House of Commons Hansard Debates for 7 Mar 1994

Mr. Nelson : Right hon. and hon. Members on both sides of the House have raised a number of pertinent points. I shall do my best to answer them, and to give the House the reassurance it seeks. The hon. Member for Edinburgh, Central (Mr. Darling) asked why the order was being introduced now. The timing is partly due to the fact that many building societies hold their annual general meetings in the spring or thereabouts. Societies that qualify under the order--those with bookings of over £100 million--may seek the agreement of their members at those meetings to an extension of their activities in the way for which the order provides ; the timing will facilitate that.

I appreciate that the hon. Gentleman raised a wider point, about the review of the Building Societies Act 1986

Column 32

which I announced recently. The review will consider two of the proposals of the financial services task force : the raising of wholesale funding limits--which the hon. Gentleman mentioned-- and the simplification of the procedures when societies merge. It will not, however, confine itself to those topics ; all the main provisions of the Act will be considered.

This will be a two-stage process. First, officials from the Treasury and the Building Societies Commission will meet representatives of the industry, with the intention of putting a paper to me by early summer ; secondly, if my colleagues at the Treasury and I think it worth pursuing the option of significant changes to the current legislation, there will be a more wide-ranging consultation process. It is hoped that that will be completed by the end of the year.

Mr. Austin Mitchell : May I ask a question arising from a point that I made in my speech ? Will the review include a facilitation of the transformation of building societies into banks ? That is what worries me. Where did that proposal originate ? Did it come from the societies, which want it made easier to follow in the steps of the Abbey National, or did it come from the Government ?

Mr. Nelson : We shall be considering fundamental questions relating to the legislation : I think it right to do so. As for where the calls are coming from, certain voices have been heard--particularly that of the banking sector, which is not surprising. The banks might prefer no legislation at all ; they might want all building societies to become banks.

One building society has chosen to take up its legislative right to do so ; the Abbey National obtained the support of its members for such action. Others--probably the majority of the building society sector--want to retain the so-called nature limits : they want to retain their identity as building societies. They want the protection of the Building Societies Act- -or something like it--to remain, so that there is a demarcation between the activities of the sectors. I shall consider all the issues very carefully. I shall also consider the representations that I receive. I am very conscious that building societies have a special place in people's hearts, as well as their pockets. It is no surprise that the hon. Member for Great Grimsby (Mr. Mitchell) is present : building societies strike me as very much a Yorkshire phenomenon.

It is important to remember the mutual history of building societies, which have provided both prudence and benefits, and the fact that historically-- to a large extent, although not

exclusively--there has been safety in bricks and mortar, which represent a nature activity or limit of building societies' activities. There must be compelling reasons for that to be abandoned--or, at least, for the removal of the legislative environment that protects or insists on it. Many people choose to deposit their savings with such institutions.

On the other hand, times change. When many of the building societies themselves are seeking liberalisation in regard to what they can do by way of advances, and from whom they can borrow--in the form of wholesale funding limits, for example--both the Government and, more especially, the Building Societies Commission, as the regulatory body concerned, have a responsibility to review matters from time to time, and to establish whether the legislation is up to date.

Column 33

Mr. Oliver Heald (Hertfordshire, North) : The building society movement and Government policy for the past 15 years have increased the number of home owners in Britain from 56 per cent. to about 70 per cent. Will the order enable such progress to be made in Europe, with our building societies helping people in Europe to achieve the same ? Is not the order part of a Conservative vision of Europe, and does it not clearly demarcate the difference between Conservative and Opposition Members ?

Mr. Nelson : Given my strong sentiments about Europe and home ownership, I am tempted by my hon. Friend's grand design, but I cannot pretend that that ambition is embodied in this rather modest order.

Mr. Darling : The Minister seems to be saying that the Government have an open mind on whether banks should become building societies and vice versa. Does he agree that this fundamental question should be a matter of widespread public debate and not only ministerial debate ? If he goes down that road, does he accept that he will have to review the regulatory regime governing banks ? If it is proposed that the Bank of England should regulate building societies, we shall have to do something about the partisan nature of the court of the Bank of England.

Mr. Nelson : The hon. Gentleman goes beyond what I said. He must not put words into my mouth and suggest that I am intending to sweep away building societies, to remove their legislative base and to turn them all into banks. We are fundamentally considering the legislation-- specifically, a number of provisions such as wholesale funding. It is right to do so from time to time. It is no part of my business or my intent to unsettle people who find security and favour in building societies, and I acknowledge and reiterate the importance that they attach to that.

A debate has been held not only in the House but in a Select Committee on the supervision of banking and building societies. I believe that one has been held on financial services more generally. I shall be interested to read the conclusions. That is certainly not the intention of the order.

The hon. Member for Edinburgh, Central referred to the court of the Bank of England, or directors of the board of the Bank of England. I assume that he was referring to some of the recently announced changes to the directors. I know that he has complained publicly about the fact that the prominent trade unionist, Mr. Gavin Laird, who had two terms as a member or director of the court of the Bank of England, was not renewed in that capacity.

That does not reflect on Mr. Laird, whose contribution and standing in the Bank and elsewhere is extremely high, but it should be no part of policy on the boards of public bodies, on the Bank of England or on other institutions that automatic constituencies must be represented. I am not suggesting that the hon. Gentleman is saying that, but all such appointments are considered on their merits, and from time to time it is considered that changes must be made. In this instance, where somebody was brought in who has particular experience of small businesses, that was deemed to be of some benefit to the Bank of England.

Mr. Darling : I am arguing not that the court of the Bank of England has constituencies but that, for the first time since 1946, no one representing trade union interests has been reappointed. Other people have been on the court

Column 34

of the Bank of England for longer than two terms. The Prime Minister, for some reason--either weakness or prejudice-- felt unable to reappoint Mr. Laird.

It is a matter of regret that the court should be the victim of such partisan behaviour. I am surprised, because it stands on its head everything that he has said about the new approach, that the Prime Minister has decided to take a partisan and prejudiced position on the court.

Mr. Nelson : I am naturally very sorry that the hon. Gentleman should feel that that is the case, because it certainly is not ; nor was it the intention. Apart from the six executive directors, the court of the Bank of England will comprise six members, all with interests outside the south-east of England, who will represent industry, five people who have interests in finance and banking, and one accountant.

There is no intention to be partisan in this matter, as it is far too important for party politics to play a part. It is much more important that the right people are chosen for the job, especially in supervisory and regulatory bodies. That is what is done and what is uppermost in the mind of my right hon. Friend the Prime Minister when he advises the Queen on such appointments.

Mr. Beith : Lest the Minister should think that it is a knee-jerk reaction confined to the Labour party defending its trade union friends, may I tell him that it is widely felt that it was undesirable the Government should not continue a long-established practice of ensuring that at least one person on the court of the Bank of England was drawn from a trade union background ?

Mr. Nelson : I hear what the right hon. Gentleman says. He at least used the phrase "drawn from", whereas the hon. Member for Edinburgh, Central used the word "representing". I was trying to say that it is important that people elected to the boards of public companies are not delegates from constituencies but are people who will deliberate and contribute to important decisions in the public interest, not represent particular points of view. I happen to believe that there is sometimes a role for prominent trade unionists as well as others in this institution but that is not always the case. From time to time, there have to be changes and variations, and such there have been.

The order is a useful measure that will help societies compete in Europe. It will be some time before the review of the Building Societies Act 1986 is complete, so it is sensible to proceed with the order straight away. It has in fact been delayed, as it was originally intended to be made in 1992 but, when Switzerland decided not to join the EEA, the order was withdrawn until the position became clear.

At present, building societies have the power to provide financial services throughout the EEA and to undertake mortgage lending throughout the European Union. The order completes the picture by extending mortgage lending to the rest of the EEA and the other EFTA countries. If societies are to adopt it at their forthcoming annual general meetings, it needs to complete its passage through the House as quickly as possible.

The hon. Member for Edinburgh, Central asked specifically about Liechtenstein. As he is probably aware, Liechtenstein's entry into the EEA has been postponed, but it has already signed up to the agreement in principle. Orders have already been made allowing building societies to carry on a range of activities in all EFTA states, so the order is consistent with them. There is no prudential reason

Column 35

to exclude Switzerland and Liechtenstein, and it will avoid the need for another order when Liechtenstein joins, and if Switzerland eventually ratifies the EEA agreement.

Several hon. Members raised the same point. There has been no reference to prudential notes. I tell the hon. Member for Workington (Mr. Campbell- Savours) in particular that the Building Societies Commission, which is the supervisory body for building societies under the 1986 Act, promulgates good practice and the rules that must be observed by means of prudential notes.

There is a prudential note covering aspects of foreign lending, which is included in the Building Societies Act 1986 prudential note 1992/2. The prudential notes contain guidelines, requirements and quite detailed obligations for reporting, assuring capital adequacy, through-provisioning and other matters. They are the working tools that the Building Societies Commission uses to implement the requirements and the restraints of the 1986 Act.

The right hon. Member for Berwick-upon-Tweed (Mr. Beith) urged that there should be no relaxation of the restrictions and democracy of building societies. Indeed, many of the restrictions and responsibilities are laid down in prudential notes.

The right hon. Gentleman was quite right to say what he did, because the sentiment underlying his speech seemed to be that, if building societies were allowed too much freedom, either to change themselves without the agreement of their members or to engage in practices in an executive and unilateral way, they might over-extend themselves and bring not only risks to depositors with a particular building society but, potentially, a systemic risk to the movement as a whole.

Both the Bank of England, in its overall surveillance of the banking and financial markets, and the Building Societies Commission, under its statutory obligations in the Act, are extremely mindful of the fact that I, in my ministerial capacity, meet the chairman of the Building Societies Commission regularly to ask relevant questions about the implementation of those responsibilities and to ensure, as far as we possibly can, that prudential obligations are observed. Some hon. Members, including the hon. Member for Great Grimsby, asked about provisioning practice. Building societies have made provisions. Interestingly, they have made significantly fewer provisions in their latest reports than was the case a year ago. The results of the building societies have been relatively good compared with those of many of the commercial banks in recent years. They have had a lesser exposure to provisions than many of the banks have. That may reflect the business they do, although there has been a serious recession in the property industry.

The fact that the societies have remained so solvent and strong, and have retained the affection and respect of high street depositors and the public generally is an interesting and positive reflection on their performance during a difficult period.

Mr. Campbell-Savours : The measure seems to have the general support of the House. In the guidelines to which the Minister referred, is there adequate consideration of the political implications of lending in certain areas ? I do not want to go into detail about what I think the fortunes of Finland will be in 10 or 20 years' time, except to say that

Column 36

they may well be difficult in the light of recent developments in the former Soviet Union, yet Finland is on the list.

I do not expect that, if one delved into the detail of the documents which, the Minister says, exist for building societies, one would find a specific reference to Finland. However, to what extent are the building societies taking into account the implications of political changes in this much enlarged area, which now includes the whole of the European Union and the EFTA countries ? They are a large part of the world.

Mr. Nelson : There is already a general interest among building societies in expanding into Europe, although so far only three of the larger societies have gone ahead. The Halifax building society has established a subsidiary to carry out mortgage lending in Spain. The Woolwich has subsidiaries in Italy and France. The Bradford and Bingley has recently established a bausparkasse, which is the nearest German equivalent to a building society.

Societies cannot realistically consider plans to expand into EFTA states until the order is made. I am sure that, in doing so, they will take account of the political and economic risks that may be involved.

It is also important that the hon. Member for Workington and the House generally understand that, under the prudential note requirements, before building societies can go ahead, they will have not only to seek the agreement of their members--that is, 75 per cent. of those who vote in a meeting--but to adhere to the prudential note requirement of reporting and to comply with the requirements laid down by the Building Societies Commission.

The hon. Member for Workington and others were concerned that moneys raised might over-extend the building societies, or that risks might be involved. The prospects of that are extremely limited. We are dealing here only with the largest building societies, with more than £100 million. The building societies will have very small exposures or interests in these countries, if they have any at all. The building societies already have the right to undertake certain banking activities. The order will allow them to lend against the security of land.

If building societies lend in a particular country, which may involve foreign currency, there may be an interest rate differential. Some hon. Members mentioned interest rates. Equally, there will be an exchange rate differential. The point is that it is most unlikely that a building society would want, or that the Building Societies Commission would allow, a significant exposure to a foreign exchange risk, even where there was an interest rate differential. Normally, a building society would cover its position in the derivatives market to match any currency risk which was involved. Certainly it is not the intention of the order to enable any building societies either to expose British depositors in sterling to substantial exchange rate risks and exposures elsewhere, or substantially to enhance or increase their activities in foreign currency countries compared to here, and I hope that the order will not enable them to do so.

My right hon. Friend the Member for Honiton (Sir P. Emery) rightly said that the order will not make any difference to the savings practice or to the security of people in the country who deposit money with their building societies. It would be alarmist and incorrect to suggest that it would make a difference. It provides a fairly

Column 37

modest, liberalising measure to enable building societies to do what banks in Britain are currently able to do-- lend against securities in any EFTA state. Why should not a building society be able to do that against the security of land ?

Mr. Austin Mitchell : It is not such a relief to my mind, because of the danger that those financial institutions have delusions of grandeur, see themselves as big players and want to get into currency speculation and all the rest of it.

Another danger is that lending which could usefully be pursued and which the building societies would have to pursue on the market with the developing, interesting alternative to the simple house purchase, such as becoming involved in housing associations or becoming landlords, would be curtailed by their desire to lend in Europe. Will the Minister tell us where the building societies will raise the money that they will be lending in the EFTA countries ? Will it be raised in local markets or come from money raised in Britain ?

Mr. Nelson : The building societies will be able to raise money to lend in the local markets. That will enable them to lend there, and they will be able to raise money there. Whether there is a net exposure in those EFTA countries is a matter for the overall policy of the building societies.

The extent of that exposure will be overseen by the Building Societies Commission, as will the extent to which that exposure may translate itself if there were not a derivatives cover of it into a foreign exchange risk. It would be quite wrong to suggest in any way that this modest order will suddenly or in the course of time result in massive exposures of risk to Finland, Liechtenstein or any of the EFTA states. That would be the wrong interpretation.

Mr. Campbell-Savours rose--

Mr. Nelson : I shall give way for the last time. I know that we have time, but I am sure that the House has other business with which it wishes to proceed.

Mr. Campbell-Savours : The Minister referred to net exposure. The right hon. Member for Honiton asked an interesting question. If I understand his original question,

Column 38

it was that the Minister give an assurance that no moneys currently available for investment in the housing market in the United Kingdom would be lost to other markets, and that the order would have no effect on the availability of moneys that a building society is open to lend.

That is not quite the case. The Minister assures the House that there will be no great shift. However, all that I am putting to the Minister is that, in the light of political developments in Europe, or in the European Union over the next the 10 or 20 years, a shift may well take place. It is possible to foresee conditions in which, to some extent, there may be a crowding out of the UK market. The Minister cannot foresee that now, but is it not possible that that may happen under the arrangements being introduced ? I support the arrangements, but I am simply trying to extract from the Minister an understanding that that could happen under those arrangements.

Mr. Nelson : It is a fair question, but I hope that I can reassure the hon. Gentleman that my right hon. Friend the Member for Honiton is, to all intents and purposes, right. It will not be the case that, in some way, deposits made in this country will be unavailable for lending here, and that the prospects for mortgages will be crowded out by the order. The order will provide for building societies, either by way of subsidiaries which they set up in the EFTA countries, or directly through branches, to engage in secured lending and to receive deposits.

Of course it is possible that, in an individual EFTA state, there may be a net exposure given the totality of the building societies' assets ; but a small net exposure in a particular area of activities is quite different from the overall assets of the building societies being put at risk in some systemic way. So it will be business as usual.

There is nothing for building society depositors and savers to be worried about in this modest measure. To the extent that it puts building societies on an equal footing with banks, it is a good move forward. I commend it to the House.

Question put and agreed to.

Resolved ,

That the draft Building Societies (EFTA States) Order 1994, which was laid before this House on 24th January, be approved.

Column 39

Northern Ireland (Appropriation)

4.34 pm

The Minister of State, Northern Ireland Office (Sir John Wheeler) : I beg to move,

That the draft Appropriation (Northern Ireland) Order 1994, which was laid before this House on 15th February, be approved. The draft order has two purposes. The first is to authorise expenditure of £195.9 million in the 1993-94 spring supplementary estimates. That will bring total estimates provision for Northern Ireland departmental services to £5,688 million for this financial year. The second is to authorise the vote on account of £2,533 million for 1994-95 so as to enable the services of Northern Ireland Departments to continue until the 1994-95 main estimates are brought before the House later this year. I remind the House that the order does not cover expenditure by the Northern Ireland Office on law and order and other services and I shall be unable to refer to those matters during my remarks. Details of the sums sought are given in the estimates booklet and the "statement of sums required on account" which, as usual, are available in the Vote Office.

I now turn to the estimates. Many of the votes seek token increases only, because new pressures have been offset by savings elsewhere in the vote. To allow hon. Members the maximum time to contribute to the debate, I shall refer only to the main areas in which supplementary provision is sought.

In the Department of Agriculture's vote 1, which covers expenditure on national agriculture and fisheries support measures, a token increase of £1,000 is required. Some £7 million is for payments to compensate milk producers under milk quota arrangements. Some £800, 000 is for additional commitments under a number of capital grant schemes and £400,000 is for expenditure under the 1992 crop potato support arrangements. Those additional commitments are offset by reduced requirements elsewhere in the vote and by EC receipts. In the Department's vote 2, covering local support measures, some £5.3 million is sought. That includes £3.2 million for the disease eradication programme, including compensation and professional services. Some £2 million is for additional commitments under the agricultural development operational programme, where uptake has been higher than predicted. Some £600,000 will enable the Department to advance its information technology programme. Those increases are partially offset by reduced requirements in other areas of the vote. In respect of the Department of Economic Development, increases are sought in four votes. In vote 1, some £14 million is required for the provision of land and buildings. That is to meet expenditure on new factories for recent inward investment projects and reflects the continuing success of the industrial development board in attracting internationally competitive companies to Northern Ireland. Also in that vote, £2.4 million is for assistance to Harland and Wolff Holdings plc. Those increases are offset by increased receipts and reduced requirements elsewhere, resulting in a token increase of £1, 000.

Some £3 million is sought in vote 2. This vote includes £4.1 million for the industrial research and technology unit. This will enable the unit further to enhance the level and quality of its support for local industry. This aims to

Column 40

improve the competitiveness of Northern Ireland companies and to develop the region's technological infrastructure. The amount required for assistance towards the closure costs of the local gas industry is £2.3 million. These additional requirements are offset by savings elsewhere in the vote. This includes £5.1 million reflecting the Local Enterprise Development Unit's new strategic approach to financial assistance.

In vote 3, covering the Training and Employment Agency, some £700, 000 is sought. The amount required to meet increased expenditure under the youth training programme, as a result of a greater number of young people pursuing higher level qualifications, is £1.6 million. For the job training programme there is a requirement of £1 million owing to an increased number of trainees undertaking programmes leading to a national vocational qualification at level 2 or above. Offsetting savings have been found elsewhere in the vote. The Department of Economic Development's vote 4 covers the expenses incurred in the privatisation of the electricity supply industry in Northern Ireland. These costs have been met from the proceeds of the sale.

For the Department of the Environment, some £6.2 million is sought in vote 1. This includes £2.5 million for maintenance of the road network, new road schemes and the relocation of the Belfast urban traffic control centre. The amount required for expenditure on street lighting is £500,000, and £1.7 million is needed for the Driver and Vehicle Testing Agency.

In vote 2, covering housing, token provision of £1,000 is sought. There are various reallocations within the vote, resulting in a net increase of £3.6 million for the Northern Ireland Housing Executive, mainly for maintenance. Gross housing expenditure in Northern Ireland this year is now expected to be about £552 million--some £17 million more than in 1992-93.

Vote 3, which covers water and sewerage services, also shows a token increase. There are various adjustments in expenditure within the vote-- notably, an additional£4 million for capital expenditure on sewerage services.

Token provision is also required in vote 4, covering environmental and other services. An additional £2.2 million is for Belfast action teams, and £1 million is for urban regeneration grants. This will help to stimulate private enterprise and investment activities in inner city areas of Belfast and Londonderry. These increases are offset by savings within the vote and increased receipts. For the Department of Education, a net increase of £9.2 million is sought in vote 1. Some £7 million is for grants to education and library boards, mainly for school transport, maintenance and equipment, £1.1 million is for voluntary schools and £1 million is for grant-maintained integrated schools.

In vote 2, an additional £8.5 million is sought. Some £8 million is for mandatory awards and student loans, reflecting increased demand. There is provision of £600,000 for universities, mainly for equipment. The requirement of £400,000 for arts and museums includes increased grants to the Ulster museum and the Ulster American folk park.

Rev. Martin Smyth (Belfast, South) : The Minister has referred to extra provision for student awards and loans. How much of this is earmarked for students coming from European countries to undertake tertiary education in Northern Ireland ?

Column 41

Sir John Wheeler : I hope that my hon. Friend the Member for Devizes (Mr. Ancram), who as the other Minister of State is to reply to the debate, will be able to give the hon. Gentleman the information that he seeks. If not, I will write to the hon. Gentleman.

Increases are also required for the youth services and for departmental administration. There are reduced requirements elsewhere in the vote.

In vote 3, covering the teachers' superannuation scheme, almost £1 million is sought. This is due mainly to higher than anticipated levels of payments to retiring teachers and to a shortfall in estimated receipts.

For the Department of Health and Social Services a net increase of £18 million is sought in vote 1. The main increase of £14.2 million is for expenditure on hospital, community health and personal social services. The provision sought for health and social services boards' capital expenditure is £3.4 million. Net increases of £1.7 million are required for health and social services trusts, and £6.1 million for the family health services. These increases are offset by increased receipts and savings in other areas.

In vote 3, additional net provision of £4.3 million is sought. This includes some £7.5 million for administration costs and capital expenditure in the Social Security Agency. Increases are offset by reductions elsewhere, including an increase in receipts of £1.8 million from the national insurance fund.

Finally, in vote 4, which covers social security, £121.1 million is sought. This is due mainly to a greater than anticipated demand for income support and disability benefits--in particular, disability living allowance. This is offset by lower than anticipated claims in other areas.

In my opening remarks I have drawn attention to the main provisions of the order. In replying to the debate, my hon. Friend the other Minister of State will seek to respond to points raised by hon. Members. I commend the order to the House.

4.48 pm

Mr. Roger Stott (Wigan) : In this debate we turn again to the allocation of resources among the spending Departments in Northern Ireland. I have said before, but I shall say again, that the current Government's tenure of office has been punctuated by under-funding and by the freezing and cutting of public expenditure. As the Treasury now concedes, Northern Ireland's population will face taxation rises this year.

This is no exception for the people of Northern Ireland. It is appropriate that we should be debating the Government's economic record just a month before many people in that region who are already living in near-poverty face VAT increases and higher fuel and heating bills. It is ordinary families who are being sentenced to further hardship to pay for the Government's financial ineptitude. In Northern Ireland, as elsewhere, those families will have to pay about £10 a week extra in a combination of tax rises that will take effect in April.

Also this year, every time a hot meal is prepared for a family or a cold pensioner switches on an electric fire, a payment will be made through fuel and heating bills to reduce accumulated Government debts. Many of those families and pensioners receive income support. Indeed, the latest figure reveals that, astonishingly, 17 per cent. of Northern Ireland's population receives income support.

Column 42

Those income support levels are wholly inadequate. For example, a couple in Northern Ireland with two children can meet only 74 per cent. of their basic minimum budget from current income support levels, and income support and child allowances were found to meet only 43 per cent.--less than half--of what was required to provide adequate family living standards.

The statistics for pensioner poverty in Northern Ireland are just as appalling. On average, there are already 1,000 extra cold-related deaths among elderly people in Northern Ireland each year. In spite of rebates which may be claimed for VAT on fuel, about which many people in Northern Ireland are not wholly convinced, what effect does the Minister believe the increase in fuel and heating bills will have on the shameful statistics that I have just relayed to the House ? A single pensioner in Northern Ireland spends more than 20 per cent. of his or her meagre weekly income on fuel. For pensioners on income support, the figure rises to 24 per cent. What effect does the Minister believe that the increase in fuel and heating bills will have on those shameful statistics ?

One in three recipients of income support in Northern Ireland also receives a retirement pension. The average weekly income for a pensioner household in Northern Ireland in 1993 was £73.89, compared with an average of £282.35 for non-pensioner households. What effect does the Minister believe that the increase in fuel and heating bills will have on those shameful statistics ? I must tell the Minister that many people in Northern Ireland believe that the shameful increases in fuel and heating bills will increase the number of cold-related deaths among the elderly. The Minister should pay particular attention to that point.

Unemployment has been a concern of mine in respect of my constituency and in relation to the Province. Unemployment in Northern Ireland is fluctuating at just below 14 per cent. where it has remained for a sustained period. Yet again, ministerial optimism has been misplaced and unemployment in Northern Ireland has risen from 13.4 per cent. to 13.7 per cent. of the work force. The Government's approach of merely hoping for recovery will give no confidence to the long-term unemployed. I remind the Minister that more than 50 per cent. of Northern Ireland's job seekers have been unemployed for more than a year. What help is he offering them today ? What new and exciting initiatives can he announce to the House ? There have been some new and exciting initiatives of late. However, that is simply a pepper-potting of industry. It does not tackle the real issue of unemployment in Northern Ireland. I toured the constituency of my hon. Friend the Member for Belfast, West (Dr. Hendron) last Thursday. There are people in Andersonstown, Ballymurphy and Turf Lodge whose fathers--and even sometimes whose grandfathers--and sons and daughters have never had work. One need only consider the fact that unemployment may provide one of the root causes for potential recruitment to terrorism in Northern Ireland. It is shameful that Northern Ireland's unemployment problem has not been tackled in the way in which we would have liked it to be tackled. We know that no further help is available for the unemployed to enable them to seek jobs. The Government's response to rising unemployment figures has been to cut severely the budget allocated to industrial

Column 43

development. That budget has fallen from £480 million in 1989-90 to £141 million in this financial year and it will be cut even further to £115 million in 1995-96.

That complacency and short-termism has caused many of Northern Ireland's economic problems. Gradual cuts year on year, instead of long-term planning for the future, have been the hallmark of the past 15 years. The Government cut today to get themselves out of the economic hole they dug for themselves yesterday.

I refer the Minister to the very interesting economic report by Coopers and Lybrand Deloitte which was published in January and illustrates the point well. It states :

"many of the long-term structural problems remain. GDP per head is still only around 80 per cent. of the UK average, easily the lowest of the UK Regions. The problems of local labour markets remain with unemployment at 14 per cent. still well above the next worst UK region."

Instead of tackling the long-term structural deficiencies, the Government, particularly in the last Budget as evidenced in this evening's provisions, are simply creating further future difficulties through short-sighted and inadequate measures.

That was recognised in the Coopers and Lybrand Deloitte report : "Given the size of the public sector locally--public expenditure is equivalent to around two-thirds of GDP--changes in public finances are particularly important in Northern Ireland. The fiscal squeeze imposed in the two 1993 Budgets therefore has potentially serious consequences for Northern Ireland."

In addition, we know that the fluctuating unemployment statistics, hailed by Ministers as the start of a recovery in Northern Ireland, are not the result of the creation of additional jobs in the region. That fall in unemployment, small as it was, has partly been induced by statistical factors such as people switching from unemployment benefit to invalidity benefit. While there has been an increase in employment of 2,200 in Northern Ireland, that increase, as Coopers and Lybrand Deloitte point out, has occurred in low-paid, female, part-time jobs in service industries. That is no help to the long-term unemployed and those men and women seeking full-time, secure work.

Sadly, Northern Ireland's jobless do not face a brighter future. Many of those lucky enough to be in work face equally uncertain times in the light of public expenditure restraints. In stark contrast to the quick-fix economic policies of the Government, we have constantly supported sustained training and investment in people and in the infrastructure of Northern Ireland.

In last year's debate I mentioned Sir George Quigley, the chairman of the Ulster bank. He has illustrated the point that the potential for an island of Ireland economy is there for the taking-- [Interruption.] I hear the laughter from certain Northern Ireland Members, but I believe that co- operation between the Republic and Northern Ireland in economic terms, transport infrastructure and agriculture and tourism is taking place

Next Section

Home Page