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The Prime Minister:
I am grateful to my right hon. Friend for his question. He has always taken a great interest in energy matters, and was an Energy Minister
himself. He is absolutely right to concentrate on the problem that has arisen from both the price volatility and high price of oil. Even though the price has decreased substantially in the past few days, the problem arises from there having been more demand than supply and peoples perception that in future years there may be more demand than supply, particularly because of the globalisation of our economy and the rise of China and other Asian countries, which are consuming more oil.
Therefore, we need an energy strategy that deals with the price volatility and high price of oil. That means that we need to diversify out of oil and not be wholly dependent on it. That means, for those people who will not face up to this, that they must confront the issue of nuclear power16 European Union countries have done thatand the issue of how we can get affordable renewables. We must also look at how the car is powered, so that we can have savings in the oil that is used by cars as well. We will need to have an arrangement between consumers and producers so that we can deal with the continuing volatility of the oil price, and I would have thought that this is now the time for all-party agreement on that as well.
Mr. Dennis Skinner (Bolsover) (Lab): Is my right hon. Friend aware that in 1945 the then Labour Government had to take some measures? They did not have two hapennies to rub together, and they had to borrow money in order to create full employment and the national health service, and in order to take utilities into public ownership. We are already doing some of those things, and my right hon. Friend has already passed the examination paper that has been placed before him. He has convinced right-wing Governments, such as those in France and Germany, and Bush across in America, to carry out the solutions that he has introduced. It is now high time that we put public ownership of the utilities back on the agenda, so that we have a sweeping victory at the next election and then carry that out.
The Prime Minister: And council housing, my hon. Friend says. I had not anticipated last year that we would be part-owners of two of the biggest banks in the country and that we would now be the shirt sponsor of Newcastle United football team, just as the American Government are the shirt sponsor of Manchester United now as a result of having taken over AIG. However, I must say that our determination to buy these shares is a result of the difficulties we face, and I am sorry to have to tell my hon. Friend the Member for Bolsover (Mr. Skinner) that it will be temporary.
John Hemming (Birmingham, Yardley) (LD):
The recent high prices and volatility in the price of oil is symptomatic of geological constraints on supplyalso
known as peak oil and gas. Do the Government have a view as to when peak production will occur globally, and does the Prime Minister believe that it is worth doing that research?
The Prime Minister: The hon. Gentleman is right to raise the question of supplies of oil for the future. That is concerning all countries. Not only do we need stability of supply, but, even as we move into nuclear and renewables, we will need a constantly rising supply of oil. That means that we must ensure that the demand for oil is met by supply, otherwise the price will go up again. We are, therefore, looking at what supply of oil there is, and we are trying in the North sea to increase the production that is available from some of the smaller marginal fields as well as from some of the fields that have previously been explored and developed but not exhausted.
Mr. James Plaskitt (Warwick and Leamington) (Lab): On the financial and banking items, did the Council consider the future of the EUs capital requirements directive? As my right hon. Friend knows, that is largely based on the Basel II agreement, and yet that allows banks to choose their own forms of regulation, and, in fact, downgraded the risk in mortgage lending. He has long campaigned for reform in that area. Does he agree that anything in Europe based solely on Basel II could prove inadequate to the task?
The Prime Minister: First, we need international standards, not just European standards, for the future. There is a huge debate about how we can get to that, and progress has been made. Secondly, one part of our proposals that we have circulated around other countriesI will make sure that a copy is placed in the Libraryis the reform of Basel II.
Mr. William Cash (Stone) (Con): Will the Prime Minister, in referring to the statement, also refer to the presidency conclusions? Can he explain to the House how in those conclusions, which I have in front of me, the European Union is able to lecture the House, himself and the United Kingdom, when Lisbon has engendered failure on enterprise, when the stability and growth pact has failed, when unemployment levels have been going inexorably up and when there is massive over-regulation? In the real world, does he not believe that this undemocratic, unaccountable system must be reformed and renegotiated?
The Prime Minister: In a period of economic difficulty, is it not better that people come together rather than split apart? Is it not better to use the fact that we work well with our neighbours in Europe to develop common policies to deal with this financial crisis? I know where the hon. Gentleman is coming from: we should accompany our policies, he says, with the real threat of withdrawal.
Colin Challen (Morley and Rothwell) (Lab): May I, too, welcome the reaffirmation of the climate change 2020 targets at the European Council last week? They come despite the growing tensions between the richer, older members of the EU and the more recent, poorer members, particularly those such as Poland, which is 95 per cent. dependent on coal. What discussions are taking place to help countries such as Poland and the other eastern European states to meet their 2020 targets?
The Prime Minister: I am grateful to my hon. Friend, because I know of his expertise in these matters and the work that he has done to further the cause of environmental improvement. He is absolutely right that some countries, particularly those that have a great deal of coal, want to know how they can meet those targets and want a degree of flexibility. That will be the basis of the discussion over the next two months before the summit in December. I am confident that even though there are difficulties, people want to see a resolution of the problem.
Mr. Peter Lilley (Hitchin and Harpenden) (Con): Is the Prime Minister aware that at a time of grave economic crisis, the House can rarely have heard a statement of such worrying complacency about the public finances? In particular, he apparently believes that as long as the ratio of debt accumulated to GDP is low, it does not matter how high the current deficit is. That is the exact opposite of the experience of most countries. He should recall the mistake made by the previous Labour Government, who thought that they could enter a recession with a high level of deficit and spend their way out of the recession. They found that they had to call in the IMF in the biggest rescue of a developed nation that there has ever been.
The Prime Minister: I recall that the right hon. Gentleman was a Minister in the Conservative Government when borrowing was 8 per cent. to 9 per cent. of GDP, so before he gives lectures to us, he should examine what happened in the early 1990s.
Mr. Denis MacShane (Rotherham) (Lab): On Russia, I welcome the Prime Ministers firm stand. Russia must not be rewarded, or allowed to continue business as normal, after dismembering a sovereign republic state of the United Nations. The last time that that happened was when the Reichstag voted to incorporate the Sudetenland into the Third Reich. Does he share my dismay that when the issue was fought out at the Council of Europe the other week, the Russians closest collaborators and fellow travellers in the debate were UK delegates from the Conservative party?
The Prime Minister: The Council was right to say that this is not the time for a decision to be made about resuming talks on a new partnership agreement with Russia, but we have always wanted our relationships with Russia to be good, not bad. That depends on decisions that Russia itself will take, and we look forward to a resumption of the partnership agreement talks being possible.
Stephen Hammond (Wimbledon) (Con): The Prime Minister continues to quote the historic borrowing number, but will he confirm that if one examines the true state of borrowing in this country, including off-balance-sheet liabilities, one finds that it is 126 per cent. of GDP?
The Prime Minister: Our figures are based on international accounting standards and on the independent Office for National Statistics. We follow the practices adopted by previous Governments. I remind the hon. Gentleman that debt was at 44 per cent. in 1997far higher than in the past 10 years.
Andrew Miller (Ellesmere Port and Neston) (Lab):
I welcome my right hon. Friends comments on climate change. If we are to succeed in producing the clean
energy that we need for the future and in supporting industry, we need to ensure that we maintain our investment in science. Will he ensure that the Government avoid the temptation to reduce investment in science at this time, when it is so vitally needed?
The Prime Minister: My hon. Friend will know, because his region is one of the beneficiaries of scientific investment in our countrysome path-breaking work is being done in the north-westthat we are doubling the science budget, and it is vital to our future. I hear what he says: it is important to maintain levels of science investment for the future.
Sir Peter Tapsell (Louth and Horncastle) (Con): May I remind the Prime Minister that on 11 November 1997, during the debate on the Bank of England Bill, his previous banking Bill, I urged him not to deprive the Bank of England of its supervisory powers over the commercial banks and set up a trilateral alternative arrangement? Did he explain to the European Council that his misjudgment on that was responsible for the fact that his Financial Services Authority failed to supervise AIG in Londons Mayfair, whose default credit documents were owned by almost every major bank in the world? That meant that when, on 15 September, AIG had its credit rating dropped below AAA, almost every bank in the world was faced with the possibility of bankruptcy. All that disaster stemmed straight from his original folly in reducing the supervisory powers of the Bank of England.
The Prime Minister: I have great respect for the hon. Gentlemans recollection of history, but I should tell him that AIG is an insurance companyit is not registered as a bank in the same wayand that in the old days it would have been regulated as an insurance company, not as a bank. I should also tell him that he opposed, or his party opposed, the independence of the Bank of England, which I believe his party came to regret after a few years. The Bank of England has always had responsibility [Interruption.] It is very interesting that Conservative Members try to change the subject whenever I mention the independence of the Bank of England. It has always been the case that the Bank of England has had responsibilities for financial stability.
A decade ago, my right hon. Friend the Prime Minister wisely kept Britain out of the eurozone. It contains countries that are very different in their economic strengthssome are more able to cope with the financial crisis than othersand that is causing tensions in the eurozone. If I were the Italian Finance Minister, I would like to devalue the lira and reduce interest rates. I would not be able to take such an approach, because the lira does not exist any more. Will my right hon. Friend tell us whether there have been any discussions, private or otherwise, about the tensions in the eurozone and where they might lead?
Mr. Brooks Newmark (Braintree) (Con): Given that the Prime Minister has called for greater transparency, with off-balance-sheet financing being brought on balance sheet by the private sector, will he be bringing such discipline to the public sector accounts, which currently show more than £1 trillion off balance sheet, or is this another case of, Do as I say, not do as I do?
The Prime Minister: Whatever the debate, the hon. Gentleman always asks me the same question about off-balance-sheet activity. The answer is that we follow the international standards and the Office for National Statistics on that, and, in fact, we follow the practice of the Government whom he supported.
Mr. David Curry (Skipton and Ripon) (Con): I have lost count of the number of times that the Prime Minister has announced the relaunch of the world trade talks. What is different this time? Having discussions at summit meetings and making grand declarations will not make anything happen. Who has decided to do what, where, how, with whom and on what timetable, given the expiry of the fast track in the American Congress and the near death of the present American President?
The Prime Minister: I thank the right hon. Gentleman for raising that question. The trade talks fell down on a very narrow point about a protection mechanism that would be put in place if imports to certain countries rose very fast. That argument prevented the reaching of agreement in the summer, despite all the attempts that we and other countries made. Given that the differences between countries are narrow, and not of fundamental principle, my hope has always been that we can, with good will, resume the trade talks. It is more important to do that now, and other countries recognise that. Protectionism is the danger that we face, and countries that were not prepared to sign the agreement in the summer will be encouraged by worries about future eventsand what might happen if protectionism increasedto come back to the table to discuss a solution. I cannot say that the process has been easy, because these talks have gone on for years, but there is enough common ground for us to start again to see if we can reach agreement.
Mr. Charles Walker (Broxbourne) (Con): As the Prime Minister is going large on intervention, will he personally intervene with the banks to stop them throwing people out of their homes? As a taxpayer-owner of the banks, I now say, Not in my name.
The Prime Minister: We have published guidelines with the Council of Mortgage Lenders so that repossession is a last resort. We have also published legislation that will mean that people need to be unemployed for only 13 weeks before they can draw on support to pay their mortgage. We will not pursue the policies pursued by the last Conservative Government, who let far too many people fall into negative equity.
Mr. Peter Bone (Wellingborough) (Con): The preference share subscription agreements and the ordinary share offering agreements for the £37 billion investment in the banks were helpfully placed in the Library by the Chancellor. Can the Prime Minister confirm that those terms and conditions have not changed?
The Prime Minister: We are in discussions with the banks all the time about how we can implement the agreements that we have made. The right thing to do is to continue the discussions with the banks. We must not get into the situation in which we are not discussing things with banks in which we are major shareholders, so we will continue to discuss such issues over the next few days.
Mr. Bernard Jenkin (North Essex) (Con): May I remind the Prime Minister that the IMF was warning about rising debt levels in the UK as long ago as 2003? Will he now return to the reasonable point made by my right hon. Friend the Leader of the Opposition? What is the point of calling for an early-warning system in the international markets if the Prime Minister, as Chancellor, has a track record of ignoring those very warnings?
The Prime Minister: I remind the hon. Gentleman that our debt levels, as published by the IMF, are 37 point [ Interruption. ] Our debt levels are 37.6 per cent., but Frances are 55.5 per cent., Germanys 56.1 per cent., Italys 101.3 per cent., Japans 94.3 per cent. and the USAs 46.3 per cent. He can see that from being the third worst in the G7 in 1997, when we inherited power, we are now the second best. If a country has a low level of debt to national income, it is in a position to borrow during a difficult time. The Conservatives want to say that it is impossible to borrow because debt levels are too high. They are wrong: debt levels are not too high. Ideologically, they think that they can argue from the position of the debt levels, but they are entirely wrong.
Anne Main (St. Albans) (Con): On Monday, a senior official from the Department for Communities and Local Government told the Select Committee that the Prime Minister had been involved with a difficult decision to remove £600 million from the East of England Development Agency grants for small businesses. Is that the best way to protect small businesseskeeping the quango, but removing the funding?
Mr. Graham Brady (Altrincham and Sale, West) (Con): What are the Government doing to protect the interests of the many British people who hold deposits in Icelandic banks through branches in British dependent territories such as Guernsey and the Isle of Man?
The Prime Minister: Discussions on those matters are continuing with the Icelandic authorities, as the Chancellor said. We believe that they have a responsibility in this matter, and we will continue to pursue that with them.
Tony Baldry (Banbury) (Con): On nuclear power, is the Prime Minister convinced that the City will be willing to meet the costs of the contingent liabilities of decommissioning nuclear power stations in due course, or will the state have to act as guarantor for those decommissioning costs?
The Prime Minister: This is part of the decisions that we made on nuclear energy. I think that the hon. Gentleman can see from announcements that have been made by one large company in the past few weeks that companies are prepared to invest in nuclear power in this country. That will continue in future years. Opposition Members have to face up to the fact that if we are to meet our climate change obligations, if we are to have the energy security we want and if we are to have long-term affordability of energy that is not dependent on a volatile and high-priced commodityoilwe will have to diversify our investments. That includes investment in clean coal and in renewables, but I have to say that it includes nuclear, too. I thought that the Conservative party would wake up to that fact and would have woken up to it long before now.
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