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Yvette Cooper:
The hon. Gentleman is simply wrong. In fact, I am very concerned about the lack of credit for important and viable businesses, and that is why we are taking a series of steps and measures to try to support them and help them to get the credit they need. However, I remind him that the credit crunch is global, and that
there has been a reduction of £100 billion in the lending in this country by foreign financial institutions. Near my constituency, for example, an important development for the area has been jeopardised because the Anglo Irish bank has pulled out.
Right across the country, there has been a reduction in lending as a result of the credit squeeze and of the fact that banks are no longer lending to each other. What do we need to do? We need to get banks lending again, and we are taking a series of measures to do that.
The first such measure, obviously, was to make sure that the banks were still standing. Without banks, there can be no bank lending. Our recapitalisation of the banks in October was critically important to keeping them lending. The Opposition supported that at the time, but they have prevaricated since then. They have made it clear that perhaps they no longer support what I believe was a hugely important measure to support our economy’s financial stability.
The second measure was to make sure that the banks were strong enough to withstand what is now a global recession. We had to be certain that they were strong enough to deal with their capital and liquidity problems, and with their toxic and problem assets. For that reason, we have put in place the asset protection scheme, which has very clear and binding lending agreements. As a result, banks are now pledged to deliver more lending to businesses and mortgage holders in the coming financial year than they did in the preceding year.
We need to monitor those lending agreements to make sure that the money gets out to businesses, in the constituency of the hon. Member for Billericay (Mr. Baron) and across the country. They need that money, as does our economy.
Mr. Brian Binley (Northampton, South) (Con): Will the right hon. Lady give way?
Yvette Cooper: We have also put in place further measures, such as the enterprise financial guarantee scheme, to support small businesses that are especially in need of help. We are working on further proposals, including through the working capital scheme, to put additional support into the economy.
Mr. Binley: Will the Minister give way on that point?
Madam Deputy Speaker: Order. The Minister is responding to an earlier intervention.
Yvette Cooper: Thank you, Madam Deputy Speaker. I have to tell the House that there will be no single quick fix for the problems that we face. Japan’s manufacturing output has fallen by 40 per cent. in three months, and countries across the world are being hit in a very substantial way by the global credit crunch. Only by taking major action on a series of different fronts will we be able to support our economy through these difficult times.
That does not simply mean taking action on the banking system and credit, hugely important though that is. It also means that we have to take action through monetary policy and the Bank of England’s ability to bring down interest rates—
Mr. Binley: Will the Minister give way now?
Chris Huhne (Eastleigh) (LD): Will the Minister give way?
Yvette Cooper: I will give way to the hon. Member for Eastleigh (Chris Huhne).
Chris Huhne: I am very grateful to the Chief Secretary for giving way. A number of hon. Members are clearly worried, not about the announcements of guarantee schemes but about their delivery and the extent to which credit is getting through. I know from my own constituency surgery how large the problem is, so will the right hon. Lady undertake to give us the figures on the amounts that have been lent under these schemes? Will she do so on a regular, monthly basis as part of the monetary statistics that are published by the Bank of England? In that way we can assess how much credit is getting through to businesses.
Yvette Cooper: The hon. Gentleman asks an important question, and I shall give him some examples. It is clear that we need to be able to make sure that the lending is getting through, but we must also recognise that the scale of the withdrawal of credit by foreign institutions in this country means we must do a huge amount of work on a range of different fronts. That is why it is important to look beyond bank lending and lending to business to find other ways of supporting demand in the economy through this difficult time. I know he would agree with that.
The hon. Member for Eastleigh asked for details of some of the specific schemes. For example, additional funding from the European Investment Bank of over £300 million was for small and medium-sized enterprises in November’s pre-Budget report. That has now been approved, while the enterprise finance guarantee scheme is in the middle of processing 400 loans, worth over £40 million, to businesses that otherwise would not be able to access funding. The commitments made as a result of the asset protection scheme amount to £25 billion from Royal Bank of Scotland and £14 billion from Lloyds. That is in addition to the further lending that Northern Rock has committed to.
One of the most important schemes that we have put in place is the one that allows businesses to defer taxation. So far, 90,000 businesses have taken the opportunity to defer £1.5 billion and have been able to get additional support as a result.
Mr. Binley: Will the Chief Secretary give way?
Yvette Cooper: I will give way to the hon. Gentleman. He has been so persistent, and I shall worry about his health if he has to jump up and down with indignation too many more times.
Mr. Binley: The Minister is always kind and gentle with me, and I am most appreciative. She has talked about the impact on small businesses of the Government’s loan schemes, but I remind her that on 13 March the Minister for Employment Relations and Postal Affairs said that 26 applications had been approved and that loans were “being made”. I take that to mean that not one loan under that scheme has so far got through to small businesses. Will the Minister explain that?
Yvette Cooper: I have just updated the hon. Gentleman and the House on a series of different schemes, and in particular on the additional lending that has been put in place already. However, I repeat that we face difficult and unprecedented circumstances. That is why it is right to increase support for additional lending, and to look at other ways to support the economy and the level of demand within it.
I say again to the House that we can put such schemes in place only if we are prepared to put the funding in. Time and again, Opposition Members have refused to support the investment and the Government action needed to deliver any support to households or businesses across the country.
Sir John Butterfill: Will the right hon. Lady give way?
Yvette Cooper: I must make a little progress and set out the additional support that we have put in place to help people through these difficult times. For instance, 12 million pensioners have received £60 each since Christmas, but that was opposed by the Conservatives. Moreover, 7.5 million families have received an increase in child benefit, another move opposed by the Conservatives. We have increased the investment in the Warm Front scheme so that more homes can be insulated, but that has been opposed by the Conservatives too. [ Interruption. ] Opposition Members can shake their heads, but such measures are all part of the fiscal stimulus that their party has opposed. Millions of households are benefiting by an average £20 a month as a result of the cut in VAT. That reduction was supported by the Institute for Fiscal Studies, which has said that it is in effect equivalent to a cut of around 1 per cent. in interest rates.
Sir John Butterfill: Will the Chief Secretary to the Treasury give way?
Mr. John Randall (Uxbridge) (Con): Will the right hon. Lady give way?
Yvette Cooper: I am tempted to give way to the hon. Member for Uxbridge, because he has finally woken up. However, I promise that I will give way to the hon. Member for Bournemouth, West (Sir John Butterfill) in a second.
Mr. Randall: Perhaps the right hon. Lady does not appreciate what it is like to run a business. I have a retail business with 30 employees, and I see how complacent and useless the Government are. I sometimes lay awake and find it difficult to sleep at night as I have 30 people’s jobs to worry about. I see that only 15 Labour Back Benchers are here to discuss this important issue. I cannot understand why the country does not realise that her party is not interested. However, my question is on VAT. Will she now acknowledge that the reduction in VAT was a gimmick that helped no one, and was a burden on retailers?
Yvette Cooper:
Let us just deal with the specifics of the VAT cut. It means that at the end of each month, households across the country will be better off by an average of £20. The VAT cut is supported by the Institute for Fiscal Studies, which said that the effect is equivalent to an interest rate cut of around 1 per cent. Indeed, a VAT cut benefits everyone, unlike a cut in interest rates, which obviously has a different impact on savers and
borrowers. It therefore has a fairer impact than simply using monetary policy to support the economy. The Office for National Statistics has said that price cuts have been passed on to consumers in 70 per cent. of cases, and Goldman Sachs has argued that the VAT cut is already having a beneficial impact on retail sales. It is right to support the economy, and to put that extra investment in. As a result of the measure, we are already getting billions of pounds of extra money into our economy. We believe that it is right to help the economy through a difficult time.
Sir John Butterfill: May I raise a different subject with the right hon. Lady, namely the impact that the changes in the discount rate are having on pension schemes? The deficit arising from reductions on the stock exchange is dwarfed by the deficit arising from changes in the discount rate. People are now technically much more in deficit than they were. That is creating a problem for the pensions regulator. It is also creating another potential problem, which I have discussed with the Pension Protection Fund. Unless something is done about that technical problem, firms will go under because they cannot sustain their pension scheme. Otherwise viable companies will be asked by the PPF for contributions that are wholly unaffordable. We need a longer perspective; we need a moratorium until we get out of this situation, if we are to keep some of the companies concerned alive.
Yvette Cooper: I know that the hon. Gentleman has great expertise in pensions, and that Ministers at the Department for Work and Pensions have been looking into the issue. I am happy to discuss it further with him, if he has not been able to discuss it with them directly. He is right: the contraction in the world economy and in the financial markets is having an impact not simply on stock markets, but on pension schemes right across the economy. That is why it is so important that we all pull together and do everything we can to get not just our economy but every economy right across the world moving again.
Mr. Jeremy Browne (Taunton) (LD) rose—
Yvette Cooper: I will give way to the hon. Gentleman, but then I need to make some progress.
Mr. Browne: I am grateful to the right hon. Lady for giving way. Millions of people across the country will be relieved to hear that the Government predict that the economy will be in recession only for another three and a half months, and will start growing again at the beginning of July. Will she take this opportunity to say whether that is still the Government’s position?
Yvette Cooper: As the hon. Gentleman knows, the Chancellor will set out his forecast in the pre-Budget report in the normal way. The Bank of England has forecast growth in the economy next year, and the Chancellor will update the House as part of the pre-Budget report.
We have already set out a series of extensive measures to support the economy, including action to help pensioners, families, businesses and households right across the board, and it is true that there is more to come. We have made it clear that we will do more. We have new
programmes that are about to be implemented, which will give people extra support. We will go even further, because we believe in doing so, and the Conservative party does not. It is not prepared to fund such measures. Time and again, it has said that it would not be prepared to make the investment that is needed to support the economy.
In April, an increase in tax allowances, worth £145, is to come in. There is to be an increase in pensions of £4.55 a week, a new health in pregnancy grant, and £1.2 billion extra for jobcentres, to help to get people back to work. That £1.2 billion was opposed by the Conservatives. There are to be new recruitment subsidies for those who have lost their jobs; that was opposed by the Conservatives. There are to be new apprenticeships for school leavers; that was opposed by the Conservatives. There is to be £3 billion of extra capital investment to support thousands of jobs. There are to be repairs to primary schools, new roads and new homes; that was opposed by the Conservatives. Extra help for mortgage holders to prevent repossessions, and extra help for businesses through the new schemes, were all opposed by the Conservatives. All that help is being introduced in a mere matter of months, but it was opposed by the Conservatives. They call for more, but they want to spend less.
Let us look for a second at the only measure that the Conservatives have proposed: a national loan guarantee scheme, which completely collapses under scrutiny. They are confused; they have not said whether they are guaranteeing new loans or existing loans. They will not price on risk, yet they claim that no losses will be made. That is simply not credible. They claim that the scheme can be introduced straight away, yet they have given no proper detail. Most important of all, they have not been prepared to put any money behind it. The shadow Chancellor claimed that the scheme
“does not add to public expenditure.”—[ Official Report, 18 December 2008; Vol. 485, c. 1228.]
However, last week, the shadow shadow Chancellor said that if anything goes wrong with the guarantee, the taxpayer will take some of the hit. The truth is that the scheme would cost money if carried out in the way proposed by the Conservatives, but they are not prepared to put any cash behind it. Time and again, they refuse to do what is right for Britain because they are ideologically opposed to Government action and Government investment.
Mr. Gummer: If the Government are doing all these wonderful things, why has the International Monetary Fund said that the recession will last longer in this country than in any comparable economy? Is it not a fact that although this is a world recession, the Government have caused our recession to be a great deal worse than that in any other country to which we would compare ourselves?
Yvette Cooper:
If the right hon. Gentleman looks at the facts so far, he will see that the drop in growth has in fact been steeper in Japan, Germany and Italy than in the UK. Obviously, as we all know, the problems started earlier in the US; it has been experiencing economic difficulties for much longer. London is one of the greatest financial centres in the world, so of course that means that the financial sector will be affected by the global credit crunch. Nevertheless, all countries across
the world are being affected, although they are often in very different circumstances and often have very different kinds of economies. The key question is: are we prepared to take the action that is needed to do something about the matter?
Patrick Hall: My right hon. Friend mentioned that one needs to believe in action in order to pursue it. One also needs to understand the problem. She will have noticed that every time she mentioned the global nature of the credit crunch, her words were met by derisive calls from the Opposition, who do not seem to understand or accept the global nature of the problem. May I therefore ask her how she thinks the G20 will provide an opportunity to address one of the glaring problems that we face, namely the lack of international oversight and regulation of capital flows?
Yvette Cooper: My hon. Friend is right. The fact is that no matter how tight the regulatory system is in any one country, no country could escape the impact of the global recession because of the interconnectedness across borders, and the way in which credit flows across borders. He is right: we need greater international co-operation and greater international regulation to look at those sorts of cross-border flows.
Mr. Philip Dunne (Ludlow) (Con): Will the right hon. Lady give way?
Yvette Cooper: I am sorry, but I will make some progress. Conservative Members do not understand that if we do not act, it will cost us more. If, in the early ’90s, the Conservatives had provided something similar to the fiscal boost that we are providing, they could have saved 300,000 jobs. If they had done something similar in the early ’80s, they could have prevented an entire generation from being scarred by long-term unemployment. It is worse than that: they do not want simply to do nothing—they want to make things worse. They want to cut £5 billion from public spending at the end of next month. That means cutting spending on housing by at least £800 million from next month, just when the construction industry is in real difficulties. That is the equivalent of 10,000 new homes for social rent. They want to cut the budget for training and science. They have said that they would restrict it to 1 per cent. That means cutting it by at least £900 million from next month, at a time when young people need extra support. That is the equivalent of cutting 220,000 apprenticeships. They want to cut investment in transport infrastructure just when we need to invest in the infrastructure for the future.
That is complete economic madness. In the words of the winner of the Nobel prize for economics, Paul Krugman:
“Renouncing a fiscal stimulus when private spending is contracting is strange. Governments have very few tools at their disposal, and Cameron does not want to use them.”
Yvette Cooper: I have given way considerably.
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