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Treasury

Volume 460: debated on Thursday 10 May 2007

The Chancellor of the Exchequer was asked—

Pension Funds

2. What the Treasury's latest estimate is of the cost to pension funds of the abolition of dividend tax relief in 1997; and if he will make a statement. (136446)

As the Chancellor of the Exchequer set out to the House on 17 April, the Treasury recycled revenues from abolishing the dividend tax credit through cutting the main corporation tax rate from 33 per cent. to 31 per cent. and then 30 per cent., cutting capital gains tax, and introducing the research and development tax credit. Since 1997, we have experienced a decade of stability, with the fastest growth in business investment in any nine-year period since data began in the 1960s.

The Chancellor told us that his aim in taking £5 billion a year out of pension fund income was to stimulate business investment. As a proportion of GDP, has business investment risen or fallen since 1997, and what does that say about the success of the policy?

As I told the House, we have had the fastest growth in business investment in any nine-year period since the 1960s. It has risen by 50 per cent. since 1997. Investment has been rising because of the stability that we have delivered and because of the tough decisions that we were prepared to take in 1997.

Recently, a prominent multinational company that employs many of my constituents announced a decision to close its defined-benefit pension scheme. It claimed that that was largely because of increased life expectancy and the changes in actuarial advice brought about by that. Has my hon. Friend made any assessment of actuarial advice in relation to increased life expectancy and the effect on pension funds, and if so, what steps can we take to make sure that these problems do not arise in the future?

I have made that assessment, as we discussed in our debate a few weeks ago. The assessment of Mr. Stephen Yeo, a consultant at Watson Wyatt and a former pensions adviser to the Conservative party, is that the dividends tax credit issue

“is not among the top three”

causes of concern to pension funds. He goes on to tell us recently that pension fund deficits are now at

“the lowest figure since records began.”

The Minister will know that the dividend tax credit changes have affected charities as well as pension funds. When I last raised that issue with the Chancellor, he claimed that gift aid changes had more than compensated for the reduction in tax relief. When he said that, was he aware that since 1997 the total tax repayment to charities has fallen by £100 million in real terms? In other words, charities are being taxed by stealth just the same as the rest of us.

But the fact is that extra transitional relief was given to charities when the decision was made in 1997 and since then there has been a substantial rise in the amount of tax relief available for gift aid, as a result of decisions made by the Government.

Under the previous Government, one of the particular aspects of what happened was the offer of early retirement. In a whole range of employments, it was quite common for people to start retiring from their 50s upwards. Has any analysis been done of the impact that that has had on pension funds and, in particular, of the way in which that has completely skewed the employment of people in the labour market?

My hon. Friend is right to point out those trends. There is also the fact that in the early 1980s the trend began to shift away from occupational schemes. There are also the pension holidays that occurred in the 1990s. The fact is that a fall in the stock market and an increase in life expectancy were the main drivers of the change in pension funds. Despite that, as we discussed in the debate with the shadow Chancellor, the assets of pension funds have not gone down since 1997; they have gone up.

Our estimates of the cost to pensioners of the Chancellor’s tax raid range between £100 billion and £150 billion. What analysis has the Economic Secretary done of the cost to pensioners?

The fact is that those figures are nonsense. As I said, the assets of pension funds have gone up, rather than down. The number of pensioners in poverty has not gone up; it has gone down by 2.1 million. The Government made decisions in 1997 to make the Bank of England independent, to introduce fiscal rules, to have a windfall tax on the privatised utilities and to make tax changes—all of which have delivered stability in our economy and all of which were opposed by Opposition Members. Government is about making tough decisions; we did that and they opposed them.

Employment

There are nearly 29 million people in employment—that is well over 2.5 million more people in work than in 1997. In the Budget, I announced a new partnership with retailers that could help up to 100,000 men and women to find employment over the next five years. There is now higher employment in every region and country of the United Kingdom than in 1997.

I am grateful for that response. With unemployment so low—it has gone down by 18 per cent. in my constituency alone over the past 10 years—and employment at record highs, does my right hon. Friend agree that now is not the time to be abolishing the new deal?

I agree with my hon. Friend. Employment in the north-west is up by 250,000 since 1997. In every region of the country, employment has risen fast since 1997. One of the reasons why employment has risen is the new deal, which helps people to get back into work and to train for new skills. It would be an absolute tragedy if, at a stage when we are trying to get further people back into work, the Conservative party’s policy of abolishing the new deal was adopted. I hope that that party will think twice about its proposal to abolish the new deal, which would deprive the unemployed of help and bring us back to the days of high unemployment that we saw under the Conservatives.

Could the Chancellor tell the House his opinion of the balance between full-time and part-time employment in the creation of new jobs?

I would have thought that the best way of looking at this is that we provide choices for people in the economy. By providing such choices, some can do part-time jobs while others can do full-time jobs. If the hon. Gentleman wishes to support that, I hope that he will support the tax credit system, which enables single parents, especially, to go into work by taking part-time jobs. That is one of the reasons why the percentage of single parents in employment has risen from 43 per cent. to 55 per cent. under a Labour Government.

If the hon. Gentleman is in any doubt about the Labour Government’s success in increasing jobs, let me read to him the mid-term report of a Conservative policy group:

“For the last five years interest rates have been at low levels and credit therefore has been cheap. For the past ten years inflation has been low, the stop-go cycle has given way to continued economic growth and there has been full employment.”

It is not us saying that, but the Conservative party.

Despite record high employment, far too many young people leave school without qualifications and do not go into training or a job. Does my right hon. Friend have any proposals on a new initiative to deal with that growing problem?

That was why we announced in the Budget new measures to help young people to make the transition from leaving school without qualifications and a job to getting back into the work process through getting either training or a job. It is why we are building on the situation between 1997 and now in which the number of 16 to 24-year-olds in work has risen from 3.9 million to 4.1 million, while the number in full-time education has risen from 2.1 million to 2.7 million. Let me quote the hon. Member for Henley (Mr. Johnson). He wrote:

“Most important of all, they have no trouble getting a job…we have almost full employment in this country”.

It is not me saying that, but the Conservative party.

But how much higher would employment levels have been if more people had been encouraged into work by an efficient, well administered tax credit system that had not lost £2 billion? Has it not occurred to the Chancellor that the things for which he is not responsible, such as monetary policy and the private sector, have done rather well, while everything that he has touched—tax credits, the sale of gold and pensions—has been a complete disaster?

Mr. Speaker, this Member of Parliament and his party voted against the independence of the Bank of England—[Interruption.] Conservative Members say that that is history, but we will continue to remind them of the important lessons of history. Making the Bank of England independent gave us stability and prevented us from returning to the stop-go economics that bedevilled us for 18 years under the Conservatives.

If the hon. Gentleman was being honest with us about the tax credit situation and his statements reflected what was happening on the ground, he would acknowledge that one of the reasons why we have 2.5 million more people in work is tax credits. I fear that he wants to cut tax credits because he is a member of the No Turning Back group—[Hon. Members: “Oh.”] Yes. Instead of wanting tax credits, the group wants £35 billion to £50 billion of tax cuts. That is the dividing line between the two parties.

Encouraging business start-ups and entrepreneurship is vital to job creation in Wales. What is being done to help people who want to start up their own businesses?

We have done more over the past few years to help young people and entrepreneurs, in particular, to find the chance of being able to start their own business, whether that is in Wales, through the efforts of the Welsh Assembly, or throughout the whole of the United Kingdom. When we came to power, the rate of business creation was half that in the United States of America. The rate of business creation, particularly among young people, is rising, we are giving more incentives, and the venture capital industry is developing for people who want to move on from simply starting a business to getting new capital, and we will continue to do more in the future. The record in Wales, of course, is one of more jobs since 1997, and we will continue that record in the years to come.

May I welcome the Chancellor on what must be one of the happiest days of his political career? Even the blacked-out windows will not conceal the smile today. May I ask him a question that he has spent all week avoiding? Does he think that his failed policies, including his employment policy, which the Public Accounts Committee described this week as being responsible for

“the highest rates of error and fraud in government”,

played any part in Labour’s election defeat last week, or was that entirely due to the unique leadership of the Prime Minister?

What the Conservative party will not acknowledge when supposedly talking about the economy is that, as the Conservative party mid-term report on policy said—[Hon. Members: “Answer!”] They do not like it, because the report also talks about a “period of unprecedented prosperity” in our country. [Interruption.] I remind the shadow Chancellor—this is, after all, a question on employment in the economy—that there are 600,000 vacancies in the economy. There is one more today, actually, as a result of announcements that have just been made. The shadow Chancellor has acknowledged Labour’s success in macro-economic policy, and he has acknowledged that Labour has established economic credibility. Is it not about time that the Conservatives admitted that they have lost the argument on the economy, that we are creating jobs in this country, that we have unprecedented economic growth, and that we have a record of economic stability that is unparalleled in our history?

If the right hon. Gentleman’s employment policies are so popular, how come 500 Labour councillors and one First Minister are looking for jobs this week? He is responsible for the failures of this Government—the pensions raid, the chaotic administration of tax credits, the record stealth taxes and the chronic waste of money. How can he be the change that the country wants when he is responsible for the present mess? He has been in hiding for a week, but I ask him to answer this simple question: why did Labour lose last week?

What the shadow Chancellor will not acknowledge is that there are 2.5 million more jobs in the economy, that unemployment is at half the level that it was in the 1980s, that long-term employment has gone down by 75 per cent., and that youth long-term unemployment has been virtually extinguished as a result of what we have achieved. If the Conservative party will not, through the shadow Chancellor, face up to its weakness on the economy, let me tell Conservative Members about the speech of their guru, the former shadow Chancellor, the right hon. Member for West Dorset (Mr. Letwin), who says in explicit terms that the age of talking about the economy is over for the Conservative party; it will now just talk about social issues. He says:

“Instead of arguing about systems of economic management, we have to discuss how to make better lives out of the prosperity generated by the free market.”

Is it not about time that the shadow Chancellor admitted that in his two years as shadow Chancellor, he has made absolutely no progress in developing an economic policy? He cannot even tell us, having promised to do so, that he will match us on public spending. We are the party that is creating economic stability, economic growth and jobs for the people of this country.

The Prime Minister is in his Sedgefield constituency this morning, where the level of unemployment is now below the national average, at 2.3 per cent. Will the Chancellor of the Exchequer tell the House whether he will continue with the policies of supporting science and co-operation between universities and industry that have brought so many jobs to the north-east?

I am grateful to my hon. Friend, and I know the interest that she takes in both employment and the development of creative and science industries. We have doubled the science budget; we have created a science city in Newcastle, and there is a science city in York. There is pressure to do more in other parts of the region, and we will respond to that, both through the development agency and through what central Government can do. We will continue our record, which has created in the north-east alone 108,000 jobs since 1997. The one thing on which the Conservatives are totally silent is any economic policy for the future.

The Chancellor is quite right that there is a positive story to tell about employment growth, but does he acknowledge that serious problems remain in the labour market? How, in particular, does he explain the fact that the employment rate among men is now 10 per cent. lower than it was when Harold Wilson presided over the economy?

There are 2.5 million more jobs in the economy. The reason why there are 29 million people in work is that we did not take the advice of the Liberal party but did the right thing by the economy, both in our policies for economic stability and in our public investment. If I may say so, the very tax credits that the hon. Gentleman’s party opposes are one reason why more single parents are in work today, and we will continue with that.

On the question of unemployment, in my constituency it has dropped like a stone since 1997. However, has the Chancellor taken stock of the position after the election last week on the momentum of those jobs and the continuing increase in jobs north of the border?

Scotland has increased its employment by more in the past year than almost any other part of the country, and it will continue to create jobs if it produces the right policies both in the Scottish Parliament and in the UK Government. One of the things that we are determined to do over the next few months is help people get jobs in the retail, construction, and hospitality and hotel sectors, and there are programmes to develop the new deal in those areas that will create more jobs both in Scotland and in the rest of the United Kingdom.

Inequality

Stability in the economy, together with the new deal, the national minimum wage and tax credits, has led to a strong growth in living standards across the whole range of income levels. Employment is up by 2.5 million; the number of children below the poverty line has been reduced by 600,000, and the number of pensioners in that position by 1 million.

Could the Minister explain why the number of pensioners in poverty remains at 1.8 million? What steps can he take to try to eradicate or reduce those numbers?

The figure that the hon. Gentleman gave is 1 million less than it was 10 years ago, thanks to the success of the policies that we have introduced, particularly the success of the pension credit, which has relegated abject pensioner poverty, which was far too widespread in 1997, to the history books. It has had a dramatic impact, and the level of pension credit was subject to its biggest increase ever last month. We will maintain that policy. The consequence is that whereas in the past pensioners were more likely to be poor than other population groups, today they are less likely to be so.

How can the Minister reconcile himself to the notion of reducing inequality when his own Department has pioneered regional pay rates throughout the civil service, which means that people in different areas are paid different rates for doing exactly the same job? What message does that send out on the future of the national minimum wage? Will we have a regional minimum wage in future?

I think that it is right to ensure maximum opportunities for employment around the country, because it is the case that wage levels vary. On inequality, may I tell my hon. Friend that a good measure of income inequality is the ratio between incomes at the 90th and 10th percentiles of distribution, and that that ratio has fallen under the Government’s policies?

A commitment to reduce inequality is totally at odds with the slashing of grants for domestic microgeneration announced yesterday, depriving the less well-off of access to new green technology. Is that not just further evidence of the fact that the Chancellor’s sudden interest in the environment and climate change is about as credible and genuine as his professed love of the Arctic Monkeys?

The hon. Gentleman’s question is inventive, given the topic for the original question. He should be speaking to his own Front-Bench team, who have failed to match our projections on public spending. If he wants more grants, he will need to persuade them to spend more money.

Does my right hon. Friend share my pride that this Labour Government are the first Government ever to break the link between poverty and old age?

I do share that pride, and I am grateful to my hon. Friend for underlining that. It has been an historic breakthrough, thanks to the introduction of winter fuel payments and all the other steps that we have taken, and in particular the success of the pension credit.

The Minister did not mention equality in his original answer, so may I ask him this about the Chancellor’s legacy: has the ratio of incomes of the top 20 per cent. compared with the bottom 20 per cent. risen or fallen since the Chancellor took office in 1997?

Let me underline what I said a few moments ago. The ratio of income at the 90th percentile of the distribution, which is what the hon. Gentleman is asking about, and the 10th percentile rocketed under the policies of the Conservatives when they were in government, but it has now fallen. Under the Tories, the richer one was, the faster one’s income grew. Under the policies that my right hon. Friend the Chancellor has been promoting, income growth for the least well-off 40 per cent. of households has been faster than for the better-off.

I salute what the Government have done for today’s poorest pensioners. However, we are building up a problem for the future in relation to equality for tomorrow’s pensioners. We have tax relief that costs the Exchequer £18 billion a year. It is incredibly regressive—50 per cent. is claimed by the top 10 per cent. of earners, and 25 per cent. is claimed by the top 2.5 per cent. of earners, yet the Department for Work and Pensions has no evidence that tax relief on pension contributions encourages pension savings. Will my right hon. Friend re-examine that £18 billion giveaway, mostly to the rich?

We have considered all those issues in the recent review of policy on pensions, and the decisions that we set out in the White Paper have been taken forward in legislation. It is right that we continue to encourage pension saving, including through the tax relief arrangements that we have in place.

Household Debt

5. What assessment he has made of the average levels of household indebtedness in the UK in comparison to other European countries. (136449)

Levels of household debt have risen over the past decade, as in other European countries. As a proportion of total debt, unsecured household debt is at its lowest point since 1997, but levels of secured household debt have risen by 153 per cent. as a result of the 1.8 million rise in the number of home owners in Britain.

But can the Minister confirm that the average UK consumer owes more than twice the average of the average western European consumer? Related to that, has he read a recent speech by the Governor of the Bank of England, in which he spoke of the rise in indebtedness and bankruptcies, and described it as a

“social problem that is materialising”?

Does the hon. Gentleman agree, and what does he intend to do about it?

The right hon. Gentleman is right. We have a higher level of household debt than other European countries, because we have a higher number of people with mortgages who are buying their homes. Since 1997 we have also had a 65 per cent. rise in the wealth of households, and the average net wealth of households in the UK is higher than in France or Germany. The right hon. Gentleman is right that where consumers get into distress, we need to do more to help them. I shall be in Leeds tomorrow, launching a Leeds pilot on tackling loan sharks who exploit people who get into trouble with unsecured debt. However, the fact that there are more people with mortgages who are buying their homes is a good thing, which has been delivered since 1997.

Will my hon. Friend accept my commendation of the initiatives that have taken place to improve the availability of products to poorer families, which take them away from the loan shark market? That may be a partial explanation of the fall in unsecured loans to which he draws attention.

My hon. Friend is right. We need to crack down on illegal loan sharks through policing and trading standards, but at the same time ensure that there are decent, affordable alternatives. That is why we have a £36 million growth fund which we have increased by £6 million so as to provide, through credit unions and other mutuals, more affordable credit for low-income consumers. We are determined not only to crack down on illegal lending but to ensure that decent alternatives are available for those families.

The House will be aware that households struggling with problem debt are likely to face a further increase in interest rates this afternoon. Is the Minister concerned that after 10 years the Chancellor’s economic legacy will be personal debt at £1.3 trillion, falling living standards, rising interest rates, and inflation at a 16-year high? Does he agree with Kate Barker’s analysis that the Chancellor’s fiscal policy has been partly responsible for the increasing interest rates that are hitting so many families so hard?

I do not agree with the hon. Lady at all. The fact is that we have more people with mortgages buying their own homes and they are paying lower levels of interest rates than they were 15 or 20 years ago. Under the Conservative Government, we had 15 per cent. interest rates, negative equity above 75,000 and record repossessions. Since 1997, this Government have put that instability behind us and delivered stability. That is why people can afford their mortgages and their debt and can live with prosperity.

If we might revert to the question, I hope that the Conservatives are not suggesting that the Government should dictate to people what they can and cannot borrow to buy a house, a car or whatever. Where the Government do have control over debt—that is to say, national debt—is it not a fact that British Government debt is about two thirds of the EU average, half that of Belgium, half that of Greece, far lower than France—where every penny of income tax is used to pay off French national debt—and 10 percentage points lower than when the Conservatives were last in power, when so much of our income tax was used to pay off debt because of their economic incompetence?

My right hon. Friend is right. We have low levels of national debt because of tough decisions that we took on fiscal policy and on tax, including on pension credit in the early period of this Government. A few weeks ago, the shadow pensions Minister told “The Daily Politics” that the decision we took on pension credit should be looked at and that the Conservatives would like to find a way of putting that kind of money back into pensions. The question that I would like to ask is whether the shadow pensions Minister was acting with the permission of the shadow Chancellor.

Recent figures show that a record 30,000 people became insolvent in the first three months of this year. What assessment has the Minister made of that figure?

It is right that in a dynamic economy we create businesses, and also businesses go out of business. In fact, we have a much lower level of insolvency than in the United States, which is a more dynamic economy. It is important to have more risk-taking businesses. We have many more small businesses now than 10 years ago, which is a sign of success in our economy.

International Debt Relief

6. What recent steps he has taken towards international debt relief and financing of international development; and if he will make a statement. (136450)

Twenty-two countries have now received debt relief. We expect another five countries to qualify for cancellation in 2007. I am also working with international colleagues to ensure that Liberia can receive debt relief as soon as possible.

In congratulating the Chancellor on his leadership of the international community on debt relief, which stands in stark contrast to the record of the Conservatives, may I probe him on the issue of international development? Does he agree that if we are to see long-term positive developments in the third world, it is important to have co-operative models that empower individuals and communities to be entrepreneurial and to take control of their own futures?

I thank my right hon. Friend for what he has done to promote international development, particularly through his interest in Africa. The discussions that we are having are not simply about debt relief, education and health, important as those are, but about how we can raise levels of agricultural productivity, enhance micro-credit and bring about economic development in these countries. It is, however, necessary, when we are doing these things, to ensure that there is sufficient international development aid available for supporting micro-credit and economic development, as well as education and health. My right hon. Friend is absolutely right about the record of the Conservatives, who halved the level of overseas aid as a percentage of national income. The figures that have just come out show that under a Labour Government we have doubled it.

One of the countries in particular need of development assistance is Iraq. The position is worsened by the internal conflict, which we have partly helped to precipitate. What changes in Government policy on Iraq can we expect when the Chancellor becomes Prime Minister?

At the recent conference where the Iraq compact was discussed, more countries agreed to provide additional debt relief to Iraq. Everybody understands that it is incredibly important for the future for people to have a stake in Iraq through policies of economic development and creating employment. To answer the question specifically: there has been more debt relief for Iraq.

May I genuinely congratulate the right hon. Gentleman on being about to achieve a long-standing ambition, and wish him well? And in respect of this question, may I ask how he selects the countries that are eligible for debt relief? Clearly, it is important to select countries to give them debt relief, not only to enable them to borrow more money but so that they can create a better quality of life for the people of those countries. How are those countries selected?

The hon. Gentleman is right; we cannot give debt relief unless there is a guarantee that the money will go towards poverty reduction, education and health. In recent years, it has been remarkable that, as we have given debt relief and provided aid, in Kenya, for example, 1 million children have been able to go to school, in Uganda we have trebled the number of young children in education, and in Zambia and Tanzania the number of children in education is rising. Those are examples of the results of debt relief and providing aid. I hope that Conservative Members will not say, as they tend to do, that aid does not work. What does not work is doing nothing. What does work is what we have done to provide educational opportunity and health in Africa.

Millennium Development Goals

7. What recent discussions he has had with international counterparts on the provision of funding for the millennium development goals. (136451)

Since 2004, there has been an increase of 25 per cent. in real terms in aid. The UK has contributed £1.3 billion over 20 years to the international finance facility for immunisation to vaccinate 500 million children. We are one of six donors to a £1.5 billion fund to prevent more than 5 million childhood deaths from pneumococcal disease by 2030.

May I congratulate my right hon. Friend on all that the Government have done to tackle global poverty, especially in Africa? I recently visited John Harrison school in my constituency to see the marvellous work that the children were doing as part of the “Send my friend to school” and “Every child needs a teacher” initiatives. Will my right hon. Friend send a message to those children about what the Government will do to secure free primary education for all?

Our aim is that the 80 million children who do not go to school at the moment will get the chance to do so. One of the ways in which that can be progressed is linking schools in our country with schools in Africa, so that teachers undertake exchanges with teachers in Africa. We thus build up the links that consolidate public opinion not only in Britain but in other countries, so that we can support the education for all initiative. [Interruption.] I am sorry that Opposition Members have lost interest in such issues over the past few months. I am sorry that they are not prepared to match us on overseas development aid. I am also sorry that, although the shadow Chancellor was asked on 1 March, and promised to tell us, whether he would match our spending programme, he has refused to do so—

Order. I must say gently to the Prime Minister—[Laughter.] I am getting into practice for the Wednesday. Let me say to the Chancellor that I have given him a great deal of leeway, but we must stop now. He has done well.

It was precisely because we were worried that we would not meet the millennium development goals by 2015 that we held the education conference in Brussels last Wednesday. We received promises from a whole range of countries that they would step up to ensure that we meet the educational goal by 2015. As far as health is concerned, we are trying to bring together the international community to work together to eliminate diseases such as pneumonia and tuberculosis, which will also require additional funds over the next few years. It is precisely because the rest of the international community has not done what we have already done, which is to raise development aid substantially, that we will continue to press the international community to do so—and I hope that the hon. Gentleman will join us in doing that.

As a member of the all-party group that recently visited India, can I assure my right hon. Friend that we were very much focused on millennium development goal 6, particularly when 1,000 people a day die of tuberculosis in India and the country has other problems such as HIV/AIDS? The other side of the picture is that the growing economy in India offers hope that if resources are widely shared for the many and not the few, we can indeed achieve the millennium development goals. Will my right hon. Friend continue to support that strategy?

I am grateful to my right hon. Friend, who has taken a long-standing interest in these issues and who, like me, recently visited India. He has seen that there is a long way to go in India, with 10 million children still not in school. There is also a long way to go, even as that country develops its wealth, to solve the health problems that my right hon. Friend mentioned. We will continue to support the Global Fund to Fight AIDS, Tuberculosis and Malaria, which is not simply for HIV/AIDS, but for tuberculosis and other diseases. We will support all the necessary research to provide a preventive cure for malaria and other diseases where new inventions and innovations are needed, and we will continue to build the capacity of health care systems in the poorest countries in the world and work with those countries to do so. I see emerging partnerships between trusts and foundations such as the Gates Foundation and private sector companies, as well as Governments, in doing exactly that. I hope that we will gain all-party support when we do so.

The Chancellor has just highlighted the importance of education in achieving the millennium development goals, particularly in Africa—something with which I and, I am sure, all Members agree. Why is it, then, that a British-based charity, Book Aid International, which has a 40-year track record of providing books to schools in Africa—indeed, to 17 countries in sub-Saharan Africa—last month had its annual long-standing grant terminated by the Chancellor?

I have to say to the hon. Gentleman that that was not a decision by the Treasury, if it was a decision by the Government at all. I shall look into the matter that the hon. Gentleman raises with me. I also have to say that I have had talks with many educational publishers and foundations about how to increase the supply of books to Africa. I have to tell the hon. Gentleman that we have doubled the amount of money invested in schools, teachers, books and education generally in classrooms in Africa. I hope that, whatever has happened to that individual charity, the hon. Gentleman will not deny the basic fact that we have doubled expenditure on education, made £8.5 billion available for the next 10 years and done more than any other country to make such finance available, and are calling on the rest of the international community to join us.

Cremation Certificates

8. Whether he plans to retain the exemption from VAT for fees charged by doctors on certificates required by the funeral industry prior to cremation. (136452)

The answer is yes. I can confirm that where fees charged by doctors for completing cremation forms are within the scope of VAT and are, from 1 May, no longer covered by the medical services exemption, VAT is still not chargeable. This is covered by the exemption in relation to services for burials and cremations. My hon. Friend is chair of the all-party funerals and bereavement group, and I hope that he and the other members of the group will welcome the announcement.

The whole industry will welcome what the Minister has just said. There was grave concern—[Laughter]—Pardon the pun. There was much concern within the industry that VAT would be levied at 17.5 per cent., so I am grateful for the Minister’s response. Will he continue his dialogue with the National Association of Funeral Directors, so that these services, which are very serious for many of us at a time of loss, are continued?

Her Majesty’s Revenue and Customs will indeed continue its discussions with the National Association of Funeral Directors. My hon. Friend will recognise that the United Kingdom’s VAT system has some of the most generous and wide-ranging reliefs and exemptions in Europe, and the Government have fought hard to keep it that way. I am glad that we have been able to avoid imposing additional costs in this area, as this is clearly a matter of concern to many in the industry, and to bereaved families at a time of great concern.

I congratulate the Minister on securing that exemption, but is he committed to securing similar arrangements regarding the requirement for two doctors’ signatures in these circumstances? In cases of untimely and unexpected death, which cause supreme shock and loss to a family, will he confirm that the present arrangement involving two doctors will continue for the foreseeable future?

We wish to operate a system that causes the minimum distress to bereaved families at a difficult time, while ensuring that the right kind of checks are carried out when the registration of a death takes place. I encourage the hon. Lady to join the all-party group on funerals and bereavement if she takes an interest in these affairs. I will look at the question that she has raised, and I will write to her.

Pension Schemes

9. What his latest estimate is of the number of people who have lost pensions through the collapse of company pension schemes following the entering into receivership of companies. (136453)

One hundred and twenty-five thousand—and all of them will be entitled to help, thanks to my right hon. Friend’s Budget announcement on the financial assistance scheme.

Will the Minister confirm, or categorically deny—he may confer—that when referring to the 125,000 extremely unfortunate people who have lost the prospect of a secure and prosperous old age through the collapse of their pensions, the Chancellor said, with his usual compassion, “These are not our people”?

No, that certainly was not said. Those people have suffered an appalling loss, and every Member of the House will have met people who have been in that position. Certainly no one on this side has made any such remark. I hope that the hon. Gentleman will welcome the expansion of the financial assistance scheme that my right hon. Friend has announced. That will mean that people will get 80 per cent. of the pension that they were expecting to get at 65.

I know that my right hon. Friend will welcome the strengthening of company pension schemes over the past couple of years. With many companies now making record profits, what steps is he taking to persuade them to divert more of those profits into their company pension schemes?

It is certainly welcome that we have seen a big increase in employer contributions to pension schemes. Under Tory tax rules, companies were encouraged to take pension holidays and, in far too many cases, not to contribute to their schemes at all. One of the most important steps that we have taken to build confidence was to introduce the Pension Protection Fund, which is boosting confidence in pension savings. It is a scandal that although the US equivalent of that fund was in place by 1979, for 18 years the Tory Government did nothing to protect pensions. However, the fund is now in place.

Perhaps the Chief Secretary would care to answer the question that the Economic Secretary did not answer earlier. According to independent experts, the abolition of dividend tax credits in 1997 has cost pension funds a minimum of £100 billion. What assessment has the Treasury made of this? Does it disagree with that figure, and if so, what is the figure?

I certainly do not agree with that figure. As my hon. Friend the Economic Secretary said earlier, pension fund assets have risen. They actually rose immediately after that announcement. I suggest that the hon. Gentleman look at the assessment made last year by the Pensions Policy Institute, which came up with a figure a great deal lower than the one usually cited by the Conservatives.

The workers at H. H. Robertson in my constituency are extremely grateful for the increases in the financial assistance scheme introduced in the Budget. Their pension scheme collapsed under the previous Conservative Government, partly because of the practices of that Administration. Will my right hon. Friend have a word with the usual channels to ensure that the regulatory changes necessary to bring about those Budget increases are brought before the House at the earliest opportunity? My constituents, whose scheme collapsed in 1996, are now getting elderly, and the small amounts of money that some of them get from their pension scheme are very important to their economic well-being.

I agree with my hon. Friend. The matter is urgent, and I shall ensure that his concern is passed on to my right hon. Friend the Secretary of State for Work and Pensions.

Identity Cards

10. What recent discussions he has had with the Secretary of State for the Home Department on a contingency budget to underwrite possible overruns in the costs of the identity card programme; and if he will make a statement. (136454)

The arrangements for funding the identity cards scheme were agreed in November 2003. Costs will be met from existing departmental budgets, and from charges.

It is rather alarming that the Chancellor and the Home Secretary have not had discussions about such an enormous issue. Perhaps the Chancellor’s famous inability to get on with Home Secretaries might be an explanation. The London School of Economics estimates that the cost of the identity cards scheme could run to £20 billion—four times the current projected cost—which will punch an enormous hole in the Home Office budget, creating a serious threat to the United Kingdom in terms of the Home Office’s inability to protect our country from terrorism. Is it not about time that proper contingency arrangements were made, as this massive IT scheme is being administered by the Home Office, and we cannot expect it to run to budget?

I do not agree with the hon. Gentleman. The project will be well planned and taken forward in partnership with private sector suppliers. The threat to the security of our country comes not from that source but from his right hon. and hon. Friends’ refusal to match our spending commitments in that crucial area.

Clearly this is a good day to bury bad news, and that is why the report on the cost of the ID cards scheme has been published today, nearly a month late and in breach of the law. In an answer to my hon. Friend the Member for Rayleigh (Mr. Francois), the Chief Secretary said that despite the fact that the Cabinet backed ID cards, the Treasury had yet to approve the expenditure. Has approval now been given—or, once the Prime Minister and the Home Secretary are out of the way, will the Chancellor follow our advice and scrap the scheme that he once backed?

The procedure being followed in this case is precisely the same as with other major projects of this kind. Before substantive procurement begins, Treasury approval needs to be given, and it will be.

HM Revenue and Customs

11. What plans he has for the provision of Her Majesty’s Revenue and Customs offices in rural areas. (136455)

As the hon. Gentleman knows, HMRC is carrying out a series of regional reviews of all its office accommodation. It has more than it needs at present, and far more than it will need in the future. Every review will involve detailed consideration and an impact assessment of any proposed closure, and that will take account of the impact on staff, local areas and the local community.

I am grateful to the Financial Secretary for that response, but I am sure that the whole House will be interested in any calculations and assessments that Ministers have made of the impact of staff reductions on recoverable tax. Given his remarks, will he emphasise the extent to which the Government will satisfy concerns in constituencies such as mine, which includes west Cornwall and the Isles of Scilly, that the true socio-economic impacts should be taken into account, and the local community should be fully and properly consulted before final proposals are brought forward?

I can give the hon. Gentleman that assurance. If there are proposals to close offices in Cornwall as part of the review, which is unlikely to kick off in full until next year, full consultation will take place among staff, with local communities also involved, and there will be a full impact assessment on the local economy and the local area. We will take into account the responses that we get during the consultation. That is an important part of the process, and the hon. Gentleman might like to look at our revised proposals for central London, which were heavily influenced by the responses during the consultation period.

May I tell my hon. Friend that there is already anger and concern in my constituency and the whole of Derby about the prospect of 430 staff being moved down the road to Nottingham—well over an hour’s journey? That does not make financial or economic sense, and it certainly does not make environmental sense. It is already clear that the move should not take place. In relation to that specific case, will he consider not going ahead with the proposed moves?

No decision on the closure of any offices will be made before Ministers have looked carefully at the results of the consultation and the assessments, and we will do that in the case of my hon. Friend’s area. The representations that he and other Members have made will be among the matters that we will consider. At present, however, HMRC has about 40 per cent. more office accommodation than it needs, and taxpayers expect us to use their money in the most efficient way to deliver good services.

What assurance can the Minister give about the continuation of the Welsh language helpline, which for many years has been run from Porthmadog in my constituency? It may now be moved to Cardiff, where all employers report intense difficulties in recruiting Welsh speakers in the first place. Can the Minister reassure us that the line will continue to be run properly, from Porthmadog?

Concerns and questions about the Welsh language helpline will be considered as part of the review of the office and the location of services in the hon. Gentleman’s area, but I can tell him this. We have given a clear commitment that in each and every case, an inquiry centre where taxpayers seek face-to-face advice will remain in its current location or, if necessary, move to another location in the same locality.

Fiscal Rules

During the last decade the introduction of strict fiscal rules has been an important part of the United Kingdom’s macro-economic policy framework, which has delivered higher growth, lower inflation, more jobs and greater stability than existed in the years before Britain had a Labour Government.

I am grateful for that answer. I am also grateful for the consequences of the Government’s policy, which include the hundreds of millions of pounds being invested in my constituency. Two examples are the building schools for the future investment and the investment in Hammersmith hospital, which is bidding to become the first academic health science centre in the country. What, however, is my hon. Friend’s estimate of the prospect of that investment continuing if a third fiscal rule is adopted?

We have two central fiscal rules which have played a big part in the fact that the level of stability, growth and jobs has been higher over the past decade than ever before. The third fiscal rule that some have proposed would inevitably lead to deep public service investment cuts, amounting to more than £20 billion in the current year alone.

If, as he hopes, the Minister’s right hon. Friend the Chancellor becomes First Lord of the Treasury, will the Minister—who, I am sure, will remain a member of his right hon. Friend’s team—urge on him that when helping to determine the Government’s future fiscal policies, he should agree with President-elect Sarkozy’s strong belief in the importance of retaining large national gold reserves, and with his fierce criticisms of the incompetent behaviour of the independent European Central Bank?

We will continue to make such decisions in the very best interests of the United Kingdom, as we have done in the past.

Identity Cards

14. What recent discussions he has had with the Secretary of State for the Home Department on funding for the identity cards project; and if he will make a statement. (136459)

There have been no recent discussions. As I told the hon. Member for Reigate (Mr. Blunt) a moment ago, the position remains as agreed in November 2003 and confirmed in the House in October 2005.

The Chief Secretary gave the House a laugh a few minutes ago by talking about well-run Home Office IT projects. Perhaps he should read the startlingly honest remarks of the Under-Secretary of State for Justice, the hon. Member for Bradford, South (Mr. Sutcliffe)—the prisons Minister—who told me last week in a written answer:

“These figures have been drawn from administrative IT systems, which, as with any large scale recording system, are subject to possible errors with data entry and processing.”—[Official Report, 30 April 2007; Vol. 459, c. 1421W.]

If the Home Office admits that it cannot cope with processing 80,000 prisoners, what hope has the Chief Secretary? Why is he wasting billions of pounds of taxpayers’ money on trying to record the details of 60 million British citizens?

I hope that the hon. Gentleman will listen to the views of Lord Stevens, who is advising his party on these matters and who, as the Prime Minister pointed out yesterday, has acknowledged the absolute benefits of an identity card scheme. He may well find that he, along with his hon. Friend, must rethink his position.

Pension Funds

15. What the Treasury’s most recent estimate is of the cost to pension funds of the abolition of dividend tax relief in 1997. (136460)

As I told the hon. Lady and her colleagues a few moments ago, we took that action to address the historical problems of under-investment and short-termism which had held back the British economy, and following that, the assets of pension funds in our country rose.

The Economic Secretary has not replied to the simple question posed earlier: exactly how much? Does he recall the dire warnings given to the Chancellor, which were put into the public domain only after a two-year campaign by The Times? Those warnings highlighted the groups of people who would be adversely affected by the abolition of direct tax relief, and said that the lower-paid would be worse off under the new rules, that pensioners due to retire would lose out immediately, and that businesses would struggle to adjust to the change. Will the Economic Secretary apologise to those groups?

As I said a moment ago, that decision also involved the recycling of revenues back to pension funds and investors through corporation tax and other tax cuts. Some people feared that the stock market would fall in 1997; in fact, it rose. Some people feared that investment might go down; in fact, it went up. Some people claimed that pensionable assets would decrease in value; in fact, they went up. However, if Opposition Members think that that was the wrong decision, why will they not make a commitment to reverse it? The shadow pensions Minister has made that commitment, but the shadow Chancellor cannot tell us whether he agrees with the shadow pensions Minister or not. Until that is cleared up, there will be no clarity on this issue.

On Tuesday, I paid tribute to Speaker Weatherill on behalf of the House. Lady Weatherill has told me how touched she has been by the generous support given to her by Members and staff of the House. Immediately after business questions, I shall call those Members who wish to pay their tribute to Speaker Weatherill.