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I look forward to visiting Ayrshire shortly. My hon. Friend referred to the fact that unemployment went up across many parts of the United Kingdom last week, after years of growth in employment. In response, the British Government published a £100 million training plan, the Welsh Government
published a £30 million training plan, and the Scottish Government issued a press release. That is not the action of a serious Government. The fact is that there are enormous challenges, and one such challenge in the current economic crisis is to ensure that those who are economically on the bottom rung of the ladder do not become dislodged and take a generation to recover. I am determined to work with everyone and anyone, across Scotland, to make sure that that does not occur.
David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con): I welcome the meeting that the Secretary of State had last week with Scottish business leaders and trade unions. Is it planned that such meetings will be held regularly? Did he use the opportunity to ask Scottish businesses whether they would be better served by the Government borrowing to pay for increased spending on unemployment benefit, which is what his party wants to do, or by our taking the immediate practical steps on VAT and national insurance for small businesses that the Leader of the Opposition set out in his visit to Glenrothes?
Mr. Murphy: Of course we intend to repeat the meeting, and CBI Scotland will host the next one; that is a welcome step. The fact is that net debt was 43 per cent. of gross domestic product in 1996-97, and today it is 36 per cent. The UKs net debt is lower, as a percentage of GDP, than that in the euro area and in all G7 countries except Canada. It is important that we borrow to invest in public services. That is a striking contrast with what happened under a previous Government, who invested in failure. Unemployment was at 3 million; incapacity benefit trebled; and unemployment was considered a price worth paying. That price will never be paid, and is never considered worth paying, by a Labour Government.
Mr. Brian H. Donohoe (Central Ayrshire) (Lab): I welcome my right hon. Friend to his position as Secretary of State. Given recent economic events, is it not the case that the First Minister of Scotland could be compared to an eight-year-old child with a bean rack?
The Secretary of State for Scotland (Mr. Jim Murphy): The merger of HBOS and Lloyds TSB is a commercial decision for the boards and shareholders of those banks. We want stability in the UK banking system and protection for savers, mortgage holders, staff and businesses.
I thank the Secretary of State for his answer. The merger of HBOS and Lloyds TSB will, of course, have to be voted on by shareholders; I understand that the
meetings will take place in mid and late November. I am sure that the Secretary of State will agree that all the information should be available to the shareholders before the votes take place. Will he impress on the noble Lord Mandelson, the Secretary of State for Business, Enterprise and Regulatory Reform, the need to publish the Office of Fair Trading report on competition in advance of the shareholder meetings?
Mr. Murphy: It is important that we have a wide conversation about Scotlands economy and Scotlands future. Again, the matters mentioned are for the boards and shareholders of those two great institutions.
Until now, the Scottish National partys argument about economics has relied entirely on oil and Iceland. Every family in Scotland knows that a household budget cannot be organised on enormous fluctuations in oil prices, which stood at $150 a barrel a year ago and now stand at $59 a barrel. Iceland as a country is on the verge of bankruptcy. On the particular point about the banks merger, I should say that it is important that information should be available and that shareholders should make their decisions in an informed way.
Mr. Ian Davidson (Glasgow, South-West) (Lab/Co-op): I congratulate the Secretary of State on his new position. Will he work with the Unite union to make sure that the jobs of those in the banking industry throughout the United Kingdom are protected? Spivs and speculators have been destroying jobs in the industry, and we do not want to lose any more.
Mr. Murphy: My hon. Friend is right: it is important that we should have such conversations with trade unions. That is why on the very day when my right hon. Friend the Chancellor made his announcement about bank recapitalisation, I invited both the trade union Unite and the trade union Accord to meet me at the Scotland Office in Edinburgh. We discussed the type of issues that my hon. Friend has rightly raised today.
Malcolm Bruce (Gordon) (LD): Is the Secretary of State not forgetting that British taxpayers are about to become a shareholder in HBOS and that they should have a view on the matter? Given that competition rules are being set aside, is it not important to ensure that every possible optionincluding maintaining HBOS as an operating entity in its own rightis considered, to ensure that consumers have the full range of choice in the future?
Mr. Murphy: The right hon. Gentleman is absolutely right. There has been enormous UK taxpayer investment in saving those two great financial institutions. I think he will agree that only through the power and influence of a United Kingdom Government and a UK economy are we able to make such enormous investment in those institutions. Lloyds has confirmed that the HBOS part of the business will continue to use the Mound as its Scottish headquarters and that it will continue to publish Scottish banknotes. I remind the House again that there is currently only one offer on the table which can be considered by the board and the shareholdersand that remains a fact, regardless of any press speculation.
The Parliamentary Under-Secretary of State for Scotland (Ann McKechin): Meetings are currently being arranged with the energy industry. My right hon. Friend the Secretary of State will also be attending the oil and gas UK supply chain conference on 12 November in Aberdeen.
Miss Begg: I am glad to hear that because obviously the oil and gas industry is important for Aberdeen and the whole economy of the north-east of Scotland. I hope that there is a long future for the industry in the North sea [Interruption.]
Miss Begg: Thank you, Mr. Speaker. I hope that there will be a long future for the offshore oil and gas industry, which is so vital to the economy of my constituency. However, does my hon. Friend agree that it would be a mistake to base a whole economy on a very volatile resource?
Ann McKechin: My hon. Friend has a fine record of working for the oil industry in Aberdeen and for her constituents. As she rightly points out, the oil industry remains a vital industry in Scotland, but it is important that it has a stable investment and tax structure, which the UK framework currently provides. The oil fund to which the First Minister has made reference has suddenly disappeared from his press releases, and now we have the request for £1 billion regurgitated from six months ago. I think we can all draw our own conclusions.
Mr. Bailey: Small businesses, which are essential to jobs in my constituency, are suffering from high raw material prices, high energy prices and, in some cases, reduced demand. What steps is my right hon. Friend taking to ensure that the support that we have given to the banks is reflected in the support that banks give to small businesses during this difficult time?
The Prime Minister:
My hon. Friend is absolutely right. Central to the recovery of jobs is the resumption of lending by banks to businesses. I discussed that not only as a national problem, but a problem in many countries, with President Sarkozy when I met him last
evening. We have all taken measures to recapitalise our banks and to ensure stability. We continue to work on increasing access to funding. Having recapitalised the banks, we want to ensure that they will extend availability of credit at competitive prices. Further announcements will be made tomorrow when we have a meeting with the banks.
We are also considering new mechanisms by which, for example, the European Investment Bank can give financial support where traditional institutions are not able to do so. We urge banks not to change the terms and charges for existing lending to small businesses in our country. The President and I also talked about the role of fiscal policy in the future. I have been discussing that with other leaders. It is right that fiscal policy supports monetary policy at this time.
In the past fortnight we have learned that housing repossessions are up 71 per cent., unemployment is rising at its fastest rate for 17 years and the economy is shrinking. Will the Prime Minister now finally admit that he did not abolish boom and bust?
The Prime Minister: I have already told the right hon. Gentleman: we have had the longest period of growth in the history of this country. We have created 3 million jobs during that period, and we have been able to double public investment in education, health and transport. If we had taken his advice, we would not have nationalised Northern Rock and we would not have taken the action to deal with the problems of HBOS and other banksand he would have loosened the regulation on banks at a time when everybody is saying to increase it. I am not going to take any advice from the Leader of the Opposition on these matters.
Mr. Cameron: How can the Prime Minister not admit that there is an economic bust when 120 homes are being repossessed every day and when the Bank of England says that 1.2 million people are going to go into negative equity? If he cannot admit what he got wrong in the past, why will anyone listen to him about the present or the future?
the basis on which I think people have seen this Government as competent.
He said that they were right for every stage of the economic cycle, and he absolutely guaranteedthat is the word that he usedthat he would not break them. Does he accept that the fiscal rules are now dead?
The Prime Minister:
First of all[Hon. Members: Answer!] I think that the Opposition should listen for a minute, and maybe they will learn something. First of all, the cause of the crisis that we are facing started in the private banking sector, not with national Governments. If the Leader of the Opposition does not understand that that is the problem, he will not be able to come to a proper solution, because the solution lies in recapitalising the banks, then ensuring that they start lending again. If
we could have a sensible debate about the matter across the Floor of this House, and he removed the partisan way in which he is dealing with it, as he promised to do [ Interruption. ] He was the man who was going to end the Punch and Judy show, and he was the man who was going to have a bipartisan approach.
As for the fiscal rules, we have met them in the last 10 years. If I may remind the right hon. Gentleman, borrowing has been 1 per cent. under the Labour Government during the last 10 years; it was 3 per cent. under the Conservative Government. They broke the roof; we fixed it.
The Prime Minister says that he wants us to listen; we have been hearing about his fiscal rules for 10 years. He stood there and lectured us about the brilliance of his fiscal rules. Why will he not now admit that they are dead? Let us just remember themhe used to be so proud of them. Rule 1 was, Only borrow to invest; now he is having to borrow to pay for unemployment benefit. That rule is dead. Rule 2 [ Interruption. ] They do not like being reminded about their own fiscal rules. They used to enjoy the lectures so much. Rule 2 was, Dont have debt over 40 per cent. of national income. Even on his own fiddled figures, that rule is now dead. Why will he not admit that the rules failed to deliver responsibility in the good years and that, as soon as the bad times came, they collapsed completely?
Borrowing...is inevitable and you have to allow that to happen. Those automatic stabilisers as Keynes called them, those have to operate.
He is saying that, but the shadow Chancellor said this morning in a newspaper that borrowing is the wrong approach. The right hon. Gentleman said a few days ago that it is the right approach. When will they get their act together and show that they have one coherent policy?
Mr. Cameron: The Prime Minister cannot tell us whether his fiscal rules are alive or dead or in some sort of suspended animation. We have established that he has broken his fiscal rules, and we have established that he led the economy from boom to bust; now let us look at what he is going to do about it. Does he agree that you cannot spend your way out of a recession?
Borrowing...is inevitable and you have to allow that to happen. Those automatic stabilisers...have to operate,
that means we have to spend in a way that takes us through this economic crisis. If he does not understand what he said a few days ago, perhaps his meetings with the shadow Chancellor during the past few days have not been about economics at all.
I asked the Prime Minister whether he agreed that you cannot spend your way out of a recession. Why did he not just say yes? I have a quote for him. It is
something that he said in 1997[Hon. Members: Ah!] Oh, it was 10 years ago, so it does not countis that the new rule? This was not some off-the-cuff speech; it was at the Labour party conference, as Chancellor of the Exchequer. He said,
we have learned from past mistakes...you cannot spend your way out of recession.
Is not the truth that the Prime Minister has been going round telling everyone that he is the new John Maynard Keynes with a plan for a spending splurge? Meanwhile, the pound has fallen further than in any previous devaluation, and the Chancellor is having desperately to back off. So can he confirm: is he planning a spending splurge or not?
The Prime Minister: And he is quoting Keynes. I thought the right hon. Gentleman said that he supported Keynes on when the automatic stabilisers should work. Let me remind him again of the Conservative party position. The person who shadowed for the shadow Chancellor last week said in an interview to the BBC:
To increase borrowing to deal with an economic downturnthats a perfectly sensible thing to do.
Increasing borrowing is not a strategy for dealing with the recession.
Mr. Cameron: So that is the new fiscal rulenever answer the question. The Prime Minister has been caught red-handedhe spun a line about a spending splurge to try to look as if he had a plan, but the Treasury Secretary said that the Government would not increase but maintain spending. He has been caught irresponsibly spinning about irresponsible spending. Is not the truth that he has got not a plan but a giant overdraft? Is it not the case that thousands of people are losing their homes and their jobs because the Prime Ministers irresponsible boom has turned to bust?
The Prime Minister: The thousands of people in our country who are worried about their homes and their jobs will want to know that they have a Government who are prepared to take the action that is necessary to deal with the problem. The Conservative party says that borrowing is the wrong approach; I say that it is right to take the action that is necessary to lead us through the difficulties. The Conservative party has no policy. It is not prepared for governmentit is not even prepared for opposition.
Joan Walley (Stoke-on-Trent, North) (Lab): I know that the Prime Minister has a lot on his plate, but I would like him to know the outcome of the referendum in Stoke-on-Trent last Thursday. The people voted to go ahead to have a leader and a cabinet to run the council from next summer. In these difficult times, will my right hon. Friend give the people of Stoke-on-Trent his assurance that the Government will do everything they can to work in Stoke-on-Trent to draw a line, move forward and deal with all the economic issues that we face?
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