The economy
Posted by James Plaskitt, MP for Warwick and Leamington, at 17:02, Thu 6 November 2008:
I’m delighted to open a new dialogue with constituents on HearFromYourMP. And in these difficult economic times, it’s more important than ever to hear directly how people are being affected.
As I talk to many people and small businesses around Warwick and Leamington, I’m not surprised to hear a lot of comments about the economy. I hear plenty of support and praise for the swift action we took to stabilise the banks. But I also hear that everyone now wants to see the banks get their own houses in order. Businesses tell me that they too want to see the banks get back to normal lending practices.
So here is what we are doing: We are taking all the bold measures necessary to support the British economy as the world heads into a sharp downturn in activity. We were the first to come up with the right measures. We injected money into the banks, in return for shares. We have given guarantees to support bank lending. We put more money into the system, to get normal lending flowing again. Almost every other government has now copied our approach, and a global financial crash has been averted.
But the banks have now got to do their bit. I want to see an end to the outrageous bonuses that were being paid. Normal lending needs to get going again. Interest rate reductions must be passed on to us, the customers. We took action to support the banks. Now it’s up to the banks to take action to support us.
I know that people are also concerned about the outlook for our economy over the next year. So, we’re not just helping out the banks. We have acted quickly to prevent banks and building societies rushing to repossess homes. We will bring forward major government capital projects to keep money in the economy. We have put more funding into schemes to help people find work.
We will allow government borrowing to rise, in order to support the economy. We can do this because we repaid large amounts of government debt when the economy was growing. At 37% of GDP, the UK’s national debt is far smaller than the European average of 75%. So we have room to allow higher levels of government borrowing through the downturn.
Because we are taking the right steps, and because inflation is now set to fall rapidly, the Bank of England has also been able to take action to support the economy. Interest rates are now 3% - the lowest level for 50 years. This will help businesses and every family with a mortgage.
I’ve been amazed to hear in Parliament all the criticism of our measures from David Cameron and his Tory MPs. They oppose further government borrowing. That means they would allow our economy shrink and more people lose their jobs. They opposed the bold measures we took to rescue Northern Rock and Bradford and Bingley. They wanted them to go bust. That would have meant people losing their money - and would have risked the whole banking system collapsing. In my view, this shows a complete lack of judgment at every critical point.
We will continue to take the necessary measures to support people fairly through the downturn. This is all a great contrast to where we were when we faced a big downturn when the Conservatives were in government and David Cameron was an adviser in the Treasury in the early 1990s - inflation had been at 10%, interest rates reached 17% and unemployment soared to 3 million. This time we are far better placed to weather the international storm.
I’ve created a dedicated section of my website, www.jamesplaskitt.com/creditcrunch to follow the credit crunch and keep people updated on the latest announcements.
I’m interested to hear your views on this site about the government’s actions, and how the credit crunch is affecting you. I look forward to your comments.
Comments
Commenting on this message is now disabled.
Posted by Guy Freeman, 15:05, Mon 1 December 2008: (Is this post abusive?) #
Thank you, Mr. Plaskitt, for joining the HearFromYourMP service. It is always important, not just during recessions, to communicate effectively with your constituents. I deeply appreciate your commitment to this duty.
I am one of those who disagrees strongly with the Government's approach to the "credit crunch", but I will not use this forum to discuss my opinions. I simply ask that in future you try to limit any party political point-scoring to other forums. We just want to know what you've been up to since your last communication. This channel is about transparency, not political discussion. You'll note that the Tories don't have a right of reply on this site; please respect this state of affairs.
Once again I'd like to thank you for signing up to this website's service. I hope we hear from you as often as possible.
Posted by Nicolas Pain, 21:27, Tue 2 December 2008: (Is this post abusive?) #
The OECD don't agree: The OECD slashed its global forecasts in a new report and said the downturn in the UK would be "severe", with gross domestic product falling 1.1pc next year - in line with Mr Darling's estimate - before growing by 0.9pc in 2010. It contradicts the Chancellor's forecast of 1.5pc-2pc growth in 2010. Mr Darling claimed the economy would start to recover in the third quarter of next year, because of measures announced at the pre-Budget report, including a £20bn fiscal stimulus package.
Britain is uniquely vulnerable to the deepest economic slump since the recession of the 1990s because the Government has left itself no room to cut taxes, a report warned yesterday. The economy faces one of the sharpest slowdowns in the world, the Organisation for Economic Co-operation and Development (OECD) found. In an unusually explicit rebuke, the report blamed the Government - and by implication Gordon Brown - for borrowing and spending too much in recent years. This "excessively loose fiscal policy" left little, if any, room to cut taxes and save the economy from a deep decline, it stated.
Posted by Nicolas Pain, 21:30, Tue 2 December 2008: (Is this post abusive?) #
Fears are rising over the ability of governments to raise the vast amounts of debt they need to pay for economic stimulus packages and bank bail-outs.
Faced with the prospect of governments around the world issuing more than €2,000bn ($2,535bn) of bonds in the next year, bankers are warning of potential problems in meeting funding needs.
Roger Brown, global head of rates research at UBS, said: "Governments are already running into problems, which does not bode well so early after the recapitalisations and extra funding needs have been announced.
"We do have to ask whether there will be enough investors to buy the bonds, or at the very least whether this will push yields substantially higher to attract them. Given the volumes involved investors may decide to wait and see if yields rise."
...The UK and Italy may face the greatest difficulties. The UK is expected to issue £10bn ($15.3bn) of bonds this month. In the past, monthly volumes have averaged about £2bn a month. The government is also expected to issue £60bn in the remainder of the financial year to the end of March - more than it would previously issue in an entire year.
Posted by Nicolas Pain, 11:49, Sat 6 December 2008: (Is this post abusive?) #
This makes be feel angry and cheated by your government . Why do you make me pay for other people who do not work ?
For Better or Worse
Effects of Labour's tax and benefit changes, 1997-2012
Worse off
Both earning, no children £2,208
Single earning couple, no
children £1,684
Both earning, plus children £1,466
Single, employed £1,281
Multiple benefit households,
no children £976
No earning couple, no
children £543
Single, unemployed £297
Better off
No earning couple, children £2,901
Lone parent, unemployed £2,491
Lone parent, employed £2,066
Single pensioner £1,148
Couple pensioner £350
Multiple benefit households, children £220
Single-earner couple, children £180
Source: IFS