Liam Byrne MP [check against delivery]:

It’s a great pleasure to be speaking here at Progress this afternoon. When we set up Progress 15 years ago, we were always very clear that it should be the home of the new generation. Now I’m approaching 40 I want you to know how I feel very comfortable here. Although I don’t think it’s going to be long before I feel a sense of relief that Ed says the new generation is an outlook and not an age. JK Galbraith once said that the only function of economic forecasting is to make astrology look respectable. Nonetheless I do want to look into the future a little this afternoon and make two points about the way we oppose this government’s economic policy. And second, how we renew our own plans for Britain – in the spirit of humility and pride which Ed Miliband put so well this week.

That is why when I look at this coalition, my greatest fear is that they are about to destroy what we got right – and ignore all the lessons we had to learn the hard way. As much as they try as they might to destroy our economic record. They can’t disguise that GDP per capita grew faster than any other major economy between 1997 and 2009. And while inequality grew in almost every single country in the OECD – we were one of just three that held inequality in check. What a contrast to the Tory record of two recessions which were accompanied by inflation spirals and double-digit interest rates. Labour’s success was built on a simple philosophy. Connecting people to work. Making work pay. Working smarter, not just harder.

Economically, we knew it made sense. Politically, we knew it was vital. For both the new Democrats and New Labour understood that the path back to power demanded people know us as sharing their values; values of aspiration, hard work, restraint. Earning your way on in life. Not riding on the backs of others. That instinct fashioned an agenda that won three elections. The New Deal and the windfall tax on utilities. Welfare to work. Tax credits. .Work was the way to get on. Welfare was a hand-up not a handout. It produced extraordinary success: Employment up 2.6 million; Hours up every year by 4%; National wealth up by some £600 billion.

But Britain was not just working – we were working smarter. Our spending on education rose significantly. When I started as an MP six years ago, many of my schools were in crisis. Now they are delivering in Birmingham’s inner city 100% of kids with 5 good GCSEs. An accident? No. Total funding, including capital, has more than doubled per pupil in real terms. Our investment in skills and higher education more than up by £15 billion during our time in government. There were 1 million people fewer without skills in 2010 than there were in 1997. And so our productivity as a country rose: from 1.5% to 2.1%And with productivity up, so wages rose. Jobs up. Productivity up. Wages up. It is a story almost without parallel across the world. Now the Tories seem determined to tear that strategy to pieces.

Labour was very careful about putting together our plan to halve the deficit. We set out in detail in our budget in March to halve the deficit by 2013/14 – a target which we would have met according to the OBR’s forecasts of Labour plans. Crucially, we planned some £22 billion of consolidation to come from a return to growth. And that’s why we put so much effort into our plans to get people back to work with new programs like the Future Jobs Fund, and critically a pace of paying down the deficit that didn’t put the recovery at risk. That wasn’t just good morality. It was good economics. The overall savings from lower unemployment up to 2015 would total [£14 billion]. Now the Tories plan. Adds £6 billion more cuts this year. £80 billion more by 2014/15 in cuts over and above what we said is wise. It will hit the economy so hard that they had to cut growth in every one of the next five years. Put 100,000 people – at least – on the dole. And put the benefits bill up by £750 million more. Now, they’re planning public sector cuts when every warning light is telling them the private sector’s not ready to pick up the pieces: Bank lending to business is not up, it’s down. Vacancies in the job centre are not up, they’re down. They simply cannot kick old habits, old actions, old slogans: that unemployment is a price worth paying.

Repeating mistakes

But let’s be honest. I said on Monday that I would rather have a government that made mistakes, than a government frozen in the ice of its own indifference, but Labour’s economic record wasn’t perfect. No one is. But where we learned from our mistakes, the coalition seems determined to repeat them. Let’s start with the big one: the causes of the global crash. Books are pouring off the presses now. There are different views of the cause. But almost all confirm: this crisis was born American. It started on Wall Street. Not Downing Street. Perhaps the best analysis starts with Ben Bernanke, Chairman of the Fed. The point he makes is that after the Asian financial crisis of 1997, developing countries stopped risking deficits, and started building surpluses. Today China has some $2.5 trillion of foreign exchange reserves. That money had to go somewhere. And plenty of it went into US Treasury Bills. So even after the Fed started raising interest rates in July 2004, long term interest rates stayed low. The result was the boom in the US housing market and the blowing of the bubble. US house prices were to rise by 189% between January 1997 and April 2006. But, spreading that risk like a virus into the world’s financial system, was the practice of slicing up loans and reselling them around the world. I’m not sure there was much that could have inoculated RBS, of which 64% of its business was abroad or Lloyds TSB of which 47% of its business was abroad. Now our opponents humoured us with such intellectual power that we created this global meltdown all by ourselves.

But the crisis was well and truly global. In response to the turmoil, the European Central Bank had to pump €95bn into the credit markets to improve liquidity. German banks were hit. Even Swiss banks were hit. The Swiss government had to invest CHF 6 billion into UBS, and relieve UBS of problematic assets of up to US$60 billion. The only solution to solving an international problem is an international solution. Yet, where is the UK push to get global banking reform fixed? And where is the UK push to get the world economy moving once more? Be under no illusion about the new challenge: Over the last decade the American consumer has become worth some 20% of the global economy. But Americans are no longer spending. $13 trillion of American wealth has been destroyed in this crisis. They’re saving. And that means we need a new source of growth. We need a new plan and a new push to rebalance and re-regulate the global economy. Problem 2: when the crash hit our shores, we were exposed because we’d come to rely too much on financial services. Make no mistake, the city is key to Britain’s prosperity. But it had come to make up some 20% of corporation tax.

That’s why we had to rebalance. That’s why we put aside money for new industries with new jobs: digital; low carbon; pharmaceuticals; nuclear. New infrastructure like high speed rail. And strong agencies in every region. Now this government is tearing that plan apart. The Tories have no growth plan. The centre-piece of the Tory growth plan is ‘making Britain open for business’ by cutting corporation tax cut by 4% over the course of the Parliament. However the IFS have said that this helps banks and supermarkets more than it helps manufacturers. Worse, to pay for it the Tories killed the Annual Investment Allowance which our manufacturers said they needed. One of the systemic problems of Britain’s economic model has been regional divides. But the Tories have no regional strategy. They have scrapped regional ministers. They have scrapped regional targets which aim to reduce the North-South divide. They have scrapped existing government help for regional commerce (RDAs). Their cuts in public spending, particularly 610,000 public sector jobs over the next six years, will hit the parts of the country where economies are dominated by the public sector, but also where unemployment is already relatively high. This could lead to the same unemployment hot spots of the 1980s – areas completely devastated for an entire generation. In Birmingham it could take the unemployment rate to 18%. The Tories have said that these job losses will be made up for by private sector job growth. But after the last They are estimating 2.5 million private sector jobs created over five years with the economy growing at 2.5% annually. But after 1980s recession it took 8 years to do this with 3.5% annual growth and after 1990s recession 11 years with 3.1% annual growth.

Third. The government’s doing nothing to fix the root cause of the asset bubble here in the UK. Right the way around the Northern Atlantic economies, house prices boomed. Up by 190% in the US. 210% in the UK. 220% in Ireland. Cheap money – driven by global imbalances and regulation that was too light, was part of this. But let’s be honest, there was a basic supply and demand problem too. As a country we were just not building enough houses. But Labour simply didn’t fix this fast enough. Now the government has a plan to bring house building to a halt: They have scrapped regional house-building targets. They are laying the foundations for another bubble to come.

Conclusion

So we win – and then what? The truth is we can’t simply return to power on a prescription for a country of ever greater, yet soulless wealth. We have to be the party that stands for a country with a wealth of soul. And that means we have to confront the basic challenge that globalisation is no longer uniting, it is dividing the United Kingdom. Over the last 20 years decisions by leaders and voters on four continents have created a global marketplace that links together 6 billion of the worlds 7 billion people. It’s created what Newsweek calls the Rise, not of the West, but of the Rest. The world’s tallest building. It’s not in New York but Abu Dhabi. The world’s largest investment funds. Not in Europe. But China. The world’s biggest film industry. Not Hollywood. But Bollywood. It’s created incredible chances for Britain. We have grown faster than Europe and Japan for the first time in a century. When I started my career as a technology entrepreneur 10 years ago, I was able to put together intellectual property from the US, investment from Switzerland, programmers from Poland to build a business in the space of months. Yet look around a constituency like mine and you see businesses moving out. Jobs lost. Not replaced. And when you look across our country and our society you see amidst the story of the last 10 yrs the bottom third of workers who have barely had a pay rise for a decade. Yet think of the decade to come. If nothing changes this group’s earnings could fall behind the national average by £2 billion a year. This is not an outlook for a more United Kingdom. It’s a country that grows, but grows apart. So core to the business of economic policy renewal must be a plan for growth, yes, but also a plan for us to grow better off together. A year ago, this week I had the chance to meet in Washington, the team behind president Obama’s taskforce on the middle class. I’m pleased to be able to say in a few weeks I’ll launch a similar initiative here in the UK, focused on the squeezed middle. When I talk to my constituents about the future, they are worried now about whether their kids will have the chance to do as well as them. They worry we’re becoming a country that’s growing apart. This party’s been as its strongest when we taken up the call of One Nation politics. That isn’t a plan for just a better society. It’s a plan for a better, Labour economy too.

Rachel Reeves MP then responded to Liam’s speech, beginning by saying there was nothing she disagreed with in his analysis, but set about expanding on what sort of economy and society this vision could lead to. She noted that New Labour developed a critique of the state but it must also now develop a sophisticated critique of the market. In her constituency of Leeds West average incomes are £16 000 a year. The Lib Dem-Tory government’s budget will see households earning £190 per week lose £8 a week in income, while households on £1600 a week are set to lose £13 a week. Good growth forecasts have now been downgraded, while predictions for unemployment are up. Without a strategy for growth we won’t reduce the deficit. Given reducing the deficit is what the government says is its key goal, this is a big obstacle to achieving this.

So what is Labour for? What would it try and build? she asked. Ed M’s message will contrast with ‘austerity, austerity, austerity’ message coming from the Tories.

Thinking about what sort of society we want to see, do we want one where VAT is up, benefits are cut, but little is taken from the banks to help pay for this?