House of Commons
Thursday 26 March 2009
The House met at half-past Ten o’clock
Prayers
[Mr. Speaker in the Chair]
Business before Questions
Manchester City Council Bill [ Lords] and Bournemouth Borough Council Bill [ Lords]
Resumption of adjourned debate on Question (15 January),
That the promoters of the Manchester City Council Bill [ Lords] and Bournemouth Borough Council Bill [ Lords ], which were originally introduced in the House of Lords in Session 2007-08 on 22 January 2007, should have leave to proceed with the Bills in the current Session according to the provisions of Standing Order 188B (Revival of bills).
The debate stood adjourned; to be resumed on Tuesday 21 April at Sev en o’clock.
Canterbury City Council Bill, Leeds City Council Bill, Nottingham City Council Bill and Reading Borough Council Bill
Resumption of adjourned debate on Question (15 January),
That the promoters of the Canterbury City Council Bill , Leeds City Council Bill, Nottingham City Council Bill and Reading Borough Council Bill, which were originally introduced in this House in Session 2007-08 on 22 January 2008, should have leave to proceed with the Bills in the current Session according to the provisions of Standing Order 188B (Revival of bills).
The debate stood adjourned; to be resumed on Tuesday 21 April at Seven o’clock.
Oral Answers to Questions
Treasury
The Chancellor of the Exchequer was asked—
Credit Insurance
1. Mr. Michael Jack (Fylde) (Con): What assessment he has made of the effect of the availability of credit insurance for industry on the prospects for economic recovery. [266523]
The Chief Secretary to the Treasury (Yvette Cooper): About 20 per cent. of lending between businesses is generally covered by trade credit insurance. There is evidence that credit insurers are withdrawing insurance as part of the credit crunch, which is increasing the risks for those companies that use it, and the Government are in discussion with trade credit insurance companies about ways to give business more support.
Mr. Jack: Welcome as it is to learn from the Chief Secretary that the Government are in dialogue about this subject, I ask her to consider the situation of a small company in my constituency. The premium for its trade credit insurance has risen from £7,000 to £21,000 a year, and that is unaffordable. It had hoped that in the light of the announcement by the Under-Secretary of State for Business, Enterprise and Regulatory Reform, the hon. Member for Dudley, South (Ian Pearson), that the Government were working on a scheme to underpin trade credit insurance, something would have been announced by now. When will the Government formally address this problem and provide these companies with the help they need?
Yvette Cooper: We are looking at this issue, and the right hon. Gentleman is right to raise it. Much of the market is not covered by trade credit insurance, but this is a real pressure for those businesses that are, which includes many small businesses. He will be aware, however, that there is a private trade credit insurance market, and it is also important to ensure that we protect the taxpayers’ interests. He is calling for more action, and I respect that position and think it right that we try to do more, but he should also be prepared to put money behind that, and that is something that his party has persistently refused to do.
John McFall (West Dunbartonshire) (Lab/Co-op): May I remind the Chief Secretary that in November I wrote a letter to the Chancellor and Lord Mandelson after discussions with Marsh insurers about credit insurance, and the situation is still precarious, so I think further negotiations need to take place in that area? Dare I also mention the remarks of the Governor of the Bank of England to the Treasury Committee the other day? He said that he would not rule out targeted measures, whether in terms of the labour market or corporate credit. I think targeted measures are still necessary in terms of corporate credit.
Yvette Cooper: My right hon. Friend is correct to say it is right to support the economy at this difficult time. That means providing support for businesses to deal with the pressures they are facing as a result of the global credit crunch, and particularly also support for those who are losing their jobs. That is why we are putting more than £1 billion of additional funding into, for example, helping those who are losing their jobs—investment that, sadly, is continuously opposed by the Conservative party.
Mr. Michael Moore (Berwickshire, Roxburgh and Selkirk) (LD): For many world-class textile businesses in my constituency, the lack of credit insurance is now a very serious issue. In addition to the monitoring that the Chief Secretary is doing, will she look at the increasing amount of information that we are getting to the effect that the banks are restricting their own facilities and their lending to these companies because there is no credit insurance, which means these businesses are now feeling a double whammy from which they are getting no relief at all?
Yvette Cooper:
The hon. Gentleman makes an important point, and that is exactly why we are in detailed discussions with the trade credit insurance companies, and also why we have been setting out a range of measures with the
banks to support increased lending. The global credit crunch means there has been a big drop in foreign bank lending, for example, in the UK. Nevertheless, it is right to do everything we can to increase lending and support, which is why we now have legally binding commitments with the banks that have signed up to the asset protection scheme, in order to increase lending this year by tangible amounts.
Mr. Barry Sheerman (Huddersfield) (Lab/Co-op): Does my right hon. Friend agree that dialogue is not enough? There are good firms in our region that will be going out of business if we do not get help to them soon. The textile industry in Yorkshire particularly needs help, and it needs it now—if these businesses are supported for six to nine months, they will survive and flourish. We must do something quickly.
Yvette Cooper: My hon. Friend will be aware of the range of additional support that we have already provided for businesses, because it is right to do so to get them through the credit crunch. For example, 90,000 businesses are now benefiting from being able to defer their tax payments to the tune of more than £1.7 billion. That has been opposed by the Conservatives, but also £350 million of loans—
Mr. Speaker: Order. The right hon. Lady has made mention of what the Conservatives are doing in every one of her replies. I do not want that; what I am looking for is a ministerial reply.
Yvette Cooper: Opposition Members are obviously pleased not to hear reminders about their policies, but—
Mr. Speaker: Order. I call Anne McIntosh.
Waste Disposal
2. Miss Anne McIntosh (Vale of York) (Con): What discussions he has had with the Secretary of State for Environment, Food and Rural Affairs on the implications of Government policy on the private finance initiative for contracts for waste disposal. [266524]
The Exchequer Secretary to the Treasury (Angela Eagle): Government policy, as announced on 3 March, is to ensure that vital infrastructure projects proceed as planned, supporting jobs in the economy and preparing for full recovery. In total, £13 billion of public investment in procurement will be safeguarded by the Government’s action. That protection will ensure the future of a broad range of public infrastructure projects, including £3.5 billion of waste treatment and environmental projects.
Miss McIntosh: But is this—a time of credit crunch and the most severe recession that this country has ever faced—the best time to be inviting private finance initiatives? Why are the Government hiding behind private finance and why are public authorities having to explain what the benefits of energy from waste and other forms of incineration are? Why cannot the Government come out fighting with their own financing of these initiatives and explain to the public what the benefits or disbenefits of these initiatives are?
Angela Eagle: The announcements we made on 3 March will ensure that temporary problems experienced in the debt market will not put at risk £13 billion of vital investment in infrastructure, which will lead to the building of new schools and new hospitals, as well as jobs in waste procurement. I am not sure whether the hon. Lady is arguing that we should just abandon that and lose all the economic activity, jobs and support that goes with it—it sounds as if she is.
Miss Julie Kirkbride (Bromsgrove) (Con): Why are the Government not open about the level of public sector finance initiatives, which should now be included in the national debt? If they were more open about that, we could see exactly the extent to which they have mortgaged our future.
Angela Eagle: To the extent that public finance initiatives have helped to increase and renew our infrastructure, they are to be welcomed. The hon. Lady knows that that is about 10 per cent. of capital investment, and that it has created jobs and new buildings. In fact, we have mended not only the roof, but the whole inside of the building, which was crumbling when we inherited it in 1997. Public investment is a good thing. It has completely renewed our infrastructure, and that means that we have modern and more efficient, effective and productive infrastructure for the future. I would have thought that she would welcome that.
Mr. Dennis Skinner (Bolsover) (Lab): Is the Minister aware that there is a new waste disposal unit in Bolsover, on the old Coalite site? It is doing exceptionally well; there were queues there on Sunday. I propose that the shadow Business Secretary get hold of the Tories’ inheritance tax plan and dump it in the waste disposal unit at Bolsover.
Angela Eagle: Our ability to deal with the complex problems caused by waste gets ever more sophisticated; my hon. Friend has come up with an intriguing new way of recovering energy from waste.
Credit Provision
3. Mr. Bernard Jenkin (North Essex) (Con): What further steps his Department plans to take to encourage banks to provide credit to businesses. [266525]
The Chancellor of the Exchequer (Mr. Alistair Darling): The Government will continue to take whatever action is needed to maintain the stability of the financial system and to kick-start credit in the economy.
Mr. Jenkin: There has now been a credit crunch in the economy for 18 months. The Government have introduced a great many measures, but is there any evidence that they are working? Has not all the extra liquidity that the Government have thrown at the banks been insulating them from the need to make the changes to and the clarifications of their balance sheets? Is it not the case that they will not start lending to each other until they trust each others’ balance sheets, and that the Government have not actually forced them to come clean about what is on their balance sheets?
Mr. Darling: The restoration of trust in the banking system is essential; it is a precondition of fixing the problems in the wider economy, here and across the world, and it is absolutely necessary. The second thing to say to the hon. Gentleman is that it was necessary, as I believe most people accept, for us to recapitalise the banks in October. It was also necessary to go further than that and to help to deal with the problem that we face of these banks having on their books assets for which there is no market or whose value has been much reduced. That is why we introduced the asset protection scheme—the United States Government have announced something similar in its intent earlier this week, and other countries are doing that too. We have to make sure that we fix the banking conditions, because that is a precondition of sorting out the wider problems in the economy. Our approach is having an effect and will continue to have an effect. There is no overnight fix, but we are doing the right things to get lending and credit flowing in the economy, as well as supporting the wider economy and protecting jobs.
Mark Durkan (Foyle) (SDLP): Does the Chancellor accept that some people are finding a significant difference between the headline funds that the banks announce are available to support businesses and the amount of credit actually facilitated? We have banners in banks in Northern Ireland saying, “Lending isn’t ending”, but the message from business is, “Credit? We can’t get it!” That comes from sound, reliable businesses. Will the Chancellor seek a report from the lending panel on what exactly is happening with the banks in Northern Ireland in terms of support for business?
Mr. Darling: Yes, and we will continue to do that. I can understand the frustrations of businesses and individuals when they find that a credit line that was available is no longer available, or that the price being charged has increased. Our objective in everything we are doing to support the banking system is to get credit flowing in the economy again. As I said a moment ago, that is essential. We will continue to monitor what banks are doing. There is some evidence that in several cases credit is now available, although as we continue through one of the severest downturns we have seen—the House will have seen the figures from Japan and Germany earlier this week, which show a significant downturn—it is necessary that we maintain the course that we have set and do everything that we can to get credit flowing again. That is very important.
Mr. Julian Brazier (Canterbury) (Con): Nobody doubts the Chancellor’s commitment on this issue, but in drawing parallels with the US recapitalisation, will he accept that because their preference stock was at 5 per cent. while ours was at 12 per cent., US banks have an incentive to rebuild their businesses, whereas British banks have an incentive to minimise their exposure to Government recapitalisation?
Mr. Darling:
I am not sure whether the hon. Gentleman has noticed, but in the past six weeks we have converted the preference shares that we held in the RBS Group and the Lloyds Group into ordinary shares, because they needed the additional capital. The Financial Services Authority’s requirements were quite clear about that. I welcome what the hon. Gentleman says about supporting
the banks, but what we are doing in supporting the banking system is complemented by what we are doing to support the wider economy.
I know that there is a difference of view about whether there should be any fiscal stimulus, but a substantial amount of money has gone into the economy, on which the Governor of the Bank of England fully agrees with us. I also agree with the Governor that it is necessary to continue to take action to support our economy. In particular, it is necessary to do everything we can, when people face losing their jobs, to get them back into work. That is one of the big lessons that people should have learned from what happened in the 1980s and 1990s.
Mr. Jim Devine (Livingston) (Lab): Will my right hon. Friend consider placing a cap on interest rate charges for credit? For some store cards, interest is 26 per cent. APR and some companies charge as much as 182 per cent. as legalised moneylenders. That is obscene at a time when interest rates are below 1 per cent.
Mr. Darling: I do not think that a generalised cap or Government regulation of interest rates would work. I have great sympathy with what my hon. Friend says about the very high interest rates imposed by some unscrupulous lenders, and I know that he has done a great deal to try to address those problems. People have to remember, however, that if we impose controls and try to restrict lending, it comes at a wider cost to individuals, businesses and the economy. It is important to tread the fine line between sufficient public regulation, supervision and controls to protect the public interest, and stopping the flow of credit on which everything in our economy depends.
Stewart Hosie (Dundee, East) (SNP): The minutes from the Bank of Japan tell us that Japan’s quantitative easing programme was expected to encourage the banks to provide more credit to business, but the evidence is that bank lending reduced over the period of quantitative easing. What can the Chancellor say today to give us more confidence that the UK’s version of printing money will have the right result and encourage the banks to provide more credit?
Mr. Darling: Quite simply, in the 1990s Japan did not address the underlying problem in the banking system. It did not put in enough capital and did not deal with the assets that had gone bad, and until one addresses those problems anything else that one might do will not have the full effect that is hoped for. The Japanese are now quite clear about what went wrong in the previous decade and that is why most countries are now at pains to avoid it. The very fact that Japanese exports have gone down by nearly 50 per cent. demonstrates the extraordinary circumstances that we face. When a country such as Japan is facing such problems, there is all the more reason for us not only to take action to deal with the bank problem and to sort that out, but to take whatever action is necessary to support the economy through fiscal stimulus. We have given the Bank of England additional fire-power to put more money into the economy, because that is essential if we are to protect jobs in quite extraordinary conditions across the world.
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