2. Mr. Nick Hurd (Ruislip-Northwood) (Con): What the Treasury's latest estimate is of the cost to pension funds of the abolition of dividend tax relief in 1997; and if he will make a statement. 
The Economic Secretary to the Treasury (Ed Balls): As the Chancellor of the Exchequer set out to the House on 17 April, the Treasury recycled revenues from abolishing the dividend tax credit through cutting the main corporation tax rate from 33 per cent. to 31 per cent. and then 30 per cent., cutting capital gains tax, and introducing the research and development tax credit. Since 1997, we have experienced a decade of stability, with the fastest growth in business investment in any nine-year period since data began in the 1960s.
Mr. Hurd: The Chancellor told us that his aim in taking £5 billion a year out of pension fund income was to stimulate business investment. As a proportion of GDP, has business investment risen or fallen since 1997, and what does that say about the success of the policy?
Ed Balls: As I told the House, we have had the fastest growth in business investment in any nine-year period since the 1960s. It has risen by 50 per cent. since 1997. Investment has been rising because of the stability that we have delivered and because of the tough decisions that we were prepared to take in 1997.
Mr. Jim McGovern (Dundee, West) (Lab): Recently, a prominent multinational company that employs many of my constituents announced a decision to close its defined-benefit pension scheme. It claimed that that was largely because of increased life expectancy and the changes in actuarial advice brought about by that. Has my hon. Friend made any assessment of actuarial advice in relation to increased life expectancy and the effect on pension funds, and if so, what steps can we take to make sure that these problems do not arise in the future?
Ed Balls: I have made that assessment, as we discussed in our debate a few weeks ago. The assessment of Mr. Stephen Yeo, a consultant at Watson Wyatt and a former pensions adviser to the Conservative party, is that the dividends tax credit issue
is not among the top three
the lowest figure since records began.
Greg Clark (Tunbridge Wells) (Con): The Minister will know that the dividend tax credit changes have affected charities as well as pension funds. When I last raised that issue with the Chancellor, he claimed that gift aid changes had more than compensated for the reduction in tax relief. When he said that, was he aware that since 1997 the total tax repayment to charities has fallen by £100 million in real terms? In other words, charities are being taxed by stealth just the same as the rest of us.
Ed Balls: But the fact is that extra transitional relief was given to charities when the decision was made in 1997 and since then there has been a substantial rise in the amount of tax relief available for gift aid, as a result of decisions made by the Government.
Mr. David Drew (Stroud) (Lab/Co-op): Under the previous Government, one of the particular aspects of what happened was the offer of early retirement. In a whole range of employments, it was quite common for people to start retiring from their 50s upwards. Has any analysis been done of the impact that that has had on pension funds and, in particular, of the way in which that has completely skewed the employment of people in the labour market?
Ed Balls: My hon. Friend is right to point out those trends. There is also the fact that in the early 1980s the trend began to shift away from occupational schemes. There are also the pension holidays that occurred in the 1990s. The fact is that a fall in the stock market and an increase in life expectancy were the main drivers of the change in pension funds. Despite that, as we discussed in the debate with the shadow Chancellor, the assets of pension funds have not gone down since 1997; they have gone up.
Mr. Brooks Newmark (Braintree) (Con): Our estimates of the cost to pensioners of the Chancellors tax raid range between £100 billion and £150 billion. What analysis has the Economic Secretary done of the cost to pensioners?
Ed Balls: The fact is that those figures are nonsense. As I said, the assets of pension funds have gone up, rather than down. The number of pensioners in poverty has not gone up; it has gone down by 2.1 million. The Government made decisions in 1997 to make the Bank of England independent, to introduce fiscal rules, to have a windfall tax on the privatised utilities and to make tax changesall of which have delivered stability in our economy and all of which were opposed by Opposition Members. Government is about making tough decisions; we did that and they opposed them.
The Chancellor of the Exchequer (Mr. Gordon Brown): There are nearly 29 million people in employmentthat is well over 2.5 million more people in work than in 1997. In the Budget, I announced a new partnership with retailers that could help up to 100,000 men and women to find employment over the next five years. There is now higher employment in every region and country of the United Kingdom than in 1997.
Kitty Ussher: I am grateful for that response. With unemployment so lowit has gone down by 18 per cent. in my constituency alone over the past 10 yearsand employment at record highs, does my right hon. Friend agree that now is not the time to be abolishing the new deal?
Mr. Brown: I agree with my hon. Friend. Employment in the north-west is up by 250,000 since 1997. In every region of the country, employment has risen fast since 1997. One of the reasons why employment has risen is the new deal, which helps people to get back into work and to train for new skills. It would be an absolute tragedy if, at a stage when we are trying to get further people back into work, the Conservative partys policy of abolishing the new deal was adopted. I hope that that party will think twice about its proposal to abolish the new deal, which would deprive the unemployed of help and bring us back to the days of high unemployment that we saw under the Conservatives.
Mr. Brown: I would have thought that the best way of looking at this is that we provide choices for people in the economy. By providing such choices, some can do part-time jobs while others can do full-time jobs. If the hon. Gentleman wishes to support that, I hope that he will support the tax credit system, which enables single parents, especially, to go into work by taking part-time jobs. That is one of the reasons why the percentage of single parents in employment has risen from 43 per cent. to 55 per cent. under a Labour Government.
For the last five years interest rates have been at low levels and credit therefore has been cheap. For the past ten years inflation has been low, the stop-go cycle has given way to continued economic growth and there has been full employment.
Mrs. Louise Ellman (Liverpool, Riverside) (Lab/Co-op):
Despite record high employment, far too many young people leave school without qualifications and
do not go into training or a job. Does my right hon. Friend have any proposals on a new initiative to deal with that growing problem?
Mr. Brown: That was why we announced in the Budget new measures to help young people to make the transition from leaving school without qualifications and a job to getting back into the work process through getting either training or a job. It is why we are building on the situation between 1997 and now in which the number of 16 to 24-year-olds in work has risen from 3.9 million to 4.1 million, while the number in full-time education has risen from 2.1 million to 2.7 million. Let me quote the hon. Member for Henley (Mr. Johnson). He wrote:
Most important of all, they have no trouble getting a job...we have almost full employment in this country.
Mr. Michael Fallon (Sevenoaks) (Con): But how much higher would employment levels have been if more people had been encouraged into work by an efficient, well administered tax credit system that had not lost £2 billion? Has it not occurred to the Chancellor that the things for which he is not responsible, such as monetary policy and the private sector, have done rather well, while everything that he has touchedtax credits, the sale of gold and pensionshas been a complete disaster?
Mr. Brown: Mr. Speaker, this Member of Parliament and his party voted against the independence of the Bank of England [ Interruption. ] Conservative Members say that that is history, but we will continue to remind them of the important lessons of history. Making the Bank of England independent gave us stability and prevented us from returning to the stop-go economics that bedevilled us for 18 years under the Conservatives.
If the hon. Gentleman was being honest with us about the tax credit situation and his statements reflected what was happening on the ground, he would acknowledge that one of the reasons why we have 2.5 million more people in work is tax credits. I fear that he wants to cut tax credits because he is a member of the No Turning Back group[Hon. Members: Oh.] Yes. Instead of wanting tax credits, the group wants £35 billion to £50 billion of tax cuts. That is the dividing line between the two parties.
Mr. Don Touhig (Islwyn) (Lab/Co-op): Encouraging business start-ups and entrepreneurship is vital to job creation in Wales. What is being done to help people who want to start up their own businesses?
We have done more over the past few years to help young people and entrepreneurs, in particular, to find the chance of being able to start their own business, whether that is in Wales, through the efforts of the Welsh Assembly, or throughout the whole of the United Kingdom. When we came to power, the rate of business creation was half that in the United States of America. The rate of business creation, particularly among young people, is rising, we are giving more incentives, and the venture capital industry is developing for people who want to move on from
simply starting a business to getting new capital, and we will continue to do more in the future. The record in Wales, of course, is one of more jobs since 1997, and we will continue that record in the years to come.
Mr. George Osborne (Tatton) (Con): May I welcome the Chancellor on what must be one of the happiest days of his political career? Even the blacked-out windows will not conceal the smile today. May I ask him a question that he has spent all week avoiding? Does he think that his failed policies, including his employment policy, which the Public Accounts Committee described this week as being responsible for
the highest rates of error and fraud in government,
Mr. Brown: What the Conservative party will not acknowledge when supposedly talking about the economy is that, as the Conservative party mid-term report on policy said[Hon. Members: Answer!] They do not like it, because the report also talks about a period of unprecedented prosperity in our country. [Interruption.] I remind the shadow Chancellorthis is, after all, a question on employment in the economythat there are 600,000 vacancies in the economy. There is one more today, actually, as a result of announcements that have just been made. The shadow Chancellor has acknowledged Labours success in macro-economic policy, and he has acknowledged that Labour has established economic credibility. Is it not about time that the Conservatives admitted that they have lost the argument on the economy, that we are creating jobs in this country, that we have unprecedented economic growth, and that we have a record of economic stability that is unparalleled in our history?
Mr. Osborne: If the right hon. Gentlemans employment policies are so popular, how come 500 Labour councillors and one First Minister are looking for jobs this week? He is responsible for the failures of this Governmentthe pensions raid, the chaotic administration of tax credits, the record stealth taxes and the chronic waste of money. How can he be the change that the country wants when he is responsible for the present mess? He has been in hiding for a week, but I ask him to answer this simple question: why did Labour lose last week?
What the shadow Chancellor will not acknowledge is that there are 2.5 million more jobs in the economy, that unemployment is at half the level that it was in the 1980s, that long-term employment has gone down by 75 per cent., and that youth long-term unemployment has been virtually extinguished as a result of what we have achieved. If the Conservative party will not, through the shadow Chancellor, face up to its weakness on the economy, let me tell Conservative Members about the speech of their guru, the former shadow Chancellor, the right hon. Member for West Dorset (Mr. Letwin), who says in explicit
terms that the age of talking about the economy is over for the Conservative party; it will now just talk about social issues. He says:
Instead of arguing about systems of economic management, we have to discuss how to make better lives out of the prosperity generated by the free market.
Is it not about time that the shadow Chancellor admitted that in his two years as shadow Chancellor, he has made absolutely no progress in developing an economic policy? He cannot even tell us, having promised to do so, that he will match us on public spending. We are the party that is creating economic stability, economic growth and jobs for the people of this country.
Helen Goodman (Bishop Auckland) (Lab): The Prime Minister is in his Sedgefield constituency this morning, where the level of unemployment is now below the national average, at 2.3 per cent. Will the Chancellor of the Exchequer tell the House whether he will continue with the policies of supporting science and co-operation between universities and industry that have brought so many jobs to the north-east?
Mr. Brown: I am grateful to my hon. Friend, and I know the interest that she takes in both employment and the development of creative and science industries. We have doubled the science budget; we have created a science city in Newcastle, and there is a science city in York. There is pressure to do more in other parts of the region, and we will respond to that, both through the development agency and through what central Government can do. We will continue our record, which has created in the north-east alone 108,000 jobs since 1997. The one thing on which the Conservatives are totally silent is any economic policy for the future.
Dr. Vincent Cable (Twickenham) (LD): The Chancellor is quite right that there is a positive story to tell about employment growth, but does he acknowledge that serious problems remain in the labour market? How, in particular, does he explain the fact that the employment rate among men is now 10 per cent. lower than it was when Harold Wilson presided over the economy?
Mr. Brown: There are 2.5 million more jobs in the economy. The reason why there are 29 million people in work is that we did not take the advice of the Liberal party but did the right thing by the economy, both in our policies for economic stability and in our public investment. If I may say so, the very tax credits that the hon. Gentlemans party opposes are one reason why more single parents are in work today, and we will continue with that.
Mr. Brian H. Donohoe (Central Ayrshire) (Lab): On the question of unemployment, in my constituency it has dropped like a stone since 1997. However, has the Chancellor taken stock of the position after the election last week on the momentum of those jobs and the continuing increase in jobs north of the border?
Scotland has increased its employment by more in the past year than almost any other part of the country, and it will continue to create jobs if it produces the right policies both in the Scottish
Parliament and in the UK Government. One of the things that we are determined to do over the next few months is help people get jobs in the retail, construction, and hospitality and hotel sectors, and there are programmes to develop the new deal in those areas that will create more jobs both in Scotland and in the rest of the United Kingdom.
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