Economy

Part of the debate – in the House of Lords at 3:15 pm on 3rd November 2008.

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Photo of Lord Myners Lord Myners Parliamentary Secretary, HM Treasury 3:15 pm, 3rd November 2008

My Lords, I agree with my noble friend.

As recent events have shown, we need more effective global regulatory co-operation. The UK was among the first to call for increased transparency of financial institutions' exposures, for improvements in the effectiveness of credit rating agencies, and for agreements for enhanced capital adequacy requirements. There have been improvements in risk disclosures by banks and the steps being taken to establish the college of 30 cross-border supervisors by the end of this year will be a material step forward in that respect.

In this new age of global markets we also need more effective global institutions. The challenges we face are significant, and it is right that we give attention to strengthening global institutions to ensure that they are well placed to meet those challenges. The Prime Minister has been at the forefront of calls to create a new framework for global financial stability. These led, under the UK's G7 presidency in 1998, to the creation of the Financial Stability Forum. The problem with the Financial Stability Forum today is that it has knowledge but no power and, while the IMF has power, it has less knowledge. This is why we need the two of them to work better together, and with national regulators, towards a system that gives early warning of incoming global economic and financial shocks.

Financial stability and strong banks are an essential precondition to restimulating lending and an eventual recovery in the wider economy. Just as we led the way on the global recapitalisation of banks, we will lead the way when it comes to the wider global economy. At home, the Government are now implementing a comprehensive set of measures, reaching commercial agreements with UK banks and building societies to stabilise their capital position and ensure that they are able to perform well for the economy in the future. The Chancellor is providing an update on how the Government's investments in these banks will be managed to the Treasury Select Committee this afternoon. The comprehensive programme we have introduced includes taking Northern Rock and part of Bradford & Bingley into public ownership, protecting depositors and making sure their problems could not spread. On FSA and Bank advice on financial stability grounds, we introduced extraordinary measures to amend the competition regime so that the merger of Lloyds TSB and HBOS could proceed swiftly. The problems of liquidity in the banking system are being tackled directly through the Bank of England's Special Liquidity Scheme.

Alongside our action to promote financial stability, the Government are determined to help families and businesses with targeted support for those who need it most. That is why we are supporting families facing higher food and fuel bills through raising the income tax personal allowance by £600 for 2008-09, worth £120 for every basic-rate taxpayer. Moreover, making this announcement ahead of the PBR means that most basic-rate taxpayers will have seen this in their take-home pay from September. We have postponed the fuel duty increase for all of 2008, saving businesses and families nearly £100 million a month. We are making additional payments to households containing over-60s and over-80s, of £50 and £100 respectively, alongside the winter fuel payment, to the benefit of around 9 million households. We have also announced a £1 billion package of energy efficiency measures, including at least 50 per cent off a range of practical energy-saving devices for all households, with 11 million of the most vulnerable households qualifying for these free of charge.

The Government cannot and should not try to prop up house prices, but we are supporting the home owners of today and of the future by removing stamp duty from all house purchases under £175,000 for the next year. In addition, we have provided first-time buyers with access to expanded home-buy direct shared-equity programmes, alongside earlier support for mortgage interest to home owners in difficulty and reducing the number of repossessions through new mortgage rescue schemes. We are also working to improve the mortgage markets, taking advice from Sir James Crosby, who will report to the Chancellor later this autumn ahead of the Pre-Budget Report.

We are supporting businesses. An announcement last week from the Chancellor means that Britain's small and medium-size businesses stand to benefit by up to £4 billion from the EIB. As the Chancellor said, small firms are vital to the strengths of our economy. We need to make sure that, despite the global credit crunch, they have access to the loans and capital they need to help their business grow and develop. Together with a range of other measures being taken by the Government, these commitments will contribute to ensuring that strong small businesses in the UK have continuing access to the best support available.

We are confident that our economy will get through the difficult period. We are better placed to weather this global economic storm than we were in the 1970s, 1980s or early 1990s because of the decisions we have taken over the past 10 years.