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Services Sector

10. Mr. Mark Hoban (Fareham): What recent assessment he has made of the state of the services sector. [27560]

The Chief Secretary to the Treasury (Mr. Andrew Smith): The Government's latest assessment of the United Kingdom economy, including the service sector of course, is contained in annexe A of the pre-Budget report.

Mr. Hoban: In the last quarter, we saw the end of employment growth in the service sector. It is now clear that it cannot absorb job losses elsewhere in the economy. When will the Government realise that their policies on red tape and taxes are damaging all sectors of the economy, not just manufacturing?

Mr. Smith: The capacity of Opposition Members to talk down important and successful sectors of the British economy never ceases to stagger me. The truth is that the service sector, notwithstanding the difficulties arising from foot and mouth disease and the events of 11 September, has continued to perform strongly, with outputs up 3.7 per cent. on the previous year and employment in September 229,000 higher than a year before. As the figures that came out yesterday show, the

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sector made a trade surplus contribution to the economy of more than £12 billion in the first 11 months of last year, although there are, of course, difficulties in some sectors.

As for regulation, this Government introduced regulatory impact assessments, mandatory on audits and registration. We are raising the audit level for firms, simplifying the VAT procedures and doing everything that we can to cut down unnecessary regulation.

Dr. Vincent Cable (Twickenham): May I take the Chief Secretary back to the answer given a few minutes ago to my hon. Friend the Member for Kingston and Surbiton (Mr. Davey)? Is he aware that the Government proposal to redefine services to boost manufacturing output has been roundly condemned by, among others, the director of the highly respected National Institute of Economic and Social Research, because to do that unilaterally would be against Britain's international treaties and bring the statistical service into serious disrepute? Will he agree to approach the issue with a little more humility than the Financial Secretary and to take a fresh look at it?

Mr. Smith: The derivation and basis of official statistics is independent and the statistical service will form its own judgment. When my right hon. Friend answered that question he said that what is at issue is the very important contribution that services make to manufacturing success. Genuine issues, however, arise as a result of the fact that there is less vertical integration within industry than there was in the past.

Public Service Agreements

11. Mr. Nigel Beard (Bexleyheath and Crayford): If he will make a statement on the progress in capital investment made by Government Departments toward their public service agreement targets. [27561]

The Chief Secretary to the Treasury (Mr. Andrew Smith): The projections contained in the pre-Budget report show that we are on course to meet our ambitious targets on public sector net investment over the three years to 2003-04. This substantial increase in investment, matched with reform, will help Departments in achieving their public service agreement targets.

Mr. Beard: I congratulate my right hon. Friend on the progress that has been made. It stands in marked contrast to the days of successive Conservative Governments who borrowed for day-to-day spending and fecklessly neglected investment in schools, hospitals and railways. What are the possible impediments to maintaining the momentum of the capital investment programme? Such as they are, can they be overcome quickly? What steps are being taken to ensure that investment projects continue to be made on time and achieve their timetable as set out in public sector agreements, and that they are completed to best effect?

Mr. Smith: As for the record of the previous Administration, the last time they were in office public sector net investment fell by an average of 15 per cent. a year whereas in this spending period it is increasing by 40 per cent. a year. On bringing capital investment on-stream, my hon. Friend mentions impediments. It is

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the case, of course, that projects must be planned, implementation teams put in place, planning permission secured and so on.

Some of the procurement practices, as well as the institutions, that we inherited from the Conservatives were greatly in need of reform. That is why we set up the Office of Government Commerce, which is revolutionising public sector procurement. It is also why our commitment to investment is matched with reform. We have devolved more power to the front line, given local managers a greater ability to manage and formed a close partnership with the private sector where appropriate so that we get the investment that we need. I assure my hon. Friend that that investment will be sustained.

Roger Casale (Wimbledon): Was not the legacy of the Tory Government—[Interruption.]

Mr. Speaker: Order. The hon. Gentleman should not be worrying about the last Conservative Government. The Minister is responsible for his Department and his Government.

Roger Casale rose

Mr. Speaker: Order. Perhaps the hon. Gentleman should leave it.

Roger Casale indicated assent.


12. Mr. Mark Prisk (Hertford and Stortford): When he last met the Governor of the Bank of England to discuss prospects for manufacturing industry. [27562]

The Financial Secretary to the Treasury (Mr. Paul Boateng): The Chancellor and the Governor meet regularly to discuss a wide range of issues. As I made clear in my earlier answer to the hon. Members for Edinburgh, West (John Barrett) and for Cities of London and Westminster (Mr. Field), the Government have introduced a wide range of policies that benefit the manufacturing sector. The economic stability that our macro-economic frameworks are delivering offers the best foundation for manufacturing to thrive once global prospects strengthen.

Mr. Prisk: I am grateful to the Minister for that reply. Since the latest discussions to which he referred, employment in manufacturing is now at its lowest level since records began. Manufacturers in my constituency and elsewhere tell me that they are struggling under a burden of regulation; small firms, in particular, are struggling with payroll regulations. Given that the Government have had the answer to payroll regulations since September, in the form of the Carter review, can the Minister tell the House why they are dithering over that report? How many more people have to lose their jobs in manufacturing before the Government act?

Mr. Boateng: We are of course doing no such thing. The document to which the hon. Gentleman refers is a consultative document, aimed at finding out from business what it wants by way of Government action. We listen to

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business and we involve business. Interestingly enough, Mr. Martin Temple was good enough to acknowledge that fact yesterday in his observations about manufacturing. We are not prepared to accept any suggestion from Conservative Members that red tape is the minimum wage, that red tape is health and safety at work and that red tape is combating poverty through tax credits. We are proud to do all those things while removing burdensome regulation, much of which accumulated while the Conservatives were in charge of government.

Mr. Harry Barnes (North-East Derbyshire): Does the Governor of the Bank of England show any concern for matters beyond overall fiscal policy when he is involved in these discussions? Is he concerned about the fact that manufacturing in certain areas faces considerable problems, such as those in north Derbyshire, where several firms have closed? At the moment, Chesterfield Cylinders is downsizing because it faces problems, yet it has Ministry of Defence contracts and it is important that those are maintained. What ideas does the Governor offer the Government to try to solve those problems?

Mr. Boateng: My hon. Friend understands that the Governor will speak for himself. He will also realise that the Governor has the benefit of the Bank's regional network, and that all relevant factors, including those that he mentioned, are taken into account by the Monetary Policy Committee.

Mr. Mark Francois (Rayleigh): Does the Minister remember Labour's promise in opposition to implement an industrial policy to enable our manufacturing industries to grow again? Given that manufacturing output fell by over 5 per cent. in the last year alone, when will Labour deliver on its promises to our manufacturers?

Mr. Boateng: Not only do I remember that promise, but I am part of a team that is delivering it. The hon. Gentleman

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needs to understand that in 2000 manufacturing output grew at its fastest rate since 1994. That is a tribute to this Government and an indictment of his.

Working Families Tax Credit

13. Siobhain McDonagh (Mitcham and Morden): What his estimate is of the impact of working families tax credit in reducing child poverty in (a) Mitcham and Morden and (b) the UK. [27563]

The Paymaster General (Dawn Primarolo): The introduction of the working families tax credit, along with other changes to the personal tax and benefit system since 1997, means that there are 1.2 million fewer children in relative poverty in the United Kingdom than there would otherwise have been. In Mitcham and Morden, 1,600 families are currently benefiting from the working families tax credit.

Siobhain McDonagh: I thank the Minister for her answer. Will she look at the categories of child care that are eligible for the child care tax credit? As she knows, a number of us are concerned that although registered child minder costs are covered, those of resident Nursery Nurses Education Board nannies are not, even though the training for that child care qualification is significant. That restricts the ability to work of people who work shifts, particularly NHS nurses.

Dawn Primarolo: I can tell my right hon. Friend—my hon. Friend; I nearly promoted her—that the question of care for children in their homes, whether they are disabled or their parents work unsociable hours, is of great importance. I am currently discussing with Ministers in the Department for Education and Skills how to ensure that regulation is in place so that the child care element of the working families tax credit could be paid. My hon. Friend will understand that it is not for the Treasury to regulate the standard and quality of care; that is the responsibility of the Department for Education and Skills. I hope that we can resolve that problem soon.

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