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What Id be doing to save jobstrying to keep stability into the system, trying to join with the others in getting the worst of the global recession over and I would also be concentrating on bailing out the banks, concentrating on the toxic asset problem.
Would you borrow any money?
Id be borrowing some money in order to go for a loan guarantee to help with the credit markets.
Mr. Darling: I will in a moment. The right hon. and learned Gentlemans appearance on Newsnight rang alarm bells in his mind as well as in other Conservatives minds. He is right that it is important that we borrow money to support the economy now, but at the same time we are ready to ensure that in the medium termlike every countrywe live within our means.
Mr. Clarke: I am glad that the Chancellor watched me. He probably saw that I agreed with the Governor of the Bank of England, with most of the worlds Finance Ministers and with the President of Chile that, in view of the appalling state of our public finances, this Government cannot afford any further fiscal stimulus. I suspect that the Chancellor also agrees with those distinguished gentlemen: will he confirm that?
Mr. Darling: I certainly agree that it is necessary for us to be cautious. I agree in particular with what the Governor of the Bank of England told the Select Committee when he was asked about the prospects for growth in the world economy and in our economy. He said that the same factors that led the Bank to believe that there would be a recovery in the UK also suggest that there will be one in the world economy, and those factors included the large financial stimulus that has been injected. In other words, the Governor supported the view that we took last autumn that we had to support the economy, and we will continue to do that.
Mr. Darling: I shall give way to the hon. Gentleman, but I just want to tell the House that normally I give way to most Members who wish to intervene, but I know that many Back Benchers want to speak in this debate and that Mr. Speaker has been concerned about the length of time that Front Benchers have been taking in economic debates. I shall give way, but then I shall make some progress. No doubt the hon. Gentleman wishes to ask about Europe.
Does the Chancellor accept that the public sector debt figures that he gave in the pre-Budget report only a few months ago have now tripled, and that the most recent estimate by the Office for National Statistics is that it is £2.2 trillion? Does he accept, therefore, that the reduction in public expenditure and the increases in taxation that go with it make a nonsense of the statements he made in the pre-Budget report only a few months ago?
No, I do not. As I have said throughout this time, it is necessary for Governments to support their economies, and 19 of the 20 G20 countries are doing so. There is recognition across the world that in these extraordinary times we need to take extraordinary action to support our economy. It is equally true, as I have said time and again, that in the medium term we have to live within our means. I believe that we were right last autumn and that we are right now to continue to protect jobs, to support people and to support businesses. We are right to continue to repair the banking system and to make the reforms we need for the future. We are right, too, internationally to use the International Monetary
Fund and other international institutions to support developing and emerging economies; otherwise, that will not only damage them but affect us, too. We need to get world trade going and we need to ensure that the recovery is sustainable in the long term.
That was why last autumn I took the judgment that we needed to intervene. I rejected the suggestion that we should simply sit back and let the recession take its toll. That was what happened in the 1980s and 1990s, with disastrous consequences. We are helping people and businesses, with more than £1 billion going into the Jobcentre Plus network to help people find jobs. That is one reason why, still, more than half the people who lose their jobs get back into work within three months. That did not happen in the 1990s and 1980s.
We have given additional money to pensioners. Next week, the pension credit will go up from £124 to £130 a week. The state pension will go up to more than £95 a week. In January, we increased child benefit to more than £20 a week for the first child. The child tax credit will go up next week, and from Monday 22 million basic rate taxpayers will see a reduction in their income tax. That is real help for people up and down this country, at a time when the Conservatives have opposed every single one of those measures. They would have done nothing, as they did in the past. On top of that, we have put £12.5 billion into the economy through the reduction in VAT. The health in pregnancy grant is another measure that shows how we, even at this time, are ready to help people who need help, and it will come in at the beginning of next week.
It is important that at a time such as this we support people and businesses. It is imperative. I simply do not understand the policy whereby, in the face of all this, we should do absolutely nothing and hope for the best.
Mr. Philip Dunne (Ludlow) (Con): The Chancellor says that he wants to help businesses. Why, therefore, did businesses up and down the country last week receive new business rate demands significantly greaterin some cases, two or three times greaterthan those they had paid the previous year? How is that helping business?
Mr. Darling: I shall come on to that in a moment. The hon. Gentleman supports his party in believing that we should not be spending any extra money. Time and again, Opposition Members say they want more of this and more of that, but they are not prepared to find the money for it. I believe it is important to support businesses, and one way in which we do so is by supporting the wider economy. When we consider what we have donethe £20 billion that went into the economy last year, the automatic payments into the economy through lower tax receipts and higher benefit paymentswe see that we have increased such support as a percentage of what we produce. We have provided about the same level of support as the United States, Germany and Chinaindeed, most countries in the G20 have been prepared to take action because they recognise that it is necessary to support their economies and families and businesses.
We can afford to take that action because we were prepared as we came into this[Hon. Members: What?] To put it another way, I firmly believe that we cannot
afford to take no action. If we did so, the cost would be far greater. That is why the IMF said only in February:
Some countries entered the crisis with greater fiscal space to expand.
Canada, China, France, Germany, the U.K., and the U.S.
We were in a position to take action, and we did so. The Opposition would have turned their backs on the people of this country. They would not have done what was necessaryjust as they did not in the 1980s and 1990s. They were wrong then and they are wrong now.
Mr. George Osborne (Tatton) (Con): The Chancellor is talking about the decisions that were taken in the autumn. This afternoon, a letter from the former chairman of the Royal Bank of Scotland to the Select Committee on the Treasury has been published. It says that the evidence that the Treasury Minister, Lord Myners, gave to the Select Committee was not an accurate account of how much the Government knew about the size of Sir Fred Goodwins pension. In other words, while the Prime Minister was pretending to be angry about the Goodwin pension, his hand-picked Minister knew about it all along. Does the Chancellor agree that unless, by the end of the day, Lord Myners can prove that what he told the Select Committee was true, he must resign?
Mr. Darling: I know that the letter sent by Sir Tom McKillop has been published. We are considering it and will respond to it, but we are in the middle of a debate on the economy for which the hon. Gentleman has been calling for weeks. He said he was desperate to set out his case, so I thought that he was going to intervene to tell me why it was wrong to do anything and why his policy of inaction and standing by was absolutely right. However, he chose not to do so.
We must continue to make progress with sorting out the problems in the banking system. There is no quick or overnight fix, but it is important that we build on the recapitalisation of the banks. We must strengthen and restructure them where appropriate, and of course it is also important that we strengthen the regulatory system. We have to ensure that the supervision and regulation of institutionsincluding hedge fundshere and abroad are more extensive than in the past.
We must make sure that regulation is more intrusive than it has been in the pasta point that, to some extent, we discussed with Dunfermline building society yesterday. We need to strengthen prudential oversight: in future, we must make sure that banks throughout the world have sufficient reserves and that systems are in place to put the brakes on lending, where necessary.
We must also ensure better co-operation within the EU. We need common rules but, at the same time, we must respect the need for national supervisors to ensure
an adequate system of regulation, here and throughout the world. The process of strengthening and improving the regulatory system is absolutely necessary, and of course it must be accompanied by a long-term culture change in bank boardrooms. Ultimately, it is the responsibility of banks boards to get these things right, and it is important that they do so in future.
Mr. Andrew Tyrie (Chichester) (Con): Lord Myners has asserted that the RBS board exercised discretion to enhance Sir Freds pension. Sir Tom McKillop flatly contradicts that, and he is supported by the minutes. In his letter, he says:
There was no question of any discretion being exercised in relation to Freds pension and no discretion was exercised in that regard by any other RBS director.
Mr. Darling: No, I do not. As I said earlier, Sir Tom McKillops letter has just been released. We need to consider what he has to say, and we will respond in due course. However, we are 15 minutes into this debate and one would have thought that someone on the Opposition Benches had something to say about the economy.
Mr. Oliver Heald (North-East Hertfordshire) (Con): On a point of order, Mr. Speaker. I do not know whether you are able to guide the House, but when a witness is found to have lied to a Select Committee, would it be in order
Mr. Speaker: I am going to make this plain. If any Member of the other House is accused in this Chamber of lying, I will make sure that it is not reiterated in the Chamber. I think the hon. Gentleman was out of order in even raising a point of order in the manner he did. It is best that he resume his seat and keep quiet. That is the best thing he can do.
Mr. Darling: We have commitments from the banks in which we have shareholdings. RBS will increase its bank lending by £25 billion this year and next, and there will be £14 billion from Lloyds and more from Northern Rock.
That is important, because it is vital that we help businesses. For example, 100,000 businesses have already benefited from the extra time we have given them to pay taxes. We have also helped small companies by postponing the increase in corporation tax.
Dr. Ladyman: As my right hon. Friend says, we have taken shareholdings in banks. Has he estimated how much profit the Government will make if they return the shareholdings to the private sector when the banks share prices recover?
Mr. Darling: No, I want to deal with the point about business rates because I am conscious of the fact that businesses in this country faced a 5 per cent. increase in business rates, simply because the increase is linked to last autumnslast Septembersretail prices index rate. However, RPI inflation has fallen to 0 per cent. in the past month and is expected to fall further. I want to help businesses, so I can tell the House that companies will be able to pay only a 2 per cent. annual increase this year and pay the remaining 3 per cent. smoothed out over the following two years. Local authorities will write to business rate payers to let them know what will happen and what their options are, so businesses need not contact local authorities at this stage. I believe that that will provide genuine help to businesses in this country, with 1.5 million properties gaining from the measure and about £600 million of payments being deferred. I am glad that the hon. Member for Ludlow (Mr. Dunne) raised the matter. I hope that he is still glad that he did so.
Mr. Mark Todd (South Derbyshire) (Lab): Has my right hon. Friend received representations from the aerospace sector on loan support to support sales of major items, which are greatly straitened by the present unwillingness of banks to support such sales?
Mr. Darling: Yes, I have, and I believe that my hon. Friend has raised the matter with the Economic Secretary in his capacity as a Minister at the Department for Business, Enterprise and Regulatory Reform. I am aware of the importance of supporting the aerospace industry. When I was Secretary of State for Trade and Industry, I was glad that we were able to support the industry in a number of ways. We shall continue to consider what else we can do.
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