Tory plan to protect firms from credit crunch

David Cameron has set out plans to protect companies from the effects of the economic downturn.

The Conservative leader used a speech to the CBI employers' organisation on Tuesday to back a US-style 'Chapter 11' model which would protect firms from bankruptcy while coming to an agreement with creditors.

He warned that firms must be given "breathing space" to prevent tens of thousands of jobs being lost.

"The credit crunch has meant more companies are finding it hard to get the money they need to keep their business alive," he said.

"That means one thing - more companies going into liquidation. And we all know what liquidation means - job losses."

He added: "This change will ensure that fewer good companies end up in liquidation - and fewer people lose their jobs through no fault of their own."

Under the proposals, courts would be able to give protection to UK businesses that were unable to repay debts but had a "real chance" of recovering.

Spending

Cameron told BBC Radio 4's Today programme that "we are feeling pain".

"The question for the government is 'what are you going to do about it?' The answer from this government seems to be very little," he said.

"The answer from the Conservative Party is actually on homes, on the cost of living, on savers, on businesses, there is a lot we could do to help to have a proper economic recovery plan, which is what we should do."

He said he hoped he would not have to raise taxes to meet spending plans, adding: "Government always has to do what is right to safeguard the public finances.

"The tragic thing now is that at this point in the economic cycle what the government ought to be doing is cutting taxes and giving a fiscal stimulus to the economy. They can't do that because the cupboard is bare and borrowing is so high."

However, a Department for Business, Enterprise and Regulatory Reform spokesman said there was "no evidence to suggest that adopting a US Chapter 11 approach would save more companies than the UK's current administration model".

"Government has already made changes in the Enterprise Act of 2003 to deliver a more rescue focused culture for companies in the UK," he said.

Osborne

Meanwhile, shadow chancellor George Osborne used a speech on Tuesday to say that social problems and economic success are "two sides of the same coin".

Speaking to the Centre for Policy Studies, he argued that "fixing" society is central to building a strong economy.

"Of course we know that you cannot improve social conditions without economic success," Mr Osborne said.

"But the crucial insight for modern Conservatives is that in the new global economy you cannot have economic success without social success.

"Reducing educational failure, tackling worklessness and poverty, mending our broken society - these are all progressive social goals that we have rightly put at the very centre of our agenda."