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Comprehensive Spending Review
16. Michael Fabricant (Lichfield) (Con): When he expects to announce arrangements for the next comprehensive spending review; and if he will make a statement. [306858]
The Chief Secretary to the Treasury (Mr. Liam Byrne): I refer the hon. Gentleman to the answer I gave a few moments ago.
Michael Fabricant: Yes, but does he not think that the answer he gave to my hon. Friend the Member for Putney (Justine Greening) bears all the credibility of that of the Prime Minister when, two years ago, he said that his decision not to hold a general election had nothing to do with the fact that the polls were so bad?
Mr. Byrne:
Even the hon. Gentleman would admit that there remains a degree of uncertainty in the international economy. We need only look at events in Dubai and the Gulf to see the kind of instability that persists. Indeed, we are only halfway through the measures agreed at the G20 in London, so we are by no means out of the woods yet. Recovery is not guaranteed, and we cannot know how much we should allocate for welfare benefits. Therefore, it is difficult to pin down to
the last pound and penny how much each individual Department should have. Last week, my right hon. Friend the Chancellor set out one of the clearest deficit reduction plans in the G7. We set out our priorities for the year to come, including some £15 billion of cuts and efficiencies in lower priority programmes. What we have yet to see is any plan of sufficient clarity from the Opposition.
Youth Unemployment
17. Mr. William Bain (Glasgow, North-East) (Lab): What recent representations he has received on the effect on the economy of the level of youth unemployment. [306859]
The Economic Secretary to the Treasury (Ian Pearson): Treasury Ministers and officials receive representations from a wide range of organisations, including on the issue raised by my hon. Friend. We are taking action to ensure that young people are supported through this recession. As he will be aware, this includes a guaranteed job, work experience or training for those young people who remain unemployed for more than six months. That will ensure that we avoid the long-term detachment of young people from the labour market that was such a feature of previous recessions.
Mr. Bain: I thank my hon. Friend for that reply. Has he taken note of the recent International Monetary Fund "World Economic Outlook" report, which makes it clear that the fiscal stimulus should be continued next year until recovery is on a firmer footing? What assessment would he make of the effects on youth unemployment if deficit reduction replaced going for economic growth as the main aim of economic policy, as some in this House would prefer?
Ian Pearson: My hon. Friend is right. The judgment that the Chancellor made at the time of the pre-Budget report was that we needed to take action to secure sustainable public finances, but we needed to do so in a way that did not jeopardise the recovery. That is why we are planning to halve the deficit over four years. That action, as opposed to the more precipitate action that the Opposition prefer, will give us the best chance of ensuring that we have a sustainable economic recovery and can address youth unemployment.
Mr. Peter Bone (Wellingborough) (Con): If the Government's policies are working so well, why is unemployment in Wellingborough more than double what it was in 1997?
Ian Pearson: As the hon. Gentleman well knows, we have been going through a recession in the UK, just like most countries around the world. That has obviously had an effect on unemployment, and that is very regrettable. However, the active labour market policies that this Government have introduced have been highly successful in getting people back to work. Youth unemployment continues to be a problem, but more than half of people leave jobseeker's allowance within three months, and three quarters do so within six months. That is as a result of the programme of policies that we have put in place.
Public Services
18. Charlotte Atkins (Staffordshire, Moorlands) (Lab): What recent assessment he has made of the likely effect on the economy of maintaining present levels of Exchequer spending on public services. [306860]
The Chief Secretary to the Treasury (Mr. Liam Byrne): The combined action of the Bank of England and the Government is supporting up to half a million jobs at the moment. The Government believe that, as there are still risks to the economy, it would be risky to consolidate too quickly.
Charlotte Atkins: The Government have done a lot to try to help young people during the recession, particularly with the guarantee of a job or training after six months of unemployment. Does the Chief Secretary agree that any attempt to reduce spending immediately would scupper the chances of economic recovery and impact in particular on young people coming into the jobs market?
Mr. Byrne: There are those who believe that we ought to be cutting public spending faster, even now, before recovery has been locked in. We think that that would be a risk and that the price would be paid in higher unemployment and more repossessions. That is why last week the Chancellor set out further measures to help to combat youth unemployment and why we think that the right approach is to say to our young people that if they have been out of work for six months they will be offered a job, a place in training or, of course, community service.
Mr. John Redwood (Wokingham) (Con): What does the Minister think of the work by the International Monetary Fund showing conclusively that the higher the proportion of public spending in an economy, the slower the growth rate?
Mr. Byrne: If the right hon. Gentleman looks at other economies in the OECD or the G7, he will see that the levels of debt forecast among them are pretty much in line with our own. This recession has hit us all. However, we are probably the country that has set out the clearest plan to halve that deficit over the next four years.
Topical Questions
T1. [306866] John Robertson (Glasgow, North-West) (Lab): If he will make a statement on his departmental responsibilities.
The Chancellor of the Exchequer (Mr. Alistair Darling): The Treasury's responsibilities remain as I have set out on previous occasions.
John Robertson: My right hon. Friend will be aware of the present difficulties in investment levels in key driving areas. How does he intend to co-operate with the CBI and the TUC to try to maintain the recent excellent progress?
Mr. Darling: It is very important that we do everything possible to get a return of private sector investment in the economy. The public sector has been supporting the economy, particularly through public expenditure, over the past year or so. We can continue that until recovery is established, but part of getting recovery established and achieving growth in the future must be to get private investment going again.
T4. [306869] Mr. Stephen Crabb (Preseli Pembrokeshire) (Con): Does the Minister accept that a decision to press ahead with changes to the furnished holiday let rules will introduce a distortion into the domestic tourism industry, with self-catering accommodation now placed at a competitive disadvantage to bed-and-breakfast accommodation and hotels, and that it will hit rural communities such as mine in Pembrokeshire particularly hard?
The Financial Secretary to the Treasury (Mr. Stephen Timms): No, I do not, although I am aware of the concern on this issue. We are putting furnished holiday lettings and bed-and-breakfast accommodation on a level playing field. However, a query has been raised, for perfectly understandable reasons, about the legality in European law of providing help to furnished holiday letting accommodation purely in the UK and not elsewhere in Europe. It is very important that we comply with international law.
T2. [306867] Mr. David Chaytor (Bury, North) (Lab): In my constituency, more job vacancies are being advertised, and many of those who lost their jobs earlier in the year are now returning to work. However, as growth returns, what more can the Government do to ensure that returning to work always pays more than staying on benefits?
Mr. Darling: My hon. Friend is absolutely right. It is important that we encourage people back into work, and as part of that, we must ensure that if people do go back into work, they can see the benefit of it. As the House will know, my right hon. Friend the Secretary of State for Work and Pensions will make a statement shortly, and I hope that she will have something further to say about that. However, my hon. Friend is right to emphasise that job vacancies are being advertised everyday. It is our job to ensure that we get people to fill those vacancies as quickly as possible.
T6. [306871] Jo Swinson (East Dunbartonshire) (LD): Will the Chancellor explain how it is fair that after the national insurance rise, people on low incomes will be paying 32 per cent. tax on their income, while he is letting bankers off the hook with a tax that will be easy to avoid, is full of holes and will raise just 10 per cent. of the £5 billion expected to be paid in bank bonuses this year?
Mr. Darling:
In relation to the bank payroll tax, we are trying to change the behaviour of some banks that still want to pay out very large sums in bonuses when we believe that the money would be better applied to building up their capital position. Of course, from next April, people earning more than £150,000 a year-that will include many recipients of these bonuses-will pay tax at the top rate of 50p. In addition, the hon. Lady asked about national insurance. I made the position
clear last week. In particular, I made the point that people earning less than £20,000 would not be paying more as a result of the measures that I introduced.
T3. [306868] Mr. Jim Cunningham (Coventry, South) (Lab): Can my right hon. Friend assure me that the level of investment in high-speed rail through the west midlands will be maintained?
Mr. Darling: We have invested a considerable amount of money in the railway system in the west midlands. The upgrading of the west coast main line cost between £7 billion and £8 billion, and has meant more services and, above all, more reliable services than in the past. That is an example of what happens when public investment is run down, because that line last had serious investment in the 1970s. We have put that right and we will continue to do what is necessary to ensure that the railways work.
Mr. George Osborne (Tatton) (Con): Has the Chancellor seen the helpful comments of the right hon. Member for Norwich, South (Mr. Clarke), with whom he used to sit in the Cabinet, who said yesterday:
"the reason why this Pre-Budget Report has been so disappointing is that the Prime Minister used his constitutional authority as First Lord of the Treasury to ensure that no full account of our economic predicament was provided, no systematic reform of banking was promoted and no clear account of Labour's approach to closing the fiscal deficit was made"?
The truth is that the Prime Minister and the Schools Secretary overruled the Chancellor of the Exchequer. Sofa government is alive and well, in the form of a Chancellor who bears the impression of the last person who sat on him. Will he take this opportunity to demonstrate his independence and publish the overall departmental spending limit-not for the individual Departments; the overall number, which was leaked by us after the Budget and which he now has an opportunity to publish-after this pre-Budget report? Just answer that question, on the third time of asking.
Mr. Darling: I did see the article by my right hon. Friend. It is fair to say that he has had his disagreements with the Prime Minister over some considerable time; there does not seem to be anything new there. In relation to the departmental expenditure limits, I made the position clear earlier, and I have nothing further to add to that.
T5. [306870] Andrew Gwynne (Denton and Reddish) (Lab): The Chancellor was correct when he said that private businesses had a key role to play in Britain's recovery. Has the Treasury made any comparisons on the relative impact of the current recession, compared with that of the 1990s, on business insolvencies?
The Economic Secretary to the Treasury (Ian Pearson): Yes, indeed we have. If we had repeated the experience of the 1990s recession, we would have expected something in the region of two and a half times as many businesses becoming insolvent as have actually done so. The action that we have taken-through the business payment support service, the time-to-pay initiative, the enterprise finance guarantee and other measures that we have taken-has had a genuine impact. There is a distinction to be made between a Government who have provided real help now to businesses through this recession and a Government who, during the 1990s, did nothing and just let companies go to the wall.
T7. [306872] Willie Rennie (Dunfermline and West Fife) (LD): I understand that the total cost for the administrators, lawyers and consultants to clear up after the Government break-up of the Dunfermline building society is approaching £26 million. Who was representing the taxpayer's interests when such outrageous fees were agreed for such a small building society?
Mr. Darling: I am not sure that I recognise those figures, although I will certainly write to the hon. Gentleman as soon as we have the final figures. However, there is a broader point to be made in relation to Dunfermline building society. It would have been nice if we had not been put in that position in the first place, but unfortunately that building society got itself into difficulties and they had to be resolved. That is precisely what we did. Both the hon. Gentleman and I would have liked the Dunfermline to continue as an independent building society. That was not possible, but the reason was that it got itself into difficulties and we had to sort the problems out.
Mr. Jim Devine (Livingston) (Lab): Can we follow the lead of other European countries and introduce a cap on interest rates for the likes of store cards? People will be using store cards over the next few weeks in the run-up to Christmas. If someone spends £1,000, it will take them 15 years to clear that if they simply pay the minimum. That is totally unacceptable.
The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry): I entirely agree with my hon. Friend that there is a problem with the high rates of interest charged by some lenders, particularly to vulnerable people. I am aware that some other EU countries have introduced interest rate caps. However, the evidence from those countries is that introducing a cap has not resolved the problem, as the institutions have got round it by introducing other charges. However, we are still reviewing the position with the Office of Fair Trading.
Adam Price (Carmarthen, East and Dinefwr) (PC): Given the recent announcement by the Secretary of State for Wales of a floor for devolved spending in Wales relative to England, are the Government guaranteeing, at least as far as Wales is concerned, that they are banishing the Barnett squeeze?
Mr. Darling: The position in relation to the Barnett formula is that it continues to be the Government's policy, and it is the basis on which allocations will be made to Wales, Scotland and Northern Ireland. Over the past 10 or 12 years, Wales has benefited from the increase in public expenditure right across the piece.
Gordon Banks (Ochil and South Perthshire) (Lab): This is a difficult time of year for many small and medium-sized businesses in the UK, with holiday closedowns, holiday pay, and so on. What more can the Government do to improve the payment methods used by UK companies to encourage them to pay their suppliers more quickly?
Mr. Darling:
We have introduced a number of measures that will help businesses. One of the most effective has been the time-to-pay regulations, which mean that businesses can stagger their payments of tax. That has eased their cash flow. It has also meant that 95 per cent. of the
undertakings have been met, which benefits the Revenue as well. In addition, we have provided guarantees for loans, which have benefited firms in Scotland, and tax credits have meant that many people's income has been supplemented by as much as £37 a week as a result of what we have been able to do.
T8. [306873] Mr. David Evennett (Bexleyheath and Crayford) (Con): Is the Chancellor of the Exchequer confident that the banks that have benefited from direct taxpayer support are not exploiting that advantage to the detriment of the building societies?
Mr. Darling: This is something that we keep under close review. I am well aware that we need to ensure that the larger banks-particularly the two in which we have substantial shareholdings-do not behave in a way that is detrimental to the smaller building societies. This is something that we, along with the Financial Services Authority and the Office of Fair Trading, will continue to keep a close eye on.
Dr. Tony Wright (Cannock Chase) (Lab): This is a difficult time for savers, and they are not being helped by the practice of banks that market savings accounts with a bonus attached to them without telling the savers when the bonus is going to fall away. Could we not require banks to provide that information?
Mr. Darling: I am very much in favour of making more information available to savers-and, indeed, to borrowers-so that they can understand exactly what the terms and conditions are. I agree with my hon. Friend that, at times, those terms and conditions are not as clear as they should be. We want more people to save, and the best way to achieve that is to be very clear and up front about what the saver will get and when they will get it.
Justine Greening (Putney) (Con): Can the Chancellor confirm that the Treasury completely ignored warnings from the Department for Communities and Local Government last autumn about the impact of the rise in business rates on the economy?
Mr. Darling: I only heard part of what the hon. Lady said, but what I can say-which will probably not satisfy her-is that we announced measures earlier this year to allow companies to spread the rates increase over three years, to ease the burden on them.
Joan Walley (Stoke-on-Trent, North) (Lab): In the aftermath of the pre-Budget report, and given the importance that Members of Parliament in Stoke-on-Trent attach to the relocation of jobs from the south-east, what advice can my right hon. Friend give to people in Stoke-on-Trent on how to ensure that we can get such jobs relocated there?
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