Amendment of the Law

Andrea Leadsom Excerpts

Wednesday 21st March 2012 Commons Chamber

[Mr Tyrie]

I think I will ask the Bank of England that question when it comes to see the Committee, but I agree that the issue needs to be taken into consideration.

One measure that was announced yesterday, about which I might just have time to say a few words now that I have some injury time, was credit easing. Yesterday’s announcement on the loan guarantee scheme responded to many constituents’ complaints that they simply cannot get the money they need to run or start up small businesses. We all have constituents in that position, and the scheme will offer some welcome relief. How much relief? I think it will offer only a little, and there is a risk of the banks pocketing most of the money. The Treasury Committee, the Public Accounts Committee— I do not know whether its Chair is in her place—and the National Audit Office all need to play a role in ensuring that the banks do not run off with the money, and that value for money is secured.

None the less, I still think the scheme may turn out to be valuable, for several reasons. First, by announcing it the Chancellor has raised the salience of an important issue and put pressure on the banks not to dismiss requests for loans without examining them properly. Furthermore, it seems to me that the Treasury’s own pessimistic briefing yesterday that the money will go only to existing borrowers is almost certainly mistaken. There is very likely to be some more lending, because banks will benefit from the stronger financial position of firms to which they have lent. Those loans, in turn, will be less risky for the banks, so they should have some more headroom for new lending without altering their risk profile.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does my hon. Friend agree that one of the best ways to improve lending to small and medium-sized enterprises is a dramatic improvement in the amount of competition in the British banking system?

[Mr Tyrie]

I absolutely agree. My hon. Friend serves with me on the Treasury Committee, and we have published quite a detailed report on competition in retail banking that has won the support of Vickers and of the Joint Committee on the Draft Financial Services Bill, chaired by my right hon. Friend the Member for Hitchin and somewhere. [Interruption.] Harpenden, is it? My right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley)? Anyway, wherever it is, it is somewhere in Hertfordshire.

The loan guarantee scheme was at least announced. I have to tell the Chancellor, who is in his place, that several colleagues on both sides of the House have complained to me about the leaks and briefings in the days prior to the Budget. All I will say at this point is that the Treasury Committee will look at the matter.

The Committee will also publish a preliminary report on the Budget in time for the consideration of the Finance Bill. The timetable proposed by the Government is very tight, but we will do our best. In particular, we will scrutinise what the Chancellor has described—correctly, by the look of things—as a tax-reforming Budget. We will examine whether the main tax measures live up to what it is claimed they will achieve. We will assess them against a number of principles that the Committee believes should guide tax reform, which we set out in a report 14 months ago, “Principles of tax policy”.

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[Brandon Lewis]

That shows a lack of understanding of how the business world and business leaders work.

[Andrea Leadsom]

Does my hon. Friend agree that it is astonishing that the Opposition do not seem to realise that it is the private sector, wealth generation and incentives that create the income for the Exchequer that enables us to pay for good, sound public services?

[Brandon Lewis]

I thank my hon. Friend, who makes an important and valid point.

One of the important things that the Government have done is to introduce enterprise zones. I appreciate that I have an interest in that as chairman of the all-party group on enterprise zones and local growth, but they are hugely important. In the New Anglia enterprise zone alone, we are looking at about 2,000 extra jobs in the next couple of years, growing possibly to 15,000 in just one enterprise zone in the East Anglia region that is focused on energy.

It was pleasing to hear the Chancellor explain today that one of the industries on which the Government are focused is energy. There are huge opportunities for growth for this country, with £50 billion of business available to companies along the coastline of East Anglia. We have a whole energy offer and proximity to the energy market that are almost unique. We are most often competing with countries overseas for that business, so it is hugely important to companies to understand that the Government are supportive and want that business to be based here in this country.

The moves on corporation tax and capital allowances for enterprise zones are hugely important. I have a couple of asks, to follow on from Prime Minister’s questions today. I make a plea to the Chancellor and the Treasury to look hard at whether we can extend that capital allowance opportunity to all enterprise zones to provide a supercharged boost as they move forward to growth.

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[Stewart Hosie]

One might also make the case that the United States, with a fiscal stimulus programme, is borrowing money at negative real terms percentages. It has engaged in fiscal stimulus, not in the cut-and-burn approach of the UK Government, and, as the right hon. Member for Doncaster North (Edward Miliband) says, the US has succeeded where the UK is failing.

[Andrea Leadsom]

Surely the hon. Gentleman agrees that the US economy is not the same as the British economy. The US benefits enormously from being a foreign reserve currency, for example, so the situation is very different, and we cannot simply equate what happened in the US with what happened in the UK.

[Stewart Hosie]

The hon. Lady is obviously right that we cannot draw a direct comparison, and that is why I would not draw a direct comparison with the yield rates paid in Japan, but the point I was making is that it is wrong for any politician, particularly the Chancellor, to imply that a credit rating agency’s score is in any way related, or correlates directly, to the real yield that a Government pay.

Of all the things that the Chancellor could have done in the Budget but did not, the failure to act on the rising price of fuel was the most disgraceful. The previous Government were awful on fuel. They introduced the fuel duty escalator and opposed the introduction of a fair fuel regulator at every turn, but this Government, notwithstanding the rhetoric before the election, are little better.

Let us understand what this Government’s fair fuel stabiliser actually does. Fuel continues to rise by inflation and will, as confirmed today, when the price of oil is high, rise by inflation-plus—an escalator—when the price is low. A real fuel duty stabiliser would see the duty rate fall when the price rose, precisely because the UK Government already receive a VAT windfall at the pump or a North sea windfall at source in order to pay for it. Given the scale of the North sea windfall in particular, with £70 billion forecast over six years in last year’s Budget, which was £17 billion more than was identified the previous November, the failure to tackle properly the rising cost of fuel genuinely is a disgrace.

This year the forecast revenue for the six years from 2011 onwards is almost £50 billion, but that is based on a price for this year and the next two years of $111, $118 and $112 a barrel. The spot price today is $124.7, so we can safely conclude that, as usual, the UK Government’s assessment of North sea revenues will be understated. There is more than enough money to tackle the rising price of fuel properly, and not as this Government have done.

It has been described as pernicious already today; it is a pernicious measure to be cemented, I think, in future policy—I am talking about the unfairness of the proposal for regional pay. It will be extraordinary if the same person doing the same job in the same office with the same clients is paid differently in different parts of the country. I am very pleased indeed that the measure will not apply to Scottish Government civil servants, although I suspect that there will be huge resistance to the proposal from UK civil servants working outwith London.