Previous Section Index Home Page

My right hon. Friend for Hitchin and Harpenden touched on quantitative easing. I suspect that the current consensus that favours it will find less favour as this year wears on. With little evidence that the velocity of money within the economy is any less sluggish as the real recession takes hold, printing money in vast quantities increasingly seems like a last throw of the governmental dice when relatively little else has succeeded. My right hon. Friend is quite right that inflation is clearly not an imminent problem, but the unprecedented pumping of money into the system is certain to be inflationary as time goes on. History suggests that an unsustainable mini-boom may well be on the cards by the first half of next year, but I fear that stagflation—a toxic mix of inflation, rapidly rising unemployment and low growth or diminished competitiveness—will follow. Indeed, the commodities and futures markets already factor it in when pricing for the early years of the next decade. I suspect that the Government will not have seen the last of their recent problems with trying to sell gilts, either. In the City, there is a lot of evidence that many banks
4 Jun 2009 : Column 424
now hold vast sums of cash and are ready to reinvest in the market, courtesy of the Bank of England’s policy of promoting liquidity.

I accept that now that we live in a globalised economy, this crisis is certainly different in magnitude from any that we have ever seen. One of the grand old names of British banking, Barings, collapsed owing what seems like a minuscule amount, £780 million, only 14 years ago. Today, the Royal Bank of Scotland survives courtesy only of a £26 billion bail-out. However, we can learn lessons from the past. As I mentioned earlier, we need to restore the distinction between retail and investment banking which, in the US at least, existed for more than six decades until the Clinton Administration repealed the Glass-Steagall Act in 1999. At that juncture, it was regarded as outdated 1930’s throwback legislation, but its purpose was to protect the ordinary depositor from high-risk, if innovative, banking practices. That protection now seems mighty apposite.

How then do we deal with the toxic assets that banks still hold and find so difficult to quantify? Curiously enough, the UK has a pretty good template close at hand. The near collapse of Lloyd’s of London in the insurance market, which has developed great strength in recent years, was avoided almost two decades ago by the creation of the Government-backed Equitas fund. That experience should be the starting point for the consideration of any further large-scale Government- backed rescue expenditure. In fairness to the Government, they have begun down such a path, but we should be fearful of the likely overall cost to the taxpayer.

The nagging sense of insecurity that the spoils of globalisation are being spread inequitably will continue to grow among the majority of the UK work force, and it has the makings of serious social unrest. I echo the words of my hon. Friend the Member for Macclesfield, because the hollowing-out of large swathes of “traditional” UK industry, particularly manufacturing, as employment has been exported to low-cost China and India, has not been accompanied by higher, middle-class and middle-income professional earnings, at least for those outside the gilded world of financial and associated services.

During the past decade, the mirage of higher living standards was maintained only by the credit-fuelled residential property market. The sharp correction of that market has exposed the reality that, in recent times, international free-trade has done little to enrich, personally, at least, the majority of our fellow countrymen. It is dawning on many middle-income folk that the losers from the free movement of labour and capital are not simply the unskilled who are forced to compete with ever large numbers of immigrant workers; it is increasingly apparent that the generation that is about to join the work force will probably be less well off than their parents, not least because they will have to foot the bill for the economic unravelling that became so apparent last September. That phenomenon is almost unimaginable outside times of war and a shocking indictment for today’s generation of politicians.

On the political difficulties ahead, there is little doubt that, whichever political party wins the next election, tough and unpalatable decisions will have to be made on public spending. Even if the Government’s own—almost certainly wildly optimistic—figures on public spending come to pass, during 2009 they will raise only £3 for every £4 that they spend.

4 Jun 2009 : Column 425

I agree with my right hon. Friend the Member for Hitchin and Harpenden that we must come to terms in double-quick time with the fact that, arguably, entire areas of central and local government activity should no longer qualify for public funding. The overall state of the public finances suggests the necessity for further scrutiny, even in areas such as education, health and defence, which in more economically clement times my party pledged to ring-fence. The issue of defence, of course, will be discussed in the forthcoming debate. Although there has been a marked improvement in school and hospital infrastructure in the past decade, much of it has been financed, off balance sheet, by the private finance initiative. It will need to be paid for in the years to come.

I appreciate that the hon. Member for Northampton, North (Ms Keeble), having arrived slightly late, wants to say a few words, so I shall bring my comments to an end. In the past decade or so, we have lived to a large extent in the best of economic times; now, however, we have a big price to pay—and a much tougher era awaits.

1.40 pm

Ms Sally Keeble (Northampton, North) (Lab): I thank the hon. Member for Cities of London and Westminster (Mr. Field) for cutting short what was obviously a much longer speech; we saw him paging through it at the end.

I should like to pick up a few points and make a few remarks to the Government on how to move forward. Despite the need for caution and care, and despite the caveats and risks involved in what the Government are doing, the Government’s approach to dealing with the crisis is absolutely right and it has already spared a great many of my constituents a great deal of hardship. Without the Government’s strategy, I am sure that many more of them would have lost their homes, or been at risk of that happening, and that many more would have found that that they did not have jobs
4 Jun 2009 : Column 426
either. Despite the difficulty of managing such a profound recession, I think that we will see the benefits of the Government’s approach.

It would be extremely nice to be able to discuss the comments made by the right hon. Member for Hitchin and Harpenden (Mr. Lilley) and the hon. Member for Cities of London and Westminster, but there is no time for that. I will, however, pick up on a couple of points. First, it is completely wrong to say that the quantitative easing is anything like the printing of money in Zimbabwe. The asset purchase facility, coming on top of the asset protection scheme, has been well designed to deal with the toxic assets and get money flowing in the private sector. It has been absolutely the right approach.

If the right hon. Member for Hitchin and Harpenden is to lend money to the hon. Member for Cities of London and Westminster, I hope that he will conduct an honest assessment of the risks involved with that character, that he does due diligence and that he gets some proper security, because what caused the banking crisis were improper risk management, lack of due diligence and lack of proper security for the assets.

The Minister is not going to respond, but I will make three points to him. First, will he please make sure that there is a report on the results of bank lending to business? Like other colleagues, I think that the situation has not been as we would like and everybody wants such a report. Secondly, will he also make sure that his Department does real work with the Department for Communities and Local Government so that public spending on housing goes to local private contractors and so that local councils can manage things properly and support their local industries? Thirdly, will he make sure that the Government take into account the impact of their spending and efficiency reviews on the wider economy, so that—

1.44 pm

One and a half hours having elapsed since the commencement of proceedings, the motion lapsed (Standing Order No. 24A).

4 Jun 2009 : Column 427

Defence in the World

1.44 pm

The Secretary of State for Defence (Mr. John Hutton): I beg to move,

I am delighted to open this afternoon’s debate on defence in the world. Today more than 17,000 of our armed forces personnel are deployed around the globe, protecting our national interests and working with our international partners in places such as Afghanistan, Iraq, the south Atlantic, Gibraltar, Nepal, Canada, Belize, Kenya and Cyprus. I know that all Members of the House will wish to join me once again in paying tribute to the contribution that each and every member of our armed forces makes to build a safer world on our behalf, and in acknowledging the sacrifices that they all make in doing so. They are truly outstanding individuals, and the whole country can be rightly proud of their professionalism and dedication to duty.

It is right that, sadly, I should begin by offering my deepest condolences to the family and friends of Cyrus Thatcher, of 2nd Battalion the Rifles, who was killed on active service in Afghanistan this week. We mourn his loss and extend our deepest sympathy to his family.

In April, I had the honour of attending the ceremony to mark the successful completion of British combat missions in Basra. It was, for me and many others, a deeply moving occasion. Our armed forces have achieved a huge amount in the past six years, including a transformed security situation in Basra and an increasingly capable Iraqi police force and army. Furthermore, they have helped to create a secure environment in which Iraq’s new democracy can grow. After years of oppression by Saddam Hussein, southern Iraq now has the opportunity to fulfil its very considerable economic potential.

The task was not achieved without sacrifice. The House will, I know, also join me today in paying tribute to the 179 British armed forces personnel who lost their lives in Iraq. We and the Iraqi people owe them a debt that we can never repay, and that is why we must honour their memory and care for their families. I am in no doubt at all that we have left Iraq a better place, and that we have made a real difference to the lives of its citizens. According to General Odierno, the commander of coalition forces in Iraq, what the British armed forces have achieved in Basra and elsewhere in Iraq is “nothing short of brilliant”.

Operation Telic was not the beginning of our involvement in Iraq; this week, the Royal Air Force concluded almost 19 years of operations in the skies above the country. Whether it was strike missions during the wars in 1991 and 2003 and the protection of the Shi’a of the south and the Kurds of the north from the malevolence and violence of Saddam’s regime, or the provision of support to ground forces and the playing of a vital logistics role over the past six years, the Royal Air Force has a proud record, in the finest traditions of that service.

The combat mission in Basra was not the beginning of the UK’s role in Iraq, and nor does its conclusion mark its end. As part of a broadly based relationship between the UK and Iraq, we are now making the transition to a different, but close, bilateral defence
4 Jun 2009 : Column 428
relationship. As the Prime Minister told the House in December, our future military role will focus on continuing protection of Iraq’s oil platforms in the northern Gulf, together with training of the Iraqi navy and marines, and officers of the Iraqi armed forces more broadly. We are preparing to lead an officer training initiative as part of the NATO training mission in Iraq, but that, of course, will be subject to NATO reaching its own agreement with the Government of Iraq.

In the meantime, as our current permissions for operational and training activities expired on 31 May, we have paused in our support to the Iraqi military in Iraq, pending ratification of the new agreement. However, our programme of training for Iraqi service personnel on military courses in the UK continues and is expanding. I very much welcome the Iraqi Council of Ministers’ endorsement on Tuesday of a draft UK-Iraq training and maritime support agreement. Once that has been signed, which I hope will happen shortly, I will place a copy of it in the Library of the House in parallel with its presentation to the Iraqi Council of Representatives.

As our relationship with Iraq enters a new phase, the main focus of operations will naturally shift to Afghanistan. As the Prime Minister has said, Afghanistan and Pakistan are of critical strategic importance to the United Kingdom and the international community as a whole. In December 2007, we set out a comprehensive approach to tackling the insurgency in Afghanistan. Building on that, in April this year the Government published our approach to Afghanistan and Pakistan.

The 9/11 attacks demonstrated overwhelmingly the international terrorist threat posed from Afghanistan. We must never forget that that country was allowed to become a base for al-Qaeda to plan terrorist operations across the world.

Barry Gardiner (Brent, North) (Lab): Does my right hon. Friend accept that the country of India, perhaps more than any other, has experienced exactly those kinds of terrorist attacks from that base in Afghanistan and, indeed, in parts of Pakistan? Does he welcome the fact that a new and very stable Indian Government have just been elected, and will he tell us of any prospective talks with his counterpart in the Indian Government to ensure that the bulwark of stability in the region that is democratic India can continue to help in what is going on, which is causing so many problems across the world?

Mr. Hutton: I certainly do talk to the Indian Defence Minister, and I was able to do so particularly in the aftermath of the Mumbai terrorist atrocity. India is the most remarkable and vibrant democracy in the world. In my view, democracy is the best defence against extremism. However, as we know—our own history tells us this—democracies need to be defended. The atrocities against the Indian people—the Indian democracy—require a robust response from the Pakistan authorities, because there is no doubt whatsoever that those terrorist missions were launched with support and logistics from Pakistan. That has to be addressed. There can be no hiding place for those terrorists in Pakistan. We therefore welcome the steps that the Pakistani Government have taken to bring them to justice, but more has to be done for that crime to be addressed. Until that action is taken, tensions will remain unnecessarily
4 Jun 2009 : Column 429
high in the region. There is no doubt at all, in any part of the House, about our respect for the Indian democracy and our best wishes for the newly elected Indian Government.

We have certainly learned our lesson from the failure in allowing Afghanistan to fall into the clutches of the violent extremists and ideological terrorists. We remain in Afghanistan to prevent it from again becoming an ungoverned space from which terrorism can be launched against ourselves or our allies. So our mission in Afghanistan is designed first and foremost to protect our own national security.

The United Kingdom has contributed military forces in Afghanistan since 2001, and since 2006 we have played a key role in the south of the country, in the Taliban heartland. In Helmand, our forces perform extraordinary acts of bravery and courage every day as they confront the terrorists and help to protect the local population from the fear and reality of violence. They are training the army and the police to ensure that the Afghans themselves can develop a position of strength to withstand and ultimately overcome the terrorists who threaten their country from within, and to create a stable security environment in which the Afghan Government can build institutions and enable development to take place. Across Helmand province, town by town, we have seen that happen. District centres have been taken from the insurgents and are now thriving, with markets bustling and schools and clinics opening.

Crucial to this success has been the development of the Afghan national army. The international community must help Afghanistan to build a capable and competent force that can take the lead on security operations. The long-term future of Afghanistan depends on its ability to manage its own affairs. In the three years that the UK has been mentoring the Afghan national army in Helmand, it has developed into one of the most battle-hardened and competent brigades in Afghanistan, with three of the four infantry kandaks and the brigade headquarters now capable of conducting operations with minimal support from the international security assistance force—ISAF.

These achievements are producing tangible results. Only last December, Afghan security forces, supported by British, Danish and Estonian troops, successfully cleared insurgents from the town of Nad-e Ali. Since that operation, the provincial governor, Governor Mangal, who is doing an excellent job, has held the first shura there for five years; voter registration has successfully taken place; and bazaars in urban areas are open for business again, and thriving. But the most important thing is that since the initial operation, security in Nad-e Ali has been maintained by the Afghans themselves. Our military successes in Helmand have allowed the UK, working with the Afghans through our civil military mission in Helmand, to deliver support to the provincial government and help it to deliver basic services and be more accountable to the people.

Rightly and properly, the Afghan people want and deserve the right to decide the future of their own country. We are committed to helping them to hold credible elections that represent the will of the people and demonstrate that the Afghan Government have the authority to rule. Security over the election period will be critical. That is why last month my right hon. Friend the Prime Minister announced an increase in troops
4 Jun 2009 : Column 430
from 8,300 to 9,000 until the autumn. However, the Afghan national security forces will lead on securing the elections; our role is to provide effective support to them. We are working closely with the Afghan national security forces, the Afghan independent electoral commission, ISAF and others to prepare for these elections. Voter registration, which started in October last year, has now been completed across the whole country. More than 4 million new names have been added to the existing voter registry. The fact that the insurgents have failed to disrupt the process so far is a credit to all involved, particularly the Afghan national security forces.

Mr. Bernard Jenkin (North Essex) (Con): In the emphasis that the British and the Americans are placing on persuading the Afghan people to accept the Afghan constitution, are we not still in danger of imposing too much of a western style of government on to a country to which that is completely alien? Should we not be doing more to work for reconciliation towards more traditional forms of Afghan government in order that we alienate less the tribal institutional structures, particularly in the provinces?

Mr. Hutton: The constitution of Afghanistan is a matter for the Afghan people. The current constitution has been supported in a number of important elections since it was adopted. There is no conflict between supporting the Afghan constitution and supporting the reconciliation process. I think that we are all in favour of seeing greater reconciliation, and there are different avenues and paths through which that can be conducted. Essentially, my view is pragmatic, not ideological. It cannot be said of the Afghan constitution—the Afghan system of government—that it is a thing of perfect democratic beauty; it would be naive and probably premature to imagine that it ever could be. However, the fundamentals of the constitution are decent and enduring. The right of free people to decide their own Government and to choose the people who govern over them is the fundamental characteristic of the Afghan constitution, and that is worth defending.

Mr. Jenkin: The problem is that the Bonn constitution was constructed perhaps rather artificially at a time when a large part of the Taliban community of Afghanistan was not involved. The whole Karzai Administration have little support among the Pashtun majority, who were excluded from that constitutional settlement. Do not we need to allow the Afghan people more collectively to reframe a constitution that is more in line with their own history and tradition?

Mr. Hutton: The Afghan people have those freedoms. Ultimately, as I said to my hon. Friend the Member for Brent, North (Barry Gardiner) as regards India, those freedoms are the best defence against the extremism of the violent insurgents who seek to replace the democracy of Afghanistan—imperfect though it might be, as I would concede—with an altogether different regime with no respect for human rights, freedom of conscience and freedom of speech. I am sure that the hon. Gentleman and I would join forces in ensuring that that did not come about. These are ultimately matters for the Afghan people, who are now, fortunately, free to address those concerns themselves.

Next Section Index Home Page