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Consumer Prices Index
9. Mr. Bill Wiggin (Leominster): When the harmonised index of consumer prices measure of inflation has been below 1 per cent. since January 2000; and if he will make a statement. [132064]
The Economic Secretary to the Treasury (John Healey): The HICP inflation figures are published monthly by the Office for National Statistics. As my right hon. Friend the Chancellor said in the summer in this House, that measure gives a more complete picture of spending patterns by all consumers. It is the most comparable measure internationally, and it is used by our European neighbours. That is why, subject to confirmation at the pre-Budget report, he intends to change the inflation target to the consumer prices definition.
Mr. Wiggin : Will the Governor of the Bank of England be writing letters, given that the new index—known as HICP, or hiccup—has fallen below the 2 per cent. target several dozen times? Will not that contribute to a significant imbalance in the stability of our monetary policy?
John Healey: On the contrary, last month the Governor of the Bank of England confirmed to the Select Committee on the Treasury that a change in target is not likely to be a big factor in setting monetary policy and that HICP is a better measure of inflation than RPIX. That is why my right hon. Friend the Chancellor has said that, subject to confirmation at the pre-Budget report, he intends to change the inflation target to that measure.
Mr. James Plaskitt (Warwick and Leamington): The Minister knows that as a rule the harmonised prices index runs 1 per cent. lower than RPIX. The Chancellor has indicated that were it to be introduced, benefits would remain tied to RPIX. Would my hon. Friend expect it to become the benchmark for wage settlements?
John Healey: Both the Treasury and the Bank of England have confirmed that the estimate of long-term divergence is 0.5 per cent., not 1 per cent. As my right hon. Friend the Chancellor has made clear, the index is a better measure for the conduct of monetary policy and the decisions that hang from it. Pensions, index-linked
gilts and benefits will remain tied to the current measure of inflation, so pensioners should have no fear that they will lose out.
Mr. Michael Howard (Folkestone and Hythe): But is not this change bedevilled by confusion? Were Treasury sources right when they suggested that implementation might be delayed until the Budget or that alternative options might be considered, including delaying implementation for two years or trying to run the two systems in parallel for a while? Can the Minister confirm that the HICP index is likely to be revised? Has not this ill considered change thrown monetary policy into wholly unnecessary confusion and uncertainty?
John Healey: I have no idea what the right hon. and learned Gentleman is talking about. His remarks are based not on fact, but on pure imagination. The principal change to the HICP index was made in 1996. As I said to the hon. Member for Leominster (Mr. Wiggin), this series of figures has been published monthly by the Office for National Statistics: I suggest that the right hon. and learned Gentleman consult it.
Mr. Howard: I remind the Minister that the Governor of the Bank of England suggested that changing the target in this way is comparable to David Beckham taking a shot on goal only to see that someone has moved the goalposts. Does he agree with the Governor's view that leaving out housing costs would be "strange"—that is his word—and might confuse people? The fact is that this change has absolutely nothing to do with the economic needs of the country: it stems from the shabby compromise cobbled together by the Chancellor and the Prime Minister on the euro. Is not monetary stability being put at risk as a result?
John Healey: I suspect that David Beckham would have welcomed somebody moving the goalposts when he was taking his penalty kick against Turkey last Saturday. If the right hon. and learned Gentleman consults the minutes of the Treasury Committee hearing with the Governor of the Bank of England, he will see that he confirmed that a change in target is not likely to be a big factor in setting monetary policy and that the index is a better measure for targeting inflation and for conducting monetary policy. That is why my right hon. Friend the Chancellor has said that, subject to confirmation at the pre-Budget report, he intends to move to that measure.
Low-income Families
10. Mr. Bill O'Brien (Normanton): What recent measures he has taken to support families on low incomes; and if he will make a statement. [132065]
The Paymaster General (Dawn Primarolo): In April, the Government introduced the working and child tax credits. They build on the success of the working families tax credit and are additional to the real terms increases in child benefit. More than 5.8 million
households are already benefiting from the new tax credits, and more than 90 per cent. of the families are expected to benefit in 2003–04.As a result of these and other measures introduced since 1997, families with children in the poorest fifth of the population are on average nearly £50 a week better off in real terms.
Mr. O'Brien : I thank my right hon. Friend for her reply and congratulate her and her colleagues in the Treasury on their splendid work in helping low income families. Is she aware of an anomaly that applies to the Child Support Agency? When an absent parent starts a second family and receives family tax credit, it is considered as income whereas when the parent with care receives it, it is considered as non-income. Different principles apply to the two examples. Will she have a word with her colleagues in the Department for Work and Pensions to erase the anomaly of an uneven application of family tax credit to those on low incomes?
Dawn Primarolo: If I understand my hon. Friend's point correctly, I must tell him that there is no anomaly in the application of the rules. Parents are responsible for their children under CSA rules, which also provide for payment to be made. Tax credit legislation will not cut across that principle. Responsibility would be diminished if the tax credits compensated for parents paying for it. I shall check the record to ensure that I understood my hon. Friend's point properly. However, it is intended that the tax credits should not cut across parents' responsibility to support their children, as determined by the CSA.
Mr. Peter Luff (Mid-Worcestershire): How does it help families on low incomes to rig the local government financial settlement in such a way as to force county councils such as Worcestershire's to do the Chancellor's dirty work and impose massive stealth taxes through unacceptable increases in council tax?
Dawn Primarolo: As the hon. Gentleman knows, since 1997, when the Government took office, the real terms increase for every council has been greater—some 25 per cent., compared with a decrease of 7 per cent. in the last few years of the Conservative Government. He well knows that the Government's record in supporting the poorest families, for example, through support for child care and ensuring that lone parents can return to work, has contributed to the lives of people in his constituency. The shame is that the Conservative party wants to take all that away.
Insurance Premiums
11. Lawrie Quinn (Scarborough and Whitby): If he will make a statement on the impact of insurance premium levels on the service sector of the economy. [132066]
The Financial Secretary to the Treasury (Ruth Kelly): I am aware that increases in insurance premiums in the past few years have had an impact on many sectors of the economy, including the service sector.
Lawrie Quinn : My hon. Friend knows that three quarters of the British work force work in the service sector. Does she share my concern that employers' liability insurance is due for much needed reform? Given that the relevant legislation was enacted in 1969, is not it time that she encouraged her colleagues in the Department for Work and Pensions to consider the important subject of insurance?
Ruth Kelly: I know that my hon. Friend takes a great interest in employers' liability insurance. Indeed, he tabled a ten-minute Bill on the matter. Surveys show the importance of developing enforcement procedures to ensure that everybody has compulsory employers' liability insurance in place. We are therefore determined, as part of our review of employers' liability insurance, to develop a comprehensive database to ensure that we have full records of firms' procedures. We are also reviewing the current fines system to ascertain whether legislation or regulation is needed.
Chris Grayling (Epsom and Ewell): Is the Minister aware that the situation in regard to employers' liability insurance will be made worse by the Government's latest stealth tax, in the Health and Social Care (Community Health and Standards) Bill, which will allow charging to take place for health care when it is related to a court settlement? Will the Minister work with her colleagues in the Department of Health to ensure that the implementation of this measure does not have the effect—which it could have—of further increasing employers' liability insurance and forcing more businesses closer to the wall?
Ruth Kelly: The hon. Gentleman will be aware that any system of employers' liability insurance needs to be fair to all parties—to employers, to insurers and, of course, to employees who are injured as a result of an employer's negligence. We are aware of the pressure on the system, which is why we have commissioned this wide-ranging review, and it has already come up with many concrete proposals that are improving the situation. We must also ensure that, in future, all legislation is carefully scrutinised to maintain the pressures on the system at a minimum.
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