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The Queen's Speech has highlighted another sharp difference between the Government and the Opposition: the Government are committed to spending money on those who need it most. This crisis has a social dimension, and we have to be alert to that. It is the most vulnerable groups in society who could lose out as a result of it. I welcome the Government's investment in protecting people's jobs and in ensuring that there is work or training for the 1.2 million young people who will leave
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education this year and next. When the general election comes, issues such as the role of the state will play quite a part.

Today, however, I want to focus on lending. A large part of the correspondence that I have received over the past year has focused on that matter. When the Governor of the Bank of England came before the Committee almost a year ago, he told us that lending was the biggest issue facing the economy, and it still is. According to Bank of England statistics, UK banks are still contracting their lending. This is particularly difficult for small businesses, which rely on the banks. The newest member of the Monetary Policy Committee, Adam Posen, recently said:

He added that there must be channels for non-financial companies, particularly SMEs-small and medium-sized enterprises-to get capital. Without that, there would be little scope for a private sector recovery. Without a return to lending, the recovery will be inhibited. Here, again, there is a need for the state to intervene. The Government-indeed, Governments globally-are the only show in town. Without Government intervention, to whom would we resort for that lending? Forty per cent. of the lending in the UK, which used to be provided by overseas banks, has now disappeared.

I have called on the Government to establish a public sector bank-for example, via the Post Office-which would be able to lend to creditworthy businesses and individuals when the private sector was unable or unwilling to do so. I welcome the Prime Minister's initiative on banking via the Post Office, but there is still a need for direct lending to individuals and businesses by the state. In that respect, I have an ally in Jim O'Neill of Goldman Sachs, who has made the very same point. There is a need for this provision, because good SMEs could go out of business as a result of the crisis, and we cannot afford that to happen.

Turning to remuneration and City bonuses, I welcome the Government's commitment to reforming the bonus culture. However, the issue at the heart of this matter is not just the bonuses but the incentive structures in the City. It is the incentive structures that we have to get right, because we have seen the situation being skewed by short-term rewards, while the long-term interests of companies have been neglected.

When the Governor of the Bank of England came before our Committee, he told us that the remuneration structures in the City of London encouraged people, in his words, "to gamble". He said:

This is not about the politics of envy, but about the implications for financial stability of bonus payments that reward excessive risk taking. It is also about how much money should flow to employees when the financial system is effectively supported by public funding and owners have lost money.

Capital has to be rebuilt. Some try to deny that bonuses played any role, but Joseph Stiglitz, the Nobel prize-winning economist, argued that bonuses played a
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major role in encouraging reckless behaviour. Even bankers such as John Varley of Barclays and Andy Hornby of HBOS, when they came before the Treasury Committee, said that bonuses had been a contributory factor to the crisis.

This is why there is a strong case for granting the Financial Services Authority new powers and legal rights to "tear up" up employment contracts for bankers if the terms of those contracts encourage excessive risk taking or include multi-year guarantees. Such a power would be no more stringent than, for example, the power of the courts to declare a contract unenforceable if it breaks the rules, or indeed the Competition Commission's power forcibly to split up monopolies.

What we are witnessing at the moment is the possibility of a return to business as usual in the banking sector. We must prevent that return to business as usual. At the moment, policy makers worldwide are busy proposing reforms to make the financial system more resilient. The banking sector today has largely accepted, although not welcomed, the idea that change is coming and the regulatory environment will become tougher. Yet we are already seeing banks challenging that state of affairs.

One message that I have for the banking community-I have been in the City and spoken about this-is that the banks must put their heads above the parapet and discuss the issues now. Whether it be in television or radio programmes or other media appearances, we do not see many chief executives. They are hiding, and the danger that arises from that is that we will end up with inappropriate legislation as a result. If we want to change the system, we must have a vigorous debate in which those chief executives become involved. We have already heard some comments. For example, at an FSA seminar last week, Joseph Ackermann of Deutsche bank was saying, "Don't interfere. Keep the banks as they are." That is a danger. What I would say to chief executives and the banking community is that they should not just put money into public relations and promote their image; they should get on the same platform as the rest of us and debate that issue.

Chris Huhne: I am sympathetic to the right hon. Gentleman's case for the importance of bonuses in leading to potentially excessive risk taking, but I wonder whether he thinks it necessary to go as far as having new legislation, because the Financial Services Authority already has the power to increase capital requirements for financial institutions that, in its view, are taking extra risks. It could define that risk as including bonuses paid in the way that the right hon. Gentleman describes.

John McFall: I take the hon. Gentleman's point, but one of my recollections of the Northern Rock inquiry was the stand-off position that the FSA adopted regarding individual businesses; I mentioned that earlier in connection with the lack of regulation. The FSA thought that business models were not its priority, but I think that they should be, so we need a cultural change. I believe that we will therefore need extra powers.

The hon. Gentleman's question reminds me of the issue of insider trading. The FSA has been talking to me, and I have been talking to the Government, about the need to examine insider trading. We need to ensure that we have appropriate legislation; at the moment we do not have it. The more pressure we can put on the
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Government to ensure that the FSA has the powers to deal with insider trading, the better. I believe that in the future, given the cathartic experience we have had, regulation will be a competitive issue for environments in the future. If London develops a good regulatory framework, that will help it to maintain its position.

As for the issue of narrow banking, we must solve the problem of "too big to fail". If we do not, the status quo will continue. When he appeared before the Committee, the Governor of the Bank of England preferred to use the phrase "too important to fail". The problem, as he has noted, is this:

Like the hon. Member for Twickenham (Dr. Cable), I see no reason for us to have a system that socialises the risks but privatises the profits. If a solution is not found, we will have to admit that we have not a free market in financial services, but a system of what could be described as communism for the rich, in which the state underwrites the enterprises and the bonuses of a select group of bankers. Of course we want the market to work-but in that case, the problem of "too big to fail" must be addressed. That is one of the issues on which the Treasury Committee will continue to focus.

Let me say something about mutualisation. One sad aspect of the financial crisis is that all the former building societies that demutualised in the 1980s and 1990s have disappeared. Perhaps there is a case for us to go back to the future. Mutuals have been shown consistently to give better service and better value for money to their customers than banks, and they consistently score higher in terms of customer satisfaction. I have prodded the Chancellor on this issue. He has said that he does not rule out the remutualisation of Northern Rock, but I agree with my right hon. Friend the Member for Norwich, South (Mr. Clarke) that this is an issue that the Government should take on board.

A big issue arising from the crisis, prompted by the response of the European Commission, is the issue of competition. We need more competition in the banking service. Adam Posen of the Monetary Policy Committee made the same point in his speech. If we do not have that competition-if we are dominated by five or six banks-we will have a monolithic structure. Another big issue is the idea of macro-prudential tools. What that rather fancy term means is anticipating the problems to a certain extent. Can we take risk out of the system? Absolutely not. Can we have a fire brigade that goes to the fire and puts it out before the whole building is on fire, which is what we have experienced? There has been great debate about who does what with the macro-prudential tools, but not about what the tools are. The Committee wants to impress that on the Government.

Public debt is another issue that we must consider as we move forward. I welcome the proposed legislation on fiscal responsibility, but I believe that we must not focus on spending cuts to the exclusion of the social dimension. Accompanying the banking crisis is understandable public anger about the current situation. When we go back to our constituencies and say that we have bailed out the banks, our constituents say, "But we need a new school," or, "We need more police on the
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streets," or, "We need better buildings and better education." That is what they think of the recapitalisation of the banks. We need to understand that, and to have a strategy to deal with it, but as yet the Government have no strategy.

If we proceed too quickly with spending cuts, the social costs will be extremely high. I was reminded of that yesterday evening when I went to a seminar involving City of London business people. The view was expressed from the platform that spending cuts, if taken too far, would plunge us backwards. Getting the public finances in order is important, but it has dangers if it is taken too quickly. We ignore the social costs of cutting spending at our peril.

There is a big job for the Government: the job of balancing the budget with a fiscal deficit strategy that is both transparent and realistic. That is the examination that the Treasury Committee is undertaking. At the same time, however, we must ensure that we stimulate growth and keep good companies going through this recession, and that we maintain prosperity and opportunities for our constituents and, not least, the young citizens of our country.

5 pm

David Maclean (Penrith and The Border) (Con): It is a privilege to follow the right hon. Member for West Dunbartonshire (John McFall). I commend him on his loyalty in supporting the Government's programme, but I must tell him that these measures will not achieve their main purpose: they will not put clear blue or even clear red water between the Government and the Opposition in polling terms. I have seen this before, in 1996, when we had a proper Queen's Speech of real measures that were good for this country. No doubt an element of it was also designed to expose the differences between us and the then Labour Opposition. What happened was that the Labour Opposition voted for most of it, and the public yawned and got on with the decision they had already reached, which was that it was time for a change. I therefore say this to the Prime Minister: by all means hang on and wait for "events dear boy, events," but it is naive and foolish to think that there are some bits of legislation that will suddenly make the public change their verdict on this Government.

Mr. MacShane: I accept the thrust of the right hon. Gentleman's argument, but can he therefore explain the following result in a by-election for a council seat a couple of weeks ago, when real British citizens were voting? The by-election took place in south Yorkshire and 2,500 people voted. The result was as follows: 1,500 for Labour, 600 for the British National party, 300 for the Barnsley Independent Group, 92 for the UK Independence party and 88 for the Conservative party. Surely the Conservatives should be doing a little better at this stage than winning the support of merely 88 out of 2,500 British citizens who cast their vote.

David Maclean: In answer to that, I say to the right hon. Gentleman that perhaps he should look at the generality of election results around the country. He need cast his mind back no further than the county elections of last May, or the elections of 18 months ago, perhaps.

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I can understand why Labour Members are clutching at straws. I did a lot of whistling in the dark when I sat on the Government Benches in 1997. It did not work then, and I say to Labour Members that it will not work now-and it certainly will not work by passing legislation to enable the Government to halve the deficit in order to prevent themselves from undertaking more financial profligacy. The public will see through that.

It was a privilege to hear the speech of my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard). I would hope that in a new Parliament that may not be tarnished with the same brush as this Parliament-unfair though that tarnishing is-Members will, with restored public integrity, have the ability and courage to begin to wrest back to this House powers that currently lie elsewhere. Some of my hon. Friends may think that some of those powers lie in Europe-I also subscribe to that point of view-but over the years I have observed the increasing amount of judicial review, which takes powers away from this House. That is one of the greatest threats that this Parliament faces.

I, too, however, will not waste more time on the legislative programme. Instead, I want to talk about climate change, which was referred to in the Gracious Speech-and also, briefly, by both Front-Bench spokesmen-since what this Government do on that in international negotiations during the last few months of their life will be infinitely more important than their legislative programme.

There is still some argument about the extent, nature and pace of climate change. I accept that climate change is happening, but no one knows the exact rate of that change. However, there is a massive change taking place in the world that is the prime contributor to climate change, and we can measure that to the hectare: day by day and week by week of the year, we burn 32,000 hectares of rain forest-9 million hectares every year, which is the size of England.

Why should that matter? If climate change matters-and it does-the only way to stop it is by stopping deforestation. Saving the rain forest, and other forests, is the key. Forests are critical to regulating climate. Any real solution to climate change requires not only a reduction in fossil-fuel use, but protection of ecosystems like forests, which are critical to regulating carbon. The Amazon rain forest has been described as the "lungs" of our planet, because it provides the essential world service of continuously recycling carbon dioxide into oxygen. More than 20 per cent. of the world's oxygen is produced in the Amazon rain forest, which also releases 20 billion tonnes of moisture every day, much of it watering crops tens of thousands of miles away.

Let us look at this another way round. I understand that the main thing we have to do to tackle climate change is to reduce carbon emissions, but the burning of the rain forest accounts for almost 20 per cent. of all such emissions in the world-that is far more than is accounted for by all the cars, lorries, buses, planes and ships in the world put together. Of course we in the western world have to do our bit to reduce transport carbon emissions, but if we do not halt the total destruction of our rain forests, we could close down all the transport in the world and we would still, eventually, die. Some say that the rain forests are very large and can easily take the loss of an area the size of England every year,
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but at the present rate of destruction, they will be totally destroyed in 40 years' time. In just 20 years' time, there will be only half of them left and they may then be too small to act as the lungs of the world to give us the oxygen we need.

There is an infinitely greater reason for saving the rain forest than merely reducing carbon emissions, important though that is-the reason being that the rain forests are the "medicine cabinet" of the world, to steal another phrase from the Prince's Rainforests Project. As rain forest species disappear, so, too, do many possible cures for life-threatening diseases. Currently, 121 prescription drugs sold worldwide are derived from plant sources and 25 per cent. of western pharmaceuticals are derived from rain forest ingredients, but less than 1 per cent. of tropical trees and plants have been tested by scientists. So we have tested 1 per cent. and we are burning the other 99 per cent., yet we are getting 25 per cent. of our drugs from that 1 per cent.-that is a dangerous pyramid.

Why have scientists spent millions tracing every star back to the beginning of time but have not got a clue as to how many species we have on this earth or what unique life-saving properties they may have? Let us briefly consider the following facts: a single pond in Brazil can sustain a greater variety of fish than is found in all the rivers of Europe put together; a 25-acre area of rain forest in Borneo may contain more than 700 species of trees-that figure is equal to the total tree diversity of north America; a single rain forest reserve in Peru is home to more species of birds than are found in the entire United States; and the number of species of fish in the Amazon exceeds the number found in the entire Atlantic Ocean. I repeat my question: how can we in the west be so stupid as to destroy a habitat permanently when we have not looked at 99 per cent. of the species in it?

Some scientists estimate that we are losing more than 130 different species of plants and animals every single day because of rain forest deforestation-we just do not know, yet we are carrying on. Estimates of the total number of world species vary from 2 million to 100 million-the best estimate being that there are about 10 million different species of living things, which range from nematode worms, slugs, molluscs, plant life and fungi to trees, birds and the cuddly animals about which we worry. Only 1.4 million of the species in the world are named, and we do know the terrifying rate of loss of those species. The latest update by the International Union for Conservation of Nature was published on 3 November, just as we were about to prorogue. Its red list of threatened species showed that 17,291 species out of the 47,677 that it has assessed are threatened with extinction; some of those species are close to complete and permanent extinction. Its results reveal that 21 per cent. of all known mammals, 30 per cent. of all known amphibians, 12 per cent. of all known birds, 28 per cent. of reptiles, 37 per cent. of fresh water fishes, 70 per cent. of plants and 35 per cent. of invertebrates assessed so far are under threat. Hundreds have become extinct already. With enormous effort and tremendous will on the part of all Governments in the world, we can eventually reverse climate change, but we can never bring back to life a species that has been wiped out.

Biodiversity is not just about saving the red squirrels, polar bears, orang-utans, lemurs and tigers, as vital and close to my heart as some of those are. Of far greater
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importance to the planet are the plants and bugs that we never see and which are not cuddly. Most Members have recently become very concerned about the plight of the bee population, not just in Britain, but in Europe and north America. That tiny insect, which we have taken for granted for millennia, holds the key to huge quantities of our food production. That is just one insect that we know about and which we have studied. We kind of know its place in the jigsaw of the survival of humankind, but why, therefore, do we carry on destroying without checking hundreds of other species whose role we have not studied and do not understand, but which might be equally crucial?

The United States National Cancer Institute has identified 3,000 plants that are active against cancer cells, 70 per cent. of which are found in the rain forests, and as I said, 25 per cent. of the active ingredients in today's cancer-fighting drugs come from organisms found only in the rain forests. We are destroying the only source of those drugs.

On a less important level, at least 80 per cent. of the developed world's diet originated in the tropical rain forests. Their bountiful gifts to the world include: fruits such as avocados, coconuts, figs, oranges, lemons, grapefruits, bananas, guavas, pineapples, mangoes and tomatoes; vegetables, including corn, potatoes, rice, squash and yams; and spices on which we depend, such as black pepper, cayenne, chocolate, cinnamon, cloves, ginger, sugar cane-I shall not read out a lexicon-coffee, vanilla and Brazil nuts. At least 3,000 different fruits are found in the rain forests, of which we, in the west, eat about 200 at the most. The Indians of the rain forest use more than 2,000.

The magnitude of the loss to the world was most poignantly described by Harvard's two-times Pulitzer prize-winning biologist, Edward O. Wilson. In 1993, he said:

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