The Economy

It is a pleasure to take part in this debate and to follow the hon. Member for Stone (Mr. Cash). I agreed with some of what he said, particularly about the rise of the far right and, indeed, about post office banks. We are both members of the European Scrutiny Committee and I suspect we have different views on Europe, but I agree with him that it has been interesting to observe how what the EU identified as orthodox criteria that had to be adhered to have had to be thrown completely out of the window in reaction to what has happened over the past year. Many of us felt that those orthodoxies and rules were not necessarily in the best interests of us or other European countries in any event. Many people listening to the debate may feel that some speeches have not necessarily related to where they are. They may feel that the language we use and how we put our points across do not relate to the problems they are facing in their lives. Significant numbers of people have already suffered as a result of what we have been through over the past year or so. Many people have lost their jobs, particularly in the construction industry and manufacturing, and many people are worse off as a result of what has happened, although others are better off financially, as their tracker mortgage payments have decreased. One of the biggest impacts, however, is that the entire community has experienced worry about what lies ahead. People are very fearful about what might be coming. They do not know what is coming, but over the past year they have watched on their television sets what has happened to the casino economy of capitalism, with share prices plummeting and events taking place that nobody in any of the major political parties' leaderships had predicted. As a result, people have been genuinely fearful of what lies ahead, and it has to be said that the political class has not really provided leadership in explaining what is going on. That is because it is difficult to explain, as there are no words of comfort that we can give to people because of the nature of the crisis that we could face. One of the problems with capitalism is that so much of it is to do with confidence. Some people, including some Opposition Members, have said they always thought a recession was coming because the nature of the economic cycle had not changed, but they could not predict when it would come. Often, it is something unpredictable that leads to a complete breakdown in confidence, and then we experience the spiral of the past year, and longer in the United States of America. We face major challenges. There is no doubt that Britain is suffering as a result of events in the world economy, but some of the poorer countries in the world are experiencing much greater pain. We should welcome the fact that the G20 is taking place in London this week. We should also welcome its having been expanded to include 20 countries; it is a step in the right direction that representatives of more major economies are taking part in these discussions. We must also recognise, however, that that still means that many of the major players and peoples of the world are not represented in these discussions by having their leaders there, and also that even countries that are represented are very much represented by political elites that have bought into the systems that have led to the situation we are now in. Many people simply feel that their voice is not being heard, and it is incumbent on us to look for ways to provide political representation for those people. I say that particularly for Labour Members, because in my view one of the reasons why we have got ourselves into this situation is that the financial and economic system has given little attention to the long-term issues that people face. Far too many short-term decisions have been taken that are about the interests of an individual, company or corporation making money, rather than the long-term interests of the majority of the people in this country. Speaking as someone involved in the left of the Labour party, one of my frustrations is that we will have to relearn lessons that we have learned previously. A number of Members have referred to what happened in the 1930s, but what was very clear then was that it is not inevitable that capitalism will continue to produce and to grow, and to work in a stable way. It is part of the nature of capitalism that there is a boom and bust economy. The types of regulations that were brought in after the crash have been dismantled over the past 30 or 40 years, with the support of all the major parties including the nationalist parties in this place. I say that as a Member who represents a Scottish constituency. Those of us who remember the Thatcher and Major Governments will recall how they dismantled—the Major Government less so—many parts of financial sector regulation and will be painfully aware that our own Government have not been strong enough to take on the interests of big business and capital. That is part of the reason why we are in this situation. We have to recognise and be very aware of the role of practices such as short selling and of the fact that although the Government promised us last October that regulation would be brought in for the banking sector, we are still not having a real debate about what that regulation should be and about the actual detail. We have to recognise that over the past 30 years the gap between the richest and the poorest in this country has increased, and decisions have been made without taking into account the long-term interests of the people. Even in the past year, when we have been facing this crisis, we have still been far too soft, particularly on the banks and on big business. We are reaching the point where we have a UK banking liability that is four and a half times our gross domestic product, so we have to consider what my hon. Friend the Member for Nottingham, South (Alan Simpson) and other hon. Members have said about the fact that the British state is not big enough to provide insurance for the whole banking sector, and look at the different forms of liability, be they retail liability or speculation. We have to say that if British taxpayers' money is going into the banking system, we must control the decisions that the banks concerned are taking. People talk about the nationalisation of the banks, but in reality most of the money that has gone into the British banking sector has not gone into it in a way that could be considered nationalisation, because we have not got control over the banking decisions that are being made. One can quite understand that issue from the banks' point of view, because a conflict of interest is involved, as a number of hon. Members have mentioned. The banks obviously want to protect their capital and to make sure that they maintain their reserves, because they are worried about their own futures, whereas British taxpayers, whom we all represent—they come to our surgeries—think that if they are putting their money into the banks, that should be passed on and Government policy should be, as is generally agreed throughout the House, that the banks lend that money on to small businesses. I reiterate the point made by a number of hon. Members, including my right hon. Friend the Member for Stirling (Mrs. McGuire), that there is massive frustration that despite our having put so much money into the banks and despite so many helpful Government initiatives, those initiatives are not coming through at the grass roots, businesses up and down the country are not getting credit and that is having a massive impact on the people whom we represent. I ask the Minister to respond to my points at the end of the debate, particularly in respect of how we ensure that the initiatives that have been introduced bear fruit.