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Rob Marris (Wolverhampton, South-West) (Lab): Is my right hon. Friend aware that research by the Department for Work and Pensions shows that a single female pensioner aged 75, who has too much income to be eligible for any pension credit whatever, is still better
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off than she would have been if the Government had not introduced the myriad measures to which he refers but had simply restored the earnings link?

Mr. McFall: I agree entirely, and I shall deal with that point with an anecdotal comment. Just a few months ago, there was a council by-election in my constituency—there is one tomorrow, in which I shall vote—and I met an old lady. As my right hon. Friend the Member for Airdrie and Shotts (Mrs. Liddell) would agree, we might call her an old dear in Scotland. She said, "I was brought up on a farm and I've been a Tory all my life. You're the Labour MP for this area, aren't you, Mr. McFall? I want you to go back and thank that fellow, Gordon Brown, because over the past few years my income has increased and I've never been better off." That was said by an old Tory farmer, so our prospects in the next general election are pretty good.

On behalf of the pensioners in my constituency, I welcome the pension credit guarantee and the savings credit. I have been a Member of Parliament for 18 years, and for well over a decade of my time here, I was used to pensioners coming into my constituency surgery and saying, "Look, I've got just a little bit of extra savings, and there's a 100 per cent. withdrawal rate as a result." The pension credit is helping to alleviate that situation, but we still have some withdrawal tax rates of 50 or 60 per cent. I suggest to my right hon. Friend the Chief Secretary that we should work on improving that situation to ensure that we do not have such penal rates. However, when we consider that in 1997 the withdrawal tax rate was 100 per cent., we see that have come a long way.

I want to mention China. The need for investment in manufacturing and the need to upskill our population are extremely important. As I have said, the Treasury Committee went to China the other week. Three things struck us about our visit to China that we should take note of: first, the sheer size of the country; secondly, the pace of change there; and, thirdly, the need to pay close attention to China. When we put together the first two—the size and the pace of change—the result is an emerging economic superpower with an increasingly important impact on the global economy.

First, China is supporting the American current account deficit. Secondly, it is supporting many countries in Asia. Thirdly, it has bilateral arrangements with countries as far apart as Africa and south America. Australia is flourishing because of the commodities market. Half the cement in the world is imported by China. China is looking to Africa, especially Nigeria, for oil. A fascinating example comes from one of my former colleagues with whom I worked, the former Secretary-General of NATO, who visited Venezuela about six weeks ago. He told me that the second biggest user of the Panama canal is China. So China's stamp is all over the world—it is a global superpower—and that is a very important issue for us to take on board.

China's population is 1.4 billion, but it is sometimes very hard to get an understanding of that when we bandy such figures about. It may help to consider the fact that more people are learning English in China today than the population of Britain. There are 60 million people in Britain, but more than 100 million people in China are learning English. That gives us an idea of what is happening there.
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Let us go down to a very low level—sport. English football attracts 500,000 fans to games and another 8 million people watch it on television. English sport is a very big issue in China: 400 million people watch English football in China. An example that was cited to us is Stockport County. I do not know whether any hon. Member present represents Stockport, but certainly, coming from Scotland, I would not consider that as one of the biggest teams, or as a team in the premier league. Am I correct?

Rob Marris: Correct.

Mr. McFall: I think that I am correct. That team plays to gates of about perhaps 4,000 or 5,000 every week—but it has an arrangement in China, and when it goes to China it plays to crowds of 25,000 to 30,000. No wonder the English Football Association has set up a website as the result of such initiatives.

On a per capita basis, China remains a relatively poor country with per capita income of approximately $1,000 per annum, but it is a £1.4 trillion economy and is in the process of overtaking the United Kingdom to become the fourth largest economy in the world. In 20 years' time—who knows?—it could be up there with America.

The Chancellor mentioned that China is now producing 2 million graduates and is spending three to four times what we spend on research and development. It has accounted for a bigger share of world growth over the past few years than the whole of the G8 combined. Given that China exports more than France, Italy and Britain combined and is the world's No. 1 destination for foreign direct fixed investment, we have a challenge on our hands in this country.

There are two ways of looking at that. We can consider it a threat or we can consider it an opportunity—and it is important that we consider it as an opportunity. Chinese politicians and officials have indicated to us that they are heavily engaged in a search for new technologies to improve energy efficiency. China has huge scope to make efficient use of energy and to make its energy production—currently heavily reliant on coal—less environmentally harmful. There are opportunities for clean technology in China—an area in which we should encourage British firms to get involved.

The present level of car ownership in China is 10 per 1,000 people. The average in the EU is 500 per 1,000 people. What will be the environmental damage if China gets up to the EU average? There are opportunities for us in China, but there are also responsibilities to ensure that, in a global sense, we have a measured environmental policy and that we help our economy while engaging with the Chinese.

The need for positive engagement is extremely important. The processes, such as the entry of China to the World Trade Organisation, mean that China has begun constructive dialogue with the rest of the world. We need to build on that and broaden it out into other economic co-operative bodies, but that may require a change in the international economic bodies as well as on the part of China. When the Governor of the Bank of England, Mervyn King, came before the Treasury Committee a number of months ago, he mentioned that very point, as did the Chancellor.
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It is striking that many of the international bodies that are currently used as platforms for dialogue between the world's major economic powers evolved long before China's emergence as a significant economic force. These bodies have shown themselves to be capable of change. To accommodate Russia, the G7 became the G8, but as the pace of change in the global economy has accelerated in recent years, our international economic organisations have still to adapt to the changing environment.

Economic experts have indicated to the Select Committee that a lot of what the G8 currently talks about—oil prices, currency evaluation and world trade negotiations and imbalances—are subjects increasingly beyond the control of the G8. We should be considering the role of China in such bodies.

John Barrett: I agree with much of what the right hon. Gentleman says, but does he agree that much of what he says about China is also applicable to India, which in future will have a massive impact on the world economy?

Mr. McFall: I agree entirely. I have mentioned that China is producing 2 million graduates a year. India also produces 2 million graduates a year, so we have two superpowers, in economic terms, producing 4 million graduates a year with a heavy emphasis on research and development. When we take account of India, it makes it more urgent that we develop.

The Chancellor has pointed out that as the world economy develops and major new economies such as China and India emerge, there is a strong case for reassessing what international bodies such as the International Monetary Fund and the World Bank do. The calls on those organisations now are very different from those that existed when they were set up in 1945.

Lest anyone think that this will just be a case of inviting China into the G8 to become the G9, China—in my humble opinion—has moved on from that. China is developing links with developing countries, and is more interested in the G20. We should approach China not in an arrogant way—saying that we are making way for it in the G8—but in a more humble way, recognising its importance to the global economy and working along with China for its benefit, but particularly for our benefit.

As we emerge into the 21st century, we have a stable economy, but if we are not alert to the challenges that face us in a global context, we could find ourselves behind the curve in 10 or 20 years. I certainly do not want that, and I urge the Government to look at the economy in a wide fashion, as they have done to date.

2.15 pm

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