Tuesday Volume 527 10 May 2011 No. 154 HOUSE OF COMMONS OFFICIAL REPORT PARLIAMENTARY DEBATES (HANSARD) Tuesday 10 May 2011 £5·00 © Parliamentary Copyright House of Commons 2011 This publication may be reproduced under the terms of the Parliamentary Click-Use Licence, available online through The National Archives website at www.nationalarchives.gov.uk/information-management/our-services/parliamentary-licence-information.htm Enquiries to The National Archives, Kew, Richmond, Surrey TW9 4DU; e-mail: [email protected] 1009 10 MAY 2011 1010 lower for longer while remaining consistent with the House of Commons inflation target. It is now widely accepted that this framework is far more effective than the one that went Tuesday 10 May 2011 before it. Helen Goodman: May I associate myself with your The House met at half-past Two o’clock tribute, Mr Speaker? David Cairns was a highly valued colleague, and I am sure that all our thoughts and PRAYERS prayers are with his partner Dermot and his family. I am grateful to the Chancellor of the Exchequer for [MR SPEAKER in the Chair] his answer, and I was wondering whether, in his more reflective moments, he would agree that Portugal, Greece and Ireland face a major problem, in that they cannot BUSINESS BEFORE QUESTIONS run an independent monetary policy attuned to their particular needs. That being the case, will he stop making DEATH OF A MEMBER rather childish comparisons between the UK and the eurozone countries? Mr Speaker: I regret to have to report to the House the death of David Cairns, the Member for Inverclyde. Mr Osborne: The hon. Lady is right that those countries David was a most assiduous Member serving as do not have a flexible exchange rate. That is because Parliamentary Under-Secretary of State and Minister they are in the euro, which I campaigned to keep Britain of State in the last Parliament, and was much respected out of. I do not know how she has campaigned in recent by the House. David trained and served as a priest years, but the last time I checked I think it was still before beginning his political career. I am sure that official Labour party policy to join the euro in principle. Members in all parts of the House will join me in Perhaps the shadow Chancellor will clear that up when mourning the loss of a colleague, and extending our he gets to his feet. The comparison I make is a good sympathy to the hon. Member’s partner Dermot, his one: a year ago almost to the day, people were looking father John, his brother Billy and his many friends and at the British budget deficit, which was larger than family. those of Portugal and Ireland, and asking whether Britain could pay its way in the world. Our credit rating had been put on negative watch. Now, however, thanks Oral Answers to Questions to the policies of this coalition Government, Britain has economic stability again. Sir Peter Tapsell (Louth and Horncastle) (Con): I TREASURY also wish to pay tribute to the memory of David Cairns. May I ask the Chancellor how the co-ordination is The Chancellor of the Exchequer was asked— organised to achieve a synthesis between our tight fiscal policy and our lax monetary policy? Monetary Policy Framework Mr Osborne: Obviously, monetary policy is 1. Helen Goodman (Bishop Auckland) (Lab): What independent—the MPC sets it in the way we all know—so recent assessment he has made of the effectiveness of there is no co-ordination in that sense. I do not have a the monetary policy framework. [54721] direct influence on monetary policy, but it is clear that by setting a credible fiscal policy, we give the MPC The Chancellor of the Exchequer (Mr George Osborne): maximum room for manoeuvre and the freedom to I begin by expressing my own personal sadness and keep interest rates lower for longer. The Governor of shock at the death of David Cairns, whom I knew the Bank of England made that clear when he gave his pretty well. I went with him on a trip to the United Mansion House speech last year, and it is an observation States some years ago and spent some time with him, also made by many independent observers of the British and I know that he was principled, gentle—in the best economy. Interest rates would be higher if we had a less sense of the word—and genuinely liked and respected credible fiscal policy. in all parts of the House. His sudden and premature death is a tragedy, and my sympathies—and, I suspect, Ms Angela Eagle (Wallasey) (Lab): I would like to those of everyone here—go to his partner Dermot and thank you, Mr Speaker, and the Chancellor for your his family. tributes to David Cairns, our colleague, and to add our The Government have set up a new macro-economic tributes from the Opposition side of the House. David framework to restore economic stability. The building was one of those very rare people who caused a change blocks of that framework are an independent Monetary in the law in order for him to be able to take his seat in Policy Committee that will continue to target inflation, this place, and when he arrived his presence was not a a new Financial Policy Committee to operate macro- disappointment to anyone. He was a great colleague prudential tools, so that we can assess overall levels of and friend, and our hearts go out to his family and debt in the economy—something not done in recent friends. We would like to add our deepest condolences years—and, crucially, a credible, coherent and independently at the shocking news of his untimely and very early monitored fiscal policy that allows interest rates to stay death today. 1011 Oral Answers10 MAY 2011 Oral Answers 1012 Before the last election, both parties now in government Tessa Munt: I would like to draw attention to the pledged no rise in VAT, but with inflation running at situation affecting my constituent George Archer, a double the Bank of England target, people are facing business man who has had a £5,000 overdraft that was the biggest and longest squeeze in their living standards unused for three years, with the exception of four days for 80 years. How does the Chancellor think that increasing when he requested a £20,000 extension. The bank—which VAT by 2.5% has helped them to cope with this issue? is one of the big four—offered him £25,000 on rates that he initially refused, before beating it down to Mr Speaker: Order. Whatever may be said about the acceptable rates. On paper, that bank has increased its question, I am sure that the Chancellor will focus on the lending to a small or medium-sized business by £20,000, monetary policy framework. That is what he can be but I wonder what the Minister can do to halt this relied upon to do. duplicity and ensure that loans are real, active, needed and utilised. Mr Osborne: Actually, monetary policy is the thing that I am not directly in charge of, but the point I would Mr Hoban: I cannot comment on the particular make is that the VAT rise is part of a credible fiscal circumstances that my hon. Friend has raised, although policy. The person who was Chancellor of the Exchequer I am happy to look at them more carefully. I am sure before me has made it pretty clear in interviews since that she would welcome, as does the whole House, the the election that he, too, was considering a VAT rise, commitment of banks to increase their capacity to lend and he would probably have gone ahead with one if to businesses of all sizes. Labour had been re-elected. Chris Leslie (Nottingham East) (Lab/Co-op): I wonder Ed Balls (Morley and Outwood) (Lab/Co-op) indicated whether the Minister still thinks that Project Merlin was dissent. such a great deal with the big banks. Lending to small businesses continues to fall, while the charges for those Mr Osborne: The shadow Chancellor shakes his head. loans are rising. The banks’ promise to support the big I know that in government he tried to do everything to society bank looks less generous, as we learn that money stop a credible fiscal policy being developed, and he is will be lent only on commercial terms, and now we hear now doing everything in opposition to stop Labour that Santander is pulling out of the business growth developing a credible economic policy. Long may he fund, which was a key plank of the deal. Is this a failure continue to do so. of Project Merlin or a failure of the Government? Mr Andrew Tyrie (Chichester) (Con): The Chancellor Mr Hoban: It is rather churlish of the hon. Gentleman will shortly publish draft legislation on financial regulation to be critical of Project Merlin. When his party was in making the Bank of England the most powerful central office it was able to secure lending commitments from bank of its type in the world. The word “Governor” only two banks. We have achieved a comprehensive simply does not do justice to the empire over which package with all banks, including Santander, to increase Mervyn King will shortly preside. What specific proposals the amount of money that they will lend to businesses, does the Chancellor have to ensure full democratic including small businesses. The business growth fund, accountability of the reformed Bank to both Parliament which he also raised, is an opportunity for businesses to and the country? seek equity finance in a way that is currently not available and that meets the equity gap, which the previous Mr Osborne: I thank my hon.