Morning press briefing from 21 April 2008
Briefing from the Prime Minister's Spokesman on: World food prices, meeting with President of the African National Congress, 10p tax, Northern Rock and Bank of England Liquidity and misc
World food prices
Asked if the group of people the Prime Minister would be meeting this week regarding food prices would include the head of the World Food Programme, the Prime Minister's Spokesman (PMS) said that the head of the World Food Programme was not on his list of attendees but that the meeting included some people from Oxford University, representatives from the retail sector, the European Commission, the Organisation for Economic Co-operation and Development (OECD), Save the Children and others.
Put that the Prime Minister had mentioned in Washington last week that he planned to have a meeting with the World Food Programme, the PMS replied that he would check if there was going to be a representative from the World Food Programme at the meeting.
Asked what the purpose of the meeting was, the PMS replied that the meeting would follow on from the letter the Prime Minister had written the week before last to discuss the strategy, short and longer term, regarding the problem of rising global food prices.
Asked if there was anything the Government had in mind that it could actually do, the PMS said that there were a number of things we were discussing with our international partners at the G8, the International Monetary Fund (IMF) and elsewhere. We were looking at the impact of global food prices on the world economy and some of the underlying causes of higher food prices, such as bio-fuels. We were also looking at what could be done by the IMF and the World Bank to mitigate the impact of higher food prices.
Asked if the Prime Minister was concerned about the rising cost of food here, the PMS replied that the Prime Minister was concerned about the impact of rising food prices on both the global economy and the domestic economy.
Meeting with President of the African National Congress
Asked if anything could be said about the Prime Minister's meeting with President Jacob Zuma of the African National Congress (ANC), the PMS replied that there was not much he wanted to say ahead of the meeting on Wednesday. Jacob Zuma was in London this week and had asked if he could see the Prime Minister.
Asked if the meeting had been put in the diary recently, the PMS said that it had been in the diary for some time.
Put that this meeting was presumably to put further pressure on Mugabe, the PMS said that we should wait and see; the meeting was not until Wednesday.
10p tax
Asked if the Prime Minister would regard a vote on the Budget as a confidence issue, the PMS replied that at this stage the amendment had not been tabled so we would have to wait and see what happened in Parliament during the course of today and the rest of this week.
Asked if the Prime Minister was prepared to allow the speculation about this being a confidence issue to continue, the PMS said that any vote on the Budget was an important vote but at the moment we had not yet seen what amendments would be tabled.
Asked repeatedly if the Prime Minister accepted that some people would be worse off as a result of the tax change, the PMS replied that the Prime Minister had been saying consistently that when you undertake a significant tax reform of the kind that was undertaken in the 2007 Budget, of course that would affect different groups in different ways. That was why, in the 2007 Budget, we provided an additional £3 billion to help people who were affected by the reforms that were made elsewhere in the Budget; there was an extra £1billion to increase the pension allowance; an extra £1 billion for the working tax credit and an extra £1billion for the child tax credit. These measures directly helped those people who were affected by the removal of the 10p rate. We had done a lot to help people on lower incomes since 1997 and as the Chancellor had said yesterday, we would continue to help people on low incomes in future Budgets and Pre-Budget Reports.
Asked if the Prime Minister recognised that there was a huge amount of anger on the backbenches regarding the 10p rate, the PMS replied that the Prime Minister recognised that when you took on a significant reform of this kind, people would be affected in different ways. It was important to remember that in the 2007 Budget we reduced the basic rate of tax from 22p to 20p and also, as was just mentioned, we had spent a considerable amount of money in that Budget to increase the working tax credit, the child tax credit and pensioner allowances.
Asked how many people would be worse off due to the abolition of the 10p rate, the PMS said that, as the Prime Minister had said previously, so much depended on the behavioural responses as well as individual family circumstances; tax credits were claimed based on family income, whereas tax changes affected individuals.
Asked if the scrapping of the 10p tax was done purely to pay for the 2% change in the basic rate, the PMS said no; it was part of a much wider package of reforms that had been made to the tax system. As was said at the time of the 2007 Budget, the 10p rate was introduced at a time when tax credits were at an early stage and over time, as tax credits had become more generous and developed, a more effective way of helping those on lower incomes was to provide support direct to them through the tax credit system.
Asked if the Prime Minister would be having discussions with MPs about the 10p tax, the PMS replied that the Prime Minister spoke to Labour MPs all the time, as you would expect.
Northern Rock
Asked if the Prime Minister accepted that if the Government and the tri-partite authorities had acted earlier in providing support, the Northern Rock crisis could have been avoided, the PMS said that we would not accept that; the circumstances surrounding Northern Rock depended very much on the individual business model that had been pursued by Northern Rock. The Government had provided considerable support and had intervened to stabilise the situation with regard to Northern Rock and prevent any contagion effects to other financial institutions.
Bank of England Liquidity
Asked why last week the had Prime Minister had denied plans to swap debts when asked about the subject, the PMS said that he thought that that question might come up and referred to the transcript of last week's conversation in which the journalist's specific question had been whether or not the Prime Minister could confirm that the British Government was going to swap debts with banks, taking on some of their bad debts so that they could remain stable. The answer was that the Government was not taking on the banks' bad debts; we were swapping debts for high quality assets. It was only AAA assets or above which were being considered as part of the swap. What the Prime Minister had been denying was the reference to bad debts.
Put that the Prime Minister had been asked the same question by another journalist last week and had said that swapping was not the first thing to do in this situation, the PMS said that he had not checked the transcript for that particular question but he would do so. He added that we had always made clear that significant additional liquidity for the banking system was something that was being considered.
Asked how confident the Government was that the AAA assets taken on would remain so, the PMS said that there had been a number of measures which had been put in place and announced by the Bank of England today to ensure that the tax payer was protected; firstly by ensuring that the assets swapped were high quality assets; secondly, that the value of the assets that the banks provided as collateral were greater than the value of the Treasury Bills that the Bank of England would swap them for; thirdly, that the banks would be charged a commercial interest rate and fourthly that the risk of losses remained with the banks.
Asked why, if an asset was AAA, it should be swapped for a more secure form, the PMS replied that it was because there was a problem in this particular market of liquidity, so it was in order to address the liquidity problem in the market that the Bank of England had taken this action.
Asked if the Government would still press mortgage lenders to pass on the Bank of England rates tax, the PMS replied that that remained the Government's position; as we had made clear, we wanted to create the conditions that enabled the banks to do so and this was part of what we were doing today.
Put that the Governor had suggested that there was no need for the Government to do that, the PMS said that he had not seen the Governor's comments in their proper context and would rather do so before commenting further.
Misc
Asked why it was that the Prime Minister appeared to be so out of touch, the PMS said that he was not too sure whether that was a statement or a question and went on to say that the Prime Minister had been talking in Scotland that morning about many issues which affected millions of people in this country, such as what the Government was doing to increase employment. Last week the Prime Minister had spoken at great length, emphasising the great importance he attached to dealing with issues regarding the economy. Following his meeting with the banks last week, the Prime Minister was seeing the Bank of England today to discuss injecting £50 billion of extra finance in order to help deal with problems in financial markets, which in turn should help create the conditions to help difficulties faced by mortgage holders. Those were just a few examples of things the Prime Minister was doing, which demonstrated that he did recognise the concerns of people in this country and that the Government was acting on the side of the people of this country to meet those concerns.
Asked if there was an agreement with Germany and France not to propose a candidate for the EU Presidency if it were objected to by one of the others and if it were the case that Germany had vetoed Tony Blair on that basis, the PMS replied that any suggestion of an agreement between the UK, France and Germany was news to him and that he would have to check before giving an authoritative response.
Asked if the Prime Minister had been aware of John Prescott's eating disorder, the PMS replied that that was not something he would want to comment on.
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