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The Queen's Speech debate used to be one of the big events of the parliamentary year. It was up there with the Budget, up there with a no confidence motion were one ever tabled, up there with a really big argument over war or a major economic problem that the country faced. It was something we attended with a sense of expectation. One of the reasons that it worked so much better in the past was that we did not read all the contents of the Gracious Speech in the media and press for several days in advance.
I remember when I was chief policy adviser at No. 10 for a previous Government when I was privileged enough to work with the palace on the draft Queen's Speech. Very few people saw the whole draft speech; it was kept extremely secret. Obviously, all those who needed to know were informed; all those who had an influence on the decisions were involved in their part of the speech-but it never leaked. None of the major or minor items of that speech ever leaked because the whole sense of drama and theatre required that the first that the world knew about it for sure was when Her Majesty delivered it in the House of Lords and that the first people who unpicked that speech, criticised it, attacked it, praised or supported it should be Members of this House in one of the most important debates of the year.
I think our visitors have been insulted today, Mr. Deputy Speaker. We invite the ambassadors of all the great countries represented in London to be present, so they can hear at first hand what the Government are going to do over the next year and write their telegrams back to their countries. We invite many other important dignitaries and they do not come here solely for the sense of occasion-to see people in unusual clothes and the colour of the spectacle before them. They used to come because it was their first chance to be sure of the Government's programme and their first chance to talk to others, perhaps to Ministers, about how that programme was going to proceed. If you destroy that secrecy, that drama, that importance of this Queen's Speech, you kill Parliament, you kill debate and you stifle proper cross-examination.
When I was a Minister-making less important announcements than in the Gracious Speech, but still sometimes important announcements-I always accepted the constitutional propriety. I would make the announcement first to this House. Very often it was Members on both sides of the House who had really good questions, which made me think or want to modify the plans. That is how it should be. Then I would rush from this House-back to the Department, usually-to give the press conference and face another barrage of questions from able people, sometimes coming from different angles from those that came from the House. Today, we are told, that is very bad practice because it does not give Ministers the chance to showcase their policies and to present them on favourable terms through the media first.
David Taylor: If the past is a foreign country, what the right hon. Gentleman is describing is a different planet. He was describing, no doubt accurately, a situation that obtained perhaps 20 or more years ago, when there were just four TV channels, the internet was hardly established and the media storm and network that surrounds politics now was vastly different at that time. Is it not reasonable to respond to that in what we do now?
Mr. Redwood: There were rather more newspapers selling rather more copies in those days, as there was plenty of competition and choice in newspapers-less so in the media, as the hon. Gentleman says-but this is one of the myths of modern politics and why modern politics is, I think, so broken. The myth has arisen that it is the job of Her Majesty's Ministers to entertain the media and that it is their job to have a story for every part of the 7-by-24 news cycle. Why is that their job? It is their job to try to govern the country well. From time to time, they come to this House to report on their conduct, to be cross-examined, to present their new policies, to sell to us and the wider public what they are trying to do. Those Ministers who forget that their prime duty is to this House usually end up doing their jobs worse than those who remember it and who are prepared to face sensible criticism. Those Ministers who think it is very media-savvy to leak their story in advance to a privileged media outlet or a privileged journalist discover in the end-if not earlier-that it is often a very foolish thing to do in terms of media management.
Yes, of course a Minister can get away with a few spectacular leaks to chosen media outlets who will puff up him or her and the story, but all the rest of the media will be hopping mad that that is the way the Minister has chosen to do it, and they will not all feel that they can get closer to that Minister and get a privileged leak themselves, so they are more likely to write badly about the Minister and his or her plans. I would say that even in the Government's own terms of media management, it is often quite stupid to leak in advance through selected outlets rather than let all of them have a fair chance on the day, when they can come to the Gallery or watch the Queen's Speech on television or go to the press conference and ask their privileged questions and ring up for specialist interviews as soon as the statement is made to this House. The sooner we get back to that system, the better-the better for the Government of Britain, the better for the scrutiny of the Government of Britain and the more meaning this House will have.
I say to colleagues that this Parliament is dying; it is in a very parlous condition. If the next one is going to be any better, it has got to learn the lessons. Those lessons are not just temporary lessons relating to some foolish expenses claims. They tell us that this model is broken.
The Government are not treating Parliament seriously, Parliament is not kicking back and making the Government treat it seriously, and so people are bypassing Parliament. The electorate are not stupid; they can see that Parliament is weakening and being damaged, and so they bypass Parliament. The media scorn Ministers who behave in the way in which many Ministers now behave, and so they bypass Parliament as well. They have their special lines, and their reliance on spin doctors. The result is what we see today: a hopelessly broken Parliament, with a few faithful parliamentarians here and the rest perhaps working elsewhere in the Palace of Westminster, or perhaps saying, "There are no votes today, so I need not be there although it is Queen's Speech day."
The issue on which I want to concentrate is what I consider to be the most fundamental issue. It is at the heart of this Queen's Speech, and it will be at the heart of our politics for the next few years whatever the result of the next general election. I refer to the fiscal responsibility
Bill and the parlous state of the public finances. After years of denial and after months of fevered political activity in an attempt to prove that the Opposition and those who challenged them on the deficit were wrong, the Government have put at the heart of their mock legislative programme a Bill providing for the deficit to be halved over a four-year period.
The Government may be right. I am impressed by the magnitude of the numbers about which they seem to be talking, which implies to me that at last they understand that the country is lurching towards bankruptcy at an unacceptably rapid rate and that they need to reimpose the fiscal disciplines that they discussed so liberally in the late 1990s, and even practised until about 2001.
Mr. Ken Purchase (Wolverhampton, North-East) (Lab/Co-op): I am listening carefully to the right hon. Gentleman's speech. He made some very good points earlier. However, I think that he uses the word "bankruptcy" a little carelessly. Does it not mean that one's liabilities exceed one's assets? That certainly does not apply in the case of British plc.
Mr. Redwood: What it means is that anyone who thinks that a Government of this country can continue to borrow at the current rate will experience a rude awakening. I remind the hon. Gentleman what happened to a previous Labour Government in the 1970s. They thought that they could go on borrowing. They had perfectly good things on which to spend the money, or so they thought. The hon. Gentleman may recall what happened: a Chancellor of the Exchequer had to be called back from the airport, and had to go off to the International Monetary Fund and beg for special measures to stave off bankruptcy. The special measures and the terms imposed on the Government were thought to be extremely damaging, but if they had not accepted those special measures and terms, they literally could not have paid the bills. Bankruptcy means not being able to pay the bills. It can mean illiquidity as well as a shortage of assets relative to liabilities.
The hon. Gentleman is in denial. The country is now building up the most colossal debt that it has ever seen. The Government are going to double the national debt that they inherited in just two years of borrowing, and that cannot go on. Every sensible person knows that it cannot go on. The hon. Gentleman's own Front-Bench team knows that it cannot go on. That is why today is such a significant day in British politics. It is the day on which the Government themselves have said that they have been borrowing too much and cannot go on doing so. It is the day on which the Government themselves have said that the next four years of British politics, whoever wins the general election, will be about how they are to get the deficit down.
This is a totally different world from the one to which we have been accustomed, in which Conservative and Labour Governments alike have always been able to increase spending. We have had our rows about the speed of the increase, we have had our rows about which programmes are more favoured and which less favoured, but throughout my adult lifetime in this country we have discussed how to increase spending, apart from that one year in which the IMF took over to stave off the difficulties faced by the Labour Government.
The Government have said that they think they need to halve the deficit over a four-year period. We know that the deficit will be running at 12 to 14 per cent. of national income next year. That means that the Government wish to cut the deficit by between 6 and 7 per cent. of national income. It means-in round figures-£100 billion of annual spending that must be cut or £100 billion of extra taxes that must be imposed, or some combination of the two.
During what has passed for a debate today, I managed to ask the Prime Minister how he thought it would be best to make that reduction in the deficit-how he thought it would be best to remove that £100 billion from the accounts. I did not prejudge whether he would reply "tax increases" or "spending cuts"; I left that to him, because he is the man proposing the overall measure. His response was very interesting. He instanced three very small tax increases about which we already know-small in terms of the amount of revenue that they would raise, that is; not necessarily small in terms of the economic impact that they would have, which could be rather severe and negative. As those increases are already included in the figures, they would not produce the £100 billion. The Prime Minister was talking about loose change or petty cash. He was talking about just a few billions. What his Bill is talking about is £100 billion off spending or on to taxes, or some combination of the two.
I renew my challenge to those on the Front Bench to go away and think up an answer. This is a question that the Prime Minister has constantly asked about Conservative plans for years and years. I asked him the most simple question in the book-the one that he always asked-and he had no answer to it. I was amazed.
David Taylor: The right hon. Gentleman is posing a false choice. He is suggesting that the only way of starting to bridge the growing gap is either to cut expenditure or to increase taxes. I am sure he would acknowledge that one significant way of bridging the gap in the medium term would be returning banks to the private sector and regaining the money that we, the taxpayers, have had to invest to underpin them. I might regret that, but it is what the Government have said will happen. Does the right hon. Gentleman acknowledge that accelerating the process would provide a source of necessary income?
I am the one Member of Parliament who has consistently said "Do not buy shares in these banks." There were other ways of avoiding a catastrophe. I have always thought that we would lose all or most of the money that we were sinking into those shares, and that seems to be the view emerging from the Treasury. The Treasury decided to buy in at too high a price. As we now know, the market price is well below the price at which the Treasury bought in. If the Treasury decided to sell all those shares on the market any time soon, the price would be considerably lower again. I do not think that we are going to recover huge sums of money from the very foolish share-buying into which the Government have entered.
That is a one-off capital item. What we are talking about is a deficit running at 10, 12 or 14 per cent. of national income every year. We are talking about a massive gap between annual spending and annual income, and-even if the hon. Gentleman is right and I am wrong-a few one-off capital receipts would not suddenly transform that position. We would still have to deal with the structural deficit.
Some Labour Members may think that the way out of this is growth. Of course growth will narrow the deficit, but we need it to narrow the other half of the deficit, which may well be cyclical and may well be related to the tragic recession and the state of the economy. However, we cannot leave this deficit at 6 or 7 per cent. of national income, because we know that the last time the Government tried to do that, they had to go off and take special measures as a result of the IMF lending.
Whoever governs the country, in the next four years-in the next Parliament-hanging over British politics will be the Prime Minister's question: how can the deficit be cured? Throughout the time in which they remain nominally in charge and continue to recommend to the House a piece of legislation telling us that we must control the deficit, those on the Treasury Bench are honour bound to come back with a better answer than they managed today to the simple question that I have asked. I have said, "Fine: you want to get the deficit down by around £100 billion, excluding the cyclical recovery and the natural consequences of some growth. How do you propose that that should be done by this Government, or a future Government?" That is the dominant question in British politics, and it will rule all our lives-or the lives of those who are fortunate enough to be re-elected-in the years to come.
The second aspect of the Queen's Speech that I wish to raise briefly is the issue of control of the banks. As Labour Members have said, one of the reasons our economy is in such a mess is that we made a bigger mess of regulating our banks than many other countries around the world, and we happened to have rather bigger banks. Indeed, one of the most egregious regulatory failures was the regulator's decision to allow those massive banks to accumulate so many assets by merger and purchase. I was very much against the series of mergers that produced RBS, and I was also against the prominent public decision of the Government to back the Lloyds and HBOS merger, because it has led to Lloyds unnecessarily being sucked into this vortex of underperforming bank assets, state subsidy and semi-nationalisation.
It is the failure of the regulator in Britain that has made our financial and economic position so much more difficult than those of many other competitor countries around the world. I therefore asked the Chairman of the Treasury Committee, the right hon. Member for West Dunbartonshire (John McFall), to remind us of the findings of its very important report on why the banks in Britain went wrong. He gave us a very fair answer again today, when he said that, of course, the main problem was regulatory failure-the proper rules of prudence were not applied. By that, he meant all the rules that were always in place under previous Governments to control both the amount of cash a bank needed in case people turned up off the streets and wanted their money back and the amount of capital a bank had in
case it lost lots of money on foolish investments and needed to pay the losses. That was always governed by very strict controls under the Conservatives-the deregulating Conservatives. We always had very firm controls on cash and capital. In our day, the banks were not allowed to gear and lend anything like the quantities of money they came to lend in recent years.
Keith Vaz: The right hon. Gentleman was a member of the last Government when BCCI-the Bank of Credit and Commerce International, which was the sixth largest private bank in the world-closed because of a lack of regulation. I think he may have been at the Department of Trade and Industry at the time. There then followed the Bingham report into why the bank failed and why it was not properly supervised. Lord Justice Bingham-as he then was-suggested that the supervision of banks should be taken away from the Bank of England, and, indeed, the Government, and placed in the hands of an independent regulator. It may be the case that the regulator has not been up to speed, but surely the right hon. Gentleman is not suggesting that regulation should be returned to the Bank of England.
Mr. Redwood: Yes, of course I am. The Bank of England occasionally made mistakes-it did so with BCCI and in two other cases that I can remember-but it never made systemic errors and it never made a mistake in respect of one of the major clearing banks that affects everybody in the country. What has happened on this most recent occasion was that mistakes were made with a whole series of banks-several of the mortgage banks, several of the large clearing banks, and some other financial institutions. The result was therefore a comprehensive disaster on a scale that, fortunately, we have never seen before.
To return to the line of argument I was previously pursuing, we need good regulation of cash and capital, but that is what we did not have. The Government have belatedly woken up to this, and now, at exactly the wrong point in the cycle, they are telling the broken banks that they need to have a lot more cash and capital. At the same time, however, they are telling those same banks that they need to lend more money. The Government have to make up their mind as they cannot do both: either they make the banks far more prudent immediately, in which case no further credit will be extended in addition to what is already out there in the economy and some of the existing credit will be withdrawn, or-this is my view-they say, "The current situation is so grave that now is not the time to strengthen cash and capital. As we know that no banks will go under and we the Government stand behind the most damaged banks anyway, that can be sorted out later. The priority must be to get money pumping through the economy again, so let's delay strengthening the cash and capital until there are signs of greater activity in the economy."
If the Government want there to be any kind of economic recovery in this country on a faster and better basis than we are currently experiencing, my recommendation is that they need to sort out the banks, and also that they should not require them to do opposing things because at present the banks will listen to the regulator rather than the exhortation to lend
and, if the regulator intervenes in the suggested way, all our constituents who run small businesses or need loans will face difficulties.
The Government also have the strange idea that the problem will go away if they can control all the remuneration of the highly paid people in the banking sector. I regret to have to tell them that it will not. First, the bankers in the private sector will be far too swift and clever for them; they will move offshore or find other ways of remunerating themselves-share-based rather than cash-based awards, perhaps, or deferred awards. Whatever might be necessary, there will be lots of people working very hard to try to solve that problem because these bankers like being highly paid. Secondly, even if it is possible to control the pay of all these bankers, that does not mean they will run a bank well or solve the cash and capital problems, or that the banks will suddenly come gloriously right, because they have been so badly regulated in the past and they are now so comprehensively broken.
I say this to the Government: by all means examine the issue of bankers' remuneration as there are examples of excess, but the cases of excessive remuneration that I see lie in those banks that are state subsidised. If a bank decides to pay its staff lots of money because it is very profitable and trading very well, I have no philosophical problem with that. That might mean there is not enough competition in the market, in which case let us put in some more competition in order to try to lower the overall returns; but we should not start regulating the pay of the staff. It may be that there is a foolish private institution that decides to pay a few people too much money when it is not making a profit; it may or may not trade itself out of the difficulties, but as long as its private shareholders are paying the bill, again, I have no philosophical problem with that. I would have a problem, however, if that institution were then to expect a state subsidy because it had been paying its people too much, or if it were already in receipt of a state subsidy.
As the majority owner of RBS and the leading owner of Lloyds-HBOS, the Government should put in place a remuneration policy with which we can all live. I cannot live with those bankers getting megabucks when they are having to be subsidised by people in my constituency who are on very small incomes compared with their own. Why must they pay more tax to tip money into these state-subsidised banks so that these people can earn a lot of money for losing us, as those banks' collective owners, so much? Surely the Government can put that right. It does not need an Act of Parliament; it will not be sorted out by the Bill in the Gracious Speech. What is required is a bit of management and courage from the Treasury Minister responsible; he should go to his new charges and say, "We need to change the remuneration structure. Until you're profitable, we cannot accept this. We do not want dozens, or hundreds, of people paid more than the Prime Minister when the overall results are so dreadful. We cannot sell this to our constituents."
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