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Topical Questions

Volume 493: debated on Tuesday 9 June 2009

Perhaps like many other hon. Members in this House, I have a branch of Cheltenham & Gloucester in my town. May I put it to my right hon. Friend that many people will be really concerned about the loss of jobs and services from institutions that have had so much public sector funding? Will he therefore ensure that the banks understand that although of course we expect them to make a profit and repay their debts, we also expect them to honour their wider social commitments to their employees, their customers and the wider community?

I fully understand the comments that my hon. Friend makes. She will be aware that Lloyds Banking Group is undertaking a restructuring exercise. To be frank, in some instances it does not make sense to have three branches of the same bank within 100 yd of each other. That having been said, it is vital that Lloyds Banking Group follows the right sort of processes, and that it treats not only its customers but its staff fairly. Although we are talking about an operational decision for Lloyds, Lloyds has made it clear that it intends, as a matter of preference, to try to carry out its proposals through natural turnover of its staff, and we hope that it will be possible to do that.

Order. In case there is a problem, I should say that the Chief Secretary to the Treasury opened by saying what great things his Department was doing. It would appear, however, that the Economic Secretary to the Treasury knew more about this particular subject.

I know he got off to a shaky start, but let me welcome the new Chief Secretary to the Treasury to his job. He is the fifth Chief Secretary I have faced—and hopefully the last before the general election. I hope he enjoys his move from No. 10 to the Treasury, and that the coffee is up to his exacting standards. At least he knows he will not be hit on the head by a flying mobile phone.

Will the Chief Secretary confirm that the Treasury’s current spending plans—the plans set out by the Treasury at the Budget—show that total real Government spending is going to be cut in the years 2011, 2012 and 2013? If that is the case, what on earth was the Prime Minister saying when he told the press conference last Friday:

“Public spending is due to rise every year”?

I thank the shadow Chancellor for that welcome, delivered with the self-assurance and charm that have become his trademark in the House. As he very well knows, when the Chancellor set out his Budget he provided for 0.7 per cent. real-terms increases in current spending. That is set alongside a move in public service net investment to 1.25 per cent. That was the position the Prime Minister was echoing last week.

I am sorry, but I must press the Chief Secretary on this. He gave us the current spending figures; I am asking about total Government spending, which is what the Prime Minister was asked about. The Treasury figures clearly show that that is going to be cut in 2011, 2012 and 2013. That is why the Chancellor of the Exchequer said on the radio, the day after the Budget, that he had cut overall spending. What on earth did the Prime Minister mean when he said that public spending was due to rise every year?

The position is as I have just stated. There will be real growth in public spending of 0.7 per cent. between 2011-12 and 2013-14, alongside a situation in which public sector net investment moves to a position of 1.25 per cent. by 2013-14. [Interruption.] I hear Opposition Members squealing “Cut” from a sedentary position. However, through our process of bringing forward capital investment into this year, we are indeed able to provide for reductions in capital spending in later years. What the Prime Minister was reflecting is very clearly the position in current spending as was set out by the Chancellor at the Budget.

T2. The prevailing economic philosophy is that the free movement of labour across Europe is good for the economy. Does the Chief Secretary agree with me that his Department needs to provide statistics to demonstrate whether a worker permanently resident in this country who gets a job has a greater economic multiplier effect than a temporarily resident migrant worker who gets the same job? (278529)

That subject has been debated extensively in both Houses and it was reviewed in some depth by the House of Lords Economic Affairs Committee. In their evidence submitted to that Committee, the Government were clear that, on average, migrant workers contribute more to this country than they take out. Obviously, it is important to keep that under close review. The advent of the Australian points-based system means that we are able either to raise or lower the bar to newcomers much more flexibly, depending on the needs of the labour market here and the overall economic contribution made to this country by migration.

My hon. Friend the Member for Twickenham (Dr. Cable) apologises for being unavoidably absent owing to a recent operation on his appendix. As the Chief Secretary surveys the team in his new Department, can he think of any part of the Treasury ministerial anatomy that, similarly, serves no useful function, exists in a state of constant pain and was threatened with brutal surgical removal over the weekend?

Ministers will be aware that this week is carers week. Could the appropriate Minister from the Treasury meet the appropriate Minister from the Department for Work and Pensions to try to find the finances to end the unfairness in the carer’s allowance, which is completely lost following a very small increase in earnings or on retirement, despite the fact that the caring role and responsibility continue?

This being my first day as a Treasury Minister, having previously been at the Department for Work and Pensions, I can say I will be delighted to hold such a meeting.

As the hon. Gentleman will be aware, the Government appointed Sir John Chadwick to advise us on the form of an ex gratia payment scheme that should be devised and the factors that relate to disproportionate impact. I can report that Sir John Chadwick has made progress; when I recently appeared before the Public Administration Committee, I gave further details about how his work was proceeding. I can confirm that actuarial advisers have been appointed to help him with his work, and that he has the staffing and resources he requires to do his job. We have always said that we wanted progress to be made as quickly as possible, and that clearly remains the Government’s position.

Last week, the Northern Ireland Secretary gave the House an undertaking that he would pursue with vigour the crisis facing investors in the Presbyterian Mutual Society in Northern Ireland. There is clearly a Treasury dimension to this. I would like to know what has been done, what is being done, and what discussions are being held on behalf of those investors—the most thrifty and decent people who are very anxious about having access to their funds now.

I sympathise with the situation that people who have made investments in the Presbyterian Mutual Society are facing. My hon. Friend will be aware that the PMS is not like a normal savings institution: it is not regulated by the Financial Services Authority, and when people made investments they did so in the form of shares rather than deposits. Different circumstances therefore apply. He will be aware that there has been an investigation. We have been looking into the whole issue of the regulation of credit unions and industrial and provident societies, and a report is due to be published shortly.

T4. In respect of the Government’s planned changes to furnished holiday lettings tax rules, could the Financial Secretary to the Treasury clarify whether it would be possible to distinguish between properties that are purpose-built chalets, caravans, and other properties with occupancy restrictions that are clearly intended for the holiday lettings industry, and other properties that have been lived in and could be lived in again by local families in need? (278531)

I would not want to encourage the hon. Gentleman in the view that that might give a way forward on this issue. Our position is that we have given support in the past. It is clear, under European Union rules, that that support would need to be extended to furnished accommodation not only in the UK but across Europe. We are therefore making that change, but only for a year; then our intention would be to withdraw the relief altogether, not just for some but for all furnished holiday accommodation.

Further to earlier answers, Britain’s national debt would be repaid more rapidly, and public expenditure cuts would be avoided more easily, if the top 700 British companies did not involve themselves in tax avoidance on such a grand scale. Why, in that case, does this year’s Finance Bill repeal section 765 of the Income and Corporation Taxes Act 1988, which requires companies to seek the permission of Her Majesty’s Revenue and Customs before moving cash offshore and to say whether the move will be to the detriment of the Treasury? That will encourage avoidance.

I do not think it will. Indeed, we are likely to debate the matter in the Finance Committee this afternoon. The Treasury consents rules were introduced in 1951 in a very different environment and they are now clearly out of date. The measures that I will set out in Committee this afternoon, with which we are replacing those rules, are a much more effective way of tackling the genuine problem of avoidance, to which my hon. Friend rightly draws attention.

T5. The announcement today by Lloyds TSB about the job losses at Cheltenham & Gloucester is a big blow, particularly to the 74 people who will be made redundant in Gloucester. The bigger issue is the 1,000 people who also work in our county for the Cheltenham & Gloucester mortgage business. Given that the Government control a significant stake through UKFI—which the second permanent secretary to the Treasury runs, and which is therefore not at arm’s length—can the Minister provide any assurance about whether those jobs are secure in the short and the long term? (278532)

As I have told the House previously, if we are to protect taxpayers’ interests, it is vital that UKFI manages its relationships with the banks in which the Government have investments commercially. Lloyds Banking Group is making commercial decisions. As with any major company, we expect it to act in a socially responsible manner and undertake due processes of consultation with its work force. My understanding is that that is exactly what is happening.

T6. Despite the massive investment of public funds in the banking sector, many small and medium-sized viable companies have contacted me to say that the banks are not providing the financial support that they require. What are the Chancellor and the Treasury team doing to ensure that money that goes to the banks finds its way to small and medium-sized businesses? (278533)

Let us first be clear that, when the Government took action to prevent the collapse in the banking system, we were investing not in the banks but in people who had savings and mortgages and in companies that had overdrafts in the banking system to ensure that it could continue. As a result of the negotiations in January, under the asset protection scheme, RBS has made legally binding commitments to invest more in businesses this year and next, as has Lloyds. The sums for businesses are £16 billion from RBS and £14 billion from Lloyds, on top of the additional investments that Northern Rock is making and the announcements from banks that have not taken advantage of the recapitalisation scheme, such as HSBC and Barclays.

We are in a position whereby much of the international finance that was available to the UK economy in the form of lending to business has disappeared in the past 12 months. We are putting that back in place through our negotiations and agreements with UK banks. We will continue to monitor, through the lending panel, actual lending in the UK economy, so that we can ensure that small and medium-sized enterprises and other businesses get the lending and financial support that they need to see them through the difficult times.

I wonder whether my hon. Friend saw the survey in the Financial Times yesterday of City economists. It showed that a majority thought the recession would end in June. The minority who did not thought it would end sooner rather than later this year. Does that not show that the City is coming round to the Budget forecasts for the economy? Is that not a clear endorsement of the Government’s programme for a fiscal stimulus?

My hon. Friend will be delighted to hear that I have no plans to provide a running commentary on growth forecasts. The Budget clearly set out our current expectations, and the next update will be provided to the House in the pre-Budget report. I merely note that several City economists and independent forecasters have revised up their forecasts for growth next year and adjusted their forecasts for the extent of the downturn this year. As I said in response to earlier questions, independent forecasters’ average for contraction this year is 3.8 per cent., which is much closer to the forecast that we published in the Budget.

T7. May I ask Treasury Ministers to look again at the position of those families who are being pursued by the Treasury for alleged overpayment of tax credits? I still have a steady stream of families coming to my surgery who are being chased, sometimes for up to £10,000 or more. They come in with detailed files of information, and I am absolutely inclined to believe that they have been entirely honourable and honest in looking at their claims. Those families tell me that the Treasury sometimes takes the more expensive period of their child care, rather than looking at their child care costs over the period as a whole. Those families do not like the way the Treasury acts as judge and jury, with no right of appeal. That causes huge distress, so may I ask Ministers please to look again at the issue and tell us that they can do something to help those families? (278534)

We have already made some substantial changes and improvements to the way the tax credit system works. One of the consequences is, for example, that complaints to the tax credit office are down by a half, compared with two years ago, so there have certainly been considerable improvements. The tax credits transformation programme that we have put in place is delivering. I accept that there is more to be done, but it is worth remembering that 6 million families benefit from tax credits, and that includes 10 million children. That is one of the main reasons why we have been able to reduce child poverty so substantially over the past 10 years, but we need to ensure that the system works as efficiently as possible and that overpayments are minimised. We have seen a big reduction in the number of overpayments, and we will work to improve the position further.

T8. May I give the new Chief Secretary another opportunity, while the cat is away, to play at being open about the Government’s spending plans? Given the analysis of spending plans by the Institute for Fiscal Studies, Departments are projected to face a real-terms cut of 2.3 per cent., which translates into cuts totalling £20 billion. Can he come clean today and accept that the 2009 Budget heralded significant Labour cuts? (278535)

Let me be very clear—I am afraid I will have to repeat a number of the points that I made earlier. The Chancellor set out clearly what changes will happen overall to public sector net investment over the next few years and what changes we forecast to real growth in current spending. However, as he said as recently as last oral questions, with the degree of uncertainty in the international economy that we currently face, I just do not think that now is the time to start making detailed budgets for individual Departments for the year after the Olympics.