Tories planning crackdown on loans and debts

Sep 29 2008 By Jon Walker

Britain must end its dependency on debt, Shadow Chancellor George Osborne has warned.

He confirmed plans to create an independent watchdog to oversee Government borrowing. And he also warned that families must avoid racking up credit card debts, loans and mortgages which they cannot afford to repay.

Mr Osborne set out his plans for the economy at the Conservative Party Conference in Birmingham, as another British bank bit the dust.

He warned that bankers were to blame for the financial crisis threatening jobs and homes across the world, saying they would “help pay” to clean up the mistakes they had made, as Bradford and Bingley became the second British bank to be nationalised.

The mortgage operation is to be taken over by the Government, and its savings business will be sold to Spanish group Santander. Up to 3,000 people could lose their jobs.

It follows the nationalisation of Northern Rock earlier this year.

Mr Osborne said Britain and the United States had forgotten the importance of living within their means.

He said: “We forgot that an economy built on debt is not economy built to last . . . we borrowed and borrowed as if the party would never end.

“Banks did. Businesses did. Families did. And so did this government.”

Gordon Brown had borrowed billions using the Private Finance Initiative, in which private firms help pay for new infrastructure such as schools and hospitals, he said.

But the British public also ran up debts, he warned. “We racked up more than a trillion pounds of mortgages and credit card bills and household debts and the government never stopped to think what would happen if the credit dried up.”

He highlighted what he said were Tory plans “to end Britain’s dependency on debt,” including a crackdown on high-interest store credit cards.

He added: “We will set up a new Office for Budget Responsibility, independent of government like the Bank of England is.

“This independent office will stand in judgment over our commitments, hold us to our promises.”

Mr Osborne attacked the Government over its handling of the Bradford and Bingley crisis.

He said: “On Bradford and Bingley, we say you can protect people’s deposits, you can try to save people’s jobs, you can maintain people’s confidence.

“But you don’t have to leave the taxpayer exposed to a multi-billion pound bill for the mistakes of the management and the big money that backed them.”

The Government had “dithered and delayed” in dealing with a problem they had known about for a year.

But Mr Osborne warned: “In the end, the failures of the banking industry are the failings of the bankers.

“Perhaps there are some market ideologues who think that the money men can never do any wrong. But I tell you this right now: I am not one of them.”

However, Mr Osborne also insisted that the Conservative Party wanted the City to succeed.

“We recognise the importance of the investment you bring, the prosperity you have created, the thousands of jobs that depend on you.”

Yvette Cooper, Labour’s Chief Secretary to the Treasury, said: “George Osborne said he wanted to cut borrowing but offered no policies to deliver this. Instead his economic plan still promises billions of tax cuts and today they added billions more in spending commitments such as new high speed rail links.

 “Just as George Osborne is talking nonsense on banking, he is talking nonsense on the public finances too.”