John Redwood contributes to Queen’s Speech debate

During yesterday’s debate on the Queen’s Speech, John Redwood called on the Government to re-visit the banking package and also look again at the regulatory framework in order to get credit flowing again. He also called for Parliament to be given greater opportunity to hold the Government to account, and consider the laws and statutory instruments which they intend to push through. John also expressed disappointment that the Prime Minister had engaged in party political point-scoring over his suggestions on how to beat the recession.

The full text of John’s contributions, taken from Hansard, now follows:

Mr. John Redwood (Wokingham) (Con): Will the Prime Minister re-examine the £487 billion banking package, because surely he shares our disappointment that more lending is not taking place to decent businesses in our country?

The Prime Minister: The right hon. Gentleman signed the report that said that we should give up regulation in mortgage finance. I criticised a Conservative Member last week for saying that the recession should take its course, but what the right hon. Gentleman said yesterday on his website is even more amazing:

“Living standards in both the public and private sector have to be brought down.”

That is the Conservative party’s answer to the problems that we face, not taking the necessary action.

Mr. Redwood: Does the Liberal Democrat leader also agree that we need more time to consider the Budgets, the statutory instruments and the laws that go through the House with very little of their content being debated?
Mr. Clegg: I agree with the right hon. Gentleman. That involves the much wider issue of the lop-sided nature of the information, power and prerogatives of the Executive, compared with the increasingly feeble powers and prerogatives of the legislature.

Mr. Redwood: I spent quite a lot of time on that. I explained that the Government needed to revisit the banking package to get the banks lending again. I said that they needed to look again at the regulatory framework for the banks so that credit could flow. I also explained that we needed lower interest rates. Those are all suggestions that I made.

Mr. Mitchell: I can agree with the right hon. Gentleman on that, but he did not say whether he welcomed the Government’s putting money into the banks to improve their reserve ratios, which will get them lending again.

Mr. John Redwood (Wokingham) (Con): I remind the House that I am a company director, and that I have declared my interests on the register.

I echo the words of the right hon. Member for Leicester, East (Keith Vaz) about legislation often not being the answer to the pressing problems that confront the nation. Perhaps I should begin with a rare word of praise for the Government: the good thing about this Queen’s Speech is that there is not too much legislation in it. I make two pleas, however. First, may we please have the time to debate, at length and seriously, the proposed legislation in it, in order to do it justice? If one legislates in haste, one repents at leisure and has to legislate again and again, as we have seen.

Secondly, may we also have more time in which to hold the Executive to account? What Ministers do when they spend money and when they lead or mislead their civil service teams, or do not lead them at all, is crucial work. Their implementation of programmes and their day-to-day work of judging cases and hearing representations is also crucial work. As a parliamentarian who would like the opportunity to have more sittings here that we could attend, I feel that we could profitably spend our time probing and discussing more of those matters. Sensible Ministers would welcome that scrutiny. As a Minister, I often found it good to have to explain to the House what I was doing. It made one marshall one’s case and realise where one needed to raise one’s game. Colleagues on both sides of the House made helpful points, sometimes in anger or desperation and sometimes as friends, and one would have been a fool not to take such points on board and to understand what the House was doing.
I want to speak mainly about the leading item in the Queen’s Speech, which is reflected in some Treasury legislation: the need to create financial stability. I think that is the Government’s phrase to mean that we need better economic policy so that living standards can start to rise again instead of falling, and so that we can do better by our constituents who face serious trouble. We see factory closure after factory closure and people going on to short-time working. Many people face having employment for only three or four days a week, some people are facing extended factory closures over Christmas and the new year and some people are facing redundancy.

All our living standards have been chopped brutally by the 25 per cent. fall in the value of sterling of the past four months. Most people’s living standards have
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fallen in the past year because wages have risen less quickly than prices. Living standards are also falling because although the oil price has come down a long way in dollar terms, it has not come down so far in sterling terms because of the weakness of the pound. It certainly has not come down when one faces the gas or electricity bill at home. Practically everyone in the country, save those who have managed to get an extra job on better pay, is experiencing a severe squeeze on living standards.

When I made a non-party political point to the Prime Minister during the course of his remarks on the Gracious Speech, which was designed as a helpful suggestion to him to tackle the biggest problem that confronts us today—the lack of credit and money flowing through the banking system—I was treated to the usual, foolish political put-down, which was not even accurate. Apparently, the Prime Minister has nothing better to do with his time than to consider the latest offerings on my website. I am greatly flattered by this, and perhaps that shows his true sense of priority, but would he and his acolytes please read it carefully, because what it said was that markets and Government policy are forcing living standards down. That is what I have just told the House, but I have done so at greater length on the website. That is not what I want or propose or think a good idea. I have gone hoarse and have written a lot on the website in the past two years making sensible, serious proposals to try to avoid that calamity and to prevent living standards from falling.

I deeply resent the way in which time and time again I am told personally, and the Conservative party told generally, that we in some way welcome a recession, that we want to do nothing about a recession, that we accept a recession, that we think a recession is good enough and somehow we like recessions. I loathe recessions; I have seen too many. Yes, they have occurred when different parties have been in office, but they have all been because major policy mistakes have been made. Every one of them has occurred in ways that could have been abated or ameliorated if different policy action had been taken. That is why I have spent the past two years trying to persuade the Government that they needed to take different action to avoid recession or, now that we are deep in it, to get out of it more quickly.

Bob Spink (Castle Point) (Ind): Did the right hon. Gentleman note that Her Majesty said, in the Gracious Speech:

“My Government will work towards European action on economic stability”?

Does that fill him with fear given that this country is a net contributor to the European budget and that we subsidise 20 or so other countries in Europe? Does he think that it will be a way out of recession for us to put more money into Europe to be used in its particular and peculiar way to tackle economic stability?

Mr. Redwood: I welcome intergovernmental action of any kind that will address the banking crisis that runs across Europe and the United States of America. I do not take the hon. Gentleman’s bait. He well knows that I think that a lot of money is wasted in the European Union, and that I should like it to have a much smaller
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budget and much less power. However, that is not the point of this debate. We are discussing the very big crisis that confronts a range of economies in the world.

Britain happens to have one of the worst and most persistent examples of that crisis. We went into it quite early, with the collapse of Northern Rock, and we are now deep in it in a way that is not mirrored in China, Japan or Germany. Those countries are rather stronger when it comes to their balance of payments and financial position. Our position is closer to that of the United States of America, where similar policy errors were made to those that were made here.

Let us be under no delusion. We did not inherit this problem from the United States of America; we do not have it because something went wrong there. Our policy makers and authorities, using their powers, made similar mistakes to the American mistakes. They should have known better, and they should listen to those of us who can give some explanation as to what went wrong. They should listen to those of us who care so much about our country that we offer them good advice to get out of the situation.

This is a big crisis, and it is not something to play party politics with. I agree with that proposition, which some have advanced from time to time. Everyone knows that I like a good party political scrap, and that I am not afraid of a good argument, but on this occasion, the magnitude of the crisis and the way in which action has been ineffective so far should be of grave concern to us all. We should listen a little more carefully and think together a little more about how to get out of the situation.

Let us consider some of the mistakes that have been made. In August 2007, it was obvious to me, as a commentator, and to many people in the City, that the money markets were drying out, that the Bank of England was not supplying enough cash and that there was going to be a banking catastrophe. We warned the Bank and told it to supply more cash, but it failed to do so. We had lectures from the Governor and the Chancellor that it served the banks right, but shortly after those lectures, the run on Northern Rock began. Shortly after that, I am pleased to say, they reversed their policy and agreed that they had to do something and to put money in. Had the Government put in the amount of money in August that they had put in by the end of the year, Northern Rock would not have gone down. It was a totally unnecessary casualty, as a result of obstinacy, foolishness and the inability of the authorities to understand the state of the markets.

In my new-year message, and in other speeches, comments and articles that I wrote at the turn of the year, I told the Government that interest rates were far too high and that, because they were keeping them so high, we were going to have a very nasty and deep recession in a year’s time. I said that if action had been taken to slash interest rates at that time—I suggested halving them, and that has now just about been done, nine months too late—some of the severity of the downturn could have been avoided. The Government decided, however, that they did not want to do that. They now have to answer to the House and tell us why they refused that well-intentioned advice, and why they could not see for themselves that interest rates were far too high and doing enormous damage, and that this was drying up credit in a way that was going to hit the
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jobs of their constituents as well as ours, in a way that meant that a lot of businesses were going to run out of cash and in a way that was bound to bring things down.

The Government have taken several famous lines on the recession. First, they have told us that they are on the side of everyone at this time. Well, I would hope that they are. We are all on the side of the people who are about to suffer; that is not something that creates a party political divide in this country. We are elected here to serve people, and I think that we all come here because we have a passion about the people we represent, and because we want them to have a better standard of life and better opportunities in life. That is not something that divides the parties, so it is quite wrong of the Government to go round suggesting that it is only they who are on the side of the people.

The Government, unlike us, are in a very privileged position. We can suggest, propose and argue about what we think should be done to show that we are on people’s side, but the Government can actually do these things. When they threw the challenge across to my right hon. Friend the Member for Witney (Mr. Cameron)—who was in extremely good voice today—to name five things that he would do to help people during this very nasty recession, he reeled off five extremely sensible proposals that he and others on our Front Bench have been arguing for. He obviously took the wind out of the sails of that foolish attack.
The Government should stop playing trivial politics with this issue, and see that the loyal Opposition are on the side of the people as well, and that we have some proposals that the Government have not yet adopted and which could help a bit. They need to understand that what the people want more than anything else is not help when they have a repossession crisis, when they have lost their job or when they cannot afford to pay the gas bill, but to see the Government following an economic policy that will get us out of this situation. They want the Government to offer some real hope to show that they have got on top of the banking crisis.

In its early stages, the Gracious Speech referred to legislation for the banks. I have no objection to the Government wishing to put the banking code into legislation, and I understand that the banks have no objection either. The timing of the proposal is quite bizarre, however, because the Government are going to be legislating on banking conduct at precisely the time when a big chunk of the banking sector is coming under their direct control as a nationalised industry. Perhaps the Government do not trust themselves. Perhaps they suddenly see the need to have lots of banking regulation codified in statute because they are going to be the shareholder representatives, as well as choosing and getting rid of the directors and otherwise exercising some sort of control.

This brings us to an interesting dilemma that the Government now face, and which they need to resolve. Again, it would be helpful if we could have some intelligent dialogue on this matter, rather than silly yah-boo politics. Here is the dilemma. The banks were called in on one famous weekend and told that they did not have enough capital for their existing amount of lending, and that they had to raise large sums of capital very quickly to satisfy the Government and the regulator, who could then say that the banks were secure and safe. That was a rather odd thing to do in the middle of a
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very bad credit crunch. It would have been very good to have done it three years ago, before the credit explosion really got under way, because it would have taken some of the pressure out of the system and moderated banking conduct. It would also have been sensible to have done it in private, and not to have leaked it, so that the banks could have had a chance to raise the money from private sources without share prices being pushed against them by untimely and worrying leaks about how strong the banks really were.
If the Government are serious that this is the right time to demand so much more capital for the existing amount of lending, they have to understand that the banks are going to lend less. There are two ways in which banks can meet the new capital requirements. One is to raise very large sums of money, and they have done that a bit, to the extent that they and the Government think that they can. The other way is to lend less, which will result in the ratio improving—the ratio compares the lending with the amount of capital—and this is primarily why the banks are lending less. They have been told, by the Government’s regulator, that they need to lend less, relative to the amount of capital that they have.

At the same time, however, the Government are saying that, now that the banks are coming under public ownership, it is terribly important that they should lend more. Are the Government going to adjust the capital ratio? Are they going to provide even more shareholder capital from the taxpayer? Or do they not understand that their statements are pointing in opposite directions and are contradictory? We need a better explanation from the Government of what they really expect from the banks. Do they want them to be super-prudent, now that they realise how imprudent the regulatory regime, the monetary regime—and, yes, banking conduct—were in the run-up to the credit crisis? Or are they now saying that they have probably overdone it, and they need the banks to lend more? If that is the case, they need to look again at the ratios and consider what they are going to do.

Of course, no bank of any major scale must be allowed to go down, and I am pleased that the Government understand that. They normally suggest that people like me would like to see that happen, but of course I would not. I have gone blue in the face trying to explain why banks need to be supported, and that they need to be supported in the right way. I think that they need to be supported by an intelligent central bank that will lend them short-term funds when they need them, and by an intelligent regulator privately telling them how much extra capital they need to raise and giving them the chance to raise that capital, either by selling assets, cutting costs and generating more profit, or by going to the market, if that option is open to them. There are many ways in which banks can improve and increase their strength and their capital base, but they were not given the chance to do that because of the damaging leaks that occurred over that fateful weekend, when they were called in by the Government and the regulator.

The subject of leaks is, of course, extremely topical, and I find it odd that such an asymmetric approach is being taken to the matter. A high-level inquiry is taking place into a series of leaks from the Home Office. There will be plenty of opportunity to debate that matter, and I do not wish to detain the House by talking about it
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now. We need to know more before we can have an informed debate. I find it odd, however, that the same level of interest was not shown in the leaks about banking share capital, which were highly price sensitive and market sensitive, and which got out through a well-known conduit when what should have been secret talks were taking place at the Treasury. That had a big impact on the handling of the banking crisis in Britain. It speeded up the decision making, which possibly led to bad decisions being made, and, for some banks, it ruled out going to the market in the normal way or generating profit in the normal way to meet the targets. The leaks will prove extremely damaging to the taxpayer, and the information was highly price sensitive. It is surprising that no one is taking a great deal of interest in those leaks.

The other day, we heard a statement that was meant to be the pre-Budget report. The pre-Budget report is quite rightly normally delivered as a statement, in which the Government revise their economic forecasts and give some background to the real Budget. On this occasion, however, the statement was not a pre-Budget report at all; it was a Budget. In fact, it was the biggest Budget that I have ever sat through in the House of Commons. It moved more money—in absolute terms, and as a proportion of the economy—than I have ever seen a Chancellor of the Exchequer propose to move. It was vast. It was a Budget that divided the House on party lines. The Conservatives rightly said that it involved the least sensible tax cut that could possibly be introduced, which would not have the desired effect. We also pointed out that the borrowing figures were so preposterously large that the Government would be running much too great a risk. The Government, however, believe that that tax cut and that amount of extra borrowing are the right way to handle the recession.

That was a perfectly good disagreement that needed to be exposed. It was worth a decent debate. However, we got a debate only thanks to the Speaker and only after a lot of huffing and puffing. A Government who come to the House in the person of the Prime Minister to say that they believe in parliamentary democracy should automatically have tabled two or three days to debate that Budget. The Prime Minister should have been proud of it, for heaven’s sake. If he really believes in his case, if he thinks that he is right to gamble with so much borrowed money, and if he thinks that an immediate VAT reduction is what is needed to get everyone feeling happy and spending again, and to open the factories and stop the job losses, he has every entitlement to hold that view and to come and tell us about it. Surely he must be proud of it. I think that proposal is completely wrong; I wish it were not: if there were a quick, easy fix and if I thought that taking 2.5 per cent. off VAT would suddenly turn the economy around, I would be encouraging my colleagues on the Conservative Benches—whether or not they agreed with me—to say, “Yes, this is exactly what we should be doing”. Unfortunately, I do not think there is a prayer of it working. That is why it deserved a proper parliamentary debate.
That brings me to the concluding part of my remarks, which is about democracy itself. On this day of all days, we should be reminded of the mighty battles our predecessors fought so that this place could stand up for
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the people against an over-mighty Executive. Now the form of the ceremony handles the King or Queen as the possible aggressor: that was true 300 to 400 years ago, but it is not true today in an era of a wonderful monarch, who is a democratic one and does not interfere in the political process. Today, the power is on the Treasury Bench; today, the power is in ministerial offices; today, the power is there in the form of Ministers who will not tell us what is going on, who will not answer to this House, who will not answer questions and who will not hold debates on the things that really matter.

That is why Opposition Members—I think Liberal Democrats as well as Conservatives—are united in believing that the Government have to wake up and listen to those who say that we need a stronger democracy in this Parliament and that we will have better government if it is more accountable government. We will have better government if the Government respect the traditions of this place; we will have better government if Ministers try to answer questions instead of playing silly politics all the time and refusing to answer. It would not have hurt the Prime Minister to have treated my intervention seriously and answered my question about the £487 billion that he is spending on the banks and the banking sector. It is a colossal sum of money; I, of course, wish him well with it; I agree with all the £37 billion of it—but it is not working and it needs to be reconsidered. The Prime Minister needs to re-examine the package to get it working quickly for all our sakes; otherwise, we are simply going to have more factory closures, more job losses, more office closures throughout this country’s constituencies.

If the Prime Minister cannot see that that is how he should conduct himself, it is going to be very difficult for him to make the difficult and important decisions he needs to make to start to get us out of this crisis. It is regrettable if he does not understand that most of the information handled in Government offices is not private information for Ministers to hoard and release to their favourite journalists when they choose, but public information that Ministers have a duty to release in due time and in the proper way to this House of Commons first. The privilege of belonging to this House should be that we get the information first and that we cross-examine the Government first. Why do we need that privilege? Because that is the way we do our job for our constituents. They expect to see Government policy and information tested in the furnace of the House of Commons first, not given to preferred journalists on the side and spun in favourable ways that do not allow the alternative case to be made.

Our democracy is at risk. We have gone from having twice-a-week opportunities to cross-examine the Prime Minister to having only one opportunity. We were told, “All will be fine, as you are going to get half an hour instead of a quarter of an hour”, but that matters very much. It means that the Opposition have a chance of making the agenda only one day a week instead of the two days that we used to have with two 15-minute sessions. We have gone from a system under which most of the time most parliamentary questions got sensible answers in response to the question asked to a position today when most of written parliamentary questions I table get absolutely no answer at all. I am referred to a website or I am told that I have put the wrong question, that I have no right to ask it or that the issue I raised
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relates to a Government-owned bank or a quango and the Minister cannot comment on it. It is pathetic, Madam Deputy Speaker. The quality of answers to written questions is very low and we cannot have an informed public debate if the Government will not answer those written questions.
When it comes to oral questions, it is a remarkable occasion if a Minister actually knows the answer and shares it with the House. We have two sorts of Ministers: very clever ones who know the answer and will not give it away because they find it so embarrassing, and not-so-clever ones who do not even know the answer that they must not give away. It is high time that we saw some Ministers on the Treasury Bench who know their subject well enough and have enough confidence in their case to tell us what the facts are, put the spin they want to put on it and try to satisfy the more moderate-minded people on the Opposition Benches. There are some and they would be satisfied with that; others would still disagree, but do so over something that mattered and based on proper information.

When I was a Minister, before making major statements or announcements, I used to allow my shadow Minister access to civil servants because I wanted him to know quite a lot of what I knew so that we would not have a row or argument about the facts—the facts would be in common so we could have a debate about what the public wanted to hear, namely what interpretation was placed on those facts and what action had been decided on as a result of them. All too little of that happens nowadays. That is why people outside are frustrated with this place; that is why people do not think it is working as it should be; that is why people feel that all the spin—that the Government are on the people’s side and the Opposition do not have a clue—is not actually working. People are hurting out there; they are losing their jobs; their living standards are falling; they are under pressure. It need not be like that: the Government should listen and they should, above all, become democratic.
6.25 pm

Mr. Austin Mitchell (Great Grimsby) (Lab): I will not attempt to follow the right hon. Member for Wokingham (Mr. Redwood) in the animated version of his website, fascinating as it was. It seemed to me that his speech was a pot pourri of ideas about banking and parliamentary reform, which somehow did not gel together. He told us that he had foreseen the crisis—well, congratulations on that—and that the Government’s measures were wrong, but he never told us what he would do. He then launched into his diatribe about parliamentary reform. Perhaps he thinks that having an extended Prime Minister’s Question Time is the answer for all those people out there who are hurting. Is that his answer?

Mr. Redwood: I spent quite a lot of time on that. I explained that the Government needed to revisit the banking package to get the banks lending again. I said that they needed to look again at the regulatory framework for the banks so that credit could flow. I also explained that we needed lower interest rates. Those are all suggestions that I made.

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5 Comments

  1. Posted December 4, 2008 at 1:35 pm | Permalink

    Highly informative speech Mr Redwood, and I’m pleased you managed to make a reply to Brown’s wrongful accusation which he made against you yesterday.

    I understand your reply to Bob Spink and I see the need for international togetherness to aid the financial crisis, but I also feel he has a point too.
    I can’t see how us giving more money to Europe, for it to waste on hair brained bailouts and other fruitless things, is going to do the UK economy or our taxpayers any good at all.

    As for Austin Mitchell’s unhelpful and discourteous comment, I think you may have been better had you let a lump of old English Oak intervene rather than the honorable member from Great Grimsby.

  2. jean baker
    Posted December 4, 2008 at 4:32 pm | Permalink

    John,

    Thank you for your wisdom and sanity on behalf of the public.

  3. mikestallard
    Posted December 4, 2008 at 9:09 pm | Permalink

    I have been reading and learning a lot from this blog for some time now and I can honestly say that you are not lying above: every word has been constantly on the blog along with (Austin Mitchell) simple suggestions about what could be done with the economy.
    I liked the bit, too, about the nature of parliamentary opposition. Right again!
    The Labour party has, in power, taken great pride in Labourising the House of Lords, the Speaker’s chair, the Serjeant at Arms, the Metropolitan Police, several newspapers and the BBC. That is new.
    They rather remind me of the engine driver who, in order to enjoy his breakfast in peace, tied down the safety valves on the engine to stop them noisily letting off steam. The resultant explosion killed both him and his fireman.

  4. Posted December 5, 2008 at 10:33 am | Permalink

    The EU is in in far worse financial crisis than has yet been revealed. Because most third world bad debts are held by European banks.

    Asia is not too bad (bar Korea) and most toxic debt is again in South America with Ecuador days away from default, as well as central europe. 80% of these bad loans have been made by european banks.

    The next tranche of the financial crisis will be the exposure of Europe’s banks to a second line of toxic assets and bad debts, emanating from serial default of countries from these locations. France and Austria will be heavily hit as will Italy, Spain.

    Any crumbs Gordon offers his EU brethren will be meagre when compared to the size of the holes blown in EU banks once these third world collapses are added to their sub-prime losses.

    If a trillion dollars was blown in sub-prime, a second trillion has been blown in third world lending to corrupt regimes. Europe is about to hit another financial Titanic. The Euro is going to topple into the Mediterranean on the back of the coming collapse of confidence in European banking. Sarkozy will be choking on his cocaine.

  5. Malcolm Edward
    Posted December 5, 2008 at 12:57 pm | Permalink

    A very pertinent speech showing the wilful financial incompetence of this government.
    And you enunciated very well how this government is eschewing accountability and treating opposition with contempt.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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