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Will my right hon. Friend bear it in mind that this time last year there was serious speculation in oil and other commodities, and the price of oil rose to $147 a
barrel? Speculation undoubtedly played a significant part in that. The price has now risen to $68 today. Will he ensure that there is no speculation of the kind that we had last year, to ensure that the recovery gathers pace through to next year?
Mr. Byrne: As my hon. Friend will know, the Governor of the Bank of England and the Chancellor, in the Budget, projected that the consumer prices index would begin to fall over the course of this year, which is why it is important that we ensure that the Governor has the right tools at his disposal to ensure that we do not see prices falling uncontrollably and for an extended length of time. We will therefore ensure that the Governor has the tools that he says he needs, but we will need to keep situations such as the rise in oil prices under close review. That is why it is important that we retain a degree of flexibility. It is also why it will be important for us to carry on acting internationally, because the kind of co-ordination that my hon. Friend mentions is best done internationally. That is something that would be very difficult if we were to take the very different approach proposed by the Opposition.
Mr. Speaker: I call Mr. Field. I thought that you wanted to ask a question.
Mr. Mark Field (Cities of London and Westminster) (Con): I often want to intervene, although not particularly on this point; the question that I was going to ask concerns something that arose some time ago. What level of quantitative easing does the Chief Secretary believe is consistent with a low inflation target?
Mr. Byrne: Well, I am afraid that that is a judgment that we will leave to the Governor of the Bank of England. The Chancellor has authorised up to £150 billion of quantitative easing, and the Bank has drawn down something like £125 billion so far. As I say, it is important that we provide the framework and give the Governor the tools to do the job, but it is also important for the confidence of markets and for delivering the target in hand that it is left to the MPC and the Governor to make the ultimate judgment about how much is needed now and how much is needed later.
Reoffending (Access to Services)
5. Alun Michael (Cardiff, South and Penarth) (Lab/Co-op): What discussions he has had with ministerial colleagues to ensure that methods of budgeting for health, education and skills enable quick and effective access to services required to reduce levels of reoffending. [278508]
The Chief Secretary to the Treasury (Mr. Liam Byrne): The Treasury sits alongside 13 other Departments, including the Department for Children, Schools and Families, the Department for Work and Pensions and the Department of Health, in our work focused on reducing reoffending. My right hon. Friend will be glad to know that adult reoffending fell by 23 per cent. between 2000 and 2006, while juvenile reoffending fell by nearly 19 per cent. over the same period.
Alun Michael: I welcome my right hon. Friend to answering these questions.
Does my right hon. Friend agree that spending on aspects such as drug treatment and public health can have an implication for reoffending? For instance, the engagement of young people in school and in having a future through education is also relevant to reducing reoffending. Will he come with me to look at the success of the violence reduction strategy in Cardiff, which has prevented violent crime and also reduced the need for expensive surgery? Will he also ensure that officials in his Department make the connection between these different sorts of budgets?
Mr. Byrne: I congratulate my right hon. Friend on the persistence and tenacity with which he has raised this issue with Treasury Ministers. I would be pleased to learn a little more about the work in Cardiff that he has talked about. It is a clear example of the way in which front-line public servants, when they are given greater freedom, can work together more effectively to deliver better outcomes on such an important agenda, very often for less money. I know that he will be keen to know more about the work of Sir Michael Bichard, who is working in 13 different areas around the country to consider how, within different local authority areas, we can bring together the work of public services engaged in similar endeavours.
Mr. Gary Streeter (South-West Devon) (Con): Is this not an area where the Minister can bring to bear experience from his previous office? Is it not something that Governments of all colours are rather bad at—namely, spending on prevention rather than cure and spending upstream to avoid a problem rather than spending money on the consequences of that problem? Could not the excellent third sector organisations be deployed far more efficiently by the Government, with the right kind of backing, to stop people reoffending as frequently as they do?
Mr. Byrne: I have to agree with the hon. Gentleman. Moving our attention and our resources into the business of prevention will, overall, be much cheaper for the country and will save a lot of human pain in the medium and long term. I must agree with him that the third sector provides extraordinary new potential, as do charities, voluntary groups and social enterprises. They can help on this agenda in two fields in particular. First, they can ensure that those who are convicted of offences are given much greater skills, education and literacy training so that they are better able to succeed in the labour market. Secondly, they can do a better job of helping people to kick the poison of drugs. As we know, that is the root cause of so much reoffending in this country.
Mr. Andy Reed (Loughborough) (Lab/Co-op): One of the most effective approaches with young offenders in particular is finding paid employment. I have seen a scheme sponsored by National Grid that reduces the reoffending rates from 70 per cent. to just 7 per cent. through supported employment, taking young people into the workplace and ensuring that they have all the support they need. As has been said, this is all about prevention and ensuring that we invest in the long term by investing these moneys up front. Will he commit to ensuring that such schemes are replicated across the country so that we learn from the best practice that is already happening up and down our Prison Service?
Mr. Byrne: The scheme that my hon. Friend mentions is very much the kind of scheme that will be more possible in the future because of the £100 million of investment provided last year in the youth crime action plan. As I say, ensuring that money and resources go into equipping people with the skills that they need to succeed in today’s labour market is one of the best investments that we can make in crime prevention. From my experience in my constituency, I think that that must go alongside well-organised, well-structured and well-delivered programmes to keep people away from drugs, too, but where there is innovation such as that pioneered by National Grid, we will, of course, seek to learn from it and build on it.
Debt Reduction
6. Richard Ottaway (Croydon, South) (Con): What recent discussions officials in his Department have had with the International Monetary Fund on the Government’s plans for debt reduction. [278509]
The Chief Secretary to the Treasury (Mr. Liam Byrne): The IMF holds bilateral discussions with each of its member countries, usually every year, as part of its country surveillance function. IMF staff last visited London in May 2009 and met representatives of various institutions, including Her Majesty’s Treasury.
Richard Ottaway: The IMF recently published its report on the British economy and the Minister’s colleagues have clearly read it, as they are very fond of quoting the odd phrase that supports the Government’s tattered economic policy. However, at its heart it is highly critical and calls for a
“more ambitious medium-term fiscal adjustment path”.
Does the right hon. Gentleman agree that that is bureaucratic code for, “We’re in a mess and the Budget doesn’t sort it out”?
Mr. Byrne: I am afraid that I am going to be guilty of quoting from aspects of the IMF report again, but like me the hon. Gentleman will have read the IMF’s endorsement of the Government’s response to the crisis. It said that it was “bold and wide ranging” and would “support the recovery”—an echo of what IMF managing director Dominique Strauss-Kahn said when he told “Newsnight” that it was “obvious” that the fiscal stimulus
“is the right thing to do”.
However, there will be differences of view with the IMF. For example, we have a different projection or estimate of what the return to growth will look like; the IMF estimates that economic growth will contract by 4.1 per cent. this year, but the consensus among independent forecasters is for something more akin to 3.8 per cent. It is not unexpected, therefore, that we will have different ideas and judgments about what is the right pathway back to fiscal balance. We are determined to make sure that we halve the deficit over four years and pay off something of the order of £50 billion by 2013-14. Where there are difficult decisions to make, we will make them, especially on tax and efficiency. Unlike the Opposition, however, we are determined to make sure that we protect front-line services because we think that that is the best way to protect businesses and families in this country while returning as quickly as possible to a sensible and sustainable fiscal position.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): The economies of some European economies, such as Hungary and Latvia, are experiencing deep economic troubles, and traditionally they would turn to the IMF for help and rescue. They are also committed to becoming members of the eurozone, so is the Treasury having any discussions with the IMF on how to co-ordinate the actions of the IMF and the European Commission in respect of those failing currencies?
Mr. Byrne: As my hon. Friend knows, conversations about such questions go on all the time with the IMF and within the European Commission. She underlines the point that we need a better system of international surveillance so that preventive action, where it is needed, can be taken fast.
Mr. David Heathcoat-Amory (Wells) (Con): Will the Chief Secretary confirm that this country is now formally in an excessive deficit procedure, and that the Economic and Finance Council wrote to the Chancellor on 27 April to say that the Government had not taken effective action to correct the situation? ECOFIN also said that, even on the Government’s own figures, our deficit will be more than four times the permitted 3 per cent. level. Is the Minister pleased or sad that that rules out this country joining the euro in the foreseeable future?
Mr. Byrne: I missed the last bit, but the answer to the substance of the question is that we have to make sure that we publish a pathway back to balance that is open, transparent and credible. It will entail the difficult policy choices that were set out very clearly in the Budget. Difficult decisions will have to be taken, such as increasing marginal rates of tax on the 600,000 people who earn more than £150,000 a year. Serious efficiency measures will also be needed, but as my right hon. Friend the Financial Secretary said recently, that is precisely the sort of discipline that we are determined to set out, and stick to.
Mr. Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): Since debt reduction is of the utmost importance to developing countries, will my right hon. Friend confirm that the Government remain absolutely committed to achieving the millennium development goals?
Mr. Byrne: Yes, I am happy to provide my right hon. Friend and the House with that assurance.
Mr. Richard Spring (West Suffolk) (Con): Given the way our debts are growing, is the right hon. Gentleman aware that according to The Economist, our Budget deficit this year as a percentage of GDP will be the highest in the entire industrialised world?
Mr. Byrne: The very reason we are able to mount the fiscal stimulus that we put in place this year is that, against international comparisons, we went into the downturn with relatively low levels of debt. We think it is important that we invest now, because if we did not provide the stimulus that we are putting in place, the recession would cut deeper and longer, and would more closely resemble the kind of experience that this country went through in the 1980s and 1990s. That is not an experience, thanks very much, that we want to repeat.
Dr. Stephen Ladyman (South Thanet) (Lab): I do not know where The Economist got its figures, but the IMF figures indicate that debt in this country as a percentage of GDP is lower than in all our industrial competitors and will stay lower than theirs for several years. Is not the key thing about debt whether or not we can service it? As we reduce those levels of debt, may I ask my right hon. Friend not to cut the investments that we are making in jobs, wealth creation and public services, because those are what will guarantee that we can repay the debt in the long term?
Mr. Byrne: I can provide that assurance because in the Budget the Chancellor was able to set out a pathway back to balance, which involved difficult decisions on tax, spending and efficiencies, not least adding to the £30 billion of efficiencies projected for next year a further £5 billion. The Chancellor was also able to set out the kind of sustained investment that we can continue this year, for example, in primary care trusts, with budgets up 5.5 per cent., in schools, with budgets up this year 4.3 per cent., in front-line policing, with budgets up this year 2.7 per cent., and in local councils, which this year helped to deliver the lowest council tax increases for more than a decade.
Mr. David Gauke (South-West Hertfordshire) (Con): May I welcome the Chief Secretary to his new position? I am sure his arrival in his new post will be welcomed by the Chancellor as well, not least on the grounds that, presumably, the Chief Secretary’s spouse will not be plotting to replace the Chancellor. The IMF report that we have been discussing says that the UK recovery will be subdued and gradual, in contrast to the Treasury’s very optimistic forecasts, yet is was reported in The Times last week that even the Treasury’s projections were insufficient for the Prime Minister, and
“the Prime Minister tried to upgrade the growth forecasts to make the economic outlook appear rosier than it was; the Chancellor refused.”
Is there any truth in this allegation? Is this not another example of splits between the Prime Minister and the Chancellor?
Mr. Byrne: What are important for the House are the estimates that were published. There is indeed a range of views right the way across independent forecasters. The hon. Gentleman will no doubt have access to those, as I do. The IMF, it is true, is on the pessimistic end of those forecasts, projecting a 4.1 per cent. contraction this year. I understand that the IMF has now revised its forecast three times since October last year, reflecting a degree of uncertainty in the international economy, but I merely note for the House that the IMF is at the pessimistic end of that range of forecasts. If one corrals the range of independent forecasts that are available, one finds the consensus among them is about 3.8 per cent. We think growth will be stronger than that but, as the Chancellor has said to the House a number of times, the international economy remains in an uncertain place.
Early Intervention
7. Mr. Graham Allen (Nottingham, North) (Lab): If he will take steps to ensure that policy to encourage early intervention is taken into account in decisions on expenditure in the next comprehensive spending review; and if he will make a statement. [278510]
The Financial Secretary to the Treasury (Mr. Stephen Timms): I pay tribute to my hon. Friend’s work on early intervention. Its benefits have been recognised in spending decisions and, for example, in January’s “New Opportunities” White Paper, as my hon. Friend knows, and they will certainly be recognised, as he calls for, in future spending decisions as well.
Mr. Allen: Will my right hon. Friend have a word with the new Chief Secretary to the Treasury and congratulate him on now being a little closer to the place where he can actually do something about social inclusion and early intervention? Will he also discuss with him the idea that the best way to pay off debt is to invest effectively and early, securing returns through people who have grown up to be more capable citizens due to early intervention? Will he therefore include early intervention, as the next theme of the comprehensive spending review, in every single Department so that we can start to receive repayments from that investment, to pay off the debt and to establish an effective economic base among our people as well as among our financial institutions?
Mr. Timms: My hon. Friend is absolutely right to highlight the benefits of investing particularly in the early years of children’s lives. Sure Start children’s centres are a great example: we have invested almost £2 billion in them, and we will have 3,500 of them by the end of next year. It is absolutely right to say that that investment in children’s earliest years will amply be repaid in years to come. Future spending will not be needed because children will be better equipped for their future lives—transforming their chances. I can tell my hon. Friend that we certainly will reflect that perspective in the comprehensive spending review, when that work is under way. It would be catastrophic to impose £5 billion of unplanned spending cuts this year, as the Opposition have argued for.
Miss Anne McIntosh (Vale of York) (Con): Early intervention is welcome, but how does the Minister expect to cope with the lack of social and language skills of many pupils entering reception classes and the first years of primary school, which reflect the breakdown generally in British society?
Mr. Timms: Of course, the hon. Lady’s point is one reason why early intervention is so important. The network of 3,500 children’s centres will make a big contribution to preparing children at the start of their lives to do well, and for school when they reach it. It is vital that those investments be maintained. One great benefit of the work of my hon. Friend the Member for Nottingham, North (Mr. Allen) on that issue is the cross-party support for it. He wrote a pamphlet jointly with the right hon. Member for Chingford and Woodford Green (Mr. Duncan Smith), and we need to sustain that commitment.
Mr. Andrew Love (Edmonton) (Lab/Co-op): One issue that must be considered, along with early intervention, is poverty among families. The Government have a commitment to child poverty reduction targets, but unfortunately it has not been possible to implement them in recent years. We must stick with those targets, however, so will my right hon. Friend commit to keeping them as a priority and ensure that they are part of the comprehensive spending review next year?
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