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Government Capital Expenditure

Part of Opposition Day — [3rd Allotted Day] – in the House of Commons at 4:55 pm on 2nd February 2009.

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Photo of Stephen Timms Stephen Timms Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills) 4:55 pm, 2nd February 2009

My hon. Friend may have heard me refer to bad decisions at the heart of the international financial system, which I think is an accurate account of what happens. I very much sympathise with the point he makes.

Key to solving the global problem will be a global response. Working with international partners, we are taking a leading role in developing, agreeing and delivering that global response. As I said, the Chinese Premier is in London today and the Prime Minister and other Ministers are in regular contact with leaders around the world. We took a leading role in the G7 autumn discussions in Washington and the five-point action plan produced there was largely based on the UK's then recently implemented financial stability measures. Both the Prime Minister and the Chancellor were at the Washington summit in mid-November. We hold the G20 presidency this year, and it is increasingly recognised, as Stephen Green of HSBC was saying last week, that the G20, in bringing together the biggest developing as well as developed countries, is the right group of nations to bring together to formulate solutions. My hon. Friend Mr. Hendrick rightly expressed concerns earlier about developing countries, which underlines the importance of the G20. Through our presidency, we are driving an ambitious work plan to help tackle the problems.

The Prime Minister presented a paper to the European Council in October, outlining five key principles to improve regulation and supervision, and setting out reform of the International Monetary Fund and the World Bank. We know that there are major lessons to be learned there. It is clear that existing international systems of regulation failed to adapt to the challenges of this new, highly globalised world; we need to co-operate internationally to make major changes so that those mistakes cannot be repeated.

International action needs to be accompanied by a decisive domestic response. Our response has been threefold. First, we had the comprehensive package of support for the banking system announced in October, which has been widely replicated around the world since. Secondly, there were announcements in the pre-Budget report of a major fiscal stimulus package to support the wider economy; the measures we are discussing today are an important part of that—and I shall say more about it in a few moments. Thirdly, there was a package of measures last month to begin to replace the lending capacity lost by the withdrawal from the UK of foreign banks and other institutions and to address the barriers preventing UK banks from expanding lending, to support stability and to restore certainty in the banking sector.

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