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House of Commons

Thursday 5 June 2008

The House met at half-past Ten o’clock


[Mr. Speaker in the Chair]

new writ


private business

Bournemouth Borough Council Bill [Lords] (By Order)

Canterbury City Council Bill (By Order)

Leeds City Council Bill (By Order)

Orders for Second Reading read.

To be read a Second time on Thursday 12 June at Three o’clock.

London Local Authorities (Shopping Bags) Bill (By Order)

Order for Second Reading read.

To be read a Second time on Thursday 12 June.

Manchester City Council Bill [ Lords ] (By Order)

Nottingham City Council Bill (By Order)

Reading Borough Council Bill (By Order)

Orders for Second Reading read.

To be read a Second time on Thursday 12 June at Three o’clock.

Oral Answers to Questions


The Chancellor of the Exchequer was asked—

Mortgage Rates

1. Ms Karen Buck (Regent's Park and Kensington, North) (Lab): What recent discussions he has had with ministerial colleagues on the impact of mortgage rates on the economy. [208597]

The Chancellor of the Exchequer (Mr. Alistair Darling): I have many discussions with colleagues on a range of matters, including those who are in the market for mortgages.

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Ms Buck: House prices in my constituency are among the highest in the country, and home owners are experiencing real pain and anxiety. What can my right hon. Friend tell me to assure those who hold fixed-term mortgages that are coming to an end that the Government understand the pain and anxiety that they are going through and will take action to help them with future repayments?

Mr. Darling: My hon. Friend has raised a matter that concerns many people in this country. We have had discussions with the Council of Mortgage Lenders, which I expect to meet again next week to discuss how we can ensure that when people come off fixed-term mortgages and look at the options, they can receive proper advice and hopefully get on to rates that are as low as possible. I can also tell the House that the CML has told me that it hopes that it can make considerable progress in ensuring that smooth transition, because we want to make sure that people get on to the lowest possible mortgage, especially at this time.

Mr. Michael Fallon (Sevenoaks) (Con): Would the mortgage market not be working better if the Chancellor had not dithered and delayed for so long about the necessary banking reforms in the light of the Northern Rock crisis? It is nine months since Northern Rock ran into difficulty; when are we going to see some serious proposals for legislation?

Mr. Darling: The two things are not connected, as the hon. Gentleman well knows. On action that we have taken to help the mortgage market, in addition to the money that the Bank of England and other central banks put into the system last autumn, the Bank of England’s special liquidities scheme will help. It will take time to work its way through, but it will underpin the financial system in a way that is absolutely essential.

Yes, the banking reforms are necessary, but we have just finished a period of consultation and spoken extensively to banks and other institutions about the reforms that we need. We want to get the reforms right, and the overwhelming view of the British Bankers Association, which is working co-operatively with us, is that we can see where we want to get to. We need to get the detail right, but I intend to introduce legislation during this parliamentary Session. I hope that that legislation will receive all-party support, because the sooner we get it on to the statute book, the better. Of course, the Banking (Special Provisions) Act 2008 that we put on the statute book following the taking into public ownership of Northern Rock will help, in that it provides powers that the Government and the other authorities simply did not have before then.

Ms Sally Keeble (Northampton, North) (Lab): Will my right hon. Friend look at the plight of home owners on low incomes who face particular pressures because of reductions in their working hours? He is giving very generous support to families in rented accommodation, but will he also look at providing some support to families on low incomes who are in their own homes?

Mr. Darling: Yes. As my hon. Friend knows, we discussed this matter yesterday in the Treasury Committee, and, as she has rightly said, we have been able, through disregarding the child benefit, to help people who receive
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housing benefit. She rightly raised concern about people on low income, who may be facing reductions in their income because they are working fewer hours and who have to pay their mortgage. As I said to her yesterday, we clearly need to look at that as part of a range of measures to help people. Of course, the increase in the personal allowance will mean that all basic rate taxpayers will be paying less tax this year, and that, too, will make a contribution.

Mr. Mark Field (Cities of London and Westminster) (Con): Discussions with ministerial colleagues, or, indeed, with the Council of Mortgage Lenders, on this matter are all well and good, but what advice would the Chancellor give the Bank of England in respect of alleviating the pain of the many millions of mortgagees who are suffering from high interest and mortgage rates?

Mr. Darling: As the hon. Gentleman knows, the Bank of England and its Monetary Policy Committee are entirely independent of Government, and neither I, nor my predecessor, have commented on what they do, because it is important that they conduct those things independently. The Bank of England is, of course, making its decision today, but it is doing so against a background of a strong and stable economy over the past 10 years. It has a target, and it has to decide what it ought to do.

Kelvin Hopkins (Luton, North) (Lab): A substantial fall in house prices inevitably brings with it the risk of serious recession. Yesterday’s OECD economic forecast was quite pessimistic, so is it not time for my right hon. Friend to urge the Monetary Policy Committee to reduce interest rates?

Mr. Darling: As I have just said to the hon. Member for Cities of London and Westminster (Mr. Field), the Bank of England’s Monetary Policy Committee is independent of Government. That is one of the main reasons why our inflation levels are now at a historically very low level, and I am not going to change Government policy so far as that is concerned.

The OECD, along with other independent commentators, has made the point that, across the world, economies are slowing down and, as I said in the Budget, ours is no exception. However, the OECD said that the

for this country

and if my hon. Friend the Member for Luton, North (Kelvin Hopkins) were to look at the routine surveillance report that the International Monetary Fund carried out on this country about three or four weeks ago, he would see that it made the point that we have experienced sustained low inflation and rapid economic growth, and that that was an exceptional achievement and the result of the policy that we have been pursuing for the past 10 years. That policy will ensure that our economy remains resilient, although we cannot be complacent. We are going through a period of unprecedented uncertainty and turbulence in the financial markets, and we are facing the pressures of inflation in relation to fuel and food. We must be mindful of those, but our economy is in a much
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stronger position than it was 10 or 15 years ago, when 3 million to 4 million people were out of work and there was double-digit inflation. [Interruption.] Opposition Members may want to forget it, but people in this country remember it very well indeed.

Dr. Vincent Cable (Twickenham) (LD): Will the Chancellor accept that with mortgage lending at its lowest level since the early ’90s, prices in vertical decline and the extent of arrears and fraud exposed by the Bradford and Bingley’s problems, more drastic intervention is required? That drastic intervention could take the form of using the perfectly sensible, but pitifully small, proposal from the Prime Minister, which is to acquire repossessed homes for social renting, and operate it on a much larger scale, using the prudential borrowing powers of local councils and the Housing Corporation?

Mr. Darling: As the hon. Gentleman has said, taking action on repossessed homes will help. We may want to consider other measures as well. I say to him that house prices have been falling, which is inevitable given what is happening and the constraint of credit and mortgages, but that is happening against a background of house prices having risen by about 45 per cent. over the past five years. We will continue to take whatever action is appropriate to support not only the economy, but the housing market.

Mr. George Osborne (Tatton) (Con): It is remarkably complacent of the Chancellor to describe the British economy as “strong and stable” at the moment, which is not the experience of home owners and people in work. Will he confirm, given that he is fond of his historical comparisons, that the figures announced by the Halifax this morning on house prices showed the fastest fall on record in house prices?

Mr. Darling: In relation to the hon. Gentleman’s first point, our economy is strong and it has been resilient. I was drawing attention not to what I have said, but what the IMF, which is, of course, entirely independent of this and every other Government, has said. House prices are falling, but the Halifax also said today that one of the factors that is important this time—as opposed to my historical comparison with last time—is that employment levels are much higher than they were 10 to 15 years ago. That makes a difference to confidence and the outlook for the future.

Mr. Osborne: Again, we hear remarkable complacency from the Chancellor. He knows that the most recent figures show a rise in unemployment, and house prices are falling at their fastest rate ever. Inflation is rising, real incomes are falling and the Government stand paralysed, like a rabbit in the headlights, because they saved nothing in the good years to prepare for these difficult years. Therefore, their only answer is to increase taxation on families that already face a rising cost of living. Indeed, the Chancellor’s performance is so poor that he is about the only member of the Cabinet not touted about as a future leadership contender.

As the Chancellor wants to quote international organisations, will he confirm that the OECD said yesterday that

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In other words, they did not fix the roof when the sun was shining. In what could be his last ever Treasury questions, who does he think is to blame for that?

Mr. Darling: The hon. Gentleman would have more credibility on that point if, at the time in question, he and all his colleagues had called for less expenditure, not more, on education, health, police and defence. You name it, Mr. Speaker, the Conservatives were calling for more and more expenditure on it, without any identifiable means of paying for it.

Over the past 10 years, as the IMF and others have noted, we have built up a strong and resilient economy. It is undoubtedly the case, in this country and every other country, that we are feeling the effects of the problems that started in the financial markets and have spread to the wider economy. We are also facing the twin threats of inflation in food and fuel prices, but I believe that what we have done over the past 10 years will stand us in good stead. We will continue to do whatever is right to support the economy, but above all we will ensure that we continue with policies that build a stable economy, which is so important for the future.

Vehicle Excise Duty

2. Mrs. Nadine Dorries (Mid-Bedfordshire) (Con): If he will reconsider his proposals on vehicle excise duty changes announced in Budget 2008. [208598]

The Exchequer Secretary to the Treasury (Angela Eagle): The vehicle excise duty reforms announced in the Budget are due to be legislated in the 2009 Finance Bill. The Chancellor keeps all taxation policy under review. Tackling climate change is the most serious environmental challenge that we face, and road transport contributes about a quarter of the total UK carbon dioxide emissions. As part of a package of measures to reduce emissions from transport, the VED reforms will send strong signals to motorists to purchase more fuel efficient new and second-hand cars.

Mrs. Dorries: This morning, all over Britain, many British mums have finished the school run. During the day, they will probably pop into Tesco, where they will have to leave on the shelves treats for their children that they could have afforded a few months ago. [ Interruption. ] Well, that is how it is. Those mums will be unaware that the road tax on the family second-hand car in the car park is about to increase dramatically. How much misery does the Chancellor want to heap on to the shoulders of struggling British mothers?

Angela Eagle: Many of the mums about whom the hon. Lady seems to be so concerned have benefited greatly from tax credits, which the Conservatives would abolish.

Ian Lucas (Wrexham) (Lab): In my hon. Friend’s consideration of the Tory fuel escalator, will she look again at the excellent proposal by my constituent, Mr. Peter Bernie, to end the cap at the top end of the vehicle excise duty rates, so that the most polluting vehicles pay the most vehicle excise duty?

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Angela Eagle: I note that the quality of life policy group report published by the Conservative party last September suggested introducing a purchase tax on new cars of up to 10 per cent. of sale value, which would be far more than the £950 that we are proposing.

Mr. David Heath (Somerton and Frome) (LD): In a rural constituency such as mine, there are a lot of working vehicles, many of which are older vehicles, which will be caught by these VED changes. There is a very strong environmental argument for doing something about VED on new cars, but what on earth is the environmental argument for doing that to cars that have already been purchased?

Angela Eagle: Agricultural vehicles are exempt, and there is, of course, the red diesel concession for those who use vehicles for farming. We understand and are considering the issues for those who live in rural areas.

Mr. Brian Jenkins (Tamworth) (Lab): Will my hon. Friend consider holding the tax band for the present owner until the vehicle is sold on, which would inform the new owner of the tax that they will have to pay?

Angela Eagle: Changes to VED have always been applied in such a way. There is nothing new or unusual about applying new car tax rates to existing cars. Indeed, the Conservative party put up VED rates 13 times when it was last in power, and those increases applied to all cars, not just to some.

Sir Patrick Cormack (South Staffordshire) (Con): Is the Minister aware that this is the most intellectually threadbare argument that the House has heard for a long time? How can she conceivably justify such retrospective taxation, and how does that show any understanding of the plight of the rural community?

Angela Eagle: It is not retrospective legislation. Will the hon. Gentleman explain to Labour Members why the quality of life policy group report, which the right hon. Member for Witney (Mr. Cameron) welcomed and said would form part of the Conservative manifesto, suggested an even greater increase between the top and bottom bands based on CO2 emissions?

Sir Nicholas Winterton (Macclesfield) (Con): I appreciate that the Minister represents an urban constituency, but what thought has she given to livestock farmers in the hill country of the UK, who need a powerful 4x4 not only to transport livestock to cattle markets and elsewhere but to undertake their job in difficult terrain? Is it not unfair that those cash-strapped farmers face a huge increase in vehicle excise duty?

Angela Eagle: I hope that the market will develop so that such cars and vehicles produce lower emissions in the future than they do now. That is what these dynamic changes are intended to produce.

Justine Greening (Putney) (Con): In a parliamentary answer that I received today, the Minister stated that

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