Tonight:
5°c
Osborne: 10 firms a day will fail unless PM acts
Joe Murphy, Political Editor9 Jan 2009
SHADOW chancellor George Osborne today warned that 10 businesses a day will go under unless the Government gets banks lending again soon.
In a hard-hitting speech, he announced that the Conservatives will force a Lords vote next week on putting up billions of pounds in loan guarantees to help small firms.
It puts pressure on Prime Minister Gordon Brown to rush out his own plans to encourage lending to businesses, which are expected to be similar to the Tory proposal. "Every day that Gordon Brown dithers, he is putting at risk people's jobs and futures. That's why we need action and action now," Mr Osborne told the Policy Exchange think tank in London. He highlighted new data showing company liquidations up from 241 a week to 304 a week in a year, adding that the rate of closures was almost certainly worse in recent weeks.
"That's almost 10 businesses a day going under because of the credit crunch," he said.
The Banking Bill is due to be debated when Parliament returns from its Christmas recess next week.
Mr Osborne said the Conservatives will table an amendment to include a National Loan Guarantee Scheme, in which banks would be allowed to buy state insurance to cover the risk of firms failing to repay their loans.
Labour hit back by accusing the Conservatives of failing to explain how they would fund such a scheme.
An official report four years ago found that the rate of default for loans covered by existing loan guarantee schemes was 28 per cent - suggesting that a £50billion scheme advocated by the Conservatives could require many billions of pounds in funding.
The Tories insist it would be self-funding because banks would be charged a fee for enjoying the guarantee.
Mr Osborne claimed that the economy would be in better shape to recover if the Government had accepted his call for a credit guarantee scheme.
"The national debt would be lower and, because credit would now be flowing to businesses, jobs could have been saved," he said.
"So today I want to appeal again to Gordon Brown to take the action we recommend, before further jobs are lost, before further debts are heaped on the shoulders of our children and before the Government reaches for the desperate last resort of printing money with all the risks that involves."
"Without radical government action, this vicious cycle will make the recession longer and deeper."
But Treasury Minister Angela Eagle said he had ignored the "international consensus" that higher state spending was vital to prevent worse damage.
She said: "As America and Germany gear up to launch big fiscal stimulus packages, the Conservatives should admit they were wrong to oppose Labour's plans to give real help now."
Lib-Dem Treasury spokesman Vince Cable said Mr Osborne's plan would expose taxpayers to "vast, liabilities". He called for a nationalised bank to be harnessed, not lending to firms.
Reader views (3)
Should not the Labour Party be funding Brown's "tour",when it is clearly an electioneering campaign?
The Taxpayer pays for enough political freebies and in this case also pays for the embedded BBC publicity machine that travels with it.
In the mean time businesses go bust,as the Government goes walkabout.
Just what is the Prime Minister smiling about?
- Jon Dee, N Warks UK, 10/01/2009 20:47
Report abuse
Nurse He's escaped again. Tell David or he'll ruin it for everybody.
- Harry Phibbs, Westminster UK, 10/01/2009 14:22
Report abuse
He is right. Bigger state will not fix this. It was the problem the economy was over-taxed, over-indebted here in the UK. Crash Gordon should admit defeat and then he will be quickly forgotten?
- Jacqueline, Hampstead, London, 09/01/2009 19:33
Report abuse
