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Mr. Darling: My right hon. Friend is right about the first point: payments are being met on the majority of these loans, and there is every reason to suppose that they will be redeemed, so they will not be a loss to the company. Inevitably, as I said to the hon. Member for Twickenham (Dr. Cable), there will be some cases where, because of what Northern Rock was up to towards the end when it was getting into difficulties, there may be continuing difficulties, but perhaps they can be managed out in time.
I shall return to my right hon. Friend's second point about competition when I shortly make my statement on banking reform. I want to see more competition on the high street for mortgages and for loans to small and medium-sized businesses, and I believe that Northern Rock will form an important part of that policy. We are not in an immediate hurry to sell, as I said, but I hope that the proposed split will take place sooner than would otherwise be the case-it might be several years.
On mutuality, I would like to see more diversity in the banking system. I have always wanted to support the building society sector. I would just say in relation to Northern Rock that we cannot put any more public money into it. It is just not possible-state aid rules would preclude it-to do so. Of course, anyone seeking to take over Northern Rock would need to have regard to the fact that it is necessary to ensure that the taxpayer is repaid. I have no difficulty with the concept of a mutual, certainly in principle, provided that funds for that came from outside Government sources.
Mr. Philip Hammond (Runnymede and Weybridge) (Con): The liabilities in respect of both Northern Rock and Bradford & Bingley have been taken on by the taxpayer because the elected British Government formed the view that this was the best course of action. The Chancellor has previously taken a robust line on the issue of fiscal sovereignty, insisting that decisions on bank bail-outs that impose a burden on the British taxpayer can be made only by the British Government. Unfortunately, the draft proposals under consideration in the European Council do not reflect that view, so will the Chancellor take the opportunity today to reiterate that red line and to confirm that under no circumstances will the Government agree to a structure that could allow an unelected European regulatory body to order a British taxpayer-funded bail-out of a bank?
Mr. Darling: That is a bit rich on the day when the Conservative party is throwing in the towel on its key promise on Europe, but there we are. Yes, I did judge it right to intervene and to nationalise Northern Rock, and I think that most people accept that that was the right thing to do. It is only the Conservatives who were against doing that. Equally in relation to Bradford & Bingley, we used the very legislation that the Conservatives opposed in order to resolve the problem over the weekend.
The hon. Gentleman is asking about the proposals from the de Larosière report that came before the European Council earlier this year. We have made it absolutely clear that we believe that domestic regulation ought to be a matter for our regulators. We do see a case for a European fiscal stability council, because that is important, and we do also see a case for far more collaboration and co-operation, as that would have avoided some of the problems we had with the Icelandic banks, which must be to our advantage. We have made it clear to the Commission, however, that what we
agreed to at the European Council in June ought to be implemented as European law, which respects sovereignty at the same time as ensuring that there is a degree of co-operation in a single market. Of course, all that demands an ability to work with allies in Europe, which is something that the hon. Gentleman might want to reflect on, because I do not think-
Mr. Speaker: Order. I am grateful to the Chancellor; I think we got the thrust of his answer.
Small Businesses
8. Mr. Desmond Swayne (New Forest, West) (Con): What fiscal measures he has introduced to assist small businesses with cash-flow difficulties during the recession. [297055]
The Financial Secretary to the Treasury (Mr. Stephen Timms): Among other measures, we have extended loss relief, we have deferred the increase in corporation tax for small companies, we have helped businesses spread payments through the Business Payment Support Service and we have introduced the capital for enterprise fund and the enterprise finance guarantee.
Mr. Swayne: There is a gulf between what Ministers say at the Dispatch Box and what is actually happening. Yesterday, at column 782W, the Minister told me in terms that these schemes include PAYE, but when I made representations on behalf of my constituents, Excelsior Coaches, and wrote to the Chancellor, I received a letter back from Revenue and Customs saying that the Chancellor had never mentioned PAYE and that no such scheme for PAYE existed. Will the Minister find out exactly what is going on?
Mr. Timms: First, I agree with the hon. Gentleman on just how important the small and medium-sized enterprise sector is to the UK, accounting as it does for nearly 60 per cent. of the private sector work force. That is why we have gone to such lengths to support those businesses, not least through the Business Payment Support Service. About 150,000 businesses have benefited from those agreements, and PAYE has been included in a number of them.
Mr. Geoffrey Robinson (Coventry, North-West) (Lab): Can the Minister tell us whether the bankers' bonuses have been tied to their meeting the lending promises and engagements into which they entered with the Government, and in particular with small businesses?
Mr. Timms: My right hon. Friend the Chancellor will be referring to the question of bonuses in his statement to the House in a few minutes' time.
Mr. David Gauke (South-West Hertfordshire) (Con): Last month we saw a record fall in bank lending to smaller businesses, with a 40 per cent. drop in lending to manufacturing firms. The CBI and members of the Monetary Policy Committee have highlighted lack of credit as a major impairment to the recovery, but at lunchtime today Lord Myners told "The World at One" that there was
"no problem with the availability of credit".
Does the Minister agree with the noble Lord, or does he live in the real world?
Mr. Timms: I agree with the Federation of Small Businesses and others who have reported that credit conditions are improving. That is a welcome development. However, I can tell the hon. Gentleman that we will continue to give real help to businesses and reject calls from Opposition Members to let the recession take its course.
Fiona Mactaggart (Slough) (Lab): While credit conditions are improving, a number of small companies are still suffering because they cannot obtain credit. This week I visited Saint Engineering in Slough, a precision engineering company which, although it has even provided components used for a Mars landing, had to operate for 26 days without a bank account because of the unhelpful attitude of bank managers towards small businesses. What can the Minister do to get them on the case?
Mr. Timms: My hon. Friend is absolutely right to draw attention to the importance of supporting innovative businesses such as the one in her constituency, and we will continue to talk to the banks about it. It is encouraging to hear reports that conditions are improving, but they are not yet as good as we would wish them to be, which is why we will continue our support and our efforts with the banks.
UK Economic Growth
9. Mr. Stephen Crabb (Preseli Pembrokeshire) (Con): What is his most recent assessment of the level of growth in the UK economy compared with those of other OECD economies; and if he will make a statement. [297056]
13. Michael Fabricant (Lichfield) (Con): What is his most recent assessment of the level of growth in the UK economy compared with those of other OECD economies; and if he will make a statement. [297062]
The Chancellor of the Exchequer (Mr. Alistair Darling): I shall publish my latest assessment in the pre-Budget report.
Mr. Crabb: Is it not the case that all the Prime Minister's and the Chancellor of the Exchequer's fantasy predictions about Britain leading the world out of recession have now been proved false? Can the Chancellor explain why the United Kingdom is still mired in the worst recession, while all the other major economies have returned to growth?
Mr. Darling: I said at the time of the Budget that I did not expect our economy to return to growth until about the turn of the year, and I remain of that view. As the hon. Gentleman may recall, I also said a couple of years ago that I believed the recession would be deeper and more profound than many observers were predicting.
It is good news for us that America, Germany and Japan are coming out of recession, because they are important markets for us. It was inevitable that the recession would affect countries in different ways and for different periods. The downturn in Germany and Japan at the beginning of this year, for example, was far greater than the downturn that we had experienced. However, the one obvious common feature applying to every country that has come out of recession is the introduction of a fiscal stimulus of one sort of another. The Conservative party is the only party in 186 countries that takes a different view.
Michael Fabricant: Given that the fiscal stimulus in the United Kingdom to which the Chancellor just referred was greater than the fiscal stimulus in any other country in terms of our borrowing as a percentage of GDP, and given that our currency has been devalued against the dollar, stimulating exports, was the Chancellor surprised to find that the United States had emerged from the recession before the United Kingdom, and was the Prime Minister even more surprised-
Mr. Speaker: Order. I am grateful to the hon. Gentleman.
Mr. Darling: In terms of size-and size sometimes matters-I think the hon. Gentleman will find that the German Government's stimulus was slightly larger than ours, although my former opposite number, the right hon. and learned Member for Rushcliffe (Mr. Clarke) said that he was not very much in favour of it. The key point is that Germany, France, Italy, Japan, China and many other Asian countries, and the United States all do the same thing when faced with the most severe downturn in modern times: they put money into the economy to support people and businesses. That is why, throughout the world, the confidence that we now enjoy is far greater than it was six months ago.
Rob Marris (Wolverhampton, South-West) (Lab): May I urge my right hon. Friend to reject the shallow short-termism from those on the Opposition Benches? It looks as though the UK will have slower growth coming out of the recession, but also a shallower recession. Will my right hon. Friend say what has happened and what will happen in terms of the size of our economy as against those of comparable OECD countries between, for example, 2005 and 2015? Let us look at the medium term.
Mr. Darling: I am sure-and I certainly hope-that you would rebuke me, Mr. Speaker, if I were to try to read out a table giving all that information immediately, but my hon. Friend makes the general point that the measures we are taking are making a difference. The scrappage scheme, which is part of the stimulus and which has been opposed by the Conservatives, has meant that Nissan has taken on more workers in Sunderland and has reported an increase in its small car sales. Honda is also reporting an increase in its sales after having had a lay-off for the first six months of the year. I say to the Conservatives that the point at issue is that Government action can and does make a difference; that is the difference between the two of us. We must continue to support our economy until we have made sure that the recovery is established and we can then start the necessary consolidation. That is very important, and I am sorry about the Conservative party's approach. Of all the 186 members of the International Monetary Fund, there is not a single country that believes in and supports the stance the Conservatives have taken.
Mr. George Osborne (Tatton) (Con): Given that all the other major economies are now growing, what exactly did the Prime Minister mean when he said:
"This Chancellor is leading...the world...out of recession"?-[ Official Report, 3 June 2009; Vol. 493, c. 268.]
Mr. Darling:
I do not recall that he singled me out in that way, but what I would say to the hon. Gentleman-I have been saying this for some time now-is that the difference between the two of us is that when we were faced with a severe downturn I believed that the right
thing to do was to use the spending power of Government to ensure we supported our economy. All the countries that have now come out of recession or are coming out of it have had that same thing in common. They have all been affected in different ways-sadly, America has had higher unemployment than us-but the Governments of all these countries decided that to do nothing and let the recession take its toll was unacceptable. Instead they have taken the necessary action, and it is bearing results.
Mr. Osborne: I am sorry that the Chancellor does not remember the compliment the Prime Minister paid to him, but the Prime Minister said in June 2009-which was, in fact, also the month in which he was trying to sack his Chancellor-that the
"Chancellor is leading...the world...out of recession."
The problem is that the British Government do not have a simple answer to the simple question why this country is still in recession when the rest of the world is recovering. The Chancellor now says that he will hit his Budget forecast that by the end of the year the economy will be growing-and, of course, we hope he is right about that-but he knows that the Budget forecast included a prediction that the economy would shrink by 3.5 per cent. this year. Is he still confident that that growth prediction will be hit, because it would require an annualised growth of 24 per cent. in the final quarter of this year if he is to be accurate?
Mr. Darling: I believe I said at our last Question Time that, in common with other countries, the downturn in the first quarter of this year-and, indeed, also in the last quarter of 2008-was more severe than people had thought. I repeat the point, however, that the hon. Gentleman's answer would have been to do absolutely nothing. As my right hon. Friend the Financial Secretary said, until the hon. Gentleman tried to nuance the Conservatives' position in his press conference last Monday, he has said time and again that he would not have done anything-he would not have supported people, and nor would he have supported businesses, to get through this recession. Indeed, most informed commentators take the view that what we have done is right. It is a view that is accepted by the OECD, the International Monetary Fund, the CBI and the Federation of Small Businesses. The Conservatives alone took the view that they would do absolutely nothing, and I believe that they did so on the entirely cynical calculation that if what we did did not work, they would say they were right, and if it did work, they would say the recovery would have happened anyway. They are wrong on this-they are fundamentally wrong on perhaps the most important issue of the day.
International Development
10. Mr. Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): What recent discussions he has had with the Secretary of State for International Development on proposals to ensure the Government meet a target of allocating 0.7 per cent. of gross national income to overseas development assistance by 2013. [297057]
The Economic Secretary to the Treasury (Ian Pearson):
Treasury Ministers and officials have meetings on a wide variety of issues, including this topic, with a wide variety of public and private sector organisations. The Government remain committed to meeting the target of
allocating 0.7 per cent. of gross national income to overseas development assistance by 2013, and we will set this target in legislation.
Mr. Clarke: Is my hon. Friend aware of any discussions involving those who recognise that ODA funding has also got to be matched against the need for increased resources to combat climate change, and will we set out our stall ahead of the Copenhagen summit?
Ian Pearson: My right hon. Friend is absolutely right, in the sense that one of the key things that many of the poorest countries in the world face today is not just the challenge of getting out of poverty, but having to adapt to climate change, which will hit some of them the hardest. That is why it is vital that we do agree on climate change financing in the run-up to Copenhagen. This will be discussed by G20 Finance Ministers at the weekend; however, it is important that it be seen as separate from the funding that will be provided to help some of the poorest countries out of poverty.
Miss Julie Kirkbride (Bromsgrove) (Con): If I remember correctly, back in 1997, the Labour Government had the aspiration of 0.7 per cent. of gross national income being spent on overseas development. Why, therefore, is it in the last year of the Labour Government that they are proposing to put that into legislation?
Ian Pearson: We will not take any lectures from the Conservatives on overseas aid, given that they slashed the budgets year on year. We have seen sustained improvement in the amount of money going to help some of the poorest countries as a result of the 12 years of this Labour Government; indeed, it is one of the things I am most proud of. We have said that we will meet our interim target of 0.56 per cent. by 2010. We are on track to do that, and we will also, as my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) clearly pointed out, lead the way in having a climate change deal that will help the poorest countries of the world.
Time-to-Pay Arrangements
11. Mr. Ken Purchase (Wolverhampton, North-East) (Lab/Co-op): What recent assessment he has made of the effect on small businesses of the time-to-pay arrangements operated by Her Majesty's Revenue and Customs. [297060]
The Financial Secretary to the Treasury (Mr. Stephen Timms): The Business Payment Support Service was introduced last November. Since then, more than 220,000 time-to-pay arrangements have been agreed with 150,000 businesses-employing between them some 600,000 people-enabling them to spread tax payments of almost £4 billion.
Mr. Purchase: These arrangements are very welcome in my constituency, where people have struggled, but does the Minister accept that these and other measures that have been introduced are really a cover-up for the catastrophic failure of profit-maximising finance capitalists who have failed our small businesses? Is it not now time to look for more responsible banking, to remutualise those organisations that have gone to the free market, and to reject the idea that "competition, competition" is anything other than a mantra?
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