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“no research was being done”
on it? He said that it was designed for the next day’s headlines, not for the next generation of school children.
Mr. Brown: What the hon. Gentleman says is completely wrong. I announced in the Budget new money for capital spending on schools, so that each pupil in state schools would have exactly the same amount of capital spending invested in him or her as is the case in private schools. [Interruption.] They do not think that investment in buildings or computers or equipment is important. [Interruption.] When we came to power, the average investment per pupil in buildings and equipment was £100 a year; today it is £1,000 a year—a tenfold rise. The hon. Gentleman should look at his own party’s policies, which have consistently tried to cut expenditure on education.
Mr. John McFall (West Dunbartonshire) (Lab/Co-op): Will the Chancellor continue his commitment made at Gleneagles last year to halve world poverty by 2015? If the wealthiest countries can increase their spending from £20 billion a year to £200 billion a year over the next decade, we can indeed reach that target. If his fellow Finance Ministers think that is challenging, will they look at global arms expenditure, which is £900 billion? In the comprehensive spending review that he will announce later this month, will he give a commitment that the United Kingdom will do more than its bit to ensure that the target of halving world poverty by 2015 is achieved?
Mr. Brown: International development spending in the United Kingdom increased last year and this year and will increase next year. We are on course to meet our targets for international development spending. World development aid is increasing. We have signed the agreements that make it possible to write off multilateral debt, so in total we expect up to £170 billion of debt to be written off. The condition of that is that the money will go to education, health and anti-poverty programmes in the developing countries. At next month’s meeting of the G8, we are determined to push forward so that every country agrees that the commitments that we made for the millennium development goals on poverty, education and health are met. I hope that that is the common view in all parts of the House.
Mrs. Theresa Villiers (Chipping Barnet) (Con): Did the G8 Finance Ministers discuss the fact that in 2005 Britain recorded its slowest economic growth for 13 years? In the first quarter of this year, our growth put us 15th out of the 23 Organisation for Economic Co-operation and Development states that have reported so far. We are below the OECD average, below the G7 average, behind the EU 25 and no better than the poorly performing eurozone. We may be ahead of slow-growing France, Germany and Italy, but when will we start catching up with the world’s successful economies?
Mr. Brown:
The Conservatives seem to be banking on a recession. They must face up to the fact that growth is strengthening this year and will be faster in the second half of the year than in the first half. Growth since 1997 is far faster than it was in the 18 years before 1997, and we are the country that has low inflation, low interest rates, high employment and sustained growth—the opposite of what happened with
two major recessions in the Conservative years. The hon. Lady will also have to face up to the fact that, to maintain our levels of growth, we will need the investment in education and science and the investment in the infrastructure for the future, so her announcement at the time of the Budget that she would not support the additional public spending will have to be revisited. I hope that she will agree that she has to do that.
Mrs. Villiers: The Chancellor is in denial about the way everything is going in the economy. If everything is going so well, why has Derek Scott, the former economic adviser to the Prime Minister, criticised the Chancellor’s “higher taxes”, “intrusive micromanagement”, “deteriorating fiscal position” and “burdensome regulation”? Does the right hon. Gentleman agree with Derek Scott, a Labour insider, that Labour’s record is “mixed”, “depressing” and “dispiriting”?
Mr. Brown: If things are going so badly, why did the shadow Chancellor praise us only a few months ago for our record of macro-economic stability? Why did he praise us for having an economic record in creating stability, which his party had never achieved? If things are going so badly on regulation, why did the Heritage Foundation, which is beloved of the right wing of the Conservative party, report that we are a more liberal and deregulated economy now than in 1997, when we took office? If things are going so badly, why are there more people in work, why are interest rates low, why are there more home owners, and why is there more prosperity in this country than ever the Conservatives could achieve?
Debt Cancellation
8. Chris McCafferty (Calder Valley) (Lab): What recent assessment he has made of progress on cancellation of the debt of the world’s poorest countries. [77549]
The Economic Secretary to the Treasury (Ed Balls): At their spring meeting, the World Bank governors confirmed the 100 per cent. debt cancellation for heavily indebted poor countries, matching the debt relief that the International Monetary Fund has been providing since January. World Bank debt cancellation will be implemented on 1 July, the first day of its financial year. Debt relief is already making a difference in Zambia, for example, where the Government are using the proceeds of debt relief to abolish health fees for rural populations.
Chris McCafferty: How will my hon. Friend ensure that the funds released to the poorest countries through debt cancellation will be used for basic services to achieve the millennium development goals, particularly reproductive health services for HIV prevention, the reduction of child and maternal mortality and gender empowerment?
Ed Balls:
My hon. Friend is right to press us on those issues. She has considerable expertise and a fine record of campaigning on those issues over many years. She
has mentioned reproductive health, and she knows that unprotected sex is the most common cause of HIV/AIDS infection, which currently affects millions in developing countries, including 2 million children around the world. Worldwide, less than one in five people have access to HIV prevention services. Last year, DFID spent £242.9 million on improving maternal health services and reproductive health services, but, as I have highlighted in the case of Zambia, releasing resources for investment in preventive health care is the particular focus of discussions. We must do everything that we can to fight the scourge of AIDS around the world.
Mr. Mark Hoban (Fareham) (Con): The Chancellor has highlighted the importance of trade as well as of debt cancellation as a means of lifting people out of poverty. The Government know that a good result from the Doha round will lift more people out of poverty and improve the economies of particular countries. When did the Chancellor last meet Peter Mandelson face to face to put that case?
Ed Balls: We are in regular touch with commissioners on all those issues. The successful completion of the round is extremely important. Although we made progress at the end of last year, the situation is still disappointing. The hon. Gentleman is right to press for further action, and we will not lower our ambitions. In particular, agriculture is key—we need an ambitious outcome to the round, which means an ambitious outcome on agriculture. We will continue to press commissioners and Trade Ministers around the world to get an outcome as soon as possible.
Kitty Ussher (Burnley) (Lab): Will my hon. Friend join me in congratulating organisations such as Jubilee 2000 on their work over many years in highlighting the need to cancel debt in the poorest countries of the world? Does he agree that that type of people power can be incredibly effective both at home and abroad? Will he therefore update the House—
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. That is at least two questions.
Ed Balls: My hon. Friend is absolutely right. Make Poverty History was a truly brilliant campaign—it was probably the most successful political campaign that I have ever seen in terms of mobilising, in particular, young people to support international social justice. There has also been some fine campaigning by hon. Members. In particular, my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) is promoting a private Member’s Bill that has Government support tomorrow. The Bill will make sure that we continue to make progress on the millennium development goals, and I urge all hon. Members to be here tomorrow to support it.
Tax Credits
9. Malcolm Bruce (Gordon) (LD): What steps he is taking to tackle overpayment of tax credits. [77550]
The Paymaster General (Dawn Primarolo): End of year adjustments are an integral part of the flexible system that responds to families’ circumstances as they change. Eliminating the need for adjustments would require a move to a fixed system, where eligibility would be based on the previous year’s income and circumstances, which would diminish responsiveness. The Government have introduced administrative enhancements and policy developments to improve the operation of the tax credits system, which includes measures to reduce overpayments.
Malcolm Bruce: I hope that that works. Last month, the Paymaster General wrote to me confirming that, after an examination of the transcripts of a constituent’s telephone calls to the Revenue, the Revenue acknowledged that it had incorrectly advised the constituent, that the constituent would not have to repay the sums involved and that the constituent would be compensated. Given the clear evidence that staff are finding it difficult to cope with the system, the lack of staff training, the evidence of fraud and the injustice to so many thousands of citizens who have claimed those credits and who have been forced to pay them back, will she acknowledge that the Revenue should always examine the transcripts and not persist in issuing denials when the mistake is usually theirs and not the constituent’s?
Dawn Primarolo: Improvements to the tax credit system have been discussed in detail in this House, and I am sure that those discussions will continue. I cannot comment on the specific case raised by the hon. Gentleman, but the system to determine whether an error has occurred and whether an overpayment should be written off is clearly defined and clearly followed. If he believes that that has not happened in the individual case that he has mentioned, I am happy for him to bring it to me again.
Mr. Brian Jenkins (Tamworth) (Lab): My right hon. Friend will realise the hardship that is caused to many families who have to repay tax credits, but does she recognise, as I do, that only a fool or a knave would ever pretend that we will get this 100 per cent. correct? I assure her that I would rather be struggling to defend overpayments than underpayments under this scheme.
Dawn Primarolo: My hon. Friend is making a very clear case. Some 6 million families are receiving tax credits, and their role in lifting 700,000 children out of poverty is making a huge contribution to all our communities. Their flexible and responsive nature is particularly important for families whose incomes fall and who therefore need more tax credits. He will know from last year’s figures that 700,000 families’ incomes fell significantly and they then received extra support from the tax credits system, which the system supported by the Opposition—the Liberals and the Tories—would have denied them.
Mr. Mark Francois (Rayleigh) (Con):
Yet another question on tax credits; yet another occasion on which the Chancellor has failed to defend his own failed policy. In 2004-05, almost half of the 6 million tax credit payments were wrong. This week, the Institute
for Public Policy Research, Labour’s favourite think-tank, produced a report that said:
“as the system currently operates, there are real doubts about whether this is an effective policy mechanism.”
When will the Chancellor accept personal responsibility for his creation of a massively over-complicated system that is causing misery to millions of families and needs to be reformed?
Dawn Primarolo: It does not matter how much the hon. Gentleman wriggles in trying to disguise the fact that the Conservatives want to abolish tax credits and take them away from millions of families, because he cannot deny that whenever this has been discussed in the House, including by the Treasury Committee, it has been concluded that tax credits are a significant contribution to challenging and eradicating poverty. The basic policy is correct, and the administration must follow that.
David Taylor (North-West Leicestershire) (Lab/Co-op): There is no doubt that tax credits have helped millions of families—thousands in North-West Leicestershire and in every other constituency—in tackling poverty. However, can my right hon. Friend reassure the House that the substantial income disregard that is being implemented is the best way of tackling poverty? Is it not at least possible that it will be a significant incentive to collusion in fraud in some cases? What assessment has been made of the cost of this new initiative?
Dawn Primarolo: First, as my hon. Friend can see, the package of announcements, including the disregard, is in the pre-Budget report books. Secondly, tax credits have two objectives: first, to assist in the eradication of poverty; and secondly, to help people to into work. The disregard is designed specifically to help people to transfer into work and to support them in that early period. Thirdly, I can give my hon. Friend the undertaking that he seeks in that the tax credits system will continue to ensure a robust compliance strategy.
Inheritance Tax
10. Mr. Peter Bone (Wellingborough) (Con): What the total cost was of administering inheritance tax in each of the last five years; and what the estimated cost is for 2006-07. [77551]
The Chief Secretary to the Treasury (Mr. Stephen Timms): The cost of collecting each pound of inheritance tax was 1.23p in 2000-01, 1.21p in 2001-02, 1.38p in 2002-03, 1.21p in 2003-04 and 1.14p in 2004-05, the most recent year for which figures are available. I do not expect a big change in the current year.
Mr. Bone: Why will not the Government scrap this morally indefensible tax?
Mr. Timms:
Because it is morally the right tax. Only 6 per cent. of estates paid inheritance tax last year. The zero threshold is £285,000 this year, rising to £325,000
in 2009-10. All wealth passed to spouses or civil partners is tax free. It is right to apply tax in that way and we will continue to do so. If the hon. Gentleman is suggesting that it should be abolished, he needs to explain where the money would come from.
Helen Goodman (Bishop Auckland) (Lab): Does my hon. Friend agree that any party that claims to be concerned about equal opportunities must have a fair inheritance tax regime?
Mr. Timms: I do agree; my hon. Friend is right. I expect inheritance tax to raise £3.6 billion this year. The Conservative party needs to identify the spending that would be cut or the taxes that would be raised to fill the gap.
Tax Credits
12. Mr. Andrew Pelling (Croydon, Central) (Con): What steps he is taking to reduce underpayments of tax credits. [77553]
The Paymaster General (Dawn Primarolo): Her Majesty’s Revenue and Customs actively encourages claimants to report changes in circumstances promptly to reduce the likelihood of underpayment.
Mr. Pelling: I thank the right hon. Lady for that answer. Will she take cognisance of the Treasury Committee’s suggestion that a complete analysis should be made of official error? Would that analysis be published?
Dawn Primarolo: A full statement on the strategies for tackling fraud and error will be published shortly.
Mr. David Laws (Yeovil) (LD): The Treasury report on tax credit fraud and error was supposed to be released last month. I understand from the Department that it has been completed. Where is it?
Dawn Primarolo: The report will be published shortly.
Science and Innovation
13. Mrs. Siân C. James (Swansea, East) (Lab): What assessment he has made of the contribution of expenditure on science to the performance of the economy; and if he will make a statement. [77554]
The Chief Secretary to the Treasury (Mr. Stephen Timms): A study by the Organisation for Economic Co-operation and Development in 2001 found that a 1 per cent. increase in public research and development spending leads to a productivity rise of 0.17 per cent. There is also growing evidence of a link between effective use of information and communications technology and higher productivity.
Mrs. James:
I thank my hon. Friend for his response. I believe that it is important to invest in science to help
the UK economy grow and for us to compete in an ever increasing global economy. I draw his attention to the semi-conductor company, Pure Wafer, in my constituency. It is the only company outside Japan with the technology and capability to recycle 300 mm silicon wafers on a global scale. It has received grant assistance and brought jobs to Swansea, and it was recently awarded the title of Welsh company of the year. Will he ensure that the Government continue to invest in science to provide local jobs and help us to compete on a global scale?
Mr. Timms: I can certainly give my hon. Friend that assurance. I congratulate the company in her constituency and pay tribute to the support that she gives it and other firms in her area. The 10-year strategy for science that we launched two years ago set out the ambition that public and private investment in research and development should reach 2.5 per cent. of GDP by 2014. Thanks to the new stability that we have achieved in the British economy plus the extra support for science, we can look forward to many more examples, such as that to which my hon. Friend drew the House’s attention.
Adam Price (Carmarthen, East and Dinefwr) (PC): Given the Chief Secretary’s comments about the link between science expenditure and economic development, why does Wales, with 5 per cent. of the UK population, receive only 2 per cent. of the science budget, which is about a third of what the Government spent last year on science overseas?
Mr. Timms: The science budget will reach £3.4 billion by the next financial year—more than twice the 1997 level in cash terms. Of course, many decisions about money that is committed in Wales are now for the Welsh Assembly. However, there are many outstanding examples in Wales of science-based companies thriving, thanks to what the Government have done.
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