Emma Reynolds (Wolverhampton North East) (Lab): As the Prime Minister is aware, businesses in Wolverhampton bore the brunt of the criminal activity on Tuesday night. I am sure he will agree that now is the time for Members across the political divide to work together. I say gently to him that next time he arrives at the train station in Wolverhampton, I will be there ready to welcome him. With regard to what he said to gangs, can he reassure me and my constituents that as well as looking at punitive measures, he will look at

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measures and perhaps additional resources to strengthen community organisations, which are well placed to reach out to young people to stop them joining gangs in the first place?

The Prime Minister: I am sorry I missed the hon. Lady in Wolverhampton yesterday and I will try and make up for that in future. I met the right hon. Member for Wolverhampton South East (Mr McFadden), however, the former Trade and Industry Minister, who is no longer in his place, so it was not any party issue. The hon. Lady makes a good point about what local government can do with voluntary bodies to thicken society in our constituencies, and I applaud that wherever it takes place.

Mr Robin Walker (Worcester) (Con): In addition to providing substantial mutual aid to the west midlands police force and keeping up numbers on the streets of Worcester, the West Mercia police have made a number of arrests in the past few days for inciting public disorder through social media. Will the Prime Minister join me in commending that front-footed, proactive policing approach, but also make sure that the police and the courts have the powers that they need to pursue not just the perpetrators, but the organisers and inciters of this criminal violence?

The Prime Minister: My hon. Friend makes a good point. We have to make sure that people who use this new technology for evil purposes are properly prosecuted and convicted, and I am sure they will be.

Natascha Engel (North East Derbyshire) (Lab): One of the ways in which ordinary people are trying to get their voices heard is by going on to the Government’s new e-petitions website and signing a petition that was posted only two days ago, which has already got up to almost 100,000 signatures asking for the rioters to have their benefits withdrawn. How will the Prime Minister meet those raised expectations and say to the 100,000 people who have signed that e-petition that something will happen as a result of visiting a Government-sponsored website?

The Prime Minister: One of the points of the new e-petitions website is to make sure that if a certain level of signatures is reached, the matter will be debated in the House, whether we like it or not. That is an important way of empowering people. There may be opportunities, possibly through the new criminal justice and sentencing legislation, to make sure that we are better at confiscating things from people when they commit crimes. We must look at all the ways we can of making sure that our punishments are robust.

Dr Sarah Wollaston (Totnes) (Con): As a former police surgeon, I have personally witnessed the great professionalism of our police forces in the face of extreme provocation. This week they have faced extreme violence as well. At all times they have been identifiable and therefore accountable. Is it time for us to make it an offence for anybody involved in rioting and demonstrating to cover their faces, so that they too can be both identifiable and accountable?

The Prime Minister: The hon. Lady makes an important point. In my statement I said that we would extend the power that the police have—at present they can do it

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only in limited circumstances with limited people—so that they have a more blanket power of insisting that people remove face masks.

Lilian Greenwood (Nottingham South) (Lab): People in Nottingham are understandably shocked and very frightened by some appalling incidents in some parts of our city on Monday and Tuesday nights. I want to pay tribute to Nottinghamshire police for bringing the situation under control and arresting those responsible. What plans does the Prime Minister have to meet residents and community leaders in Nottingham to listen to their concerns and hear what they believe needs to be done to learn the lessons of recent days?

The Prime Minister: It is important that Ministers make a number of visits, as I have been doing over recent days and will do over coming days. I think the Deputy Prime Minister plans to visit Nottingham very shortly. I do not plan to do so at present, but I will be trying to get to as many parts of the country as I can.

Mr Julian Brazier (Canterbury) (Con): I welcome my right hon. Friend’s statement, in particular his comments on more robust policing and more tools being made available to the police. May I urge on him the fact that for police officers and their commanders in particular to be willing to take greater risks, rather than have their men stand by, entails recognising that sometimes those actions will have grave unforeseen consequences? Police commanders need to be supported then.

The Prime Minister: We must always back the police when they do the right thing. Much has been said about the police, police tactics and so on. Every year I attend—I know the leader of the Labour party also goes—the police bravery awards. There one sees police officers who have done extraordinary things—confronting people with guns and knives when they do not even have any body armour. So let it be on the record in the House that individual officers do incredibly brave things every day, and we praise them for it.

John Cryer (Leyton and Wanstead) (Lab): It actually took four nights, not two nights, to put 16,000 police officers on the streets of London. That put businesses and people in danger, including my constituents. So far I have not heard a convincing explanation as to why that took so long. Can the Prime Minister give one?

The Prime Minister: In the end, the deployment and the numbers are an issue for the Metropolitan Police Commissioner, and that is a question that he will have to answer. It was a different situation Sunday night to Monday night to Tuesday night. We must look at that in finding the answer. The point that I was making is that it is possible to surge. The police demonstrated that that was possible, but we needed to surge more quickly.

John Hemming (Birmingham, Yardley) (LD): The Prime Minister shares my concern about the children on the streets and the importance of parental responsibility and parental discipline. Does he share my concern that certain parents say that the public institutions from time to time undermine parental authority, and that that issue needs to be looked at as well?

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The Prime Minister: I agree with my hon. Friend. As I said, we should test Government policy by whether it improves responsibility or undermines it.

John McDonnell (Hayes and Harlington) (Lab): I regret the response that the Prime Minister gave to the hon. Member for Brighton, Pavilion (Caroline Lucas), but I thank him for the words of tribute that he paid to firefighters. As the secretary of the Fire Brigades Union parliamentary group, may I ask him whether the commitment that he has given to police authorities to stand by any additional costs applies to fire authorities as well? A thousand firefighter posts have been cut over the past year and there are real concerns about overstretch.

The Prime Minister: The point that I was making about the police is that they have to stand behind the Riot (Damages) Act. That is why it is important that the Home Office stands behind them. It is not an analogous situation to that of the fire brigade.

John Glen (Salisbury) (Con): The Prime Minister rightly identified new and unique threats that the police have faced in recent days. What new and unique solutions does he think will be necessary to deal with the underlying causes of this social unrest?

The Prime Minister: On the first part of the hon. Gentleman’s question, the police themselves will want to review what happened when there were large numbers of different groups looting in different parts of the country at the same time. They will want to work out how to address that—what tactics are needed and how to make sure they get arrests made more quickly—and the Home Office will want to work with them in that endeavour.

Hugh Bayley (York Central) (Lab): In North Yorkshire, public order officers have been sent to London, Birmingham and Manchester. The consequence has been that all rest days have been cancelled. Police officers are now working 12 hours on, 12 hours off around the clock, and there is no more fat to cut. Will the Prime Minister give the House an estimate of how much in Bellwin money, Riot (Damages) Act money and other compensation the public purse will have to pay out? Would it not make sense in future years to spend that money on the police instead of on paying for the cost of disorder?

The Prime Minister: I cannot give an estimate of what will be paid out under Bellwin or under the schemes that we have established today because that will depend on the demand that comes from local authorities, but there is a huge amount of money and resources available. I do not agree with the hon. Gentleman’s idea that somehow if we had spent more on the police this year, that would have prevented the disorder that took place. The causation is entirely the wrong way around.

George Freeman (Mid Norfolk) (Con): Does my right hon. Friend agree that the outbreak of mob rule this week has been incubating during a decade of irresponsibility across our society in banking, football, media and, dare I say it, in politics and the welfare state? We are witnessing the consequences of a politically correct, debt-fuelled, anything-goes consumerist culture. Far from the debt crisis being the cause of this criminality, it is a vital

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opportunity for us to wean our young people off a shallow celebrity culture and restore some old-fashioned virtues of thrift, personal responsibility and respect for the law.

The Prime Minister: My hon. Friend makes some important points about the culture that has grown up, which people will want to consider in the coming days.

Chris Bryant (Rhondda) (Lab): I commend the Prime Minister for being extremely reluctant to send in the troops, because when the troops were sent into Tonypandy by a Liberal Home Secretary 100 years ago to try to deal with the riots there they made the situation worse rather than better. But does not that place all the more emphasis on ensuring that there are enough people in police uniforms on the street able to do a robust job? He commends Welsh police forces for sending people down to London, but in the next four years we will have 1,200 fewer police officers in Wales and it will be more difficult for us to help London out.

The Prime Minister: In Wales, as in England, there are opportunities to get officers out from desk jobs, HR jobs and IT jobs. Opposition Members shake their heads. That is what is so hopeless about them—a sense that there is no reform that can be made to try to get better value for money. That is why, frankly, the country is not listening to them.

David Morris (Morecambe and Lunesdale) (Con): Will the Prime Minister share with me his gratitude to Lancashire police for sending 76 police officers to help out in London, and will he convey to the Opposition that, at my insistence 12 months ago, Lancashire police found a way of keeping their PCSOs, preventing two of my constituents from fuelling violence and rioting in my constituency and in Lancaster?

The Prime Minister: I certainly pay tribute to the Lancashire force and to other forces who acted quickly under the PNICC system to make forces available in London, Manchester or the west midlands where they were most needed.

Jack Dromey (Birmingham, Erdington) (Lab): Following the tragic killing of three young men in Birmingham, the city faced its most dangerous moment in a decade. Will the Prime Minister join me in paying tribute to our brave police, under the inspirational leadership of Chief Constable Chris Sims, and all that is best in our community, Tarik Jahan and my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood), who acted to hold the community together so that Birmingham could say with one voice, “We will not be divided”?

The Prime Minister: I agree wholeheartedly with the hon. Gentleman. I was extremely impressed when I went to the West Midlands control centre and saw that Chris Sims was spending as much of his time on meeting and talking with community leaders and representatives as he was on planning to ensure that there were the right number of police on the streets throughout the west midlands. It was very impressive. It showed the community coming together. Birmingham city council played a big role as well, and I pay tribute to all those who did a model job.

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Joseph Johnson (Orpington) (Con): Will the Prime Minister join me in paying tribute to the 1,300 voluntary special constables who played a vital part in restoring calm in the capital on Tuesday? Will he also take note that many special constables, including one in my constituency, Orpington, struggled to secure permission from their employer to enable them to take part in the surge effort, which was eventually so successful?

The Prime Minister: My hon. Friend is entirely right. There has recently been a growth in specials in some forces and that is hugely welcome, but we need employers to show a sense of social responsibility to release them rapidly for service when they are needed.

Simon Danczuk (Rochdale) (Lab): I welcome the £20 million fund for high street businesses, but the problem is that 48,000 retailers have been directly or indirectly affected by the riots. Is the fund enough, and how will it work?

The Prime Minister: The £20 million fund is available from the Department for Business, Innovation and Skills, but there is also the Riot (Damages) Act, which dates back to 1886 and may be another measure that the Liberals were responsible for, which enables businesses that have been affected by riot to claim the money from the police service, which the Home Office can stand behind.

Mary Macleod (Brentford and Isleworth) (Con): As a London MP, I was shocked and horrified by the scenes of criminality, violence and looting in this great city of ours during the last week. What was evident was the complete lack of respect and discipline among those who did it. Will the Prime Minister reassure the House that he will work closely with schools to make sure that we can improve this for the future?

The Prime Minister: I will certainly do that. In the task of trying to make a more responsible society where people live up to their responsibilities, schools will play a major part.

Several hon. Members rose

Mr Speaker: Order. I remind the House that Members who were not here at the start of the statement should not now be standing in the expectation of being called.

Mr Ian Davidson (Glasgow South West) (Lab/Co-op): Scottish police assisting their English colleagues is part of the benefit of the Union, but why is it that from the beginning of the riot the Government have given the impression of being behind the curve, always paying catch-up, doing too little, too late? Is there not more than a whiff of incompetence?

The Prime Minister: Of course, I do not accept that, but I do accept what the hon. Gentleman says about the Union. It is important that forces come to each other’s aid, and if there were problems in Scotland, English forces would do the same thing.

Daniel Kawczynski (Shrewsbury and Atcham) (Con): Many of my constituents in Shrewsbury have watched in horror the events in some of our cities, and they have

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written to me overwhelmingly to ask when we will have tangible and enforceable penalties for parents who do not discipline their children.

The Prime Minister: As I said earlier, there are parenting orders. They can be used, they can involve parents paying quite hefty fines, and I very much encourage their use at this time.

Helen Jones (Warrington North) (Lab): The Prime Minister is quite right that our first duty is to ensure that people are safe and to bring criminals to justice, but when that has been done there are serious issues to be considered, not only about policing, but about employment and education, the values we transmit as a society and the direction in which we are going. These cannot be considered by one Select Committee, so will he rethink his view on setting up a commission of inquiry into what lies behind these riots, so that we will ensure that they are never repeated?

The Prime Minister: As I said earlier, this is only a week from the very starting event that triggered the process, so having a Home Affairs Committee inquiry to start with is right. The hon. Lady mentions the economic circumstances, but I checked this morning and in a three-mile radius from Tottenham more than 1,300 apprenticeships are available for young people. That is yet another example of attempts to try to link this to economic circumstances or to try to find some excuse for it, which is completely wrong.

Tessa Munt (Wells) (LD): The film and print media have shown us footage and photographs of incidents such as people torching shops and they have interviewed looters and rioters. They would say that we have a right to information, but they should recognise that they also have a duty and responsibility, as members of society, not just spectators, to report what they see to the authorities. Can the Prime Minister confirm whether reporters have called the police at the time they saw these things happening, whether the media have handed over their film and recordings, and whether that evidence will be accepted in our courts of law?

The Prime Minister: I cannot give the hon. Lady that assurance. What I can say is that media organisations, like others, have responsibilities and should act on those responsibilities. That sort of evidence can be admissible in a court of law.

Mr Gareth Thomas (Harrow West) (Lab/Co-op): I join the Prime Minister in praising the police, particularly those in Harrow, who earlier this week successfully prevented disorder from breaking out, but may I take this opportunity to point out to him that decisions taken by the Mayor of London are already leading to police sergeant posts being axed in my constituency and that a valuable local police station is set to close as a result of those decisions? May I therefore add my voice to those urging him to think again about police budgets?

The Prime Minister: I can only repeat that there are 32,000 officers in the Met and there is a perfect capability to surge that number of officers when necessary. I do not believe that the sort of reductions in budgets that are planned over the next four years should lead to any

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reduction in visible policing, whether in London or elsewhere. There are police officers working in IT, HR and desk jobs that can be civilianised so that police can be released for the front line. Because the Government are taking difficult decisions about police pay and allowances, we will not have to make the reductions in police numbers that the cuts proposed by the Labour party would have meant.

Andrew Stephenson (Pendle) (Con): I join my hon. Friend the Member for Morecambe and Lunesdale (David Morris) in paying tribute to Lancashire police, who did not just send officers down to London but also sent officers to support Greater Manchester police. Following the arrest of a 25-year-old in Nelson in my constituency for inciting people via Facebook, will the Prime Minister say more about what is being done to ensure that social networks are used as a force for good rather than for evil?

The Prime Minister: The Home Secretary is going to have meetings with some of those organisations, but even before that they should recognise their own social responsibilities and stop broadcasting the images if they are inappropriate.

Kate Green (Stretford and Urmston) (Lab): Like many others, I was shocked by the extreme youth of some of those perpetrating the criminal activity earlier this week, but children who are engaged in criminal activity are also children in need. Can the Prime Minister confirm that our youth offending services will be properly equipped and supported to provide the multi-agency interventions that are needed to redirect those young people from a future of crime?

The Prime Minister: Yes, I can. We are making changes to the youth justice system, but that is really to incorporate it within the Ministry of Justice, where I think we will be able to make it more efficient and work better.

Rehman Chishti (Gillingham and Rainham) (Con): The Prime Minister attracted enormous criticism years ago when, as Leader of the Opposition, he made a speech tackling the consequences of family and societal breakdown. I urge him to return to these themes; he was right then and he is right now. I also ask him to congratulate Kent police on their excellent work in making our streets safe. On Monday night, youths from London came to Gillingham to try to set businesses alight, but they were detected, prevented from doing so and put before the courts within 24 hours.

The Prime Minister: I certainly pay tribute to the Kent police force, which does such a good job. My hon. Friend referred to a speech I made about the importance of addressing the problems of family breakdown and irresponsibility. These are not easy things for politicians to talk about, because our families can also break down and we fail on many occasions, but it is too important a subject to ignore.

Frank Dobson (Holborn and St Pancras) (Lab): We all welcome the Prime Minister’s praise for the individual police officers, firefighters and ambulance and emergency staff. Will he now follow up his warm words with warm action and abandon his proposals to undermine the pension arrangements of those self same firefighters, ambulance staff and policemen?

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The Prime Minister: We are taking action on the advice of Lord Hutton, the former Labour Secretary of State for Work and Pensions, who has written a very good report. He makes certain exceptions for uniformed services. It is a very sensible report that I am sure the right hon. Gentleman will study.

Greg Mulholland (Leeds North West) (LD): One of the many abhorrent aspects of the recent disorder was the threat of violence against our brave firefighters, and yet the relevant legislation is insufficiently clear. There is no specific offence of threatening a firefighter and the Emergency Workers (Obstruction) Act 2006 allows for only a £5,000 fine. Considering that the firefighters are defending not only homes and business but lives is it not now time to revisit this and make an appropriate and strong custodial sentence the presumption?

The Prime Minister: When we hear about people attacking firefighters who are trying to put out fires, it is absolutely appalling and unforgiveable that that can happen in our country. I know that the issue of giving specific public servants specific protection has been looked at in the past in criminal justice legislation and I dare say that we can look at it again, but I think that any court using its discretion and judgment would want to give a pretty exemplary sentence to anyone viciously minded enough to attack a firefighter when they are trying to put out a fire.

Several hon. Members rose

Mr Speaker: Order. Notwithstanding the very heavy taxation of the Prime Minister’s knee muscles, I am inclined to continue and accommodate the remaining Members who wish to contribute, but I urge colleagues to help me to help them by being brief.

Mr David Anderson (Blaydon) (Lab): I was genuinely saddened to hear the Prime Minister’s response to my right hon. Friend the Member for Rother Valley (Mr Barron) on the proposal to evict the people responsible for this damage from social housing. Some of us from the communities that have been on the receiving end of the damage and seen stable communities destroyed by these acts really know what we are talking about, so may I ask the Prime Minister to think about this and engage with us before pursuing the matter?

The Prime Minister: Perhaps I can arrange for the Minister for Housing and Local Government, who has worked very hard to deliver this policy, to contact the hon. Gentleman. If people in social housing behave appallingly, it should be possible to evict them and keep them evicted.

Greg Hands (Chelsea and Fulham) (Con): My constituents have also been victims of some of the disorder in recent days and strongly welcome the much tougher policing that has been launched since Monday night. The Prime Minister mentioned Bill Bratton, who has done such fantastic work in reducing crime in Boston, New York and Los Angeles. Can he mention some of the things that we might be able to learn from the excellent beat and street policing that has been used in many cities in the United States for the past 17 years?

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The Prime Minister: This work that is done in the United States is also done in the United Kingdom. One thing we can do is work harder to map and understand how many gangs there are, what their membership is and what they are doing so that we have better intelligence, but I am sure that there will be many things I can discuss with Bill Bratton when he comes to meet me shortly.

Fiona Mactaggart (Slough) (Lab): The Prime Minister said he did not want a sterile debate on resources, which I do not think any of us wants, but there is a division of views on whether there are sufficient police available to deal with this. I would like to praise the police in my constituency for the way they helped to avoid these events affecting Slough. If he is right that there are absolutely sufficient numbers of police, perhaps he would agree to ensure that we have a regular report to Parliament telling us how many police are available and how many are trained to deal with riots so that we can know the real facts.

The Prime Minister: I would welcome that, because the point is that the police availability figure today is only 12% of police officers on the beat at any one time. The hon. Lady, like me, is a Thames valley MP, so let me just repeat what Chief Constable Sara Thornton of Thames Valley police said, which is that

“what I haven’t done at all is reduce the number of officers who do the patrol functions, so the officers you see in vehicles, on foot, in uniform, on bicycles. We haven’t cut those numbers at all.”

We have not cut the number of officers or police community support officers in neighbourhood policing teams either. Thames Valley is a big force, and as the hon. Lady and I have sometimes argued against previous Governments, it is not always a very well funded force. If it can do it with these budget reductions, other forces can do it too.

Jack Lopresti (Filton and Bradley Stoke) (Con): Will elected police commissioners have the power to authorise the use of water cannon, troop support and such measures, or will they have to let others further up the chain of command make those decisions?

The Prime Minister: Those decisions must always be an operational matter for the chief constable. Let us be clear—I do not think that the right hon. Member for South Shields (David Miliband) fully understood this—that we are talking not about electing chief constables, but about electing commissioners who will replace the police authorities and to whom the chief constable will be accountable.

Mrs Mary Glindon (North Tyneside) (Lab): As my constituents witnessed the terrible events across the country and members of our own Northumbria police force were deployed to the capital, can the Prime Minister tell them how, by pressing ahead with huge public sector cuts, he will sustain their confidence in the capacity of all the public services that are meant to protect them?

The Prime Minister: Perhaps the hon. Lady should stay for the next statement, in which we will hear about the difficult decisions we have had to take in this country in order to keep our credit rating and have low interest rates so that we can get our economy growing. We now have lower interest rates than almost any other country

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in Europe. Why? It is because we are taking these difficult decisions. If we do not take the difficult decisions, we will end up like other countries with rising interest rates, lack of confidence and, as in the United States, which has the biggest economy of all, a debt downgrade.

Karl McCartney (Lincoln) (Con): It is my understanding that public order training for police officers was reduced back in 2005. Does my right hon. Friend believe, as I do, that that might have exacerbated some of the instances that so annoyed the public who have watched the pictures on TV in the past few days, and would he like to see that trend reversed if it has not been already?

The Prime Minister: There will be lessons to learn about the extent of riot training and the balance between it and ordinary beat-based policing, and I know that we will want to learn all those lessons in the days to come.

Julie Hilling (Bolton West) (Lab): The Association of Chief Police Officers undertook research that showed that where there is a well-funded youth service there is a decrease in criminality and where there are cuts in youth services there is an increase in crime. Youth work is part of a solution to this disorder, but youth workers are being made redundant across the country as we speak. Will the Prime Minister introduce a moratorium on youth service cuts?

The Prime Minister: We are going ahead with the Myplace youth centre programme, which is seeing vast and very well-funded youth centres built in places such as Islington and Hackney and across some of the most deprived parts of London. I do not accept the hon. Lady’s point about causation and that somehow a budget change in youth services leads inexorably to the sort of looting and rioting we saw on our streets.

Mark Pawsey (Rugby) (Con): May I congratulate the Prime Minister on his diligence and energy in remaining at the Dispatch Box for two and a half hours and welcome the measures he is bringing forward to compensate victims of the mindless violence we have seen? One group with concerns are people who own vehicles that have been torched by thugs and who have only third-party insurance. Will he provide some comfort to those innocent victims?

The Prime Minister: I thank my hon. Friend for what he says about these long sessions at the Dispatch Box; I am beginning to get used to them. Uninsured businesses are able to claim under the Riot (Damages) Act. That is what the Act is there for, and, as I have said, the Home Office will want to stand behind police forces that are adversely affected by it.

John Woodcock (Barrow and Furness) (Lab/Co-op): If the Prime Minister now wants to extend the previous Labour Government’s legislation to restrict gang members’ wearing of masks, will he explain why he opposed the measures at the time and allowed the right hon. and learned Member for Beaconsfield (Mr Grieve), now the Attorney-General, to describe them as

“practically unworkable and legally dubious gimmicks”?

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The Prime Minister: Now that my right hon. and learned Friend the Attorney-General is sitting on this side of the House and working so hard, he will make them workable.

Michael Ellis (Northampton North) (Con): This week saw the busiest night for the London fire brigade since the blitz in terms of the number of fires in one night. Will the Prime Minister join me in commending the brave and dedicated public service that firefighters provide throughout this country, and in thanking police officers, including dozens from Northamptonshire police, who left their force areas to help other forces that were in need of assistance?

The Prime Minister: I certainly praise Northamptonshire police, but I praise again the firefighters in London and elsewhere who did such magnificent work. I was told one story of a woman firefighter who was on her way to work when a rioter pushed her off her moped and took it away, but instead of going home she just called a taxi, appeared for work and got on with fighting fires in London. It is that sort of spirit that we should praise in the House today.

Mike Weatherley (Hove) (Con): As chair of the all-party group on retail and business crime, I can tell the Prime Minister that retailers’ biggest concern is lenient sentences. Will he assure them that sentencing terms will increase, and will he come along to the group’s next meeting on 8 September to advise us of the progress on that since this debate?

The Prime Minister: I might want to send the Business Secretary, or someone from the Business Department, to that meeting, but my hon. Friend makes a very important point that businesses want not only to see the people who perpetrated the looting prosecuted and convicted, but to work even more closely with the police to protect their premises. I have heard that from many businesses, and from multiple chains, some of which had their stores attacked in many different places on the same day.

Stephen Hammond (Wimbledon) (Con): I commend the Prime Minister for his statement and his comments about social media. The criminal elements who visited the constituency of my hon. Friend the Member for Ealing Central and Acton (Angie Bray) were due to come to Wimbledon on Tuesday night, having been urged to do so via social networking sites. Only the boarding up of the town centre and the surge of which my right hon. Friend spoke stopped them. May I urge the group that he has set up to look at, and to ask Ofcom to look at, the possibility of introducing variants to licences and temporary prohibition on a public order basis?

The Prime Minister: We will certainly do that. What method we use is less important than the intent of looking at ways to ensure that, if social media are used for violent purposes, we are able to intervene.

Mr Marcus Jones (Nuneaton) (Con): I join right hon. and hon. Members from all parts of the House who have commended the brave work of West Midlands police officers. Will the Prime Minister join me in commending

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the brave work of Warwickshire officers, who have also given mutual aid, and will he tell us whether the Government will compensate smaller forces, such as Warwickshire, for that work?

The Prime Minister: This is how the system works. ACPO has established the police national information co-ordination centre, or PNICC, through which forces work together to make sure that officers get to the places where they are needed, and we should allow those arrangements to work.

Graham Evans (Weaver Vale) (Con): Does the Prime Minister agree that those who are convicted, those who have tried to destroy our society, should not receive the benefits of our society?

The Prime Minister: I think my hon. Friend refers to the petition that is gathering signatures, and, as I have said, we should look at additional powers to ensure not only that we confiscate things from people who have committed crimes, but that the punishments that they receive, whether prison or not, are robust.

Bob Stewart (Beckenham) (Con): When Mark Duggan was shot last week, the IPCC immediately went in and sealed the crime scene, but then no statement was made, and that gave an excuse to the rioters. It would be good if the IPCC, or someone, made a definitive statement on what happened. Otherwise, conspiracy theories build up.

The Prime Minister: The difficulty with my hon. Friend’s suggestion is that the IPCC has got to get across the detail before it makes a statement. There is a huge danger on such occasions of making statements that turn out not to be true and that inflame passions either at the time or afterwards when their veracity is questioned. This is an extremely difficult situation, but we must have confidence and faith in the IPCC system, which is independent of the police and can, therefore, give victims confidence.

Paul Uppal (Wolverhampton South West) (Con): I, too, thank the Prime Minister for coming to Wolverhampton yesterday, and I particularly welcome the initiative on planning. Yesterday evening I was with a community TV station on the Dudley road, and I heard with my own ears the brave, stoical and wise words of Tariq Jahan. I also spoke to about half a dozen young Muslim men, who said to me quite directly, “You will not stem this tide of irresponsibility unless the House speaks with one voice. It is important that the issue is not hijacked for political point-scoring.” Does my right hon. Friend concur with that view?

The Prime Minister: I thank my hon. Friend for organising that cross-party meeting in Wolverhampton, and I pay tribute to him for the wise words that he spoke in his community yesterday, and for his efforts to bring people together in Wolverhampton. Let me praise Sangat TV, which helped the police to catch a criminal. That was an exercise in social responsibility by a media company. It should be praised, and so should he.

Mr Edward Timpson (Crewe and Nantwich) (Con): Many Crewe and Nantwich residents have told me of how appalled they have been by the despicable scenes that have been played out on our streets, and by the

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potential cost to them as taxpayers. Will my right hon. Friend take this opportunity to thank Cheshire police for their role in related arrests, and to reassure my law-abiding constituents that they will not pay the price for the wanton criminality of others?

The Prime Minister: My hon. Friend makes a good point. Cheshire police gave help to Greater Manchester police and, I think, to other areas as well. I want to reassure his constituents and people throughout the country that this Government, this House, this Parliament are on the side of the law-abiding. What needs to happen is a process of taking back the streets on behalf of the law-abiding, and of demonstrating to the whole country that the guilty will be punished.

Christopher Pincher (Tamworth) (Con): Will my right hon. Friend pay tribute to the chief constable and officers of Staffordshire police, who not only kept Staffordshire safe but policed Birmingham and Manchester? Mike Cunningham is one other chief constable who believes that he has the resources now and will have in the future to do the job. Will the Prime Minister commend him?

The Prime Minister: I certainly join my hon. Friend in praising Staffordshire police, who provided assistance to the west midlands. Once again, this demonstrates that small forces can not only do a good job in their local communities, but help out others when they are in need.

Mr Don Foster (Bath) (LD): Looking to the future, I note that far too many of the people—young and old alike—who were involved in violent and criminal behaviour appear to come from the relatively small number of totally dysfunctional families in this country. Does the Prime Minister agree that work to turn such families around is somewhat piecemeal, involving far too many agencies, too many targets and too much paperwork? Will the Government find ways of targeting resources more effectively?

The Prime Minister: The right hon. Gentleman is absolutely right about that. We plan to spend additional money on the 20,000 most troubled families in the country, with more early intervention and much better co-ordination. So often with those families, we find that they have contact after contact with the authorities, but that it is contact with them rather than work to change behaviour and address problems. The problem is manageable. I know that there are 20,000 such families, and there might even be 100,000, but it is still a manageable number which we can deal with during this Parliament.

Eric Ollerenshaw (Lancaster and Fleetwood) (Con): Two hours and 40 minutes ago the Prime Minister in his statement referred to the British model of policing. My understanding is that that model is policing through and by the public’s consent. Does he accept that he now has the public’s consent in such situations for a police force to rebalance its concerns about individual freedoms with its own freedom to act?

The Prime Minister: I know that my hon. Friend has been waiting two hours and 50 minutes to say that, but he puts it absolutely beautifully. None of us in the House

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wants to break with the British model, whereby the public are the police and the police are the public. They come from our communities, they are known to us and we know them, and it is a very special thing that we have, but that model has to be refreshed and updated with new tactics, resources and technology, as appropriate, so that it meets new threats. One message of the past few days is that police chiefs should feel that they have the political backing to make the necessary changes to meet new threats. “Don’t be stuck in the old ways of doing things if they are not working”—that will be one of the real lessons that we learn in the coming days.

Mr Aidan Burley (Cannock Chase) (Con): Will the Prime Minister consider the suggestion that anyone who is convicted of rioting and who is not a UK citizen should be deported immediately and barred for life from returning to this country?

The Prime Minister: My hon. Friend makes a good point. There are now much better mechanisms to ensure that people who enter the criminal justice system and who do not have a right to be here are removed more quickly.

Mr Speaker: I thank the Prime Minister for his commitment to the House over the past 165 minutes, and I thank all 160 colleagues, including the Leader of the Opposition, who have questioned him.

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Global Economy

2.20 pm

The Chancellor of the Exchequer (Mr George Osborne): People will be concerned about the turmoil in the world’s financial markets and what it means for economies here and across the globe. I want to update the House on what we are doing to protect Britain from the storm and to help lead a more effective international response to the fundamental causes of this instability.

As of this morning, after heavy losses yesterday, markets in Asia and Europe are a little calmer, although some are still down. Over the past month, the Dow Jones index has fallen by more than 14%, the French market by 23% and the Nikkei by 11%, and it is striking that the German market has fallen by 24%. Even Chinese equities have fallen by 20% since November. Bank shares in all countries have been hit particularly hard. Many sovereign bond markets have also been exceptionally volatile, with market rates for Italian and Spanish debts soaring before falling back in the past three days.

Sadly, Britain is not immune to these market movements. In the past month, the FTSE 100 has fallen by 16% and British bank shares have been hit hard. However, while our stock market has fallen like others, there has been one striking difference from many of our European neighbours: the market for our Government bonds has benefited from the global flight to safety. UK gilt yields have come down to about 2.5%—the lowest interest rates in more than 100 years. Earlier this week, the UK’s credit default swap spread, or the price of insuring against a sovereign default, was lower than Germany’s. That is a huge vote of confidence in the credibility of British Government debt and a major source of stability for the British economy at a time of exceptional instability. It is a reminder of the reckless folly of those who said that we were going too far, too fast. We can all now see that their approach would have been too little, too late, with disastrous consequences for Britain.

It is not hard to identify the recent events that have triggered the latest market falls. There have been weak economic data from the US, including revisions to GDP figures, and the historic downgrade of that country’s credit rating. The crisis of confidence in the ability of eurozone countries to pay their debts has spread, as many feared, from the periphery to major economies such as Italy and Spain. Those events did not come out of the blue and they all have the same root cause—debt. In particular, there is a massive overhang of debt from a decade-long boom, when economic growth was based on unsustainable household borrowing, unrealistic house prices, dangerously high banking leverage and a failure of Governments to put their public finances in order. Unfortunately, the UK was perhaps the most eager participant in that boom, with the most indebted households, the biggest housing bubble, the most over-leveraged banks and the largest budget deficit of them all.

History teaches us that recoveries from such debt-driven, balance-sheet recessions will always be choppy and difficult, and we warned that that would be the case. The whole world now realises that the huge overhang of debt means that the recovery will take longer and be harder than had been hoped. Markets are waking up to that fact. That is what makes this the most dangerous time for the global economy since 2008. We should be

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realistic about that and set our expectations accordingly. As the Governor of the Bank of England said yesterday and as the head of the Office for Budget Responsibility has noted, the British economy is expected to continue to grow this year. Some 500,000 new private sector jobs have been created in the past 12 months. That is the second highest rate of net job creation in the G7. However, instability across the world and in our main export markets means that, in common with many countries, the expectations for this year’s growth have fallen.

This is what our response must be. First, we must continue to put our own house in order. I spoke again to Mervyn King yesterday and I confirm that the assessment of the Bank, the Financial Services Authority and the Treasury is that British banks are sufficiently well capitalised and are holding enough liquidity to cope with the current market turbulence. We have in place well developed and well rehearsed contingency plans. We must also continue to implement the fiscal consolidation plans that have brought stability to our bond markets.

I believe that the events around the world completely vindicate the decision of this coalition Government from the day we took office to get ahead of the curve and deal with this country’s record deficit. While other countries wrestled with paralysed political systems, our coalition Government united behind the swift and decisive action of in-year cuts and the emergency Budget. While other countries struggled to command confidence in their fiscal forecasts, we created the internationally admired and respected independent Office for Budget Responsibility. Those bold steps have made Britain a safe haven in this sovereign debt storm. Our market interest rates have fallen while those of other countries have soared. The very same rating agency that downgraded the United States has taken Britain off the negative watch that we inherited and reaffirmed our triple A status. That market credibility is not some abstract concept; it saves jobs and keeps families in their homes. Families are benefiting from the lowest ever mortgage rates and companies are able to borrow and refinance at historically low rates thanks to the decisions that we have taken.

Let me make it clear not only to the House of Commons but to the whole world that ours is an absolutely unwavering commitment to fiscal responsibility and deficit reduction. Abandoning that commitment would plunge Britain into the financial whirlpool of a sovereign debt crisis and cost many thousands of jobs. We will not make that mistake.

Secondly, we need to continue to lead the international response in Europe and beyond. In the G7 statement agreed between Finance Ministers and central bank governors this week, we said that we would

“take all necessary measures to support financial stability and growth”.

In the eurozone, there is a growing acceptance of what the UK Government have been saying, first in private and now in public, for the last year—it too needs to get ahead of the curve. Individual countries must deal with their deficits, make their economies more competitive and strengthen their banking systems. Existing eurozone institutions need to do whatever is necessary to maintain stability. We welcome the interventions of the European Central Bank this week through its securities markets programme to do just that.

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However, that can only ever be a bridge to a permanent solution. I have said many times before that the eurozone countries need to accept the remorseless logic of monetary union that leads from a single currency to greater fiscal integration. Many people made exactly that argument more than a decade ago as a reason for Britain staying out of the single currency, and thank God we did. Solutions such as eurobonds and other forms of guarantees now require serious consideration. That must be matched by much more effective economic governance in the eurozone to ensure fiscal responsibility is hard-wired into the system.

The break-up of the euro would be economically disastrous, including for Britain, so we should accept the need for greater fiscal integration in the eurozone, while ensuring we are not part of it and that our national interests are protected. That is the message the Prime Minister has communicated clearly in his calls with Chancellor Merkel, President Sarkozy and others this week. I have done likewise with individual Finance Ministers, in ECOFIN and in the G7 call at the weekend, and will do so again at the September ECOFIN and G7 meetings.

This is a global as well as a European crisis. At this autumn’s meetings of the IMF and the G20 we need far greater progress on global imbalances. We need an international framework that allows creditor countries such as China to increase demand and debtor countries to make the difficult adjustments necessary to repay them. Everyone knows what needs to be done, but progress so far has been frustratingly slow, with lengthy disagreements on technical definitions, let alone any concrete actions. The barriers are political not economic, so it is up to the world’s politicians to overcome them. There are no excuses left.

The UK, like the rest of the developed world, needs a new model of growth. Surely we have learned now that growth cannot come from yet more debt and more Government spending. Those who spent the whole of the past year telling us to follow the American example, with yet more fiscal stimulus, need to answer this simple question: why has the US economy grown more slowly than the UK economy so far this year? More spending now, paid for by more Government borrowing and higher debt, would lead directly to rising interest rates and falling international confidence, which would kill off the recovery, not support it.

Instead we must work hard to have a private sector that competes, invests and exports. In today’s world, that is the only route to high-quality jobs and lasting prosperity. In the developed countries, especially in Europe, that means making the difficult structural reforms needed to restore competitiveness and improve the underlying performance of our economies. The EU should cut red tape, not add to it. Internationally, we have the greatest stimulus of all on the table in the form of the Doha round—a renewed commitment to free trade across the world, which should be taken up now.

Here in Britain, the Plan for Growth that we announced in the Budget set out an ambitious path—23 measures have already been implemented and another 80 are being implemented now. On controversial issues, such as planning reform, we will overcome the opposition that stands in the way of prosperity. On tax, we have already cut our corporation tax by 2p, with three more cuts to come in the next three years. We will continue to pursue a radical agenda in welfare and education reform.

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However, there is much more we can and must do if we are to create a new model of sustainable growth. All of us in the House must rise to that challenge in the months ahead and confront the vested interests—the forces of stagnation that stand in the way of growth.

In these turbulent times for world markets, we will continue to lead the international response. We will redouble our efforts to remove the obstacles to growth and stick to our plan, which has made Britain a safe haven in the global debt storm. I commend the statement to the House.

Ed Balls (Morley and Outwood) (Lab/Co-op): The shocking and inexcusable events of recent days in our cities are today rightly the Government’s first and immediate priority. However, looking ahead, the global economic events of recent days are an equal and perhaps even graver threat to our stability and cohesion, putting small businesses, jobs and mortgages at risk throughout our country. It is therefore right that the Chancellor is today updating the House and the country on the parlous state of the global economy and, I am afraid to say, the parlous state of the British economy.

In the same spirit of bipartisan co-operation that we have just seen from the Prime Minister and the Leader of the Opposition, let me set out where Opposition Members agree with the Chancellor of the Exchequer as well as where we have grave concerns. First, the Chancellor is right: we made the right decision not to join the single currency in 2003. We agree with him that the crisis in the eurozone requires more decisive and radical action than we have seen so far. I welcome the fact that he is now, at last, involving himself in those discussions, and preparing contingency plans if British banks come under threat.

Tough fiscal decisions in Europe are vital, but is it not clear that the approach of European leaders so far—demanding ever more austerity from smaller countries—is not working because it does nothing to get those economies growing? Without that, countries find it harder and harder to convince the markets that they can repay their debts. Should not the Chancellor finally take a lead in brokering a plan in Europe for growth, alongside European-wide guarantees to reduce debt service costs, and stop the contagion?

I also agree with the Chancellor that months of political wrangling and uncertainty in the US about the pace of deficit reduction have depressed confidence and US growth. However, does the Chancellor agree with those wise heads who favour a balanced and sensible approach to deficit reduction, and fear that rapid US retrenchment could drive the world back into recession? Or does he agree with his friends—we know he has many in the Republican party and in the Tea party movement—who have urged deeper and faster cuts, and hailed the recent budget deal as delivering 98% of their demands? Is the Chancellor on the side of the Federal Reserve, former Treasury Secretaries and Nobel prize winners, or on that of, in the words of the Business Secretary, “right wing nutters”?

It is also right that G7 finance Ministers are finally discussing a co-ordinated response to a global crisis. However, listening to the Chancellor’s analysis, one would think that Britain was a bystander, watching public debt crises unfold in the eurozone and America

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that are best solved by individual countries taking their own actions to get debt down—on his analysis, the faster, the better. But the growth crisis is now global.

Does the Chancellor agree that the coming together of powerful negative forces in every continent, including in Britain—continued deleveraging by banks and the private sector, drastic tightening of consumer spending and fiscal retrenchment from Governments—now means that some commentators warn that the crisis could become as grave as that of the early 1930s, when Governments around the world ignored their collective responsibility to promote growth, ploughed on with austerity and retrenchment and ushered in a decade of depression, unemployment, protectionism and political instability? Here in Britain, families and businesses, deeply worried about their jobs and mortgages, will hear the Chancellor’s talk of safe havens and conclude that he is either deeply complacent or in complete denial about what is happening in our country.

Since the Chancellor’s economic policies have started to kick in, well before the latest bout of financial market instability, confidence has collapsed and our economy has flatlined for nine months, growing slower than that of the US and the eurozone. On the latest OBR figures, before growth forecasts—which the Chancellor today confirmed—were to be downgraded yet again, the borrowing forecast was £46 billion higher than the Chancellor planned.

We need a tough, medium-term plan to get our deficit down, but it is the Chancellor’s reckless—[Interruption.]

Mr Speaker: Order. The House must come to order. I repeat what I have said many times: if Members shout their heads off, then expect to be called, they are suffering from an element of self-delusion.

Ed Balls: The Chancellor’s reckless policies—too far, too fast—have ripped out the house’s foundation and left our economy deeply exposed to the brewing global hurricane. Yet, despite all the evidence and with our stock market falling 10% or more this week, the Chancellor still claims that his policies are working and that we are a safe haven. Despite the evidence of the past two years from credit default swaps and the fact that, in the past week, long-term interest rates have fallen in Britain and in the US, he still claims that falling UK long-term bond yields are a sign of enhanced credibility and not of stagnant growth in our economy. Does he not remember that the Japanese Ministry of Finance briefly took some comfort from low and falling bond yields in the early 1990s, at the beginning of a lost decade of no growth and stagnation? However many times he says that his plan is working, that does not make it true. However, many times he claims that he has restored confidence or delivered on deficit reduction, that does not make it true.

We know that the Chancellor has spent the past fortnight in Hollywood, but he cannot just write the script and watch it come to life. That is not how things work in the real world. If he will not take it from me, perhaps he should hear the words of Paul Krugman, the Nobel prize winner, who said:

“Britain’s experiment in austerity is going really, really badly. But the Chancellor of the Exchequer is finding solace in… fantasy… the wolf is at the door and Osborne thinks it’s the confidence fairy.”

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The Chancellor finds the state of the British economy reassuring; we find it deeply worrying. He rejects our call for action now, including a temporary VAT cut, and vows to plough on regardless. We say that this approach is deeply incautious and reckless. The eurozone is in crisis. America is in political paralysis. The British economy is flatlining. Global markets are in turmoil. The world desperately needs strong and united leadership. Here in Britain, we need our Chancellor to get out of his complacent denial and get back to reality before it is too late.

Mr Osborne: I did meet Mickey Mouse in California, and he seems to be writing the Labour party’s economic policy at the moment.

Let me start with the areas where we agree. We agree that it is right for Britain not to join the euro—perhaps the shadow Chancellor will change the official policy of the Labour party in that respect. I would be very happy to offer him a briefing from the tripartite authorities on the contingency plans of the financial system. Obviously, they have to remain confidential, as he will understand, but I am very happy to give him that briefing.

On what the shadow Chancellor says about European countries being forced to reduce their deficits, I would ask him this question. Who is supposed to be lending those European countries the money that he talks about, in this imaginary world where they are not taking action to reduce their deficits? He voted against the decisions that we took to increase the resources of the IMF, and now he turns round and thinks that there is some magical body or some investors out there who are going to lend money to European countries that do not have credible deficit plans. It is completely for the fairies, as he puts it.

Let me talk about the US debate, which the right hon. Gentleman mentioned. He talked about deficit reduction in America and asked where I stand on the measured pace argument. Actually, I agree with the plan that President Obama set out at George Washington university. [ Interruption. ] Perhaps the Leader of the Opposition does not know what is going on in America at the moment, but actually, the President of the United States has set out a deficit reduction plan that is at the same pace and on the same scale as the one that we are pursuing in Britain. That is what the President has set out; it is his offer in the debate. Indeed, the composition of tax increases and spending reductions that he has put forward is the same as the spending consolidation that we announced last year, and is based on some of the ideas put forward by the bipartisan Bowles-Simpson commission, which we spoke to after the event. It said that it looked to the UK for inspiration for some of its ideas.

The shadow Chancellor says that there is a global economic crisis. He is right about that, and we agree, but it is caused by an enormous debt overhang. That is what all serious economists are saying at the moment. He is also right when he says that the Labour party needs a tough deficit reduction plan. I agree with him about that. Where is this tough deficit reduction plan? We have just spent two and a half hours listening to Labour MP after Labour MP getting up and complaining about spending cuts and the deficit reduction plan—they are all nodding their heads—but where is the tough

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deficit reduction plan that he promised? The shadow Chancellor is now almost alone in the world in making the argument that he makes. He talks about international leadership, but if he turned up at the G7, the IMF, the G20 or ECOFIN with his plans to borrow more and increase our deficit, he would be laughed out of that meeting. He is completely irrelevant to where the international debate has gone. I am afraid that he is living proof of why the public will never again trust the Labour party with their money.

Mr Andrew Tyrie (Chichester) (Con): Does the Chancellor agree that the collapse in the credibility of the eurozone is a warning to any Government who flinch on dealing with the deficit? Is that not why he is quite right to stick to the commitments that he made a year ago to put the country on a course to greater stability? Does he not also agree, however, that the credibility of economic policy in the long run will depend on a fully developed strategy for improving the supply side of the economy? He talked a bit about that at the end of his statement. Will he say a bit more, and say whether he intends to publish a fully worked up improvement to the strategy for growth that he put forward at the time of the last Budget?

Mr Osborne: I completely agree with what the Chair of the Treasury Committee says about the credibility of the deficit reduction plan and how disastrous it would be in the current environment to weaken that plan. We would—within hours, I think—find ourselves sucked into the global debt whirlpool from which other countries are struggling to get out. I also agree with him that we need to do more to improve the supply side of our economy. That is hard work for Governments, and it means taking on difficult vested interests. We have seen the argument in the last few days about planning controls, where we are trying to make it easier to have economic development, and there are plenty of groups that pop up and oppose that. That is an example of some of the battles that we will have to have and win. I can confirm that we will be producing the second phase of our plan for growth at the time of the autumn forecast.

David Miliband (South Shields) (Lab): I would be grateful if the Chancellor confirmed private sector estimates that I have seen that a 0.4% downgrade of the growth forecasts for the next four years means that it will be impossible for him to hit his fiscal target of turning the debt-to-GDP ratio down by the end of this Parliament.

Mr Osborne: The most recent independent analysis of the British economy was done by the IMF this month. It made an assessment using lower growth forecasts, and came to the conclusion that we will hit both our fiscal mandate and our target for reducing debt, which the IMF made clear in its article IV assessment. I cannot help but note that if the right hon. Gentleman had given the leader’s speech that he had written, the Labour party would be in a much more credible place than it is today.

Malcolm Bruce (Gordon) (LD): As the wolves circle country after country, are this coalition Government not vindicated? They were absolutely right to come together with a robust strategy to bring our public finances into balance over the lifetime of this Parliament,

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while the Labour party lacks credibility. If there is one area where we can ensure that that is done in a fair and equal way that puts the lower and middle-income groups in the driving seat of recovery, it is the accelerated process of increasing the tax threshold, and reducing taxes on those people is the best way to do that.

Mr Osborne: The right hon. Gentleman is absolutely right that we are taking more than 1 million low-paid people out of tax altogether, implementing the policy that the Liberal Democrats put forward at the general election. I also agree that what he describes is a vindication not just of the economic decisions we took, but of the political decisions we took. Let us reflect on the fact that a year ago we had a hung Parliament—the first time since the 1970s—and we formed a coalition Government. That was a difficult decision for both political parties involved, but given the political weakness in some other countries, which is driving a lot of the market concern about those countries, the political strength of the Government in Britain is a tribute to both those political parties, which set aside their political differences and came together in the national interest.

Mr Geoffrey Robinson (Coventry North West) (Lab): Will the Chancellor—who persists in this bewildering implausibility that his plan is working—please tell the House by how much this financial year he will fall short of his target for deficit reduction?

Mr Osborne: The important difference between the hon. Gentleman's time in the Treasury and my time in the Treasury now is that we have the independent Office for Budget Responsibility making those announcements. It is not the Chancellor who makes those announcements from the Dispatch Box, for the very simple reason that by the end of the last Government, those Treasury pronouncements were so discredited that they were believed by absolutely no one. One of the important early decisions that we took to restore credibility in British public finances was the creation of the independent OBR, which makes those announcements.

Tracey Crouch (Chatham and Aylesford) (Con): Will the Chancellor tell the House whether the UK economy is growing faster than the US economy this year, and if so, why?

Mr Osborne: In the first two quarters of this year the UK has grown more strongly than the United States, but that is not a source of comfort for the world, because we need a strong US economy as well, and we want to help to bring about the international framework that will enable that to happen.

Mr Gordon Marsden (Blackpool South) (Lab): Is it not revealing that it took to the end of page 5 of his speech for the Chancellor even stutteringly to mention the word “growth”? Will he now reflect on the fact that it is his reckless abolition of regional development agencies and his failure to put money into the local enterprise partnerships that were supposed to solve the problem that have left the English regions stagnant in growth over the past nine months?

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Mr Osborne: Both the hon. Gentleman and I represent constituencies in the north-west of England, and the striking fact about the RDAs is that during their period of existence regional disparities grew. They did not work in the way that they were supposed to work. Because local enterprise partnerships involve businesses and are on much more practical boundaries, they will help to deliver that local growth. However, if he thinks that all the world’s problems are caused by the fact that we got rid of the RDAs, he is exaggerating his case.

Mr William Cash (Stone) (Con): The Chancellor will know that our trade balance between 2002 and 2009-10 with the other 26 member states has gone up from minus £14 billion to minus £53 billion in one year? Does he not agree that even Edward Heath would have repudiated and vetoed a fiscal union with a hard-core Europe with such an incredible trade deficit against us? The coalition agreement, according to the latest answer I got from the Prime Minister, determines our relationship with the European Union. Does the Chancellor disagree with the Deputy Prime Minister, because we must have radical renegotiation of the treaties and the repatriation of powers so that we can achieve growth for all our businesses?

Mr Speaker: I enjoy listening to the hon. Gentleman’s words so much that it is in my interest, Parliament’s interest and the national interest that they should be suitably rationed.

Mr Osborne: My hon. Friend and I will have to agree to disagree on this issue. The remorseless logic of monetary union leads towards fiscal union, and that was one of the reasons that I opposed joining the single currency. However, it is now in our interests to allow that to happen more in the eurozone, because it is in our absolute national economic interest that the eurozone is more stable. It is clear that that means that they need to have more fiscal powers to reduce instability. That means, of course, that Britain must fight hard to ensure that its interests are represented and that we are not part of this fiscal integration. Important decisions, such as on financial services, must continue to be taken at the level of 27. He talks about treaty changes and so on, but the prospect of a major treaty change to bring about eurozone fiscal integration is not imminent, although I imagine that there will be a lively debate if and when it comes about.

Meg Munn (Sheffield, Heeley) (Lab/Co-op): The number of people claiming jobseeker’s allowance in my constituency has gone up massively, with hard-working people with good work records unable to find jobs. Why will not the Chancellor look seriously at areas such as mine, do more and take some measures—such as reducing VAT—to put money into the hands of ordinary people?

Mr Osborne: We have announced an enterprise zone for Sheffield and we will have further announcements to make on enterprise zones in the coming weeks. The evidence of the past 10 years is that in important regions of our country—I have in mind the statistics for the west midlands, rather than for the hon. Lady’s constituency—private sector employment fell over the decade before the financial crash. That shows that that model of growth we pursued, based on the biggest housing boom of any country—with the possible exception of Ireland—the most over-leveraged banks and the

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highest budget deficit, ultimately led to ruin. We need a different model of growth in which we grow the private sector in areas such as Sheffield and get real, lasting jobs, rather than assuming that we can just use Government spending to create them.

Mr John Redwood (Wokingham) (Con): As someone who believes that we need to get the deficit down and do more to assist growth to help that, will the Chancellor look at the dreadful losses at RBS and the big hit on capital values on its shares, and see what more can be done to manage that colossal pool of assets in the interests of economic growth and the taxpayer?

Mr Osborne: We of course continue to monitor the situation at RBS and all the British banks very closely. There is a concern in the financial markets about the capitalisation and liquidity provisions of banks in many countries. I have to say that those concerns have not been expressed at the moment about the UK. We passed the stress tests well and we have a strong liquidity provision in place for the banks, including RBS, and the markets can therefore have confidence in British banks.

Mr Michael Meacher (Oldham West and Royton) (Lab): Is it not clear that the Chancellor’s whole strategy is failing, as it is now almost entirely dependent on achieving growth? As the economy has been flatlining for nine months, export markets are stymied, quantitative easing has already been tried with little or no effect and interest rates are already flat on the ground. Where exactly does he expect the growth to come from to get us out of prolonged stagnation?

Mr Osborne: As I have said, the British economy is growing and it is the assessment of the Bank of England and the Office for Budget Responsibility that it will continue to grow. The growth in the last six months has actually been stronger than in the United States, and half a million jobs have been created in the private sector in the last year—

Ed Balls: In the last nine months?

Mr Osborne: In the past 12 months. So that is all good news. Where does the right hon. Member for Oldham West and Royton (Mr Meacher) expect the money to come from for additional Government borrowing? Who in the world would lend to a country that abandoned its deficit reduction plan at a time like this, especially a country such as Britain which, unfortunately, has the highest budget deficit in the G20?

Mr Charles Kennedy (Ross, Skye and Lochaber) (LD): Given that we are all still hearing that the banks are not making sufficient funds available to small and medium private enterprises in our constituencies and that that is the fulcrum on which the Government’s strategy has been based to make up the deficit from the loss of jobs in the public sector as a result of the strategy being pursued, and that we now have a downward estimate for growth, what did the Business Secretary mean when he said that we would have to find more imaginative ways of getting the money through? What did he mean by that and does the Chancellor agree?

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Mr Osborne: The challenge that we and many developed countries face is that banks are shrinking their balance sheets, because they got too big and they lent too much money. They are also hoarding capital because of the current market turbulence. What we are trying to do as a Government is to ensure that, in that process, lending to small and medium businesses is protected and indeed increased. We signed the Merlin agreement with the banks at the beginning of the year to see an increase of 15% in small business lending. The Bank of England will publish the figures tomorrow, so I cannot give them today, but the banks have already indicated that they are on track to meet that 15% increase in small business lending over this year and I am confident that the figures tomorrow will show that that is the case.

Stewart Hosie (Dundee East) (SNP): The June 2010 Budget described the deficit reduction plan as adding £8 billion of tax rises a year from 2014-15 and £32 billion of cuts from 2014-15 every year on top of the £73 billion or so fiscal consolidation that Labour had in mind. It also forecast growth from this year of 2.3%, 2.8%, 2.9%, 2.7% and 2.7%. Those growth figures are now shredded. What will the Chancellor do? Will he increase taxes or cut public spending further, or did he mean by saying that we had to adjust our expectations accordingly that he would change his deficit reduction target?

Mr Osborne: We are not proposing for a second to change our deficit reduction target. The target is a structural budget deficit target and was deliberately set as such. The reason we set out those plans in the emergency Budget and went beyond the previous Government’s mantra of halving the budget deficit in four years—not that they had actually written in the proposals to do that—was because on the day we came into office our country’s credit rating was on a negative outlook for a downgrade. Our market interest rates were tracking Spain’s and everyone from the Governor of the Bank of England to the IMF and the CBI was saying that the previous Government’s budget deficit plan was not credible. If we had stuck with that plan and even filled in the blank spaces, we would now be part of the sovereign debt crisis whirlwind that is engulfing other countries.

Michael Fallon (Sevenoaks) (Con): Before there is any further attempt to rewrite history, can the Chancellor confirm again that until last year’s emergency Budget and spending plan this country’s triple A rating was on negative outlook and was restored to stable only through the measures he took last year? Is not the real lesson of the United States that any country that goes off its fiscal deficit reduction plan can suffer a downgrade, with all the damage to jobs and prosperity that that entails?

Mr Osborne: My hon. Friend is absolutely right. In January last year the largest bond investor in the world said that UK gilts

“are resting on a bed of nitroglycerine.”

Today I could read out a whole string of comments from market participants saying that the UK has been a safe haven in this sovereign debt crisis because of the decisions that we took.

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Standard & Poor’s, the rating agency that has just downgraded the United States, took the United Kingdom off “negative outlook” and reaffirmed our triple A credit rating. The practical consequence of that is much lower interest rates. If we pursued the policy proposed by the Opposition of more spending and more debt, the immediate response would be higher interest rates which would kill off any recovery. That is why such a policy is economic madness.

Alison McGovern (Wirral South) (Lab): Given poor and worsening United Kingdom growth, at what point will the Chancellor advocate further quantitative easing? If he will not answer that question, will he tell us whether he believes that there is no chance that rapidly rising sterling will hurt our exports?

Mr Osborne: Both those matters are properly for the Bank of England. It is for the Governor to comment on the value of sterling, if he chooses to do so. As for quantitative easing, the arrangements agreed by the last Government, which I have retained, remain in place. If the Monetary Policy Committee makes a serious request, of course we will consider it seriously, but we have received no such request.

Sarah Newton (Truro and Falmouth) (Con): Moneyfacts reported yesterday that the low cost of borrowing in the United Kingdom means that, on average, five-year fixed-term mortgages are now £1,400 cheaper than they were two years ago. That is very welcome news for my hard-working but squeezed constituents. Will the Chancellor confirm that he will continue his policies, which will deliver the low interest rates that are so important to families and businesses across the country?

Mr Osborne: Absolutely. I think that interest rates are often the missing part of the debate in the Chamber. It is simply economically impossible at the moment for the Opposition to have more spending, more debt, and low interest rates. Those things do not square in the current global economic environment. The automatic, immediate response from the market, and quite possibly from the Monetary Policy Committee, would be an increase in interest rates if the Opposition abandoned our fiscal plans. We would have higher interest rates that would kill off any recovery.

Several hon. Members rose

Mr Speaker: Order. I appeal to colleagues to ask single, short supplementary questions without preamble, so that we can maximise the number of contributors.

Kelvin Hopkins (Luton North) (Lab): The frightening instability of the world economy has arisen since, and as a result of, the abandoning of the post-war arrangements decided at Bretton Woods, and the liberalisation and globalisation of finance capital. Part of that arrangement was that each country had its own currency and managed its own economy within international rules. Would it not be sensible to move back in that direction by establishing national currencies within the eurozone and starting again where we left off?

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Mr Osborne: We abandoned the Bretton Woods arrangements in the early 1970s, so it has been a while since we have operated under those international arrangements. Let me, however, make a few observations, because the hon. Gentleman has made a serious point about the eurozone.

I think that it would be disastrous for Britain’s economy if the eurozone were to break up, and I think that it would also be disastrous for the economies of the eurozone themselves. It would lead immediately to a balance of payments crisis in many European countries. That is why it is in our interests for the eurozone to work. Some of us questioned whether it was right to go ahead with it 15 years ago—we certainly did not want Britain to be part of it—but it exists now, and, as I have said before, “I told you so” is not an economic policy for today.

I agree with the hon. Gentleman that we need better international arrangements to monitor and deal with global imbalances. For instance, there are currently huge creditor countries such as China, and big debtor countries such as the United Kingdom and the United States. I am afraid that progress on that at the G20 and the International Monetary Fund is painfully slow. At some of the meetings, it has not even been possible to agree on the definitions. I hope that, if there is a silver lining to the present black cloud of the financial market crisis, we will see at the autumn meetings of the various institutions much more progress towards the arrangements that I think everyone accepts should be in place.

Alun Cairns (Vale of Glamorgan) (Con): I congratulate the Chancellor on the deficit reduction programme that has secured the United Kingdom’s triple A rating, but can he tell us what analysis he has made of the rising price of gold, and how much better off the UK economy would be if the last Government had not sold off our gold in the same way?

Mr Osborne: I expected that that question might arise, as it often does at Treasury events. As people will have seen, the price of gold has hit a record high of $1,800. It was $300 when the shadow Chancellor sold our gold stocks. As a result of that action, this country has lost £12 billion.

Sir Stuart Bell (Middlesbrough) (Lab): The House will have noted that the Chancellor did not mention the fact that inflation is approaching 5%, the fact that that our borrowing is £46 billion higher than his figure, or the fact that consumer and business confidence is falling. He did mention his growth plan, but there is no growth. When will he accept the paradox that the sharper and deeper the cuts, the less growth there will be?

Mr Osborne: The question that I would ask the hon. Gentleman is this: who in the world does he expect to be lending money to countries with very high budget deficits if they do not have credible deficit reduction plans? What group of people would put their money on the line? That is precisely the problem that we have at the moment in the global financial markets.

The hon. Gentleman asked about inflation. Yesterday, at his press conference, the Governor of the Bank of England said that he expected it to hit 5% this year. Let me draw attention to another silver lining to the dark

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clouds. Commodity prices have fallen in the last few weeks, and the oil price has fallen somewhat from its high. One of the biggest challenges that all developed and, indeed, developing countries have faced in the last year or so has been the very big increase in the oil price.

Mr Brian Binley (Northampton South) (Con): I welcome the Chancellor’s comments about the need to cut deficits. Let me also remind him that a healthier market is important to our export performance, and that growth requires buyers and sellers to have the confidence to transact. Will he therefore, while steering the economy, remember that the need to instil demand in the British economy is very important to households and businesses? May I ask him not to lose sight of that?

Mr Osborne: Of course I agree that we need demand. I think that demand comes partly from confidence, and that confidence comes from economic stability. If we think of the difference between the statement that I have been able to make today in the House of Commons and the emergency statements and emergency budget cuts that many Finance Ministers have had to announce in the last two weeks, we have, in a nutshell, the reason why we made the right decisions last year to get ahead of the curve, and why so many other countries are now trying to catch up.

Valerie Vaz (Walsall South) (Lab): Can the Chancellor explain how relaxing planning controls will stimulate the economy when offices, houses and shops are already standing empty in my constituency?

Mr Osborne: Of course we need to fill vacant properties, but we also need to allow new development. I think that we all want to protect areas of outstanding natural beauty in our country, and I have a constituency in the green belt, but planning decisions in this country are so lengthy, so bureaucratic and so costly that almost every study of the British economy that has been commissioned in the last decade has identified planning as an obstacle to further economic development. I think that we need to simplify those planning controls so that we can—yes—protect the countryside, but also secure decisions in reasonable time that allow development to take place. That is why we have introduced the presumption of sustainable development into the planning system.

Geoffrey Clifton-Brown (The Cotswolds) (Con): What further help can the Chancellor give small businesses, 4.5 million of which employ fewer than five people? If a quarter of them employed an extra person, that would make a huge dent in the unemployment register.

Mr Osborne: Small businesses are, of course, the engine of job creation in our country. As I have said, 500,000 new jobs have been created in the private sector over the last year. That is the second highest rate of job creation in the G7. As for specific help for small businesses, we avoided the increase in small business taxation that the Labour party included in its last Budget.

Gavin Shuker (Luton South) (Lab/Co-op) indicated dissent.

Mr Osborne: The hon. Gentleman shakes his head. He obviously did not know that there was to be an increase in small business taxation. We have cut it.

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We have also introduced support for the exports of small business. A central part of the strategy developed by Stephen Green as trade Minister is helping small businesses to export. I have already mentioned the Merlin lending agreements with banks, which are beginning to bring about an increase in lending to businesses that simply was not happening last year.

Chris Williamson (Derby North) (Lab): In view of the flatlining economy, and given that inflation is set to hit 5%, the spectre of stagflation looms large. Can the Chancellor tell us why he is so wedded to crackpot Tea party economics when it is plainly failing the country?

Mr Osborne: It sounds like the shadow Chancellor wrote that question. Let me repeat what I said earlier: the proposal Barack Obama put forward in his speech at the George Washington university is for a deficit reduction in the United States of the same pace and scale as the one we are pursuing in Britain. That is because in America, too, they understand that they have to deal with their budget deficit.

Mrs Anne Main (St Albans) (Con): Europe is making increasing demands on our pension pots and our benefit pots and, indeed, it recently made a demand on our VAT. Is it not time that we had a debate on how much we pay towards Europe? The Chancellor says it would be economically disastrous if it broke up, but there should be a debate. Some 75,000 people have signed a Daily Express petition asking for a debate on this, so surely there should be an autumn debate?

Mr Osborne: We do debate the European budget in this Parliament, and they are often quite lively debates. We are fighting hard for a real-terms freeze in the European budget not just for next year but for the coming new financial perspective from 2014, and we have enlisted a number of allies. There is now an understanding across Europe that, with very tough public expenditure decisions at home in every European country, we also need to get control of the European budget.

Stephen Timms (East Ham) (Lab): The momentum for growth in the UK economy has clearly now run out, and I am glad that the Chancellor will make announcements on growth in the autumn. As he plans for them, will he take account of the International Monetary Fund’s view that if there is the prospect of a lengthy period of weak growth ahead, he should be willing to consider temporary tax cuts?

Mr Osborne: Of course we bear in mind advice from the IMF and others, but it makes it clear that that is not its central view at the moment. It asked itself a specific question, and it says this:

“The weakness in growth and rise in inflation raises the question whether it is time to adjust macroeconomic policies. The answer is no…Strong fiscal consolidation is underway and remains essential”.

That is what the IMF says in its article IV report into the United Kingdom published on 1 August this year.

Jeremy Lefroy (Stafford) (Con): Recently, the UK has been the highest per capita exporter of services in the world, and that is vital for future growth. What action are the Government taking to ensure that we can continue to compete globally in services on a level playing field, and particularly in the European Union?

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Mr Osborne: First, while not all the recent economic data have been encouraging, the services index for the United Kingdom in the last couple of weeks was the strongest in Europe, which gives us some cause for optimism in that sector. I agree that we want to maintain our competitiveness, and that we want to export more to Europe. I think Europe’s agenda should be much more about completing the single market and implementing measures such as the services directive, which has merely sat on the “Too Difficult to Handle” shelf for far too long. That is the agenda that we need to get the European Union focused on.

Nia Griffith (Llanelli) (Lab): Last week I visited the Dividers Modernfold factory in my constituency. In common with many other construction products companies throughout the country, it is very worried about the prospects for immediate economic growth, particularly in the light of public procurement cuts. What precisely is the Chancellor going to do in the very near future to stimulate demand and growth, so we can create and safeguard jobs in the private sector? We do not want to be fobbed off with the sorts of answers he has just given to my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) and the Chancellor’s party colleague, the hon. Member for Northampton South (Mr Binley).

Mr Osborne: In the spending review, we set higher capital budgets than those set out by my predecessor, the Chancellor of the Exchequer in the last Labour Government. Therefore, capital spending budgets are higher than they would have been under the plan the hon. Lady stood on in the last election.

On getting the construction sector moving, that is precisely why we are tackling issues, such as the planning delays, that have been so difficult, and why we made a number of tax changes in the Budget to help the construction sector. The construction index was also positive in the last couple of weeks. I just say to the hon. Lady that when we are running the highest budget deficit in the G20, it is not possible to abandon our fiscal consolidation plans and to seek someone out there in the world to borrow more money from. That would lead to markedly higher interest rates—we need only look at the interest rates in Spain and Italy at present—and we know that higher interest rates do particular damage to the construction sector.

Mr Tobias Ellwood (Bournemouth East) (Con): I congratulate the Chancellor on sticking to his deficit reduction plan, which has allowed us to keep our triple A rating, unlike some other countries, including the United States and possibly now France. If France were to lose its triple A rating, what would be the implications for the EU stability fund and the ability for eurozone bail-outs to continue in the future?

Mr Osborne: My hon. Friend asks a good question, which is being asked in the markets at present. I have to say that one of the causes of the instability in the last couple of weeks has been loose comments by Finance Ministers on issues such as that which he raises, so I will “take the Fifth” and not comment.

Jeremy Corbyn (Islington North) (Lab): Does the Chancellor of the Exchequer have any concerns about the unaccountable power of the credit rating agencies,

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who, seemingly at a whim, can cause disasters to be visited on small and vulnerable economies, increase interest rates, and lead to public spending cuts and devastation to many poor people’s lives? Does he not think it is time that these rating agencies are brought under some kind of accountable control?

Mr Osborne: It might surprise the hon. Gentleman to learn that I agree with at least part of what he says: we do have concerns about how the credit rating agencies have operated. That is why we have been part of the European discussions to get some European rules on credit rating agencies put in place, and I think they are appropriate. I disagree with the hon. Gentleman, however, on blaming all of what is happening on credit rating agencies. However imperfect they might be, credit rating agencies are trying to give market investors some idea of the credit worthiness of countries and companies. The truth is that they have not led to the spending cuts. The reason why we have had to undertake spending cuts is that this country is currently spending close to 50% of GDP on public expenditure, which is far higher than the historical average under Conservative and Labour Governments. That is why we are having to act. We are doing so because we have a record budget deficit—the highest in our peacetime history and the highest in the G20.

Mr Mark Spencer (Sherwood) (Con): The Chancellor referred to Merlin and the agreement with the banks, but is he aware that these banks are double-counting their lending by forcing businesses to convert overdrafts into long-term loans? A business in my constituency wants to expand. It has full order books and wants to take on more staff, but it cannot do so because not only are the banks not being helpful, but they are actually being obstructive.

Mr Osborne: I would be very happy to look at that specific constituency case. Let me look into the details and get back to my hon. Friend with an answer, or meet him in person to discuss it.

Dame Anne Begg (Aberdeen South) (Lab): The sluggish growth rate has led the Office for Budget Responsibility to now forecast even higher unemployment. More jobs are being lost in the economy than are being created. The Government’s own policies are adding to that, because they are putting new work obligations on to people who have been out of the work force for some time. While it is absolutely right that the Government help people to find jobs, not all of them will do so. It is very wrong that people who are doing all they can to find work and still have not done so will find they are facing the loss of their benefits. In light of the new growth figures, will the Chancellor speak to the Secretary of State for Work and Pensions, as the sanctions on these people should be lifted?

Mr Osborne: First, if I might correct the hon. Lady, the OBR is not forecasting rising unemployment over the Parliament; it is forecasting falling unemployment over the Parliament. I also remind her that half a million private sector jobs have been created over the last year. Let me deal directly with her point about social security. The welfare system is a poverty trap that is discouraging people from working. People on benefits

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face incredibly high marginal tax rates if they find work. That is why my right hon. Friend the Secretary of State for Work and Pensions is, with my full support, seeking major reform of the welfare system, so we incentivise people off benefits and into work. That is one of the most important reforms this Government are undertaking.

Duncan Hames (Chippenham) (LD): Give our country’s debts, it is reassuring to learn that the price for Government borrowing has fallen to the lowest levels since the last Liberal Government. How much more expensive would Government borrowing be for taxpayers and public services if our interest rates had gone the same way as those in other parts of Europe?

Mr Osborne: It would of course have been ruinous, not just for individuals but for the Government. One of the largest items of Government spending I inherited, unfortunately, was debt interest. We are raising taxes in order to pay our international creditors and that interest is forecast to rise, sadly, over the Parliament, as we reduce the deficit. That is why it is so important to try to get debt falling by the end of the Parliament. Of course, any reduction in our gilts yields is good for the Government and saves us money, too.

Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab): Can the Chancellor explain why his own Office for Budget Responsibility forecasts £46 billion of more borrowing?

Mr Osborne: The Office for Budget Responsibility makes its independent fiscal forecasts and, I think, one of the great policy developments of this Government has been the creation of that independent body, which will make its autumn forecasts in the usual way.

Laura Sandys (South Thanet) (Con): The Chancellor rightly mentioned the issues about the Doha round and trade. Trade permeates every aspect of our Government’s growth agenda. Will the Chancellor comment on whether he believes that the G20 appreciates how crucial releasing trade and ensuring greater free trade is at this moment in the global economic cycle?

Mr Osborne: My hon. Friend is right to draw attention to the Doha round. The significance of this is that it is available for the countries of the world to seize—today, this month or next month—and implement. If one is looking around the world for something that could, in very short order, increase global demand, it is sitting there in the Doha trade round. I hope that we make progress at the G20. I suspect we will certainly be a leading advocate of making progress and we have some good allies, for example in China, but I have to say that there remain considerable obstacles, not least in the Democrat and Republican parties in the United States.

Steve McCabe (Birmingham, Selly Oak) (Lab): If it is true that we are being used as a safe haven, why are we not seeing significant growth in the value of sterling?

Mr Osborne: As I say, I have a simple policy not to comment, as previous Chancellors have also decided to do, on the value of sterling. I do not propose to break that commitment today.

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Matthew Hancock (West Suffolk) (Con): In terms of the stimulus to the British economy, what does the Chancellor think would be the effect of increased borrowing, which would then have an impact on increased mortgage rates for millions of people up and down the country? What would be the aggregate impact, say, of a VAT cut?

Mr Osborne: My hon. Friend is right that there is a significant monetary stimulus in place through the very low market interest rates and of course the official rate. Both of those would go up, almost certainly in the case of the markets and probably in the case of the Monetary Policy Committee, although it is independent, and that is why all this talk of more fiscal stimulus is a debate that is happening only in the Labour party of the United Kingdom, alone in the world. It is very difficult to find an opposition anywhere in Europe arguing for less deficit reduction coming off the published plans of a Government. As I say, if the shadow Chancellor turned up at one of these meetings and put forward his proposal, he would be laughed out of the meeting.

Andrew Miller (Ellesmere Port and Neston) (Lab): On a bipartisan basis, may I invite the Chancellor, as a fellow Cheshire MP, to join me in sending our best wishes to the two Cheshire officers injured last evening?

On the subject of the statement, 11% coming off the stock market and massive hits to the values of British companies will have a knock-on impact on many pensioners. What is the Chancellor going to do about it?

Mr Osborne: Of course, stock market falls affect pension investments and other equity investments. Our stock market has fallen—not as much as some, but it has nevertheless fallen—

Ed Balls: Why is that?

Mr Osborne: It is because of the global lack of confidence in Governments’ abilities to deal with their deficits. We have not seen turbulence in our bond markets precisely because we have in place a credible deficit reduction plan. I note that I have been answering questions for more than an hour and it has almost been an hour since the shadow Chancellor said that the Labour party needed a credible deficit reduction plan, but has a single Labour MP got up and proposed any component of that reduction plan? No, they have not.

David Rutley (Macclesfield) (Con): I welcome my right hon. Friend’s statement and the fact that over the past year we have seen the private sector create four times more jobs than have been lost in the public sector. Does he agree that this is a better approach to job creation than the overreliance on the public sector, which was all too prevalent over the past decade in regions such as the north-west under the previous Administration?

Mr Osborne: My hon. Friend is absolutely right. First, I should take the opportunity that I did not take in answer to the previous question—as my hon. Friend, too, is a Cheshire MP—of praising the work of the Cheshire police, who have shown outstanding bravery over the past few days. My thoughts go out, as the hon. Member for Ellesmere Port and Neston (Andrew Miller) said, to the injured officers.

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My hon. Friend is absolutely right. Surely we have learned something from the past decade, which is that relying on an unsustainable housing boom, unsustainable Government spending and unsustainable bank lending is not a model of growth that this country can pursue again. We have to get off this country’s addiction to debt, not just in the Government but in banks and households. That is what we are doing and it is a difficult adjustment that many western economies are having to go through. Unfortunately for us, given that we were the most enthusiastic participants in the debt boom, that adjustment is particularly difficult here in the UK.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): Does the Chancellor agree with the recommendations of the recent economic commission of the Conservative party in Wales that job creation levers should be devolved to the Welsh Government? Does he agree that there is no need for another lengthy commission to come to that sensible conclusion?

Mr Osborne: As the hon. Gentleman knows, we are in active discussion with all the parties in Wales and with the Welsh Assembly Government, discussing what further powers might be devolved to the Welsh Assembly, including fiscal powers that might have a role in economic development. I do not want to pre-empt that debate, but the fact that we have been prepared to engage in it shows that we are doing this in good faith.

Neil Carmichael (Stroud) (Con): Given the credibility that the coalition Government have won through their deficit reduction programme, securing a triple A rating and having low interest rates, does the Chancellor think that it would be appropriate to send a message to encourage the same kind of decision making—swift and strong—across the eurozone?

Mr Osborne: I think we have got ahead of the curve. As I say, I am not one of those Finance Ministers who are having to come to their Parliaments and announce emergency budget cuts because they did not get ahead of the curve. It is important for the eurozone countries, and all countries, to have fiscal credibility. There are many good examples in the eurozone of countries that have done that and we are part of that pack.

Margaret Curran (Glasgow East) (Lab): I draw the Chancellor’s attention to the unemployment rate in my constituency, where 24 people are chasing every vacancy. People in my constituency have learned lessons from previous years: we learned from Mrs Thatcher that mass unemployment is not a price worth paying. What does the Chancellor intend to do to tackle unemployment in my constituency, which seems likely to rise?

Mr Osborne: I would make the observation that only every Labour Government in history have left office with unemployment higher than when they came into office.

Nicky Morgan (Loughborough) (Con): Is not the best way to help the hard-pressed families, taxpayers, jobseekers and pensioners mentioned by Members in all parts of the House—people who are not rioting, but getting on with the business of trying to make savings in

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their budgets and their family’s income—to ensure a stable economy, so that they can make sure that their living standards are maintained in the long term?

Mr Osborne: My hon. Friend is right. What we are able to provide in the Government debt market is the stability that is sadly lacking in other Government debt markets. All of us now need to rise to the challenge of removing the obstacles to growth; that will mean confronting some vested interests, pressure groups and, dare I say it, even, potentially, trade unions, but it is absolutely essential that this country wakes up to the competitive pressures of the modern world—the competitive pressures that countries such as China and Brazil present to us—and gets the private sector growing in a way that will create the sustainable jobs that were so lacking in the past 10 years.

Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op): Last year, Government borrowing came in some £20 billion lower than was anticipated; this year, we learn that it will be some £46 billion higher than was forecast. Can the Chancellor give us an explanation?

Mr Osborne: As I have already explained, we have an independent Office for Budget Responsibility—[Interruption.] I am pretty tempted to say that the answer is that the previous Chancellor did not want to have to downgrade his borrowing forecast four weeks before the general election, so he kitchen-sinked the borrowing forecast a year before, to make sure that he was able to show a reduction just before the general election.

Jo Swinson (East Dunbartonshire) (LD): I support the Government’s plans for cutting the deficit, leading to lower interest rates and increased international confidence in the UK economy, but the Chancellor is well aware that our economy is still fragile, so if tax revenues are higher than expected, or if there are receipts from asset sales, will the Chancellor reinvest that in capital infrastructure projects and skills development, to give a boost to our economy and create jobs, rather than being seduced by the voodoo economics of giving tax cuts to the rich?

Mr Osborne: There are quite a lot of American references in this debate. We have used the receipts of some of the asset sales that we have proposed—and indeed undertaken—to invest in new infrastructure, or in a particular industry. Of course, we have to do that on a case-by-case basis, but the spending review set out how we were going to use the proceeds of some of the asset sales for future investment.

Pamela Nash (Airdrie and Shotts) (Lab): The Chancellor failed to mention in his statement that the Bank of England has now downgraded the growth forecast for this country five times since he took office. How does he reconcile that fact with his claim that Britain is a safe economic haven?

Mr Osborne: I reconcile it by quoting the Governor of the Bank of England, given that the hon. Lady mentions the Bank. [Interruption.] Labour appointed the Governor of the Bank of England; in fact, I suspect

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that the shadow Chancellor made the appointment. The Governor of the Bank of England said yesterday that

“the UK has done what it can”,

in terms of putting the major conditions in place to ensure a rebalancing and a recovery. He went on:

“We have a credible medium-term fiscal plan, which many countries do not”.

Andrew Jones (Harrogate and Knaresborough) (Con): I welcome the Chancellor’s statement. If he accepted submissions to revert to a VAT cut through a debt-funded cut, would it have an impact on the UK’s triple A credit rating?

Mr Osborne: A multibillion-pound increase in our deficit would undermine market confidence in the UK, and would lead to an immediate increase in our market interest rates, probably within minutes. That would effectively mean higher mortgage and interest rates for businesses and families, and it would be one of the things that would choke off the recovery.

Alex Cunningham (Stockton North) (Lab): I was pleased to visit TAG Energy Solutions in my constituency on Tuesday—a company that has just invested £20 million in a new rolling mill to make monopiles and transition pieces for the offshore wind industry. It is still to land its first order, and it is frustrated at the disadvantage that it has in comparison with Germany and other European countries, which buy at home. When will the Chancellor really do something to help British industry, ensure British wind farm developers buy British, help TAG create hundreds of jobs in Teesside, and get our economy moving again?

Mr Osborne: We are seeking to develop a domestic green energy industry; the company that the hon. Gentleman speaks of sounds like a good example of that. I hope that people buy British products, such as wind turbines, because they are the best in the world. To help that company make the best products in the world, we have to create a very competitive business environment, because the competition from the likes of Germany is so strong. Some of the decisions that have been taken on our energy policy have provided some stability, which allows investment in renewable energy technology.

Andrew Percy (Brigg and Goole) (Con): The Humber is one of the regions that, over the past 10 years, lost private sector jobs, and instead relied on the public sector. Our way back is through manufacturing, so may I urge the Chancellor to look very closely at measures such as carbon floor pricing, and to look at clipping the wings of organisations such as Natural England, which are frustrating the planning process locally? Perhaps more parochially, will he look seriously at the submission from the Humber Bridge Board to buy the Humber bridge and cut tolls by next year?

Mr Osborne: I completely agree with my hon. Friend about the need to make progress on our planning reforms for the reasons that he gives. That means making some difficult decisions, and taking on some pressure groups, but I think that is absolutely right. Our planning reforms take into account the need to preserve our natural environment.

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Believe it or not, I am very familiar with the subject of Humber bridge tolls because my hon. Friend the Member for Beverley and Holderness (Mr Stuart) is a tireless campaigner on them. The Treasury is conducting an economic study of the effects of the tolls, and that will report at some point in this Parliament.

Roberta Blackman-Woods (City of Durham) (Lab): I congratulate the Chancellor on recognising, albeit somewhat belatedly, that there is a link between what happens in the global economy and what happens in the UK economy. In the light of that, what action does he intend to take to ensure that the problems with the US economy and the eurozone do not lead to further downward pressure on UK economic growth?

Mr Osborne: Unfortunately, I cannot make the UK invulnerable to events elsewhere in the world. Of course there is a global connection. I would draw this distinction between what I am saying and what the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), says. I am not saying that Britain has been blameless in the way it has handled its economy in the past decade or so. I am saying that we were the most enthusiastic participant in a global debt boom, and as a result we have one of the more difficult adjustments. That is, I am afraid, a statement of fact.

Roger Williams (Brecon and Radnorshire) (LD): Recent reports have shown that the rural economy has the capacity to grow quickly if it has the right conditions. Will the Chancellor confirm in his autumn update on the plan for growth that those conditions will be met so that the rural economy can play its part in improving the national finances?

Mr Osborne: We recognise the specific needs of the rural economy. Meeting them is one of the specific work strands in the second phase of the growth review. I know something of the hon. Gentleman’s constituency. One of the absolute keys to rural economic development is getting the infrastructure right, especially rural broadband, which will open up all sorts of business opportunities in what would previously have been regarded as quite remote places. That is why we are right to be investing in rural broadband in Wales and across the UK.

Dr Alan Whitehead (Southampton, Test) (Lab): Will the Chancellor take the opportunity today to repudiate the OBR’s linkage of low growth with a requirement of £46 billion additional borrowing over the next period? If he will not, what additional cuts is he planning in order to avoid that outcome?

Mr Osborne: The hon. Gentleman misunderstands two things. First, the OBR is independent. If it is going to work as a permanent institution, it will need the support of the official Opposition. I hope that that is forthcoming, not just in the letter but in the spirit. There should not be a constant demand for the Chancellor of the day to provide their own fiscal forecasts. Secondly, as I say, we have put in place a credible deficit reduction plan. We heard from the shadow Chancellor that Labour needed a credible deficit reduction plan as well. Not a single Labour Member, including him, has proposed a single pound of spending cuts. Until the Labour party gets that credible plan, it will not really be able to participate in a sensible debate.

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George Freeman (Mid Norfolk) (Con): Has my right hon. Friend seen the latest data which show not only that the private sector has created four times more jobs than the public sector has lost but that Britain is now second in the G20 league of net job creation? Does that not show that the deficit strategy is working, and that the shadow Chancellor is wholly out of touch and has not learned the golden rule that you cannot borrow your way out of a debt crisis?

Mr Osborne: The shadow Chancellor has a bit of a history on his golden rules, and they do not usually turn out to work, but my hon. Friend is right that we are seeing net job creation. We are not remotely complacent about that. We are working extremely hard at improving the competitiveness of British industry, making sure that it is able to export and invest. That is the model of growth that this country now has to pursue.

Katy Clark (North Ayrshire and Arran) (Lab): As the Chancellor knows, growth figures over the past nine months have been 0.2% and in the preceding nine months they were 2.1%. Many of the suggestions from the Opposition are about growth and economic regeneration. If we continue to see growth figures of that nature, either flatlining or negative, will the Chancellor reconsider his position and look at policies that stimulate growth?

Mr Osborne: The only thing I have heard from the Opposition—who by the way presided over the deepest recession since the 1930s—is a complaint every time there is a proposal to cut public expenditure. We heard that earlier today. I have not heard about any growth policies—as the hon. Lady puts it—from the Labour party; I have just heard opportunistic opposition to everything the Government are doing to have a credible deficit reduction plan. The shadow Chancellor has set himself his own test; he says he will produce a credible medium-term fiscal deficit plan. Let’s hear it.

Several hon. Members rose

Mr Speaker: Order. I thank the Chancellor of the Exchequer and the 52 Back Benchers who have questioned him.

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Point of Order

3.40 pm

Dr Thérèse Coffey (Suffolk Coastal) (Con): On a point of order, Mr Speaker. During the Prime Minister’s statement, you suggested that people could not speak if they were not here at the beginning of that statement. Could you clarify for me whether that includes people who were not on the Floor of the House but were indeed sitting in the Galleries?

Mr Speaker: I do not think any clarification is required. I simply say to the hon. Lady that by recent custom and practice, an hon. Member would be expected to be near a microphone in order properly to pose a question and to receive an answer. When a Member is in the Chamber for that purpose, he or she can do so. I did not refer to any particular Member. I have no intention of doing so and no need to do so. I said what I did and I felt that it was clear to the House.

Business without Debate

Sittings of the house

Motion made, and Question put forthwith (Standing Order No. 25) ,

That this House, at its rising this day, do adjourn until Monday 5 September 2011.—(Sir George Young.)

Question agreed to.

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Public Disorder

3.42 pm

The Secretary of State for the Home Department (Mrs Theresa May): I beg to move,

That this House has considered the matter of Public Disorder.

Mr Speaker: I remind the House that in view of the enormous interest in the debate I have imposed a limit of five minutes on Back-Bench speeches. There is no limit on Front-Bench speeches and I leave it to the Home Secretary and the shadow Home Secretary to tailor contributions in the light of the level of interest.

Mrs May: Thank you, Mr Speaker.

The last five days have been a dark time for everybody who cares about their community and their country. Violence, arson and looting in several of our towns and cities, often openly in front of television cameras, have destroyed homes, ruined livelihoods and taken lives. As long as we wish to call ourselves a civilised society, such disorder has no place in Britain.

I know that the House will want to join me in paying tribute to the bravery of the policemen and women who have worked to restore order on our streets. In particular, I know that hon. Members will want to lend their support to the police officers who have suffered injuries in the course of their duties, and the whole House will want to send condolences to the families of the three men so senselessly killed in Birmingham on Tuesday night.

The violence of the last five days raises many searching questions, and the answers may be painful to hear and difficult to put right. Why is it that so many people are prepared to behave in this way? Why does a violent gang culture exist in so many of our towns and cities? Why did the police find it so hard to prevent or contain the violence? It will take time to answer those questions fully and adequately, but I will take each of them in turn.

First are the reasons behind that behaviour. We must never forget that the only cause of a crime is a criminal. Everybody, no matter what their background or circumstances, has the freedom to choose between right and wrong. Those who make the wrong decision, who engage in criminality, must be identified, arrested and punished, and we will make sure that happens.

Alun Michael (Cardiff South and Penarth) (Lab/Co-op): Does the right hon. Lady not recognise what the Prime Minister said earlier? Every crime has a context. Is it not important, therefore, to have a full and proper inquiry, led by somebody of the level and competence of Lord Scarman, to look at the wider context of all these events? Of course, as the Home Secretary says, stating the blindingly obvious, the acts are the responsibility of those who committed them.

Mrs May: The right hon. Gentleman asked the Prime Minister exactly the same question, and he gave a very clear answer. The Home Affairs Committee will consider the policing of the violence that has taken place over the past five days, and I will bring a report on gang culture and the number of gangs in our society—I will make further reference to it—to the House in October.

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Mr David Burrowes (Enfield, Southgate) (Con): I commend the points that my right hon. Friend has made in opening the debate. Does she share the concern relayed by a number of hon. Members about the soft sentences for such disorder passed in the cases that have already gone through the courts? Does she share my concern that, although we talk about riots, the number of people charged with riot is very small? As these were riots, whoever is charged with an offence during the nights of disorder should punished accordingly.

Mrs May: We have been clear in encouraging those who are making decisions about charging and, indeed, those who will make sentencing decisions in the courts to consider these crimes in the context of the circumstances. My hon. Friend refers to the fact that no one has been charged with the very specific offence of riot. The police and the Crown Prosecution Service are making the right charging decisions, in the context of ensuring that they recognise the impact that people being on the streets can have.

No one doubts that the violence that we have seen over the past five days is a symptom of something very deeply wrong with our society. Children celebrated as they smashed their way into shops. Men in sports cars arrived at stores to steal goods. Women tried on trainers before they stole them. A teaching assistant was caught looting. Thugs pretended to help a injured young man but robbed him. They are shocking images, but they are in fact symbols of a deeper malaise in our society.

Almost 2 million children are brought up in households in which no one works. One in three children leaves primary school unable to read, write and add up properly. We have the highest level of drug abuse in Europe. Almost 100 knife crimes are committed every day and nearly 1 million violent crimes every year. Half of all prisoners reoffend within a year of their release from prison. Those are serious social problems, and we cannot go on ignoring them. No one is pretending that there are easy answers to such deep-rooted problems, but they are the reasons why the reform of welfare, schools and the criminal justice system cannot wait.

Toby Perkins (Chesterfield) (Lab): The right hon. Lady lays out the context of the difficult role that faces our police. In that context, is it not bizarre that the Government should choose to make such swingeing cuts to the Home Office budget and particularly to the police budget, in comparison with other budgets that have survived relatively intact? Why does she not fight her corner and ensure that we have enough police on the streets to do the job?

Mrs May: I am clear that there will be enough police on the streets to do the job that we and the public want them to do, and that police officers want to do. I say to any other Opposition Member who wants to make a similar point that I listened to the previous statement and it is now absolutely clear that the Labour party has abandoned any pretence of having a credible policy to deal with the deficit.