Economic Affairs and Work and Pensions

Part of Speaker's Statement – in the House of Commons at 8:15 pm on 8 June 2010.

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Photo of Steven Baker Steven Baker Conservative, Wycombe 8:15, 8 June 2010

Thank you, Mr Deputy Speaker, for the opportunity to give my maiden speech. Some Members may know that I am a skydiver. I am happy to tell the House that this is far more terrifying than two miles of air and a hardstop.

I congratulate those hon. Members who have spoken before me. I was particularly encouraged by the words of Naomi Long. When I served in the Royal Air Force, Belfast was a name perhaps to strike terror into our hearts, but I am very encouraged that today, with the Alliance party, the hon. Lady is healing divisions and has a positive story to tell.

I also congratulate my hon. Friend Nick Boles on a very charming speech, and I am sure that he suits his constituency very well. Having lived there for a number of years, I know that it is a charming place and I congratulate him on his win.

It is a great honour to enter this House and I am grateful to the people of the historic constituency of Wycombe for sending me here. I very much look forward to serving them. Throughout my campaign, I was strictly forbidden to quote Disraeli, as he fought the constituency at least three times I think, and lost. Today, as we are in coalition, it is my great pleasure to use this perhaps well known quote from a campaign speech in High Wycombe:

"I am a Conservative to preserve all that is good in our constitution, a Radical to remove all that is bad. I seek to preserve property and to respect order, and I equally decry the appeal to the passions of the many or the prejudices of the few."

In representing Wycombe, I well understand Disraeli's sentiments and his reasons for writing "Sybil or The Two Nations".

Wycombe is a constituency of astonishing diversity and contrast and yet unity in adversity. From the wealth and beauty of the Hambleden valley, through the tougher areas of the town-some Conservative Members do represent constituencies with pockets of severe deprivation-to the affluence of Tylers Green and Hazlemere, from the stoic Buckinghamshire traditionalists of old Wycombe to our large ethnic communities, Wycombe is a microcosm of contemporary Britain. I am proud to represent an area that defies expectations and encapsulates contemporary Britain.

The most consistent theme of my candidacy was, above all, the tribute to my predecessor, and I feel I can scarcely do him justice. Paul Goodman enjoyed the respect and admiration of all sections of the community, his parliamentary colleagues on both sides of the House and his party. He set out aspiring to Sir Ray Whitney's qualities of shrewdness, courtesy, unselfishness and kindness. I know that Paul surpassed his own aims and that this House will miss him. Paul's top priority was Wycombe hospital, and I have to say for the benefit of the Bucks Free Press that it will be my top campaigning priority. I mean that sincerely; no other issue compares to it, in terms of its ability to create anxiety and concern.

As a trustee of a charity for economic education, I would like to give what is perhaps an alternative perspective on the cause of the banking crisis; I hope that Members will indulge me. I should like to put to them a proposition that is uncontroversial: around the world, the system of money is a product of the state. Our monetary system is characterised by private banking, with a fractional reserve controlled by a central bank, which determines monetary policy and has a monopoly on the issue of legal tender. A Monetary Policy Committee sets interest rates.

The banks have the legal privilege of treating depositors' money as their own. In the words of Irving Fisher,

"our national circulating medium is now at the mercy of loan transactions of banks".

In the other place, in the Banking Bill debate of 5 February 2009, the Earl of Caithness explained eloquently the base of 19th-century judicial decisions-and yes, our system of money has evolved since then-that enabled that situation to take place. He called it

"the fault which has led to every major banking and currency crisis during the past 200 years, including this one."-[ Hansard, House of Lords, 5 February 2009; Vol. 707, c. 774.]

The Bank Charter Act 1844 ended the practice of banks over-issuing notes, but it left them virtually unmolested in their ability to issue deposit currency to be drawn by cheque. That loophole haunts us today. Unlike the situation in respect of any other commodity, in the case of money, price controls do not drive the product off the market. Artificially lowered interest rates increase the demand for credit, and decrease the supply of savings, but the legal privilege granted to banks means that they can meet demand by extending credit that is unbacked by real savings. There is a good argument to say that that causes the boom-and-bust cycle, the misdirection of resources in the capital structure of production, and over-consumption by consumers. That is the biggest problem that we face today.

We could talk about the moral hazard of having a state-backed lender of last resort and state deposit guarantees, and of the socialisation of the cost of failure; I only wish that I had time to touch on the accounting rules on derivatives. Perhaps that is for another day. My political hero, Richard Cobden, spoke on the subject. He held

"all idea of regulating the currency to be an absurdity", but I see that time is short; I shall have to save the rest of the quote for another day.

Today, money is a product of the state. The Bank of England controls the price, quantity and quality of money. Perhaps if we were talking about any other commodity, there would be far less confusion over and questioning of the cause of the crisis. If money is a product of the state, we should ask ourselves, "Is this a good idea?"

In the coalition, we have a Government ideally suited to be conservative to preserve what is good, but radical to change all that is bad. If we are to have a once-in-a-generation, fundamental review of the role of government, let us also examine government's role in the system of money and bank credit.