Previous Section | Index | Home Page |
The Economic Secretary to the Treasury (Kitty Ussher): I am grateful to all hon. Members who have contributed to what has been an interesting and timely debate, even though we might have a slight sense of déjà vu, having debated a similar subject only a couple of weeks ago. Let me add my congratulations to those of other hon. Members to the hon. Member for East Londonderry (Mr. Campbell) on securing this debate, and to his colleagues on making their points so clearly.
In Northern Ireland, as in the rest of the country, it is clear that the prices of food and fuel, and energy bills, are rising and that families are feeling the pinch as a result. That is no surprise, given the recent state of world oil and food prices, with oil up by 80 per cent. and food up by 40 per cent. in the year to May. However, Opposition Members may not like this, but it is a fact that our economy is well placed to respond to the disadvantageous global scenario, and that it is coping far better than it could have done in the past.
Oil prices have increased fivefold in the last five years, in what is widely being described as the third oil price shock in living memory, but this time headline inflation has risen by less than 2 percentage points, as compared with a rise of nearly 20 percentage points during the first oil price shock in the mid 1970s and a rise of more than 10 percentage points during the second shock in the early 1980s. That, if nothing else, is a demonstration of the increased resilience of our economy after 11 years of low inflationthe second lowest in the G7, in factand steady and strong growth.
Christopher Fraser: Can the Minister explain why, if we have the cheapest diesel in the Europe and the second lowest price for unleaded petrol, we pay the most tax?
Kitty Ussher: That is not the case. In fact, we have fallen down the ranking in fuel duty taxation compared with other countries in Europe. Including tax and duty, the UK has the seventh lowest petrol price in the EU 15 and the 19th lowest in the EU 27. We have fallen from our habitual rank, when the Conservative party was in power, of second highest in the EU 15 to around the middle of the range, so I would politely suggest that the hon. Gentleman check his facts.
In the past 10 years, real household disposable income has risen substantially, by more than 30 per cent., and income per head has risen faster than in any other G7 country, taking us from the bottom of the pile to second place. We are now second in the G7 in terms of GDP per capita, whereas before 1997 we were bottom. We have experienced the fastest rise in income per head of any G7 country since 1997. Real disposable income
increased by 25 per cent. between 1997 and 2006. Most importantly, growth for the bottom 40 per cent. of people in our country is greater than that for richer households. Employment has also risen by around 3 million, to record highs. The hon. Member for Putney (Justine Greening) tried to imply that things were worse under this Government than under previous Governments, but the facts do not bear her out.
In Northern Ireland, as my right hon. Friend the Financial Secretary to the Treasury said earlier, the economy is stronger, with unemployment halvedit is now the third lowest of any UK regionand 100,000 more people in work than was the case under the previous Conservative Government. We are seeing progress all the time, as the new era of stability in Northern Ireland brings new investment and jobs. This means that Northern Ireland, like the rest of the UK, can respond far more strongly to the challenges that we all face. We cannot be complacent, however. We need to work to tackle the causes of these challenges and to support people in the meantime.
Obviously, no national Government by themselves can stop world fuel and food prices rising or end a global credit squeeze, but we are working with our international partners at every level, because these challenges need international solutions. As I have said, we also need to support people in the meantime. We are doing that through the delay in the planned April fuel duty increase and, yes, the Chancellor is carefully considering the October increase. We are also supporting people through the increases in personal allowances this year and through the additional payments that will be made with the winter fuel payment this winter in the whole of the UK, including Northern Ireland. We will continue to support people in that way.
I want to turn now to the specific points that have been raised in todays very useful debate. We challenged the hon. Member for Putney about her own policy during her speech. She mentioned a fuel stabiliser policy, but, when challenged, she said that it was not a policy, simply a consultation. That is yet another example of the Conservatives using salesman-like tactics to get in through the front door of our nations households, even though they would be unable to follow them through.
Justine Greening: When Ministers have gone through the absolute disaster of not consulting properly on issues such as non-doms and capital gains tax, the one lesson that they ought to take from us is on consultation. It is sensible to consult, to make sure that we get things right first time. That is something that we have learned from the Governments getting it wrong.
Kitty Ussher: I confidently look forward to this so-called consultation being quietly dropped because the plan simply would not work. The hon. Member for Twickenham (Dr. Cable) gave one reason why it would not work, with which I absolutely agree. His understanding of the Conservatives consultation/policy/not-quite-sure-what-were-talking-about was that it would rely on a cyclical oil price, so that households and motorists could be subsidised when oil prices rose, and it would pay itself back when the oil price was in the other half of its cycle. He rightly pointed out, however, that that would not work because oil prices are not cyclical.
However, the main problem with the Conservatives consultation/policy/not-quite-sure-what-were-talking-about is that it would require an automatic correlation between the international price of oil and the effect on the public purse. They are effectively saying that if the international oil price rose because of decisions taken in different countries by OPEC, there would automatically be a channel of funding that would go from the public purse to the motorist. If I were a nurse, a doctor or a teacher in this country, I would be extremely worried by what the Conservatives might, or might not, be proposing.
The hon. Member for Wellingborough (Mr. Bone) finished what might politely be called a wide-ranging speech by saying that his was the party that would control public expenditure. At the same time, however, those on his own Front Bench are saying that they would not control public expenditure, but would simply hand out taxpayers money on the basis of what was happening to the international oil price.
Mr. Bone: The doctors, nurses and policemen who would have their fuel prices reduced by the stabiliser would welcome that policy. This party is interested in looking after the consumer. The Government are trying to reduce their borrowing because of their inefficient running of the economy.
Kitty Ussher: It is the overall state of the economy that we are interested in, and we will not play fast and loose with the public finances through cheap gimmicky policies like those being proposed by the Conservative salesperson in order to get in through the front door.
My hon. Friend the Member for Foyle (Mark Durkan), who is no longer in his place, made a useful contribution to the debate and raised several issues to which I should like to respond. First, he expressed understandable concern that the price of oil is being driven by speculators, and asked whether we could intervene to prevent trading in oil futures. The issue is being looked into by the Financial Services Authority, although I have to say that there has been no indication of any inappropriate inactivity.
Secondly, my hon. Friend asked what we were doing to help people to cope. We understand, of course, as I said in my opening statement, the significant difficulties faced by families feeling the pinch. At such a time, it is right for the Government to use whatever resources are at their disposal to ensure that everybodywhether they be working class or middle classhas access to good impartial advice. [Interruption.] The hon. Member for Winchester (Mr. Oaten) mentioned the middle classes, but I am not accusing everyone on the Liberal Democrat Benches of actually being middle class.
We want everybody to have good financial advice in what we all recognise as a difficult time. That is why in recent weeks we have expanded by £10 million our debt advice funding and why, together with my right hon. Friend the Chief Secretary, we made a substantial policy announcement earlier this week on the whole issue of financial capability. That includes not only a significant £12 million pilot in the north-east and north-west, taking forward the work of Otto Thoresen in order vastly to improve access to so-called generic or non-product-tied financial advice, but rolling out a programme through schools and the workplace for accessing good financial advice at this important time. That involves an
expanded helpline available nationally, including to people in Northern Ireland, as a one-stop shop to signpost people to the advice most suited to their needs.
Christopher Fraser: If the Minister is saying that the Government are serious about people suffering from fuel poverty, why have they cut the Warm Front budget for the next three years?
Kitty Ussher: My experience is that the services offered through Warm Front are expanding. We have the potential to do that, and I certainly see increasing numbers of people in my own constituency taking advantage of what Warm Front has to offer.
Let me address an issue raised by Members of all partieswhether the Government have a tax revenue windfall from the rise in oil prices. The simple answer is that there is absolutely no correlation between the international price of oil and what the Government actually receive. That is one reason why the hon. Member for Putney is wrong to imply that money is necessarily coming in; as I said in an earlier intervention, an analysis done by the Institute for Fiscal Studies shows that.
Kitty Ussher: May I give way after I have finished explaining my point, as it may answer the hon. Ladys question?
The key point is that we cannot look at North sea revenues in isolation. Higher oil prices will, of course, boost revenues from petroleum revenue tax and North sea corporation tax, but a number of offsetting effects limit the overall impact on the public finances. We have already made this argument: fuel duty is set as a constant amount per litre of fuel sold, and it does not go up as a result of fuel price rises. When consumer spending on fuel goes up, there is likely to be a separate effect elsewhere in the economy, leaving the overall level of VAT revenues broadly unchanged. Of course businesses, including road hauliers, can reclaim the VAT that they spend on fuel as well.
Higher oil prices have temporarily pushed up inflation, and as most tax and social security benefits are linked to inflation, this will reduce income tax receipts and boost Government spending from April 2009. Higher inflation also increases the cost of servicing index-linked bonds, and higher oil costs could mean smaller profits for companies that have to spend more of their income on fuel, thus leading to reduced Government receipts from that source, and all this depends on the impact on the wider economy. I hope that that picks up a number of points raised by Members in the debate. We will, of course, update all our forecasts in the pre-Budget report.
Justine Greening: The Minister says that there is absolutely no correlation between oil prices and Government revenues. Is she really saying that the Government have some random way of assessing revenues, depending on oil price changes? Surely, there has to be a model showing some kind of correlation, albeit a complex one.
Kitty Ussher:
I do not think the hon. Lady understood what I just said. I said that there was no automatic correlation between an oil price rise and the overall
effects on the public finances. Many other factors are involved, such as the way in which mechanisms operate throughout the economy. As I said, we will update all our forecasts for revenues and the wider economy at the time of the pre-Budget report.
I do not want to intervene in the debate between the hon. Member for Upper Bann (David Simpson) and my hon. Friend the Member for Foyle, but I thank the hon. Member for Upper Bann for his mixed metaphor about the Celtic tiger which had been on fire withering on the vine. I shall bear it in mind when I consider the economy of the Republic of Ireland.
The United Kingdom is well placed to respond to the international economic challenges that we face. That also goes for Northern Ireland, where the economy is far stronger than in the past, partly because of the Governments economic policies but also, of course, because of the new era of stability. Politicians in Northern Ireland have had the chance to build on that stability and to secure more investment and more jobs by completing devolution, which includes signalling their willingness to achieve agreement on the transfer of policing and criminal justice powers.
Mr. Gregory Campbell: The Minister presumably accepts that she is a member of a Government who, for whatever reason, are deeply unpopular at the moment, as a sequence of by-elections appears to show. Todays debate raised a core issue affecting tens of millions of people throughout the United Kingdom, and gave the Government an opportunity to introduce steps to deal with the deepening problems that people are facing out there. Is not their lack of ideas in this regard an example of what makes them so deeply unpopular?
Kitty Ussher: We present policies at the appropriate time. We make our economic forecasts at the time of the Budget and the pre-Budget report.
All politicians in Northern Ireland have a responsibility to build on the stability that has already been granted through the peace process, and we all have a responsibility to play our part to secure more investment and jobs by completing devolution. That is not to say, however, that families are not feeling the pinch, in Northern Ireland as much as elsewhere. Energy bills, petrol and food are all significantly more expensive than they were a year ago, and that is creating tougher times.
The motion calls on us to look at new ways of helping those on low and medium incomes. Of course we are always happy to hear new ideas, and we will always do our best for the people of this country
Kitty Ussher: I will not give way.
The Government have done a huge amount for people on lower incomes over the last 11 years through tax credits, the national minimum wage and measures for pensioners in particular, such as pension credit. Many of those measures were opposed by the Conservatives. Those policies have supported people in every part of the UK. We are continuing to support the people of this country during difficult times, and I commend the amendment to the House.
Question put, That the original words stand part of the Question:
Next Section | Index | Home Page |