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HM Treasury

The hon. Gentleman tempts me into a debate that is for another day, but I hope I have made my views clear. I welcome the comments of the hon. Member for Wellingborough (Mr. Bone). I do not agree with everything he said, and he would not expect me to, but his most important point was that this is the first opportunity that Back Benchers such as myself have had to say anything about the biggest international and national crisis that the House has had to cope with for many a long year, and that a debate such as this is an inadequate vehicle for that purpose. I would go further: I have said more than once how badly the House deals with matters of supply, which some would say is our prime purpose. It is why we are sent to this House, yet we are unable properly to scrutinise Government expenditure. I suppose that we do a reasonable job of scrutinising the raising of revenue, but expenditure is largely a matter of the House rubber-stamping estimates during wholly inadequately estimates day debates. If the House is serious about holding the Government to account for the vast amount of taxpayers' money that they spend, it needs to consider major reform of that procedure. As the hon. Member for Broxbourne said, it is extraordinary that so few right hon. and hon. Members have felt it appropriate to come to debate the spending of £42 billion. They will come and debate other things, but £42 billion? ““Oh, well, that's nothing important, is it? That's not why we're sent to Parliament. We've got far more important things to do.”” Well, I disagree; I think it is exactly why we are here. Various hon. Members have mentioned the difference between how we debate these matters and the American system. There is much to criticise about American governmental and administrative structures, but it is entirely misplaced to argue, as some have, that it was wrong for the House of Representatives to debate at length and in detail the package that was put to it a week or two ago. Whether or not we agree with the views expressed, it gave those representatives the opportunity to express the views of their constituents, which are easy to forget in the desire to establish consensus. That is not an unreasonable or incorrect impulse, but there seems to be a desire to demonstrate how clever we all are about matters economic and financial. I am certainly not clever about them. My hon. Friend the Member for Twickenham (Dr. Cable) is, which is why I trust implicitly the views he has expressed in recent weeks. I claim no expertise, but I do claim a right to speak up for my constituents and discuss the concerns that they have expressed to me. I shall therefore talk about those concerns. I am not against the step that we have reluctantly taken to recapitalise the banks through the mechanism that has been set up. It raises enormous questions, of course, and at one stage I was worried that there would be an almost free injection of cash into the banking sector. I could not have countenanced that without at least some return for the taxpayer. I am satisfied that that is at least partly covered in the Government's proposals, but the people in our communities who examine what the House and the Government are doing have real concerns that have perhaps not yet been satisfactorily met. Our constituents have suspended disbelief at the moment. They accept that there is an enormous crisis. It was often referred to last week as ““staring into the abyss””, but a more apt metaphor would be the mediaeval maps of the world on which there would be a vague bit around the edge, where would be written ““Here be dragons””. Nobody knew quite what would happen if they sailed off the known world into the areas where the dragons were assumed to lie in wait. We do not even know the nature of the dragons, but it was an extremely scary place to be. I hope that what has happened in the past week or so, in this country and internationally, will have allayed some fears and staved off some of the dangers, but there is still genuine concern. I think that people are beginning to realise just how important the whole process has become to their real lives and the real economy. The interconnection was not immediately apparent. People in Somerset do not lie awake worrying about merchant bankers. If the merchant banking system were to crash suddenly, it would not cause many tears among my constituents until they realised the consequences for real jobs and businesses and real people's private finances. I received a tragic letter from a constituent about events a long way away, in the United States. Sometimes we wonder whether we worry unduly about events in the economy and politics of the US, but the letter was from a 94-year-old lady in a nursing home, all of whose savings had been invested without her positive agreement—it was done by one of those advisers who manage such things—in Lehman Brothers. When she wrote to me, she had no idea whether she had anything at all left to ensure that she would be looked after in her old age. That shows the real interconnection between events that may seem distant but actually have direct consequences in our communities. The big question that my constituents and, I am sure, those of other hon. Members are asking is where the conditionality is. They say, ““We are putting into play vast amounts of our money, so what do we get out of it, other than stability?”” Stability is a perfectly good end in itself, but what else do they get? One issue that has been raised with me many times is the culpability of those who took risks and played fast and loose, and whether there will be a degree of retribution. Will those people get their come-uppance? It is unfortunate to use another north American example, but when the chief executive officer of Lehman Brothers was before a congressional committee, he was taxed on why he was walking away from the crash with—what was it?—$500 million. People do not understand why somebody who appears to have been criminally irresponsible with their money gets to keep $500 million. That sticks in the craw of many people in this country; they do not like the idea of a one-way bet. They do not like the idea that someone can win only if they have the money to pay the entrance fee to these casinos that we call the City, because if they find themselves losing, somebody else pays the bill. The view that this is a one-way bet whereby people can only win and cannot lose offends not only the Chapel sensitivities of people in Somerset but ordinary British people, and we must be careful not to create that impression. People are worried about the vulnerability of the money that is being invested by the Government. They want to know that it is not simply being poured down the drain and that there will be a return on the investment. I look at what is proposed, but I am not sufficiently expert to be convinced that there is a lock on those investments that will ensure a return for the taxpayer—I hope that there is. Most people have to accept at face value the assurances that they are given, but, not too far away, there will be a reckoning when we will see whether there is such a return. People want to see equity between different interests and between different sectors, because it cannot be right that the Government are interested, for strategic reasons, in propping up only one industry and will allow others to fall. That takes us into tremendous conundrums of national policy: are we then to intervene in every failing company in every failing sector, or are some sectors considered more equal than others? I do not know the answer to that, but I know that the question will be asked. There have been recent company failures in my constituency. Usually the companies involved are not household names. They are not big companies that attract the headlines, but for the people who find themselves redundant as a result of such failures, it is every bit as important as the collapse of some big name in the City. That brings me to my next concern. Unemployment is rising, and we have explored that over the past couple of days. I remember when I was first elected, the town of Frome, which I have represented for nearly 25 years in one capacity or another, had a 17 per cent. unemployment rate—it was crippling. The town was in deep and long-term recession. Over recent years, the town has been blessed with almost zero unemployment—almost full employment. It has been very good for the town. There have been hiccups along the way: companies such as Cuprinol and Coloroll, the carpet company, both of which people will have heard of, lost their way, but we recovered from that because the underlying local economy has been strong. Now, unemployment is creeping up again. Although the increase is not huge in empirical terms, in proportional terms we are talking about quite a high percentage. What worries people in rural areas—areas off the main communications system—is how we win those jobs back in a competitive environment if there is a national recession. I am not satisfied that we have right even the basics for dealing with failing companies. Only this Saturday, a gentleman who had just been made unemployed—along with a number of his colleagues—came to my constituency surgery. He had not been paid his last month's wages, but the company was carrying on trading. It was doing so despite failing to pay these employees for their last month—they were owed that money. That is not a unique experience, but it is wrong; it is robbery and theft from the people who can least afford it, and I object to it. We talk a lot about the need to refloat the business economy, particularly small and medium-sized businesses, which are so dependent on bank loans in order to maintain their business. I have yet to see clearly that the steps that have been taken have had the desired effect, although I have faith that they will do so. A big risk is involved over the next few months. I supported the Bank rate reduction, and my hon. Friend the Member for Twickenham had called for it, although he would perhaps have preferred a slightly more aggressive reduction. However, if it is not even passed on to those who have loans with a bank in Government ownership, why should we trust that other banks will pass it on? What mechanism is in place to ensure that banks make business loans both available and affordable, rather than merely to exhort them to do so? Housing and household repossessions also need to be addressed. The biggest growth industry in Somerset is in the courts dealing with repossession orders: there are not enough people to hear the repossession cases in order to clear the backlog, and the position is worrying. I have been warning for many years about the situation in my constituency, which has one of the country's highest ratios between average house price and average earnings. The fact that people are paying such large multiples of their average wage to keep a roof over their head is unsustainable—indeed, many people cannot have a roof over their head, at least not in the village or small town in which they were brought up. Foreclosures are now occurring, and it is not clear to me that what the Government are proposing and what we are being asked to support will reduce them. Measures could be taken to do so: we could offer to take equity in houses in order to keep people in possession of their own homes. There are ways that the banks, building societies and others could make a real difference, but it is not clear that such measures are included in the proposals before us. Mention has been made of local government and the difficult position that so many councils face in respect of their investments in Iceland. I looked at the list of such councils, and I could see no discernible political difference between the councils that had invested in Icelandic banks and those that had not done so. Many of the local authorities involved are considered to be the most astute in the country at financial management, so something has gone wrong with the advice they were given. I find it difficult to blame councillors of any political persuasion on this matter, unless I have evidence that they acted rashly. I suspect that most councillors will have had no part in the decision-making process. When I led a council, we were given regular reports on the investments of our pension fund, but they were in generic terms; such reports dealt with the sectors rather than the day-to-day management of investments. I would be worried if elected members had direct control of the route by which investments were made. Although I do not attach blame directly to councillors—or even to councils, provided that they were shown to have taken proper precautions—we must do something to get the assets back. It is very important to get those assets back, despite the fact that, compared with the turnover of the councils, the investments are relatively small. The figures sound huge when they are quoted down the pub, but they are only a small part of the annual spend of large county authorities. However, the sums are significant and need to be returned. The Government and the Local Government Association—and anybody else who can help—need to be fully engaged in ensuring the return of those assets, because if they are not returned, the money cannot be used for investment in the local community, be that in the direct provision of services or in long-term capital investment and so on. Thus, the return of those assets is an imperative.