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Sir Stuart Bell (Middlesbrough) (Lab): Relative to the fiscal stimuli throughout Europe, is it not a fact that Germany is in recession, the eurozone is in recession and, come January, the United States may be in recession? Following on from the point made by the Leader of the Opposition, may I say that even the G20s communiqué referred to fiscal stimulus? Should that fiscal stimulus cover tax cuts, interest rate cuts above the 2 per cent. and spending plans, such as those for Crossrail? Is that not what the British people wishor do they wish for the woeful and curmudgeonly approach of the Opposition?
The Prime Minister: I am surprised that the Opposition think that they have such genius that they can stand out against the opinion that is being expressed by right-wing and left-wing Governments and right-wing and left-wing economists. If the Opposition put themselves in a situation in which, facing a world downturn and the prospect of inflation reducingas it will over the next yearand when we have interest rate cuts, they are unprepared to use the fiscal weapon, people will believe, as they will then conclude, that the Conservatives see no role for government in sorting out those problems. That is a big mistake that the Conservative party is making.
Sir Peter Tapsell (Louth and Horncastle) (Con): May I assure the Prime Minister, putting aside for one moment his heavy personal responsibility for the very serious situation in which we find ourselves, that I think he is right to continue here in Britain the overdue reduction in interest ratesas I am sure he intends to doto boost consumer demand, which I hope will be done by a serious cut in VAT, and to increase investment in public works? More controversially on the Conservative Benches, and speaking as a Keynesian, may I say that he is right to fund that by further borrowing and to watch, as I am sure he hopes to do, the next two Governments trying to pay off the bills from an office in the International Monetary Fund?
The Prime Minister: Here we have a voice from the Conservative party saying that there should be a fiscal stimulus[ Interruption.] The Leader of the Opposition suggests that the hon. Member for Louth and Horncastle (Sir Peter Tapsell) was joking, but I think that he was serious. He wants to see a fiscal stimulus because he understands what Conservative Front Benchers have decided they do not want to understandthat fiscal action is necessary in the circumstances that we face. Indeed, two weeks ago the Leader of the Opposition said that there had to be more borrowing: now he says that there should not be more borrowing. The Opposition cannot make up their mind in any given circumstances. The only change they represent is that they change their mind every week.
Nigel Griffiths (Edinburgh, South) (Lab): Will my right hon. Friend take no lessons from those who talk the pound down today and who sent the pound down 16 years ago with a disastrous exit from the exchange rate mechanism, which caused a record number of bankruptcies, a record number of people losing their homes, and record unemployment? Some people never learn.
The Prime Minister: I hope that the Opposition will reflect on what they have said about sterling. It is one thing to get a cheap and quick headline: it is another thing to take responsible action on behalf of the British economy. These are the people who said at their party conference, when they were in another particular predicament, that they would work with the Government and we would have all-party agreement on economic policy[ Interruption.] Does the Leader of the Opposition deny saying that? That is what they said then, but now they want to change their mind every week on policy, simply to get a headline. As one of their documents said a few days ago, the most important thing is getting a headline and it does not really matter what is said.
The Prime Minister: A year ago, the dollar was at a low level. This year, the pound is at a lower level. Currencies change[ Interruption.] If Conservatives want to give a running commentary on sterling, they are not even responsible enough to be in opposition.
Ms Sally Keeble (Northampton, North) (Lab): I welcome my right hon. Friends commitment to the introduction of international regulation for the credit ratings agencies next March. However, I urge him not to listen to the Opposition about light-touch, or even no-touch regulation, and ensure that the proposals are robust and provide real confidence for institutions and individual investors.
Mr. Michael Fallon (Sevenoaks) (Con): Is it not often the case that in a major conflagration the arsonist is spotted in the crowd watching the fire brigade at work? Does the Prime Minister still not accept any responsibility for the fact that five of our 10 biggest banks were allowed to over-lend under a system of supervision that he set up, and that the public finances were hopelessly over-borrowed under his chancellorship?
The Prime Minister: This is the Conservative party that was saying a few months ago that it wanted less regulation in our banking system. This is the Conservative party that produced a document saying that it was time for deregulation of mortgages. This is the Conservative party that cannot now claim that it has the answers to a crisis that it has no idea what to do about.
Mr. Doug Henderson (Newcastle upon Tyne, North) (Lab): My right hon. Friend will know that Members memories tend to be very short. Perhaps he can jog our memories and tell us whether any one of the leaders at the conference suggested that they thought that it was inappropriate to borrow to provide a fiscal stimulus in their country or in any other country of the G20.
The Prime Minister:
My hon. Friend is absolutely right: a consensus is developing across the world. The G20 is a group of emerging markets and developed countries. It represents every continent in the world and a consensus is developing, from China to the US, to Canada, across Europe and over to Asia, that the way
through this period of unique circumstancesa downturn, a credit crunch and falling inflationis a fiscal stimulus. I do not think that, on reflection, many Conservatives would disagree. This is the right thing to do, and I hope that they will go back to the drawing board and think again.
Mr. John Redwood (Wokingham) (Con): Why did the Prime Minister ignore the strong advice that we gave him in the economic policy review, which he often quotes, to give powers back to the Bank of England and to concentrate regulation on capital adequacy because there was a credit boom under way? He should not in any way imply that we were ignorant of that fact. We warned him before Northern Rock went down, and if he had taken our advice we would not have had to nationalise a single bank.
Derek Wyatt (Sittingbourne and Sheppey) (Lab): My constituents understand that doing nothing is not an option. They know what a depression is because they lived through one 18 years ago, and so they welcome intervention in the market. When my right hon. Friend chairs the G20, does he intend eventually to wrap the G8 into the G20? If the G20 is to become a financial regulator, what will happen to the IMF and the World Bank?
The Prime Minister: The reform of the international institutions that include the International Monetary Fund, the World Bank, the G8 and the G20 will be very much the subject of discussion at the next meeting of the G20. We have put forward our proposals for reform and other countries will put forward theirs. I believe that we will come to recognise that in the new world economy decisions cannot be made about the future unless the Asian countries and a wider spectrum of representation are included in discussions about the big macro-economic decisions. That is why I think that there will be general agreement about the need for change and I hope, on this occasion, that we will have support from all parties in the House when that change happens.
Mr. John Maples (Stratford-on-Avon) (Con): The Chancellor, I mean the Prime Ministerhe is doing both jobs, I thinkis talking as though the economy is not already receiving a huge fiscal boost. The Government will run a deficit this year of £50 billion or £60 billion. If we add all those American banks that went wrong, such as Northern Rock and Halifax Bank of Scotland, it must come to well over £100 billion. The recession has to take its course [ Interruption. ] Just listen. Bad debts have to be written off, bad investments have to be written off and people and businesses need to repair their balance sheets. The Prime Minister knows that, even if some of his Back Benchers do not. If that does not happen, there will not be a solid base for recovery. He risks endangering that base for recovery with a massive increase in Government borrowing that will leave a legacy of debt and taxes into the future.
The Prime Minister: Now we have a new position from the Conservative party, which I think people will reflect on: the recession has to take its course and nothing can be done about it. We have heard three positions from the Conservative party: the hon. Member for Louth and Horncastle (Sir Peter Tapsell) says that there has to be fiscal action; the hon. Member for Stratford-on-Avon (Mr. Maples) says that nothing can be done; and those on the Front Bench are dreaming up initiatives every day, all of which fail before they even reach the scrutiny of the afternoon. The Conservative party will have to think about whether it has a responsible economic policy at all.
Clive Efford (Eltham) (Lab): I congratulate my right hon. Friend on the leadership that he has shown in trying to deal with this worldwide economic crisis. Will he tell the House whether anyone was prepared to argue the case for deregulation at the G20 summit? Is there anybody of any note, other than the Opposition, who is arguing that line?
The Prime Minister: Well, because the Conservative Front Bench was not represented at the G20 conference, nobody was arguing the case for deregulation. I suspect that if Conservative Front Benchers continue to argue the case for deregulation, they will not be at any other conference for a very long time.
The Conservative party wants to deny the truth that this was a downturn started in America with the financial sector problems, as acknowledged by one Conservative Member, the hon. Member for Bournemouth, West (Sir John Butterfill) and that it cannot be sorted out by national action alone and needs international action, including that action within Europe that the Conservative party would not support. The international downturn needs monetary policy to be allied to fiscal action, and the Conservative party cannot contemplate that. On every major issue it is out of touch not just with national opinion but with international opinion, too.
Alistair Burt (North-East Bedfordshire) (Con): The G20 will no doubt have considered how to restore public confidence in political and financial institutions and how to reassure the public that they are not simply being offered a false prospectus of jam today and pain tomorrow. In view of that, and bearing in mind the pain and trouble that has already been caused, will the Prime Minister assure us that he is leading international consensus to ban from use anywhere the phrase, No return to boom and bust?
The Prime Minister: This country had 10 years of economic growth under a Labour Government and 3 million more jobssomething the Conservative party never achieved. Given that we now know that the Conservative party does not even have a policy to deal with the downturn, people will understand that they are better off with the leadership they have.
Laura Moffatt (Crawley) (Lab):
Many people around the world know that the measures being taken today are to defend their jobs and ensure that they have a future. For small businesses in the UK, that is incredibly important, so will my right hon. Friend in his leadership of the G20 take to them the message that small businesses in the
UK and around the world are the backbone of our economies and need to be supported? What will he do to support them around the world?
The Prime Minister: My hon. Friend is absolutely right. Working with small businesses in her constituency, she does a great deal to promote the local economy. Interest rates have come down to 3 per cent., which will help small businesses. Having recapitalised the banks we have to persuade them that it is necessary to lend, and to remove the aversion to risk that exists in many banking institutions. Those who have been recapitalised by the Government signed up to stringent proceduresthat they will make capital available for small businesses at 2007 levelsand we intend to work with them to ensure that happens. I hope that there will be all-party support for these things, but I am afraid that we cannot see it in the Conservative party today.
The Prime Minister: I believe there is now a genuine desire for international action to deal with the problems of offshore centres that do not respond to the normal regulatory rules that exist in the rest of the world. We can see from the communiqué that there is a determination to take action where it is necessary. Again, that is one of the subjects for debate after the recommendations on 31 March.
Mr. William Cash (Stone) (Con): The Prime Minister noticeably did not answer the question that was just put about action at EU level. He answered only in the international context. During the statement, he repeatedly used the word co-ordination when in fact the declaration on the summit repeatedly uses the word co-operation. He knows perfectly well what the difference isat least I think he doesso will he please tell us?
The Prime Minister: I am referring to the statement made after the summit by the President of the European Union, President Sarkozy, when he called for concerted action and coordination. There is general agreement that Europe must work together to deal with these problems. Unfortunately, the policy that I think the Conservative party is trying to put forward is a rigid form of the growth and stability pact. The Conservatives oppose it in Europe but seem to want to apply it in Britain.
Kerry McCarthy (Bristol, East) (Lab):
Is it not the case that in previous recessions the bulk of Government borrowing had to go on funding a massive bill for unemployment benefit? Will my right hon. Friend join me in rejecting the Pontius Pilate approach of Opposition Members who want to wash their hands of responsibility
for tackling the problems, and will he make sure that we have fiscal stimulus that will protect our constituents from the misery that mass unemployment would cause?
The Prime Minister: Last week, the Conservative party announced a proposal for employment that would cut employers national insurance and spend £2.5 billion on it. It was immediately [ Interruption. ] The right hon. Gentleman says he knows that we have been looking at it. It was immediately rejected by the chambers of commerce and by the national Federation of Small Businesses because as usual [ Interruption. ] The CBI welcomed it, but it was designed to help small businesses and the national Federation of Small Businesses says not only that it is a bad policy but that it would be counter-productive. The Conservatives spent £2.5 billion on that great initiative and got all their figures wrong as usual. It was confused, contradictory and ill thought out, and I predict we will not hear much about it from the Conservatives again.
Mr. Brian Binley (Northampton, South) (Con): The Prime Minister talks about jobs in this country, yet over 11 years he has added £66 billion to the burden for businesses in this country through regulation and additional costs. That is the burden that business is facing and that is what he can do something about, but he fails to do so. I challenge him today not to go ahead with the 1 per cent. increase in corporation tax due to come into effect next April, on the basis that business needs all the money it can get to protect the jobs it is providing at this very moment.
The Prime Minister: When we came to power, corporation tax was 33 per cent.; it is now 28 per cent. I fear that the hon. Gentleman is reading from the old script when he complains about regulation. I think that everybody understands the necessity for regulation in the financial sector to protect small businesses and savers.
Andrew Miller (Ellesmere Port and Neston) (Lab): Did my right hon. Friend have any discussions in the United States with his colleagues about the motor vehicle industry? Does he agree that we need sustained investment in that industry, particularly in newer technologies? That will have a much more positive effect than talking down the economy, which is what some people believe in doing.
The Prime Minister: Conservative Members ask about car tax; if they had their way, they would put up fuel duty by 5p in the pound. That is the Conservatives policy for fuel duty. That is what they call the fuel duty stabiliser. It would mean an extra 5p, and they cannot deny that that is their policy.
Mr. David Curry (Skipton and Ripon) (Con):
The Prime Minister will know that interest rates are a double-edged sword, because low interest rates mean cuts in the
value of savings, of pension funds, and of annuity rates. In his pre-Budget statement, will he take action to help at least elderly people, who may be the most vulnerable, by suspending the present annuity rules that can lock people into a punishingly low rate of return as they grow older?
The Prime Minister: There is more than one alternative for pensioners at the age at which the question of an annuity arises, but I have to say to the right hon. Gentleman that as far as pensioners are concerned, the winter allowance is going up to £250 for all households of people over 60, and to £400 for households of people over 80. We recognise that for the vast majority of pensioners, the issue is their heating bills over the winter months. That is why we have raised the winter allowance.
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