That an humble Address be presented to Her Majesty as follows:
Most Gracious Sovereign,
We, Your Majestys most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.
Mr. Speaker: I wish to inform the House that I have selected for debate the amendment in the name of the Leader of the Opposition. Standing Order No. 33 provides that on the last day of debate on the motion for an address to Her Majesty the House may also vote on a second amendment, selected by the Speaker. I have selected the amendment in the name of the leader of the Liberal Democrats. The vote on the amendment will take place at the end of the debate after the amendment in the name of the Leader of the Opposition has been disposed of.
but humbly regret that the Gracious Speech fails to deliver a clear direction for British economic policy, does not contain measures to assist in building a low debt and low tax economy, and lacks any radical action to unblock the credit channels of our banking system; note that many individuals have seen returns on their savings severely reduced as a result of the economic downturn and regret that the Government has no plans for emergency protection of pensioners with a suspension of annuity rules; further regret the absence of a clear strategy on value added tax; and further regret the absence of measures to avoid the United Kingdom undergoing the worst recession in the G7 next year..
Thanks to your decision, Mr. Speaker, to grant our request for an emergency debate, it has been three weeks since we last examined the Governments handling of the recession that is now engulfing our country. We were then told by the Chancellor from the Dispatch Box that the measures in the pre-Budget report would hasten the end of the recession by bolstering confidence at home and the credibility of British Government policy abroad.
What has been the judgment in the last week alone on the Chancellors claim? The pound has fallen against the euro, hitting a record low earlier today and demonstrating again the Prime Ministers maxim that a weak currency is a reflection of a weak economy and a weak Government. The loss of international credibility has sent the cost of insuring British Government debt higher than insuring the debt of those two homes of French fries, Belgium and McDonalds. An independent survey out today says that the drop in the VAT rate seems to have made little difference in lifting consumer confidence and encouraging consumers to spend. The head of Barclays bank says that despite the measures
announced by the Government over the past few weeks, such as those on stamp duty, house prices will fall by at least as much next year as they have this year.
This lunchtime, the Minister for the Olympics has contradicted every statement made by the Prime Minister and the Chancellor over the past six months by admitting, in her words, that Britain is facing a recession
deeper than any that we have known.
So, what about all that talk about the 1980s and 1990s now? The Finance Minister of the worlds third largest economy has described the Governments approach as crass and breathtaking and as raising debt to a level that will take a whole generation to pay off. That is the problem with saving the worldsometimes the world answers back.
The Chancellor and the Prime Minister tried to dismiss the German Finance Ministers commentsindeed, the Prime Minister again did so just a few minutes agoas their being all to do with the internal politics of Germany. Mr. SteinbrĂ1/4ck is a Social Democrat, and the Christian Democrats issued the statement:
Peer SteinbrĂ1/4cks comments have nothing whatsoever to do with internal German politics, as Prime Minister Brown has suggested.
After years of lecturing us on how we need to share in the gains of uncontrolled financial markets, the Labour politicians cant now expect us to share in its losses. The tremendous amount of debt being offered by Britain shows a complete failure of Labour policy.
Of course, this debate should be about more than the mistakes that the Government made with their pre-Budget report, serious though they are; it is about the legislative programme for the coming year, so my hon. Friend the Member for Epsom and Ewell (Chris Grayling) will speak about the welfare reform and child poverty Bills. Let me make it clear to the Chancellor that our offer of co-operation to ensure that the Banking Bill, carried over from the previous Session, passes through Parliament by next February still holds, but we expect the powers we give the regulators to be enforced in the courts if necessary, as my right hon. Friend the Leader of the Opposition made clear today.
I wish that todays debate was an opportunity to examine the Governments response to the Equitable Life scandal and the damning report from the parliamentary ombudsman. After all, only a couple of weeks ago the Prime Minister made an absolutely unambiguous promise at the Dispatch Box:
There will be a statement before the House rises at Christmas. I can say to the hon. Gentleman that that will be done.
There will be a statement before the House rises this Christmas.[ Official Report, 3 December 2008; Vol. 485, c. 38.]
Indeed, that was followed up by a letter from the Economic Secretary to my hon. Friends the Members for Fareham (Mr. Hoban) and for Macclesfield (Sir Nicholas Winterton), saying that the Government would give their considered response to the ombudsmans
report to the House shortly, andin the Economic Secretarys own handwritingbefore the recess.
Those were the promises made to Parliamentto Members of the Houseyet now it seems that the promises are to be broken. Having waited months for the Government replyindeed, they have had a draft report for well over a yeardesperate policyholders will have to wait even longer. As the Public Administration Committee put it in a report today:
Justice further delayed will mean justice denied to even more people.
Equitable Life policyholders have suffered enough: raising hopes and then dashing them before Christmas is a shabby way to treat people. It is time the Government said sorry and accepted the ombudsmans report. I suspect that the Chancellor will not do so today, but I am sure that he will be forced to in due course.
Instead, we must focus our attention on the deepening recession into which the Government have led us, and what better place to start than by reminding the House what the Chancellor told us in the debate on the Queens Speech a year ago? That debate was held many months after the August seizure of the credit markets. It took place long after the Chancellor had discovered from reading his Financial Times that a credit crunch was happening. It was after the Northern Rock run and after warnings had come thick and fast about the downturn that lay ahead; in other words, when the Chancellor rose to speak in this debate a year ago there was absolutely no excuse for his not facing up to the economic realities, preparing the country for a forthcoming recession and readying the House for the difficult decisions that lay ahead. However, instead he told us that Britain
will grow the fastest of all the developed countries. Inflation is around target...The foundation for all those things is a strong and stable economy...That is why, as I have said time and again, we shall take no risks with stability.
What risks stability is getting into a position of making promises that cannot be afforded. That will result either in increased taxes elsewhere or, more likely, increased borrowing, which puts pressure on interest rates. That is the last thing we need, especially at this time of international uncertainty.[ Official Report, 14 November 2007; Vol. 467, c. 701.]
How did the Government move from the position a year ago, when the Chancellor boasted that he would take no risks with stability, and predicted that Britains economy would grow the fastest of all developed economies, to todays position? Now, the prediction from almost every international body is that Britains economy will contract the furthest of all developed countries in the world, and the Chancellor is taking enormous risks with stabilityrisks that mean increased taxes, increased borrowing, and pressure on long-term interest rates, as he warned us a year ago.
The Governments answer is that it is all Americas fault. That has become a kind of mantra for the
Government, like something in a panto; I know that the Chancellor has been spending time with panto characters. The Government blame sub-prime, Lehman Brothers, AIG and all that. Of course, all those things help to explain why all countries are facing tough economic circumstances; the Chancellor says that that is right. However, they do not explain why the slow-down is forecast to be worse in Britain than in any other major economy. They do not explain why the European Commission, the International Monetary Fund and the Organisation for Economic Co-operation and Development predict that Britain will have one of the steepest recessions and one of the sharpest rises in unemployment. For a decade, when the Prime Minister was Chancellor, he took personal credit for the fact that, as he modestly put it, Britain was doing better than anyone else. Now, he refuses to accept any personal responsibility for the fact that, as the world sees it, Britain is set to do worse than anyone else. That will not do.
Eleven years ago, the Prime Minister inherited a strong economy from the predecessor Government. Now, once again, Britain is on the path to being the sick man of Europe. Labour has done it again. The blame for that lies fairly and squarely with him. The truth about the Prime Ministers record is that during all his years at the Treasury, he became so convinced of his own propaganda about abolishing boom and bust that he mistook a finance and housing boom for stability, and never prepared Britain for the bust.
The Prime Minister talked of prudence endlessly from the Dispatch Box, but ran up a huge structural budget deficit. He pledged that he would be the iron Chancellor, but let spending rip. He went on and on about the long term while wrecking our pension system. He preached a kind of Presbyterian morality, yet presided over an age of excess and irresponsibility. He created a regulatory system that allowed the biggest financial crisis of our lifetime to develop entirely unnoticed. Indeed, last week he pleaded to a newspaper that he did not know what was actually happening behind the scenes.
When the credit markets froze last year, the Prime Minister froze, too. The Government were paralysed by indecision, because, as ever, he did not want to do anything that might lead him to admit that he could, in some way, be held to blame. The Budget came and went without anyone noticing, except the poor motorists, who were to be hit by higher taxes. Just days before his own party decapitated him, the drama of the collapse of Lehman Brothers and Washington Mutual threw the Prime Minister a lifeline and enabled him briefly to seize the international limelight with the recapitalisation plan that the Bank of England had drawn up.
Ever since then, the Prime Minister has been scrabbling around for other things to announceon housing, on VAT, on almost anythingregardless of whether the measures would work, regardless of the absence of any detailed policy, regardless of the cost or the impact on national debt, regardless of the burden placed on future generations, and regardless of the damage done to Britains international credibility or creditworthiness. The attitude is, It doesnt matter whether it is the right or wrong thing to do, just so long as it can be spun as something rather than nothing. That is what the last
few weeks have been all aboutthe short-term political plans of the Prime Minister, not the long-term economic interests of this country.
That is why Britain is where it is todaybadly prepared for the recession, and badly led now that the recession is upon us. It is not just that the Prime Minister failed to fix the roof when the sun was shining. [ Interruption. ] I will say it again: it is not just that the Prime Minister failed to fix the roof when the sun was shininghis plan for the recession is now failing. Britain has been in recession since Julyalmost half a yearand at some point the country will ask whether all the promise of action has actually delivered. There is no evidence that the bank recapitalisation has got credit flowing again to businesses; no evidence that the stamp duty holiday has persuaded a single person to buy a house; no evidence that the £12 billion temporary VAT cut has made the slightest difference to the confidence of a single consumer.
Mr. Frank Field (Birkenhead) (Lab): I am following the hon. Gentlemans argument carefully. He has noted the importance of getting credit out to businesses, so that they can open again after Christmas. One obvious way of doing so is to use the two nationalised banks, and perhaps the moneys that we are putting up, to cut VAT. On Wednesday, we have a chance to vote on the VAT reductionwill the hon. Gentleman seek ways to vote against it, so that Government Members who would like the money to be spent in other ways will similarly be able to vote?
Mr. Osborne: If I needed persuading before that intervention, I am totally persuaded now. We plan to vote against the VAT reduction, which has already come into effect. Because of the procedures of the House, the Government did not allow us to have a vote before it did so. Our argument, made over many weeks and against quite a lot of criticism, not just from Ministers but from various economic commentators and so on, was that we were standing in the way of a fiscal boost that would deliver a transformative effect on the British economy. There is an independent surveythe first, I suspect, of quite a fewout today that shows that there is absolutely no evidence that that measure has had any impact whatsoever on consumer confidence.
Mr. Field: May I push the hon. Gentleman further on that? Members on both sides of the House will be desperately worried about how the unemployment figures out on Wednesday or Thursday will begin to affect their constituencies, and what the level of unemployment will be after Christmas. The one thing that we could do to mitigate those redundancies would be to ensure that firms, which will prosper only if the banks deliver credit to them, received credit. The banks are clearly not going to do that, so we should use the moneys from VAT to go through the two nationalised banks so that firms can get credit and open again after Christmas.
The right hon. Gentleman makes a compelling case, with which I agree, about the need to get credit flowing from the banks to businesses. That is essential if we are to keep small and medium-sized businesses in particular, but also larger businesses, afloat. That is the single most pressing problem facing the Government. I disagree with him about the method: I think that a different approach is needed, and I shall discuss it in detail [ Interruption. ] The hon. Member
for Bishop Auckland (Helen Goodman) giggles, but I think that the Chancellor is about to copy something akin to what the right hon. Gentleman or I have announced about a loan guarantee scheme, so perhaps she will have to swallow her giggles. However, I certainly agree that we need to do something about the problem. I would introduce a loan guarantee scheme similar to the inter-bank scheme that is now in place, with the Government underwriting lending, and I shall come on to discuss that in more detail.
Mr. Tobias Ellwood (Bournemouth, East) (Con): Supporting businesses is an aim shared by Members in all parts of the House. The Government have borrowed £37 billion of taxpayers money and given it to the banks, but they have set an interest rate to the banks of 12 per cent. They then expect the banks to lend to small businesses at a rate of about 3 per cent. The banks cannot be pulled both ways: that is why money is getting stuck, and it is why small and medium-sized businesses are not receiving the support that they need from the Government.
Mr. Osborne: My hon. Friend makes an excellent point. Again, I shall come on to discuss recapitalisation. I certainly think that the Chancellor needs to revisit the terms of recapitalisation, as the 12 per cent. charge is too high, if one considers the coupon bond charged in the United States, Germany, France and other countries. That is one reason why our banking system has the problems that it does.
a low debt and low tax economy.
To me and many of my constituents, that suggests that there would be considerable cuts in public expenditure. That is a coherent political position, but my constituents deserve to know what cuts the hon. Gentleman and his party propose to make to public expenditure.
Mr. Osborne: Let me say two things to the hon. Gentleman. First, according to the Institute for Fiscal Studies, if we use the same methodology as the Labour party used against us at the last electionas, indeed, the Chancellor usedthe thing that Labour Members all cheered a couple of weeks ago amounted to a £37 billion cut in public expenditure, so no one will ever believe anything they say again about spending cuts. Secondly, when it comes to specific Departments [Interruption.] Treasury Ministers say, Answer the question. They probably do not know the answer to this question, so I have some sympathy with them.