Govan Law Centre Conference
'Tackling the credit crunch in Scotland'
Monday 8 December
Glasgow University Union
The timing of today's conference is important, and its title - What We Can Do To Lessen the Impact on Scottish households - highlights a worldwide phenomenon that affects every city, every town and every community - not just in Scotland, but across the globe.
What we do to minimise the impact and mitigate the circumstances is the question we face. People here today, representatives of organisations who understand best the impact on people who have daily contact with families and individuals, have a crucial role to play in that.
The term "credit crunch" has entered the modern lexicon in recent weeks and months - almost casually, - an alliterative phrase that simply does not do justice to the scale of the incredibly difficult times impacting upon the lives of millions of people around the world.
While our focus today is ¿ rightly - about how we can mitigate the worst effects, I would like to make three brief wider points.
The first is that this is not a local or even national situation, and unlike previous economic downturns that have impacted upon Scotland, it is not driven by circumstances particular to our economy.
Despite the half-baked myths that are sometimes peddled, there is not an economy in the world that has not been adversely affected, and none are immune.
The second is that the impact is felt by real people. It is not a distant economic concept that lives in the business pages and the financial institutions ¿ the impact on the real economy manifests itself in real lives, real jobs and real homes.
And the third is that just as the impact has been felt by every country across the world, so the response of governments from across the world are hugely significant. That response is not about political positioning - it is the clearest possible test of values and commitment of any government.
While the circumstances are different, we have experienced economic slowdown in the UK before. And there are still all too many reminders in Scotland of the damage of the "do nothing" response of governments of that era.
For too many consigned to a life on benefits and generations being written off - the attitude that unemployment was a price worth paying, and the commentary now that a recession must be allowed to run its course, and even that a downturn is good for you.
To hear those chilling words being used again is a stark reminder of a different political philosophy that we ¿ but perhaps not they ¿ have thankfully moved away from
.
It is my view that it is the responsibility of the government to act, not sit back and watch. To take action, not apportion blame. To support people and families, not shrug shoulders.
We have seen in Scotland before the lasting damage done to entire areas, and we have seen the confidence of a generation of people crushed by the failure to get into work. The Labour government will look at what was done in the 1980s ¿ and do the opposite.
That is why recapitalising the banks ¿ supporting and underpinning the banking sector in Britain ¿ was important. Banks are crucial to our economy, and crucial to the scale and speed of recovery. The flow of money is vital for businesses needing investment, for pension funds needing long term returns and for homeowners borrowing to fund mortgages. The unprecedented support provided by the government for banks is not for the sake of bankers. It is not about rewarding failure, it is not because we support the culture of excess or the secrecy in how banks operated. It is being done to establish the preconditions for recovery by safeguarding the financial system upon which British homeowners and jobs depend. The cost of inaction would have been catastrophic.
Helping families and businesses through the tough times ahead is what people expect of government ¿ and what we are determined to do.
And that is why, two weeks ago, we had a pre-budget report - putting money into the pockets and purses of individuals and families in Scotland is an essential part of the government's response. Supporting the economy now ¿ to do what we can towards a shorter downturn, rather than the longer and deeper recession that doing nothing would entail ¿ is the rationale and justification for a package worth £2 billion in to the economy in Scotland.
You know the detail of many aspects of the package. Temporarily cutting VAT ¿ worth £625 million to the economy in Scotland; extra and earlier payments to pensioners; advanced payments to families with disabled children; bringing forward increases in children benefit that will benefit 600,000 families in Scotland; match funding savings of people on lower incomes, to help 725,000 Scots through a new savings gateway scheme; permanent changes in tax allowances that cut the tax bill of everybody in Scotland ¿ all actions that sit alongside enforcing the minimum wage with unscrupulous employers, safeguarding tax credits, providing more training for those newly unemployed and reforming the benefits system to help people through the tough times.
We are serious about changing welfare policy, and detailed measures will be announced later this week. But I know that some of you have deeply held concerns about moving people from welfare into work when the economic situation is difficult and there are less jobs. I was previously the Minister for Work, and I believe that this is exactly the right policy at exactly the right time. From announcements made this week to become law and take effect will take up to two years. Even the most pessimistic economic analysis acknowledges that the economic situation will have improved by then, and as the economy recovers we should give people the opportunity to work.
Welfare policy has not kept pace with changing attitudes and expectations. People have for too long been excluded from work when they want to have the chance to work, to experience the satisfaction and dignity of earning a wage. On average, an individual on incapacity benefit will be so for nine years. If you are on long term benefit for more than two years, you are more likely to retire or die than go out to work another day.
Is it the policy of a Labour government to just accept this ? No. We will do what we can to help people off benefit. Even if that means compulsion? It is not about compulsion to work when work is not available, but about compulsion to take up support to enable people to get into work as opportunities are available. This is why I believe it is the right policy at the right time.
The prospect of repossession is a major upheaval that can affect people's relationships, health, well-being and quality of life. And in the current challenging circumstances, it is unsurprising that people are worrying they could lose their homes.
And while repossessions are rising, the numbers affected remain small, with the number of properties taken into possession in the third quarter of 2008 equating to 0.1% of mortgages. But that ¿ rightly - does not stop people worrying.
And that is why we are:
As you will know, most of these initiatives will apply across the UK, but court protocols are a matter for the devolved government in Scotland. They have chosen not to do so. I know that there is cross-party pressure in the Scottish Parliament on this issue, and I hope it will persuade the devolved government to reconsider their position so that mortgage holders in Scotland receive the same protection.
As much as intervention from the government will help and support people at difficult times, that is only part of the equation. It is also important for people to know the help that is available to them.
That is also where the work done by voluntary and advice services in communities across Scotland is vital. It is to you that people turn for independent advice in their local area. The first step in facing up to problems is often the most difficult part ¿ and knowing where to turn is an important comfort for people. The help is there, but the help is often down to you and your organisations.
As more people are worried, the pressure on your services have increased. That is why as part of his pre-budget report, Alistair Darling provided additional funding to citizens advice bureaux in England and Wales for face to face debt advice, worth more than £10m over three years, with an additional £1m earmarked for Scotland.
Of course, that pressure is as acute in Scotland as in other parts of the UK. It is important that advice services in Scotland are also able to meet demand, and I hope that the Scottish government will consider using the additional consequential funding coming to them for similar purposes. And I know you will be pressing for that commitment.
Last week I met Money Advice Scotland and Citizens Advice Scotland to talk about these issues ¿ but I want to ensure that there is a regular and meaningful dialogue between the UK government and organisations represented here today.
And so that is why I am announcing this morning that I will establish a new Scottish panel to advise and inform my work in the Government. I will invite experts, advice and voluntary organisations to join this important group. The expertise and local knowledge it will draw on will help our understanding of the specific nature of the impact of the situation facing individuals and families, and how the Government can continue to do what we can to help and support people through the tough times ahead.
When I became Scottish Secretary I said that I wanted to work with anybody sharing my determination to work in the interests of people in Scotland during these unprecedented times of economic turbulence.
Whatever our differences on other issues, people want to see all tiers of government working together, constructively and co-operatively.
Those closest to poverty are often the furthest from power and influence. They don't go to comfortable dinner parties, or write letters to our national newspapers ¿ and the question we need to ask is how we can ensure in what we do, we speak for them. Together, it is our responsibility to do just that.
And it is the duty and responsibility of government to work with the voluntary sector, advice organisations, community groups, trade unions and others to help individuals and families tackle the credit crunch. It is a considerable challenge ¿ one you will discuss and debate throughout today ¿ but it is a challenge I think we can meet.
Thank you.
Date: 08 Dec 2008