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Treasury

Volume 454: debated on Thursday 7 December 2006

The Chancellor of the Exchequer was asked—

Money Laundering

1. What estimate he has made of the total amount of money laundered through British businesses and by individuals in each year since 1997-98; and if he will make a statement. (104881)

It is estimated that the total quantified organised crime market in the UK is worth about £15 billion a year. As a result of actions taken to counter money laundering, we have seized more than £230 million of assets from criminals over the past three years. Last year we recovered a record £97 million.

The Minister will be aware that when the Permanent Secretary to the Treasury was giving evidence to the Treasury Committee he confirmed that only £500,000 of suspect terrorist funding had been frozen, but the United States has interdicted 400 times that amount. Why has the Treasury’s performance been so poor in that vital regard?

I am aware of the hon. Gentleman’s interest in those matters and I read his very interesting speech in the debate on the Queen’s Speech a few weeks ago. It is true that we have frozen 192 accounts with some £500,000 of suspected terrorist funds since 2001. That is less than the US, but more than other G7 members, including Canada, France, Germany and Japan. In addition to that £500,000, a further £460,000 cash has been seized under the Terrorism Act 2000, a further £126,000 of assets has been forfeited by those suspected of being involved in terrorism, and the latest figures show that £1.385 million—which is solely terrorist-related money—has been seized under the Proceeds of Crime Act 2002. Across the piece we have been freezing and seizing assets. We have also been acting to ensure that we crack down on terrorist networks. I know that the hon. Gentleman has a great interest in those matters and I believe, as he does, that we should try to achieve a consensus across both sides of the House on the many actions that we are taking to deal with that important issue.

Are there not matters that are not only abused by terrorists but by others, which lead to considerable tax losses? Those matters include the abuse of remittances; the abuse of taxed resident status; the shunting of private equity capital between tax jurisdictions; the abuse of trust services; and the failure to register trust service providers. Those issues have been on the agenda for some time and more tightening up is required.

My hon. Friend is right to say that we need to tighten up even further and we are doing so. We have just completed a consultation into how we may strengthen the regulation of bureaux de change and the money services businesses so that we can deal with precisely the issues that he raises. In the past three years there has been a 46 per cent. rise in prosecutions for money laundering through those money services businesses and he is right to say that we need to act. We need to strengthen regulation and, following our consultation, we will have a consensus with the industry on tougher action to deal with those issues.

Will the Treasury bear in mind the fact that, without expert supervision at all times, casinos can be used by criminals to launder money. Criminals are believed to do so in many parts of the world, so why are we bringing super-casinos to Britain?

The hon. Gentleman is quite right: we need to ensure that we get the regulation of that area right, as in all other areas. We have been consulting on how to implement the third money laundering directive to provide a better and more risk-based approach to the regulation of the casino industry. It is an important industry that creates jobs, but we must ensure that it is properly regulated and that is what we will do.

The UK joint money laundering steering group’s guidance notes acknowledge that misuse of corporate entities is the most likely vehicle for money laundering. When in July the Treasury published its consultation paper on the measures that are necessary to comply with the EU’s third money laundering directive, the proposals were seriously criticised by non-governmental organisations such as Transparency International because they would not monitor trust and company service providers tightly enough to avoid such misuse. Can my hon. Friend reassure the House that he will introduce proposals for legislation shortly that will include tough monitoring of company service providers?

I can assure my hon. Friend that we have indeed been toughening up the guidance. We have also been consulting on how we implement the directive. I believe that we will have a consensus on the way forward on money laundering and I will take seriously the points that he makes. We have not only strengthened our rules and regulations on the important issue of money laundering over the past year, but have taken action that has involved 13,000 different financial investigations by the police in the past two years alone. We are acting and ensuring that we have the best approach to regulation of that area, and I take seriously the points that my hon. Friend makes.

In last year’s pre-Budget report, the Chancellor promised a comprehensive progress report on countering money laundering and terrorist finance in the spring. It is now winter: where is the report, and why is it more than six months late?

As the hon. Gentleman knows, we have produced report after report on these matters all year. We produced new guidance on countering money laundering in February, and will produce Sir Stephen Lander’s Serious Organised Crime Agency report in the spring. In addition, we produced a consultation document on money laundering in July, and we made an economic statement to the House in October in which we outlined all the measures that we are taking. Those measures include two new orders and new powers to deal with benefits paid to the households involved. We have taken action month by month, and we are working very closely with the security services and the police to make sure that we have the best regime. As I said a month ago, we will produce a report around the end of the year that will bring together everything that we are doing.

I advise the hon. Member for Tatton (Mr. Osborne) and his colleagues that they would do much better if they took this matter seriously and tried to build a consensus about the ways forward and the measures that we are taking. I should be very happy to meet him and the hon. Member for Chipping Barnet (Mrs. Villiers)—if she can fit it into her diary—so that we can discuss these matters.

I very much look forward to that meeting, when we can discuss Oxford days. When the Economic Secretary publishes the review to which he referred, will he learn lessons from the Treasury’s past mistakes? The Treasury’s permanent secretary has confirmed that when steps were taken to freeze terrorist funds in 2001 a loophole was left open that allowed terrorist assets to go on being transferred. The Treasury closed the loophole only two months ago, when news broke that Abu Hamza was playing the property market from his prison cell. Why did the Treasury not spot that glaring error for five years, when it is clear that Abu Hamza was able to spot it? Why do the Chancellor’s claims on security fall apart on closer examination, just like his claims on the economy?

I shall be very happy to have a serious meeting to discuss these serious matters. We discussed them at last month’s Treasury questions, and I wrote to the shadow Chief Secretary to the Treasury to offer her a meeting, but unfortunately she had to cancel. The meeting is being rearranged, and when we get together we can discuss the details.

In the meantime, I advise the shadow Chancellor to stop repeating statements that are factually incorrect. The police and security services advise us on these matters, which they looked at in 2005. They submitted a report, and I can tell the hon. Gentleman that there was no illegal transaction at all that involved Abu Hamza. As I said, I shall be happy to discuss these matters with the hon. Member for Chipping Barnet when she can fit a meeting in. In my letter to her I said that there was no evidence that Abu Hamza bought any properties while he was subject to an asset freeze or in prison. Moreover, there is no evidence that the financial sanctions against him were breached, or that funds from the sale or use of properties had been diverted to him or to terrorism.

I advise the shadow Chief Secretary and the shadow Chancellor to look at the details of the matter and listen to the advice of the police and security services, as the Government do. When we have the meeting that we are arranging, I will be able to discuss these matters in detail and seriously—if that is possible with the hon. Gentleman. Then we may be able to put an end to false and erroneous statements that undermine the national interest.

PFI Projects

2. What recent representations he has received on the National Audit Office’s access to the accounts of companies involved in private finance initiative projects. (104883)

The most recent representation was in the Hansard Society report in July. Last December, we introduced an addition to the standard PFI contract that gives the NAO access, within reason, to all such documentation and requires contractors to agree up front that they will disclose publicly all but the most commercially sensitive information.

As both a Labour MP and a public sector accountant, I am politically delighted with the huge health infrastructural investment, but professionally disappointed that much of it has been rooted in PFI, whose spiralling costs and deepening inflexibility are aggravating NHS budgetary difficulties. Therefore much greater NAO access to PFI company accounts is urgently needed to expose their worrying lack of probity, efficiency and accountability. However, does the Chief Secretary believe that the incoming Prime Minister next summer will get a grip of the Treasury policy shapers, whose ardent love affair with private sector finance has stored up such serious problems for his future Administration?

The PFI has made an important, albeit minority, contribution to the big boost in public sector investment of the past few years. I agree that better transparency and accountability improve management and performance, and we have made much headway in that direction. However, it is very important to maintain the programme so that the progress that has been made with new hospital building, new schools and other public sector investment can continue to go from strength to strength.

Is it now Treasury policy, agreed with the Office for National Statistics, that PFI investment in hospitals is public sector investment, not private sector investment? Will the Minister say whether the National Audit Office is told each time that a hospital PFI contract is doubled in length from 30 years to 60 years because the original terms are too generous? Is that information normally given to the NAO and is it usually approved by the Treasury?

I welcome the hon. Gentleman’s contribution. Thanks to freedom of information, the Department of Health places on its website detailed information on the profitability of each PFI contract. On the specific point, I did not quite grasp the question that he asked about the NAO information. I will gladly come back to him on that.

Will my right hon. Friend accept congratulations from many of the people in my constituency, whose children are now being taught in the seven new PFI-built schools? Those schools had been on the books to be built for years and years, but never appeared until this Government took office.

I gladly accept that point and I thank my hon. Friend for it. She will have heard the announcement that my right hon. Friend the Chancellor made yesterday about £36 billion of investment in education over the next four years, to ensure that many more children and communities around the country benefit in the way that her constituents already have.

Several years ago the Chancellor called PFI

“a cynical distortion of public finance”.

Does the Minister agree with him?

Of course, under the Conservative Government there were serious problems with PFI. [Interruption.] Absolutely. Not least of those problems was the fact that they could not make it work. For years under the Conservative Government we were waiting for the programme even to start. Under this Government, however, we have seen the problem solved and impressive and important progress.

Sir John Bourn, the head of the National Audit Office, told the Public Accounts Committee in February this year that too many PFI schemes were off balance sheet, even where the majority of risk was borne by the public sector, not the private sector. Given that the Chancellor told us yesterday that he plans to borrow about £167 billion, if Labour stays in power over the next five years, is it not time that we had an honest appraisal of the true state of the nation’s balance sheet, including the £48.4 billion cost of PFI?

The hon. Lady should tell the House whether she is in favour or against the big programme of public investment that the PFI initiative has provided the country with. We have provided full information about the scale of the liabilities and the extent of the programme, and we will continue to do so.

Lyons Review

3. What discussions he has had with the Office of Government Commerce on the measurement of the wider social and economic benefits of departmental relocations under the Lyons review. (104884)

I can announce that, since the Lyons report recommended 20,000 civil service relocations by 2010, 10,179 posts have already been announced for relocation. Some 1,200 of those posts are in the east and west midlands. The Lyons review presented evidence that movement of posts would offer positive economic and social benefits for the receiving destination. That is now the subject of a review that will be published in the new year.

I thank my right hon. Friend for that reply. May I remind him of our objective in north Staffordshire and Stoke-on-Trent of getting jobs relocated there from the Government estate? Given the information in yesterday’s pre-Budget report that more than half of the jobs to be relocated have now been relocated, will he look closely at the guidance from the Office of Government Commerce and, in particular, the e-PIMS mapping system, which tends to highlight areas that already have parts of the Government estate? In Stoke-on-Trent, we do not have that Government estate and we desperately need the Chancellor to recognise the social and economic case for relocation of jobs to our area.

I will look at that. When my hon. Friend asked me a question yesterday about the textiles and other industries—the pottery industry—in her area, I said that we would hold a meeting with her and other local MPs. The fact is that some of the 1,200 jobs relocated to the midlands have been relocated to her constituency—from the Department for Environment, Food and Rural Affairs and from Her Majesty’s Revenue and Customs. However, I appreciate that, although unemployment has fallen substantially in her constituency since 1997, from 1,880 to 1,326, jobs need to be created for the future. That is why we will also look carefully at how local enterprise grants can go to her constituency in future.

Yesterday, the Chancellor recycled announcements and fiddled his fiscal rules. Has he given Sir Michael Lyons the same misleading information as he gave the public last month about increases in central Government grant for next year’s local finance settlement? In south Shropshire in my constituency, the public were told that the Chancellor was increasing that grant by 5.9 per cent., but it ended up being 3.4 per cent.

I see that the hon. Gentleman has asked not about relocation of jobs to his constituency, but about Government grants. I think he will agree that Government grants to local authorities have gone up every year, continue to go up this year and will go up next year, which is a very different situation from what happened under the Conservative Government.

My right hon. Friend should be congratulated on the progress of relocation of jobs and administrative centres since the Lyons review, but does he agree that many other bodies that receive Government money could also be relocated in other more deserving areas?

That is exactly what we are looking at. My hon. Friend may be interested to know that the Training and Development Agency is moving to Manchester, the Qualifications and Curriculum Authority to Coventry and the Standards Board to the north-west; and that there are other relocations right across the whole of the UK. We will continue to look further into relocations—first because we believe that they are about best value for money and, secondly, because we believe that they can be of great benefit to constituencies and regions like my hon. Friend’s, where there is a continuing need to create more jobs for the future.

The relocation of civil servants raises issues about lack of geographical coverage: for instance, HMRC will now apparently be fighting fraud in London with a team based in Portsmouth. What does the Chancellor say to Mr. Clive Murray, who has 16 years experience as an HMRC compliance officer and who wrote to me last month about the centralisation of anti-fraud teams to ask how

“somehow or other overworked staff in Portsmouth will be able to find crooks throughout London and the South East by purely technological means unknown to them before”?

How is the Clunking Fist going to make that work?

We have created the most modern system of investigating fraud and I think that the hon. Gentleman will agree that the changes in HMRC and more generally in our approach to dealing with criminal fraud have been major and substantial. I do not quite understand the hon. Gentleman’s point when he says that relocation has been unbalanced throughout the whole of the UK. Relocations are also taking place in the south-east region, from the centre of London to some of the south-east’s higher unemployment areas. The House should know that, so far as the 10,000 reallocated jobs are concerned, 2,000 went to Yorkshire, about 1,000 to the midlands, 2,500 to Wales, 693 to the south-west, and the east of England and the north-east have also received some relocations. It is important to correct the misrepresentation, as these relocations are taking place right across the UK.

The Chancellor will be aware that unemployment in my constituency has dropped since 1997 and that it continues to drop, even since last month’s announcement. Will my right hon. Friend tell me how I should campaign to get some of the relocated jobs into my constituency?

I am grateful to my hon. Friend, who has fought for jobs in his constituency. He is right that, as a result of the new deal and other Government initiatives, unemployment in his constituency is lower now than it was in 1997. A report will be published soon on the economic and social benefits of relocation. I suggest that, following that, we have a meeting to look into how jobs can be relocated to new areas that have not yet benefited from the relocation policy.

Banking and Lending Services

4. What steps he is taking to ensure that benefit claimants and people on low incomes have ready access to regulated banking and loans services. (104885)

The Government’s goal is to halve the number of people without access to a bank account. We have established a £120 million financial inclusion fund and an independent financial inclusion taskforce, which has recently reported to me that we are making good progress towards that goal. I can tell the House today that we have appointed two new members of the taskforce: Bridget McIntyre, the UK chief executive of Royal and Sun Alliance, and Danielle Walker Palmour, director of the Friends Provident Foundation.

The Farepak disaster has thrown a spotlight on the financial barriers and debt burdens faced by the poorest people in this country. How is the Treasury using this opportunity to promote the good work of organisations like credit unions and to warn against loan sharks and doorstep lenders?

My hon. Friend is quite right to highlight the important role that credit unions can play. It is important that we crack down on loan sharks as we learn lessons from the terrible Farepak debacle. As she knows, we are putting £36 million into supporting credit unions for low-income lending. In addition, there are two pilot schemes—one of which I visited in Birmingham last Friday—for cracking down on illegal loan sharks. Over the past year or two, the Birmingham team has helped 1,000 victims and wiped out more than £1 million worth of debt. A team in Glasgow is doing the same work. We have put £1.2 million aside to continue those pilots for a further year and to extend them to Sheffield, Liverpool and west Yorkshire. The Government are determined to crack down on loan sharks and to make available the resources to do so.

I fully support the hon. Member for North-East Derbyshire (Natascha Engel), who put an important question, but in addition to ensuring that people on low incomes have access to resources should not the Government be doing more to prevent the financial services industry, particularly banks and credit card companies, from bombarding people to borrow money for irresponsible purposes? Can we do more to regulate those organisations to prevent them from tempting people on low incomes?

As the hon. Gentleman knows, the Office of Fair Trading is responsible for such regulation. As a result of the Farepak problems, a review of the regulatory framework of such schemes is under way. The Department of Trade and Industry is also holding an investigation into the particulars of the case. In addition, we at the Treasury have asked Brian Pomeroy to carry out a review for us of the debt implications of hamper schemes and savings clubs. I have asked him to look into who uses hamper schemes, which are often poor value for money, why they opt for such schemes rather than mainstream financial services products, and in the light of that, to consider whether the savings needs and debts of those groups can be better met by mainstream financial services providers; and to consider what we can do to promote consumer awareness in that area. I hope that the hon. Gentleman can see that we are acting to try to make sure that we learn the right lessons from the problems of recent weeks.

As the Minister is aware, the Treasury Committee has recently produced three reports on financial inclusion and I thank him for his ready co-operation with us. The main conclusion of those reports is that the poor pay more for their credit, and as 3 million people still have no access whatever to bank accounts there is still a mountain to climb. The Committee looked at one good aspect—the savings gateway, which, with matched pound for pound contributions from the Government, helps people on low incomes who do not benefit from tax relief. Will my hon. Friend ensure that the savings gateway pilot is encouraged throughout the country to help people on low incomes to save?

I am grateful to my right hon. Friend; he and his Committee have played an important leadership role on those matters in recent months and we are studying his report in detail. He raises some particular issues about cheque clearing and generic advice, on which we are already acting. I hope that the review that I have asked Brian Pomeroy to carry out will tell us precisely what more we need to do to make sure that our savings mechanisms for low-income savers work well. I very much look forward to the report the Committee will soon produce on access to automated teller machines in low income areas. I know that my right hon. Friend has done important work on that subject and I hope that we shall be able to welcome the conclusions of the report. I can assure him that we are giving close consideration to all the issues he raises in his reports and we shall respond in the new year.

Red Diesel

5. What recent progress has been made in negotiations to extend the derogation from EU regulations to enable UK pleasure boats to use red diesel in 2007; and if he will make a statement. (104886)

I know that the derogation that permits the use of red diesel in Britain is highly valued by private boat owners and users. Thirty-four separate derogations from the directive are held by member states. None has yet been approved by the Commission and 14 have been rejected so far. Late yesterday afternoon, it was confirmed to me that the Commission had decided not to renew the UK’s application for a fresh derogation for private boats. I know that will be unwelcome news. As we have argued to the Commission, it could be highly complex and costly to implement the measure, so today I asked officials to meet concerned and affected organisations soon to discuss the implications of the Commission’s decision.

I thank the Minister for that answer, and he is right that the terms of the Commission’s communication to the Council of the European Union are disappointing. Is he telling the House that that communication effectively kills the application for the derogation, as it is, of course, a communication to the Council? What can we do to ensure that the necessary pumps and facilities will be put in place in every marina and pier that will require them before 1 January? I have pursued the Minister on that point for a number of years. The issue could have been dealt with much more quickly and much sooner, if he had had the backbone to deal with it.

We put the strongest possible case to the Commission, and we prepared that case in close co-operation with, and with contributions from, many of the organisations affected. We could have done little more to press the case. I have personally spoken with and written to the Commissioner on the issue, but there is no further stage in the process. First, we need to discuss the implications of the Commission’s decisions. Secondly, we will consult widely on implementing the directive. Thirdly, we will have to legislate, and implement the changes. I made it clear to the Commissioner that it is important to allow the UK a suitable period in which to translate the Commission’s decision into the implementation of the changes required. The Commissioner acknowledged that point, and we will work with the boating associations on that in the coming months.

The derogation relates to pleasure boats, but not working boats. Can my hon. Friend tell me how much tax revenue is forgone each year because of the red diesel tax concession for those engaging in aquatic leisure pursuits?

It is fair to say that my hon. Friend has not been one of the strongest proponents for continuing the derogation. He is right that the derogation applies to private boat owners. Commercial boat owners and commercial interests will continue to benefit from reduced rates of duty on fuel. The revenue that we expect to gain if we are forced to implement the three derogations that we currently hold—and we have applied to the Commission for their renewal—totals about £10 million. The revenue gain is totally out of proportion to the cost of implementation, the complexity that may result for the industry, and the disadvantage to users. That was the core of the case that we put to the Commission, and I am disappointed that it rejected continuing the derogation for private boat owners.

The decision will be met with great dismay in marinas in ports such as Scarborough and Whitby. Does the case not expose the myth of the UK veto on taxation matters? A stealth tax is being imposed on us by the European Commission, against the wishes and the request of the British Government. Who runs Britain?

I know the hon. Gentleman’s constituency well and I recognise the concern that will be felt in Scarborough and Whitby. However, I must point out to him the source of the derogation. The principle that road fuel level duty should be applied to private boat owners was agreed not in 2003 under the energy products directive, but in 1992 under the mineral oil structures directive, by the previous Government.

I am sure that my hon. Friend will know that, as has been stated, the new regulation will be impossible to police, and it will add a further burden to our law enforcement agencies. However, is it not about time that we woke up to the fact that red diesel is outdated? It is just as polluting and bad for our environment as ordinary diesel. Should we not work towards cutting out red diesel? To meet the costs that that would mean for the industry and users, we could come to some tax arrangements that would allow us to phase in that change over the next decade.

My hon. Friend is right that, in some respects, red diesel is more polluting than mainstream fuels. He will have noted that, yesterday, my right hon. Friend the Chancellor announced a special duty rate in the pre-Budget report to encourage rail operators to use biofuels mixed with red diesel to reduce the environmental impact. Red diesel is valuable to many commercial sectors that have been given permission to use it. The consequences of moving away from red diesel would be profound, but in the case of the derogation that we are considering this morning, its environmental impact is negligible, which was part of our case to the Commission for retaining it.

BBC Licence Fee

6. What recent discussions he has had with the Office for National Statistics on whether the BBC licence fee should be treated as a tax. (104887)

There have not been any discussions between Treasury Ministers and the Office for National Statistics on the reclassification of the BBC licence fee, which is a matter solely for the national statistician, not for Ministers. It has been done solely for the purposes of compiling the national accounts, and it has been done consistent with national guidelines.

Given that the Chancellor is one of the strongest advocates of modern British values, does my hon. Friend share my hope that, after careful scrutiny, he will decide to back one of the most trusted British brands—the BBC—and agree an adequate increase in the licence fee to allow a successful digital switchover, a move in production to Manchester and more quality programming, even if that annoys Mr. R. Murdoch, who would love to see a cash-strapped BBC and who opposes Government plans for a digital switchover.

As chair of the all-party BBC group, I accept that my hon. Friend is more interested in the size of the licence fee than its statistical classification. However, he follows these things closely, so he knows that the licence fee has risen by 15 per cent. above inflation since 1997. He knows, too, that the BBC’s income has risen above that because of the growth in the number of households and improved clamping-down on evasion of the licence fee. We can settle the new licence fee for the next period at a level that is fair to the BBC and to the licence fee payer, and that allows the BBC to lead and fund the digital switchover, while making sure that it is available to everyone in the country.

The deputy chairman is acting as chairman pro tem, and we will hold discussions as appropriate. We will hold them with the new chairman when one is appointed.

Does my hon. Friend support access to the licence fee for the community radio fund, so that in areas such as Wrexham, where the BBC refuses to provide a local radio station, the community radio station that will begin broadcasting in the new year will have access to public funding?

We are considering all the relevant matters in decisions on the licence fee for the future period. We will make an announcement as soon as we can, when the work is completed.

Unemployment

I announced yesterday new measures to help lone parents and the young unemployed into work. Since 1997, 900,000 lone parents have benefited from the new deal, and 122,000 disabled men and women have found jobs. We have helped 316,000 young people and 283,000 of the long-term unemployed, which is one reason why there are now 2.5 million more people in work than in 1997. The answer is not to abolish the new deal but to extend it into a new deal for jobs and skills.

Last year, unemployment increased in 527 constituencies across the United Kingdom. In Wellingborough, unemployment increased by 17.6 per cent. There are, and I have checked my figures, more people unemployed in Wellingborough today than there were nine years ago. Is this “here today, gone tomorrow” Chancellor proud of that record?

I know more about Wellingborough than almost any other constituency in the country. The claimant count is down from 1,856 in May 1997 to 1,535 now. Youth unemployment in the hon. Gentleman’s constituency is down by 47 per cent. since 1997, and adult unemployment is down by 71 per cent. The count on employment shows that not a few hundred but several thousand new jobs have been created in his constituency since the last election.

I hope that the hon. Gentleman is more serious about creating jobs in the future. On April 15 2005, he said this in the Northamptonshire Evening Telegraph, “We want to get rid of red tape, but if that means unemployment, I am sorry, they will get another job. We are not here to create jobs.” I hope that he will support us on the new deal.

Does the Chancellor agree that as a result of the coalfield plan, we have made progress in coal-mining areas throughout Britain? I have spoken in many of those areas, where there have been 40 to 50 per cent. reductions in unemployment—at one time, many of those pit villages experienced unemployment of 15 per cent., and in some cases the figure reached 20 per cent. We will need a little bit more money for junction 29A, which goes straight into Markham pit yard. That is where we are going to get rid of all the pit tips and the lines of coke, which will be replaced by industrial premises and 5,000 jobs. Give us the extra money.

My hon. Friend has outlined the high road to employment. Looking at every region of the United Kingdom since 1997, there are 160,000 new jobs in the west midlands, 200,000 new jobs in the east midlands, 200,000 new jobs in Scotland and 200,000 new jobs in Yorkshire and Humberside. The one thing that the Opposition cannot say is that the 2.5 million new jobs that have been created in Britain in the past 10 years is not a record for this country. There is a higher proportion of people in work in this country than in most of the other advanced industrial economies. The Opposition should support the new deal, rather than trying to abolish it.

According to the Joseph Rowntree Foundation this week, unemployment among adults under 25 has never fallen below 10 per cent. since the Chancellor came into office, is three times greater than for adults over 25 and is now rising. Does the Chancellor agree with the Joseph Rowntree Foundation? Will he accept that that is a problem? And why does he think that policy has so far failed that group of people?

The hon. Gentleman might also have said that unemployment has fallen in his constituency by 54 per cent. since 1997 and that it has fallen for the young people that he is talking about. It is important that the House knows the employment figures on 18 to 24-year-olds since 1997, despite what the Opposition say. There were 3,230,000 young people in work in 1997; by 2006, the figure was 3,600,000, which is an increase of more than 300,000.

I recently paid another visit to the Single Parent Action Network, which has its national headquarters in my constituency. It has just received nearly £400,000 in lottery grant to expand its study centre work. Does my right hon. Friend agree that sometimes it is important that single parents have a year or two to gain qualifications, so that when they enter the job market they can go for better-skilled, better-paid jobs, rather than entering work straight away? And will he tell me what the Government are doing to support that?

One of the great changes that has taken place since 1997 is that the number of single parents entering work has risen substantially. When we came into power, the figure was about 43 per cent., and it has now risen to nearly 58 per cent.—we are on the road to raising it to around 70 per cent. in this country. One of the reasons why we have been able to make that change is by providing training support and child care help to lone parents to enable them to make those decisions. In particular, we have been able to help those people with the sort of courses recommended by my hon. Friend. Again, that part of the new deal is essential to the creation of jobs. I wish that there were all-party support for the new deal, instead of the Opposition parties trying to abolish it.

In the light of research that every 10 per cent. increase in unemployment results in a 30 per cent. increase in home repossessions, will the Chancellor call in the banks to negotiate a code of conduct with them to ensure that job losses do not lead to the loss of homes? In that context, can he confirm an alarming fact on page 224 of the Red Book, where the Government appear to project that claimant count unemployment will rise to more than 1 million in 2007-08? Is that correct?

No, because we do not make projections about the claimant count. I have to tell the hon. Gentleman that historically no Government have predicted what unemployment will be in a year’s time. I have to tell him also that in 1997 unemployment was 1.6 million and that since then it has fallen by 700,000 to 900,000. That is an achievement in itself.

As for mortgages, the hon. Gentleman will probably remember that 1.5 million people were in negative equity at the beginning of the 1990s. It is because interest rates remain low that so few people, in comparison with that figure, are in negative equity and that there are now so many fewer repossessions. I hope that he will support an economic policy, contrary to the one that he represents at the moment, that will ensure economic stability through low inflation and low interest rates.

Unemployment in my constituency halved in the first four years of this Government, but sadly it plateaued, and in the past year it has increased by almost 22 per cent. and is now 7.7 per cent.—more than double the national average. Can the Chancellor tell me what fresh initiatives in the pre-Budget report will bring some hope to my constituents?

As my hon. Friend knows, unemployment in his constituency is still very much below what it was in 1997, as a result of the new deal. Yesterday we announced more help for single parents and the young unemployed to get into work. We will carefully consider, area by area, whether in local employment offices or in the regions, what local discretion can be exercised to allow jobcentres to enable jobs to be created in those areas. We are determined to get more people into jobs. My hon. Friend must recognise that there are now 2.5 million more people in work than there were in 1997 and that the percentage of the adult population in work—75 per cent.—is higher than in most countries. We will continue to create jobs, but we will need the new deal to do that, not its abolition.

Can the Chancellor confirm the simple but little-known claim that unemployment among young men in Britain is now the highest in the whole developed world? A yes or a no will do.

It is completely untrue. Unemployment among young people in France is nearly 20 per cent. [Hon. Members: “Young men.”] I said that unemployment among young people in France is about 20 per cent. If the hon. Gentleman were to look at the figures for France and for many other industrialised countries, he would also be in a position to know that in his constituency unemployment is down by 25 per cent. since 1997. I hope that the Opposition will start to think about their policy. If they seriously want to get more young men and young women into work, how can they possibly support the abolition of all the measures that are necessary to get people into work? Instead of attacking the unemployed, they should be attacking unemployment.

Gershon Target

8. What progress has been made towards the Gershon efficiency savings target; and if he will make a statement. (104889)

As we set out in the pre-Budget report, at the September halfway point in the three-year Gershon efficiency programme, Departments and local authorities had reported annual efficiency gains amounting to £13.3 billion-worth of the £21 billion target.

To corroborate the figure that the Minister quoted, would he be willing to publish an independently audited report setting out the savings by Department and by programme? Could he give the House information about the five biggest savings that have been identified as part of the Gershon programme?

The departmental figures will be in the departmental autumn reports. There has been a lot of scrutiny of this programme by the National Audit Office—that has been welcome—which said that the programme has been more systematic than previous attempts. It made several observations when it reported in February and since then, we have been working with it to ensure that the numbers are more robust. I think that it will report again early in the new year, and I look forward to hearing what it has to say.

On additional numbers, I can tell the hon. Gentleman that of the £13.3 billion-worth of overall savings, £5.5 billion came from procurement, £2.4 billion came from productive time, and £1.5 billion came from policy funding and regulation. I agree that it is important that we provide full information on the programme, because the more transparency there is, the better the chances of success.

Does my right hon. Friend agree that it is right, when possible, to make savings in bureaucracy and the administrative function of Government in order to move resources to front-line public services such as policing, schools and hospitals? In doing that, will he reject outright any proposals that the Treasury may have received to reduce overall public expenditure, as the Conservative party proposes?

I completely agree. My hon. Friend heard my right hon. Friend the Chancellor announce yesterday that each Department will be required to reduce its spending on administration by 5 per cent. year on year throughout the comprehensive spending review. I also agree with my hon. Friend about the way in which the freed-up resources should be used. We shall certainly reject proposals for £20 billion-worth of tax cuts in the Tory tax report, the £40 billion in tax cuts that the Cornerstone group proposes or the £50 billion in tax cuts that the No Turning Back group proposes. The priority needs to be to equip Britain for the future.

Why are valuable jobs being cut in Revenue offices in objective 1 areas—which are, by definition, deprived—in Wales? At the same time, jobs are being moved to Cardiff, Swansea and Wrexham, which are prosperous areas where the labour market is tight. What is the sense of that?

I remind the hon. Gentleman that there are 100,000 more jobs in Wales since 1997. It is important to deliver public services as efficiently as possible in Wales as elsewhere. We are relocating jobs through the Gershon programme and the Lyons recommendations to Wales as to every other part of the country. However, it is vital that we deliver services as efficiently as possible.

Given that yesterday the Chancellor set out massively increased borrowing requirements for the Government over the next five years, has the Gershon report failed to achieve savings or is it some other failure by the Treasury that requires every family in the UK to borrow an extra £10,000 in the next five years to support the Government’s public spending programme?

We will meet our fiscal rules over the cycle. We do not support a third fiscal rule, as the hon. Lady may. However, the Gershon programme is delivering the savings that it was designed to produce—£21 billion in the current spending review period. Yesterday, we set out an ambition to release £26 billion over the three years of the comprehensive spending review, thus making a big contribution to value for money for taxpayers.

Millennium Development Goal

9. What progress is being made towards the millennium development goal of education for every child; what financial contribution the UK will make to meeting that target; and if he will make a statement. (104891)

The United Kingdom is committed to spending at least £8.5 billion on aid for education over the next 10 years. We are entering into 10-year agreements to help finance poor countries’ education plans and we have called an international donors’ conference on education for early 2007.

I thank my right hon. Friend for that reply and for his commitment and leadership in achieving that specific millennium development goal. Research by Save the Children shows that half the 77 million children who are currently not in education live in conflict zones. The pigmy villagers that I met in Bukavu in the Democratic Republic of the Congo earlier this year were desperate for their children to receive an education. Will my right hon. Friend ensure that half of all education spending for reaching the millennium development goal goes to children in conflict-affected fragile states? It is so important to offer children, especially those who have been in militias, an alternative.

My hon. Friend is absolutely right. The latest figures show that 39 million children—half of the world’s children who do not go to primary school—live in fragile, conflict-afflicted states. That is a particular problem where traditional and conventional systems of education do not provide for those young children. Something must be done in those places. The Red Cross and Médecins sans Frontières deliver health care behind conflict lines. It is now important to consider whether we could establish an organisation to help deliver educational services to young children, even in broken-down states and those where there are conflicts. I look forward to working with our international partners and the World Bank on that. Perhaps a fast-track initiative can help provide new opportunities for children who are otherwise the victims of not only conflict but illiteracy and poverty.

Given that Ghana, Kenya and Tanzania have all scrapped school fees in recent years and subsequently enjoyed a dramatic rise in pupil attendance, does the Chancellor agree that, when providing funds to meet the millennium development goal on primary education, he should ask for explicit commitments from recipient Governments that they will abandon policies that restrict access and adopt policies that promote it?

I am grateful to the hon. Gentleman for asking that question, because it allows me to say that the support that we are giving is for free primary education. When we sign agreements that give countries long-term funding, it enables them to make the long-term decision that, whatever is happening from year to year, they will be able to fund education free of charge over the long term. When I was in Kenya, I heard that, in the week in which it made education free for primary school children, 1 million children turned up to be registered for school. They had been denied that education for years—or all their lives, in most cases—and now they were able to go to school free of charge. We will continue to push for free education as part of these plans, and I hope that we can persuade other countries that that is an essential element of providing opportunity and an escape from poverty for young people in developing countries.

Yesterday, Joseph Kabila was inaugurated as president of the Congo after its first election in 40 years. During that election, I met women who felt desperate about their own and their children’s lack of education. Does my right hon. Friend agree that education is critical if we are to entrench democracy? Will he encourage his fellow Ministers to continue to support, and also pressurise, newly elected Congolese politicians to pursue and tackle issues of good governance, security and the distribution of mining and tax revenues in order to create the conditions in which we can meet this millennium development goal?

I know that my hon. Friend has taken a particular interest in the problems of that country, and I hope that, after yesterday’s inauguration, things will progress there. We are ready to provide funds for education, and we are working with 17 African countries on 10-year plans for their education. We are also working with Canada, the Netherlands, Sweden and Norway on long-term predictable financing. Now we need to win over all the other members of the G7 to that project; that is the task for next year.

Employment (Scotland)

This year alone, there are 20,000 more people in work in Scotland, and the total increase in employment since 1997 has been 200,000. There are now a record 2.47 million people in work in Scotland.

I welcome those figures. My right hon. Friend will be aware that the Scottish National party—whose representative is, surprisingly, no longer in the Chamber—is fixated by the idea that the rise in the growth rate is the only true indicator of Scotland’s wealth. Does my right hon. Friend not agree that the way in which we use that growth to create jobs and improve skills is a key component on which the Scots will judge us? Will he give me his assurance that we will prioritise those groups that have still to enter the job market, and introduce real and practical policies that will give them that opportunity?

My hon. Friend is absolutely right. Growth in Scotland—like growth in the United Kingdom—has risen faster than in the euro area over the past 10 years, and employment has increased even faster. In her own area of Glasgow, unemployment, which stood at 85,000 at its peak under the Conservative Government, is now 17,000, and long-term and youth unemployment are both down substantially. It is important to point out, given that the SNP is not represented in the Chamber today—even when there is a question on employment in Scotland, its members fail to turn up to debate the issue—that the real future for Scotland is as part of the United Kingdom, where it will benefit from the growth-creating strategies of this Government, the new deal and other employment measures.

What forecasts for employment in Scotland has the Chancellor made for 2007-08? Has he now had a chance to read his own Budget Red Book and to reflect on the point made by the Liberal Democrat shadow Chancellor earlier? Will he confirm that my hon. Friend’s assumption for unemployment, audited for the National Audit Office, is that it will rise slowly to more than 1 million in that period?

Once again, burying himself in the detail, the hon. Gentleman has missed the main point. [Interruption.] The main point—[Interruption.] The main point—if Opposition Members will listen—is that it is not an assumption by the Government at all. It is not an assumption made by the Government, it is not an assumption compiled by the Government, and it is not an assumption used by the Government. It comes from independent forecasters outside Government, and it is nothing to do with a forecast made by the Government.

Charity Sales (VAT)

Charities already benefit from VAT zero rating or exemptions on many goods that they supply, donated items and goods sold in connection with fundraising. Total VAT reliefs for charities are worth more than £200 million per year, which forms part of the £2.6 billion in tax reliefs for charities and charitable giving provided each year.

As my right hon. Friend will know, I have represented the concerns of my constituent Catherine Haynes and others about items such as the BBC Children in Need TOGS celebrity calendar and the Janet and John CD. What assurances can she give my constituents that when they buy such charity goods, there will be special VAT arrangements for them in the future?

I can give the assurance that the available VAT exemptions and zero rates for fundraising sales made by charities are applied as widely as possible under the European Union agreements governing VAT reliefs and exemptions. Very generous gift aid relief means that charities and fundraising organisations such as Children in Need can claim 28p for every pound donated. Last year that meant that the Government paid charities £728 million through gift aid relief.