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“the Conservative Party chairman who has been sidelined over allegations she paid for her children’s nanny from parliamentary funds, has a worse rating than Mr Osborne”—
the hon. Member for Tatton, I should say. The clincher came when the article went on to say that
“the Shadow Scottish Secretary who is barely known outside Westminster, is higher than Mr Osborne.”
That confirms the wisdom of the immortal Mark Twain quotation:
“It is better to stay silent and look a fool, rather than speak and remove all doubt.”
It has been a sad period for the Conservative party, which has rarely looked more foolish.
We have to remember that the Conservatives’ flagship economic policy, which enabled them to look both ways and tell completely different audiences that they were on their side, was to share the proceeds of growth. It was launched against a backdrop of sunlit trees by a leader who told us, from the beneficial standpoint of lifelong security in terms of his own finances, that GWB—general well-being—was more important than GDP. How much the rhetoric of Conservative Front Benchers has changed since then.
David Taylor (North-West Leicestershire) (Lab/Co-op): I counsel caution when speaking in this Chamber. I once said that economics could not have been on the curriculum of the minor public school that the shadow Chancellor attended, and within minutes I had received a flurry of abusive e-mails. Will the hon. Gentleman have time to reach the worst quote of all from the shadow Chancellor—that the function of financial markets is for people to make loads of money out of the misery of others?
Mr. Browne: The hon. Gentleman sets me a very difficult challenge, which is to chronicle in 15 minutes absolutely every inappropriate remark made by the hon. Member for Tatton. I am concentrating on some of the particular lowlights. It is a depressing experience for all of us who want to see a young man do well in politics. He is very enthusiastic, and his reputation was extremely good, but we are now witnessing a very difficult period for him. However, that is how the Conservatives have positioned themselves. They wanted to share the proceeds of growth, seeming never to have considered that there may not be any growth to share the proceeds of. One can only infer that the logical conclusion is that they now want to cut spending and increase taxes, which would be the flipside of that—in other words, sharing the pain of negative growth.
The other policy that the Conservatives have been giving us a cast-iron promise to put in place is to match Labour’s tax and spending commitments. We are now in an unhappy position whereby Labour’s tax and spending commitments are not quite as impressive as the heir to Blair—the leader of the Conservative party—clearly originally thought that they were. Only yesterday, there was an unseemly clamour in the Sunday newspapers for Labour and the Conservatives to position themselves much closer to the commitments made by my hon. Friend the Member for Twickenham and the Liberal Democrats.
Steve Webb (Northavon) (LD): The suspense is too great for me to wait to see whether my hon. Friend is going to come to another example: when fuel prices were rocketing, the shadow Chancellor promised to cut fuel duty to keep things fair. Does he agree that the logic of the Tory position is that we should now be jacking up fuel duty to keep things fair?
Mr. Browne: That is another extremely well-informed intervention. What the Conservatives did—I suppose that it is only fair given the lack of experience on their Front Bench—was rush into panic mode when they thought that there would be an opportunity for a quick hit when prices for unleaded petrol were going up to 110p or 112p a litre. My party had a reasonably detailed conversation about the Conservative proposal, concluded that it was completely potty, and therefore decided not to support it. We were well advised in that, because now the Conservatives, keen to tell everybody their policies, will be putting out leaflets, inappropriately called “In Touch”, in every constituency saying, “Vote Conservative—we’ll put your petrol up by 5p a litre.” [ Interruption . ] It is 5p this week, and it could get a lot worse. The Conservative proposition is, “Vote for the same taxes as under Labour apart from more on petrol.” That is not a particularly impressive piece of positioning.
My message to Conservative Members who long instead for decisive and coherent leadership is this: “You do not have to remain trapped in the high-tax, wasteful spending box into which your shadow Chancellor has locked you. You can support this Liberal Democrat motion and show your constituents that you too believe in the values put forward by my party—effective public spending that offers real value for money, low interest rates to help struggling families and small businesses, and real tax cuts now for low and middle-income households, who need our help.” Those are the right policies for Britain; they are Liberal Democrat policies, and they need to happen now.
6.44 pm
The Economic Secretary to the Treasury (Ian Pearson): Earlier this month, the International Monetary Fund reported:
“The world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s”.
The Bank of England’s recent financial stability report concluded that in recent weeks the global banking system had undoubtedly undergone its biggest episode of instability since the start of world war one. Even the dogs in the street know that the origins of the current financial and economic turmoil lie in the problems of the US sub-prime market and a record surge in oil and food prices. It does not wash with the British people to suggest that the problems we are facing are wholly or mainly the result of domestic policies, and the official Opposition have no credibility in attempting to suggest that.
I am not pretending that there are no lessons to be learned—we have done so. That is why the Financial Services Authority is introducing its enhanced supervisory regime and why we have asked Lord Adair Turner, its relatively new chairman, to advise us on further reforms that might be necessary. However, the general public will find it difficult to take seriously the judgment of the official Opposition, who were against our actions on Northern Rock, who opposed the Banking (Special Provisions) Bill, and who would not have safeguarded Bradford & Bingley but who, in effect, would have let it go to the wall.
I think that British people have welcomed our decisive action in leading and co-ordinating the efforts of Governments across the world to support the global economy through these very difficult times. At home, we have taken unprecedented steps to shore up the UK’s domestic financial system, providing £37 billion of public money to some of our high street banks so that they can improve their capital positions. Through the Bank of England, we have made available more than £200 billion of Treasury bills to provide liquidity to the banking sector, and we have introduced a £250 billion credit guarantee facility to restore confidence and breathe new life into inter-bank lending. This support is crucial, because banks lie at the heart of our economy. We will do whatever it takes, despite the fact that the official Opposition do not support us, to ensure financial stability—to ensure that small businesses have access to credit and that home owners are able to re-mortgage when they have to do so.
Mr. Redwood: When the regulator decided to increase the capital requirement for each bank in the system, did it calculate how much lending that would take out of the system and, if so, was it happy with that?
Ian Pearson: I will answer the right hon. Gentleman’s question in a moment.
We recognise that it is tough out there, and getting tougher, for hard-working families and small businesses, so we are targeting support at those who need it most. We are supporting households that are facing higher food and fuel bills by raising the income tax personal allowance for 2008-09 by £600, which is worth £120 to the basic rate taxpayer. All basic rate taxpayers will have seen that in their take-home pay from September. We have delayed the fuel duty increase from April this year to April 2009, saving businesses and families nearly £100 million every month, as opposed to the Tories’ bungled policy, which would mean that people would now be facing a fuel duty escalator. We are making additional payments to the over-60s and over-80s of £50 and £100 respectively alongside the winter fuel payment, to the benefit of some 9 million households. We have announced a £1 billion package of energy efficiency measures, which means that all households will be able to save at least 50 per cent. on a range of practical energy-saving devices, for which 11 million of the most vulnerable households will qualify free of charge. We are offering financial support through the winter fuel payment, the Warm Front scheme and the expanded carbon emissions reduction target.
Despite the global credit crunch, we need to ensure that the small firms that are vital to our economy have access to the loans and capital they need to let their businesses grow and develop. An announcement from the Chancellor at the end of last month means that Britain’s small and medium-sized enterprises stand to benefit from up to £4 billion in loans from the European Investment Bank over the next four years. Based on the UK’s shareholding in the EIB, British small businesses should be able to benefit substantially between 2008 and 2011. As a first step, UK banks have already signalled their interest in securing around £1 billion a year from the EIB.
Mr. David Gauke (South-West Hertfordshire) (Con): If the Government are on small businesses’ side, can the Economic Secretary explain why they are increasing the rate of corporation tax on small businesses?
Ian Pearson: It is always the task of the official Opposition to raise points that deflect us from the key issue. We are acting to help small businesses and to promote inter-bank lending. There were issues, as the hon. Gentleman well knows, relating to the way in which individuals set themselves up in business because of relative tax positions. That was one of the reasons we took the action we did, and we have debated the matter on many occasions. Moreover, the availability and active marketing of competitively priced lending to small businesses and to home owners is part of the conditionality agreements under the recapitalisation scheme.
I shall deal with some of the key issues raised. I say to my right hon. Friend the Member for Bolton, West (Ruth Kelly) that we will continue to hold our nerve, and stay on the side of the British people during this difficult time. We in this country will work with others to help to reform the international financial system.
My right hon. Friend the Member for Airdrie and Shotts (John Reid) raised an important issue. He is right that guarantees on inter-bank lending are only a temporary
solution—they are specifically designed as such in response to the current crisis. He suggested that we ought to have an inter-bank market exchange, which would be a long-term solution to enable inter-bank lending in future. I would be happy to meet him and those advising him on these matters, along with my officials, because inter-bank lending is of fundamental importance—a point raised by a number of hon. Members.
John Reid: I thank my hon. Friend for that generous offer, which I will take up. I would like to make it absolutely plain that what I suggested was meant to supplement the measures taken by the Government. I congratulate the Government and I fully support everything they have done. Given the magnitude of the crisis, all of us in this House should be acting—as far as we can—to bring together our efforts to address it. I thank my hon. Friend for the spirit in which he accepted what I said, and I shall respond likewise.
Ian Pearson: I appreciate the constructive way in which my right hon. Friend set out his proposal.
The Government’s policy on credit guarantees is an important part of the overall financial package announced on 8 September, and progress has been made. Overnight LIBOR was 6.8 per cent. on 16 September; today, it is 3.2 per cent. The three-month LIBOR rate has declined over the past 10 days from 6.3 per cent. to 4.4 per cent. Contingent liabilities taken on through the scheme will be reported to Parliament through the usual winter and summer estimates process.
John Hemming: On the reintroduction of 150 basis points in the minimum lending rate, LIBOR went down by only 120 points. Does that not demonstrate the failure of some aspects of the Government’s policies?
Ian Pearson: I would like to think that the hon. Gentleman supported our action on credit guarantees and welcomed the Bank of England’s cut in interest rates. Some of these things will take time to work through the system, but the credit guarantees, the measures taken through the special liquidity scheme and the bank recapitalisation comprise a sophisticated package that has been copied by other countries around the world. We believe that it will have a hugely positive impact. We will, of course, keep all the policies under review, as we always do with such matters.
A number of other points were raised, and I would like to address in particular the Liberal Democrats’ tax proposal, which, as expressed by their leader on television this morning, was a sustainable cut of 4p, to make the rate 16p in the pound. I have not seen any real explanation of how the Liberal Democrats would pay for that. It would cost £19.2 billion per annum. If the Liberal Democrats propose to pay for the cuts by raising the higher rate of tax, it would have to go up to 52p in the pound. If they were to say, as they often like to, that the top earners on more than £100,000 should pay, a 26 per cent. increase in the top rate of tax would be required, taking it to 66 per cent. I am told by officials that that estimate does not take behavioural impacts into account. I am not sure how many high earners would remain in the country if they had to pay a 66 per cent. marginal rate of tax on income over £100,000. I am afraid that Liberal Democrat tax policies simply do not add up.
The Government cannot and should not try to prop up house prices, but we recognise that volatility in the housing market can be a cause of great concern. That is why we announced a significant package of measures on 2 September, and it is why we will continue to consider what more we can do.
On the contention that we did not fix the roof when the sun was shining, I remember the dog days of the Labour Government of 1974 to 1979. We were investing in fixing roofs even during those very difficult economic times. When we came to power in 1997, capital spending was less than half what we spent during that hugely difficult economic period. Since 1997, we have been able to more than triple in real terms capital spending in this country. We have not only fixed many roofs, but we have built new schools and hospitals, and improved the UK’s transport infrastructure.
We must not let the official Opposition con the British public into thinking that we have not fixed the roof—we have, and we have taken decisive action. What is more, we were prudent and sensible in running the UK economy. Since 1997, inflation has averaged 3 per cent., compared with more than 8 per cent. in the previous three decades. Long-term interest rates have averaged about 5 per cent., compared with roughly double that previously. That is how the Government have managed to triple public investment while cutting debt. It was not always easy, and we have had to make tough choices—for example, the decision to spend the £23 billion that we secured from the spectrum auctions not on public services but on reducing Government debt. That has put us in a strong position as we face difficult economic times. The Government want to show in our pre-Budget report the further steps that we will take on the side of hard-working people and small businesses in this country.
Question put, That the original words stand part of the Question:—
The House proceeded to a Division.
Mr. Deputy Speaker: Order. I do not know where the delay is greater, but it is too great, given that there is another debate to follow. I therefore ask the Serjeant at Arms to investigate the delay in the No Lobby, and then, if necessary, that in the Aye Lobby.
The House having divided: Ayes 58, Noes 303.
AYES
Alexander, Danny
Baker, Norman
Beith, rh Sir Alan
Breed, Mr. Colin
Brooke, Annette
Browne, Mr. Jeremy
Bruce, rh Malcolm
Burstow, Mr. Paul
Burt, Lorely
Cable, Dr. Vincent
Campbell, rh Sir Menzies
Clegg, rh Mr. Nick
Davey, Mr. Edward
Davies, Mr. Dai
Farron, Tim
Featherstone, Lynne
Foster, Mr. Don
George, Andrew
Gidley, Sandra
Goldsworthy, Julia
Hancock, Mr. Mike
Harris, Dr. Evan
Harvey, Nick
Heath, Mr. David
Horwood, Martin
Howarth, David
Hughes, Simon
Huhne, Chris
Hunter, Mark
Keetch, Mr. Paul
Kramer, Susan
Lamb, Norman
Leech, Mr. John
Moore, Mr. Michael
Mulholland, Greg
Öpik, Lembit
Pugh, Dr. John
Reid, Mr. Alan
Rennie, Willie
Rogerson, Dan
Rowen, Paul
Sanders, Mr. Adrian
Shepherd, Mr. Richard
Smith, Sir Robert
Spink, Bob
Stunell, Andrew
Swinson, Jo
Taylor, Matthew
Taylor, Dr. Richard
Teather, Sarah
Thurso, John
Webb, Steve
Williams, Mark
Williams, Mr. Roger
Williams, Stephen
Willis, Mr. Phil
Willott, Jenny
Younger-Ross, Richard
Tellers for the Ayes:
Bob Russell and
John Hemming
NOES
Ainger, Nick
Ainsworth, rh Mr. Bob
Allen, Mr. Graham
Anderson, Mr. David
Anderson, Janet
Atkins, Charlotte
Austin, Mr. Ian
Bailey, Mr. Adrian
Baird, Vera
Balls, rh Ed
Barlow, Ms Celia
Barron, rh Mr. Kevin
Battle, rh John
Bayley, Hugh
Beckett, rh Margaret
Begg, Miss Anne
Bell, Sir Stuart
Berry, Roger
Betts, Mr. Clive
Blackman, Liz
Blackman-Woods, Dr. Roberta
Blears, rh Hazel
Blizzard, Mr. Bob
Blunkett, rh Mr. David
Borrow, Mr. David S.
Bradshaw, Mr. Ben
Brennan, Kevin
Brown, Lyn
Brown, rh Mr. Nicholas
Brown, Mr. Russell
Browne, rh Des
Bryant, Chris
Buck, Ms Karen
Burgon, Colin
Burnham, rh Andy
Butler, Ms Dawn
Byers, rh Mr. Stephen
Byrne, rh Mr. Liam
Caborn, rh Mr. Richard
Campbell, Mr. Alan
Campbell, Mr. Ronnie
Caton, Mr. Martin
Challen, Colin
Chapman, Ben
Chaytor, Mr. David
Clapham, Mr. Michael
Clark, Ms Katy
Clark, Paul
Clarke, rh Mr. Charles
Clarke, rh Mr. Tom
Clelland, Mr. David
Clwyd, rh Ann
Coaker, Mr. Vernon
Coffey, Ann
Cohen, Harry
Connarty, Michael
Cooper, Rosie
Cooper, rh Yvette
Corbyn, Jeremy
Cousins, Jim
Crausby, Mr. David
Creagh, Mary
Cruddas, Jon
Cummings, John
Cunningham, Mr. Jim
Cunningham, Tony
David, Mr. Wayne
Davidson, Mr. Ian
Davies, Mr. Quentin
Dean, Mrs. Janet
Denham, rh Mr. John
Devine, Mr. Jim
Dhanda, Mr. Parmjit
Dismore, Mr. Andrew
Dobbin, Jim
Dobson, rh Frank
Donohoe, Mr. Brian H.
Doran, Mr. Frank
Dowd, Jim
Drew, Mr. David
Eagle, Angela
Eagle, Maria
Efford, Clive
Ellman, Mrs. Louise
Engel, Natascha
Ennis, Jeff
Farrelly, Paul
Field, rh Mr. Frank
Fisher, Mark
Fitzpatrick, Jim
Flello, Mr. Robert
Flynn, Paul
Follett, Barbara
Foster, Mr. Michael (Worcester)
Foster, Michael Jabez (Hastings and Rye)
Francis, Dr. Hywel
Gapes, Mike
Gardiner, Barry
George, rh Mr. Bruce
Gerrard, Mr. Neil
Gibson, Dr. Ian
Gilroy, Linda
Godsiff, Mr. Roger
Griffith, Nia
Griffiths, Nigel
Grogan, Mr. John
Gwynne, Andrew
Hain, rh Mr. Peter
Hall, Mr. Mike
Hall, Patrick
Hamilton, Mr. David
Hamilton, Mr. Fabian
Hanson, rh Mr. David
Harman, rh Ms Harriet
Harris, Mr. Tom
Havard, Mr. Dai
Healey, rh John
Hendrick, Mr. Mark
Hepburn, Mr. Stephen
Heppell, Mr. John
Hesford, Stephen
Hewitt, rh Ms Patricia
Heyes, David
Hill, rh Keith
Hillier, Meg
Hodgson, Mrs. Sharon
Hoey, Kate
Hood, Mr. Jim
Hoon, rh Mr. Geoffrey
Hope, Phil
Hopkins, Kelvin
Hosie, Stewart
Howarth, rh Mr. George
Howells, Dr. Kim
Hoyle, Mr. Lindsay
Hughes, rh Beverley
Humble, Mrs. Joan
Hutton, rh Mr. John
Iddon, Dr. Brian
Illsley, Mr. Eric
Irranca-Davies, Huw
James, Mrs. Siân C.
Jenkins, Mr. Brian
Johnson, rh Alan
Jones, Helen
Jones, Mr. Martyn
Jowell, rh Tessa
Joyce, Mr. Eric
Kaufman, rh Sir Gerald
Keeble, Ms Sally
Keeley, Barbara
Keen, Alan
Keen, Ann
Kelly, rh Ruth
Kemp, Mr. Fraser
Kennedy, rh Jane
Kidney, Mr. David
Kilfoyle, Mr. Peter
Knight, rh Jim
Kumar, Dr. Ashok
Lammy, rh Mr. David
Laxton, Mr. Bob
Lazarowicz, Mark
Levitt, Tom
Lewis, Mr. Ivan
Linton, Martin
Lloyd, Tony
Llwyd, Mr. Elfyn
Love, Mr. Andrew
Lucas, Ian
Mackinlay, Andrew
MacShane, rh Mr. Denis
Mactaggart, Fiona
Malik, Mr. Shahid
Mallaber, Judy
Mann, John
Marris, Rob
Marsden, Mr. Gordon
Martlew, Mr. Eric
Mason, John
McAvoy, rh Mr. Thomas
McCabe, Steve
McCafferty, Chris
McCarthy, Kerry
McCartney, rh Mr. Ian
McDonagh, Siobhain
McDonnell, John
McFadden, rh Mr. Pat
McFall, rh John
McGovern, Mr. Jim
McGuire, rh Mrs. Anne
McIsaac, Shona
McKechin, Ann
McKenna, Rosemary
McNulty, rh Mr. Tony
Meacher, rh Mr. Michael
Meale, Mr. Alan
Merron, Gillian
Michael, rh Alun
Miliband, rh Edward
Miller, Andrew
Mitchell, Mr. Austin
Moffatt, Laura
Mole, Chris
Moon, Mrs. Madeleine
Moran, Margaret
Morgan, Julie
Morley, rh Mr. Elliot
Mudie, Mr. George
Mullin, Mr. Chris
Munn, Meg
Murphy, Mr. Denis
Murphy, rh Mr. Jim
Murphy, rh Mr. Paul
Naysmith, Dr. Doug
Norris, Dan
O'Brien, Mr. Mike
Olner, Mr. Bill
Osborne, Sandra
Owen, Albert
Palmer, Dr. Nick
Pearson, Ian
Plaskitt, Mr. James
Pope, Mr. Greg
Pound, Stephen
Prentice, Bridget
Prentice, Mr. Gordon
Price, Adam
Primarolo, rh Dawn
Prosser, Gwyn
Purchase, Mr. Ken
Purnell, rh James
Raynsford, rh Mr. Nick
Reid, rh John
Riordan, Mrs. Linda
Robertson, John
Roy, Mr. Frank
Ruane, Chris
Russell, Christine
Salter, Martin
Sarwar, Mr. Mohammad
Seabeck, Alison
Sharma, Mr. Virendra
Shaw, Jonathan
Sheerman, Mr. Barry
Sheridan, Jim
Simon, Mr. Siôn
Simpson, Alan
Singh, Mr. Marsha
Skinner, Mr. Dennis
Slaughter, Mr. Andy
Smith, rh Mr. Andrew
Smith, Ms Angela C. (Sheffield, Hillsborough)
Smith, Angela E. (Basildon)
Smith, rh Jacqui
Smith, John
Snelgrove, Anne
Soulsby, Sir Peter
Southworth, Helen
Spellar, rh Mr. John
Starkey, Dr. Phyllis
Stewart, Ian
Strang, rh Dr. Gavin
Stringer, Graham
Stuart, Ms Gisela
Tami, Mark
Taylor, Ms Dari
Taylor, David
Thornberry, Emily
Timms, rh Mr. Stephen
Tipping, Paddy
Todd, Mr. Mark
Touhig, rh Mr. Don
Trickett, Jon
Truswell, Mr. Paul
Turner, Dr. Desmond
Turner, Mr. Neil
Twigg, Derek
Ussher, Kitty
Vaz, rh Keith
Walley, Joan
Waltho, Lynda
Ward, Claire
Wareing, Mr. Robert N.
Watson, Mr. Tom
Watts, Mr. Dave
Weir, Mr. Mike
Whitehead, Dr. Alan
Wicks, rh Malcolm
Williams, rh Mr. Alan
Williams, Mrs. Betty
Williams, Hywel
Wills, rh Mr. Michael
Wilson, Phil
Winnick, Mr. David
Winterton, rh Ms Rosie
Wishart, Pete
Woolas, Mr. Phil
Wright, Mr. Anthony
Wright, David
Wright, Mr. Iain
Wright, Dr. Tony
Wyatt, Derek
Tellers for the Noes:
Helen Goodman and
Ms Diana R. Johnson
Question accordingly negatived.
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