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House of Commons
Monday 23 April 2012
The House met at half-past Two o’clock
Prayers
[Mr Speaker in the Chair]
Oral Answers to Questions
Work and Pensions
The Secretary of State was asked—
Single-tier State Pension
1. George Hollingbery (Meon Valley) (Con): When he plans to bring forward his proposals for a single-tier state pension. [104199]
The Minister of State, Department for Work and Pensions (Steve Webb): With permission, Mr Speaker, I will answer this question together with Questions 6 and 20.
I can confirm that, as was announced by the Chancellor in his Budget, we will present further details about the single-tier state pension in a White Paper later in the spring. Final decisions on the detailed implementation of the policy will be made in the next spending review.
George Hollingbery: A number of my constituents have contacted me expressing concern about the transition between the old and new systems—in particular, a Mr Theo Stellakis, whose questions the Minister has answered on a number of occasions. Can the Minister tell us how the transition will affect two people, one reaching the age of 65—or reaching pensionable age—on the day before the changes are implemented, and the other doing so the day after?
Steve Webb: I recall corresponding with Mr Stellakis on a number of occasions. What concerns him is the idea of a cliff edge before and after 2016. Let me clarify the position. When people receive state pensions of less than the full amount because they were contracted out, as I believe the hon. Gentleman’s constituent was, we will continue to take account of that after 2016, so there will not be the cliff edge that he envisages. We will have to phase out the arrangement over time, but in 2016 we will continue to take account of past contracting out.
Mr Speaker: Mr Simon Hughes? Not here. Jo Swinson? Not here.
The Department kindly informed me of the intended grouping at approximately 9.10 this morning. I hope, and say with some confidence that I trust, that it also informed the hon. Members in question. Neither of them is present, however, so I call Mr Julian Brazier.
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Mr Julian Brazier (Canterbury) (Con): Does my hon. Friend agree that the great advantage of his proposal is that it will help to restore incentives to save? Many people feel today that there are few such incentives in the benefits system.
Steve Webb: My hon. Friend is right. At present, the level of the basic state pension is so far below that of the means test that the first slice of savings is largely offset by means-tested benefits. My right hon. Friend the Chancellor has confirmed that whatever detailed proposition we present, the level of the single-tier pension will be clear of basic means-testing, and will therefore reward those who have saved rather than penalising them.
Mr Frank Field (Birkenhead) (Lab): How long does the Minister think he will get away with these proposals? If a private company decided to do what he proposes to do—take contributions away from people who have paid over the years and give additional pensions to people who have not paid anything—the House would be jumping around with anger. Why does he think he can do that to people who have paid for a second state pension?
Steve Webb: If we were doing what the right hon. Gentleman says we are doing, I should be as outraged as he is. However, we are not doing that. Part of our proposition is that all contributions paid to date will be recognised in the new system. At the point of transition, if someone was heading for a pension of £150, £160 or £170 a week, that is what we would pay that person. [Interruption.] The right hon. Gentleman asks, from a sedentary position, where the money is coming from. We will present our costings in the White Paper, and he will see then that we will find it through less means-testing, among other things.
As for bringing people into the system, successive Governments have, for example, credited women who have spent a period at home with children. Although they have not paid cash, they have contributed, and that should be recognised. I think that that is right, and we are doing the same.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab): In his Budget statement, the Chancellor told the House that moving to a single state pension would not cost more in any year than the current pension system. Further to the question from my right hon. Friend the Member for Birkenhead (Mr Field), may I ask whether the costs of the move will be borne partly by the more than 7 million workers in the private and public sectors who contribute to defined-benefit schemes and are currently contracted out?
Steve Webb:
As the hon. Gentleman knows, when we introduce a single state pension there will be no more contracting out, so clearly those who were in contracted-out schemes will be contracted back in. However, the annually managed expenditure costs of the scheme are being met by the reduction in means-testing and paying of savings credit to new claimants only, and by an increase in de minimis provision, so that people who have spent only a few years in the country do not build up a state pension as they would currently do. Those are the two main
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ways of meeting the costs, but they will also be met through the non-accrual of additional second state pensions after 2016.
Childcare Support
2. Julie Elliott (Sunderland Central) (Lab): What assessment he has made of the effect of changes in funding for childcare support on unemployment among women. [104201]
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller): I refer the hon. Lady so the answer that I gave the right hon. Member for East Ham (Stephen Timms) last Thursday. In case she was not able to read Hansard, however, I can tell her that the Government fully recognise the importance of child care in helping parents—not just mothers—to move into or stay in work. Through universal credit, we will for the first time extend help with child care costs to those who work for less than 16 hours a week, which will benefit 80,000 families who formerly had no entitlement to such support.
Julie Elliott: Is the Minister aware that since the cut in the child care element of benefit in October 2011, 44,000 people have stopped claiming? How many of those people does she think have simply left work because it does not pay to work any more?
Maria Miller: I think the hon. Lady is referring to some statistics about the reason why individuals are not in work, but I do not think she can quite draw the conclusion she has drawn that those particular individuals are out of work. As she will know, the Government are absolutely committed to making sure more women are able to move into work, which is perhaps why there are some 61,000 more women in work now than when Labour left office.
Mrs Helen Grant (Maidstone and The Weald) (Con): Does the Minister agree that flexible working and shared parental leave will be very helpful in keeping women in work and child care costs down?
Maria Miller: My hon. Friend is right. We have put in place a package of measures, including flexible working, that will make all the difference. I should also remind her that we have doubled the number of two-year-olds getting free nursery care, and some 80,000 more families will be able to get child care support under universal credit.
Remploy
3. Mel Stride (Central Devon) (Con): What progress he has made on support packages for Remploy workers in stage one factories. [104202]
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller): We will have a full and intensive package of support available for any employee affected by the Government’s announcement to accept the Sayce review recommendations. Remploy is currently within its 90-day consultation period, and once that has ended we will provide final and detailed information about the support disabled people will be given to move into mainstream employment.
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Mel Stride: Like my hon. Friend, I believe it is far better for disabled people to have the opportunity to work in mainstream employment than in segregated factories. However, will she outline the reforms she is making to the access to work programme to make sure that, in this case, some of the most vulnerable people in our society are able to get back into work quickly?
Maria Miller: My hon. Friend is right to suggest that we feel that access to work is the measure that will, when expanded, do most to help disabled people into work, and we will be working with disabled people to ensure we get the measures right. We have already been able to announce an extra £15 million to support access to work over the spending period, thereby helping some 8,000 more disabled people into work.
Mr Frank Roy (Motherwell and Wishaw) (Lab): I have spoken to every single worker in the Wishaw Remploy factory, and all of them are in despair at the thought of losing their jobs. How many notes of interest have there been from potential bidders for the Wishaw factory?
Maria Miller: I thank the hon. Gentleman for that question. I am not privy to those sorts of commercial details, but I will be working as hard as I can—as, I am sure, will he—to ensure that there are more credible bids so that, if possible, factories such as the one in Wishaw, which supports some 20 disabled people, can continue. However, I also remind him that there are more than 11,000 disabled people in his constituency, and we are trying to ensure that the available money is helping all of them.
Mr Lee Scott (Ilford North) (Con): Does my hon. Friend agree that it is very important to get young people with special needs into work, and does she welcome the scheme to be piloted in the borough of Redbridge in my constituency to get young people into work, and congratulate Interface and local businesses on playing their role in that?
Maria Miller: I commend the work my hon. Friend has been doing. He has done so much to support disabled people in his constituency get into work, and I look forward to continuing to follow the work he is doing.
Mrs Anne McGuire (Stirling) (Lab): Remploy Ltd provides a defined benefit occupational pension scheme for its employees, but it is not eligible for pension protection funding by virtue of regulation 2(1)(d) of the Pension Protection Fund (Entry Rules) Regulations 2005. In the case of Remploy, the Secretary of State for Work and Pensions guarantees that the company’s assets are sufficient to meet its liabilities in the event of its winding-up. Under the Minister’s current proposals, will the Secretary of State continue to honour that commitment to current and retired Remploy employees?
Maria Miller: I am sure the right hon. Lady is aware of the fact that when this Government took office we inherited an enormous deficit in the Remploy pension fund. We are trying to sort that out. I can absolutely give her the undertaking that pensions that are in place will be fully protected, as she would expect.
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Youth Contract
4. Karl McCartney (Lincoln) (Con): What progress he has made on the youth contract; and if he will make a statement. [104203]
18. Stephen Metcalfe (South Basildon and East Thurrock) (Con): What progress he has made on the youth contract; and if he will make a statement. [104220]
The Minister of State, Department for Work and Pensions (Chris Grayling): The youth contract was successfully launched on 2 April 2012. It builds on existing support available through Jobcentre Plus and the Work programme, enabling young people who are unemployed to look for work, gain work experience and skills, and find real, lasting jobs.
Karl McCartney: I thank the Minister for that illuminating answer. What assessment has been made of the impact of the work experience programme, which is being expanded under the youth contract?
Chris Grayling: We published the latest assessment of the effectiveness of the work experience scheme last week. It showed that the people who participated were 16% more likely to be off benefits 21 weeks after starting than a similar group who did not. It is worth stating that that is similar to the success rate of the future jobs fund, at a 20th of the cost.
Stephen Metcalfe (South Basildon and East Thurrock) (Con): Can my right hon. Friend tell the House how the youth contract is being received by employers across the country?
Chris Grayling: We have had enormously gratifying levels of support from employers for the youth contract, in terms of their willingness both to hire and to give apprenticeships to young people. In particular, I wish to pay tribute to all the companies, large and small, around this country, including in your constituency, Mr Speaker, and that of my hon. Friend, which are providing work experience opportunities for young people. We know that such opportunities give them a much better start in life than those who do not have that experience.
Sheila Gilmore (Edinburgh East) (Lab): Press reports have suggested that the amount of extra support being given to young people might be as little as a text message. Will the Minister be specific about how much face-to-face advice and support young people are getting under this programme?
Chris Grayling: Much more than was the case under the previous Government. We do not apply a one-size-fits-all approach; we do not drag somebody in from a work experience placement or from a sector-based work academy to do an interview with them. However, we keep in contact with everyone every week, and when people are not working—when they are not in a work experience placement—we are now providing weekly contact with young people, as opposed to the fortnightly contact that was the case under the previous Government.
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Karen Bradley (Staffordshire Moorlands) (Con): One message coming from Staffordshire Moorlands Community and Voluntary Services, which runs the job club in Leek and Biddulph, in my constituency, is that it would like more employers to offer the youth contract. What can the Minister do to encourage more employers to get involved?
Chris Grayling: First, I pay tribute to the work being done in the Moorlands by the job clubs there, which is making a real difference to the prospects of the unemployed. What I say to my hon. Friend and to every hon. Member is that there is a real opportunity for each of us, individually, to approach local employers and encourage them to provide work experience opportunities. Tremendous work is already being done by colleagues in organising job fairs and organising different opportunities for young people who are looking for work. We can all play a part in this; it is a way in which this House can be a real activist centre in trying to help unemployed young people.
Stephen Timms (East Ham) (Lab): It is a good thing that the youth contract has finally started. The Deputy Prime Minister says that he told the Cabinet in January last year that something needed to be done on youth unemployment. Why has it taken the Department for Work and Pensions 15 months to make something happen?
Chris Grayling: I have great respect for the right hon. Gentleman, but on this occasion he has plain got it wrong. Over the past 12 months, we have put in place support through the work experience scheme, and we have put in place the Work programme and sector-based work academies. We have also given greater flexibility to job centres to use funding that is available to them to provide tailored support for people in their community. We have been working hard to tackle a problem of youth unemployment that built up and was left behind as a dreadful legacy by the previous Government.
Stephen Timms: In the youth contract, the wage subsidies are in a national pot to be handed out on a first-come, first-served basis, so providers will be competing to hand them out as fast as possible, whether or not they are actually needed. Surely it would have been far better to target subsidies where they are needed. Why has the youth contract been so badly designed?
Chris Grayling: Once again, the right hon. Gentleman has just got it plain wrong. We are targeting this support at young people who are struggling to get into work—the long-term unemployed. I am talking mostly about those who have been out of work for more than nine months, but sometimes this will go to those who have come from the most difficult backgrounds and who have been out of work for three months. This money is targeted absolutely at where it is needed, and I believe that it will make a difference.
Universal Credit
5. Elizabeth Truss (South West Norfolk) (Con): What assessment he has made of the means by which universal credit will deliver funding for childcare. [104204]
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The Secretary of State for Work and Pensions (Mr Iain Duncan Smith): We have committed to invest some £2.3 billion in child care support in universal credit—that is £2 billion spent on the current system and an extra £300 million we secured in order to extend support to parents working less than 16 hours. That should give them what is really important—support in work across the hours—and it means that some 80,000 more families will get child care under universal credit.
Elizabeth Truss: In the Netherlands there is a system of agencies that train and regulate childminders. That country has twice the number of childminders per head than we do in the UK and its child care is also more affordable. Will the Secretary of State look into what happens in the Netherlands, with a view to getting better value for the universal credit money and getting more people into work as childminders?
Mr Duncan Smith: I take this opportunity to congratulate my hon. Friend on the work that she has been doing on this. She is quite right that it is an important area and it is one that I have asked my Department and the Department for Education to consider together. Under the previous Government, the number of childminders fell quite dramatically. In 1996, there were about 100,000 and in 2011 that number had fallen below 60,000. That is a huge issue. When we took over, we found that the costs of child care in the UK are about the fourth highest in the world. My hon. Friend is absolutely right that there are big issues that we need to deal with and try to resolve so that we can get more people back to work with the support that they need.
Löfstedt Report
7. Andrew Bridgen (North West Leicestershire) (Con): What progress he has made on implementing the recommendations of the Löfstedt report on health and safety regulation. [104207]
8. Mr David Ruffley (Bury St Edmunds) (Con): What progress he has made on implementing the recommendations of the Löfstedt report on health and safety regulation. [104209]
The Minister of State, Department for Work and Pensions (Chris Grayling): As my hon. Friends will recall, the Löfstedt review was published last November. We have already made good progress on implementing the report’s key recommendations. Consultation on the repeal or revocation of 21 legislative measures is already under way by the Health and Safety Executive and the Government intend to scrap, consolidate or improve 84% of health and safety regulations, greatly reducing the burdens on business and creating a clearer regulatory framework. In addition, two independent challenge panels have been established, the first to consider complaints from businesses about decisions made by HSE or local authority inspectors. The second will consider problems arising from non-regulators, such as insurance companies, health and safety consultants and employers, and to assess whether those decisions are proportionate and appropriate or whether they are wrong.
Mr Speaker: There is scope for a written ministerial statement, I would have thought.
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Andrew Bridgen: It was one, Mr Speaker.
I welcome the launch of the mythbusters challenge panel, designed to give quick advice to people affected by ridiculous or disproportionate health and safety decisions. Will my right hon. Friend explain how that panel will work?
Chris Grayling: What we are trying to do is to give people who believe that a decision that has been taken is wrong—such as a decision to cancel an event or to take some other step that will impact on their lives—a chance to go quickly to the HSE and ask whether it is based on a true interpretation. We will seek to give them a clear view within two days of whether the decision is appropriate, so that they can challenge it locally.
Mr Ruffley: EU directives accounted for 94% of the cost of health and safety rules between 1998 and 2009. What discussions has the Minister had in Brussels about this completely unacceptable state of affairs and will he make it clear to Brussels officials that British businesses want less, not more, Brussels interference in the British workplace?
Chris Grayling: I wholeheartedly agree with my hon. Friend. The tide of bureaucracy we have seen in recent years has hindered business and affected employment. My view is that the EU should focus on measures that create jobs, rather than hindering the creation of jobs. That is of fundamental importance and I can assure him that I will fight that battle extremely vigorously in Brussels.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): The Health and Safety Executive has recently concluded its consultation on charging business for some of its services. Will it be able to keep the income brought in through that process or will it go straight into the Treasury?
Chris Grayling: The actual process is that all moneys raised in such a way go to the Treasury first, but financial agreement has been reached between the Treasury and the HSE, so that appropriate amounts of money are passed on to the HSE so that it can carry out that regime as intended.
Multiple Disadvantages
9. Stuart Andrew (Pudsey) (Con): What steps his Department is taking to support families and individuals facing multiple disadvantages. [104210]
10. Paul Maynard (Blackpool North and Cleveleys) (Con): What steps his Department is taking to support families and individuals facing multiple disadvantages. [104211]
13. Jake Berry (Rossendale and Darwen) (Con): What steps his Department is taking to support families and individuals facing multiple disadvantages. [104214]
21. Chris Skidmore (Kingswood) (Con): What steps his Department is taking to support families and individuals facing multiple disadvantages. [104223]
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The Secretary of State for Work and Pensions (Mr Iain Duncan Smith): My Department’s reforms of the welfare system are to support people with difficulties entering the world of work. We have considered this matter extensively and are introducing support that is tailored to the needs of individuals to get them closer to employment and to tackle the entrenched worklessness at the heart of that. That includes £200 million of European social fund support for families with multiple problems. Local authorities play a critical role in the delivery of that support and we urge them to consider it to be as important as we do.
Stuart Andrew: I welcome the fact that about half the organisations involved in the delivery of this scheme are voluntary. Does my right hon. Friend agree that local charities are often best placed to provide the tailored and personalised support that such families need?
Mr Duncan Smith: It is true that voluntary sector organisations tend to deal with the whole person, rather than, like Government Departments and even sometimes local authorities, considering specific issues while forgetting that many of them knock on to each other. Such organisations have an important role to play. We should not ignore the fact that local authorities and Government Departments have to get their act together and make sure that when dealing with families with multiple problems, they talk to each other—always, there is a tendency for them not to do so. The good authorities hub up all the services around the family, which is at the centre, so Health, Work and Pensions, Education and all the Departments involved start to co-ordinate their activity, rather than spend all that money and get nowhere.
Paul Maynard: One of my wards, Claremont, is, according to the latest DCLG statistics, the fifth most deprived ward in the country, and I see daily the hurdles that families have to overcome to deal with some of the entrenched problems they face. I realise that no single agency can solve them, nor indeed can any single Government Department. Will the Secretary of State explain what he is doing with other Departments to ensure that all troubled families get a whole-of-Government approach, rather than a series of unconnected initiative-itises?
Mr Duncan Smith: My hon. Friend raises a good point. That is why the Prime Minister asked specifically that Louise Casey operate and head up a unit, reporting to my right hon. Friend the Secretary of State for Communities and Local Government, which is looking at the 120,000 worst affected, most difficult families. The idea, as I said earlier, is that, working with her, local authorities nominate the families. She wants them to hub up services to make sure that the pooled amount of money they get is spent on life-changing actions, not the tokenistic box-ticking that too often takes place.
Jake Berry: Does my right hon. Friend agree that the best way to escape the silo mentality in Government Departments and local authorities is to champion the voluntary sector in helping to support families in areas of multiple deprivation, such as those in my constituency? Home-Start is a fantastic charity that does such work in my area. Will he support it?
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Mr Duncan Smith: Indeed I do. Home-Start is a remarkable charity and I am sure that right hon. and hon. Members on both sides of the House will give it their full support. It is worth bearing in mind that the families it deals with are very much in that category of worst and most troubled, with children growing up with parents who often have multiple issues themselves—sometimes serious drug addictions—and sometimes the money given to the families does not get down to where it benefits the children. It is worth reminding the House that 1.8 million children live in workless households, which gives them a difficult start in life.
Chris Skidmore: Some of the families and individuals facing multiple disadvantages are also family carers and young carers. What reassurance can the Secretary of State give the House that the Government will recognise those who have a caring role when introducing this fantastic support package?
Mr Duncan Smith: That is very much part of what we are trying to do and we will certainly recognise such roles. After all, we recognise fully that the effort given beyond the state multiplies many times the amount given by the state. Without that support—that voluntary and family work with people with difficulties—it would be almost impossible for the state to operate.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): Will the right hon. Gentleman join me in paying tribute to Lord Ashley, who was passionately committed to people with disabilities and pursued that work both in this House and in the other place? As a further tribute, will he ensure that, in his Department, the needs of people with hearing impairments are met as they should be able to expect?
Mr Duncan Smith: Indeed I will. The right hon. Gentleman reminds us that we should all pay tribute to a brilliant campaigner, if I dare say, and supporter of people with disabilities. All of us in this House and the other place know the effectiveness of his campaigns and stand in awe of someone who dedicated his life as he did to supporting vulnerable people.
Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab): Yesterday, I was contacted by my constituent Edward Connolly. Edward and his wife have four children under 10, and Edward is recovering from prostate cancer. He works 16 hours a week and his employer cannot give him any more hours. He cannot access the Work programme, and he is losing £250 a month in tax credits. Can the Secretary of State tell me how he proposes to protect the Connolly family from the multiple disadvantages that have been introduced by this Government?
Mr Duncan Smith: If the hon. Gentleman wants to write to me directly about that, I am very happy to speak to the individual concerned and his family. Clearly, we want to do the best by them. That is the whole point of universal credit, which will benefit him enormously at 16 hours, and other hours too, whereas the present system, as the hon. Gentleman knows, targets only specific hours, rather than all the hours that people work. I am happy to deal with that case directly.
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Mr Gerry Sutcliffe (Bradford South) (Lab): May I add my condolences to the family of Lord Ashley, who was a tremendous worker in both Houses? The Minister is right: it is difficult to deal with families with multiple disadvantages. The difficulty is that that group is growing wider now because of people losing disability or other benefits. How will the Minister make sure that we maintain an up-to-date list of the families who have problems—a list that is going to grow?
Mr Duncan Smith: The hon. Gentleman is absolutely right. This is one of the big issues that we have to deal with. The reason why Louise Casey was asked to do this work was so that she, working with the local authorities, could start to map out where the most difficult families are in their areas. The key thing—I come back to this—is that it is ultimately local authorities that will and should know where these families are. There are some good examples. In Westminster the council has already hubbed up the issue and got organisations working with it; other local authorities are not so good. I am not here to name and blame, but I want local authorities to act with Louise Casey and the team to make sure we map those families, as the hon. Gentleman so rightly asks us to do.
Grahame M. Morris (Easington) (Lab): The Secretary of State refers to Louise Casey, but my understanding is that Emma Harrison was paid £8.6 million in dividends last year from her company, A4e, which was appointed by the Prime Minister to head up that programme, but she has now resigned. Can the Secretary of State list her main achievements?
Mr Duncan Smith: Nice try, but the hon. Gentleman has got it wrong. Emma Harrison had nothing to do with the programme. Louise Casey has always been heading it up. I understand why he wants to elide the issues, but it is not true. Emma Harrison heads an organisation and was asked to give some advice, I understand, to 10 Downing street on other issues to do with families, but she has not controlled this issue at all. I hope the hon. Gentleman will try again some other time.
Employment and Support Allowance
11. Katy Clark (North Ayrshire and Arran) (Lab): How many blind people had their contributory employment and support allowance withdrawn in the last month for which figures are available. [104212]
The Minister of State, Department for Work and Pensions (Chris Grayling): May I associate myself also with the remarks about Lord Ashley? He was one of my constituents. He and I worked together closely on the future of Epsom hospital. He was a great campaigner, as well as being a lovely man, and he will be much missed.
Assuming that the hon. Lady is talking about the changes in the Welfare Reform Act, the answer is that the change has not yet come into force so no one has had their benefit withdrawn yet.
Katy Clark:
I thank the Minister for his answer and associate myself with the comments about Lord Ashley. A 56-year-old blind constituent came to my surgery a fortnight ago. He currently receives incapacity benefit but is very concerned about the Government’s proposals
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in relation to employment and support allowance. What can the Minister say to him and to the many other blind people who are worried that they will no longer be eligible for benefits under the Government’s proposals?
Chris Grayling: It is obviously difficult to be exact in an individual circumstance without knowing about the case, but my message to all those in receipt of benefits is that this change affects only those in the work-related activity group who have the potential to return to work and who have another means of income or who have savings in their household. It does not affect those who cannot work in the support group. It does not affect those who need the financial support through an income-based benefit. It affects only a minority of claimants who have the potential to return to work and have other means.
Duncan Hames (Chippenham) (LD): I understand why the Minister would want assessments to consider people individually. However, the frameworks for those assessments need to be got right. Take, for example, how a blind person may fare in applying for the new personal independence payment. Will the Minister and his colleague look again at the weightings that will apply to the activities supported by this payment, since if someone with full sight loss is unlikely to qualify for the enhanced level of support, surely there would be a case for changing the weightings?
Chris Grayling: We are trying to get this right. We want a reform that produces a system that reflects genuine disability and does not provide support to those who do not need it. We are in the middle of a consultation about this. I ask my hon. Friend to take part in that consultation and to encourage his constituents who may be concerned about the reform to do so. We want to get it right.
Ian Paisley (North Antrim) (DUP): What message has the Minister for my constituent, Annie McAlonan, who was on income support and incapacity benefit and has now been transferred to ESA but has failed the medical examination? This woman has breast cancer and ongoing medical difficulties associated with that condition, yet she is told that she is now fit for employment and has to seek employment. Is this not a classic case of welfare reform failing the most vulnerable?
Chris Grayling: It is under different leadership in Northern Ireland, but let us be absolutely clear that someone who is undergoing treatment for cancer and is having chemotherapy and radiotherapy would, in almost all cases, be in a support group and be receiving long-term care. I do not know enough about the circumstances of the hon. Gentleman’s constituent to be exactly certain where she is in the course of her treatment, but one of the changes that we made on coming to office was to improve support for cancer patients, not to reduce it.
Richard Fuller (Bedford) (Con): A constituent visited me during the weekend to express her concerns about her husband who is blind and who has been informed that he will lose ESA in five months. He is taking a course to enable himself to get back into work, but it will take longer than five months to complete. What additional support may be provided to people in his situation to enable them to get back into work?
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Chris Grayling: It very much depends on the circumstances of those concerned. The only people in danger of losing ESA as a result of those changes are those with other financial means in the household. It may be that they gain an additional entitlement to housing benefit and tax credits as a result of the changes, but we do not want to apply a one size fits all through the system to those who are blind or partially sighted. Some will need long-term support as a result of their conditions, and we will want to help others with long records in employment back into employment as quickly as possible.
Work Programme
12. Alex Cunningham (Stockton North) (Lab): What support he plans to provide to young people who leave the Work programme without a job. [104213]
The Minister of State, Department for Work and Pensions (Chris Grayling): The Work programme will help and is helping a significant number of people into lasting work. We are trialling two approaches to supporting the very long-term unemployed. Those trials will inform the development of a national programme of support from the summer of 2013 for those leaving the Work programme who still need to find employment and need further help.
Alex Cunningham: Young people deserve the offer of a real job if they are out of work long term. Why does not the Minister put in place Labour’s real jobs guarantee to ensure that young people have the opportunity of real jobs with training and time to search for a job, instead of dropping them like a stone?
Chris Grayling: We have to remember that the funding that underlies Labour party policy has already been announced for, I believe, nine different purposes of late. The programmes that we have put in place to help young people are much more cost-effective than the previous Government’s programmes, and much more affordable at a time when, as the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) reminded us, there is no money left, and they are making a real difference today.
Robert Halfon (Harlow) (Con): Is not the best way to help these young people the investment in the hundreds of thousands of apprenticeships that give young people the skills they need?
Chris Grayling: I completely agree. My hon. Friend has done a first-rate job in promoting apprenticeships in his constituency and in Parliament. The apprenticeship dimension to the youth contract will be an important part of getting young people into work. This is a much better way forward to create long-term career opportunities for young people than the short-term placements out of the private sector that were the hallmark of the previous Government.
Mr David Lammy (Tottenham) (Lab): Will the Minister share his concerns with the House about the rising level of long-term unemployment among London’s black youth, now three times the level of their white peers? Why is it that in Tottenham, 87% of Haringey’s young residents are not entitled to the wage incentive scheme under the youth contract? This is a real concern.
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Chris Grayling: The only young unemployed people in Haringey not entitled to access funding under the youth contract are those who have not been out of work for very long. I genuinely share the hon. Gentleman’s concerns about young black unemployment, and that is one reason why we have created for Jobcentre Plus the flexible support fund, which enables our local offices to target support, as it is indeed doing in Haringey, at organisations such as the Tottenham Hotspur Foundation, which is working with young black people. The figures that the Labour party keeps putting forward about long-term youth unemployment are completely distorted by the fact that it used to hide people in the training allowance, which did not show up in the figures, and we no longer do that.
Flexible Support Fund
14. Guy Opperman (Hexham) (Con): What steps Jobcentre Plus is taking to use the flexible support fund to support claimants into work. [104215]
The Secretary of State for Work and Pensions (Mr Iain Duncan Smith): Referencing that last answer, we are all rather proud of the flexible support fund. It is a bold scheme that changes the direction of travel for jobcentres, which until 2011 worked in a static and rigid way. We are getting more flexibility, and the flexible support fund allows advisers to target money at individuals who may need support in getting to job interviews or buying the right kind of clothing, which is a big and bold change.
Guy Opperman: How has the flexible support fund actually provided funding to local partnerships to address those barriers to work, and will the Secretary of State write to me with specific evidence relating to the north-east?
Mr Duncan Smith: Indeed I will write to my hon. Friend. We have looked again at the flexible support fund and increased its flexibility and what advisers can do. Let me give some examples. General advisers in jobcentres can give up to £300—raised by over £100—to whatever specific area they think needs it. Senior operational managers can give up to £500, district managers can give up to £50,000, and work service directors can give up to £100,000, so the scope is there for them to do that flexibly. Many awards have been made, for example £985 for a class 1 HGV driver’s licence, so there is scope. I advise right hon. and hon. Members on both sides of the House to remind their young unemployed and other unemployed constituents that there is scope for them to be supported if they have difficulties.
Pension Funds
15. Dr Julian Huppert (Cambridge) (LD): What steps he is taking to ensure that pension funds adopt ethical and infrastructure investments. [104217]
The Minister of State, Department for Work and Pensions (Steve Webb):
If I may refer briefly to the grouping of earlier questions, Mr Speaker, I understand that we failed to notify my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) and
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my hon. Friend the Member for East Dunbartonshire (Jo Swinson) of the grouping and so apologise to them and to you.
Pension scheme trustees can consider companies’ environmental, social and governance practices. I am clear that trustees’ duties do not require them simply to maximise short-term investment returns. On infrastructure, the autumn statement set out details of a memorandum of understanding signed by the Government with two groups of UK pension funds to support additional investment in UK infrastructure.
Dr Huppert: I thank the Minister for his comments. He will be aware of the whole range of investments that give more than just short-term financial returns. For example, the Cambridge Retrofit programme, which was launched last week, will try to retrofit every building in Cambridge by 2050. However, how will he communicate with trustees and ensure that they are aware that their fiduciary duties do not prevent them from doing this, because many of them seem to be unaware of it?
Steve Webb: The Pensions Regulator communicates regularly with trustees and provides a trustee toolkit on its website that sets out their duties, but I think that auto-enrolment provides an opportunity for ethical investment. For example, the National Employment Savings Trust will specifically have an ethical fund for those who wish to invest in that way, and I hope that the schemes my hon. Friend refers to will seek to find investment through that sort of route.
Unemployment (Bristol)
16. Kerry McCarthy (Bristol East) (Lab): What recent estimate he has made of the level of unemployment in Bristol. [104218]
The Minister of State, Department for Work and Pensions (Chris Grayling): The latest estimate for the level of International Labour Organisation unemployment in Bristol, produced by the Office for National Statistics, is 21,400.
Kerry McCarthy: Does the Minister know whether the Prime Minister, on his visit to Bristol today, will take the time to meet some of those affected by long-term unemployment, which is up by 72% in the past year and a staggering 15,000% among young people, or was the hon. Member for Mid Bedfordshire (Nadine Dorries) correct when she described the Prime Minister and the Chancellor on the “Daily Politics” show today as
“two arrogant posh boys who show no remorse, no contrition, and no passion to want to understand the lives of others”?
Chris Grayling: I cannot speak for the Prime Minister, but I can say that I have been to Bristol recently and spoken with unemployed people there. I can also tell the hon. Lady that the figures she quotes are nonsense. She and her Labour colleagues keep forgetting the fact that they used to hide large numbers of unemployed people on a training allowance, which masked the true picture of long-term unemployment. I can absolutely assure her that genuine long-term unemployment in her constituency is not up by 72%.
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New Enterprise Allowance
17. Julian Smith (Skipton and Ripon) (Con): What assessment he has made of the effectiveness of the new enterprise allowance. [104219]
The Minister of State, Department for Work and Pensions (Chris Grayling): We have not yet made a formal assessment of the effectiveness of the NEA because it is too early to draw robust conclusions. We will of course carry out a proper impact analysis in due course. Participation in the scheme has so far proved popular; at the end of November last year, when the most recent figures were published, nearly 2,000 new businesses had been created, and many more have been created since then.
Julian Smith: I thank the Minister for that answer. Is it not correct that Yorkshire and the Humber has one of the highest take-ups of the scheme anywhere in the country? Has he thought about how we could increase the number of places on the scheme in order to allow people who want to set up a business to start much earlier?
Chris Grayling: Yorkshire and the Humber has indeed proved to be a pathfinder for the scheme. I am aware of how popular it is and am now looking at ways in which we could modify it in order to provide a greater focus on those areas where demand is high and see whether it makes sense to allow people to access it earlier.
Work Capability Assessment
19. Yvonne Fovargue (Makerfield) (Lab): What assessment he has made of homeless people’s experiences of the work capability assessment. [104221]
The Minister of State, Department for Work and Pensions (Chris Grayling): In recognition of the specific issues that homeless people encounter, information and advice related to the work capability assessment is provided through their Jobcentre Plus adviser when they collect their benefit payment via the personal issue payment process.
We have also been in touch with the Department for Communities and Local Government about homeless people. Through this, a meeting has been arranged between Professor Harrington, the work capability assessment independent reviewer, and several charities representing homeless people. We will consider fully any recommendations he makes.
Yvonne Fovargue: Upcoming research from Crisis shows that almost half the homeless people questioned felt that the health care professionals at their assessment had a bad or very bad understanding of homelessness and how it impacts on their lives. What steps are being taken to raise awareness among the health care professionals conducting that research and carrying out the work capability assessment?
Chris Grayling:
I have invited all the charitable groups that have an interest in WCA matters to feel free to offer guidance and training sessions to our decision makers, and to share their views so that any appropriate elements can be included in our training programmes, but of
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course the best way of helping the homeless is to help them into employment—to use the income to find a home and to sort their lives out properly.
Damian Hinds (East Hampshire) (Con): Given the prevalence of mental health issues among homeless people, is not Professor Harrington’s focus on such issues in his second report particularly important for them? Does the Minister also welcome the view of charities such as Homeless Link that Professor Harrington’s work is making a material difference to the operation of the work capability assessment?
Chris Grayling: It might be appropriate at this point to pay tribute to Professor Harrington for the work that he has carried out. Of all the things that I have heard over the past 18 months about the work capability assessment, one thing I have not heard is anyone criticise Professor Harrington, who has done his job excellently and independently.
Single-tier State Pension
20. Jo Swinson (East Dunbartonshire) (LD): When he plans to bring forward his proposals for a single-tier state pension. [104222]
The Minister of State, Department for Work and Pensions (Steve Webb): I apologise to my hon. Friend for not giving her a chance to ask her question earlier on.
We will shortly bring forward a White Paper on the single-tier pension, as my right hon. Friend the Chancellor of the Exchequer announced.
Jo Swinson: I thank my hon. Friend for that reply. He and I have long campaigned for a citizen’s pension, to be paid at a decent level to all pensioners, without the need for bureaucratic means-testing and, of course, the problems that that creates, with many pensioners losing out. I welcome the plans for a single-tier pension from 2016. Will my hon. Friend confirm that, although the current proposals apply only to new pensions, there is nothing to stop a future extension to all pensioners if the money can be found?
Steve Webb: Obviously, we will not write the law in a way that prevents all pensioners from being brought within its scope, and I am sure my hon. Friend will press for that. We are aware that, under our proposals, getting on for more than 80%, and eventually 90%, of pensioners will qualify for the pension, so it will have many of the features of a citizen’s pension but be based on 30 years of contributions or credits.
Mr Speaker: Well, that exchange was worth waiting for, I am sure the House will agree. I thank both Members.
T1. [104390] Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): If he will make a statement on his departmental responsibilities.
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The Secretary of State for Work and Pensions (Mr Iain Duncan Smith): In recent weeks we have published new figures on the incapacity benefit reassessment programme, so I thought it would be helpful to the House if I just reminded Members of the figures. Throughout Great Britain as a whole, some 37% of people have been found fit for work, with another 34% expected to be able to work in the future, with the right support. These figures show that the programme is working.
Tom Greatrex: Does any Minister think it appropriate that, while undertaking a contract on behalf of the Secretary of State’s Department, Atos Healthcare, first, published misleading information on its website; secondly, refused to comply with the Advertising Standards Authority inquiry into that information; and, thirdly, failed to correct it until alerted to do so by the media last week—several weeks after the compliance notice was issued? Do they think that that is acceptable for an agency working on behalf of the Government?
The Minister of State, Department for Work and Pensions (Chris Grayling): We always discuss issues such as that one very carefully with our subcontractors, but I do not believe that it affects the professionalism of the health care professionals who are carrying out the work on our behalf. Many are doing a very difficult job in challenging circumstances—but doing the best for people who claim incapacity benefit and who could have a better future.
Simon Hughes (Bermondsey and Old Southwark) (LD): Following earlier questions on pensions, will the Minister put on record the fact that the Budget and the Government’s decisions are the best news ever for pensioners now, as well as for pensioners in the future? The press and the Opposition appear to have somewhat missed the point.
The Minister of State, Department for Work and Pensions (Steve Webb): My right hon. Friend is aware that, as Pensions Minister, I am responsible for people who are currently pensioners and for everyone who will be a pensioner, which is everybody, and we have good news for today’s pensioners: not only the highest-ever cash increase but, more than that, year-on-year above-inflation increases whenever earnings grow more rapidly—and, incidentally, an increase in the age-related personal allowance this April of more than £500.
Mr Liam Byrne (Birmingham, Hodge Hill) (Lab): May I associate myself with the words of tribute to Lord Ashley, who was a formidable champion of the people whom we came into politics to serve? He will be sorely missed in both Houses, but his inspiration will live on.
Two years before the election, the Prime Minister gave the pensioners’ pledge:
“The Government I lead will make sure that older and retired people are treated with dignity and given the quality of life they deserve.”
Will the Secretary of State therefore confirm, as the Institute for Fiscal Studies has said, that pensioners will be £315 a year worse off, thanks to the granny tax?
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Steve Webb: The changes announced by the Chancellor in the Budget will increase the age-related personal allowance this April by more than £500 and leave it at £10,500 for 65 to 74-year-olds while the allowance for those of working age is levelled up to that figure, at which point all people will have a substantial tax-free allowance that will be increased thereafter.
Mr Byrne: This is why pensioners on the doorstep are so cross—they know that they have been hoodwinked by the Government. This measure was dressed up in the Budget as a simplification. I think the Secretary of State detains his barbers for about as long as I do. Does he go along and ask for his hair to be “simplified”? I do not think so. A cut is a cut. On top of granny tax 1, we now learn of granny tax 2. Will the Minister admit that from 2014 pensioners will face a further cut of £900, and apologise for trying to keep it secret?
Steve Webb: I do not recognise the figures that the right hon. Gentleman quotes, but I assure him that what matters most to the pensioners to whom I speak is a decent state pension. After 30 years of the pension declining in value relative to earnings, from now on it will rise every year by whatever is the highest of earnings, prices or 2.5%. There will be a guaranteed increase every year that matches inflation or is above inflation. That is something that pensioners value.
T4. [104394] Mr Mark Spencer (Sherwood) (Con): Does the Minister recognise that traditionally the Child Support Agency has targeted fathers who contribute willingly, rather than chase the more challenging maintenance evaders?
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller): I understand that the current system feels unfair to many people. However, I reassure my hon. Friend that we do not target people in that way. We want to ensure that more people receive positive financial support. The tragic fact is that only half of children living in separated families currently have a positive financial arrangement in place.
T2. [104391] Ann McKechin (Glasgow North) (Lab): The Scottish Trades Union Congress reported today that the number of young Scots who are in receipt of unemployment benefit for more than 12 months has increased by 1,100% since 2007. Will the Minister confirm that those 5,000-plus young people will not be abandoned? What guarantee will he give about how many of them will be in work by this time next year?
Chris Grayling: Once again, it is the same story from the Labour party and its supporters. Let us be clear that what has changed in long-term unemployment since we took office is that we no longer hide young unemployed people—or, indeed, older unemployed people—on a training allowance, which distorted the figures by as much as 30,000 each month. That is why long-term youth unemployment and unemployment appear to be rising. It has nothing to do with economic change and everything to do with how disingenuous the previous Government were.
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T5. [104395] Amber Rudd (Hastings and Rye) (Con): The Child Support Agency’s office for London and the south-east is in Hastings. It employs nearly 1,000 to do an often difficult and challenging job. When the Minister brings forward her reform plans, I ask her to ensure that this important service is not relocated, because a great deal of local expertise has been built up.
Maria Miller: I thank my hon. Friend for giving me the opportunity to pay tribute to the excellent work of the Child Support Agency staff in Hastings. I reassure her that the changes that we are planning will have a negligible effect on delivery staff.
T3. [104393] Julie Hilling (Bolton West) (Lab): After the hard-fought and successful campaign to get the higher rate of the mobility component for blind and partially sighted people under disability living allowance, will the Minister reassure me that no blind people will be disadvantaged by the transition to the personal independence payment and that such people will continue to receive the higher rate of the mobility component?
Maria Miller: The hon. Lady will know that we are in the process of finalising the assessment criteria for the new personal independence payment. I am sure that she will be reassured to know that I have met a number of organisations that represent blind people. I remind her that with the personal independence payment, we are trying to recognise the barriers that people face to living an independent life, and not simply to categorise them based on their impairment.
T9. [104399] Laura Sandys (South Thanet) (Con): I thank the Minister for agreeing to come to a jobs fair in Thanet in June. I am sure that he shares everybody else’s pleasure at seeing that there has been a small drop in youth unemployment. What more can I tell the young people of Thanet that we are doing to help them get the jobs that will be advertised at the jobs fair?
Chris Grayling: I am sure we were all pleased to see the small fall in youth unemployment announced last week, but there is a long way to go in tackling what is a big challenge for this country. I hope that the employers of Thanet will respond to the wage subsidies in the youth contract by giving young unemployed British people their first step on to the ladder of employment. That is what we all want to happen.
T6. [104396] Grahame M. Morris (Easington) (Lab): We have heard a lot of talk from the Government about creating an information revolution in Whitehall, but with the Secretary of State’s Department leading a charge by outsourcing many of its responsibilities, will the same measures of transparency apply to private sector companies such as A4e and Atos as currently apply to public sector bodies?
Mr Duncan Smith:
First, with respect to the hon. Gentleman, I do not think that this Government, or this Department under its current management, need to take any lessons from one of the most secret Governments in history. If he would like to look on our website, he will see that we publish a huge amount of data on all the contracts that we let, down to a very low level. He
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can find out more information now, as a direct result of what we do. Obviously, private contracts are for private people.
Miss Anne McIntosh (Thirsk and Malton) (Con): Would the Minister like to clarify his earlier remarks about partially sighted people not being means-tested and judged on their savings but being awarded benefit on the basis of their need?
Chris Grayling: That is of course our approach right across ESA. We do not apply a one-size-fits-all approach. Those with the potential to return to work will receive help to do so, those who will be able to return to work in due course will get support and guidance along that journey, and those who cannot be expected to work will receive long-term unconditional support in the support group. That is absolutely how the Government should seek to work.
T7. [104397] John McDonnell (Hayes and Harlington) (Lab): Members throughout the House, including Ministers, have emphasised the importance of the care that must be taken in dealing with people with mental health problems as they approach their medical and capability assessments, particularly if they lose benefits. Some anecdotal evidence is emerging of suicides taking place among people who have lost benefits. Have the Government explored any of the coroners’ reports of cases in which there has been a reference to the loss of benefits as a contributory factor, and what lessons have been learned?
Chris Grayling: We will always examine something like that very carefully indeed when it happens. So far, my experience is that the stories are usually much more complicated, but that does not mean we are not doing the right thing. I passionately believe that we should help such people, particularly those with mental health problems. I have met people who have been out of work for years and years with chronic depression, but whom we are now beginning to help back into work. We have to be careful, and we examine such situations carefully when they arise.
Jessica Lee (Erewash) (Con): Will my hon. Friend join me in congratulating Erewash credit union on its participation in the back to work scheme? A young person I met on Friday who is participating in the scheme is extremely enthusiastic about their prospects and future and now feels ready for the next step back to work.
Steve Webb: I pay tribute to the credit union in my hon. Friend’s constituency. As she knows, the Department has given credit unions significant financial support. We have recently received a report on their future development and expansion, and we hope to bring forward proposals shortly to give them a greater role and an extended way of helping people on low incomes, through both finance and initiatives such as she describes.
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Heidi Alexander (Lewisham East) (Lab): Last Friday I attended Lewisham jobcentre and was told that between 1,800 and 2,000 people visit it every day. What extra resources are being provided to jobcentres in areas of acute unemployment to help people access work?
Chris Grayling: Most recently, we have increased the number of youth advisers so that we have additional support in places such as Lewisham to enhance our work to help unemployed young people get into work. I hope that those advisers will make a difference to young people’s prospects.
Stephen Metcalfe (South Basildon and East Thurrock) (Con): Is the number of people in receipt of out-of-work benefit higher or lower now than it was in May 2010?
Chris Grayling: I am very pleased to tell the House that since May 2010, the total number of people in this country on out-of-work benefits has fallen by 45,000.
Steve McCabe (Birmingham, Selly Oak) (Lab): Is the Minister familiar with the recent freedom of information request that revealed that 1,100 employment support allowance claimants died between January and August last year after being assessed as fit for work? What steps is he taking to investigate this rather large number of deaths, and how come so many of those people were assessed as fit for work?
Chris Grayling: I am afraid that we cannot simply extrapolate one of those facts from the other. Sadly, we are all mortal, and circumstances arise that we do not expect. As I said to the hon. Member for Hayes and Harlington (John McDonnell), we always look very carefully at individual cases, but the Government are doing the right thing in trying to provide support to help people to get back into work. The worst thing for their health and well-being is for them to be on benefits for the rest of their lives if they do not need to be.
Mrs Helen Grant (Maidstone and The Weald) (Con): What discussions has the Minister had with the Department for Communities and Local Government on council tenants starting a business in their homes?
Mr Duncan Smith: We discuss such matters at all times with the Department for Communities and Local Government. I promise my hon. Friend I will ensure that I raise that one.
May I take this opportunity to say to my opposite number, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), that I wish him the very best of luck if he heads off to be mayor? I have thought of a great slogan: “Byrne for Birmingham: not just 9 to 5, but also a ‘night mayor’.”
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IMF
3.30 pm
The Chancellor of the Exchequer (Mr George Osborne): Let me update the House on this weekend’s G20 and International Monetary Fund spring meetings and the Government’s decision to make a loan of just under £10 billion, or $15 billion, to boost the IMF’s reserves.
As I have said to the House on many occasions, Britain has always been one of the IMF’s largest shareholders and biggest supporters. We helped to create the institution over 60 years ago, and our predecessors determined that countries would never again turn their backs on the world’s problems, but instead come together to solve them. In every single decade since the 1940s, the UK has been part of global agreements to increase the IMF’s resources. Why has every single post-war British Government done that? It is because they recognised what we again recognise today: that Britain, as a proud, open, trading nation, has a huge national interest in a strong IMF as a force for stability and free markets; and that Britain exerts its influence in the world partly through the institutions it helped to create, such as the IMF, where we remain one of the few countries to have our own seat on the board.
That was the case 60 years ago when the world recovered from the ravages of a global conflict borne out of depression and disastrous economic nationalism. It was the case when Latin America struggled in the ’80s and the Asian economies collapsed in the ’90s. It was the case at the London G20 summit, when Britain’s economy was at the centre of the storm. It remains the case today, as we cope with the biggest debt crisis of any of our lifetimes, and when the epicentre of the problem now lies on our doorstep in Europe and with some of our largest trading partners, including Ireland, the home of banks deeply connected to our own banking system.
We will not turn our back on the IMF, or turn our back on the world. That would be a betrayal of our country’s interest and our country’s identity, and incidentally, it would at the same time be a betrayal of my party’s history.
It is because of the decisive action this Government have taken to deal with our own debts that we can now be part of the solution and no longer part of the problem. Let us not forget that in 1976 under a Labour Government this country itself needed an IMF bail-out. If we had a Labour Government today, their Chancellor could very well be explaining to the House the heavy terms of a loan from the IMF, not a loan to it. Instead, we have taken action that means Britain is a safe haven in the storm—action that means interest payments are lower for families, businesses and the taxpayers who are funding the huge national debt that has been racked up in recent years.
However, in the modern, global economy, we simply cannot act alone. At the annual IMF meetings last autumn, there was a real sense that the world economy was staring over another precipice. The feeling at these spring meetings was that we had stepped back from the brink but that the risks remained. Markets are calmer, banks are finding funding and signs of confidence are emerging—figures last week in Britain showed unemployment falling and retail sales up, and last week the IMF revised up a little its global and UK growth
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forecasts—but, as the IMF rightly warns us all, the global economy remains very fragile. We see that in the Spanish bond spreads and the disappointment over the latest American jobs data.
In such uncertain times, we want the IMF to be able to cope with whatever is thrown at it—the worst-case scenario—instead of hoping for the best, which is why, for almost a year now, I have said that we would be willing to consider the case for additional resources for the IMF. I set out in January four conditions for British support. The first was that the IMF should only support countries, not currencies, and that is now clearly expressed in the communiqué issued this weekend. The second condition was that full IMF rigour and conditionality would apply to any future programmes. That too was agreed explicitly in Washington this weekend. Britain led the way in making it clear that that conditionality would not be restricted to a country’s fiscal policies but would also include structural reforms to increase growth.
The third condition was that we needed to see more resources from the eurozone for its own firewall—we had to see the colour of its money first. The IMF cannot be a substitute for action by the eurozone to stand behind its own currency. In December, the European Central Bank began its massive long-term liquidity operation, which we publicly called for and privately urged. Last month, the eurozone member states added €200 billion to their firewall, bringing the total to more than €700 billion. May I add that the Government have not added a single pound of British taxpayers’ money to those eurozone funds, having got us out of the commitments the last Labour Government sucked us into. Now, €700 billion is not as much as some wanted or what the IMF itself asked for, so, as I will explain, the size of additional IMF resources from non-eurozone countries is proportionate to the eurozone’s action.
The last condition I set was that other G20 countries had to make contributions—that Britain would not act alone. This weekend, we were very far from being alone. The eurozone provided an extra $200 billion to the IMF. France, which has the same shareholding as Britain, contributed $40 billion, and Germany, $55 billion. If it had just been the eurozone, Britain would not have contributed, but it was not: Japan contributed $60 billion; South Korea, $15 billion; Mexico and Singapore took part; and Australia, with a population one third our size and 10,000 miles from Europe, contributed $7 billion, with the support of all the main parties there.
European countries not in the eurozone have also committed loans—from Sweden and Denmark, to Switzerland and Norway, which are not even in the EU. Some have suggested that the BRIC counties did not contribute. That is not the case. India, Russia, and—yes—China have all made firm commitments to contribute resources and will set out the exact sums in the coming weeks. [Hon. Members: “How much?”] We will see in the next few weeks. The total of the expected commitments is set to be more than $430 billion.
It is true that America has not offered a loan, and mainly for that reason nor has Canada, but then America did not offer a bilateral loan at the London G20 summit. The reason the US Treasury Secretary gives is clear. The US, because it is the global reserve currency, has in the last few months offered dollar swap lines to the eurozone with outstanding balances peaking at more than $85 billion, which far exceeds any contribution anyone else has
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made. Its exposure is direct to the eurozone. What we and others have offered is something very different: a commitment to lend to the IMF should it need the resources.
In Britain’s case, that commitment is denominated in the IMF currency of special drawing rights and equates to just under £10 billion—about $15 billion. That is within the mandate authorised by the House of Commons and voted on twice in the past 18 months. As I set out to the Select Committee on the Treasury earlier this year, if I had felt that Britain should have contributed more, I would have asked Parliament for the authority to make a larger loan. However, $15 billion is in line with Britain’s quota share at the IMF—it is the same as previous loans we have made—and our loan is available only once the quota reform deal put together in 2010 is ratified by the required majorities of the countries that signed up to it. Our £10 billion is therefore proportionate to our shareholding and similar to our previous contributions.
Let me end by saying this. No one believes that a well-funded IMF on its own is the solution to the problems of the eurozone. Eurozone countries need to make painful adjustments to their public finances and external deficits. It is a difficult path that they have to walk, although the new Governments in the likes of Ireland, Portugal, Spain and Italy are walking it. However, that is the logic of the single currency that they are all committed to. That is why I am opposed to British membership of the euro, why I shut down the euro preparations unit in the Treasury and why under this Government Britain will never relinquish the pound.
However, opposition to our membership of the euro and the problems in the eurozone should not be a reason to turn our back on the IMF; if anything, they make the case for a stronger IMF. I know that when we offer our loan to the IMF, it is presented by some as British taxpayers simply handing over money to the euro—supposedly, money that we will never get back and which could have been used on public spending here at home—but just because it makes for an easy newspaper headline does not make it true. Lending to the IMF is a loan to the most credit-worthy institution in the world. It is a loan that comes with interest. The IMF has preferred creditor status: it gets paid back even when other creditors are not. It is true that, very occasionally, countries have defaulted on their obligations; but if eventually they want to regain access to international funding, they have to pay back debts to the fund, and in the end they all do. The IMF is designed to manage this. It lays down tough conditions, has large precautionary balances and sits on large gold reserves. That is why no country has ever lost money lending to the IMF in its 67-year history.
Let me be clear also that not a penny less will be spent on public services; nor will a penny more be levied in tax to fund our commitment to the IMF. Were the IMF to call for financing from the UK, we would exchange some of our foreign currency reserve for a claim on the IMF—in other words, we exchange a claim on one safe asset for another. That is why no one includes IMF loans in their calculations of Britain’s net debt or deficit, and nor do our sterling financing plans for the official reserves need to be changed. When it comes to lending to the IMF, therefore, I know of no other mechanism that is so clearly in the British and global interest, no other form of insurance against the world’s risks that
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has such potential benefits, and no other loan that can be provided with such low risks and which comes with interest.
At home, this Government have confronted head-on the debt problem that we inherited from the last Government; abroad, we support the international effort for global stability. We are guided by Britain’s national interest. Britain does not walk away from its problems; it confronts them. It does not turn its back on the world; it helps to lead the world. We will do everything abroad to support the IMF and everything at home to avoid a bail-out from the IMF. Keeping the UK safe is the overriding mission of this Government.
3.43 pm
Ed Balls (Morley and Outwood) (Lab/Co-op): In thanking the Chancellor for advance sight of his statement today, let me begin by setting out three propositions on which I believe all parts of the House can agree. First, the ongoing crisis in the euro area is a major threat to the stability of the European and global economies, including Britain’s. Secondly, the International Monetary Fund is a hugely respected organisation that must be properly funded if it is to play its proper role. Thirdly, solving the euro crisis and ensuring that the IMF is properly resourced are both firmly in the British national interest.
However, the agreement that the Chancellor signed up to at the weekend fails on all three counts. It will not speed up, but further delay the decisive action we need from European leaders to kick-start growth and empower the European Central Bank to act. If those extra resources were to result in the IMF stepping in to act when the European Central Bank would not, that would risk weakening the IMF as an institution. Furthermore, in those circumstances, allowing eurozone leaders further room for delay and exposing the IMF and British taxpayers’ money when rich eurozone countries will not act would categorically not be in the British national interest.
Members across the House will find it baffling that that is precisely the view that the Chancellor took, just a few weeks and months ago. Following the G20 summit in October, when euro area leaders tried and failed to get international agreement on IMF resources to bail out the euro, he told the House:
“But the IMF contributing money to the eurozone bail-out fund? No. And Britain contributing money to the eurozone bail-out fund? No. That is Britain’s clear position.”—[Official Report, 27 October 2011; Vol. 534, c. 471.]
He went further in February when he told Sky:
“We are prepared to consider IMF resources but only once we see the colour of the eurozone money and we have not seen the colour of the eurozone money”.
Will the Chancellor tell us what has actually changed since then, because we have categorically not seen the colour of the eurozone’s money? The eurozone agreement that was reached last month was widely dismissed as a “sticking plaster” that merged two funds with no new money. As Wolfgang Münchau of the Financial Times stated:
“Ignore the headlines. This is not an increase in the eurozone’s rescue fund”.
In recent weeks, as market doubts have grown about Spain and Italy, market analysts have been clear that the eurozone bail-out fund has nowhere near the resources
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that it would need to stop a renewed crisis. There is still no firewall, and the only institution that comfortably has the resources to act—the European Central Bank—is prevented from doing so because rich euro area countries refuse to put sufficient money at risk. So, let me ask the Chancellor this: does he really think that the eurozone’s firewall is sufficient? Is this really the “big bazooka” that the Prime Minister talked about last summer? Does the Chancellor really think that the ECB now has the political backing to act as lender of last resort, and so stop contagion spreading? No, of course he does not. So why is he now signing up to an agreement that will mean that the IMF will be pressured into supporting Italy and Spain because the ECB will not, exposing as meaningless his nonsensical “countries not currencies” slogan?
Is it not the truth that the Chancellor is now conspiring in allowing the IMF to become the de facto central bank of the euro area, putting the resources of UK taxpayers and some of the world’s poorer countries at risk because rich euro area countries will not act? This deal might, for a short period, take the pressure off euro area leaders, but it will be at the cost of delaying a proper solution to the euro crisis, and it will undermine the IMF in the process.
The Chancellor says that his UK critics, on both sides of the House, are “isolated” in the global community in opposing this weekend’s agreement, but the United States has not signed up to give more money either. The US Treasury Secretary said, just this month:
“Europe is a very rich continent and they have the means to solve this on their own…I don’t think it is appropriate for the IMF to take on a larger role. The world needs to see that Europe is working on helping itself first. We are not going to shift our help for them so that the burden is on the American taxpayer”.
Canada is not contributing more money either. This is what the Canadian Finance Minister said about euro area leaders this weekend:
“They need to step up to the plate and overwhelm this issue with their own resources.”
The Chancellor says that we are “out on a limb” on this issue, but with America and Canada there too, that is some limb.
Will the Chancellor tell the House why he chose to tell us on Friday that he was contributing “just under” £10 billion more? With the US not contributing, that is clearly less than the UK’s quota share. Could it be that if he had contributed a fraction more, he would have had to come to the House and ask for parliamentary approval? After the Budget shambles—should I say the “omnishambles”?—of the last few weeks, is not the Chancellor running scared of those on both sides of the House of Commons?
Could the Chancellor also explain what has happened to the UK’s contribution to the IMF through the new agreement to borrow? When an IMF quota was first increased in 2009, it was understood that it would be offset by a reduction in UK exposure to the NAB—the new arrangements to borrow. Let me remind the Chancellor what the Financial Secretary told the House last summer:
“The G20 summit in London agreed on the importance of preserving the IMF status as a quota-based institution…so at the G20 meetings last November, agreement was reached to review
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the NAB and to reduce it in size once the quota increase was implemented
.”—
[
Official Report, Second Delegated Legislation Committee,
5 July 2011; c. 3.
]
So let me ask the Chancellor this: can he update the House? Has the UK contribution to the IMF been reduced through the NAB as the quota increases, as the Financial Secretary said, or has the Chancellor found a back-door route to increase the net UK contribution by more than £10 billion, without the permission of Parliament?
Mr Speaker: I am sure the shadow Chancellor is bringing himself to his last sentence.
Ed Balls: Finally, Mr Speaker, as for the Chancellor’s claim that the UK has sorted out our problems, unlike the US, the UK is mired with the rest of the euro area in no growth, high unemployment and much more borrowing than was planned, so how out of touch can this deluded Chancellor get? He should have stuck to his guns this weekend. He capitulated. This agreement was bad for the euro area, bad for the IMF, bad for the British taxpayer and bad for the British national interest.
Mr Osborne: First, I congratulate the shadow Chancellor on running the London marathon yesterday and raising money for good causes, but his arguments are a bit like his marathon legs—wobbly and about to collapse. His response started so well. In the first 30 seconds, he said he supported increased resources for the IMF and supported Britain’s contribution to it, but spent the next 10 minutes telling us why he was against those things. He was in favour of the loan before he was against it. I have to say it smacks of the political opportunism and empty opposition that have been the hallmark of his shadow chancellorship.
People in Washington this weekend who know the shadow Chancellor, because he used to help represent Britain at the IMF, were completely astonished by his opposition to the IMF deal. They wondered whether he was the same person who was in the Treasury for all those years and who wrote all those speeches for the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) about the importance of the IMF and of the international architecture being part of global solutions. Is it the same shadow Chancellor who said in November that
“the Labour party supports an increase in the UK’s International Monetary Fund subscription”?
He was asked in an interview why he opposed the Government’s decision and he said:
“I support an increase in resources to the IMF”.
“Sorry? I thought you didn’t.”
“No…I support an increase in resources for the IMF”.
One is led to the conclusion that only political opportunism is driving the shadow Chancellor to the position he takes.
The right hon. Gentleman asked just a couple of specific questions. I think I answered all of them in the statement, which he should have listened to before he asked his questions. The US Treasury Secretary went out of his way to welcome the deal, but pointed out that the US had not made a loan at the London G20 summit
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and did not do so again because of the swap lines. Since we talked about this in the autumn, the European Central Bank has provided $1 trillion of liquidity support and €200 billion extra to the firewall, but I completely agree that euro countries need to do more to ensure reforms in their own economies.
Is the right hon. Gentleman really saying that, when a request is made for the countries of the world to come together at the IMF to provide increased contributions, Britain should stand apart from it? He represents a Labour party that stands, or used to stand, for internationalism and for the institutions of the world coming together. Now he has led the party down a complete blind alleyway. He even voted against the highlight of the Labour Government—the deal done at the London G20 summit. This is what the shadow Chancellor has done to his party—left it in no man’s land, not taken seriously at home and not taken seriously abroad. If he were ever in charge, we would be getting a bail-out from the IMF, not giving it a loan.
Mr Speaker: Sir Peter Tapsell?
Sir Peter Tapsell (Louth and Horncastle) (Con): I had rather changed my mind about asking a question because of the extremely unappealing way in which the shadow Chancellor put his case; but in order to be consistent with everything that I said in October and November, I am bound to say now that I regard it as the prime duty of Germany to solve the European problem, and that I hope that this further support from the IMF will not weaken the pressure on the German Government to do exactly that.
Mr Osborne: Germany made a $55 billion dollar contribution to the IMF this weekend, which is a much greater contribution than the $15 billion that we are putting in, and it is the principal contributor to the various eurozone bail-out funds of which we are no longer part. However, I agree with the spirit of what my right hon. Friend is saying, which is that Germany needs to stand behind its currency. That is indeed a very important part of solving this problem.
Mr Alistair Darling (Edinburgh South West) (Lab): I think it right for us to support the IMF, but is not something very wrong when it is having to pass the hat around because it is becoming increasingly concerned that the policies being pursued by the eurozone—and, within it, some of the most developed and well-off countries in the world—are making it more likely that those countries will have to draw on international help to sort themselves out? Would it not be far better if the eurozone countries accepted that until they clean up their banking system once and for all, and until they recognise that the austerity policies that they are imposing on the peripheral countries simply will not work—and there are very few people around now who think that they will work—there remains a greater risk that these funds will have to be called upon? It seems to me that, while it is all very well to have a rescue fund, it would be far better to deal with the root causes of the problem.
Mr Osborne:
I welcome the right hon. Gentleman’s support for the decision to provide extra resources for the IMF. He was Chancellor of the Exchequer in 2009,
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when we last made a contribution to it, and, as I said a moment ago, I think that that was one of the highlights—if not the highlight—of the last Labour Government.
The eurozone countries on the periphery are being asked to walk an incredibly difficult path. That is the consequence of being in a monetary union in which it is impossible to devalue. However, it is clear that Ireland, which has had to make some incredibly difficult decisions and take some very tough fiscal measures, is becoming dramatically more competitive—its current account is back in surplus, and its exports are increasing—so it is possible to walk that path.
I certainly agree with the right hon. Gentleman that further action is required on the banking systems in Europe. A European directive which is currently being debated transponds the Basel agreement into European law, and we are keen for it not to be watered down so that it is not used to disguise problems in the European banking system.
Mr Andrew Tyrie (Chichester) (Con): Is not the lesson of the 1930s that the leading economic powers must stick together and support the global financial and trading system, and is that not exactly what the IMF decision is doing now? What we need is a strong and independent IMF. With that in mind, will the Chancellor tell us what discussions he has had with non-eurozone IMF members to ensure that the IMF sees off any special pleading from the eurozone?
Mr Osborne: I welcome the support of my hon. Friend, who chairs the Treasury Committee, for our decision to make a loan to the IMF, along with many other countries.
This weekend, plenty of countries, including the UK, made very clear that a contribution to additional IMF resources must come with strict IMF conditionality. They made clear that there could be no special favours for eurozone countries that needed support, and that there was no question of creating some special eurozone fund for IMF resources. Any contribution from the IMF’s shareholders must go into general resources which could be used for eurozone countries or, indeed, for any other country that needed help.
It is worth remembering that there are 53 IMF programmes, three for eurozone countries and 50 for other countries in the world, and that two of the largest programmes are for Poland and Mexico, which are not members of the IMF.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): Does the Chancellor not accept that the credibility of the IMF itself is put in question if it continues to provide support for eurozone countries that are, and remain, insolvent?
Mr Osborne:
No, I do not accept that. For the IMF to walk away from the enormous problems that we all know exist in the eurozone would be a betrayal of why we and other countries created the IMF: to be there to help countries, including groups of countries, that get themselves into trouble. The IMF also provides advice and conditionality along with its loans. Having set up
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an institution to deal with global economic problems, it would be bizarre if, when some of the largest economic problems the world has ever known arise, we were to say that the IMF is not going to help.
Stephen Williams (Bristol West) (LD): The central unifying purpose of this coalition Government is to bring stability and credibility to the management of the United Kingdom’s economy and public finances. That, in turn, enables us to play a constructive role on the world stage. Does my right hon. Friend agree that, just as it is in the Swedish, Swiss, Australian, South Korean and Japanese national interest to give extra contributions to the IMF, it is in the British interest not just to help the eurozone, but to lend assistance wherever the IMF team’s assistance is required?
Mr Osborne: I agree with my hon. Friend. The coalition Government have taken very difficult decisions in order to make sure that our public finances are back under control, and we are seen by the world to be dealing with our debt crisis. After spring meetings in Washington at which countries not in the EU, including Australia, Japan, South Korea, Norway and Switzerland, all agreed to contribute to increased IMF resources, it would be truly bizarre if a British Chancellor were to come to the House today and announce that Britain is not contributing. [Interruption.] What did the shadow Chancellor say? [Interruption.] What? [Interruption.] What? The truth is that a Chancellor who came here and said he was not taking part when all those other countries, some of them on the other side of the world, were taking part, would have absolutely no credibility abroad.
Derek Twigg (Halton) (Lab): Does the Chancellor believe that the eurozone is doing enough to help itself and its own countries? If he does not believe that, under what conditions would he support an IMF loan to any eurozone country?
Mr Osborne: I do not want to speculate about any future programmes that might, or might not, be required. What I want to do is make sure that the IMF is able to deal with whatever is thrown at it. That is massively in Britain’s national interest. We are talking about the source of 40% of the exports made by the businesses and factories of the constituencies we represent. For us to walk away from that at the moment would be bizarre. Does the eurozone need to do more? Yes, it does need to do more. For instance, as the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), said, it needs to sort out the problems in its banking system, and it needs to make sure that the programmes that countries have been asked to embark upon are deliverable, but that is not an excuse for Britain not to take part in a global effort to support the IMF.
Sir Malcolm Rifkind (Kensington) (Con):
I suspect that on this occasion Members on both sides of the House will have found the shadow Chancellor’s remarks to have been profoundly unconvincing. Does the Chancellor agree that the purpose of these funds is to assist in the restoration of the eurozone economy, the recovery of which is profoundly in our own interests? Does he also agree that the IMF must use all the powers at its
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disposal to ensure a rigorous application of its rules to those eurozone countries that are in trouble, in order to ensure that the mistakes that were made when the single currency was first formed are not repeated?
Mr Osborne: I completely agree with the former Foreign Secretary. The agreement at the weekend is about ensuring that the IMF is fully resourced to deal with whatever is thrown at it. Of course, if problems were to emerge and future programmes were to be required, there would be an enormous amount of scrutiny of what those programmes would consist of, what the conditions would be, and the like, but what we would not want at such a time, when the markets would no doubt be incredibly febrile and when confidence in Britain and other countries would be evaporating, is a question mark hanging over whether the IMF has got the money to solve the problem. That is why countries from around the world have decided to make this contribution.
Mr Dennis Skinner (Bolsover) (Lab): Does not the Chancellor realise that he would have a much stronger case on loans to the IMF if he was not practising austerity here in Britain and calling on all families to pay for the bankers? Does not he recall that when the IMF was set up we had a Labour Government who introduced a national health service, built a welfare state, built education for all and left us with fewer than 500,000 people unemployed? That Government went for growth, and that is the kind of policy he should be going for here, instead of calling for austerity for everybody else.
Mr Osborne: What I say is that the hon. Gentleman is betraying the spirit of Ernest Bevin, Hugh Dalton, Clement Attlee and the members of that Government, who came together after the second world war to build new international institutions to make sure that, in future, the world would come together to sort out its economic problems, instead of walking away from other countries, which is what we would be doing if we followed the hon. Gentleman’s advice.
Mr Douglas Carswell (Clacton) (Con): Last October, the Chancellor told this House that Britain would not be putting money into the bail-out fund, either directly or through the IMF. He said:
“the IMF contributing money to the eurozone bail-out fund? No. And Britain contributing money to the eurozone bail-out fund? No. That is Britain’s clear position.”—[Official Report, 27 October 2011; Vol. 534, c. 471.]
Has he changed his mind or was he playing with words?
Mr Osborne: I have not changed my mind at all. That is exactly what I said today; we are not contributing to the eurozone bail-out funds, including the European financial stabilisation mechanism, which was the thing that the previous Labour Government signed us up to. We are not part of those eurozone bail-out funds. We are not contributing money to the IMF that can be put into those bail-out funds—that is something we have also insisted on. And in the communiqué it is absolutely clear that the IMF is not allowed to create some special bail-out fund uniquely for the euro. This money goes into the general resources of the IMF to be used for countries, not for currencies.
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Alison Seabeck (Plymouth, Moor View) (Lab): Could the Chancellor please explain to the House and to his largely absent Lib Dem coalition partners—I say that for the record—why the amount chosen for the IMF is, by some extraordinary coincidence, just below the level required for a parliamentary vote? He has bandied around the words “political opportunism”, but is he not himself being a political opportunist?
Mr Osborne: I do not think that there is much political opportunism in having to take the difficult decision that Britain should contribute to IMF resources. I have taken that difficult decision, and I am happy to explain it to Parliament and to the public.
Mr John Redwood (Wokingham) (Con): Given that I agree with the Chancellor that IMF money should not be used to bail out a currency, will he urge the IMF to make sure that loans are made available to European countries only when they are in a position to devalue or when they are withdrawing from the single currency? Otherwise, as with the sterling area, surely the responsibility rests with the governing authorities and the central bank of the euro to make the money, the loans, the subsidies available.
Mr Osborne: I do not agree with my right hon. Friend on this point, because if the IMF said it was never going to support a loan or undertake a programme with a eurozone country, it would, first, be walking away from one of the largest economic areas in the world. Secondly, all those eurozone countries would presumably then cease to be members of the IMF, because there would be no interest in it for them. So France, Germany and other countries would then withdraw from the IMF, and I do not think that that is what we want to see happen in the IMF. The IMF needs to support all countries that get into difficulty, provided the conditions are met and the rigour is applied to those programmes.
Kelvin Hopkins (Luton North) (Lab): The IMF was designed for a world of separate national currencies with exchange controls and properly managed national economies. Is it not time to look again at re-creating that sensible world, because it actually worked, starting with the re-creation of national currencies in Europe?
Mr Osborne: The hon. Gentleman has, for all the time I have been in the House, consistently argued against British membership of the euro and consistently raised questions about the viability of the euro. I completely respect him for that, but to say that the IMF cannot get involved in the eurozone’s problems would be just a remarkable abnegation of the IMF’s commitment to deal with the world’s economic problems. The eurozone is at the centre of the world’s current economic problems because those involved have not been able to convince the markets that they can deal with their debts in the way that we have been able to. So I do not think it would be sensible for the IMF to just say, “There is a very important part of the world, which is at the epicentre of the world’s economic problems, but we are not going to get involved there.”
Mark Field (Cities of London and Westminster) (Con):
I entirely support the Chancellor’s contention that the interests of the City of London and the UK’s financial
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services industry are best served by unequivocal backing for the IMF at this time. Will he now pledge that by the time of the Whitsun recess he will have come to this House to make a statement on the Government’s strategic policy towards our relationship with the eurozone?
Mr Osborne: I thank my hon. Friend for his support, which is very welcome. As the representative in this Parliament of Europe’s largest financial centre, he completely understands our huge national interest in a stable world economy and in institutions that can try to bring stability to that world. I will give thought to his suggestion of a statement on the broader eurozone problems and will come back to him.
Stewart Hosie (Dundee East) (SNP): I thank the Chancellor for his statement and for allowing me early sight of it, and I agree with his welcome for the European Central Bank’s commencement of the long-term liquidity operation. There are concerns about the size of the firewall and, still, about the scale of support being offered by the ECB, but notwithstanding that and irrespective of the final balance of support to the euro from the ECB and to individual countries from the IMF, will he continue to agree that the best hope we all have for an export-led recovery is a strong, stable and growing eurozone economy with no threat to that currency?
Mr Osborne: I find myself in agreement with the hon. Gentleman who speaks for the Scottish National party. One of the consequences of what has happened over the past year or two in the eurozone is that countries that want to join the eurozone now need to ante-up a huge sum of money into the bail-out fund. No doubt that is something he will be explaining to Scottish voters as we discuss whether Scotland should ditch the pound and join the euro.
Angie Bray (Ealing Central and Acton) (Con): I support the Chancellor’s decision to make this additional loan to the IMF because of the important work that the IMF does in stabilising the economy across the world, not just in the EU. Can he reassure my constituents in Ealing and Acton that the loan will be repaid with interest?
Mr Osborne: Yes, I can. IMF loans are repaid and they always have been in the past. No country has lost money giving resources to the IMF and such loans are repaid with interest. Indeed, if I can find the quotation—[ Interruption. ] It is worth waiting for, because it is from the shadow Chancellor. When the shadow Chancellor was in the Treasury, he said that IMF lending to
“countries is invariably repaid with interest.”
That is what he said in 2003. I can give my hon. Friend the assurance that loans to the IMF are made to the most creditworthy institution in the world and are repaid.
Mr Geoffrey Robinson (Coventry North West) (Lab): Last summer, the Financial Secretary, I think, said that alongside a quota increase, contributions under the new agreement to borrow would be reduced. Can the Chancellor tell the House whether they have been?
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Mr Osborne: The 2010 quota agreement has not come into effect because it has not been ratified by all the countries. Our bilateral loan will be made only once that quota deal has been ratified. I have listened to the hon. Gentleman for the 11 years for which I have been a Member of Parliament and I cannot believe that he really supports the decision being pursued by the shadow Chancellor. The hon. Gentleman knows from his time at the Treasury and from his broader experience that Britain has a vital interest in economic multilateralism and the institutions that support a more stable economy.
John Hemming (Birmingham, Yardley) (LD): Does the Chancellor find it odd, as I do, that the Opposition were happy to commit the British taxpayer to the eurozone bail-out but will betray British workers who depend on exports for their jobs by not supporting the IMF?
Mr Osborne: To be fair, probably most Labour MPs, in their quieter moments, support the IMF and think it is perfectly sensible that, when other countries add their resources, Britain should do so. The most remarkable thing is that the shadow Chancellor led the Labour party into voting against the implementation of the London G20 deal. Because of the change of Government, we introduced the statutory instrument that gave effect to the London G20 deal, yet the shadow Chancellor led the Opposition against it.
Chris Bryant (Rhondda) (Lab): Notwithstanding the mandate the Chancellor already has, would not our voters expect a separate vote on this loan in this House, so that all Members can take a view? The Leader of the House, who is sitting next to the Chancellor, is shaking his head; he knows perfectly well that he is going to prorogue Parliament a full week early. Members have plenty of time to stay here and vote on the matter. Is it not more important that we vote?
Mr Osborne: There have been two votes in this Parliament, in the past 18 months, on precisely the question of how much headroom the House of Commons gives the Chancellor of the day to make loans to the IMF. There have already been two votes.
Mr David Ruffley (Bury St Edmunds) (Con): The Economist has rightly observed that the eurozone’s big problem is not a dearth of resources to the IMF, but the institutionalised paralysis of eurozone countries. Can the Chancellor tell the House what discussions he had at the spring meetings about the need for practical steps to break that paralysis?
Mr Osborne:
My hon. Friend is completely right that providing additional resources to the IMF will not solve the eurozone’s problems, I said that in my statement. It is about making sure that the IMF is prepared for whatever is coming down the track—prepared for the worst, rather than just hoping for the best, and of course we do all hope that things improve. My hon. Friend is also right that the eurozone countries need to work more closely together in terms of the fiscal integration of their policies. That is one of the reasons why I did not want Britain to join the euro and would never want Britain to join the euro. The logic of a single currency is that devaluation is not possible and different inflation rates cannot be manufactured in different countries.
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The end result is the transfer of large sums of money from German taxpayers to Spanish taxpayers. That is their decision by being part of the currency; our decision is to make sure that the world is ready in case that does not come about.
Keith Vaz (Leicester East) (Lab): One of the communiqués following the summit referred to the need to pursue solutions for malnutrition and food insecurity, as well as fragile states. I support the loan for those purposes, but how can we be sure that the money will end up supporting countries such as Yemen, which has just been through a presidential election and desperately needs support from the IMF and the World Bank?
Mr Osborne: The right hon. Gentleman is quite right to draw attention to the fact that, although we have been talking a lot about the eurozone, the IMF does a great deal of important work in low-income countries. As I said, there are 53 programmes, of which only three—albeit they are very large ones—are in the eurozone. At the IMF I specifically intervened to ask that the IMF’s windfall profits from recent gold sales be used to reduce the interest costs for low-income countries that undertake IMF programmes, to make sure that they have access to the increase in resources we are talking about today.
Mr Peter Bone (Wellingborough) (Con): The only way for Spain, Italy, Portugal and Greece to become competitive and get their economies growing again is through a return to national currencies. Does not the Chancellor agree that it is a bonkers policy to pour billions and billions of UK taxpayers’ money into supporting the failed euro?
Mr Osborne: We are not pouring money into some eurozone bail-out fund. We are providing a loan to the International Monetary Fund. I hear what my hon. Friend says about the decision, but every single previous Government have been part of increases in IMF resources—in 1983 and in 1990, under Lady Thatcher’s Government, we contributed to increases in IMF resources. He says that these countries are lost causes, but in Portugal, where very difficult decisions have been taken, exports are up by 7% and the current account deficit has been reduced; Ireland has gone into a current account surplus and Spanish exports are up. Of course they are having to make the adjustments in a brutal way, by real cuts in wages rather than a currency devaluation, but that is the consequence of being in a single currency. The Governments in those countries, with, in most cases, the support of the public now, are taking those difficult decisions. It is interesting that even in Greece, which is probably the most traumatically affected of those countries, there is a clear and overwhelming public majority for Greece staying in the euro.
Mike Gapes (Ilford South) (Lab/Co-op): The Chancellor claimed that the additional contribution that this country is making is proportionate to our shareholding. Can he explain why we are paying $15 billion, whereas France is paying $40 billion, Germany $55 billion and Japan $60 billion, and South Korea, with a smaller population and a smaller economy than ours, is paying the same as we are?
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Mr Osborne: I am not sure if that is a request for more money to the IMF. As I made clear in the statement, the non-euro countries felt it was appropriate that the euro countries made a proportionately bigger contribution. That is why France, for example, has given $40 billion. In the past, because Britain has exactly the same quota shareholding as France, we would have given the same. We have not. Our $15 billion is almost exactly the same as the $15 billion loan made at the London G20 summit. I think it is proportionate to the eurozone effort. I cannot believe that the hon. Gentleman, as a former Chair of the Foreign Affairs Committee, really supports the shadow Chancellor’s position of opposing Britain being part of a global deal to increase IMF resources.
Mr John Baron (Basildon and Billericay) (Con): I am sure the Chancellor will agree that until the core cause of the crisis is solved or at least approached—that being a lack of competitiveness—additional borrowing in a crisis caused by excessive borrowing already is simply reinforcing failure. Is the Chancellor at all concerned that for the 50 nations that he mentioned, devaluation was always an option—an option that has always been available to IMF rescue packages, but is not available to countries inside the eurozone?
Mr Osborne: My hon. Friend is right that countries in the eurozone do not have the option of devaluation if they want to remain in the eurozone. That is the logic of the single currency. That is why the Foreign Secretary, when he was leader of our party, said that it was
“a burning building with no exits”.
In that situation the question for Britain, rather than for members of the eurozone, is what do we do? What we can do is make sure that the global institutions that try to protect the world from instability, that try to provide shock absorbers for what happens in different countries, including in the eurozone, are well resourced to deal with whatever is thrown at them. I say to my hon. Friend and to Members across the House that it is possible to be very, very Eurosceptic and at the same time to be a believer in the international institutions that Britain helped to create 60 years ago.
Mr Kevin Barron (Rother Valley) (Lab): Given the answer that the Chancellor gave to the right hon. Member for Wokingham (Mr Redwood), could he tell us exactly what was agreed this weekend that says that the IMF should give loans only to countries and not currencies?
Mr Osborne: The communiqué that was issued by the Finance Ministers and the European Central Bank governors said explicitly, with reference to the $430 billion that was provided by the countries at the meeting:
“These resources will be available for the whole membership of the IMF, and not earmarked for any particular region.”
Mark Pritchard (The Wrekin) (Con): But is not the IMF in danger of sleight of hand? On the one hand the IMF claims not to bail out currencies, yet on the other hand it offers bilateral loans to countries in the eurozone that are failing because of the eurozone currency. Is that not an indirect loan from the IMF?
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Mr Osborne: I would say, first, that the reason why these countries have the problems that they do is often because of their domestic difficulties. Portugal has been fundamentally uncompetitive for a decade. Ireland had a massive banking system that collapsed. Italy and Spain have not done enough to keep up with the competitiveness of Germany. They are addressing domestic problems. That is made more difficult because they cannot devalue their currency, but that is not the origin of their problems.
Mr Frank Roy (Motherwell and Wishaw) (Lab): What happened to the reforms that were supposed to be linked to any extra funding for the IMF?
Mr Osborne: In 2010, there was an agreement to change the quota of the IMF to give the new emerging economies of the world, such as China, India and the like, a greater say at the IMF. The quota was reallocated to reflect the new economic weights in the world. That deal has not yet been ratified, but we as a country have ratified that deal. We are one of the countries that have ratified it. There remain some countries that have not. Our loan is available only when the quota deal has been ratified by the required majority of those countries.
Mr Speaker: Order. There is still extensive interest in the subject, which I am keen to accommodate, but if I am to do so, brevity is of the essence.
Dr Julian Lewis (New Forest East) (Con): When one’s friends are trapped in a burning building, is not the kindest thing to do to lead them in the direction of the exits in an orderly way, rather than give them billions to stay exactly where they are?
Mr Osborne: I would say that it is to make sure that the fire brigade has enough water to deal with the problem.
Barry Gardiner (Brent North) (Lab): The IMF should be plan B; plan A should be the European Central Bank. Does the Chancellor not accept that until the ECB properly backs the euro, the only people who will welcome more money coming in through the IMF are the traders who are making much money by picking off the peripheral countries around Europe as they go from one to the other?
Mr Osborne: Since December, the ECB has provided €1 trillion in its long-term repo operation, so it has provided a lot of support, most of which has been used by some of the eurozone banks to stop them falling over. The ECB has taken action, but the Prime Minister, myself and other members of the Government have in public, as well as in private—but in public—over the last six months, urged the ECB to do more; urged that greater fiscal transfers take place. On many of those things the ECB has made a lot of progress since the autumn. There is a much bigger eurozone firewall. As I say, the ECB, which was not in the game at all last autumn, has now provided €1 trillion of liquidity, so it has made those contributions, and therefore the rest of the world, as well as the UK, thought it appropriate that we should make sure that the IMF is well resourced.
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Joseph Johnson (Orpington) (Con): My right hon. Friend rightly says that a well funded IMF and a bigger eurozone bail-out fund cannot be the whole solution to the eurozone crisis. Does he believe now that the overriding priority must be steps towards debt mutualisation and the structural reforms to address the underlying competitiveness issues that are at the heart of the crisis?
Mr Osborne: I absolutely believe that eurozone countries need structural reforms. This country needs structural reforms. The things that we have proposed to Parliament on welfare, education, planning and the like, are all part of reforms to make our country more competitive. We have not been talking about our economy here, but we came into government with the highest budget deficit of the lot and some real competitiveness problems. On mutualised debt, over a year ago, I said that I thought that the logic led the eurozone towards euro bonds. I have put that on the record, but ultimately that is a decision for the eurozone.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): The Chancellor is now in a position to tell us whether he intends to honour his commitment of 0.7% gross national income for overseas aid by 2013. When can we expect the legislation, which I understand is now sitting on the desk of the Secretary of State for International Development?
Mr Speaker: Order. I am sure that the Chancellor will relate the answer to the IMF, to which I feel sure the right hon. Gentleman was seeking indirectly, and without saying so, to relate the matter.
Mr Osborne: We are going to honour that 0.7%. That is in the aid budget. It is in the budget of the Department for International Development. We can talk about the merits of legislation, but we do not need a piece of legislation. The proof is whether the money is being provided, and this Government are providing the money. I for one am proud that we will be the first Government in British history to hit the 0.7% of international aid.
David Mowat (Warrington South) (Con): The Chancellor has confirmed to the House that interest on this loan is payable in full. For the avoidance of doubt, will he confirm that the rate of interest that is payable is higher than the rate at which we will have to borrow?
Mr Osborne: The rate of interest would be set at the time the IMF called upon the loan, if it were to do so. It is only a contingent loan that will be available if the IMF needs it. The mechanism for setting the rate of interest for the IMF is well known. As I have said, countries do not lose money when they lend to the IMF—that is certainly Britain’s experience and that of other countries. Thanks to the actions the Government have taken, we are borrowing money at what is pretty much the lowest rate that anyone doing my job has ever borrowed money.
Steve McCabe (Birmingham, Selly Oak) (Lab): If the rich EU countries that created the euro will not accept the risks associated with it, what is the moral case for saying that Britain and a host of other poorer countries should bail it out?
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Mr Osborne: As I have explained, we are providing resources to the IMF. It was the previous Government, of whom the hon. Gentleman was a member, who committed the British taxpayer to the eurozone bail-out funds, which we had to get this country out of. I will take comments from my colleagues on the problems with the euro, but it is a bit rich coming from loyal Labour Members who supported Labour’s official policy of taking Britain into the euro.
Mr Julian Brazier (Canterbury) (Con): I support my right hon. Friend’s commitment to that great institution, the IMF, and share his concern about what is happening to our largest export partner, but may I urge him to use the powerful position we have in the IMF, which is underpinned by this latest money, to ensure that there is a realistic examination of whether it is possible to save the southern European members without devaluation?
Mr Osborne: I welcome my hon. Friend’s support for this decision. IMF programmes should be very rigorous and there should be plenty of conditionality. As I have said, it is possible to undertake very difficult internal devaluations, as opposed to external devaluations—that is a consequence of remaining in a currency zone—and the IMF will help those countries through that.
Robert Flello (Stoke-on-Trent South) (Lab): If in the weeks ahead the IMF announces, to everyone’s utter astonishment, that it wants to use some of that general fund for the eurozone bail-out pot, will the Chancellor bring the matter back to the House and allow us to vote on it?
Mr Osborne: I can be very clear that the British Government would not allow the loan we are talking about—the loan from Britain—to be used for the eurozone bail-out fund. It is for specific countries, not currencies, as set out in the communiqué.
Penny Mordaunt (Portsmouth North) (Con): What my constituents want to know is whether their money will be safe. Is the Chancellor aware of any instance of a country that has lent money to the IMF not being repaid in full?
Mr Osborne: No, there are no such instances. Every single country that has lent money to the IMF has got its money back.
Mr Ian Davidson (Glasgow South West) (Lab/Co-op): First, will the Chancellor withdraw the outrageous slur that all Labour Back Benchers were in favour of Britain joining the euro? Secondly, surely his distinction between currencies and countries is mere sophistry. The reality is that this is about bailing out countries whose difficulties have been caused, or at least exacerbated, by being in the euro. When does he expect to have to bail out the eurozone again? When will the eurozone’s next request for money come?