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Volume 489: debated on Wednesday 18 March 2009

The Secretary of State was asked—


I am in regular contact with Scottish banks and businesses on the economy. Since the start of the year, the Government have introduced a range of measures to help to increase liquidity and to ease credit conditions for business.

Following the announcement by RBS-NatWest on 5 February that it will make a further £250 million available for small and medium-sized enterprises in Scotland, the Secretary of State said:

“I shall be talking to other lenders in Scotland over the coming days to encourage them to follow the example being set today.”

How many has he persuaded and how much brass have they come up with?

I met the chief executive of the Lloyds group last week in Edinburgh, and the hon. Gentleman will be pleased to know that Lloyds has announced the availability of £2 billion under similar terms.

Does my right hon. Friend agree that the decision of two English local authorities to sue RBS in American courts is welcome? Will he encourage Scottish local authorities that have similar concerns to do the same? Will he assure me that the Government will be as accommodating, if necessary, to any future extradition application from America for RBS bankers as they were in the case of the NatWest three?

My hon. Friend will understand why I do not want to comment on any specific impending—or possibly impending—legal process. After centuries of success, the Scottish banks were moments from collapse. Without the intervention of the UK Government and, importantly, the UK taxpayer, the stability that we wish to return to the banks would not be possible. My hon. Friend will understand if I am not tempted to join him in speculating on the other matters that he raised.

The success of the private and public sectors is inextricably linked in the years ahead as we go through the downturn. What assessment have the Government made of their plans to take £1 billion out of the Scottish economy in cuts?

That is tired rhetoric from the Scottish National party. The Scottish Government have more money than ever and, from today onwards, they will have, over the next two years, more than £2.5 billion more. It is the first time in a spending review period that the Scottish Government have £100 billion.

The tiresome obsession with grudge is wearing thin with the people of Scotland. We are in the recession together and we will get out of it together. Scotland is stronger because of the United Kingdom, which is and will remain the most successful union of nations anywhere on the planet.

Does my right hon. Friend agree that banks are the main source of credit to business? That is why he is right to remind hon. Members of the important intervention that the Government made to stabilise the banking system. Does he agree that all the banks, not least RBS and Lloyds-HBOS, now have an obligation to do all they can to support Scottish business and business generally throughout the UK?

I agree with my right hon. Friend, and RBS and the Lloyds group have committed to lending more billions of pounds through the enterprise finance guarantee scheme. Legally binding—that is important—agreements have been made under the asset protection scheme for RBS to lend an additional £25 billion and for Lloyds to lend an additional £14 billion. As he said, it is important for the money to start to flow to Scottish businesses and Scottish mortgage holders so that we can have some return to stability. I think that he appreciates that it was important from October onwards to save the banks from collapse. Our action has helped to ensure that.

The Secretary of State knows that one of the jewels in the Scottish economy’s crown is the exports that have built up on the back of skills learned in the North sea. Does he understand that exploration in the North sea is drying up because of the banks’ failure to lend—the new model relies on bank lending? The Government could step in to ease cash flow by paying early the tax relief that they normally pay when production starts, so that the companies get better cash flow to allow them to continue to explore.

The hon. Gentleman makes an important point. My right hon. Friend the Secretary of State for Energy and Climate Change and I met representatives of Oil & Gas UK to discuss those specific matters and we will talk to them again. I am happy to raise the concerns of the oil and gas industry in Scotland with the banks—that dialogue will continue. I also agree that the export market is crucial for the Scottish economy as we try to recover. I have the honour next week of leading one of the largest ever business delegations from all sectors of the Scottish economy to China. That is also an important initiative.

Does my right hon. Friend agree that, although credit is important to business, so is the ability of Scottish business to get involved in emerging markets? For example, Aspen Solutions in Cumbernauld has won a Department for International Development contract to send IT to Sierra Leone to help to build that country’s infrastructure. What is he prepared to do to assist other such companies?

My hon. Friend is characteristically correct on that matter. I should declare an interest, because I think that Aspen Solutions provides the photocopier for my parliamentary office in East Renfrewshire. For the avoidance of doubt—[Interruption.] It is a very busy photocopier, or it certainly will be in the next few months. The point that my hon. Friend makes is entirely right. Small businesses in particular need to be able to access Government procurement and the contracts and portals that are available. In the past, small companies in particular have had to get through too much bureaucracy, which is why it is important that the UK Government and the Scottish Government find new opportunities to enable small businesses to compete for Government work.

Small Businesses

2. When he last met representatives of small businesses in Scotland to discuss their economic situation. (263299)

I have met the Federation of Small Businesses, the Scottish Chambers of Commerce, the Scottish Council for Development and Industry and the CBI Scotland to discuss the economic situation.

The feedback from many of the small businesses in my constituency, many of which are involved in tourism, shows that there is a lack of knowledge at the local bank branch level about accessing Government schemes. In his discussions with Scottish Ministers, will my right hon. Friend emphasise the importance of Scottish Business Gateway and its contractors, and ensure that people understand the Government-backed schemes that are in place and disseminate that information not just to businesses in Stirling, but to small businesses across Scotland?

My right hon. Friend raises a point about Stirling and tourism that is specific to her constituency, as she always has done in the House. She is right: we must ensure that the enormous investment in the schemes to support Scottish businesses is accessible and understood, particularly for small businesses. We are trying to encourage businesses to go to the “Real help now” website, where all the information is available. We also need to ensure that the advice through Scottish Enterprise’s networks and through UK Government and Scottish Government agencies is readily available, easily understood and deliverable, and we are working very hard on that.

Small businesses are indeed having to shoulder a big responsibility. According to excellent work by the Scottish Trades Union Congress, at the jobcentre in Stornoway in my constituency, 44 people are chasing each available vacancy, which is the highest rate in Scotland. Will the Secretary of State join the Scottish National party and the parties in Wales in the fight against Westminster’s forced £1 billion of cuts that are coming our way? Otherwise, more people will be chasing each vacancy in small businesses and other businesses all over Scotland.

In these difficult economic times, the SNP’s economic policies are indeed a fantasy; they are beyond all fiction. Scottish families in the hon. Gentleman’s constituency and mine—and, indeed, across the whole country—are finding additional ways to tighten their belts. There is only one organisation in Scotland that believes that it cannot make any efficiency savings, and that is the SNP Scottish Government. The Scottish Government have more money than ever before and they should get on with delivering it. Instead of this endless constitutional obsession, we should all be focusing on the economic recovery, not constitutional referendums.

My right hon. Friend will remember coming to a meeting with small businesses in Ayrshire at which the problems associated with the banks being able to make loans and the extra charges now being imposed were raised. With the Government owning 67 per cent. or thereabouts of some of the banks, surely the Government should be putting more pressure on those same institutions to lend the money and to reduce the charges that are now being faced, so that people can get on with their business and unemployment can be maintained at a low level in Ayrshire.

My hon. Friend makes an important point. I enjoyed my visit to Ayrshire with him and my hon. Friend the Member for Ayr, Carrick and Cumnock (Sandra Osborne). Points were made in that meeting with small businesses about the availability of credit, which is why we have taken the measures that we have. The Royal Bank of Scotland has announced that it will commit £25 billion of additional lending, while the Lloyds group has announced £14 billion of additional lending, as part of the asset protection scheme. That is legally binding, because we need to ensure that Scottish businesses—particularly small businesses, but also businesses across the whole of the UK, not just in Scotland—can access credit and trade again, as part of a future recovery. I look forward to coming to Ayr again to discuss those matters with him and his businesses.

I welcome the fact that the Secretary of State has met small business leaders and the First Minister to discuss the economic situation in Scotland. However, I am disappointed that once again post-meeting reports were characterised by the First Minister and the Secretary of State briefing against each other. When will we see the mature relationship between Westminster and Holyrood that we should expect in order to tackle an economic crisis of this scale? Perhaps the Secretary of State can make a start on this new relationship today by embracing the Chancellor’s call for humility and collective responsibility and apologising to the people of Scotland for the multitude of economic mistakes that his Government have made.

Like every Labour Member, I am always sorry when anyone loses their job, and today we are seeing some very difficult unemployment figures for Scotland and the whole of the UK. As we all know, behind those figures there are real people and real families. I am disappointed, as I am sure many Scottish families will be, that, rather than focusing on the real pressures that real families are experiencing, the hon. Gentleman again chooses to participate in the soap opera of the process of politics. People are interested in solutions, not in his soundbites. It is important that we make progress on this matter, and we will do whatever we can to support the newly unemployed, so that they do not become the long-term unemployed.

I am sure that the 1,000 additional people in the dole queues of Scotland this month, and their families, will very be interested to hear the Secretary of State’s solutions. In December, he announced that he was putting together a council of economic advisers, who would be named in January. Since then, we have heard nothing. What is the reason for that delay? Is he trying to avoid the mistakes of his predecessor, who used to vaunt the fact that Sir Fred Goodwin represented Scotland in the Chancellor’s high-level group on financial services? Does the Secretary of State think that his Government no longer need economic advice, or is it perhaps that nobody wants to be associated with his group?

I made no such announcement, then or since. The announcement that I made was about how to get those involved in academia and campaigning together with experts in poverty to ensure that the poorest could see a way through this recession, so that there would not be a generational legacy as a consequence of that, as there was after previous Tory recessions. We will not allow jobcentres to redirect people from unemployment benefit on to incapacity benefit, which is what happened in jobcentres during the previous Tory recession. That policy was wrong, immoral and unforgivable.

When the Treasury Committee visited Edinburgh two weeks ago, we found dismay among small businesses that banks were putting arrangement fees and other private charges on them, rather than interest rates. When the Secretary of State meets representatives of the banks, will he remind them that the Committee is undertaking an inquiry into the banking crisis, and that we will be monitoring their lending agreements, under which transparency and value for money for the taxpayer are going to be the key requirements?

On behalf of all hon. Members, I want to put on record the respect that exists across the country for the work that my right hon. Friend and his fellow members of the Treasury Committee do, and will continue to do, on this important issue. After seeing on television the hearings involving his Committee and the bankers, I do not think that the bankers will need me to remind them that he is determined to stay on top of this issue. Now that he has asked me to do so, however, I will of course raise the matter with the banks.


3. What recent discussions he has had with representatives of banks on the future of banking in Scotland; and if he will make a statement. (263300)

I am in regular discussions with bank representatives. I am determined that Scotland and the UK can remain world centres for financial services.

The Secretary of State has just confirmed that the Royal Bank of Scotland’s lending commitment is legally binding. Will he confirm that the astonishingly generous pension settlement of its former chief executive, Sir Fred Goodwin, is also legally binding? Will he therefore apologise for the soundbite from his Cabinet colleague who has postured on this issue but not been prepared to apologise for it?

These decisions were taken by the Royal Bank of Scotland’s board. I find it distasteful that one individual can be rewarded in such a remarkable way for failure and for the undoubted banking vandalism that has put at risk the well-being of so many families and business in Scotland and across the UK. It is important, as we try to re-stabilise the banking sector, that there should be no reward for failure. We find it extraordinarily distasteful that the Royal Bank of Scotland board made that decision.

Given the Government’s assistance to the banks and my right hon. Friend’s discussions with them, particularly those with a Scottish input, is he able to assure us that banks are indeed looking to develop a strategy to provide lending facilities for small businesses and home owners as the Government intended?

My right hon. Friend has raised this matter on a number of occasions and he will rightly continue to do so. I happily give him the commitment that we are doing everything we can in that respect. We are also trying to ensure that, where there are specific difficulties in certain business sectors or certain parts of the country, we take additional action. My right hon. Friend, as a Lanarkshire MP, will share my concern that Lanarkshire might be the epicentre of the recession in Scotland. That is why I shall shortly bring together business organisations, politicians, trade unions and others to see if we can find a way through the situation, particularly in Lanarkshire, where a proud and determined people who have come through previous recessions will need additional support now to get through the present recession.

Will the Secretary of State support the establishment of a post bank, publicly owned, operating in local communities and taking decisions about granting credit to small businesses based on local knowledge rather than a nationwide formula? I believe that that would give many viable small businesses throughout Scotland access to the credit that the larger banks are denying them.

The Government are always looking for additional ways to support small businesses in communities, and we particularly like to support the community and voluntary sectors and social enterprises. I would be happy to discuss that with the hon. Gentleman. It is important, however, to focus on some of the community facilities and support that are already in place, particularly for families rather than for businesses. I believe that we should all celebrate the remarkable success and important role of credit unions throughout Scotland. They will play an important part in the recession.

Thousands of my constituents work in the banks and financial services sector, and the vast majority certainly do not receive big bonuses and multi-million-pound pensions. Some are losing their jobs and many more are worried about their future. Does my right hon. Friend agree that Government at all levels—UK, Scottish and local—should work together to find a long-term strategy to get out of a common situation? What is he doing to get such a strategy agreed among all the players in the field?

My hon. Friend raises an important point, which I know is particularly relevant in his constituency, as it includes a large number of financial services sector workers. What has happened has, unfortunately, led to the portrayal of all those in the banking sector as greedy and in receipt of enormous bonuses. As he knows and as we all know, a large number of people working in banks in the back office or as bank tellers, for example, are on very average wages and they work very hard. Some of them may have had share options, which are now more difficult. It is important that we stop demonising all bank workers simply because of the irresponsible behaviour of a tiny minority of those who previously had leading and well paid positions in these organisations.

Does the Secretary of State agree that today’s publication of Adair Turner’s proposals for a new regulatory system for the banking sector is an illustration of the extent to which the previous regulatory system put in place by the Prime Minister failed? What does he say today to the thousands of Scots who face losing their jobs in the financial sector as a consequence of the Prime Minister’s previous failure?

The fact is that the international regulatory regime did not keep pace with a remarkable change in the global movement of finance—a fact now well acknowledged across the world. That is why we need, as part of the G20 process, a new architecture for regulation. Banking will never be and should never be the same again. As for the hon. Gentleman’s point on unemployment, we will do everything we possibly can to ameliorate the consequences of this international recession. Many Scottish families have people who have lost their jobs over the past few weeks, as has been confirmed today. As I say, we will do everything we possibly can to stop the newly unemployed becoming the long-term unemployed by giving people additional skills and retraining in order to retain their confidence and an attachment to the labour market. Of course things are more difficult. Not everyone can walk straight into a job, but we should not ignore anyone, and we should try to support people to keep their skills and confidence fresh.

Unemployment (East Lothian)

4. What assessment he has made of the level of support to long-term and recently unemployed people in East Lothian constituency. (263301)

We are giving people across Scotland real help now by offering greater support to help them to move back into employment. We have invested £1.3 billion in Jobcentre Plus services to ensure that those looking for work receive individual support, and an additional £0.5 billion to guarantee more help for people who are unemployed for six months or more.

I am sure that the whole House will now want to hear my supplementary question.

We currently have quite a good level of employment in East Lothian—over 80 per cent.—but I am concerned about the possibility that unemployment will rise both in East Lothian and in Scotland more widely. The position could be greatly improved if the banks adopted measures allowing them to enable small businesses to recover by lending them money. Constituent after constituent has said to me recently that they will have to make people unemployed because the banks will not lend to them. The arrogance of the banks beggars belief.

My hon. Friend has raised an important point to which the Secretary of State has already referred this morning: the need for banks to start lending in order to enable businesses to survive and to invest. We have introduced the necessary measures to make that possible. I am sure that she welcomed the recent announcement by the Royal Bank of Scotland of the provision of additional funds focused particularly on small and medium-sized enterprises, many of which are based in her constituency.

It is important to note that the United Kingdom still has the second lowest unemployment in the G7 area, but we are not complacent. That is why, from April, we will be providing additional help for those who are unemployed for more than six months, in the form of a £1,000 recruitment subsidy. [Interruption.]

My constituency is next to East Lothian, and it is in the same position. The problem is not just unemployment, but the fact that companies are reorganising themselves. Would my hon. Friend and my right hon. Friend the Secretary of State consider bringing the banks to Dover House, so that Members of Parliament can have a discussion with them, and put our cases to them? Why are the banks still not lending to companies that are reorganising themselves to try to get through their present difficulties?

I should be more than happy to speak to any of my colleagues about constituency issues, and about how we can help Members to ensure that local banks respond to the needs of companies in their areas. I welcome the fact that East Lothian council recently joined a local employment partnership, enabling us to work with employers in trying to deal with some of the problems.

Scottish Parliament (Financial Powers)

5. What recent discussions he has had with the Chancellor of the Exchequer on financial powers for the Scottish Parliament. (263302)

I have regular discussions with my right hon. Friend the Chancellor. Sir Kenneth Calman's commission on Scottish devolution is supported by business and trade union leaders, and by the Labour, Conservative and Liberal Democrat parties.

Does the Secretary of State agree that it is useful for Governments to be able to borrow at a time of recession—[Interruption.]

Does the Secretary of State agree that at a time of recession it is important for Governments to be able to borrow, and that the Scottish Government should have the power to borrow?

The Scottish Government have more money than ever before. The current Scottish Government have more than double the budget that the late Donald Dewar had when he was First Minister. I think it important for politicians in all parties in Scotland to find additional ways of working together through the recession. We are in it together, and we will get out of it together.

I appeal again to the Scottish National party to stop putting its obsession with the constitution before the priorities of our country, which are to do with economic recovery. Scotland will never forgive any political party that puts its interests before those of our country.

Is my right hon. Friend aware that although financial powers are important, they will take some time to produce any change, if change is coming? What we need now is action. Unemployment in Lanarkshire is higher than it is in any other region, and Lanarkshire also has the fewest job vacancies. I welcome all the initiatives that my right hon. Friend is taking there—unlike the one-trick pony who is First Minister in the SNP Administration in Scotland, who is interested only in division and in rubbing Scotland out of the United Kingdom.

My right hon. Friend campaigns tirelessly for the people and businesses of Lanarkshire, which has a proud industrial heritage, not least in mining and of course the steelworks. The people of Lanarkshire have shown their determination and resolution to rise from previous recessions. Working with him and other fellow Members, and businesses and trade unions, we are determined to do everything possible to make sure that Lanarkshire is not the epicentre of this recession in Scotland.