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I start with personal debt. Two million people are in extreme debt. According to the Bank of England, one in six people has severe debt problems. The number of mortgage possession orders going through the courts is now 100,000 a year. The level of debt service in relation to income is close to the rate when the last Tory boom burst. My question is simple: who is responsible? Is it the responsibility of borrowers? Is it the responsibility of lenders? Has the Bank of England not done enough? Is it adequate for the Chancellor to be a passive spectator or does he have a role in these matters?

The Budget numbers are impressive on the surface. The Chancellor has produced some impressive numbers for Gershon savings, but why should we believe them? Until he accepts that his numbers have to be fully independently audited—both the assumptions and the outcomes—he will be treated as the clever schoolboy who always gets 10 out of 10 in his tests because he marks them himself. Why does he not take advantage of his good initiative in partially increasing the independence of the statistical service to establish a fully independent system of fiscal policy monitoring?

The Chancellor presented the Budget numbers reassuringly, but he knows perfectly well that if capital investment is to grow, current spending, especially public sector pay, must be dealt with severely in the years ahead. He has taken on board some big, expensive, open-ended public sector spending commitments: the continuing Iraq war; big defence procurement contracts, such as Eurofighter and Trident; new nuclear power; Ken Livingstone’s Olympics; and ID cards. In that constrained environment, how can he guarantee that key public sector spending commitments, such as pensions, policing and hospitals, will be sustained?

I finish with a question that I put to the Deputy Prime Minister last week and which I think bewildered him. I am sure that the Chancellor will always want to be remembered not just for economic prudence but for a progressive record in advancing social justice, so can he answer the following simple question? After 10 years of Labour Government, why is income inequality as bad as when the Conservatives left power and why is wealth inequality—in assets—actually worse than it was then?

Mr. Brown: I shall deal individually with the points that the hon. Gentleman raised. On debt and household income, he has been a persistent critic both of the Bank of England and the Government, butthe figure for debt in relation to income—the debt repayments people have to make—was of the order of 15 per cent. in the 1990s; it is about 8 per cent. now. Of course, individuals have difficult problems that need to be dealt with; we need proper protection and advice for those people, but the hon. Gentleman must not compare a situation in the 1990s, when interest rates were 15 per cent. and people faced mortgage repossessions, with the situation now when interest rates are 5 per cent. [Interruption.] Interest rates were above 10 per cent. for four years. I do not think that the Conservatives should keep raising that issue in case I read out the mortgage rates that people had to pay in the early 1990s. The hon. Member for Twickenham (Dr. Cable) will agree that we must do more to help people who fall into debt. We continue to look at what more we can do.


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The hon. Gentleman put a direct question about Gershon. Of the Gershon numbers, 45,000 jobs in the civil service have gone, so it is not a question of something that is about to happen—it is happening now. It is part of our desire to drive forward efficiency and get resources to the front line, which I believe we are succeeding in doing.

The hon. Gentleman asked about poverty and inequality. Of course, in this global economy, they are huge issues, some of which a national Government can affect, but some of which—these days—a national Government cannot affect. I think he will agree, however, that to have taken 2 million children out of absolute poverty and 1 million children out of relative poverty is a major achievement, given that child poverty trebled in the years of the Conservative Government to more than 4 million. As I announced today, we will continue with additional measures to take people out of poverty.

The hon. Gentleman’s points to me about prudence pale into insignificance when I look at his policies. He is promising to cut taxes and to raise spending—[Hon. Members: “No”.] Every day I read a Liberal press release that promises an additional increase in spending. The hon. Gentleman now says that he wants to cut borrowing— [Interruption.] Behind him, someone is saying that he has a fiscal rule equivalent to that of the Conservatives. The only difference between the hon. Gentleman and the Conservatives is that he has at least admitted that he has to raise £20 billion from environmental taxes. He has at least put the figure out in the public arena, although I have to tell him that he would have to raise the price of petrol by 18p a litre and I do not think that the Liberals would be elected in any constituency on that platform.

John McFall (West Dunbartonshire) (Lab/Co-op): Last year, the Treasury Committee advised the Chancellor to double air passenger duties, so I am delighted to see that he has taken that advice and that aviation is playing its part in environmentally responsible policies. However, behind the pre-Budget report is the issue of globalisation, which is indeed daunting. Given that current trends up to 2020 indicate that 6 million people will still be lacking everyday numeracy skills and 4 million will be lacking everyday literacy skills, is it not the case that initiatives are required in the employment sector? We have seen it in the USA and it is starting to happen here that unskilled workers’ incomes are falling behind. Will the Chancellor work with employers and trade unions to ensure that we do not end up with a two-tier work force in future—some with rising wages and prosperity and the unskilled on stagnant wages living in comparative poverty?

Mr. Brown: The Leitch report alludes to that when it says that because of globalisation, there are 6 million unskilled workers in our economy today, but because most of the traded goods sector can find unskilled workers in other continents, we will need only 500,000 in 2020. We have a stark choice. We have to ensure that people today who do not have the skills, get them for the future. I would have thought that there would be all-party consensus on what to do to achieve that. Britain is in a race with other countries to ensure that we can successfully work globalisation to our advantage.


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Mr. Graham Stuart (Beverley and Holderness) (Con): Ten years.

Mr. Brown: The hon. Gentleman shouts “10 years”, but in the last 10 years a million more people have acquired adult and literacy skills and 3 million more people in the work force are skilled. That is what we need to do to ensure that we are best equipped for globalisation. I hope that we will see all-party support—when the Opposition get a policy that adds up, they may be prepared to support us—for a strategy of upskilling our work force right across the board. We are prepared to make the commitment to invest to do so. I look forward to coming before the Treasury Committee to debate those very issues.

Mr. Kenneth Clarke (Rushcliffe) (Con): Does the Chancellor accept that, although it is true that he has not destroyed the record of growth, stability and low inflation that he inherited in 1997, he is only extending our record-breaking period of growth and stability on a sea of mounting public debt and consumer debt, to which the hon. Member for Twickenham (Dr. Cable) has already referred? If the Chancellor’s successor believes the extravagantly optimistic descriptions of the public finances that the right hon. Gentleman has just given, he will make serious policy errors. Does the Chancellor accept that his fiscal rules are now lost in a maze of creative accounting and absurd assumptions about the date of the cycle? Even in his pre-Budget reports, every year he has to raise more tax from soft political targets, such as the oil industry last year or transport through green taxes this year. Does he accept that his legacy to his successor will be the toughest public spending round that we have seen for a very long time, in which his successor will have to keep public spending below the growth of the economy as a whole for the foreseeable future? Judging from the Chancellor’s rhetoric, he will apparently give him no support in principle at all from his position as Prime Minister.

Mr. Brown: I always like interventions from the former Chancellor and I am grateful to him for attending today’s statement. However, his central point was that debt is higher under us than under him. Debt stood at 44 per cent. of national income when he left office and it is 37 per cent. and below today. He should be congratulating us on our achievement. What if I had taken the advice of the former Chancellor at any point during the last 10 years? In 1998, he was predicting a recession and he opposed giving independence to the Bank of England. In his column on 21 June 1998, he wrote:

That was the first of 10 years of stable growth in our economy.

Mr. Andrew Smith (Oxford, East) (Lab): I congratulate my right hon. Friend on his statement. My constituents will particularly welcome his commitments on science, education and skills as the keys to living standards and quality of life in the future. In carrying forward the recommendations of Lord Leitch’s excellent report, what incentives and measures is the Chancellor considering further to involve all employers in the challenge that lies ahead, especially those who do not do much at the moment?


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Mr. Brown: I am grateful to my right hon. Friend. It was under his period at the Department for Workand Pensions that unemployment came down from1.6 million to the 900,000 of today. He is absolutely right that the central question is how to persuade people to get the skills for the future. He knows that the “Train to Gain” programme, with which he was involved in the DWP, is now equipping 90,000 men and women in the workplace with the necessary adult skills. Only yesterday, I visited a college where men and women who had previously thought that they would never get a skill were encouraged to come into college to acquire it. Many of them were talking about starting their own businesses in the future. That is the way forward. I appreciate what my right hon. Friend says about Oxford. He is an excellent representative of the constituency around which a huge amount of science and innovation is going on. I can give him the assurance that we will continue to invest in science and innovation in his constituency.

Mr. Edward Leigh (Gainsborough) (Con): The National Audit Office has expressed concerns about the claimed efficiency gains because of double counting and confusion about baselines, which also applies to the Chancellor’s point a few moments ago about the saving of civil service numbers. Are the efficiency claims believable when they ignore the cost of setting up and running the Gershon efficiency projects?

Mr. Brown: Mr. Gershon—actually, I think it is now Sir Peter Gershon—undertook the review. There was no huge staff of civil servants around him, but he recommended that 84,000 civil service jobs had to go. As a result of his recommendations, large numbers of jobs have gone in the Department for Work and Pensions, Her Majesty’s Revenue and Customs and other Departments. The hon. Gentleman can see the figures for himself. There have been big changes and more will take place in those important Departments.

I understand where the hon. Gentleman comes from. He wants £50 billion of tax cuts, so he would cut back very heavily on public services. We have to get the right balance between the public services that we need, taxation that is fair with low rates wherever possible and, at the same time, stability in the economy. My job as Chancellor is balancing tax stability and the public spending that we need. I believe that we are making the right decisions today.

Kali Mountford (Colne Valley) (Lab): The textiles industry is facing major global challenges, so as we consider the innovations that it needs, is it not right to back proposals such as those in Yorkshire on the new technical textiles? We need to look into getting university-level degree standards, so that people can go right through from school into university. We should make the investments that we need to take those industries forward.

Mr. Brown: My hon. Friend has pioneered work that ensures that the textile industry can upgrade and, because of the quality of her work, get the design lead that will enable us to sell textiles to the rest of the world. A great deal of good work is being done in my hon. Friend’s constituency and throughout Yorkshire and the surrounding area to upgrade textiles with new
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investment, taskforces and skills investment. We will continue to give her constituents the opportunity to get the necessary adult skills, so that we can move to the next stage of globalisation. It is a measure of our commitment to doing so that the Leitch report recommends major targets that I believe we will be able to meet. One such target is the need substantially to increase apprenticeships.

Stewart Hosie (Dundee, East) (SNP): Under this Government, we have seen average growth in the UK of about 43 per cent., compared with 35 per cent. in Scotland, and an average growth rate over the decade of 2 per cent. in Scotland and 2.9 per cent. in the UK—a 30 per cent. growth gap. If we had matched even the UK’s growth rate, Scotland’s economy would be £5 billion bigger—£1,000 a head. If we had matched low-corporation-tax Ireland’s growth rate, the Scottish economy would be £33 billion bigger—£6,000 a head.

It is extraordinary that, in the statement today, there was nothing at all on the Scottish growth gap. Indeed, the Chancellor mentioned Scotland once, fleetingly,34 minutes into a 37-minute statement. Instead, he comforted himself, as usual, with the mantra that there have been 38 consecutive quarters of growth under Labour—ignoring the fact, of course, that there have been four downturns in Scotland and a full-blown manufacturing recession.

The statement today failed to provide any coherent strategy for Scottish economic growth and did nothing for individuals—not even a word of comfort for those in the 328,000 Scottish households who now live in fuel poverty in an energy rich nation such as Scotland. Under the Chancellor’s stewardship over the past few years, we have witnessed an increase of more than 40,000 homes suffering—

Mr. Speaker: Order. The hon. Gentleman must ask a question. This is not an opportunity for him to make a counter-statement. I can allow him to continue if he asks a question, but it must be very brief. He has had a good allocation.

Stewart Hosie: Thank you, Mr. Speaker.

May I ask the Chancellor what part of the 30 per cent. growth gap he is proud of? If he is ashamed of it, what precisely does he intend to do about it?

Mr. Brown: Under a Labour Government in Scotland, unemployment is down, employment is up, growth is up and living standards are up. The one thing that would damage Scotland most of all would be to pursue the policy of the Scottish National party, under which there would be a separate Scottish pound, a separate Scottish interest rate and separate Scottish border arrangements. I will give just one example. Probably the biggest industry in Scotland is now the financial services industry, on which 125,000 people depend. If 93 per cent. of that industry’s exports go to England, I think that the hon. Gentleman had better wake up to the fact that an independent Scotland could not guarantee having the jobs or the growth that we have now. He would be ashamed of himself putting forward a policy that is so intellectually bankrupt.


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Joan Walley (Stoke-on-Trent, North) (Lab): I welcome the measures in the pre-Budget report that relate to the environment and follow on from the Stern report, but given the challenge of the global economy, it is crucial that we find a way to link action locally to the broad general concepts. Will the Chancellor take a particular interest in what is happening in north Staffordshire and Stoke-on-Trent, because of the job losses that we are still getting and the need to promote enterprise and to join up the education and skills agenda and so on? Will he meet north Staffordshire MPs to ensure that we take forward that whole agenda?

Mr. Brown: I will meet north Staffordshire MPs again—as my hon. Friend knows, I have met them before—to talk about the very issues of the future: not only manufacturing, but jobs in the area. As she knows, we have tried to get resources into both her constituency and the rest of the area, so that we can create new job opportunities. That is our aim. The way to respond to globalisation is to give people the skills and opportunities for the future, and that is what the statement is about.

Mr. Michael Fallon (Sevenoaks) (Con): How can the Chancellor claim that his fiscal rules are fully met when so many PFI liabilities and public sector pension liabilities are kept off the balance sheet? Given that those commitments are guaranteed, why are they not properly counted?

Hon. Members: Hear, hear.

Mr. Brown: Opposition Front Benchers say, “Hear, hear.” We operate exactly the same rules and procedures that operated under the previous Conservative Government in this respect. [ Interruption. ] If the shadow Chancellor or his colleagues are saying, “This is the Enron,” it is a criticism of the previous Government for introducing those rules.

The hon. Member for Sevenoaks (Mr. Fallon) should say in the House what he is prepared to say on television. I have just been handed a note to say that, only a few minutes ago, he told Sky News that “the Chancellor has done a good job getting the economic framework stable.” Why does he not say that in the House?

Jim Cousins (Newcastle upon Tyne, Central) (Lab): May I ask my right hon. Friend to go back to his Budget three years ago, when he announced that Newcastle would be a science city? That is reinforced today by his pledge for more money for medical research and stem cell research, which are the heart of Newcastle’s recent world-beating scientific successes. May I ask him to give Cabinet leadership for science? May I ask him to share out the money that he is making available, not through closed old boy networks, but in an open and accountable way, so that if, as I believe, Newcastle can have 50 per cent. of the best ideas, it can have 50 per cent. of the money?

Mr. Brown: I am grateful to my hon. Friend for raising those issues. I have talked to him about them before. I have visited the stem cell research that is being done in Newcastle, which is one of the world leaders, and Britain is one of the world leaders in stem cell
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research partly because of what is being done in Newcastle. We are determined to support that. I think that he will find that the new arrangement, by pooling the NHS research budget and Medical Research Council money and working with the companies, allows us to be more proactive in the projects that we can support to make new drugs and new treatments more easily available. I am absolutely sure that Newcastle’s leadership on that will be rewarded when allocations are made.

Mr. John Redwood (Wokingham) (Con): I welcome the Chancellor’s realisation that a lack of transport capacity is a major constraint on our competitiveness. Given his new policy of giving that priority, what new road and rail projects will start in the next couple of years to show that that is more than words?

Mr. Brown: More than started under the previous Conservative Government—we have trebled the amount of spending a year on transport—but the right hon. Gentleman puts the dilemma that the Conservative party must solve. Yesterday, we had a transport debate in the House of Commons and all the Conservative Back Benchers were urging that there should be more spending on transport, while the shadow Transport Minister was saying on his website that corporation tax should be cut in half, losing £20 billion in revenue. How can the shadow Chancellor not control the Conservative party’s Front-Bench representatives? How can he not ensure that they do not make public spending commitments that they cannot meet and that they do not make announcements on tax cuts that he cannot afford? A year into his job as shadow Chancellor, he has lost complete control over the Conservative party’s Front Benchers.

Mark Durkan (Foyle) (SDLP): May I assure the Chancellor that there will be a very significant welcome for the very significant commitments that he has made or confirmed today in his report for education, child benefit, community-based child support and, of course, the support for the continuing efforts against child poverty globally. Those commitments confirm his continued determination to ensure that every service, every system and every budget proclaims that every child is our child. Of course, as well as social support, economic opportunity for our children’s future depends on innovation and competitiveness, which he also addressed. In that context, for the Northern Ireland political parties, can he colour in the sketchy outline of 1 November for an innovation fund?


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