The Economy

The hon. Member for Birmingham, Hall Green (Mr Godsiff) suggests that RBS should be made into a national investment bank and that it would then be our saviour. I wonder whether he watched a programme on BBC2 yesterday, which relayed the entire history of how it cost the nation £20 billion. I am not sure it is an entirely good model, therefore. First, I want to say a few words about what is happening in Europe this week. An express train is coming in our direction in the shape of the putative agreement between the Chancellor of Germany and the President of France. The shadow Chancellor said we should learn the lessons of history. Well, I have been reading about the congress of Vienna, and it is extraordinary how history repeats itself. Our whole national policy in those days—and for 300 years—was to prevent an agglomeration of power on the continent. Indeed, Napoleon created the continental system precisely to exclude us from the continent. That is why we fought so many wars over the centuries. We are now faced with a worrying situation. If the eurozone creates fiscal and monetary union, we will, of course, voluntarily exclude ourselves from that. However, although we may exclude ourselves from the euro, because of qualified majority voting the eurozone countries will have not just influence but enormous power over our financial institutions. We should be extremely worried about that. Over the next few days the Prime Minister must ensure that we have real protection from what will be going on. There has been much comment about the EU financial transaction tax. We may be able to refuse to implement it, or be given an opt-out. I certainly hope that that is the case, because the City of London is the global derivatives trading centre. Astonishingly, it accounts for 45% of all global trades in interest-rate derivatives, and this tax could cost us £26 billion. Vague reassurances are not enough. The ex-head of the Financial Services Authority has recently said that between 80% and 90% of our prudential rule book originates from Europe. In 2010-11, the FSA has listed 29 financial regulations that come from Europe. All this is coming in our direction because the eurozone countries can muster 230 votes, and we will have no way of stopping it. We should be prepared to say no or to demand a treaty reassurance, and if necessary put any proposal to the British people in a referendum. Turning away from Europe, I want now to talk about our woeful economic situation. It is in the interests of both parties to claim that the deficit reduction programme is tough and is hurting. It is in the interests of the Government because it shows that they are being prudent and implementing austerity measures, and it is in the interests of the Labour party because it is arguing that we are deepening the recession. In fact, however, we are not doing nearly enough to address the problems we face. Some 38% of all our output goes to Government. That is a higher proportion than in the USA, Canada or Australia. Contrary to what we have heard, many EU countries have a lower tax burden than ours.