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As the hon. Gentleman will know, Northern Rock operates at arms length and on a commercial basis, and it is right that it should do so. I
am aware of concerns that have been raised by charities about Northern Rocks lending, and as a result it will meet some of those charities. They have particular concerns about its Together mortgages, which were, in effect, mortgages of over 100 per cent. It is right that all lenders, not only Northern Rock and those that have support from the recapitalisation scheme, should do everything they can to make repossessions, properly, a last resort, not a first resort. That is why we have introduced new court rules to strengthen the procedures to ensure that borrowers who get into difficulties can be offered alternatives and other support.
Emily Thornberry (Islington, South and Finsbury) (Lab): Will my right hon. Friend reassure the House that she would never have welcomed the report by the right hon. Member for Wokingham (Mr. Redwood) calling for the complete deregulation of the mortgage market, because to do so would show a total lack of judgment that could be taught only at the Bullingdon school of being on another planet?
Yvette Cooper: My hon. Friend is right. To propose reducing the regulation of mortgage lending at such a time, a matter of weeks before the credit crunch hit, was not only irresponsible but did indeed demonstrate a lack of judgment.
The Chief Secretary to the Treasury (Yvette Cooper): We are concerned to ensure that all lenders do more to help people to stay in their homes at this difficult time. In addition, as part of the recapitalisation arrangements, HBOS, Lloyds TSB and the Royal Bank of Scotland have agreed to put additional funding into shared equity and shared ownership schemes to help borrowers who are in difficulties with repayments.
John Howell: Does the Chief Secretary not share my concern for constituents who see Members of Parliament as their only option to intercede with the courts to stop repossessions while they get their finances in order, because the banks have not allowed them time to do so? She may say what she likes about encouraging banks to change their policies, but how is she going to deliver?
Yvette Cooper: The hon. Gentleman mentioned the courts, and we have introduced new court rules and procedures that will make clear for the courts, and lenders, the sort of things that they will be expected to do before taking a repossession case, which the court will then ask them serious questions about. Those procedures were introduced during the past week, and will be an important part of ensuring that all lenders follow what is already best practice among some lenders in some cases. We are concerned about cases where that does not happen, and mortgagee repossessions should be a last resort in all cases. We do not want a return to the early 1990s, when the hon. Gentlemans party was in power and 140,000 families lost their homes in the space of two years.
Nick Ainger (Carmarthen, West and South Pembrokeshire) (Lab): Does my right hon. Friend agree that the current crisis stems from the fact that there is no trust or confidence between banks? They are not lending money to each other, so the wholesale markets have collapsed. The main reason for that is their exposure to substantial debt. As well as recapitalising the banks and underwriting their lending, is it not about time we insisted that they declare their exposure to the debt, draw a line under the matter, and move on?
Yvette Cooper: My hon. Friend is right in that a range of issues have led to the collapse in trust and confidence between banks, and what started with dodgy lending in the United States sub-prime mortgage market has infected financial institutions throughout the world because of the way in which they were lending to each otherbundling up assetsand they have now lost trust with regard to where those problem debts lie. We have urged much greater transparency, not just here but across the world. This is a global issue, and a global lack of trust has developed in the financial markets. It is important that we have a global approach to transparency, as well as to recapitalisation.
Mr. Mark Hoban (Fareham) (Con): Last week the Chief Secretary said that she wanted repossessions to be a lot rarer. Yet despite reassurances last year about the quality of its mortgages, Northern Rock is repossessing more homes than any other lender. Is she saying that the reassurances she gave were wrong, or are her demands just hot air?
Yvette Cooper: If the hon. Gentleman had been listening earlier, he would have heard me say that Northern Rock has agreed to meet charities that have raised concerns about its position. It also has issues with some lenders who have taken out Together mortgages, which people are aware of; those are mortgages of more than 100 per cent.
However, this is not simply a matter of Northern Rock. It is about every lender recognising its responsibilities to do the right thing by its borrowers and to look for alternatives. That might mean repayment holidays or looking for different mortgage rescue schemes, which is why this Government have introduced extra investment for mortgage rescue schemes, new rules for the courts to follow and increased support for mortgage interest for people who lose their jobs. That is the right thing to do, and I point out to the hon. Gentleman that on the day we announced the extra support for mortgage rescue schemes, his party was advocating increased tax cuts for millionaires estates. That is the wrong priority at a time like this.
The Financial Secretary to the Treasury (Mr. Stephen Timms):
We are maintaining our commitment to high employment. There are more than 600,000 job vacancies currently, and most people who have lost their jobs are finding work again quickly. We have also announced
£100 million over three years to train people facing redundancy so that they can move quickly into a new job.
Ms Buck: Mr Speaker, I wonder whether it might be possible for you to accept a note signed by everyone on the Labour Benches, because for the next 18 months we all intend to do little else other than attack the shadow Chancellor. [ Interruption. ]
Mr. Speaker: Order. A genuine attack is one thing, but a personal attack on anyones integrity will be stopped. I just put that on the record, but I know that the hon. Lady will not indulge in any personal attacks on anyone.
Yesterday I met representatives of the G15 group of major housing associations in London. They are concerned that the dip in house sales will have significant consequences for social house building. That has consequences for the construction industry and related trades. Will my right hon. Friend liaise with the Department for Communities and Local Government and others to ensure that constructionsocial housing and other forms of constructiongoes ahead so that those infrastructure jobs are delivered in London and elsewhere?
Mr. Timms: My hon. Friend makes an important point. She knows from our announcements last month the high importance we attach to maintaining investment in social housing and bringing forward some of the investment that has already been committed. She will also know, through her extensive work on the problems of child poverty in London, about the good and imaginative initiatives of several housing associations to maximise the benefits of employment from house building and to work with their tenants to increase employment. She is right that we need to use the opportunity of investment in social housing, maintain our commitment to it and bring investment forward to increase employment.
Mr. Michael Jack (Fylde) (Con): Will the Financial Secretary reflect on the fact that small and medium-sized enterprises in my constituency are working hard to maintain employment opportunities, but that dealing with punitive interest rates and arrangement fees, which many now have to face, is making that extremely difficult? In his discussions with the banks, will he agree a set of principles with them that recognise the needs of small and medium-sized enterprises in our country, especially given the effect of punitive interest rates on employment opportunities?
Mr. Timms: My right hon. Friend the Chancellor has discussed exactly that matter with the banks, recognising the importance of supporting small businesses through the period of turbulence in the world economy. Her Majestys Revenue and Customs is also considering ways in which to support small businesses through this period, and I hope that we will be able to say something about that soon.
Frank Dobson (Holborn and St. Pancras) (Lab):
Does my right hon. Friend recognise that most people hope that the Government will continue to step up investment in social housing and ignore the views of, for example,
the stupid, comfortably off collection of professors and neer-do-wells who wrote in The Times that Keynesian overspending would not rescue the economy, and claimed that the Governments investing as they propose to do would lead to the serious misallocation of resources? Most people believe that investing in houses for people who do not have anywhere decent to live is a proper allocation of resourcesmuch better than anything that came from the market forces in banking, which led to the problems that we all face today.
Mr. Timms: My right hon. Friend is absolutely right about the need to maintain our commitment to investment. We have put right a past policy of chronic under-investment in housing and in other public services. We now need to maintain our commitment to investing in public services, especially housing.
Mr. Crispin Blunt (Reigate) (Con): If, after 15 years of benign conditions, a business went into more difficult times running a loss of nearly 10 per cent. on its turnover, its bankers might ask serious questions of its management and charge a risk premium on future lending to that institution. The United Kingdom is in that position. What risk premium will we have to pay to fund the Governments macro-economic policies during the recession?
For over a decade, the United Kingdom has sustained low inflation and rapid economic growthan exceptional achievement...the fruit of strong policies and policy frameworks, which provide a strong foundation to weather global shocks.
Mr. Lindsay Hoyle (Chorley) (Lab): My right hon. Friend is well aware that construction sites are closed at the moment and that an announcement is due any day from Leyland Trucks about compulsory redundancies. What can we do to get Britain back to work and to ensure that we have procurement policies and a Buy British campaign? That is what we want from the Government. Will they launch that campaign? Let us back Britain, support British jobs and get Britain back to work.
Mr. Timms: We must work hard to ensure that people losing their jobs can return to work as quickly as possible. My hon. Friend will know that the consultation on the recent welfare reform Green Paper ended this week. It contains important proposals that we want to take forward. We want to support small businesses, as we have already set out, as well as companies large and small throughout the UK. However, the key is to ensure that if people lose their jobs, they do not get a long way from the labour market, as happened in the recessions under the Tories, when far too many people were pushed on to incapacity benefit, for example. That no doubt dealt with the short-term political problem, but too many of those people have never been able to get back into work. We need to keep people close to the labour market, so that they can get back into work as quickly as possible.
Mr. David Gauke (South-West Hertfordshire) (Con):
May I seek some clarity from the Minister on whether the Government are seeking to introduce a fiscal stimulus programme to prevent increases in unemployment? We all know that tax receipts go down in a recession and
that welfare bills go up. Over and above those automatic stabilisers, however, do the Government believe that more borrowing will help the economy, or do they accept that we cannot spend our way out of a recession and that the main consequence of such a policy would be to make it harder for the Bank of England to cut interest rates?
Mr. Timms: It is right to support the economy at a difficult time in the world economy. We have a low rate of borrowing on the latest figures compared with other developed countries. That is why we are in a position to allow the rate of borrowing to increase, in order to support businesses and the economy.
Phil Wilson (Sedgefield) (Lab): Will my right hon. Friend share with the House his views on the belief held by some people that it is a function of capitalist markets to make money out of the misery of others? Is he aware, too, that people who believe that also believe that unemployment is a price worth paying?
Mr. Timms: I remember a time when views of that kind were expressed on the Government Benches. It is a matter of shame that some of those points were made. It is also a matter of deep regret that the Conservative party opposed the ban on short selling. I think that that position was a serious misjudgment.
Mr. Heath: How is it that the auditors of big companies, whose job is to ensure regularity and probity in the public interest, can apparently wave through the accounts of big companies whose finances, it then transpires, are so vulnerable and precarious? Is there not a suspicion that the concentration of audit of big companies in the hands of a few large accountancy firms has created far too cosy a relationship between those firms and the companies that they audit? If the Chancellor agrees with that concern, is he going to do anything about it?
Mr. Darling: I agree with the hon. Gentleman that the fact that there are comparatively few large accountancy firms that can carry out audits can be a problem. I am not sure that we can simply produce more auditors just like that, but as I have said on a number of occasions, the first line of defence in any regulatory system must be the board of directors of banks and other companies, too. Auditors also have their role to play, to ensure that people understand the risk to which they are becoming exposed. That is an important function that should never be overlooked.
Mr. Andrew Love (Edmonton) (Lab/Co-op):
It is clear that there has been a collective failure of financial regulation, no more so than among the credit reference agencies. The issue is particularly complex, but what consideration has my right hon. Friend given to reform
in this area to ensure that we do not see the sort of double standards that we have seen with credit reference agencies up to now?
Mr. Darling: I agree with my hon. Friend. He will recall that, really since last autumn, we have been calling for reform of the way in which credit rating agencies operate. That is something on which we need an international agreement; we cannot do it in one country. Indeed, given the nature of our banks and other financial institutions, there would need to be agreement here. We have been calling for that at meetings of the IMF and the Financial Stability Forum, and it is also something that we are pursuing actively through the European Union. Such an agreement is one of many reforms that need to be put in place, because we need to recognise that the financial markets today are very globalised. We therefore need to ensure, right across the piece, not only that we have a robust domestic regulatory regime, but that there is increasing international co-operation, as we are now seeing. More than 30 big banks are now being regulated by colleges of regulators from different countries, so that they all know what is going on and will therefore be better equipped to spot problems far earlier than in the recent past.
Stewart Hosie (Dundee, East) (SNP): The Chancellor will know that credit default swaps are credit derivative contracts between two counter-parties, and that they played a role in the collapse of Lehman Brothers and Bear Stearns. Effectively, these derivatives separate the management and ownership of the credit risk from the qualitative aspects of ownership of the underlying asset. They are very complicated, more so because derivatives now look not only at equity, commodity and currency markets but at more subjective risks as well, making them very volatile. How does the Chancellor envisage audit capacity being enhanced so that auditors can fully understand and report on the real risks to institutions and investors?
Mr. Darling: The point that the hon. Gentleman is making is that banks and their directors need to understand the risks to which they are becoming exposed. The problem is not necessarily the instruments themselves, because it makes sense to insure and reinsure against risks, which is perfectly okay as long as people know what they are doing. The problem is that those at the top of rather too many institutions did not seem to know what they were doing. The hon. Gentleman is quite right to say that we need to have effective audit. The directors of the banks need to know what they are doing, andas I said last night in my Mais lecturethe supervisors and regulators also need better to understand what individual practices are doing and the exposures that banks are entering into, because this is not just a problem for individual banks. There are systemic problems, as has been graphically shown, and the hon. Gentleman has given the House two examples from the United States of institutions that are no longer with us.
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