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7.27 pm

Stewart Hosie (Dundee, East) (SNP): It is a pleasure to follow the right hon. Member for Birkenhead (Mr. Field), and I am glad that he mentioned the pound. In the past few debates on the Budget and the pre-Budget report, I have commented on the balance of trade deficit. Last year we had an £87 billion deficit in goods and a total deficit of £70 billion in goods and services. Even with the collapse in the value of the pound sterling, the deficit is forecast to approach £50 billion every year over the next three years. That puts us in a serious position, and probably speaks volumes about the decimation of our productive capacity, and the loss of the 1 million manufacturing jobs that we have seen since Labour came to power.

I want briefly to take the House back to the late summer, when the banking crisis came to the fore in the public eye. Politicians from all parties suspended their usual criticisms of the Government to build a consensus on the stability package that was designed to bring confidence back to the banking sector. I found it incredibly disappointing that within days, the Government began to use the crisis for narrow political advantage. As the
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crisis in banking became a crisis in the real economy, I was doubly disappointed that they were using that, too, as a partisan lever.

The Government did that at the same time that they were saying that the global crisis—or the downturn, as it was described in the Queen’s Speech—had nothing to do with them. Well, the crisis did not come from nowhere; it did not grow on a tree in the Amazon. Some of it was down to the lack of confidence and the risk associated with the American sub-prime mortgage sector, but it was also down to a combination of bad policy, poor regulation, a failure to act decisively and weak leadership on the part of leaders around the world, including our Prime Minister in the 10 years when he was Chancellor.

The crisis was also down to a failure to learn lessons, and there were many lessons to learn, not least in the 2000 edition of the Bank of England’s “Financial Stability Review”, which gave a good assessment of the then recent banking crisis in south-east Asia. It showed, in both the macro and the micro measurements of how to forecast a banking crisis, any number of metrics, including significant property-related lending, the degree of reliance on inter-bank lending, and domestic credit growth. I know that the Bank collates this information and that it is reported, but I make a plea to the Government and to the Treasury Select Committee to look not at how the information is collected and collated but at how it is analysed, so that we no longer find ourselves in a position—as we did with the 2007 report—in which many of the risks are documented but then glossed over, in line with the Government’s assertion that everything is fine and that they have done everything correctly.

On the issue of burgeoning credit, among the many flaws that hon. Members have identified is the fact that too much credit was allowed into the system in the early part of the economic cycle, and there was too much public debt at the end of it. This has resulted in our having to borrow £300 billion more over the next three years and to triple the debt two years after that. The Government were effectively saying that there was nothing in the tank to stimulate the economy when the cycle ended—as it was always going to, because boom and bust never ended.

I would also add the criticism that this Government changed the system of banking regulation to allow banks to overexpose themselves to weak business models. This is not a critique that says that we need either a heavy-handed regulatory framework or a soft touch. However, we needed a regulatory framework—we still need one now—that identifies and manages the risks properly. I shall come back to that in a moment.

Mr. Pelling: Would the hon. Gentleman regard it as reasonable for the Scottish people to be taking on all the additional debt that has been taken on by the UK? Would it not be better for Scotland to leave as quickly as possible, so as not to be burdened with a debt that is far too huge for it to carry?

Stewart Hosie: It would be useful for Scotland to be independent as soon as people want it to be. I will not be too distracted by the hon. Gentleman’s question—but given that Scotland has had an average surplus for the past 30 years, while the UK is building up a £1 trillion debt, there is much merit in his argument, and I shall certainly look at it in more detail in the future.

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A further criticism of the Government is that when the banking crisis was at its peak, Ireland moved decisively to guarantee all deposits in its banking system, yet they delayed and dithered, which weakened the position further and brought HBOS and RBS to their knees. More stark than that, however, was the Government’s failure to have on the statute book a proper system for dealing with failing banks, even though they began to look at this issue in October 2007, when the Northern Rock failure commenced. Since then, we have had the recapitalisation of the banks, the facilitated takeover of Bradford & Bingley, a massive expansion in liquidity provision, an increase in deposit protection, and the Government standing behind inter-bank lending. I welcome much of this, but we did not have the appropriate provisions in place at the time.

Even the Banking Bill, which introduces a process for dealing with failed and failing banks, is not new. It was in the Queen’s Speech, and will receive its Third Reading on Wednesday, but it will not be on the statute book until 2009. Given that we have a problem that started in the middle of 2007, yet we will not have a law to deal with it until 2009, the one criticism that we cannot level at the Government is that they have acted decisively.

There is a paucity of any real economic measures in the Queen’s Speech. One thing that struck me during the Chancellor’s pre-Budget report speech, and again during his comments today, was that he said that we needed to improve the system of regulation and supervision. It is therefore extraordinary that he also said that he would not have the relevant proposals reported to him until spring 2009. A Bill will be introduced two years after the problems began to emerge and became widely known, and the regulations or changes that it contains might not come into effect until 2010.

The fiscal stimulus in the emergency package has been widely discussed today, and we welcomed many of the measures in the pre-Budget report. However, the Government have said time and again that they were taking the lead and acting decisively—

Angus Robertson (Moray) (SNP): Saving the world.

Stewart Hosie: Indeed. However, the stimulus package came after the announcement of the $150 billion package from the USA in February, and after the €18 billion plan announced in Spain in April. It also came after the announcements in October of the plan in France to fund 100,000 subsidised work contracts, and the $275 billion plan in Japan that would result in $20 billion going straight to Japanese households. The package also post-dated Germany’s announcement in early November of a €50 billion plan, and even China’s £375 billion economic plan. So there has been a great deal of puffed-up hyperbole from the world-savers on the Labour Benches, but this Government have not led, nor has the Prime Minister saved the world. Indeed, I think that the old adage might well apply to him: he is their leader; he must follow them.

The UK Government have argued time after time that in this global crisis, we cannot insulate ourselves from the financial turmoil. That is absolutely true, but it does not allow them to abdicate responsibility for their part in the crisis. They look at this situation through a
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particular prism, which allows them to say that they have done everything right and that national debt was always low. That is ridiculous, because it was already a colossal £500 billion in the last Budget. It seems even more silly when we consider the hundreds of billions of pounds of private finance initiative liability, much of which is off balance sheet.

In this year’s pre-Budget report, we saw PFI liabilities to 2033 reported at £216 billion—an increase of nearly £30 billion since last year. That increase is set against an increase of only £4 billion in the capital value. That means £7 of repayments for every £1 of capital—and that is not even the end of the story. Secreted away on the Treasury’s website is the full list assigned projects—reporting to 2048—involving another £24 billion of liabilities, which were not even included in the pre-Budget report.

In economic terms, we have become used to the Government trying to hide things and making the wrong decisions. They reduced the Scottish Government’s block by manipulating the English spending Departments’ baselines. They hid their plan to raise VAT to 18.5 per cent. They subjected the whisky industry to two duty rises in a single year. They also kept on the books their plans for a real fuel duty escalator from 2010, and they are planning a £1 billion cut in Scottish spending when we are entering a recession and public expenditure must play an essential part in the stimulus package.

The fundamental problem with the Government’s economic plans in the Queen’s Speech and the pre-Budget report is that they are based on wildly optimistic assessments. They assume an early exit from a short recession, and rapid growth thereafter. The International Monetary Fund suggests that the recession will be deeper, and the recovery longer and much more difficult. Even with £300 billion of borrowing over the next three years and a doubling of the national debt thereafter, the Government already have a black hole in the public finances that can be measured in tens of billions of pounds.

My biggest fear of all is that this Queen’s Speech was not concerned about the future of the economy. It was a thin, sparse, cut-and-run Queen’s Speech from a Government who think that they have got their lines against the Conservatives bottomed out, and now want to play politics with the misery of millions of people as we head into a very deep recession.

7.38 pm

Mrs. Anne McGuire (Stirling) (Lab): Thank you, Mr. Deputy Speaker, for giving me this opportunity to take part in today’s debate. I am pleased to follow the hon. Member for Dundee, East (Stewart Hosie), although he will not be surprised to hear that I disagreed with most of his analysis, most of his proposed outcomes and most of his politics. However, it was a pleasure to listen to him.

This is my first Back-Bench speech since 1998, when I first became a Government Minister. I was a new MP for only a relatively short period of time before being catapulted into the Government Whips Office, so I did not have time to brush up on my technique; I feel as though I am among experts here, and I hope that colleagues and other Members of the House will understand.

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A lot has changed since 1998—not least the fact that, until recently, we had enjoyed one of the most consistent periods of growth and increasing wealth for generations. It is little wonder, therefore, that people in the UK have been startled by the recent turn of events. However, the greatest shock for many of us was not what was happening in America, but what was happening here in Britain, under our own noses. A British banking system had built its reputation over hundreds of years on prudence and propriety. Having been found out, it had apparently abandoned those principles and indulged in some of the most spectacular examples of speculation and risk.

In Scotland, we were stunned to learn that our two iconic financial institutions, the Royal Bank of Scotland and Halifax Bank of Scotland, had not only been indulging in the same practices but, in doing so, had put their customers, shareholders and work forces—and indeed the banks themselves—in serious jeopardy. The Chancellor should be congratulated on the comprehensive action that he took. If it had been left to a so-called separate Scotland, as envisaged by some of my colleagues in the House, the banks in Scotland would have gone under because Scotland would not have been able to afford to bail them out.

John Mason (Glasgow, East) (SNP): Will the right hon. Lady give way?

Mrs. McGuire: No.

The business model proposed by the Scottish National party was the arc of prosperity consisting of Iceland, Norway and Ireland. If Members wish to make comparisons between Iceland and Ireland—and, indeed, to discuss Norway and what has happened to its oil fund—we should have a debate on the subject, even if we do not have it tonight. I do not want to talk about banking, however. I want to talk about maintaining the momentum of welfare reform, and making jobs and employment support available to those who need them most—those who have often been abandoned to live on benefits, either ignored or written off as being unable to make any contribution to the world of work.

I know that, in a period of economic uncertainty and increasing unemployment, it is sometimes felt that we should not continue to invest in those who are most distant from the labour market, but I hold the opposite view. It was abandoning people on incapacity benefit during the 1980s and 1990s that left good folk all over the country on a benefits scrap heap with no support and little prospect of building up or maintaining the skills and experience that they needed, or—in some cases more important—maintaining the motivation that could return them to the world of work. That aspect would be understood by my right hon. Friend the Member for Birkenhead (Mr. Field). It involves not just motivation, but maintaining the discipline of getting up in the morning.

In the late 1990s, we had to take up a challenge. For many individuals, families and communities, work was an alien concept because the necessary support had not been provided. That is why I welcome the ideas in the White Paper that will form the basis of the legislation outlined in the Queen's Speech. We have seen a transformation in the welfare state over the past 10 years. We have seen developments underpinned by the strengthening and deepening of our anti-discrimination legislation, not least in regard to disability.

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Over those same years, we have seen a greater focus on reducing welfare dependency. My right hon. Friend the Member for Birkenhead may be cynical about parts of it, but it should be recognised that some of the work done through our welfare to work programmes has brought more single parents on to the labour market, making a real impact on child poverty. It has also encouraged older people to retrain for different kinds of work, and helped more disabled people into jobs.

However, there are still some who have been left behind. More than 2 million people are on incapacity benefit—people with long-term health conditions or disabilities, who all too often are judged on the basis of their disabilities rather than their abilities. Like the Secretary of State, I believe that no one should be left out or written off, and that approach is recognised by many welfare organisations representing disabled people which have voiced their opinions on the proposals. They have some problems with the details, but they generally accept the underpinning principle that no one should be written off. I hope that the Secretary of State was pleased to note the comments of the Royal Society for Disability and Rehabilitation—RADAR—on the “right to control” proposals in the White Paper.

The real difference of opinion is on whether, in return for the increased community, society has the right initially to encourage people but ultimately to insist that they take up the opportunities that exist, and on whether, if they refuse for no apparent good reason, they should be able to do that without consequences. I understand many of those concerns. The legacy of welfare reform in this country is based on the experience of many people during the 1980s and 1990s, an experience of cuts and the demonising of people on benefits. That is why I welcomed the Secretary of State’s clear assurance in his statement last week that his welfare reform programme was about rebalancing the rights and responsibilities of the state and the individual, and emphasising that the state, as well as the individual, has responsibilities.

It is important that those receiving incapacity benefit are not abandoned to a life of inactivity as a result of the tyranny of the sick line which states “unfit for work”. Many people are not unfit for work, but unfit for the kind of work that they have been doing. If Members truly believe that work is good for us and that it is the best way out of poverty, why do we not encourage all people to consider all the options and opportunities? Why should we, as a society, make people feel that they have no further contribution to make to the world of work?

There are people who are now in work because of the intervention of the new pathways to work approach. According to that approach, we cannot impose a template on our welfare system, and must understand that in the case of those who have been out of work for many years a range of issues should be taken into account. I was delighted when the Secretary of State described the breadth of the investment that he was prepared to make in people, rather than casting aside those who needed the greatest investment. I hope that his words will give some comfort to organisations that fear that this is all about benefit cuts rather than support.

Conditionality means more than just cutting the benefit at the end of the line. It is about investment, and the investment highlighted by the Secretary of State in the access to work programme is a tremendous example of
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the way in which the investment of resources can enable people to go out to work. Labour Members should take great pride in the fact that the resources in that programme have increased more than four times since the Government came to power, and are set to double again. However, we must recognise that there are great gaps in our provision. There is no easy access to rehabilitation: people often cannot obtain the support that they need when they need it, so that they can make a full recovery and return to employment. What happens to people if they cannot obtain advice quickly?

The Labour party was built on a philosophy of fairness, but the philosophy also recognises that alongside fairness, we—as a society, as individuals and as a community—have rights and responsibilities. I believe that our welfare reform programme balances those rights and responsibilities, and I am delighted that it has been included in the Queen's Speech.

7.48 pm

Dr. William McCrea (South Antrim) (DUP): It is a pleasure to follow the right hon. Member for Stirling (Mrs. McGuire). She made a thoughtful speech which is worthy of careful consideration. It was preceded by—as usual—an excellent speech from the right hon. Member for Birkenhead (Mr. Field), who has a tremendous passion for the issue of welfare reform and a great deal of personal knowledge of it.

There is much to be welcomed in the welfare reform programme, and it is important for us to deal with it in the context of today’s wide-ranging debate on the economy, pensions and welfare. We need to realise that there are those who genuinely wish to obtain work, and that it is important to enable people to get back to work or into work. Our problem is the number of job losses throughout the country as we enter the depths of a recession. It will be difficult to get people into work if the jobs are not there for them, and that is another challenge for us to face.

We must also bear in mind that there are those who do not want to get into work; we should be honest about the fact that there are those in society who desire to remain on benefits because they receive less for going out to work than they do from being on benefits. We must look into that, and the Government must tackle it, because it is vital that every person who is capable of working is given the opportunity to do so—and, indeed, is encouraged to do so, as it is very good for those people personally and for their families that they have gainful employment and therefore a reason to get up in the morning.

The hon. Member for Gosport (Sir Peter Viggers) said that society has two problems in that we are both overtaxed and over-governed. I have much sympathy with that point of view. I certainly believe that we are overtaxed, and many of those taxes are indirect taxes that are slipped in—they come in unawares. Our constituents loathe such indirect taxation, whereas direct taxation is open and lends itself to being debated. We are also over-governed; business and society are over-laden with bureaucracy. That is another issue that a Government of whatever political hue must tackle.

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