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the Conservative Party chairman who has been sidelined over allegations she paid for her childrens nanny from parliamentary funds, has a worse rating than Mr Osborne
the Shadow Scottish Secretary who is barely known outside Westminster, is higher than Mr Osborne.
It is better to stay silent and look a fool, rather than speak and remove all doubt.
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 GWBgeneral well-beingwas 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 Chancellorthat 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 thatin 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 Labours tax and spending commitments. We are now in an unhappy position whereby Labours tax and spending commitments are not quite as impressive as the heir to Blairthe leader of the Conservative partyclearly 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 didI suppose that it is only fair given the lack of experience on their Front Benchwas 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 Conservativewell 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 partyeffective 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.
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 Englands 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 learnedwe 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 UKs 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 stabilityto 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?
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 Britains 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 UKs 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
solutionthey 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 importancea 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 actingas far as we canto 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.
The Governments 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 Governments policies?
Ian Pearson: I would like to think that the hon. Gentleman supported our action on credit guarantees and welcomed the Bank of Englands 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 UKs transport infrastructure.
We must not let the official Opposition con the British public into thinking that we have not fixed the roofwe 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 choicesfor 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.
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.
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