The Economic Secretary to the Treasury (Ian Pearson): As you will be aware, Mr. Speaker, the Chancellor of the Exchequer is at a meeting of European Finance Ministers in Brussels today. However, he and the Treasury hold frequent discussions with United Kingdom Financial Investments Ltd on a range of topics related to the Government's holdings in financial institutions, in line with the UK Financial Investment's framework document and investment mandate.
Malcolm Bruce: Given that the Government have reduced competition among high street banks, does the Minister not recognise that many small and medium-sized businesses will be frustrated by an economic recovery, because they will be unable to access finance on the terms that they need for expansion and recovery? Is it not the Government's responsibility to ensure that they can do that, so will he do something about it rather than being passive on the sidelines?
Ian Pearson: We are certainly not being passive on the sidelines. As the House is well aware, the Government have negotiated binding commitments with RBS and Lloyds Banking Group on lending to businesses, as well as mortgage lending. We have taken further actions to help small, growing companies, through the enterprise finance guarantee, which has been a big success in lending to small businesses, and through intermediate lending by the European Investment Bank. We have also seen EIB loans at cheap rates to help companies through the recovery, which is what we all want to see.
Miss Anne Begg (Aberdeen, South) (Lab):
Like many hon. Members, I have probably spoken to more constituents over recent months than I would normally, and there is still a huge amount of anger among my constituents-and, I suspect, many others-about bankers' bonuses. They
feel that, as the Government have a stake in a number of such institutions, perhaps they should have taken a lot more action to curtail the amount that bankers are still being paid.
Ian Pearson: The whole House will have had representations from constituents on the issue of bankers' bonuses. My hon. Friend will be aware that UKFI manages the Government's interests in RBS, Lloyds Banking Group, Northern Rock and Bradford & Bingley on an arm's length basis. It is not in the interests of shareholders, including the taxpayer, for banks to lose key profit-making staff, but we have to ensure an appropriate balance. As she will be aware, RBS made a commitment to pay the minimum possible, to protect the banking franchise, and it is in investment banking where that issue is most apparent. On behalf of the Government, UKFI took independent analysis and looked at sector averages in coming to its conclusions, and it was entirely appropriate that it showed that due diligence.
Sir Peter Tapsell (Louth and Horncastle) (Con): On lending banking, has the Chancellor yet modified his opposition to Mr. Paul Volcker's view, which is strongly supported by President Obama, that it is a mistake for commercial banks to allow their depositors to run the risk of their money being handled by investment banks?
Ian Pearson: No, I do not think that the Chancellor has changed his views on that. Indeed, he has clearly expressed the view to the House on a number of occasions that he does not believe the causes of the current financial crisis to have been brought about as a result of a failure to implement Glass-Steagall and split investment banking from ordinary commercial banking. Both types of banks have got into difficulty over the past couple of years. What is important is that we pay due attention to ensuring the effective regulation of the banks. That is the approach that we have adopted, which is why we have introduced recovery and resolution plans, for instance, as part of our new legislative programme.
In the past year more than 3.5 million people have been helped off benefits and back into work, while more than 300,000 people have been helped to stay in their homes and more than 160,000 businesses
have been helped to defer more than £5 billion in taxes. Together, those measures have helped our economy return to growth.
Chris McCafferty: Will my right hon. Friend join me in congratulating the partnership of Yorkshire Forward, the local authority, West Yorkshire MPs and local businesses, which has been so successful in saving the Halifax brand, as well as the maximum number of jobs in my constituency? Can he also tell the House what further he can do to support jobs in my constituency?
Mr. Byrne: I am pleased that because of the measures that we have taken over the past year, unemployment in my hon. Friend's constituency is not only lower than the UK average, but lower than the average for Yorkshire and the Humber. Thanks to the Government help that has been put in place, the partnerships to which she referred have now delivered more than 350 jobs to the local community. We have no plans to take away that support, which is helping to get people back into work. We still provide the young person's guarantee which helps young people to obtain jobs when they have been out of work for six months, and extra help is also available to those aged over 25 who are in that position.
Derek Twigg: May I stress the importance of capital expenditure to the Merseyside and Cheshire area, and, in that context, the importance of a decision on the proposed Mersey gateway bridge, which will create hundreds of construction jobs and many thousands of jobs thereafter? Will my right hon. Friend talk to his colleagues in the Department for Transport about the need for an early decision?
Mr. Byrne: I congratulate my hon. Friend on the consistency with which he has championed that project over the past few years. It will make a great deal of difference to the local economy: I understand that it is worth 4,000 or 5,000 jobs to his area. As he will know, the Government have brought forward some £3 billion of capital expenditure to help fight the effects of the recession. I understand that the Departments for Transport and for Communities and Local Government have received an inspector's report on the bridge, and I will continue to press my colleagues for an early decision.
Mr. Michael Fallon (Sevenoaks) (Con): If last year's Budget decisions were right, why did the Chief Secretary rule out a VAT increase last week only to rule it in again this morning? Will he clear up the confusion, and tell the British public categorically whether or not an increase in VAT is being considered?
We will not cut support for the economy this year, unlike the Conservative party. Once growth is locked in, we will take action to halve the deficit over the next four years. What we will not do is make the commitment made this morning by the shadow Business Secretary, the right hon. and learned Member for Rushcliffe (Mr. Clarke), to bring down the deficit to 3 per cent. by 2014-15-a step that would take another £20 billion out of public spending over the medium term.
Ms Sally Keeble (Northampton, North) (Lab): Does my right hon. Friend share my concern about the impact of continuing low interest rates on people who rely on savings income, especially pensioners? What measures to support that group were taken in the last Budget?
Mr. Byrne: Over the past year, steps have been taken not only to increase the basic state pension, but to increase the support available through pension credit. We have increased the disregard in the pensions system to put more money into pensioners' pockets, and they will also have benefited from VAT cuts over the past year which have put about £1 billion into the pockets of consumers throughout the country.
Mr. Philip Hammond (Runnymede and Weybridge) (Con): At a time when economic confidence is crucial to Britain's recovery, the assessment of the policies in the 2009 Budget that matters is not the Chief Secretary's assessment or mine, but that of the international investors who have to buy our debt and the business men who will invest in that recovery. Their verdict is clear, and it is getting louder. It is summarised very neatly by the European Commission's view that the Government's plans are "not sufficiently ambitious" and that "additional fiscal tightening" is necessary. Is not the simple fact that the Government's deficit reduction plan is not designed to restore confidence in markets, not designed to kick-start business investment and not designed in the long-term interests in the British economy, but designed to postpone the tough decisions until the other side of a general election?
Mr. Byrne: The argument that the shadow Chief Secretary seeks to advance is one that he has rehearsed over the past year. In his opinion, it would be right to start to cut public spending now, before the recovery is locked in. If he is so interested in the views of business leaders and others, let me quote a couple. Richard Lambert has said:
"I think the Government is right to say that it would be a bad idea to slam on the brakes right now because the economy's still... fragile."
"it doesn't make sense to announce more tax increases or spending cuts that would take effect over the course of the coming year."
That argument has been reinforced by the International Monetary Fund. If the hon. Gentleman does not wish to listen to those organisations, however, perhaps he will listen to his own economic adviser, Alan Budd, who has said:
"If you go too quickly, then there is a risk that the recovery will be snuffed out and we will go back into a recession. I mean, what do the Americans say? 'Remember 1937.'"
Mr. Speaker: Order. May I say to both the Chief Secretary and the shadow Chief Secretary that what I do not want is for Back Benchers to be "snuffed out" by excessively prolonged exchanges between the Front Benches. Mr. Hammond, I know that your second question will be shorter than your first.
"If Labour win we may well have a sterling crisis."
"halving the deficit over four years is frankly too slow",
"the Government has no credible plan."
The truth is that whereas the Conservative party is willing to roll up its sleeves and take the tough decisions that are necessary for Britain's future, Labour still has its head buried in the sand and is merely hoping that the problem will go away. When will the Chief Secretary start telling the British people the truth about the challenges that lie ahead?
Mr. Byrne: We could carry on trading quotes from business leaders, but the International Monetary Fund, the Bank of England and respected economists such as the chief economist of UBS have all made it clear that this year would be the wrong year to start making cuts. The hon. Gentleman is, I think, reaffirming the argument made this morning by the shadow Business Secretary, which is that another £20 billion should be cut from public spending. Will the hon. Gentleman deny that today? [Interruption.] Will he issue a statement denying that today? It appears that the shadow Chancellor and the shadow Business Secretary are now auditioning for the same job, but the problem is that they are using a different script.
The Financial Secretary to the Treasury (Mr. Stephen Timms): The annual investment allowance of £50,000 is particularly helpful for small manufacturing businesses. The business payment support service allows firms with cash-flow difficulties to spread tax payments over a period. My right hon. Friend the Chancellor will set out our plans in his Budget statement next week.
Mr. Sheerman: Is my right hon. Friend aware that many businesses, such as manufacturing businesses in Yorkshire and especially Huddersfield, very much value the range of incentives that they have, particularly the research and development tax credits? Does he also understand that they are very worried? One business man said that he could not sleep at night because of thoughts of a naive new Chancellor sweeping all this away.
Mr. Timms: My hon. Friend is absolutely right. There is a great deal of concern among manufacturers about the Conservative party's proposals. I agree with the Engineering Employers Federation, which has described the proposals as a disaster for manufacturers. The Institute for Fiscal Studies said that the proposals
"would help companies that make large profits with little investment, at the expense of businesses that are investing heavily in the UK".
Mr. Philip Hammond (Runnymede and Weybridge) (Con): The Financial Secretary told the hon. Member for Huddersfield (Mr. Sheerman) that he would have to wait for further announcements in the Budget, but why does he have to wait until then when the Chief Secretary is merrily going around ahead of the Budget telling the world there will be no tax increases? Is the purdah rule now selectively applied, or is the Chief Secretary just gaffe-prone?
Mr. Timms: As my right hon. Friend the Chief Secretary has made clear, tax announcements are made at the time of the Budget. Like my right hon. Friend, however, I am very interested in what the shadow Business Secretary has been saying this morning, apparently committing the Conservative party to a 3 per cent. deficit by 2014.
Mr. Speaker: Order. The Minister is being very cheeky-anybody would think an election is on the way. The Minister does not need to preoccupy himself with the policies of the Opposition, and I know that in a moment he will want to return to the policies of the Government.
"the tax deductibility of interest is creating a bias in the tax system".
That bias is towards debt, rather than equity. For the sake of all manufacturing industry, is it not time that we had a real debate on this issue, so that we correct the tax system in favour of people who are involved in manufacturing and creating jobs in the country?
Mr. Timms: My right hon. Friend is right. We will need to reflect on this, but I think that he will agree that it would be a mistake to make changes now that undermine the incentive to invest in manufacturing. That is what the Conservative party is proposing, however.
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