George Osborne
Main Page: George Osborne (Conservative - Tatton)Department Debates - View all George Osborne's debates with the HM Treasury
(10 years, 10 months ago)
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Mark Tami (Alyn and Deeside) (Lab)
11. What recent assessment he has made of the effect on economic growth of the level of bank lending to businesses.
The Chancellor of the Exchequer (Mr George Osborne)
The Government are committed to creating a banking system that supports the British economy, rather than being supported by it. Two months ago, the Government and the Bank of England extended the funding for lending scheme, with a particular focus on small business lending. Last week, the Office of Fair Trading announced its review into how to make that lending more competitive, and at the Mansion House, I announced a plan for taxpayer shareholdings in RBS and Lloyds that will return these banks fully to the private sector, get value for the taxpayer and support the economy.
Simon Danczuk
Last Monday, I met businesses at Greater Manchester chamber of commerce and heard how banks were often failing them, thereby having an adverse impact on business performance. Does the Chancellor accept that bank lending to businesses has fallen over the past year and that the Government’s funding for lending scheme has totally failed businesses in Greater Manchester and the United Kingdom?
Mr Osborne
Gross lending to businesses is up under the scheme, but I am happy to agree with the hon. Gentleman that there is an issue—let us be honest, there has been an issue since 2008-09—with the contraction of bank lending to businesses in our communities. That is why we are taking further steps in two respects. First, with the Bank of England, we are extending the scope of the funding for lending scheme. It has proved very effective at getting mortgage rates down, and now we need to reduce the rates for small businesses. Secondly, we are sorting out the Royal Bank of Scotland, which is the largest lender to small businesses in our country.
Mr Osborne
The business bank, which was established last year, is now making loans to the funds that will lend to small businesses, creating non-bank lending channels. [Interruption.] There was no business bank under the Labour Government. I will tell the House what we had instead: we had a socking great banking crash under the Labour Government, and the person sitting opposite, the shadow Chancellor, was City Minister when it happened. We are cleaning up the mess from one of the biggest financial crises in the country’s history by ensuring that it never happens again.
Sir Peter Tapsell (Louth and Horncastle) (Con)
May I say to my right hon. Friend that after a lifetime as a stockbroker and fund manager, my instinct, as bond yields rise all over the world, is that we are heading for another banking crisis that will certainly choke off the already inadequate lending of banks to small businesses? May I put on the record my dismay that he has not yet committed himself to the total separation of investment from commercial banks, which I have been urging on him ever since he became Chancellor? I am absolutely convinced that if we do not go back to something approaching Glass-Steagall, it will be an absolute disaster when the next banking crisis hits us.
Mr Osborne
Of course, I respect my right hon. Friend’s experience. A powerful argument has been made that we should completely separate and split up retail banks from investment banks. We asked John Vickers to convene a commission to look at this specific subject, and he came forward with proposals to ring-fence retail banking, as he thought that that would be a better approach. We also set up a cross-party parliamentary commission to consider the ring fence, and it thinks that the ring fence is the best approach. It made a specific recommendation that we should give the regulator the power to split up a bank that had refused to comply with the ring fence, and we are giving the regulator—[Interruption.] The shadow Chancellor shakes his head, but again not one of these things was done when he was City Minister. Let me say to him again, because he obviously does not understand, that we are giving the regulator a specific power to split retail from investment banking in a bank that is ignoring the ring fence. I think that that is the right way forward.
Mr Andrew Tyrie (Chichester) (Con)
In the Treasury Committee this morning, the Governor of the Bank of England expressed considerable concern that unacceptable pressure had been brought to bear on the Prudential Regulation Authority from within Government, both from No. 10 and from No. 11, at the behest of the banks, putting at risk the regulator’s independence. Will the Chancellor reassure the House that he knew nothing about this, that he was not personally involved, that he will investigate the allegation that others did bring unacceptable pressure to bear, and that he will report to Parliament?
Mr Osborne
Of course, if there is unacceptable pressure, I absolutely say that that is not acceptable—if that is the right way to put it. The PRA, which we created, is completely independent and it has made its independent decisions on capital in our banks. We also have the Financial Policy Committee, which again is completely independent and able to make these recommendations. We empower our regulators to do their job. Of course, banks, consumer groups and anyone else can make their case, but this is ultimately an independent body, an independent regulator, that makes the judgment. That is the system we have created.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
The whole House agrees that we need to see more lending to small businesses and a return of RBS and Lloyds to the private sector so that taxpayers can get their money back, yet two weeks since the Chancellor helped to remove Stephen Hester from RBS, the taxpayers’ stake in the bank has fallen in value by £4 billion. Was that part of the plan?
Mr Osborne
In case the hon. Lady had not noticed, stock markets around the world are down. Bank stocks are down—
Mr Osborne
RBS: the world’s largest bail-out, under a Government who completely failed to regulate it. How dare the right hon. Gentleman have the audacity to come here and complain about the Royal Bank of Scotland? We are fixing the problems in the Royal Bank of Scotland. We are looking at the case for establishing a “bad bank”, which, as I said at the Mansion House, should have been done in 2008. We are going to fix the mess in the banking system that Labour left behind.
Andrea Leadsom (South Northamptonshire) (Con)
I congratulate my right hon. Friend on setting up the Parliamentary Commission on Banking Standards. Does he believe that implementing some of its recommendations will help banks to lend? Will he urge the Leader of the House to allocate time for a debate on this subject?
Mr Osborne
We will have plenty of time to debate the recommendations of the parliamentary commission, which I think has done an absolutely excellent job for the House, by the way. We will shortly have the Report stage of the Banking Bill, at which the Government will say how we intend to respond to those recommendations. If there is more work to be done on the drafting of specific amendments, those amendments can be tabled in the House of Lords and they will of course come back to the House of Commons as well. The whole purpose of the parliamentary commission was to enable us to get on with this. If we had created a public inquiry, as Labour recommended, it would only just be getting going now. Instead, Parliament has done what it is supposed to do, which is to investigate a problem and provide recommendations, and we are going to debate those recommendations here.
Jason McCartney (Colne Valley) (Con)
2. What assessment he has made of the effect of the pensions triple lock on pensioners.
The Chancellor of the Exchequer (Mr George Osborne)
Three years ago, I cut the small companies tax rate; this year, I have taken a number of further steps to support small businesses, including the new £2,000 employment allowance, which will reduce small businesses’ tax bill. Up to 1.25 million businesses will benefit, with about a third of all employers taken out of paying employer national insurance contributions altogether. We have also increased the annual investment allowance tenfold this year from £25,000 to £250,000. This directly helps small and medium-sized businesses looking to invest in the future.
Sheryll Murray
Small businesses in South East Cornwall welcome the measures that the Chancellor has already introduced. It has taken some of them to a position where they can expand, but they have been applying and waiting for grant funding for a considerable time. Will my right hon. Friend speak to his Cabinet colleagues to ensure that decisions are taken as soon as possible to allow these businesses to grow and to avoid missed opportunities?
Mr Osborne
I thank my hon. Friend for her work on the Finance Bill, which she put huge effort into. I know she is passionate about her constituents and the businesses of Cornwall. The Department for Environment, Food and Rural Affairs has already given £7 million in rural development grants to her constituency. She has raised some specific cases; a company that makes Cornish Blue has been waiting for what I think is an unacceptable period for an answer from another Government Department about a grant. I will personally look into this matter and see if we can speed the award.
George Freeman
In the £50 billion UK life science industry, the Chancellor’s support for the patent box, the research and development tax credits and a globally competitive corporation tax rate are helping to secure global companies here, as evidenced by Johnson & Johnson’s recent announcement of a global innovation centre here in the UK. Does he also agree that we need to support insurgent small and medium-sized enterprises emerging into the sector? I would like to highlight the role of the biomedical catalyst fund in securing over 50 projects for the UK and £1 billion in venture capital funding.
Mr Osborne
My hon. Friend’s knowledge in this area is well known, and he has applied it as a Member of Parliament to promoting schemes that help the life sciences industry—and not just the big companies, although we welcome the Johnson & Johnson announcement, but the small companies, too. The biomedical catalyst fund has been very successful at supporting small businesses in this sector. Without giving too much away about tomorrow’s announcements, I can tell him that we will go on funding this scheme.
Bill Esterson (Sefton Central) (Lab)
Can the Chancellor tell us how many firms have been helped by his small firms national insurance holiday since it started three years ago, given that he claimed it would help 400,000 firms?
Mr Osborne
About 20,000 firms have been helped—[Interruption.] Well, 20,000 firms have been helped, small business creation is at the highest level since the 1980s and there are over 1 million new jobs in the private sector. And we will bring before Parliament new legislation to make sure that the first few thousand pounds of their national insurance bill is completely wiped out—they will not have to pay it at all. That is a real success story, and if the Opposition want to vote against it, they can be my guest.
Ms Margaret Ritchie (South Down) (SDLP)
Finance and credit are the lifeblood of small businesses. The Government have been pumping money into the banking sector, so what is the Chancellor doing to ensure that that money goes to small businesses rather than to repair bank balance sheets?
Mr Osborne
Of course, as we discussed earlier, the capital position of the banks is important, but the funding for lending scheme is now focused on small business lending. I know that there is a particular issue with the very tough situation that the banking sector faces in Northern Ireland and the problems from the Irish Republic that have spilled over into Northern Ireland. One thing we are doing with the Royal Bank of Scotland is looking specifically at Ulster and the issues surrounding some of the bad loans made in the past, and at how we can help that bank to make good loans in the future to help the businesses of Northern Ireland. We are specifically supporting the Northern Irish economy and we are aware of its problems.
Mr David Amess (Southend West) (Con)
Does my right hon. Friend agree that extending rate relief to a further half a million small businesses will help many of them in the constituencies of Southend West and Rochford and Southend East?
Mr Osborne
Small business rate relief has helped many small firms to cope with the cost of rates, and we have been able to extend it year after year. We will have to make a decision later in this Parliament about a further extension, but there is clear evidence that the current extension is doing a great deal of good.
Anas Sarwar (Glasgow Central) (Lab)
The main complaint from businesses throughout the country, both small and large, is that they do not feel they are receiving the support that they need from the banking sector. Given that state-owned banks are among the poorest in terms of lending, what is Jeffrey—sorry, the Chancellor of the Exchequer—doing about it?
Mr Osborne
As I said earlier, the Royal Bank of Scotland is the largest lender to small businesses in our country. That is why it is such an important support for the economy. We are taking a serious look at how we can enable it to move on from all the bad loans—all the bad bets that it laid—during the middle years of the last decade, when, by the way, the shadow Chancellor, who is still muttering from a sedentary position, was City Minister.
Surely it is in all our interests to try to sort out the banking problem, but I have no idea whether Labour Members support our proposal on the Royal Bank of Scotland. We have heard absolutely nothing from them. However, what we are doing shows that we are actually confronting the problems that we inherited.
Simon Danczuk (Rochdale) (Lab)
T1. If he will make a statement on his departmental responsibilities.
The Chancellor of the Exchequer (Mr George Osborne)
The core purpose of the Treasury is to ensure the stability and prosperity of the economy.
Simon Danczuk
In his March Budget, the Chancellor boasted that Government borrowing fell last year. Will he confirm that figures published by the Office for National Statistics on Friday show that Government borrowing last year actually did not go down, but went up?
Mr Osborne
The Office for National Statistics revised down borrowing for 2010-11, 2011-12 and 2013-14; that is actually good news.
Andrew Jones (Harrogate and Knaresborough) (Con)
T2. The quality of schools in my constituency is very high. Will my right hon. Friend outline the Government’s intentions on school funding?
Mr Osborne
Everyone knows that Britain needs to live within its means, and tomorrow I shall set out the next phase of the economic plan to move Britain from rescue to recovery. However, I can confirm that we will offer real protection for our national health service and our schools. Those vital public services are an investment in our economic future, and they are all about doing what we need to do to win that global race.
Ed Balls (Morley and Outwood) (Lab/Co-op)
The whole House will have heard the Chancellor not answer the topical question asked by my hon. Friend the Member for Rochdale (Simon Danczuk). The reason is that, despite all the Budget speech bluster, borrowing last year went not down, but up.
Let me ask the Chancellor another question. The bonuses paid in the financial services sector this April, the first month of the new tax year, were 65% higher than in the same month last year—up by a total of £1.3 billion. Can the Chancellor tell the House why bank bonuses rose by £1.3 billion this April?
Mr Osborne
First, on borrowing, the Labour Government were borrowing £157 billion a year. This Government borrowed £118 billion last year, which represents a fall in borrowing. The deficit is down by a third because we are taking the tough decisions to ensure that Britain lives within its means. On bonuses, they are 85% lower than when the right hon. Gentleman was City Minister.
Ed Balls
The fact is that the Chancellor promised to get the deficit down, but it is rising, and that month-on-month rise in bonuses is the highest since records began in 2000. There is a simple reason why that happened: thousands of very highly paid people deferred their bonuses into the new tax year to take advantage of the Chancellor’s top rate tax cut, which has cost the Exchequer millions of pounds in lost tax revenue. How can the Chancellor still say, “We’re all in this together,” when living standards are falling for everyone else and the economy has flatlined for three years? Is not this economic failure the reason why the Chancellor will not balance the books in 2015 and why he will be coming back to the House tomorrow to ask for more cuts to public services? He is unfair and out of touch, and he is now revealed as totally incompetent.
Mr Osborne
Getting a lesson from the shadow Chancellor on how to balance the books is like getting a lesson from Dracula on how to look after a blood bank. He finds himself in a most extraordinary situation. On Saturday, the Labour leader said that Labour was going to rule out borrowing more. On Sunday, when the shadow Chancellor was asked whether Labour could borrow more, he said, “Yes, yes, of course,” and then, on Monday, the Labour party committed itself to higher welfare spending—it is a complete shambles. On the eve of the spending review, Labour finds itself in the extraordinary situation in which it has completely abandoned the economic argument that it has been making for the past three years, but kept the disastrous economic policy. That is a hopeless position. The shadow Chancellor has led Labour Members up a cul-de-sac and they have to find their way out of it.
Chris White (Warwick and Leamington) (Con)
T4. In the last Budget the Chancellor announced a video games tax relief to help support UK publishers and developers, which was a very welcome step. However, the European Commission has launched an investigation into this tax relief. Will my right hon. Friend join me and industry representatives such as TIGA so that we may make the best case possible for this vital policy?
Mr Iain McKenzie (Inverclyde) (Lab)
T3. Since the Chancellor’s last spending review the US economy has grown four times faster than the UK’s. Is this not further evidence of the Chancellor’s failed policies?
Mr George Osborne
The US fiscal consolidation is faster this year than the UK consolidation. The structural deficit in the UK has fallen by more than in the US. But look at the UK—we have created over a million new jobs in the private sector. That is one of the most impressive employment records anywhere in the world.
Glyn Davies (Montgomeryshire) (Con)
T6. Devolution is a continuing process. Does my right hon. Friend agree that if the National Assembly for Wales is to develop into a fiscally responsible governing institution, it must have responsibility for raising a significant part of its own budget?
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
T5. May I take the Chancellor back to the question posed by the shadow Chancellor and by my hon. Friend the Member for Rochdale (Simon Danczuk)? Did Government borrowing rise in 2012-13, as compared to 2011-12?
Mr George Osborne
Figures from the Office for National Statistics show that the deficit fell from 7.8% to 7.7%, so it came down.
Priti Patel (Witham) (Con)
T7. In the light of the Chancellor’s assiduous commitment to deficit reduction, what assessment has my right hon. Friend made of the Opposition’s spending plans, which appear to consist of more borrowing, more debt and a return to Labour’s failed policy of boom and bust?
Mr Speaker
Order. The Chancellor is not responsible for Labour policy. A very short one-sentence reply will suffice, then we must move on. Members must ask questions that are orderly, not disorderly.
Andrew Gwynne (Denton and Reddish) (Lab)
T8. Why does the Office for Budget Responsibility say that the deficit this year will be the same as it was last year and the year before? Is not the truth that the Government’s stalled plan on jobs and growth has led to this appalling situation?
Mr Osborne
Let me tell the hon. Gentleman the appalling situation. It was an 11% budget deficit that the Opposition left us when they left office—11%. It is now going to be 7.7%. Borrowing—[Interruption.] The right hon. Member for Morley and Outwood (Ed Balls) asks how much money. I will tell him. The Opposition were borrowing £157 billion. We are now borrowing £118 billion. Borrowing is not going up. It came down from £157 billion to £118 billion, and if the right hon. Gentleman cannot do that maths, no wonder he left the country in such a mess.
Mr David Ruffley (Bury St Edmunds) (Con)
The A14 Cambridge toll road is strategically vital for the golden economic triangle that is Cambridge, Norwich and Ipswich—
Mr Ruffley
And indeed Colchester. Can my right hon. Friend the Chancellor confirm that he will have that at the forefront of his mind when the Treasury makes its capital allocations?
Mr Osborne
The A14 is a strategically important road, not just for my hon. Friend’s constituents, but for the whole country. It links ports to many of our largest cities. It is at the forefront of our mind. My right hon. Friend the Chief Secretary will set out on Thursday not just the capital plans for 2015-16, important as they are, but our long-term plans for road investment. Central to that is making sure that Britain has the economic infrastructure that we need to succeed in the modern world, and the A14 is part of that infrastructure.
Paul Goggins (Wythenshawe and Sale East) (Lab)
T9. The Chancellor must be concerned about the spiralling costs of air travel, with fares currently up by 22%. Does he agree that we need to increase competition by making better use of spare capacity at regional airports? To that end, will he agree to look again at reforming air passenger duty in order to promote growth at airports such as Manchester airport?
Mr Osborne
The right hon. Gentleman and I represent both ends of the runway at Manchester airport and know how important it is to our constituents and to economic growth in the north-west. We looked specifically at whether to split APD into a tax for hub airports and a tax for regional airports, but we ruled that out because we do not think that it would be fair. We have stuck with the APD rates we inherited from the previous Government. With regard to the campaign being run on the subject, it is important to recognise that airlines often refer to charges and taxes, and many of the charges are those, such as fuel charges, that they have chosen to put on. I understand the argument, because we have collectively—it was the previous Government’s decision—taken a tough decision on APD rates, but I think that people should read the small print of the campaign.
Mr Brooks Newmark (Braintree) (Con)
Does my right hon. Friend share my concern that, notwithstanding the Alice in Wonderland economic world of the shadow Chancellor, a plan to borrow more will not actually bring borrowing down?
Mr Osborne
I completely agree that Labour’s plan to borrow more to borrow less is completely nonsensical. It really is extraordinary that a day after the Labour leader said that Labour had ruled out borrowing more, the shadow Chancellor committed the party to doing just that. It is a catastrophic position for his party to hold. Frankly, I do not think that the country will ever adopt it.
Mr Pat McFadden (Wolverhampton South East) (Lab)
Given that the Chancellor appears unwilling to give us the answer that dare not speak its name on last year’s borrowing, I will ask him about the time available to debate the recommendations of the Parliamentary Commission on Banking Standards. A number of those recommendations require legislation before they can be given effect. The Government have allocated only one day on Report for the banking Bill. Although I respect their lordships, surely it should be the elected House that is given a chance to debate the recommendations. Will he reconsider and allow two days on Report?
Mr Osborne
First, I thank the right hon. Gentleman for his contribution to the Parliamentary Commission on Banking Standards, along with all Members of this House and the other House who took part in it. The very fact that the Commission has done its work speedily means that we can consider its recommendations for the banking Bill going before Parliament. Of course, allocation of time is a matter for the Leader of the House to make clear in his statement. The right hon. Gentleman has my commitment that over the course of the Bill’s scrutiny—it will go to the Lords and then come back to the Commons—there will be proper time to consider all the Commission’s recommendations and, if necessary, for the Government to draft changes in order to implement them. It is a parliamentary commission, which is what I wanted it to be, and it is of course right that Parliament should consider its report in detail.
Mr Douglas Carswell (Clacton) (Con)
In 2007, 50% of UK gilts were purchased by insurance companies and pension funds. Last year the figure had fallen to 22%, the lion’s share of UK gilts now being bought by the Bank of England. Does my right hon. Friend share my concern that we are funding public sector overspend by having one branch of the state write out IOUs for another? Can that be sustained?
Mr Osborne
The arrangements for quantitative easing are well established, and the decisions on whether to increase asset purchases are within the envelope that I set for the independent Monetary Policy Committee. I think that an active monetary policy has helped sustain demand over the past few years. It is anchored in a credible fiscal policy, the next stage of which we will set out tomorrow.
Stewart Hosie (Dundee East) (SNP)
It is six months since the Banking Commission’s first report warned against a delay in ring-fencing, so it is disappointing that the ring-fencing of the banks might not be fully implemented until 2019. Can the Chancellor give one guarantee today—that the markets division of RBS, and comparable departments in other large banks, will be outside the retail ring fence and not liable to taxpayer assistance when the new rules are in place?
Mr Osborne
First, the timetable is one that John Vickers and his commission themselves proposed. Secondly, it is not for me to make individual decisions about individual banks; that is for the boards of those banks and, of course, the regulator. But the whole purpose is to insulate the retail bank from things that go wrong in the investment bank and, above all, to make it possible for the person doing my job to be able to resolve the retail bank and keep the retail operations going without having to bail out the investment banking arm. Indeed, that whole problem of “too big to fail” is something we need to deal with.
Sir Bob Russell (Colchester) (LD)
It is the Government’s policy that, to cover cutting the Army to its smallest size since the battle of Waterloo, people should be encouraged to join the reserves. Leading by example, will the Chancellor of the Exchequer say how many members of his staff have joined the Territorial Army since January this year?