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Nadhim Zahawi portrait

Nadhim Zahawi is a member of the BIS Select Committee, the Party’s Policy Board and MP for Stratford on Avon.

Since 2010, Britain has pursued a clear and decisive economic plan. We’ve been an island of stability, in stark contrast to a Europe mired in crisis and uncertainty. When Kipling wrote ‘If you can keep your head when all about you / Are losing theirs and blaming it on you,’ he could have been referring to Conservative economic policy.

By sticking to our guns we have now the fastest growing economy in the G7. Indeed, the recovery began much earlier than first thought. Recent revisions to GDP show that not only was there no double dip, but that the economy returned to its pre-crash size last year. There are 1.8 million more people in work, we’ve seen record falls in youth unemployment and business investment is growing at double digit rates.

What’s missing from this picture is stronger real wage growth, but we should be in no doubt that Conservatives are best placed to help on this. By taking tough decisions on spending we’ve been able to support take-home pay with cuts to income tax. The strong jobs recovery has also meant we’re backing the first real-terms increase in the Minimum Wage since the recession.

In the long run, higher pay can only be paid for with a more productive workforce, and that means better schools and more skills. We’ve reformed schools with a more rigorous, industry-relevant curriculum, and we’re on track to see two million apprenticeship starts by the end of this Parliament. We’ve also introduced a modern industrial strategy: working in partnership with business to back the most advanced sectors of our economy, from robotics to pharmaceuticals, synthetic biology to satellites. It’s about long-term planning on the skills, finance and infrastructure we need to create the high paid jobs of the future.

Yet all our plans to drive up pay are only possible in the context of a strong economy. Without economic stability, employers would not have the confidence to invest in new skills or research and development, nor would tax cuts and a higher minimum wage be affordable. So we must continue to work through our plan, and we can’t let the public forget the risks that remain.

Those risks are numerous. China is over-leveraged and struggling to reduce its dependence on government-led investment. The days of rapid rollicking growth in the emerging economies seem to be over. Above all, a weak eurozone is threatening to slip back in to a triple dip recession. The IMF has said that just 30 per cent of eurozone banks are healthy enough to rebuild their balance sheets and boost lending at the same time.

Weak banks are matched by weak governments. As in 2010, the experience of Greece is instructive. Threats from the government to exit the IMF bailout programme early have sent Greek bond yields soaring. This isn’t because Greece is really ready to “stand alone” but because the political agenda is being driven by a populist left committed to reversing reforms and writing off half the country’s debt. The problem here is not just that the Greek government have lost control of the economy, but that they’ve lost control of the argument.

For many years, Labour have derided this comparison, arguing that “Britain is not Greece”. And, yes, they’re right. Britain is not Greece because we have a strong government with a clear plan. That plan means that unlike Greece we enjoy the confidence of investors and we’re not at the mercy of events.
So having lost the big argument on the need for early austerity, Labour is now experimenting with a new argument, one which I suspect we’ll hear a lot more of in the months ahead. It goes like this: the biggest threat to Britain’s recovery is not more borrowing, debt and tax but David Cameron’s plan to hold an In/Out referendum on Europe by 2017. The suggestion is that this will create uncertainty, which in turn will hit business confidence.

Leaving aside the business costs of an unreformed Europe, Labour’s central premise is deeply flawed.  Something is wrong with the relationship between the British people and the European Union – that is the cause of uncertainty, not the prospect of a referendum. So denying the British people a voice won’t make that uncertainty go away, quite the opposite. It will give credence to the UKIP argument about a Westminster conspiracy against democracy, assist the rise of minority parties who are long on angry slogans and short on solutions, and ensure a future of weak government without the parliamentary numbers to drive though serious reform. Let’s see what happens to business confidence under Lab-Green-SNP coalition in 2025. By contrast, we’re putting the question to the British people because we want to end this uncertainty, one way or another.

So we must remain vigilant against the external threats to the recovery, because the plan is working but it isn’t finished. At the same time we must do everything we can to see off the biggest single internal threat to our economy: another Labour Government.

30 comments for: Nadhim Zahawi MP: Labour says “The UK isn’t Greece”. Indeed. Because they don’t govern Britain.

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