The Chancellor of the Exchequer (Mr. Gordon Brown): With debt repayments as a proportion of income at 8.9 per cent., in contrast to 15 per cent. at the peak in 1990, the International Monetary Fund and the Bank of England have both said that the impact on macro-economic policy is small. However, to protect the most vulnerable citizens subject to illegal money lenders, I can announce that, as part of our financial advice and inclusion programme, we will extend to every region of the country projects to improve advice, and to expose and secure higher prosecutions of people who are illegally charging exorbitant rates of interest.
Greg Mulholland: I thank the Chancellor for his answer, but I find it hard to believe that this issue does not have an impact on the macro-economy. According to Credit Action, total personal debt in 2006 was a staggering £1.25 trilliona figure that has doubled in the last 10 years. Why has the Chancellor failed over the last 10 years to address this very real personal and economic problem? Also, can he tell us why it has taken so
are unlikely to have large implications for monetary policy because any effect they might have had on aggregate consumer spending is likely to have been relatively small.
As for the issue of debt, there are 1.8 million more home owners in this country with mortgages, but I see that as one of the Governments achievements, not something that we should be criticised for.
John McFall (West Dunbartonshire) (Lab/Co-op):
Is it not time that some balance was restored on this issue? Are not total household assets in this country
worth £7 trillion, and have not real incomes increased by 65 per cent. since 1997, allowing for personal debt? The big issue is about those who are excluded from the financial community. I know that the Government are hoping to tackle the problem in their 10-year programme for financial inclusion, but can the Chancellor provide some comfort this morning that the part of the community that is excluded financiallyand also sociallywill be incorporated in the coming years?
Mr. Brown: I know that my right hon. Friend has taken a big interest in these matters. We must do more to help people who are either subject to illegal money lending or lack the advice and expertise that they need to help them make their personal decisions. That is where the resources are going. We are providing more resources for help with financial inclusion, more help with money advice and more support to organisations that provide such advice. The crackdown on illegal money lenders, which started in two areas of the country and was extended to another three, making five, will now be extended to every region. With the local authority working with the police for higher prosecutions, we can send out a signal that we are not going to tolerate illegal money lenders charging exorbitant rates of interest, often running into hundreds of per cent. We will continue that crackdown, but I have to say that the economys success over the last 10 years is such that peoples real living standards have risen, with wages going up by 48 per cent. over the last 10 years and consumer price index inflation by only 18 per cent.
Mr. Julian Brazier (Canterbury) (Con): Measures to tackle predatory loan sharks are obviously welcome across the political spectrum, but will the Chancellor tell the House why average levels of household indebtedness are so much higher in Britain than in almost all our European neighbours?
Mr. Brown: I have just given the House the figures. As a proportion of income, debt in this country is something in the order of 8.9 per cent. In the early 1990s, it was in the order of 15 per cent. Mortgage lending as a proportion of household incomes is around 15 per cent., whereas in the early 1990s it was something in the order of 30 per cent. The situation as a proportion of household incomes is far better now than it was, so the hon. Gentleman should be congratulating us on our economic performance.
Angela Eagle (Wallasey) (Lab): Will my right hon. Friend share with the House his views on what would happen if personal financial services products were deregulated, which is an idea going around the City at the moment?
Mr. Brown: One issue raised by both illegal money lending and certain instances of people having been given bad advice is the need for proper regulation of the financial services industry. I had hoped that there was an all-party consensus that that should happen. Unfortunately, the Conservative report on financial services and economic competitiveness says that we should
allow people to buy and sell products that are not regulated if they have signed to do so.
That would be a recipe for more people falling into debt, more people being exploited and more people being subject to unregulated behaviour that would lead them into being far worse off than they are now.
Mr. David Laws (Yeovil) (LD): Has the Chancellor had the opportunity to make any assessment of the impact on personal debt of tax credit overpayments? Given that during his time in India, the right hon. Gentleman compared himself not only to Gandhi but to Lady Thatcher and Winston Churchill, could he use those great abilities, before he becomes Prime Minister and moves on from the Treasury, to resolve the outstanding problems in the tax credit system?
Mr. Brown: The hon. Gentleman will know that as a result of the rises in child benefit and child tax credit, 700,000 children have been taken out of poverty. As a result of the changes that we have made, poverty among childrenwhich trebled under the Conservative Governmenthas been falling under this Government. The hon. Gentleman should be applauding us for our policy on tax credits, which is taking more and more people out of poverty, instead of criticising us.
Ms Angela C. Smith (Sheffield, Hillsborough) (Lab): Personal debt can be either secured or unsecured. Will my right hon. Friend tell the House whether there are significant differences in the overall growth of the two kinds of debt?
Mr. Brown: Consumer debtconsumer creditis rising a lot faster than it was, and I am concerned enough about some of the arrangements that individual consumers and citizens enter into to look at what more we can do in relation to financial advice, to giving people specific help through the different agencies that are available, and to cracking down on illegal moneylenders. It is true that the overall level of personal debt has had a limited effect on the macro-economic management of the economy, but it is also true that when people fall into difficulty, they need more help. I hope that there will be consensus that we should do more to help people in that position.
Mr. George Osborne (Tatton) (Con): The Institute for Fiscal Studies has said this week that the rising cost of living and stagnating real incomes are causing personal debt problems for the poorest families. Will the Chancellor confirm that inflation in Britain is now double the average of the developed world, and double the level that he inherited? A simple yes will do.
Mr. Brown: Inflation is 3 per cent. Average inflation under the Conservatives was 6 per cent. Inflation in the United States of America has risen as high as 4.3 per cent., and it has been above 3 per cent. in the euro area. In another G7 country, Canada, it has been above 4 per cent. Our record of keeping inflation low throughout the past 10 years is the reason why we have had lower interest rates than other countries, along with 10 years of unparalleled sustained growth. The hon. Gentleman should be congratulating us on that.
Mr. Osborne: The Chancellor talks about the previous Government, then goes round telling newspaper editors how much he admires Margaret Thatcheralong with Mahatma Gandhi, who presumably taught him all about peaceful non-co-operation with the rest of the British Government. The facts are that inflation is double the level that he inherited, the real cost of living is rising even faster, personal debt is at record levels, unemployment has been rising in Britain but falling in the rest of the world, and real living standards for millions of families are now falling. The Chancellor blames the Prime Minister for everything else that is going wrong under this Government, but who is to blame for this?
Mr. Brown: We are about to enter the 40th quarter of sustained economic growth under this Government. No other Government in the industrial history of this country have achieved that. If the hon. Gentleman wishes to list facts, that should be the first one. The second is that there are now 2.5 million more people in work. The third, as far as living standards are concerned, is that wages have gone up by 48 per cent. under this Government, and inflation under the consumer price index has gone up by less than 20 per cent. As for the record of the Conservative party, the hon. Gentleman should read out his own speeches to the House, because he told the City, but has not yet told the House:
We still lag a long way behind the Labour party when it comes to public confidence in our ability to manage the economy.
The Financial Secretary to the Treasury (John Healey): The specifications for the Office for National Statistics personal inflation calculator have been, and continue to be, matters for the national statistician, although I checked last night and there are already 23 categories of spending in the calculator, with education costs included in the other category.
Mr. Blunt: Will the Minister confirm that even on his preferred measure of inflationwhich does not reflect the reality faced by many families, whose experience is much worseinflation is at its highest for 15 years, double the OECD average and double what it was when the Government came into office?
John Healey: It is true that inflation has been going up across the world. It has been driven by energy prices, a hot summer and food prices. If the hon. Gentleman studies the economic data rather than the briefs that he has been handed, he will see that the peaks, and the instability, in inflation have been higher in other countries, and that we have had low stable inflation here. Inflation is now historically low and stable here compared with the levels under the Conservative Government, which averaged more than 6 per cent. and peaked at more than 20 per cent.
Mr. Barry Sheerman (Huddersfield) (Lab/Co-op): Will my hon. Friend not only include data on university fees but trumpet the success of variable fees, which have delivered to universities a new stream of income and made it possible to employ university teachers and pay them well? They have been an absolute success story, which is admired by countries all over the world.
John Healey: As Chairman of the Education and Skills Committee, my hon. Friend analyses such policy areas closely. Like me, he will find it interesting that Conservative Members are not raising questions about inflation and cost pressures for families in relation to the price of fuel, and they are not noting the recently falling prices of clothing, mobile phones and consumer electronics. Instead they are talking about school fees, which are paid by fewer than 1 in 100 of the population covered by the retail prices index.
Justine Greening (Putney) (Con): Obviously, as student fees rise, student debt rises too. The Chancellor will be well aware that many students pay their way through university via part-time work. Has he estimated how many might be at risk of not being able to pay their way through university via work if growth falters in the coming months?
John Healey: It is right in principle that people who benefit from the university education system should contribute to the cost of that education. More people are going through university than at any time before, and some of them choose to work to help to pay their way. That has always been the case. The proof of the policies in place is whether more people are going to university and getting the training and opportunities that increasingly they need in the modern economy and the modern worldand the short answer to that is yes.
The Chancellor of the Exchequer (Mr. Gordon Brown): As was confirmed yesterday, growth in 2006 was, as the Government forecast, 2.7 per cent. Exports are rising at a rate of 4.5 per cent. a year, investment by 5 per cent. a year and business investment by more than 8 per cent. I call on work forces in the public sector to recognise that discipline on pay settlements, founded on our inflation target of 2 per cent., will be central to stable and sustained growth in the future.
Mark Tami: Do not those figures illustrate the underlying and long-term strength of the British economy, in sharp contrast to the predictions of the Conservative party? Whether they are giving us doom and gloom or boom and bust, the Conservatives have demonstrated once and for all that they cannot be trusted with the reins of government.
The Labour party had become in the publics mind the party of economic competence.
Mr. Mark Field (Cities of London and Westminster) (Con): We would all say that the economic growth figures are positive. In large part, however, they are due to the effect of migration. Given the skills gap and increasing unemployment among the UKs indigenous population, what does the Chancellor suggest to ensure that not just the 50 per cent. who go to university but, perhaps more importantly, the many who will never aspire to go to university, have proper skills so that they can do the jobs that are being taken by Poles, Lithuanians and the like, and get back into the workplace at the earliest opportunity?
Mr. Brown: I agree with the hon. Gentleman that we should invest more in education and skills in the economy. We have doubled expenditure per pupil in our schools and achieved higher standards, and we have now published the Leitch report on adult skills. I think that he is really referring to vocational skills, which we can expand, first through the national employer training programme, and secondly through other measures to help people at school get apprenticeships and vocational qualifications. The dividing line between the two parties is that we are prepared to make the investment, but the Conservatives third fiscal rule would mean a cut in investment in education. That is the difference.
Dr. Ashok Kumar (Middlesbrough, South and East Cleveland) (Lab): May I praise my right hon. Friend for doing a great job? He is one of the greatest Chancellors ever, and he has ensured that my region has benefited from great policies, unlike the boom and bust polices of the Conservative party. May I tell him the good news that manufacturing industry in the north-east, which accounts for 20 per cent. of employment, has increased its output by 2.5 per cent. in 2006? What policies does he have in the pipeline to ensure that that growth continues in 2007 and for many years to come?
Mr. Brown: The answer is the stable economic growth into an 11th and a 12th year that we have achieved under this Labour Government. I am glad that my hon. Friend said what he did. He was simply repeating what the Conservative higher education spokesman said only a few days agothat young people
have no trouble getting a job...We have almost full employment in this country, and they will go on to do fantastic things in this vibrant low-inflation economy.
Dr. Vincent Cable (Twickenham) (LD): When the Chancellor was in India, did he notice that one thing we have in common with that countryapart from steady and respectable rates of economic growthis an utterly abysmal infrastructure, as we were all reminded yesterday? How do the Government and the Chancellor propose to achieve the very high level of investment in British transport infrastructure that will be required, given that the debt-to-GDP ratio he has set is already very close to the 40 per cent. limit?
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