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T he Government of the day were certainly not blameless, and I was critical at the time, but they recognised the issues and helped us to restore and retain jobs. The Chief Secretary to the Treasurythis is why I make the pointcould not have sounded more shrill and insulting to the stalwart people who soldiered through that time. I hope that she will reflect seriously on the fact that her comments do not play well with the people whom she claims to represent as a Minister of the Government. One need only look at the current number of housing starts, which are at 5,000 a month. In the very worst of previous recessions, they were about double that, at 10,000 a month.
Given todays unemployment figures, we need to recognise that this recession puts other recessions into the also-ran department. The rate of the rise in one month is sufficient to make most people afraid; it is eye-watering compared with the rates in previous recessions. Let us not for a moment try to pretend, as the Government have done today, that the recession is not deadly serious, and that many people in our country are not frightened. Frankly, they are right to be afraid.
We may say the usual knockabout stuff about an apology-free Prime Minister, the Blame anyone but me attitude, and the fact that we are now in the Brown bust, despite the Prime Ministers claim that he would get rid of boom and bust. Many right hon. and hon. Members sought to include those points in their speeches, but let us not forget that in recessions the victims are peopleour constituents. The remedy is to back business, and for people to get back to work in those businesses. I know that this sometimes pains the Government and many Labour Members, but whether they like it or not, when we talk about business, from the shop floor to the boardroom, we are talking about the private sector.
Yet again, as in all recessions, it is the private sector that takes a disproportionate share of the pain. Those in the private sector are ultimately the wealth creators, the risk takers, the entrepreneurs and the investors. Now that I am in the public sector, I understand why I was so angry with it when I was in the private sector. It seemed to think that a recession was something that happened to other people, not those in the public sector. In a recession, the national interest is damaged and deeply affected for everybody, but we all depend on the private sector for growth, wealth creation and ultimately the tax revenues that fund all our choices and democratic opportunities, and we must back it.
I received an e-mail from Robert Jenrick, who relates a story about Newcastle-under-Lyme, where another good business has fallen victim to the economic crisisa local engineering firm for over 40 years, and exactly the kind of respected employer of skilled workers that we must ensure survives the recession. Its parent company is Wrekin Construction, a profitable business which recently built Keele universitys science park. The business collapsed after Royal Bank of Scotland, now majority owned by all of us as taxpayers through the Government, demanded repayment of its entire overdraft. A similar thing happened as a result of a demand from Midland bank in the north-west back in 1979. I should know; it had a big effect on my family. More than 500 jobs may now be lost as a result of the engineering firms collapse. That could be unnecessary, provided the banks start lending again.
Among all the issues bearing down on this country now are the initial crisis, the banks inability to continue lending, and the fact that they had to hunker down and recognise that they had made some serious misjudgments. They had got out of control, they had lost what it was truly to be a banker and had become financial speculators and product innovators while most of those who had supervisory responsibility did not know what those products did.
It is vital that we all club together to help in political terms and get the banks lending again. Without lending, we cannot fuel, preferably from the bottom upfrom the SMEs upthe necessary business activity. We cannot support bankers who have decided to take public money to support themselves. We are right to be angry and to challenge the intention of those banks to continue to pay bonuses. They say they are contractually bound, but I would have said of those who might have been expecting a bonus, Let them sue for it. It may have been interesting to see how many of the arguments they advanced to get their entitlement, as they see it, would cut any ice. We must maintain that supply of fuel to business, and at present it is not getting through.
The key to success, as we know, is confidence. We start from a poor base. The uncertainties, particularly in relation to corporate tax, mean that most businesses have not been investing in their future, in innovation, in competitiveness and in ensuring that they can capture and retain markets, as they would have done had normal investment taken place in the so-called good times.
It is important to recognise that we start from a low base of business investment. Even in these tough times, businesses have to think about where, if they can get capital, they place that capital to ensure that they are best positioned for recovery, so that they do not find themselves disadvantaged by the recession, which has largely had nothing to do with their good business activities and everything to do with another part of the economy. In addition to all that others have said, I suggest that there is an opportunity for the Government tolet us call it thissteal our policies, including the £50 billion national loan guarantee scheme. Despite the various attempts by various Whips and others to rubbish that, nothing has been proved against it.
We have also proposed a tax break for new jobs, making sure that we reduce employment costs for small businesses by cutting national insurance, and helping small business with their cash flow by delaying VAT bills for six months. Through the Department for Business, Enterprise and Regulatory Reform we need to tackle the credit insurance calamity, which is causing major problems of supply. The Government are not prepared to acknowledge that and Lord Mandelson is apparently unwilling to meet leading retailers to discuss it.
Another point, which I hope I will be able to discuss later with my right hon. and hon. Friends on the Front Bench, is that we should look seriously to the past when the Industrial and Commercial Finance Corporation, which was succeeded by 3i, was an extremely good way
of trying to get a balance between equity and debt risk into new and start-up companies and early development companies. That was a success story, and I do not think that the conditions today are dramatically different, so we should look to those lessons. But perhaps, rather than being owned by the Bank of England and the clearers, such an entity might be very interesting to the venture capital trusts that are looking for opportunities to get their money to work.
I have to report an insidious and worrying effect of the Governments increasing involvement in the everyday aspects of our lives. As some may have read in the press, my constituent, Geoff Robbins, who has a thoroughly sound business, rang up his bank, RBS, for a normal merchant account, and after the usual questions, the final one was whether he had any political or judicial affiliations. Can you believe it? A well-known journalist tested that and received exactly the same reply and the bank was embarrassed and had to backtrack. That is a sign of the times. When banks start to become state-owned, people begin to worry that unless they are something to do with Labour they will be disadvantaged. That is a deeply worrying development in our national life. One has only to pose the question in the future: Labour or Conservative, which is safer? The answer is Conservative.
Ms Sally Keeble (Northampton, North) (Lab): I am sorry that I was not here for the opening speech, but we had a homecoming parade in Northampton, and I congratulate both the Royal Lancers on their wonderful parade and the people of Northampton on turning out in record numbers in brilliant sunshine, showing the enormous support in the town and the countryand in the county. I see one of my county Members of Parliament.
This afternoon I have listened to pearls of wisdom from Members about what they advised or would have done over the years. I have also had the privilege to sit on the Treasury Committee for the past four years and have heard the evidence of all those involved in the banking crisis. It has been clear throughout that nobody predicted it, gave the warnings or said what action they could have taken at the time that would have prevented it. However much hon. Members might say that they gave warnings at the time, it is clear to those of us who sat through the evidence that people did not recognise the size and scale of the problems until it was very late indeed. The first person to give the public warning about the scale of what was happening was my right hon. Friend the Chancellor, who did so last summer.
The real issue is whether the Government are taking the right approach to the crisis and whether the Conservatives have policies that would make the situation any better. I am clear that, although the Governments policies are risky, difficult and not perfect, they are the most likely to support people during the crisis. I also draw on my experience of previous recessions, which
was not as a Member of Parliament making speeches in this place, but outside reporting on them and dealing with the consequences.
For example, in the 1980s recession, I saw the consequences of a Government who did not invest enough in the Department for Health and Social Security, and in particular in social security offices. In Birmingham, when unemployment rose, the offices were overloaded and they shut down. For nine to 10 months people simply did not get any benefits. That is why the Government are right to invest in the Jobcentre Plus offices and to think carefully about how they will support people who need advice and retraining, and, yes, benefits.
During that recession, the Conservative Government were also not prepared to invest in training. As a result, one of the most talented work forces in the worldthe car workers of Birminghamfound themselves unemployed with no opportunities to retrain. That is why I particularly applaud the investment that this Labour Government have made in apprenticeships, schools and universities.
During the recession of the 90s, my hon. Friend the Exchequer Secretary and I were both in south London and saw its consequences. The then Government, who had no commitment to tackling inequality, allowed people in London to work on £1.20 an hour when people in Canary Wharf and the City were still making vast amounts of money.
The right hon. Member for Wokingham (Mr. Redwood) was right: what the Government have done is risky. However, it is absolutely right to interveneand with real force. Last autumn, the recapitalisation was needed to prevent a major bank from collapsing. The asset protection scheme frees up the banks balance books to enable them to start lending. There is also the quantitative easing; it would, I suspect, have been extraordinarily difficult for the Bank of England to manage both the quantitative easing and banking supervision. The division of responsibility at the Bank was right, although the FSA has clearly had difficulties.
Furthermore, it was right for there to be a fiscal stimulus. It would have been wrong if the stimulus had gone into public sector infrastructure spending at that stage, because that is notoriously slow. I would have preferred the stimulus to have gone through tax credits rather than VAT. It would then have been more targeted at the people who needed it more, and some of the retailers would not have been able to massage the figures.
As we prepare for the upturn, the focus on science, technology, engineering and maths will help rebuild the economy for the future. Young people will get education in the subjects necessary if they are to follow the direction in which the economy needs to go in the future.
In the short time that remains, I have a wish-list to give to the Exchequer Secretary. Some of the items will even find favour with the Conservative party. First, the Government should make sure that when something is announced, it is available. Some of the measures put in place are available, so this is not a criticism of all the Governments schemes. However, there have been real difficulties, particularly with the mortgage rescue scheme. That scheme was announced and people thought that it would be available, but it has taken a couple of months to put in place. Most peoplecertainly my constituentsare realistic about what happens. They make plans on
the basis of what is on offer. If they think that something is on offer, they will plan around it. If, however, they then find that it is not, they get very cross.
On the home ownership front, can the support for mortgage interest be extended so that it is made available to some extent to people on contributions-based jobseekers allowanceperhaps through a link to the tax credit system? In my constituency, there are one and a half incomes per household, so if one person loses their job the income is still too large to qualify for support for mortgage interest. People might lose their homes, so I ask my hon. Friend the Exchequer Secretary to look at that issue.
In particular, will the Government put pressure on the banks regarding the conditions imposed on recapitalisation? The banks should maintain their 2007 levels of lending, and we should get monthly rather than just annual reports. The banks are obliged to provide that level of lending and there is clear evidence that the money is not getting through. The Northamptonshire chamber of commerce kindly organised a business advice surgery for me at which businesses raised issues, and that was the No. 1 problem.
One of the other problems was that, because of very low interest rates, banks were recouping some of the money that they would otherwise have got by increasing arrangement fees and other hidden charges. I hope that the Government will put real pressure on the banks so that they cannot use other means to make life difficult for small and medium-sized enterprises. If banks are reviewing their loan books, which they obviously have to do, they should not be punitive or trigger problems for fairly sound firms, which are finding their way through current difficulties, by stopping draw-downs on existing loans, for example, which is what HBOS did to one of my constituents, threatening 50 jobs.
I hope that the Government will implement quickly the recommendations of the Turner report. The Government called for it, and it is important to recognise that. In particular, I hope that we will implement the recommendations on credit ratings agencies and on remuneration policies. While there has been much focus on Fred the Shreds pension, we have not heard so much about the fact that bonuses encourage inappropriate risk-taking, which needs to be dealt with.
Finally, please will the Government maintain their outstanding commitment to tackle child poverty and global poverty? In these hard times, it is important that our party and our Government hold fast in the great crusade that has won them credit not just in this country, but around the world. It has been one of the defining policies of this Labour Government.
Mr. Brooks Newmark (Braintree) (Con):
The Prime Minister has indeed taken Britain from boom to bust. As we heard from my hon. Friend the Member for Tatton (Mr. Osborne), today the IMF predicted that the global economy will shrink by 0.6 per cent. in 2009, compared with a figure of 3.8 per cent. in the UK. By contrast, the United States economyI know that the Prime Minister likes to contrast us with the USwill contract by 2.6 per cent. Next year, however, while the rest of the world returns to growth, the UK will continue to shrink. As the economy shrinks, so do tax revenues,
and tax revenues from the City alone are expected to drop by up to 40 per cent., with a loss of up to £25 billion.
Unsurprisingly, sterling has collapsed to a 23-year low of $1.35 from a peak of $2.11 under a year ago. Let me remind the Prime Minister that it was he who said, in 1992, that a weak currency arises from a weak economy, which in turn is the result of a weak Government. The problem began the day that the Prime Minister stepped into No. 11 Downing street. In making the Bank of England independent, removing debt management to the Treasury and removing day-to-day supervision of the commercial banks, he left the Bank, as my right hon. Friend the Member for Wokingham (Mr. Redwood) pointed out, blind in one eye as to what the Government broker was up to, and blind in the other as to what was going on with the clearing banks.
It was the Prime Minister who set up the tripartite system of regulation between the Treasury, the Bank and the FSA, with no one ultimately taking responsibility when the economy began to unravel with the collapse of Northern Rock. Indeed, in his Mansion house speech of 16 June 2004, he said:
I want us to do even more to encourage...risk takers.
On that policy, he was certainly successful. As we heard, he sold gold at the bottom of the market, at an average price of $275 per ounce, when its price subsequently rose to almost $1,000 an ounce, costing the public purse £5 billion. He also abolished tax benefits that pension funds had gained from advance corporation tax, costing pensioners £5 billion a year and diminishing the value of personal savings by more than £100 billion. His tax credits system is in tatters, with more than two thirds of recipients receiving the wrong amount at one point. There have been £5.8 billion of overpayments, with £500 million written off so far and another £1.5 billion unlikely to be recovered.
In the meantime, debt ballooned. While the Prime Minister sought to maintain his golden rule of keeping net debt at about 40 per cent. of GDP, he put more and more debt off balance sheet so that by the time I wrote my pamphlet The Price of Irresponsibility for the Centre for Policy Studies last October he was hiding £2 off balance sheet for every £1 that he was keeping on balance sheet. Not surprisingly, he become known as the Enron Chancellor.
Today, the situation is even worse. If public sector pension liabilities and private finance initiative schemes are added to the on-balance sheet debt of recently nationalised banks, total debt today is not the £700 billion that the Government acknowledge but as my right hon. Friend the Member for Wokingham indicated, a whopping £4.6 trillion. In other words, it is not 40 per cent. of GDP or even 48 per cent., as the figure of £700 billion implies, but almost 300 per cent. That is about £200,000 for every household in the country.
According to some estimates, it will take us until 2030 to bring the debt to GDP ratio back to 40 per cent. That is the Prime Ministers legacy to our children and our childrens children. Yet in October 2008 he said:
I have to say to you that we face this situation as a country with relatively low national debt.
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