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Mr. Timms: I certainly will. We have made a great deal of progress in reducing child poverty. The number of children below the poverty line has been reduced by half a million since 1997; our commitment is to secure the eradication of child poverty in the UK by 2020, and we will shortly publish legislation to enshrine that commitment in statute.
Mr. Philip Hammond (Runnymede and Weybridge) (Con): I realise why it was impossible up until last week for the Chancellor to confirm the details of the comprehensive spending review, but, since the Chancellor has now reasserted control of his Department, will the right hon. Gentleman, on the Chancellor’s behalf, confirm that there will indeed be a comprehensive spending review? Will he also confirm the timing of that review and the period that it will cover?
Mr. Timms: An announcement of the timing of the comprehensive spending review has not yet been made, and I am not able to provide additional information on that, but of course there will certainly be one.
Mr. Jim Cunningham (Coventry, South) (Lab): In the spending review, will the Government take into account the impact of oil prices, particularly on businesses and communities, which have great difficulties with them?
Mr. Timms: Yes, we certainly will. We have put in place an effective programme of support for businesses, which need help to get through this very difficult period in the world economy. We are starting to see clear signs that the steps we have taken are working, and we will maintain our support for businesses in the period ahead.
Public Sector Debt
8. Andrew Selous (South-West Bedfordshire) (Con): By what date he next expects public sector debt to fall below 40 per cent. of gross domestic product. [278511]
10. Mr. Brooks Newmark (Braintree) (Con): By what date he next expects public sector debt to fall below 40 per cent. of gross domestic product. [278513]
The Chief Secretary to the Treasury (Mr. Liam Byrne): In the current global environment of uncertainty, our focus is on ensuring that debt is on a downward turn in the medium term, and we have set out clear plans to do precisely that.
Andrew Selous: Does the Minister accept that the huge increase in Government debt in the UK represents significant extra tax rises for the British people in the future, and that the interest on that debt also represents massive amounts of public spending forgone in future years?
Mr. Byrne: We have been very clear about what precisely we project and anticipate in the years to come. We have been candid and open about the tax and spending implications, and the efficiency implications. I know the hon. Gentleman will forgive me if I tell him that the future costs of today’s downturn would be far more significant if we let it cut deeper and longer, and taking £5 billion out of public spending right now would guarantee exactly that.
Mr. Newmark: I am sure the Minister is aware that on-balance-sheet debt is likely to rise to 79 per cent. of gross domestic product by 2013-14. I am sure he is well aware that, the Government having acquired several banks, that debt amounts to roughly £2 trillion, currently held off-balance sheet, in addition to another £1 trillion of public sector pension liabilities. Can he confirm how much debt is currently held off-balance sheet by the Government, and what percentage of GDP that represents?
Mr. Byrne: We can be open about what the costs are of the current financial crisis, and those costs were set out clearly in the Budget. Both the International Monetary Fund and the Bank of England have welcomed the degree of transparency about the kind of costs we have projected.
Rob Marris (Wolverhampton, South-West) (Lab): When calculating public sector debt, can my right hon. Friend assure me that the whole cost of private finance initiative schemes will be included? He talks of transparency; we need transparency in relation to PFI, which is at best a murky scheme, and at worst a failed scheme.
Mr. Byrne: I know that I will not be the first Minister to answer that question by reminding the House that that is of course a matter for the Office for National Statistics.
Clive Efford (Eltham) (Lab): Will my right hon. Friend reflect on what the alternatives might have been if we had not intervened in the banking system? My constituents—pensioners with savings, and people with mortgages and businesses—are relieved that the Government have taken the action that they have taken. Complaints from Conservative Members about the level of debt that that has given rise to demonstrate that they would have done absolutely nothing to assist those people, or to deal with the dire consequences that people would have faced as a result.
Mr. Byrne: My hon. Friend is absolutely right, and I would tempt him to go further. Of course, if the rescue for the banks had not taken place, not only would the economy be in a far more serious situation now, but its potential for growth would be in a far more serious position. That, in part, is precisely why the IMF has congratulated the Government on the bold and wide-ranging programme we have put in place, and indeed on the international leadership we have shown.
Topical Questions
T1. [278528] Ms Sally Keeble (Northampton, North) (Lab): If he will make a statement on his departmental responsibilities.
The Chief Secretary to the Treasury (Mr. Liam Byrne): We will bring forward a statement of departmental responsibilities to the House at the earliest possible opportunity.
Ms Keeble:
Perhaps like many other hon. Members in this House, I have a branch of Cheltenham & Gloucester in my town. May I put it to my right hon. Friend that many people will be really concerned about the loss of jobs and services from institutions that have had so
much public sector funding? Will he therefore ensure that the banks understand that although of course we expect them to make a profit and repay their debts, we also expect them to honour their wider social commitments to their employees, their customers and the wider community?
The Economic Secretary to the Treasury (Ian Pearson): I fully understand the comments that my hon. Friend makes. She will be aware that Lloyds Banking Group is undertaking a restructuring exercise. To be frank, in some instances it does not make sense to have three branches of the same bank within 100 yd of each other. That having been said, it is vital that Lloyds Banking Group follows the right sort of processes, and that it treats not only its customers but its staff fairly. Although we are talking about an operational decision for Lloyds, Lloyds has made it clear that it intends, as a matter of preference, to try to carry out its proposals through natural turnover of its staff, and we hope that it will be possible to do that.
Mr. Speaker: Order. In case there is a problem, I should say that the Chief Secretary to the Treasury opened by saying what great things his Department was doing. It would appear, however, that the Economic Secretary to the Treasury knew more about this particular subject.
Mr. George Osborne (Tatton) (Con): I know he got off to a shaky start, but let me welcome the new Chief Secretary to the Treasury to his job. He is the fifth Chief Secretary I have faced—and hopefully the last before the general election. I hope he enjoys his move from No. 10 to the Treasury, and that the coffee is up to his exacting standards. At least he knows he will not be hit on the head by a flying mobile phone.
Will the Chief Secretary confirm that the Treasury’s current spending plans—the plans set out by the Treasury at the Budget—show that total real Government spending is going to be cut in the years 2011, 2012 and 2013? If that is the case, what on earth was the Prime Minister saying when he told the press conference last Friday:
“Public spending is due to rise every year”?
Mr. Byrne: I thank the shadow Chancellor for that welcome, delivered with the self-assurance and charm that have become his trademark in the House. As he very well knows, when the Chancellor set out his Budget he provided for 0.7 per cent. real-terms increases in current spending. That is set alongside a move in public service net investment to 1.25 per cent. That was the position the Prime Minister was echoing last week.
Mr. Osborne: I am sorry, but I must press the Chief Secretary on this. He gave us the current spending figures; I am asking about total Government spending, which is what the Prime Minister was asked about. The Treasury figures clearly show that that is going to be cut in 2011, 2012 and 2013. That is why the Chancellor of the Exchequer said on the radio, the day after the Budget, that he had cut overall spending. What on earth did the Prime Minister mean when he said that public spending was due to rise every year?
Mr. Byrne:
The position is as I have just stated. There will be real growth in public spending of 0.7 per cent. between 2011-12 and 2013-14, alongside a situation in
which public sector net investment moves to a position of 1.25 per cent. by 2013-14. [Interruption.] I hear Opposition Members squealing “Cut” from a sedentary position. However, through our process of bringing forward capital investment into this year, we are indeed able to provide for reductions in capital spending in later years. What the Prime Minister was reflecting is very clearly the position in current spending as was set out by the Chancellor at the Budget.
T2. [278529] John Mann (Bassetlaw) (Lab): The prevailing economic philosophy is that the free movement of labour across Europe is good for the economy. Does the Chief Secretary agree with me that his Department needs to provide statistics to demonstrate whether a worker permanently resident in this country who gets a job has a greater economic multiplier effect than a temporarily resident migrant worker who gets the same job?
Mr. Byrne: That subject has been debated extensively in both Houses and it was reviewed in some depth by the House of Lords Economic Affairs Committee. In their evidence submitted to that Committee, the Government were clear that, on average, migrant workers contribute more to this country than they take out. Obviously, it is important to keep that under close review. The advent of the Australian points-based system means that we are able either to raise or lower the bar to newcomers much more flexibly, depending on the needs of the labour market here and the overall economic contribution made to this country by migration.
Mr. Jeremy Browne (Taunton) (LD): My hon. Friend the Member for Twickenham (Dr. Cable) apologises for being unavoidably absent owing to a recent operation on his appendix. As the Chief Secretary surveys the team in his new Department, can he think of any part of the Treasury ministerial anatomy that, similarly, serves no useful function, exists in a state of constant pain and was threatened with brutal surgical removal over the weekend?
Mr. Byrne: None springs immediately to mind.
Mr. David Clelland (Tyne Bridge) (Lab): Ministers will be aware that this week is carers week. Could the appropriate Minister from the Treasury meet the appropriate Minister from the Department for Work and Pensions to try to find the finances to end the unfairness in the carer’s allowance, which is completely lost following a very small increase in earnings or on retirement, despite the fact that the caring role and responsibility continue?
The Exchequer Secretary to the Treasury (Kitty Ussher): This being my first day as a Treasury Minister, having previously been at the Department for Work and Pensions, I can say I will be delighted to hold such a meeting.
T3. [278530] Tom Brake (Carshalton and Wallington) (LD): What progress has the Chadwick review made on compensation for Equitable Life policyholders?
Ian Pearson:
As the hon. Gentleman will be aware, the Government appointed Sir John Chadwick to advise us on the form of an ex gratia payment scheme that should be devised and the factors that relate to disproportionate impact. I can report that Sir John
Chadwick has made progress; when I recently appeared before the Public Administration Committee, I gave further details about how his work was proceeding. I can confirm that actuarial advisers have been appointed to help him with his work, and that he has the staffing and resources he requires to do his job. We have always said that we wanted progress to be made as quickly as possible, and that clearly remains the Government’s position.
Andrew Mackinlay (Thurrock) (Lab): Last week, the Northern Ireland Secretary gave the House an undertaking that he would pursue with vigour the crisis facing investors in the Presbyterian Mutual Society in Northern Ireland. There is clearly a Treasury dimension to this. I would like to know what has been done, what is being done, and what discussions are being held on behalf of those investors—the most thrifty and decent people who are very anxious about having access to their funds now.
Ian Pearson: I sympathise with the situation that people who have made investments in the Presbyterian Mutual Society are facing. My hon. Friend will be aware that the PMS is not like a normal savings institution: it is not regulated by the Financial Services Authority, and when people made investments they did so in the form of shares rather than deposits. Different circumstances therefore apply. He will be aware that there has been an investigation. We have been looking into the whole issue of the regulation of credit unions and industrial and provident societies, and a report is due to be published shortly.
T4. [278531] Andrew George (St. Ives) (LD): In respect of the Government’s planned changes to furnished holiday lettings tax rules, could the Financial Secretary to the Treasury clarify whether it would be possible to distinguish between properties that are purpose-built chalets, caravans, and other properties with occupancy restrictions that are clearly intended for the holiday lettings industry, and other properties that have been lived in and could be lived in again by local families in need?
The Financial Secretary to the Treasury (Mr. Stephen Timms): I would not want to encourage the hon. Gentleman in the view that that might give a way forward on this issue. Our position is that we have given support in the past. It is clear, under European Union rules, that that support would need to be extended to furnished accommodation not only in the UK but across Europe. We are therefore making that change, but only for a year; then our intention would be to withdraw the relief altogether, not just for some but for all furnished holiday accommodation.
David Taylor (North-West Leicestershire) (Lab/Co-op): Further to earlier answers, Britain’s national debt would be repaid more rapidly, and public expenditure cuts would be avoided more easily, if the top 700 British companies did not involve themselves in tax avoidance on such a grand scale. Why, in that case, does this year’s Finance Bill repeal section 765 of the Income and Corporation Taxes Act 1988, which requires companies to seek the permission of Her Majesty’s Revenue and Customs before moving cash offshore and to say whether the move will be to the detriment of the Treasury? That will encourage avoidance.
Mr. Timms: I do not think it will. Indeed, we are likely to debate the matter in the Finance Committee this afternoon. The Treasury consents rules were introduced in 1951 in a very different environment and they are now clearly out of date. The measures that I will set out in Committee this afternoon, with which we are replacing those rules, are a much more effective way of tackling the genuine problem of avoidance, to which my hon. Friend rightly draws attention.
T5. [278532] Mr. Mark Harper (Forest of Dean) (Con): The announcement today by Lloyds TSB about the job losses at Cheltenham & Gloucester is a big blow, particularly to the 74 people who will be made redundant in Gloucester. The bigger issue is the 1,000 people who also work in our county for the Cheltenham & Gloucester mortgage business. Given that the Government control a significant stake through UKFI—which the second permanent secretary to the Treasury runs, and which is therefore not at arm’s length—can the Minister provide any assurance about whether those jobs are secure in the short and the long term?
Ian Pearson: As I have told the House previously, if we are to protect taxpayers’ interests, it is vital that UKFI manages its relationships with the banks in which the Government have investments commercially. Lloyds Banking Group is making commercial decisions. As with any major company, we expect it to act in a socially responsible manner and undertake due processes of consultation with its work force. My understanding is that that is exactly what is happening.
T6. [278533] John Barrett (Edinburgh, West) (LD): Despite the massive investment of public funds in the banking sector, many small and medium-sized viable companies have contacted me to say that the banks are not providing the financial support that they require. What are the Chancellor and the Treasury team doing to ensure that money that goes to the banks finds its way to small and medium-sized businesses?
Ian Pearson: Let us first be clear that, when the Government took action to prevent the collapse in the banking system, we were investing not in the banks but in people who had savings and mortgages and in companies that had overdrafts in the banking system to ensure that it could continue. As a result of the negotiations in January, under the asset protection scheme, RBS has made legally binding commitments to invest more in businesses this year and next, as has Lloyds. The sums for businesses are £16 billion from RBS and £14 billion from Lloyds, on top of the additional investments that Northern Rock is making and the announcements from banks that have not taken advantage of the recapitalisation scheme, such as HSBC and Barclays.
We are in a position whereby much of the international finance that was available to the UK economy in the form of lending to business has disappeared in the past 12 months. We are putting that back in place through our negotiations and agreements with UK banks. We will continue to monitor, through the lending panel, actual lending in the UK economy, so that we can ensure that small and medium-sized enterprises and other businesses get the lending and financial support that they need to see them through the difficult times.
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