I thank my right hon. Friend for that reply. Given the amount of toxic debt in the system, will he consider creating a public-private investment fund, designed to remove toxic debt from financial institutions' balance sheets? Or perhaps he favours the Credit Suisse model of banks creating internal hedge funds in which they put their toxic debts to pay directors' bonuses.
My hon. Friend is right that different solutions are being developed across the world to deal with the basic problem, which is that far too many banks have assets that either turn bad or have clearly reduced in value because of the economic downturn.
The new United States Administration have proposed the first suggestion that my hon. Friend made—a joint venture by Government and the private sector—although the details have still to be worked up. I said on
The main problem, as I said in reply to Dr. Cable, is that we need to get banks to realise and disclose the extent of the liabilities as soon as possible. Until that uncertainty comes out of the system, banks will continue to be reluctant to lend to each other and to their customers, not only here but throughout the world.
The proper test of the effectiveness of the recapitalisation scheme is the willingness of the banks to continue viable lending. Unfortunately, the failure of that willingness has led to a viable, profitable, long-term and well respected company in my constituency having to declare 1,000 job losses, 400 in my constituency and in that of the Health Secretary. That is a failure of the recapitalisation regime, of the credit guarantee regime and of the Treasury, in not intervening. Will the Chancellor undertake now to intervene in the case of the finance company Cattles, to ensure that the credit guarantee scheme underpins it?
There are two issues there. First, I do not agree with the right hon. Gentleman in relation to the recapitalisation scheme that I announced in October. It was there primarily to stop the banking system collapsing. That was the scheme's purpose, and it was supported by all parties in the House at the time. I appreciate that since then it has been convenient for his party to run away from that, but that is why the scheme was there. In relation to his general point about lending, he is right that the crucial thing is for us to try to get lending going as quickly as possible. The recapitalisation was of course necessary, because if there were no banks, there could not be any lending. That was the first stage. The measures that I announced in January are designed to do more to get lending going.
In relation to Cattles, I am aware of the problem, which has been raised with me by other hon. Members in the House. In relation to the credit guarantee scheme, that is available to banks. That is what it was set up for and it has been run by the Bank of England. I am aware of the Cattle scheme and I will continue to keep the House informed on it.
Is my right hon. Friend aware that when the Conservative party was in power, unemployment in my constituency was 20 per cent.? Today it is less than 3 per cent. During that time we were told that high unemployment was a price worth paying and that if it was not hurting, it was not working. Is it not the case that today we are trying to prevent that scenario?
My hon. Friend is quite right. Yesterday's unemployment figures surely demonstrate the need to do more, not less, to help people who lose their jobs. The lesson from the 1980s is that the Government waited almost two years before they started to introduce any help, and most of that help was aimed at people who had been out of the labour market for some considerable time. As a result of that delay and doing nothing at that time, a whole generation of people was written off, and many of them never went back to work again. My hon. Friend and, I suspect, hon. Members in most parts of the House will have personal experience of knowing people who were in precisely that position.
That is one of the reasons we set up Jobcentre Plus. We set it up in the good times, when unemployment was falling rapidly. We have given Jobcentre Plus more resources, in order to help people. Even today, the majority of people get back into work within six months of losing their jobs. We will continue to ensure that we put more money into the system to help people get back into work. There are nearly 500,000 vacancies in the economy. There are jobs; it is our job to match people up as soon as we can, preferably before they leave employment, in the event of being made redundant, and help them get back into work as quickly as possible. That is another example of where the Government can make a difference for the good.
A moment ago the Chancellor told my right hon. Friend David Davis that the primary purpose of the bank bail-out was to prop up the banks, but that is not how he described it when he made the announcement last October. He defined the criterion by which the effectiveness of that intervention was to be measured in these words:
"The purpose of these proposals is to get lending started again and to get the economy moving forward."—[ Hansard, 8 October 2008; Vol. 480, c. 280.]
Since then, survey after survey has shown that lending has dried up, and the published data show that the economy is shrinking. In the Chancellor's own definition, has the bail-out not been a failure?
No, and the hon. Gentleman well knows that what he is saying is absolute nonsense. The primary purpose of our intervention last October was to stop the banking system collapsing. Indeed, that is why he and his hon. Friends on the Front Bench supported us, so it is no good their now saying that they were not in favour of it and would have done something different. Of course, if there are no banks in the first place, there will be no lending, so propping them up was a precondition of getting lending going again. That is no more than a statement of the obvious.
Since that time, there has been a substantial downturn of economies, not just here but in every country in the world. We can see that in all the forecasts and in all the figures that we know about at the present time. That is all the more reason for us to ensure that we get lending going again and help to fill the gap that has been left by foreign banks withdrawing from lending, not only in this country but in other parts of the world. It is also all the more reason for the Government to step in to help to support businesses and families.
That approach is supported right across the world, and the Conservatives are virtually isolated as far as that is concerned. It has been backed by the independent Institute for Fiscal Studies—which is often favourably cited by the Conservatives when it suits them—and, even yesterday, the Bank of England's inflation report made the case that if Government support comes through, it will make a substantial difference to the position that would otherwise be the case. We are clear that supporting the banks and supporting our economy are absolutely essential, and I am sorry that the Conservative party cannot bring itself to give that support, because it is pretty essential for the future of our country.