(12 years, 6 months ago)
Commons ChamberNo, I have given way twice, and there is a time limit on speeches.
There is a disconnect between wealth creation and money making in our society, which is offensive to our sense of fairness and bad for the economy as well. The business context can be demonstrated in a number of ways, one of which came home to me when I visited Rolls-Royce in Derby, and spoke to a bright, young girl at the company who was an Oxbridge engineering graduate. She told me that of her Oxbridge cohort she was the only one to go into engineering with an engineering degree: other engineers went into banking. Given the debate about the importance of manufacturing, engineering excellence and rebalancing the economy, to my mind, that demonstrates an important issue: we will not rebalance the economy unless we rebalance the rewards for working in different sectors. We cannot achieve one without the other.
Another factor is the relationship between banks and industry. It is fair to say that the German economy has survived better than those of other European countries, and one of the reasons for that—I accept that it is not the whole picture—is the relationship between banks and industry, which historically have worked together on a much longer-term basis. German SMEs are not totally immune to the problems facing their British counterparts, but they are not nearly as great. The Minister set out the situation with Project Merlin and gave a litany of schemes that have been put in place to help small businesses, but the fact is that lending is falling. Probably every Member has an example of an SME in their constituency coming to them and saying, “If only we could get a grant or get the bank to help, we could invest this or buy that, and we would be able to employ more people and expand, and that could get us out of recession.” The fact is that there is a dysfunctionality in our banking system’s relationship with industry that is grossly impeding our ability to create jobs and grow our way out of recession.
My hon. Friend the Member for Streatham (Mr Umunna) quoted Robert Jenkins, a member of the Bank of England’s Financial Policy Committee, when he made the point that £1 billion less in bonuses could provide £20 billion for SMEs. Banks must factor in risk when lending to businesses, but that £1 billion, if diverted, would be written off their balance sheets anyway. Why not look at some scheme whereby money that might have been allocated for bonuses is diverted, either through taxation or another scheme, to lending for small businesses? That could make a huge difference to the capacity of small businesses to play a full role in growing us out of recession.
Alternatively, we must look at tax. The bankers bonus tax would provide the basis for stimulating the economy. A high proportion of small businesses say they are not applying for loans because they are so lacking in confidence about their future prospects and current levels of consumer spending, and that is a barrier. Getting 100,000 more people into work as a result of that stimulus would help to overcome the problem.
I will conclude my remarks by acknowledging—one or two Members have mentioned this, quite validly—that our financial services industry in itself is hugely important to our economy, so we must be careful to ensure that any measures are proportionate and will not have unintended consequences that could damage the industry. However, there is no doubt whatsoever that the industry is not serving our wider economy or society as well as it could do. The sorts of measures that the Opposition propose would go a considerable way towards changing that.
We have a window of opportunity, with public opinion behind us and all the economic and social statistics demonstrating the validity of the case for taking action. The Government should lead on this, but at the moment they seem to be finding excuses for not doing so. If they would only apply to this matter the same resolution and commitment they have shown on welfare reform and other areas, we could have a change that would transform the economy and generate that sense of fairness in this country.