Financial Markets

Part of Opposition Day – in the House of Commons at 8:04 pm on 5th November 1987.

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Photo of John Reid John Reid , Motherwell North 8:04 pm, 5th November 1987

I echo the congratulations offered by my hon. Friends to the hon. Member for Boothferry (Mr. Davis) on his maiden speech. I am sure that he will deliver many more interesting speeches. I would be less than truthful to the House if I did not say that my admiration for that speech was enhanced because, due to Committee work, I heard only one other speech in the debate—the speech by the Chancellor. After that speech it was almost inevitable that the maiden speech by the hon. Member for Boothferry should be received in glowing terms.

I listened to the Chancellor in amusement and amazement. It put me in mind of the famous last words of Douglas Fairbanks senior. Before he died he said, "I never felt better in my life." The whole of the Chancellor's speech was complacent, and either he does not or he will not understand the threat of the crisis in the City. I agree with the right hon. Member for Guildford (Mr. Howell) who said that the financial catastrophe might hit us again and that we could not just sit around and wait. The problem facing the right hon. Member for Guildford is that that is exactly the Chancellor's policy. Is it any wonder that Sir Nicholas Goodison, the chairman of the stock exchange, said last night at a dinner which the Chancellor attended: the fall in share prices over the last three weeks demonstrated a massive loss of confidence in the judgment of the world's political leaders. To whom do the Treasury Ministers think Sir Nicholas Goodison was speaking? Was he speaking about the leadership in the Soviet Union, or China or Taiwan or was he—as he must have been—speaking about the Tory leadership of the seven major industrial powers of the Western world?

I suppose that we should be thankful for small mercies, because the Chancellor has moved somewhat in the last week. When the crisis started a week ago, the Chancellor argued that the stock exchange was acting in "an absurd way" and that it would not affect the real economy. He has now had to admit that the collapse in share prices and the events in America are likely to have a recessionary impact on the economy. It is all the more puzzling that, even though he has moved that distance, he still retains a policy of doing absolutely nothing.

We know that the Government have a 4 per cent. growth rate this year and they say that next year it will be only 2·5 per cent. We know that the inflation rate this year is 4 per cent. Next year it will go up to 4·5 per cent. For nationalised industries, it will probably be 6·5 per cent. and in the housing sector it will be 7 per cent. The Government admit that the trading deficit will be worse next year—up to £9 billion for manufactured trade goods.

There is fear of a fall in growth and an increase in recession, the threat of an American spin-off in the recession and fear of increased unemployment. In that situation, is it not amazing that the Chancellor is without policies? I was tempted to use the simile, "the king with no clothes" but I thought that the image might horrify the House. The Chancellor has no international policy because he will not take a lead in calling a meeting of the major industrialised countries. He has no national policy because he will not take the precautionary or preventive measures that are necessary to protect and to raise public investment.

My right hon. and learned Friend the Member for Monklands, East (Mr. Smith) and my other hon. Friends have outlined an alternative. We have called for regulation of the financial markets and for international action. We have also called for a further fall in interest rates and for an injection of public investment into the British economy to prevent a downturn and further unemployment. That is the way to match economic sense and social conscience. I shall dwell on that for a moment, because under the Government those things have been separated and remain poles apart. In one compartment there are the economics of the mad house as they are so often called, and the other compartment contains the philosophy of the poor house which governs the social reality and the social policies of the Government.

Conservative Members have confined the debate to the City of London as though it sits in a little crystal glass unrelated to the outside world. The right hon. Member for Worthing (Mr. Higgins) asked that we link the financial and industrial sectors and that we link the debate to the realities of the real economy. We should also link the debate to the realities of the real world, not only the economic realities but the social realities. If we do that, we shall find that the contrast between the Government's treatment of certain sectors becomes all the more stark.

I am not surprised that the Government want to keep their colleagues in the City isolated from any outside reality, because the Government are the party of the City, are paid by the City and are driven by the City, for the City. The past week has illustrated just how far that bias has gone. We have seen the Government running around trying to stop City investors losing their proverbial shirts. The BP share issue proved that, despite all the proclamations of adherence to free market economics, the Government are prepared to intervene in the economy. They are prepared to intervene to avoid hardship and poverty, but tragically only when it is hardship and poverty affecting their friends in the City.

When was the panic when those on the poverty line increased to 18 million? When was the House greeted with hushed statements when the number of people on supplementary benefit increased by 119 per cent. under the Government? When was the midnight oil last burnt by civil servants in Whitehall or the Treasury poring over a solution to the 3·5 million unemployed? When were civil servants paid overtime to work through the night to find a solution to the problem of the 1,200 Caterpillar workers in my constituency who tomorrow will probably lose their jobs?

There was no panic, no statements and no burning of the midnight oil over those issues. For eight years the Government have shown an indifference to growing impoverishment and increasing deprivation among millions. However, they went scuttling back to their drawing board when their City friends faced the grim prospect of having to sell one of their Picassos, while the really deserving people do not have Picassos to sell. They do not have millions to shuffle between frontiers. They do not take their savings bank deposits and deposit them in South Africa because it will earn an extra 0·5 per cent. interest there since that country is guarded by guard dogs and barbed wire. That is the real scandal of the financial crisis.

There used to be a saying that God helps those who help themselves. We should rephrase that. This Government help those who help themselves. They help those who help themselves to the rich pickings of privatisation at the taxpayers' expense. Having helped themselves, those poor Oliver Twists of the City time after time come running back with their big begging bowls demanding ever more. The big, bumbling beadle of a Chancellor is ready to dollop out ever more of the taxpayers' money to bale out those poor Oliver Twists.

That philosophy has never been better illustrated than by the conflicting actions of Government Departments last week. While officers in the Treasury were working their shirts off to save the investments of the rich, the Government were presiding over more than half a million householders who pay tax on incomes below the poverty line. There are three times more on the poverty line than when the Government took office. While the Treasury mandarins worked late into the night to hatch a cunning, expensive plan to bale out the Government's City friends, just down the road their colleagues in the Department of Health and Social Security were beavering away just as hard in an attempt to freeze and eventually to abolish child benefits, despite the fact that 4 million children are now in poverty. While those Treasury mandarins did their utmost to protect the institutions that underwrote the privatisations, they could not find it in their hearts or in their heads to devise a scheme to help those 4 million children in poverty.

When it comes down to it, the City is the friend of the Chancellor. The Chancellor, in an astonishing statement today, said that when he used the word "poppycock" last week he was referring to some of the brokers in the City, yet last night he sung their praises. The peddlers of poppycock of last week have become the cockleshell heroes of last night. For the Tory Government, I suppose that that is how it should be.

The basis of a strong economy is not how loud the Chancellor can shout about cuts in public spending or how often he can lecture the United States on economics; it is the sensitivity of the Government's fiscal policy. By that standard, their record has been one of unmitigated failure. They have shown no sense in their approach to our national assets. They have undervalued them by £2·6 billion so that they could be sold off painlessly to the lucky few. They have shown no sensitivity because, at the same time as they helped investors and their friends in the City, they have abolished the maternity grant and the death grant, income support for young people is being cut by about £6 per week and those who look after elderly or sick relatives will lose their long-term rate of benefit, and will not receive a premium to compensate.

It is difficult to believe that the Chancellor could come to the House full to the brim with self-satisfaction and smug to the point of overflowing when so many people lack the ability to feed their families, to care for their elderly dependants and to educate their children to a standard that one would expect in a civilised country.

Regardless of what the Chancellor claimed this week, the economy is not strong because no country is strong unless it can protect its weak and its most vulnerable. The Government have deliberately followed policies that have hurt individuals but helped big City institutions They have made millions suffer while a prosperous few have made millions. Now that the Government Benches have some knowledge of the poverty and hardship faced by those outside the City of London in my constituency and the constituencies of other hon. Members, we demand that the Chancellor withdraw the absurd comments he made on Tuesday about the unsoundness of the policies that the Government have been following. He ought to have the guts and the sense to admit the nonsense that he has been speaking and the insensitivity of those policies, and support the Opposition motion.