Speaking to the Commons Liaison Committee on the economy and the UK's overseas role David Cameron said that youth unemployment was a 'severe problem' and that the banks must honour their commitment to lend.

The Commons Liaison Committee*, which is made up of MP's select committee chairs, heard the Prime Minster say that there are now nearly one million 16-24 year-olds out of work in the country. He also said that Britain had a 'schools problem' as well as an 'opportunity problem'.

According to a BBC report the Prime Minister said that "This is a very severe problem. We understand the extent of it…

"We have got to fix the problem of people leaving school without adequate qualifications."

He then said that the government was putting policies in place that would ensure that work always paid more than benefits, referring to the work of Iain Duncan Smith the Work and Pensions Secretary to incentivise people to work.

The Prime Minister also singled out the banks for attention saying that the last set of lending figures had been disappointing. He said that the banks understood that it was not good for the banks and government to be at loggerheads and that it was in their best interests to honour the lending commitments they made with the government. The alternative was for the banks to break the agreement leaving the government would feel free to impose more taxes on them.

"The banks recognise that it is extremely unhealthy in a modern, competitive market economy to be in a permanent state of war with the politicians. It was in their interests to reach an agreement. I think that is quite a sanction. It was a deal, it was an agreement and they have to meet their side of the agreement or we don't have to meet ours." He said.

31_01_52_prevLabour have reiterated their claim that the Tory led plans for economic recovery 'aren't just hurting, they're not working'. With Angela Eagle, the shadow chief secretary to the Treasury saying that the Prime Minister was in 'denial' over the negative impact his cuts were having when the economy should have been growing strongly.

'But by making a political decision to cut too far and too fast, this Conservative-led government has choked off the recovery. The slower growth, higher unemployment and higher inflation we're now seeing means the government will have to borrow £46bn more than they were planning just a few months ago.' She said.

*The Liaison Committee (Commons) is appointed to consider general matters relating to the work of select committees; to advise the House of Commons Commission on select committees; to choose select committee reports for debate in the House and, by a decision of the House on 14 May 2002, to hear evidence from the Prime Minister on matters of public policy.

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