Osborne cautious over new bailout

Britain and other leading economies are not ready to fund another eurozone bailout, George Osborne said today.

Speaking as finance ministers meet in Mexico for the G20 summit, the Chancellor said extra funds would not be handed over until countries who use the struggling single currency commit resources themselves.

In an interview with Sky News, Mr Osborne said: “We are prepared to consider IMF resources but only once we see colour of eurozone money and we have not seen this.

“While at this G20 conference there are a lot of things to discuss, I don't think you're going to see any extra resources committed here because eurozone countries have not committed additional resources themselves, and I think that quid pro quo will be clearly established here in Mexico City.”

The Chancellor also refused to reveal if he would be increasing the personal tax allowance to £10,000 at next month's Budget.

“Any tax cut would have to be paid for...what we are not going to do in the Budget is borrow any more money to either increase spending or cut taxes,” Mr Osborne said.

“We can't have any deficit finance measure in that sense because getting the Budget deficit down which is now happening is an incredibly important part of keeping economic stability in Britain.”

Mr Osborne also stood by his decision to rule out any further duty cuts for motorists.

“We've taken action in last two fiscal statements either to avoid a fuel duty increase that was coming or to cut fuel duty,” he said.

“Fuel duty is 6p lower than it would have otherwise would have been. I have absolutely shown willingness to respond to international fuel increases and have taken action this year to tackle fuel duty rises, which were planned by the last Labour government.”

Mr Osborne said the eurozone crisis "remains probably the biggest source of global instability" and was probably going to be the "centrepiece" of the G20 discussions.

Referring to the Liberal Democrats' ambition to bring in a mansion tax or increase the number of council tax bands, he said: "We have already taken measures to make sure the tax system is fairer. I increased capital gains tax for wealthier people in my first Budget, and I've taken action on stamp duty avoidance, that's something we're definitely looking very closely at now, these are wealthy people who just avoid stamp duty when they buy or sell a home, that's something that I've made very clear is unacceptable."

Asked if he thought the 50p tax rate should stay, Mr Osborne said the tax returns had only just been received from the first year of the 50p tax rate.

He said: "We are assessing those tax returns, I've committed at the Budget to publish an Inland Revenue study of how much money the 50p is actually raising, whether it raises what the last Labour Government said it was going to raise."

"Again I'm afraid you're going to have to wait for that study to be produced and it's not completed."

Mr Osborne warned all Western countries needed to be careful not to create an anti-business culture.

He said: "Of course people are angry about what happened three or four years ago with the banks, and that's perfectly understandable.

"We mustn't let that spill into an anti-business culture in Britain, we mustn't let the anger at what happened at the Royal Bank of Scotland four or five years ago, colour what we need to do to the Royal Bank of Scotland today and we certainly mustn't allow those in British politics who frankly never trusted business to get the upper hand, because the British economy needs business to invest, needs business to create jobs."

Mr Osborne said the Government was taking measures, such as cutting business tax in Britain, which he said "everyone around the world, including here at the G20, have noticed and have made Britain an attractive home for investment".

He added he and the Prime Minister would do "everything we can" to "create a pro-business culture in Britain".

The Chancellor said bonuses at RBS had come down "pretty dramatically".

He said: "The British taxpayer put many tens of billions of pounds into these banks and we need the new management to sort out these problems.

"Their bonuses, as I say, are much less than they were and they are indeed back markers in that industry, even if you take the view that the whole banking industry probably pays itself too much, the Royal Bank of Scotland is a back marker and I think that's appropriate."

Mr Osborne stressed the importance of getting RBS "back on its feet lending", adding: "Frankly, Stephen Hester and his management team have done a pretty good job so far in reducing the risk to the British economy of the Royal Bank of Scotland and getting that bank out there into the economy doing the job we want it to do."

Labour deputy leader Harriet Harman said Mr Osborne was "still on Plan A" and called on him to use the Budget to take action to stimulate growth.

"We want to see the Government producing a Budget for jobs and growth that will actually stimulate the economy. We think the best tax measure for doing that would be a cut in VAT," she told the Murnaghan programme.

"They really do need to step forward and stimulate the economy. It is not growing. If you can't grow the economy, you can't reduce the deficit."

PA