o Who will give us the right balance of public spending to deliver that plan, and not put the recovery at risk?

o And who will deliver a fair share of the prizes we know our country can win in the years ahead? Who will do most for the many?

GROWTH

• Let me start with growth, becuase here we confront our first choice

• We can resign ourselves to a lost decade of under-investment and low employment

• Or we can be ambitious and go for growth.

• Though some disagree, the Government cannot sit this one out – the decisions we make are critical to our country’s prosperity

• We’ve acted in the last couple of years in a way only Government can:

o We stepped in to support the financial system

o We cut VAT to put £12bn into the economy

o We gave confidence a jump-start with measures like the scrappage scheme. Over 23,000 cars have been ordered in Scotland alone

• Our takeaway from this action is that action was right. And that is why we’ll act again to support growth – putting growth at the heart of the forthcoming Budget

• That means creating conditions for you to trade and invest

• It means looking at areas such as transport, skills and innovation, to see how we can further dismantle the barriers to growth and enterprise

• It means building on Scotland’s strengthes.

• Even in the global downturn, Scotland exported over £20bn of goods and services last year

• Edinburgh is a world-class financial sector. And, like London, it needs to remain so

• The reforms we’re making to strengthen the banking system will help achieve this

• And look at high-tech. There are over 100,000 jobs in electronic and high-tech in Scotland – supported by R&D tax credits and our investment in skills

• Or look at the energy sector. Never more important

• Only last month, the Chancellor announced new incentives to promote investment in remote gas fields in the West of Shetland.

• With Government support and investment, we have the capacity to be world leaders in this area.

• You will have other views – and this morning I’d like to hear your priorities for the budget

PUBLIC SPENDING

• So growth is essential to our economy. It will create jobs and new opportunities for all parts of the UK

• But growth will be faster if we put in place the right plan to reduce the deficit

• Unlike some, we firmly believe its right to maintain spending until the recovery is secured

• As the IMF has said, to cut now would be too risky

• But we’ll need to take action to bring down borrowing once our economy is again growing at full clip

• We’ve published our plan to halve the deficit over the next four years. In fact we’ve made it a legal commitment;

• We’ll take out £82bn by 2013-14.

o £19bn will come from the tax measures we’ve already announced. No Government likes to raise taxes, but when we do, we must do it fairly. 60% of extra revenue will be raised from the top 5%.

o £38bn will come from scaling back spending

o And £25bn from growth and other factors

• This is the most ambitious and detailed deficit reduction plan of any G7 country

CALMAN ANNOUNCEMENT

• I want to finish with a few words on a fair share of the prizes of the years ahead.

• I am an optimist about the decade to come. Economic growth is set to outstrip population growth meaning rising wealth per head around the world.

A giant new middle-class is being created in China and India. And we are still only at the beginning of our relationship with those great markets. We trade more with Ireland than Brazil, Russia, India and China put together.

And growth won’t come just from exports. It will come from others investing in us. We are already home to $1 trillion of FDI. We are the favourite place in Europe for Chinese HQ. Thousands of foreign students every year start their careers with a spell of study on our shores.

We can do well in the era that’s coming. And devolution has and will help make sure every part of the UK shares in that change. .

• Now, some argue for full fiscal autonomy for Scotland – but they can’t answer some fundamental questions, like how to deal with Scotland’s fiscal deficit

• And full fiscal autonomy could impose yet more cost on businesses – such as the financial service firms so important here

• So the Government does not agree with the call for full fiscal autonomy. But the Calman commission recognised the merits of greater fiscal responsibility to strengthen the devolved Government

• So, back in November, Jim announced a whole package of measures that together represent the most significant change to Scottish finance in a generation

• Allowing the Scottish Parliament to set its own rate of income tax; devolving some smaller taxes; introducing a new Scottish borrowing power for capital investment

• These are radical changes and we’ll introduce legislation in the next Parliament as a matter of priority

• We’ll need to ensure we learn from the experience and knowledge of businesses and third party groups in Scotland as we make these changes

• So, today I can announce that HMRC will establish a new group to advise on the technical and practical implementations of Calman

• The group will include professional and tax advisers, and business representatives with a number of open events.

• Ensuring a stronger Scotland plays its full role in a stronger Union.

• A Union where we’re making the right calls

o Seizing the opportunities for growth

o Not playing games and risking the recovery

• Thank you

Tomorrow sees me in Edinburgh with our Secretary of State Jim Murphy and the Treasury team. We are meeting a cross-section of the business community to hear how they feel the recovery is taking hold – and what their priorities look like for the budget. More on this later.

The Conservatives’ ‘panic of the polls’ is now producing a shriller lurch to the right as today, like a bad magician, Mr Osborne started claiming he can cut taxes and the deficit all at the same time.

In a very short speech, he claimed he wants Britain to make things and then said he’ll put up tax on business investment in a way our manufacturers say would be a ‘disaster’ for the recovery.

He spoke about fairness but he stood by tax cuts for millionaires while cutting child tax credits, and the child trust fund for those on modest incomes, in just a few months time

We were promised a 12 point plan but I’m afraid and we got just one idea. The Tories would slam on the brakes just as Britain is starting to recover. This man is a chancer not a Chancellor.

Some of you might have seen a story in The Times today, which suggested that hospitals would close as a result of the savings and efficiencies in spending in the Department of Health,  part of a wider programme of savings across government which I am driving as Chief Secretary to the Treasury.

This is wrong. The Times accepted that they’d made a mistake and overnight they changed the way the story was written to more accurately reflect what I said in the interview.

In the interview, I specifically said that hospitals would NOT have to close as a result of these savings. What I DID say is that hospitals will do more of their work in community health centres and the like.  These centres – we’re going to get three in Hodge Hill – are more convenient, efficient and cheaper. And patients like them.

The Health Secretary Andy Burnham has said many times that he wants more care provided in the community, rather than in hospitals. Of course, if you start providing more care in the community, you might be able to stop using certain buildings on hospital sites – but ‘closing buildings’ is a world away from “hospital closures”!

For the record, here’s the relevant part of the interview transcript:

EXCERPT FROM INTERVIEW WITH LIAM BYRNE

INTERVIEWERS ARE RACHEL SYLVESTER AND ALICE THOMSON OF THE TIMES

FRIDAY 26 FEBRUARY 2010

RACHEL SYLVESTER:
Is it going to mean hospitals are going to close?

LIAM BYRNE:
No, I don’t think it is, but I do think that some hospitals will have to start doing more of their care in the community rather than in, you know, big expensive buildings, so we’re getting three health centres,  big new health centres, in Hodge Hill, thanks to the fantastic constituency MP [sound of laughter from journalists] and a lot of hospitals will be able to do more of their work in centres like that which are in many ways more convenient

RACHEL SYLVESTER:
So you might be able to close some of the hospital buildings?

LIAM BYRNE:
Yes, well, a lot of hospitals I think are thinking about moving some of their business out  into the community because it’s better care, it’s better quality, it’s more convenient, it’s round the corner, you know. It’s also cheaper.

ENDS

After an interview with the Times, a schoolgate surgery at Gossey Lane School and my weekly street survey out in Tile Cross, I got the chance tonight to drop by and see one ofthe community groups that has inspired me most – eVolution, based in the Pelham in Washwood Heath.

I talk about them all the time. Starting with after school football clubs at Leigh Rd School, Basharat Dad has built the organisation into a group running youth services, training, and now getting people back into work. What was fascinating was talking to youngsters whose confidence and self esteem have been transformed by working through eVolutions year long youth programme. Yet they have a tough time getting funds and contracts to do what they do – despite being so much better at it than anyone else.

It is partly their inspiration that drove me to push to create a Social Investment Wholesale Bank. But we need to widen far further the role groups like eVolution play in delivering services in communities like mine.

After what could generally be regarded as a difficult four weeks, the Shadow Chancellor used last night’s Mais Lecture to break loose from the Tories’ “reassurance first” strategy, and confirm he would start cutting straight away.

And the alarm bells in the City started ringing immediately.

Almost as soon as George Osborne sat down, UBS’s highly respected senior economic adviser George Magnus voiced fears of many in the City who believe that Mr Osborne’s plans to cut spending immediately could lead to a sterling crisis and a ratings downgrade.

Mr Magnus’ comments came just days after the IMF said withdrawing support for the economy too soon could put the recovery at risk, echoing what 60 leading economists said at the weekend.

Much under-reported in George Osborne’s speech was another gem – his admission that his plans to cut tax credits and child trust funds for families on middle incomes are only ’some specific examples’ of the cuts he has up his sleeve – not the full picture.

We’ve always said that these plans were grossly unfair. Last night he reminded us of a Tory side we’d hoped would disappear when he said he wanted to get rid of the Child Trust Fund for people earning just £16k, who he described as being among the richer families in the country.

But now, we must also consider the impact that those cuts would have on consumer confidence – families who expect to see their incomes fall will be less likely to spend, slamming the brakes on the recovery even harder.

Mr Osborne has also said he’s going to increase the tax on business investment in a few months time by scrapping the Annual Investment Allowance: this when we know business confidence is fragile and when investment is critical to future growth.

Now that we know they WILL cut in 2010, he must come clean about the other cuts he is concealing. Our great fear is that the other cuts will include the discretionary fiscal stimulus schemes he already opposed – e.g. the Future Jobs Fund, and the business support schemes, such as Business Payment Support Service which has helped over 160,000 businesses to defer over £5bn of tax to get through the recession.

The Tories’ talk on the deficit is getting more and more aggressive but the detail of their plans if anything is getting cloudier and cloudier. We still don’t know by when they’ll halve the deficit; we still don’t know by how much further than us they will cut the structural deficit; and now most urgent of all, we don’t know what their planned cuts are for next year.

It’s time that the Tories end their strategy of concealment and be much more straightforward about the gamble they’re taking with our recovery.

Notes to editors:

 ”We will take targeted steps to reduce some budgets in-year – and we have set out some specific examples – in order to build credibility and make a start on reducing the deficit.” George Osborne, Mais Lecture, 24 February 2010

“A credible plan is not really credible unless you’re prepared to make a start on it this year.” George Osborne, Mais Lecture, 24 February 2010

In search of this week’s press release, the Conservative party cooked up a plan to give away the public’s shares in the banks to ‘low-income’ families; presumably to fill the hole in their social policy created by taking away Sure Start, child trust funds and childrens’ tax credits from middle income earners.

I would just say this.

When it comes to the shares in the banks the public expects us to focus on getting their money back. That means selling them at a time and way that maximises their value, not an irresponsible and expensive political gimmick.

My interview on today’s Politics Show in the West Midlands will be on iPlayer soon.

It was a great privilige to help launch Labour’s fight – and message – in Warwick today. Briefing the press together with the PM afterwards (below), my argument was simple. Only Labour is going invest in the jobs of the future with support digital technology and for low-carbon technology at firms like Jaguar Land Rover, and high speed rail which will revolutionise our regional economy. And only Labour is going to protect those public services especially schools and 16-19 training, that will giving everyone in our region a crack at getting those high skilled, better paying opportunities. The fight is on.