Tory MPs pose good questions to the Treasury

Yesterday the House of Commons hosted Treasury Questions.

Justine Greening, MP for Putney and a Shadow Treasury Minister, asked about loans to small businesses:

"For the 1,500 people losing their jobs and the 60 small businesses going bust every single day, the Government are not tackling the recession. The Government’s small business loan guarantee scheme will not even be up and running until mid-January and even then it will not cover 99 per cent. of loans to companies. Does not the Minister agree that that is too little, too late, that he should get on with our national loan guarantee scheme and that Britain is facing the deepest recession of any G7 country because we have the most incompetent, ineffective Government?

Mr. Timms: The hon. Lady should have a word with some of her colleagues on her Front Bench. I agree with her that it is right for the Government to address these problems, but that contrasts with the policies of those on her Front Bench, which are the policies of do nothing. Those were the policies that we saw in the catastrophic recessions under the last Conservative Government and they are being repeated by Conservative Front Benchers now. The policies that we are putting in place are directly addressing precisely the challenges that small businesses are facing, and that is why such an ambitious and effective package was set out at the time of the pre-Budget report."

They're making every effort to get that "do nothing" line to stick.

North West Norfolk MP and Shadow Minister for Justice Henry Bellingham tabled a question about the balance of payments:

"The Financial Secretary to the Treasury (Mr. Stephen Timms): The pre-Budget report forecast the current account deficit of the UK balance of payments to narrow in the second half of 2008 and in 2009, with net trade forecast to add three quarters of a percentage point to gross domestic product growth next year.

Mr. Bellingham: Is that not an incredibly complacent reply? Is the Financial Secretary not ashamed that having inherited a trade surplus in 1997, our deficit last year was the worst since records began—when William of Orange was on the throne? Is it not a disgrace that the trade deficit in manufactured goods has grown from £7 billion in 1997 to a staggering £59 billion last year? Why do the right hon. Gentleman and the Chancellor never talk about the balance of trade? Is it any wonder that the pound is falling so sharply?

Mr. Timms: I remind the hon. Gentleman that there have actually been quite a few occasions in the past when the current account deficit was higher than it is now. To give him one example, it was 3.8 per cent. in the third quarter of 2007, but it was 4.9 per cent. in 1989 and it is more than 5 per cent. now in the United States. Our strategy is to ensure strong competition in every UK market by promoting openness to free trade, minimising product market regulation and ensuring that there are world-class competition authorities. That is the strategy we are pursuing and we will do so successfully."

Desmond Swayne, MP for New Forest West and PPS to David Cameron, asked about Government borrowing:

"The Chief Secretary to the Treasury (Yvette Cooper): We have received representations covering a wide range of issues, including discussions with a series of national and international institutions which support the case for higher borrowing to support the economy.

Mr. Swayne: Does the Chief Secretary accept a representation from me that, by the Treasury’s own figures, the national debt is set to double by 2012, to £1 trillion? Will she confirm that, for next year, Government borrowing as a proportion of our national income will be higher than when Denis Healey went to the International Monetary Fund?

Yvette Cooper: I should perhaps point out to the hon. Gentleman that borrowing as a proportion of gross domestic product will be not dissimilar to the level that it reached in the early 1990s, when, in fact, the Conservative party doubled the national debt in the space of just five years in response to a home-grown recession, when it did not have an international, world financial crisis to deal with on a scale that we have not seen for many generations. We think that the right thing to do is to increase borrowing right now to support the economy, so that we can come through this faster and stronger."

Shadow Chancellor George Osborne once again stressed the need to get credit flowing:

"The director general of the CBI has just sent a letter to all his members that says:

“Until this underlying issue—getting credit flowing around our economy—is resolved, economic activity cannot begin to recover”,

that the Government have failed to

“address the root of the problem”

and that, until they do,

“other government initiatives to mitigate the recession will be ineffective and expensive failures”.

When will the Prime Minister and the Chancellor swallow their pride, accept that the bank recapitalisation plan has not rescued the economy and introduce a national loan guarantee scheme, which we have proposed and which this country needs?

Mr. Darling: The purpose of the recapitalisation scheme, which was clearly stated when I set out the proposals in October, was to ensure that the banking system remained viable and to rescue it from imminent collapse. We did that, and other countries right across the world did the same. I said at the time, and I say again today, that we will continue to look at that scheme to see how it can be improved and further strengthened. The director general of the CBI, to whom I spoke last night, is quite right to say that we need to do more to ensure that banks lend in the wider economy. It is important that we ensure that banks are sufficiently strong to do that, but it is also important to make sure that lending takes place.

As for the hon. Gentleman’s proposal, it is an empty promise. He talks about a national scheme, yet he has quite explicitly said that the Conservative party would spend no more money; it would do absolutely nothing, so the promise that he makes is empty. Instead, he should perhaps pay greater heed to what the chairman of the CBI said—that although there might be a cost to the fiscal stimulus, the cost would be far greater if we did nothing.

Mr. Osborne: The national loan guarantee scheme is supported by every single business organisation. It is exactly equivalent to the inter-bank guarantees that the Government have put in place, but does not add to public expenditure. It is consistent with what the Governor and deputy governor of the Bank of England have said this week. Is not the truth that the country has been in recession for six months, and Labour’s policies are not working? The Government said that they would get recapitalisation going to help start lending again, and lending is contracting. They said that their stamp duty holiday would restart the housing market, and it is plummeting. They said that they would pay bills to small businesses more quickly, and a survey today says that the situation is actually getting worse. They said that their massively expensive VAT cut would stimulate the economy, but their own former Minister, the right hon. Member for Birkenhead (Mr. Field), says that it is

“like spitting in the face of an economic hurricane.”—[ Official Report, 17 December 2008; Vol. 485, c. 1139.]

Meanwhile, unemployment is soaring early in the cycle, and a Cabinet Minister says that Britain is facing the worst recession that we have ever known. Could the Chancellor explain why it is that all Labour Governments leave office with unemployment higher than when they entered office?

Mr. Darling: What the hon. Gentleman says might have more strength if he was prepared to do something to help the economy, businesses and people; he is not prepared to do so. He talks about a scheme for national lending, yet he has quite explicitly said that there will be no more money to support it. That is an empty promise. We are supporting the economy and are helping people. We have recapitalised the banks, which has prevented many banks from collapsing. We are taking steps to extend lending. The measures that we have taken in relation to VAT, to cutting income tax for basic rate taxpayers, and to helping businesses will all help in the face of a global downturn, the like of which we have not seen for generations. The Conservative party is making it quite clear that if it were in office, the choice that it would make is to do absolutely nothing to help people. [Interruption.] That is what the Conservatives did in the 1980s and the 1990s. They can shout and bawl all they like, but the fact remains that the Conservatives’ approach is wrong, muddled and would not help the British economy or the people of this country."

All these interventions give the lie to the notion that the Conservatives are unconcerned about what is happening and have no remedies. It is a lie that Labour are intent on promoting regardless.