Gordon Brown is to face a parliamentary challenge from the Tories to introduce a £50bn loan guarantee scheme to help businesses through the recession.
GORDON Brown is to face a parliamentary challenge from the Tories to introduce a £50bn loan guarantee scheme to help businesses through the recession.
George Osborne, the Conservative shadow chancellor, served notice on the Prime Minister yesterday that the Conservatives have tabled an amendment to the Banking Bill proposing such a scheme, which will be debated in the House of Lords next week.
As party leaders continued their regional tours of the country ahead of their return to Westminster on Monday, the government also faced calls from John McFall MP, chairman of the Commons Treasury Select Committee, to consider establishing a state bank so that businesses were able to reach credit during the recession.
Mr McFall's suggestion that the Post Office transform itself into a full provider of financial services finds favour with Labour back benchers and opposition MPs who have campaigned to save Post Office branches in their constituencies. But the Dunbartonshire West MP, whose pronouncements often anticipate government thinking, said that if a new state financial institution was required to deliver much-needed lending, then "so be it".
It was in an attempt to get back into the ring on the economic debate that Mr Osborne urged the Prime Minister to back the Tory plan to avoid the "desperate last resort" of printing money. In a speech to the Policy Exchange think tank Mr Osborne said that almost 10 businesses a day were going under.
"Every day that Gordon Brown dithers, he is putting at risk people's jobs and livelihoods and futures. That's why we need action and action now," said Mr Osborne.
But the shadow chancellor was accused by Business Minister Peter Mandelson of merely playing "catch up" with the government.
"We have already announced, in the pre-Budget report, schemes that will enable us to focus on the needs of small and medium-sized companies in particular, to bring into existence greater amounts of working capital for the banks to use in extending credit as well as guaranteeing loans to the SME sector in particular," said Mr Mandelson.
He said the government would "make operational" the schemes announced in the pre-Budget report "in the next couple of weeks". Mr Mandelson is due to give evidence to the Business and Enterprise Committee of the Commons next week.
The more we hear Peter Mandelson attack our proposals, the more we know he's likely to adopt them next week," said shadow business secretary Alan Duncan in Mr Osborne's defence.
Liberal Democrat Treasury spokesman Vince Cable also took a swipe at Mr Osborne.
He said: "Considering the Tories express such concern about the public finances, it's rather bizarre that they're making proposals that would potentially expose the taxpayer to vast, open-ended liabilities.
"Undoubtedly there is a role for properly managed loan guarantee schemes, which already exist for exports. But it must be absolutely clear that this is not a mechanism for shifting all the risks of doing business and making bank loans on to the public purse without the taxpayer having proper control.
"The government can no longer avoid making tough choices in relation to bank lending."
Mr Cable added: "If the banks are on strike and will not lend, one of the large banks now partially nationalised but run at a very distant arm's length will have to be brought fully within government control with full accountability to the taxpayer to ensure that lending is maintained to sound businesses."
The Prime Minister ended his three-day tour of England and Wales yesterday in Cardiff, having visited a school in Swindon, home of the giant Honda plant, and stopping off at Newport. He refused to rule out a bailout for the UK motor industry.
When asked if such a bailout was on the cards, Mr Brown said: "What we're talking about is help for an industry where there's been investment taking place, such as in electric and high technology, for energy-efficient cars, and what we're also looking at with the car industry is the credit system."
