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Volume 450: debated on Thursday 26 October 2006

The Chancellor of the Exchequer was asked—

City of London

1. What his assessment is of the competitiveness of the City of London; and if he will make a statement. (97054)

In 1997, financial services earned £45 billion for the United Kingdom, and last year the figure was £94 billion—twice as much. Net exports have risen from £11 billion to £19 billion and financial services, once 6 per cent. of the economy, are now 8.5 per cent. of our economy. With the new City task force we will continue to found our policy for competitiveness on thinking globally, investing in skills, a competitive business and light-touch regulatory environment, and, most of all, doing nothing to put economic stability at risk.

The City is set for another bumper year of growth, due in no small measure to the stability and low-inflation environment of the wider economy. Will my right hon. Friend reject any unfunded tax cuts as putting that stability at risk, and what more can he do to enhance the role of the City in the world economy?

In 1997, 280 billion shares were traded in the City of London: last year, the figure was 900 billion. That shows that the City is responding to the global challenges in a way that we can be proud of. What we will not do is put stability at risk by irresponsible, unfunded and reckless tax cuts, as proposed by the Opposition. The policy we will not follow, as suggested in the new competitiveness economic policy group document published last night—it is interesting what one can read on the Conservatives’ website—is to abolish consumer protection for mortgages, pensions, insurance and credit cards. We will not return to the pension mis-selling that we have spent years getting away from.

Does the Chancellor agree that it will help to maintain the competitiveness of the City of London if the London stock exchange is not taken over by a foreign stock exchange company?

I hope that the hon. Gentleman will agree with the Government—we propose new legislation on the issue—that nothing should interfere with the right of the City to be regulated by the Financial Services Authority. Rather than Governments deciding who should own what, we must put in place the proper regulatory mechanisms that insist that whoever owns industries, services and, in this case, the stock exchange in London, it is regulated in London by the FSA. I hope that we will have all-party support for the Bill that my hon. Friend the Economic Secretary will introduce.

In terms of competitiveness, will my right hon. Friend indicate how the City of London compares with other financial centres in the European Union?

In the nine years since we took office, of the companies that have located either their national, regional or international headquarters, it is true to say that 398 have located in London and the United Kingdom, 63 in Paris, fewer in Germany and the Netherlands and 30 in Ireland. Opposition Members who wish to suggest that the success of Ireland is somehow comparable with the success of London should think again. London has doubled the amount of trading and financial services work. It will continue to thrive because we will think globally, but we will not put it at risk by an irresponsible funding of tax cuts that we cannot afford, and which would put at risk the very public services, infrastructure and skills on which the City and the rest of the British economy depend.

Is the Chancellor aware that the City’s big fear now is that big bang is being followed by big bureaucracy? On the very day that he had City leaders in last week for a bit of spin and one of his fake smiles, he forced through this House new legislation compelling companies to reveal their most sensitive commercial information. Is not the City right to judge him by his actions, rather than by his words?

The hon. Gentleman, who should know something about this, should look at the facts about the performance of the City and the British economy. Perhaps he might read the comments from the chairman of the New York stock exchange, who said that London is getting business for two reasons: one, it does not have the heavy touch regulatory environment of the United States of America; and, two, it has proved itself to be competitive in so many areas. I contend—and the hon. Gentleman should think about this—that the stability of our economy and the future of the City of London would be put at risk by getting the balance wrong between tax, spending and borrowing. That is why we will not accept the unfunded, irresponsible and reckless commitments being made by the Conservative party.

I declare an interest, as I chair the all-party group on private equity and venture capital. The City of London is the centre of the world when it comes to private equity, with 52 per cent. of the European market. That is principally due to the unprecedentedly supportive environment that this Chancellor and this Labour Government have created and put in place over the past 10 years. In the context of the Financial Services Authority’s—[Interruption.]

Order. I cannot hear the hon. Gentleman because of all the shouting from Conservative Members. Also, he knows that a supplementary should be brief, and should be a question. Perhaps the Chancellor would like to respond.

It is clear that the Opposition do not like hearing the good news about the achievements of the British economy. Six previous shadow Chancellors have dined out on the idea that the City of London and our whole economy were about to move into recession, so I shall give the House the benefit of the latest foreign direct investment figures. In 2005, inward investment into the UK amounted to £164 billion—twice the level in France, five times the level in Germany, eight times the level in Italy, and 50 per cent. more than in the US. The Opposition should congratulate the Government on their success, not try to claim failure.

What the Chancellor did not mention is that we are celebrating this week the 20th anniversary of the big bang, which he opposed at the time but now presumably welcomes. The City is not celebrating the damage that he has done to the pensions industry with his tax and regulatory regime. Labour’s first pensions Minister was the right hon. Member for Birkenhead (Mr. Field), who has said:

“when Labour came to office we had one of the strongest pension provisions in Europe and now we…have some of the weakest”.

I know that the Chancellor does not do humility, but does he accept any blame for what has gone wrong?

I notice that the hon. Gentleman is not defending his £4.7 billion tax cut proposal. After all the publicity that he sought last week, I should have thought that he would at least explain how that would be funded. As for pensions, let me read out the policy that we will not follow:

“In financial services we should allow people to buy and sell products that are not regulated if they have signed to do so”.

That is the new Conservative economic policy—[Interruption.]

Order. In the past I have allowed the Prime Minister and the Chancellor, and their Opposition shadows, some leeway, but the right hon. Gentleman cannot dwell on Conservative party policy. [Interruption.] The hon. Member for Wallasey (Angela Eagle) is looking at me, so I shall tell her why. The reason is that Ministers are responsible for the Government, not for the Opposition. She has been in the House long enough to know that.

Our policy is to ensure economic stability, and not to abolish consumer protection for pensions, mortgages, insurance and credit cards. Why do the Opposition propose that today?

No one believes what the Chancellor says about his own policies, let alone ours. [Interruption.] Excellent! The Chancellor has thrown his copy of our document at me. I thank him very much, as I am glad that he is reading such things. Nor, by the way, should anyone pay any attention to the ludicrous claims from the Economic Secretary to the Treasury, but I make one request to the Chancellor—please put him on television more often.

I return now to the matter of the City and pensions. The Chancellor may ignore Labour’s first pensions Minister, but he cannot ignore the facts. His pensions tax has reduced the value of people’s pensions by £100 billion, and his pensions regulations have forced 60,000 pensions schemes to close. Does he accept what his own party says—that he has made serious mistakes in the handling of pensions? If he cannot accept that, surely the current Secretary of State for Work and Pensions is right: the Chancellor will make an “effing awful” Prime Minister?

Order. Will the hon. Gentleman withdraw that remark? We must have temperate language in this House. I do not care what is said outside.

It is very interesting that the shadow Chancellor has made the question of whether pensions are properly regulated in this country the central issue. The difference between us is that we want proper regulation to protect individual pensioners, whereas the Opposition have proposed a plan that would deregulate and abolish consumer protection for pensioners. Until Conservative Members look at the plans that their own group is pursuing and find out what damage would be done to the regulation of pensions, they will be living in a dream world about what their policy proposals are going to be. We will insist on the proper regulation of pensions. We have introduced compensation for people who were deprived of their pensions. We have introduced a new Pension Protection Fund board to ensure that there is proper protection for pensions. We have a new pensions Green Paper to ensure that protection. Most importantly, we will not as unfortunately happened under the Conservative Government, or put the stability of the economy at risk, and that will be foremost in resisting irresponsible and unaffordable tax cuts.

Work Force Skills

2. What assessment he has made of the relationship between the level of skills in the work force and economic growth; and if he will make a statement. (97057)

7. What assessment he has made of the relationship between the level of skills in the work force and economic growth. (97062)

We have created the new deal for skills, which we will expand. We have the new train to gain programme, which we will also expand after the Leitch report is published. We have increased education spending from 4.7 per cent. to 5.5 per cent. of GDP—investment which we will not cut in future years, but will increase.

With 20 million students graduating in China every year and 2 million in India, can my right hon. Friend reassure me that the Government will seek to resource fully the recommendations from the Leitch review so that the United Kingdom can continue to compete in the global knowledge economy? Will he reject any tax proposals that come before him that would undermine our education service and take us back to where we were 20 years ago?

I can assure my hon. Friend that when the Leitch report is published the national debate on skills for the future will be led by this Government. We want to see more people who are in work at the moment acquiring the skills for the future so that British workers can get jobs that are available because they have the skills to do so. We wish to see more students able to study at university and college and more students staying on at school to get the necessary qualifications. We have already increased education spending from 4.7 per cent. to 5.5 per cent. of national income. We will continue to increase that figure in future years. What we will not do, in the interests of both stability and public investment, is go for irresponsible tax cuts in preference to investment in education. What we will not do—as I now find is another policy of the Conservative party from their economic policy review—is to introduce vouchers to pay for our public services. I hope that Conservative Members are aware that that is now their new policy.

Is my right hon. Friend aware that all the evidence that comes to my Committee—the Education and Skills Committee—suggests that the massive investment in education and skills over the years of the Labour Government has resulted in a direct improvement not only in millions of people’s lives but in the dynamism of our economy? [Interruption.] Yes, in our report that was published yesterday we called for more expenditure, greater investment and a speedy material increase in the amount of money going to individual pupils.

Will my right hon. Friend respond to my question—[Interruption.]

When we took office, expenditure per pupil was £2,500 in our state schools. Today, the expenditure is £4,500. It is rising—

The shadow Chancellor says from a sedentary position that to increase expenditure from £2,500 to £4,500 is meaningless. That is an illustration of just how the Conservatives treat the very big issue of how we fund education in our state schools. We have increased spending from £2,500 to £4,500; we will increase it to £5,500 by 2007-08. As for capital investment per pupil, I have to tell the House that it was £100 when we came into power and it is now £650 on average per year. That is expenditure on IT, computers, buildings and equipment. That will rise to £1,100 in the next spending round. It will be above the level that is spent in private schools, as we move to our aspiration that state school pupils get the same teacher-pupil ratios and advantages in education as are available in private schools. I thought at one point that there was all-party support for that, but unfortunately the Conservatives have gone for irresponsible tax cuts.

Does the Chancellor accept the economic analysis published earlier this week that a liberal and flexible approach to the work force, reflected in substantial skilled and unskilled immigration, has boosted growth, reduced inflation and boosted the Government’s revenue? If he agrees, what estimate has he made of the possible cost to the British economy of the Home Secretary’s U-turn on that policy this week?

We have always said, we continue to say, and I hope the hon. Gentleman agrees, that migration to this country must be managed. We must get the balance right between the number of people we need to fill the skilled jobs that are available and a policy for managed migration to this country. I hope that that is still the policy of the Liberal party. We have benefited enormously from immigration in this country and we continue to do so, but there will always be—as there should be—managed migration to this country.

Why are the Government cutting adult education grant funding to Essex county council, which is resulting in the closure of Grey Friars adult community college in Colchester? Does not that make the Government’s commitment to skills in the work force rather hollow?

I would have thought that the hon. Gentleman supported what we are doing; in other words, what we are doing is—[Hon. Members: “Cuts!”] Well, we are putting the money through the employer, through the train to gain scheme. The employer and the individual will buy their courses from colleges where that is appropriate. If the college is providing the right service to the employer and the employee, it will get the business; if the college is not providing the right service, it will have to do so in future. I would have thought that was the policy of the Conservative party, but if that, too, has changed between tonight and today, perhaps the hon. Gentleman will tell me.

Funding for higher national certificate work-based learning programmes for engineers is very important. Will my right hon. Friend clarify what the Government are doing to improve the skills of our engineers?

In recent weeks I have met many people who raised with me the question of how China and India are funding vast expansions of engineering training. Here in Britain we need more engineers and we have to persuade more people to study engineering: partly through the reputation of science and engineering, which we must enhance; partly through encouragement to young people through vocational training in their schools, which we are expanding at present; and partly through the train to gain scheme, which is now in companies, where nearly 100,000 people are benefiting and gaining qualifications that they can add to. Some of those people will go on to become engineers. In those three ways, we will pursue a strategy to get more engineers in the economy and to value more the work that our great engineers do for this country.

Does the Chancellor agree that there is something seriously cock-eyed in the relationship between skills in the work force and economic growth and performance, when people such as those at my local university in Chelmsford, who have trained for between two and three years to become highly skilled nurses, could not find a job when they completed their training because the local NHS trust had to make 250 nurses redundant last week?

The fact of the matter is that nearly 80,000 new nurses are being employed by the national health service. The fact of the matter is also that the NHS budget is rising by between—[Interruption.]

Order. I have to say to the hon. Member for West Chelmsford (Mr. Burns) that he asked the Chancellor a question, so he should let him reply, and not shout at him—[Interruption.] I am not responsible for the Chancellor’s answer—that is one thing I am not responsible for.

There are 80,000 new nurses in the national health service and more than 20,000 new doctors. The health service budget will expand next year. I believe that nurses now in training will get jobs in the future, but the one policy that would prevent them from doing so, and prevent us from expanding the NHS, is to go for irresponsible tax cuts in preference to investment in public services.

Local black country business leaders assure me that skills and training are essential for the future economic well-being of my locality. Can my right hon. Friend assure me that in the spending review they will be given high priority in future spending plans?

I accept what my hon. Friend says. As he knows, the Leitch report is considering all aspects of skills for the future of our economy, and is looking into how we can persuade both those in the workplace, and those who will join the workplace later, to get the skills necessary for the future. I agree with him that that must be a priority for the nation as it faces the global challenges ahead, but let us be honest: that will require us to spend a higher share of national income on education and training, and it will require employers, as well as Governments, to spend more on education and training. We cannot do that if we have irresponsible policies, promising reckless tax cuts that would put our country’s public services, and the stability of the economy, at risk.


3. What pump-priming he plans to provide to research and development in creating biofuels from agricultural products. (97058)

We strongly support greater use of biofuels in Britain. The Chancellor’s announcements in the Budget of a new road transport fuels obligation and the extension of the duty discount on biofuels were welcomed by the industry and by this House. Those measures are helping to create the climate for new investment and expansion, and the latest figures show that sales of biofuels in Britain are about double last year’s levels.

I welcome that answer, but could the Minister give the House an indication of how long allowances other than those to which he referred—how long the Treasury’s whole regime for supporting biofuels—will last? My understanding is that the allowances are time-barred for three years, and that they will not run for a fourth year until that first three-year period is finished. However, to defray costs, people investing in bioethanol plants, particularly sugar beet, which is a key crop in north Yorkshire, are looking to write off the costs over 10 years, so we need to boost confidence in such investment over a longer period.

The guarantee on the duty discounts lasts for three years, and we deal with that on a rolling basis. The obligation is set at 5 per cent. until 2010-11, but we have made it clear that we want to extend it beyond that date. Another important element is the research and development tax credit, which is available to biofuels firms, just as it is to firms in other sectors. Some £1.8 billion has been claimed in R and D tax credits since we introduced them. That support is absolutely vital, as Britain’s capacity to compete internationally will in future depend ever more on our R and D, and on commercialising science and innovation. I can tell the hon. Lady that the prospects for the economy, the certainty that people want about biofuels, and the prospects for manufacturing, including in her constituency, would only be harmed by her party’s commitment to abolish the R and D tax credit.

In East Anglia a new bioethanol plant will shortly come on-stream, and of course we have many acres of sugar beet that can be processed into bioethanol. However, not many vehicles can use bioethanol. What discussions is my hon. Friend the Financial Secretary having with motor manufacturers to make sure that full-flex vehicles, such as those in Brazil that can run off both traditional petrol and bioethanol, are available in this country?

My hon. Friend, who follows the subject closely, will know that the obligation relates to blended fuel, which can be used in conventional engines and delivered through pumps on the forecourt. On the future generation of biofuels, he will have noticed that part of the Budget announcement on supporting biofuels concerned reducing vehicle excise duty for those with car engines that run on E85. Our ability to move further on the issue will depend partly on the European Union changing its fuel quality standards, and partly on the discussions that my right hon. and hon. Friends in the Department for Transport are leading with motor manufacturers, to ensure that there are improvements in engine technology that will allow greener future fuels to be used more widely in Britain, as elsewhere.

Environmental Taxation

4. What proportion of tax revenue was represented by environmental taxation (a) in 1997 and (b) in the latest year for which figures are available; and if he will make a statement. (97059)

Revenues from taxes introduced for a specifically environmental purpose amounted to 0.12 per cent. of overall tax revenues in 1997, and that rose to 0.4 per cent. in 2005. The climate change levy has proved particularly effective, delivering more than 28 million tonnes of emissions savings so far.

The Minister’s answer was carefully worded, but I remind him that the proportion of green taxes has fallen from 9.4 per cent. in 1997 to 6.2 per cent. this year. Is that what the Chancellor meant when he said, in this morning’s Financial Times, that he had got the balance about right in the economy? Is the Minister aware that CO2 emissions have gone up in six of the past eight years, and does he not agree that the only solution—

The problem with the hon. Gentleman’s metric is that it measures the wrong thing. That could increase with an increase in pollution, which is a bad thing, not a good thing. We need a balanced package of fiscal measures and trading, and that is what we have delivered. The hon. Gentleman should support the climate change levy, which is a big switch from taxation on employment to taxation on pollution, and delivers 6 million tonnes of carbon savings a year. I hope that he welcomes that.

My right hon. Friend will be aware that green taxation on company cars has resulted in a hugely positive change in behaviour, but will he assure me that he will resist the temptation to make revenue from green taxes central to Government funding, as that would lead to a huge black hole in Government finances if and when behaviour changed?

My hon. Friend is right. The company car tax changes are very important, as they save about a quarter of a million tonnes of carbon a year, which will probably increase to half a million tonnes by the end of the decade and more beyond that date. It is important not to create huge holes in the public finances. For example, abolishing inheritance tax would require an 18p increase in petrol duty. If that is the Opposition’s policy, we should know about it.

According to a poll published this week, only 4 per cent. of the population believe that Labour has made effective progress on climate change; presumably the Chancellor is one of them. Does not the fact that he suddenly mentioned the issue 15 times in his Budget speech, compared with a previous average of one speech reference—

Order. The hon. Gentleman must ask a question. This is a supplementary question; he must not make a long speech.

The question is—because the Chancellor mentioned climate change 15 times this year, but only once the year before—is it not true that he is much more interested in political change than climate change?

The hon. Gentleman had the opportunity to support the climate change levy, which delivers 6 million tonnes of carbon savings a year. Almost uniquely in the world, we will deliver on our Kyoto objectives, and that is the result of the Government’s policies.


Employment levels are the highest on record, and have grown year on year every month since 1997, contributing both to the strengthening of economic growth and an 800,000 reduction in child poverty under this Government since 1997.

Part of our success in areas such as Denton and Reddish stems from a combination of the new deal, the national minimum wage and tax credits, all of which help to make work pay. Does my hon. Friend agree that in future we need to do even more to invest in skills and training so as further to enhance employment opportunities in areas such as mine, and that that should be our economic priority, not unfunded tax cuts?

I do agree, and I wish only that the shadow Chancellor agreed, too. We have increased employment since 1997 by 2.5 million jobs. In my hon. Friend’s own constituency, unemployment has gone down by 42 per cent., youth unemployment by 62 per cent., and long-term unemployment by 84 per cent. since 1997. [Interruption.] That is not good enough, however, as we still have too many people out of work on incapacity benefit, and we still have too many lone parents who want to work but cannot. The way to address that is to expand the new deal, not to abolish it.

What assessment have the Government made of the impact on employment of the tax credit system? As the Chancellor of the Exchequer has failed to answer a question on the issue in Treasury questions for 896 days, will the Economic Secretary tell us whether the Chancellor has read the recent report from the Institute for Fiscal Studies that indicates that work incentives have become worse under this Government?

I am proud of the fact that we have more than 1 million more single parents in work because of the way in which tax credits, with the new deal, have boosted thier employment prospects. The employment outlook from the Organisation for Economic Co-operation and Development states:

“There is a group of countries”

including the UK

“where the policy-driven improvements in employment and unemployment over the period considered have been the most significant”.

The OECD is referring to what we have done on tax credits. Tax credits and the new deal have improved the employment prospects of single parents in our country.

The economy in Aberdeen is booming. We have very low unemployment. It is well below 2 per cent., which is effectively full employment. However, there is a labour shortage; employers are finding it difficult to find people to go into work. What else can the Government do to encourage more people who are on inactive benefits to get into work?

My hon. Friend is right; we need to do more to help single parents get back into work with our support through the new deal and child care. We are also expanding the pathways to work initiative, which will help more people to move from incapacity benefit into employment. I hope that people in her constituency will be able to benefit from those measures as well.

Is the Minister aware that unemployment in Shropshire has risen by 36 per cent. over the past 12 months and that nationally unemployment is at a six-year high? I invite him, rather than reading tired and outdated ministerial briefs, to join the dole queues that are growing in Shropshire every single day of the week, and to come into the real world for a change.

We have the lowest level of unemployment for 30 years. We have 255,000 more people in work this year than last year. People have long memories; they remember 3 million unemployed and the 1.5 million families in negative equity. They also remember that it was unfunded tax cuts that led not only to public spending cuts but to double-digit interest rates. Nobody wants to go back to those days and, under this Government, that will not happen.

Is my hon. Friend aware that, during the summer recess, Honda in my constituency announced another 700 jobs to manufacture the new Civic? That is due in part to the success of the work force and management in doubling production of the new Civic in six months. Does my hon. Friend agree that Honda’s investment in manufacturing in Swindon demonstrates a world-class company’s confidence in the Labour Government’s world-class economy?

I do agree, and there are similar examples all around the country. The most important thing driving that job creation and new investment has been the stability in our economy since 1997—stability through Bank of England independence and through our fiscal rules. That stability would be put at risk if we were to return to the old days of unfunded and uncosted tax cuts for a few, which would be paid for by higher interest rates and instability, hitting families all around our country.

In 1995, the Chancellor said:

“Our plan is nothing less than to abolish youth unemployment. I will not make promises I cannot keep”.

Will the Minister confirm that the numbers of young people who are neither working nor studying are higher now than they were when the Government came into office? Is not that promise simply an early example of the Chancellor’s tendency to call for aspirations without a commitment to a specific timetable for delivery?

If the hon. Gentleman looks at the figures, he will find that his claim is untrue. Since 1997, we have seen not only falling youth unemployment—down by two thirds—but falling inactivity among 16 to 17-year-olds. The fact is that we have more people going into apprenticeships and going to college—[Interruption.]

I am sure that you are right, Mr. Speaker, although I do not think that the House will be surprised that he is.

We have more people going to college and going into apprenticeships and all those people are included in the figures referred to by the hon. Member for Fareham (Mr. Hoban). There has been falling inactivity among that population group and, at the same time, there has been falling unemployment among young people. We should be proud of the achievements that we have seen since 1997, rather than trying to run them down with inaccurate figures.

Debt Relief

In addition to debt relief of $38 billion to 20 countries, 20 additional countries may qualify for relief of up to $50 billion. As a unilateral act, the UK is offering the equivalent of our share of 100 per cent. debt relief to a total of 80 countries and we call on other countries to follow.

I thank the Chancellor for that answer. Last Friday, I met Dudley borough churches forum to mark the start of One World week. While welcoming the work that the Government have done to tackle the problem and the international leadership of my right hon. Friend, my constituents rightly want further progress in more countries. What is he planning to do to accelerate the debt relief process and move us more quickly towards the millennium goals and justice at last for the world’s poor?

I thank my hon. Friend for the work that she, like many others, has done with churches in her constituency. We should be clear that, as a result of debt relief, Uganda has increased the number of children in education from 2 million to 6 million. In addition, Zambia has just announced the abolition of health charges, which means that health is available to all members of the population, however poor they are. As a result of aid and debt relief taken together, in one week 1 million children turned up for school and were given education free of charge in Kenya. Countries all round the world are able to spend on education, infrastructure and health as a result of what has been achieved by the write-off of debt. However, my hon. Friend is absolutely right that many poor countries are not heavily indebted poor countries. That is why we have made the unilateral gesture of saying to 30 or 40 more countries that we will be prepared to pay our share of 100 per cent. debt relief. We urge other countries to follow so that a higher share of debt relief can be paid as a result of international effort. I hope that we can persuade other countries to do exactly that as part of the international campaign that is being mounted.

May I ask the Chancellor about debt relief and personal indebtedness at home? Is he worried that both secured and unsecured borrowing stand at record levels? At the end of August, a total of £1.247 trillion was owed.

I am happy to answer a question about domestic debt relief, if that is the reading of the question. The biggest guarantee that people will not find it impossible to pay their debts will be maintaining the economic stability on which the British economy has grown over recent years. It is only when interest rates get out of hand—they rose to 15 per cent. under the previous Government—that people are unable to pay their bills. The debt advisory services for people who have personal problems are greater than ever before. When people are up against loan sharks and those who exploit their indebtedness, they need the protection of Government measures to regulate the pensions, mortgage, insurance and loans industries, so the hon. Gentleman had better look at his party’s proposals to abolish that protection.

Debt relief is of course extremely important to developing countries, but it must be accompanied by growth. What does the Chancellor expect must happen to get the Doha round of trade talks back on track?

My hon. Friend takes a big interest in this matter. As she knows, Africa has grown faster in recent years than it did previously, but there are still many people in poverty. One reason for that is that developing countries are unable to trade their products with the richest countries, which is why it is really important that the Doha trade round is resumed. I believe that it will be possible in the next few months to bring together the parties that have been unable to agree so that we can reach an agreement. Europe and America could make concessions on agricultural protectionism—I believe that it is the will of the House that that should happen—and the other major countries, which are Brazil and India, and the developing country bloc could also make the concessions necessary for agreement. We will do whatever we can in the next few weeks to get the trade round going again.

Critical elections are taking place this month in the Democratic Republic of the Congo. As the hon. Member for Dumfries and Galloway (Mr. Brown) and I saw on a recent visit, it is the poorest country in the world and its civic society has all but collapsed. Will the Chancellor outline his plans—I am sure that he will have the support of the whole House—for helping the Democratic Republic of the Congo with debt relief and generally increasing aid and help?

Debt relief is possible when a country has a working Government who are capable of managing its affairs. One reason we have had problems with debt relief has been that even when the will has been there on the part of the richest countries in the world, some countries had such a broken-down system of government and history of conflict that they were unable to manage the transition, so we need to give them extra special help to do so. I can tell the hon. Gentleman that we are prepared to give extra help. We are prepared to put in place measures that will make it possible for the republic to benefit from debt relief. Of course, our other measures to enhance educational and health expenditure in Africa will also be put in place, but that depends on the country having a stable Government who are able to manage their affairs.

As the Chancellor has said, debt relief is not an end in itself, but merely a way of improving the position of the poorest people in the poorest countries. Will he therefore join me in congratulating the children of Burtonwood primary school in my constituency, who recently did a project on the exploitation of child labour and discussed it with me, showing a great deal of knowledge and fluency? Will he explain to those young people what is being done to ensure that we improve the incomes of the poorest families, so that their children are able to take advantage of the education that we hope to offer them?

I am grateful to my hon. Friend. Once again, links are being developed between schools in Britain and schools in Africa, India, Pakistan, Bangladesh and many other of the poorest countries. I know that the Department for International Development is very willing to help expedite those links, whether they are teacher exchanges or schools just maintaining contact with schools in Africa and the rest of the world.

With reference to child labour, next year is the 200th anniversary of the abolition of the slave trade. One of the ways in which we could commemorate that is by making people aware of the extent of child labour around the world and the use of children as slaves. Over the next few months we should attempt to educate the public about the problem and do more to ensure that, instead of being in work during their early years, every child is given the proper chance of education. I want to see the 110 million children who are not in school given that chance of education over the next few years.

Money Laundering

8. When he expects to announce the results of the consultation for new proposals to tackle money laundering carried out to fund terrorist activities. (97063)

12. When he expects to announce the results of the consultation process on new proposals to tackle money laundering for funding terrorism. (97067)

The Government are consulting on how best to safeguard the money services business sector from criminal and terrorist finance, and will publish the results of their consultation on implementing the third money laundering directive when they publish draft regulations for consultation at the turn of the year.

Last year the Chancellor lectured fellow EU Finance Ministers on terrorist financing after the 7/7 bombing. He said that

“it’s important to realise that you’re only as strong as your weakest link. Where there are countries that are not taking action to cut off the sources of terrorist finance, we will clearly have continuing problems”.

Will the Minister ask the Chancellor to apologise to those EU Finance Ministers for failing to freeze the assets of former Hammersmith and Fulham resident Abu Hamza, and will he join the new Conservative council in Hammersmith and Fulham in seeking to evict the Hamza family from their council house?

The hon. Gentleman is quite wrong in his assertions. We have applied our terrorist order in exactly the right way over the past few years in this—[Interruption.]

Order. Once again, let the Minister answer. That is the best thing to do. [Interruption.] Order. I tell the hon. Gentleman that he should not interrupt the Minister, and he should not interrupt me, which is worse.

As I said, we have applied the order in exactly the right way. The assets of that individual have been frozen from the beginning. There has been no transfer of resources to him. The transfer of property, which was discussed between ourselves and the police, was not an illegal act. That transfer has now been frozen in order that we can recover legal costs. We strengthened our position in the case a few weeks ago. I ask the hon. Gentleman to look at the facts in more detail before he makes such accusations. I can tell him that he is quite wrong in all the things that he said.

The whole House appreciates that the Chancellor has much on his mind at present, not least his relationship with his at times tiresome neighbour. However, he said in October 2001 that finance was

“the lifeblood of modern terrorism”.

That being the case, can the Minister tell the House why we are still waiting for the report that the Chancellor promised us as long ago as December last year?

We have made repeated reports over the past year. I made a ministerial statement to the House just a few weeks ago. We have acted regularly in recent months to strengthen our terrorism order, to use closed source evidence and to strengthen our benefits regime. As I just said, we are also acting on money laundering and money services business. Across the piece we have been acting, and at the same time we have been freezing assets of individuals regularly and substantially. I say to the hon. Gentleman and to his colleagues on the Front Bench that I accept that we will not have a consensus on the new deal, public spending cuts, tax cuts or the priority that we attach to tackling child poverty, but I would have thought that we could have a consensus on the importance of our acting together on these issues. Frankly, we do not have that consensus because of the absurd claims that have been made by Opposition Members, which only undermine our efforts to take the terrorists to task.

Systems to disrupt money laundering and terrorist financing are most effective when necessary information for the authorities and private sector institutions is shared and acted on. What is being done to encourage the supervisory authorities and the financial intelligence units to develop international information-sharing systems?

On those very issues, we are acting all the time. I have met the US Treasury Under Secretary, Stuart Levey, three times in the past four months to discuss them. Across the piece, we are working very closely with our police and our security services to ensure that we use all the available information. I will publish a report at the end of the year that will set out all the measures that we are taking in order to make sure that we have the best and most comprehensive approach to those issues.

Let me give some more facts. Since 2001, a total of 85 individuals and 58 entities have had their assets frozen in the UK. Of those 85 individuals, 68 were designated by the Treasury and only 17 by the European Union. Of the 58 entities, 51 were designated by the Treasury and seven by the EU. We have been on the front foot on these issues. We have been acting decisively with our international partners. I believe that we are putting in place the best regime that we could have. Instead of undermining Britain’s efforts to tackle the terrorist threat around the world, I wish that the Opposition parties would start to support our efforts.

In 2001, the Chancellor promised that there would be

“no safe haven for terrorists”


“no safe hiding place for their funds.”

Despite all the Economic Secretary’s bluster, can he explain in what possible universe that statement by the Chancellor can be consistent with letting Abu Hamza sit in his prison cell in Belmarsh and splash out £220,000 on a four-bedroom semi in Greenford, two years after the Chancellor proudly claimed to have frozen the man’s assets?

I am happy to have a meeting with the hon. Lady to explain the facts to her, because the accusations that she makes are both completely wrong—completely factually incorrect—and undermine our efforts as a country to deal with these issues. I have to say to Opposition Members that if they want to get involved in a grown-up debate about how we can tackle the terrorist threat in our country, I am happy to have that debate, but if they want to make party political shots that are based on incorrect facts, all they will do is undermine their own standing and—

Millennium Development Goals

9. What progress has been made on achieving the millennium development goal of education for every child; and what financial contribution the UK has made. (97064)

At the request of the United Kingdom Government, 19 African countries have submitted plans so that by 2015 every one of their children would be in primary education. The United Kingdom has committed, over 10 years, £8.5 billion to that effort. It is prepared to enter into 10-year agreements with the countries that have produced plans, and we have called a donor conference in early 2007 for all other countries, to invite them to contribute to the goal of achieving primary education for every child.

All of that is excellent news, but there are 100 million children in conflict-affected fragile states in the world, 43 million of whom have no opportunity at all to go to school. Those are the countries that receive the least financial support—or support of any kind—from the developed world. Is there nothing that we can do to make sure that those children—the most vulnerable children in the world—get the opportunities that we would expect for any child whom we know in our own country?

My hon. Friend makes a good point. Of the 110 million children who are not in education, a very substantial number are in countries where the education system has completely broken down because of conflict. I believe that, as a world, we will have to consider—just as we have done for health care—how we might provide international support in the future in situations where there is conflict and there are difficulties in running a civil education service from within a country. We obviously need to provide more funds for education in the poorest countries: £8.5 billion has been put into that by the British Government over 10 years. That would be enough to get 15 million children educated—and, therefore, a very substantial number of those who are not in school into school—but we need other countries to support us. We need Canada, which has already indicated that it will support, and other countries—Germany, France, Italy, Japan and America, which are all part of the G7—to support the effort. That is why we have called the donor conference, which will be held in Brussels at the beginning of next year, and that is why I hope that all the efforts of the international aid organisations will be directed at persuading other countries to contribute to what is the only way in which we can achieve the millennium development goals.

Given that achieving the millennium development goal of universal access to primary education is vital for individual fulfilment and for a country’s growth, will the right hon. Gentleman, in pursuing his laudable initiative to achieve improvement in this regard, pay particular attention to the problem that I have found in Malawi, Sierra Leone and Sudan—to name but three countries—whereby there is a very powerful cultural and institutional bias against disabled children? They cannot be left till last, because it is just not right.

The hon. Gentleman makes a very good point. Sometimes, girls are forgotten in education programmes, and sometimes disabled children are forgotten when we are developing education programmes in the poorest countries. Of the countries that have used debt relief to abolish user fees, Malawi, Uganda, Tanzania and Kenya have made huge progress in getting all children into education, and I hope that that can be a model for the future. As the hon. Gentleman knows, there are difficulties within Sudan that prevent the development of education, but we are ready to give it debt relief and to provide funds for education when it can sort out its internal affairs. However, I agree with him that we should never forget that the people who have the least chance of advocating their own case are those whom we should support most.

Since 1997, the UK has given crucial international leadership on tackling international poverty, and it would be wonderful if we could build cross-party consensus in the UK on this crucial work. Has my right hon. Friend considered pursuing policies based on an ideology of a small state and big spending cuts, leaving the most vulnerable with less support and relying on charities to step in, as some have advocated?

We could not afford to put £8.5 billion into education if we cut the international development budget. Let us be clear: if the Opposition are serious about supporting the doubling of international development aid and continuing to increase it, they will have to abandon at least some of the policies that they put forward last week.

Does the Chancellor welcome the support of the United Nations co-ordinator of the millennium development goals for reports to Parliament such as the one that we have embraced in legislation, not just because it is helpful on matters such as education, but because it represents the transparency that is essential as we challenge global poverty?

There was all-party support for my right hon. Friend’s International Development (Reporting and Transparency) Bill, which requires the Government to prepare a report annually on the amount of spending and how it is being used. I want to see that happen at an international level, and, as he knows, there is a new Commission for Africa to be chaired by Kofi Annan, which will report back every year on how we are doing in meeting the Gleneagles agreement. That will put pressure on individual countries and international organisations, and again, I hope that there will be all-party support for it.

Flood Defence

10. What recent discussions he has had with the Secretary of State for Environment, Food and Rural Affairs on funding for flood defence works. (97065)

The Government recognise the importance of funding flood defences, as I have made clear to the hon. Gentleman in letters and at a meeting with him in July. We have ensured and put in place big increases in flood defence and flood management funding since 1997, and future funding will be considered in the context of next year’s comprehensive spending review.

I thank the Minister for that meeting and for receiving the thousands of petition signatures from Lewes Flood Action and the National Flood Forum, which expressed concern about funding for flood defence works, but does he not realise that the Department for Environment, Food and Rural Affairs is being squeezed and that, because of the farm payment fiasco, the money for flood defence work is actually being reduced? How can the Government be consistent with their policy to tackle climate change when money for one of the major adaptation measures is being cut, and what has he got to say to my Lewes constituents, who were promised a comprehensive scheme in 2000 and are still waiting for it?

The reality is that this year, compared with 1997, spending on flood defences and coastal erosion is more than a third higher than inflation. Let me be clear: there are no cuts in DEFRA’s spending limits or in the Environment Agency’s capital investment programme for flood risk management. DEFRA Ministers are managing the year-to-year pressures resulting from problems in the Rural Payments Agency and the costs associated with bird flu. It is right that we expect them to do so, although I recognise that that is not the traditional Liberal way, which is to throw money at, and make fresh spending commitments in respect of, any problem and any pressure.

US Economy

As it is our largest export market, trends in the US economy are important for the UK. My right hon. Friend the Chancellor will set out a full account of the UK economy in the pre-Budget report, but I can tell the House that gross domestic product rose by 2.75 per cent. in the year to the third quarter of 2006.

Is the Minister aware that The New York Times describes the US economy as a “financial mess” and that interest payments are the fastest growing component, squeezing out public spending and inducing recession? Bush’s conservative economic policy has been to spend unwisely and borrow heavily; his Administration have not had the sound financial management policies of our Chancellor. Will my right hon. Friend assure me that we have built-in protections in the UK economy against the growing US financial crisis?

I noticed that the Federal Reserve said yesterday that the economy seems

“likely to expand at a moderate pace”.

Whether it or my hon. Friend is right about the future remains to be seen. The key is maintaining our macro-economic stability in the UK—our record as a paradigm of stability, as the Organisation for Economic Co-operation and Development expressed it. For example, during the slow-down at the start of this decade, we were alone in the G7 in avoiding recession. Under the Conservatives’ policies, we were always first into recessions and last out. That is why the vast tax cuts that they are arguing for are such a threat to our continued economic well-being.