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13 Mar 2008 : Column 437

His whole document is based on quoting the Freud report and saying that the Opposition will implement it. Now that the cupboard is bare on Freud report implementation proposals, which we are putting in place, will he come up with some ideas of his own?

Mr. Osborne: The Secretary of State well knows that Tony Blair commissioned David Freud’s report, and it was completely rejected by the present Prime Minister. It is only after the disastrous events of the autumn—when we discovered that although the Prime Minister had been planning it for 10 years, he had no idea what he wanted to do with the job—that he started dusting off the reports that we had read and decided to implement them. [ Interruption. ] The Secretary of State knows that those ideas came from David Freud, who worked for the previous Conservative Government as well as the present Government.

If the Secretary of State were to implement the entire Freud report, we would welcome that. David Freud himself says that the most important proposal in his report is to use the money that is currently spent on benefits—the so-called AME spending—on helping people get back into work. After months of negotiation with the person sitting next to him—the Chancellor—and the Prime Minister, the best that the Secretary of State has, on page 60 of the Red Book, is a commitment to explore the idea.

James Purnell rose—

Mr. Osborne: If the Secretary of State wants to say that he will implement the Freud recommendation on DEL-AME spending—the difference between departmental spending and benefit spending—in its entirety, I shall let him.

James Purnell: We are implementing them in full and David Freud is advising us on that. Will the hon. Gentleman now admit that he is copying our ideas?

Mr. Osborne: The Secretary of State should have seen the look on the face of the Chancellor when he said that he would implement the proposals in full. He has not secured agreement to deploy AME spending into DEL— [ Interruption. ] I would happy if the sitting were suspended for 10 minutes—with your consent, Mr. Deputy Speaker—so that the Secretary of State and the Chancellor could have a discussion and come back with the Government’s policy. I will speak for another 10 minutes if that will help them get it together.

The Secretary of State asks what we would do. We would make the change and allow the Government to use welfare spending through payment by results across the out-of-work benefit system to get people into work. That is a commitment from the Opposition, and the sooner the Government make that commitment the better.

Greg Clark (Tunbridge Wells) (Con): Will my hon. Friend confirm that hidden away in the Red Book is another startling admission, which is that 145,000 more families will face a marginal rate of tax, or reduction in
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benefits, of more than 60 per cent. as a result of the Budget? Is that likely to help people get back into work?

Mr. Osborne: My hon. Friend makes an excellent point. Of course, as I have already mentioned, we face a vote next week that will see an increase in the income tax bills of 5.3 million of the lowest-paid. Those people will not be compensated by the handouts in tax credits elsewhere in the system.

Ms Buck: Will the hon. Gentleman give way?

Mr. Osborne: I have already given way to the hon. Lady and I now wish to conclude my speech.

Mr. Henry Bellingham (North-West Norfolk) (Con): Will my hon. Friend give way?

Mr. Osborne: My hon. Friend has not intervened thus far, so I shall give way.

Mr. Bellingham: Several aspects of the Budget are obviously bad news for small businesses, but did my hon. Friend spot that one of the papers that accompanies the Budget proposes that tax inspectors should be given powers of surprise entry, without official warrant? Does he agree that that could easily be abused and could be very bad news for the hard-pressed small and medium-sized enterprises in thiscountry?

Mr. Osborne: I certainly know that in years gone by the behaviour of the Inland Revenue caused enormous upset in areas of the business community, and the previous Chancellor had to intervene. It does not surprise me that the Government will now give more powers to the excise men and the Revenue men, as Governments have done that down the centuries, but the Chancellor desperately needs every single pound he can get out of the tax system because of the borrowing mess he is in.

Chris Bryant: Will the hon. Gentleman give way?

Mr. Osborne: No, I have already given way to the hon. Gentleman twice.

Chris Bryant: Once.

Mr. Osborne: Well, it was such a long intervention perhaps I just thought I had given way twice. With respect, I suspect that the Government will have some problem providing speakers in the debate this afternoon, so I suggest that the hon. Gentleman saves it for the long speech that he will need to make to fill up time. I am sure that the whole House will be very interested in what he has to say.

The final aspect of the Budget to which I want to draw the attention of the House today is the long-term assumptions that it makes. Again, those assumptions were not mentioned in the Chancellor’s speech but underpin the sums in the Red Book and something called the long-term public finance report. They reveal the Government’s true plans. For example, we discover that there is a new long-term forecast for immigration.
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We have read a lot from the Prime Minister in the tabloid press about immigration recently. In fact, there is a projection that immigration will go up to 190,000 people a year, which is 30 per cent. higher than the previous forecast.

If one reads the National Audit Office audit of the Budget figures, one will discover that unemployment is projected to rise in the near future to 1.1 million. That was not mentioned by the Chancellor at the Dispatch Box. We discover on page 36 of the Red Book that on the current spending assumptions, in the many decades ahead, taxes will have to go up by £55 billion. If we delve into the Red Book, we see how borrowing is increasing. That is the true story of the British economy. What is the Government’s response? They have no long term-plan, just short-term tax hikes; no leadership, just dither and delay.

That was summed up in another extraordinary interview yesterday, this time with the hon. Member for Coventry, North-West (Mr. Robinson)—the paymaster general to our Prime Minister in every sense of the term. He said on television yesterday that the Government had given the impression of making policy on the hoof. That comes from a former Treasury Minister in a Labour Government. That policy on the hoof led to the fiasco on capital gains tax and the many U-turns on non-doms. It is now forcing them to raise taxes in the downturn.

The British people deserve better than policy on the hoof from a Government who have failed. We need a long-term plan to restore stability to public finances by sharing the proceeds of growth. We need a long-term plan to reverse the slide in our country’s ability to compete by simplifying reliefs and lowering corporation tax rates. We need a long-term plan to combat climate change by building public confidence in green taxation, rather than making such taxes stealth taxes. We need a long-term plan to help aspiring families by taking nine out of 10 first-time buyers out of stamp duty and raising the inheritance tax threshold to £1 million. We will not get any long-term plan from this short-term Chancellor, and so the country will have to wait for the election of a Conservative Government to get the economic leadership it deserves.

1.2 pm

The Secretary of State for Work and Pensions (James Purnell): It is no secret that we live in economically interesting times, which are sometimes unpredictable. They are so unpredictable, in fact, that until last night I expected to face the hon. Member for Epsom and Ewell (Chris Grayling). Clearly, Mr. Speaker expected that too when he introduced the debate. Unfortunately, like Jonny Wilkinson, the hon. Gentleman has been benched. In his place, we have the boy wonder—the young pretender— [ Interruption. ] I think he is younger than me. I am sure that, just like Jonny Wilkinson, my shadow will wish his replacement well today and hope that he performs well.

So, why the late substitution? Perhaps it was something I said.

Mr. Andrew Mackay (Bracknell) (Con): On the point of late substitutions, the Secretary of State will be aware that stories are circulating widely today that the Chancellor changed his growth forecasts in the last few
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hours before the Budget statement and changed them upwards. Does the Secretary of State think that is true and does he also think that the Chancellor will live to regret that change?

James Purnell: That is clearly complete nonsense. It was not even about a late substitution; I thought that the right hon. Gentleman was going to draw a rugby analogy.

Why did the Opposition change their Front-Bench speaker today? The answer reveals a lot about their tactics this week. At the beginning of the week, their tactics were to erect a smokescreen around the subject of child poverty, to wring their hands if we did not achieve enough and to hope that no one would notice that they were not committed to the target that they intended to criticise us on.

They hoped that we would fail on child poverty but instead we have a Budget that has been welcomed by the Child Poverty Action Group as

and by Barnardo’s as

That is why the shadow Chancellor did not speak about child poverty today and why he concentrated on the economy. The Opposition do not want to talk about child poverty.

The presence of the shadow Chancellor raises two interesting questions. We have already had the answer to the first: the Opposition would not support our increase in the winter fuel allowance this year nor the ongoing increases in child benefit. His answer was clear on that. We will ensure that every pensioner and family in the country knows that between now and the next local elections.

Mr. Winnick: Is it not a fact that the shadow Chancellor gave no explanation of why for 18 years there was no winter fuel allowance and pensioner poverty grew, as did child poverty? Is it not the case that if there were a Tory Government, the winter fuel allowance would be stopped?

James Purnell: That is right. I think that about £60 million was spent on help on fuel costs for the elderly during the last year of the last Tory Government, but that figure is now more than £2 billion, even before yesterday’s increases. The shadow Chancellor is welcome to stand up and say that he will support that increase—

Mr. George Osborne: Of course.

James Purnell: How will he fund it? He says of course he supports it, but he said earlier that he would not use the tax revenue that we are raising to fund it, yet said that the child benefit increases would continue. The shadow Chancellor has no money to fund the winter fuel allowance or the child benefit increases, and there is no way that the Conservatives can commit to that. He is welcome to stand up and say how he will fund it. He cannot say he supports it if he cannot say how he will fund it, and I think that the electorate will be interested to find that out.


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The presence of the shadow Chancellor gives us an opportunity to ask another question, which he was keen to avoid in his opening speech. How will he fund the proposals that he said that he would go for? How will he fund his inheritance tax cuts? How will he fund his stamp duty changes? How will he fund the spending pledges that every one of his fellow Opposition Front Benchers seems happy to make every week? Where will he get that £10 billion from? Again, he said nothing in his speech about that. He has no short-term plan to fund any of the long-term plans that he mentioned in his peroration. That is why those on the Opposition Front Bench have gone very quiet. They have no way of funding those plans, and they know it.

The shadow Chancellor also knows that over the past 24 hours that problem has got radically worse. He liked to say that he would fund his proposals by “squeezing welfare”. We are implementing the welfare reform set out in the Freud report, which he likes so much, and that means, as the Opposition admit, that they aim to get exactly the same number of people off incapacity benefit as we do. That offers no opportunity to squeeze welfare to fill that black hole, and that presents an even bigger problem today than it did at the weekend.

Stewart Hosie (Dundee, East) (SNP): That is all very interesting, but this is the Labour Government’s Budget, and I am slightly more concerned to hear about that. The Secretary of State is asking how the Tories might fund things. Can I confirm that his Government are funding things through £43 billion of debt next year, a cumulative deficit of £581 billion, £189 billion of private finance initiative liability and, in consequence, an £87 billion balance of trade deficit in goods? I hope that the Chancellor is not shaking his head at those numbers; can I confirm whether they are absolutely correct?

James Purnell: The hon. Gentleman was obviously eager to read the Budget; I am sure that he has been quoting back a bunch of interesting figures. The point is that we have lower debt than any other country in the G7. When the Tories were in a similar position in the early ’90s they had debt of more than 8 per cent. It is now under 3 per cent. and that why we can use the fiscal position to support the real economy, and that is exactly what we should be doing.

Chris Bryant: My right hon. Friend will know that one of the constituencies with the highest levels of incapacity benefit in the country is the Rhondda—a situation it shares with many other former mining constituencies. One of the biggest problems is that there are simply not enough mental health services available to enable people with mental health problems, which are the main reason why they are on incapacity benefit, to contemplate going into work. Will my right hon. Friend ensure that we invest in mental health services, rather than just wagging a finger at those on incapacity benefit? That has never worked in the past, and such investment is the only way in which we will tackle poverty in our poorest areas.


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James Purnell: That is an extremely good point. My hon. Friend has been campaigning effectively on that policy area for many years. I know that he will look forward to the recommendations of Dame Carol Black, who has been considering that issue and how we can help people to be more healthy in work and to avoid their going off work and on to incapacity benefit. Mental health is one of the key issues that we will be considering as part of that review. As my hon. Friend knows, we are rolling out a significant increase in the number of talking therapies available, as they have been shown to have a good effect on people’s well-being and their ability to work.

Ms Buck: I am grateful to my right hon. Friend for giving way because I was unable to intervene on the hon. Member for Tatton (Mr. Osborne) earlier when he was talking about sanctions. He may have inadvertently misled the House by saying that people were not sanctioned for refusing to take jobs. In fact, 300,000 people were subject to employment sanctions last year. My personal view is that in many cases those sanctions are too harsh—indeed, they have risen sharply recently—but does my right hon. Friend agree that a sanctions regime already exists and is applied, so how on earth can the hon. Member for Tatton expect to make additional savings from further sanctions without casting hundreds of thousands more people into a position where they have no income whatever?

James Purnell: My hon. Friend is absolutely right; that is yet another area where the Conservative policy document copies exactly what the Government are doing. Another one relates to single parent benefits, on which the Conservatives say only that the Government’s policy is very good and they agree with it.

Why does it matter that the Conservatives have that £10 billion black hole and are making promises that—

Sammy Wilson (East Antrim) (DUP): Will the Secretary of State give way?

James Purnell: I want to make a little progress.

Why does the Conservative black hole matter? It matters because the Conservatives have still not learned the lessons of their economic failure in government. They did not have tough fiscal rules, so they could duck tough decisions, and they are at it again—unfunded tax cuts, lower borrowing and a new spending pledge. They are worse than the Liberal Democrats. What did that policy lead to? It is absolutely clear: 15 per cent. interest rates and 3 million people unemployed—

Chris Grayling (Epsom and Ewell) (Con) rose—

James Purnell: Perhaps the hon. Gentleman wants to apologise for his Government’s record in office.

Chris Grayling: As we are talking about the Government’s Budget, the Secretary of State will know that the Red Book says that £10 million has been set aside in 2010 to pay for additional assessments for incapacity benefit claimants. Can he tell the House how many assessments for how many claimants that money will actually pay for?


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