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Mr. David Heath (Somerton and Frome) (LD): Many businesses will welcome the business rates measure the Chancellor has just announced, but could it be coupled with the concept of automatic business rate relief for small businesses, raised in a private Member’s Bill introduced by the hon. Member for Mid-Worcestershire (Peter Luff)? If local authorities are already writing to businesses, is there not the capacity at that point to determine whether they qualify for automatic small business rate relief, and so accomplish both measures in one operation?
Mr. Darling: I shall certainly look into the possibility of doing that. Anything we can do now to help businesses, especially small businesses, is well worth while. I shall ask the Secretary of State for Communities and Local Government, who is sitting beside me, to investigate further.
Mr. Doug Henderson (Newcastle upon Tyne, North) (Lab): Before my right hon. Friend moves from banking, may I tempt him with, I hope, a slightly easier question than the one asked by my hon. Friend the Member for South Thanet (Dr. Ladyman)? It is now accepted in Newcastle that the Government did the right thing by Northern Rock, bringing about stability and turning the bank around. Does my right hon. Friend anticipate that the bank will fully repay the loans?
Mr. Darling: I very much hope that it will. My hon. Friend knows that when we lent money to Northern Rock, there was a lot of scepticism—especially among the Conservatives—about whether we would ever get any of the money back. When we eventually nationalised the bank, there was downright hostility, but few would say now that that was not the right thing to do. Of course, we have new legislation, which would help us in future. However, Northern Rock has been able to repay, ahead of schedule, the money it borrowed from the Government. A loan of about £10 billion is outstanding, but I think it right, in the light of changed circumstances, to allow Northern Rock to re-enter the mortgage market. That is important.
Peter Luff (Mid-Worcestershire) (Con): rose—
Mr. Darling: I want to make more progress before giving way again.
It is important to remember that the fiscal action we have taken is reinforced by the monetary action taken by the Bank of England. Interest rates have fallen quite dramatically in the past few months, which is helping millions of people in this country—mortgage holders as well as business people.
Mr. Bone: Will the right hon. Gentleman give way on that point?
Mr. Darling: No—I am making progress.
In addition, we have given the Bank of England power to put more money into the economy, to ensure that we do not get deflationary pressures and that we do all we can to keep the economy going.
The Bank of England, in addition to buying Government gilts, will buy commercial paper and commercial bonds. As a result of its intervention, the 10-year gilt yields have fallen by about 0.5 per cent. since the announcement.
We are doing the same as the United States, Switzerland, and Japan; other central banks will no doubt follow. The point is that in the face of unprecedented conditions, we are prepared to act—to provide substantial help for families and businesses, prevent the collapse of banks, protect people’s savings in UK institutions, kick-start credit, and build a sustainable recovery. We are ready to seize the opportunities ahead. That is the difference—
Peter Luff: Will the Chancellor give way?
Mr. Darling: I will give way shortly, by all means.
That is the difference between our choice, and the choice that the Opposition have made. Our choice is to support jobs and help people to get back into work. More money for pensioners and families with children, more money in the child tax credit, basic rate taxpayers being helped by next Monday—all that is being opposed by the Tories. Those are not their priorities. Their priority is to introduce one proposal to help just 3,000 people in this country. If ever there was a policy for the few, not the many, that is it. That is the path that the Conservative Government have chosen.
Mr. John Maples (Stratford-on-Avon) (Con): Does not the Chancellor think that all the things he is doing, and wants to do, would be much easier to do if the Government had run a responsible fiscal policy over the past six years, and had run surpluses in the good years?
Mr. Darling: The hon. Gentleman has to remember that, over the past 10 years, our economy has had the longest period of stability in a generation. We were able to do more for the health service, housing and education. At no time did anyone anywhere in the House say that we should spend less—quite the opposite. In these debates, Members used to call for even more to be spent, so, no, I do not agree. I thought that at least one Conservative might explain why, when faced with the choice of whether to help people to get back into work, which has cost about £1.3 billion—that is what we are giving to Jobcentre Plus—they would instead spend the money on helping a tiny minority of people. In the scheme of things, one might have thought that the Conservatives’ choice would be on the side of the many in this country, not just the few.
Mrs. Ann Cryer (Keighley) (Lab): I appreciate my right hon. Friend’s giving way. Will he briefly comment on the disparity in the contributions made by building societies and banks to the Financial Services Compensation Scheme? The hon. Member for Dunfermline and West Fife (Willie Rennie) was in the Chamber just now. We have lost one building society; I would hate to see another go.
Mr. Darling: As I said yesterday, we want to do everything we possibly can to make sure that we support stability in the financial sector, including the building society sector. Indeed, yesterday, although it was very sad that the Dunfermline building society got into the position it did, at least we were able to transfer it to another building society; that is important.
Mr. Darling: I will give way in a moment, but first I thought I might give the Opposition some further food for thought.
We face the most substantial economic downturn in generations. The whole world faces a financial crisis the like of which we have not seen for decades. The Conservatives might have thought that the No. 1 priority was to cut inheritance tax. Surely they would question not only having such a policy, but the fact that they cannot even pay for it. On 24 March this year, the shadow Chancellor told the BBC,
“what I’m saying is with the Conservatives’ plans these are funded, on inheritance tax we will pay for it with the long-established proposals we’ve put forward on non-domiciles.”
The next day, again on the BBC, the shadow Secretary of State for Business, Enterprise and Regulatory Reform said:
“We don’t know how many non-doms will be here, we don’t know how much our policy of raising fair taxation from foreigners who work in this country will raise”.
In other words, the policy is not only unfair but unfunded. Does not that tell us everything we need to know about where today’s Conservative party is?
Chris Huhne (Eastleigh) (LD): Given the Chancellor of the Exchequer’s remarks, with which I entirely agree, about Conservative policy on inheritance tax, will he reconsider the Government’s own cuts to inheritance tax in the forthcoming Budget?
Mr. Darling: No, because they are the right thing to do. At every stage, when we take action, we do it because we think it is fair and right. Faced with all the current problems that we and other countries have, it would be utterly wrong to make a priority of a measure that would benefit a very small number of people.
The Tories have a second policy. Not only do they oppose our putting money into the economy, but they are calling for £5 billion to be taken out of the economy, starting next week. That would mean taking money out of the police service and out of the environment at a time when we should be putting money into the economy. We can grow our way out of a recession; we cannot cut our way out of a recession.
Mr. Gerald Howarth (Aldershot) (Con): The Chancellor of the Exchequer has got a nerve. He is posing as the saviour of the millions of pensioners in this country. Does he not accept that it was his Government’s action in removing advance corporation tax relief to pension funds that destroyed the pensions industry and millions of pensioners throughout the country? Furthermore, he accuses my hon. Friend the Member for Tatton (Mr. Osborne) of inaction. Where was the Chancellor’s action when he set up the Financial Services Authority? It crucified the small independent financial adviser, but it failed to spot the big bankers making a huge mistake with the economy of the country.
Mr. Darling: I do not agree with the hon. Gentleman, as he will appreciate. In the past 10 years we have increased the state pension, we have introduced the pension credit, which is helping millions of pensioners by matching hard-earned savings, and we have taken many more pensioners out of tax. We will continue to do everything we can to help older people, because that is the right thing to do.
I believe that at a time like this, Governments across the world need to take action. They need to support their economies. Yes, of course they must take action to ensure that they live within their means in the medium term, but we must also ensure that we support our economies, continue to get credit going again and sort out the banking system: together, internationally, we must get international trade going again. We need to do everything we can to help the emerging markets and to prevent people from falling into poverty, because that would be a scandal.
There is a moral imperative on every one of us to do everything we can, both here and abroad, to make sure that we help people in this difficult time. We are committed to doing that. The sad fact is that the Conservatives will be committed to doing nothing. I look forward to hearing exactly why.
4.17 pm
Mr. George Osborne (Tatton) (Con): I begin by welcoming the Chancellor to one of the debates that we have been having in the House of Commons on the economy, even if he chose to speak for only about half an hour on it.
As always with the right hon. Gentleman, the most interesting parts of his speech were the bits that he left out. I notice that he did not repeat his pre-Budget prediction that the British economy would start growing in 12 weeks. I notice that he did not repeat his prediction that the Budget deficit would be a mere 8 per cent. of national income this year, because he knows that it will be higher. I see that he did not even try to mount a credible defence of the VAT cut, which cost £12 billion—he mentioned it in passing. Perhaps that is because Labour MPs are queuing up to say that it should be scrapped.
I could not help noticing that there was no reference to the grand global bargain, even though the Prime Minister is supposed to sign that in a couple of days. A whole Government White Paper was produced by the Treasury on the grand global bargain, yet it does not even make it into the speech from the Chancellor of the Exchequer two days before it is supposed to be signed at the G20.
Were it not for my hon. Friends’ interventions, the Chancellor’s speech would not have mentioned the Prime Minister’s ambitions for a second fiscal stimulus or the fact that the Governor of the Bank of England has put the kibosh on that. Listening to the Chancellor, one would never know that the Government’s entire economic argument that they have advanced against their opponents had collapsed in that defining moment when Mervyn King said that the country could not afford to borrow more for a second fiscal stimulus.
We heard the rehearsed lines on my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke). Let me say this about the former Chancellor and inheritance. He left this country with a golden economic legacy, whereas the present Chancellor will leave the worst inheritance any Government have left since the second world war. The right hon. Gentleman had a dig at me and at my right hon. and learned Friend. I read the interview with the Secretary of State for Children, Schools and Families in which he openly pitched for the Chancellor’s job, and I hear all the briefings from Downing street that the Chancellor is to be moved in
the next couple of months. Frankly, by the time of the next election I am a bit more likely to be in my job than the Chancellor is to be in his.
The Chancellor did talk about the G20. I shall come to considerable areas of disagreement, but there is some common ground on the G20. We welcome the fact that the summit is happening and that it is to take place here in London. We hold out real hope that substantial achievements can be made, provided that the Prime Minister resists the temptation that he always has—to fight his domestic battles and look for political dividing lines.
Skilfully chaired, the meeting on Thursday could achieve a real breakthrough on free trade, for example. By “breakthrough”, I do not mean warm words in the communiqué about how we will resist protectionism and not turn inwards; we had exactly those words in the communiqué signed in Washington at the last G20. Since then, as the Chancellor well knows, 17 of the 20 leaders who attended the conference have increased protectionism, 47 new protectionist measures have been introduced, the Indians have increased agricultural tariffs, the US Congress has passed “buy American” clauses, the French Government have boasted about the jobs that France is taking from eastern Europe and our own ludicrous Prime Minister has gone around repeating the slogan about British jobs for British workers, even though not a single member of his Government will repeat it alongside him.
Meanwhile, world trade is contracting for the first time in 30 years and the engine of global growth, on which we have come to depend, is spluttering to a halt. Completing the Doha round this spring would send not only a massive boost to the world economy, but a massive message to the world of confidence in our future. The G20 also looks likely to agree a substantial increase in resources for the International Monetary Fund. We welcome that, although I am disappointed that the Chancellor does not think that IMF reform should be on the agenda; I would have thought that, with China, India and Brazil attending the G20, this is a moment when we could get some real reform.
Mr. Darling indicated dissent.
Mr. Osborne: The Chancellor shakes his head, but the last time we exchanged remarks about IMF reform across the Dispatch Box, he said that it should not be attempted at the moment because it would be too difficult. As I say, that is disappointing.
We want the members of the G20 to live up to the commitments on aid signed at Gleneagles by the G8, because all of us in the House appreciate that the poorest countries are the silent victims of the credit crunch. On financial regulation, the test will be whether the G20 engages with or ducks the difficult issues. We can, of course, expect a strongly worded statement on bankers’ bonuses and offshore tax havens; the Government would have more credibility on those issues if the Prime Minister dealt with Lord Myners. The vote of confidence that Lord Myners got from his boss, the Chancellor of the Exchequer, was hardly a ringing one. We await events this afternoon.
It would also be good to have reform of the structure of banking. I noticed that although Paul Volcker, Nigel Lawson and the head of the Bank of America are all saying that we should look at dividing narrow banking from investment banking, the only person in the world who wants to shut down that debate is the Prime Minister, who has already made up his mind and does not want to listen to any other argument. It would be useful to have that debate in the G20.
Those are all tests for the Prime Minister as he chairs the summit. [Interruption.] I am glad to hear that the hon. Member for Blyth Valley (Mr. Campbell) is confident that the Prime Minister will pass all those tests. Of course, the real test will be whether he is focused on the right objectives in the build-up to the summit or whether we will end up with what Lord Malloch-Brown candidly called
“meaningless, empty commitments which don’t survive the flight home”.
The fear is that the Prime Minister is not focused on those objectives but has instead wasted his energies on trying to use the international stage to fight his domestic political battles. After all, as the Chancellor knows perhaps better than anyone, the Prime Minister will look for the domestic political advantage in everything. He cannot help himself.
The Prime Minister’s plan has been pretty clear since the beginning of the year. He wanted to get all the G20 leaders together in London and make them sign up to a second round of fiscal stimulus. He then wanted to unveil the British version of that second fiscal stimulus three weeks later—in the Budget, which he delayed for the purpose—and to leave the Opposition on the wrong side of one of his pathetic dividing lines. Well, if that was the plan, it has spectacularly backfired. The result is hardly the springboard for yet another political relaunch by this Prime Minister but actually proof that the Prime Minister is the one who is isolated, while European Governments are lining up with us to warn about the dangers of borrowing more.
Mr. Redwood: My hon. Friend is making his usual, very powerful, case. Does he agree that the Chancellor should be pitied, because his predecessor set up his own regulatory system, made himself head of it, and had no foresight when six major financial institutions went under for lack of capital, which he had failed to monitor?
Mr. Osborne: My right hon. Friend is completely right. One of the most ridiculous positions that the Government have got themselves into, which all Labour Members will be defending come the general election, is that the system of financial regulation that allowed the collapse of the UK banking system does not need to be changed. That is what they will go into the general election defending, whereas we argue that the Bank of England should have back the powers to monitor overall levels of debt in the economy so that we do not repeat the mess that the Prime Minister has visited on us.
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