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Volume 483: debated on Wednesday 19 November 2008

This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall have further such meetings later today.

Can the Prime Minister explain why the pound has lost over a quarter of its value against the US dollar in less than four months? Does he still believe what he said in 1992—that

“a weak currency arises from a weak economy which in turn is the result of a weak Government”?

I would advise Conservative Members not to talk down the pound, and I advise them to take the advice of Lady Thatcher, who said that

“trying to help the speculators”

and talking sterling down was

“the most unBritish way.”—[Official Report, 15 June 1989; Vol. 154, c. 1119.]

Q2. A strong skills base in both services and manufacturing is key to the recovery strategy that the Prime Minister is pursuing at home and abroad. It is also key to regenerating towns such as Blackpool. Does he agree that this is a time to expand, not contract, investment in skills and apprenticeships, particularly in the public sector, but also in small firms? Unlike the Conservative party, we need action, and we need it now. (236807)

I think what people want is real help for families and real help for businesses now, and I think people are beginning to understand that what is happening in the global economy is that while last year we had a major inflationary problem because of oil prices and food prices, in the coming year, inflation will fall. It will enable us to apply fiscal policy in support of monetary policy. What I mean by fiscal policy is real help and real support to families and businesses now. That is the way for the economy to grow in the future.

May I start by thanking the Prime Minister for agreeing to the full, independent inquiry into baby P that I asked for here last week? This was never about politics; it was about getting to the truth, and I am grateful that we are to have that inquiry.

Does the Prime Minister agree that bank reconstruction, which we all support, has not yet had the desired effect, in ensuring that lower interest rates are passed on to businesses, and that credit is genuinely freed up?

First, on baby P, I think there is unity and common ground in this House on the fact that we have got to act quickly on the report on Haringey that is to come, and that Lord Laming’s work round the country is essential. We will look at what he says very carefully indeed. It is in all our interests that where there is failure, we change the system, and where people are to blame for failures, they are held accountable.

As for the banking system, I think that we were right to recapitalise the banks. This act has now been followed in every country of the world. The issue now is how the banks will resume funding to small businesses and home owners, and we are in discussion with the banks—every one of the banks—about, first of all, how HBOS-Lloyds TSB and Royal Bank of Scotland can achieve their promise that their lending and marketing of lending activity will be at the 2007 level, and, secondly, how all the banks can resume funding. We will bring forward proposals very soon indeed.

I am grateful for what the Prime Minister says about the tragic case in Haringey and the need for proper accountability and responsibility, and there will be all-party support for that.

On the issue of talking to the banks, let me give the Prime Minister two specific cases that we have been in touch about this morning. First, a manufacturer in Lancashire, employing 120 people, is now being charged £16,000 for a modest overdraft facility. Even more dramatically, a small business in Leicestershire wrote to us saying that it had never breached its banking covenants and never exceeded its overdraft limit, yet its overdraft facility had been withdrawn and cheques had bounced. Do not such cases show that what has been done so far, which we support, has not yet worked properly, and that we need to do more on the credit side to ensure that such small businesses are not strangled?

I have said all along that the banks have got to accept their responsibilities. We have done what we can; they have to accept their responsibilities to act in a responsible and fair manner. I shall be happy to look at the individual cases to which the right hon. Gentleman has referred, but I have to say that we have expanded the small firms loan guarantee system to small businesses, that we have drawn on a European facility that could be worth up to £4 billion to help small businesses, that we already monitor what the banks are actually doing in every individual area, and that we will continue to monitor their work very closely. I have to say also that despite the Opposition’s predictions, the Bank of England has also reduced interest rates, and that must flow through to small businesses, as it has to home owners.

The Prime Minister says that we have done what we can. My question is, do not we need to go ahead and consider doing more? Is the Prime Minister considering—[Hon. Members: “Doing more?”] Yes. This is about small businesses in the real world that are struggling and want to know how we are going to get credit moving again. Is the Prime Minister prepared to consider more direct measures to get lending to business restarted, including the establishment of new institutions to underwrite lending, so that businesses can get the money that they need? At the same time, can he tell the House whether he is contemplating any further taxpayer investment in the banking system?

The reason I mentioned what we have already done was to remind the House of the action that has been taken, which the Opposition unfortunately opposed. The issue now is providing real help—as I said early on—for small businesses and for families, and, to make that real help possible, there will have to be some fiscal expansion. If the Leader of the Opposition is now telling me that he will support that fiscal expansion to make it possible, that is a change from yesterday, but a welcome change, indeed. We will take all the measures that are necessary to help small businesses get the loan capital that they need, but the Opposition are going to have to be consistent: if they are asking for fiscal action now, that is the opposite of what they were doing yesterday.

I was asking about the constructive measures that need to be taken on bank lending, and I do not think that we really got much of an answer. The right hon. Gentleman did not answer the question about whether additional taxpayer support needs to go into the bank system, and people might draw their own conclusions from that.

Let us turn to the pre-Budget report—I know that the Prime Minister is keen to, and I know that he is desperate to go on this borrowing binge. Everyone wants to know how he is going to pay for it. The employment Minister, the Business Secretary and the Chancellor have all said that taxes will have to rise. Is that not true?

Order. The Prime Minister is answering. I can hear him answering. [Interruption.] He may not answer the way that hon. Members want him to, but he is answering.

We are calling for action on small businesses. That means that there will have to be a fiscal expansion to help small businesses. The problem is that the Conservative party has set its face against a fiscal expansion. Why are we proposing a fiscal expansion, and why are the Conservatives opposing it? The reason is to bring back growth into the economy, and the best way of dealing with tax issues is to secure growth in the economy and to secure tax revenues. The Conservatives are the do-nothing party when it comes to now, and they will let the country down by their actions.

It is amazing for a former Chancellor, but I think that the Prime Minister has forgotten the difference between monetary policy and fiscal policy. He has forgotten—[Interruption.]

He loves to lecture on economics, but for him it is actually all about the politics. Let me say to him—[Interruption.] He has made his choice about fiscal policy, and now he has to tell us how he is going to pay for it. The Business Secretary—not a man known for his candour—said this:

“you have to make a structural adjustment later on”.

In plain English, that means tax rises. On this side of the House, we have made our choice—it is called spending restraint. Is it not clear that the Prime Minister favours tax rises?

The Leader of the Opposition, on 30 September—[Interruption.] Oh yes. He said:

“The lightweight thing to do would be to make unrealistic promises about slashing Labour’s spending”

plans—a “lightweight” response to the problems that we have at the moment.

Let me tell the right hon. Gentleman the difference between monetary and fiscal policy. He proposes that we only use monetary policy, yet only a few days ago the shadow Chancellor was saying that it would be impossible for the Bank of England to cut interest rates because of our fiscal action; the Bank cut interest rates by the largest margin for years, 1.5 per cent. As for the present circumstances, everybody in every continent around the world is saying very clearly that monetary policy is not enough. The right hon. Gentleman wishes only to use monetary policy, but everyone—right-wing Governments and left-wing Governments—is saying that monetary action will not be enough, and that is why we need to use fiscal policy. That is real help for people and for families now. If he is setting his face against that, he is setting his face against helping families and business through the difficult downturn that they face.

The Prime Minister is so fond of trading quotes; let me give him one that I found from just yesterday. This is the former economic adviser to his own Government, Derek Scott. He was asked—[Interruption.]

He was asked about the Government’s claim that this recession was largely not of their making. His answer was that that was “largely drivel, frankly”. That is what he said. Let me use some words that the Prime Minister might be very familiar with. They are these:

“unfunded…tax promises…simply do not add up”.

They mean

“tax cuts before the election”,

leading to tax rises after an election. That is what he said as Chancellor just a few years ago. If he does not agree with his employment Minister, if he does not agree with his Chancellor and if he does not agree with his Trade Secretary, perhaps he can tell us—does he agree with himself?

They all shout, but only a few days ago the Leader of the Opposition himself was saying that borrowing had to be allowed to happen. Then he changed his mind, and he is depriving people of real help for businesses and families. The issue will come down to this: do we want to help people through difficult times, a downturn that every country in the world has faced? It is a downturn, by the way, that even the Americans agree started in America. Do we want to help people through difficult times, or do we want to take the advice that was followed in the 1980s and 1990s by the then Conservative Government and do absolutely nothing to help people in time of need?

We are going to be the party that helps people through this difficult downturn. The Conservative party has changed its policy yet again and now it is unable to help people. The deputy chairman of the Conservative party said only two days ago that the recession must take its course. We will act; the Conservatives would refuse to act.

Will the Prime Minister agree to meet a delegation of MPs, including me, who lost constituents due to the use by the IRA of Semtex and other weapons that had their provenance in Libya? We are disappointed that the Foreign and Commonwealth Office has not yet taken the initiative of following America’s example and negotiating adequate compensation with Colonel Gaddafi. I believe that Members in all parts of the House, along with victims’ families, would want to press him to remedy this wrong, including the hon. Member for Belfast, North (Mr. Dodds) and colleagues from the SDLP—from people like me—

It is a very important point. I will be very happy to meet my hon. Friend to talk about it, and then we will review what we do.

I would like to return to the bank bail-out plan. We supported that action because we were told that there would be strings attached—that the banks would be forced to lend. Yet every Member of this House will have heard about local companies receiving e-mails from their banks forcing them out of business overnight. What concrete evidence does the Prime Minister have to show that his bail-out plan is working?

The first thing to do was to provide liquidity to the banking system. The second thing to do was to recapitalise the banks so that they would not collapse. Some of these banks would not be in existence today had we not taken the action that we did to recapitalise them. I am pleased that the right hon. Gentleman supported us on this. The next thing to do is to secure the funding that is necessary for small businesses and for mortgages. We have expanded the small firms loan guarantee scheme, and we have arranged for £4 billion of funding from Europe. We are meeting banks and building societies almost every second day to consider the technical issues and other reasons why the lending has not happened in some cases, and we are ready to take further measures if necessary. I hope that he agrees that if we take further measures, that may cost money as well as costing the banks changes in the way that they operate, and I hope that he will support us when we do it.

That was an extraordinarily complacent reaction when thousands of jobs are at risk. We all know that the Prime Minister likes to strut his stuff on the world stage telling everybody that his plan is better than their plan, but his plan is not working where it counts—here at home. The bankers cannot believe their luck. They have got billions of pounds of taxpayers’ money, they can keep their bonuses, and they do not have to lend to companies. If he is too weak to get tough on the banks, will he instead consider ways of lending serious money directly to businesses?

First, they have not, under our scheme, taken their bonuses as members of the boards. Barclays announced just yesterday that they will not take those bonuses. We are having some success, and I hope that we will have more success, in persuading the executives of these companies to take full responsibility. As for the resumption of lending, every country in the world is facing this problem, and we are all looking at what we can do. What has happened—let us be honest—is that we have gone from a period where banks were prepared to take any risk to one where they are averse to risk, and we have got to turn that round. That means that we are going to have to build confidence in the future of the financial system. Some of the measures we have already taken, but I hope that the right hon. Gentleman will support the further measures that we will take.

Does the Prime Minister believe that it is right for councils to go on encouraging their tenants to take out mortgages that they can ill afford to repay? If he thinks that it is wrong to encourage people who are only on benefits, in arrears or have been bankrupt to take out mortgages, will he please tell Birmingham city council, which is controlled by the Conservative party, that it should stop taking advertising from companies that facilitate just such loans in its council tenants’ freesheet?

If there is any area where there are irresponsible lending practices, we must look at it carefully. I will look carefully at what my hon. Friend says about Birmingham city council.

Q3. The US President-elect wants change. Will the Prime Minister ensure that extradition arrangements are changed so that UK citizens such as my constituent, Gary McKinnon, are not routinely extradited, despite having Asperger’s syndrome? Will the Prime Minister listen to cross-party calls for an assurance that Gary McKinnon will be repatriated following a conviction in the US? (236809)

The hon. Gentleman refers to the case of his constituent, which he has taken up with Lord West. The UK has important obligations in that area, and we take those obligations seriously. I am sure that he will be aware that the case is before the courts again on 5 December, and I cannot comment on any specifics. As I understand it, however, the UK and the US are signatories to the Council of Europe convention on the transfer of sentenced persons, which enables a person found guilty in the United States of America to serve their sentence in the UK.

Q4. For those of who have had to suffer post office closures in our constituencies, the recent news that the Post Office card account will continue was extremely welcome. More has to be done, so what else can the Government do, and what can they encourage others to do, to ensure that we see the continuation of the existing post office branch network? (236810)

I believe that the whole House will support the decision made on the Post Office card account. It gave stability to the post office network at a very difficult time for the economy. We have also invested £2 billion for the next three years to help the post office network and we will do what we can to sustain services. One of the ways that we can do so is for people to use the post office network.

May we have an answer from the Prime Minister to the question posed by my hon. Friend the Member for Ludlow (Mr. Dunne)? If it were true that the economy is better placed than any other to come out of the recession, what is the Prime Minister’s explanation of why our currency has fallen so far, and so fast?

That was the first time I ever saw the hon. Gentleman lost for words. Now that he has asked his question, I say to him that what puts our economy in a good position to deal with the problems that we face is that we were able to bring interest rates down. That was not possible in the recession of the early ’90s, when interest rates were 15 per cent. What makes it possible for us to be strong is that employment remains high in this country—3 million more than in 1997, something that was not possible in the downturn of the early ’90s. What is also strong about our country is that company balance sheets outside the financial sector are in a generally healthy position, which will stand us in good stead. What also stands us in good stead is that we are making the right decisions to come through this, not the wrong ones.

Q5. As chair of the all-party group on smoking and health, I joined Cancer Research UK at the Department of Health today, to present a petition of more than 50,000 signatories calling for the prohibition of point-of-sale tobacco displays and tobacco vending machines, and for the introduction of plain packaging. Does my right hon. Friend agree that more measures of that kind are needed to protect our children and young people from the impact of tobacco marketing, and to discourage them from starting smoking in the first place? (236812)

I applaud the action that my hon. Friend has taken, and I also applaud what Cancer Research UK has done. We will publish our response to the consultation with which it was involved very soon, and we will launch a new national tobacco control strategy in 2009. Tobacco use in this country has fallen from 28 to 22 per cent., and for children it has fallen from 13 to 6 per cent., but that is not good enough. The age of sale for tobacco products was raised from 16 to 18, and stronger sanctions will be made against retailers who persistently sell cigarettes and tobacco to children.

Earlier this year, the Prime Minister visited my constituency to meet representatives of the oil and gas industry to hear about the challenges to investment in the North sea. What reassurance will the pre-Budget report on Monday give the many thousands of people in the north-east of Scotland and throughout the country who work in that industry that the Government remain committed to maximising investment and production from the North sea to protect our security of supply and maximise future revenue for the Treasury?

We will continue the enhanced support that we have given new investment in new fields—fields west of Shetland—and the support for an enhanced recovery rate in existing fields. Much of the oil that can be taken out of the North sea in future is in existing fields, some of which have already been left behind. With enhanced technology, there can be enhanced recovery rates, and we are determined to support that. I cannot say what is in the pre-Budget report, but we are determined to support the extra development work, and then production in the North sea.

Q6. Is it not an absolute disgrace that 40,000 students are still waiting for their education maintenance allowances? However, is it not right that the Learning and Skills Council has today sacked Liberata, the dysfunctional private sector company that is supposed to deliver on that? What can we learn about the culture of contracting out and outsourcing from that example of something going so pear-shaped? (236813)

The private company responsible for delivering the education maintenance allowance has not delivered. We are taking action to protect the students who are affected by that, and I believe that that action will be announced in the next few hours.

Q7. Can the Prime Minister explain why, in the past three years, employment of British workers has fallen by more than 300,000, while the employment of migrant workers has increased by 900,000? (236814)

May I just tell the hon. Gentleman that, in his constituency—[Interruption.] Long-term unemployment is down by 80 per cent. I thought that the hon. Gentleman would be far happier because, instead of what happened in the last downturn, 3 million more people are employed in Britain now than there were in 1997. More British citizens are employed in Britain since 1997 as well.

Last year in Yorkshire, 158 employers were caught not paying the minimum wage to their employees, 10 years after the Labour Government introduced it in the teeth of Tory opposition. What more can my right hon. Friend do to ensure that rogue companies that pay poverty wages are brought speedily to justice?

The minimum wage was raised to £5.73, and to £4.77 for 18 to 21-year-olds, on 1 October. We will do everything in our power to ensure that the legal minimum wage is applied in every part of the country. We have doubled the number of inspectors who monitor the development of the minimum wage. In addition, we will introduce legislation so that tips cannot be taken off the minimum wage—people should be paid tips on top of that.

Q8. In the real world, the difficulties that small businesses face with banks are not just to do with lending. A constituent came to me who had previously had a small business loan at base plus 2.5 per cent. Last week, he went back to the bank to get a replacement business loan and was quoted base plus 4 per cent. He was not given the benefit of the fall in interest rates from the Bank of England. When will we have real action to stop banks treating our small business men with such contempt? (236815)

That is exactly what we plan to do: take action to help small businesses through the difficult period. I have to tell the Opposition parties that that will also cost money, and those who resist fiscal activism and help for businesses and families at this point are making a big mistake.

As the Government rightly consider targeted timely fiscal measures to assist growth, will the Prime Minister assure us that they will remember pensioners, who will spend to good economic effect any extra money they receive from either a one-off top-up this year of the winter fuel payment or the automatic payment for three months of pension credit, which could assist several pensioners through the hardship of the winter, and would improve take-up rates of that credit for the longer term?

The hon. Gentleman is absolutely right. We want to help pensioners through these difficult times. We have already raised the winter allowance to £250, which will be paid in the next few days, and we have already raised it for the over-80s by £80, and that will also be paid in the next few days. Any additional action that we take to help pensioners through these difficult times, which I know hon. Members on this side of the House would support, will require extra resources. The Conservative party really has to make up its mind: is it going to deny families and businesses real help in difficult times simply because of its ideology or will it support us in helping people through the difficult times?

Q9. Point 3 of the G20 communiqué makes it clear that policymakers should take responsibility for what went wrong. The Prime Minister signed up to that communiqué and he has been the policymaker for the past 11 years. Why can he not take responsibility and why can he not apologise? (236817)

Because what that section was referring to was financial regulation and what had happened principally in the United States of America. The Conservatives cannot accept that the problems that we are facing started with the sub-prime market in America and they do not seem to be able to understand that even the regulators in America accept that the problem happened first of all in America. If the Conservatives do not understand the sources of the problem, they will never be able to solve the problem.

Q10. Constituencies such as mine are set to benefit from new schools, new hospitals, new health facilities and new social housing in the near future, but those developments will be put at risk by the public spending cuts from the Opposition. Does the Prime Minister agree that constituencies such as mine throughout the north of England would be decimated by such proposals? (236818)

I want us to be able to say that in difficult times we were able to maintain our services in education, health and other areas. If the Conservative party had its way in that the recession has got to take its course, as its vice-chairman said, and the Conservatives do nothing to try to help people through these difficult times, then they will make the return of growth even more difficult. We are going to take action to help people through difficult times and to get growth into the economy, so that we can move ourselves out of this downturn more quickly. I had hoped that that would be the united view of the whole country, as well as the whole House, but unfortunately in one part of the House we do not yet have agreement.