The Work of the Department - Business and Enterprise Committee Contents

Examination of Witnesses (Questions 100-119)


14 JANUARY 2009

  Q100  Chairman: Just to say on the record, we did hear evidence from the SME sector in December, a month ago, that officials in your Department and the Treasury were making it very clear that the Christmas and New Year holidays would delay consideration of it and they expressed real concern that they sensed a lack of urgency.

  Lord Mandelson: That is why our holidays and officials' holidays were caught short whilst this work was going on throughout the holiday. If you heard the representatives on the radio this morning of all the small business organisations congratulating the Government, firstly, for what we are doing and, secondly, the speed with which we are doing it, I do not think you would take us and our officials to task in quite that way.

  Q101  Chairman: I am just repeating what the small business sector said before Christmas.

  Lord Mandelson: They do need Christmas Day and Boxing Day.

  Q102  Miss Kirkbride: From a Government that is going to double our national debt to a trillion pounds, we are very grateful that you are taking such care over public money. You did just say that the Government does not want to spread money around, you did give £12 billion in the VAT cut before Christmas. I want to take you up on something you said this morning on the radio, you said that was £270 for everybody.

  Lord Mandelson: Average.

  Q103  Miss Kirkbride: Yes, exactly, but it will not really help that many pensioners or low paid people because that equates to around £15,000 of VAT-able spending and I doubt very much whether very low paid people would spend that much money on VAT-able goods. I am not sure that was terribly well directed either to the people who need it the most.

  Lord Mandelson: I do not agree.

  Q104  Miss Kirkbride: But you agree it is £15,000 of VAT-able spending?

  Lord Mandelson: With respect, I do not agree with you that it would have been better to spend that money on income tax cuts or raised tax allowances when so many more people will benefit from the VAT reductions who do not pay tax at all. I strongly agree with Kenneth Clarke whose views on the VAT reduction were made absolutely clear. He said in November, advocating what the Government should do, "I would look at a temporary reduction in value added tax which is the best way of stimulating spending".

  Q105  Miss Kirkbride: A great many business leaders do not agree with him because he is a past chancellor. I think this is diversionary tactics. Chairman, I do not think we need to hear anymore of this.

  Lord Mandelson: He went on to say in November, "As far as I am concerned, as far as this fiscal stimulus is concerned, I would go for a VAT reduction". Well, hear! hear! Kenneth Clarke!

  Q106  Mr Hoyle: We are backing Clarke, absolutely!

  Lord Mandelson: On this matter, as on other matters, for example, to do with Europe and his commitment to Europe, I strongly back him. Bring back Ken, please!

  Q107  Miss Kirkbride: One other question I would like to ask you, Secretary of State, on the basis that there does not seem to be a sense of urgency in your Department, was what you called earlier "refinements", by which I think you were talking about Basel II and the return to the banks on the money that the taxpayers have given them. You are talking about refinements, but that goes to the heart of the credit crisis and why the banks are not lending money because they are required to build up their balances, both by the Basel II arrangements and by the preference share issues which were given by the Government, so they are caught in a cleft-stick. You call these issues refinements like they are not a major issue, like they are not the thing which needs to be sorted out today because that is why they are not lending money. They could lend a whole host more money than is on offer from your scheme if these issues were sorted out. You call them refinements like it is something that we will worry about come the summer when we have got nothing else better to do. A sense of urgency, Secretary of Stage, what do you have to say about that?

  Lord Mandelson: I would say you are talking about apples and pears. Basel arrangements are rather more fundamental than, for example, the capital ratios required by the Financial Services Authority or the premium attached to the recapitalisation that was introduced, apples and pears.

  Q108 Miss Kirkbride: They all add up to the same problem though.

  Lord Mandelson: Some can be addressed rather more easily and quickly than others.

  Q109  Miss Kirkbride: But none of them is being at the moment.

  Lord Mandelson: I think I said that they are being addressed, you have dismissed them.

  Q110  Miss Kirkbride: But when? Can you give us a timescale on when they will be addressed?

  Lord Mandelson: You have dismissed them as refinements.

  Q111  Miss Kirkbride: No, you called them refinements, Secretary of State, not me. Those were your words, not mine, I took it down as you said it.

  Lord Mandelson: No, no, you dismissed the refinement. I did describe them as refinements, you dismissed it.

  Q112  Miss Kirkbride: A curious word.

  Lord Mandelson: Let us call them adjustments, let us call them revisions, call them what you want, all I know is we have got to keep looking at this and making any changes needed in order to get the results that we need. We are active on the case. The Chancellor is actively talking to the banks at the moment and has been for a few weeks now. These are very complex technical areas of possible adjustment and when conclusions have been reached, announcements will be made.

  Q113  Miss Kirkbride: You ridiculed the Liberal Democrats' spokesman earlier, as is your want with any of your Opposition, do you rule out nationalising the banks?

  Lord Mandelson: I did not ridicule him, I actually described him as eloquent.

  Miss Kirkbride: Do you rule out nationalising the banks?

  Mr Hoyle: We have done.

  Q114  Miss Kirkbride: Just yes or no.

  Lord Mandelson: Do you mean fully nationalise?

  Q115  Miss Kirkbride: However you choose to term it, do you rule out nationalising the banks?

  Lord Mandelson: You are asking the questions, not me.

  Q116  Miss Kirkbride: Nationalising normally means the public owns 100%, so do you rule out nationalising the banks?

  Lord Mandelson: It is not on the Government's agenda.

  Miss Kirkbride: Thank you.

  Chairman: We have got some other more detailed and important questions to ask as well. Adrian wants to ask about HM Revenue and Customs.

  Q117  Mr Bailey: In fact, this is a supplementary to an earlier question by Brian about your working relationship with the Treasury and we quite understand that you have a very good relationship at ministerial level. However, the supposed flexibility of HMRC in dealing with tax issues with regard to small businesses, I have got a particular horror story in my constituency which I will not go into in detail at the moment.

  Lord Mandelson: Share it with me or with Alistair.

  Mr Bailey: The thrust of my question is what are you doing with the Treasury and HMRC to ensure that an almost cultural change which should be taking place on the ground is actually happening in their dealings with small businesses?

  Q118  Chairman: Can I add to Adrian's question as well. I have been talking to representatives of the small business sector, the impression they form is there is a great deal of regional variation in the action of HMRC, some are being very co-operative, very helpful, fully flexible, others are falling back to the bad old ways of the Inland Revenue. I think Adrian is right, there is a cultural problem in some parts.

  Lord Mandelson: I was not aware of that, that is new to me and I did not know that. I will pass it back and look into it. As you know, some time ago the Government talked to HMRC about their attitude to companies which were struggling, that had cash flow problems and having trouble getting cash in and wanted the cash out to, amongst others, the HMRC to be slowed down on deferral. HMRC responded very positively to that, certainly as an organisation as a whole and I know in many parts of the country. I will look at what you say about this being rather patchier than we had realised. This is a major contribution that the HMRC is making. It represents a couple of hundred and more millions of pounds' contribution by the HMRC in deferred tax-line abilities which they are making to struggling businesses to enable them to get through the downturn. They are making their contribution, it is a real one. I know it is greatly appreciated by many companies, but if it is patchy, then we will look at that.

  Q119  Mr Bailey: I notice in your written statement today you have got a business payment support line number, which is very welcome, but one of the problems I have found with this company in my constituency is their attempt to enter into a dialogue with HMRC. They have been passed from pillar to post. Again, I would emphasise the need to monitor this to see that it is working effectively.

  Lord Mandelson: Adrian, I absolutely take what you are saying. I do not have direct ministerial responsibility for this or for HMRC, but I will make sure the Chancellor and his colleagues are aware of what you have said.

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