PM 'deluded' on assistance schemes

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The prime minster was compared with a "deluded emperor" as shadow chancellor George Osborne criticised the government handling of the economic downturn.

Osborne said that lending in the economy was lower than expected because half of the government’s financial assistance schemes were not working.

And he asked the chancellor how many major banks had made use of the asset-backed securities guarantees scheme

Alistair Darling said the government was still in discussions to "make sure that facility is there", explaining that it had to be seen in context with other measures introduced.

But Osborne responded that the scheme has had "no take-up".

"The homeowner rescue scheme has helped just six families since its launch," the Tory frontbecher said.

"The prime minister increasingly resembles a deluded emperor, introducing schemes that were only announced in a press releases and don’t actually insist on the ground."

Osborne called on the chancellor to go back to the "drawing board" and redesign the asset-backed securities guarantee scheme, to ensure the government can "deliver real help now".

But Darling said funding for the scheme would not exist if the government followed Tory spending plans.

"We have a range of measures that are being put in place to help businesses," he told the Commons.

"There are also a range of measures in place to stabilise and make sure the banking system functions properly.

"Some measures will take time to work through, but all are opposed by the Conservatives."

Derek Twigg (Lab, Halton) urged the government to encourage banks to lend to viable businesses to prevent a further increase in unemployment.

In response, the chancellor Alistair Darling said there were lending agreements in place with banks that the government had substantial holdings in.

In some cases "the instructions don’t appear to have got themselves down to the regional and local level", Darling admitted, in order to create lending for companies and individuals.

He added that he was meeting with banks shortly to discuss the issue.

Treasury select committee member Michael Fallon (Con, Sevenoaks) warned that only £178m had been provided through the small firms and enterprise finance guarantee scheme, despite government promises of new lending to businesses.

This is less than half of the original target and is still falling, he added.

The chancellor responded that take-up of lending at the beginning of the year had been slower on both sides.

He explained: "It's now important to make sure that the lending takes place and gets put into the economy as quickly as possible."

And Treasury select committee chairman John McFall (Lab, West Dunbartonshire) stated that scoring has been tightening, quoting the Home Builders Federation who sad lenders were looking for any reason to refuse loan.

McFall urged the chancellor to reinforce the point to the banks that they have both "economic obligations and economic obligations to ensure this lending takes place".

Darling said that, inevitably, there had been "some retrenchment" from lenders in ensuring that the borrower can maintain the repayments.

He added: "We need to get credit going again because that will help drive the economy."

Willie Rennie (Lib Dem, Dunfermline and Fife West) called on ministers to provide the Scottish Government with "real help" in providing borrowing powers to raise more funds for the Forth Bridge.

Treasury minister Stephen Timms said funding was a devolved issue and for the Scottish Government to determine.

Rob Marris (Lab, Wolverhampton South West) said Scotland is already receiving "shed loads of money" from the UK taxpayer through the Barnett Formula and the money should be raised as a devolved assembly through taxation.

Timms responded that Marris had made a "forceful point".