Tory money-man backs return to "savings culture"

The MP for Fareham was a nervous onlooker in the financial centre twenty years ago, and remembers the "shock to the system" when the downturn hit.

He said: "I was at PricewaterhouseCoopers during the recession of the 1990s and some of my team were made redundant. It was a real shock to the system.

"For many of the people who live and work in Canary Wharf, this is the first recession they've experienced and it's quite difficult for some of them to assess how to get out of it.

"We've all got to get our heads down and battle on. It will be tough and there will be a lot of uncertainty. But we can't spend our time wondering 'What if? What if?'. We've got to get on with our lives."

North Easterner Mark worked for PWC from 1985 to 2001, and has been the shadow financial secretary since December 2005. The chartered accountant's ties to the financial world are strengthened through his wife Fiona, who works for the Corporation of London in the City.

During his time on the opposite bench, he has seen Britain swing from boom to bust, with banking collapses and record losses dominating the headlines.

He said: "The problem we face is that what we've seen over the course of the last decade is an asset price bubble, created by rising property prices and share prices and pumped up by debt.

"Now the bubble's burst.

"Part of the crisis is attributable to the natural economic cycle. But part of it is related to the lack of government activity. We're paying the price for that now."

Mr Hoban believes the Government's VAT cut "misses the point" of the downturn, which lies in the lack of available credit. The Conservatives propose a National Loan Guarantee Scheme, in which the Government provides security on part of a loan in exchange for a fee.

He said: "We pushed this out in November, so the Government are playing catch-up with a scheme that's more modest and complex.

"What angers me and a lot of businesses is that the Government, having criticised the scheme, now want to adopt it. But a lot of businesses have gone bust while they opposed this."

The MP's zeal for savings goes so far that he submitted a written parliamentary question asking if the Prime Minister's office had picked up any of Gordon Brown's bills for hairdressers or make-up artists. The answer was a terse "no".

But he earnestly advocates a return to the piggy bank rather than the credit card during the downturn.

He said: "We want to rebuild the savings culture. The tax on the basic rate of savings should be abolished.
"In the long term it will act as an incentive for people to save."

Bonuses have been page one news throughout 2009, but Mr Hoban believes regulators should shoulder some of the blame for the crisis.

He said: "We had an economy very much based on consumption, the housing market and the expansion of personal debt.

"We've been very critical of the banking sector, but we need to realise that the regulatory system that's been in place for the last ten years didn't stop this from happening either.

"The FSA and the Bank of England need to recognise they've made their own contribution to this crisis and should make changes in the future.

"One of the areas we've identified is that we had a big increase in debt and no one had a formal responsibility to monitor it and decide what action should be taken.

"We realise that international banking is complex and highly innovative. What a regulator needs is to beef up the quality of its staff so it has people who understand what's going on in Canary Wharf and elsewhere, and have the ability and seniority to engage with senior managers in banks and take a tougher line with them."

The suggested inclusion of a "Buy American" clause in the US Government's bail-out package has raised fears that major countries could resort to protectionism to shore up their finances.

Mr Hoban said: "These are all very cheap and easy slogans to make, and they might be seen as short-term measures. But if you look at Canary Wharf, it's successful because it has an open economy with low barriers.

"The UK is dependent on international trade for income and our future has to lie in embracing globalisation. It's dangerous to retreat behind barriers and tariffs like we have in the past.

"I believe in globalisation and the free movement of goods. If we pull up the shutters, why would people like Citibank want to be in London?"

The danger of businesses leaving the UK also looms large, with many considering their futures abroad.

Mr Hoban said: "It's gone from something people are talking about to something people are doing.
"A whole host of companies have moved offshore and HSBC looked into it last year.

"We need to make sure we have a competitive tax regime which gives people a reason to be in the UK.

"The current tax regime has been seen as unpredictable and unstable, and that's a real barrier to stability in the UK as a whole.

"But I'm confident that people will work hard to keep business in the UK, and a commitment to investment and projects such as Crossrail is a key part of that.

"I'm positive about the long term prospects of Canary Wharf and the City.

"All the reasons we've been successful in the past will apply in the future. We have the time zone, the infrastructure, the people and the commitment to being a successful financial service centre.

"You can't really say for sure when the turning point will come, and when the growth will return, but it will be a much more careful place as a consequence of the crisis."