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Clive Efford (Eltham) (Lab): Can the hon. Gentleman reflect on this for a moment? We are about to have a meeting of G20 leaders in the UK, at the instigation of the Prime Minister, with an agenda to try to tackle globally the current downturn. Does the hon. Gentleman really think that the British people think that he has the
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gravitas to achieve that sort of meeting and the coming together of minds to try to deal with this? Does he really think that people would listen to him given the several positions that he has held on many major issues over the past 12 months?

Mr. Osborne: The last time I looked at public opinion, we were the people who were trusted on the economy, not Labour; the public were opposed to a second fiscal stimulus, not in favour of the Government’s policy; and the man chairing the G20 was about the most unpopular Prime Minister that this country has ever had—so when it comes to credibility at the G20, we will see what other European Governments think of him.

Dr. Ladyman rose—

Mr. Osborne: Let me take another question, particularly as we are going to take the hon. Gentleman’s seat at the next election.

Dr. Ladyman: The Conservatives have been saying that for 12 years now.

Before the hon. Gentleman leaves the subject of banking regulation, would he like to point to any speech that he made prior to this crisis in which he indicated that there was the wrong level of banking regulation? Would he like to contrast that with the speech that he made after Northern Rock went under, when he said that the problem was too much regulation?

Mr. Osborne: I can point the hon. Gentleman not only to numerous references by me and my colleagues to the growing debt levels in our economy but to the fact that we fought the last general election—in complete contrast, by the way, to what the Chancellor said—arguing that we were spending too much as a country and needed to slow the growth in spending. Since the hon. Gentleman says that he has been in this House for 12 years—he will not have much longer—I point out to him that 12 years ago my hon. Friends who were in Parliament at the time raised concerns about the tripartite arrangements in numerous debates, and those predictions have been borne out by events.

Mr. James Plaskitt (Warwick and Leamington) (Lab) rose—

Mr. Osborne: The hon. Gentleman is clutching the Whips’ handout, so let us hear what is on it.

Mr. Plaskitt: I will tell the hon. Gentleman what I am clutching—the Conservative election manifesto from 2005. As he mentions the Bank of England and the tripartite arrangement, and all his warnings, can he explain why that manifesto, on which he stood for election, includes a discussion about the Bank of England with not one word about the tripartite arrangement, the level of bank regulation or credit expansion? When did he have his convenient conversion on all those subjects?

Mr. Osborne: I think that the hon. Gentleman will remember that during that election campaign we repeatedly raised concerns about the levels of debt. As I say, he has a choice—

Chris Huhne: You are in favour of tax cuts.

Mr. Osborne: That is rich coming from the Liberal Democrats, who are proposing to spend even more than the Government. We would be in an even bigger hole if they had, by some miracle, won the general election. [ Interruption. ]

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Mr. Speaker: Order. Mr. Browne, you are normally quiet, so get back to normal.

Mr. Osborne: The truth is that given all that has happened in the last 18 months, Labour Members are going to fight the next general election on a commitment to maintain the tripartite committee—to maintain exactly the relationship between the FSA, the Treasury and the Bank of England. That is not a credible position given what has happened, and we are the ones coming up with answers about how to reform it.

In the last few days, a whole string of European leaders have queued up to agree with our arguments about debt. The German Chancellor said:

The Spanish Finance Minister said:

The Czech Prime Minister, and the current President of the European Council—before the Chief Secretary to the Treasury sneers at him—says:

John Reid (Airdrie and Shotts) (Lab): In view of the shadow Chancellor’s comments, will he confirm that the German stimulus is not less than that of the British, but 1 per cent. of GDP above it?

Mr. Osborne: The German Government went into this downturn with a surplus and the scandal is that the Government of whom the right hon. Gentleman was a member, and those at the Cabinet table around which he sat, agreed to spending plans that were completely unaffordable and which left us with the biggest budget deficit of any western economy going into this downturn. He did not fix the roof when the sun was shining and we are all having to pay the price now.

John Reid rose—

Mr. Osborne: The right hon. Gentleman can explain himself.

John Reid: The shadow Chancellor has given a long answer to a question that was not asked. Will he confirm that despite what he has said, twice, about the German Government agreeing with his position of not having a fiscal stimulus, their fiscal stimulus is the equivalent of 4 per cent. of GDP, which is 1 per cent. more than ours?

Hon. Members: Admit it!

Mr. Osborne: Let me just say this to the right hon. Gentleman: the question is—[Hon. Members: “Answer!”] I will answer his question. He is the one handing out the Whips’ handouts. Of course the German Government have engaged in a round of fiscal stimulus, just as the US Government have. But the difference between the German Government and the British Government is that the former were led by people who put aside money so that Germany would be better prepared when the economy turned down. The truth is—this is what the right hon. Gentleman will have to reflect on when he thinks about his time in the Cabinet—that he never once challenged the Chancellor of the Exchequer of the day, who was spending and spending and spending, racking up debt in the good years, so that when the
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economy turned, there was nothing left for us to deal with the economic downturn. That is the true story of the Blair years.

Chris Huhne: Will the hon. Gentleman give way?

Mr. Osborne: It is very odd; I usually take interventions from the hon. Gentleman, who is sort of bidding for the job of finance spokesman, even though he is the shadow Home Secretary—or whatever they call themselves in the Liberal Democrats.

Chris Huhne: I am grateful to the shadow Chancellor for giving way. Given what he said about the German position, how does he explain the fact that the German general government-to-debt ratio was substantially higher at the beginning of this recession than ours was—in fact, it was a matter of some 20 percentage points of GDP?

Mr. Osborne: If we had a true account of British Government debt that included the PFI and Network Rail liabilities, British debt would be significantly higher. Secondly, British debt is now rising at a faster rate than anyone else’s because our budget deficit is higher than anyone else’s. Surely the hon. Gentleman cannot be happy with the fact that this Government are running the highest budget deficit that Britain has known in peacetime—higher than when Denis Healey went to the IMF. Surely he cannot be happy with that.

As I was saying, European Governments are now lining up in agreement that there should not be a second fiscal stimulus, which completely shoots away the ground on which the Prime Minister thought that he would stand at the G20. Faced with that icy response, he went on that rather bizarre trip to south America last week. Even his most loyal henchmen would struggle to call that trip a success. First he went to a half-empty European Parliament and found that the response to his speech by a Conservative MEP got 1.6 million hits on the internet and no one noticed a word that the Prime Minister said. Then he crossed the Atlantic to continue his campaign for more spending, only to find that while he was away the Governor of the Bank of England had said that the country could not afford more fiscal stimulus, and in effect had cut up his credit card.

Finally, the Prime Minister made it to south America, where not only was he ticked off by the President of Brazil and stood up by Pelé, but the President of Chile gave him a lecture on sound public finances. Instead of addressing the G20 agenda, the Prime Minister was reduced to saying that he would reform the monarchy and that we would keep the Falkland Islands. That is how the chairman of the G20 used the week before the meeting to prepare for that summit. Where is the sense of priority in this Government?

What is left of the main economic argument that the Government have deployed against us since the autumn—that Britain needs to spend and borrow its way out of recession? It was striking at Treasury questions last week that, when pressed twice, the Chancellor could not bring himself to agree with the Governor of the Bank of England on fiscal stimulus. He was challenged twice to agree with the statement that the

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That is the argument that we have been making, and the Chancellor did not take the opportunity that he was given to agree with it. Indeed, when my hon. Friend the Member for West Chelmsford (Mr. Burns) asked the Chancellor to express confidence in the Governor of the Bank of England, he ducked that question too.

I would have thought that the Chancellor of the Exchequer should see the Governor of the Bank of England as a key ally. For weeks, presumably with the Chancellor’s knowledge, the Treasury has been briefing everyone that actually he agrees with the Governor, the CBI and all the other organisations that are lining up to say that this country cannot afford a second fiscal stimulus. The Chancellor’s disagreement is not with the Governor, but with a Prime Minister who thinks that we can borrow our way out of debt.

Even if the right hon. Gentleman makes it to the next election and, by some remote possibility, his party wins that election, he knows that he will not be reappointed as Chancellor. Everyone knows who the Prime Minister’s top choice as Chancellor is—the Secretary of State for Children, Schools and Families. This is the Chancellor’s moment in that great office of state. Does he want to go down as the Chancellor who stood by and let his Prime Minister lead the country down the road to fiscal insanity, or as the one who did something to stop that Prime Minister? That is the choice that he has to confront in the next three weeks—does he do the right thing and face down his neighbour, in which case he will earn the gratitude of the country, or does he cave in? [Interruption.] The hon. Member for Stockport (Ann Coffey) wants to talk about the measures that the Government are taking. Let me take one example, the working capital scheme.

For five months, since November, we have been calling for a national loan guarantee scheme to support businesses that need credit. In early January, the Government finally conceded that we had a point and promised a guarantee scheme of their own. It was called the working capital scheme and was supposed to start on 1 March. It did not, and businesses desperate for help were left out in the cold again. Then the Business Secretary reassured them and said, “Don’t worry, the scheme will be operational in March as originally announced.” It is now the last day of March, so where is the working capital scheme that was promised for 1 March and then promised to be delivered by the end of March? Companies are going bust and thousands of people are losing their jobs because businesses cannot get credit, and the scheme announced by the Government in January and promised for March has still not been delivered. That is a scandal.

Of course, that is the truth of so many Government schemes. The home owners mortgage support scheme, announced in December—not a single home owner has been helped. The automotive assistance programme was announced two months ago—still not a single loan has been made to car firms. The national internship scheme—it was never heard of again. The Government’s slogan of “real help now” is a cruel joke to businesses and people losing their jobs up and down the country.

Mr. Dunne: Is my hon. Friend surprised to learn, as I was, that the directors of Technorton, a small business in my constituency that went into administration this morning, laying off several constituents, had been trying for the past few weeks to get access to the enterprise finance guarantee scheme? The scheme is much trumpeted
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by the Chancellor as one of the few that actually work, but when the directors applied for it, they were told that funding would be available only if they first put in personal guarantees. They had already exhausted those by backing the business, so they looked to the Government for help. None was available, hence the business is now in administration.

Mr. Osborne: I suspect that almost every hon. Member could tell a similar story. The Chancellor sits there and will not even answer the basic question of why the working capital scheme and the loan guarantee scheme, which we have discussed in the House for months, are not operational now that we have reached the end of March. Will he intervene and explain that to the House?

Mr. Darling indicated dissent.

Mr. Osborne: Why will he not intervene?

Mr. John Baron (Billericay) (Con): Does my hon. Friend accept that, although the Government may scoff at individual examples that Members present to the House, surveys throughout the country, especially from the Federation of Small Businesses and local chambers of commerce, show time and again that the majority of local businesses do not believe that any Government schemes will improve lending or terms? That is third-party confirmation that the Government schemes are not working.

Mr. Osborne: My hon. Friend is right. Not only Conservative Members have complained—if the Chancellor had attended some of our previous economic debates, he would have heard Labour Members complain regularly about the schemes not being operational. Last week, the hon. Member for Coventry, North-West (Mr. Robinson) said that

Hon. Members have an opportunity in this debate to put pressure on the Government to fulfil their promises. Getting credit flowing is crucial in a credit crunch. Agreement at the G20 is important, but in the end, confidence will not return and recovery will not come until we have a Government who understand that the debt-fuelled model of economic growth which they pursued for the past 10 years is fundamentally broken.

Our Prime Minister shows no sign of that understanding. He continues to assert that Britain is better placed than most economies to weather the storm. Yet, when he looks around the table of G20 leaders, he will see no one else with a budget deficit as large as Britain’s, according to the IMF, and no one else who will have a longer and deeper recession than the United States, according to the OECD. He continues to argue that the recession is caused by a banking crisis that blew in from America on an otherwise sound economy. [Interruption.] The hon. Member for St. Helens, North (Mr. Watts), who is the Government Whip, says he never said that. The problem is that the Prime Minister kept saying it from the Dispatch Box. That has been the Government’s main economic argument—that we are suffering some banking crisis from America. The truth is that it is caused by 10 years of building an economy on debt and the Government are now reaping the consequences.

Richard Burden (Birmingham, Northfield) (Lab) rose—

Mr. Lindsay Hoyle (Chorley) (Lab) rose—

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Mr. Osborne: I must give way to the hon. Member for Chorley (Mr. Hoyle), since I visited his constituency on Friday.

Mr. Hoyle: Which the hon. Gentleman failed to tell me. Not to worry, it is the second time, so it is not a problem.

The hon. Gentleman rightly uses the Federation of Small Businesses as an advocate of how policies should be developed. If he accepts its recommendation and that of JCB, Corus and other major industry, will he back short-time work subsidies as a way forward to ensure that we protect the jobs that matter to all of us and save manufacturing for the future?

Mr. Osborne: Of course I am sympathetic to those who are desperate to keep their jobs and to people who have lost their job. I would like to help them by providing a national insurance rebate for employers who take them in. The problem is identifying the cost of the hon. Gentleman’s proposal. He asks a good question. I think that I am right that he opposed the Government’s VAT cut and proposes that they should give back that money. Perhaps he will suggest that they use it for his scheme. So that we have it on the record, will he confirm that he does not support the Government’s principal fiscal stimulus—the VAT cut?

Mr. Hoyle: Let me give the hon. Gentleman the answer that he seeks: the scheme would cost £1.8 billion, which would save 600,000 jobs a year. That is the sort of stimulus that one could use if we ended the VAT cut.

Mr. Osborne: There we have it: another Labour MP who does not agree with the principal component of the pre-Budget report announced by the Chancellor just a few months ago.

Richard Burden rose—

Mr. Osborne: I promised to give way to the hon. Gentleman, but this will be the last time that I give way before I conclude.

Richard Burden: When the hon. Gentleman answers my question, perhaps he could start by also answering the question that my hon. Friend the Member for Chorley (Mr. Hoyle) asked about whether he supports a short-time subsidy, to which I did not hear an answer. How would the hon. Gentleman’s loan guarantee scheme work? Does he insist that a national loan guarantee scheme would work if it had no money behind it, or does he say that it would indeed have money behind it? In which case, does he agree with the shadow Business Secretary, his right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who says that if such a scheme were introduced, the taxpayer would take some kind of hit?

Mr. Osborne: The person whom I agree with is the Economic Secretary to the Treasury, who says of the loan guarantee scheme:

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