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Wed 19th Nov 2008:

Lib Dems: Getting banks lending.

Bank of England The Government bank bail out isn’t working. Despite billions being pumped into the banking sector and the Government taking large stakes in Britain’s major banks, viable businesses are continuing to go under as banks pull lending from them. Although the bail out has ensured that no further British banks have collapsed, the banks are reneging on the deal that was struck with the Government. If they continue to hoard capital, refusing to lend to viable business and individuals, we are doomed to head into an ever deeper recession. In the last three months total secured lending by banks to individuals and housing associations fell by £22.6bn. That is the largest 3 month fall since the Bank of England started collecting data on this in 1993. Just under half of small businesses say it has been harder to gain access to finance in the last year. Despite the falling Bank of England base rate, the rate charged by banks to loan customers has risen in the past 12 months, by an average of 1.24%. The Government, as a majority shareholder in three of the UK's major banks and the effective guarantor of all the others, must use its position to insist that banks lend at the levels they agreed to as part of the bank bail out plan. This means Government directors on the boards of part-nationalised banks must take an active role to ensure that banks lend to viable businesses. The Government must also now develop a plan B to be put in place if current measures prove to be insufficient to help good businesses through the recession. A plan B would also ensure that the banks realise that they cannot hold the Government to ransom and if they fail to perform the job of lending themselves, this will be done for them. The Government should investigate: Removing bad assets from banks' balance sheets to help restore confidence to the markets. These assets could then be run by a ‘bad bank' created by the Government and if possible sold when market conditions are more favourable. Creating a system of direct lending, with SMEs being made a priority. There are several possible ways this could be done: Through the setting up of an entirely new bank, with government backing, whose remit is to supply affordable credit at prudent levels Extending the powers of the Post Office to offer lending services making use of its considerable branch network Allowing local councils to lend, although issues of expertise would have to be addressed Using one or both of the two fully nationalised banks to offer affordable lending Under any circumstance direct lending should only be seen as a temporary measure. The longer-term priority must be to ensure that the banks are put on a stronger footing and regulated in such a way that they can resume prudent lending to small businesses and individuals.

Get the financial plumbing working - Vince Cable in the Guardian.

Vince Cable Tax cuts may help, and after the recession we must get a grip on public debt, but the priority now is to get banks working again. This article was first published in the Guardian, 18th November 2008. The financial crisis is now hitting the real economy where it really hurts. After over a year of dramatic but somewhat remote events in the banking system, we are seeing the consequences with thousands of job lost every day and hundreds of companies closed every week. I hope the governor of the Bank of England is right that, after a nasty recession next year, the economy will turn upwards in 2010. But I do not understand how he believes the economy will simply bounce back off the floor. I can see two other, equally plausible, outcomes. One is that the vicious downward spiral of contracting activity, jobs, spending and house prices will take the economy far below the 2% GDP decline next year that he envisages. The other is that the economy levels out but then bumps along the bottom for years. When the car engine has burnt out we should be cautious if the chief mechanic tells us that an oil change and cleaning the plugs will get the vehicle motoring again. The underlying assumption in the King-Darling analysis is that the banking system has been "fixed". I doubt it. The reason why companies are to shed loads of jobs is only partly because consumer demand has fallen. The real scandal is that banks will now not lend, on reasonable terms, to sound business customers. It is truly shocking that the government has committed £37bn of taxpayers' money to recapitalise the banks in the form of a blank cheque, but it has now decided to wash its hands of any further responsibility, declining even to appoint government directors. The undertaking by the banks to maintain a flow of lending and to discipline bonuses has been quietly buried. Yet the banks are at the centre of the downward vortex that is pulling down the economy and hundreds of thousands of jobs. Government should not decide whether banks lend to Pat the Plumber or Bob the Builder. But the government must ensure that credit flows on reasonable terms to solvent businesses. The banks argue that they have to give overriding priority to rebuilding their capital, repaying government loans and restoring dividends. But if blocked bank lending drives us deeper into recession, bad bank debts will rise far above where they are today. Barclays' shareholders are already in revolt at the prospect of their directors accepting fiendishly expensive Arab money, costing effectively 16% a year including £250m of commissions. That's a bonanza of bungs from Barclays beyond a football agent's wildest dreams. Britain's leading life insurers Legal & General and Aviva (Norwich Union) have taken a strong stand against this disgraceful deal. Small shareholders should vote against it too. Government, as the main shareholder in other banks, must also be less supine. To be sure, it is difficult for banks to raise money but the government should, for a start, insist that they get rid of their investment banking casino operations, which are underwritten by a taxpayers' guarantee, in order to concentrate resources on their mainstream lending. And the government has almost certainly underestimated the capital the banks need while the FSA has overestimated the reserves required in this downturn. We must get the financial plumbing working properly. A few weeks ago, I broke the rules of the club by calling for deep, urgent, cuts in interest rates while the conventional wisdom was to wait politely for the Bank of England MPC to make up its mind. The 2% cut I called for has happened and the governor is now canvassing even deeper cuts, to 1% or lower, as deflation replaces inflation as the dominant risk. Yet, while cuts in the official interest rates are necessary, they are not sufficient, not least because the flow of money through the banking system has been badly disrupted and only some interest rate cuts are being passed on. That is why the new focus is on tax cuts to stimulate the economy. My Lib Dem colleagues and I have been arguing for some time that there should be income tax cuts for those on low and middle incomes, raising tax thresholds and/or cutting the basic rate. The tax cut would be mainly paid for by removing generous tax reliefs and avoidance opportunities enjoyed by those with very large incomes or capital gains. The proposal is similar in its basic architecture to the tax plans of president-elect Obama. In both cases, the aim is to restore a greater sense of fairness in the tax system. The fiscal stimulus occurs because those on lower incomes spend a higher proportion of their income. So a proposal designed to provide a permanent, substantial tax cut to millions of families on modest incomes in the interests of fairness should also support jobs. If some are horrified by our suggestion that capital gains should be taxed at the same rate as income tax - as was the case after the Thatcher/Lawson reforms - they should recognise that if the economy recovers sooner, they will be making capital gains rather than capital losses, as now. There is also a strong case for pressing ahead now with easily mobilised public investment in sound projects. The most obvious area is social housebuilding by housing associations and councils that would help save our construction industry from collapse as well as one-and-a-half-million people with grossly overcrowded and unsatisfactory accommodation on housing waiting lists. One of Gordon Brown's less fanciful claims is that the ratio of public debt to GDP is among the healthier ones in the western world (even if the PFI and public pension liabilities make it less impressive than it seems). It makes sense in an emergency to use the public sector balance sheet to support the economy. It is economically sensible to treat the public sector as a safe haven in an economic storm. But after the recession, there will have to be a serious tightening up on public finances to prevent us lurching back to an era of high taxation or high inflation or both. And the top priority now is to make the banks lend again to British business.    

Tue 18th Nov 2008:

Clegg: Conservatives have no solutions to today’s problems.

Nick Clegg responding to David Cameron's speech on Conservative spending plans said "The Conservatives clearly can’t be trusted to create a fair society." Nick also said "After months of wandering aimlessly on economic policy David Cameron has finally performed a full U-turn." "Today's announcement is economic madness. No-one can predict the length and depth of this recession so making promises for two years time is foolish. "What is clear is that they have no solutions for today's problems - that's why they can only make pie in the sky promises for the future." Outlining how Liberal Democrat policy would help ordinary people on low and middle incomes, Nick said; "If we want to help our economy now, we must immediately cut taxes for those on low and middle incomes and pay for it by closing tax loopholes exploited by the very wealthy. "If we are also to borrow to help kick-start the economy this must only be for one off capital projects that will benefit our country, not only today, but also in the future. We must not simply borrow to plough money into unsustainable spending or tax cuts."  

Mon 17th Nov 2008:

Liberal Democrat Lords challenge telephone and internet record database proposals.

House of Lords Liberal Democrat peers have defended a person’s right to privacy, as the Government continue with plans to compile a huge database, containing records of all telephone calls, emails and text messages. Speaking in the House of Lords, Baroness Miller of Chilthorne Domer described the measures as a "huge step" towards "a person with a right to privacy...being treated as a suspect." She questioned how effective the costly proposals would prove, given the vast amounts of correspondence the database would contain. "With 3 billion e-mails - that is, 35,000 every second - 18 million internet connections and 57 billion text messages a year, does he think that this is really likely to prove the most effective way of fighting terrorism, given that the estimated cost will be up to £12 billion?" Lord Avebury supported Baroness Miller's comments, highlighting the distinction "between looking at individual accesses with a view to the detection of particular crimes...and the collection of a record of every telephone conversation, every internet access and every text message made by you and me across the board, to be kept in a government-held database for ever." He called on the Government to publish a PowerPoint presentation given to internet service providers explaining the proposal in detail. Lord Thomas of Gresford suggested, "that the information should be available only for the solution of serious crime" to safeguard against government abuse. Read the full debate here

Clegg calls for redirection of wasteful public spending as Brown returns from Summit.

Liberal Democrat leader Nick Clegg called upon the Government to redirect public spending towards the things that people really need in a recession, following the Prime Minister’s statement on the G20 Summit in the House of Commons. Describing the Prime Minister as "incapable of differentiating between good public spending and bad public spending", Nick Clegg criticised rumours that the Government will borrow to fund a fiscal stimulus, suggesting instead, that closure of tax loopholes for the very wealthy "could pay for a big permanent tax cut". He called upon the Prime Minister to redirect public spending projects doomed for failure and instead invest in "infrastructure that the country needs." "The right thing to borrow for is not short-term cash bribes, but long-term capital investment in infrastructure that the country needs in any case. Does he agree that extra borrowing can be justified only to fund green energy, sustainable transport and the homes we need for a sustainable economic recovery. "Why in the teeth of this recession, does he still want to waste £13 billion of the public's money on an NHS computer system that will not work, £12 billion of it on a surveillance database that no one wants and £5 billion on ID cards that no one needs? "I know that in the past the Prime Minister has struggled to distinguish between cutting public spending and redirecting it as we want, but will he now accept that my party's plans to redirect wasteful spending to things that people really need in a recession - such as homes, child care, education, training and fairer taxes - is the right thing to do?"  Read Nick Clegg's full response to Gordon Brown's statement here

Brake: Less talk and more action needed to tackle knife crime.

The Liberal Democrats have published plans to tackle the growing problem of knife crime in London. The document, entitled Less talk, more action, highlights several key proposals for reducing knife crime, including: Putting 10,000 extra police on the streets, around 2,000 of which would be in London, paid for by scrapping ID cards Ensuring each Safer Neighbourhood Team includes a trained, dedicated community support officer to identify and work with the young people who are most at risk through schools, youth groups and outreach work Creating a Greater London Youth Volunteer Force to make it easier for young disadvantaged people to volunteer. Activities would be relevant to young people but also teach them important skills Commenting, Liberal Democrat London Spokesperson and Member of the Home Affairs Select Committee, Tom Brake MP said: "Thanks to a decade of Labour, Britain now has the highest rate of youth incarceration and the lowest age of criminal responsibility in Europe. "The number of stab wounds for under 16s has gone up 62% in the past five years while admissions to hospital for stab wounds for 16-18 year olds have also jumped. "Between 1995 and 2005 there was an 86% rise in the number of 15 to 17 year-olds in custody. "Labour has completely failed to rehabilitate offenders, leading to sky-high levels of repeat offending."

Fri 14th Nov 2008:

Big rise in number of people who declared themselves bankrupt .

The number of people who declared themselves bankrupt in the last three months was more than 13,500, up 7% since 2007. A total of 13,653 people in England and Wales petitioned for bankruptcy in the three months to the end of September, the second-highest number recorded by the Ministry of Justice since 1995. Commenting on the news, Liberal Democrat Shadow Chancellor, Vince Cable said: "It's now clear that more and more people are being stretched to breaking point. "We are heading ever deeper into recession and with news that the Eurozone is now going the same way, this is clearly part of a major world slump. "With the cost of credit remaining sky high, millions of hard-pressed families are struggling to keep their heads above water. "It is critical that we offer help now to the millions struggling to make ends meet, by cutting taxes and working with the banks to reduce the cost of borrowing and doing all they can to keep people in their homes."  

Thu 13th Nov 2008:

Willott welcomes government Post Office Card Account u-turn.

Jenny Willott The Liberal Democrats have welcomed the Government’s decision to continue the Post Office Card Account (POCA). In a House of Commons statement yesterday, the Government confirmed it would end the tendering process and allow Post Office Ltd to keep the contract to distribute benefits to 4.3 million claimants until 2015. Jenny Willott, the Liberal Democrat Shadow Secretary of State for Work and Pensions, criticised the "huge stress" caused to POCA customers by the tendering process and the "waste of money involved". She questioned the Government's newfound commitment to the Post Office network, given the decision "to cancel the contracting exercise rather than award the contract to the Post Office." She asked: "Does it mean that the terms of the tender would not have allowed the Department [for Work and Pensions] to award the contract to the Post Office?" Jenny Willott's full response to the government statement was as follows: "I thank the Secretary of State for advance notice of the statement. I wish to make it clear from the outset that the Liberal Democrats are delighted at today's decision. It is good to see that the Department for Work and Pensions has listened to the vociferous opposition to the possible loss of the Post Office card account that has come from all parts of the House and from outside it. I understand that 2 million people signed a petition requesting that the POCA remained with the Post Office. Today's decision could also be seen as a response to the Liberal Democrat Opposition day debate on Monday. "Today's statement is a strange way of going about the decision. Cancelling the procurement exercise raises huge questions, some of which have been asked by the hon. Member for Rutland and Melton (Alan Duncan). I should be grateful if the Secretary of State clarified why the Department decided to cancel the contracting exercise rather than award the contract to the Post Office. Does it mean that the terms of the tender would not have allowed the Department to award the contract to the Post Office? To enable us to make our own decision on that, will he release the specifications, the invitation to tender or negotiate, and the descriptive documents, which the Government have refused to release up to this point - indeed, on Monday, he again said that he would not be able to release them. I would be grateful if he made them public now. "The Secretary of State said that he has decided to award a contract for the continuation of the POCA within the terms of the relevant EC regulations. If he can do that now, why could he not have done it before or why did he choose not to do so? I would be grateful if he clarified that point. The reasons that he gave for the decision relate to the current economic climate. What is it about that climate that means that the Government can now reconsider? This situation leads to the suspicion that as 1,500 jobs are being lost every day in the UK, he knew that the Government could not afford to close a further 3,000 post offices - at least - with all the accompanying job losses. Will he tell us exactly what has changed? "The Secretary of State also said that he believes that it is not the time to do anything to put the network at risk, particularly as post offices are often the only provider in rural and deprived urban areas - that is what the Liberal Democrats have been saying for the past two years, as have a number of Labour Members. As that was the case when the Government decided to put this out to tender - it remains the case - what has brought him around to our way of thinking and to deciding that now the Post Office does need to be saved? Why did he think last week that it was okay to risk the only providers in those deprived areas, but that now it is not okay to do so? "As the hon. Member for Vauxhall (Kate Hoey) said, the DWP has behaved appallingly so far on this matter; there has been delay after delay. This has been going on for nearly three years and the decision was 11 months overdue. That has caused huge stress for POCA customers, sub-postmasters and all who are concerned for their community facilities. Why has there been such a delay? It also raises issues about the cost of the process and the waste of money involved. Legal questions have already been posed about changing the competition rules halfway through the process, but this has been a waste of money not only for the bidders that did not receive the contract, but for the post offices and the Government. The Secretary of State has said that he will be providing compensation, but will he finally give us an estimate as to how much money has been wasted? Why is the amount of compensation considered to be commercially confidential? Nevertheless, I welcome today's announcement and the saving of post offices."

Wed 12th Nov 2008:

PMQs: Clegg calls for “big, permanent and fair” tax cuts.

Liberal Democrat leader Nick Clegg reiterated calls for immediate tax cuts at Prime Minister’s Questions yesterday. He criticised government tax increases that are disproportionately penalising Britain’s poorest and urged the Prime Minister to clamp down on tax breaks for the rich. Mr. Nick Clegg (Sheffield, Hallam) (LD): Week after week, I have called on the Prime Minister to cut taxes to give help to people on low and middle incomes, and he is now raising expectations that he will do just that, but why should anyone believe him? This is the Prime Minister who will not take responsibility for people losing their jobs, but did take credit for a bank rescue plan that he copied. This is the man who doubled the tax rate for 5 million of the poorest people in the country, and called it a tax cut. When it comes to taxes, he may pretend that he is Robin Hood, but he is no more than a petty pick-pocket. People do not need more cynical tinkering. What people need are tax cuts that are big, permanent and fair. The Prime Minister: If we had listened to the Liberal party's advice, we would be cutting public expenditure by £20 billion this year. That is not the policy that I believe it is right to follow. I hope that, on reflection, the right hon. Gentleman will support not only the recapitalisation of the banks, but the fiscal and monetary stimulus that ought to be co-ordinated worldwide, and ought not to be happening just in one single country. It is the ability of countries to work together and to co-ordinate that work worldwide that I think will be important to recovery in every country. Mr. Clegg: The Prime Minister can misrepresent me all he likes, but he needs to get on and represent the millions of British families who are suffering under his unfair tax system. Right now, millionaires pay less than half the tax that they should on their capital gains. Top earners get an £8 billion tax bonus on their pensions. Up to £40 billion is lost in tax avoidance every year. When will he put an end to these tax breaks, and give ordinary people big tax cuts that are simple, immediate, permanent and fair? The Prime Minister: First, we have raised capital gains tax from 10 per cent to 18 per cent. Secondly, we have closed tax loopholes and continue to do so in every Budget. Where they are found, we take action when it is necessary. Thirdly, I come back to the point: what sort of stimulus to the economy would it be to cut £20 billion of public spending at the moment? NB. As has been pointed out by the independent FactCheck website operated by Channel 4, Gordon Brown misrepresented Liberal Democrat policy in his answer. The Lib Dems are not proposing a cut of £20 billion in government spending. The party are proposing to redirect £20 billion a year of government spending that is currently being wasted or used for projects we don't think are necessary (like ID cards), and put it into our priorities. These priorities include guaranteed care for the elderly and extra investment in the poorest children's education (pupil premium). And if there's money to spare, we will channel it into extending our tax cuts for people on low and middle incomes.   Click here to read Prime Minister's Question in full  

Liberal Democrats call for fairer representation in Regional Committees.

Simon Hughes Thumbnail The Liberal Democrats yesterday accused the Government of abusing the opportunity to provide decent regional accountability by imposing its parliamentary majority on new regional Select Committees, even in areas where they have the fewest MPs. Shadow Leader of the House, Simon Hughes MP, challenged the proposed make up of the new committees in a House of Commons debate, as MPs voted in their favour yesterday. The need for the Committees to reflect voting patterns was, he said, a "central obligation" of devolution and something the Government had "failed to grasp". Simon illustrated the problems with the proposal by highlighting the situation in the south-west region: "At the last election, Labour won 13 seats, we won 16 and Conservatives won 22, so Labour has the least number of seats, but it is now being proposed that, instead of the regional assembly, Labour colleagues will dominate a Committee representing an area of that size. By definition, that means that Conservative and Liberal Democrat Members cannot be chosen to represent Somerset, Cornwall, Devon, Gloucestershire and the other areas - it cannot happen. The people of those regions and the organisations of those counties will look to a Select Committee to look after their interests, but that cannot be done because, as anyone in the House knows, the interests of Cornwall might be different from those of Gloucestershire." An amendment proposed by Simon which stated that the make-up of the committees should be proportionate to the number of MPs from each party in the region was defeated by just two votes. A further Lib Dem amendment that would have restricted membership of the committees to MPs from the region was also defeated. Another Lib Dem speaker in the debate, Andrew George MP, described as absurd the idea that Labour MPs from outside the south-west would be ‘dragooned' into sitting on the committee for that region. On another aspect of the proposals, Simon criticised the idea that Chairmen of regional committees should receive the same amount of pay as those of UK-wide committees, instead arguing: "Eight new Committees are proposed, so we suggested that the Chairmen should be paid an eighth of what the other Chairmen are paid...If that is not accepted...at least to start with, those posts should not be remunerated. Otherwise, we will just be accused of creating more jobs at public expense." The latter suggestion was subsequently approved by the House in an amendment to the motion. A vote on the overall proposal to adopt the new set of committees was passed, despite Liberal Democrat and Conservative opposition. Simon Hughes' full speech here Read Andrew George's full speech here

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