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Mr. Darling:
As the right hon. Gentleman knows, the lending agreements into which we have entered are either those in which we have put more capital or those to which we have made more money available through the insurance scheme. The Bank of England’s scheme
for credit easing is part of its monetary policy and does not, therefore, have direct lending agreements tied to it. Of course, if that much more money is in the system, it should help with the amount of money that is available for lending.
Mr. Richard Spring (West Suffolk) (Con): In view of the universal criticism of the expensive VAT cut in this country, will the Chancellor say how many other members of the G20 have followed or plan to follow the Government’s path in that direction?
Mr. Darling: As I have said many times—I said it again on Saturday—we have not sought to tell each country that they must do one specific thing. Each country must make its own decision. We have a range of measures, including VAT reduction, cutting the basic rate of income tax and introducing infrastructure projects such as home insulation, as well as measures to help business. Each country must do what is right, but it is important that they do something. The hon. Gentleman is entitled to make his criticism as a debating point, but he should remember that his party is against all the measures—it would do nothing.
Mr. Andrew Pelling (Croydon, Central) (Ind): Will the Chancellor add to his earlier comments about the regulation of credit rating agencies? Standard & Poor’s and Moody’s have a stranglehold on the rating business and freely gave triple A ratings to sub-prime debt structures. Has any consideration been given to promoting a European champion on credit rating agencies, or perhaps even to introducing a public sector provision on rating agencies?
Mr. Darling: I have to tell the hon. Gentleman that there was not a discussion about the creation of a European credit rating agency. However, his general point about the need to supervise properly those agencies that already exist is important, not only because their determination can be pretty important, but because we need to deal with conflicts of interest where agencies approve a scheme in which they have a direct financial interest. That is clearly unsatisfactory, given the importance and the nature of such agencies.
Mr. Douglas Hogg (Sleaford and North Hykeham) (Con): May I reinforce the point made from the Liberal Benches about the desirability of separating the functions of an investment bank from those of a retail bank, which is also a point that the noble Lord Lawson made this morning in the Financial Times? The Chancellor was, I thought, not very enthusiastic about that, but would he consider publishing a Green Paper setting out the arguments on both sides? Alternatively, perhaps he could appoint a royal commission to look into the matter, because it is a matter of major importance and the arguments need to be properly articulated.
Mr. Darling:
I agree with the right hon. and learned Gentleman: there is an argument to be had. I made the point to the hon. Member for Twickenham (Dr. Cable) that it is not the case that deposit-taking institutions here have avoided trouble, and investment banks are the sole source of it. It is rather more complex than that. There are arguments about whether we need separate degrees of regulation within institutions that might be involved in both deposit-taking and investment activities.
Indeed, I suspect that there are also arguments about what the capital adequacy ought to be in relation to both of those.
I certainly do not want to stifle argument. All I was saying to the hon. Member for Twickenham (Dr. Cable) was that I am not yet persuaded that what has been proposed is the right thing to do. The situation is rather more complex than it was when Glass and Steagall sat down to draw up their Act. However, it is important that we use this opportunity to have a debate. My only caveat is that we do not have an unlimited time to do that. Given the length of time that it takes to change the law here or anywhere else, people would want the confidence that we were dealing with the problems and that we had a clear way forward.
Mr. David Heathcoat-Amory (Wells) (Con): Does the Chancellor accept that the system whereby everybody urges ever bigger bail-outs from everybody else is regarded by the public with some bemusement as well as fear, because they know that they are going to have to pay everything back? Does he understand that in the real economy, firms—particularly small firms—are on the receiving end of a completely inappropriate degree of interference from the public sector, by way of regulations, rules, taxes and directives, which prevent the real economy from earning its way out of this recession? Did he discuss that with his colleagues at the G20 or does he have a do nothing policy on that aspect of the economy?
Mr. Darling: While we are in humility mode, the right hon. Gentleman will no doubt remember that throughout the passage of the Financial Services and Markets Act 2000, hardly a speech went by when he did not call for light-touch regulation. Like everybody else, I think that we can learn from experience. We are intervening to support the banking system not to help the banks, but because businesses and individuals would have lost substantial sums of money if we had not done so. People would have lost their savings and businesses could not have accessed money, which would have been disastrous for our economy. As for the smaller businesses sector, it is important that we think long and hard before imposing regulations and that, if we do impose them, we are clear that there is a clear economic or social benefit arising from them.
Mr. Philip Dunne (Ludlow) (Con): It seems that Lord Turner may have started his review of the regulatory structure with one hand tied behind his back by the present Chancellor and the other tied by his predecessor. Would that be because the Chancellor, as architect of the existing Financial Services Authority, does not want to recognise that any of the plans were perhaps at fault? The regulator has acknowledged that it fell down in its first review of a high-impact firm. Why, therefore, has the Chancellor told Lord Turner not to look afresh at regulation, but just to bolster up failed plans?
Mr. Darling: I do not think that I said anything of the sort to Lord Turner. Knowing Lord Turner, I do not think that he is the sort of person who is ever likely to do anything if he feels that his hands are tied. He had a free hand. He was asked to look at what he thought needed to be put right. When we see his recommendations, I am sure that the hon. Gentleman and others will find that.
Mr. Philip Hollobone (Kettering) (Con): Does the Chancellor of the Exchequer understand the remoteness of the G20 process to the average British taxpayer? Last week the Government-financed regeneration of Kettering town centre ground to a complete halt because the Royal Bank of Scotland, which is now 70 per cent. owned by the taxpayer, pulled the plug on a local construction firm, which put loads of people out of work and meant that construction came to end. Does grand summitry not stand in sad and sorry contrast to the inappropriate banking decisions taken every day by now almost nationalised banks?
Mr. Darling: As the hon. Gentleman will appreciate, I am not aware of the circumstances of the construction company to which he refers. If he writes to me about it, I will certainly look at it, but he will appreciate that whether or not the state owns a significant shareholding in it, a bank has to reach a judgment about whether something is a good risk on a commercial basis. I am in no position to pass comment on the particular case, as he knows. Banks have to make commercial decisions and evaluate the risks to which they might be exposed irrespective of whether they are in public or private hands.
Mr. Peter Bone (Wellingborough) (Con): The public will welcome the fact that the Chancellor went to the G20 meeting, but they will find it very strange that he is unable to attend the House of Commons this Wednesday, when we have the first full-scale debate on the economy—and only because Her Majesty’s Opposition have called for it. Would the public be right in thinking that the Chancellor is running scared?
Mr. Darling: I may be wrong, but I believe that I have given more statements to this House as Chancellor than many of my predecessors. I am always happy to engage with the Opposition, not least because I am engaging with a blank sheet of paper.
Points of Order
4.21 pm
Mrs. Theresa May (Maidenhead) (Con): On a point of order, Mr. Speaker. I seek your guidance on how I can ensure that Ministers respect statements that are made in this House. On 27 January in a Second Reading debate on the Welfare Reform Bill, I said that
“we Conservatives support this Bill”.—[ Official Report, 27 January 2009; Vol. 487, c. 203.]
Yesterday on the “the Politics Show”, the Secretary of State for Work and Pensions, with reference to the Welfare Reform Bill, said:
“the Bill we want to put through on Tuesday will do that, and the Tories oppose it”—
a view that I believe he repeated in Work and Pensions questions this afternoon. How can I ensure that Ministers respect statements made in this House and do not make such inaccurate statements that are designed to mislead the general public?
Mr. Speaker: I must tell the right hon. Lady that I have no control over what Ministers say in this House, so it is not a matter for me. It seems to me, however, that she has put the matter on the record and put the record straight.
Mr. Jim Devine (Livingston) (Lab): On a point of order, Mr. Speaker. Last Thursday I attended a meeting in this place about Des Warren and Ricky Tomlinson, who were jailed in the early 1970s for their trade union activities. Some 60 people were at this demonstration, and many of them were wearing T-shirts displaying the slogan “The Shrewsbury Two”, as those two people were commonly known. Sadly, the vast majority of those individuals were told to take their T-shirts off when they came into this place. Is that a practice that you are aware of, Mr. Speaker, or has something new happened recently?
Mr. Speaker: I am well aware of the story of the Shrewsbury pickets. It was something that I was involved in. [Interruption.] Perhaps I should put that another way: I listened to their case when I was a shop steward. The dress code of individuals visiting the House is varied, so I see no reason why these people’s T-shirts should have been taken from them or why they were told to remove them. I will look further into the matter and see what I can find out.
The Parliamentary Under-Secretary of State for Work and Pensions (Kitty Ussher) rose—
Mr. Speaker: If this is going to be an extension of what I have already said—
Mr. Speaker: We will leave it at that, then.
Industry and Exports (Financial Support) Bill
4.23 pm
The Parliamentary Under-Secretary of State for Business, Enterprise and Regulatory Reform (Ian Pearson): I beg to move, That the Bill be now read a Second time.
It is important that the UK emerges from the global downturn rapidly and strongly. The Government have responded and will do whatever it takes to ensure the stability of the financial system and to provide real help to people and businesses during these difficult economic times. However, we cannot secure recovery without willing the means, and this short Bill gives the Government the necessary flexibility to provide further support to industry.
The Bill makes two small but important amendments, to the Industrial Development Act 1982 and to the Export and Investment Guarantees Act 1991 that will help to strengthen the provision of support for businesses.
The first clause proposes to amend the cumulative limit on financial support that may be provided under section 8 of the Industrial Development Act 1982. That provides the legislative power for Government to provide selective financial support to businesses. However, just to avoid any doubt, I would like to make it clear that increasing the section 8 financial ceiling does not in itself authorise any actual expenditure.
The precise purposes for which assistance may be used are set out in the Act. They include promoting the development, modernisation or efficiency of an industry; the creation, expansion or sustaining of productive capacity in an industry; promoting the reconstruction, reorganisation or conversion of an industry; encouraging the growth of an industry; and encouraging the arrangements for ensuring the orderly contraction of an industry.
The Act does not include support that is provided under the auspices of the designated assisted areas, which is covered by section 7 of the same Act, or assistance for certain sectors, notably banking and insurance, which are covered by separate legislation. The scope of the power under section 8 is nevertheless wide, and has been used as the legislative basis for a wide range of programmes of support for businesses that have been introduced since 1982. They include enterprise fund products such as small firms loan guarantee schemes, regional venture capital funds and early growth funding; enterprise capital funding; the Phoenix fund; support for the post office network, such as the urban post office reinvention programme; and the new programmes of assistance that we have announced to give business additional support during the current economic downturn, including the enterprise finance guarantee scheme, capital for enterprise, and support for the automotive sector.
Mr. David Drew (Stroud) (Lab/Co-op): A couple of automotive firms in my constituency are experiencing significant problems. One of the questions arising from the training packages that we have put together is whether there is some form of wage subsidy to help those undergoing training who are already on short-time working. Would the Bill enable us to proceed with such a scheme if the necessary funds were available?
Ian Pearson: As I have said, a wide range of support for industry is available under this part of the Act. My hon. Friend will be aware that we are already supporting industry by means of new flexibilities in the Train to Gain programme operated through the Department for Innovation, Universities and Skills, and there are separate funding arrangements for training support governed by votes in Parliament.
Mr. Geoffrey Robinson (Coventry, North-West) (Lab): My hon. Friend will know that the problems of the midlands van company LDV are becoming particularly acute, and may not be covered by the £1.3 billion that he says will be available for green investment in the motor industry. Can he assure Labour Members—indeed, all Members with an interest in the area: I do not think his own constituency is so very far away—that LDV’s case will, if necessary, be treated separately from the £1.3 billion green initiative?
Ian Pearson: As my hon. Friend will know, we recently announced the provision of £2.3 billion in loan guarantees and exceptional-need loans under the automotive assistance programme to support automotive companies and companies in their supply chain. That potentially includes support for a wide range of companies.
My hon. Friend mentioned the case of LDV in Birmingham. As he knows, the company has been making a loss for a number of years. We understand from discussions between LDV and officials last Wednesday and Thursday that the management buy-out is proceeding. At present the company is owned by a Russian firm called GAZ, which is responsible first and foremost for the workers at Washwood Heath, who have given the company loyal support for many years. It really must be the responsibility of GAZ to give the company enough support to ensure that it is viable in the future. We have given LDV support and encouragement to enable it to proceed with its application for financial assistance through the European Investment Bank.
This is clearly a critical time for the company. We made it very clear that without significant further material support from GAZ, its parent company or from another investor, we would find it difficult to justify providing any further assistance, on top of the £24 million we provided to LDV at the time of the takeover by GAZ.
Mr. Robinson: This is a critical time, and although losses have been made at LDV, I understand that it has a very convincing five-year recovery programme and a plan for a management buy-out that is quite far advanced. Can the Minister at least promise us that before the company is forced into receivership, or some other form of inactivity, he would agree to a meeting with a delegation of west midlands MPs to hear their case—and perhaps we could have such a meeting earlier rather than later?
Ian Pearson: As I have said, my officials have had a number of meetings with LDV on its financial situation, and I do not think it is as straightforward as my hon. Friend pretends, but I am always happy to meet Members who are representing their constituents’ interests, and I will be happy to meet my hon. Friend and my west midlands colleagues.
Miss Julie Kirkbride (Bromsgrove) (Con):
While this appears to be a very simple Bill to enable the Government to spend more money on our industrial sector, the
details are a little unclear to say the least. Will the Minister therefore tell the House which bits of the financial help to be given specifically to the automotive sector will be coming out of the pot that this Bill provides for, and which bits will come out of the EIB, as encouragement has been given to apply to it for money, too? Where will the money for the £23 million green car initiative come from, for example? If the Government are so minded, could these provisions also be used to help car companies with their loan books by giving a spur to people to take out loans to buy new cars?
Ian Pearson: I can confirm that guarantees offered by the Government under the automotive assistance programme would have as their legislative authority the increase in spending proposed in this Bill. I hope that things will become clearer to the hon. Lady after I have explained the situation in a little more detail.
The 1982 Act set the cumulative ceiling for support that could be provided under section 8 at £1.9 billion, increasable by up to four affirmative orders not exceeding £200 million each. The overall ceiling in the original Act was therefore £2.7 billion. That was subsequently revised by the Industrial Development (Financial Assistance) Act 2003, which raised the initial limit to £3.7 billion, increasable by up to four affirmative orders not exceeding £600 million each, to an overall limit of £6.1 billion. We have already debated the second order under the 2003 Act, and will shortly be introducing the third and fourth orders. By doing so, we will ensure the necessary legal headroom is in place to ensure the ongoing delivery of existing programmes and the package of new initiatives that we have recently announced to provide real help for businesses in the current economic climate. I can therefore confirm that all existing and recently established schemes can be delivered under the limits established by the 2003 Act.
However, scope to introduce any future support for business will be severely restricted, as we estimate that current schemes covered under section 8 will take us close to the £6.1 billion ceiling. Given the unprecedented global economic conditions we are facing, it is important that we maintain sufficient flexibility to bring forward further support if that is required. The first clause of the Bill therefore seeks to amend the limits in the Act, raising the initial ceiling to £12 billion, increasable by four orders of up to £1 billion each to an overall limit of £16 billion.
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