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I hope that the hon. Gentleman understands that this is the world of funny money and this programme of buying back our own debt cannot last, and that although it was necessary at the time when it was initially implemented, as soon as the economy stabilises,
which it is doing now, the programme will have to be stopped or even reversed and that would be hugely costly for a generation to come.
Sir Stuart Bell: That is another wild and woolly forecast far removed from reality from the Conservative Benches. We are talking about a nation state. The Chancellor made the point that we are the fourth largest economy in the world. We are not a tin-pot economy, therefore. The hon. Gentleman talks of funny money. His party colleague, the right hon. Member for Hitchin and Harpenden, mentioned quantitative easing. They should get together and try to work out what they are talking about. With a general election coming up, it is important that the Conservatives get their act together but, unfortunately, that is not happening.
My right hon. Friend the Member for West Dunbartonshire mentioned the private and public sectors, and he correctly said that if the policy is not right, it leads to unemployment. That was the great scourge of the '30s, and we have sought to avoid it. That is why unemployment is coming down. That is also why, unlike the French economy, we do not have a 10 per cent. unemployment rate. The French have had such a rate for years, and it has caused many severe ructions in their economy.
My right hon. Friend also mentioned youth unemployment. We have done all we can over the years; we even introduced the national minimum wage for employed youth in order to get people into work. I am making an important point, but Conservative Members do not seem to get it. They have completely lost touch with reality, and they do not understand that destabilising the economy leads to unemployment, and that is not a price worth paying in this time.
May I now return to the speech that I wished to make in the interests of my constituents, on the basis of what the Chancellor has said? A long time has passed since the good news was brought from Ghent to Aix, as Robert Browning said in his great poem. Browning did not say what the good news was, and I leave that to historians.
Sir Stuart Bell: I thought it was the battle of Blenheim. Regardless of what Browning's good news was, however, there most assuredly is good news on the Teesside scene, and also the national scene and economy.
On the national scene-I am glad the hon. Member for Dundee, East (Stewart Hosie) is in his place because as a Scottish Member of Parliament this will be of great interest to him-Total SA has announced a £2.5 billion development investment in the North sea west of the Shetlands. This will be a strategic development of two new gas fields-Laggan and Tormor-lying in 600 metres of water in the harshest environment in the United Kingdom, and the fields will be developed using the latest technology. The fields contain more than 1 trillion cubic feet of gas, plus some condensates, equating to about 230 million barrels of oil equivalent. This will create 117 jobs a year in the Shetlands over the lifetime of the project, and some 2,200 jobs in Scotland. The fields will be able to provide the nation with 20 per cent.
of its gas when they come on stream, and the fields themselves represent some 17 per cent. of the nation's gas reserves. As the Prime Minister said in today's Question Time, the investment has been helped by the Chancellor's decision to provide up to £160 million-worth of tax relief for each gas field that qualifies for the support. As the Chancellor of the Exchequer has said, the Government recognise the importance of the United Kingdom oil and gas industry to our economy and the dependable foundation it provides for the nation's energy security.
The goods news, however, has gone further than from Ghent to Aix. Yesterday, Total announced that it has passed to Corus a letter of award for the gas pipelines that will link the gas fields with the mainland. The contract will be worth nearly £200 million. It will involve building 350 km of pipelines, safeguard 250 jobs at the Corus Hartlepool mill and add a further 100 jobs for up to a year. The order was won against strong global competition, but it shall be the Corus world-class, large diameter Hartlepool pipe facility that will manufacture the pipes, thus securing jobs, and creating new ones, on Teesside. Also, £200 million of orders shall be added, and there is the £60 million Tees valley industrial programme, put together by the Government in recognition of the need to accelerate industrial transition and seize new opportunities in low-carbon and advanced manufacturing in the area.
It is estimated that the two-year Tees valley industrial programme will create 3,000 new jobs in the short to medium term and sustain over 10,000 jobs in the long term. The Tees valley industrial programme builds on One North East's existing £130 million investment in business, support and skills in the Tees valley to run from 2009 to 2012. In the last 10 days, One North East and its partners have unveiled the first of a number of investments via the £60 million programme to support engineering apprenticeships in the Tees valley, help workers with business start-up opportunities and help businesses in the Tees valley to be more energy-efficient. These investments alone amount to about £10 million.
The mothballing of the Teesside cast products blast furnace is a sad blow to Teesside, an industrial cradle that has seen over many years the obliteration of its shipbuilding and module yards, and the destruction of the coal industry in neighbouring Durham-and now a further diminution in steel production. However, as Corus Steel Tubes in Hartlepool testifies, the industry is not entirely extinct. The more the steel market returns, with the help of the £200 million contract from Total, the more likely it is that the blast furnace will be de-mothballed.
I am always averse to waving documents in the Chamber, but I yield to an American habit that has developed over the years. I would like to show hon. Members a magazine- [ Interruption. ] You shake your head, Mr. Deputy Speaker, so my little moment of glory is-
"how Teesside's iron fist could forge a new beginning."
"Vision" is also published with The Journal in Newcastle, and it gives the same message of optimism for two industrial areas that have lost nothing in their vibrancy, their determination or their work ethic, notwithstanding the global recession. Earlier I mentioned low-carbon and advanced manufacturing. Teesside fully intends to take advantage of the low-carbon sector, because the Tees valley is well placed to do so. It has its port lands, both at Teesport and Victoria harbour in Hartlepool-lands attached to the Corus plant. There are also offshore wind farms and biofuels, while in the Tees valley there are already facilities to capture carbon dioxide and store it under the North sea, with possible links to assisting the oil and gas sector.
However, in addition to developing a low-carbon economy, the Tees valley, and Middlesbrough in particular, is leading in other sectors that will hopefully assist the long-term future of the economy, and specifically in the digital-creative sector. Middlesbrough council, in partnership with Teesside university, has developed Digital City, building on the university's burgeoning reputation in computer sciences, to retain graduates in the town and create policies and graduate businesses in the sector. In short, the mothballing of the blast furnace at Redcar might cast a deep and long shadow, but if one combines the £60 million investment programme with the original £130 million investment from One North East for 2009 to 2012, along with the £200 million pipeline contract, we can see £390 million of investment flowing into Teesside. I agree with my Evening Gazette that Teesside's iron fist could forge a new beginning.
Lest it be thought that the private sector was excluded-I welcome the Chancellor's statements today about small and medium-sized businesses, as well as the various measures that he is taking-I should say that local entrepreneurs have a considerable track record on Teesside, having created the Wynyard business park, which has attracted 58 new businesses and £250 million of private investment, creating 1,200 jobs in the past few years. The Secretary of State for Health recently confirmed the creation of a new £464 million state-of-the-art hospital on the site to service the communities of Stockton and Hartlepool.
What we need, and what we are getting on Teesside, is a new start-a fresh start, for the people and for industry, for our future. It is good to go down memory lane-even I can tickle the fancy of the Conservatives by going back to 1979 and the noble Lady Thatcher cutting public expenditure-as long as one does not stay there. It is good to look at the past, with its heritage, but it is more important to look to the future, with its hope, and to do so with a determination and focus built on skills, a work ethic and fraternity within society. We have seen many things on Teesside, but it builds itself again and renews itself again, and it will continue to do so. It is incumbent on us all in the area to show leadership, work together, unite among ourselves and unite our community so that all will gain individually, and society will also gain.
Let me end on the Budget, which is most important to Teesside and the people who live and work there. It is, of course, the final Budget of this Government-there
will be a general election before another Budget-but it is also a parameter-setting Budget. It will give the community, who study the Budget carefully, hope in their future-hope under a Labour Government. Given the response of the Conservatives, the Budget will also let the community see through the shallowness of Conservative policy and, on many occasions, the idiocy of Conservative policies. When it comes to the vote, those on the Opposition Benches will find, probably to their dismay, that they will still be there after the next election.
Mr. John Redwood (Wokingham) (Con): I remind the House that I have declared in the Register of Members' Financial Interests that I provide business advice to an industrial group and an investment management company.
This was the go nowhere Budget-it was almost the do nothing Budget. It was also the dither and fiddle Budget. I sometimes think that Ministers have still not understood how big an economy they are seeking to influence and how much money and resources they command, now that about half the entire national income goes through the public accounts under their mismanagement. It is, for their information, a £1.4 trillion economy. This Budget provides, on their scoring, a stimulus of £1.4 billion for the first year and a small reduction in the amount of resource available from the public sector in the following two years. Even at the peak of the Chancellor's proposed intervention this year, therefore, he is playing with 0.1 per cent. of the national income, so we can immediately see that this Budget is not serious. It is not trying to change anything real in this nearly moribund economy, nor is it trying to do anything big to stimulate growth or recovery.
Stewart Hosie: Have the Government's horizons not shrunk even further, if one considers that the total managed expenditure for 2010-11 is £2.7 billion off what they forecast even in the pre-Budget report late last year?
I also agree with the hon. Member for Middlesbrough (Sir Stuart Bell) when he rather kindly said that he saw the Leader of the Opposition as a new manager coming in to take over an ailing football club. He was absolutely right that the UK Government football club, under its current management, has slipped down several divisions and is facing further relegation. He is absolutely right that there are no star players who can win matches. He is also absolutely right that the wage bill is bloated and gross, and that the club is facing bankruptcy. Indeed, the club has all the conditions, which the hon. Gentleman perhaps did not have in mind, for better and new management.
What we need is new management to stop further relegation. The hon. Gentleman should understand how far this country has already been relegated, as my right hon. Friend the Leader of the Opposition said in his passionate and eloquent speech today, when he pointed out that a country that was fourth in the world for competitiveness-which means more jobs,
more exports and more ability to make a decent living-has managed to sink to 84th in the world under this Government, with their too many taxes and their too many regulations.
To understand why our economy has suffered so badly and is not growing rapidly, we have to understand the nature of the national and public finances created by the disastrous mismanagement of this Government. It is now easiest to understand the national finances as being two rather large banks, under Government control and with substantial Government shareholdings, with a medium-sized Government attached. That is because the two banks that the Government partly or wholly nationalised are considerably bigger than the national income-or they were when they took them over-and we need to understand what is happening in those banks in order to understand the background to the Budget, what is happening in the national finances and why the recovery is so sluggish. Unbelievably, the Government proclaim that they have created sustainable and stabilised banking, in the Chancellor's words, but in fact they have done exactly the opposite, by their blundering into owning so many bank shares and their inability to manage those banks properly.
Over the past year, to December 2009, the Royal Bank of Scotland slimmed its balance sheet by £700 billion. When it was taken over by the state, RBS started with a balance sheet of £2.2 trillion, or one and a half times the national income. However, at the end of last year that had fallen to £1.5 trillion only, just a little over the national income. When I asked the Prime Minister about that recently in Prime Minister's questions, he seemed to be completely unaware of that fact. One would have thought that it was the dominant economic fact that might concern him and his colleagues. At a time when they say they want growth and expansion, their bank-the bank they took over and they say they have stabilised-has shrunk its balance sheet by £700 billion, or by the same amount as total public spending in the year.
Of course, the bank shrunk assets and liabilities and was reducing risk. Of course, some of that had to take place. Some of it involved withdrawing loans in overseas economies and not in the British economy, because RBS is a global bank. I put it to the Chancellor and to his representative, the Financial Secretary to the Treasury, who is left to hear the debate, that they will not have a vigorous and strong recovery if the biggest bank in the country, under regulatory and ministerial instructions, is all the time slimming its balance sheet that rapidly. Although a lot of that slimming took place through instruments other than loans and although some of it was not in the UK, all of it is withdrawing liquidity, risk management and financial instruments primarily from the business sector, which is bound to have an impact.
To reinforce that process, Lloyds bank was doing something similar on a more modest scale. Lloyds was a £1.1 trillion bank and by the end of last year it had fallen to a £1 trillion bank-it had taken £100 billion out. Between the two banks that the Government owned, £800 billion was withdrawn. We know from the corporate plan and from the remarks of the chief executive of RBS-approved by the Government, who are the
principal owners-that another £300 billion will be taken out of the balance sheet of RBS over the current year. Again, I put it to the Government that if that is the plan, although it might make business sense-I presume that the aim is to turn the thing round into a profit-making bank by getting rid of risk-it is not good news for the British corporate sector trying to use RBS as well as Lloyds. It will make it almost impossible to meet these ministerial exhortations and targets to increase lending.
The Lloyds reduction of £100 billion was more damaging in a way, because Lloyds does rather more lending and has rather more assets in the UK relative to the size of its balance sheets, and £50 billion of the £100 billion Lloyds slimming was a reduction in loans. It does not tell us in the figures that I saw how many of those were outside the UK, but clearly quite a bit of it was UK lending. At the very time when the Government told us they had nationalised the bank to stabilise it and to allow it to lend money, it was doing the opposite and going through a severe restructuring that entailed lending less.
That is the fundamental reason why this economy is not going anywhere: the banks have been broken and they are being nursed back to health in a way that contracts rather than expands activity. I do not know why the Government cannot see that, although I can understand why they never want to talk about it. They pretend that they are not responsible for this £2.5 trillion of assets at risk and that it is somehow nothing to do with them, yet come the Budget they say, "We stabilised the banks. Job done-no problem. All is well."
Mr. Mark Todd (South Derbyshire) (Lab): I am intrigued by the right hon. Gentleman's analysis. I share some of his thoughts, but by extension I assume that he is suggesting that we should have a much more directive role in running RBS and Lloyds, and should perhaps seek to foster an underpricing of credit to the business sector. Is that what he is really thinking?
Mr. Redwood: I would be very happy to make a positive recommendation because I would like my country to recover quicker and for there to be more jobs and prosperity. I suggest that instead of mouthing the words "countercyclical regulation" but doing the opposite, the Government should try some countercyclical regulation. I and a few others were telling them in 2006-07 that everything was overheating and that they should have tightened the regulation of the banks. They did not; they made a big mistake. What we are now saying-those of us who have got the cycle right-is the opposite. They are now tightening too much at the bottom of the cycle. We must be somewhere near the bottom of the cycle-I hope that we are through the bottom of the cycle and have just begun to turn up. This is the point at which they should be relaxing the regulatory controls on cash and capital, particularly for the two nationalised banks, which nobody is going to worry about because they know they will just print whatever it takes to meet the obligations of those banks.
The regulator should be told to think countercyclically. The cash and capital controls should be relaxed at this stage of the cycle and tightened in a couple of years' time when the recovery is under way.
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