Briefing from the Prime Minister’s spokesman on: Cabinet, Zimbabwe, economy, credit card summit and small businesses
Cabinet
The Prime Minister’s Spokesman (PMS) told the assembled press that Cabinet this morning had lasted for about an hour. They predominantly discussed the economy and there was also a discussion on the Children’s Plan led by Ed Balls and on the situation in Zimbabwe led by the Foreign Secretary.
On the economy, the Chancellor reminded Cabinet about the action the Government was taking to ensure families and businesses could get through the downturn fairly. He made it clear that had we not taken this action, the downturn would undoubtedly be longer and deeper. The Chancellor referred to the announcement from the French Government last week of a fiscal stimulus of equivalent size to that seen in the UK, the announcement from the German Government a few weeks ago of a fiscal stimulus there and the increasing likelihood of a significant fiscal stimulus in the US as President elect Obama had been outlining at the weekend.
The Prime Minister also emphasised the importance of the action we were taking in addition to the reduction in VAT; the £145 permanent tax cut for basic rate taxpayers, the increase in child benefit and pensions and also the action that we needed to continue to take, such as addressing peoples fears of repossession as we had set out in the Queen’s Speech debate last week.
There was also some discussion led by Lord Mandelson on how we were working with the banks to ensure lending to small businesses and a discussion round the Cabinet table of the action we were taking to bring forward capital spending, for example, the 100,000 jobs that were associated with the schools building programme alone.
Asked if there was any discussion about welfare reform in Cabinet, the PMS said that there had been a brief discussion on the subject in the context of the economic discussion. However there was a lengthy discussion on welfare reform last week when the main contents of the White Paper were discussed.
Zimbabwe
Asked for details on the Zimbabwe discussion, the PMS said it was an update on the appalling situation there as outlined by the Foreign Secretary. There was also a contribution from the Development Secretary on the assistance that we were providing and a reference to the fact that Mark Malloch-Brown would be travelling to the region in the next few days.
Asked whether the Prime Minister was disappointed that Jacob Zuma was not intervening, the PMS replied that it was clearly an international emergency. It was important that the regional partners remained engaged, as they were doing. Asked if the Government was disappointed that Jacob Zuma did not appear to be any more effective than Thabo Mbeki, the PMS said that that was rather a premature judgement. We wanted to continue to work with South Africa and other partners in the region, to address what was clearly now an international emergency.
It was widely recognised that what we were seeing in Zimbabwe was very disturbing in terms of the humanitarian consequences, the outbreak of cholera and the wider collapse of the public infrastructure and the economy.
Economy
Asked if the Prime Minister thought that banks should focus on cutting mortgage rates or rebuilding their balance sheets, the PMS replied that the Prime Minister believed that we had taken action in order to strengthen the balance sheets of banks through the re-capitalisation programme and that the banks should pass through any reductions in base rates so that customers would benefit. Put that Bank of England figures released today showed that banks were not passing on rate cuts, the PMS replied that the Government’s position had been set out by the Chancellor and the Prime Minister at the end of last week and he referred people to that.
Asked if there would be more announcements on the repossession package, the PMS said that we were working with the banks and we would be in a position shortly where we would be able to make further announcements on that.
Asked if the Prime Minister would accept the point from the leader of the opposition that decisions on the economy were so serious that the public should be able to vote in a general election on the matter, the PMS said that the public would have a choice when there was a general election. What the public would expect was for their Government to govern and that was what we were doing with the action that we were taking in order to help families and businesses get through the downturn fairly.
Asked whether the Prime Minister or the Chancellor had given any indication in Cabinet as to how bad the recession would be, the PMS said that we had set out our forecasts in the PBR and that was the Government’s position. What the Cabinet was unanimously clear about was that failure to take action now would mean a longer, deeper and more protracted recession which could have potentially permanent, damaging effects on the economy and that was clearly something the Government would do everything in it’s power to avoid.
Asked what part of the economy the potential permanent damage could affect, the PMS replied that the case for the fiscal action that we were taking was in order to avoid some of the damaging consequences of a recession that we were seeing in other countries and previously in the UK. That was why we were taking action in Britain and that was why there was almost a universal global consensus on the need to compliment action on monetary policy with action on fiscal policy.
Asked what the Prime Minister thought about remarks made by Jean-Claude Trichet on budget deficits not exceeding 3% of GDP, the PMS said that Jean-Claude Trichet was the Governor of the European Central Bank and he had made other remarks that people could interpret in a different way. We would interpret his remarks as being focussed on the Euro area and countries that had to apply to the full terms and conditions of the Stability and Growth Pact. What people had seen was the Head of the IMF for example, making it clear that countries which had relatively low levels of public debt like the UK, were in a good position to undertake a fiscal stimulus.
We were seeing countries like France that had a higher level of public debt undertaking a fiscal stimulus of equivalent size to that in the UK. We were seeing America that had a higher level of public debt as a proportion of GDP, talking about a fiscal stimulus potentially greater than what we had seen in the UK.
The PMS added that it was now accepted pretty much around the world that we did need to take fiscal action in order to support monetary action, particularly in those countries which started from a position and went into this downturn with relatively low levels of public debt as a proportion of their national income like the UK.
Credit Card Summit
Asked about the credit card summit and whether the political parties were profiting from credit card companies, the PMS said that questions in relation to the behaviour of political parties were best addressed to the political parties themselves. Asked if the Prime Minister thought it was wrong for political parties to profit from 20% interest on a credit card, the PMS said that the Prime Minister believed that any questions about the behaviour of political parties were best addressed to political parties.
Asked if the Prime Minister was concerned that the major credit card companies had not cut their interest rates despite the credit card summit two weeks ago, the PMS advised people to see how things progressed in the days and weeks ahead. The Government said at the time of the summit that it would respond to the issues raised at that summit in the following few weeks, so people could expect something on this shortly.
Put that Lord Mandelson had asked the companies to come back with some specific proposals specific to the way in which they charged interest rates to certain customers they thought might be potential defaulters, the PMS said people could expect something on this quite shortly.
Small Businesses
Asked if there had been any progress on lending to small businesses, the PMS said we were seeing some progress. The banks were taking a constructive approach to these discussions and we had seen announcements from RBS and HSBC in recent days about how they would be treating small businesses more fairly. So we were seeing some progress but there was more to do. Put that a lot of small businesses felt that they would have to lay off staff because the banks were still not lending, the PMS said he would not get into the specifics of what was said in Cabinet, but the Government was aware that many small businesses were facing difficulty accessing bank credit.
That was why we wanted to work constructively with the banks in order to get the banks lending and ensure they fulfilled the commitments that they themselves entered into at the time of the re-capitalisation programme.
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