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Let me return to the BBC2 documentary. It was about the banking crisis and the global financial crisis, and how they had arisen. Episode 3 consisted of interviews with the American Treasury Secretary, Hank Paulson, with American and European bankers, and with the French Finance Minister. They all said, more or less as one, that the British intervention in nationalising the three banks in the autumn of 2008 had been decisive in halting the slide towards the breakdown of the global financial system. One of them went so far as to say that the global financial system had come within hours of meltdown, and that if the British had not acted when
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they did, it might indeed have melted down. As we know, the Americans had their plan, but it was bogged down in Congress after they had spent 14 days talking about it. Incidentally, it is not only the people interviewed on that programme who have expressed that view. I have heard the Prime Ministers of Spain and Norway say something similar, and also the Australian Prime Minister.

As I watched the programme, I asked myself "Why is this a secret? How come no one in this country knows about it? How come only foreigners seem to know about it?" I concluded that that was, in part, a tribute to our free press, who, as we know, have been preoccupied with other matters. On each of the occasions when our Prime Minister has gone to Washington in the last year, the press have decided from the outset-before he has left British soil-that his trip will be a disaster. On the first of his two trips, they pursued him with a single question: "Prime Minister, will you apologise for the recession?" They kept that up. I believe that Mr. Nick Robinson even took it into the Oval Office of the White House. The Americans were amazed.

During the second trip, which took place only a few weeks ago, the headline was "Obama Snubs Brown". As Members may recall, the President and the Prime Minister were going to New York to attend a United Nations meeting. There was not to be a face-to-face meeting between them there; but the next day they were off to the G20 summit in Philadelphia, where there was plenty of face time, and the story swiftly faded. Nevertheless, it had dominated the headlines, even in the broadsheet newspapers. If Members wonder why we in this country know nothing about the British Government's intervention in the banking crisis, it may have something to do with those distractions.

Stewart Hosie: Let me summarise what the hon. Gentleman has said: the United Kingdom Government have no responsibility whatsoever for any of the failures, the Prime Minister saved the world, and the 943,000 youngsters who are on the dole should say thank you to Labour for fixing the problem. I just wanted to get it right.

Mr. Mullin: As so often, the hon. Gentleman does not get it right. I am not arguing that. I am just saying that the British Government did quite a lot in bringing this most recent-and particularly large-crisis to a halt, not just in this country, but around the world. Many distinguished foreigners appear to have noticed that, even if the hon. Gentleman and we in this country have not. I was pleased to hear the Liberal Democrat spokesman, the hon. Member for Twickenham (Dr. Cable), acknowledge that today, as he has done on several previous occasions. That is why he is taken more seriously than the hon. Member for Tatton (Mr. Osborne), who speaks for the official Opposition on these matters.

Let me mention something else I thought while watching that programme. I also thought it at the Institute of Directors dinner last night, at which I had a ringside seat. IOD director general Miles Templeman was demanding less Government interference, of course, and as he was playing on home ground that was greatly welcomed by his audience. In fact, he was asking for
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many of the same things that the hon. Member for North-West Norfolk was just requesting: less Government interference, less red tape, less this and less that, and smaller government. I thought to myself, "Goodness, it's lucky there was some Government interference around last autumn, when the banks went belly-up. I didn't hear any talk about the need for smaller government then, when the world economy faced potential ruin."

Over the years, all the main political parties have indulged to some extent in the pretence that we in this country can have a European level of public services while paying only American levels of taxation. We are all guilty of having encouraged that belief. As a result, when there is an argument about cuts versus tax increases, it is assumed across the board that only cuts will do. Indeed, there was a period a few months ago when the leaders of all three main parties appeared to be vying with each other on cuts. The leader of the Liberal Democrats was, I was shocked to hear, calling for bold and savage cuts at his conference, which cannot have gone down too well with his punters. The leader of the Liberal Democrats is a wide boy and a chancer as far as I am concerned, and if he thinks that is going to get his party any votes, he is wrong. If people want bold and savage cuts, they will vote for the Conservatives, not the Liberal Democrats.

I think that we do need to contemplate the possibility that, sooner or later, the basic rate of income tax will have to rise-I am not talking about taxing the rich, because that is often a cop-out as it does not raise the necessary sums. The basic rate of income tax has come down consistently over the years. It was 25p in the pound as recently as 1995, but successive Chancellors have reduced it so it now stands at 20p. Sooner or later, a political party in this country will have to confront the electorate with the reality that if we want European levels of public services, we will have to pay European levels of taxation. That cannot just be paid for by the rich; the prosperous-or the relatively prosperous-will have to contribute as well. There may well need to be a rise in the basic rate of income tax, therefore.

Finally, I want to say a few words about "broken Britain". We have heard quite a lot on that subject from those on the Conservative Benches. Those of us who represent less prosperous areas of the country know a thing or two about broken Britain. When I was first elected to Parliament in 1987, at every single surgery that I held people from the poorer parts of my constituency came to me begging to be evacuated from various notorious estates. All that has stopped over the last five to 10 years. There were parts of my constituency where normal life had broken down to such an extent that we had to evacuate the few remaining residents and demolish entire streets-indeed, in one case, a large part of an entire estate. I fear that there is a danger that we might return to that situation. That is broken Britain.

Sandhill View school in my constituency is a secondary school. Twelve years ago it was achieving a GCSE result rate on the five A to C grade measure of less than 10 per cent. Today, that rate is more than 50 per cent. The school has been completely rebuilt, it is under completely new management and more than 50 per cent. of the pupils are getting those results, despite the catchment area being the same. So when somebody tells me that nothing has changed and everything is bad and getting worse, I can put my hand on my heart and honestly say
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that the poorer people in my constituency-I would be surprised if this were confined only to my constituency-are significantly better off as a result of this Government.

I dread that in future we may go back to where we were in the late '80s, when there was mass unemployment, and a breakdown in the social fabric and in law and order. Some future Government would then have to clear up the mess, as this Government are still doing to some extent. I hope that we will not go down that path again. I am told that a new, merciful and compassionate Conservative party has arisen from the ashes of the greedy and mean Conservative party-I accept that there have been some changes at the top, but I do not believe that down below that is the case. I think that the party has the same philosophy and wants one thing only: tax cuts for the already prosperous.

3.15 pm

Lorely Burt (Solihull) (LD): On the face of it, there does not appear to be a great deal for business in this Queen's Speech, so I wish to focus on business. Legislation is not always needed to make changes, as the hon. Member for Mid-Worcestershire (Peter Luff) said. I trust that that proves so and that having introduced a plethora of measures, some of which have worked and some of which spectacularly have not, the Government are not resting on their laurels, thinking that we are through the worst and that everything will be all right. If the measures that they have announced had been properly implemented, business would not be suffering in the same way as it is now.

Recent talk about recovery is encouraging, but we must be realistic and recognise that businesses are still suffering and our gross domestic product is still falling, with the third quarter figure showing the decline slowing to 0.3 per cent. The hon. Member for North-West Norfolk (Mr. Bellingham) cited a figure of 0.4 per cent. but I believe a revision was made yesterday-either way, the situation is bad and GDP is still declining. The level of bank lending to businesses continues to decline, with third quarter lending decreasing by £23.2 billion. The level of unemployment is still increasing, with the figure now at more than 2.5 million. Manufacturing investment has decreased by more than a quarter and construction investment has decreased by almost a third.

Despite all that, an array of business support is due to end before the recovery has been secured: the trade credit insurance top-up scheme ends on 31 December 2009, just when it might have become useful as the credit insurance market stabilises; the vehicle scrappage scheme ends in February 2010-or earlier if the Government funding is used up; the enterprise finance guarantee scheme ends on 31 March 2010; an extension on empty property rate relief ends on 1 April 2010; and first-year capital allowances of 40 per cent. end in April 2010, when we understand they will return to 20 per cent.

Although we have heard noises from the Government about extending these schemes, no clarity has been provided. They have left it late before explaining their plans, which has left businesses with little time to prepare. The worst thing that we can do to businesses is leave them in a state of uncertainty. How can they make provisions when they have no idea of what is coming? Can the Minister tell business today which of the schemes
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are to be extended? The Chancellor has said "no", but he is not serving the interests of businesses by making them wait until the pre-Budget report. Despite the endless announcements about help for business, some Government actions are holding business back. Businesses face an overnight increase in business rates of up to 12.5 per cent. from April. That is a significant cost, especially for small businesses. Empty property rate relief is due to be withdrawn on the same date, encouraging unnecessary demolitions and destroying the capacity of the economy to grow in the future.

We have long said that fundamental reform of business rates is required to make them more equitable. Let us take the timing of the VAT increase as an example. Despite modest, well-argued representations from business, the Government refuse to change the timing of the VAT increase from midnight on 31 December. The Federation of Small Businesses has called for it to be deferred to 1 February to avoid the peak January sales-a sensible measure, but one that the Government are ignoring. What a happy new year message that will be to retailers.

Another example is an increase in the burden of tax. The small companies tax rate is due to increase from 21 to 22 per cent. In last year's pre-Budget report, even the Government realised the counter-productive effect of that change and deferred it from last April to next April. I hope that they will reconsider this ill-timed additional burden on small companies and that the Minister will comment on that.

I want to see a new sense of urgency in the Government, with fewer announcements and more action. The sense of urgency among businesses is palpable as they struggle to stay afloat. I do not want to be unfair-some of the Government schemes have worked, although some have not. One that has worked relatively well is the enterprise finance guarantee scheme. Will the Minister confirm what will happen to that scheme?

One scheme that has not worked is the automotive assistance scheme. Guarantees of only £400 million have been promised, compared with £2.3 billion of ostensibly available guarantees. For six months of this year, no money was forthcoming but 10,000 jobs in the automotive industry were lost. Jaguar Land Rover, in my constituency, finally decided after months of being messed around by officials that the game was not worth the candle and got financial help elsewhere. Will this scheme be quietly forgotten now? Will the Minister respond on that point, please?

The trade credit insurance scheme was most welcome when it was announced, but it has been an absolute disaster. Although the Government said that they expected a £3 billion take-up by October, only £13 million has been allocated. The conditions have been far too restrictive. Will the Government consider relaxing the criteria so that struggling companies can benefit or will they quietly forget that scheme, too?

Mr. Nigel Dodds (Belfast, North) (DUP): I agree entirely with what the hon. Lady is saying about the various Government schemes and the need to consider which work and which do not. Does she agree that as well as Government schemes, the banks and the financial lending institutions need to be doing a lot more? Although Government help is very welcome, more pressure needs to be put on the banks to do more for businesses, because that is what businesses are crying out for.

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Lorely Burt: I absolutely agree. My hon. Friend the Member for Twickenham (Dr. Cable) made that point quite strongly, so I have not concentrated on the banks, but the hon. Gentleman is absolutely right.

Let me finish by looking towards the longer term. I do not want to focus merely on the difficulties and challenges that we face. This country has a legacy of innovation and enterprise that should give us confidence for the future. It is now time for the Government to get ahead of the game and to begin to support enterprise in the longer term by creating an environment in which small and large businesses can flourish side by side. I welcome some of the moves to generate wealth through the knowledge and skills of our young people, such as the creation of a cluster of university enterprise networks to harness the value of the academic knowledge that is taught in our universities to drive future entrepreneurship and long-term economic growth.

The upturn will bring some risks. In the downturns of 1980 and 1990, insolvencies rose significantly after the technical end of the recessions as businesses rebuilt their working capital on returning to growth. Will the Government make sure that they take adequate steps to prevent the destruction of jobs and livelihoods this time round?

We all know that the state of the public finances means that there are limits to the help that can be provided, but there are no limits to what the Government can do when it comes to creating a level playing field, reducing interference from Government and enabling businesses to drive forward the diverse, vibrant and sustainable economy that is the key to our future.

I and my colleagues on the Liberal Democrat Benches will do all that we can to offer support for any step that is taken to help and enhance this country's business future and prosperity.

3.25 pm

Mr. Michael Meacher (Oldham, West and Royton) (Lab): I want to concentrate on the banking system, the case for major reform of which continues to be greatly understated. I strongly agree with my hon. Friend the Member for Sunderland, South (Mr. Mullin) that we should never forget that the root of the problem is to be found overwhelmingly-not entirely, but very largely-in the behaviour of the banks.

The Financial Services Bill unveiled in the Queen's Speech gives the FSA the power to crack down on bankers' bonuses and to tear up contracts that expose the banks-and the taxpayers standing behind them-to excessive risk. That will obviously be very popular, but it is also absolutely justified. However, the central question remains: is that sufficient to prevent a recurrence of the epidemic of bankers' greed and recklessness that so nearly brought down the entire global financial system? One has only to ask that question to get the answer that it clearly is not.

Certainly, the Bill offers important steps that will help to curb the most obvious and visible banking excesses that rile the public most, but they fall well short of the root-and-branch reform of the whole banking sector that I now think is so urgently needed.

Mr. Bellingham: Does the right hon. Gentleman agree that the mistakes in the banking sector were made by a very small number of proprietary traders, and that they
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represent only 1 or 2 per cent. of the total number of sector employees? It is true that they were not overseen properly, but surely we need a way forward that recognises that the vast majority of bankers were highly responsible.

Mr. Meacher: The hon. Gentleman makes my case for me. It is of course true that the problems were precipitated by only a small proportion of total banking staff, and that many of them, as he says, were involved in proprietary trading. However, the financial sector is incredibly important to the whole economy, and the fact that it cannot be-and was not-managed properly by directors in the boardroom is something that desperately needs to be addressed. I do not think that the measures in the Financial Services Bill-or, as I am about to make clear, any of the reforms that have been suggested so far-are adequate in that regard.

The Government's policy on the banks seems to consist of only three elements. The first is to limit bonuses, although I think that I am right in saying that the FSA already has the authority to intervene in that area. The second element is to increase regulation but-and I say this with great respect-we will judge the effectiveness of that approach when we see it. The third element is to introduce some increase in capital ratios. I think that everyone agrees that that is necessary, but by exactly how much will they be increased? That is the key question, and the answer has not yet been specified. However, the Government's policy still leaves the City as dominant as it is now, and the rest of the real economy hobbled and dependent.

If I understand it correctly, the policy of the Opposition is very little different. They are proposing living wills, by which the banks can wind themselves down in the event of a collapse, higher capital reserves-exactly like the Government-and more support for long-term equity finance, although again they have not said exactly how they would bring that about. I do not disagree, but it, too, is minimalist reform. I do not want to be over-partisan, but given the Tory party's dependence for major donations on City institutions and on the British Bankers Association, whose chief executive is a former Tory MP, and given that both those institutions have no wish for radical change, we are entitled to wonder how much of even those modest reforms are likely to see the light of day.

The truth is that the original financial crisis flowed from several causes other than the monstrous bonuses that generated thoroughly irresponsible banking practice. Such factors include mammoth bank size-beyond the capability of any reasonable manager to control-a dangerous confusion of retail and investment banking roles, excessive debt leveraging prompted by over-cheap money, global proliferation of toxic derivatives, the suborning of credit-rating institutions by banks and other bodies whose creditworthiness they were supposed to be assessing, and an orgy of offshore speculation and tax evasion taking preference over industrial investment and the real economy. None of those fault lines is being addressed.

All the big four remain-to use the customary phrase-too big to fail, not least RBS, which at the time of the collapse had an exposure level 12 times the entire UK gross domestic product. Even with EU intervention, the bank is still far too large. The only dent in that behemoth structure was brought about by the EU Competition Commissioner.

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