When Conservatives were in power Labour used to fulminate about the persistence of high unemployment and low incomes in certain cities and counties. They thought then that more public spending in the poorer districts would do the job and would transform them. Over the last ten years there has been no shortage of public money going into these places. So how have they got on?

The three highest constituency figures for unemployment in September were Brimingham Ladywood (21.2%), Birmingham Sparkbrook (18%) and Birmingham Hodge Hill (16.9%). The top 25 highest unemployment constituencies include parts of Liverpool, Wolverhampton, Glasgow, Middlesbrough, the Welsh valleys and East London. In contrast the four lowest in England are Westmoreland (2%), West Dorset (2.1%), Witney (2.1%) and Henley (2.1%). This is strikingly similar to the results in the Tory years.

The regional breakdown is much as it ever was, with the South East, South West and East of England experiencing relatively low unemployment and the West Midlands, the North East and the poorer parts of London relatively high. The only exception to the old pattern is the position of Scotland. There unemployment has fallen below the national average. The three constituencies with the lowest levels of unemployment are all Scottish.

So what does this prove? It shows that in most cases the decision to spend much more public money has not triggered independent growth and job creation. Unemployment has remained obstinately high. Well intentioned efforts to lift educational standards, raise skill levels, attract in more businesses, create more entrepreneurs and improve the local built enivronment have not in the main brought about a self sustaining economic revival. A community only grows and prospers when the private sector can sustain its own growth, and when many creative and entrepreneurial people live there or are attracted in. There are still large areas of the inner cities, of the Midlands and the North where unemployment has remained too high through good times and bad, where huge public spending has failed to transform.

It also shows that in the case of Scotland, when you get above a certain threshold of public employment, you can influence down the unemployment numbers. Even there the old areas of highest unemployment have remained difficult to shift, and there has been no breakthrough in growth rates. London has outperformed Scotland by a country mile in growth over the last decade.

A sustainable and strong recovery requires a strong and competitive private sector, with access to the talent, property and money it needs to make a success of it. The world is an ever more competitive place. The latest figures should send a shiver down the spine, if we are still not in recovery and are still not exporting enough with the pound devalued as much as it has so far.

The UK economy is troubled by three mighty deficits. Individuals and companies borrowed too much in the good days. They are now scrambling to pay some of it off. Broken banks have little to lend to them and then only at a high price.

The banks overdid it. They are now being forced to rein in their private sector lending, to improve their balance sheets. They are building up more money to lend to the government. The Regulator tells them lending to the government is a safe thing to do, and they should do more of it.

Now the government is overdoing it. The public debt is large and increasing at a rapid pace.

The government says it needs to borrow more to keep the economy going. They think more public spending and borrowing will produce recovery. The danger is it is starts to do the opposite.

If the government pre empts too much of the available cash, there is too little for everyone else to use and borrow. If the government demands too much money from markets, lenders may force up the interest rates before lending more. That would be bad news for the private sector as well.

In the short term the strain is being taken on the currency. International investors and governments do not like the look of sterling so they are selling it, or declining to buy.

Some fall in our currency could be good for exporters. It should enable them to sell at keener prices. It also will cut off some imports, as foreign luxury goods will be dearer. Too large a fall can get out of control, and just makes us all poorer.

As we import around one third of all that we buy, each 10% fall in the pound adds around 3% to our bills – or takes that much off our incomes.

If you print too much money you cut its value. At some point the government has to stop printing money and go back to a more normal approach. Every pound the government borrows on behalf of taxpayers one day has to be repaid. We do need to pay the interest on all that debt. We cannot put off the day much longer when we have to start putting our house in order, before markets do so in a painful and unhelpful way.

This was a crisis brought on by the private sector banks and others borrowing too much. It cannot be solved by the government borrowing too much. I wish it were otherwise. History shows that you can only have a sustainable recovery when the government puts its own house in order. We also need the banks to sort themselves out more quickly, as the broken ones are still not working for the rest of us in the way that is needed.

Today I find that Parliament is experimenting with free child and student labour to do the jobs of MPs. What if they do well? Could it catch on? What would Mopy (Members of Parliament Union) and Health and Safety say about that?

This week two of the higher profile parts of the public sector have been forced to accept that public sector costs have to come down. MPs will doubtless endorse that their expenses scheme needs to be much less generous in the future than in the past. If the leaks are anywhere near accurate, there will be good savings for the taxpayer under the new regime.

BBC top management, operating in a more rarified environment on pay and rations with 27 senior managers paid more than the PM, have also announced substantial cuts in executive costs. They have chosen to do their slimming down primarily by cutting numbers over the next three and a half years, reducing top executive costs by 18% through having fewer of them. An additional 7% saving will come from pay and other reductions.

What was interesting was the public reaction. Far from a grateful public thanking the BBC for listening and proposing a quite significant cut – at last – in the high costs of management, many are asking why the BBC needs to pay of its top executives more than the PM on his salary below £200,000.

For the point is this. The BBC is constantly reminding us that it is not a commercial organisation. Its people are motivated by a strong belief in public service. They are brought up in the ethos of public service broadcasting. It is a different pressure and a different motivation from for profit broadcasting , which has to chase audience and revenue to stay alive and to pay big bonuses when it works. It is paid for out of the forced levies on anyone with a TV, not out of the freely chosen spending of advertisers of subscription members. Now the issue of public reward is squarely on the agenda, the BBC like the rest of the public sector is vulnerable when it comes to explaining reward at or near the top.

For those of you who will want to ask, what am I doing to control public sector costs, I say this. In 20067/8 I was the 19th cheapest MP on total expenses for offices and personal Parliamentary expenses. Before the media interest in all this I announced I would cut my total costs by 10% in 2008/9 and by another 10% in 2009/10. I have just seen the half year unaudited figures for costs for 2009/10 and am pleased to see I will come in for the full year well below the target I set.

Yesterday in the Commons John Denham told us how much he and the government welcomed the idea of more publication and disclosure of information about how and where public money is spent. Yet it could not be done today.

In due course he might be able to go further than they envisaged when they legislated to do this in 2007. The exciting pilots in compiling all public spending in given locations might show us how to do it generally in due course. In the meantime the simpler way of just publishing what they already have lying around would not be sensible. Could you include all the spending on a university or a prison in a given area as publlic spending just for that area? Apparently this was far too big a problem to crack today, or anytime soon. A footnote or an assumption could not solve it. Sir Humprhey had been working overtime thinking up the objections to full publication. Quangos and outposts of central government posed bigger problems than Councils, who would have to publish.

Like all monopolists the government thinks its paymaster and service users are too stupid to understand the information they publish, so it’s better not to publish it. The sooner all the spending information is published the better. Knowledge is power. Many of the salaries, bonuses, expenses and consultlancy contracts the public sector fat cats have been signing should be put up for public scrutiny. The sooner we start to get more value for money the better. Our best ally to do so is publication of all the details so we can all judge.

The semi-final round of the Wokingham Schools Debating Competition will be held on Thursday the 12th November, 7pm at Wokingham Town Hall, where teams from Luckley Oakfield, Bearwood College and St. Crispin’s will challenge each other on the topical, and controversial, issue of bonuses for highly paid bankers and footballers.

At the first round of the competition on Thursday the 15th October, two teams from Luckley Oakfield emerged victorious to proceed through to the semi-final. The triumphant pupils from Luckley Oakfield were Camilla Potter and Perdita Foster, who successfully argued against the motion “This House thinks that everyone who wants to go to university should be allowed to do so”, and Helena Thompson and Lucy Hammond, who argued against the motion “This House believes extremist views should not be aired on television”,.

The Luckley Oakfield contestants will be joined by the successful pupils from the second round, held on Thursday the 22nd October at Bearwood College. Charles Conway and Sam Mohsen will represent Bearwood College, and Laura Webber and Carrie Mathieson will represent St. Crispin’s.

The two winning teams from the semi-final will then face one another at the final round in Wokingham Town Hall on Friday the 27th November. The winning team will receive the John Redwood Cup for debating and an overhead projector for their school courtesy of sponsors 3M. Both the winning team and the runners-up will receive a tour of the Houses of Parliament and the chance to watch Prime Minister’s Questions, while all the participating pupils will receive certificates acknowledging their contribution to the contest.

Speaking about the first two rounds, John Redwood said: “The standard of debating was excellent in both preliminary rounds and even the teams that failed to get through to the semi-final were of a very high standard”.

“I would like to thank the teachers who have prepared and help coach their pupils, and am very much looking forward to the semi-final”.

For more information please contact Carl Thomson on 020 7219 4205

It is good news that breaking up large failed banks is on the agenda. It is good news the EU is on the side of more competition in banks. It is bad news that the UK response to this is to split the good bits off for sale and to leave the bad bits for taxpayers to pay all the losses.

This is lop sided privatisation at its worst. It is crazy economics, leaving the banking market with newly privatised large banks unencumbered by some of the usual junk loans all banks have accumulated over the years. It is another nasty mugging of the taxpayer, expecting us to pick up all the bills for past excess and present sloppy management.

I guess this shortest of term governments wants to be able to present an imminent “success” in the form of the possible sale of the good bits of Northern Rock “at a profit”. Any fool could sell parts of any of the nationalised banks for more than taxpayers paid for the whole, because the toxic estates will be so expensive to maintain and sort out.

Proper privatisation of the banks should be about two aims. The first is to cut taxpayer risk. That means selling as much of the bad loan portfolios with the better loans and branches as possible. We want to shift responsibility for managing poor peforming loans onto the private sector, where it should have remained throughout. The second is to create a better more competitive banking industry. We will not do that by selling RBS UK as a whole shorn of its unsuccessful loan books, nor by selling Lloyds/HBOS as an entity.

The main problem with the bad bank concept is obvious. Why should the poor taxpayer have to stand treat? The management issue is large. Who will run these remaining bad banks? How will they have an incentive to minimise the losses, given the recourse to the state and the printing presses to sort out the problems? Can you give me examples of well run businesses in wind up mode handled by the public sector?

We need a vision of a new UK banking sector, where brands like Nat West, Halifax, Bank of Scotland, TSB and the others subsumed into the failed mega banks are brought back to reality and established as independent private operations, each with their share of poor loans from the present accumulations. The aim should be to sell everything somehow, even if that means some of the new banks going for negative consideration in order to get all the bad loans away. Then we will know how much the taxopayer has lost from this expensive and ill judged experiment in nationalised banking, and the taxpayer will at last be freed from more risk.

There is no iron law which says that bad debt portfolios must improve from here. They could get worse. That is one very good reason why we should try to sell all we can as soon as we can. There must be a limit to how much taxpayers are made to suffer.

EDMs are Parliamentary graffitti. Literally thousands of these unheard motions litter the Order paper. Some MPs keenly sign them, safe in the knowledge that they will never be debated and never come to a vote in anger. Unless, that is, the Opposition decides to table the contents of one of them as a proper motion for debate and vote.

Today is an Opposition day, one of those days when team Cameron can choose the topic, Today they have chosen to highlight the issue of disclosure of spending by every local Council and quango. The government said it was enthusiastic, but has proved very reticent about requiring all the quangos to do what Councils will have to do and what MPs have been made to do – publish their costs and spending and let the public see how wise and wonderful it all is.

A good number of Labour MPs were happy to sign an EDM to that effect when it languished hopeless on the Order Paper. It seemed a safe way to join the heroes. I wonder how many of them will convert their paper enthusiasm into a vote for the motion, now it threatens the government with an embarrassing defeat? Usually when the Opposition does this the Labour votes melt away, underlining that EDMs are just for show, and not serious.

Wouldn’t it be good if every item of public spending were set out on a website so press and public could see it and challenge it? Wouldn’t it make quango and Council chiefs more reticent about some of their bonsues, overseas trips, consultancy contracts and the like? The full publication of all public spending in all its inefficiency and incompetence would be worth a saving of several per cent, just through the impact it would have on the behaviour of the big spenders. That’s why I fear today Labour will recoil in horror from such transparency and commonsense. Their failure to transfer their vote from EDM to proper motion will just add to the cynicism about politics.

Speaking in the Opposition Day Debate on Equitable Life in the House of Commons last week, John Redwood reiterated his demand that the Government pay compensation to Equitable Life policyholders who lost money as a result of regulatory failure, and enquired whether victims could expect more sympathetic treatment under a Conservative Government.

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

Mr. Redwood: As the Minister who promptly paid compensation, with the permission of the House, after the regulatory failure in the Barlow Clowes case was found to be maladministration, may I ask my hon. Friend to confirm that a future Conservative Government would be prompt in making some compensation available to Equitable Life victims?

Mr. Hoban: My right hon. Friend speaks from his experience of Barlow Clowes. The Prime Minister has tried to avoid paying compensation to people who suffered loss through the maladministration of Equitable Life. He is trying to block the process and has fought every step of the way to prevent that from happening. I am happy to say that we want to ensure that policyholders receive the justice that they deserve. The Chief Secretary was careful in his language and phraseology about quite what would happen in spring 2010, so it seems that whoever wins the next general election will have to deal with the problem, and clear up the mess that this Government have left, in order to provide justice for Equitable’s policyholders.

Mr. John Redwood (Wokingham) (Con): Is not the bottom line, then, that whenever the next general election is held the Government will go into it having to say to Equitable Life policyholders, “We have not agreed any compensation for you”?

Mr. Byrne: I hope that we will not be in that position.

It sounds as if the Czech court is close to crumbling over the advent of the Lisbon Treaty. Maybe the President of the Czech Republic is made of sterner stuff, as he pursues his demands over land claims.

Meanwhile the pro Lisbon forces carry on as if Czech capitulation is inevitable. Mr Miliband tells us Mr Blair is the man for the job of President, as he “would stop the traffic”.

He is right that Mr Blair failed at transport policy as PM, and is memorable in that respect for using the Zil lane he thoughtfully put in to the M4 to speed him on his way whilst the rest of us were queueing in the congestion he had created. He stopped more British traffic in his time than any of his predecessors, with his failure to improve our highway and rail networks and his disinterest in easing congestion. I am sure he would insist on plenty of police outriders and road closures should he become European President, hastening his way to 5 star hotels in the centre of many capitals.

What is so unpleasant about Mr Miliband’s intervention are the two underlying assumptions. Firstly, the Czechs and due process do not matter. Secondly, any British person should take this new job when he must know that the large majority of the British people oppose the Treaty on which it is based and want the vote they were promised.

It would be a bad idea for any British candidate to get this job. The UK is not committed to the full federal project, even under this federally inclined Uk government. Following a General Election it is likely there will be a Eurosceptic government here.

Today the UK is not part of the single currency and the fully integrated economic policy, is ambiguous about full defence integration and states that as a matter of policy it does not wish to see more powers transferred to the centre. The government is keen to break all the economic rules with its large budget deficit.

A future Conservative government would make it a matter of faith to be against the single currency in principle, to want powers back from the centre and to be strongly against defence integration.

There are many genuine integrationists on the continent. A smaller group of countries than the full EU probably could make a success of a federal state. That is what they want. They should choose their own leader as President . Ideally it will be someone who intuitively understands the genius of the British people, and knows that they should not be for ever trying to push us into commitments to integrated central European government which we do not want and cannot accept.

The EU can only make a success of its new Presidency if it understands that there are some whole hearted members of the EU state scheme, and there are other members of the EU who want trade and friendship but do not want common government. Mr Blair clearly does not want to understand just how strongly opposed the UK is to the full scheme, and for that reason alone would be a bad choice for the job of President.

In view of the great interest in this issue in recent days, I thought readers might like to see the latest statement of Opposition Policy on this topic from Damian Green MP:

“Recent events may reinforce the position of immigration as one of the most salient issues for the public. I thought therefore it would be helpful to remind you of Conservative policy in this area.

Britain can benefit from immigration, but not uncontrolled immigration. Since 1997 Labour’s open –door immigration policy has seen the largest and most sustained rise in immigration in the UK’s history, a five-fold increase in the ten years to 2007. Recently published figures have shown that 512,000 people came to the UK as immigrants in the year to December 2008, little change on 527,000 in the year to December 2007. These figures show the pressure immigration places on public services such as housing, health and schools.

Grants of settlement also rose by 19 per cent from 124,855 in 2007 to 148,740 in 2008. This fact shows that the pressure on public resources, imposed by high immigration numbers in recent years, will be permanent. This is yet another indication how foolish Gordon Brown was to use the phrase ‘British jobs for British workers’.

We have developed an immigration policy based on three strands:

Controlling legal migration

First, we plan to introduce an explicit annual limit on the numbers of non- EU economic migrants. This means that there should be an annual limit on the numbers allowed to come here to work from outside the European Union, taking into consideration the effects a rising population has on our public services, transport infrastructure and local communities.

A further step we can take to control immigration directly is the imposition of transitional controls for new EU entrants. They should be applied here as they are in other countries.
As well as having a better controlled immigration system we badly need welfare reform and improved skills training so that we are not simply ignoring millions of British workers, which is why Conservatives have launched a plan to Get Britain Working. We need to do better in making British workers competitive.

Preventing illegal migration

To reduce the amount of illegal immigration, Conservatives will ensure our borders are properly policed. No immigration system will inspire confidence if our borders remain as badly protected as they have been throughout the lifetime of this Government. A Conservative Government would introduce a dedicated border police force to protect the UK from illegal immigration, organised immigration crime and human trafficking.

Promoting Integration
We believe that everyone coming to this country must be ready to embrace the core values of British society, and become a part of their local community. For this reason we will introduce new measures for those coming to the UK as spouses, including raising the age of both the potential spouse and UK sponsor from 18 to 21. We will also introduce an English language test for spouses to ensure that only those whose command of English allows them to play a full part in British life are able to settle in the UK. ”

One of the most suprising things about current policy is the way the government is creating two nations.

Bankers are subsidised, financially supported, allowed large bonuses and protected from the cold winds of competition and financial reality. Manufacturing workers are subject to the full force of competitive pressures, are unsubsidised, face wage cuts and receive no bonuses.

House and flat prices in Central London have remained largely detached from reality throughout the slump, and are now roaring up again as loads of money sloshes around the financial districts and comes in from abroad to take advantage of the cheaper pound. House prices in the West Midlands and the North continue to fall, after substantial falls for the past year or more.

The government seems determined to continue on its subsidising way for the banks. Rumours abound that Lloyds would like to avoid the toxic debt insurance scheme the government is busily designing. Good for them. Let them out of it then. Why should the taxpayer have to stand behind all their past errors? Why are RBS to be allowed into such a scheme, when taxpayers are already on risk for too much in RBS anyway? The answer is they subsidise the banks so they direct all their extra money to the government to spend.

Surely both Lloyds and RBS should be given a simple remit. Sell your assets and businesses back to the private sector as quickly as possible, selling toxic debts with other assets in suitable business units and packages so we the taxpayers get rid of the lot. If some units end up needing a dowry, then I guess we will have to put up with that, but the aim should be to minimise taxpayer losses given the folly of past subsidy policy. In the meantime all pay and bonuses for people earning six figures in state funded banks should be frozen or cut, to get costs more into line with revenues and write offs.

The current behaviour of central London house prices, commodity prices, share prices bankers bonuses and the rest shows that monetary policy is selectively very lax. We have asset price inflation all over again, and once again the Bank of England thinks that does not matter. Presumably the government wants more inflation. As a collosal borrower, it has everything to gain as it sees it from debauching the money it has to use to repay the debts. Meanwhile manufacturing shivers to death, as the banks cannot spare them a dime.

The government keeps threatening the financial sector for paying bonuses that are too large. It fails to explain why, and fails to take the action that would curb them.

There are three categories of institution paying over large bonuses.

1. The banks where the state is a significant shareholder.
2. Institutions which would benefit from state loans, guarantees and subsidies if they got into financial trouble.
3. Genuinely private sector competitive companies, which would go bust or require private shareholder subsidy if they over pay.

The fact that over large bonuses are being paid in each of these three categories should worry us. It is evidence that the government’s monetary policy is wrong. Money is too easy for the financial sector, and too tight for most of the rest of the private sector. The government has designed a financial money go round to allow the public sector to spend as much as it likes. Because much of this money passes through the financial system on its way to the government, the government is allowing financial institutions to make apparently super profits and reward itself accordingly. We need to control the amount the government prints and borrows, and to reorient money and banking policy in ways I have often described so it is fairer across the rest of the economy. The regulators are forcing banks to direct their excess money to the government, and preventing them lending it on to other businesses and individuals.

If we rebalanced money policy in this way there would be no need to take other action for category 3 businesses paying bonuses. Their actions are a consequence of money that is too easy for financiers and would stop if money were tighter for them and freer for others. Politicians could still express opinions on the private sector bonus levels, could still argue about tax levels and equality, but there would in my view be no need to take special measures about truly private sector bonuses.

In the case of Category 1 bonuses, the government should act strongly. It should tell all its higher paid employees and Directors in banks with substantial state shareholdings that there are to be no bonuses until the bank concerned is profitable, able to trade without state support and repaying the taxpayer money it has taken. They argue that they need to match other institutions to retain talented staff. If that is the case they should establish those businesses requiring such people as separate businesses and sell them off so we can see they are unsubsidised. Then they can pay what they like. The top people in the state banks should be given incentives to repay the taxpayer money, but not paid bonuses before they have done so.

Category 2 businesses are the most difficult. The principle applied should be to say that they can pay what bonuses they like, but all the top executive bonuses are contingent on not receiving any state aid or specific gurantees. Should the institution need state help, all the unpaid bonuses would be forfeit. If past bonuses were thought to be excessive, the state aid might be conditional on repayments in certain cases.

When the government at last acknowledged we were going into recession around the turn of the year 2008 they told us two things. This was, they said, a US crisis created by their sub prime lending. The UK was uniquely well placed to limit the collateral damage from across the Atantic. Neither of these statements was credible at the time, though the spin machine ensured they were widely circulated. After yesterday’s poor GDP figures, no-one surely can go on believing them.

Yesterday the government and the BBC’s Economics correspondent moved on from blaming the Americans, and drew instead comparisons with the downturns in Japan and Germany, which were sharper in the last quarter of 2008 and the first quarter of 2009 than in the UK. They ignored the fact that of the large economies China, India, and Canada performed much better, that Australia had no recession at all, and only mentioned in passing that the USA and France also experienced a milder downturn.

Germany and Japan experienced a sharper downturn at the worst point for the world economy, because their economies depend heavily on successful exporting industries which were badly hit when Western demand fell off a cliff as excessive private sector borrowing came to an end.

Japan is an important economy to study. It has performed very badly ever since its own Credit Crunch in 1990 left it with large and gravely weakened banks. There have been endless reflationary packages, a massive expansion of government borrowing, and money printing. None of it has stimulated decent growth again on a sustainable basis. It shows that if you prop up banks but delay sorting them out, you end up with slow growth or no growth.

Conversely, Canada which had a major budget deficit and public spending reduction exercise in the 1990s, cutting back by 20%, has performed much better even though it is an economy much closer to the US than the European ones. Australia has shown greater budgetary and monetary discipline than poorer performing economies. China did apply a very large stimulus, but from a position of huge financial strength.

The figures for UK output and income may be modified upwards a little, but no-one can get away from the fact that the UK economic performance is very poor. The reason is simple – it is the treble deficits I have been talking about for months. The UK has banks that are too big and now too damaged and too regulated to be able to lend sensible sums to the private sector.It has a government which pre-empts too much of the money.

The figures are not necessarily an obstacle to government strategists, who are on an election stategy more than they are on a recovery strategy. The Chancellor has from time to time predicted the start of recovery around the turn of next year. Ministers probably want an excuse to continue with record levels of public spending and borrowing in the pre-election period, and may well like the idea of more money printing. The calls will now go up from Labour that given the weakness of the economy, now is not the time to remove the stimuli.

Ministers should be asked to explain why economies with much lower deficits and no money printing programmes are recovering earlier or having milder downturns. They should be asked why even the US has done better than the UK. They should be worried that their toxic mixture of bad bank regulation, state support for bad banks, large state borrowing and money printing has so far failed to work.

A Westcott Infant School pupil has won John Redwood’s annual Christmas card competition and will have his painting sent out to MPs and some of Wokingham’s top dignitaries.

Jacob Wallis, aged 6, from the Westcott Infant School, has had his drawing chosen to illustrate John Redwood’s parliamentary Christmas cards by a panel of judges. Every year, John asks primary school age children to paint or draw a picture about Christmas. The winning entry is used as the design for John’s Christmas cards, with four runners up having their pictures reproduced on the back of the card. The winners and runners-up also receive several blank copies of the card to keep as a memento.

This year’s runners-up were Brony Swinyard, aged 6, from Westcott Infant School, Dean Clacey, aged 9, from Emmbrook Junior School, Shriya Fatania, a year 3 pupil from the Hawthorns School, and Adam Blee from Emmbrook Junior School.

Speaking about the results of the contest, John Redwood said: “I’m very pleased that Jacob has created such a great picture for me to use on my Christmas cards this year, and am sure the recipients will appreciate the time and effort that went into the design”.

“I would also like to congratulate Brony, Dean, Shriya and Adam for their hard work. All the entries were of a high standard and I hear the judges had difficulty in deciding on a winner”.

“I’m grateful to the primary schools in the constituency who did so much to help publicise the contest. I find the competition is a good way to kick off the Christmas season, and I’m looking forward to seeing the final result when it comes back from the printers shortly”.

For more information please contact Carl Thomson on 020 7219 4205

Mr. John Redwood (Wokingham) (Con): I remind the House that I have business interests in manufacturing and investment management, but I am obviously not speaking on their behalf today.

In the debate on Monday, I said that we needed to make the banks more competitive and change banking regulation at the bottom of the cycle, which is where we are now. Unless we make the banks work, we will not have a sustainable recovery. I drew attention to the grotesque distortion in the economy, in that we have very easy money at very low rates of interest for the public sector, created by quantitative easing, but a dreadful shortage of money, and high interest rates for those who can get money for the private sector. That is why we will not have a vigorous and sustained recovery such as those in China and some other big economies around the world. I hope that the Minister will bear that in mind and that the Government will do something about it, because we all want to see more jobs, more prosperity and a quicker return to the levels of economic activity of a couple of years ago. We will not get that unless we fix the banks.

There is another huge imbalance in the British economy that has to be adjusted in the years ahead if we are to have a return to prosperity and sustainable growth. The big imbalance that the Government’s policies have allowed to occur is that we are borrowing too much, consuming too much and importing too much, but saving too little, investing too little, making too little and exporting too little.

Let us start by looking at the parlous plight of manufacturing. The sector has been squeezed and squeezed under this Government. They came to power with the best of intentions. They said that they wished to reverse the long-term trend downwards of manufacturing as a proportion of our economy. They said that they wished to reverse the balance of payments difficulties that had been experienced from time to time under Governments of both political persuasions in the previous 30 years. The Prime Minister, as an Opposition spokesman, used to specialise in going through the balance of payments figures every month and drawing attention to what he thought were unsatisfactory levels of excess imports over exports, especially in manufacturing. Well, the deficits that we were then running were tiny in comparison with the monumental deficits that we are now seeing month after month. We cannot go on like this. It is most important that activity is shifted away from consuming, importing and spending into producing, making and selling abroad.

The Government have not been good for manufacturing, which is now only 13 per cent. of our total economy. However, I am pleased to say that we have some fine companies and good performance in certain sectors. Two sectors in which British performance has been good are pharmaceuticals and aerospace and defence engineering. Those two sectors have some characteristics in common: they employ a lot of talented people, they spend a lot on research and development, they have high returns on sales in normal times, and they have a lot of public purchasing, providing them with demand and activity for their factories. NHS purchasing is an important element of the demand for the leading pharmaceutical companies that have come here, expanded here or grown here. We also have a monopoly purchaser of defence hardware in the UK.

One of the things that is most disappointing is how little intelligent purchasing there is in other areas to provide that kind of enthusiastic support—not a free lunch or subsidised purchasing—to sustain more industries on the back of the huge sums that the Government are spending. For example, we have had a substantial train investment programme in recent years, much of it financed by public subsidy. Much of that work has gone abroad. Was it not possible for Ministers to apply competitive purchasing but ensure, as other countries do, that those purchases benefit domestic manufacturers and create opportunities for people to set up and make things here in the UK? Why is it that so many quango chiefs, civil service chiefs and Ministers run around in foreign-manufactured cars? Surely competitive products can be found from the extremely good British factories? Many of them are owned by foreign companies, but that does not matter. The important point is that they employ people in this country and the value is added here. Why are we not able to make more intelligent use of our purchasing?

Christopher Fraser: Does my right hon. Friend accept that apprenticeship schemes are enormously important as a source of training for businesses and to enable young people to enter the work force? Because of the bureaucracy that businesses, especially manufacturing businesses, are under, they are unable to take on vital new apprentices to do the jobs that my right hon. Friend describes so accurately.

Mr. Redwood: I am sure that that is one of the constraints. Businesses always need more skilled people at all levels. A better system for apprenticeships might well help. One of the additional constraints at the moment is that businesses cannot raise money. They cannot borrow cash or get working capital out of the banks because we have a lopsided banking system that is channelling huge sums of money into the public sector, but not into the private sector. They cannot borrow the money from the commercial banks because of the mistaken policy, and they are not getting the money in turnover because they are not getting the benefit of the orders. Every time that public sector cash is spent on an import, it is not doing the good that it could do if it was spent on a domestically produced product, because it means that we are still keeping people on the dole, untrained and unable to produce that good.

Mr. Jim Cunningham: The right hon. Gentleman’s exposition of what he thinks should be done is interesting, but when he was a member of the previous Government, we had similar problems with apprenticeships. During the last recession, under the previous Government—I worked for Rolls-Royce at the time, so I know a little about this—the first casualty was always the apprenticeships. We talk about companies such as Rolls-Royce, and aid for them. The previous Government talked about lift-off aid—or something like that—but this Government brought in tax credits for companies such as Rolls-Royce and so helped them with research and development.

Mr. Redwood: I am sure that we could improve on the apprenticeship schemes in place under the Conservatives, but the lamentable truth is that they are not working now. We have had 12 years of this Government. We have less manufacturing as a proportion of our economy. We have a worse situation for manufacturing orders than I have ever seen in my life, affecting most manufacturing business that I talk to. I was at a Royal Society event last night, meeting a lot of manufacturers and talking from the platform. They all reported dire situations for orders a few months ago. I am pleased to say that there is some evidence that the situation is beginning to lift off the very bottom, but it is still way behind what it reached at peak levels.

Mr. Cunningham: I do not want to get into a ding-dong with the right hon. Gentleman, but there were very few apprenticeships under his Government, particularly in the 1980s. All the apprenticeships budgets were cut. I notice that he did not really go into the issue of tax credits for companies such as Rolls-Royce. I can remember taking a delegation to meet one of his Ministers in the 1980s. I also remember the works convener saying, “You’re going to have a lot of very expensive shelf-stackers because of how you are trying to assist companies such as Rolls-Royce.” That is why we brought in tax credits.

Mr. Redwood: I want to live in the present and look forward to the future, not wallow in the past, but if we are talking about the past, I must say that there was a lot more manufacturing then than there is today. Many factories have closed on this Government’s watch. There has been a massive jobs haemorrhage out of the manufacturing sector.

Christopher Fraser: About 2 million.

Mr. Redwood: Indeed, there are 2 million fewer jobs under this Government’s tutelage, as my hon. Friend reminds me. That is a great tragedy.

Mr. Love: The primary reason for that haemorrhaging, not just over the past 11 or 12 years, but over a much longer period, was an over-inflated exchange rate for the pound. We now have a more competitive pound. We need to sustain that competitive element in the value of the pound. How does the right hon. Gentleman, as a liberal laissez-faire economist—if I may call him that—believe that we can achieve that?

Christopher Fraser: Such flattery!

Mr. Redwood: That is the nearest to flattery that I am going to get from Labour Members. I was about to say that the sharp devaluation of the pound last year and the little wobble in the pound in recent weeks are positive for those who wish to export, but negative in many other ways. They are causing much more price inflation in this country than anywhere else in the free world and have, of course, cut our living standards massively, because if we import a third of all that we need, and our currency falls in value by one fifth, we can see immediately that we will have lost an awful lot of purchasing power and will all be much worse off.
We need, however, to find the silver lining in this rather nasty cloud, and the hon. Member for Edmonton (Mr. Love) has rightly pointed to one: it is now possible to compete much more aggressively on price, as well as on quality and product, off a British manufacturing base, because of the devaluation. It would be a tragedy if we threw that away.

So far, the export recovery is not nearly as vigorous as one might hope for, or expect, given that we had a devaluation of more than one fifth about a year ago. We are not seeing the follow-up that we would like to see. Why is that? I think that it is because of the points that I am making: manufacturers are not getting the orders or the financial support from the banks because the system is so skewed and asymmetrical.

Many businesses and manufacturers, because they cannot get the banking cash and are having to conserve and generate their own, are saying, “I’m not going to get many orders anyway, so I’m going to keep my prices up. I’m going to take advantage of the falling pound and will not go for volume, because I am not sure I’m going to get it and I certainly can’t get the working capital.”

Christopher Fraser: In addition to that, does my right hon. Friend agree that the problem is with the red tape that businesses in this country suffer from as a result of this Government focusing not on jobs and prosperity, but on bureaucracy?

Mr. Redwood: I was going to come to that; it is on my list of things that need fixing. We need access to working capital and more domestic orders to provide the volume that lowers the unit cost. We also need to keep control over the tax and regulatory burdens because most international businesses now look globally and do so on the numbers. They look at the costs, the cash flows and how easy it is to do business in each location. They do not have a romantic attachment to one country. I wish that they did—I wish that they shared my romantic attachment to my country and wanted to see success here—but they do not. They will look at the numbers and put the plant, the new jobs and the new projects in the place where they think that the numbers make sense. If the regulatory burden is too high, they will score that against the particular country—and regulation is a cost.

Labour Members like to portray me as the man who would have no regulation at all, but that is a grotesque distortion. I have strongly urged stronger regulation of certain things in banking, and of course we need strong safety regulations in manufacturing. However, the overall balance is wrong. There is too much regulation overall. It means that there is too much cost and that we have fewer jobs as a direct result.

Some voices on the Labour Benches have taken up an idea that I have launched into the public debate in recent years, which is that we should have regulatory budgets here. They have been adopted in Holland very successfully. The Dutch budgets do not go as far as I would like, because they just concentrate on the Government and regulation costs, whereas I also want them to include the impact cost on the businesses being targeted. However, the model is there and I urge the Government to do it, even at this late stage in this Parliament, because the sooner the signal is sent out that we want to start to curb and limit regulatory costs on businesses, the better it will be for generating new jobs here.

Mr. Love: The first impact of a competitive exchange rate will be on import substitution. Then we would hope that, as the economies of Europe, in particular, but also the United States, recover, we will be able to export. My concern—this was the question I asked the right hon. Gentleman originally—is this: when our economy begins to recover, it is likely that the exchange rate will appreciate, losing the advantage that we have had, so how do we prevent that from happening?

Mr. Redwood: Given the amount being printed and the amount that the Government want to borrow, we are in for a weak currency, unfortunately. I do not think that that is the worry; the worry is whether we get the response. That is the issue that I am trying to address. That was a good way for the hon. Gentleman to influence my speech. The answer is that we will not get enough of a response for import substitution or direct export unless we get these things right.

People have to have access to capital and land with planning permission, and to the right kind of factory space, with the right kind of floors, loadings and eaves heights, so that they can do modern manufacturing in a good environment. They need access to the skilled people, young and old, and they need very high-quality engineers and other such people to go in, take the risks and develop the products.

The world’s manufacturers know how to drive a process for quality. We can make expensive items out of a high-cost labour base, and I am not one who wants to drive down wages. I want staff on high wages who are well rewarded and motivated because they are skilled. We do not need many of them, but we need to use them intelligently in successful manufacturing. In good manufacturing, labour costs might be only 10 or 15 per cent. of total selling price, so it is not the main driver. It is not impossible to run really good manufacturing out of a UK, US or German base, as we can see in many examples.

I am conscious that others wish to join in this very short debate. My conclusions are that we need to give every sensible incentive so that we can have this massive shift out of consuming and borrowing and into producing and making to tackle the balance of payments deficit and the very large deficits across the economy. We have the groundwork for that, with the large devaluation brought about by an incredibly sloppy money policy and by printing so many pounds. We must not throw that away or waste it.

The early evidence is that the reaction is not strong enough. That implies that the Government need to look at the availability of people, of buildings and land, of planning permission and of orders. If, for example, the Government had an energy policy that they could announce and activate, that would trigger a large number of orders for all kinds of things in the energy sector, but we have had dither and delay. If we had a proper transport policy that was more clearly defined, that could also trigger the sort of orders that we need.
I urge the Government not to rest on their lack of laurels or think that because they are printing so much money, the economy will suddenly come miraculously right.

Printing money without things happening on the ground just causes inflation and far worse mess and distress. If we are to make anything out of the mess, we need now to put in place policies that create orders and create a sensible level of regulation and low taxation, so that people will want and be able to make things here and so that we can get people back into jobs.

Yesterday was another one of those Thursdays. The government chooses its topic for debate from Gordon’s book of spin. They call it a “topical” debate.

Yesterday you might have thought the topical debate would be about the Postal strike. It is a nationalised industry. Taxpayers pick up the tab when it loses money. Ministers support the modernisation plans that lie behind the dispute with the workforce. Or they might have chosen the topic of who should be invited onto BBC programmes, as the media and political classes seemed grippped by that issue.

Instead we were offered a debate on economic recovery. No worry that we had had a full day debate on the economy on Monday thanks to an Opposition motion. No worry that Labour had run out of speakers that day, and were unlikely to have found any more enthusiasm three days later. The Labour book of spin said it was time to repeat the new mantra “The Tories have been wrong on the economy” – replacing the little mourned “No more boom and bust” and “We will do whatever it takes”.

The Minister told us nothing of interest about where we have reached in the recovery. He told us nothing new about how they would assist or handle the recovery. He ignored money printing and borrowing. He spent most of his time misrepresenting the Conservative position on most things.

At one point he had five backbenchers to hear him, at another he had just three. The Liberal Democrat spokesman was on his own on his benches. No single Labour MP wished to speak in the debate, leaving it free for Conservatives.

Parliament deserves better. Minsiters should mainly talk about what they are doing and what impact that is having. More government backbenchers should turn up, either to support or to badger them to do better. This Parliament is dying.

The vanity of the BBC has led to stories that Mr Griffin’s appearance on Question Time last night was a defining moment, a Waterloo in British politics. I don’t think so. As always in Nulabour’s Britain many place media events above real life events which do make a difference and have led us into difficult days.

The two crucial events which made Mr Griffin’s TV appearance possible were the decision of this government to introduce proportional representation to European elections, and the decision of around one million people to vote for Mr Griffin’s nasty party at the last European elections. His party achieved that without Question Time helping them. Without 2 MEPs the BBC would not have issued such a contentious invitation.

One of the worst features of proportional representation is the encouragement it gives to the few to create and energise extreme or nasty parties, and to disillusioned or unpleasant voters to vote for them. We have not had a single communist or neo nazi elected to Westminster. First past the post is too high a hurdle. The European system based on PR regularly elects extremes to Parliaments.

The main parties have to cut the electoral ground from under Mr Griffin. They can do this by removing whatever legitimate grievances have helped lead over one million voters into his camp. They may be able to do so by exposing more of the unpleasant side of his views. They need to do so, as we have a European electoral system which is adding fuel to his fire. His party is now in receipt of taxpayers money through the European Parliament, which helps it publicise itself even more. Commentators say Mr Griffin received a mauling last night. I was speaking at a dinner so I did not see it. What I do see is huge publicity for his party the morning after. Very few uncommitted voters watch Question Time. Many more will read the spin that followed the programme. It is a dangerous strategy the government is following.

Last night at the Royal Society I was invited to debate the question of whether manufacturing could save the UK economy or not. John Hutton, the former Defence Secretary, and several representatives of the media and business also contributed.

There is a defeatism about some British attitudes towards manufacturing, which was reflected in the voting of the audience. They were strongly of the view that manufacturing would not “save” the UK economy, and felt that its steady decline as a proportion of our total activity would continue.

There was general agreement that the UK does not value engineers and manufacturers in the way a country like Germany does. The media usually present torrid images of clapped out oily old machine tools as the backdrop for a manufacturing story. The images usually only come onto our screens if there has been a bankruptcy, a catastrophic decline in activity, or a safety problem. Schools are prone to present industry as a pollution or safety hazard rather than as a an exciting challenge to design the new and conquer the old problems.

Corporatism is alive and well, with many looking for a government “20 year plan” to chart a way to a bigger sector. The answer lies not in government offices, but in manufacturing itself. The pound has fallen a long way, so the UK can now be competitive on price and cost. There are many talented people in the UK, some now out of work. We need to find the entrepreneurs who can organise the talent, and mobilise the capital behind them.

I drew attention to the things that government can do. It could have less and more effective regulation – indeed the two often go together, as the volume and complexity of much of our present regulation gets in the way of its doing its job. All the extra financial regualiton failed to stop banks collapsing. John Hutton agreed with the proposal that we need regualtory budgets, with downward pressure on the costs government is allowed to impose on business.

We can have more competitive tax rates. Capital and labour are footloose in the modern manufacturing world. If we take too much in tax people will build their factories elsewhere. Tax takes away money needed for new equipment, for design and innovation, for marketing and sales.

I asked why it is that the UK government is so bad at buying things. The NHS purchases of drugs has been an important prop to the large and successful UK pharmaceutical industry. The substantial and badly handled defence procurement programmes have nonetheless kept industrial capacity in the UK. Yet when it comes to buying trains – paid for out of public subsidy – cars for government and quango officials, and much else, we buy from abroad. You do not see a French Minister or German broadcasters riding around in foreign vehicles, yet in the UK it seems to be de rigeur to drive or be driven in an import.

Of course we need to seek value for money by competitive purchasing. Of course we need to observe world trade rules. Yet just as we do this and buy British pharmaceuticals, surely we can do the same and buy some British trains and cars?

The overall position is clear. We have been consuming, spending, borrowing and importing too much. We need to save, invest, make and export more. There is no way around this necessary adjustment. So let’s welcome it. Let’s celebrate the engineer and the manufacturer. Let government try to act in a way which makes it more likely products will be made in Britain.

Manufacturing has to make more of its successes. Companeis have to pay engineering talent world class salaries and use the poeple concerned to design and build the products of the future. If the engineer is a manager not on the board, given a small plywood and glass box next to the shop floor, it is going to be difficult to get the engineering talent which will be offered better terms and conditions to work for an engineering consultancy or as a financial specialist in the City. Some yesterday told me they had difficulty attracting good engineers. Grand prix car makers in Britain have no such problems, because they offer an exciting project and an attractive package. The City has no problem, because it pays high salaries. Manufacturing just has to compete with these, and make sure they work the best hard once hired.

Mr. John Redwood (Wokingham) (Con): I remind the House that I am involved in business in a global manufacturing company and I am an investment manager of a company, but I am not, of course, here to speak for those companies.

Like most Members, including my right hon. and hon. Friends, I come here because I want my country to be prosperous. I come here because I want there to be more jobs, not fewer. I come here because I am appalled by the tragedy of unemployment that we see in our streets in our towns and villages today. I am appalled by the devastating impact that both domestic and global errors of policy have made on our economy and our country.

What I find most difficult to accept is hearing Government Members suggest that Conservative Members are here to argue the case for the banking industry, that we take great delight in having to cut public spending or that our motive is to have more people out of work or to make the poor suffer more. On the contrary, we are here because we want more opportunity and we are here because we want a wealthier and more prosperous people. Our recommendations to the Government come from the heart and from our experience. Surely Government Members can see that it is they who have messed it up: they should be a little more contrite; they should listen more and lecture less; and they should understand that this country needs many changes in order to give more of our people more of a chance.

We have heard a lot from Government Members about Japan, but they have misunderstood the history and the economics. They say that Japan cut spending, which created a 19-year recession, yet the right hon. Member for Oldham, West and Royton (Mr. Meacher) said that Japan has the biggest accumulated Government deficit and biggest stock of public debt in relation to the size of its economy of any major country he spoke about. Quite right. It does, and the reason it does is that it has had fiscal stimulus after stimulus year after year for 19 years—and they have not worked. Labour Members need to ask why they did not work. They did not work because that country did not mend its banks. If the banking system is not mended, throwing more money into public capital and into public works does not create a prosperous economy with many more people at work; it creates bigger problems.

If Labour Members cared to look at Canada, they would see that the country got into such a public deficit mess some years ago that it had to put through massive cuts on a scale that none of us would like to see. After that was done, however, the economy performed extremely well. The Canadian economy has got through this world crisis so much better than the British economy in part because its public sector is in better shape and making fewer extraordinary demands on its economy. If we look at the Australian economy, there has been no downturn at all. Again, sound public finances are part of the Australian response to the crisis.

Even the United States, which some people very stupidly try to blame for the whole thing—when, as my hon. Friends have said, this is a British problem made in Britain as well—has had a gentler downturn than the UK’s over the last year, largely because of the strength and depth of the American economy and the Americans’ refusal to go to the extremes of policy response that the British Government have adopted. The American Government did not subsidise and put as much public money at risk in their banks, relative to the size of the economy, as we did.

The problem Britain faces and the reason we are doing so badly relative to many other countries around the world at this time of danger and difficulty is that we have the worst treble crisis of all the major countries. Yes, we have the excess credit from the easy money days, the bad monetary policy days, of 2003 to 2007, when policy mistakes by the Government and the Bank of England allowed and fuelled a mighty boom in private-sector credit. Yes, we also have the worst problem of all major countries with our Government deficit. On top of the over-borrowing in the private sector, we are now heaping unbelievable amounts of extra debt on taxpayers through the public sector. We then have the third deficit—the banking deficit—where, quite wrongly I believe, the Government decided to force the effective nationalisation of two of our largest banks when they could have seen them through at much less cost and risk to the taxpayer.

Again, I deeply resent the way in which, in the past, some Ministers have tried to suggest that I wanted to bring the banks down, as if that would be a good thing to do. Of course no sensible person would have wanted our major banks to go down. What we wanted—what I wanted—was for Ministers to do a better deal and to be ahead of the game. We wanted them to regulate the banks effectively when they could have been pulled back from the brink, rather than taking them over the brink and then lumbering the taxpayer with so much risk and so much extra cost.

We did not need to draw Lloyds into HBOS, but the Government decided to do that. We did not need to allow the mega-mergers that created RBS, but the Government decided to do that, perhaps for Scottish reasons. We did not need to go public with the view that the banks were weaker than they should have been, which was bound to starve them of access to money markets and capital markets—the access that they needed—and then force them on to the taxpayer, who now carries far too big a burden.

In order to create the jobs that I think any sensible Member of Parliament wishes to see, and in order to ensure a recovery in the United Kingdom that is much more vigorous and faster—not as fast as the recovery in China, which has been in progress for many months and is doing extremely well, and probably not even as fast as the recovery in more broken America, but faster than any recovery that we are likely to see at the moment—the first thing that the Government need to do is go back and help to mend the banks. Nothing will work properly in this country until the banks are sorted out.
We have two mighty banks with combined balance sheets of £3 trillion—twice our national income—which are hobbled. They are hobbled by the regulations imposed on them, because, most extraordinarily, the Government and the regulator have decided to tighten the cash and capital rules at the bottom of the cycle, having failed to tighten them when some of us asked them to do so as we approached the top of the cycle. So we have pro-cyclical regulation. We are making the problem worse at the peak by making it too easy, and we are making it worse at the nadir by making it too tough.

In my opinion, the reason for that asymmetric regulation is quite clear. The Government are following an election strategy, not a recovery strategy. The election strategy is about spending as much as possible in every way in the public sector while knowing that that cannot be sustained beyond the election. It is about assuming that a future Government, if there is a change of Government, will obviously have to make cuts because that level of spending is not sustainable. If by some miracle the Government got away with it, they would say “Of course we had to make some adjustments, because the Treasury officials suddenly told us that none of the arithmetic worked.”

Far from fuelling a better recovery—far from offering hope to all the people who have lost money and jobs in the private sector—that strategy is doing the opposite. We have a completely lopsided economy. We have a public sector that is still taking none of the hit and none of the pain, and a much bigger private sector that is suffering, anaemic, emaciated and under pressure because the banks cannot lend it the money that it needs, and there is not the necessary demand to create that money through the turnover in the businesses.

David Taylor (North-West Leicestershire) (Lab/Co-op): The right hon. Gentleman says that the public sector is taking none of the hits and none of the pain. Which parts of the public sector does he think should take some of the hits and some of the pain? Could he identify one or two of them?

Mr. Redwood: I should like to see it start from the top. The fat cats in the public sector, the excessive bureaucracy, the regulation that does not work, the unnecessary quangos, the people on the six-figure salaries: that is where we should start to slim down the public sector, because it is an affront to everyone else who sees the very different standards that apply to the private sector and the public sector in this world.

I am not someone who believes that it is a case of “public sector bad, private sector good”—although a fair number of Labour Members seem to believe that it is a case of “public sector good, private sector bad” in every instance. The world is much more complicated than that, and, like many Members, I am proud of many of the great public servants and public services in my constituency and elsewhere in the country. But if the Government still cannot see that the public sector overall is inefficient, bloated and in need of substantial treatment, they really are not fit to govern. Their own Ministry of Defence recently produced a damning report describing how much waste and incompetence there is in defence procurement, and that is the only Department on which they have put any downward pressure over budgets in recent years.

The biggest cuts in public spending that I want to see are cuts in welfare payments because people have gone back to work. We cannot afford the welfare budget at its current level. We need a much more active policy—which I am sure my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) will recommend—to enable us to spend the money more wisely, so that we can get more people into jobs more quickly and do not have to sustain this massive burden.

Another big cut that I want to see is a cut in interest rates. The interest rate burden is escalating out of control. If we are not careful, the interest programme will not just be bigger than the defence budget, but will be bigger than the budgets of some of the even larger and more important Departments of State that are more valued by members of the Government. We should be very worried about the way in which the interest rate burden could so easily get out of control.

There can be no sustained and sustainable recovery unless we ensure that there is a fairer balance between the public and private sectors. There can be no sustained recovery while people continue to be alarmed by the scale and rate of the increase in the deficit. That has an impact on confidence: it means that people hold back from business investment or spending. They know that there are tax increases around the corner from this Government, because the deficit is so implausible. They know that there will be rises in interest rates, because once the Government stop the quantitative easing—once they stop printing the money that they are now spending in their public sector—interest rates have only one direction in which to go.

People are going to say “We do not think we should lend to the Government at 1 per cent. for a short term, or at 4 per cent. for a very long term.” Given the risk posed by the Government—given the enormous scale of the deficit if it is not curbed and controlled—they are going to want a much higher rate of interest. The Government may then reach a point at which their interest rate costs and programme become completely out of control. The rates will rise not only because they are borrowing too much new money, but because each time they re-finance their debt they are re-financing it not at 3 per cent. or 4 per cent. but, perhaps, at 6 per cent. or 7 per cent. The arithmetic then becomes quite shocking and terrible.
So what should the Government do if they really want a recovery? First, they should change the regulation of the banks so that the banks have some scope, given their current capital and cash position, to lend to the private sector. Yes, that will mean laxer regulation for a bit while they get the thing going again, but there will be no problem with that, because the two weakest banks are state-aided and state-supported. People would not lose confidence in them if they took such action, and it is the sensible thing to do now. As my Front-Bench colleagues have pointed out here and at the party conference, allowing the banks to lend a bit more to the private sector means having to start adjusting the deficit in order to create a bit of room and a bit of balance between the public and private sectors in our economy.

How do you mend banks? Well, Mr. Deputy Speaker, as you own two of them—you and all the rest of us, and the Government as our representatives—it is much easier to sort them out. As shareholder, as the dominant influence on that bank, it is the Government, as our representative, who hire and fire the directors and senior executives. It is the Government, as the shareholder representative, who should be monitoring the cash and capital, and ensuring that they are happy with their rather ill-founded investment on behalf of the taxpayers.
What would I do if I were the Government trying to sort out those banks? First, I would go in tomorrow and tell them that there would be no bonuses for senior executives and directors until they became profitable and were returning to the private sector. I would tell them that I did not want to return Royal Bank of Scotland and Lloyds HBOS to the private sector in their current forms. I would tell them that they would be split up, and I would want plans on my desk as soon as possible to create half a dozen banks in the United Kingdom out of the two massive banks that we have. If they did not like it, I could say “In that case, we will negotiate with you the withdrawal of all subsidy and support from the state, because we do not accept this position. We think that there is not enough competition and choice in the banking sector, we think that you cannot run such a big organisation as this, and we think that we need to split it up and make it work rather harder for its living.”
There was not enough competition in the banking market before the problems that the authorities helped to create in 2007 and 2008. Now there is even less, because of the actions that they took over Lloyds HBOS, and the actions that they took over the three mortgage banks that they failed to regulate properly and that also got into considerable difficulties.

The Government should be alarmed that there is so little competition in the banking market, because without that competition there will be no loans for anyone who wants to run a reasonable risk—there will only be loans for people running practically no risk at all—and there will be no loans at sensible prices for the private sector. I do not know whether Ministers are aware of this, but interest rates and charges have gone through the roof because these banks, knowing that they now have oligopoly in the market, know that they can get away with charging the earth and nobody can stop them. All the time that position remains true there can be no virile, decent, strong recovery in Britain. All the time that remains true, our trend rate of growth will not be the 2.5 per cent. that we always said, or the 2.75 per cent. peak of the market forecast from the Treasury. It will not even be 2 per cent. I hope there is a recovery in the next few months—there may well be as the figures we are comparing with are so bad it would be stunning if there were not—but in no way will we get back to even 2 per cent. growth unless the Government mend the banks and sort out the public sector.