international coordination of fiscal stimulus measures.
Good progress has been made in implementing the...Economic Recovery Plan,
the size of the fiscal effort (around 3.3 per cent. of EU GDP or over €400 billion) will generate new investments, boost demand, create jobs and help the EU move to a low-carbon economy.
We agreed a further €5 billion to be invested in stimulus projects in energy security, renewable energy and broadband. The agreement provides for at least €220 million of additional investment in UK carbon capture and storage and offshore wind projects.
We have seen an unprecedented fiscal injection in almost every major economy: in France, a package worth €26 billion with further recent measures worth €2.6 billion; in Spain, an infrastructure package worth €11 billion alongside other measures, with the IMF estimating a total stimulus of 2.3 per cent. of GDP; and in Germany, not one but two fiscal stimulus packages totalling €82 billion1.5 per cent. of its GDP this year and 2 per cent. of GDP in 2010. As the Council concluded, Europes determination is
to do what is necessary to restore jobs and growth.
The Council also reached important conclusions on energy security and climate change, on the eastern partnership and the relationship with the United States. The Council remains committed to working for a worldwide and comprehensive climate change agreement in Copenhagen. Following the December council, Europe
became the first continent in history to make legally binding the detailed policies required to set itself on a path to a low-carbon economy. There is a commitment to a 30 per cent. reduction in emissions, provided that other countries make comparable commitments according to their capabilities. But our success in Copenhagen will depend on unlocking negotiations with developing countries. The Council therefore agreed that within the framework of a future comprehensive climate agreement, the European Union will take on its fair share of financing for green technologies, reducing deforestation and protecting the poorest from the impacts of climate change.
The global economic downturn is no time to walk away from our commitments to the developing world. The Council agreed that Europe should continue to play a leading role in supporting developing countries in order to avoid jeopardising the progress achieved in recent years and undermining their economic and political stability. The Council agreed that commitments to increase development assistance and to deliver on the millennium development goals must be honoured. The Council also emphasised the importance of promoting stability, good governance and economic development in the eastern neighbourhood.
Finally, in looking ahead to the informal EU-US summit to be held in Prague next month, the Council welcomed the inauguration of President Obama and reaffirmed the strategic importance of transatlantic relations. At this moment of international economic crisis, we are showing that Europe and the world can work together to achieve co-ordinated interest rate cuts, substantial fiscal stimulus, banking reform, new rules for tax havens and new rules for remuneration. I commend this statement to the House.
Mr. David Cameron (Witney) (Con): Before asking the Prime Minister about his statement today, may I ask him about reporting back to the House on the outcome of next weeks G20? Given that it is taking place on the day when the House rises, will he consider making a statement that evening?
Before turning to the economy, I welcome what the Prime Minister says in the communiqué about the climate change agreement in Copenhagen. I also agree with what he says about the importance of not walking away from developing countries at this time.
On the economy, I want to ask about trade, financial reform and the recession in Europe. First, on trade, this communiqué talks about the importance of the Doha round, but frankly, so did the last one and the one before that. Since then we have seen Buy America programmes from the US Congress, higher agricultural tariffs in India, French Ministers boasting of repatriating jobs from Slovenia back to France and the Prime Minister talking about British jobs for British workers. The task of the London summit should be urgently to agree the key issues of the Doha round. That should be the key aim. Will the Prime Minister confirm that the existing trade rules in fact allow countries to double their revenues from tariffs? Is freezing existing tariffs not a pretty minimum acceptable outcome for the London summit?
Secondly, on financial rules and financial reform, we need rules that force banks to hold more capital when the economy is strong. We have been pressing for such counter-cyclical capital requirements for more than a year now. Will this communiqué mean that that actually happens, and do we not need the same sense of urgency when it comes to the supervisory colleges of regulators? The Prime Ministers office announced that they would be established by the summer, but the communiqué is now talking about it happening by the end of 2009. Can the Prime Minister tell us whether the deadline has slipped?
I agree with the Prime Minister that it is better to have co-ordination than a single European regulator that overrides national regulation, but would it not be easier to resist such a European regulator if he would accept that the tripartite system that he put in place in 1997 simply has not worked and needs reform? Does he not need to admit that clearly and frankly today?
Next, on recession in Europe, the Prime Minister repeatedly lectures everyone in this House and beyond that he is uniquely forging a consensus in Europe on how to deal with recession. Does not that claim now look completely ridiculous? Are there not three examples of that? The first is whether we in Britain can afford a fiscal stimulus, the second what that stimulus should consist of, and the third whether he is any good at actually implementing the measures that he has announced. Let me take each in turn.
Is it not remarkablethat is a questionthat today the CBI, which is the organisation responsible for representing businesses large and small, said [Interruption.] Labour Members should perhaps spend a bit less time filling out their expenses and listen to the CBI. The CBI said that
a further significant fiscal stimulus is unaffordable and would lead to businesses and households retrenching.
deliver a clear and credible [Interruption.]
Mr. Speaker: Order. Mr. Austin, for a few months you have been quiet, and now you have begun to shout again. You just cannot do that. I keep telling you that you cannot do it. By the way, Ms Thornberry, the right hon. Gentleman is in order. If he were out of order, I would be the first to tell him. It would not be you telling him, it would be me. How is that?
needs to... deliver a clear and credible plan for restoring the public finances to health.
Last week, we had the worst set of public finance figures in our peacetime history. We are forecast to have the largest budget deficit of any G20 economy next
yearalmost twice as large as for the G20 as a whole. Is the view in Europe not clear? As the German Chancellor says:
We should not be competing for the most unrealistic fiscal stimulus.
Let me put it another way. This week, the Prime Minister goes to south America. Will he confirm that only one country in the whole of south America entered recession with a higher deficit than Britainnot Argentina, not Paraguay, not Uruguay and not Ecuador, which all managed to balance the books better than the Prime Minister? Is it not something when the British Prime Minister has to go to a conference in Latin America to get a lecture on fiscal responsibility and prudence?
The Prime Minister is criticised in Europe for not only affordability, but the make-up of his stimulus. No one else is copying his policy of cutting VAT. Indeed, the consensus in Europe is that it made things worse. The French President said:
We wont be repeating Gordon Browns mistakes
The Prime Minister is not only wrong about affordability and VAT; everyone thinks that he is getting implementation wrong, too. Can he not see that, when his various schemes exist only in a press release, they do not help build confidence and instead destroy it? The home owners mortgage support scheme and the recruitment subsidies for the unemployed were announced months ago, but are still not available. Should he not listen to the German Chancellor, who said that
if we want to make a real impact, you really must implement the package first before you talk about the next step?
Instead of listening to his lectures, we should all be clear about what the Prime Minister is deliveringa longer recession than the United States or the eurozone, the fastest rise in unemployment since records began and the worst public sector deficit in British peacetime history. When will the Prime Minister understand the need for change? Should that change not start with his acknowledging properly and apologising for the mistakes that have led this country to that position? Is it not time to start now, with Sorry?
The Prime Minister: I will deal with each point in turn, but is the central point not that, in the face of a global recession, unemployment and a loss of output, alone in Europe and alone in the rest of the world, isolated even from the Conservative party in Europe, the Conservatives only response to the recession is to cut public services and public spending, except for the £200,000 that 3,000 people will get in inheritance tax?
Our priorities are to raise the pension for everyone, which we are doing; to raise child benefit for everyone, which we have done; and to ensure a VAT cut for everyone. The Conservative partys policy is a £2 billion tax cut for the smallest number of people in Britainthe 3,000 people who will benefit from an inheritance tax cut. Is it not time for the Conservatives to face up to the fact that their policy is a 6p a week cut in the licence fee for the many and a £200,000 cut in inheritance tax for the few? Usually in times of difficulty, the few who have money help the many; only the Conservative party says
that, in times of difficulty, the many should come to the aid of the few. [Interruption.] What am I on about? I am on about the Conservative policy, which Conservative Members say is a priority. At a time of crisis, they say that there is nothing for pensions, nothing for child benefit, nothing for public services except cuts, but tell us today that they are going ahead with an inheritance tax cut, which will help 3,000 people and give them £200,000 each. At least the shadow shadow Chancellor spotted that that was a difficulty, but he is not here because he is so out of synch with the Conservative party. He disagrees on VAT, the married couples allowance, Europe, and now the inheritance tax cut. The Conservative party is out of touch with the rest of the country. [Interruption.] They will have to face up to that one daytheir priority is an inheritance tax cut for the few, whereas ours is to help the many.
As to trade[Hon. Members: Hooray.] I know that the Conservatives are grateful that we have moved off what I will be coming back to in a minute. As to trade, we are working with the developing countries to see whether we can get a trade deal, but I have to tell the right hon. Gentleman that the problem is not Britain or Europe. The problem on the trade dealas he would see, if the Conservatives were serious about it and if they wanted to face up to itis that we have to get an agreement between America and India on very difficult and sensitive negotiations, which we are trying to move forward.
As for the colleges of supervisors, which the right hon. Gentleman mentioned, I have to tell him that instead of none having been established, as he said, 25 colleges of supervisors have been established to cover the financial institutions right across the world.
As far as delivery of policies is concerned, the right hon. Gentleman might want to notice that 90,000 companies are already benefiting from the schemes that we have put in place. He might want to know also that large numbers of people are benefiting from the greater support that we are giving in income support to those who are unemployed and who need help with their mortgages. None of those policies is supported by the Conservative party.
As for the right hon. Gentlemans quotations of Chancellor Merkel, President Sarkozy and other European leaders, is it not remarkable that he is trying to quote them in evidence the week after he walked away from the European Peoples party and linked up with the Czech forum, which says that there is no problem with climate change, and the Polish party of law and order [ Interruption. ] I have to say to the Conservatives that they are isolated from the German Christian Democrats, that they are isolated from the French Conservative party of President Sarkozy and that they are now isolated from the party of Mr. Berlusconi in Italy. The Conservatives are out of touch with the European mainstreamso much so that the President of the Commission has criticised them, as has the President of the Parliament, and the chambers of commerce have said that it is a matter of regret that they are moving to the fringes in this country.
As for the delivery of policies, let me be absolutely clear that in every area in which we are working, we are trying to move forward, but that requires money. The only party that is refusing to support a fiscal stimulus is the Conservative party. It is the Conservatives who are
out of step with Europe; it is they who are out of touch with public opinion; and it is they who are out of their depth when it comes to dealing with the economy.
Mr. Nick Clegg (Sheffield, Hallam) (LD): I thank the Prime Minister for his statement, in which there is much to welcome. The principle of a common European framework of regulation in financial services is a significant step forward, and one that we have been advocating for many years. There will continue to be differences in detailhe alluded to them himselfbut the principle of cross-border regulation of cross-border finance will be welcomed by all but the most small-minded Eurosceptics. The eastern partnership with countries such as Georgia and Ukraine is also welcome, not least because of Russias sometimes belligerent attitude towards its neighbours.
I remember in years gone by that the whole of Europe would groan every time the Prime Minister made another tub-thumping speech about how superior his policies were to everybody elses, so it is good that the idea finally appears to have dawned on him that he does not have all the answers and that he might even have a thing or two to learn from our European Union neighbours. Is the problem not now that, even with a touch of new-found humility, it is hard for him to lead at the G20 summit and in the European Union, because he does not practise at home what he preaches to them abroad? Would his rhetoric about stopping protectionism not pack more of a punch if he had not indulged in populist rhetoric about British jobs for British workers? Would his words about cracking down on tax havens not be more compelling if he had not presided for 12 years over industrial scale tax avoidance by British banks and big businesses here in Britain?
When the Prime Minister tries to act as President Obamas agent in Europe and persuade his European counterparts to issue another fiscal stimulus, would those leaders not listen to him more if he had not blown £12.5 billion on his wasteful VAT cut? Would those leaders not be more likely to listen to his recommendation that economic recovery must be driven by green investment if he was actually making those investments at home, rather than talkingas he did the other weekabout 400,000 fantasy green jobs, which he has no idea how to create? If he had used the VAT money, as we proposed, to invest in public transport and in a transformation of our housing stock, he could have created 100,000 new jobs starting right now.
It is becoming increasingly clear that it will be difficult for Britain to afford a sustained, major new fiscal stimulus to boost our economy. Is it not therefore clear that we must take drastic action to ensure that we stop wasting any more money on things that do not create jobs? Will the Prime Minister commit immediately to cancelling the VAT cut and investing what money there is left in green transport, in the insulation of our homes, schools and hospitals, and in jobs? Did he not wonder, as he looked round the table at the other EU leaders at the summit, why not one of them had copied his cut in sales tax? Will he admit that they were right to choose to invest money in jobs instead?
The Prime Minister:
The right hon. Gentleman wants us to spend money on insulating homes, and we are doing that. He wants us to spend money on investing in
schools, and we are investing more than in any previous year. He wants us to invest money in hospitals, and we are doing more than we have done. I thought that he would support the £44 billion of public investment that is being put into the economy, instead of failing to support it today.
As far as tax havens are concerned, in every Budget since 1997 we have tried to crack down on the use of tax havens. We have taken action that, since 2005, has secured £14 billion of funds that would otherwise have been lost in tax avoidance. We know that we have to get a global agreement, however, and that is why we are pressing other countries to sign up to the international standards that are necessary. That means that Switzerland, Liechtenstein, Hong Kong and Singaporeareas that have been regarded as tax havens in the pasthave got to come within the net. [ Interruption. ] And, yes, other parts of the world have got to come in, and I hope that the Opposition will join us in demanding that.
As far as the low-carbon recovery is concerned, the right hon. Gentleman should know that we are investing, and ready to invest, as I announced today, in major projects of energy infrastructure [ Interruption. ]
Mr. Speaker: Order. Mr. Mackay, you are another regular who seems to want to shout across the Chamber, particularly at the Prime Minister. You are down to ask a question, but you cannot keep shouting and then expect to be called.
The Prime Minister: As I was saying, the right hon. Member for Sheffield, Hallam (Mr. Clegg) can be sure that we are investing in low-carbon projects, and that we want to continue to do so. On the fiscal stimulus, I am not surprised that he is opposing it now. The reason for that is that he is committed to £20 billion of public spending cuts.
Sir Stuart Bell (Middlesbrough) (Lab): Is it not appropriate that the Prime Minister should seek consensus within the European Union, within the group of 20 and with the United States of America at the meeting in Prague next month in relation to the first global recession, and that he should link it with climate change proposals and, not forgetting the less developed world, with the millennium development goals? Is it not a pity, or even a tragedy, that the whole House cannot support that consensus?
The Prime Minister: This is a global problem that requires global solutions. I do not think that anybody in our country is in any doubt about that. There are four problems that must be solved if the global economy and our global society are to work better in the future. The first is financial instability, and that is why we are proposing the measures that we are proposing. The second is climate change and the need for energy that must be met in the future, which is why we are looking forward to a Copenhagen agreement. The third is security for people in a world of greater mobility and yet greater terrorism, and we have to deal with that as a global problem as well. The fourth is the poverty and inequality that led us to propose the millennium development goals in the first place. Everybody knows that those problems cannot be solved by Britain, America or any other country alone; they can be solved only by the world working together.