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AMENDMENT OF THE LAW

My impression of the Budget is overwhelmingly one of boredom. It was illuminating to look around the Chamber and see the number of people who were nodding off. It was predicted that it would be a boring Budget, and it most certainly was. It will probably be remembered as the carrier bag Budget, rather than as any other kind of Budget. If that is to be the Chancellor’s main claim to fame, I suspect that he will not be in his job for very long. It was striking that in the midst of the anodyne messages that the Chancellor poured out in order to send us all to sleep there was little reference to Northern Rock and the issues that it has created for the British economy, and little reference to the problem that the world economy faces. I sincerely hope that we are not facing the sort of economic downturn that I remember from 1974, when the stock market fell to some 120 points, which seems unbelievable in this day and age. It may seem odd for a Conservative to quote JK Galbraith, but a close analysis of his book on the great crash of 1929 shows the similarities between the situation that the world economy is facing, and the factors that contributed so greatly to the world crash in ’29. That crash was based on pyramid selling of investment trusts, and we now face the prospect of pyramid selling of derivatives in an attempt to defy risk, but of course when one attempts to defy risk, it is spread more widely. When risk finally comes into the equation—as it inevitably does, because nothing is risk free—the potential for collapse is much more calamitous. We are on the cusp of witnessing such a collapse as the various derivatives that have been developed in the past few years unwind through the system. My understanding is that banks across the world have lost 10 per cent. of their capital base. It is an indication of the severity of the problem that the central banks have fed so much money into the system, just a few months after they last did so. The expectation is that for some weeks, or perhaps months, there may be some loosening in the international credit market, but as the underlying problems are severe, and as unwinding has not yet been completed, we are seeing the same situation being created for a third time in a year. If we prop up a market that is in denial about risk, those concerned will not learn their lesson, and the same pattern of behaviour will be repeated. However, if they are allowed to confront their actions and take responsibility for them, we will see the sort of scenario that we saw in 1929. I should say that I did not see what happened in 1929; I read about it. However, I did witness the crunch in 1974, and that was fingertip.