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We called todays debate because people throughout Britain who face redundancy, short-time working, layoffs, pay cuts, business failures, negative equity and repossessions cannot understand why Parliament is not debating the economic crisis all day, every daynever mind why it has not debated it this year. Real help now is the slogan, and I have a copy here of the glossy brochure that the Government have produced to promote it. But we have heard from Members this afternoon how hollow that slogan is, and it is clearly not a piece of rhetoric that the Chancellor is prepared to come here to defend. Nevertheless, I have to sayperhaps the Exchequer Secretary will convey this to the Chancellorthat even without him we have had a useful debate. Let me now mention just some of the important issues that have been raised in the course of it.
The shadow Chancellor, my hon. Friend the Member for Tatton (Mr. Osborne), set the tone with a forceful case against the Government, along with a devastating analysis of Labours failure to prepare the British economy for the problems that we now face and its continued failure to address those problems once they were upon us. Some of my hon. Friends offered specific examples of the failure of the Governments announced programmes to deliver.
The hon. Member for Twickenham (Dr. Cable) made the important point that there is a distinction to be drawn between the institutional implementation of a programme and that programmes delivery of results at the sharp end. My hon. Friend the Member for Bournemouth, West (Sir John Butterfill) gave examples of constituents to whom the loan guarantee schemes were simply not available. We heard from my hon. Friend the Member for North-West Cambridgeshire (Mr. Vara) of the inability of a constituent of his to access an announced career development loan, and, perhaps even more worrying, the unawareness of his local jobcentre staff of that scheme.
My hon. Friend the Member for Bosworth (David Tredinnick) gave an example of a denial by banks of access to one of the guarantee schemes for a company in his constituency. My hon. Friend the Member for Sevenoaks (Mr. Fallon) told us just how patchy knowledge and awareness of those schemes is, not just among jobcentre staff but among businesses. That point has been reinforced by the director general of the CBI.
I think it was my hon. Friend the Member for Crewe and Nantwich (Mr. Timpson)although he is a relatively new Member, he obviously has the knack of seeing right through the issueswho identified the problem, which is the Governments instinct to announce first and work it out later. His point was reinforced by the hon. Member for Northampton, North (Ms Keeble), who said that when something is announced it must be available. I hope that those on her partys Front Bench will take that message on board. She went on to explain the disappointment, confusion, dismay, anger and frustration caused when schemes that are supposed to be available are simply not there. That confusion, particularly in relation to help in the job and housing markets, adds to the loss of confidence, which, as my hon. Friend the Member for North-East Hertfordshire (Mr. Heald) pointed out, is so important at a time like this. My right hon. Friend the Member for Haltemprice and Howden (David Davis) reminded the House that Keynes himself came to recognise the critical role of
confidence in an economic recovery. The recovery of confidence is, as a number of hon. Members pointed out, a necessary, if not a sufficient, condition for economic recovery and must be a principal focus of the Governments attention.
Several hon. Members focused on the underlying problems in the banking system. My right hon. Friend the Member for Haltemprice and Howden drew attention to the very different models of Japan and Sweden, and the banking crises they had both suffered. He noted that the Government appear to be following the Japanese model of fiscal loosening while failing to get to grips with the problems in the financial system, and to be shying away from the Swedish response, which was ultimately successful. He offered a credible explanation for that choice: the Swedish route, of recognising the problems in the banks up front and taking them explicitly on to the balance sheet and dealing with them, requires some tough decision making, while the Japanese approach pushes the problem down the line to be dealt with and paid for later on. We all know that this Governments inclination is to push problems down the linecertainly beyond May 2010even if that gives rise to the risk of zombie banks being created, as my right hon. Friend suggested.
My right hon. Friend and a number of other Members referred to the challenge of defining the limits of taxpayer responsibility for banks in future, whether by some Glass-Steagall type approach or by other means. There was general consensus that the taxpayer will not in future be prepared to stand behind the kind of behaviour we have seen in the investment arms of banks. We will have to find a way forwardlooking at the Turner report and the recommendations of Sir James Sassoon to the shadow Chancellorto build a new structure that will protect the taxpayer while allowing a banking system to operate for the benefit of the real economy in this country.
My hon. Friend the Member for Aldershot (Mr. Howarth), my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) and my right hon. Friend the Member for Wokingham (Mr. Redwood) reminded us of the flimsy basis on which the Prime Ministers reputation for financial management was built. His great coup of the Bank of England reform of 1997 is now exposed as having delivered a dysfunctional regulatory system. As my hon. Friend the Member for Braintree (Mr. Newmark) said, the problems we are now facing began on the first day of this Labour Government, when the now Prime Minister crossed the threshold of No. 11 Downing street. My right hon. and learned Friend the Member for Folkestone and Hythe reminded uscontrary to what some Labour Members suggestedhow he and others were warning in November 1997 that this undermining of the Bank of England would create a field day for spivs and crooks. Again, in 2002, 2003 and 2004, when he categorised the then Chancellors Budget as a credit-card Budget, heand otherswere warning of the hollowness of an economic model that built an economy on the sand of excess debt. The truth is that my right hon. and learned Friend and other hon. Friends have consistently warned about the risks the then Chancellor was running with the economy, and they were consistently ignored.
Several Members referred to the confusion in Government policy towards the bankson the one hand urging greater lending, on the other hand urging them to rebuild their balance sheets. Several Members also gave examples of banks that do not appear to have received the message from head office of the deal that the Chancellor and Prime Minister tell us they have done on extending lending to businesses that need support. This problem urgently needs resolving if the measures that the Government have taken are to deliver a freeing-up of lending at the sharp end.
There were a couple of interesting speeches made by those on the Labour Benches. The hon. Member for Newcastle upon Tyne, North (Mr. Henderson) used the D-word about this recessionI am sure that he will get a note about that later from the Whips. He accused the Conservatives of not being prepared to face up to what he called the new economic situation. I should say to him that it is precisely because we are facing up to the fact that the challenges that the economy faces are on a scale not seen before and that the changes we will see in it require a sea change in our thinking that we have resisted signing up to the easy consensus being offered by Labour Members. We have insisted on taking on the chin the really difficult challenges that have to be dealt with. It is he and his colleagues who are not prepared to face up to the fact that their Government did not prepare the United Kingdom to withstand this downturnthey are the ones who are guilty of gross negligence and dereliction of duty in preparing the UK for the problems it faces today.
Anyone listening to this debate would recognise that there have been massive failures of Government policy, both in the decade to 2007 and in the Governments response to the crisis since. I do not know where the Chief Secretary to the Treasury stands on the issue of apologies, but her boss and her husband have given one, yet the Prime Minister still insists on saying that he has nothing to apologise forthat is how the British people will remember him. He will be remembered as the Prime Minister who brought destruction upon the economy, but who says that he has nothing to apologise fornot the failure of his regulatory system, which contributed to the global crisis in the first place; not his failure to manage our public finances, which meant that we went into this recession less well prepared than any other major economy; not his hubristic claim to have abolished boom and bust, which led many people to borrow money they could not afford, a decision that they regret now and will regret for the rest of their lives; not his grandstanding abroad when he should have been fixing the problems at home; and not his endless stream of ineffectual announcements, which are still not delivering today for the businesses and the households of this country.
A Prime Minister who implemented a financial regulation system that has failed so catastrophically, who operated a model of economic growth based on unsustainable public debt, unsustainable global imbalances and unsustainable household debt and who cannot acknowledge those failures, even now, cannot be part of the solution. He is the problem, he is the past, and the sooner we move on to the future, the better for Britain.
The Exchequer Secretary to the Treasury (Angela Eagle):
We have had an interesting debate and I wish to
mention a few of the contributions that I have enjoyed listening to this afternoon. First, I should mention the one made by my hon. Friend the Member for Coventry, North-West (Mr. Robinson). He pointed out the untenable Conservative position of calling the Government response to the current conditions inadequate, while being against the Governments spending, which is needed to pay for any action at all. The speech made by my hon. Friend the Member for Crawley (Laura Moffatt) recognised the really difficult times for people and businesses that the current conditions we are battling are causing us to have to deal with.
My right hon. Friend the Member for Oldham, West and Royton (Mr. Meacher) and my hon. Friend the Member for Elmet (Colin Burgon) gave us a critique of neo-liberalism and, in some cases, a timely analysis of the problems of inequality. My hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson) cited Galbraiths statement about where the wise got their wisdom, but pointed out that the Tories are not ideologically comfortable with the direction that is needed to get us through the current problems. My hon. Friend the Member for Northampton, North (Ms Keeble) made an extremely good speech, talking passionately about the unfavourable consequences of the Conservative do nothing approach to the recession of the 1980s and 1990s, contrasting that with the Governments action so far.
The main themes of the speeches by Opposition Members can be summed up in two words. Many Opposition Members, including the right hon. Member for Haltemprice and Howden (David Davis) and the hon. Members for Eddisbury (Mr. OBrien) and for Wellingborough (Mr. Bone), talked about the need to restore confidence. If they wish to restore confidence, why do they go around scaremongering about levels of debt? Why do they talk down the British economy and emphasise the negatives, rather than help us battle the serious problems that we face?
Other Opposition Members talked about how the problems here were caused by the Bank of England and the creation of the tripartite arrangements, but that has not had anything to do with the global recession that we now face. In fact, the problems of the global credit crunch have been manifested in every country, despite very different styles of financial regulation. Clearly, there are lessons to be learned, and Lord Turner has talked about some of those in the publication of his report today, which the Chancellor requested last October. The problems are deeper, as Lord Turner pointed out, and include the complex financial engineering that was going on, and the global imbalances between saving and spending, which manifested themselves in low-priced credit. All those issues have to be solved if we are to create a sustainable future.
This debate has demonstrated the real differences that we have with the Conservatives over how to tackle the unprecedented economic challenge that we now face. The Conservatives like to insist that somehow the downturn we are now experiencing is all the fault of our domestic policy. In fact, the credit crunch began in the American sub-prime mortgage market. As it has reverberated around the world, we have seen a noticeable deterioration in global economic prospects. In the last quarter of 2008, the world economy shrank for the first
time since 1945. The IMF now expects global growth to be negative in 2009. That will be the first global contraction for more than 60 years.
The battle to end this global financial crisis and return the world to sustainable growth demands new ways of thinking and new ways of acting, both domestically and internationally. There are three priorities. First, the global economy is interconnected, so we can succeed only if we work together. Secondly, we need to stimulate demand and, thirdly, we must reform both regulation and international financial institutions.
Whether the Tories like it or not, the fact is that the problems we are facing are shared across an interconnected world. It is only by acting together that we can tackle them effectively. That is why the G20 conference is so important. Our national action will be more effective if it is accompanied by globally co-ordinated responses. That is especially true of boosting demand and reforming regulation.
What have we heard from the Conservatives to match the scale of the task that we face? The need for major changes to our systems of financial services regulation is obvious
Mr. Redwood: When did Treasury Ministers first become aware that there was a debt crisis in this country?
Angela Eagle: Far from demanding more regulation during the passage of the Financial Services [ Interruption. ] The Conservatives spent their entire time in government and in opposition calling for less regulation, for markets to be free, and for markets to make the decisions. The right hon. Gentleman is one of the major causes and supporters of deregulation in the financial markets [ Interruption. ] They do not like [ Interruption. ]
Mr. Deputy Speaker (Sir Michael Lord): Order. The House gave a fair hearing to the Opposition spokesman in the wind-ups. These are extremely serious matters. Outside this House, people are watching the way in which we are debating them with great anxiety and the House should give a fair hearing to the Minister who is winding up.
Angela Eagle: Perhaps I might ask the right hon. Gentleman when he first gave me a warning about what was happening with debt in the British economy.
We have heard that somehow all these issues are problems caused by our national regulatory arrangements. They clearly are not, because they manifest themselves around the developed world in advanced financial services and, in particular, in banks.
Far from demanding more regulation during the passage of the Financial Services and Markets Act 2000, which created the current tripartite arrangements, the Conservatives called for less. The right hon. Member for Wells (Mr. Heathcoat-Amory), for example, said from the Tory Front Bench on Second Reading of that Bill that
we believe that regulation should be minimal
and that their concern about the Bill was
the danger of over-regulation.[ Official Report, 28 June 1999; Vol. 334, c. 42-44.]
The hon. Member for Chichester (Mr. Tyrie) expressed similar concerns. Four years later the then shadow Chancellor, the right hon. Member for West Dorset (Mr. Letwin), announced that an incoming Tory Government would abolish or rein in the FSA because of its intrusive regulatory regime.
In March last year, in the middle of the credit crunch, the Leader of the Opposition was still at it when he said:
I understand totally that the strength and success of the City of London has been based on light-touch regulation.
It is little wonder then that just as the credit crunch took hold the right hon. Member for Wokingham (Mr. Redwood) was unveiling plans to scrap completely the regulation of all mortgages. So, are the Opposition in favour of boosting demand?
Rob Marris: Does my hon. Friend find it strange that the Conservatives in opposition now castigate the Government for proposing to double the national debt in the light of the worst world recession since 1946, yet the previous Conservative Government doubled the national debt when there was not such a deep world recession at all? They were the profligate ones, whereas we have had to pick up the pieces and pay down some of that national debt.
Angela Eagle: My hon. Friend is right.
Are the Conservatives in favour of boosting demand to give real help now, just when it is needed, at the beginning of a recession? No, they are not. They are alone in the world in proposing huge spending cuts. They would repeat the mistakes of the past. They would take us back to the 1930s by weakening demand just when it needs to be strengthened. They have proposed to cut £5 billion from current spending plans by April this year. That is two weeks from now. Two days ago, the Leader of the Opposition was saying that Labours determination to support demand and protect real people from the effects of the downturn was unaffordable. He said, Does that mean some areas will be cut? Yes it does.
The Tories also opposed the £20 billion injection of demand into the economy that we announced at the pre-Budget report. That means that based on the policies that they have announcedwe have heard precious little of most of themthey would take £25 billion of spending out of our economy just as the recession is at its worst. They would let this recession take its course, whereas with real help now we have ensured that 12 million pensioners have received a £60 extra payment since January to support them at this difficult timethe Tories, however, are opposed to it.
In April, all 22 million basic rate taxpayers will get a £145 tax cut. That is real help now, but the Tories are opposed to it. They make the completely unfounded assertion in the motion that the temporary cut in VAT has not worked. Evidence from the independent ONS shows that the tax cut has been reflected in price reductions in 70 per cent. of cases [ Interruption. ]
Mr. Andrew Robathan (Blaby) (Con) claimed to move the closure (Standing Order No. 36).
Question put forthwith, That the Question be now put.
Question put accordingly (Standing Order No. 31(2)), That the original words stand part of the Question.
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