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Nigel Griffiths:
What the hon. Gentleman is failing to point out to the House is that at the beginning of the 1997 cycle, Conservative debt was more than 41 per cent. of gross domestic product. Under Labour in this
cycle, it is less than 37 per cent. The cost of servicing that Conservative debt was 9 per cent.; now it is less than 6 per cent.—a saving of around £23 billion to put into services each year. The hon. Gentleman may be shaking his head, but the truth is that debt levels under the Conservatives were astronomical compared with debt levels today, and he should admit that fact.
Mr. Hammond: We have to remember that nowadays there is a huge concealment of Government debt off balance sheet, through the private finance initiative and other mechanisms. What I remember of 1997 is rising economic growth, falling unemployment, falling youth unemployment, falling inflation, and inflation half the level it is today. That is the legacy that I remember, which the hon. Gentleman’s Prime Minister has squandered.
Mr. Brooks Newmark (Braintree) (Con): To clarify the point that my hon. Friend is making, may I add that the figure is, I believe, not 40-odd per cent. of GDP but about 110 per cent., if we include all the debt that this Government have put off balance sheet?
Mr. Hammond: My hon. Friend is right. If we strip out the Enron accounting we will get to some very different figures, which few Labour Members will want to quote back at us.
Mr. Jeremy Browne: Will the hon. Gentleman give way?
Mr. Hammond: I want to finish, as many hon. Members would like to speak.
There are other practical steps that the Government could take to help, such as promoting greater awareness of the best tariffs available from gas and electricity suppliers, adopting the proposal made by my right hon. Friend the Member for Witney (Mr. Cameron), the Leader of the Opposition, to include in gas and electricity bills information on average consumption levels of similar properties and a roll-out of smart metering to help people to manage their energy consumption better. However, the sad truth is that the Government have boxed themselves in. Excessively loose fiscal policy has left the UK, in the words of Alan Greenspan, “more exposed” than the US and facing difficulties that, in the words of the OECD, will be “larger than elsewhere”.
So here we are, with a Labour Prime Minister who for the last decade has been lecturing his neighbours on the continent on how to do it, now being slammed by the OECD for excessively loose fiscal policy, disciplined by the EU for the size of our deficit and, more importantly, unable to take action of the kind that more prudent Governments are taking to help their citizens and businesses when they most need it, not just because Governments are there to help their citizens, but because that is the best way to counter the pressure for inflationary wage increases.
With the cost of living set to go on rising as growth stagnates, there are just two possible outcomes: either real living standards will fall in the immediate future or inflationary wage rises will defer the moment of pain, and in the process risk destroying Britain’s competitiveness, and thus its prospects beyond the current downturn. The Government need to be frank with the electorate about the situation. Either way, the British public will
know who to blame: a Prime Minister whose sole legitimacy was the claimed ability to manage the economy, but whose economic incompetence has left Britain and its citizens so ill prepared for the economic slow-down that we now face.
4.17 pm
The Chief Secretary to the Treasury (Yvette Cooper): I beg to move, To leave out from “House” to the end of the Question, and to add instead thereof:
“notes the significant increases in world prices, with the oil price rising 80 per cent. and food prices up 60 per cent. in the year to May 2008; notes that the Governor of the Bank of England’s letter to the Chancellor dated 16th June 2008 said that 1.1 per cent. of the 1.2 per cent. increase in inflation over recent months was due to world food and energy prices, and that the Government was right to tackle the rises with action on an international level, including urgently looking for a successful conclusion to the Doha round of negotiations in the World Trade Organisation and examining the impact of biofuels on food production; supports the Government’s global leadership on these issues; recognises the pressure that these increases in world prices put on family budgets; further notes the measures that the Government will continue to take to support families and individuals, including pensioners and businesses, throughout the UK, including through extra tax credits, increased tax allowances, winter fuel payments and increases in child benefit; further notes that the most important support for working families is a strong and stable economy; and supports the Government’s actions that have delivered unemployment, inflation and interest rates all at historically low levels, helping millions of families into stable home-ownership and sustainable employment.”
This is an important debate at a time when families across the country face pressure from rising world food and fuel prices. Those prices are going up across the world, not just here in Britain. Oil prices have nearly doubled in a year. Whereas a barrel of oil cost $10 a decade ago, a few weeks ago the price rose by that much in one day alone. That puts up the cost of petrol at the pump, as well as the cost of gas and electricity bills, which have themselves risen by 15 per cent. and more than 12 per cent. respectively in the last 12 months.
Mr. MacNeil: The Minister mentions the rising price of oil in world markets, but my constituents face prices per litre for diesel and petrol that are 30p more expensive than in the Irish Republic. Will she accept her responsibility and that of her Government in relation to the pump prices that people face?
Yvette Cooper: Right across the country, there are pressures that people face—at the petrol pump, but also with their utility bills. There are also different parts of the country that show disparities in the prices that they face, which do not appear to be justified by ordinary economic factors. We are keen to look further into that. Discussions have taken place on the issue.
Mr. Redwood: If people could still get petrol at £1.15 a litre, 70p of that would be Government taxes, which have been going up this year when the Government claim to be worried about the plight of the motorist. Why do they not simply get their tax down, because that is the dominant part of the price at the pump?
Yvette Cooper:
As the right hon. Gentleman knows, we have delayed the fuel duty increase, and fuel duty has fallen in real terms over many years as a result of the decisions that we have taken. The issue that faces people
at the petrol pump is not fuel duty, but the fact that we have seen such substantial increases in the price of oil, which is affecting countries right across the world.
Robert Key (Salisbury) (Con): The Chief Secretary is a reasonable person, and knows that hundreds of thousands of people across the country, in every part of the economy but notably in the national health service and social services departments, are subsidising their employers every time they fill up their cars with petrol that they use in the course of their work, because the approved mileage allowance payment scheme, set in 2002 at 40p a mile for the first 10,000 miles, has not been upgraded. Last year there was a review, which has not been published. I have tabled a parliamentary question asking the Department to publish that review, and have not been answered for three weeks. If she wants to take us into her confidence, could she not publish that report so that we can see why the Treasury has refused to take the simple step of upgrading such mileage allowances so that some of the poorest people in society no longer subsidise their employers?
Yvette Cooper: I am happy to look into the point about the review and to write to the hon. Gentleman about it. Again, however, the fundamental problem faced not just by this country but right across the world is the soaring price of a barrel of oil. Fuel duty is 16 per cent. lower in real terms than it was in 1999. Every country in the world is facing problems. Egypt, Haiti and the Philippines have had riots over food prices as a result of the pressure on commodity prices. In Spain and Italy, major protests have taken place about the cost of petrol. Countries right across the world are affected, and that is feeding into domestic inflation in this country too.
Mr. Stewart Jackson (Peterborough) (Con): On that point, is not the pertinent issue that other countries, particularly the United States, have in their armory fiscal policy to alleviate the credit squeeze? They are in a position to do that, but we are not, as a result of our Government’s fiscal management.
Yvette Cooper: I want to come on to that point, because it is important. As a result of changes to tax credits, tax allowances and so on, we are putting money into the economy this year, and such support is right. The record of the hon. Gentleman’s party on fiscal policy and debt management, however, was atrocious. Under this Government between 1997 and 2007 public sector borrowing was 1.2 per cent of GDP, whereas under the last Conservative Government between 1992 and 1997, public sector borrowing was considerably higher at 6 per cent. of GDP, and that is why debt was also considerably higher. He is therefore in no position to provide lessons on management of fiscal policy.
Daniel Kawczynski: Will the Chief Secretary give way?
Yvette Cooper: I will give way on one last point, and then make some progress.
Daniel Kawczynski: The Chief Secretary has referred repeatedly to the price of petrol and diesel. What plans does she have to help essential users such as road hauliers and those in the farming industry in the short term, to help them to overcome the petrol costs crisis?
Yvette Cooper: As the hon. Gentleman will know, such users can claim back VAT, and there is support in place to do that. We must recognise, however, that such price increases are having an impact across the economy, on businesses as well as on households. That is why it is important that sensible decisions are taken not just in this country but globally, to try to get through the problems that we face as rapidly as possible.
The problem affects not just oil, but food. Global food prices have also risen by over 40 per cent. in the last year, with basics such as rice and wheat hitting new highs. The increased price of bread and eggs in the shops has an impact on families. The Governor of the Bank of England has said that the inflation increase that we have seen is accounted for by
“large and until recently unanticipated increases in the prices of food, fuel, gas and electricity.”
Those components alone account for 1.1 percentage points of the 1.2 percentage points increase in the CPI inflation rate since last December.
The price rises are having an effect across the world. Those on fixed incomes, and particularly pensioners, who are often on fixed incomes and might be on lower incomes than households across the board, face particular pressures when they look at their gas and electricity bills and worry about prices as winter approaches.
Mr. Mark Field (Cities of London and Westminster) (Con): Will the Minister give way?
Yvette Cooper: I shall be happy to give way after I have made a little progress.
The world economy faces rising prices, and at the same time we are having to deal with an ongoing global credit squeeze that is having an impact on mortgage lending. As a result the British economy faces tougher times ahead, and like other countries we will need to respond to that. However, we face these challenges in a much stronger position than our position in earlier decades. Overall inflation stands at 3.3 per cent.; the Governor of the Bank of England has said that he expects it to rise to 4 per cent. before falling again towards the target next year. Our inflation rate is still lower than the rates in the United States and the eurozone, and very different from the rate in the 1980s and 1990s.
Mr. Philip Hammond: The Minister says that we face these pressures in a stronger position than other countries, but Alan Greenspan says that the United Kingdom is more vulnerable than other major economies. I understand that Alan Greenspan is, or was, an adviser to the Prime Minister. Is he wrong?
Yvette Cooper: Last month’s report from the International Monetary Fund stated:
“For over a decade, the United Kingdom has sustained low inflation and rapid economic growth—an exceptional achievement...the fruit of strong policies and policy frameworks, which provide a strong foundation to weather global”
Let us examine the position from which we start, compared with that of previous decades. While the CPI inflation rate is now 3.3 per cent., it was 8.5 per cent. in April 1991, and for nearly two years it was more than twice as high as it is now. The retail prices index inflation rate is now 4.3 per cent. It peaked at over
20 per cent. in 1980 and averaged 6.4 per cent. from 1979 to 1997, compared with an average of 2.8 per cent. since. We should now be supporting the pensioners who experienced the breaking of the link between pension and earnings, cuts in their pensions and persistent high-inflation problems throughout the Conservatives’ time in office, rather than listening to lessons from the Conservatives, whose record on both inflation and the management of public finances is one of which they should be ashamed.
Mr. Field: Does it not occur to the Minister that the hostile public sentiment being directed at the Government is partly due to the fact that, while everyone understands that big global problems are affecting the economy at the moment, during the good times for the Government over the past 10 years they never observed that they were being assisted by benign economic conditions throughout the world, but tried to take the credit for all that was going well?
Yvette Cooper: I certainly think it worth reflecting on some of what has happened over the last 10 or 11 years. There have been benefits from world commodity prices, largely thanks to developing countries. There have also been significant benefits as a result of our making the Bank of England independent—a decision which, as the hon. Gentleman will recall, was opposed by his party—and there have been changes to support more competitive and global markets across the board. During the same period we have dealt with global challenges: for example, the bursting of the dotcom bubble and the events of 9/11, which pushed other countries into recession. Over the past 11 years other countries have experienced recession, while the United Kingdom has continued to experience strong economic growth throughout. We have weathered global storms before, and have done so better than other countries.
The particular challenges that we face at the moment—the dual challenges of increasing world prices and a global credit crunch—are also posing considerable challenges to every other country in the world, but over the last 11 years income per head of population has grown faster in this country than in any other G7 country. In 1997 we were bottom of the G7 prosperity league; now we are second to top. We begin this period with employment at a record high, rather than the record unemployment that we experienced in earlier decades.
None of that should cause us to underestimate some of the challenges that we will face as a result of these global problems, and the need to respond to them. No national Government can act alone to stop a global slowdown, and no national Government can act alone to solve problems caused by rising world commodity prices. What we can do, however, is work with the rest of the world—with our global and European partners—and take action here at home to support the economy and the families who face difficult times.
Mr. Douglas Carswell (Harwich) (Con): Pensioners in Clacton face a fall in their standard of living. Their incomes are by and large fixed, but the costs of energy and utility bills and council tax bills have shot up. Apart from offering pensioners free swimming, what does the Minister think can actually be done to try to help their situation?
Yvette Cooper: As the hon. Gentleman will be aware if he has talked to pensioners in his constituency, we have increased the pension credit, as a result of which some pensioners are £2,000 a year better off than they would have been in 1997. We have also introduced the winter fuel payment, which will be increased this year by £50 for the over-60s and by £100 for the over-80s, particularly because we know that pensioners will be facing winter fuel bill pressures as a result of rising oil prices. We have increased the pensioner tax allowance this year as well. We have, therefore, already done a lot to support pensioners. [Interruption.] My party colleagues on the Back Benches are reminding me of other measures, such as concessionary fares, free bus passes and the Warm Front programme to help pensioners insulate their houses. [Interruption.] Yes, TV licences, too, and free eye tests. This Government have introduced a whole series of measures that the Conservative party did not introduce in order to help support pensioners. We want to continue to support pensioners, because we recognise that pensioners on fixed incomes face the greatest pressures.
Yvette Cooper: I have given way to the hon. Member for Na h-Eileanan an Iar (Mr. MacNeil) once already, so I shall give way to my hon. Friend the Member for Coventry, South (Mr. Cunningham) instead.
Mr. Cunningham: My right hon. Friend lists what we are doing for pensioners, and I am sure that the Government understand that there are both fuel and economic problems. Will she also mention what she is doing for women between the ages of 60 and 64, because that is important, too, and people are concerned about it?
Yvette Cooper: My hon. Friend is right. As well as the winter fuel payment increase, we have increased the tax allowance; my right hon. Friend the Chancellor announced that.
It is also worth pointing out that the Conservative party’s own research document on the cost of living was forced to admit that since 2001-02 pensioner couples are in real terms £30 a week better off and single women pensioners are £21 a week better off. Those are not our figures; they are the figures that the Conservative party produced on the impacts on pensioners.
Yvette Cooper: Members will appreciate that I have given way a lot, and I know that many Members want to speak, but I shall give way to my hon. Friend the Member for Hastings and Rye (Michael Jabez Foster).
Michael Jabez Foster: I am grateful to my right hon. Friend. May I remind her of the deal she has done with the energy companies? The poorest pensioners in my constituency are getting 15 per cent. reductions in their fuel bills as a result of the social tariffs she has brought about.
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