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8.42 pm

Mr. William Cash (Stone) (Con): I listened to the debate with great interest, but there have been moments when I felt that we were listening to an economic seminar, some of which gyrated around the learned reports that had been pouring out and the questions with which it is important for those who are super-intelligent in economic matters to grapple.

I want to deal with several matters that underpin our discussion, and concentrate on what we must do to kick-start our economy and get into a position, against the background of a likely 3 million unemployed next year, where we can ensure that the people who would otherwise be severely disadvantaged are given a genuine opportunity not only to survive but to prosper.

I should like to get one thing off my chest—it will not surprise anybody. Many of the problems we are experiencing in the current economic crisis are partly attributable to the failures of the European Union. [Laughter.] I said that would not surprise anybody. In the fiscal policy debate on 7 October, I pointed out that it was a question not only of banks, but of countries. I considered the stability and growth pact and the deficits under the Maastricht criteria and the convergence criteria. I said that I thought that some countries would go under. I leave it to others to judge whether I was right, but the bottom line is that the absurd stability and growth pact means, as I said in an article written as many as five years ago, no stability, no growth and no pact. The idea that somehow one can fine countries that get themselves out of kilter with their deficits is absurd when one considers the size of the deficits, as I said on 7 October. I mentioned the latest figures from the Office for National Statistics to the Chancellor this afternoon.

The ONS’s current estimate of our public sector deficit is £2.2 trillion, which not only is triple what the Government set out in the pre-Budget report only three months ago, but excludes major financial obligations, such as public pensions, which amount to £1 trillion,
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and PFI schemes, which amount to about £70 billion. Including those obligations takes the total to £3 trillion—I challenge any Member on the Government Benches to say, “Oh, we’re not going to pay the public sector pensions.” Those sums may not be in the ONS statistics, but they are certainly financial obligations. If we add them in, we arrive at a figure of £3 trillion, which I am informed is 200 per cent. of GDP. France, Spain, Greece and Ireland have all broken the pact’s rules with their rising budget deficits. Therefore, the whole thing is complete nonsense.

In addition, there are riots going on. I know that Ukraine is not part of the European Union, but there are huge riots going on in Latvia, Greece, Spain and Italy. They are grass-roots reactions. No wonder the far right is going up. That is where the problem lies. With hon. Members representing Stoke-on-Trent in the Chamber this evening, I should say that we are deeply concerned about the growth of the British National party in our area. In Stoke-on-Trent there are as many as 12 or 13 BNP councillors, and that is likely to grow as unemployment increases.

In the few minutes that are left, I want to deal with the absurdity of the direction of the response by the G20 and the Government, which is towards more Europeanisation. There have been letters in the papers today from Roland Rudd, Lord Brittan of Spennithorne and a variety of other Euro-fanatics, who are asking for more Europe and not less. The fact is that Europe is a practical failure and people need to wake up to that. I am not against co-operation or trade, but I am very much against European government and a failing system.

Mr. Flello: I am grateful to the hon. Gentleman for raising the issue of the far right in Stoke-in-Trent. Is he aware that when Councillor Coleman, one of the BNP leaders in the city, was asked how the economic difficulties would affect his party, he said that the misery was good if it meant that it would gain power?

Mr. Cash: That kind of language is extremely dangerous. I have even received BNP literature in Pimlico in the past couple of days, which really is extraordinary, and now there is Sevenoaks. Situations are developing all over the country that are of grave concern, but which, at the same time, are a reflection of the economic crisis that we are in and which we must do something about.

That brings me to the more positive side of the equation. There is European government and over-regulation, but I want the introduction of the supremacy of Parliament amendment, which I have proposed on many occasions. We could thereby override legislation and return to what the leader of the Conservative party said in November 2005 about his imperative policy being to repatriate labour and social legislation, by using our powers in this House and ensuring that we govern on behalf of the people of this country, in accordance with the votes that are expressed in the ballot box, not according to majority votes or the rules of the European Court of Justice.

While we are on the subject of financial regulation, I simply make the point, which I have made many times, including to the Prime Minister last week, that there are a lot of weasel words coming from the Government. I challenge the Financial Secretary to the Treasury to tell me this evening whether we will indeed repudiate the
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idea of the Europe-wide supervision of banks and financial services. I have read the 85 pages of the de Larosière report and the European Commission’s response. I have also read the Turner report and the explanatory memorandum to the European Scrutiny Committee, by the man whom I have described as the hapless Lord Myners, whom we are summoning to the Committee to explain the explanatory memorandum. There is absolutely no doubt whatever that, despite the Government’s attempts to say there will be national supervision, if this turns into a regulation or directive under the Single European Act, that will mean simply acting as agents for a European system, and the effect will be to bring in majority voting. While it is being negotiated, we will be able only to tinker with it, not to change it, and it will subsequently be adjudicated by the European Court of Justice. That will cover the whole of our banking and financial services, which is an enormous threat to the City of London and an enormous threat to this country. I believe that it is also a threat to the Bank of England. I suggest that we wake up and realise exactly where all this is going.

I said that I was going to say something on a more positive note. There should be much more emphasis on the importance of giving credit arrangements to companies that need credit in order to buy the excellent machines of companies such as JCB in my constituency and others. We should also remember that small businesses employ 58 per cent. of the UK’s private sector work force and contribute half of the UK’s GDP, employing more than 12 million people. We want to look after those small businesses.

One of the first things I did when I came to the House was to bring in the Small Business Bill. I have always believed in it; I have always believed in promoting enterprise and employment. We should bear it in mind that 90 per cent. of UK businesses employ fewer than 20 people, so what should we do to help them? Of course we have to help bigger companies, but at this point in the debate I emphasise that we should ensure that we provide these businesses with post office banks, which I believe would help a great deal. There is a proposal from the Federation of Small Businesses to provide a network of small post office banks, which would help rural communities where there is a great deal of deprivation, while also providing facilities in competition with, but not overtaking, the main banking system.

I think we should reintroduce enterprise allowances and enterprise zones, which were enormously successful in the 1980s, and I think that we should reduce the burden of legislation and the burden of taxation wherever it is possible to do so in application to small businesses. In the light of what I have already said about the economic crisis, I fear that public expenditure will be massively reduced and taxation will go up. In the course of that, we must also look after small businesses. I strongly advocate more relief for empty properties.

We want a positive message to go out about what we could describe as the grass-roots people in this country; we should ensure that they have a real purchase on their own future. Right now, what is happening is that they are being crushed, yet they represent a very substantial proportion of the business community and of the population of this country. I say we should put small businesses right at the top of the list.

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Several hon. Members rose

Mr. Deputy Speaker (Sir Michael Lord): Before I call the next hon. Member to speak, let me point out that time is rapidly running out, so if hon. Members could see their way to taking less than their allotted 10 minutes, it would be extremely helpful.

8.53 pm

Ms Katy Clark (North Ayrshire and Arran) (Lab): It is a pleasure to take part in this debate and to follow the hon. Member for Stone (Mr. Cash). I agreed with some of what he said, particularly about the rise of the far right and, indeed, about post office banks. We are both members of the European Scrutiny Committee and I suspect we have different views on Europe, but I agree with him that it has been interesting to observe how what the EU identified as orthodox criteria that had to be adhered to have had to be thrown completely out of the window in reaction to what has happened over the past year. Many of us felt that those orthodoxies and rules were not necessarily in the best interests of us or other European countries in any event.

Many people listening to the debate may feel that some speeches have not necessarily related to where they are. They may feel that the language we use and how we put our points across do not relate to the problems they are facing in their lives. Significant numbers of people have already suffered as a result of what we have been through over the past year or so. Many people have lost their jobs, particularly in the construction industry and manufacturing, and many people are worse off as a result of what has happened, although others are better off financially, as their tracker mortgage payments have decreased. One of the biggest impacts, however, is that the entire community has experienced worry about what lies ahead.

People are very fearful about what might be coming. They do not know what is coming, but over the past year they have watched on their television sets what has happened to the casino economy of capitalism, with share prices plummeting and events taking place that nobody in any of the major political parties’ leaderships had predicted. As a result, people have been genuinely fearful of what lies ahead, and it has to be said that the political class has not really provided leadership in explaining what is going on. That is because it is difficult to explain, as there are no words of comfort that we can give to people because of the nature of the crisis that we could face.

One of the problems with capitalism is that so much of it is to do with confidence. Some people, including some Opposition Members, have said they always thought a recession was coming because the nature of the economic cycle had not changed, but they could not predict when it would come. Often, it is something unpredictable that leads to a complete breakdown in confidence, and then we experience the spiral of the past year, and longer in the United States of America.

We face major challenges. There is no doubt that Britain is suffering as a result of events in the world economy, but some of the poorer countries in the world are experiencing much greater pain. We should welcome the fact that the G20 is taking place in London this week. We should also welcome its having been expanded to include 20 countries; it is a step in the right direction that representatives of more major economies are taking
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part in these discussions. We must also recognise, however, that that still means that many of the major players and peoples of the world are not represented in these discussions by having their leaders there, and also that even countries that are represented are very much represented by political elites that have bought into the systems that have led to the situation we are now in.

Many people simply feel that their voice is not being heard, and it is incumbent on us to look for ways to provide political representation for those people. I say that particularly for Labour Members, because in my view one of the reasons why we have got ourselves into this situation is that the financial and economic system has given little attention to the long-term issues that people face. Far too many short-term decisions have been taken that are about the interests of an individual, company or corporation making money, rather than the long-term interests of the majority of the people in this country.

Speaking as someone involved in the left of the Labour party, one of my frustrations is that we will have to relearn lessons that we have learned previously. A number of Members have referred to what happened in the 1930s, but what was very clear then was that it is not inevitable that capitalism will continue to produce and to grow, and to work in a stable way. It is part of the nature of capitalism that there is a boom and bust economy. The types of regulations that were brought in after the crash have been dismantled over the past 30 or 40 years, with the support of all the major parties including the nationalist parties in this place. I say that as a Member who represents a Scottish constituency. Those of us who remember the Thatcher and Major Governments will recall how they dismantled—the Major Government less so—many parts of financial sector regulation and will be painfully aware that our own Government have not been strong enough to take on the interests of big business and capital. That is part of the reason why we are in this situation.

We have to recognise and be very aware of the role of practices such as short selling and of the fact that although the Government promised us last October that regulation would be brought in for the banking sector, we are still not having a real debate about what that regulation should be and about the actual detail. We have to recognise that over the past 30 years the gap between the richest and the poorest in this country has increased, and decisions have been made without taking into account the long-term interests of the people. Even in the past year, when we have been facing this crisis, we have still been far too soft, particularly on the banks and on big business.

We are reaching the point where we have a UK banking liability that is four and a half times our gross domestic product, so we have to consider what my hon. Friend the Member for Nottingham, South (Alan Simpson) and other hon. Members have said about the fact that the British state is not big enough to provide insurance for the whole banking sector, and look at the different forms of liability, be they retail liability or speculation. We have to say that if British taxpayers’ money is going into the banking system, we must control the decisions that the banks concerned are taking. People talk about the nationalisation of the banks, but in reality most of the money that has gone into the British banking sector has not gone into it in a way that could be considered nationalisation, because we have not got control over the banking decisions that are being made.

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One can quite understand that issue from the banks’ point of view, because a conflict of interest is involved, as a number of hon. Members have mentioned. The banks obviously want to protect their capital and to make sure that they maintain their reserves, because they are worried about their own futures, whereas British taxpayers, whom we all represent—they come to our surgeries—think that if they are putting their money into the banks, that should be passed on and Government policy should be, as is generally agreed throughout the House, that the banks lend that money on to small businesses.

I reiterate the point made by a number of hon. Members, including my right hon. Friend the Member for Stirling (Mrs. McGuire), that there is massive frustration that despite our having put so much money into the banks and despite so many helpful Government initiatives, those initiatives are not coming through at the grass roots, businesses up and down the country are not getting credit and that is having a massive impact on the people whom we represent. I ask the Minister to respond to my points at the end of the debate, particularly in respect of how we ensure that the initiatives that have been introduced bear fruit.

9.3 pm

Mr. Tobias Ellwood (Bournemouth, East) (Con): “Boom and bust” is one soundbite that we have not heard too recently—I understand that the Prime Minister has used that phrase 120 times since he has got into this position, although we do not hear it too often now—but it has come to underline some of the problems that we face. The hon. Member for North Ayrshire and Arran (Ms Clark), who has just spoken, talked about the confusion in coming to terms with the complexity of the economic downturn. We have had an awful lot of policies, but nothing new or concrete to change the way in which things are happening.

We have also had plenty of soundbites, to the point where the nation cannot keep up. We started by understanding who or what Freddie Mac and Fannie Mae were; the credit crunch was a new term; we then encountered toxic assets and quantitative easing; and even the G20 is a new phenomenon—it used to be the G7 and then the G8, but it suddenly jumped and became the G20. It is almost as if words are being created just to show that the Government are on top of the issues and know where they are going, whereas it is all a bit of a bluff and all they are is one step ahead of the public. Now the public are catching up with what has happened.

The G20 summit is an opportunity to see how other countries are dealing with the economic crisis, and who has made sure that their economy is in order in the past. The tide of prosperity is going out, some economies are not wearing any swimming trunks, and it is not a pretty sight. We are one of those countries.

I wish to focus on a specific part of the economy. Many hon. Members have spoken in general terms about what needs to be done or who is to blame. I want to look at part of the economy that is actually doing well—the British tourism industry. People may ask why I should bring that up as a subject in a general debate on the economy— [ Interruption. ] It does not have a high enough profile, and the fact that hon. Members are
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laughing about that shows that we need to spend more time understanding the benefits of British tourism for the economy.

Mr. Jeremy Browne (Taunton) (LD): I am extremely supportive of the tourism industry, but I caution the hon. Gentleman not to be too dismissive of the G20. There may be great value in having countries such as China and India, with their huge and growing economies, involved in the discussions in London this week, if we are trying to find solutions that will benefit people across the world.

Mr. Ellwood: The hon. Gentleman makes a valid point, but I have a suspicion that not a lot will come out of the G20. I hope that something does, but it could be just another soundbite that we will have to wait for Robert Peston to explain by the end of the week.

David Taylor (North-West Leicestershire) (Lab/Co-op): The hon. Gentleman’s comment was not unlike that of the late James Callaghan when he asked rhetorically, “Why do I speak of the interests of the Royal Navy?” A voice from the back answered, “Because you’re in Plymouth.” The hon. Gentleman asked why he should raise the interests of the tourism industry, and of course he represents a very fine city on the south coast. That is why he raises the issue of tourism, and that is all that we were laughing at.

Mr. Ellwood: Perhaps I should have declared an interest. Ironically, British tourism is doing well because people can no longer afford to go abroad and they are looking for domestic destinations. That is why I ask Ministers to consider what we can do to enhance that situation.

The industry is the fifth largest in the UK, and I do not think that the House fully appreciates that. It is worth £114 billion a year to the economy, so it is twice the size of the IT services sector and four times the size of the agricultural sector. It has 2.6 million jobs and is responsible for one in four new jobs. It is also helping to compensate for the decline in other sectors. With 13 million visitors to the UK every year, it is a sector worth investing in.

We can all be proud of the heritage that we offer, including museums, theatres, countryside, villages, towns and sporting events. There are myriad tourism opportunities in the UK that are unique to this country. Oxford cannot be replicated in Dubai. The Tower of London cannot be reproduced elsewhere. What we have here is special, and we need to promote it. I fear that we are not doing so.

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