House of Commons
Monday 21 April 2008
The House met at half-past Two o’clock.
[Mr. Speaker in the Chair]
Death of a Member
I regret to have to report to the House the death of Mrs. Gwyneth Dunwoody, Member for Crewe and Nantwich. I am sure that hon. Members in all parts of the House will join me in mourning the loss of a colleague and in extending our sympathy to the hon. Member’s family and friends.
Oral Answers to Questions
The Secretary of State was asked—
Mr. Speaker, I associate myself—and, I am sure, all Members of the House—with your comments. My hon. Friend the Member for Crewe and Nantwich was an inspiring and powerful parliamentarian. Parliament, her constituents and her family, with whom our thoughts are at this time, will miss her very much.
In September 2007, I set up the tackling gangs action programme to develop multi-agency action in inner-city areas of London, Manchester, Birmingham and Liverpool. The £1.5 million programme included a day of action, which resulted in 124 arrests and the seizure of 10 real and more than 1,000 imitation firearms. We will build on the work of that programme and continue to work with partners to reduce further the supply of firearms.
I associate myself, Mr. Speaker, with your observations and those of the Home Secretary about the loss of our friend Gwyneth Dunwoody.
I thank the Home Secretary personally for her strong commitment to the agenda on guns and gangs; there is no doubt that what she is trying to do is making a real difference. However, although it is vital that we consider technical solutions for taking the gun physically out of circulation when that is possible, in the end the only way to resolve and drive against the problem of guns in our inner cities is by changing hearts and minds and the culture that says that the gun is acceptable. That means working with young people and finding them beneficial activities that they want to do and that the rest of society wants them to be involved in.
I met my hon. Friend and representatives of community organisations and the police in his constituency, and that demonstrated to me what a difference can be made on the issue when the community stands by the police. When I visited his constituency, I was particularly pleased to see the work done by local police officers in Plymouth Grove primary school, for example. They were getting in early, alongside teachers, and not only talking to children and young people about the dangers of guns, but giving them the strength to resist some of the pressures, from their peers and others, that might well have led them into trouble later in life. I wholeheartedly agree with my hon. Friend. What he has mentioned has been an important part of the programme.
I also associate myself with the Home Secretary’s remarks about the late Gwyneth Dunwoody. She was indeed a remarkable parliamentarian who will be much missed and long remembered.
I revert to the question. If the day of action was so splendidly successful, can we not have at least a week of action?
The day of action is part of an ongoing programme of work in which police forces, particularly in areas that face the most gun crime, are involved all the time. It was followed up in some areas by a week of action and in others by a month of action. That work certainly focuses activity, and it will continue.
A number of employees of the House have mentioned to me their sadness at the loss of my hon. Friend the Member for Crewe and Nantwich, and I should like to pass those messages on.
I am pleased by my right hon. Friend’s response to the first question. Shortly after we were elected in 1997, a lot of people from Dunblane, whose children had been killed, came to sit in the Gallery. We were promised, among other things, that there would be a national register of people who held handguns. How far have we gone down that road?
My hon. Friend is right that we have strengthened our legislation in a whole range of areas; it is now among the strongest gun legislation in the world. I reassure her that the roll-out of the national firearms licensing management system to all forces in England and Wales is now complete. The system is fully operational.
As someone who was brought up in Dunblane and lives near Hungerford, I feel very strongly about the subject of gun crime in inner cities and elsewhere. Does the Home Secretary agree that it is not about £1.5 million-worth of one-day actions collecting 10 guns, or about working with children in schools, both of which are perfectly legitimate things, and that the only thing that the little neds who carry guns illegally will understand is tough sentencing? If these guys know that they are going to go to prison, they will not carry the guns.
That is why I am sure that the hon. Gentleman is pleased that in bringing forward the proposals for a minimum sentence for gun possession we have increased the average length of time that criminals serve for gun possession from about an average of 18 months in 2002 to well over 50 months now.
Plaid Cymru and Scottish National party Members fully associate ourselves with the remarks made about Gwyneth Dunwoody. She was a truly formidable politician.
The Secretary of State knows that in Scotland we have a particular problem with airguns, which have resulted in three deaths and more than 1,000 injuries in the past few years. It is of such a scale that the Scottish Government have organised a gun summit that will be attended by the police, gun control campaigners and shooting groups—everybody other than herself and Home Office Ministers. Surely she could take a couple of hours out of her diary to come to the summit to explain what the UK Government are going to do about the issue, because if she does not, the impression will be that she could not care less about it and is prepared to do absolutely nothing.
It is a shame that the hon. Gentleman’s party is using the very good initiative of the summit and a whole range of actions to make cheap party political points. I have discussed gun control with his colleagues in the Scottish Executive, and I discussed the issue of airguns. They, like me, will therefore be pleased that the Violent Crime Reduction Act 2006 ensures that it is now necessary to have a licence to sell an air weapon and has increased to 18 the age limit for acquiring or possessing an air weapon. It is probably better if we work together to implement that legislation and to review what more we need to do, instead of making cheap political points that have more to do with the campaign for independence than with a campaign against gun crime.
National DNA Database
Data are available on the number of detections with DNA, but not the number of convictions. The data for 2007-08 will be available this coming June. To give an indication, in 2006-07, 41,148 crimes were detected in which a DNA match was available or played a part.
I thank my hon. Friend for that answer. Does she agree that, if further restrictions were placed on the data that are held on the national DNA database, she and other Home Office Ministers would not be in a position to come to the House and give such positive numbers?
I agree completely. Taking the figures for 2006-07 alone, 452 homicides, 644 rapes and 222 other sexual offences were among the offences detected thanks to the help of DNA. The murders in Suffolk by Steve Wright and the murder of Sally Anne Bowman by Mark Dixie were detected and those men imprisoned thanks to the DNA database.
Dr. John Bond of the scientific support unit at Northamptonshire police has been at the forefront of developing DNA, forensics and other scientific techniques to detect crime and criminals. What specific incentives does the Home Office give to police forces to expand their scientific support operations?
The forensic science capability in this country is a very important issue. We are keen to ensure that we have proper forensic support across those bodies that supply that, including the police, and we now have a permanent regulator in the form of Andrew Rennison, who ensures that our forensics work is of top scientific quality.
Of course, I accept but the beneficial aspects of the DNA database, it is now the largest of any country in the world. It is estimated that there are 500,000 mistakes connected with the database. Can the Minister assure the House that that will be dealt with, and that the information contained on the database is protected from any unfortunate loss?
Security is of course an important issue. The National Policing Improvement Agency, which is responsible as the custodian of the DNA database, is also responsible for other key national databases and has a good track record. My right hon. Friend mentions replication, which is currently at 13.3 per cent. but going down. That is partly because in the early days of new DNA testing, police forces took extra samples to meet higher evidential standards. Much work has gone on to educate police forces in taking DNA samples, so that replication is being reduced. However, that does not adversely affect any of the individuals involved.
More than 2,000 Dutch DNA samples, many relating to serious offences, were mislaid in 2007 for over a year due to the incompetence of UK authorities. Will the Minister tell us today exactly how many suspects have now been arrested by the UK police, and which offences were committed in this country?
This is an ongoing police investigation and it would be inappropriate for me to talk about any partial findings while that investigation, which is an operational matter, is going on. It would be wrong to identify or alert any of the individuals suspected, as it might give them the chance to go under cover. My right hon. Friend the Home Secretary made a commitment to this House to report back when we have all the information after a full, thorough investigation by the police.
We have solved an enormous number of crimes because of the data held on people who have had their DNA taken on arrest, whether they were charged or not. Up to 2005 alone, 3,000 offences were identified involving those arrested and not charged, including 37 murders, 16 attempted murders and 90 rapes. I ask my hon. Friend which of those crimes he would like not to have been solved.
The Government have received representations on part 6 of the Counter-Terrorism Bill from four non-governmental organisations—Inquest, Liberty, Justice and Amnesty International—three trade organisations and a small number of private individuals, including one submission entitled “Fascism—the UK Government wants to change the law on inquest. Will this give the freemasons a licence to kill?”
I am grateful to the Minister for that answer, but is he aware that the Bill gives the Home Secretary fundamental powers to overhaul the coroners system completely? For example, the Home Secretary will have the power to appoint the coroner, and to issue a certificate requiring an inquest to be held without a jury. Is today’s terrorist threat so different from what we faced under the IRA that it is vital in the minds of the Home Secretary and the Minister to tear up hundreds of years of judicial procedure? Is that really necessary? Surely the Government should wait until a coroners Bill is before the House so that the matter can be properly discussed and debated.
I do not agree with much of that. I certainly do not agree that the legislation fundamentally changes the whole coroners system; it does not. It simply says that in one or two specific cases—terrorist and non-terrorist cases, by the bye—it might be necessary to go into such a context to get full closure for the families involved on the circumstances in which someone dies and how they have died. Some Opposition Members indicated that they had difficulties with that provision in the Bill and I am happy to discuss it further in Committee.
In the summer, I lost nine of my friends in Afghanistan. None of their deaths has so far been the subject of a completed inquest. Their families are grieving. I utterly fail to understand why such a provision should be part of a counter-terrorism Bill. Will the Minister listen to many of his Labour colleagues who have said to me that we need a proper coroners Bill, not a provision that is part of a totally different and overweening Bill?
I agree with the second part of the hon. Gentleman’s question. The whole House agrees that there is a need for substantial reform of the coroners system, which is forthcoming. But to alleviate and obviate at least some of the delays that he talks about—I have huge sympathy with what he says about them—it is important to include the provision in question at this stage. The hon. Gentleman will be on the Committee considering the Bill, and as I indicated on Second Reading, I am open to exploring how we can resolve a problem that everyone is aware of—the use of sensitive and secure material in such cases—to ensure that the system works well and is expeditious, so that people are not left in the sort of limbo he describes. Let us talk about that in Committee.
Right to Remain
Published targets are to make 70 per cent. of decisions on postal applications within 20 days of receipt and to make 90 per cent. within 70 days. Complex cases and applications by overstayers, or by those in breach of the rules, can take a bit longer.
I am grateful for the Minister’s answer and his earlier contact. However, he knows that I—and perhaps other colleagues—have several cases that take considerably longer to determine. One problem appears to be the delay in allocating case workers to each application. Some applications will be refused, and people will have to go back to their countries, but at least that is a decision, and they can get on with their lives. However, it is often difficult for people who are waiting to start education courses or who wish to visit their country and then return here. I had a constituent whose mother was dying in hospital abroad and, because of delays, she could not visit, and her mother died. Will the Minister do what he can to speed up the process? Some results will be negative but that is better than the delays that currently occur.
I am grateful to the hon. Gentleman for not only for his question but for the conversation earlier today. I hope that we can resolve quickly the cases that are on the table. Approximately two thirds of applications for indefinite leave to remain are resolved within 20 days and nearly 90 per cent. are resolved in 70 days. However, many cases are outside that target, and the UK Border Agency needs to work faster to get them resolved quickly. Many of the lessons that we drew from creating fast-track asylum teams around the country are being applied to those cases. I therefore hope that faster progress will be made on that front in 2008.
Yes, I can. Indeed, the powers that the UK Border Agency takes under the UK Borders Act 2007 will also provide for stiffer sanctions. However, we have said consistently that we should prioritise the removal of those who have abused our welcome and broken our laws. I am therefore pleased that the UK Border Agency deported 80 per cent. more foreign national prisoners last year. The new agency this year will set tougher targets and we expect it to deport more than 5,000 foreign national prisoners. That is a different order of magnitude from a couple of years ago.
The Minister may know that the former Home Secretary’s decision to refuse citizenship to Mr. Mohamed Fayed was dispatched in a matter of weeks. Given the great distress and burden on the public purse caused by Fayed’s absurd allegations, will the Home Secretary take swift action to remove for good as an undesirable alien that thief, crook and liar?
My hon. Friend will know that some employers in our country and others in the Indian sub-continent have expressed concern that the new system of points-based work permits for those seeking to come to Britain or remain here for the purpose of working may make it more difficult for several people to come here to work. Will he assure me that, under the new system and with the new agency, Britain will continue to benefit from the talents of those who want to work here and can contribute to our economy, without undue delays in processing their applications?
I am grateful to my right hon. Friend for those remarks. Trevor Phillips was right to say yesterday that there is a type of talent around the world from which the UK would benefit in the right circumstances. A little later this week, we have our first debate in Government time on the points system. It is important because it precedes the publication on the way in which we believe that the key stage of the points system will work. We will publish that policy after purdah. There will be a chance for hon. Members of all parties to put their views on the record before we finalise it.
If things are going as well as that, when will the Minister do something about the four months that it has taken to right a wrong—the wrong declared by an appeal judge —done to my constituent, Mrs. Massiah Stockings? When will he ensure that the wife of a serving officer in Helmand province will be given leave to remain in this country, not told that she has to send his passport in? When will he ensure that a man who is British by both parents can get a passport and not be asked impudent questions by officials about why he cannot produce his parents’ divorce document from some 40 years ago?
The right hon. Gentleman will know that about half of the casework in my constituency concerns immigration matters. It sounds as though he has quite a lot of his own, and I should be happy to discuss those issues with him in private, if that would help to expedite the cases that are of concern to him.
The Home Office’s policy-making process makes it clear that policies should be based on sound evidence. This is supported by the Department’s 330-plus scientific staff and the outputs from a variety of Home Office-funded research programmes.
May I invite the Home Secretary to comment on one example, which is the Government’s proposal to reclassify cannabis from class C to class B? If it is a policy decision or simply politics—a bad policy and bad politics—that is fine, but why ask the Advisory Council on the Misuse of Drugs to look into the evidence for doing so, yet then plan to reject that advice and reclassify anyway? What is the point of having those structures for scientific advice if the Government have predetermined their position?
The Home Secretary is right to remind the House that advisers are there to advise. One area where I would ask her to challenge the advisory council’s decision is on the use of khat, a drug used particularly by the Yemeni community that is currently legal, but which is causing disproportionate problems in some areas of our cities. I would ask the advisory council to look seriously at khat again and consider proscribing it.
My hon. Friend makes an important point. One of the actions that we have undertaken under the 10-year drugs strategy that we published last month is to look in more detail at the growing impact of khat and what that implies for how we deal with it, in the way that she suggests.
Of course all policy should be based on evidence. My experience in the criminal courts is that a much more effective and cheaper alternative to prison for many drug offenders is a residential drug rehab bed, yet the Home Office has never been able to undertake research into what is more effective in reducing reconviction rates. Could the Home Office take a careful look and see whether appropriate research can be commissioned?
One of the other things that we are clear about in the drugs strategy is the need to maintain our research into the most effective forms of drug treatment. However, there is clear evidence that doubling the availability of drug treatment saw a 20 per cent. reduction in acquisitive crime. In increasing drug treatment, we have seen crime reducing. As the hon. Gentleman rightly pointed out, we now need to be clear that that increased investment in treatment is going to the most effective forms of treatment, and we will ensure that that happens.
A draft research proposal using the inelegantly titled PEACE process—I am told that it stands for “Planning and Preparation; Engage and Explain; Account, Clarification and Challenge; Closure; Evaluation” and uses interpreters for interviews with non-English-speaking suspects—has been put forward by Kerry Marlow, one of my constituents, and his research group. Is that not a prime example of the police taking forward research that they need to improve working practices that the Home Office should be considering?
While the Home Secretary is pondering the merits of evidence-based policies, perhaps she will take into account the evidence of the House of Lords Economic Affairs Committee on her immigration policy. The Committee includes former Labour Ministers, a distinguished economist—Professor Richard Layard—and the Government’s own pensions adviser, Adair Turner. That Committee concludes that the Home Secretary’s main defence for her policy—that it increases gross domestic product—is, in the Committee’s words, “irrelevant” and “misleading”. Why should anyone believe the Home Secretary’s evidence rather than that of a cross-party Committee of people who actually know what they are talking about?
Actually, we have always argued that there is a positive impact from immigration, and that is supported by the Committee. However, I think that what the Committee says proves that we were right to set up the independent migration advisory committee to provide us with evidence for our new points-based system on which individuals will most benefit this country in terms of the skills that they bring. The largest reform in the immigration system for 40 years is based on that evidence and on that objective.
Immigration Checks (London Airports)
We have recently received a number of representations from a variety of stakeholders about the time that it takes to complete immigration checks at London airports. Records show that, in the past 12 months, there have been 19 parliamentary questions relating to queuing times.
Whatever the Minister might say about the average time taken to get through immigration being below the target level, the truth is that the situation is getting worse. That is creating a bad impression and undermining the reputation of a world-class city. What is the reason for that? What is going on? What steps is the Minister taking to improve the situation?
The growth in passenger numbers between 2005 and 2007 was about 5 and a bit per cent. Over the same period, the number of immigration officers increased by about 33 per cent. Obviously, that growth is now spread around a lot of different airports, so there are particular pinch points, and I think that Heathrow has become one of them. This is exactly why we have said that we will increase the budget for border control by 10 per cent. this year. That will mean 300 extra staff, and I am pleased to be able to say that 150 of those will be for Heathrow.
What evidence is there that some of these hold-ups are caused by females of a particular religious sect who cover their faces and refuse to reveal them as they go through immigration? Is there any evidence that that is causing problems?
Would not the time taken to carry out immigration checks be speeded up if fewer work permits were issued for overseas workers to come to this country, and if the Government heeded the central conclusion of the House of Lords Economic Affairs Committee, which states that
“we have found no evidence for the argument, made by the Government, business and many others, that net immigration…generates significant economic benefits for the existing UK population”?
That blows out of the water the case that has just been made by the Home Secretary, although I have no doubt that it will not stop her making it. Will the Government actually listen to the evidence that has been produced by that expert Committee?
We previously estimated the cost of identity fraud at about £1.7 billion a year, but we are currently engaged in calculating a new estimate which we intend to announce shortly.
Following a straw poll in my office, we discovered that two members of my staff had been victims of identity fraud involving money being taken out of their bank accounts. In any review of the cost of identity fraud, will the Minister ensure that account is taken of the cost to the individual of correcting the errors and getting their money back, as well as the cost of the money taken from the bank account in the first place?
A great deal of work has been done to assess the cost in time, effort and the impact on individuals. It is estimated that it takes an average of 48 hours to sort out the problems of identity fraud. Figures from CIFAS, the UK fraud prevention service, show that about 65,000 individuals were victims of fraud. We take these figures very seriously, and we all need to work together to tackle identity fraud across the piece.
The illegal online trade in stolen identities which fuels ID fraud, and the costs associated with it, operates across borders, yet the Government have not bothered to ratify the international treaty to combat cybercrime that they signed as far back as 2001. Why not?
We continue to look into the issues of international identity fraud and will continue to do so in order to ensure that we protect the British public to the best of our ability. It is worth stressing, however, that preventing identity fraud is not a matter only for the Government, so I would urge any individual not to release personal information, to use only secure websites—[Interruption]—to get credit references and, of course, to notify key players of changes of address—[Interruption.] It is a serious point, Mr. Speaker, and I am sorry that the Opposition seem to think—[Interruption.]
I am sorry that the Opposition seem to think that this is a laughing matter, but the reality is that tackling identity fraud is a matter not only for a number of agencies, including the Government, but also for individuals. It is my responsibility as Minister always to remind individuals to do their bit to prevent identity fraud.
With permission, I should like to answer questions 8 and 20 together.
Thank you, Mr. Speaker.
Since the phasing out of exit controls in 1994, no Government have been able to produce an accurate figure for the number of people who are in the country illegally. By Christmas, however, our border information systems will count in and out the majority of foreign nationals. Together with fingerprinting visa applicants and the issuing of ID cards to foreign nationals, that will ensure that a much more effective set of controls will be in place.
The policy of the UK Border Agency over the past year has been quite clear: when there are lorry drops, they are all attended by immigration officers and the people are immediately taken to detention centres, where their claims—some will obviously claim asylum—are processed. That policy has been the fruit of new partnerships with the police up and down the country; almost all constabularies have immigration crime partnerships in place and one of the most fundamental objectives is to ensure that everyone detected at a lorry drop who we think is an illegal immigrant is arrested and brought to detention centres.
The Home Secretary said that the new UK Border Agency would have
“tough customs, immigration and police-like powers”,
so why did the Government decide to create an agency with “police-like powers” rather than follow Opposition calls to integrate the police into a UK border force so that a robust force with real powers could tackle illegal immigration?
The steps taken to create one agency with £2 billion of resources, 25,000 staff and 9,000 warranted officers have been widely welcomed in the House. Obviously, that agency has to work closely with the police, who have all kinds of other jobs to do at our ports. As the Home Secretary said a week or two ago, discussions with the police—both with the Association of Chief Police Officers and with constabularies up and down the country—about the best way for the new agency to work in an integrated manner with the police will continue, as, indeed, the Prime Minister promised in his statement of last year.
Fear of Crime
We take seriously the fear of crime wherever it occurs and we are taking steps to reduce crime and the fear of crime. According to the 2006-07 British crime survey, younger people have the highest levels of worry about violence and car crime and are more likely than older people to be victims of crime. Older people are less likely to be victims of crime than other age groups. However, their fear of crime is disproportionately high when compared with their low risk of being a victim.
The British crime survey for 2007 records overall crime falling by 32 per cent. since 1997 and 5.5 million fewer victims than in 1995, yet fear of crime continues to paralyse too many lives, both old and young alike. What discussions has the Minister had with the Youth Justice Board and Department for Communities and Local Government colleagues about Age Concern recommendations to have regular intergenerational meetings in all communities so that young and old alike can discuss their fears and counter the destabilising threat of age-related segregation?
I know that my hon. Friend works closely with Age Concern in his constituency, and as a former magistrate he knows the importance of different generations working together. At a recent conference, we discussed the issue of intergenerational liaison to enable elderly and younger people to discuss fear of crime. It is often said that there is a difference between older and younger people. There might be such a difference in perception, but it is in everybody’s interest—whether they are old, middle-aged or young—to reduce crime and the fear of crime.
The understandable fear of crime felt by my rural constituents of all ages is partly based on their awareness of the fact that national police targets are forced on local chief constables, and in their circumstances that means the concentration on urban crime leaving too many isolated rural communities at the mercy of travelling intimidating thieves. How long will it be before local chief constables get more scope to decide their own priorities, rather than following those of the Home Office?
I think that the hon. Gentleman would accept that all levels of crime in all areas of the country have fallen dramatically over the last 10 years, and he should also accept that with the new police assessment framework we have ensured greater scope for local chief constables to determine their priorities. One of the best ways to ensure that local people get the policing they want is the roll-out of neighbourhood policing, which was completed on 1 April.
Alongside that, people in the hon. Gentleman’s constituency will be helped by the Home Secretary’s announcement that, from July, local crime information will be published, which will allow his constituents to see how well the police force is doing and help them to establish the priorities that there should be in each area.
Police Community Support Officers
PCSOs are an invaluable addition to policing. They engage with their local community, provide high-visibility reassurance, and deal with low-level crime and antisocial behaviour. They are complementary and supplementary to the police, and communities up and down the country are benefiting from their presence and their work.
In my constituency, PCSOs have helped to decrease theft from cars by patrolling hot spots. They take 75 per cent. of all antisocial behaviour order cases to the local panel and their visible presence on the streets is much welcomed by the public. Can my right hon. Friend assure me that the funding for PCSOs will continue beyond 2008 and become part of the general policing grant, so that my constituents can continue to benefit from successful neighbourhood policing in my area?
I know that my hon. Friend does a lot of work with local police in her area and that her police division does exceptional work, including the PCSOs. They are to be commended on that. I can assure her that over the next comprehensive spending review period—and, I suspect, beyond, although I should not say that—we have committed to the funding and that work will continue. There is a debate, which ultimately we need to address, about whether the neighbourhood policing fund should be subsumed into the police grant and un-ring-fenced, but for now she can have the assurance that over the next three years that money is assured.
May I congratulate the Minister on the initiative behind community support officers? It has been one of the better initiatives of this Government, and I welcome all those PCSOs in my constituency. However, as my constituency is in Surrey, he will be more than aware of the Government’s gross underfunding, under the formulae, of Surrey police. This has become a crisis situation. He has proposed capping the police element of the county council’s council tax, yet has made no offer to substitute for the shortfall that would then emerge for Surrey police. The year-on-year underfunding of the Surrey force is causing great concern for the residents of that county.
I am more than aware of the circumstances of Surrey’s police and their resource base, although I do not think that I would characterise that in quite the terms that the hon. Gentleman used. He will know that following my hon. Friend the Minister for Local Government announcing the capping criteria, all police authorities involved have some 21 days to put their case together. My hon. Friend and I will be meeting them.
I am sure that Surrey will put its case, and do so quite robustly, and I am happy to offer the hon. Gentleman and other Surrey MPs a separate meeting to look at that matter, as I have authorities on the list of six or seven police authorities that are at least in the frame to be capped, although that will not necessarily happen. Those decisions will be determined at a later date.
Will my right hon. Friend join me in congratulating Durham police on the roll-out of neighbourhood policing? Police community support officers have played a key part in the rolling out of that initiative. Does my right hon. Friend agree that, although the Opposition voted against the introduction of PCSOs, they have become a vital part of the delivery of neighbourhood policing in rural communities such as Durham?
I agree wholeheartedly. I happened to be up in Durham looking at neighbourhood policing a couple of Fridays ago, and—this brings me back to the point made by the hon. Member for North-East Bedfordshire (Alistair Burt)—I saw that both urban and rural communities were benefiting from it.
Like anyone else, I take great joy from the repentance of sinners. If the Opposition now endorse PCSOs and all that they are doing to help our warranted police officers up and down the country, I shall be a very happy man.
My Department is responsible for the security of our nation’s borders. That is why I launched the new UK Border Agency, which brings together the work of the Border and Immigration Agency, Ukvisas and Customs at the border. In its first two weeks alone, the agency barred more than 800 illegal migrants from boarding planes to the UK or crossing into Britain at juxtaposed controls, and seized more than 50 kg of ecstasy, 40 kg of cocaine and 20 kg of heroin. It is vital for the agency to be fully accountable for its work, which is why I am pleased to announce that I am appointing John Vine as the first chief inspector for the UK Border Agency. Mr. Vine has been chief constable of Tayside police since 2000, during which time he was president of the Association of Chief Police Officers in Scotland. He will take up his appointment in July 2008.
When will the Home Secretary recognise that there is no evidence in favour of extending detention without charge beyond 28 days? It is not just the usual suspects who are saying that; it is being said by Sir Ken Macdonald, the Director of Public Prosecutions, and by Sue Hemming, who heads the counter-terrorism section of the Crown Prosecution Service. A whole cacophony of informed opinion opposes the Home Secretary on this matter. Sir Ian Blair has said that there has been no case in which the Met police have required a person to be held for more than 28 days. When will the Home Secretary present the House with evidence to support this substantial erosion of liberty?
I have discussed the issue at length, both during my appearances before the Home Affairs Committee and on Second Reading of the Counter-Terrorism Bill. I have provided the House with considerable evidence—as supplied to me, not least by chief police officers—of the growing scale and complexity of terrorist investigations that are now being undertaken, and the nature of those investigations. Because of what may well come to pass if the plots in question are not foiled, it is necessary to step in early.
Those factors have led senior police officers, and me as Home Secretary, to believe that at some point in the future it may well be necessary to investigate for longer than 28 days, which is why we are including in the Bill a reserve power not to extend the period now, but to ensure that the risk is covered in the future. If the hon. Gentleman feels happy to live with the risk, that is up to him. My responsibility as Home Secretary is to do the right thing, on the basis of the evidence, to keep the country safe.
My hon. Friend has made an important point. In the short term, it is crucial for us to have the legislation and the ability to investigate and bring to justice people who are now plotting terrorist attacks against our country and our interests, but in the longer term we cannot arrest our way out of the problem. That is why we need to invest in expertise and capacity so that work can be done in our prisons and with the young people cited by my hon. Friend, whether through the provision of extra police officers or through the money that my right hon. Friend the Secretary of State for Communities and Local Government has made available to community organisations. We need to prevent people from becoming terrorists and supporting violent extremism in the first place. We take this issue seriously because, as my hon. Friend says, in the long term that is how we will prevent the continued and growing threat to this country from terrorism.
The Home Office, working with the 43 police forces, is constantly reviewing the information that it keeps. I think the hon. Gentleman is completely in error; I say that with hesitation, not least because he has recently beaten up the “Pink Pounder”, who is 10 years older than he is. Quite why the hon. Gentleman should be getting in a boxing ring with someone 10 years older is his own business. Those data will be collected; information on police injuries is important to us. The form in which the information is collected may, as he suggests, have changed, but we are constantly reviewing our data. I am happy to meet him to discuss the matter further, but not in a boxing ring.
I know that my hon. Friend is very concerned about the effects of binge drinking in her constituency and across the country, and she will know that the Home Office and the Department of Health are looking at the impact of discounting in supermarkets and elsewhere and the effect that that has on alcohol consumption. That report will be with us in July or August of this year. We look forward to receiving it so that we can determine the best way forward in that important area of work.
Before I ask my question, may I thank the Home Secretary for what she had to say about Gwyneth Dunwoody? She was a very close friend of mine and we will all miss her greatly.
After the aggressive behaviour of the blue-tracksuited Chinese officials guarding the Olympic torch relay through London, I wrote to the Home Secretary to ask what authorisation she had given to these characters to exercise force on the streets of London. She wrote back and said none. But she did not answer the question as to what checks she had made on their background and particularly whether they were members of the Chinese People’s Armed Police, a paramilitary riot control organisation. Will she answer that now? What checks did she do? Were they members of the People’s Armed Police? On what legal basis did they manhandle British citizens on the streets of London?
I made clear in my letter to the right hon. Gentleman that the Chinese torch officials had no executive power in London. The basis of their agreement was that they were to protect the torch, with activity limited to putting themselves between the torch and anyone who was trying either to take it or to do it damage. They were of course issued with visit visas by the embassy in Beijing on the same basis as anyone else would have been in accordance with standard procedures, including biometric checks. I reiterate to the right hon. Gentleman that they had no policing role. I spelt that out at some length and clearly in my response to him.
Well, we note that we still have not got the answer as to who they were. But even the Mayor of London concedes that it was a mistake to subcontract crowd control to Chinese military security. If Chinese military security was not authorised, as she says, what representations has she made to the Chinese Government about the assault on British citizens? Has she made it clear that they cannot behave as though Trafalgar square were Tiananmen square?
There was no subcontracting of responsibilities. Security in London is a matter for the police and the security services. The Metropolitan Police Service was responsible for the safety, security and safe passage of the torch bearer and the torch as it travelled through London. They had the executive power where it was necessary. There was no executive power vested in the Chinese torch officials, who are a standard part, I understand, of any Olympic organising committee and have very limited responsibilities. Furthermore, if there are allegations of unlawful actions, it is absolutely right that anybody who believes that they have taken place should report them to the police, who will investigate.
As my right hon. Friend the Minister for Security, Counter-Terrorism, Crime and Policing made clear, an analysis of the success of neighbourhood policing in some areas ensured that, with the strong leadership of senior police officers and the National Policing Improvement Agency, we were able by the beginning of this month to have neighbourhood policing teams in every neighbourhood in the country. Importantly, those teams can respond and act differently, depending on the priorities and circumstances of local areas. That is why our preliminary evidence is that in both rural and urban areas not only are neighbourhood policing teams helping to bring down levels of crime and antisocial behaviour, but they are helping to increase confidence and the involvement of local people in tackling such issues.
Certainly not, in answer to that last question: the Counter-Terrorism Bill is about the protection and security of the public in this country, full stop. [Interruption.] No, absolutely not; the right hon. Member for Haltemprice and Howden (David Davis) is entirely wrong. Unlike him—as he declared in The Sunday Telegraph some time ago—we do not run counter-terrorism and security policy by focus group; he should be ashamed of himself for that. We take national security more seriously. Many of the 20 recommendations mentioned do not require legislation; many of them—certainly those to do with bureaucracy and paperwork—have been dealt with by ACPO. I agree, however, with the import of the comments of the hon. Member for Lancaster and Wyre (Mr. Wallace) that there is still an issue to do with police forces taking full cognisance of ACPO’s guidance; we do not need 16 pages in order to authorise many of the aspects of intervention and surveillance under RIPA, as ACPO says that two will suffice. There will also be a need for further legislation in terms not only of ACPO’s recommendations, but of other aspects of intercept and surveillance more generally. Hopefully, they will be dealt with at a subsequent time, when we find the appropriate legislative vehicle.
Britain’s most senior Muslim police officer, Tarique Ghaffur, the assistant commissioner of the Metropolitan police, has confirmed that he believes that 42 days’ detention without charge would be counter-productive and that there is a danger that it will make the police’s long-term job harder. Will the Secretary of State now recognise that, tragically, she is repeating the mistakes of Northern Ireland by going over the top on legal powers of detention, which will only alienate Britain’s ethnic minority communities and dry up terrorism intelligence, and make witnesses more inhibited and convictions harder to achieve?
Let me quote the words of Assistant Commissioner Tarique Ghaffur on Friday:
“I do not lead on counter-terrorism matters for the Metropolitan Police Service and I respect the professional assessment of colleagues who deal with counter-terrorism on a daily basis, and who envisage circumstances arising when the current upper limit of 28 days is not going to prove sufficient.”
Those colleagues include Peter Clarke, former head of counter-terrorist command, Bob Quick, assistant commissioner for special operations—whose letter to me is available in the House of Commons Library—ACPO and the commissioner of the Metropolitan police.
I choose, in making a judgment about keeping this country safe, to listen to the police officers whom we task with investigating terrorist offences and keeping us safe in a proportionate and precautionary way. Unlike Opposition Members, I am not willing to live with the risk of not taking action now to keep this country safe.
It is very difficult to speculate on the circumstances of an individual case, but if it helps the hon. Gentleman, of course I shall be happy to see him and discuss it in detail.
With your permission, Mr. Speaker, I would like to make a statement about this morning’s announcement by the Bank of England to improve conditions in the financial markets. This scheme has been developed following extensive discussions with the Treasury and the Financial Services Authority. I also want to report on the recent G7 meeting in Washington on restoring financial stability to financial markets. I will also report on the measures that we are taking here at home to strengthen the stability of the banking system, as well as to help home owners with their mortgages.
Before I set out in further detail the Bank of England’s special scheme, let me remind the House of the background against which it has been developed. The financial markets throughout the world remain turbulent, following the problems that arose in the US housing market last year. Functioning financial markets rely on banks and building societies being able to raise finance from each other, and from other investors, including through securitisation markets and through inter-bank lending markets. These funds can then be used to finance lending to businesses and to consumers, including the provision of mortgages.
However, global financial markets are currently not functioning normally. Across the world, there is a lack of confidence in credit markets, most notably in mortgage-backed securities. That lack of confidence was prompted by the downturn in the US housing market, and in particular by the problems associated with sub-prime mortgages there. Banks are reluctant to lend to each other, and as a result lending to customers is more expensive and more restricted.
Along with other central banks, the Bank of England has, over the past few months, made additional funding available to the markets through its regular market operations. The UK financial system remains fundamentally strong, and the Bank of England’s action has helped to take some of the pressure out of the system by giving banks additional liquidity to continue their usual banking operations. Indeed, last week the Bank of England made a further £15 billion available, over three months, as part of its open market operations, and the Governor has said that he is committed to providing the liquidity assistance that the system as a whole needs to enable it to function normally.
Here at home, the economy continues to grow. Last week’s figures confirm that unemployment remains low and employment high. That, and the recent interest rate cuts, will provide wider support for the housing market and the wider economy. As banks here and across the world disclose their losses and strengthen their financial positions, which will help to rebuild confidence, the Bank of England can now take action to ease conditions in the financial markets, particularly in relation to mortgage-backed securities.
The special scheme announced today by the Bank of England is a further step towards tackling the problems that have become more evident in recent weeks with the increasing cost and decreasing availability of lending by banks and building societies. Under the new scheme, for a six-month period the banks and building societies, and other institutions that are eligible for the Bank’s standing facility, will be able to enter into agreements with the Bank of England under which they exchange high-quality asset-backed securities for Treasury bills. They can then hold these bills or trade them in the markets. Each exchange agreement will be for a maximum of a year but can be renewed at the Bank’s discretion, so that the exchange could be ultimately for up to three years. The arrangement is available only for assets existing at the end of December last year and does not apply to new lending since then.
At the end of the scheme, the banks will return the Treasury bills to the Bank of England and will receive back the securities that they provided as collateral. This means that the banks will continue to hold the risk on the securities that they provide, so it is they, rather than the Bank of England, that will be exposed to any fall in value. At all times, the banks must provide as security to the Bank of England assets worth significantly more than the Treasury bills they receive in return. If the value of their assets falls, the banks must provide more assets to the Bank of England or return some of their Treasury bills. They will be charged a commercial rate, so there is no subsidy to the banking sector.
The Bank of England expects the initial take-up to be £50 billion. It will monitor the position daily, both to check new bids from banks and to track the value of the assets exchanged as collateral. The Treasury is supporting the scheme announced by the Bank of England by lending to it—at a commercial rate—the Treasury bills which it will then exchange with the banks and building societies. As the House will know, the Government stand behind the Bank as its sole shareholder, and we are making this clear by providing an indemnity. The Bank of England believes that these measures will support the banking sector during the present period of uncertainty and will help to restore the stability that the financial markets need both now and in the longer term. This will help to alleviate the problems that have seen banks reluctant to lend to each other, and, in turn, support the provision of new mortgage lending.
Maintaining economic and financial stability is a key objective. In addition to the Bank of England’s announcement, I can confirm to the House that the Government will take further action at home, and internationally, to restore stability in financial markets. It is important that banks continue to make full disclosure of their exposure to losses, and that they do so as soon as possible. That is why, at the G7 and International Monetary Fund committee meetings in Washington, we agreed that banks should be as open as possible—as quickly as possible—in order to remove the continuing uncertainty as to their true positions. This process has started throughout the world, including here in Britain, with banks disclosing their losses and making proposals to rebuild their capital position.
Transparency is an essential part, along with other steps that we are taking, of stabilising financial markets. In Washington last week, the Financial Stability Forum agreed a range of actions—some to be implemented in the next three months, and others for the longer term. We agreed to strengthen the oversight of risk management, including capital and liquidity, clearer standards for valuation and transparency, and changes in the role and use of credit ratings. We will strengthen international co-operation so that we are better able to prevent crises and deal with problems that occur. We are also working with the IMF to allow it to play a greater role in providing early warning of the threats to financial stability, so that the relevant authorities can take early action to prevent these actions in the future.
Here at home, we are about to finish consulting on the reforms to the banking system that I announced in January. These reforms will make it easier to intervene in the event that a bank gets into trouble, in order to protect depositors and maintain the stability of the financial system. Because it is important that we get this right, I will continue to hold discussions with the industry on the detail of these proposals before bringing forward legislation. We will also want to make changes to the Bank of England to emphasise its role in maintaining financial stability.
The responses that we have received so far to the consultation have made it clear that, given the importance of these reforms, it is crucial that we have further discussions. Once those are completed, I can confirm that it is our intention to introduce legislation this Session to strengthen financial stability and depositor protection. The legislation needs to be on the statute book early next year, when some of the provisions of the Banking (Special Provisions) Act 2008, which we passed in February, are due to expire.
Finally, we are determined to do everything that we can to help home owners, so I am meeting the Council of Mortgage Lenders, the Finance and Leasing Association and major lenders tomorrow, along with the Chief Secretary to the Treasury and the Minister for Housing. Since 2004, mortgage lenders have been required by statute to treat their customers fairly, and at our meeting I will be discussing how banks and building societies can help people whose fixed-rate mortgages are coming to an end, as well as helping people who may get into difficulties in repaying their mortgages. Banks and building societies have a duty to treat their customers fairly and, in the light of everything we are doing, I want to discuss how they can pass on the benefits of falling interest rates as well as wider Government support to mortgage holders.
The Government will continue, along with the Bank of England and the Financial Services Authority, to do everything they can to maintain stability. The announcement by the Bank of England this morning will help to resolve problems in the wholesale financial markets, which have a subsequent impact on the retail markets, and so help businesses, individuals and, in particular, the mortgage market. I commend this statement to the House.
I thank the Chancellor for prior sight of his statement, and the Governor of the Bank of England, who phoned me yesterday to explain in advance what he was proposing to do. On a lighter note, I welcome the hon. Member for Sheffield, Hillsborough (Ms Smith), who is still in her place—the call from the west wing clearly worked, although judging by the Prime Minister’s face, that was the last time that they will talk.
It is nine months since the credit crunch began. We know from the recent International Monetary Fund report, to which the Chancellor referred, that Britain has been left more exposed than any other European country: it has the highest Government borrowing in the developed world and the highest personal debt on record. Of course we welcome any international moves to improve stability. Such moves should include reforms to the Basel accords. Surely it is time to look at counter-cyclical capital rules, so that we try to avoid this boom and bust in debt and asset prices in future.
I know that the Prime Minister was with the Kennedy clan last week. Perhaps he should borrow a phrase from President Kennedy: next time, let us fix the roof “when the sun is shining.” In the meantime, the Bank of England has to pick up the pieces. I broadly welcome the liquidities scheme that it announced this morning. [Interruption.] Indeed, we were recently calling for it. The difference between a well-judged intervention and a bail-out lies in the details and in the protection offered to the taxpayer.
Will the Chancellor, on the record today, give us his personal promise that as the man entrusted with the nation’s finances, he believes that the guarantees are such that there will be no loss to the taxpayer? Would not the risk to the taxpayer be reduced still further if the Government had not agreed to indemnify securities backed by credit card debt as well as those backed by mortgages? Why has he done that? Perhaps he could explain that to the House, because we are trying to keep people in their houses, not prop up credit card lending. According to the market notice issued by the Bank this morning, the British taxpayer is underwriting securities based on United States credit card debt. Could the Chancellor confirm whether that is the case? Has he calculated the extent to which that will expose the taxpayer to developments in the US economy?
The Chancellor is calling on the banks to be more transparent about their liabilities—I agree with him on that—but can he confirm that the Treasury has insisted that the scheme be designed to keep the taxpayer exposure off the Government’s balance sheet? Is it true that the swaps are for 364 days because if they were for a day longer, £50 billion of debt would be added to the national debt? Crucially, what steps is he taking to ensure that the main lending banks will use the facility to pass lower rates to borrowers? Has he had any commitment from the banks that they will do that?
We have seen the share prices of the banks go up since word of the scheme was leaked by the Prime Minister on his American trip, but what we have not seen is mortgage costs come down. The last time the Chancellor called for the banks to pass on a rate cut, they all ignored him, even the bank that he now owns, and several actually raised their rates. Let us hope he is more successful when he meets the Council of Mortgage Lenders tomorrow.
Finally, do not the past nine months reveal the folly of a Prime Minister who failed to use the global good times to prepare for the difficult times? A competent Government would be in a position to help people with the rising cost of living. Instead, this incompetent Government’s 10p tax rise will add to the misery of some of the lowest-paid families, who are already struggling with a rising cost of living, and could more than cancel out any help with mortgage costs that this scheme might bring. It is not too late for the Chancellor to back down and stop this tax raid on the poorest. We know from the climbdowns on capital gains tax and non-doms that this Chancellor is for turning. We know from his comments yesterday that he thinks the Prime Minister’s last Budget was such a mess that he has to return to it. If the Chancellor has a concession to announce or if he wants to set out the process towards any concession, he should not leave it to his deputy; he should get up and have the courage to announce the concession at the Dispatch Box himself.
The Bank of England is now playing its part to help families hit by the credit crunch, and it is time for the Government to do the same. It is time for the Government to stop fighting themselves and start fighting for the country. It is time for a Government who are on the people’s side, not on people’s backs.
I note that the shadow Chancellor had very little to say about the Bank of England scheme, just as he has had precious little to say throughout the past few months. Indeed, ever since these problems first arose in the financial markets last summer, what he has had to say has been contradictory. I note his invitation to discuss boom and bust—something that the Conservative party is well qualified to talk about. I prefer to remind the House that because we have a strong and stable economy, with low levels of unemployment and record levels of people in work, we are far better placed than most other economies to see through this period of financial uncertainty and turbulence.
As for the hon. Gentleman’s assertion that we are the only country affected, he must have noticed that banks and other financial institutions in the United States have been substantially affected. So too have banks in Germany and in other parts of the world. This problem is affecting the banking system throughout the world, which is why central banks and Governments have been taking action to try to alleviate it, with a view to getting the financial markets stabilised and returning to normality.
The hon. Gentleman asked several questions. He asked about the Basel regime, and Basel II in particular. I am sure he would agree that it is important that the banks have adequate capital, and the Basel II agreement was meant to ensure that banks are properly capitalised, so that if they run into difficulties they have something to fall back on. Indeed, the evidence of the past few weeks is that several banks throughout the world need to improve their capital position.
The hon. Gentleman asked how the banks will adapt from the present regime to the new regime, and the FSA is considering that. He also asked about the Bank of England scheme itself, which I understand he broadly welcomes. First, the issue of its classification is for the independent Office for National Statistics. Secondly, perhaps I may explain to him further how the scheme will work, although the Governor must have covered this ground in his helpful conversation yesterday. The Bank of England will make available Treasury bills to a bank in return for which it will have to pledge collateral. Most of that will be mortgage-backed securities, but it can include credit card assets, provided that they are AAA-rated, but in any event it will be for the Bank of England to decide what collateral it will accept.
Crucially, as I think the hon. Gentleman acknowledged on the radio this morning, the Bank of England will ensure that it takes far more from the bank than it gives out in Treasury bills. An example is given in the Bank of England press notice today, which shows that if £100 of collateral is pledged, the receiving bank will get between £70 and £90, depending on the strength and value of the collateral. In other words, there will be a margin to protect the taxpayer. In addition, the banks will pay a fee.
The crucial point is that the Bank of England is now able to take action to provide liquidity in the system for a longer period, which will help banks to restore their capital position and be able to start lending to businesses and individuals. That is crucial for this country in terms of improving the mortgage market. We want to ensure that institutions are sound, but we also want to see the benefits of what is happening passing to home owners, because they are entitled to expect not only support from lenders, but that will the Government to do everything they can to support them. We will continue to do that.
This is a strange day for a Labour Government. They are announcing that they are advancing billions of pounds to the banks at the same time as they are taking billions of pounds away from low-paid taxpayers. The Chancellor reminds me a little of a character whom I frequently encounter in the stories I read to my grandchildren—Little Red Riding Hood, who went around trying to be kind and helpful, but ended up being out-manoeuvred and then eaten by a wolf. [Interruption.] The Chancellor is in the process of being slowly devoured by the British banking system. The banks are not in this position by some unfortunate accident. Their own Institute of—[Interruption.]
The banks are not in this position by accident. The Institute of International Finance, which is the bankers’ group, acknowledged only last week that the banks had engaged in substantial bad practice. British banks have, over the past few years, lent too much, too quickly and too carelessly. The correct course of action, which the markets now anticipate, is that the banks should make a rights issue to their shareholders to raise money to offset the losses that they have to own up to. The problem is that chief executives do not want to go to the markets because they face the sack, so they rattle the begging bowl to the Government and hope that the Government will help them out, which they are doing.
The Government have assured us that they are covering risk as a result of the discounts on the transfer of assets. Can the Chancellor tell us what those discounts are? Only two weeks ago, the International Monetary Fund made an independent estimate that residential property in the UK was 25 to 30 per cent. overvalued. That is the IMF’s estimate; it has no axe to grind. Any asset-backed mortgages that have a discount of less than 30 per cent. represent a transfer of risk to the taxpayer. As I understand it, the Bank of England will provide a discount of up to 30 per cent. but not beyond it. Will the Chancellor explain that discrepancy?
The statement also says—this was confirmed a few moments ago—that the Bank of England will accept credit cards as part of the transfer mechanism. It is said that they will be accepted because they have a AAA rating but after the complete mess that the rating agencies have made over the past six months and the meaninglessness of the AAA rating designations, what possible confidence can we have in that assertion?
My main point is this: if the Government are substantially to relax the conditions under which they make liquidity available to the banking system, surely conditions should be attached to that process. The most important condition should be that the banks accept up front and in writing that they will go to the markets to raise money in the way proposed by the Royal Bank of Scotland. Without that, there is no guarantee that the money raised in this way will not sit in the banks without being advanced to the markets, to small business or to residential borrowers. Without those guarantees, the package promises to be a liability to the taxpayer and to do little to sustain the domestic economy.
I always thought that part of the Liberal Democrats’ problem was that they believed in fairy tales, but I had not understood that the hon. Gentleman did not know the ending of a fairy tale. I hope that when he goes home this evening he will apologise for misleading his grandchildren—inadvertently, of course—about the end of that nursery story.
The hon. Gentleman’s position in relation to the Bank of England’s proposals lacks sense, too. The logic of what he is saying is that the Bank of England should not be providing the support. If these were normal circumstances, that would be a perfectly statable case, but these are highly unusual circumstances. We are in a situation, getting on for nine months after the problems first started, in which the mortgage bank security market is virtually non-existent. That is putting particular strain on banks and making them increasingly reluctant to lend to each other and to customers. That cannot be good for any of us as the problem spreads further into the wider economy. That is why I believe that what the Bank is doing is right. It is similar to what other central banks are doing.
On banks that have got themselves into a position in which they need to recapitalise, I agree with the hon. Gentleman that it is important that they disclose their position as quickly as possible. The sooner the world knows the extent of the exposure, the more confidence there will be in our getting back to trading on a normal basis. Banks are doing that in this country and all over the world. However, the Government cannot say to every institution, willy-nilly, “You ought to have a rights issue,” because that may not be appropriate for some institutions. When the hon. Gentleman thinks through the logic of his position, I think he will see that what he is proposing does not work.
The Bank of England set out the securities that it will accept in the market notice that it published today, as the shadow Chancellor said. As I said in reply to him, it is up to the Bank of England to decide what securities it will accept and, crucially, what margin it requires in order to protect its interests—and, ultimately, the taxpayers’ interests. The measures proposed by the Bank of England are necessary and will be beneficial in helping to get the banking system back into a position in which it functions normally. That will benefit businesses, individuals and mortgage payers in this country.
I think that the principle of moral hazard is very important, but as I have said to my right hon. Friend on a number of occasions, I do not think that we can just stop there. We have a particular problem in relation to the banks. The banking system is crucial to just about every single business and individual, and to all home owners in the country; no Government could simply say, “It really doesn’t matter what will happen to the banking system.” It is crucial to the economy, as we have seen in the United States, as we see in Europe, and as we now see in Asia. There is not a country in the world that is not now being affected by the problem. That is why it is right for the Bank of England to take action, and why it was right to spend the past few weeks developing a proposal that I think will help to begin the process of getting back to normality.
As I said to the shadow Chancellor, the classification of debt is a matter for the independent ONS. On the broader point made by the hon. Member for Gosport (Peter Viggers), as I have said, Treasury bills will be obtained by banks only in return for collateral. Let me make a general point: I know that both in the Treasury Committee and on the Floor of the House the hon. Gentleman has frequently asked perfectly pertinent questions about Northern Rock, as he was concerned about the exposure in that case. The Government did step in to stabilise the position at Northern Rock, but of course money has not been lost; indeed, Northern Rock’s exposure and debt to the Bank of England are being reduced.
The Chancellor referred to low unemployment in his statement. Is he aware that between December last year and February this year employment rose in our country by 152,000? In the last financial year, it rose by 456,000, and 29.51 million of our fellow citizens are now in gainful employment. His theme today is stability. Will not his measures add to the stability of our economy and help our businessmen, citizens and consumers—all of us—overall?
The answer to my hon. Friend’s question is yes, they most certainly will. The shadow Chancellor offered to give us a free lecture on boom and bust, but he might have recalled the difficulties that arise when there are 3 million or 4 million people out of work, and interest rates are at 15 per cent. That is what destabilised the housing market in the early 1990s. The position today is quite different. There are very high levels of people in work, and historically low interest rates. What we have to deal with at the moment is an almost unprecedented shock to the financial system, or certainly one that we have not seen in recent generations. It is important that we, and other banks, and authorities throughout the world, act together to do everything that we can to ensure stability in the banking system.
How much extra cash do banks in the UK now have to deposit or keep for prudential reasons, as a result of the regulator’s change of rules? That will offset the beneficial effects of some of the package. Will the measures be enough to bring mortgage rates down?
In relation to the first point, the right hon. Gentleman is aware that the FSA is responsible for the prudential supervision of the banking system and specifying what arrangements are required, first under Basel I and then under Basel II, which is in the process of coming into force.
In relation to the right hon. Gentleman’s wider point about mortgages, we want to make sure that financial institutions are in good financial health, as I said in reply to the hon. Member for Twickenham (Dr. Cable). That means that some of them will have to restore their capital position. I believe that this is a way of helping to restore the position in relation to financial markets. I have made it very clear that, as most people in this country would expect, in taking action through the Bank of England—either in direct interest rate cuts or through today’s support—the Government are entitled to expect that businesses, individuals and, in particular, mortgage payers will see the benefits of what we are now doing.
The Chancellor needs congratulating if he has got the Bank of England acting with some urgency at long last. However, the House needs to be reassured that we are not, as taxpayers, just bailing out the very same bankers who got us into this problem. I have noticed the financial conditions attached to the loan for the building societies and banks. However, are there other conditions that will force those institutions to pass on rate cuts, extend mortgages and the like—or will the money be used just to mend their balance sheets?
In reply to the latter point, it is not possible for the Government to insist that a cut in the bank rate, for example, should be passed through in every case, whatever happens. There may be reasons why a financial institution is not able to do that—not least because it may need to make sure that its capital position is strong. However, one of the reasons why, in the present position, the rate decreases have not been passed on, and why people have found getting mortgages more difficult or expensive, is that there is less money around because banks are not lending to each other. When we sat down to discuss how we could try to resolve the problem, we asked ourselves what was the root cause of that lack of funding and of the increase in the cost of getting loans, and it is the fact that the mortgage-backed security market is virtually shut. Sorting that problem out will begin the process of freeing up the lending process. That, I believe, will enable us to achieve the situation that we all want, in which people receive the benefits of that. It is not possible to prescribe in a mechanistic way what every single institution in this country must do, but, as I said, if public money is doing its bit, people expect banks to do everything that they can so that the general public can see the benefit.
I welcome the liquidity proposals that the Bank of England has announced today, but I remain concerned about taxpayers’ exposure. Does the Chancellor think that the lessons of recent times will be learned by the banks and building societies, and that those institutions will stop indulging in irresponsible lending? Will the Chancellor and the Government play their part by not adding to the cost of living in this country through stealth taxation?
Banks and building societies should lend responsibly. They should be satisfied that the borrower can afford the loan being taken on, that the asset on which the loan is secured is good and that they will get their money back. I also agree that those responsible for running financial institutions should remember what has happened. What often happens is that the generation involved in one financial or banking crisis has long gone by the time something else happens. I hope that the memories of what has happened in the past few months stick not only with the current generation of managers, but with the rising generation. People need to learn from experiences, particularly bad ones.
I welcome the Chancellor’s statement, although I recognise that it cannot be the place of a Labour Government to bail out a banking sector that has allowed itself to privatise profits and nationalise debt. Will the Chancellor spell out to the House that he intends to bring forward regulations for the banking industry that will, first, make it illegal for banks to conduct the off-balance-sheet transactions that have taken us into our current mess, and, secondly, require the full disclosure of the toxic debt that they are carrying? Is he confident that in the intervention in respect of access to mortgages, he will not be discriminating against the building societies that have remained in mutual ownership and in which people have saved, as opposed to those that converted to banks in order to speculate?
As I said, all institutions that are usually eligible for Bank of England support, including the building societies to which my hon. Friend refers, will be eligible in this regard as well. We are as mindful of their position as we are of that of other banks. I agree with what he says about the need for far greater transparency. There also need to be stricter rules in relation to off-balance-sheet activity, which has enabled some banks to get round their other regulatory responsibilities. That is clearly not a satisfactory position.
In relation to my hon. Friend’s first point, the important thing to remember is that this money, through these facilities, is effectively being lent, not given, to these institutions—they have to repay it. As I said, the collateral—the security—that they have to offer in return will be greater than what they get out of the system. This is helping to put money into the system so that it starts to work again, because if we do not do that there is a risk that the problems that we now see will spread even further and take much longer to recover from. That is why we are taking this action.
I congratulate the Chancellor on getting the Bank of England to do now what it should have done last August at far less cost. Will the Bank of England require, in return for these loans, finance to be restored to home buyers? Will it also require the banks not to pay themselves bonuses for getting out of this mess on the same scale and style that they paid bonuses to themselves for getting into it?
Many people look at these bonuses and ask themselves what the individuals did to get them. In relation to Northern Rock, on which my hon. Friend has had quite a lot to say, that is a perfectly pertinent question to ask. This is not something that we can legislate for; at the end of the day, it has to be for companies themselves.
I dealt earlier with the point about passing on the benefits of interest rate reductions to home owners. This action, which comes on top of other action that the Bank has taken independently or with other central banks, of putting money into the system, has helped. I do not think that last summer anyone would have envisaged that what we now see in the financial markets would have gone on for so long and be so deep in so many countries. It is important not only that action is implemented but that it works.
I welcome the statement and thank the Chancellor for advance notice of it. I particularly welcome the international elements of transparency, co-operation and early warning. I give a guarded welcome to the £50 billion of Treasury bills and the changes to the use of credit ratings. The Chancellor spoke about the background against which these new measures have been developed. He spoke about liquidity and rightly pointed out that we have known about this for some nine months. Given that last August the Governor of the Bank of England knew about the difficulties that the credit squeeze was causing, given that on 4 September last year the inter-bank offering rate was higher than the Bank of England emergency rate, and given that on 6 September the European Central Bank pumped £150 billion-worth of liquidity into the system, does the Chancellor now regret allowing the Governor last September not to increase liquidity in the system? Is the real lesson for the future that in a future event such as this, early intervention will always be better than allowing things to drift on for eight, nine, 10 or 11 months?
My guess is that if we had introduced this particular scheme in August last year many people would have said, “Why on earth is this necessary?”, because the extent and the depth of what has happened could not possibly have been foreseen at that time. As I have said before, certainly to the Treasury Committee and, I think, on the Floor of the House, by the time Northern Rock started to get into difficulties it would have been very difficult to help it through a general provision, because by that time it needed so much money that it was almost inevitable that it would come along to the Bank of England. The hon. Gentleman is right that it is always to our advantage to prevent such things from happening in the first place, if that is possible. That is why we will introduce legislation later in this Session, which I hope that he and his party will support, that was partly foreshadowed by the Banking (Special Provisions) Act in connection with Northern Rock.
I welcome the Chancellor’s support for the banking system, but does he agree that it is important to look at what is happening in other sectors in the economy? Last Friday, I visited the Nissan car plant in Sunderland and met some of the 800 new employees who have been taken on to produce the new Qashqai car. That investment was secured because of a stable economy, but also because of a flexible and skilled work force who make the plant the most productive in Europe and one of the most productive in the world.
I agree with my hon. Friend, and the Qashqai has been extraordinarily successful. I know from my time as Secretary of State for Trade and Industry that the situation he describes came about partly because of the support that the Government were able to give Nissan, and because it recognised that we have a strong, stable economy and that the work force in the motor industry in the north-east is extremely highly skilled and motivated. Indeed, the number of cars being produced by the motor industry at the moment is more reminiscent of what happened in the 1970s. The industry has been highly successful.
There is money available—tens of billions—to fund the banks because of their own incompetence, and money was available, which will not be repaid, when we had an unplanned war against Iraq, so surely a Labour Government with a brilliant record of stealth socialism in their redistribution of wealth to the lower-paid for the past 10 years can find a mechanism to ensure that those who will lose out because of the abolition of the 10p tax rate will be compensated.
As my hon. Friend acknowledges, the Government have done a great deal for people during the past 10 years, particularly those on low incomes, and as I said yesterday, we will continue to do so. It is essential that we put in place the plan before us today because many people in this country, including those on modest incomes, depend on being able to get access to mortgages, and on mortgage payments being kept as low as possible.
The success or otherwise of the measures announced today will be seen in the economy and the banking industry in general, but I wonder whether the Chancellor has any formal process to evaluate the success of the measures during the three-year period for which they could operate.
Success will be demonstrated by the financial markets beginning to return to a stable position, so that banks begin to lend to each other again, which in turn will be reflected in it being easier for them to lend, and for people to borrow, whether we are talking about businesses or mortgages. There has been a substantial jolt to the system that will take time to work its way through, but the step we are about to take is an important one in that process.
The Chancellor is right to address the lack of liquidity in the financial markets. Will he now consider the effect that the lack of liquidity might have on the utilities sector, which bears a collective £28 billion burden of debt? Has he spoken to utility regulators to ask why they continue to rely on rating agencies to fulfil their statutory duty to assess financial stability, despite their track record?
The scheme that we are considering applies to the institutions that can normally get support from the Bank of England. That would not include a utility company. Credit rating agencies should be perceived as a means of reaching a decision, whether that is for a bank, a utility company or anybody else. Their findings are not something definitive, which demands no further questions. The responsibility for running companies and making decisions about debt must lie, first and foremost, with their boards of directors.
Anything that stops us going back to the 15 per cent. interest rates of 1992 must be welcomed in the House. However, what will be the pecking order for the banks in borrowing the £50 billion? Will UK banks come first or can foreign banks also borrow the money?
As I said, the facility is open to the banks that are normally here—British banks and those from abroad with branches here. From the discussions that the Bank of England has held, I do not think that there will be a pecking order problem. The Bank of England is fairly confident that the banks that want to take advantage of the facility can do that.
Banks have been reluctant to take advantage of overnight borrowing facilities from the Bank of England because of the opprobrium that attaches to that public borrowing. What makes the Chancellor so certain that they will be more likely to borrow under the facility that he has just announced rather than under the overnight facility?
As is fairly widely known, a long discussion has taken place between the Bank of England and banks in this country about what the scheme might resemble and whether banks might take advantage of it. I believe that most said that they would. The hon. Gentleman mentioned opprobrium. A feature of the scheme is that the Bank of England will not report on individual banks as and when they may look for facilities. It will report on an aggregate but, for obvious reasons, there is no sense in identifying individuals. My guess is that the scheme will be taken up fairly widely.
Points of Order
On a point of order, Mr. Speaker. Following the recent Freedom of Information Act report released to The Times last week by the Ministry of Defence on the humiliating abduction of Royal Navy and Royal Marine personnel by the Iranian revolutionary guard, I seek your advice on how to secure more transparent, accurate and timely information from the Government on the issue, which is obviously of great importance.
According to an internal and unpublished Ministry of Defence report dated 13 April last year, the illegal abduction by the Iranian revolutionary guard navy took place in waters that are not internationally agreed to be Iraqi. However, the Secretary of State told the House on 19 June last year:
“There is no doubt that HMS Cornwall was operating in Iraqi waters and that the incident itself took place in Iraqi waters.”—[Official Report, 19 June 2007; Vol. 461, c. 1266.]
I am sure that you agree that it is important that Parliament be presented with the facts. It appears—it may not be the case—from the reports that the House was given information, which the Ministry of Defence has contradicted. Although there are Defence questions next week, the matter is so important to our foreign policy that I wonder whether you could advise me on how best I might seek information from a Ministry of Defence Minister.
The hon. Gentleman has given me the solution to his problem by saying that there are Defence questions next week. He should ask those questions. It is up to Members of Parliament to seek clarification on all matters that come before the House and to ask questions. The hon. Gentleman should continue to ask questions, either written or oral, when he gets the opportunity.
On a point of order, Mr. Speaker, on a different matter about which I seek your guidance. Given the weekend reports of further arrests, torture and killings that were undertaken in Zimbabwe—to the distress, I am sure, of hon. Members of all parties—at the obvious behest of the mass murderer Mugabe, and in the light of the Prime Minister’s welcome public statements in the United States and elsewhere on the subject, have you had any indication that the Foreign Secretary intends to come to the House to make a statement about how, on a multilateral basis, we can achieve progress to bring that ghastly regime to book and ensure that the people of Zimbabwe have a better future?
Orders of the Day
[Relevant Document: The Ninth Report from the Treasury Committee, on the 2008 Budget, HC 430.]
Order for Second Reading read.
I beg to move, That the Bill be now read a Second time.
The Finance Bill implements measures from the Budget 2007, the pre-Budget report last year and the Budget 2008. There are three central areas in the Bill that I want to highlight: support for the economy at a time of global economic turbulence; the changes to the personal tax system; and the long-term reforms for the future of our country, particularly those addressing climate change. I will take each of those three areas in turn.
The Bill supports the economy at a time of significant global pressures. As the Chancellor said in his statement a moment ago, a serious global credit squeeze is taking place, triggered by the problems in the US sub-prime mortgage market. At the same time, as families in Britain know well, world food and fuel prices are increasing, too. As a result, all economies across the world are likely to be affected this year.
The British economy is well placed to weather global storms. Inflation is lower here than in the US or the euro area. As the recent labour market figures show, claimant count unemployment is now at its lowest for more than 30 years. Product, capital and labour markets have become more flexible and responsive as a result of the skills and competition reforms that we have introduced. That is why the independent International Monetary Fund has forecast that the UK will be the joint fastest growing economy in the G7 this year.
However, resilience is not enough. We are doing more now to respond to the economic challenges that we face. So for a start, the Chancellor has today set out the steps that we are taking with partners across the world to help address the problems that have stopped banks from lending to each other. As well as the action to promote financial stability, supporting liquidity and monetary policy, the Budget sets fiscal policy to support the economy, too.
The overall approach set out in the Budget and implemented through the Finance Bill is deliberately to put more money into the economy this year. We are using the flexibility that our fiscal rules give us to support additional borrowing in a sensible and sustainable way when the economic pressures are greatest. That is the right thing to be doing now. The overall impact of the fiscal decisions is to put billions more into the economy this year, through the automatic stabilisers and the decisions on things such as delaying the increase in fuel duty until October, which is implemented in the Bill. That is the right thing to do within the fiscal framework at a time when the economy faces global challenges.
Thanks to our fiscal rules, we are able to protect investment at the same time. Previous Governments often slashed capital investment when economic pressures grew. We are protecting it, however, which means protecting investment for the future in our vital transport infrastructure, in our schools and hospitals, and in the underpinnings of the economic growth that we have sustained for so long.
The Opposition have set out a rather different fiscal judgment—in fact, they have set out several, depending on their audience. First they say that borrowing is too high; then they set out ways to increase it further. In the past 12 months, they have set out £10 billion of unfunded tax promises. On Budget day alone, the shadow Chancellor set out proposals for borrowing an extra £5.4 billion, cutting inheritance tax except for millionaires, changing stamp duty and more. Six days later, after the Budget debates, the Opposition voted for an extra £10 billion in borrowing on top of that and against all the revenue-raising measures—on alcohol, on vehicle excise duty and so on—but for none of the tax cuts. Funny that. The Opposition have never told us where the money would come from or how they would make up their black hole—a black hole that just gets bigger and bigger.
The Budget and the Finance Bill also support the economy in other ways, confirming corporation tax at 28 per cent. for this year and next—the lowest rate in the G7 and the lowest rate since the tax was introduced. The Bill also makes changes to the small companies rate to create a more level playing field, and introduces a new annual investment allowance to support capital investment.
The Bill also increases research and development tax credits and makes the enterprise investment scheme—a tax scheme that supports small businesses—more generous. It restructures capital gains tax, creating a single rate of 18 per cent. with a new entrepreneurs relief. It implements more than 20 business tax simplification measures that were announced in the pre-Budget report and the Budget. So, the Bill supports the economy, simplifies the tax system to help businesses and provides overall support for the economy at a time of global pressures, while retaining a sustainable and responsible approach to the public finances.
I want to turn now to the personal tax measures in the Bill. It sets out a major package of reforms to run alongside the changes made by the National Insurance Contributions Bill last year and the changes made to the tax credit system. These include the cut in the basic rate by 2p to 20p, its lowest rate for 75 years. They also include the removal of the 10p starting rate. They include increases in the tax allowance for pensioners, increases in the working tax credit for those in low-paid work, increases in child tax credits and, next year, child benefit to help families with children, and changes to the national insurance upper earnings limit.
As the independent Institute for Fiscal Studies has set out, the poorest third of the population will benefit most from this package because of what we have done for pensioners, for families with children and for low-paid workers through allowances and tax credits. Indeed, the impact of the two Budgets and the pre-Budget report is to raise more than 500,000 children out of poverty. We should not underestimate the immense impact of this. When children grow up in poverty, it can disadvantage them for the whole of their lives. Lifting them out of poverty now could help them not only in the year to come but for decades into the future. As a result of these measures, households with children in the poorest fifth of the population will be on average £340 a year better off, and that will make a very big difference to them.
Pensioners will benefit too—600,000 pensioners will be taken out of tax altogether—and the increases to the working tax credit will help low-paid workers without children. The working tax credit increases will mean that a single-earner household without children earning, say, £14,000 a year will be about £180 a year better off as a result of the Bill.
I want to say more about those who will not benefit from this year’s package. These are major reforms, and the majority of households will be better off or remain the same, although some will pay more as a result of the package. It is hard, in any one Budget, to help everyone, and those who lose in any one year might have benefited in previous years or might benefit in the next. If we look at the Budgets as a whole since 1997, we see that even those who are paying more in this year’s Budget have still benefited significantly overall since 1997. So, on average, those who will pay more this year are still about £500 a year better off than they would have been under the 1997 personal tax and benefits system that the Conservatives left us with.
As the right hon. Lady has already cited the Institute for Fiscal Studies, will she remind the House what the institute’s estimate is of the number of people who will be losers as a result of this package? Will she also remind the House of the Treasury’s own estimate, as reported to the Select Committee?
We have set out the figures. Four out of five households will be better off or see no change. One in five will pay more as a result of this year’s personal tax package, but that does not take into account measures such as the extra given on the winter fuel package or the increases to the minimum wage. For example, the increases to the minimum wage over the past two years alone are worth about £13 a week to those on the lowest pay. We want to do more to help many of those who will not benefit from this year’s package and we have already been working to achieve that.
Does my right hon. Friend accept that Labour Members in general fully support the Budget and the direction in which it is going, but that there are 5.3 million workers—including some in my own constituency and that of the Exchequer Secretary to the Treasury, my hon. Friend the Member for Wallasey (Angela Eagle)—who are worse off? Before we reach clause 3, as I think we will do next week, I hope that the Government will be able to find their way not to unstitch the Budget—nobody is asking that—but to bring forward specific proposals to ensure that those in work who are on the lowest pay are not made worse off by a Labour Budget.
I welcome my right hon. Friend’s support for the overall Budget and the fact that he is not asking the Government to reopen the Budget. I hope that he will understand quite how impractical that would be when people already have their tax codes for this year and are already paying tax and benefiting from tax credits as part of this year’s proposals. He will also recognise that tax changes are part of a major package and that it is not always possible to help everybody in any one package; even those who may end up paying more as a result of this package will still be significantly better off on average than under the Conservatives’ package of 1997.
I would also say to my right hon. Friend that the Chancellor has said that it is his intention to return to this issue in future Budgets and the pre-Budget report and that he wants to look further into what we can do for those on the lowest incomes, just as we have in previous Budgets. That is why we have already made proposals for additional money to help those over 60 this year with winter fuel payments and also why we have provided further help with child tax credit and child benefit. Those will be part of a major programme of work that we shall be taking forward.
Will hon. Members allow me to complete one more paragraph of my speech, after which I will be happy to take as many interventions as they wish?
In the Budget report, we announced that we would begin a new programme of work on the next phase of tackling child poverty. We said that we would work with stakeholders, launching seminars and debates over the next few months, and begin pilot programmes on new approaches to help more children out of poverty. I can tell the House that we will now extend that work to include consideration of households on low incomes without children. Many without children have already benefited from things such as minimum wage increases and the working tax credit, but we want, as always, to do more for those on the lowest incomes, given the resources in the economy at the time. We will therefore consult stakeholders, MPs and different groups on the next phase of tackling poverty and unfair inequality in Britain. That work will initially feed into the pre-Budget report and then future Budgets as well.
Nowhere more than Plymouth appreciates the importance of the economic stability that my right hon. Friend set out earlier in her speech, but she will know that I inherited from my Conservative predecessor the poorest ward in England. Although I can see from what she has set out that the net losers are considerably fewer than was put out by the press over the weekend, does she nevertheless understand that it is some of the youngest people in the constituency, who already feel undervalued, who are losing out? Will she look further into how they might be given a signal that they do matter?
My hon. Friend raises the important issue of young people, for whom the changes in the minimum wage often make a particular difference. As I said, over the last couple of years, those changes have been worth £13 a week for those on low incomes and about £11 a week for the youngest age group. Although that has made a significant difference to their income, my hon. Friend is right that we are keen to do more to help younger workers who need investment in their skills to get the chance of a better job. Our overall approach across the Government has been to support people, through work where possible, but children and pensioners, of course, cannot go out to work. We have given particular additional support to them as well, on top of such things as the working tax credit, but I recognise the points that my hon. Friend has made.
I am extremely grateful to the Chief Secretary for giving way. Further to the question from the hon. Member for Plymouth, Sutton (Linda Gilroy), can the Chief Secretary confirm that the number in the press at the weekend—5.3 million people—is correct? Will she share that with the House today?
Indeed, those figures have been published as part of parliamentary answers, but I say again that they have not included such things as the winter fuel payment, which is an important factor. I would also say to hon. Members that they might be interested to know that about half those households that pay more this year are in the top half of the income distribution. It is right to say, as the IFS has said, that we are providing the most support for those who are on the lowest incomes.
While I fully accept and welcome the many positive proposals in the Budget, does the Minister accept that it is utterly perverse, given that a minority of households are losers, that they should be disproportionately represented among those just above the lowest income bracket?
As I have just said, interestingly, the figures show that around half those who are paying more as part of this particular package are in the upper half of the income distribution, so in fact the distribution is rather different from how it has often been presented in the media. The IFS has made it very clear that those in the bottom third of the income distribution are the biggest gainers.
Let us be clear: we have to recognise the fact that in any major package of reforms it is difficult to help every household, but that is why we look continually—in every single Budget and in every pre-Budget report—at what more we can do so that those who do not benefit in any one year may well be able to benefit in a future Budget or pre-Budget report.
The Chief Secretary has referred to the practical difficulties of making tax changes when the tax codes for this year are established, but she also referred to, and boasted about, increases in the national minimum wage. Given that the Government have announced increases—respectively for the adult and youth rates of 21p and 17p—to take effect from October, will she concede that in principle there is nothing to stop her raising the adult rate to £6 and the youth rate to £5 from October?
I appreciate the fact that the hon. Gentleman recognises the increases in the minimum wage that have taken place. I suspect that he is perhaps one of the few members of his party who have not necessarily been adamantly opposed to the minimum wage throughout its history, as I know many of its members have been. Certainly, we take the advice of the Low Pay Commission in setting the minimum wage for the future and we shall continue to do so. We have a proud record of increasing the minimum wage.
I wish the Minister to see whether we can have a figure, even if it confirms the 5.3 million. That was the figure given last year by the IFS, but it has obviously been overtaken by the tax credit changes and so on. Is 5.3 million people still a valid figure or is it now outdated?
My hon. Friend makes an important point, as the figure changes all the time because people’s income changes all the time. That is the figure that we have confirmed as part of parliamentary answers—we have set out parliamentary answers in this area—but it is also the case that, with every Budget, further changes are made. For example, the winter fuel payment, which is not taken account of, is part of that. Also—
I apologise, Madam Deputy Speaker.
My hon. Friend the Member for Leeds, East (Mr. Mudie) will also appreciate that there are changes to the winter fuel payment and such things as the minimum wage, which are obviously not taken into account as part of this. Of course, there will be further changes.
At the beginning of March, I exchanged correspondence with the Financial Secretary to the Treasury about the 60 to 64-year-olds who would lose out. She wrote back to me admitting that there would be losses, but that they
“will be relatively modest, at about £2 per week on average.”
Those losses will affect about 1.5 per cent. of people on low incomes, in some cases both people in a household. When the current Prime Minister announced the Budget, did he entirely disregard the people who would pay more tax this year than they did last year, or was this an omission that was not recognised at the time?
The work of the former Chancellor, and that of the current Chancellor, has strongly supported pensioners. In fact, the poorest third of pensioners are on average more than £2,000 a year better off since 1997 as a result of the changes that we have introduced. This year we are increasing the winter fuel payment for the over-60s as well as the over-80s, and introducing a range of other changes such as free bus travel.
I understand that my right hon. Friend is trying to help the House, but does she accept that there are millions of low-paid losers who are not entitled to tax credits, and millions more who are but who do not claim them because their earnings change from week to week and they do not want to become enmeshed in overpayments? They face food, fuel and rent increases this week, or this month. They cannot wait for a package in 2009: they need it in 2008.
Many of those families will be about £500 a year better off than they would have been under the tax and benefits system in 1997. It is right for us to continue to support households, which is why we introduced and increased the working tax credit to give additional help to, for instance, people with incomes of £14,000 or £15,000 a year. We have been working on the issue, and my right hon. Friend the Chancellor has said that he intends to return to it as part of his work on the pre-Budget report and on future Budgets. He wants to take into account not just those on low incomes with children, in whom we have already invested a considerable extra amount, but those with no children.
I have already taken a large number of interventions, and I want to make some further points.
These measures will build on the progress that we have made over the last 11 years. Overall, the lowest-income families are receiving much more help through lower taxes and higher credits and benefits than in 1997. In practice, for the poorest prisoners and families with children—
On a point of order, Madam Deputy Speaker. Can you confirm that the debate can continue until any hour, which means that every Member will have ample opportunity to speak and the Minister has ample opportunity to give way as often as she wishes in order to clear the matter up?
I believe that the right hon. Member for West Derbyshire (Mr. McLoughlin) is one of the few Members on the Conservative Front Bench who was not a member of the Bullingdon club, but that does not appear to have stopped him engaging in student politics.
As I was saying, the Bill will build on the progress that we have made over the past 11 years—
On a point of order, Madam Deputy Speaker. Is it in order for an ambiguous remark to be made that could encompass your response to the point of order properly made by my right hon. Friend the Member for West Derbyshire (Mr. McLoughlin)?
Overall, the lowest-income families are benefiting by literally thousands of pounds a year as a result of the changes that this Government have made. The poorest third of pensioners are more than £2,000 a year better off than they were in 1997, and the poorest fifth of families with children are, on average, more than £4,000 a year better off. That means over £80 a week—cash that makes a real difference to those hard-pressed families, and cash that has, more often than not, been opposed by Opposition Members through their continual opposition to the tax credits system. Let us be clear about the crocodile tears we have seen from the Opposition— [Interruption.]
Since when have the Opposition cared about those on low incomes? Since when have they cared about the 10p rate? Last October, when the shadow Chancellor made his big speech calling for tax cuts, did he say that his priority then was to restore the 10p rate? Of course not. Did he say then that he was worried about low-income households? Not a bit of it. What he talked about then was inheritance tax for millionaires. In his big speech on tax reform in February, did he say that he wanted to change the 10p rate? Not once. In his website call for action on Budget day this year, did he mention the 10p rate? Not once.
What is the shadow Chancellor’s policy now? The Conservatives would vote to keep the 10p rate now, but they will not say where the money would come from. They will vote to keep the rate, but they will not tell us whether they would restore it. The shadow Chancellor tells us about plenty of other taxes that he has promised to cut, but there is nothing on the 10p rate. They would vote to keep the rate, but now they admit that they do not even like it. The hon. Member for Runnymede and Weybridge (Mr. Hammond) said this weekend:
“We would not necessarily re-introduce the 10p rate. We are quite happy with the idea of simplification.”
All the shadow Chancellor could say today was that he wanted to reopen the whole package. Perhaps the Conservatives could tell us whether that means he now thinks that we should stop the 2p cut in the basic rate.
Once again this is shocking opportunism, and we will not take any lessons from the Conservative party on helping families on low incomes. That party opposed the minimum wage and even now still wants to opt out of the social chapter. Nor will we take any lessons from the party that is opposing the funding for the winter fuel payment this year and the child benefit increase next year.
I am very grateful to my right hon. Friend for giving way, and pleased that she is making the point that when we debated this matter last year, the Opposition sat on their hands and did not support the amendment proposed by Labour Members. She has said that the Chancellor will return to the issue in the autumn. I know that her hands are tied on this, but may I remind her that the House returns to it next week? Many of us want to know what the Government propose to do to ensure that 5.3 million lower-paid workers are not made worse off by the Budget.
I say again to my right hon. Friend that the distribution of households that are paying more is rather different from how it has been portrayed in the media. It is clear that the lowest-income households are the ones who benefit the most. This is an area on which we continue to work and, following on from our work on child poverty, we will look at those people without children and what more can be done to support them. We will also take the views not simply of MPs, but of stakeholders and others.
I want to return to the important point about the winter fuel payment, which is important for pensioners this year. In order to fund the additional winter fuel payment, as well as child benefit and child tax credit increases the following year, we are increasing alcohol duty as part of this Finance Bill. Over recent years, as incomes have risen, alcohol has become more affordable. In the supermarket, a bottle of wine costs around £4, whereas 10 years ago, the equivalent figure was nearly £4.50. The extra duty is worth only around 14p, so that bottle of wine is still cheaper than it was a decade ago. That is why this is a fair time to raise a bit of extra revenue from alcohol to help pensioners and families with children.
I am grateful to the Chief Secretary for finally giving way. She has now mentioned the winter fuel payment nine times in her speech. She has just told us that it is being funded through a permanent increase in alcohol duty. Over what period will the increase in the winter fuel payment last?
The Budget clearly sets out that we are paying for the winter fuel payment and also for the child benefit increase and the increase in the child tax credit in the following the year, so we are benefiting both pensioners and children through the increase in alcohol duty. The Opposition voted against that increase, so they are saying no to pensioners on their fuel bills this winter, and they are saying no to families with children on their increase in child benefit for the following year. Opposition Members have not been honest about that with their constituents, have they?
I entirely understand the Government’s position that such matters have to be looked at in the round, in terms of countervailing measures such as the increases in tax credits, age-related personal allowance and winter fuel allowance, and that therefore the 5.3 million figure is wrong, particularly in the context of the households to which she referred. If one takes into account such countervailing measures, and also that some households have a low-paid earner and a higher-paid earner, what is the net number of households that will lose—if there are any—because of the abolition of the 10 per cent. tax rate?