Mr.
Timms: The world economy is certainly facing grave
difficulties and major challenges, and we are putting in place the
right measures to address those in Wales and across the UK. The hon.
Lady’s difficulty is that her party’s policy, in reality,
is to do nothing.
Mrs.
Gillan: That is
rubbish.
Mr.
Timms: Some of the hon. Lady’s colleagues have made
it clear that they would let the recession run its course. That is the
view being expressed on the Opposition Benches, and in particular they
have insisted that there should be no spending in response to the
recession. That is not our view. Our view is that it is the right time
to support families and businesses in what we can all see from
conditions in the world economy will be an exceptionally difficult
time. That is the reason for the stimulus announced in the pre-Budget
report and the VAT reduction, which, contrary to what she has said, is
already having an impact on spending. John Lewis reported only the
other day a significant impact on sales in their
shops—
Mrs.
Gillan: It is
Christmas.
Mr.
Timms: —thanks specifically to the VAT reduction, a
point that it made.
The
hon. Lady is absolutely right that too many people in Wales are still
economically inactive, a number that has been brought down sharply by
the Government’s policies. Far too many people were left
economically inactive in Wales because of the policies of the last
Conservative Government, who at one stage were deliberately encouraging
people to move from jobseeker’s allowance to incapacity benefit
because that reduced the headline rate of unemployment. In contrast, we
have been ensuring that those people have been able to get back into
work, and that commitment remains undimmed and will continue to be
extremely important in the coming
months. The
hon. Lady rightly asked me about the priority for skills development,
and I agree with her that that is an important priority in the coming
period. That is why my right hon. Friend the Secretary of State
announced in the pre-Budget report additional spending from the
European social fund and from the Department for Innovation,
Universities and Skills through the Train to Gain programme, which has
been doing excellent work, so that people who lose their jobs are able
to get access to the training they need and return to work as quickly
as possible. Across the UK we have more than half a million vacancies,
so now the key is to ensure that people can move into new jobs as
quickly as possible if they become unemployed. That is why we will be
working with employers, including the Royal Mail and the others listed
by my right hon. Friend, and ensuring that we navigate a path that gets
Britain through in the best possible shape and in a way that is fair to
everybody in Britain and Wales.
Mr.
Don Touhig (Islwyn) (Lab/Co-op): I welcome my right hon.
Friend’s statement. I am fully supportive of the package
announced by the Government in recent weeks and the recapitalisation of
the banks in particular. Unfortunately, the banks have not responded;
small businesses in Wales are still being starved of essential cash to
invest and to grow our economy. Will the Government set a deadline to
compel the banks to free up their lines of credit, and if not will they
take the advice of our right hon. Friend the Member for West
Dunbartonshire (John McFall), the Chairman of the Treasury Committee,
and take the banks into public
ownership?
Mr.
Timms: My right hon. Friend is right about the importance
of ensuring that businesses are able to borrow to meet their essential
needs, which has been greatly helped by the measures already announced.
We will continue to work closely with the banks, including those partly
in public ownership, to ensure that small businesses get the help that
they need. In addition, in the pre-Budget report a new small firms
financing programme of £1 billion was announced, the details of
which will be announced at the beginning of the new
year.
Mr.
Roger Williams (Brecon and Radnorshire) (LD): We believe
that the Government should use a fiscal as well as a monetary stimulus,
but they have taken the wrong decision in cutting VAT. If £12
billion was available, it should have been invested in improving
infrastructure and in sustainable social housing and affordable
housing. That would have created jobs in the construction industry and
taken us through the recession while improving the outlook for that
industry, which is suffering so badly at the
moment. Today
the House will have the opportunity to vote on the Government’s
proposals for VAT. In coming to the decision to cut VAT, which part of
the economy did the Minister think would benefit most, apart from John
Lewis? It does not have a shop in Wales at the moment, but we hope that
it may be able to invest there shortly. What effect will the VAT cut
have on the economy? At the moment, we do not believe that there is any
effect and any in the future will be very small indeed. Throughout
Wales, banks have been writing to their customers and altering the
terms of overdraft facilities. That was in the middle of the year when
those customers believed that they had those facilities on those terms
for the whole year, thus undoing all the good work that the interest
rate cuts had achieved.
I have
already questioned the Secretary of State on the burden that business
rates place on small businesses. Can the Treasury put measures in place
similar to those that Her Majesty’s Revenue and Customs has on
phasing tax payments, to extend phasing to business rates?
On fuel
poverty, many people in Wales are off the gas mains and depend upon
fuel such as liquid petroleum gas, heating oil and coal, which are
completely unregulated by Ofgem. Can the Government or the Treasury
ensure that the cost of fuel is regulated and that those people off the
gas mains are supported through what appears to be a very cold
winter?
Mr.
Timms: As the hon. Gentleman knows, we are bringing
forward capital spending as well as taking other steps for fiscal
stimulus. As the Secretary of State has pointed out, opportunities are
being taken up in Wales, as elsewhere. We will be debating the VAT
reduction later on the Floor of the House. The reduction is a very
effective measure for providing the stimulus that we are looking for.
It meets the readily acknowledged criteria for an effective stimulus in
being timely—it came into
force very quickly after the announcement—targeted and clearly
temporary. People can see that it is time-limited and that VAT will
return to its former rate at the beginning of 2010. It will inject more
than £12 billion into the economy. For example, if a typical
family spends £900 per month on household VATable goods, it
will, thanks to the reduction, find itself with an extra £20 at
the end of each month, which is £275 over the full duration of
the cut. That is exactly the stimulus that we need, particularly for
hard-up families, who will be able to use that extra cash as they
choose. I
am glad that the hon. Gentleman acknowledged the good time-to-pay
arrangements that HMRC introduced. I am pleased to tell the Committee
that they have been well taken up by businesses in Wales and elsewhere.
I am sure that he also welcomes the sharp reductions in fuel prices. He
is right in saying that it is vital that those reductions are passed on
to
consumers. Mr.
Peter Hain (Neath) (Lab): Will my right hon. Friend
confirm that the £140 million that he is allowing the Welsh
Assembly Government to bring forward is for 2009-10, and that that
could be deployed by the Plaid Cymru Minister for Economic Development
and Transport to invest in the Welsh heads of the valley road, which
has, regrettably, been postponed or, indeed,
shelved?
Mr.
Timms: My right hon. Friend is absolutely right that
funding is being brought forward to this year and next year. How it is
deployed is a matter for the Welsh Assembly
Government. Mr.
Elfyn Llwyd (Meirionnydd Nant Conwy) (PC): I welcome the
Minister to the Welsh Grand Committee. His arrival was as eagerly
awaited as that of Santa Claus, and we were all scratching our heads
and looking
around. The
right hon. Member for Islwyn referred to the banks, and he is right in
saying that the credit guarantee scheme is a useful tool, but it is
useful only if the banks lend in the first place. The hon. Member for
Brecon and Radnorshire also referred to that good point. Unless the
banks are prepared to lend, there is no point in having a credit
guarantee scheme. What are the Government doing about their apparent
dual message that on one hand the banks must ensure higher
capital-to-lending gearing, and on the other they must lend more
freely? Which is it to be? It must be one or
t’other. My
second point is about small and medium-sized enterprises and the VAT
changes to which the Minister referred. The VAT change, with the tax
change, means that an average SME with a turnover of £100,000 is
£500 worse off, and those figures have been verified. What is
being done about
that?
Mr.
Timms: I am grateful to the hon. Gentleman for his
welcome, and I apologise again for my delayed arrival. I shall comment
on his specific
points. We
must stabilise the banking system; there is no question about that.
That job must be done, and we have taken action to do so. A key benefit
must be that lending will be available to small businesses and others.
We are working with the banks to ensure that it is, and on the new
facility that was announced in the pre-Budget report, the details of
which will be published shortly.
The hon. Gentleman is absolutely right in saying that that facility
needs to be taken up by the banks, and I am confident that it will be.
There have been some helpful moves already, and I have no doubt that
there will be
more. The
hon. Gentleman made a fair point about the work that the VAT reduction
has imposed on businesses. He is right, and I take this
opportunity to pay tribute to all those businesses in Wales, especially
small businesses, that have worked extremely hard to ensure that they
have been able to deliver the reduction, which has been widely
welcomed. That work was required during a very short period—a
week—and was a remarkable achievement on the part of businesses.
There will be more work when VAT increases at the beginning of 2010,
but the reduction is providing a vital and valuable stimulus to
businesses throughout Wales, and I know that they appreciate
that. Nick
Ainger (Carmarthen, West and South Pembrokeshire) (Lab): I
welcome my right hon. Friend’s statement and the fact that now,
as with virtually every other bloc or large economy in the world, a
policy of both monetary and fiscal stimulus is being followed. It would
appear that the Conservative party is possibly the only party in the
world that is opposed to that policy.
On the issue
of bank lending, there is obviously the £7 billion, which is now
available to small and medium-sized businesses in the form of the small
business finance scheme, the European Investment Bank funding and the
export guarantee scheme, but we are hearing now from the banks
themselves. In a brief interview on the “Today” programme
this morning, Sir Victor Blank claimed that Lloyds TSB was maintaining
the same level of credit to small businesses as last year. RBS has
basically said the same thing and so has
HSBC. The
lending panel has been set up to monitor the performance of the banks,
particularly in this sector. I know that it met recently. What
monitoring is being done by the lending panel, the Treasury, the
Financial Services Authority and the Bank of England to ensure that the
banks’ claims that they are honouring the deal that has been
done with the Government and that they will continue with the credit
flow to small businesses are correct, accurate and
true?
Mr.
Timms: I am grateful to my hon. Friend for his welcome. He
is absolutely right about the importance of ensuring that those
commitments are honoured. We shall monitor what happens very carefully,
particularly in the case of those banks that have benefited from
recapitalisation. But more widely, as he said, we have set up the
lending panel to bring together the Government and the banks and others
to monitor lending and to identify areas of concern. The British
Bankers Association is also working with business representatives to
put together a new statement of principles to set out how banks and
businesses should work together. We have in the PBR—my hon.
Friend sets out the figures correctly—announced major additional
help to small businesses. It will be vital over the next few months to
ensure that help is delivered to businesses in Wales. We are determined
to do that.
Mr.
David Jones (Clwyd, West) (Con): The Financial Secretary
acknowledged in his statement that the Government expect the
construction sector to be disproportionately affected by the economic
downturn. In fact, as I think he would acknowledge, it already is.
Shortly before he arrived I raised the issue with the Under-Secretary
of State for Wales. I pointed out that in my constituency construction
companies are finding it difficult to obtain credit because of a
blanket policy on the part of banks to refuse that credit. I was very
encouraged to receive the response from the Under-Secretary that the
Government are now looking carefully at Conservative proposals for a
national loan guarantee scheme. Is that indeed the case and when does
he propose to make a further
statement?
Mr.
Timms: My right hon. Friend the Secretary of State
announced in the PBR a new small firms lending facility, the details of
which, I have said on a number of occasions, will be set out at the
beginning of the new year. Because of the current vulnerability of the
construction sector, that is a key argument for the measures we have
taken to bring forward capital spending and which the Welsh Assembly
Government have announced to bring forward capital spending in Wales.
That will support the construction sector and the economy as a
whole. Paul
Flynn (Newport, West) (Lab): Does the Minister agree that
manufacturing industry has been the bedrock of the Welsh economy for
generations, and provided many jobs, particularly multiplier jobs
outside the industry itself? There is a particular crisis at the moment
because of the lack of demand from the construction and motor
industries for the steel and aluminium industries. The Novelis plant in
my constituency in Newport and Llanwern and the other plants in other
constituencies in south Wales face similar problems. The problems are
not internal. Those industries are highly skilled, and profitable. They
have been doing a good job for a many years. There is a need for a
bridge to make sure they get through the downturn. The great fear is
that permanent damage could be done to the viability of those
industries because of a short-lived
problem.
Mr.
Timms: My hon. Friend is absolutely right about the
importance of the manufacturing sector. It is interesting that at the
beginning of this calendar year the Engineering Employers Federation
was talking about the renaissance that had unfolded in UK
manufacturing, and we have seen very impressive improvements in
manufacturing productivity in Wales. There are now export opportunities
for manufacturers, given what has happened with the exchange rate. He
is absolutely right about the importance of those industries. My
colleagues in the Department for Business, Enterprise and Regulatory
Reform are watching closely what is happening in the manufacturing
sector, and will ensure that what support can be provided is provided,
so that businesses can get through this difficult period and be in a
good position to benefit from the pick-up in the economy that will
follow. Lembit
Öpik (Montgomeryshire) (LD): Humphreys and Foulkes
in Newtown has highlighted to me the fact that the VAT reduction is
balanced out exactly by the increase in fuel duty, so that such
companies, which are dependent on fuel pricing, now pay more tax rather
than less, as they could claim back VAT but they cannot claim back fuel
duty. When VAT returns to a higher level the problem will be
exacerbated. Do the Government intend to reduce fuel duty when VAT goes
up or do they accept that they have increased tax already and they will
increase it again for those who are very dependent on the effect of
fuel duty on their business and
profitability?
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