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We need to make sure that we get world trade going, which is why the resumption and conclusion of the Doha round of trade talks is important—and that will feature next week at the G20. It is also necessary for countries around the world to do everything that they think is right and appropriate to boost their own economies. Nobody is saying that they need to turn up next Wednesday with a budget on the table, but we are saying that if countries act together the effect will be far greater. When recession is affecting or threatening countries across the world, the need for countries to act together is essential, which is why next week is an important step along the way.
Mr. Michael Fallon (Sevenoaks) (Con): Why did it take the Governor to warn the Prime Minister that this country simply cannot afford to borrow any more money? Why does the Chancellor not stand up for taxpayers’ interests, resist the banging on the wall from his neighbour next door, and start the long haul of getting our public finances under proper control?
Mr. Darling: I would say two things to the hon. Gentleman. First, the International Monetary Fund noted in its recent report that many countries entered this problem
“with greater fiscal space to expand”.
It noted that Canada, China, France, the UK and the US were such countries, so we are in a place where we can provide help for the economy. To put it another way, if we had not done so—if we had taken £20 billion out and withdrawn the power that we have given to the Bank of England to ease credit—the effect on the economy would have been absolutely harmful and very damaging, especially to jobs and the future prosperity of businesses.
I made the point in the pre-Budget statement last year that, just as it is necessary to support our economies now, all countries need to live within their means over the medium term. That is why I announced measures to raise money in the pre-Budget report. It is important—and no one should be in any doubt about this—that, yes, we need to take measures now, as I have said, as the Governor has said, as the Prime Minister has said, to support our economy, but all of three of us have also made the point that it is necessary to make sure that in the longer term we have a sustainable position and that all countries live within their means. That may mean making some hard choices, but it is necessary.
Mr. Lindsay Hoyle (Chorley) (Lab): My right hon. Friend is well aware of the difficulties. He has heard about manufacturing in Lancashire, and we have just lost more jobs at Leyland Trucks. We ought to look at how we can protect manufacturing for when the economy goes into growth, and the best way of doing so is through a short-term working subsidy. Will he look at that, and if he is looking at how we can fund it, he can always end the VAT cut early so that that much-needed measure can put the impetus back into manufacturing?
Mr. Darling: I agree with my hon. Friend that we need to do whatever we can to protect jobs or, where jobs are lost, to get people back into work. I also agree that it is necessary as far as possible to do what we can to help where we think that businesses have a viable future. I do not agree with the point that he made in relation to VAT, but I do not think that he expected me to do so.
Mr. Greg Hands (Hammersmith and Fulham) (Con): Earlier this week, the former Cabinet Minister, the right hon. Member for North Tyneside (Mr. Byers), said that the VAT cut had “run its course” and should be reversed. Does the Chancellor agree?
Mr. Darling: No, I do not, because I think that putting £12.5 billion into the economy and doing it immediately was necessary. We are also—and I am grateful to the hon. Gentleman for allowing me to say this—taking other steps that will help the wider economy. Basic rate taxpayers will see a reduction in their tax, starting on 6 April. We have increased child benefit for the oldest child, and for other children as well. We have brought forward, too, a payment of £60 for pensioners, and the state pension itself will go up in April, so we are taking a range of measures to help. As for VAT, perhaps the hon. Gentleman should have a word with the shadow Business Secretary, who supported the reduction in VAT. Increasingly we are hearing a lot more sense and a lot more experience from that direction than we are from the shadow Treasury Front Bench.
Automotive Industry
6. Mr. David Drew (Stroud) (Lab/Co-op): What recent discussions he has had with the Secretary of State for Business, Enterprise and Regulatory Reform on assistance for those on short-time working in the automotive industry. [266529]
The Financial Secretary to the Treasury (Mr. Stephen Timms): The tax credit system is particularly effective in delivering immediate help to families whose income falls—for example, as a result of short-time working. We have worked closely with the Department for Business, Enterprise and Regulatory Reform on the Government’s automotive assistance programme.
Mr. Drew: In a previous exchange, my hon. Friend the Member for Chorley (Mr. Hoyle) mentioned the need for wage compensation for those on short-time working. In Stroud we have worked up quite a sophisticated training package with both Delphi and Renishaws, and I thank the South West of England Regional Development Agency, Gloucestershire First and Unite trade union for that. The missing link is the need to recognise that people are putting their own time and money into the training package. If the Government could provide some additional funding for that, that would be important. I know that there is a paper before the Cabinet. May we have some clarity and some progress on this?
Mr. Timms: I am grateful to my hon. Friend and he is right to draw attention to the range of measures that are in place to support the automotive industry. I point out to him again the benefits of the tax credit system—for example, for someone who is earning £400 a week, with two children. If their income falls by £40 a week, perhaps as a result of short-time working, the tax credit award could well go up by £15 a week. So there is real and immediate help from the tax credit system to people in the position that my hon. Friend describes. We are looking at other options. We are looking, for example, at the possibility of a wage subsidy scheme that we have seen elsewhere, to see whether that could add to the real help that we are already giving. The car industry is making good use of the Train to Gain support of up to £100 million, which my hon. Friend mentioned. We are giving the help that is needed.
Topical Questions
T1. [266548] Mr. David Hamilton (Midlothian) (Lab): If he will list his departmental responsibilities.
The Chancellor of the Exchequer (Mr. Alistair Darling): My responsibilities remain as I set out on previous occasions.
Mr. Hamilton: My right hon. Friend will be aware of the crisis that is facing pubs and clubs throughout the country. My constituency cannot be any different from anywhere else, and every week a pub or a club is put under pressure. When reviewing the Budget, will the Chancellor look into the duties placed on pubs, as opposed to the loss leaders in supermarkets, and consider the possibility of changing the duty on draught beers, ciders and lagers, which could help them? Will he also take a good kick at the breweries and tell them that they should reduce the rates that pubs have to pay?
Mr. Darling: My hon. Friend raises an understandable concern for pubs throughout the country. He will know that the number of pubs in this country has been declining pretty steadily over the past 20 years or so. He is right to say that there are many factors that influence the price of beer that the customer pays in the pub. That depends not just on duty but on charges made, in many cases, by brewers that are tied. I met representatives of the brewing industry and the industry generally fairly recently to discuss these matters and, as ever, I will keep them under review.
Mr. George Osborne (Tatton) (Con): I notice that in previous answers the Chancellor has avoided directly addressing the comments of the Governor of the Bank of England to the Select Committee on Tuesday. The Governor said:
“the fiscal position in the UK is not one that would say, ‘Well, why don’t we just engage in another significant round of fiscal expansion?’”
In one word, will the Chancellor tell us whether he agrees with the Governor of the Bank of England—yes or no?
Mr. Darling: As I have said on a number of occasions this morning, the Governor and I are in complete agreement in relation to the fiscal stimulus that I announced in the pre-Budget report last year. We are in complete agreement about the declaration that we both signed up to at the G20 meeting in Horsham a couple of weeks ago, when we said that countries needed to do whatever was necessary for as long as necessary. I also agree with him when he says specifically in the same evidence to which the hon. Gentleman refers that he would not rule out targeted and selected measures that help people faced with unemployment, something that the hon. Gentleman has turned himself against. The difference is not between me and the Governor—far from it. It is between me and the hon. Gentleman, who opposes doing anything to help people in these unprecedentedly difficult conditions. It is he who has the problem, not us.
Mr. Osborne:
The Chancellor knows full well that the question is about a potential second fiscal stimulus in the Budget which the Governor of the Bank of England was warning against and on which the Chancellor has yet to express a view. Is it not a defining moment in the
history of the Government’s handling of the recession when the Governor of the Bank of England pulls the rug on the entire fiscal approach pursued by this Government? We have the truly humiliating position of a Prime Minister lecturing Latin American economies about fiscal probity while the Governor of the Bank of England cuts up his credit card back home. Can I ask the Chancellor again, very specifically, does he agree with the Governor of the Bank of England that
“the fiscal position in the UK is not one that would say, ‘Well, why don’t we just engage in another significant round of fiscal expansion’”?
If there is no agreement between the Chancellor, the Governor of the Bank of England and the Prime Minister, what hope is there for any confidence that the Government can pull us out of this recession?
Mr. Darling: As ever, the hon. Gentleman is talking nonsense and he knows it. I have made it very clear—and the Governor and I have discussed this on many occasions—that it was and remains necessary for us to take the action necessary to protect jobs and get credit flowing again in the economy. The hon. Gentleman opposes that. I believe that it is right, because I believe that the Government should be in the business of helping people through what is an unprecedentedly difficult period.
In relation to this country’s position, the International Monetary Fund itself, as I said, has noted that we and other countries were able to put in place a stimulus. It called for countries to take action together. We have done that, but again it is something opposed by the hon. Gentleman. He has absolutely no policies, prescriptions or suggestions as to how we should deal with these things. Indeed, the only policy that he has, in relation to inheritance tax—a policy that he claimed was funded—was undermined yesterday when the shadow Business Secretary, someone who does have experience, said that he had no idea how much money could be raised by the proposals. Is that not another example of experience on the part of the Business Secretary triumphing over the youthful impetuousness that we see opposite?
T2. [266549] Tony Lloyd (Manchester, Central) (Lab): My right hon. Friend will be aware that the Financial Services Authority’s compensation scheme has refused to recompense the charitable scheme of the Christie cancer hospital in Manchester for the £6.5 million that it lost when the Icelandic banks crashed. Will it be possible to urge the FSA to look once again at the unique position of charities—not, I recognise, only one charity? They are not equivalent to local authorities or individuals, but represent the many small donations of thousands upon thousands of individuals.
Mr. Darling:
I fully understand my hon. Friend’s point about the Christie hospital and a number of charities. Many people have spent hour after hour, day after day and week after week raising money for an extremely worthwhile cause. I want to say two things to my hon. Friend. The first is that clearly there are lessons to be drawn in relation to our ability to regulate branches of banks that are supervised in countries where the regime perhaps leaves something to be desired. The second is that we are very conscious of the position of charities. My right hon. Friend the Minister for the Cabinet Office has been looking at the matter, and
charities—including, I think, representatives from the Christie hospital—met the Economic Secretary earlier this week. Indeed, they are also due to meet the Prime Minister shortly. We will continue to see what we can do. I understand my hon. Friend’s point about charities and the differentiation that can be made for at least some of them and the larger local authorities, which might reasonably be assumed to have greater knowledge of how the system operates.
Dr. Vincent Cable (Twickenham) (LD): Given the excitement over the Governor’s comments, yesterday was a very good day to bury bad news. Can the Chancellor explain the comments reported from a Treasury spokesman yesterday? The spokesman said:
“The asset protection scheme and the code of practice on taxation for the banking sector are separate issues.”
That completely undermined the original terms of that arrangement, which required the full disclosure of all tax opinions. It suggested that the private banks had now won their battle to obtain support from the taxpayer under the asset protection scheme while continuing arrangements of large-scale tax avoidance at the expense of the British Government and maintaining intact their tax avoidance departments.
Mr. Darling: I do not know the quote that the hon. Gentleman is referring to. There are two distinct issues here, are there not? First, there is the asset protection scheme, which is designed to get credit flowing again and to ensure bank assets. As I said earlier, it is similar to the sort of thing that America and other countries are doing. There is a separate issue about the payment of tax by all companies, but the banks in particular. Both are equally important, because it is important that people pay what is due. On the hon. Gentleman’s general points about yesterday, as I said to him before, I believe that what we are doing is absolutely right, not just for banking but more importantly for the wider economy.
T5. [266552] Mr. David Chaytor (Bury, North) (Lab): Now we know that the former directors of the Royal Bank of Scotland spent much of their last weekend in office plotting how to double the size of Sir Fred Goodwin’s pension, is there not a more powerful case for some fiscal tightening over Fred’s pension pot? Could the Chancellor give the House an update on the Government’s efforts to scrutinise in fine detail the nature of that pension?
Mr. Darling: I said some time ago that UK Financial Investments Ltd., which holds our shareholding, and RBS are investigating that matter, with the lawyers looking at the position, and I have nothing further to add.
It is important that we deal with the problems that we have inherited, but it is also important that, at all times, we look forward. We have to ensure that we put RBS and, indeed, the Lloyds Group and any other bank in which we have shareholdings, on a proper and firm footing—that we rebuild them with the eventual aim of returning them to full, proper commercial operation, because that remains our intention. It is important that we keep our eyes on that and recognise, in RBS’s case, that its new management are taking a different approach and doing what is necessary to repair the damage that has been done—and they will have our full support in doing that.
T3. [266550] Tony Baldry (Banbury) (Con): Does the Chancellor recall that last November my right hon. Friend the Leader of the Opposition and my hon. Friend the shadow Chancellor warned that if the Government pursued reckless levels of borrowing, the question would stop being one of how much the Government want to borrow from the markets and become one of how much more are the markets prepared to lend to the Government? Is it not now clear that those warnings have been fully vindicated and that the Government have reached the limits of trying to borrow their way out of the recession?
Mr. Darling: I do not agree with the hon. Gentleman. As the Leader of the House said yesterday, the head of the Debt Management Office said a few weeks ago that one must always be careful about reading too much into one particular auction. The hon. Gentleman may not know this, but today’s gilt auction, which concluded less than an hour ago, was fully covered. I would be cautious before saying what he said, which suggests that there is something to be said for thinking before one speaks.
Mrs. Joan Humble (Blackpool, North and Fleetwood) (Lab): Will the Chancellor liaise with the Secretary of State for Work and Pensions to ensure that the hard-working staff at our Jobcentre Plus offices, who are delivering real support to people who are becoming unemployed, have the resources made available to enable them to continue to do the job that is needed and to work as hard as they are doing?
The Exchequer Secretary to the Treasury (Angela Eagle): I support what my hon. Friend says and offer my congratulations on the superb work that Jobcentre Plus staff are doing. They not only have, unfortunately, a higher number of inquiries to deal with, but are getting their average time in dealing with them down and managing to ensure that more people return to the labour market faster. The rate of getting people back into jobs in the current recession is 60 per cent. after three months, whereas in the last recession, when Jobcentre Plus was not properly funded, it was 45 per cent. Jobcentre Plus staff are doing a magnificent job, and we are relying on them to get people back into work as quickly as possible. We will provide them with the resources to do that; the Conservatives voted against it.
T4. [266551] Mr. Andrew Robathan (Blaby) (Con): May I take the Chancellor back to his answer to my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands), and draw his attention to a notice in the window of Lutterworth Motor Spares in my constituency that went up in December? It says:
“Thanks Darling! The Chancellor has gifted the nation a reduction in...VAT...Hurrah!...Yippee!”
Mr. Darling: I gathered that it was meant to be ironic—I think that I got there before the hon. Gentleman felt it necessary to make the point. It would be nice to be appreciated in his constituency, but that is clearly not the case in one part of the high street.
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