Professor William Black:

There is really good evidence on this in the United Kingdom context. We have talked about payment protection insurance, PPI, but when they made small business loans, they characteristically sold swaps - often very complex swaps - to small business people, which is an utter outrage. This is the whole theory of financial intermediation, where they always claim to be engines of growth and such but they became the opposite in many contexts. What should you do? You should crack down on this recipe because it systematically leads to funding bad projects as opposed to good projects that are going to lead a country into development.

In the figures that the Deputy gave for Europe, in particular, what we are seeing is austerity. This is one of the costs of austerity. Banks are going to lend to businesses when businesses want to hire more people. That is demand. When there is not a whole lot of demand from the business community for purchasing, banks sit on the cash. They will particularly sit on the cash in circumstances where we have massive bailouts of the banks, not through the formal bailout that we have been talking about today, but through this incredibly ultra-low interest rate regime. Basically, the banks are not just sitting on the money; they are arbitraging. If they buy a bond, often a foreign bond, the supposed productive is not to Ireland, Greece, Italy, Spain or even Germany; that money is going out to somebody else, probably in China.

It is beyond this committee's remit, but the austerity principles that Europe is following are just nonsensical to economists because they have managed to create a gratuitous depression. Greece, Spain and Italy are not in great recessions; they are in great depressions.