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In response, the Prime Minister claims that Germany’s fiscal expansion backs up his own plans. However, Germany went into the downturn with a budget surplus; it fixed the roof when the sun was shining. In contrast, the Prime Minister led Britain into the downturn with the largest budget deficit in the industrialised world. Next, he claimed that this was all to do with internal German politics, but has not that claim been shattered, too? The Christian Democrats’ budget spokesman said that the German Finance Minister’s comments

The Prime Minister is always telling us that he wants a consensus. He certainly got one in Germany: they all think that he has got it wrong.

With the EU Council in mind, will the Prime Minister act to deal with what the Governor of the Bank of England says is the most pressing challenge: getting banks lending again? Will he adopt our proposal for a national loan guarantee scheme? I have the draft Bill here. Will he support it, so that we can get business trading and Britain out of the recession? Instead of dreaming about saving the world, when will the Prime Minister start saving businesses here in Britain?

The Prime Minister: Let me say first of all that I agree with what the right hon. Gentleman says about the losses of life in Iraq and Afghanistan. It is particularly poignant, as we face Christmas, that so many families will be without their loved ones as a result of those deaths.

I thank the right hon. Gentleman for his support for what we are doing on Afghanistan, Pakistan and India. Our plan in Afghanistan is clear: to complement the military action that we have to take—because this is the front line against the Taliban—by helping Afghan people take more control of their lives and have a stake in the future. To do that—yes, we must tackle corruption. That is why we have offered President Karzai a multi-agency taskforce, which we will put at his side in Kabul to help him deal with the problems. It is also why we have taken the necessary action to increase our troop numbers in central Helmand so that they can deal with the Taliban in that vital area of Helmand.

When I was in Musa Qala, I could see that a place that the Taliban held a year ago is now a place where there is law and order. A school and a hospital had just been built and opened as a result of the investment that we and others are making. Afghan people are now taking control of the judiciary system and law and order in that area. If that can be done in Musa Qala, it can be done in other parts of the region.

I have to dispute what the right hon. Gentleman says about the money that we are providing for helicopters and vehicles. We announced only last week more
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provision for helicopters, and we have spent £1 billion on vehicles. We are determined that our troops have the best and most modern equipment.

I agree with the right hon. Gentleman that we must deal with the root of the problems in Pakistan, and I support what President Zardari is doing. I did meet General Kayani and talked to him about his responsibilities and those of the Pakistani army and the ISI to ensure that terrorists who have operated from Pakistan to do damage in India are properly rooted out, that the training camps of TEL are closed down and that order is brought back to the FATA areas. I believe that General Kayani shares President Zardari’s view that those things must be done, so that Pakistan can show the world that it is taking the action that is necessary.

I now turn to the European meeting. The right hon. Gentleman did not say much about climate change, but he questioned whether we were doing enough. I believe that the agreement that we have reached on a 20 per cent. cut in emissions by 2020 is an historic agreement. This is the first time that 27 countries have come together, and that was possible only because we are part of the European Union. It is now possible to move forward to the next stage, which is to win a worldwide treaty at Copenhagen, because the European Union—and, hopefully, the American Government—can join together in taking the action that is necessary.

As for Ireland, let me repeat to the right hon. Gentleman that the agreement to meet Irish concerns means that the Lisbon treaty in no way affects the rights of member states to make taxation decisions or individual member states’ defence policies—both things that we in Britain have always insisted on. We have also made it clear that the charter of fundamental rights creates no new rights at the EU level. That is something that we have always insisted on, and which the Irish now want as part of their protocol. Therefore, it was perfectly proper for us to support the Irish in their determination to get those three things made absolutely clear, as well as to have a Commissioner of their own.

The right hon. Gentleman talked about what the European Union is doing on the economy, but it is interesting to read what President Sarkozy has said:

and what Chancellor Merkel has said:

The one thing that the right hon. Gentleman tries to deny, by quoting people whom he would never quote in ordinary circumstances—German Finance Ministers and European Union politicians—is the one thing that is absolutely true: that the whole of the rest of Europe wants a fiscal stimulus, and wants it to complement the interest rate cuts that are being made. The Conservative party does not even have the Czech social forum with it on this occasion. Not one of the leading parties in Europe supports the position of the Conservative party.

Why is that the case? Because the Conservative party has committed itself not only to doing nothing during this period, but to public spending cuts. The Conservatives say that they will cut public spending from 2010. Just at the point when people need help, they revert to the old policies of the 1980s and 1990s. That is what made
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people think of the Conservative party as the nasty party. The Conservatives will give no help to home owners and no help to small businesses, because they will spend no money. They have announced support for a national business guarantee scheme, but there is no public money behind it, as a result of their decisions to cut public spending, and there is no help for the unemployed. This is the Conservative party that we are coming to see. At a time when people need help at Christmas, the Conservatives would pull the help away. It is the same old uncaring Conservative party of the past.

Mr. Nick Clegg (Sheffield, Hallam) (LD): May I add my expressions of sympathy and condolence to the family and friends of Lance-Corporal Steven Fellows, Corporal Marc Birch, Sergeant John Manuel and Marine Damian Davies, who tragically lost their lives in Afghanistan, and to the family and friends of Lee Churcher, who, sadly, died in Iraq? We all owe them a huge debt for their service and sacrifice.

Like so many European Union summits before it, last week’s summit was stronger on words than action, richer in promises than in delivery. I welcome the summit proposals for a fiscal stimulus to boost the economy, in the shape of tax cuts and public investment. The question, then, is: why is the Prime Minister not properly practising here at home what he has preached in the European Union? Instead of having his short-term VAT cut, why will he not make the big, permanent, fair tax cuts for ordinary families that were called for at the European summit?

Instead of wasting extra borrowed money on that VAT cut, why will the Prime Minister not invest in green infrastructure for Britain’s future, creating green jobs and green growth, as were also called for at the summit? Does the Prime Minister not see that if he does not boost growth in that way—permanent tax cuts and green jobs—Britain will fall behind those countries in Europe that he has been boasting about beating for about a decade? Already, in some places one can no longer buy a whole euro for a pound. Does the Prime Minister recognise that many eurozone economies could surge ahead of Britain, under his leadership, leaving us once again as the sick man of Europe?

The summit was a wasted opportunity to defeat climate change. All those of us who want our children to have a planet worth living on will be disappointed that dirty industry has been given extra time to clean up its act. Will the Prime Minister tell us when the commitments will be reviewed, and when the loopholes for dirty industry will finally be closed?

The Prime Minister also told us about his visits to Afghanistan, India and Pakistan. I welcome his words of commitment to those countries and support the temporary increase of troops until August in Afghanistan. Does he now recognise that any lasting peace in that country will have to come from a regional agreement—like the Dayton peace accords in the Balkans—and that we need to start talking now to China, Russia and Iran? Does he also agree that, if the local pragmatists in the Taliban are to be split from the national fundamentalists, the talks with the moderate Taliban that are going on in the shadows need to be brought out into the light and given new emphasis?

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Finally, I was disturbed to see that Zimbabwe warranted only a few words in the conclusions of the summit, even as millions face disease and starvation, and no words at all from the Prime Minister this afternoon. The Government have got their priorities wrong: instead of being tough on Mugabe, they are being tough on his victims, by refusing to allow Zimbabwean asylum seekers here to work, and, despite assurances to the contrary, by still deporting Zimbabweans to their fate—including Privilege Thalambo, who was arrested with her two daughters for deportation just last Friday.

The Prime Minister talks with great passion about Africa, but he is not providing the right leadership. He has given the wrong leadership on the Congo. Why, instead of encouraging EU leaders to send EU troops, has he encouraged them not to send them? He has also given the wrong leadership on Zimbabwe. Why has he not pushed for international action by the United Nations under the new doctrine of responsibility to protect?

Does the Prime Minister not agree that, on the economy, on climate change and on Africa, making the right promises is the easy bit, but delivering them is the real test?

The Prime Minister: The right hon. Gentleman’s whole theme was that the summit was stronger on words than on action; if any group in the world is stronger on words than on action, it is the Liberal party.

I shall answer individually each of the questions that the right hon. Gentleman has asked. On troops in Afghanistan, I am grateful for his support for the additional mission to ensure that central Helmand is free of the Taliban.

On Zimbabwe, I disagree that we have done little; we have done a huge amount to try to get humanitarian aid to the people who are affected by cholera, to persuade the southern African states to take the necessary action, to bring this forward to the Security Council, as we are doing, and to ensure that the whole world understands the blood-stained regime that we are dealing with in Zimbabwe. We will continue our efforts to try to persuade African leaders to take a tougher stand on the issue.

On the Congo, I think that the right hon. Gentleman realises that, in preference to rushing to deploy an EU force at the moment, the most important thing is to strengthen the UN force. It is to rise from 17,000 to 20,000, and we have put aside some money to help the recruiting of the additional troops for work in the Congo. By far the quickest and most effective way of getting help to people there, and of dealing with the incursions that are taking place, is to strengthen the numbers, the quality and the leadership of the UN force on the ground.

On climate change, I also disagree with the right hon. Gentleman. There is a debate to be had about carbon leakage, and there is to be a rigorous examination of its impact. No action will be taken to exclude the non-power sectors of the economy from auctioning until that rigorous examination has been carried out. The proposals will then go back to the Council for further discussion within six months, so that we can be clear that carbon leakage is not being used as an excuse to escape responsibility for taking action on climate change. Our objectives of a 20 per cent. cut in emissions, of 100 per cent. power auctioning and of a €9 billion commitment
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to carbon capture and storage were all achieved at the summit, and, for all the difficulties that the right hon. Gentleman has raised about carbon leakage—a matter that has still to come back to be discussed in full later—there have been enormous advances that will put Europe in a position to take the lead in Copenhagen in securing a climate change agreement.

I know that the right hon. Gentleman does not favour the VAT cuts that have taken place, but I believe that they are already making a difference, and I hope that he will support the increase in public spending that is taking place as a result of decisions that we have made. Not only has £5 billion already been allocated to small businesses, with a great deal more to come, but a £10 billion increase in the capital budget from last year to next year will enable us to proceed with our plans for roads, transport, schools and hospitals in a way that will employ more people. I hope that the Liberal party will continue to support that action, which is necessary to inject more capital spending into the economy at a time when it is most needed.

The fact of the matter is that monetary policy has a transmission mechanism that is impaired, and we cannot rely totally on monetary policy. No other major country in the world is saying that monetary policy alone can do this work, apart from the people who represent the Conservative party at the moment. Fiscal policy is absolutely essential, especially at a time of low inflation and low interest rates: the case for using fiscal policy is even stronger then.

It is unfortunate that the Conservatives have not learned the basic lesson of the 1970s and 1980s that a recession is prolonged by a failure to invest and a failure to use capital spending. The Liberals and I are agreed on the need for capital investment. The Conservative party should go back to the drawing board and think again.

Mike Gapes (Ilford, South) (Lab/Co-op): The Prime Minister has rightly referred to his efforts to improve the climate between India and Pakistan and to secure greater co-operation against terrorism, but does he not agree that the Afghan Government also have a responsibility to improve co-operation with Pakistan so that there is a collective effort? He referred to burden sharing. What discussions has he had with his German partners in NATO about Germany’s beginning at last to pull its weight in European and NATO security, especially in the context of the dangerous areas in Afghanistan?

The Prime Minister: I should point out to my hon. Friend that the German Government have taken responsibility for the training of police in Afghanistan. They have a number of people allocated from Germany to do that, and they are taking responsibility for the rest of the European Union to do that.

If we are to succeed in Afghanistan, we will have to increase not only the number of soldiers and armed forces trained—70,000 are being trained at the moment—but the quality and quantity of police on the ground to do the job. Those who visit Musa Qala, as I did, will see that the police force is working in providing law and order. In every other part of Afghanistan we must carry out the training that is absolutely essential, and the German Government have agreed to take the lead in that.

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Mr. James Arbuthnot (North-East Hampshire) (Con): As I listened to the Prime Minister reading out the list of reasons why we needed to be in Afghanistan, I found myself agreeing with them, but not inspired or enthused by them. Is there anything that he can do to inspire the country so that it actually starts to believe, with some enthusiasm, the reasons why we need to be in Afghanistan?

The Prime Minister: I have said before and I say again—and I think that the country understands this—that Afghanistan is the front line against the Taliban as well as al-Qaeda. If we are to prevent terrorists from Pakistan and Afghanistan from entering our country, we need to be both in Afghanistan and working with the Pakistani authorities to deal with terrorism.

Afghanistan is now a democracy. Schools have been built and young people, including girls, are going to school and receiving an education. Health centres are also being built. Yes, the Taliban have changed their tactics and it is now guerrilla warfare that is being practised through roadside devices, suicide bombings and other means, but we are in a position to turn the Taliban back in many areas in Helmand, and where we have not yet done so, we are taking action to do so. I believe that if we are to protect ourselves at home, we must remember that the terrorism that affects us in Britain starts from Pakistan and Afghanistan.

Sir Stuart Bell (Middlesbrough) (Lab): I welcome the Prime Minister’s statement that the European Council has endorsed the European Commission’s recommendation that €200 billion should be put into the European economies, building on the €62 billion from France, the €32 billion from Germany and the €2.18 billion from Portugal, as well as a future $800 billion from the United States. Given the flawed monetary policy to which the Prime Minister has referred, is it not beyond peradventure that a monetary policy plus fiscal stimulus is the only way out of the difficulties, and that to talk consistently of a national loans scheme for small businesses when one already exists is simply a camouflage for having no policy at all?

The Prime Minister: My hon. Friend is absolutely right that what used to be called the one-club policy of using only interest rates—of using only monetary policy—will not work in the circumstances that we now face. The more the Conservative party ties itself to that, the more it ties itself to the failed policies of the past. The reason why fiscal policy is important is that we are in a period of low inflation with low interest rates—low inflation next year, following the low interest rates we currently have. That is why fiscal policy can have the greatest effect. If the Conservative party is going to say that this is the right time to stop building schools, to stop building hospitals, to cut back on transport and to cut back on the roads, and to say that it will severely cut public spending from 2010 onwards, it will have to explain why it is making nurses, doctors, teachers and others unemployed. That is the policy of the Conservative party.

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