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House of Commons

Thursday 22 July 1999

The House met at half-past Eleven o'clock


[Madam Speaker in the Chair]

Oral Answers to Questions


The Chancellor of the Exchequer was asked--


1. Mr. Simon Burns (West Chelmsford): What the difference was between the money the Treasury received from the recent sale of gold and the purchase price of that gold. [91091]

2. Mr. Michael Fabricant (Lichfield): How much gold from the National Reserves he will sell next month. [91092]

The Chancellor of the Exchequer (Mr. Gordon Brown): Continuing the policy of the previous Government, this Government have accepted the principle of gold sales and have therefore continued to support the sale of International Monetary Fund gold to fund debt relief for the poorest countries.

In order to achieve a balanced portfolio of our national reserves, we will sell 125 tonnes of gold this year by the preannouncement and phasing of sales. There will be no sales of gold in August.

In answer to the first part of the question asked by the hon. Member for West Chelmsford (Mr. Burns), most of the gold held in our reserves was acquired before 1950 at a purchase price of $35 an ounce or less. Therefore, in answer to the hon. Gentleman's detailed question, the 25 tonnes of gold sold on 6 July would have been purchased for a notional $30 million or less. The gold was sold for $209 million, which makes a cash profit of more than $170 million.

Mr. Burns: I am slightly surprised that the Chancellor did not give the figures in updated terms. Does the Chancellor accept that, between 7 May and the present, the price of gold per ounce has fallen from $287 to $254? That means that, as a result of the sale, every man, woman and child in this country has paid £10. Does the Chancellor think that the gold sale on 6 July helped or hindered the national interest? Given the fall in the gold price and the uncertainty in the gold market as a result of his announcement, will he postpone or put on hold future sales?

Mr. Brown: The answer to the latter part of the hon. Gentleman's question is no. The mistake was made by the

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previous Government. When the price of gold was valued at anything between $300 and $800 per ounce, they took no action while other countries around the world were rebalancing their assets portfolios. Although the hon. Gentleman complains about the British sale, over the past few years, Australia, Austria, Canada, the Netherlands, Belgium and Switzerland have been selling their gold portfolios. Canada has sold 500 tonnes, the Netherlands has sold 700, Belgium has sold 707 and Switzerland plans to sell 1,300. We plan to sell 125 tonnes this year.

If the hon. Gentleman wants to take up the case of South Africa, I must inform him that it has halved its gold assets in the past 20 years and it sold more gold last year than we will sell this year. Those are the facts of the position. It is about time the Conservative party looked at the facts instead of being opportunistic in this matter.

Mr. Fabricant: Have not the Government achieved a double whammy not only by trumpeting the sales of gold as the price has fallen, but by saying that 40 per cent. of the sale proceeds will be used to purchase euros? Although the euro rallied slightly this morning and, as the Chancellor will know, is currently valued at $1.0535, is he not aware that the value may fall again in three or four months? What is his estimate of the value of the euro in three, four or six months or a year?

Mr. Brown: There is no change in the balance of our portfolio between euros, dollars and yen. The hon. Gentleman, who was a Parliamentary Private Secretary at the Treasury, should know that the Chancellor whom he served supported the principle of gold sales in relation to the IMF. We will take no lectures about the use of the national reserves from the party that, when in power, lost £4 billion in a day on Black Wednesday 1992.

Mr. Fabricant: On a point of order, Madam Speaker. As the Chancellor refused to answer my question about the value of the euro, I shall seek to raise the matter on the Adjournment.

Madam Speaker: In that case, I must move to the next question.

Windfall Tax

3. Mr. Michael Clapham (Barnsley, West and Penistone): What evaluation he has undertaken of the use made of the windfall tax on the privatised utilities. [91093]

The Chancellor of the Exchequer (Mr. Gordon Brown): Madam Speaker--[Interruption.]

Madam Speaker: Order. Let me explain to the House what has happened. When an hon. Member says that he intends to raise a question on the Adjournment, I must end the exchanges and move on.

Mr. Brown: The windfall tax, which raised £5.2 billion, has enabled the Government to embark upon the new deal--the biggest ever programme to get the unemployed into work. More than 284,000 people have now entered the new deal through the young person's scheme and almost 100,000 long-term unemployed have

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entered the scheme. The windfall tax has also enabled the Government to inject much-needed capital investment into more than 10,000 schools. We will launch the new deal for the over-50s in the autumn. Therefore, we will continue to expand the new deal over the next few months.

Mr. Clapham: I am grateful to my right hon. Friend for that reply, which shows clearly that the windfall tax has been used to create hope and opportunity for tens of thousands of young people. Does my right hon. Friend agree that, if we are to reach the Government's objective of eliminating child poverty within the next 20 years, we must complement what has been done at regional and local levels in areas such as Barnsley where the average income per household on council estates is between £5,000 and £6,000 and 34 per cent. of children come from families that are in receipt of family credit or income support? Does he agree that we need more opportunity, greater equality and further redistribution of wealth if we are to eliminate child poverty and remedy the neglect that the Tory party inflicted on older industrial areas?

Mr. Brown: My hon. Friend is absolutely right--when we came into power in 1997, a third of our children were in low-income families and 40 per cent. of children were being born into low-income families. That is why the first thing that we had to do was to create new job opportunities for the unemployed. That is why, with nearly 600,000 more people in work and nearly 300,000 young people involved in the new deal, we are creating working opportunities for families in this country.

As my hon. Friend rightly says, the second challenge is to make work pay, and it is very surprising that the Conservative party still opposes the new deal, the minimum wage and the working families tax credit. On every issue, it is on the wrong side for the needs of working families, and I hope that at some point the shadow Chancellor will withdraw his remark that the new deal is

The fraud is what the Conservatives perpetrated on the unemployed.

Mr. Geoffrey Clifton-Brown (Cotswold): How can the Chancellor have the gall to stand there and say that the windfall tax and the new deal have been a success? How many genuine jobs at full pay have been created? How much do those jobs cost? What will the Chancellor do in two years, when the windfall tax revenue will have run out?

Mr. Brown: There are 100,000 young people now in jobs. If only one young person had got a job, that would be satisfactory, but 100,000 young people are now in work. I should have thought that despite party politics, the hon. Gentleman would welcome the fact that there are more people in jobs.

On the use of the windfall fund, we have a new deal not only for young people, but for the long-term unemployed and single parents, and in October we shall introduce a new deal for the over-50s. If anybody considers the cost of unemployment under the Conservative Government, they will realise that the introduction of a windfall tax to get people back to work is the best use of public money.

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The Conservatives' problem is not only that they opposed the new deal, but that they opposed the windfall tax, which was the right measure to take revenue from companies that had made excess profits as a result of the unfair privatisations and to use it to get people back to work.

Financial Services

4. Mr. James Plaskitt (Warwick and Leamington): What steps he is taking to ensure that people in poorer communities have access to financial services. [91094]

The Economic Secretary to the Treasury (Ms Patricia Hewitt): Following the publication of the report of the social exclusion unit, "Bringing Britain Together", we established two policy action teams, led by the Treasury to consider the problem of financial exclusion. We have involved community groups, credit unions, banks and buildings societies in their work and we expect to publish their reports and action plans in the autumn.

Mr. Plaskitt: Does my hon. Friend welcome the new duty imposed on the Financial Services Authority to perform an educational role? Does she agree that it should seek to concentrate its efforts on people with lower incomes, who have not previously had access to financial services? Does she further agree that the impact of the national minimum wage and the forthcoming working families tax credit will give lower-income families far greater opportunities to draw on financial services? Do not all those measures extend financial opportunity to the many, as opposed to the few?

Ms Hewitt: My hon. Friend is right on both points. First, the Financial Services Authority has an important role to play in spreading information among all sections of consumers, particularly those on low incomes. Secondly, the Conservative party is opposed to the minimum wage, the working families tax credit and the new deal for the unemployed. In other words, the Conservatives would make the poor even poorer while a Labour Government are delivering opportunities and social inclusion for all.

Sir Peter Tapsell (Louth and Horncastle): While we are on the subject of poor communities, does the hon. Lady think that the Chancellor understands that his decision to sell our gold has plunged South Africa into crisis, and only today 2,500 Ghanaian miners have been laid off, and they and their many dependants have been plunged into abject poverty? Is that a good way to help poor communities throughout the Commonwealth?

Ms Hewitt: I quite understand that the hon. Gentleman's question and the question that the shadow Chancellor was planning to ask about gold sales were destroyed by friendly fire. I do not really think that the hon. Gentleman can get them out of that hole.

My right hon. Friend the Chancellor has made the position on gold sales absolutely clear. We are continuing the policy of the previous Government, to support gold sales by the International Monetary Fund in order to help to relieve the debt burden of the poorest people in the poorest communities--because, unlike the Conservative

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party, we are determined to deliver opportunity and security, and to help the poorest people, whether in our own country or in the poorest countries of the world.

Mr. Gerry Sutcliffe (Bradford, South): I thank my hon. Friend for meeting a delegation of community-based credit unions the other week. She knows the concerns that they raised about the balance between community-based credit unions and other credit unions. Will she give us an undertaking to ensure that the balance is redressed and that community-based credit unions are supported?

Ms Hewitt: My hon. Friend has taken a long-standing interest in this matter. I entirely agree that credit unions have a very important role to play, especially in the most disadvantaged communities. We have some very successful credit unions in this country, such as the one that I recently visited at Speke in Liverpool, but they could obviously play a much larger role in helping to combat financial exclusion.

We shall shortly publish the report of the task force chaired by Fred Goodwin of the Royal Bank of Scotland, on how banks and building societies can help promote credit unions throughout the country, but especially in the poorest areas.

Dr. Vincent Cable (Twickenham): Following the Chancellor's eloquent comments in the Daily Mail earlier this week about the abuses in the mortgage market, is the hon. Lady aware of the disappointment at the fact that the Government continue to disregard the advice of the Treasury Committee and the Treasury Joint Committee on the Financial Services and Markets Bill that mortgages should be brought within statutory regulation and not allowed to remain within the self-regulating framework of the very institutions that are abusing the market?

Ms Hewitt: I know that the hon. Gentleman was not always able to attend meetings of the Joint Committee, but I think that he will be aware that, earlier this week, we published a consultation document on whether the sale of all mortgage products and advice on those products should be brought within the scope of the new Financial Services Authority. As we said then, we shall decide on the scope of the Financial Services and Markets Bill, and in particular the issue of mortgage regulation, before the end of the year, but we shall do so following proper consultation, and following a proper cost-benefit analysis, so that we can ensure that we get the best possible deal for every consumer and home buyer.

Dr. Brian Iddon (Bolton, South-East): I am pleased by the focus that we have had this morning on credit unions, but will my hon. Friend admit that credit unions in this country have tighter restrictions than those in Australia and other countries? Are the Government considering relaxing those restrictions so that credit unions may expand, as they have in several countries?

On a different subject, do the Government look favourably on the expansion or development of local exchange trading schemes?

Ms Hewitt: I am very grateful to my hon. Friend for raising both those points. We have already issued proposals for a deregulation order that would improve the capacity and the ability of credit unions to offer wider

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services, for instance by enabling them to bring into membership people who work in a specific area as well as those who live in it. We are currently considering the responses to that consultation.

We are also considering in the social exclusion policy action teams the role that LETS can play, especially in helping unemployed people to develop skills that may be useful to them on returning to work.

Mr. David Heathcoat-Amory (Wells): Does the Economic Secretary agree that one way of making financial services less accessible to people would be to put VAT on them? Will she therefore comment on the fact that, with the Treasury's knowledge and consent, Customs and Excise is engaged in discussions organised by the European Commission about extending VAT to financial services? To prevent the Government getting into the same muddle on this as they have on the withholding tax, where they are led along into damaging negotiations, will she make it clear now, in advance, that the Government will veto any attempt to extend VAT to things such as credit cards, bank charges or mortgages, and will she give that categorical assurance now, in advance of the negotiations, which are already under way?

Ms Hewitt: I am astonished by the right hon. Gentleman's ability to see European conspiracies even in a question about financial exclusion and credit unions. I remind him that it was the Conservative Government who imposed value added tax on fuel and who would have increased it to 17½ per cent. had we not stopped them and brought the rate down. It is a disgrace for the right hon. Gentleman to try to divert attention from what we are doing to promote competition in financial services and to ensure that the poorest people have access to mainstream financial services.

Mr. Dale Campbell-Savours (Workington): Will the consultation paper to which my hon. Friend referred include any reference to rates of interest paid on building society deposits, which many low-income families are very much dependent upon?

Ms Hewitt: The consultation document to which I referred deals with many of the problems that consumers have raised with us and with others in relation to mortgages. My hon. Friend will be aware of many of those problems, including the danger of lock-in periods, high financial penalties and the bundling of some mortgages with expensive home-and-contents insurance policies. The best way to deal with interest rates on both mortgages and on savings deposits is to ensure that there is healthy competition within a well-regulated banking and financial services sector. That is precisely what we are delivering through the Financial Services and Markets Bill. My right hon. Friend the Chancellor of the Exchequer has recently invited Mr. Don Cruickshank to conduct a special review of competition within the banking sector.

Rev. Martin Smyth (Belfast, South): Having grown up on a road where there was no bank, I know how people always look to the Post Office for savings and other services. I welcome the Minister's statement on credit unions. Given that consultation is taking place, may I suggest that she does not give too much credit to those

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who might be opposing credit unions because they have vested interests? I have seen how credit unions have freed many small, poor communities and given them more liberty in spending.

Ms Hewitt: I am grateful to the hon. Gentleman for making that point. I happily assure him that we will not allow any vested interests to stand in the way of the development of credit unions and other services for low-income areas. I draw the hon. Gentleman's attention to the announcement that the Government made in May about computerisation of the Post Office network.

As we modernise Post Office Counters Ltd. so it will be able to offer efficient banking and financial services to everybody within the communities that it serves, including rural and deprived communities. It will be able to do that in partnership with banks and building societies, which may in the past have withdrawn their branches from rural and deprived communities.

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