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House of Commons

Tuesday 6 December 2011

The House met at half-past Two o’clock


[Mr Speaker in the Chair]

Business before Questions

London Local Authorities and Transport for London (No. 2 Bill) [Lords] (By Order)

Transport for London (Supplemental Toll Provisions) Bill [Lords] (By Order)

Second Readings opposed and deferred until Tuesday 13 December (Standing Order No. 20).

Oral Answers to Questions

Chancellor of the Exchequer

Official Development Assistance

1. Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): What assessment he has made of the effect of changes in gross national income on the level of expenditure on official development assistance. [84780

The Chancellor of the Exchequer (Mr George Osborne): This Government will honour the commitment that our country made to the poorest people in the world and increase aid spending to 0.7% of gross national income. To ensure that we do not exceed that target, we have adjusted the spending plans of the Department for International Development. Its budget will now increase from £7.8 billion this year to £10.6 billion by 2014-15.

Mr Clarke: Is the Chancellor still committed to ensuring that he places the achievement of 0.7% GNI for overseas aid as a specific commitment for 2013 and in the legislation that the Government have promised?

Mr Osborne: I am absolutely committed to that legislation, but more importantly, frankly, we should be delivering the commitment on the money for the aid budget. We are doing that in very difficult times. We are doing it, I hope, on a cross-party basis. We are, as I say, honouring our commitment to the poorest in the world. Even in these difficult times, Britain has not forgotten its obligations to the world’s poorest.

Charlie Elphicke (Dover) (Con): While I congratulate the Government on holding to this spending and maintaining this commitment, is the Chancellor aware that France, Germany and other European nations have not done so well in adhering to their commitments and are therefore pledged to, or desire, a financial transaction tax? Will he be trenchant in making sure that this does not happen, as it will damage our economy and our growth?

Mr Osborne: There are arguments for, and very much against, a financial transaction tax, but a real red herring is the idea that a financial transaction tax could be used

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to meet the aid commitments that countries have entered into alongside Britain but have not delivered on. The financial transaction tax which is proposed in Europe, and which we will not accept, has been spent about four times over on domestic programmes, on the EU budget, on climate change measures, and on aid. A far better thing for the countries of the European Union to do is to live up to the commitments they made on international development and deliver them out of their domestic budgets.


2. Kate Green (Stretford and Urmston) (Lab): What assessment he has made of the implications for his policies of the Office for Budget Responsibility’s forecast for unemployment in 2012. [84781]

The Chief Secretary to the Treasury (Danny Alexander): In line with the weaker outlook for our GDP growth, the OBR has revised up the projected level of unemployment over the year term. In the autumn statement, we committed to important new steps to provide private sector job creation and reduce unemployment, such as nearly £1 million for the youth contract, an initial £1 billion for the regional growth fund, and a £21 billion package of credit easing to support small firms, which are an important source of employment in this difficult time.

Kate Green: With unemployment set to soar to 8.7% next year, according to the OBR, can the Chief Secretary explain how meeting the rising cost of out-of-work benefits helps to get public borrowing down?

Danny Alexander: The hon. Lady should also note that unemployment rose by nearly half a million during her party’s time in office. The fact remains that we have to deal with the enormous problem that was left to this country in our public finances by the previous Government. The one thing that would hurt the unemployed and the poorest in this country more than anything would be stepping away from our plan and letting interest rates go through the roof, causing mortgage costs to rise, business costs to rise, and costs to the country to rise. That would be the most significant cause of unemployment that we could have.

Michael Fallon (Sevenoaks) (Con): Will my right hon. Friend confirm that the independent OBR forecasts that there will be 1 million more people in employment by 2016, even including the reduction in public sector employment? Does he agree that the route to higher employment lies not through yet more borrowing but through getting control of our deficit and opening up opportunities and improving skills, not least through the apprenticeships that the Government are introducing?

Danny Alexander: I wholeheartedly agree with my hon. Friend’s assessment. He is right that the OBR forecasts the net creation of 1 million more jobs and the creation of 1.7 million jobs in the private sector over the forecast period. It forecasts that unemployment will fall to 6.2% by 2016, reflecting the fact that the commitments we have made will deliver for the British economy.

Pat Glass (North West Durham) (Lab): The Government have shown that they are very relaxed about unemployment more than doubling in constituencies such as mine and

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about their economic policies hurting the poorest and the most vulnerable the most. When will they turn their attention to companies such as Vodafone, which is allegedly failing to pay millions of pounds of tax? That is an affront to the taxpayers who do pay their share.

Danny Alexander: I am not in any way relaxed about unemployment increasing in the hon. Lady’s constituency or the constituency of any hon. Member. That is why in the autumn statement we set out a youth contract designed to help half a million young unemployed people to get into work and stay in work. I hope that she welcomes such measures.

Mr Philip Hollobone (Kettering) (Con): Presumably, the forecasts from the OBR on unemployment are very sensitive to interest rates. Given that interest yields in Spain have hit 7% and its unemployment rate is 22%, is it not the case that unemployment in Kettering and across the country would be far higher if the Government relaxed their deficit reduction plan?

Danny Alexander: My hon. Friend is absolutely right in that assessment. A 1% increase in our bond yields would cost the country an extra £21 billion in debt interest, and a 1% increase in market rates would cost mortgage payers £10 billion and businesses £7 billion. That is not the right solution for this country and it would certainly lead to higher unemployment. That is what the Labour party are offering.

Rachel Reeves (Leeds West) (Lab): In 2010, long-term youth unemployment fell by 36%. Will the Chief Secretary tell us by how much long-term youth unemployment has fallen since January 2011?

Danny Alexander: The hon. Lady will know that youth unemployment rose by more than 40% during Labour’s time in office. It is precisely because of the rise in youth unemployment, which I do not regard as tolerable any more than she does, that we have set out the youth contract. Perhaps she recognises that her party’s strategy is not working. Perhaps she is the anonymous shadow Cabinet member who was recently quoted as saying:

“The simple fact is Ed Balls’ economic strategy is hurting but it isn’t working.”

Rachel Reeves: I failed to hear an answer in that response. The shocking truth that the Chief Secretary either will not own up to or is not even aware of is that instead of declining, long-term youth unemployment is up by a staggering 83% since January this year. This tragedy is quickly becoming a national emergency. More and more young people leaving school, college or university are missing the chance to fulfil their potential and are stuck on benefits, their talents wasted and their hopes fading. It is no wonder that the Chancellor’s borrowing plans are out of control, with an extra £158 billion of Government borrowing. When will the Government change course, abandon their failed plan and support young people instead of throwing them on the scrap heap?

Danny Alexander: I did not hear a welcome from the hon. Lady for our youth contract, which will help half a million young unemployed people with real jobs, support

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through work experience and additional apprenticeships. If there is any tragedy in this House, it is the economic strategy of the hon. Lady and her party. I notice that she denies the deficit but does not deny the quote that I attributed to her. Perhaps I can recommend some holiday reading for her. “In the black Labour”, which was written by three of her party’s most successful activists, states:

“It is precisely the vagueness of Labour’s position over…the deficit that confirms the voters’ worst suspicions about the Party’s lack of commitment to”—

Mr Speaker: Order. We are grateful to the Chief Secretary, but we will move on to questions and, hopefully, answers that relate to the policies of the Government. [ Interruption. ] I do not need any gesticulation from anyone. That is the purpose of the exercise, and that is what is going to happen.

National Asset Management Agency

3. Ian Paisley (North Antrim) (DUP): What recent discussions he has had with the Republic of Ireland’s National Asset Management Agency on its operations in Northern Ireland. [84782]

The Financial Secretary to the Treasury (Mr Mark Hoban): Treasury officials have met NAMA officials as part of the bilateral engagement between the Irish and UK Governments. Day-to-day operational decisions are a matter for NAMA and its overall strategic decisions are set by the Irish Government.

Ian Paisley: I thank the Financial Secretary for that answer. As of today, NAMA is the single largest property owner in Northern Ireland. It is also the single largest creditor operating in Northern Ireland. It threatens to put 150 businesses and individuals into receivership. What are the Government doing strategically to address the needs of the economy in Northern Ireland to prevent NAMA from aggressively putting people out of business and taking blood from the stone?

Mr Hoban: I understand the concerns that the hon. Gentleman has identified, and I know that the hon. Member for East Antrim (Sammy Wilson) has had discussions with NAMA and the Irish Government about NAMA’s strategy in Northern Ireland. I encourage the hon. Member for North Antrim (Ian Paisley) to use the mechanism that is available to Members of Parliament and of the Northern Ireland Assembly to raise his concerns with NAMA directly.

Bank Lending and Credit (Businesses)

4. Chris Kelly (Dudley South) (Con): What steps he is taking to reduce the cost of bank lending and credit for businesses. [84783]

The Chancellor of the Exchequer (Mr George Osborne): In the autumn statement, I announced the launch of measures to help improve the flow of credit to businesses. We expanded the enterprise finance guarantee scheme within the constraints of state aid rules, but that was not enough, so we have committed to a programme of credit easing as well, using the low interest rates at which the Government can borrow to help get low

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interest rates to businesses. The national loan guarantee scheme will lead to a reduction in the cost of bank loans for small businesses, while the business finance partnership will deliver additional finance for mid-sized business through non-bank lending channels.

Chris Kelly: I thank my right hon. Friend for that answer. Can he confirm that guarantees under the Government’s national loan guarantee scheme are contingent liabilities, and so will have no effect on the country’s balance sheet or deficit?

Mr Osborne: My hon. Friend is right that the national loan guarantee scheme does not add to the debt or deficit; the guarantees are contingent liabilities. The previous Government had a contingent liability scheme for lending between banks, but this is a contingent liability scheme for lending by banks to small businesses. We are following the model of the European Investment Bank, which has a small programme to lend to smaller businesses in Britain. We are using that model to try to reduce interest costs for small businesses, using the credibility of the low interest rates at which we can borrow to deliver those low interest rates to businesses.

Mr Geoffrey Robinson (Coventry North West) (Lab): Given the urgency of getting credit flowing to small and medium-sized companies again, when does the Chancellor realistically expect the first loans to be made under the new arrangements?

Mr Osborne: We hope to get the scheme up and running early in the new year. We have to get state aid clearance, which is the rule that we and every other member state of the European Union have to abide by, but by following the European Investment Bank scheme quite closely, which of course is permissible, we hope to get that state aid clearance as quickly as possible and get the scheme up and running early in the new year. I do not need to be reminded of the urgency of getting help to smaller businesses, particularly as bank credit conditions tighten.

Mr Andrew Tyrie (Chichester) (Con): The major banks argue that they cannot be expected to strengthen their balance sheets and increase net lending at the same time. Does the Chancellor agree with the Governor of the Bank of England that that could be achieved if banks were prepared to cut their bonuses and dividends? In particular, is it not time that shareholders stepped up to the plate and ensured that banks behaved responsibly on the matter?

Mr Osborne: The Financial Policy Committee, which is the body that we have established in the Bank of England to provide advice on issues that affect the whole financial system, is absolutely right to say to banks that they should be using any earnings that they have to strengthen their balance sheets if necessary, rather than distributing them in larger bonuses. We need stronger banks, not larger bonuses, this winter. The advice from the Bank of England is very clear, and I would expect the banking system to follow that advice.

When it comes to shareholders, it is particularly good news that the Association of British Insurers has said this morning that it expects to see restraint in financial sector pay. We have to ensure that our banks are prepared

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for whatever is thrown at them in the coming months, and that they do not pay the large bonuses that used to be paid out.


They were paid out when people like the hon. Member for Nottingham East (Chris Leslie) supported the Government.

Stewart Hosie (Dundee East) (SNP): Bank lending funds business investment, so I welcome some of the measures that the Chancellor has announced. However, if the lack of lending is a consequence not of availability or cost but of reduced aggregate demand, and if business investment continues to fall or be sluggish, is he not at all concerned about the fact that the vast majority of next year’s gross domestic product growth—0.7%—will be driven by business investment? Should that happen, where would it leave his growth forecasts?

Mr Osborne: Of course, the components of our GDP forecast, like the forecast itself, are produced by an independent body, the Office for Budget Responsibility, so it is not my assessment of business investment next year but the OBR’s. I am confident that if we invest in the infrastructure that we set out last week, provide support for seed investment through the enterprise investment scheme that we have created and make it easier to hire people, as we propose to do, we will encourage business to invest, grow and take people on.

Taxation (Banks)

5. Ian Lavery (Wansbeck) (Lab): What recent assessment he has made of the level of taxation on banks. [84784]

8. Hazel Blears (Salford and Eccles) (Lab): What recent assessment he has made of the level of taxation on banks. [84787]

The Financial Secretary to the Treasury (Mr Mark Hoban): The Chancellor announced in his autumn statement that the bank levy would increase to 0.088% from 1 January 2012, consistent with the Government’s intention to raise at least £2.5 billion each year, as set out in Budget 2011.

Ian Lavery: In the autumn statement last week, the Chancellor announced measures that will mean that the Government will raise three times as much from cuts in child tax credits than they will raise from any additional taxes on the banks. Should he not hang his head in shame at the Government’s actions? When will they change course and stop their relentless, ruthless attack on those less well off in society?

Mr Hoban: The hon. Gentleman should get his facts right, because the Government are increasing the child tax credit by £135.

Hazel Blears: Earlier this year, the Prime Minister announced that the high street banks would commit £200 million to the big society bank to try to fill the £5 billion shortfall currently faced by charities and the voluntary sector. To put it another way, that is just 1.4% of the £14 billion the banks have paid out in bonuses this year. What steps will the Chancellor take, including by providing further incentives, to ensure that those financial institutions commit more to community reinvestment?

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Mr Hoban: The right hon. Lady should recognise that bank bonuses are a quarter of what they were when she was in the Cabinet. The banks are doing that. The previous Government were in office for 13 years. They had no idea about introducing a bank levy. This Government have taken the right steps to ensure that banks pay their fair share of taxes.

Dr Thérèse Coffey (Suffolk Coastal) (Con): My hon. Friend will be aware that banks and financial services contributed more than £50 billion in taxes last year, but has he noted that this Government’s bank levy—the permanent levy—will raise more in one year than the previous Government’s payroll tax?

Mr Hoban: My hon. Friend is absolutely right. Of course, the previous Government said that the bank bonus payroll tax would be a one-off tax. This Government had the courage to go forward, and to say that we would introduce a bank levy unilaterally, which the previous Chancellor opposed. We are taking the tough action on taxing banks that the previous Government failed to take.

Interest Rates

6. Nadhim Zahawi (Stratford-on-Avon) (Con): What recent assessment he has made of the likely effect on the economy of an increase in interest rates. [84785]

16. Claire Perry (Devizes) (Con): What recent assessment he has made of the likely effect on the economy of an increase in interest rates. [84796]

17. John Howell (Henley) (Con): What recent assessment he has made of the likely effect on the economy of an increase in interest rates. [84797]

The Chancellor of the Exchequer (Mr George Osborne): An increase in interest rates would be particularly damaging to an economy with the UK’s level of indebtedness. A one percentage point rise in interest rates would add around £21 billion to debt interest payments. That is why the Government are determined to keep Britain’s fiscal credibility and to keep our interest rates low. A 1% rise in lending rates would add £10 billion to household mortgage interest repayments and £7 billion to business costs.

Nadhim Zahawi: Forty per cent. of households in Stratford-on-Avon—some 17,870 home owners—have a mortgage secured against their home. Will the Chancellor confirm that each percentage point increase in interest rates would cost the average household £1,000, and that adopting Labour’s plan B and seeing our interest rates reach those of Italy would mean £89 million being taken out of the local Stratford-on-Avon economy?

Mr Osborne: My hon. Friend is right that a 1% rise on the average mortgage bill would add £1,000. That is why it is particularly important at this time and in this debt crisis that we try to keep our interest rates low. That is what the credibility of our fiscal policy is doing.

Claire Perry: Yesterday, millions of families across Europe faced a bump up in their uncertainty in their financial affairs as Standard & Poor’s, the rating agency,

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said that it was looking potentially to review their countries’ debt ratings downwards. Will the Chancellor please tell us what has happened to Britain’s debt rating since the election and what the result has been for British interest rates?

Mr Osborne: The UK is the only western country that has seen an improvement in its credit rating in the past 18 months. When this Government came to office, the country’s triple A credit rating was on negative watch, which is where it was put by the Labour party. I am delighted that it came off negative watch, but we must stay vigilant. The credit rating agencies have said that an abandonment of our deficit plan would definitely lead to a downgrade of the credit rating.

John Howell: The Chancellor has already commented on the impact of low interest rates on mortgages. Does he share my concern that high interest rates would affect business? Will he say a little more about the effect of low interest rates on business in this country?

Mr Osborne: My hon. Friend is absolutely right that an increase in interest rates at this time would also hit businesses with loans and lead to an additional £7 billion of business costs, which would mean some businesses failing and jobs being lost. It is all the more reason why we must maintain our fiscal credibility; it is all the more reason why every single business organisation supported our business statement last week; it is all the more reason why international organisations are backing what we have done; and it is all the more reason why the shadow Chancellor cannot find a single credible party in western Europe that supports what he is doing.

Mr Dennis Skinner (Bolsover) (Lab): Why should anybody take a blind bit of notice of the Chancellor’s forecast on interest rates when he has only been in power for 18 months and he has got every other economic indicator wrong? For Christ’s sake, don’t go to the Prime Minister and ask him to bail you out because he was economic adviser to Norman Lamont, who lost £10 billion in an afternoon and never went near a betting shop.

Mr Osborne: The hon. Gentleman is the man who has supported a party that said there would be no more boom and bust and that gave us the biggest ever boom and the largest ever bust. I will tell him what has happened since the general election: the deficit is coming down and credibility is going up.

John Healey (Wentworth and Dearne) (Lab): The Chancellor claims that low interest rates are a sign of success of his policy. Can he tell the House how many months before the last election did the Bank of England set interest rates at the current 0.5%?

Mr Osborne: What we are talking about here are the market interest rates. Italian and Greek households and businesses are looking not at the European Central Bank official interest rate, but at the market interest rates. The market interest rates that we are paying in this country are less than 2.5% and that is a sign of the credibility that we have earned in a debt crisis. That is what we have done. Instead of opposing the difficult

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decisions that we have taken to put our public finances in order, the right hon. Gentleman should be supporting them.

Chris Leslie (Nottingham East) (Lab/Co-op): The Chancellor will be aware that around 40% of Treasury bonds issued this year will be bought by the Bank of England and that the Bank concluded in its last quarterly bulletin that quantitative easing—printing money—accounts for a fall in gilt interest rates of around 1.25%. For the sake of clarity, can the Chancellor say whether he agrees with that Bank of England analysis or is he seriously saying that printing money has no impact whatsoever on low bond interest rates?

Mr Osborne: The low interest rates were there before the Bank undertook its quantitative easing programme in the autumn. We have had low market interest rates for the whole of the past 18 months, not just when the Bank of England has been undertaking its QE programme. This is what the chief economic adviser to the Treasury said in 2004: long-term interest rates are

“the simplest measure of monetary and fiscal policy credibility.”

That was Mr Edward Balls.

HMRC Contact Centres

7. Tony Cunningham (Workington) (Lab): What recent discussions he has had with Her Majesty’s Revenue and Customs (HMRC) on the provision of customer services by private sector companies in HMRC contact centres; and if he will make a statement. [84786]

The Exchequer Secretary to the Treasury (Mr David Gauke): HMRC has kept me informed about its plans for a small-scale, short-term trial to test whether the use of additional resources for contact centres from third party providers might help it to improve levels of service.

Tony Cunningham: There are obviously issues relating to the use of the private sector in tax offices. Will the Minister meet me and other constituency MPs who are affected by this rather risky pilot?

Mr Gauke: I am happy to meet the hon. Gentleman, but HMRC is exploring ways in which it can improve the service in contact centres so that when taxpayers and tax credit claimants phone up they can get through more easily and more reliably. I would have thought that that was something that hon. Members on all sides of the House would welcome.

Nicholas Soames (Mid Sussex) (Con): May I ask my hon. Friend to recognise that the service provided by HMRC contact centres is not good enough and that many of our companies have great difficulty with continuity of service? Anything that can be done to improve the service is wholly to be welcomed.

Mr Gauke: I am grateful for those comments. It is worth noting that about 70% of calls now get through to HMRC contact centres on the first attempt, whereas last year the proportion was about 40%. Progress has been made, therefore, but we want to make further progress and it is sensible that HMRC explores what possibilities exist.

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Mrs Mary Glindon (North Tyneside) (Lab): Will the Minister say how many more or fewer HMRC staff there will be over the next three years?

Mr Gauke: The overall trend in HMRC employment has been downwards since 2005, when the organisation was formed, and that will continue, but we are redeploying staff, for example in enforcement and compliance, which means that additional staff are being taken on to deal with tax evasion and tax avoidance.

Tax Rates

10. Christopher Pincher (Tamworth) (Con): Whether he has made an assessment of the effect on the economy of setting different tax rates in each economic sector. [84790]

The Exchequer Secretary to the Treasury (Mr David Gauke): The Government’s aim is to create the most competitive tax system in the G20. The corporate tax road map sets out a series of reforms in a single programme to give certainty to business, including by reducing the main rate of corporation tax to 23% by 2014. Where appropriate, the Government provide tax reliefs to support specific sectors of the economy, but simplicity is a key characteristic of a competitive tax system.

Christopher Pincher: I am grateful for that answer. One of the biggest employers in my constituency is Drayton Manor park, home of Thomas Land, and one of the greatest challenges that it faces is the lower rate of VAT levied on the leisure sector in our continental competitor countries. Has the Minister examined the case for lower VAT for the leisure sector in this country, and if he has not—I appreciate the bust that we inherited—what measures is he taking to make the industry more competitive?

Mr Gauke: We continue to look at VAT in the leisure and other specific sectors but we have to be careful to keep the tax system as simple as possible and we have to bear it in mind that such measures can simply move spending from one area to another. Furthermore, as my hon. Friend points out, we have to ensure that the public finances are in a sound state. I am sure that I remember reading one “Thomas the Tank Engine” story in which the big, unpopular engine Gordon went off the tracks. We do not want a repeat of that.

Jonathan Ashworth (Leicester South) (Lab): The Exchequer Secretary will be aware that consumption is a major part of the economy. Given that in recent days we have seen news that retail figures have been poor and the CBI has said that retail stores are laying off people at the fastest rate for two years, why will he not consider a temporary VAT cut to boost demand and get the economy moving again?

Mr Gauke: Returning to the fundamental question, the difficulty is that if we do not have credibility in the public finances and if interest rates rise, it will do nothing for consumption. We have to get control of the deficit, get borrowing down and stick to the path. We cannot grow money off the money tree, which, I am afraid, seems to be the Labour party’s policy.

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Regional Investment

11. Alun Cairns (Vale of Glamorgan) (Con): What assessment he has made of the effect of fiscal policy on the level of investment in the regions. [84791]

The Chief Secretary to the Treasury (Danny Alexander): The Government continue to support investment across the United Kingdom, including through the £6.3 billion boost to infrastructure spending over this spending review period. As a consequence of this decision, the autumn statement made available to the Welsh Assembly Government a further £216 million of capital funding. I urge the Welsh Government to consider how best to direct that funding towards growth-enhancing priorities

Alun Cairns: I am grateful to my right hon. Friend for that answer. The regional growth fund is having a significant impact in Newcastle, Teesside, Cornwall and other parts of the United Kingdom, yet the inaction of the Labour Welsh Government means that little is happening there in spite of them receiving the Barnett consequentials. Will he agree to raise the matter with the Welsh Government to ensure that my constituents can benefit in the same way as other parts of the UK?

Danny Alexander: My hon. Friend makes an important point, and he will know that the additional £1 billion of funding to the regional growth fund announced at the autumn statement generated an extra £57.6 million of additional funding for Wales. I hope very much that the Welsh Assembly Government will use that money for similar growth priorities. I shall certainly raise the matter with my counterpart in the Welsh Assembly Government, and I am sure that my hon. Friend will do the same in his own constituency.

Mr George Mudie (Leeds East) (Lab): A recent report by the Institute for Public Policy Research suggested that the economy in London and the south-east will recover by 2014, but that Yorkshire’s economy will take until 2018 and that of the north-east until 2020. In view of those figures, does the Chief Secretary not regret abolishing the regional development agencies and giving the successor bodies less than half the money?

Danny Alexander: No, I do not, but I share the hon. Gentleman’s view that the unbalanced nature of the economy that we inherited from the previous Government is a serious problem, particularly for regions in the north of England. That is why in the autumn statement and the spending review we prioritised additional infrastructure projects—on the roads, on the railways, and so on—with a particular focus on his part of the world. I hope that he will welcome those sorts of developments.

Sarah Newton (Truro and Falmouth) (Con): Will my right hon. Friend join me in congratulating Piran Trezise, Ian Jones and Steve Jones, who have today secured regional growth funding to regenerate the iconic Goonhilly earth station, which will bring hundreds of highly skilled jobs to Cornwall? Does he agree that regional growth funding should be used to enable businesses to rebalance our economy away from London-centric financial services towards sustainable jobs in science, technology and engineering?

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Danny Alexander: That was an excellent point, and I wholeheartedly endorse what the hon. Lady says. I join her in congratulating her constituents on successfully acquiring regional growth fund support for that important project. The regional growth fund as a whole will maintain or support 325,000 jobs in the private sector across the country. That is something that Members on both sides of the House should welcome.

Mrs Jenny Chapman (Darlington) (Lab): Given the very sharp decline in applications for education from adults in the north-east, how worried is the Minister about the supply of skilled labour to our economy?

Danny Alexander: We are seeking to address that through, for example, our policies on youth unemployment and the substantial increase in our investment in apprenticeships. All that is designed to expand skills in the economy, which business constantly raises and the Government are acting to support.

Economic Growth

12. Mike Crockart (Edinburgh West) (LD): What assessment he has made of the reasons for the Office for Budget Responsibility’s forecast of lower economic growth in 2012. [84792]

The Chief Secretary to the Treasury (Danny Alexander): The OBR is independent, so we accept its numbers, its forecasts and, of course, its analysis. The OBR attributes the lower growth prospects in 2012 to higher than expected inflation, as a result of recent global commodity price shocks, revisions to the depth of the financial crisis and the crisis in the euro area.

Mike Crockart: Does my right hon. Friend agree that the OBR is a key participant in ensuring the UK’s economic recovery and that its establishment by this Government marked a step change in the transparency and openness of our economic and fiscal policy making? Further—[ Interruption. ] I have more. Does he share my view that if Labour had won the last election, we would still be without that independent assessment and thus, crucially, still in the dark about just how bad Labour’s recession is?

Mr Speaker: May we have a brief reply to what was rather a lengthily constructed essay-question? I know that the Chief Secretary will respond pithily.

Danny Alexander: The creation of the OBR is a marked improvement, as my hon. Friend says, to fiscal credibility in this country. That is why other countries are looking to our example, to see whether they can follow it. Other countries are not looking to the example of Labour, whose prescription for more borrowing in answer to a borrowing crisis is the one policy that no country in Europe or the world is following.

Ian Austin (Dudley North) (Lab): Since the spending review, which the Chief Secretary took part in, the economy has grown by just 0.5%. In the year before that, it grew five times as quickly, and in Europe it has grown three times as fast, so is it not the case that what has brought economic growth to a standstill and pushed up unemployment is the utter failure of the policies that he and the Government have pursued?

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Danny Alexander: The hon. Gentleman should have read the OBR’s report, which analysed the depth of the economic crisis during his time in office and found that the size of the boom and the bust—which he claimed to have abolished—was larger than forecast. As a result, for every £8 that we thought we would have as a country, we have only £7. [ Interruption. ] It is an appalling legacy for this country, and he ought to be apologising, not chuntering from the Back Benches.

Mr Brian Binley (Northampton South) (Con): Does my right hon. Friend recognise that export-led growth will not reach the levels needed to match our growth projections by 2015? Will he consider other measures, over and above those already taken, to stimulate demand in the home market, especially to help the small and medium-sized enterprise sector, on which he is so reliant?

Danny Alexander: The hon. Gentleman is absolutely right to support initiatives to support the SME sector. I hope that he will therefore welcome the continuation of the small business rate relief holiday and the credit easing package, which is aimed at supporting lending and reducing the cost of lending to small businesses—one of many things that we are doing to help that vital sector of our economy.

Tax Loopholes

13. Valerie Vaz (Walsall South) (Lab): What steps he is taking to close tax loopholes. [84793]

The Exchequer Secretary to the Treasury (Mr David Gauke): The Government have set out a strategic approach to tackling tax avoidance, with an emphasis on preventing avoidance before it can occur. Measures introduced in the Finance Act 2011 will bring in an additional £1 billion a year over the course of this Parliament and protect further revenues. The Government will carefully consider Graham Aaronson’s report on a general anti-avoidance rule and engage formally with interested parties to establish whether that could further reduce tax avoidance.

Valerie Vaz: I thank the Minister for attempting to answer my question before I have asked it. Hard-working and hard-paying taxpayers demand fairness, but the stamp duty loophole cost the Treasury almost £1 billion. The Minister spoke earlier about redeploying staff; will he confirm that he will put more resources into enforcing tax evasion?

Mr Gauke: We are putting more resources into dealing with tax evasion and avoidance. Just this morning we have announced proposals that will extend the disclosure of tax-avoidance schemes to stamp duty land tax. The biggest measure we have taken in tackling tax avoidance was on disguised remuneration in the last Finance Bill. Unfortunately, Labour Members did not support us.

Stephen Williams (Bristol West) (LD): Only today my hon. Friend the Minister has had to table written statements blocking tax-avoidance schemes in derivatives, loan relationships and capital allowances and many other measures. A general anti-avoidance rule would back up the plethora of anti-avoidance measures that this and previous Governments have had to introduce. The coalition agreement provided for a study of a general anti-avoidance

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rule. The Treasury now has that study; will my hon. Friend give me an assurance that it is under urgent consideration for implementation at the earliest opportunity?

Mr Gauke: I can give the hon. Member that assurance. We are grateful to Graham Aaronson and his distinguished panel for studying this issue. We are looking at it. It is important to consult properly, but we are giving urgent consideration to the matter.

Owen Smith (Pontypridd) (Lab): The Government said in August that the deal between the UK and Switzerland would close other tax loopholes and net the Exchequer an additional £4 billion to £7 billion in revenue. Will the Minister explain why the Office for Budget Responsibility described the deal last week as a “fiscal risk”, declined to validate the Government’s numbers, citing “significant uncertainties”, and discounted the revenues from its central projection for receipts?

Mr Gauke: The agreement has not been ratified as yet; it is yet to go through the parliamentary process in this country or, indeed, in Switzerland. The OBR is rightly cautious, but even the £4 billion is likely to be greater than the amount we would have received from privatising Lloyds Banking Group and RBS. That is not an insubstantial sum of money which Members on both sides of the House should welcome. It will put an end to tax evasion through people putting their money into Switzerland.

Public Sector Borrowing Requirements

14. Mr Tobias Ellwood (Bournemouth East) (Con): What recent assessment he has made of the public sector borrowing requirement. [84794]

The Economic Secretary to the Treasury (Miss Chloe Smith): In the economic and fiscal outlook for November, the independent Office for Budget Responsibility forecast public sector net borrowing in 2011-12 to be £127.1 billion or 8.4% of gross domestic product. The deficit forecast for 2015-16 is £53.2 billion or 2.9% of GDP.

Mr Ellwood: I am grateful to the Minister for that reply. The public sector borrowing requirement was, of course, affected by the size of the public sector. Under the last Government, the number of public sector employees ballooned by 700,000. Although many might be important jobs such as those for doctors and nurses, has the Minister had an opportunity to do any analysis to ascertain whether every single one of those jobs was really necessary?

Miss Smith: The Treasury would not centrally manage changes to public sector work forces, but employers have been reforming their work forces since the spending review to make the necessary savings and maximise value for money. My hon. Friend is certainly right that the last Government left us a ballooning financial disaster with the highest deficit since world war two.

Benefit Changes (Women)

15. Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): What assessment he has made of the effects on women of the changes to child tax credit and working tax credit proposed in his autumn statement. [84795]

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The Exchequer Secretary to the Treasury (Mr David Gauke): The Chancellor considered the equality impacts of the changes to tax credits announced in the autumn statement, which included an assessment of the effects on women.

Luciana Berger: That was not an answer to my question. Figures from the House of Commons Library show that since the election changes to tax, pensions, pay and benefits are hitting women more than twice as hard as they are hitting men. Of the extra £18.9 billion that is being raised, £13.2 billion comes from women, with just £5 billion or so coming from men. This is the biggest attack on women in a generation. Will the Minister tell us what his Government have against women?

Mr Gauke: Let us look at some of the measures we have taken that will help women and families—the additional support for child care announced last week, for example. The increase in the personal allowance for income tax will take 1.1 million people out of paying income tax at all—and 58% of them are women.

Margot James (Stourbridge) (Con): Does my right hon. Friend agree that it is important for us to target the women who need the money most, and that the plans to double investment in child care and free education for children from disadvantaged families must be beneficial in these times?

Mr Gauke: My hon. Friend is absolutely right. We are taking steps that will provide better opportunities for children, and measures such as the increase in child care provision will help women in particular.

Capital Allowances (Regional Growth)

19. Tristram Hunt (Stoke-on-Trent Central) (Lab): What recent assessment he has made of the effect of capital allowances on regional growth. [84800]

The Exchequer Secretary to the Treasury (Mr David Gauke): Her Majesty’s Revenue and Customs does not have the data that are required to analyse capital allowances claims by region.

Tristram Hunt: I thank the Minister for another great non-answer. Those in the ceramics sector in Stoke-on-Trent and elsewhere are concerned about the fact that the Government’s package for energy-intensive industry does little to prevent further offshoring of jobs and businesses. Will the Government give careful consideration to the suggestion in the Energy Technology Criteria List that the granting of enhanced capital allowances should include the low-carbon equipment that is vital to the sustainable future of Britain’s world-class ceramics industry?

Mr Gauke: I should have thought that the hon. Gentleman would welcome the measures announced last week for energy-intensive industries. We are also doing more to help the economy more broadly in the tax system. A couple of hours ago I happened to meet the chairman of one of the leading manufacturers in his industry, who was very supportive of the reduction in corporation tax from 28% to 23%.

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Miss Anne McIntosh (Thirsk and Malton) (Con): York Handmade Brick Company is delighted by the announcement in last week’s Budget statement, and hopes to work closely with the Government to reduce emissions and ensure that we are on track to help energy-intensive industries such as brick companies.

Mr Gauke: I am grateful for my hon. Friend’s comments. We do not want to export jobs in pursuit of policies that are not effective and do nothing for UK industry.

Topical Questions

T1. [84805] Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): If he will make a statement on his departmental responsibilities.

The Chancellor of the Exchequer (Mr George Osborne): The core purpose of the Treasury is to ensure that the economy is stable, to lay foundations for growth and employment, to reform banking, and to manage the public finances so that Britain starts to live within her means.

Mr Clarke: I thank the Chancellor for his reply to my supplementary question earlier. May I put it to him that his announcement last week that £1 billion was to be taken from international aid over the next three years suggests that, in the Prime Minister’s words, he is balancing the books on the back of the world’s poorest?

Mr Osborne: I do not agree with the right hon. Gentleman. I think that people should reflect on the fact that we are making some very difficult decisions in the current Parliament about welfare benefits and departmental spending, and that much of that is controversial. During this period, spending on aid is set to increase from £8.5 billion to £12 billion, which is a big increase. I think that if we start to attack that commitment—if we say that it is not enough, and the like—the coalition of support for the increase in aid spending that I believe exists throughout the House will start to fall apart, and I do not think that we want to go down that route. We have made our commitment to the poorest in the world. We will be one of the first countries in the world to hit the target of spending 0.7% of our gross national income on aid, and I think that we should all support and welcome that.

T2. [84807] Andrew Rosindell (Romford) (Con): I commend the Chancellor on the Government’s decisions to protect the lowest paid in the public sector pay freeze and to take 1 million people out of income tax altogether, but will he tell us what effect that will have on working women?

Mr Osborne: Sixty per cent. of the lowest-paid workers whom we have taken out of tax are women, as are 80% of those who benefit from our policy of exempting the lowest-paid in our public sector from the pay freeze.

Ed Balls (Morley and Outwood) (Lab/Co-op): In October this year, the International Monetary Fund advised the Chancellor that

“if activity were to undershoot current expectations and risk a period of stagnation or contraction, countries that face historically low yields (for example, Germany and the United Kingdom) should also consider delaying some of their planned consolidation.”

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At the time when the IMF warned of the risks of growth undershooting, what were its forecasts for growth in the UK in 2011 and 2012?

Mr Osborne: I do not have the IMF forecast to hand, but as I remember it was absolutely in line with other forecasts at the time. It was very much as we expected, but when the IMF produced that forecast it asked the question again of whether Britain should change its deficit plan policy, and it said no. In doing so, it joins a host of other organisations, ranging from the OECD to the CBI and the Governor of the Bank of England here in Britain, which make it very clear that Britain must stick to its deficit reduction plan.

Ed Balls: In October, the IMF said that if growth

“were to undershoot current expectations”

the Government should change course. The Chancellor did not know the answer to my question, so let me give him the answer. The IMF was forecasting UK growth of 1.1% in 2011 and 1.6% in 2012. The latest Office for Budget Responsibility forecast is that the UK is now expected to grow by just 0.9% this year and to grow next year not by 1.6% but by 0.7%.

Let me share another international judgment with the Chancellor:

“Wiser policies, mixing short-term stimulus with longer-term deficit reduction, should have been embraced last year…Instead, the Cameron government persists on a failed, irresponsible course that is unlikely to lead to recovery anytime soon.”

With growth undershooting IMF expectations in October, with borrowing now set to be £158 billion higher than he planned, and with even the IMF calling for a change of course, why is the Chancellor ploughing on? If even across the Atlantic The New York Times can see that it is not working, why can the Chancellor not see it?

Mr Osborne: The managing director of the IMF has clearly said that the “policy stance” in the United Kingdom “remains appropriate.” The right hon. Gentleman talks about international support, and not one single credible mainstream party in Europe is advocating the position that he advocates in the UK. We have done some research, and we have found that the Workers Struggle party in France supports what he is doing, as do the Communist parties of Spain, Switzerland, Finland, Romania and Moldova. Those are his new fellow travellers. If he had his own Communist manifesto, it would be “Workers of the Labour party unite! We have nothing to lose except our shadow Chancellor.”

T4. [84809] Chris Skidmore (Kingswood) (Con): The small business rate relief holiday has proved vital to many companies in Kingswood and across the country. Does the Minister agree that many of those companies will welcome the extension of that holiday?

The Exchequer Secretary to the Treasury (Mr David Gauke): My hon. Friend is absolutely right. The measure will provide support in the form of a reduction in business rates for more than 500,000 small businesses and 29% of all shops for the whole of the next financial year.

T3. [84808] Emma Reynolds (Wolverhampton North East) (Lab): Will the Chancellor tell the House and the country whether it is fair for the brave men and women of our armed forces to face a pay freeze?

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Mr Osborne: The decision to freeze public sector pay was, of course, a difficult one. I am not sure whether it was opposed by the Labour party; I do not think it was, but I stand to be corrected. Although it was a difficult decision, in respect of our armed forces we sought to double the operational allowance to give tax-free help to those who are risking their lives at this moment fighting for us in Afghanistan. We have also sought to double the council tax relief for our brave armed services when they go abroad. We have not changed the incremental pay increases that people—for example, those in the Army—get through their contracts, and we are enshrining the military covenant in law. So we are absolutely aware of the struggle and sacrifice the armed forces undertake on our behalf and we honour their sacrifice.

T7. [84812] Claire Perry (Devizes) (Con): I hope it is not giving away too many House secrets to say that it is rumoured that the shadow Chancellor will be reprising his role as Father Christmas at the Westminster Christmas party tomorrow. If that is true, I am sure many children will tell him about their presents, and a recent survey suggests that the average cost of Christmas for a child is £112.50. Is the Chancellor aware that that is almost exactly the same amount that this Government are giving families through the council tax freeze and the reductions in fuel duty we have proposed?

Mr Osborne: I am sure that Father Christmas tomorrow will welcome that. Given that my wife is opening the Christmas party with the shadow Chancellor tomorrow, it will certainly be an event worth turning up to.

T5. [84810] Mr Adrian Bailey (West Bromwich West) (Lab/Co-op): Does the Chancellor agree with the chief executive of the Engineering Employers Federation, Terry Scouler, that

“the biggest threat to reducing”


“deficit comes from weak growth”?

In view of the fact that growth is dependent on demand, that this country is confronted over the next two years with the biggest squeeze on its living standards in a very long time, and that demand in our main export market, Europe, is also falling, can he tell us where that growth is coming from?

Mr Gauke: May I point out to the hon. Gentleman that Terry Scouler is supportive of the steps we are taking to get the deficit under control, and made that very clear last week. He was also supportive of some of the measures we announced last week, such as the reforms relating to R and D tax credits, which will help manufacturing.

Mark Pawsey (Rugby) (Con): On Friday, I met businesses in my constituency at an event organised by our local enterprise partnership. They tell me that access to finance is one of the most important issues they face. Will the Chancellor confirm that the measures introduced in the autumn statement will provide more and cheaper finance to businesses in Rugby?

Mr Osborne: That is absolutely the intention of the national loan guarantee scheme. It is designed to help small businesses, in particular, with turnovers of less

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than £50 million to get access to cheaper credit—in other words, to pass on the low interest rates that we can borrow at, because of the difficult decisions we have taken, to those businesses in Rugby and elsewhere.

Mr Wayne David (Caerphilly) (Lab): Will the Chancellor give a commitment to the English regions that they will receive all the European regional development fund money they are entitled to—or will that money end up with the Treasury?

Mr Osborne: If there are good projects that need European support and we can put together a joint bid and the resources to do that, of course we will do that. But let me make a broader point: disparity between the regions of this country grew over the past decade and ultimately, what we have got to do is to help the private sector across the regions to grow, as well.

Duncan Hames (Chippenham) (LD): Unlike the previous Government, this coalition Government agreed £1 billion in compensation to qualifying Equitable Life policyholders. Yet, judging by the Minister’s written answers, as recently as six weeks ago less than £500,000 had been paid out. What action will he be taking to ensure that the payment scheme finally gets compensation to policyholders without further delay?

The Financial Secretary to the Treasury (Mr Mark Hoban): We are on track to pay out £500 million in compensation to policyholders this year. We have completed a pilot testing phase to make sure that the system works, and I can advise my hon. Friend that we have made 3,000 payments to policyholders just today.

Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): In one of his earlier answers, the Chief Secretary to the Treasury referred to the infrastructure fund announced last week. Given his comments of last week, can he confirm to the House precisely how much of the £1 billion allocated to carbon capture and storage will now be available for CCS projects before 2015?

The Chief Secretary to the Treasury (Danny Alexander): As the hon. Gentleman will know, the consequence of last week’s infrastructure announcement for Scotland is an additional £430 million to be spent in Scotland. We have said throughout this process that £1 billion is available for the carbon capture and storage project. The likelihood is that that project will be delayed because of the failure to agree the Longannet project, and we will make funds available as soon as the competition is completed.

Harriett Baldwin (West Worcestershire) (Con): Given that it is the festive season, will the Chancellor be able to spend the proceeds of his bank tax more than 10 times over?

Mr Osborne: Sadly, I am not a quack doctor who can perform miracles and take a bank bonus tax and spend it 10 times over. What we have done is to introduce a permanent annual levy on the banks that raises in each and every year more than was ever raised in any year of the previous Labour Government, net, and we are using that to pay for things like new nursery care for disadvantaged two-year-olds, and of course to deal with our deficit.

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Sheila Gilmore (Edinburgh East) (Lab): Earlier, the Chief Secretary to the Treasury indicated that the reason for the slow growth in the past year was the depth of the recession. He quoted the OBR report, but it goes on to say that the recovery in 2009 was stronger than previously reported, and that decline started only in the latter part of 2010. Why did he not tell the House and the country that?

Danny Alexander: The hon. Lady should recognise that the OBR cited three reasons. It said that the bust was bigger and the boom was greater under the previous Government. I would have thought that she would stand up and apologise for that, as well as recognising that the high costs of commodities over the past year has slowed growth now and that the risks posed to the eurozone are what is causing a slowdown in demand at the moment. That is what the OBR said and she should accept it.

Sir Peter Tapsell (Louth and Horncastle) (Con): What percentage of our foreign exchange reserves are in the euro?

Mr Osborne: We publish, on an annual basis, a breakdown of our foreign exchange reserves, and this Government, like previous Governments, do not give a running commentary on the composition of those reserves.

Dame Anne Begg (Aberdeen South) (Lab): Is Her Majesty’s Revenue and Customs trying to maximise its income by not warning businesses immediately that they have incurred a penalty for late payment of PAYE? Businesses in my constituency have been facing huge bills because HMRC has taken six months before letting companies know about the fines they are incurring.

Mr Gauke: I am grateful to the hon. Lady for raising that point. I assure her that that is not a revenue-raising policy, but I am happy to raise her particular case with HMRC and find out what has happened in those circumstances, if she would like to contact me.

Philip Davies (Shipley) (Con): Which strategy does the Chancellor think is best for dealing with a deficit caused by overspending: cutting expenditure by more than 8% over the next four years, as the Irish Government are doing, or increasing cash expenditure by more than 5% over the next four years, as this Government are doing?

Mr Osborne: I think, of course, that we have got the fiscal judgment right in this country, which is one of the reasons for the support we have had from international investors and others. Each country must make its own decisions. Ireland has to had to make some very difficult decisions, although because of the interconnectedness of the British and Irish economies it is to be welcomed by everyone in this House that better economic news has come out of Ireland more recently.

Huw Irranca-Davies (Ogmore) (Lab): Given successive quarters of downward revision of the growth forecasts by the Office for Budget Responsibility and given that eurozone countries are now outstripping the UK in

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terms of upward growth figures, is the Chancellor proud to have abolished boom and bust and to have replaced it with bust and bust?

Mr Osborne: I do not know how long it took the hon. Gentleman to dream up that question, but he would have spent his time better reading the economic forecasts that he purported to give the House of Commons. They show the OBR downgrading its eurozone growth forecasts, and of course the OECD has forecast quite deep recessions in some eurozone countries. The Labour party really has taken the most extraordinary position; in this week when we have the European Council meeting coming up, those in the Labour party are literally the only people in Europe who think that the eurozone crisis is not having an impact on the British economy or the other European economies. It is absolutely bizarre and it shows why, in a week when some of the numbers have been going up, the one number that continues to fall is on the economic credibility of the Labour party.

Tessa Munt (Wells) (LD): What plans does the Chancellor have in place for peer reviews of the Crown dependencies and the overseas territories, and what sanctions will be in place for individuals, banks and businesses that are found not to be complying with international tax standards and are guilty of money laundering and tax avoidance?

Mr Gauke: Of course we monitor these matters very closely and are in discussions with Crown dependencies and overseas territories, many of which are taking

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substantial steps to improve their compliance with international tax standards. We welcome that and will further encourage it.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): By what means will infrastructure projects in Wales, Scotland and Northern Ireland access finance from the pension funds element of the capital investment programme announced in the autumn statement? Is it a matter for the devolved Governments to put forward projects or not?

Danny Alexander: The agreement we have reached with pension funds will, in due course, set up a vehicle that enables pension fund investment to be made in infrastructure projects right across the UK. Of course there are many infrastructure projects in the private sector in Wales, in Scotland and in Northern Ireland where that money can help to deliver those projects more quickly. The Welsh Assembly Government will be free to bring forward projects for which they think private sector money is suitable. I also say to the hon. Gentleman that we are in discussion with the Welsh Assembly Government about their proposals for expanding the M4, which is a significant infrastructure project in its own right for Wales, for which Government money will need to be deployed.

Several hon. Members rose

Mr Speaker: Order. I am sorry to disappoint colleagues, but Treasury questions remains a popular sport, in which demand rather heavily exceeds supply.

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Benefits Uprating

3.34 pm

The Minister of State, Department for Work and Pensions (Steve Webb): Mr Speaker, with permission I should like to make a statement about the uprating of social security pensions and benefits for 2012-13. I shall place in the Vote Office full details of the new rates that are due to come into force from the week of 9 April 2012 for each pension and benefit, and arrange for the figures to be published in the Official Report.

As part of his autumn statement last week, my right hon. Friend the Chancellor of the Exchequer announced the rates of tax credits for 2012-13, and today I am announcing the uprating of those social security pensions and benefits for which my Department is responsible. As my right hon. Friend Chancellor pointed out in his statement, uprating in 2012-13 would protect

“those who have worked hard all their lives…poorer pensioners…those who are not able to work because of their disabilities…those who, through no fault of their own have lost their jobs and are trying to find work.”—[Official Report, 29 November 2011; Vol. 536, c. 802.]

Starting with those who have worked hard all their lives, I should like to turn to one of the early actions of the coalition Government: the restoration of the earnings link for the basic state pension. This Government not only made good on the pre-election promises to restore the link with earnings, we went one step further by protecting the future value of the basic state pension with a triple guarantee—that the basic state pension will rise each year by the highest of growth in earnings, prices or 2.5%. The triple guarantee means that even in times of slow earnings growth, we will not see a repeat of small rises such as, for example, 75p in 2000.

The new rate for the basic state pension will be £107.45 for a single person, an increase of £5.30 a week. I can announce, therefore, that from April 2012, the basic state pension is forecast to be 17.1% of average earnings, a higher share of average earnings than in any year of the Labour Government since 1997.

I turn now to additional state pensions, commonly referred to as SERPS—the state earnings-related pensions scheme. In April 2010, one of the last acts of the previous Government was to freeze SERPS pensions. This was in the apparent belief that pensioners had not experienced any inflation in the preceding year. That was solely because the retail prices index was negative in the year to September 2009, with the rising cost of goods and services swamped by falling mortgage rates. However, in April 2011 we increased SERPS pensions by 3.1% and I am pleased to confirm that this year SERPS pensions will also rise by 5.2%. That means that the total state pension increase for someone with a full basic pension and average additional pension will be around £6.70 a week or £348 a year.

The standard minimum guarantee in pension credit must be increased each year at least in line with earnings. However, this would have implied an increase of just 2.8%; in other words, the poorest pensioners would have got the smallest increase. We judged that unacceptable, so instead, from April next year, the single person rate of the guarantee credit will rise by £5.35, taking their weekly income to £142.70. For couples, the increase will be £8.20, taking their new total to £217.90 a week.

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To help manage expenditure, we shall be funding that above-earnings increase to the standard minimum guarantee by increasing the savings credit threshold, which means that those with higher levels of income will see less of an increase. In his autumn statement, the Chancellor told the House that we will uprate the standard minimum guarantee by £5.35 and that we would meet the cost of the over-indexation by increasing the threshold for the savings credit. That plan was correctly reflected in line 30 of table 2.1 on page 46 of the autumn statement, and it is indeed our plan. Unfortunately, the precise thresholds, which were calculated by our Department and appear at paragraphs 1.143 and 2.24, were incorrect. I apologise to the House for this error, which I am now in a position to correct. The correct thresholds for savings credit from April 2012 will be £111.80 for single pensioners and £178.35 for couples.

As many hon. Members will know, an important component of our plans for uprating pensions and benefits last year was the move to the consumer prices index— CPI. We believe that the CPI is a superior measure of inflation for benefits and pensions uprating. That is because the basket of goods on which it is based is a better match for the spending patterns of pensioners and others on a low income, and because it takes better account of the way in which lower income households respond to price changes. It is also the headline measure of inflation in the UK, the target measure of inflation used by the Bank of England, and internationally recognised. I am pleased to say that last week the High Court upheld the Government’s position that the CPI can be used for pensions and benefits uprating.

The coalition will ensure that the value of other social security benefits is maintained through a rise of 5.2%, even in these tough economic times. This means for disabled people, above and below pension age, through disability living allowance and attendance allowance, an increase of 5.2%; for people of working age who are not fit for work, through employment and support allowance, an increase of 5.2%; and for people who have lost their jobs, through no fault of their own, through jobseeker’s allowance, an increase of 5.2%.

On local housing allowance, at the emergency Budget in June 2010, the Government announced that from 2013, local housing allowance rates will be calculated annually by using the lower of the rent at the 30th percentile of local rents or the previous year’s rate uprated by reference to CPI. This will end the monthly uprating of LHA rates and bring the system into line with the uprating of other pensions and benefits.

As part of the preparation for this change, we need to fix LHA rates, to establish a baseline from which they will be uprated in future. As the new cycle for uprating LHA will be annual, we have decided that the baseline should be one year ahead of the first uprating event. Therefore, LHA rates will be fixed from April 2012. This approach means that there will be no reductions in ongoing awards as a result of this change.

So at a time when the nation’s finances are under severe pressure, this Government will be spending an extra £6.6 billion in 2012-13 to ensure that people are protected against cost of living increases: no less than £4.5 billion extra on state pensions; over £1 billion extra on disabled people and their carers; and over £1 billion extra on people who are unable to work through sickness or unemployment.

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We protected the triple lock, securing the largest ever cash rise in the basic state pension. We have uprated the pension credit as well, so that the poorest pensioners benefit in full from the triple lock. We have uprated working age benefits by 5.2%, protecting the real incomes of the poorest. Through this statement, I have outlined our firm commitment to ensure that even in these difficult times, no one is left behind. I commend this statement to the House.

Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab): I thank the Minister for advance sight of his statement, and welcome some of his announcements about the uprating of pensions. I am delighted that on the issue of increasing the state pension age further, the Government have learned from some of their mistakes on the previous round and will at least give adequate notice to those affected. That is a positive move. I welcome the U-turn on the mobility component of disability living allowance. The change should never have been proposed. We, along with disability campaigners, have argued hard for a U-turn and we are pleased that the Government have taken that action.

Last year, in the wake of the autumn statement, the Minister told my predecessor that his Government had embarked on decisive action to take Britain out of the danger zone. What a difference a year makes. The Government’s economic policy has failed and is failing, and working families are paying the price. It is when a Government’s back is against the wall that their true character is revealed, because that is when the difficult choices have to be made. The failure is writ large in the Government’s revised borrowing forecasts.

We know that the Chancellor told the House that he is going to borrow £150 billion more than he planned—£150 billion more. The Government are fond of the credit card analogy, and £150 billion is an astonishing extra debt to add to the nation’s credit card bill. It is the price of failure, and this failure is nowhere more apparent than in the extra £29 billion, largely the price of rising unemployment, which the Government project they will spend on benefits. What the Minister failed to say in his statement today is that to pay for the Government’s own failure, they propose to take twice as much money from children and families as they do from bankers.

Let us look at the impact on families and women. We are left with a benefits policy that hits the poorer hardest. The Institute for Fiscal Studies, which used to employ the Minister, has said that measures in the autumn statement would

“take away from lower-income families with children.”

Even the Secretary of State had to admit to the House last week that the bottom 30% do quite badly. The Government’s benefits policy will hit women harder than men. The House of Commons Library estimates that of the £2.37 billion raised from tax credits and public sector pay changes introduced in the autumn statement, 73%—£1.73 billion—will come from women and 27% will come from men. Taking together all the changes to direct tax, benefits, pay and pensions announced by the Chancellor since the general election, of the £18.9 billion the Government are raising each year, £13.2 billion comes from women. Women are being hit twice as hard as men.

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In addition, the Government’s benefits policy will increase child poverty. In its distributional analysis of the autumn statement, the Treasury has admitted that as a result of Government decisions the number of children living in households with incomes below 60% of the median will increase by 100,000 in 2012-13, which means more children living in poverty. The IFS now estimates that the number of children living in poverty will rise by 600,000 over the next period. Surely the Government and the Minister cannot be proud of that.

Let me ask the Minister some straightforward questions. Minister, you signed up to the Child Poverty Act 2010. Do you believe that under the terms and definitions of that Act child poverty is set to rise under your Government? You will have studied the IFS—

Mr Speaker: Order. I gently say to the shadow Minister that he knows that debate should be conducted through the Chair and that use of the word “you” is not encouraged in the Chamber. We would be grateful if he addressed the Minister through the Chair. We are grateful that he has some questions, but he must wrap them up pretty sharpish.

Gregg McClymont: Thank you, Mr Speaker.

The Minister will have studied the IFS presentation. Will he confirm that its conclusion is that the people who will pay most will be those in the bottom 30%? Does he agree with the Secretary of State that work incentives will be diminished by the Government’s actions in the autumn statement and that the changes to tax credits and public sector pay announced in the autumn statement will hit women disproportionately?

Steve Webb: I am grateful for the bits of the hon. Gentleman’s speech that actually responded to my statement, because he appeared to agree with us entirely. I am grateful for his support for our increase in the basic state pension, our announcement on the state pension age and our changes on the mobility component of DLA. I also agree that we see the true colour of a Government when their back is against the wall. Notwithstanding the huge pressure on the public finances, for reasons he might understand, we took the view that protecting the most vulnerable was a priority. That is the true colour of this Government.

The hon. Gentleman asked about the distributional impact of the measures we have taken. I refer him to Chart 1.C of the distribution analysis published by the Treasury last week to accompany the autumn statement, which takes account of not only the measure set out in that statement, but the cumulative impact of all that we are doing. I am sure that he will not want to be selective and will look at the whole picture. Page 4 of the analysis includes a chart ranking people by what they spend, which shows that the proportion lost rises with income. In other words, the smallest amounts lost are for the lowest households and the largest cash amounts lost are for the highest households [ Interruption. ] Yes, cash is what matters to people.

The hon. Gentleman asked about work incentives, and I am pleased to say that with his support the universal credit that my right hon. Friend the Secretary of State wants to introduce will be the biggest boost to work incentives for many generations. Starting in 2013, we will be rewarding work instead of penalising it, and the best thing that we can do for low-income households is to enable them to work and to support them in that.

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The hon. Gentleman did not mention the many things that we are doing for low-paid working households, such as the personal income tax allowance increases, the council tax freeze, the cuts in fuel duty and, above all, the low-interest-rate environment, which for households with mortgages is crucial to their living standards. I am grateful to him for the measures that he did welcome, but there was a lot more that he should have welcomed.

Mrs Anne Main (St Albans) (Con): I am sure that the £6.6 billion that the Minister has announced today will be welcome to many families in the UK, but I am extremely concerned that the European Commission is seeking to open that benefit pot to European benefit tourists who seek to avail themselves of it. That £6.6 billion will be in no way enough if we are to encompass benefits for European benefit tourists.

Steve Webb: I can assure my hon. Friend that my right hon. Friend the Member for Epsom and Ewell (Chris Grayling), the employment Minister, has quite categorically stated that Britain does not believe in benefit tourism, and that we will do all we can to prevent it.

Mr Frank Field (Birkenhead) (Lab): Is it not true that the Minister’s partial statement today will in the next couple of years result in decreasing the incentive to work? If the Treasury believed in localism and had given the £6.6 billion to the Department to spend on uprating as it wished to, would not the Minister have made a statement today that increased work incentives rather than decreased them?

Steve Webb: The right hon. Gentleman, for whom I have a great deal of respect, will be aware that the reward for working comes from a combination of factors, one of which is the tax burden on the low-paid, and that this Government have twice increased the personal tax allowance by about £1,500. That is worth more than £300 a year for a standard rate taxpayer and, for two members of a couple in low-paid work, is a £600 gain with more to come. That is a real reward for working which all too often they have not had in the past.

Jenny Willott (Cardiff Central) (LD): I welcome the fact that the state pension and the state earnings-related pension scheme will rise by 5.2%, and that pension credit will do so above earnings, but different levels of uprating and a complex system can make it difficult for pensioners to understand exactly what they should expect. Will the Minister do all that he can to simplify the system and bring in a flat-rate pension as soon as possible, so that pensioners are able to see clearly and easily what pension they should expect?

Steve Webb: My hon. Friend is characteristically persuasive. It is absolutely clear that a system in which we pay a wholly inadequate basic pension—we pay a pension that, even after the uprating to £107 a week, is not enough to live on, so we will top it up—cannot be a sustainable basis for the future. We therefore continue to develop our proposals for state pension reform, precisely so that we get more money to people automatically, with less reliance on complicated means tests that mean too many people do not get what they should.

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Gloria De Piero (Ashfield) (Lab): Children’s well-being does not just depend on benefits; it is often about child maintenance, too. So what is fair about charging single parents to use the Child Support Agency?

Steve Webb: The Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Basingstoke (Maria Miller) brought forward proposals only this week to make child maintenance more effective, because, as the hon. Lady rightly says, getting child maintenance paid is crucial. We believe that far too little is paid and the cost of collecting it is disproportionate to what we receive, so we need an efficient child maintenance system, and that is what we propose to bring forward.

Nigel Mills (Amber Valley) (Con): Does the Minister agree that rather than trapping more low-paid families in the complicated web of means-tested benefits, which has done so much damage already, taking them out of tax altogether is by far the better approach?

Steve Webb: My hon. Friend is quite right that we have already taken, I think, just over 1 million families or individuals out of tax. We have a long-term goal of a £10,000 tax-free allowance, which would take out millions more, but what is often not understood is that couples in which both members go out to work to make ends meet get twice as much benefit. Each benefits from the personal tax allowance increase, so it helps precisely those most hard-pressed families in which both parents work all hours to keep their family going.

Dame Anne Begg (Aberdeen South) (Lab): People can get the uprating only if they get the benefit in the first place, and, despite what the Minister said about protecting those who have worked hard all their lives, there is a measure in the Welfare Reform Bill which time-limits contributory employment support allowance to one year, so a large number of people who work all their lives but drop out of work because of ill health will get nothing after that.

Steve Webb: As the hon. Lady, the Chair of the Work and Pensions Committee, knows, that is a measure in the Welfare Reform Bill being considered in another place, but we have put in place two safeguards—that the most sick and the most poor are protected. In other words, those in the support group will continue on an un-time-limited basis to get ESA, and those with no other household income will continue, through income-related ESA, to be helped. So, at a time when we have to find savings, protecting the most vulnerable and the poorest seems to us to be a priority.

Mr Philip Hollobone (Kettering) (Con): Pensioners in the Kettering constituency will warmly welcome the £5.30 a week increase in the basic state pension to £107.45. Can the Minister also confirm that for periods of extreme cold he is announcing a permanent increase in the cold weather payment from £8.50 to £25?

Steve Webb: My hon. Friend is absolutely right; it was remiss of me not to trumpet that fact. Last year, we announced that we were reversing Labour’s planned cut in the cold weather payment, which was due to fall to £8.50 and will now be £25 in each year of this Parliament. Last year, we spent over £400 million to help the most vulnerable when it is freezing cold, and that is a priority for this coalition Government.

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John McDonnell (Hayes and Harlington) (Lab): Many of my constituents may well have welcomed the increase, but they cannot because they are no longer receiving their benefit, particularly as a result of the extremely bizarre assessments of their disability by Atos—

Mr Speaker: Order. I apologise for having to interrupt the hon. Gentleman. I do not know what has come over the hon. Member for South West Bedfordshire (Andrew Selous). He is normally the very model of restraint, good manners and kindness to all things human and animal, and I am sure that he will recover his poise, but I want to hear the hon. Gentleman’s question; if he wants to start it again, he can.

John McDonnell: Many of my constituents would have welcomed the increase but they cannot because they are no longer receiving their benefit, particularly as a result of the Atos assessments of disability living allowance. In addition to that, having lost, or not gained, their benefit, they are waiting long periods for their appeals. Will the Minister look at the length of time that people are waiting for their appeals and the number of appeals that have been postponed as a result of lack of staff?

Steve Webb: The hon. Gentleman is bringing together several different issues. It is entirely the case that at the time of the election the previous Government had given Atos a contract for the work capability assessment for ESA—not DLA—and we have gone through with the Harrington process, independent reviews and recommendations for change, all implemented by the Government. Good progress is being made on making the system fit for purpose, but getting the decision right first time is better than speeding up the appeals process, and we are doing that more and more because we are reforming the system.

Philip Davies (Shipley) (Con): Further to the point made by the right hon. Member for Birkenhead (Mr Field), how on earth can the Minister justify increasing benefits by over 5% when people who are in work are facing a pay freeze or, at best, very modest increases in their salary? Is not that another kick in the teeth to hard-working taxpayers, and does it not go against the Government’s priority to try to make work pay?

Steve Webb: My right hon. Friend the Secretary of State is absolutely committed to making work pay through a combination of benefit reform, with the universal credit, with which we are pressing ahead, taking people out of tax, as well as the council tax freeze and the petrol duty cut. There is a whole range of factors about whether work pays. I believe that we have done a great deal for people in low-paid work, and there is much more to come.

Helen Goodman (Bishop Auckland) (Lab): The Minister made much of his belief that CPI protects the standard of living of pensioners, but on Friday an old-age pensioner came to see me and pointed out that the Department for Communities and Local Government target for rents in the social sector is linked to RPI. Does not that display the fact that the problem Ministers have is that they assume that everyone is like them and is an owner-occupier?

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Steve Webb: I know that the hon. Lady was a Minister in our Department, and she will understand that the way the housing benefit system works is that people in the social rented sector, provided that they are not over-occupying, get their full rent, whether it is increased by CPI or RPI. The fact remains that including mortgage interest in a measure of inflation for pensioners when, as she rightly says, most pensioners do not have an outstanding mortgage, is the wrong thing to do.

Mr Marcus Jones (Nuneaton) (Con): How much better off will the average pensioner in Nuneaton be following the introduction of the triple lock guarantee and the restoration of the link between earnings and pensions?

Steve Webb: For someone retiring this year on a full basic state pension, the triple lock, we estimate, will benefit them to the tune of about £13,000 over the course of their retirement. That is a very significant change whose effects we are not yet seeing in full because earnings growth is depressed, but as it returns to more normal times, pensioners in Nuneaton and elsewhere will see real increases year after year.

Simon Danczuk (Rochdale) (Lab): As we approach Christmas, does the Minister not think it extremely sad that his latest cuts to tax credits will put a further 100,000 children into poverty?

Steve Webb: I am glad that the hon. Gentleman has raised that point, because it is a selective quotation from the autumn statement. As well as making the changes to tax credits, we are over-indexing benefits relative to average incomes. As poverty is measured in relation to average income and we are putting up benefits according to CPI, which is about twice the rise in average income, child poverty will be reduced compared with the figure that he gave. There is more to this than meets the eye.

Harriett Baldwin (West Worcestershire) (Con): The Minister will be aware that many more women than men are on pension credit and that about 60% of pensioners are women. Does this increase not therefore disproportionately help women?

Steve Webb: My hon. Friend is quite right. Not only does the pensions boost help women, but the pension credit boost helps women. Reflecting on the Opposition’s question about the combined effect of our measures, it is worth saying that the one measure excluded from that question was the VAT rise. They excluded that because men, on average, have higher incomes and higher spending. In particular, they have higher spending on VATables, so the impact of the VAT rise hits men more than women. For some reason, the Opposition did not count that measure.

Hywel Williams (Arfon) (PC): May I welcome the Government’s decision on the mobility component? That is vindication of the wide campaign on this issue, which included my early-day motion and the 88-odd Members who signed it. On a slightly more incredulous note, would the Minister claim that the move to CPI and the large savings to Government expenditure are entirely coincidental?

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Steve Webb: I am grateful to the hon. Gentleman for welcoming our decisions on the DLA mobility component. Clearly, the decision on CPI was taken in a fiscal context. However, it came after RPI was negative and CPI was positive, so the immediate context was a year in which state earnings-related pension schemes and public sector pensions had all been frozen. I certainly could not believe that there had not been any inflation, and I am yet to meet a pensioner who could.

Nia Griffith (Llanelli) (Lab): As we all understand, with rocketing fuel and food prices these rises are not as generous as they look. Has the Department assessed the impact of the £100 cut in the winter fuel allowance, combined with the fact that those on low incomes spend a lot of money on food and fuel? People will actually be worse off, particularly those with an income that puts them just above the bracket for claiming the cold weather payment.

Steve Webb: It was entirely right that we went ahead with Labour’s planned cut to the winter fuel payment. We reversed the cold weather payment cut to prioritise the most vulnerable when it is most cold. I make no apology for that. It was important to put the full 5.2% through for people with no wage because of the pressures on household fuel bills and other costs. That is why it was vital that we stood by the most vulnerable even though money was tight.

Mr Andrew Love (Edmonton) (Lab/Co-op): Will the Minister take this opportunity to admit that the policies of the coalition have led to a diminution of work incentives? If we are to believe press reports, that appears to be the opinion of the Secretary of State. Was there any consultation with the Chancellor about his autumn statement? Does this not show that the Government are in disarray over this issue?

Steve Webb: People are still better off in work. When we have the Secretary of State’s universal credit, that will be even more the case. The hon. Gentleman is focusing on a narrow aspect of the measures that we have taken. Personal income tax allowance increases, the cuts in fuel duty compared with Labour’s escalator plan and the cuts in council tax in real terms will all help people in work and make it pay to work. We have plans to take that further.

Mr David Winnick (Walsall North) (Lab): The hon. Member for Shipley (Philip Davies), who is yet to reach the 19th century, attacked the unemployed. I point out to the Minister that a store in my constituency had 20 vacancies when it opened and 250 people applied. Is that not an illustration of people out of work and

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desperate to find employment? They should not be attacked by hon. Members in the way that I have mentioned.

Steve Webb: I have no doubt that the vast majority of people who are unemployed are actively looking for jobs. Indeed, that is a condition of payment of jobseeker’s allowance. We would not pay people if they were not actively seeking work. The very fact that there are many unemployed people in the hon. Gentleman’s constituency—I grew up near Walsall, so I know the area well—is why we have to get the nation’s public finances on an even keel. We have seen what happens to countries that do not do so.

Jonathan Ashworth (Leicester South) (Lab): Further to his answers to my hon. Friend the Member for Edmonton (Mr Love) and my right hon. Friend the Member for Birkenhead (Mr Field), who is no longer in his place, does the Minister accept that the changes to working tax credits act as a disincentive to work? Does that explain why, according to newspaper reports, the Secretary of State is so angry about that change and baffled that the Liberal Democrats pushed for it?

Steve Webb: There is a danger of missing the central points here, which are that people are better off in work, and we want to go further; that the tax credits are part of a package of measures, and I have listed repeatedly the many things that make work pay; and that our increases in personal tax allowances, for example, will make work pay far more than in the past. The coalition is united on that.

Sheila Gilmore (Edinburgh East) (Lab): The Minister is trumpeting the highest ever increase for pensioners, which I am sure they welcome, but is not the truth that it is so high only because inflation is so high? This is not some generous gift from the Government; it merely allows pensioners to keep up with prices. Further to that, many pensioner groups would point out that the real types of inflation faced by pensioners are actually higher than CPI.

Steve Webb: I do not recall the previous Government ever using something other than inflation or using a different rate for pensioners because of factors such as those the hon. Lady mentions. Sometimes the pensioner rate will be higher and sometimes it will be lower, but on average it will be broadly the same. There was a lot of speculation—she may even have read some of it—that we would not provide a 5.2% increase, that we would break the triple lock, that we would average out the figures or do all sorts of things, but we stuck by our promise and provided a 5.2% increase. The real value of the pension as a share of average earnings—that is what pensions are for: to replace the earnings that people used to have—is higher than in any year under Labour, and I am proud to put my name to that.

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Registration of Commercial Lobbying Interests

Motion for leave to bring in a Bill (Standing Order No. 23 )

4.6 pm

John Cryer (Leyton and Wanstead) (Lab): I beg to move,

That leave be given to bring in a Bill to establish a public register of organisations that carry out lobbying of Parliament for commercial gain; to make provision for disclosure of expenditure by such organisations; and for connected purposes.

The Bill is in a very peculiar position among private Members’ Bills, in that it is as relevant today as it was 20-odd years ago. It was first presented to the House in 1982 by my father, who was then the MP for Keighley, and again in 1988 when he was the MP for Bradford South.

I am not seeking to bring in the Bill on the basis that I am looking for a place in the “Guinness Book of Records” for having presented the Bill with the longest gestation period in British history. The reason is that Britain now has a £2 billion lobbying industry, much of it centred here in Westminster. I believe that there is a strong mood among the public to make lobbying more transparent and accountable, and that will only be reinforced by the story on the front page of The Independent this morning that appears to show that Bell Pottinger and perhaps other lobbying firms have profound influence at the centre and seat of government. I will come to that later.

The Bill would require that all companies, partnerships or sole traders that sought to lobby Parliament in order to influence legislation or its application as their sole, major or subsidiary commercial purpose must be registered. It would not impede the ordinary lobbyist—the ordinary constituent or member of the public, who has a right to lobby his or her Member of Parliament. Nor would it affect the ability of a company, co-operative, trade unionist or residents association to lobby Parliament. My fear is that local groups such as residents and tenants groups do not have the financial muscle of big corporations that can bring professional lobbyists to bear on Parliament and be more successful and carry more weight as a result.

During the 1980s, when big consortia and companies were lobbying for contracts to build the channel tunnel, one Jonathan Aitken, who was then a Conservative MP, said—ironically, in light of later events:

“'What worries me most is that usually lobbying is genuine in the sense that it stems from little interest groups and concerned citizens. Here we are seeing the Panzer division of big business, their heavy artillery and tanks trampling over all the small people’s interests which I want to see better defended.”

I agree with that. It is odd that he should have said it, but I agree. Those Panzer divisions and that heavy artillery are now being brought to bear on possibly a greater scale than ever before.

Strangely enough, the Prime Minister agreed with me a few months ago about wanting to introduce a Bill that would establish a register of lobbyists, but he seems to have changed his mind. He promised a consultation paper on establishing such a Bill by the end of November, but that consultation paper has not yet appeared. There are now many large and powerful lobbying firms busy

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in Westminster, many of them specifically lobbying for health contracts, often for big, commercial health outfits based in north America. Here are a few examples: Citigate Dewe Rogerson lobbies on behalf of Benenden and Nuffield; Grayling lobbies on behalf of Cambian, GE Healthcare and Nuffield; Lexington Communications lobbies on behalf of Bupa, GlaxoSmithKline Beecham, Novartis and Pfizer; and MHP Communications lobbies on behalf of Ellipse, IMS Health, Lundbeck, Roche, Grünenthal, Hoffman-La Roche and Janssen-Cilag.

Incidentally, one special adviser at the Department of Health happens to have worked for MHP Communications before he went to the Department. That relationship might be above board, but we do not know because it is not transparent—we do not know what goes on in the heart of government.

Some will argue that the Bill is unnecessary because the Association of Professional Political Consultants has a code of conduct, but that argument simply holds no water. For instance, the code bars payment in cash or in kind to any parliamentarian, but Grayling public affairs is owned by Huntsworth, the chief executive of which is Lord Chadlington, who is obviously a parliamentarian, and Bell Pottinger public affairs is owned by Chime Communications, of which Lord Bell, who is also a parliamentarian, is the chairman. Perhaps they do it on a voluntary basis, but I doubt it; I suspect that they are paid by those lobbying outfits.

That brings us rather neatly to the story in The Independent today that Bell Pottinger staff have been secretly filmed making the most alarming claims to have influence at the very heart of government, even inside No. 10 Downing street. They claim to have got the Prime Minister to speak to the Chinese Premier on behalf of their business clients at something like 12 hours’ notice; they boast of having access to the Foreign Secretary, the Prime Minister’s chief of staff, Ed Llewellyn, and to the Prime Minister’s closest adviser, Steve Hilton; and they claim to be able to get MPs—presumably from the Government Benches, although that is not made clear—to attack investigative journalists for the smallest of errors in order to rubbish stories when journalists investigate, for example, the Uzbek Government or large health conglomerates.

Reporters from The Independent posed as agents of the Uzbek Government, who have one of the worst human rights records on the face of the planet. Bell Pottinger aimed for a contract worth £1 million. Bell Pottinger, which since its foundation 30 years ago has been close to the heart of the Conservative party, did not hesitate to discuss signing a contract that would include lobbying on behalf of the Uzbek Government, who, apart from anything else, we are told, boiled two opponents alive in water, but there we are.

Tim Collins, the managing director of Bell Pottinger Public Affairs, is a former MP. He is not regarded over-fondly on the Opposition Benches—if I can put it that way—but he says in the film:

“I’ve been working with…Steve Hilton, David Cameron, George Osborne, for 20 years-plus…There is not a problem in getting the messages through”.

He was talking about lobbying on behalf of the Uzbek Government when he said that there is

“not a problem in getting the messages through”.

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Strangely, when a No. 10 spokesman was contacted last night by The Independent and asked about the story, he said:

“It is simply not true that Bell Pottinger or indeed any other lobbying firm has any influence on government policy”,

which is a fairly strange claim. If it is true, all former MPs who are now lobbyists, all former lobbyists who are now MPs and all full-time lobbyists have wasted their time all these years. They have had absolutely no effect on Government policy, so why did they not go and do something else? The idea that large corporations, multinational companies and big banks that hire big lobbying firms to exercise influence at the heart of government have absolutely no consequence and no influence whatever is pretty difficult to stomach.

The reality is that this Government are very close to vested interests in the City, big corporate interests and big businesses. They have not the faintest idea what is going on in 99% of the rest of the country, where people are suffering under the cuts that are being introduced with a heartlessness not seen since the 1930s. They have absolutely no idea of the effect of the cuts in public services, but they know big business and the City, partly because the City provides more than 50% of Conservative party finances. For the first time in British history, City individuals and businesses finance the—[ Interruption. ] The Chancellor is saying something from a sedentary position. Perhaps he is contradicting what I am saying, so I shall say it again very clearly: City institutions and individuals finance more than 50% of Conservative party funds. It is just those sorts of big financial interests that hire lobbying firms and that then go to No. 10, and perhaps No. 11, to exercise influence there to steer Government policy in particular directions.

If the Prime Minister were serious about introducing legislation that creates a register of lobbyists, he would take on my Bill; it has certainly been around for long enough. He would push it through its parliamentary stages and put it on the statute book. It is perfectly simple. If he is not prepared to do that, I will assume that he and perhaps the Chancellor, who was mumbling a while ago about something or other, have something to hide. Perhaps they and their advisers are a bit too close to powerful commercial interests.

4.15 pm

Philip Davies (Shipley) (Con): I have a great deal of regard for the hon. Member for Leyton and Wanstead (John Cryer) who proposed this Bill. He will know that the people in the Bradford district still have a great deal of regard for his father, who originally brought in this Bill, and for his mother, too. However, I am afraid that the Bill is typical of the Labour party’s nanny state bureaucracy and its belief that the Government should have a role in everything.

Although the hon. Gentleman started by saying that he just wanted to introduce a register of lobbyists, it became increasingly clear that he was against lobbying altogether and wanted to see an end to it, but only for businesses and commercial enterprises. None the less, lobbying plays an important part in any democratic process. It gives a voice to a whole range of groups and interests within our democracy by allowing them to

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make their case. One of the things that I despair of in politics is that increasingly politicians want to be on the popular side of the argument and that we are in danger of having a generation of politicians who will argue for what 75% of the public want rather than the other 25%. Actually, the 25% also deserve to have their case heard, and lobbyists can play a useful role in allowing organisations that might not be immediately popular and might not even have a particularly popular message to get across to have their voice heard as well. Surely, in a democracy all voices should be able to be heard whether or not they are popular.

This Bill could lead to many organisations and Members of Parliament becoming lobby shy. Discouraging lobbying altogether, as the hon. Gentlemen wishes, would lead to poorer law-making. I make no apology for the fact that I meet people who have a particular view that they want to express. It does not mean I will end up agreeing with them, and I am sure it does not mean that the hon. Gentleman agrees with everybody who advocates their case to him. None the less, it is perfectly reasonable that they should be able to have their say and that we should be able to listen to their arguments. We can either accept their arguments if they are good ones or we can dismiss them if they are not so good. I am surprised that the hon. Gentleman has so little faith in people in this House that he thinks that just because someone makes a case to them, they will automatically agree with it, pick it up and run with it. It does not mean anything of the sort; it just means that other voices can be heard.

What was sadly lacking in the hon. Gentleman’s speech was anything to do with trade unions. He had a lot to say about the lobbying of Members of Parliament by businesses, but he was reluctant to mention the importance of the lobbying of Members of Parliament by trade unions. His Bill talks about establishing

“a public register of organisations to carry out lobbying of Parliament for commercial gain”.

It seems that he has deliberately designed his words to exclude trade unions from his provisions. He wants a system in which trade unions can lobby anybody as much as they like and spend as much money as they like on doing so, but anyone else in the commercial world will not have any opportunity to do so. That is his real agenda—to push forward the trade union argument.

An opinion poll conducted by ComRes asked MPs about the number of approaches they typically received each week from various organisations, and the results were startling: 59% of MPs said that they received 20 or more approaches from interest groups, but in sheer lobbying volume the approaches from interest groups that included trade unions and non-governmental organisations outnumbered those from the corporate world. The hon. Gentleman wants to entrench that position. In effect, he wants the trade unions to have all the influence that they desire and nobody to be able to argue against any of the things for which they lobby. That would be a triumph not for democracy but for his own agenda. A perfectly effective self-regulatory system is already in place.

I do not want to detain the House any further and I certainly do not intend to call a Division, but I thought it important that the one-sidedness of the hon. Gentleman’s argument be made abundantly clear. The Bill is not necessary or desirable. We should be prepared to listen to people who want to lobby from all parts of society,

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whether they be businesses, trade unions, charities or other organisations, and we should not support a Bill that tries to prevent certain people from getting their message across just because he happens not to agree with it.

Question put and agreed to.


That John Cryer, Natascha Engel, Mr Dennis Skinner, Lisa Nandy, Kelvin Hopkins, Grahame M. Morris, Bob Russell, Caroline Lucas, Mr Tom Watson and Valerie Vaz present the Bill.

John Cryer accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 20 January 2012, and to be printed (Bill 258).

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The Economy

Mr Speaker: Before I call the Chancellor, I remind the House that in view of the high level of interest in the debate I have imposed a six-minute limit on each Back-Bench contribution.

4.22 pm

The Chancellor of the Exchequer (Mr George Osborne): I beg to move,

That this House has considered the matter of the economy.

I am pleased that the House has been given this early opportunity to debate last week’s autumn statement and to discuss the economic challenges that our country and continent face. Being conscious that many people have asked to speak, I shall try to tailor my remarks appropriately.

Seven days ago I set out the Office for Budget Responsibility’s latest independent forecasts and the measures that we would take to reinforce our country’s fiscal credibility and keep our interest rates low, increase the supply of money and credit to ensure that those rates were passed on to businesses and home buyers, and lay the foundations for a more resilient, more competitive and more balanced economy.

That was one week ago, and in the seven days since events have provided further confirmation of why these measures are necessary: countries such as Ireland and Italy have announced further budget measures from VAT rises to pension age increases, reminding us of the value of getting ahead of the markets not following them, and the credit ratings of 15 eurozone countries have been put on negative watch, while here in Britain interest rates have stayed low despite the deterioration of the fiscal forecast, which has meant that last week we continued to borrow at below 2.5%. [Interruption.] I thought that the shadow Chancellor was about to intervene, but we shall have to wait.

Last week I answered questions from Members who wished to ask me about the detailed policy measures in the autumn statement, and I am happy to answer such questions again today, but I thought this might also be a good opportunity to address three broader issues: first, the crisis in the eurozone; secondly, how we believe that the UK banking system should respond to the ongoing crisis and the advice that we received on Thursday from the Bank of England’s Financial Policy Committee; and thirdly, given the eurozone debt crisis and the banking issues that we face, why the credibility of our fiscal policy must be constantly reinforced. Let me take each in turn.

On the eurozone, our overriding responsibility is to protect and advance the interests of the United Kingdom. Those interests are best served by the countries of the euro finding a path out of the crisis, while also ensuring that our economic interests in the single market are protected. There is no doubt that the crisis is having a chilling effect on the British economy and destroying jobs here. In the words of the Governor of the Bank of England last Thursday, it is, in his judgment, the primary cause of the downward revision of the British growth forecasts, as it was one of the primary causes of the OBR’s downward revision of its growth forecast. Of course, the OBR warned us that it had assumed an orderly resolution of the crisis over the next two years.

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This impact sadly comes as no surprise, when 40% of our exports are to the euro area and £1 in every £7 that Britain exports goes to Ireland, Portugal, Greece, Spain or Italy. Although we must plan for all contingencies—and we are—we should not lose sight of the truth that Britain has a fundamental national interest in the eurozone sorting out its problems, even though we are not in the euro and will not be while this Government are in office.

Action is required by the eurozone on three counts. First, as Germany has argued, and as I made clear in July, there needs to be much tighter fiscal discipline within member states and much tighter fiscal co-ordination within the euro. This is the remorseless logic of monetary union. Secondly, those reforms to economic governance should provide the confidence in the future discipline that the European Central Bank requires to take whatever action is necessary to protect financial confidence. We have been calling consistently for a big firewall, properly capitalised banks and lasting structural reform, and we now need that delivered. Thirdly, all this will succeed only if there is an improvement in the competitiveness of the whole of Europe, and also, crucially, in the competitiveness of the peripheral eurozone countries vis-à-vis countries such as Germany. That will involve difficult change, but it is encouraging to see some European Governments, such as Ireland and Italy, now starting to take the necessary steps on issues such as pensions and labour market reform.

Britain has a huge interest in all that happening and has put forward specific proposals to ensure that our entire continent is not priced out of the world economy. As an open, trading nation, we benefit from the single market. We would like it strengthened and deepened, but we will also insist that our interests in the single market are protected from any future developments, including our interest in financial services. That is the approach that Britain will take to the European Council later this week. We need better regulated financial services to protect our economy when things go wrong, which is one reason why we commissioned John Vickers’s report. We want a single market in Europe so that our banks, our insurance companies and our pension companies can sell their products abroad, but 70% of Europe’s financial services are based in London. We will ensure as we approach this European Council that the interests of the European Union 27 are protected and that Britain’s national interests are protected too. That is our obligation to the British people.

Let me turn from the eurozone crisis to what all this means for our banks. British banks are well capitalised and liquid. Not one of them was identified as a cause for concern in the recent exercise by the European Banking Authority. I remind people that retail deposits in British banks or the subsidiaries of foreign banks here in Britain are protected by our country’s Financial Services Compensation Scheme, which ensures that £85,000 per person per bank is protected. Individuals with deposits in a UK branch of a European bank are protected by their national schemes.

The eurozone crisis is tightening credit conditions across the world and across Europe. The Bank of England announced today the introduction of a new contingency liquidity facility—the extended collateral term repo—which it will make available if needed. In addition, to protect

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small businesses from the higher costs of credit, we are pursuing the credit easing policy that I set out last week. I have set a ceiling of £40 billion on those operations, and have committed to £20 billion of guarantees through the national loan guarantee scheme, and £1 billion through the business finance partnership. Although the means are different, the ends we seek are the same.

Angela Smith (Penistone and Stocksbridge) (Lab): Is not the Chancellor’s credit easing scheme an admission that his earlier deal—the Merlin deal—has completely and utterly failed?

Mr Osborne: The Merlin deal was for this year, and it was a commitment to increase gross lending to small businesses, which is what the banks have done. Of course, the previous Government, having tried net lending targets, then had gross lending targets with just two banks. The Merlin deal extended that to all the main high street banks. It was a one-year-only deal; the credit easing package that I have set out is, I think, what is required—not least in view of the tightening credit conditions across the continent of Europe and, indeed, across the world at the moment. The Government are using the credibility they have in the financial markets to borrow at low interest rates and passing those rates on to small businesses. As I said at Treasury questions, we are seeking state aid clearance and hope to have the national loan guarantee scheme operational by early next year.

At a time like this, we also have to be alert to risks across the financial system. One of the weaknesses of the tripartite regime is that no one felt they had a particular responsibility for monitoring the overall health of the financial system or felt they had the tools to do anything about it. We have created a Financial Policy Committee to do just that. We have established it on an interim basis to get it operating as soon as possible, instead of waiting for next year’s primary legislation. The FPC reported last week. Let me put it on the record that it is absolutely the job of the Governor of the Bank of England to be frank with the country about the challenges we face.

As the Financial Policy Committee warned very starkly:

“Sovereign and banking risks emanating from the euro area remain the most significant and immediate threat to UK financial stability.”

The committee encouraged banks to improve the resilience of their balance sheets in a way that does not exacerbate market fragility or reduce lending to the real economy. Given what it calls

“the current exceptionally threatening environment, the Committee recommends that, if bank earnings were insufficient to build capital levels further, banks should limit distributions and give serious consideration to raising external capital in the coming months.”

That is the point put to me by the Chairman of the Treasury Select Committee just an hour ago at Treasury questions. Limiting distribution includes restricting bonuses. Excessive pay in the financial sector is a concern at any time because of the perverse incentives it creates.

When it comes to linking pay to performance and being transparent, we are implementing the most comprehensive regime of any financial centre anywhere in the world. Today the Treasury launches a consultation that will extend transparency arrangements at large

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banks by requiring the eight highest-paid non-board executives to disclose their pay and bonus arrangements. This will cover an estimated 15 banks, including the largest UK banks and the UK banking operations of large foreign banks.

Gordon Banks (Ochil and South Perthshire) (Lab) rose

Mr Osborne: I will certainly give way; I hope the hon. Gentleman will welcome this change.

Gordon Banks: Will the Chancellor tell us how transparency will actually reduce the income of those to whom he refers?

Mr Osborne: Transparency should make it clear to the owners of these banks—the shareholders—what the pay and bonus levels and the remuneration levels are; it will then be for them to take action. I am aware of our responsibilities as a shareholder in some banks. As I mentioned at Treasury questions, an encouraging statement was made this morning by the Association of British Insurers, which represents the shareholders who own many of these banks, saying clearly that it does not accept current levels of pay in the financial sector and that it expects reform. As I said, we had a very clear warning from the Financial Policy Committee to the financial system that it should be limiting its distributions at a time like this.

Ed Balls (Morley and Outwood) (Lab/Co-op) rose

Mr Andrew Love (Edmonton) (Lab/Co-op) rose

Mr Osborne: I give way first to the shadow Chancellor and then to the member of the Treasury Committee.

Ed Balls: Labour Members welcome the Chancellor’s conversion to transparency in financial affairs. He will know that, following the Walker review, a piece of legislation is on the statute book that requires the publication of the salaries of all employees paid more than £1 million. Given that the legislation is on the statute book but that this Government have chosen not to enact it, will he now enact it and therefore bring about full transparency for anyone in the City earning more than £1 million?

Mr Osborne: I think that, in the interests of transparency, the right hon. Gentleman should have told the House that he was the City Minister who, for several years, had the opportunity to introduce these changes. What about the opportunity that he had to do precisely the things that we are doing today? When it comes to transparency in pay, we have consulted David Walker and others, and we think that this is exactly the right approach. We will introduce the changes unilaterally in the United Kingdom, although it is a significant financial centre, and I think that they will set an example that the rest of the world will follow.

Several hon. Members rose

Mr Osborne: I will give way if one single Opposition Member concedes that Labour was in government for 13 years and presided over a banking system that collapsed.