Queen's Speech Debate PDF Print E-mail

 

Mark Isherwood:The UK Government is taking long-term decisions to protect the UK from the global debt storm and to restore economic strength. After 13 years of a Labour-led Welsh Government, Wales remains the poorest part of the UK, with the lowest levels of economic activity and wealth creation per head of all the devolved countries and English regions. The UK coalition Government inherited the biggest peacetime budget deficit in a century, double any previous deficit, larger even than that of Greece and the largest of any major economy.

 

Keynesian economics advocates deficit spending when an economy is suffering, but it also advocates cutting back on Government outlay in the boom times. It was Labour’s failure to do that that denied the current UK Government a ceiling to borrow without jeopardising our AAA credit rating and generating bigger, externally imposed, cuts. The credit rating agencies have reaffirmed the UK’s AAA rating, stating that the outlook for the UK is stable, providing that the UK Government can continue to consolidate public finances.

 

Having previously worked in the sector for 22 years, I welcome the banking reform Bill. We must replace the current flawed system of financial regulation, promote responsible and sustainable banking and allow proper regulation by the Bank of England. Instead of scapegoating, Members opposite should remember that lenders, not borrowers, assess risk, determine whether they are prepared to lend and, if so, on what rates and terms. It was a failure to recognise that that led to the credit crunch. Working within the sector, we saw borrowers—or often, more accurately, commission-earning intermediaries—dictating underwriting terms that the non-bankers who were then controlling too much of the sector agreed to in order to protect and grow their market share, egged on by the end-to-boom-and-bust UK Labour Government.

 

When Gordon Brown opened Lehman Brothers’ London headquarters in 2004, he told Lehman bankers,  

 

'I would like to pay tribute to the contribution you and your company make to the prosperity of Britain.’

 

The same Mr Brown now warns that the crisis in Europe is more dangerous than the Lehman Brothers disaster. The National Audit Office reported that Mr Brown’s Treasury was warned three years before Northern Rock nearly went bust that it needed to set up emergency plans to handle a banking crisis, but did nothing about it.

 

The Financial Services Authority’s report, 'The failure of the Royal Bank of Scotland’, refers by name to Messrs Blair and Brown and the current Shadow Chancellor, Ed Balls. It details the,

 

'sustained political emphasis on the need for the FSA to be "light touch” in its approach’,

 

in the years preceding Royal Bank of Scotland’s failure in October 2008. No wonder the IMF stated long before the UK coalition Government was elected that the UK banking system was more exposed to subprime debt than that anywhere else in the world.

 

5.00 p.m.

 

Labour’s Financial Services and Markets Act 2000 established a single financial regulator, the Financial Services Authority. Banking supervision was transferred from the Bank of England to the FSA. Labour scrapped the Mortgage Code Compliance Board in 2004 and handed statutory responsibility for regulating mortgages to the FSA. The FSA subsequently admitted that it failed to act on signals that Northern Rock was acting recklessly, and the fallout reverberated across the sector, leading to banking bust and taxpayer bailout. Just before the 2010 general election, Gordon Brown belatedly admitted that he made a mistake by not introducing tougher bank regulation when he was Chancellor.

 

Directly or indirectly, the UK banking sector employs almost 2 million people, fewer than one in 1,000 of whom are paid big bonuses. Some 8.4% of the economy in Wales is generated by financial services. This is why the UK coalition Government is right to reform Labour’s broken system of financial regulation. The public service pensions Bill follows independent commission recommendations and guarantees more generous pensions than the private sector. The Office for Budget Responsibility stated that the annual cost of public sector pensions will treble to £9.4 billion by 2014-15. Life expectancy has increased greatly, thankfully. More than 90% of public sector employees are members of a final salary pension scheme, compared to less than 10% in the private sector. Government has a duty to ensure public sector pension affordability. Anything is affordable for now, if you are prepared to drive away investors, heap higher interest rates on mortgage borrowers and businesses and more debts on future generations.

 

Until the Labour and Plaid Cymru parties put forward credible alternative policies, nothing they or their supporters say can be taken seriously. Going back to GCSE economics might help a few Members understand matters a little better.

 

 

 

 

 

 

Promoted by Mark Isherwood AM at National Assembly for Wales, Cardiff Bay, Cardiff, CF99 1NA

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