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Oral Answers to Questions

Volume 480: debated on Wednesday 8 October 2008

Duchy of Lancaster

The Minister for the Cabinet Office and Chancellor of the Duchy of Lancaster was asked—

Social Inclusion

The Government’s strong rural communities programme sets out our goals for those living in rural areas. The Department for Environment, Food and Rural Affairs monitors the outcomes of the programme, and our own public service agreement for socially excluded adults requires all local authorities in rural and urban areas to report on outcomes for particularly disadvantaged groups.

I congratulate the Minister and his ministerial team on their appointments, and look forward very much to working with them. Is he aware that in areas such as the Vale of York and rural north Yorkshire there are pockets of rural deprivation that have worsened over the past 10 years? People suffer from feelings of isolation and have poor access to rural transport because of the fact that Yorkshire is the biggest county in the country. What are his proposals to include them more, especially in the delivery of public services across the board? How will he ensure that rural communities get a bigger share of the public budget, compared with urban areas, than they do at the moment?

I am grateful to the hon. Lady for her welcome. I want to make three points in response to her question. First, she and the House will be aware of the work that the Government are doing to bring decision making in respect of the development of local areas much closer to local communities. Secondly, my right hon. Friend the Secretary of State for Communities and Local Government has brought together plans for housing and for new jobs under the single integrated strategy, and that gives both rural and urban areas much greater latitude and power to drive economic development. Thirdly, the Housing Corporation has set out ambitious plans to make affordable rural housing more widely available. Obviously, the Cabinet Office will retain a very strong interest in the livelihood of those at the bottom, as that is the indicator that we are particularly tasked to monitor, but giving local areas greater power to bring together economic development plans and making sure that councils are backed by the increases in central Government funding that we are providing are absolutely key to making progress on the issues that she has identified.

May I also congratulate the Minister on his new role? I wish him every success in it. Although free bus travel has been a huge success in rural areas of Wales, including in my constituency of Ynys Môn, many groups of people, including pensioners, still feel isolated. Will he join me in congratulating citizens advice bureaux on the benefit take-up campaign that they are holding this week? I am supporting it, and I am sure that many other hon. Members will too. Does he agree that local authorities across England and Wales have a greater responsibility to make sure that pensioner groups and individual pensioners are aware of all the benefits to which they are entitled, and that each year they should distribute a list of those entitlements with the council tax forms?

I am grateful to my hon. Friend for his words of welcome. I should like to extend my congratulations to the citizens advice bureaux in his area on the work that they are doing. Many Labour Members are extremely proud of the work that the Government have done over the past 10 or 11 years to lift hundreds of thousands of pensioners out of both absolute and relative poverty. The changes that we have made to pensions and pension credit are central to that progress, but it is vital for everyone in public life to make sure that as many people as possible know what their benefit rights are.

In extending my warm congratulations and best wishes to the new Chancellor, may I ask him to give the House his definition of the term “social inclusion”?

I am grateful to the hon. Gentleman for his words of welcome. In the past three or four days, I have been bombarded with so many definitions that I am going to give him a concise estimate by way of correspondence.

May I congratulate the Minister on his promotion and his elevation to the Privy Council? It is a pleasure to see such a strong west midlands presence in his ministerial team.

I have been working with the community council in Staffordshire to promote social enterprises and businesses such as community shops and community orchards that promote social inclusion. Does my right hon. Friend agree that that is a useful way forward, and does his Department support social enterprises in that sort of work?

The Parliamentary Secretary, my hon. Friend the Member for Cardiff, West (Kevin Brennan), who is not from the west midlands, will have more to say about that a little later in the time we have been given this morning. My hon. Friend the Member for Stafford (Mr. Kidney) is absolutely right to say that the energy, enthusiasm, enterprise and innovation that the third sector brings to tackling some of these questions is one of our greatest assets in this country. That is why the Government have done so much over the last 10 or 11 years to back those organisations. We have doubled the amount of Government support to them over the past 10 or 11 years. Increasingly, it will be for local communities to find the best ways of working with those organisations, and that is exactly why my right hon. Friend the Secretary of State for Communities and Local Government has such ambitious plans for devolving power from Westminster and Whitehall to local areas and an expectation that local authorities will delegate power further to local communities.

The Minister is quite correct. Although housing, better employment opportunities and transport links are vital for rural areas, does he not agree that education is, too? Will he join me in regretting that one of my local schools, serving a wide rural area, the Church Lawton primary school, is being considered for closure in the dying days of Cheshire county council? Will he join me in asking the county council to look again at the matter?

It is not in my brief so I can but guess the political control of the hon. Lady’s county council.

Sometimes, I do not need things written down in front of me, with the support I have behind me.

If truth be told, the number of schools in rural areas that have closed over the last 10 years is much smaller than it used to be. Overall, because of the changes we have made over the past 10 or 11 years, education is delivering on average better results in rural schools. Obviously, I shall be happy to look into the case the hon. Lady has brought to my attention and I will consult colleagues in the Government before I write to her.

I add my voice of congratulation to the new ministerial team, and commiserate with the new Chancellor of the Duchy of Lancaster on assuming that grandest of office at the very moment it is demoted from the Cabinet.

The new index of deprivation produced for the Government by Oxford university reports that almost 50 per cent. of neighbourhoods across England have markedly deteriorated over the past four years on the measure of geographical deprivation, which is what happens when communities are stripped of key local services. Post offices are of course the most devastating loss. More than a quarter of the network has been lost and now we are warned that thousands more will be forced to close if the Post Office loses its contract for the card account. As the Government dither, communities live with uncertainty. Given the impact on social exclusion, what is the Cabinet Office view on the future of the crucial card account, and when on earth will we get a decision?

I congratulate the hon. Gentleman on his rapid rise through the ranks of his colleagues. He joins a strong Front-Bench team.

If the hon. Gentleman spent a little longer looking at some of the evidence from up and down the country, he would see that people living in both rural and urban areas where there is deprivation have actually become better off over the past few years. That has not happened by accident; it is because of the extra investment that has gone into connecting people with jobs and into education and cutting crime. He brought up the example of Post Office accounts—a subject that has been debated at some length in these parliamentary questions over the past few months. He knows that about £150 million a year in subsidy goes from the Government into the post office network, so perhaps he or one of his colleagues would confirm today whether that policy is supported on the Opposition Benches. I think he would accept that £3.5 million a week in subsidy is not sustainable and that we need to make changes, but making sure that 95 per cent. of the population in both urban and rural areas live within 3 miles of a post office is perhaps an acceptable compromise.

Voluntary Sector

2. What recent discussions he has had with Treasury Ministers on support for those working in the voluntary sector; and if he will make a statement. (224356)

The current economic downturn disproportionately hurts charities and voluntary organisations in terms of costs, income and staffing. Will the new Minister press Treasury colleagues to introduce early measures to help the third sector, especially in reforming gift aid allowance and approved mileage allowance payments, and so demonstrate to unpaid volunteers the Government’s commitment to help them and not just the exorbitantly rewarded City bankers who fund the Conservative party and who have so recklessly gambled with all our futures?

Many hon. Members represent constituencies that are made substantially better by the work of volunteers and volunteering organisations. The truth is that the voluntary sector enters the current economic circumstances in much more robust health because of the fact that this Government have doubled, from £5 billion to £10 billion, our support for the sector over the past 10 or 11 years. Gift aid is one of the most substantial contributions that we have made to that new strength: it is now worth approximately £850 million a year in assistance to the voluntary sector. I am not sure that I shall be able to persuade the Treasury overnight to be any more generous—it made substantial contributions in the transitional allowances given in the last Budget. The key is that we understand what happens to giving and volunteering in the new economic conditions, which is why it is so important that we now have up and running—from 1 October—a new research centre on philanthropy, which is supported by the Government. That will allow us to make decisions based on evidence rather than anecdote.

One of the delights of the Chancellor’s new post is that he will be able to distribute money from the Duchy of Lancaster funds to voluntary organisations and charities. There is a pot of money there—after the events of the past few days, we hope that it is still there. Will he do all he can to promote that fund, so that we can develop the voluntary sector within the County Palatine?

I am extremely grateful for that advice. I now know where to look for advice on where that money is and what it should be spent on in the years to come.

Over the summer, almost all the volunteer advisers at York CAB resigned over differences they had with the management of the bureau. John Stoker, a former chief charity commissioner, has been asked to review what went wrong. Will the Minister look at the review when it is published, to see what lessons can be learned from it, so that people are encouraged to volunteer?

I am grateful to my hon. Friend for championing this matter and bringing it to the attention of Ministers and the House. Although I cannot comment on individual details, I welcome Mr. Stoker’s involvement and hope that his review will lead to a satisfactory resolution.

I, too, join in welcoming the new Chancellor of the Duchy of Lancaster to his post. As he will be well aware, the economic recession will put many new demands on voluntary services dealing with those who are financially damaged by the economic turmoil. Will he make sure that the voice of the voluntary sector is heard in the new National Economic Council? At present, voluntary institutions are both losing volunteers and donations and facing increased demands. Will he get behind efforts to ensure that funding does not dry up in this critical period?

The third sector will of course have a voice on the National Economic Council: that voice will be mine. I shall be supported in that work by the Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Cardiff, West (Kevin Brennan). It is extremely important that we understand exactly what extra demands are being made on the voluntary and third sector in slower economic conditions, and that across Government we understand whether there are lines of funding, such as Futurebuilders, that can be directed in a helpful way. I am glad to be able to tell the House that my hon. Friend lost no time in getting together yesterday with about 45 organisations to begin that very conversation.

As I am sure the Chancellor knows, a quarter of all volunteers work in the sports sector. The Treasury has introduced the CASC scheme, which allows community amateur sports clubs to get tax relief, but there is a campaign to get junior subscriptions exempted from tax and to improve the position in relation to the tax system. Will he use his office to put pressure on the Treasury to introduce some of those measures as soon as possible, to encourage as many volunteers as possible and to encourage young people in particular to get involved in volunteering?

My hon. Friend is a tireless advocate of the sporting sector and of young people. We want to make a number of changes to cut red tape and make the business of administration much easier for the third sector. If I may, I shall spend more time with him in the coming months to make sure that we implement the package that was put together for the last Budget as fast as we can.

I join in congratulating the Chancellor of the Duchy of Lancaster and his colleagues on their appointment, and we look forward to working together to establish common ground wherever we can. On that front, does he share my concern about the fact that v, which the Government set up to channel more than £100 million of public money into stimulating volunteering among young people, is currently commissioning an evaluation of its effectiveness? As the Government’s last volunteering initiative, the Experience Corps, had to be scaled back after an independent assessment of its effectiveness, does he agree that a rigorous independent assessment of v’s effectiveness is needed?

I am grateful for the right hon. Gentleman’s welcome, and I look forward to working with him. I suspect that there is common ground between us; it is important that we find it and do our very best to champion causes. In an evaluation of any programme, when efficiencies can be made, it is important that we find that out, so I am more than happy to consider the points that he makes and to explore what there is in them. Of course, if there is room to ensure shared evaluation of projects, that is absolutely what we must ensure.

In the Minister’s conversations with the Treasury, will he raise the case of the Catz Club, which accepted that it illegally made donations to the Labour party? Catz Club was dependent on loans from the Cabinet Office quango Futurebuilders to stay afloat. When he has had a chance to look into the issue, will he tell us what role was played by Margaret McDonagh, the former general secretary of the Labour party, who is a director of the Catz Club, and by Amanda Delew, a former Labour party fundraiser who is now the fundraiser for the Catz Club? Can he tell us why the Futurebuilders website has removed all reference to its funding of Catz Club? [Interruption.]

Order. Before the Chancellor of the Duchy of Lancaster answers, let me say that there is too much private conversation in the Chamber. It is unfair to those hon. Members who are here to listen to these questions and answers.

I am grateful to the right hon. Member for Horsham (Mr. Maude) for bringing that case to my attention. He will know, first, that political parties’ members of staff are entitled to go on and do other things and, secondly, that charitable organisations are regulated by the Charity Commission, rather than by me. However, now that he has brought the case to my attention, I will of course do what I can to review it and to correspond with him.

3. What recent assessment he has made of the effectiveness of Government programmes to encourage voluntary work. (224357)

4. What recent assessment he has made of the effectiveness of Government programmes to encourage voluntary work. (224358)

A range of Government programmes has encouraged and supported volunteering. The statistics from the 2007-08 citizenship survey show that the proportion of people who volunteered at least once in the past 12 months remains high, at 73 per cent. of all adults.

As a fellow Welsh Member, may I be the first Conservative Member to congratulate the Minister on his preferment? On 7 May this year, his predecessor told the House that the youth volunteering charity, v, had secured pledges of £32 million in match funding from the private sector. A check on the charity’s website this morning revealed that the pledges had not increased; the sum was still £32 million. Is the House to infer from that that the charity is having difficulty securing match funding from the private sector, and what assurances can he give the House that it will meet its target of £45 million?

The direct answer is no, it does not mean that v has stopped raising money. Indeed, it is due to report its latest figures shortly. I am sure that the hon. Gentleman looks forward to that. I also remind him that the £32 million is matched by public funds, so there is £64 million of extra money coming in to help create wonderful youth volunteering opportunities that would otherwise not have existed.

I wish the Minister well in coping with the members of the west midlands mafia on either side of him. I put it to him that, at this time of economic downturn, we have never needed the voluntary sector more. There will be huge responsibilities on his and his colleagues’ shoulders to deliver on promises that were not properly fulfilled by their predecessors.

The right hon. Gentleman is a former member of the west midlands mafia, having represented the constituency of my hon. Friend the Chancellor of the Duchy of Lancaster. I assure the right hon. Gentleman that I will take forward my role as Minister with responsibility for the third sector very much as the Prime Minister asked that I should—as a champion for the third sector in Government. I am sure that the right hon. Gentleman will welcome the £450,000 of funding to the Berkshire Association of Clubs for Young People for a v involved team in his area, delivering wonderful youth opportunities for volunteers in Bracknell.

What steps can the Minister undertake, in association with his ministerial colleagues, to ensure that all those involved in voluntary work right across the United Kingdom, including Northern Ireland, can play a more significant role in the run-up to both the Commonwealth games and the Olympic games?

Clearly, the Olympic games provide a wonderful opportunity for volunteers across the United Kingdom. The office of the third sector is working within the Cabinet Office to ensure that there is a real legacy of increased civic participation as a result of the 2012 games. We want to enable third sector organisations to make the most of the opportunity of the Olympics to increase volunteering and we will ensure that individuals will have easy access to the increased number of volunteering opportunities that will become available in the run-up to the Olympic games.

Given that the Government now enjoy new influence on the banking sector, will my hon. Friend work to ensure that the banks show greater understanding for, and consideration of, the needs and working circumstances of the voluntary sector as it copes with a difficult fundraising cycle and the complexities of funding rounds? Banks are not always there to support that sector positively. Will the Government use their new influence to achieve a better result?

I am grateful to my hon. Friend and the hon. Member for East Londonderry (Mr. Campbell), who, as the Celtic mafia, have given me welcome relief from the west midlands mafia during this Question Time. My answer to my hon. Friend is “very much so”, and I am prepared to look, with him, at the issue that he raises.

Will the Minister ensure that funding continues for organisations that recruit volunteers, such as Chance UK? I spent a week volunteering at that organisation last month. Will the Minister commend its work in recruiting volunteers to mentor the most vulnerable five to 11-year-olds and raise their aspirations and behaviour? That work is so needed, particularly in respect of role models in our communities.

There is a social inclusion taskforce project in that very area. The role of mentoring is important. From my previous posting at the Department for Children, Schools and Families, I know that it spent a lot of money, working in conjunction with the office of the third sector, to promote volunteering in the form of mentoring, particularly for young people. I commend that work.

Third Sector

5. What research his Department has commissioned to underpin the development of its policies relating to the third sector in the last two years; and if he will make a statement. (224359)

The office of the third sector recently commissioned the largest ever survey of the sector, reaching more than 104,000 third sector organisations. It conducts additional research on issues including social enterprise, consultation, volunteering and charitable giving. It is also laying the foundation for future third sector research by investing £5.7 million in two third sector research centres with the Economic and Social Research Council.

I welcome that response from the new Minister and wish him well in his new job. He was an excellent Minister in the Department for Children, Schools and Families and I am sure that he will continue the good work at the Cabinet Office.

Not only the smaller charities and voluntary organisations help groups and people in our society now; many larger organisations are delivering front-line public services. However, in many of our towns and cities, charities, voluntary organisations and community groups are hampered in the development of their work by inadequate and inaccessible premises. As the Minister develops policies for the third sector in the next two or three years, will he consider that issue and the funding involved?

Yes, I will do that. As my hon. Friend will know, helping third sector organisations to take over former local authority premises has been one of this Department’s large programmes, and it will continue to be so.

Have the Government commissioned any research in the past two years that will not only underpin their policies but assist the third sector by identifying all those areas across Government Departments where the third sector can apply for grant, and would they publish that work to assist the third sector in knowing where it can go to seek funding?

We are doing a great deal of that work. In fact, we are following four different research strands. We are carrying out the largest ever third sector survey, this month we will open the third sector research centre, we are supporting the Centre for Charitable Giving and Philanthropy, and we are commissioning rigorous evaluation of the work that we are undertaking. I am happy to talk further with the hon. Gentleman about those issues.

Social Inclusion

6. What work programme has been put in place for the social exclusion taskforce for the next 12 months; and if he will make a statement. (224360)

The principal focus of the taskforce’s work is in ensuring delivery of the public service agreement that we have agreed on excluded adults. There will also be scope for a number of additional projects, which will be announced shortly.

The Secretary of State has recognised the work of the social exclusion taskforce, but does he recognise the following words:

“despite our successes, it is actually getting harder for people to escape poverty…In fact, it’s currently harder to escape the shackles of a poor upbringing in Britain than anywhere else in Europe”?

Does he agree with the right hon. Member for Kingston upon Hull, West and Hessle (Alan Johnson), the Secretary of State for Health?

I think that my right hon. Friend would agree with me that what is important over the next year is not only that the Government take action such as the action announced today to stabilise the banking system but that we do everything possible to help families and businesses through these more difficult economic times. Labour Members are determined to ensure that we come through the next year not only stronger as a country but as one nation, leaving nobody—no community and no business—behind. I hope that that ambition is shared in all parts of the House.

Prime Minister

The Prime Minister was asked—


Before listing my engagements, I know that the whole House will want to pay tribute to all the servicemen who have died in the summer months in Afghanistan and, in doing so, I send our profound condolences to their families and friends: Warrant Officer Class 2 Gary O’Donnell, Sergeant Jonathan Mathews, Corporals Jason Barnes and Barry Dempsey, Lance Corporals Kenneth Rowe and Nicky Mason, Private Peter Cowton, Private Jason Rawstron, Signaller Wayne Bland and Ranger Justin Cupples. We owe them, and all those who have lost their lives in conflict, a huge debt of gratitude. Like many Members, I have recently visited Afghanistan, and I have seen at first hand the superb job that our armed forces are doing. I believe that I can speak for the whole House in sending the full and unwavering support of this House for the great efforts of our armed forces.

This morning I had meetings with Ministers. I also talked to Chancellor Merkel, President Sarkozy and Prime Minister Berlusconi about the economic situation. I think that the House will want to know that the Governor of the Bank of England has just announced an immediate 0.5 per cent. cut in interest rates. He has done so in a co-ordinated action that is happening around the world, in which the US Fed has cut interest rates by 0.5 per cent. and the European Central Bank by 0.5 per cent. The Swiss, the Swedes and other members of the G10 have all cut interest rates, showing that global problems are best dealt with by global action.

I am sure that the whole House shares the sentiments expressed by the Prime Minister with regard to the fallen.

Does the Prime Minister agree with the International Monetary Fund that the British economy will shrink next year?

Every economy is facing problems, and I do not want to make predictions about the future. We are in very difficult times. However, I think that the hon. Gentleman will see, and the whole House will understand, the strength of the action that we have taken today. We have produced additional liquidity in the system of up to £200 billion. We have said that we are prepared to buy shares in our banks and recapitalise our banks to the tune of £50 billion. We have also done something that other countries will, I believe, follow very soon by providing medium-term financing of up to £250 billion, guaranteed by the Treasury. By taking co-ordinated action as a whole and leading the world in doing so, I believe that we can get our banking system on to a sound footing, and that is the key to the future. To have that combined with the macro-economic action—a cut in interest rates—is an important message that is being sent round the world: that we will do everything in our power to ensure that our economy moves forward.

Will my right hon. Friend guarantee that the fat cats of the City of London will not be allowed to line their pockets on the backs of the profound concerns of tens of millions of our fellow citizens? Will he assert that the jobs, homes, small businesses, savings and pensions of those fellow citizens of ours are the profound, top concern of this Government?

I was pleased to visit the constituency of my right hon. Friend when I opened a school only a few weeks ago, and we will do everything in our power to maintain our public services, to increase jobs in our economy and to protect the savings and deposits of the citizens of this country. I want to reassure people that everything that can be done will be done to ensure a flow of finance for mortgages and small businesses, despite the toughness of these times. I also say to him that the conditions we will lay down for support to banks in this country include executive performance and the way in which it is remunerated, and we will build on the Financial Services Authority’s work to ensure that excessive risk taking is not rewarded but punished.

May I join the Prime Minister in paying tribute to those servicemen who have lost their lives in Afghanistan since the House last met? Like the Prime Minister, I have been recently to Helmand, and I have seen for myself the courage, professionalism and dedication of people working in incredibly difficult conditions, and we owe each and every one of the fallen a huge debt of gratitude.

Right across the country, people are worried about their savings, their pensions and their mortgages. That is why I said last week that if the Government needed to take major steps to secure the banking system, they would have our support. Does the Prime Minister agree that the message should go out loud and clear from this House that in a free enterprise economy, banks play such an important role for everyone—home owners, businesses and individuals with savings—that the banking system cannot be allowed to fail?

I am grateful for the Leader of the Opposition’s support for the action that we are taking. I hope that we can proceed on the basis that there will be all-party support for the actions taken today and those taken on future days.

I believe that the scheme we put forward, which is a stability and restructuring programme, is not simply about new capital for the banks. It is increasing liquidity into the system so that there is overnight and short-term lending available for the banks. It is dealing with what is perhaps the bigger problem at the moment, which is medium-term funding that small businesses in our country need, as everyone recognises, to get funding. At the same time, mortgage holders and prospective home owners need to know that the market can resume. The absence of medium-term funding of loans over six months, a year, two years or three years has hindered the market, which is indeed frozen up in those areas. We are guaranteeing £250 billion at commercial rates, but we will do the job that the banks usually do, and should be doing in normal circumstances, by providing the guarantee that that system will work forward. In addition, the cut in interest rates will assure people that all action is being taken in the economy so that we can help businesses move forward.

I welcome the right hon. Gentleman’s support. I say to him that the measures we took this morning are far more comprehensive and wider than those speculated about in the press, and we are showing that we will do everything in our power to maintain the stability of the economy in the interest of every single British person.

Given, as the Prime Minister says, that we are trying to save the banking system not as an end in itself, but to save the wider economy, would he agree that the real test of success of these measures is not just, as he said, whether banks starting to lend to each other, but whether small business can get loans again and whether home owners can get mortgages again? Are they not the real tests that need to be met? Can he explain how he will measure whether they are met?

I am grateful to the right hon. Gentleman for giving me an opportunity to say, in addition, what we are doing to help small businesses. The key issues for small and medium-sized enterprises are cash flow, and, to some extent, access to finance, as I have just said. They need to be helped through this critical period. Late payment problems, which have intensified, with all firms on average lengthening the time it takes to pay their suppliers, including SMEs, go beyond agreed terms. The Government can ease the situation, and we will help cash flow through prompt payment. The Government have already agreed to move their procurement rules from payments within 30 days to a commitment to pay as soon as possible. In the current climate, we need to go further, with a harder target. We will therefore aim to make SME payments within 10 days. The Government will pick up the cost of that, but it is a small price for greatly increasing cash flow associated with £8 billion of contracts for SMEs.

As I announced last weekend, we propose that the European Investment Bank increase its loans worth up to £4 billion to United Kingdom banks for use by small and medium-sized enterprises. We are now pressing for further additional funding to be advanced, and for UK banks to be able to ensure that they take up the full funding available for SMEs. The Government will, of course, review the impact of any regulatory measures already agreed, but let me make it clear that we are doing, and will do, everything we can to assist SMEs throughout this period. Our restructuring of the banks is designed to ensure that, although it is difficult to achieve, credit lines can remain open to SMEs on a commercial basis. We will not accept that banks should cull their credit lines to eliminate their own exposure to risk, so we will do everything we can to help the 4 million small businesses of this country.

Taxpayers are making an enormous investment and potentially have a huge liability. They want their interests to be protected. That should mean no more irresponsible behaviour, no more inappropriate dividend policies and no more indefensible bonus packages. Will the Prime Minister confirm that those will be conditions of the agreement for getting taxpayers’ cash? Crucially, how will the conditions be enforced once everyone has signed up?

Again, I am grateful for the chance to explain how we will move forward the proposal that the Chancellor announced this morning. On the remuneration packages available to executives, it will be a condition of the capitalisation of banks that they accept new conditions attached to executive remuneration. We are in discussion, on a case-by-case basis, with the banks that want to take up the scheme about the level of executive remuneration, especially the bonus system that has caused so much difficulty.

Our aim is to support and reward work, enterprise and responsible risk taking, but not irresponsible and excessive risk taking, which has caused so much damage. The Financial Services Authority—[Interruption.] I was asked a question, so I think I should have the chance to answer. The Financial Services Authority will soon publish a consultative document about the danger to company balance sheets if, by excessive risk taking, some of their executives put those balance sheets and companies at risk. That will form part of its estimate of what capital those companies need.

It is not only a question of the individual banks with which we are dealing having to accept new conditions—there are strings attached and conditions must be met—but throughout the system, the FSA will propose a new way of dealing with executive remuneration, especially bonuses, which will allow it to regulate according to the capital requirements of a company that takes excessive risk.

May I ask a question that follows directly from the answer that the Prime Minister just gave? The banks that are most reliant on the scheme are those that have taken the greatest risks and, in some cases, behaved irresponsibly. Will the Prime Minister guarantee that, in those banks, there will be no bonuses for senior executives this year?

I think that we must get both sides of the matter right. Early on, the right hon. Gentleman said that he did not want any bank to fail, and we will take all the necessary action to ensure that banks are stabilised and can continue, and resume their normal process of lending. At the same time, we will insist in the conditions on which we issue shares that executive remuneration is as we want: based on responsibility, hard work, effort and enterprise. However, that will be part of the negotiations that we will hold. I think it is right to hold those on a one-to-one basis between the Government and the companies. Of course, those matters will be made public because that is what companies are required to do.

No one wants banks to fail, but also no one wants rewards for failure. Taxpayers now have an investment, so taxpayers have an interest, and they will rightly be infuriated if they see their hard-earned money going in bonuses that are rewards for failure. The other thing that the taxpayer will expect is that everything possible will be done to improve the regulatory system. One of the problems is that there is no one in the system who is there to take an overall view of indebtedness in the economy. Will the Prime Minister look with a genuinely open mind at restoring the role of the Bank of the England—the role that it had for decades—of calling time on debt levels in the economy? The regulatory system needs not just the right rules, but strong institutions. Should not the Bank of England be restored to its proper role in this regard, so that this never happens again?

Of course under the new legislation, for which I believe there is now all-party support, the Bank of England will have a statutory role in the supervision of the system. However, I have to remind the right hon. Gentleman that when we came in in 1997, there were seven or eight separate regulators all involved in the system. We co-ordinated that within the Financial Services Authority and we led the world in that way.

As for bonuses, the FSA will be responsible for issuing rules about capital adequacy to firms. It will take into account whether firms are taking excessive risk by rewarding people on the basis of short-term gains, not long-term success. So when the right hon. Gentleman asks what will be done, the answer is that on a case-by-case basis where we capitalise the banks, we will lay down conditions. As for other companies and the rest of the system, the FSA will now be in a position to regulate the capital requirements of firms according to the risk taking that is involved.

I hear what the right hon. Gentleman says about what he thinks about the irresponsibility of people in the City and some of the adjectives that have been used, but I have to remind him of what he said on the “Andrew Marr Show”:

“What you won’t hear from me this week is sort of easy, cheap lines…beating up…the market system, bashing…financiers.”

Now that the Government have brought forward such a bold scheme of support for the banks, does the country not have the right to expect the bankers to show a bit of courage and resume normal lending among themselves and to the wider community?

My right hon. Friend is absolutely right. What we are making possible to happen today is for that resumption of lending to take place. We are providing a guarantee for medium-term funding. I am thinking of the small business that is looking for funds for investment or the small firm with an overdraft that wants the help that a bank can usually give. I am thinking of the mortgage holder who wants to buy the next home or the first-time buyer. That is the cash that can be provided by a good banking system. To have it on a sound footing is an essential element of the programme, but to resume the medium-term funding is one of the least publicised elements of the programme that we have announced today. Not only will we do this in Britain—the £250 billion guarantee—but I have talked to my European colleagues over the past few days and I have hopes that this can become a wider scheme that other countries will take up. I hope that we will show that we have led the world in changing the terms and conditions on which we can help to renew the flow of money in the system.

I would like to add my own expressions of sympathy and condolence to the families and friends of those brave British servicemen who lost their lives during the summer recess in Afghanistan.

This is indeed a day of reckoning for the British economy. It is also a test for this House. We must show the British public that we can work together to halt the downward spiral in the British economy. That is why, speaking for the Liberal Democrats, I can confirm that we wholeheartedly support the Government package. When a ship is sinking, we send out the lifeboats. We do not argue about who has steered it into an iceberg—that is a debate for another day.

This is a national response to what the Prime Minister has rightly called a global crisis, so we need global responses, too. Will he give the House a bit more detail on exactly what he is doing to ensure that the European Union finally acts together? Will he and the Chancellor press the IMF later this week to provide support to Governments, such as Iceland’s, who are overwhelmed by the crisis and unable to cover the liabilities of their banks on their own?

Once again, I am grateful for the right hon. Gentleman’s question, because it allows me to explain, if he will allow me to do so, what we are doing in concert with our European partners and what we want to see happen at a global level.

First, the co-ordinated cut in interest rates is an important signal that the world will come together to deal with this economic problem. I believe that it has come at the right time to show that the action that we are taking, the action that the Americans are taking and the action taken in other countries in Europe is action that is designed to solve together the problem we face.

The problem is that the banking system has been overwhelmed by the fall-out from the sub-prime market in the United States and the bad assets that have been taken by many banks. Our method of doing this is to strengthen the banks in our country. In America, they are trying to move those bad assets into a Government fund. We feel that what we are doing is best for the banking system here, so while action is co-ordinated, each country will choose different things to do.

On Friday, the G7 will meet and agree co-ordinated action on transparency, disclosure and how we deal with accounting standards. I believe that the changes such as the new colleges of supervisors that will regulate multinational companies across frontiers should come in immediately and be set up before the end of the year. There will be a meeting of the IMF on Saturday, which I believe will agree the same principles. Having talked to President Bush yesterday, I think that we will have an international leaders meeting soon to look at what we can do together.

We need to have responsibility and integrity at the heart of the global financial system. We need a global early-warning system and co-operation among regulators that, to be frank, we in Britain have tried for for years, but have not been able to persuade other countries to support. We will continue to see co-ordinated action on economic policy.

I am grateful for the Prime Minister’s reply. I am sure that he will agree that although this package is hugely important, it is only one part of the jigsaw that needs to be put together to get the economy back on track. He has said, rightly, that this is a time for new thinking, not for old dogma, so does he recognise that struggling families facing huge bills need more money in their pockets now? Will he act to close the numerous loopholes in the tax system, which benefit only the very wealthy, and use that money to cut taxes for people on low and middle incomes, who need that money the most?

I am grateful to the right hon. Gentleman. Of course, wherever there are loopholes in the tax system we will act to close them, and have done so over the last nine years. He asks about money going to hard-working families in this country to help them through these difficulties. Every family—in fact, 22 million families, basic-rate taxpayers—will receive £120 as a result of the decisions made by the House to give a tax cut. Equally, at the same time, as he knows, pensioners will receive £250 in the next few weeks for their winter fuel. Pensioners over 80 will receive £400 to help with their fuel bills. We have also extended help to low-income families by increasing the social tariff numbers to half a million and more. We are trying to do more in that area. We are trying to deal with the unacceptable problems raised by pre-payment meters. We will legislate if necessary to stop the practice of discriminating against those on pre-payment meters and we will continue to do everything we can to help the hard-working families of this country.

Does the Prime Minister agree that the best way for the House to show its admiration for our troops in Afghanistan would be to investigate an alternative peace strategy that sought to consolidate the gains already made, end the bloodshed and bring stability to Afghanistan and Pakistan?

My hon. Friend is absolutely right in one thing: this is not a military strategy alone. I applaud the professionalism, dedication and ingenuity in the face of huge difficulties displayed by our British armed forces—more than 8,000 men and women who are in Afghanistan at the moment. As everybody knows, they face a new problem—not front-on combat with the Taliban, but guerrilla warfare, roadside bombs, devices such as car explosives and suicide bombings. We have had to restructure and reconfigure our troops to deal with that problem.

In addition, we are training the Afghan army to do its own job for itself—80,000 people are being trained. The Afghan police force is being trained, which is a more difficult task. Corruption has to be avoided so that it can also provide a policing role. I may say also that in what we have done in increasing the facilities available—for example, the dam in Afghanistan—we are trying to help to develop the economy of Afghanistan. We are trying to give people education and health, and all the opportunities that a civilised society should give. However, let us remember this: some criticise the effort in Afghanistan, but Afghanistan is now a democracy and millions of children, including 2 million girls who never went to school, are now going to school.

Q2. Does the Prime Minister share my disgust that some banks are charging small businesses more than 15 per cent. interest on their overdrafts? (224399)

That is exactly the problem that we are considering at the moment. Small businesses need the lifeline of banks that are able to service them. We are examining how we can use money from the European Investment Bank, the small firms loan guarantee scheme, and money that regional development agencies have to help businesses in their community, to get the banks to be better intermediaries to finance loans for small businesses at affordable rates. We have been discussing in detail with our European partners how a £25 billion scheme can be introduced. We are also considering how the small firms loan guarantee scheme can be improved. The situation is difficult and tough. Banks have increased the margins that they charge, and have responded to their difficulties by making it harder for small businesses. We should accept that that problem must be dealt with. But we must create a means by which the banks can be better intermediaries in getting funds to the 4 million small businesses in our country who deserve, and will have, our support.

I too congratulate my right hon. Friend on this bold, comprehensive financial package, especially as it has been struck voluntarily with the banks and will therefore not be delayed by legislation. Can he tell the House how quickly he thinks that the major banks will take up the offer on the table?

One of the reasons that the programme had to be completed in full before it was announced was that we had been in detailed discussions with the major banks. We have an agreement in practice that they will all join the scheme. The detailed working out of the scheme, through the conditions that we are attaching, will happen in the next few days. We must accept that this is a long haul for every economy of the world. But I hope that in a reasonable time we can get the funds from the banks into the small businesses, and resume the mortgage lending that is so essential, especially for young people looking for their first home.

Q3. When the Prime Minister was Chancellor of the Exchequer, he often used the occasion of the IMF forecast to revise his public borrowing figures. In the light of today’s revised IMF forecast, will he revise those public borrowing figures today? (224400)

If I may say so, public borrowing forecasts have always been revised in the pre-Budget report and in the Budget. I have never done that at the IMF, although sometimes at the IMF I have said what I think the growth pattern of the economy will be.

In the light of today’s historic and dynamic intervention, does my right hon. Friend consider that the proposed takeover of HBOS by Lloyds TSB will still proceed? If so, will he reassure my constituents in the Calder Valley, and those of my hon. Friend the Member for Halifax (Mrs. Riordan), many of whom are employed by HBOS in Halifax, that he will do everything that he can to ensure that there are no compulsory redundancies in the next three years?

My hon. Friend takes a huge interest in those matters, and I too am concerned with the interests of her constituents and those employed by HBOS and Lloyds TSB in Yorkshire and Humberside. When we changed the competition rules to make possible the takeover by Lloyds TSB of HBOS, the alternative that we faced—that a major bank that served a large part of our community would not be able to survive—was a great deal worse. We took the right action to make sure that Lloyds TSB could take over Halifax Bank of Scotland, with the company wishing to expand over time its business in banking, servicing the people not just of Yorkshire and Humberside but the rest of the United Kingdom. I will look at the matter carefully, and would be happy to meet her to discuss the conditions of employment that she finds. With Bradford & Bingley in the same area, I realise that people face difficulties. Our determination, however, is to stand on the side of those people who are worried about their jobs, and to help them through this difficult period.

Q4. Following the Prime Minister’s pronouncement in New York last week, will he now tell us when the age of irresponsibility began? (224401)

I am tempted to use my experience of studying history to go back quite a long time to explain what has happened.

I was talking about irresponsibility in the financial markets. Now everyone agrees about irresponsibility in the financial markets, but let me say, because I think it should be clear to the people of this country, that the dividing line here is not between business and being anti-business, or between market and being anti-market. The dividing line that we have is between rewarding hard work, effort and responsibility—rewarding enterprise—and rewarding excessive risk-taking or irresponsible risk-taking. [Interruption.] The all-party consensus seems to have dissipated a little.

I personally think that the whole country will agree that that is the right thing. Let us reward work, let us reward effort, let us reward enterprise, let us reward responsible risk taking; but let us deal with the problem—and sort it out once and for all—of excessive and irresponsible risk taking.

When the Prime Minister gave badges of honour to the women and male Spitfire pilots and others in the Air Transport Auxiliary, did he convey the great pride that the whole House shows in them, and the tremendous thanks of the whole country for their sterling service during our darkest hour?

I had the privilege, over the summer, of meeting many of the women Spitfire pilots, and the men and women of the Air Transport Auxiliary and I was able to congratulate people who had come from all over the country, and who had given a huge service to the country. Their contribution was in delivering aircraft between factories and airfields during the second world war. It is right, even 60 years after the war, that the nation has now determined that it will recognise the contribution of some very brave and courageous women and what they did.

Q5. I listened very carefully to the Prime Minister’s answer when he said that he often used the occasion of the IMF forecast to publish new growth forecasts. I repeat the question put by my hon. Friend the Member for Scarborough and Whitby (Mr. Goodwill): can the Prime Minister confirm that the Government agree with the IMF that next year the economy willshrink? (224403)

I said that I often forecast the path along which the economy will move forward. We publish—[Interruption.] I think the hon. Gentleman has been in the House for long enough to know that it is right for a Government to publish the exact figures of its forecasts at the time of a Budget and pre-Budget report. Anything else leads to uncertainty; and, if I may say so, the hon. Gentleman betrays some immaturity in expecting that we will give a running commentary on the economy.