Examination of Witness (Questions 20-39)
RT HON.
GORDON BROWN
12 FEBRUARY 2009
Q20 Sir Alan Beith: Which is looking
far from easy. The other point I want to make is that the impact
of the recession is being felt most severely in traditional manufacturing
regions. Unemployment has gone up most in regions like the north,
the north-west and the West Midlands, not the regions which actually
generated the recession, if you like, not those where financial
services are a key industry. The Government should surely be taking
all the measures it can to stimulate the private sector in those
areas. In that context, why has the Department of Communities
and Local Government forbidden English regions to bid for unspent
European money which could go to infrastructure projects which
the private sector benefits from?
Mr Brown: First of all, every
time someone loses a job or a business is in difficulty it is
a matter of regret and a matter of sorrow. Like you, I came into
politics to make sure that people had the chances to get jobs
and to stand a chance to start their businesses and be entrepreneurial
and the chances to have decent homes, to be able to get mortgages
that are fair and affordable. We are in extremely challenging
times. We are being tested all the time by what is happening in
Britain and around the world and we have got to have a plan for
dealing with it, and we do have a plan. I am confident that the
plan that we have put in place will work to gain the results that
I am talking about. As far as funding of the regions and of business
is concerned, I have announced all the various measures. For example,
with Nissan in the north-east we have given special help to the
car industry that Mr Miller may want to talk about that because
he has got a specific interest in helping—
Q21 Sir Alan Beith: Why has DCLG
blocked—
Mr Brown: I am coming to DCLG
now. The under-spend, I gather, is far less than people have said
publicly. We are looking at what we can do especially to help
the north-east and particularly the North-East Development Agency
and, as I said to you in the House of Commons, I will report back
to you on that.
Q22 Sir Alan Beith: Scotland and
Wales are allowed to bid for this money but the regions of England
where unemployment is highest have actually been instructed by
the Department of Communities and Local Government that they cannot
bid for money which is unspent.
Mr Brown: I just make the point
that when you get money you have got to be able to balance it
with other money that you have yourself. That is the point at
issue here.
Q23 Sir Alan Beith: Scotland and
Wales can do that but England cannot.
Mr Brown: They make a decision
from their own budgets to do so. We have got to make the right
decision for the regions as part of a UK decision and as part
of an English decision.
Q24 Andrew Miller: Prime Minister,
you are obviously aware of the problems being faced by some sectors
in which we have very strong industrial bases. In bioscience,
for example, liquidity is a serious problem in the smaller innovation
companies. With vehicles, something close to my heart, there are
some serious problems. When the CBI met Lord Mandelson recently
they presented to him an analysis of what wage assistance is happening
in other EU Member States for short-time working. When are we
going to do something similar?
Mr Brown: Well, to some extent
we are doing something that is comparable. We have got the Train
to Gain budget. We are saying to companies that if they are going
to train people for the next stage for future work and future
skills that are needed we will be prepared to help them with the
wage costs during the course of a working week. So instead of
people being put on short-time, or people being made redundant,
and Nissan is one of the companies we have talked to about this,
JCB and other companies, about how we can provide help with training
which is essentially an additional amount of hours per week, that
could be funded in a different way.
Q25 Andrew Miller: But are we not
behind the curve on some of these things? For example, the Germans
have already had their scrappage scheme introduced on the back
of a green agenda and that apparently is starting to have a real
effect. Why are we not pursuing similar measures?
Mr Brown: I think as far as finance
for companies is concerned, I will be honest in saying to you
I think we are ahead of the curve in what is available. If you
look at America at the moment they are just starting to introduce
a number of the schemes that we introduced some time ago. As far
as the individual scheme about car scrapping, obviously I am very
happy to look at the results of that scheme. What we did was provide
in total about £2 billion of finance that could help the
car industry. What we are also trying to do, which in a way is
a more green policy, is give the car companies the support to
investigate and develop the new car technologies. I believe if
we do so, and we have put a lot of money into this, particularly
in relation to GM, as you know, we are talking to them about this,
we could lead in the development of the new green or electric
cars of the future. I am determined that Britain can be a world
leader in this area. We have a good start in the sense that we
have strict environmental targets. We know that there is an energy
gap and our country has got to meet that, so it makes absolute
sense in climate change terms as well as in economic terms to
invest in the electric and low carbon cars of the future and we
are working with the major manufacturers to do that.
Q26 Andrew Miller: Going back to
your earlier answer to John McFall about the support to different
sectors of industry to back up their liquidity, the problem in
the manufacturing sector is we are not yet seeing any results,
any benefits of such schemes. How long do you think it is going
to take to really show some benefits from that kind of support?
Mr Brown: Obviously this is a
tough time and a very challenging time because the measures that
we have introduced are just beginning to take effect. As I said,
for example, 60,000 businesses have now got some help through
one scheme. On the Enterprise Finance Guarantee Scheme, which
is the £1.3 billion scheme, I believe there are many millions
of loans now in the pipeline. I believe that as people see first
of all that this support is available, secondly that inflation
is coming down and, therefore, mortgages, the price of petrol
is coming down, the price of gas and electricity is coming down,
then people will feel more confident about making purchases in
our economy and then people in the financial institutions will
be more confident about making investments in the future. We will
do everything in our power and I am going to leave no stone unturned
in what I do to implement what I believe is the plan that is now
supported by most countries around the world to take us through
these difficulties: capitalise the banks so that we stop them
collapsing; monetary and fiscal stimulus so we give real help
to people now; the easing of credit by making sure that working
capital is available to firms by the funding provided by the banks;
and then this investment-led growth that it is right for fiscal
policy to sponsor at a time when monetary policy is not having
the same effect as it normally does.
Q27 Peter Luff: Prime Minister, perhaps
you should leave a few stones unturned and concentrate on the
boulders. You said in answer to a question earlier from John McFall
that we can all tell small businesses what is available, but the
trouble is it is very difficult because there is such a bewildering
array of these things. Nick Clegg yesterday at Prime Minister's
Questions said three announcements a day. My research came up
with something like 30 initiatives over the last few weeks. The
trouble is not all of these are properly thought through, the
implementation dates are not clear. I think the allegations that
you suffer from some kind of initiative-itis have some substance.
Would it not be better, rather than getting headlines, to concentrate
on a long-term strategic approach, so concentrate on the boulders
and not the stones?
Mr Brown: I have just talked about
the plan that we have. A few days ago the same people were criticising
us for not doing anything and now they are criticising us for
having too many initiatives. What we have actually is a plan and
the plan is very, very clear and I will go into it in some detail.
The recapitalisation of the banks has involved £37 billion
and that was essential to stop the banks collapsing. Building
upon that, we have got to get the extension of lending started
again, so we have got to get the funding of businesses. We have
three central schemes. The first is for small business, the Enterprise
Finance Guarantee. The second is for medium-sized businesses,
the Capital for Enterprise Fund and the Working Capital Scheme.
The third is obviously the Bank of England facility which opens
on Friday for large companies that perhaps want their bonds guaranteed
or syndicated loans guaranteed. On top of that we have the Inland
Revenue help that is available. I think it is pretty clear that
we are helping small, medium and large-sized firms. We are doing
it in the ways that we can, in loan finance, in some cases grant
finance, in some cases Bank of England support and through the
Inland Revenue we are doing what we can to defer payments that
people are not able to make. The plan is very clear. It is recapitalise
the banks, get lending moving again, give a monetary and fiscal
stimulus to the economy and invest out of this downturn into growth.
Q28 Peter Luff: We will come back
to the Enterprise Finance Guarantee Scheme because I want to talk
about SMEs in particular. I am not saying the initiatives you
have taken, and there are a lot more than you have just listed
to the Committee, are bad but they are not thought through. Why
is it that a Downing Street advisor recently said: "We are
burning up money, which cannot go on, and the frenetic activity
makes us look like headless chickens"? Why did "a normally
loyal minister"—I am afraid he is not identified—say
of you, "He makes an announcement, gets the headline and
then moves on when what really matters is making sure it works"?
Why did Greg Pope say, "I do think the Government needs to
slow down and take stock rather than having to react every time
to the latest crisis"? Why does the Federation of Small Business
say what you are doing is having no impact? Crucially, why does
Richard Lambert of the CBI say, "We have urged the Government
to move as quickly as possible to set out when the various support
packages to tackle the credit crunch will come into effect, and
to implement them quickly. Day by day constrained credit is damaging
our economy". You are smiling but this is a serious point.
This is Richard Lambert: "A lack of clarity creates a fear,
the worst mentality, and could be costing people their jobs".
Mr Brown: So we are agreed that
doing nothing is not an option.
Q29 Peter Luff: We are all agreed
on that, Prime Minister.
Mr Brown: Doing nothing is not
an option. I just have to say to you that everything that we have
been doing, with limited exceptions, is now being followed by
other countries around the world, so I take from that that we
are doing the right thing and not the wrong thing. The right thing
was to lead in recapitalising banks. The right thing was to give
a fiscal and monetary stimulus to the economy, and we can debate
the extent of that and the need for it in different sectors whenever
you want to do so. The right thing to do was to deal with the
issue of lending and get funding going again, get credit moving
in the economy. The right thing to do is the fourth element of
our plan and that is to have investment-led growth. This is not
a series of initiatives, this is a plan, and I am confident that
this is the plan that will take Britain out of the downturn.
Q30 Peter Luff: We will concentrate
on the plan then, Prime Minister, because we have been talking
about addressing the issues of credit insurance for a long time
and nothing has happened and the crucial issue in the automotive
sector is people are not buying cars, applications for credit
are being turned down, support for car finance companies has been
talked about for a long time and nothing has happened. The Enterprise
Finance Guarantee Scheme, which I agree with you in principle
is a very good idea, was first announced before Christmas, we
got further details on 14 January but still we do not know where
we are. The Forum of Private Business said—
Mr Brown: I am sorry, I have got
to correct you. The Enterprise Finance Guarantee Scheme was launched
on 14 January, banks are receiving hundreds of inquiries and the
first loans are now being made. It is wrong to misrepresent this
scheme as inactive, it is actually happening.
Peter Luff: The Forum of Private Business
say many businesses are being rejected for loans and overdrafts
still. A Scottish small businessman emailed me to say he only
found out about the scheme because he watched the Parliament Channel
early in the morning, a repeat of Ian Pearson's statement on 14
January: "I can truthfully say I have never heard of the
scheme until seeing that debate. Rhetoric is all well and good
but action is what is required and publicity has to be obtained".
Perhaps more substantively, Mark Durkan—
Chairman: This is a very long question.
Q31 Peter Luff: The Prime Minister
likes facts and I like facts too, Chairman. Mark Durkan says it
is still not clear whether the Enterprise Finance Guarantee Scheme
applies to Northern Ireland banks or not. He has written to the
Business Secretary to seek clarification of this point. The banks
are unaware of the mechanisms and procedures for applying the
scheme. There are problems with these schemes still.
Mr Brown: There are many, many
calls but at the heart of this issue is whether we are taking
the right action that is necessary to get the funding into businesses
in our country. When I tell you that 60,000 businesses have already
benefited, you cannot say that nothing is being done, you cannot
say that the initiatives are not working. At the same time, the
Enterprise Finance Guarantee Scheme, so that your constituent
or other constituents are clear, was launched on 14 January and
already loans are being made. The Working Capital Scheme comes
in on 1 March after approval from the European Commission. The
Bank of England scheme comes in on Friday and that is for large
companies. The Inland Revenue scheme has been working over these
last three months and helping thousands of people. It is true
that there are different ways of helping different companies.
Small company needs are different from the large company needs.
Medium-sized companies often simply want working capital. We are
taking steps in all these areas to provide the help that is needed.
Q32 Sir Alan Beith: Prime Minister,
for the record I wonder if afterwards your office could write
to the Chairman and let us know how that figure of 60,000 businesses
is made up. I do not want to enter into a debate about it now
but it would be helpful if we could know what it is based on.
Mr Brown: I would be very happy
to give all the details.[1]
I just say that I think some of your questioning is behind the
times because we are getting money out to companies and we will
continue to get more money out to companies. I want it to be quicker,
obviously, as do you, but the idea that companies are not starting
to benefit from this scheme is simply wrong.
Q33 Mr Morley: Prime Minister, I was
very interested to hear what you were saying to Andrew Miller
about the idea of the UK being a world leader in such things as
green cars. I am sure you will be aware that in terms of the fiscal
stimuli which are being applied around the world President Obama,
who is just finalising a huge financial package, has very much
focused on the green economy. In fact, he said that the US fiscal
stimulus was being used finally to spark the creation of a clean
energy economy and to create green jobs. Given our commitments
that we made as a country, but quite rightly in relation to reduction
of emissions and also in the lead-up to the Copenhagen/UN agreement,
do you think that the UK fiscal package is focused adequately
enough in terms of encouraging new, green technologies?
Mr Brown: I admire what President
Obama has announced for America and I think it is true that about
10% of this fiscal stimulus will go to environmentally important
technologies and potentially jobs in the green industries. I think
you will find that the percentage of our expenditure is as high,
that we are investing a great deal in environmental technologies
and in insulation, everything from what we can do for individual
houses and businesses to what we can do for cars and new technologies
in relation to vehicles and other things. Of course, as you know,
internationally we are investing a great deal also on the Environmental
Transformation Fund which is trying to help the process of climate
change be addressed in developing countries. We want to be in
the lead in these low carbon technologies. We are considering
how we can lead in carbon capture storage. We are obviously investing
a lot in electric cars. We have, of course, the biggest offshore
wind farming industry and we want to develop that, so the range
of environmental technologies I think you will find that we are
not only investing in but also in time we will create substantial
numbers of jobs.
Q34 Mr Morley: These are all welcome
investments but I did notice that the Pre-Budget Report itself
did concede that the amount of money put forward in terms of supporting
green developments may not be enough. On the Environmental Transformation
Fund, again, that is a very important investment but a lot of
that money is going into established technologies, particularly
energy efficiency, again important but not necessarily encouraging
the new low carbon technologies in terms of what we can do in
this country with our science, with our engineering, with our
design. I think there is perhaps a great deal more that we could
do in relation to a new green deal. I might also say that I know
you will be chairing the G20 meeting in April and these are the
kinds of approaches we need to see globally as well.
Mr Brown: I appreciate this because
you yourself have taken an important lead worldwide in pushing
for these issues to be at the top of the agenda and I respect
the work that you have done. I can say to you that to develop
low carbon technologies in this country we are not only, with
the new Department of Energy and Climate Change, investing more
money; we are also concentrating our efforts on where we can be
world leaders, and I think you will find that, like carbon capture
storage, there are other areas where low carbon technologies and
offices to develop these technologies are being developed over
time. As far as the Environmental Transformation Fund is concerned,
you are absolutely right that a lot of that has been about energy
efficiency. A great deal of that is about forestry, by the way,
and how we can reduce carbon emissions by avoiding deforestation
and investing in that, and remember, 20% of our carbon emissions
round the world are from forestry—
Q35 Mr Morley: Deforestation.
Mr Brown:— more than from
many other sources. I think you will find over the next few months
a general consensus developing round the world as we move to Copenhagen
that this is not just a burden upon us to reduce carbon imprints
on the world but an opportunity for us to develop these new industries
and technologies in the future. I hope, with President Obama and
with the European Union coming together on these issues, we can
make substantial progress.
Q36 Mr Morley: I notice that just
today Lord Stern has said some very similar things and you, of
course, commissioned him for his very influential report on the
economics of climate change. He is calling for these kinds of
measures. Do you think that message will be heard in other capitals
around the world?
Mr Brown: Yes. As you can see,
I commission a lot of people to do reports. Lord Stern did a report
on Africa and then he did the report on climate change, and I
think his report is a world-leading report in the sense that it
has influenced the debate in many other countries which are doing
similar Stern reports. I think he is right: we should see this
not just as a challenge but as a basis on which we can build what
would be a low carbon economy in the future. Coming out of this
downturn I think you will see Britain, with low carbon industries,
with digital industries that are leading the world, with some
of our creative industries doing well, but I would say also our
advanced manufacturing, and I think you will find that in a whole
range of manufacturing industries Britain has both the technology
and the enterprising companies so that we can invest our way out
of this downturn in a way that can create jobs in our country.
Q37 Mr Willis: Can I just follow
that up, Prime Minister, in terms of coming out of the downturn
and looking at the future? In particular when you became Prime
Minister you did in fact say that you wanted to have straight
talking and an end to spin, so could you in just a couple of sentences
tell us what "market-driven industrial activism" is?
Mr Brown: That is working with
the industries of our country to develop the innovative technologies
for the future and, instead of saying industry and Government
do not talk to each other and they are doing completely separate
things, working in partnership. If you are talking about new,
innovative industries, they can normally only be developed with
a degree of support in science and research from either government
direct funding or from the tax credits that are available for
people who are doing very important research. I think you will
find there is a whole range of industries in this country that
need these research incentives.
Q38 Mr Willis: With the greatest
of respect, Prime Minister, that is not really what Lord Mandelson,
Lord Drayson and Lord Carter are saying it means. They are talking
very much about good old-fashioned Government interventions, about
picking winners.
Mr Brown: No, they are not.
Q39 Mr Willis: They are not?
Mr Brown: No.
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