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Mr. Osborne: My right hon. Friend is right. It is especially unfair that the burden of the levy is falling on the building societies rather than on the investment banks. Many of the building societies—especially the larger ones, such as Nationwide—did the right thing and are paying a heavy price for it, as I saw when I went to Swindon. I will be going again to Swindon several times over the next year to discuss these issues with Nationwide.
Mr. Geoffrey Robinson: Would the hon. Gentleman’s £50 billion loan scheme, count as Government expenditure? If so it would add massively to borrowing, and he has to accept that. Who would administer this scheme by which he is so mesmerised? At one point, the Tories suggested a new Government quango, but without much conviction. Most importantly, would he seek any security for loans made under this phantom scheme that he has invented and thrown up for general discussion without a single convincing element to lend it credibility? Would he require security, or would it be a question of everybody having what they want?
Mr. Osborne: I get the point. The scheme would be of the same nature as the guarantees we offer for interbank lending, and would be scored in the same way. Of course there would be a contingent liability, but it would not add to public borrowing. The scheme would be administered by the banks, because they have the commercial judgment— [ Interruption. ] I do not suggest that the Government should engage directly in making loans to small and medium businesses, or even large ones. The banks can do that with the support of the Government and the guarantees provided by the Government— [ Interruption. ] I do not know why Labour Members are so surprised. This is the scheme that the Government are supposed to be setting up, but it has not actually happened yet. Of course, as with a good commercial loan, there would be collateral, but the point is that businesses cannot get commercial loans and there is no credit flowing in the economy, because of the credit crunch.
The Government cannot engage in any of the debates about making good the mistakes of the past or learning the lessons about what went wrong because they are led by a man who thinks that no mistakes at all were made. He thinks that there were no mistakes in the system of regulation, in the wanton destruction of savings and pensions, or in allowing an economy to be built on debt.
Mr. Love: Will the hon. Gentleman give way?
Mr. Osborne: I have given way to the hon. Gentleman already and I now want to make some progress as many hon. Members wish to speak.
The Prime Minister said clearly when he was on that plane to Washington that he had nothing to apologise for. We can picture the scene—standing in the aisle, his hand gripping the headrest ever tighter, and trying hard to control his rage as he says with menace, “I have nothing to apologise for.” It is the “je ne regrette rien” moment of this recession. The moment when the hubris is exposed, and when we realise just how out of touch the Prime Minister has become.
Of course, those around the Prime Minister realise it too. The Chancellor is urging him to apologise. The Secretary of State for Children, Schools and Families, one of the Prime Minister’s closest allies, is urging him to apologise, we understand. But the Prime Minister
will not listen, because he genuinely believes, deep in his bones, that he has nothing to apologise for. Because that betrays such a deep misunderstanding of what has happened to the British economy in the long years that he has been in charge of it, it shows that he cannot possibly be the man to learn the mistakes of the past and lead our country into a better and more sustainable future.
If Labour Members will not listen to that argument made by a Conservative, they should listen to the Secretary of State for Communities and Local Government. She said:
“You can’t just pretend you weren’t there...if you don’t have any acknowledgment of anything then...where do you get permission to give them a vision of where the future needs to be?”
That is what she is telling the Prime Minister who chairs the Cabinet to which she belongs.
Britain is in the deepest recession that it has known for a generation. The IMF predicts that alone in the world, our economy will shrink next year as well. We have the highest budget deficit in our peacetime history, and we are storing up such debts that it will be our children and grandchildren who end up paying them off. The economic model that the Government pursued for 10 years was built on debt and it has failed. Now the blizzard of schemes announced by the Government to tackle the recession is failing too. Ministers have confused a headline in the newspaper with real help now for their constituents, and we have a Prime Minister who will apologise for nothing and who is deeply disconnected from the reality of the economic mess he has created. The country desperately needs change. And it is the weakness of a Government, who dare not call an election, that they stand in the way of that change. The sooner they go the better, for the sooner then we can begin a recovery.
2.18 pm
The Chief Secretary to the Treasury (Yvette Cooper): I beg to move an amendment, to leave out from “House” to the end of the Question and add:
“recognises the impact the international credit crunch is having across the world and for households and businesses in every region of the UK; supports the Government’s decisive action to stop the banking system collapsing, secure the sector’s role in supporting the economy, households and businesses and remove blocks to sustainable lending; notes the agreements made with Lloyds, RBS and Northern Rock to increase lending to individuals and firms; welcomes the action in line with other countries across the world to boost the economy this year and next with targeted support to people and businesses including the value added tax cut, helping homeowners avoid repossession, a range of measures to provide finance and defer tax liabilities for business, pensioner payments, increased child benefit and a tax cut of £145 for 22 million basic rate taxpayers; further notes the extra resources to support those facing redundancy and seeking work; further supports the bringing forward of capital projects to improve public services and infrastructure, and provide jobs now; further notes that the Government has set out measures to deliver sustainable public finances; further welcomes the Government’s leadership of the G20 and its focus on co-ordination between countries, equipping the International Monetary Fund and the World Bank with the resources and tools needed, and reform of global financial regulation; and further supports the Government taking action now to come through stronger and faster so that the UK can take advantage of the world recovery.”
The hon. Member for Tatton (Mr. Osborne) has tried to entertain the House with drama. Unfortunately, I noticed that the right hon. Member for Wokingham (Mr. Redwood) and the hon. Member for Uxbridge
(Mr. Randall) seemed to sleep through about half of his speech. The rest of us listened to a huge amount of bombast and feigned indignation that would have been at home on the floor of the Oxford Union, but contained no substance about what the hon. Gentleman would do to help the unemployed—those who have lost their jobs and who need our help to get back into work. We have heard nothing about how the Opposition would help businesses, how they would help families and how they would support the economy through difficult times.
Mr. Gerald Howarth (Aldershot) (Con): Can the Chief Secretary tell us why the Chancellor of the Exchequer is not answering this most important debate, which is of huge concern to the people of this country? Is it just that he cannot be bothered?
Yvette Cooper: As the hon. Gentleman will know, the Chancellor of the Exchequer was in the House on Monday and will be in the House again next week. He will be answering the Treasury Select Committee tomorrow and will be leading a debate on the economy before the end of the month. The hon. Gentleman will agree, I think, that the Chancellor of the Exchequer has repeatedly debated the economy and discussed it in this House. I am sorry that the hon. Gentleman is disappointed to see me at the Dispatch Box, but I have to say that I miss debating with the hon. Member for Runnymede and Weybridge (Mr. Hammond) and I look forward to listening to his speech later on.
First, I want to address the immediate action that we are taking here and internationally to help families and businesses to deal with the global credit crunch. I then want to turn to the issue of how we will address some of the long-term causes and the long-term opportunities for our future.
I sometimes wonder, when Conservative Members talk about the economy and the actions that we need to take, whether they understand the scale of the financial crisis that the world is going through. Lord Turner said today that
“the world’s financial system has gone through its greatest crisis for a least a century”.
Extraordinary events and extraordinary risks to our future require extraordinary action, not just here but across the world, to get us through. When Conservative Members change their minds about whether they support the action that we took in October, they misunderstand quite what the risks were not just to our economy but to the world economy last October, the sheer scale of devastation that would have been caused if those international banks had gone under and how important the recapitalisation scheme was.
David Tredinnick (Bosworth) (Con): We do not need extraordinary action, but simple action. What do I say to Labelsco, a company whose representatives I spoke to in my constituency this morning and who have shed 25 per cent. of their work force and are desperately looking for the enterprise finance guarantee scheme and the working capital scheme to support their businesses, only to be told by their two banks that the scheme is not available?
Yvette Cooper:
The enterprise finance guarantee scheme is available and people should ask their banks for it. If the hon. Gentleman has a case in which a particular
business has been turned down for the scheme, I am happy to look into that case for him. I assure him that the enterprise finance guarantee scheme is in place.
I want to turn to the measures that are in place to support the economy.
Anne Main (St. Albans) (Con): May I take the right hon. Lady back to the statement she made that implied that this was somehow like a debate on the floor of some posh university? I had a business summit where 30-odd businesses said that they were not getting the help that they need from the Government. Citizens Advice has seen a fourfold increase in the number of people coming in with debts and who have no support with their loans and their mortgages. This is not some sort of game. My constituents are suffering and unless she wants me to take back to them the fact that there is complacency in the Government, can we have some real solutions, please?
Yvette Cooper: Let me say to the hon. Lady that we believe that this is very serious. It is exactly right to provide additional support to businesses and families across the country, and to use Government support to help people. The hon. Lady’s party opposes that. Her party repeatedly denies the economy the support it needs and it is not prepared to put in the additional investment that the economy needs. She needs to recognise the importance of being prepared to put your money where your mouth is in order to support the economy at a time when it needs that support.
The biggest bank in the world would have defaulted on its loans if the US Government had not stepped in. Governments across the world were right to step in and prevent the banking system from collapsing and they were right to step in to ensure that banks are strong enough to withstand the global recession and to start cleaning up banks so that they can get lending to businesses and first-time buyers going again.
The shadow Chancellor has also dismissed the significance of global action and has said that it has limited effect, yet at a time when world trade has dropped so substantially, when the world economy is contracting for the first time since the second world war and when poorer countries are at even greater risk, only co-ordinated global action can get us through. Japan, Germany and Italy are all in deeper recession than the UK.
Yvette Cooper: I am quite happy to give way to the right hon. Gentleman now that he is awake.
Mr. Redwood: The right hon. Lady might want to correct the record. I have followed every word in this debate and it is quite wrong of her to mislead the House in such a way.
Will the right hon. Lady now answer the real question? How much money have the Government spent, committed and guaranteed on the bank support programme so far and what have we got for it?
Yvette Cooper:
I am glad to know that the right hon. Gentleman concentrates so hard with his eyes closed and his shoulders shrugging. I was asked about the
asset protection scheme, the which we have set out details of and put into place. I was also asked about the recapitalisation that took place earlier in the year. In exchange for those, we have lending agreements that have been signed up to by the major banks. For RBS, the agreement is worth £25 billion of additional lending, and for Lloyds it is worth £4 billion of additional lending. The right hon. Gentleman will recognise that we cannot get banks lending if they do not stand up in the first place. That is why it was so important to prevent the banks from going under earlier this year.
Mr. Michael Fallon (Sevenoaks) (Con): Can we come back to the enterprise finance guarantee scheme? Is the Chief Secretary aware that the Kent and Medway branch of the Federation of Small Businesses has written to me, saying that
“awareness of the scheme is patchy—among both business and, somewhat disappointingly, high street banks themselves.”
Why are not these schemes better known and working properly in our constituencies?
Yvette Cooper: I am glad that the hon. Gentleman, unlike some of his hon. Friends, concedes that the scheme is up and running and is providing support for businesses. I agree that I want to see us do more to ensure that businesses are aware of it. I point him towards the Government’s new “Real help now” website, which provides substantial additional information that he can distribute to his constituents and to businesses across the community. We all have an obligation to ensure that our constituents and businesses in our areas are aware of the additional help that is available. Unfortunately, that additional help is not supported by Opposition Members because they are not prepared to put in the investment or the finance to support it.
Mr. Peter Bone (Wellingborough) (Con): It is very good news to hear from the Chief Secretary that the scheme is in place. Can she tell us how much has been lent?
Yvette Cooper: Lending is already in place for a series of different schemes. For example, 90,000 businesses have already had tax worth £1.5 billion deferred as a result of measures that have been in place since the pre-Budget report. Again, that measure was opposed by the Opposition, because they are not prepared to put the money in to give the economy the help that we need.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): One of the success stories of the UK economy has been the north sea oil and gas industry, which has more than 500,000 jobs, has provided a third of corporation tax revenues this year and makes a contribution to the security of our energy supply. The big challenge is that the new companies that have been driving the exploration were reliant on the lending from the banks that has dried up and has still not come back. One proposal from the industry, which we should look at constructively, is to bring forward the tax relief that it receives on exploration so that it is payable up front to encourage more cash flow and to get the industry investing again. That would keep the industry going through this trough so that it is there when the economy picks up.
Yvette Cooper: The hon. Gentleman is right to point out the concerns that have been raised by a series of different major investors about the fact that companies need to invest for their future and for all of our futures and about the pressure that has been put on them by the global credit crunch. I am certainly happy to take the hon. Gentleman’s comments as a Budget representation and to pass them on to other Ministers in the Treasury.
In the 1930s, Governments and central banks across the world fundamentally failed to rise to the economic policy challenges of their day. The consequences for economic prosperity and political stability were devastating. That is why we and other Governments are so determined that we will act together this time, with co-ordinated action to safeguard the banking system, boost our economy, tackle tax havens and tackle international regulation, too.
Mr. Heald: The right hon. Lady has not mentioned consumer confidence. With repossessions going up, mass unemployment and holes in people’s pension funds as a result of the falling stock market, does she accept that there is a sense of insecurity in the country from the cradle to the grave? What are she and her Government doing in delaying the schemes on homes and jobs that would make a difference?
Yvette Cooper: The hon. Gentleman is right to say it is important to support consumer confidence. We have to do more to put more money in people’s pockets at a difficult time and to help to support the economy in different ways. That is the approach that we are taking, through both monetary and fiscal policy. Sadly, it is not supported by his party.
The Conservative party is the only party in Europe that refuses to back extra Government fiscal action to help our economy. Yesterday, the Governor of the Bank of England said that we need
“a growth of nominal demand sufficient to reverse the extraordinarily steep and simultaneous downturn in output around the world.”
That means using monetary policy to boost the economy. As a result of the legal framework that we set out for the Bank of England in 1997, it has a duty to prevent deflation as well as inflation. That is why it has cut interest rates significantly, and that has put hundreds of pounds a month back into the pockets of mortgage holders. With the support of the Government, the bank is now using £75 billion to increase the money supply by buying further assets in the market. That is already having an impact on the markets.
Mr. John Baron (Billericay) (Con): The Chief Secretary to the Treasury has been somewhat dismissive of the concerns of those hon. Members who have given examples of where credit has not got through. What would she say to third parties such as the Federation of Small Businesses or the chamber of commerce in Essex? Time and again, their surveys show clearly that credit is not reaching profitable, viable businesses and that jobs are suffering as a result.
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