As a result of our reforms to the tax and benefit system since 1997, households are better off, on average, by £1,250 a year, and the poorest fifth of households are better off, on average, by £2,575 a year. Those figures may not feature in the headlines today, but they are important and make all the difference to families on low incomes.
Mr. Mark Hoban (Fareham) (Con): Some 1.1 million households will end up paying more tax this year simply because the Prime Minister, to use the words of the Treasury Committee report, wanted to pull a rabbit out of a hat in his last Budget. Under this Chancellor and the last one, is not the lesson of the 10p rate fiasco, the climbdown on capital gains tax reforms or the botched changes to non-dom rules that short-term political hits and fixes take priority for this Government over making the right decisions for the countrys future?
Jane Kennedy: The short answer is no. I invite the hon. Gentleman to consider the comments of the International Monetary Fund on the economy in the UK, which were published in May and strongly endorse the approach that the Government have taken. I commend those comments to him.
Mr. Grogan: Given that many economic commentators believe that imprudent banking practice has contributed to the development of the credit crunch internationally, what discussions has my right hon. Friend had with his international counterparts about improving banking supervision on a global basis to complement the measures planned in this country?
Mr. Darling: My hon. Friend is quite right. If banks in the United States and elsewhere had been more aware of the extent of the risk that they had entered into, particularly in the sub-prime mortgage market, many of the problems we see today could have been avoided. We have had many such discussions, and there is now agreement that we need to do more to strengthen international supervision, especially of institutions that trade in many countries. At home, we will be introducing regulation this October. The legislation will set out a greater number of steps open to regulators to deal with situations as they arise in the future. We will introduce that legislation when the House resumes sitting, and I hope that it will get all-party support.
Dr. Vincent Cable (Twickenham) (LD):
When the Chancellor has met his G7 counterparts from Japan and the United States, has he compared notes with them about the economic hazards of allowing large bubbles to develop in property markets? Ours is arguably even more extreme than that of the United States. What wisdom have they passed on to him from their experience
of how to prevent the inevitable painful consequences of repossessions and negative equity and of how to manage them humanely and properly?
Mr. Darling: The hon. Gentleman is right to say that, across the world, there have been problems with credit, especially in relation to the housing market. I have said on many occasions that lenders need to understand the security on which they are lending and to ensure that someone taking out a loan can repay it. The position of the housing market in the United States is different from that in this country. The United States still has the problem that, in many parts of that country, there are larger numbers of houses that it is not possible to sell. As long as that problem endures, there will be problems in the United States economy.
More generally, there is widespread recognition that what is happening in the world is more profound than many people believed at the end of last year and even at the beginning of this year. That will have a profound effect on developed and developing countries alike. That is why it is necessary for us to take action where appropriate internationally, and why it will be increasingly necessary for us to take action here at home to help people through an undoubtedly difficult period.
Sir Peter Tapsell (Louth and Horncastle) (Con): Will the Chancellor explain to his international counterparts why, when Britain has proportionately a larger financial sector and a larger mortgage housing sector than almost any other country, the Prime Minister has been boasting for months that we are especially well placed to withstand the sub-prime mortgage crisis and the credit crunch? The opposite is the case, as is now clear to everyone.
Mr. Darling: I disagree. The UK economy has grown for well over 10 years. It is resilientmuch more resilient than it was. The current period, no matter how difficult, is an awful lot better than the early 1990s, when more than 3 million people were out of work, interest rates and mortgage rates were much higher and we had higher levels of debt. We as a country are better placed now than we have been in the past.
As I just said to the hon. Member for Twickenham (Dr. Cable), a combination of the effect of the credit crunch and oil prices, which are as high as they have ever been, clearly means that all economies will be affected. That effect will be profound. We all need to be able to act together internationallywhether on oil prices, food prices or stabilising the financial markets. We will also need to continue to be vigilant here at home and to take action to help get our economy through an undoubtedly difficult period.
Mr. David Gauke (South-West Hertfordshire) (Con): On Tuesday, one set of the Chancellors international counterparts, the EU Finance Ministers, backed proposals to launch disciplinary measures against the UK for breach of the EUs deficit ceiling of 3 per cent. of GDP. After his predecessor spent 10 years lecturing other countries, how does it feel to be a representative of a country and a Government who have the worst budget deficit of all the countries in the world, with three exceptions, and who are, in terms of public finances, the sick man of Europe?
Mr. Darling: The hon. Gentleman is talking nonsense. The UK economy is stronger than many other economies. Our economy has been growing strongly for more than 10 years. As I said earlier, our economy, along with every other economy in the world, will experience slower growth this yearthere is no question about that. However, on our public finances, if the hon. Gentleman cares to examine our level of debt, he will realise that not only is it lower than it was when his party was in power, but that we are better placed than many other European countries. As I said when I was at the European Finance Ministers meeting on Tuesday, every country will be affected by the twin effects of the credit crunch and the high inflationary pressures that we are seeing through oil prices. We will all be affectedin Europe and every other part of the world.
Mr. Dennis Skinner (Bolsover) (Lab): Notwithstanding all the difficulties globally, the truth is that in 1992, which the Tories have just referred to, every single pit in Derbyshire was closed and the pit sites were derelict. After 11 years of a Labour Government, there are now 3,000 jobs on those pit sites. Tomorrow I will be opening two more factories on the Shirebrook pit site. Three weeks ago I opened junction 29A on the M1 into Markham pit yard to provide 5,000 jobs. Will my right hon. Friend tell his international counterparts that the Tories may have one story, but the real story is that despite all those pit closures, unemployment in Bolsover is now below the national average?
Mr. Darling: Perhaps the next meeting of ECOFIN Ministers ought to be held on the M1, so we can see for ourselves the difference that has been made. My hon. Friend makes an important point. The difference now is not only that we have large numbers of people in work, but that where people have lost jobs and firms have closed, the Government have taken steps to ensure that we get people back into work. If people go to the sites of the former pits, they will see, far from the dereliction and despair that we saw 15 or 20 years ago, new jobs and new opportunities. That is the difference between a Labour Government, who will help people to get through difficult times, and a Conservative Government, who left people to fend for themselves and suffer. We will not do that; we have a completely different approach.
The Chief Secretary to the Treasury (Yvette Cooper): Investment per pupil has increased by some £2,500 a year to more than £6,000 a year. The proportion of children getting above key stage 2 level 4 is up from 63 to 80 per cent. in English and 62 to 77 per cent. in maths. The Leitch report showed that raising skills and education has a significant impact on improving the economy.
I thank my right hon. Friend for that answer. My constituency shares those successes. Class sizes are down in Wirral, West, every school has been refurbished and key stage 2 results are up from 1997. As a result, over the past 10 years, more students
have been going into further and higher education in my constituency. Despite the current downturn in economic circumstances, may I ask my right hon. Friend, who controls the purse strings, to affirm for me that we will continue the investment that we have put into our schools over 10 years, so that that progress can continue?
Yvette Cooper: My hon. Friend is right: in a competitive global economy, skills matter more and more. Therefore, it is vital that we have the skills and education base in this country, so that the economy can compete and we can grow in the long term. We will continue to do that, in contrast with previous Conservative Governments who, in the face of economic slowdown, always cut investment, particularly capital investment. We have increased capital investment in schools from less than £700 million in 1997 to £6.4 billion this year. That is an improvement in giving our children the high-quality facilities that they need.
Mr. Heathcoat-Amory: Will the Chancellor take a greater interest in the enormously increased targets for renewable energy, to which the Government are committed legally and by treaty law? Is he aware that if those commitments are met, they will impose huge extra costs on the taxpayer and the consumer? Is it wise to create fuel poverty and make British business uncompetitive in world markets through those commitments? Will the Chancellor do something about that now, because those commitments will endure for decades ahead?
Mr. Darling: One of the biggest threats that our economy and, as I said earlier, just about every other economy in the world faces is the high price of oil. I believe that that should act as an encouragement, a spur, to us to do more to generate our own electricity and to get our energy from non-carbon sources. That is important in terms not only of the environment but of security of supply. Self-evidently, a lot of the oil that we currently import comes from parts of the world that are not always politically stable. It is therefore necessary for us to do far more to generate renewable energy. As I understand it, that is also the policy of the right hon. Gentlemans party, although I accept that it is not his own personal preference and that he has a lot of concerns about that source of energy. For my part, however, I think that we need to do far more, not just here and in Europe, to obtain more renewable energy. I also believe that it is essential to replace our fleet of nuclear power stations.
Stewart Hosie (Dundee, East) (SNP):
The Chancellor cannot be unaware of the damaging impact of rising fuel costs on the rural economy, particularly in relation to fuel oil and bottled gas for people who do not have mains electricity or gas. What plans does he have for the
introduction of social tariffs for low-income households, particularly, but not only, in rural areas, which use fuel oil and bottled gas and which have experienced extraordinary rises in costs over the past two years?
Mr. Darling: Of course I am well aware of the problems that people living in rural areas are facing because of high fuel prices. I am also aware of the particular problem that the hon. Gentleman has risen in relation to bottled gas. Although I am not in a position today to say that we can definitely do something about it, I understand the problem to which he refers and it is something that I will consider further.
The Chief Secretary to the Treasury (Yvette Cooper): We continue to receive representations and views from the manufacturing sector. Like every sector in the economy, manufacturing is being affected by rising oil prices and by the global credit crunch. However, recent reports from the Engineering Employers Federation show continued strength and resilience in the manufacturing sector.
Tony Lloyd: My right hon. Friend is absolutely right to refer to the EEFs recent report, which shows that manufacturing is now in a far better position in relation to economic pressures than it was under previous Conservative Governments, for example, when manufacturing bore the brunt of such problems. As she says, however, the credit crunch and rising energy costs will have an impact on manufacturing. Will she ensure that she sticks closely not only to the employers but to the trade unions in manufacturing, to ensure that the sector comes out of this time of economic pressure maintaining as many manufacturing jobs as possible?
Yvette Cooper: My hon. Friend makes an important point. We want to work closely with all those involved in manufacturingemployers, trade unions and othersto ensure that we can support people through what will be a tougher time for businesses as a result of the challenges from the world economy. Many areas of manufacturing are particularly affected by rising oil prices and rising commodity prices, for example. However, my hon. Friend is right to say that manufacturing productivity has grown by almost 50 per cent. since 1997. The manufacturing sector has strengthened, and that puts it in a considerably stronger position to withstand global pressures than it was in the early 1990s and the early 1980s, when we saw devastation across the manufacturing industry.
Dr. Brian Iddon (Bolton, South-East) (Lab): I am sure that we can all agree that the pharmaceutical sector is one of the most successful industrial sectors in this country. Has my right hon. Friend noticed, however, that the sector has lost 8,000 jobs in the past three years? The Association of the British Pharmaceutical Industry and the CBI have recently reported on that fact. Will she be having discussions with either of those organisations?
Yvette Cooper: We have regular meetings and discussions, and I think that I am due to meet representatives of the ABPI to discuss the pharmaceutical industry. That sector has invested £3.2 billion in research and development, and my hon. Friend is right to say that it is a world leader. It is important that we work with all our manufacturers to ensure that they get through the difficult period ahead.
The Exchequer Secretary to the Treasury (Angela Eagle): As shown by Lord Stern in his review of the economics of climate change, the benefits of strong and early action to tackle climate change far outweigh the economic costs of inaction. The Government welcome Tuesdays commitment by the G8 to the goal of achieving at least a 50 per cent. reduction in global emissions by 2050, and the recognition of the role of market mechanisms in helping to achieve emissions reductions in the most cost-effective manner.
Nigel Griffiths: Does my hon. Friend recognise that the Prime Ministers leadership in Japan, which secured an unprecedented target for the reduction of CO2 emissions, is completely undermined by Conservative MPs back home who opposed the Bill proposed by my hon. Friend the Member for South Swindon (Anne Snelgrove) to help reduce carbon emissions here?
Angela Eagle: I agree with my hon. Friend that the communiqué agreed at the G8, to which all G8 countries have signed up, is an historic step forward in establishing a target of 50 per cent. reductions. I also agree that Conservative Members need to walk the walk as well as talk the green talk.
12. Michael Fabricant (Lichfield) (Con): If he will publish UK growth and public borrowing forecasts before the 2008 annual meetings of the International Monetary Fund and the World Bank; and if he will make a statement. 
The Chief Secretary to the Treasury (Yvette Cooper): The Chancellor will publish updated public borrowing forecasts in line with the code for fiscal stability in this autumns pre-Budget report in the usual way.
Michael Fabricant: The right hon. Lady will be well aware that the European Unions Commissioner for Economic and Financial Affairs has already said that the deficit needs to be corrected by 2009-10. Does she accept that deadline and, if so, how on earth is she going to achieve it?
In fact, the IMF has supported our policy position in a strongly supportive document. The EU has different arrangements as it operates within the eurozone, which we do not, so we have different obligations on fiscal policy. We have chosen to use borrowing to support the economy through a difficult time. That is
the right thing to do and constrasts significantly with the continued mistakes made by the hon. Gentlemans party in the early 90s.
Fiona Mactaggart (Slough) (Lab): Is it true to say that present forecasts put Britain in a situation where we have lower net borrowing than we did throughout most of the 90s? What is my right hon. Friends forecast for our performance in comparison with other European countries for the forthcoming period?
Yvette Cooper: My hon. Friend is right to say that there are significant contrasts, particularly in respect of historical periods. Between 1997 and 2007, average borrowing was 1.2 per cent. of gross domestic product; whereas between 1992 and 1997 it was 6 per cent.; and between 1979 and 1997, it was 3.4 per cent. of GDP. Borrowing has been significantly lower and continues to be substantially lower than at the peak of borrowing in 1992, which was 7.5 per centa substantially higher rate than it is today.