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Consumer Demand

4. Hugh Bayley (City of York) (Lab): What recent assessment he has made of the effectiveness of his Department’s policies to encourage consumer demand. [254311]

The Minister for Trade, Development and Consumer Affairs (Mr. Gareth Thomas): The Government have a variety of measures in place to encourage consumer demand. Within the Department, among other measures, we are conducting a wide-ranging review of the effectiveness of the consumer protection regime. That is one of a number of measures that will assist in giving consumers renewed confidence. We will announce the outcomes of the review in due course.

Hugh Bayley: With the economy in recession, it is important to do everything we can to improve demand for goods and services. Has the Department considered the impact that the cut in VAT has had on increasing demand and safeguarding jobs?

Mr. Thomas: As my hon. Friend will recognise, the VAT cut, and other questions around taxation, are very much a matter for the Treasury, so the Treasury will review the effectiveness of that measure. However, it is interesting to note the support from several bodies that could in no way be described as friends of the Government all the time—the Institute for Fiscal Studies is one, and the Society of Motor Manufacturers and Traders is another—but that welcomed the impact of the cut in VAT, as indeed have a number of retailers. Perhaps that is because it represents the largest single tax cut for some 20 years. It is also just one of a number of areas about which the right hon. and learned Member for Rushcliffe (Mr. Clarke) disagrees with his shadow Chancellor.

Mr. Christopher Chope (Christchurch) (Con): Is the Minister aware of an example of a case in which the Government are actively suppressing demand—a case about which I wrote to the Secretary of State on 10 December? I have not had a reply, despite putting down parliamentary questions. Eighty jobs in my constituency are threatened because the Government have changed the regulations, making it more difficult for foreign airlines to have their pilots trained on simulator training equipment in a company in my constituency. Is not that an example of the Government speaking with one voice and acting in another way?

Mr. Thomas: If the hon. Gentleman had written to me, I would, as he knows, have been very happy to reply. I do not know what has happened in the particular case that he refers to. He has clearly written to the Department, and I will chase up a response for him as a result of his question.

Mr. Jim Devine (Livingston) (Lab): As my hon. Friend is aware, many scams are taking place—phishing expeditions, for example—on computers. What is the Department doing to protect consumers from those scams?

Mr. Thomas: My hon. Friend is right to say that consumer demand can suffer when people are the victims of scams. He may not be aware that the Office of Fair Trading and the Trading Standards Institute have just
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launched an effort to make people aware of the risks of scams—scams awareness month. I pay tribute to the all-party group on consumer affairs and trading standards, which supported the OFT and the TSI in launching that month’s-worth of awareness-raising activities just this week. It is one of a number of measures, alongside investment in scam-buster teams and teams to deal with illegal money lending, through which we are seeking to crack down on the rogues who want to exploit vulnerable consumers at this time.

Mr. Richard Spring (West Suffolk) (Con): Given the universally held view at home and abroad that the VAT cut has been ineffective in stimulating demand, what assessment has the Department made of the effect of the VAT cut on slumping car sales in this country?

Mr. Thomas: With all due respect to the hon. Gentleman, I do not think that his view of the VAT cut is shared abroad or at home. The only place where that view is held is among the ranks of the Opposition. He would do well to review what the Institute for Fiscal Studies said about the VAT cut, and the comments of the Society of Motor Manufacturers and Traders. He might also wish to review the comments that the shadow Business Secretary made before the VAT cut was introduced.

Mr. Denis MacShane (Rotherham) (Lab): Has my hon. Friend seen the important article by Professor Thomas Piketty, France’s leading economist, praising the VAT cut as a way of increasing demand across the economy, and suggesting that it should be applied across Europe? It is only the economic illiterates surrounding the new shadow Business Secretary who believe the opposite. Will his Department look at the example of Germany and France, which are offering scrap-and-build incentives whereby people bring in their old polluting cars and buy new ones?

Mr. Thomas: I hope that my right hon. Friend will forgive me if I concentrate on reading the Harrow Observer and the Harrow Times. I will, however, rush to dig out the article to which he refers. I suspect that the comments he mentions are just one indication of the considerable support that exists for the measures that my right hon. Friends the Chancellor, the Prime Minister and the Business Secretary have taken to restimulate demand in the UK economy and lead efforts to boost consumer demand. The VAT cut, the fiscal stimulus package and the increase in incomes that pensioners will see in their bank accounts are all examples of the measures that we have taken—measures that the Opposition continue to oppose.

Motor Industry

5. Mr. Jim Cunningham (Coventry, South) (Lab): What recent steps his Department has taken to support the motor industry; and if he will make a statement. [254312]

The Parliamentary Under-Secretary of State for Business, Enterprise and Regulatory Reform (Ian Pearson): We have already announced support for businesses, including the automotive supply chain, through the enterprise finance guarantee and the working capital scheme, and helped to secure €8 billion for the sector through the
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European Investment Bank. Last week we announced a £2.3 billion package to support lending to the automotive industry, and work is under way with the European Commission to ensure that we can move forward on these measures as quickly as possible.

Mr. Cunningham: What progress has been made with Jaguar Land Rover in any discussions or negotiations about assistance? Can the Minister define what assistance he is offering?

Ian Pearson: We have been in discussions with Jaguar Land Rover for a period of time. We are certainly aware of the company’s situation, and we have been supportive by encouraging it to go to the European Investment Bank for finance. The measures that we announced last Tuesday will provide guarantees for any loan that JLR secures from the EIB, but the company has other requests and we will continue our dialogue with them. The key thing to stress is that we are talking about taxpayers’ money, and we need to ensure that that money is used in the most effective way possible. We will continue to do that.

Mr. Mark Prisk (Hertford and Stortford) (Con): The announcement of aid last week came four months after the Minister first promised to help, but even today, as we learn that car sales have fallen again, the industry still does not have the details it needs to plan. There is no plan to help with consumer demand and loans, and the Government have now admitted that they have not even cleared their plans with the European Commission. Given that most of our competitors have already injected finance into their car industry, what is the problem? Do not Ministers understand the urgency, or is it just a matter of incompetence?

Ian Pearson: The hon. Gentleman ought to welcome the fact that we have announced a £2.3 billion package of loan guarantees to the industry. May I provide some of the details that he seems studiously to ignore? We will be guaranteeing EIB loans of more than £200 million for non-investment grade companies, which we need to do to ensure that they can get access to the necessary finance, as soon as those loans are approved. We will also guarantee up to £1 billion of new lending to companies looking to borrow more than £5 million. That will sit on top of the enterprise finance guarantee scheme that we have already announced, which we have talked about this morning. We hope that it will be open for business as quickly as possible.

I expect the state aid process to take days rather than months, and we will report on its progress. In the meantime, we are contacting all the companies in the automotive supply chain with a turnover above £25 million that could take advantage of the scheme, and talking to them about their requirements. We are getting on with the process of discussing what sensible lending might be made available to them now, rather than waiting for EU state aid approval.

Payment Policies

6. Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): What recent discussions he has had with large corporations about their policies on prompt payment of contractors and suppliers. [254313]

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The Parliamentary Under-Secretary of State for Business, Enterprise and Regulatory Reform (Ian Pearson): DBERR has been in contact with more than 200 of the UK’s largest corporations and business representative bodies. Additionally, we have brought forward more than £66 billion of payments made by central Government Departments, launched a series of cash flow management guides to ensure that business has access to the very best information and supported the launch of a new prompt payment code by the Institute of Credit Management.

Sir Robert Smith: I thank the Minister for that answer. We clearly have to recognise that if large companies do not pay quickly in this crisis, they will force their supply chain out of business and lose out in the long run. Is it not crucial, given the balance of power between the large companies and the small companies trying to enforce payment terms, that there is more external intervention? To that end, does he support the call by the Federation of Small Businesses for Companies House to be given more resources to name and shame companies that do not register their payment terms with it?

Ian Pearson: Yes, it is important that big companies look to do what they can to support their supply chain during these difficult times. In the automotive industry, for instance, I am aware of a number of car manufacturers actively working with their supply chain and paying earlier than they normally do. Particularly in a time of lean or just-in-time production in the supply chains of the automotive industry and many other sectors of our economy, big companies have a direct interest in ensuring that small companies continue to survive. Many of them are already taking action to do that. Of course, the action that the Government are taking to stimulate credit in the economy will also help those small businesses.

John Penrose (Weston-super-Mare) (Con): Does the Minister accept that the Government’s efforts to promote prompt payment by large corporations will be severely undermined if they cannot put their own house in order? Will he therefore promise to investigate reports that many NHS trusts are failing to pay their contractors and suppliers within 30 days—far beyond the 14 days that the Government have promised?

Ian Pearson: I will certainly ensure that the Department of Health is aware of the concerns that the hon. Gentleman expresses. We have made a prompt payment commitment right across government, and we expect it to be delivered on. Inevitably, there may be some situations in which queries are made about invoices and judgments have to be taken about whether payment should be made, because we need to protect taxpayers’ money. We want to ensure that payments are made properly and promptly, and I will happily ensure that his comments are passed on.

Topical Questions

T1. [254328] Simon Hughes (North Southwark and Bermondsey) (LD): If he will make a statement on his departmental responsibilities.

The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): My Department is focused on helping business through the current economic downturn and ensuring that British business is in the best place possible to take advantage of the upturn, when eventually it comes.

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Simon Hughes: A small business in Borough high street in Southwark, which has been trading for 12 years, making a profit and paying all its bills, was recently 12 days late in paying its tax and liabilities. It paid them on 30 and 31 December rather than 19 December. On 31 December, it received a letter from Her Majesty’s Revenue and Customs stating:

Will Ministers talk to their colleagues in the Treasury and the Revenue to ensure that they are understanding of the difficulties when payments in make payments out a bit more difficult?

Mr. McFadden: I am happy to ask HMRC to consider the case that the hon. Gentleman raises. As the Chancellor announced in the pre-Budget report, businesses have the capacity to ask for more time to pay tax during the current period, and some 30,000 businesses have taken advantage of that capacity in recent months. Her Majesty’s Revenue and Customs is aware of the problem and understands the difficulties of business in the current period.

T2. [254329] Dr. Roberta Blackman-Woods (City of Durham) (Lab): The Minister will be aware that many north-east Members of Parliament are concerned about Nissan and the car industry in general. What is the Department doing to support and encourage Nissan to develop a new generation of cars, which are low energy and low-carbon emitting?

The Parliamentary Under-Secretary of State for Business, Enterprise and Regulatory Reform (Ian Pearson): I thank my hon. Friend for that question. Nissan is an important part of the north-east regional economy, with one of the most efficient plants in the whole of western Europe. Like other car companies, Nissan is going through major problems because of the current lack of demand for cars.

My hon. Friend is right to highlight the importance of the future. Nissan is interested in producing a new generation of electric vehicles and we have been in direct discussions with the company about that. We would like the vehicles to be made in the north-east and we will continue to have dialogue with Nissan about the matter.

T4. [254331] Mr. Philip Dunne (Ludlow) (Con): Will the Minister confirm whether the Department or Royal Mail have entered into any discussions with a private equity firm about the possible sale of a stake in Royal Mail?

Mr. McFadden: The process for people expressing an interest in Royal Mail is open and we have not reached any conclusion so far on the prospective partner. We believe that it is in the interests of Royal Mail to partner with an experienced network or postal partner that has gone through the experience of change in a network operation of the sort that Royal Mail runs.

Mr. Kenneth Clarke (Rushcliffe) (Con): As the theme of these questions has been a series of pronouncements and commitments given by the Government and questions about dithering and failure to deliver, was the Minister
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surprised to hear the Chancellor of the Exchequer, when giving evidence on Tuesday to the House of Lords, openly debating what form his latest big announcement might take, and whether the Government were switching from insurance of toxic debts in the banks’ balance sheets to a possible bad bank solution? As it is widely known that Baroness Vadera, a colleague in the Minister’s Department, is mainly in charge of the banking packages, will he get across to her the need for urgency, efficiency and some competence in delivery, and stress to her that British business cannot afford further delay and uncertainty before credit is got flowing properly again to businesses of all sizes?

Mr. McFadden: We fully understand the depth of the current crisis, which is why we have been active, first on recapitalising the banks and then on taking a greater share of risk in lending. The whole world is going through the downturn and Governments have to act to try to restore confidence and lending. That is precisely what we are doing.

I have to contrast our actions with the Conservative party’s approach. In the words of Professor Paul Krugman, the Nobel prize winner:

Hoover’s Secretary of the Treasury,


That is what the Nobel prize-winning economist thinks of the Conservative party’s approach. Ours is much more in tune with the task in hand.

T3. [254330] Fiona Mactaggart (Slough) (Lab): Few of my constituents get an annual bonus and many face pay cuts in the downturn. Given that, will the Minister take a leaf out of Barack Obama’s book and put a cap on the pay and bonuses of people who have run down our banks, which my constituents’ taxes are subsidising?

Mr. McFadden: I understand the question that my hon. Friend raises. Given the economic circumstances, banks must realise that there are huge public sensitivities about the issue. The public expect restraint. They also expect that if any bonuses are to be paid, they should be paid on the basis of achievement, not past failures.

T5. [254332] Sir Nicholas Winterton (Macclesfield) (Con): If the Minister is keen to reassure British workers about their jobs, particularly those in major infrastructure projects, will he publish a list of British companies, and in particular British construction companies, that are undertaking important infrastructure and other projects in other European countries? That information might well reassure some British workers. Will he publish such a list, and if so, the sooner the better?

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