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Mr. Ken Purchase (Wolverhampton, North-East) (Lab/Co-op): I am quite clear that banks should not be lending to businesses when underlying weaknesses are not being properly addressed. However, it seems to me that in my constituency at least many decent businesses, without underlying weaknesses, are told when they apply for credit that they have to cover that advance many times over—sometimes twice—with securities. I believe that the banks have to take some of the risk themselves, rather than trying to transfer the whole amount to small business owners, who have wives, families and so on to keep. It is quite unrealistic to expect that level of cover from ordinary small businesses when advancing credit.
Mr. Darling: If my hon. Friend would let me have a note of some of the problems that his constituents have encountered, I would be happy to look at them. I agree that as part of the process of restoring trust in the banking system we have to be clear about banks’ responsibilities as well as the responsibilities of individuals and businesses. If someone takes out a loan, they have to be clear that they can repay it. Equally, banks have to be responsible in their lending and ensure that they are realistic and reasonable about the conditions that they impose. That is very important and it is all part of restoring trust in the system, which I regard as absolutely essential.
Sir Peter Tapsell (Louth and Horncastle) (Con): Does the Chancellor agree that with the declining prospect of growth in the economy, the banks are faced with an inevitable deterioration in the quality of their loan books, so that far from increasing their loans to businesses, they are likely to be seeking the whole time to increase their capital? How will that problem be overcome?
Mr. Darling: The hon. Gentleman raises a quite reasonable point. All over the world, we have this problem. We need to ensure that banks strengthen their capital position, because in the long term that is essential. Of course, if banks did that and there was no other intervention, there would be less credit in the economy and the economy would shrink further. The result would be that the bank assets that are currently impaired would become even worse. That is why we have not only taken action to recapitalise the banks—in the case of RBS and Lloyds Group we have put additional capital in—but put in place schemes such as the credit guarantee scheme, which is working very well, the special liquidity support system, which has provided liquidity for the banks, and, in addition, the asset protection scheme, which, as I have said, will go down a similar road to the scheme in the United States. I am sure that the hon. Gentleman recognises that, as he is in a minority in his party in that he sees the point and the reason behind Government intervention in such extraordinary circumstances. Government intervention is absolutely necessary to complement the process that he and I agree has to take place if we are to maintain credit in the economy.
Mr. Philip Hammond (Runnymede and Weybridge) (Con):
The simple way to get the banks lending to business again is the Conservatives’ national loan guarantee scheme. Yesterday, in Prime Minister’s questions, the Leader of the House criticised the scheme, claiming that there was no money behind it. The Chief Secretary
said much the same thing a few moments ago. For the record, will the Chancellor confirm what the Economic Secretary told the House about the Government’s guarantee schemes on 14 January? He said:
“We expect the measures to be run on a break-even basis”.—[ Official Report, 14 January 2009; Vol. 486, c. 220.]
He said that for a very good reason, because the premiums that are being charged are expected to cover the losses. There will be no additional cost to public expenditure from those schemes. Is it not the truth that the Government’s only sustainable objection to the national loan guarantee scheme is that they did not think of it first? British businesses are suffering because the Prime Minister puts his political sensitivities ahead of their business needs.
Mr. Darling: With your forbearance, Mr. Speaker, I think that I can answer that quite shortly. When the loan guarantee scheme was announced by the shadow Chancellor, he said that
“it does not add to public expenditure” —[ Official Report, 18 December 2008; Vol. 485, c. 1228.]
On 11 March, the shadow Business Secretary said, with exemplary candour, that
“the taxpayer will take some of the hit.”
How on earth does one square the Conservatives’ position that they would spend nothing extra with the fact that this scheme, even if it were workable, would cost the taxpayer money? That just shows the nonsense of the Conservative position.
Equitable Life
4. Annette Brooke (Mid-Dorset and North Poole) (LD): What progress has been made by the Chadwick review into compensation for Equitable Life policyholders. [266527]
The Economic Secretary to the Treasury (Ian Pearson): Sir John Chadwick has begun the work that the Government asked him to undertake on aspects of the ex gratia payments scheme that was announced by the Chief Secretary to the Treasury on 15 January. The Government will keep the House updated and report back on progress at regular intervals.
Annette Brooke: The Government’s position has been described as
“shabby, constitutionally dubious and procedurally improper”.
It is clear that the parliamentary ombudsman does not think that injustices will be fully remedied. What assurances will the Government give that my constituents and other Equitable Life policyholders who have clearly suffered injustices will get justice delivered with speed, clarity and transparency?
Ian Pearson: I am very disappointed that the Public Administration Committee should choose to obscure the real help that it accepts the Government’s payments scheme will deliver under extreme headlines, seemingly driven by an uncritical acceptance of the findings of the ombudsman’s report and by its unjustifiable and irresponsible characterisation of the manner of the Government’s response. [ Interruption. ] As a Government, we do not depart lightly from any of the ombudsman’s findings, but— [ Interruption. ]
Mr. Speaker: Order. The hon. Gentleman is in order.
Ian Pearson: The Government do not depart lightly from any of the ombudsman’s findings, but in such an important and complex case we have a clear duty to the taxpayer to ensure that our response is informed by a proper and comprehensive consideration of her report. That is what we have done and, as I have indicated previously, we want to move forward with an ex gratia payment scheme just as quickly as possible. We are talking to Sir John Chadwick about the advice that he is providing.
Sir Patrick Cormack (South Staffordshire) (Con): Is the Minister aware that he has just made one of the most shameful statements to have been made from that Dispatch Box in many years? He has rubbished a Committee presided over by one of his own greatly respected colleagues, and discounted the unprecedented second letter from the ombudsman that we all received this week. He has had no support from the Benches behind him, as not a single Labour Member has risen to echo his words. He should be deeply ashamed of himself, because he is bringing the Government and the whole system into disrepute.
Ian Pearson: I have a lot of respect for the hon. Gentleman, who has a very long track record of upholding standards in this House, but we have departed from the ombudsman’s findings only where we have clear and cogent reasons for doing so. We have applied scrupulously the terms of the Parliamentary Commissioners Act 1967, as interpreted by the Court of Appeal in the Bradley judgment. For no other reasons have we departed from those findings. I have to say that I remain very disappointed indeed that the PAC does not appear to have understood some of the arguments that we have made to it.
Mr. Mark Field (Cities of London and Westminster) (Con): May I associate myself entirely with the words of my hon. Friend the Member for South Staffordshire (Sir Patrick Cormack)? I think he speaks for many people in the House, including many of the silent Back Benchers behind the Minister. What is the Minister now saying to all of our constituents? They are not unreasonable, and do not necessarily expect to get a share of the £4 billion that is being proposed, but are the Government simply waiting for many constituents across the country who relied on Equitable Life literally to die before there is any chance of getting any money on their behalf? Does he not find that a disgraceful state of affairs?
Ian Pearson: No, we are not saying that. We are saying that we want to move forward with introducing an ex gratia payment scheme as quickly as possible to help those who have suffered disproportionate impact as a result of losses through Equitable Life. We shall continue to do that. The fact that we have a disagreement with the Public Administration Committee will not deflect the Government from moving forward with all speed and providing a remedy for Equitable Life policyholders who have suffered disproportionate impact.
Mr. Speaker: Order. Condemning the Minister’s reply is not what this is about—it is about asking a supplementary on the subject. I am sure Sir Nicholas Winterton will be able to do that.
Sir Nicholas Winterton (Macclesfield) (Con): I hope, Mr. Speaker, I do not let you down.
Is the Minister not aware that the way that Equitable Life policyholders are being treated is viewed—by the public, and not just the policyholders themselves—as another example of the way the Government treat people who have been responsible and prudent? Here are people who have tried to save for their retirement. The reports produced by the ombudsman have, in a way sadly, been critical of the Government, so is it not time that the Government speeded up the process to help people such as those who are losing out from virtually negative interest on their savings under the credit crunch, and to give them the benefit of their prudence and responsibility?
Ian Pearson: The ombudsman herself admitted that the issue was not clear cut. The hon. Gentleman will be well aware of the findings of the Penrose report, which said that the company was largely responsible for the demise in the situation. We will continue to move ahead with all the speed we can. We have asked Sir John Chadwick to provide us with advice; we want to introduce a scheme and we want to make sure that we can offer a remedy to Equitable Life policyholders. There is a technical dispute between the Public Administration Committee and the Government, because we clearly do not agree with its report and we shall respond in due course.
Mr. Mark Hoban (Fareham) (Con): That was an extraordinary attack on an Officer of the House and a Committee of the House, and the Minister’s comments will be noted across the country. They typify the Government’s approach to the whole issue. At every step on the way, the Government have sought to block, frustrate and delay justice for Equitable policyholders. On Saturday, The Daily Telegraph nailed them completely. An early draft of the Treasury response to the ombudsman’s report said:
“Sir John will aim to provide his final advice to Government by June 2010.”
Is it not time for the Government to stop their shabby treatment of policyholders and give them a clear timetable for justice?
Ian Pearson: I and the Government have every sympathy for Equitable Life policyholders who have suffered genuine losses as a result of the failure of regulation, for which we have apologised. I have still not heard an apology from the Opposition for the period when they were responsible with regard to public bodies. Let us be clear. We have said all along that it is not normal practice for the Government to compensate for regulatory failure, and that is not the response just of this Government—it has been the response of successive Governments.
With particular regard to the date the hon. Gentleman gave, let me be very clear in response: we have said that we want Sir John Chadwick to advise us as quickly as possible and we want to make sure that we can introduce a payment scheme and make payments as quickly as we have the evidence, but we are talking about spending taxpayers’ money, and we have to have regard for the public purse. We have to do the right thing in the right way, and we will do that as quickly as possible.
Economic Growth
5. Mr. Nigel Evans (Ribble Valley) (Con): What his most recent forecast is of economic growth in the UK in 2009-10. [266528]
7. Mr. Mark Harper (Forest of Dean) (Con): What his most recent forecast is of economic growth in the UK in 2009-10. [266530]
The Chancellor of the Exchequer (Mr. Alistair Darling): I will update the House at the Budget on 22 April.
Mr. Evans: Well, a lot of jobs will be lost between now and then. Over the last several weeks, since the recession began, 6,500 jobs in east Lancashire have gone, and the chamber of commerce predicts that another 5,000 jobs will go. In my constituency, between Fort Vale Engineering, Fraser Eagle and Ultraframe, 200 jobs have either gone or are under threat of the axe. Will the Chancellor tell us how many jobs he believes will go in east Lancashire simply because of the business rate increase now facing many small to medium-sized enterprises? Does he not see the absurdity of pumping huge sums of money into the banks that will then have to be borrowed by some of those small to medium-sized enterprises—if they can do so—simply to pay for the business rate increases he is imposing on them?
Mr. Darling: The hon. Gentleman said that he was concerned about people who lose their jobs, and he is right to be concerned about them. That is why we have allocated just over £1 billion to the Jobcentre Plus network to help people who lose their jobs to get back into work as quickly as possible. It is still the case that most people who lose their jobs manage to get back into work within three months. Of course, that means spending money—something that he and his colleagues are against. I am aware of the concerns that have been expressed about business rates, but again, what the hon. Gentleman is asking for involves spending money, and his Front-Bench colleagues give the distinct impression that they would not spend any more money at all.
Mr. Harper: The Chancellor mentioned unemployment; in my constituency, it has risen by 18 per cent., according to the last set of figures. There are very few jobs advertised in the jobcentre, and there are 21 jobseekers for every job that it advertises, so my constituents will be looking very closely at the Budget. Did the Governor of the Bank of England not let the cat out of the bag when he pointed out that our fiscal position is so bad, our debt so high, and the Chancellor’s inheritance from his predecessor so bad, that the Chancellor’s hands are tied, and he will not be able to deliver a substantial fiscal stimulus in that Budget?
Mr. Darling:
That actually was not what the Governor said. Indeed, he made the point, in his evidence to the Treasury Committee, that he thought that measures to help people get back into work were a good thing, and ought to be supported. The point that I was making—I will make it to the hon. Gentleman as well—was that if we are to help people get back into work and retrain, and if we are to help them match with jobs in the economy, it will mean spending money. The lesson from the recessions of the 1980s and 1990s is that if we do
not spend the money—if we do not intervene for two or three years—an entire generation will effectively be wiped out. We must avoid that at all costs. That is why the Governor and I are totally agreed that the stimulus that I announced last November was necessary. That is why both of us agreed, at the G20 meeting of Finance Ministers and central bank governors a couple of weeks ago, that we needed to do whatever was necessary, for as long as is necessary, to support the economy.
Of course, as I have said on many occasions, substantial sums of money are being put into the economy through the measures that I announced in the pre-Budget report, and through the additional fire-power that I have given the Bank of England to get credit going in the economy. Both those things are absolutely essential, and we have to make sure that they work their way through. As the Governor himself said—and I agree—we also have to make sure that, if it is necessary, we continue to do more when it comes to measures such as putting people back into work. It is nice to have the support of the hon. Members for Ribble Valley (Mr. Evans) and for Forest of Dean (Mr. Harper); perhaps they could have a word with their Front-Bench colleagues.
Nick Ainger (Carmarthen, West and South Pembrokeshire) (Lab): May I agree wholeheartedly with what the Chancellor said? I was on the Treasury Committee when the Governor said the words that my right hon. Friend has just repeated. May I commend to my right hon. Friend the submission produced by Professor “Danny” Blanchflower and David Bell of Stirling university, which puts forward suggestions to address youth unemployment? In the summer, 700,000 young people will leave school and university; we need to tackle those numbers. Will my right hon. Friend look at the report, because it suggests good ways of tackling the problem of growing youth unemployment?
Mr. Darling: I have indeed seen Professor “Danny” Blanchflower’s suggestions, and I have spoken to him as well. [Laughter.] Rather than laughing about the matter, most people in the House ought to be concerned, at a time when we can see that the unemployment figures have been rising, that we do everything possible to get people back into work. The lesson from the past is that that is necessary not just for the long-term unemployed. It is especially necessary for young people, to ensure that they get back into the workplace as quickly as possible. However, I repeat that it means that at some stage we have to be prepared to spend the money to back that up. My view is that it is money well spent, because the cost of doing nothing, which is what the Opposition urge us to do, would be far, far greater.
Mr. Andrew Love (Edmonton) (Lab/Co-op): One consideration is the dramatic drop in world trade over the past six months. What action will my right hon. Friend be taking at the G20 to try to reassure the international community, so that we can get world trade moving again?
Mr. Darling: I agree with my hon. Friend. The fall in world trade is one reason why industrial production is falling. It is interesting that, in the exchange of letters that I had with the Governor of the Bank of England, he made the point that in 54 of the 57 countries for which we have data, falls in industrial output were seen over the last quarter of 2008. That has had a devastating effect on economies, particularly in the far east.
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