The Economy

Part of Council Tax Rebate – in the House of Commons at 7:12 pm on 31st March 2009.

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Photo of Michael Meacher Michael Meacher Labour, Oldham West and Royton 7:12 pm, 31st March 2009

I accept that quantitative easing has not had a chance to be developed; it was put into operation only a few weeks ago. The Government put £75 billion in and still hold another £75 billion in reserve. We cannot reach a judgment on that. There are very good reasons for thinking that its effect will be rather limited and nothing like enough to restore lending to the levels of one or two years ago. That is the problem.

Even when the Government hold a majority of the equity, as they do in RBS, they are still allowing bailed-out banks, in effect, to dictate the terms. As part of the bail-out, RBS agreed to increase lending to £25 billion—a mere 3 per cent. of its total lending to non-bank customers. President Obama sacked the chief executive of General Motors as a condition of the company's receiving greater aid, but nothing has been done in this country to remove failed or discredited bank executives.

While the US Congress capped executive pay and imposed a 90 per cent. tax on bonuses, the Government's latest quango, United Kingdom Financial Investments Ltd, is pussyfooting around the bonus culture and the continuing scandal of the massive use of tax havens by bailed-out banks. There is a great danger that UKFI could be captured by the banks it is supposed to be disciplining.

The Government have socialised the banks' losses while continuing to privatise their control. That is the essence of the point, and Dr. Cable made it. The only way to stop this haemorrhaging of the nation's finances is to take temporary—temporary—control of the banks that either cannot or will not increase lending on anything like the scale required to halt the unfolding collapse of the economy. Toxic assets that are virtually worthless should be sold or written off; they certainly should not be underwritten by colossal amounts of taxpayers' money. Boards of directors guilty of gross mismanagement should be removed, and replaced by new managers with a different system of governance and a different set of goals. The new boards, with the security of the backing of the state behind them, should give absolute priority to restoring, as nearly as possible, the full 2007 level of lending to businesses and home owners.

I repeat: that is not an ideological stance. Nobody is proposing public ownership for its own sake—I am certainly not. It is simply a common-sense, temporary mechanism.

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