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We entered this financial crisis with one of the lowest levels of Government debt of any major country, and even after the action we have taken, we are still forecast to have lower debt than most of our major competitors. That is why we can act now. It means we will have to take action to bring borrowing back down in future
years, so yes, we will introduce a new top rate of tax and cut tax-free allowances for those on over £100,000. Yes, we will expect the public sector to deliver even greater efficiencies to support the economy in future. But here is the difference between us. Whereas we will introduce a new top rate of tax and a new law to help to cut child poverty, the Opposition want to introduce inheritance tax cuts for millionaires and cut the Sure Start scheme—our priorities, compared to theirs.
Last year, the Chancellor asked Lord Turner as the new chair of the Financial Services Authority to look again at our regulatory framework and to put forward more reforms for the future. His report, and the Government report “The Road to the London Summit”, outlines many of the problems that led to the financial crisis, and the need to take action now to deal with those problems for the future. We welcome Lord Turner’s report—
Mr. Gummer: On a point of order, Madam Deputy Speaker. Is it in order to quote from a document that has been produced today, but not provided to the House? That is what the Minister is doing.
Madam Deputy Speaker: I dealt with that point of order earlier in the debate.
Yvette Cooper: May I point out that the shadow Chancellor quoted from the document in question?
Yvette Cooper: I give way to my hon. Friend the Member for Edmonton (Mr. Love).
Mr. Love: I thank my right hon. Friend for giving way. Picking up on the theme of the shadow Chancellor’s speech, are not those who should apologise to the House the Opposition Back Benchers who called for deregulation and further deregulation right up until the credit crunch hit?
Yvette Cooper: My hon. Friend makes an important point. I shall come to the challenges that led to the global credit crunch.
I give way to the hon. Member for Na h-Eileanan an Iar to whom I have not yet given way.
Mr. MacNeil: I am grateful to the right hon. Lady for giving way. Unemployment has passed the landmark of 2 million. Some people reckon that in the next year unemployment will reach 3 million, an increase of 50 per cent. Is this the right time to introduce £1 billion of cuts to Scotland, as well as to Wales and Northern Ireland? Cutting the budgets of the Scottish, Northern Ireland and Welsh Governments is the exact opposite of a fiscal stimulus.
Yvette Cooper: That is why we are not doing that. In fact, we are increasing the investment over the next two years by £2 billion in Scotland, because we think it is right to increase investment in Scotland, in Scottish jobs and in support for training and for services in every corner of the country.
Returning to the Turner report, we will issue a White Paper which sets out further proposals. As the shadow Chancellor said, we need banks to be boring again, we need banks to get back to basics, and we need bankers to stop behaving like masters of the universe.
The shadow Chancellor would have us believe that his party would have been more likely to prevent these problems in the first place. I want to test that idea and show what astonishing nonsense it is. The idea that the Conservatives would have proposed stronger international regulation of the financial system in Europe or globally is a joke. While we have been working with European and global partners to agree reforms, they are busy pulling out of Europe.
The idea that the Conservatives would have proposed stronger financial regulation here at home is even more of a joke. Here is what the shadow Chancellor said just before the credit crunch started:
“Regulation . . . inhibits enterprise. For example, speak to any business in financial services—from the largest investment bank to the smallest independent financial adviser—and the threat of future regulation from Whitehall and Brussels is now their number one concern.”
As for the shadow Chancellor’s comments about household debt, house prices and the increased lending in the mortgage market, what were the Conservatives calling for before the credit crunch started? They were calling for limits on house building, which would have pushed house prices up further, a cut in stamp duty, which would have pushed house prices up further still, and an end to mortgage regulation altogether. The fact is that the Opposition fought against all our regulation. Their policies would have made the problem worse.
Mr. Osborne: I am grateful to the Chief Secretary, who was quoting what people were saying just before the credit crunch. Let me quote what the present Secretary of State for Children, Schools and Families said in October 2006. He said:
“Some have suggested that given their central role in the economy, it would be appropriate to treat banks just like utilities—to subject them to . . . onerous rules on how they interact with their customers. The alternative approach—and the one I favour—is to rely on market forces and competition policy to promote efficiency through open and competitive markets”.
By the way, in the same year the Prime Minister heralded
“a new golden age for the City”.
Perhaps the right hon. Lady should have a word with her husband and with her Prime Minister.
Yvette Cooper: I will have a word.
The hon. Gentleman is talking about people who were putting forward regulations that he fought against. At the time that he is talking about, the present Secretary of State for Children, Schools and Families and the Prime Minister were pressing forward with regulations that his party opposed repeatedly, at every stage. When the Labour party introduced stronger and tougher regulation, the Conservatives opposed it, time and again. I agree that we need to go further and introduce stronger regulation. That is why we commissioned the Turner report.
Yvette Cooper: I am delighted to give way to the right hon. Gentleman who championed less regulation and wanted to abolish mortgage lending regulation altogether.
Mr. Redwood: If the right hon. Lady tried reading the report, she would see that it said we needed tougher regulation of capital and cash, which the Government singularly failed to provide, and less regulation of process, which did not stop a single dodgy mortgage.
Yvette Cooper: In his report, the right hon. Gentleman argued for a complete end to mortgage regulation.
Mr. Geoffrey Robinson: It might help my right hon. Friend if I read from the report largely authored by the right hon. Member for Wokingham (Mr. Redwood). He wrote—this is with the full authority of the final report of the Conservative party economic competitiveness policy group:
“We see no need to continue to regulate the provision of mortgage finance”—
[Laughter.] The best bit is yet to come. The report goes on to say that
“it is the lending institutions rather than the client taking the risk.”
Yvette Cooper: Hon. Members seem to be laughing at my hon. Friend. Do they realise that he is quoting from the Conservatives’ report, which called for— [Interruption.]
Yvette Cooper: The Conservatives report called for an end to mortgage regulation just a month before the credit crunch began. That is shocking, at a time when we need to increase regulation. The Conservatives have continued to oppose the tougher regulation that we need, and they have opposed the action and the investment that we need to get our economy through difficult times.
We have a fundamental difference in philosophy. We believe in internationalism and in working with our international partners in Europe, in the US and across the world. The Conservatives would pull out of Europe and would be isolated in their economic strategy. We believe that when markets fail, it is right for the Government to step in, support people and help them through. They believe in rolling back the state and cutting help for people. Only a few months ago, they were saying they wanted a Government who got off people’s backs. What they meant was a Government who turn their back.
Mr. MacNeil: Will the Chief Secretary give way?
Yvette Cooper: We believe that when things get tough, we need to pull together to get through, not leave people to sink or swim alone. We believe that we need to help those who are hardest hit with extra support whereas they want—
Madam Deputy Speaker: Order. It is entirely dependent on the Minister whether she gives way. She has made it clear that at this point she is not giving way.
Yvette Cooper: Thank you, Madam Deputy Speaker.
Conservative policy would be devastating for the British economy. Instead of helping those who are hardest hit, the Conservatives simply want to help millionaires. Just as they did in the ’80s and ’90s, they want to turn their backs on people who need help. We will not do that. We will keep supporting British business and British families with the help that they need to get through. That is why we reject their motion today.
Madam Deputy Speaker: I remind right hon. and hon. Members that Mr. Speaker has imposed a 12-minute limit on the contributions of Back-Bench Members.
2.59 pm
Dr. Vincent Cable (Twickenham) (LD): I agree with the argument of the Conservative shadow Chancellor and his colleagues that the Chancellor of the Exchequer should be here. We have had two very important announcements on economic matters, one on unemployment and one on a fundamental reform of financial regulation, each of which independently would have justified the Chancellor’s presence, and he should really be here. We know that he has a hard time fending off calls from No. 10 Downing street, but that is not an excuse for not reporting to Parliament. Therefore, I totally support that point.
The central point to be made on the motion is that the enormous gap between the rhetoric and the action is in many respects true. In some ways, the motion understates the case. To take the problem of repossessions, the Government have four schemes, not just one—none of which, as far as I can establish, is properly operational—plus an empty property clearing house, which does not seem to be working with any volume, and a social housing building programme, which is virtually at a standstill. So even if we take one narrow area, there is very little progress to report.
Yvette Cooper: I am sorry to intervene so soon in the hon. Gentleman’s speech, but in fact interest payments on mortgage interest have been in place since January, and the mortgage rescue scheme is also in place, with housing associations and local councils able to use it now.
Dr. Cable: The schemes have been institutionally established, but the question is whether people are benefiting from them. Even the most optimistic in the housing sector are saying that at the very most at the end of this financial year, 10,000 to 12,000 of the 75,000 repossessed households will have had access to these schemes. I hope that it is more, but that is the position.
However, there are occasions when it is desirable that there is a gap between the rhetoric and the delivery. I am rather surprised that the Conservatives have thrown their weight so strongly behind the asset protection scheme, which is really a rather questionable commitment potentially of hundreds of billions of taxpayers’ money to ill-defined potential losses from banks, some of which, as we have discovered during the past few days, are extremely reluctant to pay the British Government the taxes that are accrued here. I would be a little careful about rushing into the implementation of bad ideas, which the motion seems to imply.
As the Chancellor is not here, there is an opportunity to look at some of the ideas that the Conservatives are putting forward, and I will do so from the standpoint of curiosity rather than criticism. I will try to mix that with comments on Government policy. The Conservatives got off to a very good start this weekend when the Leader of the Opposition announced his proposal for Maoist self-criticism circles as a way of approaching past failures of ideology and judgment. We can probably all benefit from the therapy of confessing past mistakes. [Hon. Members: “Go on.”] I am not sure that the
message has yet entirely percolated through to those on the Opposition Front Bench, which I will illustrate with reference to what I think is their central argument: that there is a general problem of debt.
There is a key phrase in the motion, which the Conservatives repeat often, so they clearly believe in it:
“including a build-up of government, corporate and personal debt which has left the UK more exposed than other countries”.
Of course, Government, corporate and personal debt are fundamentally different; they are different in origin and in consequences. I can understand why spin doctors might have said to the Conservatives at some point, “This is all very complicated. Let’s simplify the message. Debt is a bad thing”, but such debts are different, and I hope that they appreciate that, because there are some important policy implications. It is useful to take the three bits and analyse them.
First, the Conservatives are absolutely right that there has been a dangerous and, in the UK’s case, almost unique expansion of household debt to unprecedented levels—the highest in the western world, in relation to disposable income. However, I thought that I heard the Leader of the Opposition apologise on Sunday for not having spotted that until the last year. That was big-hearted of him, and he deserves credit for that. He would have been even more big-hearted if he had acknowledged that six or seven years ago Liberal Democrats were warning of precisely that problem. None the less, it was a big step forward. That is household debt, and we are now in agreement that that is a big problem lying at the heart of a lot of our difficulties. It is that model of a rapid growth in consumption fuelled by consumer debt, which the Conservative shadow Chancellor described, that is not sustainable.
Secondly, is it true that there is a problem of corporate debt in Britain? Clearly in one or two institutions there is. There was massive leverage in the investment banks and there was a business model in the private equity companies that was based on private debt, and it is right to draw attention to that. However, the shadow Chancellor may have forgotten that two years ago he appeared at the British Venture Capital Association and referred to private equity and its leverage in these terms:
“On these occasions, it is usual to praise your hosts and audience. Tonight that is easy. Private equity is a beacon of British excellence. The importance of your contribution to our economy is, I believe, rightly reflected in the tax treatment that you receive.”
That was praise of a highly leveraged business model, but are the Conservatives saying that the hundreds of thousands of companies that belong to the Federation of Small Businesses and chambers of commerce and the members of the CBI are systematically over-leveraged or imprudent? Is there any evidence for that? I do not think so. Anecdotes suggest—I am sure that many Conservative Back Benchers will reflect this—that after British companies had their last bad experience of very high interest rates, most of them cut back substantially on their borrowing wherever possible. I just do not see the point about lumping corporate debt in with household debt; it is a fundamentally different problem.
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