Subject to the views of the electorate of Holborn and St. Pancras, it is not my intention not to be here after the general election, but I wish to pay tribute to the two veteran Members whom we have just heard. However, I will not attempt to follow them because I welcome the Budget statement and the Government's and the Chancellor's refusal to listen to the siren voices who demand cuts before the recovery from the recession is well under way. My view is that we will need to be fairly careful about cuts in public spending and public investment even when the recovery is well under way. The definition of a recession, in many ways, is that the economy is working below its maximum, and the best way to deal with deficits, debts and practically every imaginable problem is to get that economy back to working at its maximum as soon as possible. Slashing investment stifles growth; it does not encourage it.
I was not surprised-but it was saddening-to hear the shadow Business Secretary harking back to the days of Mrs. Thatcher, on the basis that, if it is not hurting, it is not working. He gave the impression that her policies of slashing public services promoted economic growth, but nothing could be further from the truth. Average annual economic growth under Mrs. Thatcher was lower than the average under the preceding Wilson and Callaghan Governments. Things went down, not up, as a result of those policies. We also had massive inflation during that time. The lowest inflation under Mrs. Thatcher in a year was 3.4 per cent., and it averaged 7 per cent. It was all kept afloat with takings from the North sea and privatisation, and that money was squandered: it was not invested in industry-there was not a British sovereign investment fund-research or training. However, some of the decisions that the Chancellor has made in the Budget mean that there will be investment in industry, research and even more in training.
We must remember that the biggest beneficiaries of the economic policies of the Thatcher Government were the finance industry and the speculators-the speculators who have been ruining the world economy for donkey's years now, whipping up and down the world price of oil and gas. There can be no rational justification for the price of a barrel of oil falling from $140 to $80 in the space of a fortnight-that is speculation and nothing else. There was also speculation in the price of wheat and rice. When I was in Bangladesh, I asked a rice farmer whether the price he was paid for his rice had quadrupled in the previous year, but he had not seen a penny of that. Price changes took place partly on the American markets. There are also the speculators in currencies.
The changes and relaxations introduced under Mrs. Thatcher contributed to-I do not say that they brought it about-the banking crisis, and the banking crisis has undoubtedly caused most of the deficit, directly as a result of the taxpayer having to provide bail-out funds to some of the banks that were going broke and to give guarantees to others to prevent them from going broke. The banking crisis has indirectly caused the recession, and the recession has caused the fall in output and tax take and led to more benefits being paid out. We do not need to stop investing; we need more investment to counter the downturn and to get back to maximising output. When someone loses their job, we all lose out: we lose the goods or services that they were producing, the tax that they would have paid had they been employed and then there are the benefits that we have to pay out to keep them and their families going. As I understand it, it averages at least £12,000 a year to keep someone out of work-so keeping people out of work adds to the deficit.
The Government's measures have been working. The jobless total is fewer than the wiseacres were predicting; the number of houses repossessed is lower than the level predicted by the wiseacres in the City; and there has been an element of recovery. It has to be said that Britain has led the way. I know it is a commonplace to mock the Prime Minister, but I put more faith in the words of Paul Krugman, who won the Nobel prize for economics for his study of recessions and knows what he is talking about. In response to what the Prime Minister did in the year running up to the G20 summit in London, Krugman said that the Prime Minister had acted with "stunning speed", and had
"defined the character of the worldwide rescue effort, with other wealthy nations playing catch-up", and that he and the Chancellor had displayed a
"combination of clarity and decisiveness" that had not
"been matched by any other Western government".
The Government should not be pushed off course by economists led, for instance, by Howard Davies of the London School of Economics. When the Government nationalised Northern Rock, he gave us the benefit of his view that it would undermine the reputation and standing of the City of London in the eyes of the finance industries in other parts of the world. Get real, Howard! The City and Wall Street have been hoist by their own petard. What they were doing has blown up in their faces.
Let us consider Lehman Brothers, whose auditor was Ernst and Young. Then we are faced with the output of the Ernst and Young ITEM Club, and we are expected to take notice of the predictions and are told that we need to recognise what wonderful people they are. Well, Ernst and Young was an item with Lehman Brothers in the other sense-they formed a couple that could not have been closer as they covered up for one another. And they, of course, were assisted by the noble Linklaters, the City solicitors, which actually provided cover here-cover that even some of the dodgy lawyers on Wall Street had refused to give-for what Lehman Brothers was doing worldwide.
These bankers, their auditors and the ratings agencies caused the banking crisis, and these self-same people are now demanding cuts in investment, while insisting that their bonus culture continue. Bankers apparently need mega-pay and bonuses to compete internationally, but everybody else has to take lower pay and worse working terms and conditions to compete globally. Who are these bankers and auditors and what is their track record? I have checked. Next time someone from KPMG gives us advice on finance, remember that it was supposed to be HBOS's and Bradford & Bingley's auditor. Next time Deloitte sends someone to give advice, remember that it was the auditor for the Royal Bank of Scotland-and a cracking good job it did! PricewaterhouseCoopers was the auditor of Northern Rock, and I have already mentioned Ernst and Young, which allegedly was the auditor of Lehman Brothers.
Let us consider the banks themselves. The shadow Chief Secretary to the Treasury, in a previous debate, quoted the wisdom of somebody from the City Group, but it lost $55 billion. It bought up-or got into bed with-Merrill Lynch, which lost $51 billion. We might get someone from UBS telling us what we ought to be doing about our public services, but it only lost $44 billion. HSBC lost $27 billion; the Royal Bank of Scotland lost $15 billion; and Morgan Stanley and JP Morgan both lost $14 billion, yet we are expected to take notice of them.
Then there are the ratings agencies. They gave triple-A ratings to all the rubbish that brought the international banking system to its knees, and now we have got to listen to them. Are they seriously saying that they believe that a United Kingdom Government would default on their borrowing? If they are not saying that, there is no reason at all why the British Government should have any difficulty getting their bonds on to the market. We have got to take an altogether more rigorous approach. We have got to reach a situation in which the banking industry is working for the rest of us. We can no longer continue with a situation in which the rest of us are working for the worldwide banking industry. We need a yet more radical response than we have had. We have got to end the fail-safe arrangements for the dodgy dealers. There should be no more bailing out of the people who got us into this mess.
I am genuinely fearful that unless we do something about the problem, the democratic institutions that we subscribe to will be in danger. If the people think that their elected representatives cannot protect them from what is happening in this world, while another group of people are still being paid multiples of millions of pounds in bonuses, I do not think that they will tolerate it. They will turn their attentions to those who say, "We can do away with this." If I were running the British National party, I would be delighted with the present situation, with bankers lining their pockets and handbags, and teachers, nurses and firefighters being told that their meagre pensions pose a problem for the economy. Those teachers, nurses, firefighters and others did not get it wrong, but they are being expected to pay the price. The bankers undoubtedly did get it wrong. They are not going to have to pay the price; they are claiming the right still to be paid bonuses. Such a society will not be easy to sustain. Indeed, I think that there will be a threat to our democracy and to this institution unless we do something to change the balance and provide greater protection to ordinary people against the people who speculated us into the mess that we are in now.
I welcome the Budget and the fact that we have not fallen for the silly idea of cutting investment before the recovery is well under way. However, we shall have to be careful about making cuts even when the recovery is well under way. We need the economy working at maximum output. That is the best way to deal with the deficit, debt and nearly every other problem that this country is afflicted with.