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"been matched by any other Western government".
The Government should not be pushed off course by economists led, for instance, by Howard Davies of the London School of Economics. When the Government nationalised Northern Rock, he gave us the benefit of his view that it would undermine the reputation and standing of the City of London in the eyes of the finance industries in other parts of the world. Get real, Howard! The City and Wall Street have been hoist by their own petard. What they were doing has blown up in their faces.
Let us consider Lehman Brothers, whose auditor was Ernst and Young. Then we are faced with the output of the Ernst and Young ITEM Club, and we are expected to take notice of the predictions and are told that we need to recognise what wonderful people they are. Well, Ernst and Young was an item with Lehman Brothers in the other sense-they formed a couple that could not have been closer as they covered up for one another. And they, of course, were assisted by the noble Linklaters, the City solicitors, which actually provided cover here-cover that even some of the dodgy lawyers on Wall Street had refused to give-for what Lehman Brothers was doing worldwide.
These bankers, their auditors and the ratings agencies caused the banking crisis, and these self-same people are now demanding cuts in investment, while insisting that their bonus culture continue. Bankers apparently need mega-pay and bonuses to compete internationally, but everybody else has to take lower pay and worse working terms and conditions to compete globally. Who are these bankers and auditors and what is their track record? I have checked. Next time someone from KPMG gives us advice on finance, remember that it was supposed to be HBOS's and Bradford & Bingley's auditor. Next time Deloitte sends someone to give advice, remember that it was the auditor for the Royal Bank of Scotland-and a cracking good job it did! PricewaterhouseCoopers was the auditor of Northern Rock, and I have already mentioned Ernst and Young, which allegedly was the auditor of Lehman Brothers.
Let us consider the banks themselves. The shadow Chief Secretary to the Treasury, in a previous debate, quoted the wisdom of somebody from the City Group, but it lost $55 billion. It bought up-or got into bed with-Merrill Lynch, which lost $51 billion. We might get someone from UBS telling us what we ought to be doing about our public services, but it only lost $44 billion. HSBC lost $27 billion; the Royal Bank of Scotland lost $15 billion; and Morgan Stanley and JP Morgan both lost $14 billion, yet we are expected to take notice of them.
Then there are the ratings agencies. They gave triple-A ratings to all the rubbish that brought the international banking system to its knees, and now we have got to listen to them. Are they seriously saying that they believe that a United Kingdom Government would default on their borrowing? If they are not saying that, there is no reason at all why the British Government should have any difficulty getting their bonds on to the market. We have got to take an altogether more rigorous approach. We have got to reach a situation in which the banking industry is working for the rest of us. We can no longer continue with a situation in which the rest of us are working for the worldwide banking industry. We need a yet more radical response than we have had. We have got to end the fail-safe arrangements for the dodgy dealers. There should be no more bailing out of the people who got us into this mess.
I am genuinely fearful that unless we do something about the problem, the democratic institutions that we subscribe to will be in danger. If the people think that their elected representatives cannot protect them from what is happening in this world, while another group of people are still being paid multiples of millions of pounds in bonuses, I do not think that they will tolerate it. They will turn their attentions to those who say, "We can do away with this." If I were running the British National party, I would be delighted with the present situation, with bankers lining their pockets and handbags, and teachers, nurses and firefighters being told that their meagre pensions pose a problem for the economy. Those teachers, nurses, firefighters and others did not get it wrong, but they are being expected to pay the price. The bankers undoubtedly did get it wrong. They are not going to have to pay the price; they are claiming the right still to be paid bonuses. Such a society will not be easy to sustain. Indeed, I think that there will be a threat to our democracy and to this institution unless we do something to change the balance and provide greater protection to ordinary people against the people who speculated us into the mess that we are in now.
I welcome the Budget and the fact that we have not fallen for the silly idea of cutting investment before the recovery is well under way. However, we shall have to be careful about making cuts even when the recovery is well under way. We need the economy working at maximum output. That is the best way to deal with the deficit, debt and nearly every other problem that this country is afflicted with.
Mr. David Heathcoat-Amory (Wells) (Con): I am pleased to follow the right hon. Member for Holborn and St. Pancras (Frank Dobson), although I cannot accept his prescription for growth, which consisted of little more than more public expenditure-or "investment", as he called it-which is what got us into this trouble in the first place. His criticism of auditors had some traction, but they had far less to do with the problem than the failings of the tripartite system of banking regulation, which was set up by the Bank of England Act 1998, and which spectacularly failed when the banking crisis occurred.
I am also pleased to follow my hon. Friend the Member for South Staffordshire (Sir Patrick Cormack) and my right hon. Friend the Member for Maidstone and The Weald (Miss Widdecombe), both of whom
made fine valedictory speeches. We will miss them both in the next Parliament, which I hope to be part of. We will long remember their speeches, particularly the sense of history and tradition brought by my hon. Friend the Member for South Staffordshire, which was a hallmark of his years here, and the passionate defence that my right hon. Friend the Member for Maidstone and The Weald made of the family and her support for it. She will long be remembered for those causes as well.
It is a shattering commentary on the Government and their Budget that borrowing this year will be only £167 billion, which is slightly less than the £178 billion predicted by the Chancellor last year. Whatever figure is right, we are now in the premier league for debt, which will dominate the next Parliament and probably the one after it. We are entering a decade of debt, and even on the Government's own figures, the national debt will rise during the next Parliament to £1.4 trillion. A trillion sounds a lot, and it is. That is perhaps best illustrated this way. If we were to repay debt at £1 a second, we would repay £1 million of debt after 12 days. It would take much longer to repay £1 billion. At the same rate of repayment, it would take 32 years to repay £1 billion. To repay £1 trillion at the rate of £1 a second would take 32,000 years, and that is just £1 trillion, because the Government are increasing the debt to nearly £1.5 trillion. The task before us is therefore truly awesome. There is also an intergenerational problem and a question of fairness. Are we really going to hand on to our children a debt that we have incurred? It is already the case that a baby born in Britain today arrives with a debt around its neck. That is not a sure start; it is a debt start, and it is up to us- [ Interruption. ]
Mr. Jeremy Browne (Taunton) (LD): The reason for our noises off was that if 1 million seconds last for 12 days and 1,000 million is 1 billion, we are confused about whether 1 billion seconds would last for 32 years, which is certainly more than 1,000 times 12 days. I suspect that the right hon. Gentleman is defining a billion as 1 million million, but that is not the definition that the Government use when calculating borrowing.
Mr. Heathcoat-Amory: No, but the hon. Gentleman had better check his arithmetic. I have done mine, and it is the case that on the Government's own figures it would take 32 years to repay £1 billion and 32,000 years to repay £1 trillion. I do not expect the Treasury to understand those figures, and I am a little disappointed in the hon. Gentleman from the Liberal Democrats, although I am perfectly certain that those on the Conservative Front Bench will understand them.
Mr. Newmark: It would perhaps be much easier for anyone listening to this debate to understand that £1.4 trillion of debt, which is roughly what we will be left with, approximates to about £46,000 of debt for every individual in this country by 2014.
Mr. Heathcoat-Amory: I am grateful to my hon. Friend for that illustration. I think that we can all agree that we are talking about a pretty big debt, and there are only three ways of bringing it down: tax, raising the national growth rate, or cutting expenditure. There are no other ways of doing it, and I want to say a word on each.
If the solution was taxation, we would have solved all our problems many years ago. It is a hallmark of this Government that their solution to every problem is tax and spend. That is the only consistent economic policy that I can detect from the Treasury Bench. In fact, the Chancellor is the perhaps unwitting originator of the phrase "stealth tax". When I was shadow Chief Secretary in 1997, the present Chancellor sat opposite me as Chief Secretary. I read up some of his old speeches. They were pretty heavy going, but I spotted that he had criticised taxation by stealth. I started to use the phrase and it came into common currency. We can therefore say that the Chancellor conceived the phrase. I might have been the midwife and given it currency, but we can definitely agree that the present Chancellor is the prime practitioner of stealth taxation, and there are plenty more examples in last week's Budget.
I should like to dwell for a moment on a non-stealth tax: the increase in cider duty was at least declared in the Budget speech. I come from the west country, where cider making is an important local industry. It is an environmentally benign, indigenous industry, and an important employer, but it is now being subjected to a vindictive and quite unnecessary 13 per cent. tax rise that will do great damage, particularly as the industry relies on long-term planning. Cider makers plant orchards, or persuade farmers to do so, and sign contracts with the people who buy the fruit. The industry needs to be able to plan, and for the Government suddenly to announce this vicious tax rise shows that they do not understand the second component of deficit reduction, which is raising the level of economic growth. Indeed, the Government's own so-called deficit reduction plan depends crucially on the growth targets that were declared in the Budget, which I do not believe; I think that they are too optimistic.
The Government's entire political philosophy-let alone their economic philosophy-is founded on their belief in tax and spend. That in turn depends on their mistaken belief that, in their 13 years in office, they have discovered a philosopher's stone of continuous, low-inflationary growth on which they can permanently depend. Well, the credit crunch happened, and that belief was cruelly exposed. The real foundations for economic growth have nothing to do with Government expenditure: growth depends on the supply-side reforms at the level of the firm that were pushed through in the face of relentless opposition during the 1980s and 1990s. Those reforms secured a competitive advantage for this country in world markets.
I cannot overstate the challenge that this country faces, in the face of pitiless international competition. There is only one way to get out of this mess. It is not to spend our way out, or to borrow our way out; it is to earn our way out. That will critically depend on the national growth rate, which has been eroded over 13 years of extra taxes, of tax complexity, of a benefit system that no one understands, and of over-regulation. There is not the slightest indication that the Government
understand that, or that they have learned from those mistakes. They do not understand issues of competitiveness, risk or commerce.
As we read the Budget documents and listen to the Chancellor speak, we are taken back to the 1970s with all his talk of state growth funds, innovation units and a green bank. Why do the Government want to own another bank? They already own great sections of the British banking industry. Now they want to own a new one, but it will be no more successful than the discredited regional venture capital funds. They were the target of well-merited criticism by the National Audit Office, which showed that their investments are worth only a fraction of what they cost.
I hope that my colleagues on the Front Bench will summon up the determination completely to abolish the regional development agencies. They are run by people who do not understand business. They give out loans and grants to the most vociferous, rather than to the most economically deserving. The one in the south-west is a byword for incompetence and waste.
My message is that we must concentrate on micro-economics and on getting the conditions on the ground right for business, industry and enterprise to flourish. That is not easy. The easy part of politics is spending other people's money. As Milton Friedman told us, there are only two kinds of money in the world: your money and my money. The easiest thing for me to do is to spend your money. We need to get back to attention to detail, and away from this blundering interference by central Government and all their agencies, with their mania for regulation and taxes as a solution to our problems.
The third pillar of recovery involves tackling public expenditure. The challenge there is not to make new, exaggerated claims about cutting this and that, but to show that announced reductions can really be made. I am afraid that we shall have to go well beyond that old favourite, efficiency savings. I have sat through and participated in 27 Budgets, some as a junior Minister, and I have heard references to efficiency savings in all of them. Of course they are important, but I am afraid that we shall need to go much further. We need to re-engineer government. Quite simply, we need to run official Britain at a lower cost, and that is going to require creativity, determination and flair. I see those qualities among those on my Front Bench, and I believe that they can do it, but it will not be easy, and it will require a change. Those on the Government Front Bench have not the slightest interest in this, nor do they have the talent for it.
I should like to talk briefly about pensions. They are the submerged whale of the problem. They are submerged because they appear on no Government balance sheet. I have asked Ministers about this at questions. According to many independent estimates, the scale of the public deficit on pensions is more than £1 trillion. Tackling that will also require great courage and determination.
I must also mention the EU budget, as I think is expected of me in these debates. It is a disgrace that our net contributions next year will rise to the new figure of £1.6 billion. There is no interest in restraint or economy in the European Union; I know that because I sit on the European Scrutiny Committee and we see a weekly blizzard of proposals for new regulations, laws and spending. Now they want an economic Government in
the European Union. That, too, has to be tackled. It will be difficult, because there is no easy or legal way of challenging it-certainly not according to my Committee.
Next year's EU budget is going to go up again. My Committee advises that the social policy agenda is going up by 21 per cent., and that the already enormous structural funds are going up by nearly 7 per cent. The decentralised agencies are the European quangos, and they are even less accountable than the ones we deal with. I wonder whether the House can guess by how much the expenditure on those agencies is going to go up next year. The answer is 53.3 per cent. We are in the middle of a European recession. If national Governments are having to make cuts, why cannot the European Union play its part? It is because it has a dynamic to spend taxpayers' money, and there is no countervailing force to oppose it. There is also no willingness on the Government Benches even to challenge it.
All these problems need to be tackled, but, as my hon. Friend the Member for South Staffordshire said, we need hope. It can be done. We have faced such problems before, as a country. This is not a counsel of despair because we can overcome these problems. That cannot be done, however, by a Government who spend now, tax later and leave the debt to be dealt with later still.
Mr. Browne: I am grateful to the right hon. Gentleman for giving way, for two reasons. The first is that I want to support his comments about cider, and particularly about the long-term planning that needs to go into ensuring that the right apples are produced for cider manufacture. The second is that I want to apologise to him. Having had a bit more time to do my mental arithmetic, I realise that 1 billion seconds will indeed last for 32 years. I hope that our earlier conversation was not too misleading and to be able to use that impressive statistic myself at some point.
Mr. Heathcoat-Amory: I am grateful to the hon. Gentleman. We have heard a few apologies in the Chamber this afternoon, and I accept his. Perhaps he has been taking arithmetic lessons from the hon. Member for Twickenham (Dr. Cable), who is now sitting next to him. I can promise him-and he must now agree-that a £1 trillion debt would take 32,000 years to repay, at £1 a second. I can assure him that these are not American billions or Labour billions but British billions.
I shall end in the spirit in which I came in: this is going to be difficult, but it is possible. What is absolutely certain is that it will require a change of Government. This Government's time is up, and the date in question is 6 May.
Mr. Deputy Speaker: Order. To deal with much smaller numbers than those we have just heard about, after the next two speeches-one from each side of the House-the time limit on Back-Bencher speeches will come down to 12 minutes.
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