Hugo Swire MP on the country's financial meltdown'

PUBLISHED: 10:58 18 October 2008 | UPDATED: 11:21 17 June 2010

When Parliament went into recess at the end of July, the world was a very different place. And now we are back intending to resume hostilities, only to find that the ground has shifted and we are adopting a constructive bipartisan approach to try to save the country from what appears at times to be financial meltdown.

When Parliament went into recess at the end of July, the world was a very different place. And now we are back intending to resume hostilities, only to find that the ground has shifted and we are adopting a constructive bipartisan approach to try to save the country from what appears at times to be financial meltdown.

No politician should contribute to the hysteria but things do look pretty bad. It is also a fast-moving scene so, as soon as one commits one's thoughts onto paper, the situation changes.

The problems to date seem to be ones of liquidity and banking and the Government has finally decided to provide a fund of £50 billion to be accessed by any bank in need, in the hope that not only will it shore up the banks' balance books but encourage them to start lending again.

If banks stop lending to each other (which they have on the whole), businesses cease trading and individuals are unable to get loans and mortgages which, in turn, has a knock-on effect on house building and consumables. It is, in short, a vicious circle.

So the Government is right, in my view, in seeking to shore up the banking sector. But what are they shoring it up with? Here's the rub. Taxpayers' money, of course! Alistair Darling, the embattled Chancellor of the Exchequer, said, when asked, that the money will be raised by the Government in the normal way. But there's nothing very normal about saddling each and every one of us with £50 billion of debt.

It seems that we are to become shareholders in the banks and one day - perhaps - we will receive our money back from the banks once they return to profitability.

Locally, we are beginning to see redundancies, although employment in East Devon remains fairly high. The big construction projects, such as Cranbrook, are off, which in itself means we have to re-examine the Regional Spatial Strategy and think again how to provide the housing - particularly the affordable housing - that we so urgently need.

East Devon District Council recognises the gravity of the situation and Sara Randall-Johnson, the leader, is meeting with Ben Bradshaw, the Minister for the South West, to see if there is any money for new infrastructure projects which can be diverted to EDDC to try to stimulate the local job market in the construction trade.

Additionally, EDDC is asking to hold on to the £5 million it hands back to Central Government from public housing surplus as the council would like to re-invest it in the area.

The problem, I think, comes later in what we call the 'real' economy. In the run up to the Christmas season, retailers are already recording record losses and you won't find many of them leaping around for joy. It's certainly going to get tougher, but well run businesses should survive. Over the past decade we have been encouraged to borrow cheap money, leading to an explosion in personal borrowing and expenditure.

At the same time we have sold off gold reserves and squandered money on an almost unprecedented basis while hugely expanding the size of the public sector. Add to that a significant reduction in the amount people are saving.

The trouble was when we looked into the cupboard to see what we had for a rainy day, the cupboard was bare.

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