Financial Crisis

Part of the debate – in the House of Commons at 3:36 pm on 20th January 2009.

Alert me about debates like this

Photo of Stephen Timms Stephen Timms Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills) 3:36 pm, 20th January 2009

Clearly, if the European Union spends more than otherwise would have been the case, there will be implications, but we are waiting for the detail of those proposals, which I anticipate will be provided quite soon.

The plan supports our fiscal stimulus, and provides further support for actions to front-load public expenditure, which we have just touched on, and assist small and medium-sized business. The plan and the menu of possible complementary actions that it provides can be enacted in member states as suits the needs of their domestic economies, while producing positive spill-over effects in the wider single market.

Bold action in a common market requires a common framework for action, not least to protect against competition distortion, so the plan also includes a temporary state aid framework for support to the real economy over the next two years. In the state aid arrangements, we need to take account of the extraordinary circumstances across the European Union, so we welcome the Commission's flexible, pragmatic approach in assessing measures to support both the banking system and the real economy.

The Commission provided rapid approval of UK actions to stabilise the banking system in October. Since October, 15 member state schemes have been approved, each similar to the UK model of recapitalisation or loan guarantees. The temporary framework also endorses the approach to supporting small businesses via state guarantee schemes. However, the role of the EU in monitoring state aid remains important. There should be no suspension of state aid rules, as they are key to ensuring a level playing field across the single market—and, most importantly, to avoiding moves towards protectionism, which might otherwise be a danger, and towards a counter-productive subsidy arms race. In the near term, it will be particularly important for the Commission to enforce the rules when interventions are not appropriate or well targeted.

Embed this video

Copy and paste this code on your website