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Oral Answers to Questions

Volume 478: debated on Thursday 10 July 2008


The Chancellor of the Exchequer was asked—

Aviation Duty

The Chancellor announced in the pre-Budget report 2007 that air passenger duty would be replaced by a per-plane duty in November 2009. A formal consultation that considered all aspects of the duty’s operation closed on 24 April. More than 160 responses were received, and Treasury officials are considering and analysing those in the policy design process. No decisions have yet been made about the duty’s design, and the Chancellor plans to make a further announcement about the policy in the autumn.

Why would the Minister want to make United Kingdom airports less competitive and drive long-haul operators to European airports, thus depriving this country of business and inconveniencing travellers? We will drive long-haul flights to European airports. Is that what the Minister and the Government want?

Of course it is not the aim of the tax, but at the same time, aviation needs to make a fair contribution to the public finances and better reflect its environmental impact. I note that the hon. Member for Tatton (Mr. Osborne), the shadow Chancellor, is also an enthusiastic supporter of a per-plane aviation duty.

Yes, but while we need to move to a per-plane tax, does the Minister not understand that the Government’s proposal to increase hugely the long haul to short haul ratio of 4:1, will discourage long haul point-to-point flights, which reduce the carbon footprint, and will encourage people instead to take connecting flights to European airports, thus hitting our aviation industry and increasing the global carbon impact?

We have received a range of representations, some of which the hon. Gentleman echoes. We are examining those and modelling the potential impacts on transit, long haul and freight, but no decisions about precisely how to arrange the tax have yet been made.

Will my hon. Friend assure me that some of the moneys raised from aviation duty will be earmarked for another high-speed rail link in the United Kingdom, preferably up the west coast main line through one of the centres of Britain—Wolverhampton?

I hope that my hon. Friend will acknowledge the huge increase in investment in our railways since the Government have been in office.

Given the widespread concern about the aviation duty proposal, will the Minister confirm that the retention of the current system of air passenger duty remains one option?

Perhaps the hon. Gentleman would like to talk to those on his Front Bench about their support for a per-plane duty.

Fuel Duty

The Government understand the difficulties facing businesses and families as a result of record oil prices, which is why the Chancellor deferred the forecast 2p per litre fuel duty increase that was planned for April this year. Future duty increases will also be considered in the light of future economic conditions.

The Chancellor may understand motorists’ difficulties, but he is still about to clobber 9 million motorists with extra road duty and the Government are still taxing our fuel more expensively than anywhere else in Europe. With that in mind, what relief can the Government offer motorists who have no alternative but to use their cars?

The hon. Gentleman should also reflect on the fact that as oil duties rise, there will be more fuel efficient cars, which are cheaper to run as one gets more miles to the gallon. Given where oil prices are at the moment, they will concentrate motorists’ minds.

As the Government consider the pre-Budget statement and next year’s Budget, does my hon. Friend think that it would be better to use the tax system to reduce or to increase demand for oil?

As a country, we certainly have to reduce our reliance on fossil fuels, and on oil in particular, in the medium to long term. It is therefore important—and this was discussed at the G8—that advanced economies such as ours wean themselves off their reliance on finite energy sources. The car duties have a role to play in that; as Professor Julia King said in her report, we need to be able to shift to cleaner engines and engines that reduce our carbon footprint.

At the moment, there is a considerable mismatch between the actual cost per mile of running a car and the cost per mile as assessed by Her Majesty’s Revenue and Customs for tax purposes. That is bad enough for everybody, but it particularly impacts on volunteer car drivers such as those for the hospital car service. They cannot claim the real cost of providing their service and are therefore no longer able to provide it. Is it possible to give any guidance on that matter to HMRC?

We understand the extra pressures that high oil prices are placing on many families in the UK at the moment. It is important to understand that volunteer drivers can claim their costs back, but they have to keep records of the mileage that they have donated for voluntary purposes. If they do that, they will not owe any tax on it. The approved mileage allowance payment—AMAP—scheme is a simplification. If such drivers wish to claim the actual costs of the miles that they drive, they can do that.

While the Labour party offers nothing more than government by nods and winks about what may or may not happen to fuel duty in the autumn, the Conservatives have proposed a fair fuel duty regulator that will cut duty when pump prices are soaring and that will be funded by the windfall to the Treasury from higher oil prices. The Government’s response has been to claim that there is no windfall to the Treasury. Will the hon. Lady now acknowledge that the National Institute of Economic and Social Research—the only independent body to have done any proper research on the issue—has concluded that, after taking into account all economic effects, there is a net benefit to the Treasury of £1.4 billion for every $10 increase in the price of oil? Why will the Government not agree to that plan to share the windfall, helping consumers and stabilising the public finances at the same time?

The plan would destabilise the public finances because it seeks to distribute an oil windfall that does not exist. The leader of the hon. Gentleman’s party said, “To be fair to the Government, when the price of oil goes up, corporation tax profits tend to go down, so corporation tax goes down and they suffer in other ways.” There is no oil windfall tax for the hon. Gentleman to distribute. Actually, his so-called fuel stabiliser is merely a gamble with £3 billion of public expenditure. The Conservatives need to tell us what they would cut to deliver a cut in fuel duty that may not even make it through to prices at the pumps.

Climate Change

Climate change will have a serious impact on the economy as well as on the planet. The Stern review found that the cost of inaction could be the equivalent of 20 per cent. of GDP. That is why we are working internationally and nationally to cut carbon emissions and why we welcome the steps forward made at the G8 summit.

I thank my right hon. Friend for her answer. She will be aware of my private Member’s Bill, which is designed to cut carbon emissions from Government buildings, and I thank my hon. Friend the Exchequer Secretary for her help with that Bill. What more does my right hon. Friend think can be done to improve the energy efficiency of the Government estate and what action can she take to achieve that?

My hon. Friend is right to say that we need to improve the energy efficiency not only of the Government estate but of buildings right across the country. Overall energy efficiency on the Government estate has gone up by about 20 per cent. in recent years, but we need to go a lot further. I welcome the fact that my hon. Friend’s Bill raises these issues, which she feels very strongly about. We want to keep talking to her about this, and my hon. Friend the Exchequer Secretary will write to her with further information. I think, too, that we should be considering how we build zero carbon offices and schools and how we can substantially cut carbon emissions from our public buildings in the longer term.

To what extent does the Treasury welcome the recent hike in oil prices as an incentive to encourage more environmentally friendly vehicles?

We have been very clear that the increase in oil prices is causing substantial problems for economies right across the world. It is causing difficulties for the UK economy as well as creating challenges for the global economy. That is why it is important for us to take action, working with the Saudis and people across the world, to try to address that increase and to bring those prices down in the short term. It is also why, in the longer term, we need to take more action to reduce world dependency on oil and fossil fuels in order to save the planet and to support the economy.

Does my right hon. Friend agree that climate change is both a challenge and an opportunity? Will she take further steps with her colleagues to get more eco-innovation in our universities and in the private sector? Some strong steps are being taken to make us a leading expert in this area, and a bit more encouragement from the Treasury would help.

My hon. Friend is right to say that we need to recognise the opportunity to develop leading-edge environmental technologies. That is why we are thinking particularly about carbon capture, which could have an impact right across the world, and about making the most of the UK science base in that respect. We have some great expertise and innovation in this country, and we need to ensure that that is supporting new environmental technologies.

My right hon. Friend is aware that 20 per cent. of global emissions come from deforestation. Will she therefore ensure that her Department resists the blandishments of the Office of Government Commerce, which would undermine the Government’s new policy on timber procurement, to ensure that all timber used on the Government estate is sustainable and legally harvested?

As my hon. Friend will know, my hon. Friend the Exchequer Secretary has been engaged in some detail in how we can improve sustainable procurement, and a new document was published yesterday to support that. We are working to ensure that we can get the most sustainable procurement possible within the legal framework that we have.

Low-Income Households

A single-earner family with two children on earnings of £16,750 per year, which is half male average earnings, will pay no net tax in 2008-09 because tax credits and child benefit more than offset income tax and national insurance liabilities. In 1997-98, that family’s net tax burden was 9.3 per cent. of gross income; in other words, they would have been £1,557 a year worse off.

The Chancellor left 1 million people uncompensated even after he tried to clean up the mess following the abolition of the 10p tax band. Can the Minister confirm that the people in many of those households, who drive older, often larger cars and have children, will be precisely those hardest hit when his changes to vehicle excise duty are forced through? Why is it that every time the Chancellor fiddles with tax rates the working poor are the hardest hit?

I completely disagree with the hon. Gentleman. He knows that my right hon. Friend the Chancellor will consider all these matters for the pre-Budget report. He should have a look at the transformation that low-income families have seen in their incomes and their share of the nation’s wealth since 1997. It was a completely different experience when his party was in government.

The Treasury Committee report on the 10p tax issue noted that the 13 May announcement ensured that fewer low-paid people will be paying income tax, and we described that as bringing simplicity, transparency and greater incentives to work. The Government must ensure that every effort is made not to return those people into the tax system. In that respect, the Committee recommended a poverty commission in which an analysis of the root causes of poverty would be made for the Government to consider so that we can make advances in slashing poverty and ensure that the 2020 abolition targets are achieved.

My right hon. Friend knows that we welcomed his Committee’s report, and we are considering all the recommendations that he made in detail. I hope that he accepts that we will make a full response in due course.

Does the right hon. Lady know how many low-income households will be affected among the 45 per cent. listed in The Daily Telegraph this morning who will, based on Treasury figures, suffer as a result of the vehicle excise duty hike?

Clearly, low-income families who have motor vehicles will be among those affected, but I do not have exact figures for the hon. Gentleman today.

My hon. Friend will be aware that in recent years many low-income households have been those of pensioners, so may I on behalf of pensioners pass on my thanks to the Government not only for the winter fuel allowance and for pension credits, but for raising the threshold to £9,000—which is more than 87 per cent. higher than it was in 1997? Having used that route to raise those households out of poverty, can we please now look at non-child households, and consider using the same strategy with regard to their tax threshold?

The tax burden for single-earner families without children on half of average male earnings—the figure that I used earlier—is still less than it was in 1997-98. Those families are £167 a year better off than they were. I am grateful to my hon. Friend for his comments about pensions, and I was pleased that this year’s Budget was able to increase the full basic state pension by £3.40 a week to £90.70 a week, which is the biggest increase in the basic state pension since 2001.

Does the Financial Secretary realise that many people are baffled by the Government’s policy towards low-income households? Did the Prime Minister intend to damage their interests in last year’s Budget? How many of those families remain disadvantaged, and how many does she think live in Glasgow, East?

Thank you, Mr. Speaker.

As a result of our reforms to the tax and benefit system since 1997, households are better off, on average, by £1,250 a year, and the poorest fifth of households are better off, on average, by £2,575 a year. Those figures may not feature in the headlines today, but they are important and make all the difference to families on low incomes.

Some 1.1 million households will end up paying more tax this year simply because the Prime Minister, to use the words of the Treasury Committee report, wanted to pull a rabbit out of a hat in his last Budget. Under this Chancellor and the last one, is not the lesson of the 10p rate fiasco, the climbdown on capital gains tax reforms or the botched changes to non-dom rules that short-term political hits and fixes take priority for this Government over making the right decisions for the country’s future?

The short answer is no. I invite the hon. Gentleman to consider the comments of the International Monetary Fund on the economy in the UK, which were published in May and strongly endorse the approach that the Government have taken. I commend those comments to him.

Global Economy

5. What discussions he plans to have with his international counterparts on the global economy in 2008. (217456)

Given that many economic commentators believe that imprudent banking practice has contributed to the development of the credit crunch internationally, what discussions has my right hon. Friend had with his international counterparts about improving banking supervision on a global basis to complement the measures planned in this country?

My hon. Friend is quite right. If banks in the United States and elsewhere had been more aware of the extent of the risk that they had entered into, particularly in the sub-prime mortgage market, many of the problems we see today could have been avoided. We have had many such discussions, and there is now agreement that we need to do more to strengthen international supervision, especially of institutions that trade in many countries. At home, we will be introducing regulation this October. The legislation will set out a greater number of steps open to regulators to deal with situations as they arise in the future. We will introduce that legislation when the House resumes sitting, and I hope that it will get all-party support.

When the Chancellor has met his G7 counterparts from Japan and the United States, has he compared notes with them about the economic hazards of allowing large bubbles to develop in property markets? Ours is arguably even more extreme than that of the United States. What wisdom have they passed on to him from their experience of how to prevent the inevitable painful consequences of repossessions and negative equity and of how to manage them humanely and properly?

The hon. Gentleman is right to say that, across the world, there have been problems with credit, especially in relation to the housing market. I have said on many occasions that lenders need to understand the security on which they are lending and to ensure that someone taking out a loan can repay it. The position of the housing market in the United States is different from that in this country. The United States still has the problem that, in many parts of that country, there are larger numbers of houses that it is not possible to sell. As long as that problem endures, there will be problems in the United States economy.

More generally, there is widespread recognition that what is happening in the world is more profound than many people believed at the end of last year and even at the beginning of this year. That will have a profound effect on developed and developing countries alike. That is why it is necessary for us to take action where appropriate internationally, and why it will be increasingly necessary for us to take action here at home to help people through an undoubtedly difficult period.

Will the Chancellor explain to his international counterparts why, when Britain has proportionately a larger financial sector and a larger mortgage housing sector than almost any other country, the Prime Minister has been boasting for months that we are especially well placed to withstand the sub-prime mortgage crisis and the credit crunch? The opposite is the case, as is now clear to everyone.

I disagree. The UK economy has grown for well over 10 years. It is resilient—much more resilient than it was. The current period, no matter how difficult, is an awful lot better than the early 1990s, when more than 3 million people were out of work, interest rates and mortgage rates were much higher and we had higher levels of debt. We as a country are better placed now than we have been in the past.

As I just said to the hon. Member for Twickenham (Dr. Cable), a combination of the effect of the credit crunch and oil prices, which are as high as they have ever been, clearly means that all economies will be affected. That effect will be profound. We all need to be able to act together internationally—whether on oil prices, food prices or stabilising the financial markets. We will also need to continue to be vigilant here at home and to take action to help get our economy through an undoubtedly difficult period.

On Tuesday, one set of the Chancellor’s international counterparts, the EU Finance Ministers, backed proposals to launch disciplinary measures against the UK for breach of the EU’s deficit ceiling of 3 per cent. of GDP. After his predecessor spent 10 years lecturing other countries, how does it feel to be a representative of a country and a Government who have the worst budget deficit of all the countries in the world, with three exceptions, and who are, in terms of public finances, the sick man of Europe?

The hon. Gentleman is talking nonsense. The UK economy is stronger than many other economies. Our economy has been growing strongly for more than 10 years. As I said earlier, our economy, along with every other economy in the world, will experience slower growth this year—there is no question about that. However, on our public finances, if the hon. Gentleman cares to examine our level of debt, he will realise that not only is it lower than it was when his party was in power, but that we are better placed than many other European countries. As I said when I was at the European Finance Ministers meeting on Tuesday, every country will be affected by the twin effects of the credit crunch and the high inflationary pressures that we are seeing through oil prices. We will all be affected—in Europe and every other part of the world.

Notwithstanding all the difficulties globally, the truth is that in 1992, which the Tories have just referred to, every single pit in Derbyshire was closed and the pit sites were derelict. After 11 years of a Labour Government, there are now 3,000 jobs on those pit sites. Tomorrow I will be opening two more factories on the Shirebrook pit site. Three weeks ago I opened junction 29A on the M1 into Markham pit yard to provide 5,000 jobs. Will my right hon. Friend tell his international counterparts that the Tories may have one story, but the real story is that despite all those pit closures, unemployment in Bolsover is now below the national average?

Perhaps the next meeting of ECOFIN Ministers ought to be held on the M1, so we can see for ourselves the difference that has been made. My hon. Friend makes an important point. The difference now is not only that we have large numbers of people in work, but that where people have lost jobs and firms have closed, the Government have taken steps to ensure that we get people back into work. If people go to the sites of the former pits, they will see, far from the dereliction and despair that we saw 15 or 20 years ago, new jobs and new opportunities. That is the difference between a Labour Government, who will help people to get through difficult times, and a Conservative Government, who left people to fend for themselves and suffer. We will not do that; we have a completely different approach.

Primary Schools

6. What recent assessment he has made of the effects on the economy of expenditure on primary schools. (217457)

Investment per pupil has increased by some £2,500 a year to more than £6,000 a year. The proportion of children getting above key stage 2 level 4 is up from 63 to 80 per cent. in English and 62 to 77 per cent. in maths. The Leitch report showed that raising skills and education has a significant impact on improving the economy.

I thank my right hon. Friend for that answer. My constituency shares those successes. Class sizes are down in Wirral, West, every school has been refurbished and key stage 2 results are up from 1997. As a result, over the past 10 years, more students have been going into further and higher education in my constituency. Despite the current downturn in economic circumstances, may I ask my right hon. Friend, who controls the purse strings, to affirm for me that we will continue the investment that we have put into our schools over 10 years, so that that progress can continue?

My hon. Friend is right: in a competitive global economy, skills matter more and more. Therefore, it is vital that we have the skills and education base in this country, so that the economy can compete and we can grow in the long term. We will continue to do that, in contrast with previous Conservative Governments who, in the face of economic slowdown, always cut investment, particularly capital investment. We have increased capital investment in schools from less than £700 million in 1997 to £6.4 billion this year. That is an improvement in giving our children the high-quality facilities that they need.

Energy Costs

The latest assessment of economic developments and prospects was published in the “Financial Statement and Budget Report”.

Will the Chancellor take a greater interest in the enormously increased targets for renewable energy, to which the Government are committed legally and by treaty law? Is he aware that if those commitments are met, they will impose huge extra costs on the taxpayer and the consumer? Is it wise to create fuel poverty and make British business uncompetitive in world markets through those commitments? Will the Chancellor do something about that now, because those commitments will endure for decades ahead?

One of the biggest threats that our economy and, as I said earlier, just about every other economy in the world faces is the high price of oil. I believe that that should act as an encouragement, a spur, to us to do more to generate our own electricity and to get our energy from non-carbon sources. That is important in terms not only of the environment but of security of supply. Self-evidently, a lot of the oil that we currently import comes from parts of the world that are not always politically stable. It is therefore necessary for us to do far more to generate renewable energy. As I understand it, that is also the policy of the right hon. Gentleman’s party, although I accept that it is not his own personal preference and that he has a lot of concerns about that source of energy. For my part, however, I think that we need to do far more, not just here and in Europe, to obtain more renewable energy. I also believe that it is essential to replace our fleet of nuclear power stations.

The Chancellor cannot be unaware of the damaging impact of rising fuel costs on the rural economy, particularly in relation to fuel oil and bottled gas for people who do not have mains electricity or gas. What plans does he have for the introduction of social tariffs for low-income households, particularly, but not only, in rural areas, which use fuel oil and bottled gas and which have experienced extraordinary rises in costs over the past two years?

Of course I am well aware of the problems that people living in rural areas are facing because of high fuel prices. I am also aware of the particular problem that the hon. Gentleman has risen in relation to bottled gas. Although I am not in a position today to say that we can definitely do something about it, I understand the problem to which he refers and it is something that I will consider further.

Manufacturing Sector

8. What recent representations he has received from representatives of the manufacturing sector on the Government’s economic policy. (217459)

We continue to receive representations and views from the manufacturing sector. Like every sector in the economy, manufacturing is being affected by rising oil prices and by the global credit crunch. However, recent reports from the Engineering Employers Federation show continued strength and resilience in the manufacturing sector.

My right hon. Friend is absolutely right to refer to the EEF’s recent report, which shows that manufacturing is now in a far better position in relation to economic pressures than it was under previous Conservative Governments, for example, when manufacturing bore the brunt of such problems. As she says, however, the credit crunch and rising energy costs will have an impact on manufacturing. Will she ensure that she sticks closely not only to the employers but to the trade unions in manufacturing, to ensure that the sector comes out of this time of economic pressure maintaining as many manufacturing jobs as possible?

My hon. Friend makes an important point. We want to work closely with all those involved in manufacturing—employers, trade unions and others—to ensure that we can support people through what will be a tougher time for businesses as a result of the challenges from the world economy. Many areas of manufacturing are particularly affected by rising oil prices and rising commodity prices, for example. However, my hon. Friend is right to say that manufacturing productivity has grown by almost 50 per cent. since 1997. The manufacturing sector has strengthened, and that puts it in a considerably stronger position to withstand global pressures than it was in the early 1990s and the early 1980s, when we saw devastation across the manufacturing industry.

I am sure that we can all agree that the pharmaceutical sector is one of the most successful industrial sectors in this country. Has my right hon. Friend noticed, however, that the sector has lost 8,000 jobs in the past three years? The Association of the British Pharmaceutical Industry and the CBI have recently reported on that fact. Will she be having discussions with either of those organisations?

We have regular meetings and discussions, and I think that I am due to meet representatives of the ABPI to discuss the pharmaceutical industry. That sector has invested £3.2 billion in research and development, and my hon. Friend is right to say that it is a world leader. It is important that we work with all our manufacturers to ensure that they get through the difficult period ahead.

Climate Change

As shown by Lord Stern in his review of the economics of climate change, the benefits of strong and early action to tackle climate change far outweigh the economic costs of inaction. The Government welcome Tuesday’s commitment by the G8 to the goal of achieving at least a 50 per cent. reduction in global emissions by 2050, and the recognition of the role of market mechanisms in helping to achieve emissions reductions in the most cost-effective manner.

Does my hon. Friend recognise that the Prime Minister’s leadership in Japan, which secured an unprecedented target for the reduction of CO2 emissions, is completely undermined by Conservative MPs back home who opposed the Bill proposed by my hon. Friend the Member for South Swindon (Anne Snelgrove) to help reduce carbon emissions here?

I agree with my hon. Friend that the communiqué agreed at the G8, to which all G8 countries have signed up, is an historic step forward in establishing a target of 50 per cent. reductions. I also agree that Conservative Members need to walk the walk as well as talk the green talk.

Growth and Public Borrowing Forecasts

12. If he will publish UK growth and public borrowing forecasts before the 2008 annual meetings of the International Monetary Fund and the World Bank; and if he will make a statement. (217463)

The Chancellor will publish updated public borrowing forecasts in line with the code for fiscal stability in this autumn’s pre-Budget report in the usual way.

The right hon. Lady will be well aware that the European Union’s Commissioner for Economic and Financial Affairs has already said that the deficit needs to be corrected by 2009-10. Does she accept that deadline and, if so, how on earth is she going to achieve it?

In fact, the IMF has supported our policy position in a strongly supportive document. The EU has different arrangements as it operates within the eurozone, which we do not, so we have different obligations on fiscal policy. We have chosen to use borrowing to support the economy through a difficult time. That is the right thing to do and constrasts significantly with the continued mistakes made by the hon. Gentleman’s party in the early ’90s.

Is it true to say that present forecasts put Britain in a situation where we have lower net borrowing than we did throughout most of the ’90s? What is my right hon. Friend’s forecast for our performance in comparison with other European countries for the forthcoming period?

My hon. Friend is right to say that there are significant contrasts, particularly in respect of historical periods. Between 1997 and 2007, average borrowing was 1.2 per cent. of gross domestic product; whereas between 1992 and 1997 it was 6 per cent.; and between 1979 and 1997, it was 3.4 per cent. of GDP. Borrowing has been significantly lower and continues to be substantially lower than at the peak of borrowing in 1992, which was 7.5 per cent—a substantially higher rate than it is today.

Gift Aid

13. If he will bring forward proposals to improve the effectiveness of the gift aid scheme for voluntary organisations working in the area of community sport. (217464)

I hope that my hon. Friend will be reassured to know that Her Majesty’s Revenue and Customs is continuing to work with the Central Council of Physical Recreation and with the Department for Culture, Media and Sport to improve take-up of the gift aid scheme by community amateur sports clubs. This year’s Budget announced measures to reduce the burden on charities and clubs, including major reform to the auditing process, a comprehensive programme for bringing additional smaller charities into gift aid, a redesign of guidance, outreach to 5,000 new charities through the launch of targeted marketing tools and a number of other initiatives.

I thank the Minister for that reply and for the efforts that she and others are making to ensure that the community amateur sports clubs—CASC—scheme is widely taken up. I believe that 5,000 out of a potential 40,000 clubs have taken it up so far, bringing in about £41 million for sports clubs up and down the country. Is she aware, however, that gift aid on child subscriptions, for example, is the current campaign of the Central Council of Physical Recreation and that property-owning charities such as the National Trust can participate in it? At the moment, it appears that the administrative burden is the main blocking point, but if other charities can do it as part of HMRC, can we now extend the scheme to sports clubs, which would make an enormous impact in many of our most deprived communities in providing some of our best services for young people?

My hon. Friend knows that a number of recommendations were brought forward, including those to which he has referred, and we have considered them very carefully. Some very complex consequences arise from some of those recommendations, including those raised by my hon. Friend, but I am looking closely at them and I will reach a decision in the very near future.

Is the Minister aware that the biggest threat to community leisure trusts throughout the country is her own Department, where officials in Her Majesty’s Revenue and Customs have threatened to impose VAT on co-mingled services supplied by more than 100 trusts and are seeking to backdate such penalties for three years, which would jeopardise the viability of all those community sports facilities?

I am aware of the discussions between HMRC and a number of clubs. It is only right for all organisations with a tax liability to face up to that responsibility; but, as the hon. Gentleman will know, HMRC is working closely with the clubs, and it is clearly neither its intention nor ours for such clubs to be put out of business.

Topical Questions

The core purpose of the Treasury remains to ensure the stability of the economy, to promote growth and to manage the public finances.

Of course we must recognise that the economic downturn is a worry for our constituents, but it is shared across the world. Siemens in Germany has made redundancy announcements, the Federal Reserve in America is having to make more provisions for its banking sector, and the Irish economy is stuttering. Does my right hon. Friend share my further worry that, while there is a downturn—[Interruption.]

Order. Will the hon. Gentleman please have a seat? I must reiterate that these are topical questions, and the questions should be punchy. They should not be speeches. The Chancellor will try to reply to what the hon. Gentleman has said so far.

My hon. Friend is right. The slow-down in the world economy is affecting every single country—our own, and others in Europe and across the world. In a short time the Prime Minister will report on the outcome of the G8 summit that has taken place in Japan over the past few days.

In many key areas, whether they relate to financial stability, oil or world food prices, we need to act together. Britain has taken a lead in trying to encourage countries to take action, but it is necessary for us to take action at an international level as well as, of course, doing all that we can to ensure that our economy gets through what—as I said earlier—will be a very difficult period.

T2. Why did the Prime Minister tell the Leader of the Opposition that the new road tax proposals would benefit the majority of motorists, when figures just published by the Treasury make clear that that was patently untrue? (217477)

What the Prime Minister said on many occasions was that the majority of motorists would either gain or be no worse off.

T3. At a time when families are indeed suffering economic difficulties, I welcome the Government’s announcement of a scheme to provide personal advice on money matters in the north of England to the tune of £30 million, but can the Minister tell me how it is to be delivered? Will it be wholly internet-based, will it be provided through organisations such as the citizens advice bureaux, or will there be a combination of those arrangements? Will the Minister also tell me to what extent—[Interruption.] (217480)

I thank my hon. Friend for his kind words. The money guidance pathfinder, which will start early next year in the north of England—including his constituency—will offer free, impartial advice through a variety of organisations and channels, not just the web but the telephone, and also face to face.

Mr. Speaker: Order.

May I press the Chancellor on the answer that he has just given my right hon. Friend the Member for Bracknell (Mr. Mackay)? He knows full well that the Prime Minister told my right hon. Friend the Leader of the Opposition last month

“If the right hon. Gentleman looks in detail at the proposal”

—on vehicle excise duty—

“he will see that the majority of drivers will benefit from it.”—[Official Report, 4 June 2008; Vol. 476, c. 765.]

It is clear from the Treasury figures published yesterday that that is not the case. Will the Prime Minister be apologising to the House?

As I told the right hon. Member for Bracknell (Mr. Mackay) a few moments ago, I saw what the Prime Minister said at Question Time on 14 May. He said:

“the majority of motorists benefit or pay no more in vehicle excise duty as a result.”—[Official Report, 14 May 2008; Vol. 475, c. 1380.]

That is what the Prime Minister said.

May I press the Chancellor on this? On 4 June, the Prime Minister said that a majority of drivers would benefit from the VED changes. The Chancellor knows perfectly well that that is what the Prime Minister said. Is this not the substance of the issue? Nine million families face higher car taxes at a time when few can afford them. Poorer drivers will be penalised because the tax is retrospective and hits second-hand cars. Any pretence that it helps the environment has been demolished by Greenpeace, which says that it gives green taxes a bad name.

Everyone knows that the Labour party is sleepwalking into another 10p tax fiasco. Will the Chancellor perform the necessary U-turn, or do we have to wait for Heathcliff to come down from “Dithering Heights” before they abandon this disastrous plan to tax families already feeling the squeeze?

I noticed that the hon. Gentleman had been scribbling for the last 40 minutes, composing his question. The crux of the issue is how we encourage people to use less energy and motor manufacturers to produce more efficient cars. I see that as recently as yesterday the shadow Chancellor mentioned his commitment to raise the proportion of tax taken through green taxes. Less than 24 hours later, he seems to have lost interest in the matter.

T4. My right hon. Friend will undoubtedly agree that many of the economic ills from which the world is suffering at the moment are down to the lending policies of banks and other financial institutions, varying from the extreme foolhardiness that led to the sub-prime problems, to the current extreme caution on the part of banks and building societies, which is causing economic contraction in the UK. Has my right hon. Friend got any thoughts on what could be done by way of regulation to moderate those extremes? (217481)

My hon. Friend is right. As I said earlier, if some of the banks—especially some of those in the US—had had a better idea of the basis on which they were lending, and of the fact that some of the people to whom they were lending money were not in a position to repay it when interest rates increased, they would not be in their present difficulties. It is important for any institution, wherever it is—the US, here or anywhere else—to ensure that it knows what it is doing when it lends money. It is also important to ensure that the regulators have in place a regime that ensures that companies are properly focused on the risks to which they might be exposed. In this country, we are in discussions with lenders to try to ensure that the difficulties that some people face are dealt with properly. The general point that my hon. Friend makes about ensuring that institutions are properly alive to the risks to which they may be exposed is very important.

T5. The last time a massive increase in oil and commodity prices brought to an end a decade of growth, the countries that weathered the subsequent stagflation best were those that had used the period of growth to reduce their debt and taxes. Which of the legacies that the Chancellor inherited from his predecessor does he most regret—the fact that we have the highest deficit of any country except Bangladesh and Hungary, or that we have had the worst rise in taxes of any country in the developed world? (217482)

I am surprised that the right hon. Gentleman raises that matter, as when he was in the Cabinet we had two of the deepest recessions this country had ever seen in the last century. As I have said, our debt is lower than it was—certainly than when he was a member of the Government—and is lower than many other countries. Obviously, as we go through this period, it makes sense to ensure that we support the economy, and that is why borrowing has risen, but we are in a much better position than we were in the early 1990s. I am sure that he remembers that time well, because he was Secretary of State for Social Security at the time, and one of the big problems for the then Government was that more than 3 million people were out of work.

T6. I have a very topical question, Mr. Speaker. Will the Chancellor ensure that the money that he gives to Europe is withheld in respect of the expenses of Conservative MEPs until they adopt the same independent auditing that Labour MEPs have had for some time, and until the Leader of the Opposition insists that that is done now, not next year? (217483)

I note the trouble that the Leader of the Opposition is having with his MEPs. I note also that for eight years Labour MEPs have had independently audited expenses that are published.

Order. May I say that I was distracted, but I would not expect a question like that again and certainly not a ministerial reply?

Would the Chancellor tell us whether the country would be in a better state had his predecessor modelled himself on Mr. Micawber rather than on Heathcliff?

As I have said on many occasions, the actions taken by the former Chancellor, who is now Prime Minister, over the past 10 years have meant that our economy has grown for more than 10 years. The hon. Gentleman could never have said that of the Government whom he supported. Our economy has grown and remains resilient. Although we are in a difficult time and are going through a pretty turbulent period, we are better placed to deal with that turbulence than this country ever was in the past.

Are my Front-Bench colleagues aware that they are overseeing the economics of a madhouse? What I mean by that is that the tax office at Chorley, which was not meant to close, is now down for closure, whereas the tax office at Blackburn, which was down for closure, is now staying open, yet it costs more to operate. Is there something about these tax offices that means that Secretaries of State’s tax offices remain open in Blackburn, St. Helens and Bolton yet a Back Bencher in Chorley loses his tax office, even though it costs less to operate and is purpose-built? What will the Minister say to that?

My hon. Friend makes his point forcefully, and my colleagues and I have heard it. I am sure that if he looks at all of the reforms that HMRC is introducing and appreciates that HMRC says that it needs 40 per cent. less office space than it has—

I hear my hon. Friend’s point.

I will make a final decision shortly on the consultation on all the proposals and representations that I have received. I understand that there will be an Adjournment debate next week when we will debate the future of offices in the north-west. My hon. Friend might wish to join us on that occasion.

Would the Government review the impact of the proposed VED changes on livestock farmers who need to tow livestock on a trailer? It is necessary to have a 4x4 in order to do that safely. Will the Government look exceptionally at the position of livestock farmers, not least those who operate in the hill country?

I note that some 4x4s are not in the higher VED bands. If the hon. Gentleman wants to see me, I am happy to listen to any representations that he wishes to make about the subject.

The Treasury has made a great announcement about law changes and more funding to support credit unions and defeat unscrupulous loan sharks. As part of promoting credit unions, I urge the Treasury to take more practical steps to raise the profile of the credit unions, to ensure that communities have access to their services and to ensure that if they are partnered with outlets other than the credit unions, those partners are trusted partners.

I agree entirely with what my hon. Friend has just said. That is why I was delighted to announce recently that the Government will bring forward a legislative reform order precisely to empower credit unions and to give them greater ability to partner other organisations, to expand their membership and to grow.

Following on from the point made by the hon. Member for Chorley (Mr. Hoyle), how will it provide a better service for local businesses, how is it fair to loyal staff and how does it make any sense in environmental terms to close the tax offices in Frome, Wells, Yeovil, Bridgwater and Weston-super-Mare and to relocate their business in expensive and congested Bristol?

It is no reflection whatsoever on the staff in the individual offices when offices are proposed for closure. I accept entirely that they are dedicated, loyal staff who have served Her Majesty’s Inland Revenue or HMRC for a long time. They deserve credit for that, but HMRC is under an obligation that we have placed on it—and as the hon. Gentleman would acknowledge that his constituents would expect—to get the maximum benefit in return for the public expenditure and taxes that we commit to its services. It cannot be right that we should continue to maintain uneconomic offices.

The Dormant Bank and Building Society Accounts Bill completed its House of Lords stages on 26 February, but we still do not have a date for Second Reading in this House. Why is that?

I understand that the Bill will return to the Commons immediately after we return from summer recess.

Does it remain the Chancellor’s intention to publish his factual report on the operation of the Barnett formula before the summer recess?