Amendment of the Law

Part of the debate – in the House of Commons at 3:35 pm on 23rd April 2009.

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Photo of Michael Fallon Michael Fallon Chair, Treasury Sub-Committee 3:35 pm, 23rd April 2009

I remind the House of my interests recorded in the register.

This year's Budget had to meet three crucial tests: to focus real help on those hardest hit by the recession; to start to rebalance our economy and put it back on a path towards sustainable growth; and, of course, to put the public finances back under control. Some of the Budget's measures to give real help to the hardest hit are welcome, particularly those to help people back into the labour market as quickly as possible. However, I do not think that the Minister needs reminding that what really matters is that help is real—not just announced, packaged and put up on a website, but working on the ground and getting through in our constituencies.

The two groups who obviously need help are home owners, as Laura Moffatt said, and small businesses. Home owners who may be facing redundancy, through no fault of their own, are still unable to access the help that the Government announced on 3 December—four months ago—and then re-announced earlier this week. It is still not clear exactly who will be eligible or which banks and building societies are participating. That delay has been scandalous because people being made redundant now are already falling behind with their payments.

Let me give an example from my constituency. A couple living in a village close to mine have both been made redundant—the husband in September and his wife at the end of January. She has been able to find a small part-time job, but because they have some savings they are being told by their lender that they are not entitled to anything more than a three-month payment holiday. I quote:

"In fact we have been advised by several people that NOT ONE of the banks/mortgage companies that have 'signed up' to the scheme have helped anyone. In fact one broker was informed by the Halifax that they would only give mortgage holidays to people who were going on holiday as they had a job!"

It is time that we got this scheme actually working rather than constantly being re-announced. I hope that the Minister will inform me exactly which lenders are participating and what the qualifying criteria are.

Small businesses in my constituency are so confused about the various schemes that have been announced that they are writing to me, here in the House, asking that I write on their behalf to the banks or to Ministers to sort things out. The good news is that when I do get involved, I generally find that the banks respond quite well. However, local branch managers do not seem to be fully aware of how the schemes should operate, so the help is not getting directly through to the companies that need it most.

I hope that the Minister winding up the debate will assure us that all the schemes that have been announced are now working—including the working capital scheme, which does not seem to be working at all—and yielding results in our constituencies. It is essential that, as the pain continues this year, we try to protect the two groups I have mentioned.

Secondly, the Budget was an opportunity to begin to rebalance our economy. If we have learned anything over the past 10 years, it is that it is not enough to depend on a highly leveraged financial sector, an over-extended private housing market and an ever-expanding public sector. That simply does not give us the investment that we need in new industries or the all-round performance that we need as one of the world's larger economies.

Roughly every year, I ask the Library to rank our country's gross domestic product per head against all 50 American states. Over the past six or seven years, the answer, surprising as it might be, has been about the same. This country now ranks 45th, coming ahead of only Mississippi, Arkansas, West Virginia, Idaho and South Carolina. On GDP per head measured in purchasing parity terms, this country is actually poorer than Oklahoma, which is some achievement after 10 years of ever-increasing public expenditure and the so-called investment strategy of this Government.

Why is that? It is because the three sectors that I mentioned—the highly leveraged financial sector, the overheated housing market and the ever-expanding public sector—have all been fuelled in exactly the same way: by debt and excessive borrowing. The levels of borrowing are simply unsustainable, as we have seen in the banking crisis, and are beginning to unwind, and as they do so we begin to see the damage that has been caused by our overdependence on those three sectors. We see how reliance on debt and leverage has crowded out investment, equity and savings as a basis for the commercial markets, and how our obsession with driving up home ownership even among those who could not afford it—we have all been guilty of that—has crowded out the development of a broader rental market. We have seen how the inflation of the public sector has caused growing resentment among those who are not entitled to the special working practices, protected pensions or early retirement enjoyed by those in the public sector.

I would have liked this Budget to encourage other things. For example, I would have liked it to encourage equity rather than debt and to look again at how we can back early years funding for the new companies to which Mr. Betts referred. This country is not as good at that as the United States. We need to look again at venture capital trusts and how they can be developed, for example by allowing them to invest in secondary markets, as the London Stock Exchange suggested in its Budget submission. Of course, we need to look again at having more and better applied industry-driven research to turn a handful of clusters into serious, knowledge-driven business communities, as has been done much more successfully in the valleys of California and elsewhere.

Thirdly and finally, as my hon. Friend the shadow Chancellor and others have said, this Budget has failed to get the public finances back under control. The deficit that has been announced for the next two or three years is of course appalling, but it is important to understand that a large part of it is structural and has nothing to do with the huge sums that have been put aside to bail out the banks, or the way in which stabilisers kick in and welfare rolls grow during the recession. We have inherited that structural deficit from the boom years.