House of Commons
Wednesday 9 December 2009
The House met at half-past Eleven o’clock
[Mr. Speaker in the Chair]
Oral Answers to Questions
The Minister for the Cabinet Office was asked—
Third Sector Recession Action Plan
The Government recognise the extraordinary role the sector plays in helping vulnerable people through the recession. That is why we have given unprecedented help and support to the sector, both through existing programmes and through the £42.5 million “Real help now” programme, the community action plans and the £16.7 million hardship fund. That money is getting out there right now: the programmes have already provided £32 million-worth of assistance to a total of 1,546 organisations. Evaluations of all our major recession programmes are already under way, and reports will be produced from the middle of next year.
I wonder whether the Minister is aware that charities helping those with mental health problems, such as Oakleaf Enterprise and the YMCA in my Guildford constituency, are facing a massive downturn in income. Instead of the “laser-targeted” package of help the Government’s press release described in February, we have the usual lumbering, bureaucratic, red-tape nightmare so commonly seen from this Government.
I am surprised at the hon. Lady’s comments, and if she wants to give me examples, I will be happy to look at them, because we have tried very hard to minimise the amount of red tape. Indeed, on the hardship fund in particular, we have been praised for the swiftness of our assessment of applications. Obviously, we want to ensure that charities and organisations who need help can get it quickly, and it is impressive that £32 million has already gone out to help them.
For a number of charities that I work with, there is a bit of a mixed picture. Some of the larger ones have seen their giving going up, but those that I call secondary charities— those that rely on the bigger charities to give them money—are often struggling the most. For example, I met representatives of SPEAK on Monday, and they are struggling to get money from others charities. What assistance can these programmes provide to help those charities that fund other charities, so that we can make sure that the money flows through the system and that secondary charities are not disenfranchised from these programmes?
We have sought to put in place a range of programmes to help charities and voluntary organisations in a variety of ways. In terms of those organisations to which my hon. Friend refers, may I direct him to the grassroots grants programme, as the often quite small donations given under that programme to bodies delivering services at the grass-roots level can be extremely valuable? Those grants range from £500 to £5,000 and are issued through the Community Development Foundation. I will also ensure that my hon. Friend has information on all the grants and packages of help that are available to help charities of different sizes.
The hardship fund, for charities with a turnover above £200,000, is a key part of the action plan, but the recent decision of the Office of the Third Sector to divert into it £750,000 from the campaigning research programme, which is aimed at smaller charities, has caused outcry across the sector. Does the Minister share my concern that the lack of consultation, or even warning, ahead of that decision has not only damaged the charities directly affected, but has shaken the confidence of the sector as a whole in the Government’s commitment to the compact and their support for smaller organisations?
Yes, I certainly understand the concerns about the transfer of the money. It is nothing to do with the size of the organisations; rather, it is to do with the purpose of the fund. It was a difficult decision to make, particularly because it is not compact-compliant, which I regret and apologise for. We should consider the purpose of the fund, however. When I was travelling around the country talking to different organisations, what came up time and again was that organisations delivering services on the ground at grass-roots level were being hit by the recession and needed help. We could have spent this £750,000 either on campaigning research or on helping those organisations. While it was a difficult choice, the basic decision was sound. However, I apologise to those who have been affected, and for this isolated breach of the compact.
I congratulate my hon. Friend on the effectiveness with which the hardship fund has been got out to organisations throughout the country, but does she think that the smallest organisations are sufficiently aware of, and therefore taking advantage of, the available help?
I do in some ways, as many organisations have had the help and have been able to make use of it. I think that more can be done, however, and I appeal to all Members to make organisations in their constituencies aware of the grants, support and loans that are available. We want that money to get out to third sector organisations because they are often the glue in communities, providing support on the ground to the people who most need it. We must do as much as we can to get that money out to them and to help and support them. May I direct my hon. Friend to the Government-funded National Council for Voluntary Organisations website, “Funding central”, which has all the information on grants and support? That is helpful to all organisations.
When the voluntary and charitable sector is facing horrendous pressure as a result of the Government’s recession, how helpful is it for Lord Mandelson to be railroading through the removal of the sector’s long-standing exemption on public performance rights? Does the Minister accept that adding at least £20 million in extra cost to voluntary and charitable organisations just now is the last thing that they need, or have the Government just stopped listening?
It is not a case of the Government not listening, and I should also correct the right hon. Gentleman because it is not the Government’s recession; as he may be aware, this has been an international recession, affecting countries across the world. I share concerns about the impact that charges from PPL and PRS could have on charitable and voluntary organisations; indeed, I met them to express those concerns on behalf of the sector. They are now working together to consider a plan to minimise that impact, and I urge all third sector organisations to contact PPL and PRS to ensure that it is minimised. The exemption was long-standing, and I believe that Britain is one of the last countries in Europe to lose it. I share the concern about the impact of this, and we must work with the entire third sector—the charities and the voluntary organisations—to do what we can to minimise it.
Part of the Government’s much-vaunted recession action plan was an £8 million volunteer brokerage scheme, which was intended to create 40,000 volunteering opportunities. Has not that much-criticised scheme turned out to be a flop, with only 2,500 opportunities actually being created? Given that leaders in the sector have criticised the scheme as
“a numbers game…not suited to the work of many organisations”,
has the Minister yet got the message that this sort of headline-catching initiative with rigid top-down targets is the problem, not the solution?
It is probably too early to make such an assessment as to success or failure. An increasing number of people are going into placements; this process was slow to start and we are seeing some improvement now. It is important to have targets, because they create an ambition to ensure that we get as many people into placements as possible. For example, in August, 930 people on jobseeker’s allowance took up placements on this scheme—that is important and it is success.
The social exclusion task force co-ordinates and monitors progress on tackling social exclusion across England. I am aware that in Yorkshire and the Humber a wide range of measures are in place to support more vulnerable adults into homes and jobs. I am also very pleased that Barnsley, Bradford and Rotherham are all sites for the “Inspiring Communities” programme, which will help to raise the aspirations of young people in deprived areas. May I also tell my hon. Friend that when I visited the York Council for Voluntary Service, I was very impressed by its commitment to promoting social inclusion?
I am grateful to my right hon. Friend for visiting the CVS. Since York Credit Union opened three years ago, it has done an excellent job in helping people to get out of debt, but we still face a serious problem with door-to-door loan sharks. I am holding a credit agreement offered to one of my constituents, where the annual percentage rate of interest was 2,639,385.9 per cent. I am not making that figure up; it is written here in black and white. Will she speak to her colleagues in the Treasury and press for legislation to put to an end this kind of usury?
As we can hear, the whole House is horrified by such an extortionate interest rate. We all share concerns about this, because it is often those on the lowest incomes who end up paying the highest prices because of the high cost of borrowing. I can tell my hon. Friend that the Office of Fair Trading is examining the issue and it issued an interim report yesterday. A final report will be available in the spring and the Government will consider its recommendations. As he has done, may I commend the work of credit unions, which provide a way of helping those who are financially excluded?
Although I endorse what the hon. Member for City of York (Hugh Bayley) has just said, may I ask the Minister to acquire a copy of “The Complete Plain Words” by Sir Ernest Gowers, so that she can start talking in English and get rid of terms such as “social inclusion”, “social exclusion” and “third sector”, and all this gobbledegook, which separates the very people we are trying to help from this place?
That is the first time I have ever been accused of talking gobbledegook; I think that people understand terms such as “socially included” and “socially excluded”, and find them helpful. I have some sympathy with what the hon. Gentleman says about the term “third sector” and if he could come up with a better one, that would be helpful. In some ways, I regard the “third sector”—the wider charities, voluntary organisations and social enterprise—as pretty much the first sector.
People with Disabilities
The latest volunteering figures from the Government’s citizenship survey show that in England 32 per cent. of disabled people volunteered at least once in 2008-09. In order to ensure that more disabled people are able to access volunteering programmes, the Office of the Third Sector is piloting a £2 million volunteering fund in England, which will pay for adjustments and support for disabled volunteers. The fund opened for applications on 16 November.
On the subject of diversity, may I be the first to congratulate my hon. Friend on being the first black woman ever to have spoken from the Dispatch Box? May I encourage her and her colleagues to work with excellent organisations such as Mencap and People First to ensure that people with learning disabilities are given the opportunity to play a full part in voluntary activity, which is both in their interests and the greater interest of society?
I thank my right hon. Friend for his warm words and kind remarks. It is indeed a pleasure to be standing here at the Dispatch Box. I, too, would like to congratulate my right hon. Friend on receiving a disability champion award yesterday. The Cabinet Office is looking at ensuring that disabled people—those with learning difficulties—are totally included in the packages that we are providing, such as the £17.5 million Improving Reach programme. There have been successful bids for people with learning difficulties, such as those from Mind associations. These groups receive the award funding through Office of the Third Sector programmes, including v, grassroots grants, Futurebuilders and targeted support funds.
May I obviously endorse the remarks of the right hon. Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) about the new Minister and wish her well, albeit that it will perhaps be for a relatively short time? Will the Minister accept that for disabled people—whether they are mentally or physically disabled—to be able to participate in voluntary activities is critical to their quality of life. Is she concerned that at the present time, with the recession that we are experiencing, this group of people is suffering—they are unable to indulge in all the worthwhile activities that would make their lives profitable and well?
I again thank the hon. Gentleman for his remarks. The Office of the Third Sector is building a platform to ensure that people with disabilities participate fully and are considered to be the same as able-bodied people. The scheme that has been put in place, although it is a pilot, will be reviewed in 2011. If it is successful, it will be rolled out nationally.
Does the Minister agree that an important aspect of such work would be efforts to promote among younger people the concept of people with disabilities being more able to get involved in a range of voluntary activities, thereby helping the wider community, particularly across the demographics?
The hon. Gentleman raises a valid point. Indeed, through programmes such as v and YouthNet, the Office of the Third Sector is ensuring that young people are not only working with and for, but are engaged with, people with disabilities—both those with learning disabilities and those with other disabilities—to ensure that they can play a full and active part in society.
First, I want to pay tribute to my hon. Friend for his work on, and commitment to, this issue. I am aware that a number of places, including Nottingham, have developed early intervention policies to tackle social problems. It is important that the impact of individual policies is assessed. Officials from the Cabinet Office and the DCSF have discussed the best way of addressing this, including the role of a centre for excellence in outcomes.
There are now lots of green shoots of early intervention in the UK—not just in Nottingham but in Manchester, Glasgow, London and south Wales. I hope that my right hon. Friend will ensure that all those ideas are pulled together so that lots of local authorities that wish to embark on an early intervention programme have a strong, central evidence base from which to draw, rather than replicating individual projects. I hope that she will put her weight behind a national policy assessment centre.
Yes. I know that my hon. Friend has raised this issue with the Prime Minister, too. There is no doubt that as more authorities get involved with early intervention it is very important that they can share best practice and understand what works best to get value for money. Departments will be discussing how best to achieve this, including the role that can be played by such a centre of excellence in outcomes.
The Cabinet Office aims to respond to requests from the Information Commissioner for material required for an investigation in a timely fashion.
I am not really happy with that answer. I want to know who is responsible for the grotesque delays in responding to my freedom of information request regarding Lord Ashcroft. Is it the Cabinet Office that is dragging its feet, or is it the Information Commissioner who is being dilatory and totally useless?
I might not be able to answer that question in the way that my hon. Friend has invited me to, but I can tell him that the Information Commissioner has not issued an information notice regarding any request that he has made to the Cabinet Office.
What follow-up does the Minister do with other Departments? I have just waited a year and a half to get an answer to an information request from the Department for Transport, and even now it has not been answered fully. Does she think that is too long to wait, or is that the sort of time line that I should expect?
Freedom of information matters are dealt with by the Ministry of Justice, so I will draw the hon. Lady’s concerns to the attention of ministerial colleagues at MOJ and ask them to take note of what she says.
Local Organisations (Funding)
The £130 million grassroots grants programme provides much-needed support to small voluntary groups that are doing vital work in our communities across England. In the first 14 months, there have been more than 13,000 grant awards to small charities and voluntary organisations totalling more than £33 million. I am delighted that in County Durham alone grassroots grants has invested more than £487,000 in small grants to local voluntary groups. [Interruption.]
Thank you, Mr. Speaker.
Some £51,000-worth of grassroots grants have gone to community groups in my constituency such as the Ferryhill 2000 committee, Fishburn kurling club and Thornley Homing club. Does my right hon. Friend agree that that shows the Government’s commitment to local people and communities, and makes an important contribution to the front line?
Yes, I do. There are often small community groups in communities doing first-class, important work. A small amount of money can make a huge difference to their impact on the local community, and that is why the Government have invested so much money in the grassroots grants programme, which gives grants ranging from £250 to £5,000 to small local groups. As some of us who speak to those groups know, that makes a real difference in those communities.
In April, the Department launched a programme of grants for small campaigning charities. In October, it sent out grant letters offering the funding. In November, the Minister withdrew the money that had been promised without any consultation. Of course, that has generated real anger in the sector, because with that one decision, the Department that is meant to champion the sector has made a mockery of the compact and has sent out a signal that it is okay for public grant makers to treat charities in that shabby way. I welcome her apology today, but is she really aware of the damage that she has done, and what will she do to repair it?
I suspect that the hon. Gentleman wrote his question before he heard the hon. Member for Cardiff, Central (Jenny Willott) raise this issue. I regret any damage that has been done, because it is important that people understand my commitment to the compact and to voluntary organisations. I refer him to my earlier comments. At this time of recession, and given the comments that have been made to me by organisations up and down the country, the priority had to be given to organisations that deliver services to communities on the front line. Having said that, I deeply regret the concerns that people have raised, and I assure him that my commitment to the compact is strong.
Often, when funding organisations are looking to provide grants to voluntary community organisations, they pay too much attention to the involvement of statutory bodies when they look at those organisations’ financial viability. May I urge my right hon. Friend, when she is handing out grassroots grants, to ensure that the money is going to genuine grass-roots organisations in local communities?
The grassroots grants programme is administered in constituencies on behalf of Government by the Community Development Foundation. I think that I can give my hon. Friend the reassurance he seeks on this matter, but I will send him a list of the organisations in his constituency that have received such grants so that he can make an assessment himself and talk to me further if he wishes to do so.
I meet the national statistician regularly once every three months, but I have no plans to discuss with her the policy on the publication of statistics by Government Departments. Departments are expected to follow the code of practice for official statistics that is maintained by the independent UK Statistics Authority.
I thank the Minister for that reply. The ONS has just published the results of the recent census rehearsal, with responses coming in at just 35 per cent., compared with 54 per cent. in 2001. Is not that a major warning sign that the new census is far too long, too intrusive and too much hassle to fill in? Surely the excessive cost of £450 million is totally unacceptable, given the country’s parlous finances.
I refute the hon. Gentleman’s comments on a number of grounds. First, the census pilots are voluntary, and more resources have been invested to ensure that we get accurate and clear responses from people up and down the country in the 2011 census, because we want the best information possible. Secondly, I also think that the cost of the census, which works out to 87p per person per year, is a reasonable amount to pay for the benefit that the census brings to the country.
Is it not the case that there needs to be public acceptability of the level of detail in the 2011 census? Has my hon. Friend had discussions with Jil Matheson about the level of disaggregated data that will be published, the timetable that will be associated with that, and whether full census form information will be published rather earlier than the present limit of 100 years?
I have obviously had discussions with the ONS about ensuring public confidence in the census, although I have not had particular discussions about how long information will remain confidential. I think that 100 years is appropriate, but if my hon. Friend wants to write to me about the matter, I will look at it again.
The cost of the 2011 census in England and Wales is estimated at £482 million, as stated in the White Paper on the census published in December 2008. As I just mentioned, that equates to 87p per person per year.
I think that the hon. Gentleman struggled to find a point to make on this matter. What he suggests is not the case at all: in fact, a comparison of the cost of the census in this country with the cost of that conducted in other countries around the world shows that our census is much more reasonable. It costs about a third of the census in the US, and is significantly less than that conducted in New Zealand, Canada, Australia, Ireland and Scotland. The cost cannot be called excessive, so his point is completely unfounded.
On the issue of costs, the benefits to the Treasury from the information that it gets from the census amounts to the equivalent of around £700 million. That far exceeds the costs of the census, but the point that the hon. Gentleman makes is also not valid because the ONS chooses the questions independently. It looks at why the questions are needed, and the answers to them are used to ensure that the billions of pounds of public funds are disbursed on the basis of accurate information.
I know that the hon. Lady recently visited the affected area to see for herself the impact of the flooding and to meet emergency responders. All sides of the House have paid tribute to PC Bill Barker, who lost his life.
Despite the unprecedented nature of the rainfall that occurred, the prompt and effective response to the flooding in Cumbria was exemplary, due to meticulous and effective preparation by local and national responders working through the framework set out in the Civil Contingencies Act 2004. As part of the ongoing Civil Contingencies Act enhancement programme, we will ensure that any lessons that can be learned from events such as this are used to enhance our guidance even further, but tribute must be paid to those respondents who worked together during this time.
Will the Minister join me in congratulating those wardens on the ground in Cumbria who were there knocking on doors and evacuating people, thanks to the warning? Obviously, we regret the loss of PC Barker. The Civil Contingencies Act 2004 seems to be working, but we need more wardens of the type that we saw in Cumbria.
The hon. Lady makes the valid point that we must congratulate those people and wardens on the ground, and I completely endorse her sentiments. The Civil Contingencies Act 2004 has been working, and it provides a framework that has now been well established. We will continue to look at any lessons that can be learned from that and ensure that it is enhanced further.
The Prime Minister was asked—
Before I list my engagements, it is with deep sorrow that we remember, from 1st Battalion the Royal Anglian Regiment, Lance Corporal Adam Drane, who died in Afghanistan on Monday. My thoughts and, I know, those of the whole House will be with his family and friends. Every life lost during this year and during previous years is a personal tragedy, and we mourn every single loss. We mourn heroes whose acts of bravery recognise that a more stable Afghanistan means a safer Britain, and the scale of their sacrifice does not diminish but strengthens our resolve.
This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall have further such meetings later today.
I am sure that the whole House would endorse the Prime Minister’s tribute to the lance corporal, and endorse his sentiments as well.
Last week the Prime Minister told the House that Spain was in the G20 and that it had been in recession for longer than this country—neither of which, upon checking, turns out to be correct. Do we conclude from that that the pain in Spain is mainly in his brain?
There are some people who get into the White House on false pretences, get their photograph taken and do not have a formal invitation, but the Prime Minister of Spain was invited to the G20 by the President of America, to be part of the G20. I have to tell the hon. Gentleman that I invited the Prime Minister of Spain, Mr. Zapatero, to the G20 meeting that took place in London. Mr. Zapatero was at the G20 meeting that took place in Pittsburgh. In other words, Spain was part of the G20. [Interruption.] I know that the Opposition are going to talk down Britain, but it is bit much them talking down Spain.
The fatal attack last week on four-year-old John-Paul Massey from Merseyside again raises concerns about the effectiveness of legislation relating to dangerous dogs. Will my right hon. Friend agree to meet, with me, a small delegation of those who are concerned about the issue to discuss what can be done?
My hon. Friend is absolutely right. This was a terrible death, and I am very sorry to learn about what happened to the little boy in Liverpool, John-Paul Massey. She knows that the police are continuing to investigate the circumstances of the death. They have also referred their handling of an original report from February 2009 to the Independent Police Complaints Commission. It would obviously be inappropriate to comment further on that instance, but the issue of the status of dangerous dogs was raised at the antisocial behaviour working party a few days ago. We are working with the Home Office to ensure that those who are on the front line make full use of the powers available to them to tackle the problem of dogs affecting communities. The Government have provided additional advice to the police, and funding to the Association of Chief Police Officers to help to train officers in dangerous dog legislation. This was an event that should not recur, and we will do everything in our power to make sure that it does not happen.
May I join the Prime Minister in paying tribute to Lance Corporal Adam Drane, who was killed in Afghanistan on Monday? The 100th military casualty this year is a very sad milestone. We should honour his memory; we should help his family.
As the Prime Minister and I have both seen, when one speaks to our troops in Afghanistan, it is not sympathy and pity that they are after, but support, not just for what they are doing, but for the mission in which they are engaged. In my view, they are every bit the equal of those men who stormed the beaches of Normandy or who fought their way across Africa in the second world war, and we should be proud of what they are doing.
The new counter-insurgency strategy and the extra troops announced by America last week show that we have the last best chance to get this issue right. Does the Prime Minister agree that we simply cannot waste any time in getting every element of the strategy in place, including troops, helicopters, equipment, development aid, civilian co-ordination and, of course, the pressure on President Karzai to cut corruption?
I am very pleased that the right hon. Gentleman was able to go to Afghanistan, and I also know that many Members have visited our troops in Afghanistan. I pay tribute to them for visiting our troops, but I pay greater tribute to our troops for the great work that they do.
The right hon. Gentleman is absolutely right that we must move quickly. Our additional troops will be going to Afghanistan in the next few days. We have called a conference for 28 January in London, to bring together all the powers that are involved in Afghanistan—the 43-nation coalition. That will discuss—and, I hope, agree on—civil co-ordination. President Karzai has agreed to come, and he will have to report on the reforms that he promised to make in his Administration as he started his second period of duty. At the same time, we are making available all the equipment that is necessary—helicopters and vehicles—to our armed forces.
I can just add one thing—that 80 per cent. of the deaths have been the result of explosive devices. We have now brought in far more surveillance equipment; we have brought in extra engineers; we have brought in extra drones to survey the area; we have brought in more intelligence officers; and we are backing up our troops with the best equipment possible. We will do everything we can to avoid the loss of life as a result of this guerrilla warfare.
US forces are now pouring into Helmand province, and that is welcome. But is not one of the current problems that British forces are still spread too thinly in the very tough parts of Helmand for which we are responsible? Following the increase in US forces in Helmand, is there not a danger that there will be a contrast between the UK forces, who are still spread too thinly, and US forces, who will not be? Does the Prime Minister accept that this needs to change, and change very urgently?
If the right hon. Gentleman had heard what I said last week, he would know that I said that we were going to thicken the presence of our forces in a number of key areas. Of course operational decisions are a matter for commanders on the ground, but I think it is recognised that two things have got to happen: one is that we thicken our presence; the second thing, however, which I emphasise as part of our long-term strategy, is the fact that we are also there to train the Afghan forces so that they can take over. So 5,000 Afghan troops will come to be trained in Helmand itself; 10,000 in total will be trained in Helmand over the course of the next year, and we will then want to pass security control, district by district, to the Afghan people. We not only have a reason for being there—the threat of terrorism on the streets of our country—we also have a plan to give the Afghans control over their country, so that at some point our troops can come home.
The Prime Minister is right: of course it is for military commanders to make the precise dispositions. But everyone agrees that one of the keys to successful counter-insurgency is a dense population of troops to protect the civilian population, and the figures tell a vital story. Soon, 20,000 US forces will be responsible for some 30 per cent. of the population, and fewer than 10,000 British troops will be responsible for some 70 per cent. So let me just ask him again: how quickly does he think that this vital issue can be sorted out, so that we have effective counter-insurgency throughout southern Afghanistan?
I am grateful that the right hon. Gentleman raises these questions, because I can point out to the Opposition that we are part of a coalition. These decisions are made as part of a coalition: they are made in Helmand with the Americans and the other forces who are there. Yes, we have decided to thicken in certain areas, but yes, the Americans have laid the priority for the next few months and years on training the Afghan forces, and that is what we are also going to do.
I would say to the right hon. Gentleman that we have an Afghan army of about 90,000, it will increase over the next year to about 135,000, and the number will have to go higher than that for Afghanistan to be able to sustain its own security control. The police force is at about 90,000 at the moment. It will have to be improved by police trainers, and we will need more police on the ground as well. That is the way forward for Afghanistan. I would say to the right hon. Gentleman again that decisions about the location of troops are a matter for commanders on the ground, but we work in close partnership with the Americans, and our decisions are taken with the rest of the alliance.
I am grateful to the Prime Minister for that answer, and for discussing this issue. [Hon. Members: “Oh!”] No, honestly, this is an important point, and I do believe it has to be sorted out. Crucially, there are political elements to this decision, and what I am saying to him is that he will have our support if he makes those decisions.
Let me turn to a completely different subject. Tomorrow the House of Commons will be publishing the details of Members’ second home allowances for the financial year 2008-09. That is a vital part of the process of rebuilding trust in this place, which everyone wants to happen. As of yesterday, the plans were to issue details of expenses, but without publishing the total expenses claimed by each MP. Does the Prime Minister agree that that would not be transparent and would infuriate the public who put us here, so will he take all the necessary steps to make sure that the current totals are published in full?
This is a matter for the Members Estimate Committee to make a judgment on. The shadow Leader of the House is a member of the Members Estimate Committee, as is the Leader of the House. We want the maximum transparency possible. I believe there is nothing that we have to hide, and we have got to get all the information out. Anything that maximises transparency is what I support, but I would have thought that the details of how we do it are best left to the Members Estimate Committee, and it is for the shadow Leader of the House to put his views there. I think, if I am right, that we were trying to reach a consensus about how we would move forward on these issues. I think we should all say that the sooner we can deal with all the issues the better, but the best way of dealing with them is by the process that we ourselves agreed.
With respect, the question whether you publish the totals is not a matter of detail; it seems to me pretty profound. You have got to publish the totals so that the public can see that we are being open, transparent and straightforward about this issue that has done so much damage to this House.
After the Queen’s Speech—[Interruption.]
Thank you, Mr. Speaker.
After the Queen’s Speech, I offered the Prime Minister our support if he brought forward the legislation to implement the Kelly report in full. The Leader of the House has said that she is prepared to talk about this. Can he confirm that the necessary legislation will be brought forward—and, indeed, that it will be published before Christmas? Does he agree with me that we need to end this damaging year for Parliament by showing once and for all that we “get it”?
On the very issue the right hon. Gentleman raises—perhaps he should know this—I understand that a meeting is taking place this afternoon to deal with exactly the issues that we are talking about. I would prefer that we agreed that there be the maximum transparency, and that we will do everything we can to make that happen. We have set up the Independent Parliamentary Standards Authority to do this. Let it get on with the job of doing it, and let us reach a consensus in this House that the maximum transparency is what we are going to achieve.
Of course, but the point is that Kelly made a series of recommendations, and the Prime Minister said that the whole point of prolonging this Parliament was to put them into place. Many of these recommendations require legislation, so the legislation needs to be brought forward.
The Chancellor of the Exchequer is about to stand up and deliver his pre-Budget report. He should be announcing measures to bring the deficit under control. Does the Prime Minister agree with me that we should show some leadership, and begin with this place? Will he therefore support our plans for a 5 per cent. cut in ministerial pay followed by a five-year freeze, and a 10 per cent. cut in the size of the House of Commons?
Our deficit reduction plan involves major changes in how government operates, including how Ministers and civil servants operate. I hope that the right hon. Gentleman will agree with the measures that we are bringing forward. I would say to him that the reason why we have a deficit is that we have spent to take ourselves through the recession. If we had taken his advice, more people would have been unemployed, more small businesses would have gone under, more mortgage owners would have lost their homes, and we would be facing a higher deficit and higher debt as a result. Mr. Speaker, when I listen to him now, it seems to me that he has lost the art of communication, but not, alas, the gift of speech.
Does the Prime Minister agree that people who purport to stand to be Members of this House, and give interviews to national newspapers saying that if they are elected they will not claim expenses, and that their wealth makes them incorruptible, only for us to find that that wealth is held in tax havens abroad, are unfit to be Members of this House?
I should like to add my own expressions of sympathy and condolence to the family and friends of Lance Corporal Adam Drane of 1st Battalion the Royal Anglian Regiment, who tragically lost his life serving in Afghanistan on Monday. We will remember him, as we remember all those who have made the ultimate sacrifice serving in the mission in Afghanistan.
Yesterday, the Prime Minister said that fairness was in his DNA, and today we are told that fairness will be the centrepiece of the pre-Budget report. So why is it that 4 million children are still living in poverty, one in five young people are out of work and millions of poor pensioners will struggle this winter simply to keep warm? He dares to talk about fairness, but does he not realise how offensive that is to the millions of people who feel that they have been let down by Labour?
The last time we talked about it a few months ago, the right hon. Gentleman did not know the level of the state pension. I hope that he knows the level of child benefit and child tax credit, because child benefit, taken with tax credit, has trebled for the poorest families in this country since 1997. We have taken more children out of poverty than any previous Government since 1945, and we are taking more action today: if the right hon. Gentleman listens to the Chancellor, he will hear what he is going to do. Our record in taking children out of poverty, when poverty had trebled under the Conservatives, is one that we will build on in the years to come.
Here is a list that they do not like to hear. Child poverty is going up again. Inequality is going up. Last winter more people died of the cold than did a decade ago, and a child born today in the poorest part of this country will die a full 14 years before a child born somewhere else. That has not changed in 10 years. Will the Prime Minister now be honest? He has failed on fairness.
We have taken action over the 10 years. I know that the right hon. Gentleman does not like me reading lists of what we have done, but the problem is that he cannot read any lists of what he has done. What we have done is taken hundreds of thousands of children out of poverty, protected children and families against the costs of energy bills, given thousands of children Sure Start opportunities that they never would have had and doubled the child tax credit for nought to one-year-olds to help avoid infant poverty. The right hon. Gentleman wants to abolish the child trust fund, and we are giving young children the chance for the first time to have a trust fund of their own. We are the party that will give every child in this country a trust fund. For the Conservatives and the Liberals, trust funds are just for the few.
I congratulate my hon. Friend on his pioneering work on this issue. Following my meeting with him and parliamentary colleagues, I visited some of the early intervention projects in Nottingham, including in his constituency. I welcome everyone working together on early intervention. There are 50,000 families who need our help, and breaking intergenerational cycles of deprivation requires us all to work consistently on early intervention over the years.
Do the Prime Minister and the other party leaders here today accept that giving our babies, children and young people the social and emotional bedrock that they need through early intervention not only gives them a great start in life but, at a time of financial restraint, will save the taxpayer billions and billions of pounds by reducing the bill for low educational attainment, crime, drink and drug abuse, and lifetimes that are currently wasted on benefits?
I visited Nottingham, as I said, and saw the success of an early intervention programme that had taken a family that was in absolute chaos, and every single member of that family was benefiting from the professional work that had been done to help them. I have seen early intervention in action. We are putting in a programme in all parts of the country. It is complemented by Sure Start, where young people can get the chance, before nursery school age, to get help with learning, and help for their mothers with health and education. If we are going to have early intervention, we must also have Sure Start. I hope all parties in the House will want to maintain the Sure Start programme. There are 3,000 centres—an average of six in each constituency—and it is something that we want to build upon, not destroy.
Absolutely: dealing with the root causes of poverty involves helping people to find jobs. That is why we have the new deal—but unfortunately, it is opposed by the Conservative party. Tackling the root causes of poverty means helping people to deal with health problems. That is why we spend money on the health service, instead of calling it a 60-year-old mistake. That is what we are about—helping to deal with the root causes of the problem, by investing in people.
Child tax credits are a vital support for many parents, especially those on incomes of around £16,000. Will the Prime Minister reassure my constituents that he will not cut help for those many hard-working families to pay for tax cuts for the wealthiest few?
Child tax credits have lifted 500,000 children out of poverty, and they are now helping people through this recession: 400,000 families, some of whose breadwinners are on short-time work or work part time, have been able to claim tax credits worth, on average, £37 a week. That is our way of helping people out of recession. I would regret it very much if any party chose to cut tax credits by £400 million. I understand that that would affect every family with an income above £16,000—which means that it is a policy that will hurt the many, at a time when that same party wants to benefit the few.
The Prime Minister should know that skills are vital for economic recovery and our competitiveness, so he will have been as disappointed as I was with Lord Mandelson’s concession in the recently published skills strategy that the Government will miss their 2011 targets for level 3 technical skills. In that spirit of confession, will the Prime Minister now concede that fewer people are beginning level 3 apprenticeships than 10 years ago?
We are actually doing far more to increase the number of apprenticeships. There are more apprenticeships this year than last year—and let us remember that there were 70,000 apprenticeships in 1997, whereas there are a quarter of a million now. If the hon. Gentleman wants to help people to get to level 3, why does the Conservative party oppose the summer school leavers guarantee, which helps young people to get those qualifications in their teens? Why does the Conservative party oppose the money that is necessary to give every young person, not just some young people, a chance?
We meet in a week when a big set of decisions has to be made at Copenhagen. I know that there is all-party support for our desire to get the best possible agreement at Copenhagen that could lead to substantial reductions in carbon. We—as Europe, and as Britain—have said that we will lead the way in making substantial reductions in carbon. I have to tell my hon. Friend that that will happen only if we have a balanced energy policy, and only if we are able to tackle the issue of renewables. Yes, we need nuclear power as part of our energy policy—I am sorry that the Opposition say that for them it is only a last resort—but we also need wind power as part of the renewables that we are going to create in the future. We need not just offshore wind power but onshore wind power, and I am sorry that applications are being turned down by Conservative authorities, when we want to get wind power and wind turbines in our country. I am afraid the Conservative policy on energy is all talk and no action—all wind and no turbine. [Interruption.]
My right hon. Friend is right about the importance of dealing with diabetes. The test for identifying those at risk of developing type 2 diabetes is included in the NHS health check that will be offered to those aged 40 to 74. It will also assess people’s risk of heart disease, stroke and kidney disease, and help individuals to manage that risk. We believe that we will be able to identify at least 20,000 cases of diabetes and kidney disease earlier, and that will be important for the health of our country and for preventing the further costs that result when people suffer from those diseases. Investment in that programme now will save money later, and it is the right way forward for the national health service to give people personal guarantees that they will have those health checks free of charge.
I understand that the closure has been postponed to allow the primary care trust to inform the people about the alternative services that are available. We have invested an additional £250 million in 100 new GP practices in poorly serviced areas and in 152 new health centres. This is a matter for decision by the local NHS, together with patients and others. I understand that the hon. Gentleman said at the last election that a hospital in his area would close: that hospital is still in being.
Will the Prime Minister join me in congratulating American bedspring manufacturers Leggett & Platt on investing some $22 million in establishing their European headquarters in Grimethorpe in my constituency? That is mainly thanks to the efforts of Yorkshire Forward and the Barnsley development agency. Does he also agree with me that places such as Barnsley and Doncaster specifically, and Yorkshire and Humber in general, are still great places for foreign companies to invest?
This is exactly the policy that the Chancellor is pursuing, and that his pre-Budget report is about. It is about recovery from recession by investing in the future, and it is about getting growth in the economy so that we get new jobs in new areas. I applaud the work that my hon. Friend the Member for Barnsley, East and Mexborough (Jeff Ennis) does. This is the party of jobs, whereas the Opposition would leave millions unemployed.
I am grateful that the right hon. Gentleman has raised that point, because the Energy Bill is an attempt to deal with some of the problems that arise and to ensure that the social tariff is far fairer for people with difficulties. However, I also have to remind him that into the homes of thousands—indeed, millions—of pensioners in the past few days has come the winter fuel allowance, which is paid to everyone over 60, and is higher for the over-80s. It is one contribution that we can make to help with the heating bills of the poorest in our society, but it is a contribution made to every pensioner and everyone over 60 in our country. I hope that there is now a consensus that that is the right thing to do.
The Home Secretary tells me that Her Majesty’s inspectorate of constabulary is looking into Nottinghamshire police at the moment, but I have to say that the whole purpose of neighbourhood policing, which we have developed over the past two years, is to get more police on the streets. For that, we need to invest in policing and emphasise the concept that the police serve the neighbourhood. That is exactly what we are doing.
No. I think that anybody who looks at the global recession knows that it started with the problems of the banking system in America, which spread right across the world. Our tripartite system is the right way to deal with these problems, because it brings together the Bank of England, the Financial Services Authority and the Treasury. I noticed that only yesterday the Leader of the Opposition changed the shadow Chancellor’s policy on the future of the banking system, and that he also talked yesterday about introducing “flatter taxes”. Flatter taxes mean less tax paid by the very wealthy. Before the Conservatives come to give us lectures on economic policy, they should go back to the drawing board.
I am surprised that a political party wants to fight the next election on withdrawing the ban on fox hunting. In fact, that is that party’s only job creation policy—to create a quango to run fox hunting. I believe that it is making a terrible mistake, and it will pay for it at the next election.
Today’s pre-Budget report takes place at a critical time for our economy and for our country. Governments across the world have taken co-ordinated steps to deal with the biggest financial crisis for over half a century. In the UK, our action has reduced the impact of this downturn on families and businesses, but there is still much uncertainty, so the task today is to ensure the recovery and promote long-term growth.
To promote growth, we need to invest in the dynamic sectors of the future—in digital, bio and low-carbon technology—and I will announce measures that will support those industries. To promote growth, we also need to invest in the skills of young people to prevent a lost generation of youth unemployment. I will announce measures to guarantee work opportunities for the young. To promote growth we also need to maintain support until the recovery is secured and to halve the deficit over four years, in an orderly way that does not threaten investment vital to our future. The choice is between going for growth and putting the recovery at risk—to reduce the deficit while protecting front-line services, or cuts that put those services in danger. The choice is between two competing visions. This pre-Budget report is about building a fairer society and securing opportunity for all.
When I delivered the pre-Budget report just over 12 months ago, we were faced with the sharpest and most widespread global downturn in generations. The near collapse of the financial system quickly fed through into the wider global economy. World trade went down sharply and unemployment sharply up across the world. Families and businesses in every continent felt the pain.
Governments around the world intervened to rescue the banking system. We supported our economies with tax cuts, increased Government spending and co-ordinated action to lower interest rates and to boost money supply. No choices were easy choices; indeed, some even argued that we should not have acted at all. But as a result of those actions, there is growing evidence that global confidence is returning. The US housing market, which triggered the crisis, is stabilising—so is the housing market here. Global manufacturing is up almost 6 per cent., world stock markets by 30 per cent.
As the world’s largest financial centre, the turmoil in the banking sector has had a substantial effect on the UK. With more home owners here than in Europe, a global slump in property prices hit confidence hard in this country. As the sixth biggest exporter of goods and the second largest exporter of services, our trade has been hit. But as demand picks up abroad, as is already happening, British businesses will benefit. So I am confident that the UK economy will start growing by the turn of the year.
However, across the world, there remain risks to recovery. Oil prices are volatile. Recent market reaction to financial problems in Dubai highlights just how fragile world confidence remains. So while I am confident that the UK economy is on the road to recovery, we cannot be complacent. We must continue to support the economy until recovery is established. To cut support now could wreck the recovery. That is a risk that I am not prepared to take.
This time last year, we recognised the exceptional trading difficulties that businesses here were facing. In the past, inaction by Government to support firms led to widespread—and avoidable—business failure. I was determined that we did not repeat that mistake. So in an unprecedented move, I cut VAT to 15 per cent. for a year, to put more than £11 billion into the pockets of consumers and retailers. That countered the impact on businesses of the global credit squeeze and the collapse in consumer demand when it was needed most. I can confirm that VAT will return to 17.5 per cent. on 1 January, as planned. I have no other changes in VAT to announce.
To ease problems with cash flow and access to bank lending, we deferred tax rises and extended tax allowances for businesses. Because we chose to intervene, the rate of business insolvencies is far lower than would have been expected. In the recession of the early 1990s, proportionally twice as many businesses went under. While some measures such as the VAT cut and the working capital and trade credit insurance schemes are finishing, it is right to extend others while uncertainty remains. The time-to-pay scheme has helped more than 160,000 businesses spread their tax payments over a timetable that they can afford. They can get additional time when they need it most and, because firms continue trading, the likelihood of companies paying the tax owed increases, so I have decided that the scheme will be extended for as long as it is needed.
Last year, I temporarily increased the threshold for empty property relief to help small businesses. I can announce that it will be extended, so that for 2010-11, empty commercial properties with a rateable value below £18,000 will be exempt from business rates. Seventy per cent. of all empty properties will continue, therefore, to be exempt. I have one further announcement to help small businesses. I have decided to defer the increase in corporation tax for smaller companies. That will leave the 2010 rate unchanged for 850,000 small businesses, helping them until the recovery is secured.
In the early 1990s, hundreds of thousands of families lost their homes. I did not want to see that repeated, so we introduced a range of measures to allow families to stay in their homes and to help young couples on to the housing ladder. As a result, repossessions are now running at around half the rate of the recession of the early 1990s. By the time the stamp duty holiday finishes at the end of this month, I expect 240,000 home buyers to have been helped. But with unemployment still likely to rise, it would not be right to withdraw all support now for home owners.
Last year I improved the scheme giving support for mortgage interest, to provide better cover for mortgage interest payments for those who had lost their jobs. More than 220,000 people have been helped so far. I have decided that that additional support will be extended for a further six months. There will, of course, be a cost to that and other continued Government support, but the cost to families of losing their home would be immense, and it would be a false economy for the country. The more successful these measures are in restoring confidence to the housing market, the lower the cost will be to the Exchequer.
The best way of avoiding repossessions is to help people to stay in work or re-enter the labour market quickly. Such a deep global recession was always going to have a damaging impact on employment. The bleak news last week that Corus is to shut its Teesside plant underlined the fact that the reduction in global demand will have an impact on jobs for some time to come. That is why, yesterday, I agreed with the Secretary of State for Business, Innovation and Skills to provide £30 million from within existing resources to help industry in Teesside.
No Government, even during times of the strongest economic growth, can prevent every job loss. Unemployment has risen in the UK and will keep rising for some time, but it remains lower than it was in France, Canada, the United States and the euro area. In fact, even now, there are some 2.5 million more people in work than there were in 1997. Because of our values of fairness and opportunity, promoting employment has always been, and remains, a top priority for this Government. Unemployment can never be a price worth paying.
As the global recession hit our country, we responded by bringing forward investment in vital infrastructure projects to protect jobs, and finding an additional £3 billion to help people to find new work more quickly. We expanded the Jobcentre Plus network and offered support through the rapid response service to staff in 3,000 firms hit by redundancies. Help including training, volunteering and recruitment subsidies has been offered for those still unemployed after six months.
It is clear that we are making a difference. Unemployment has increased much less than expected by independent forecasters. If we had seen the same rate of job losses, relative to GDP, as we saw in the early 1990s, four times as many people would have lost their jobs. Despite the severity of the global recession, the claimant count today stands at 1.6 million, compared with the 3 million reached in 1985 and 1992. Our comprehensive support means that a short spell in unemployment is not turning into a lifetime on benefits, as happened in the recessions of the ’80s and ’90s. Indeed, more than 3 million people have been helped off the claimant count in the past year.
Despite this support, there are groups who need more help. Past recessions have had a very damaging impact on young people, who should have been starting their working lives, but instead were unemployed. Our package of support for the young already includes a place for every 16 and 17-year-old in education or training. I intend to provide funding so that this guarantee will be available to school leavers again next September. In the Budget, I went further and announced that every 18 to 24-year-old would be guaranteed work or training after 12 months out of work. I do not want them to have to wait that long, however, so I am going to bring that forward. I have decided that, from next month, no one under 24 needs to be unemployed for longer than six months before being guaranteed work or training.
In the past, older people were allowed—indeed, often encouraged—to drift into permanent unemployment, but we cannot afford to write off their experience. So we will ensure that the over-50s receive specialist and tailored support to equip them with the confidence and skills they need to get a job. We also want to encourage those who want to stay working part-time after they reach retirement age, and to make work pay for everyone, regardless of their age. To make it easier for those over 65 to receive the working tax credit, we will reduce the minimum number of hours they need to work to be eligible.
We chose not to let people sink when they lost their jobs, but to intervene to help them to stay afloat. That is good for the individuals and their families, and also for the wider economy, boosting spending and, in turn, creating new jobs. The more successful our targeted support, the more likely that the rise in unemployment will be lower than expected and therefore cost the country less, as has already happened. Government action has made a real difference.
The worldwide recession has had an impact on all families, and it is often the most vulnerable who are affected the most, including those on modest incomes who have been put on shorter hours. The Government’s flexible tax credits system has risen to the challenge of the downturn, delivering substantial support to families to compensate for that loss of pay. I can tell the House that so far this year, because of tax credits 400,000 families whose income has fallen have benefited from that extra help—on average by £37 more per week. For those who doubt the value of tax credits, here is the proof that they work.
The recession has also had other effects. For the first time in half a century, the retail prices index has been negative for much of the year. That helps families with the cost of essential goods, but many benefits and tax credits are also linked to the September RPI. RPI inflation last September was minus 1.4 per cent. That would have meant no increase in those benefits in April. I do not believe that such a freeze would be fair, so I can confirm that the basic state pension will not be frozen, but will rise by 2.5 per cent. in April—a real-terms increase of nearly 4 per cent.
I can also tell the House that, from the time of the Budget, I will cut bingo duty from 22 to 20 per cent.—[Interruption.]Obviously a popular measure. I also want to help families in receipt of other benefits linked to the inflation figures, such as child benefit and some disability benefits, so those benefits will rise by 1.5 per cent. in April.
We are committed to helping people back into work, and making work pay. I have decided to roll out across the country a guarantee that anyone in work will always be better off than they were on benefits. If that is not happening already, they will be guaranteed extra money from the Government, making sure that work really does pay for everyone and encouraging more people to re-enter the labour market. So we are continuing to provide targeted support for people and businesses, as we secure the recovery.
Across world economies, the first half of this year saw a sharper deterioration than had been expected. That was also true here in the UK. Up to the third quarter of this year, the global recession has meant a cumulative economic contraction of 3.2 per cent. in the United States, 5.6 per cent. in Germany, 5.9 per cent. in Italy and 7.7 per cent. in Japan. Over the year as a whole, the UK economy is expected to have contracted by 4.75 per cent. this year, but as I forecast at the Budget, I expect a return to growth in the fourth quarter.
Next year, I forecast growth of between 1 and 1.5 per cent., as I said in the Budget. Because of the underlying strength of our economy, the pick-up in world demand and the substantial spare capacity opened up by the recession, my Budget forecast, broadly in line with that of the Bank of England, of growth of 3.5 per cent. in 2011 and 2012 remains unchanged. This growth, however, will come from more varied sources and not depend as much on the financial sector, which will, of course, remain an important part of our economy. Growth will be driven by fresh opportunities to export as the global economy expands and by investment by businesses in the key industries of the future. It is growth that I am determined to support in this pre-Budget report.
Partly because of the reversal of the VAT cut, consumer inflation will rise from 1.5 per cent. to around 3 per cent. early next year, before falling back. The Bank of England expects inflation then to fall below target and reach 1.5 per cent. by the end of next year.
The global recession has had an impact on the public finances in every country, with tax revenues falling and spending increasing to support the economy. Here in the United Kingdom, the financial sector, which provided over a quarter of all corporate tax revenues, has been hard hit. Revenues from stamp duty and income tax are sharply down and it will take time for tax revenues to recover.
Our steps to maintain stability in the banking sector have also had an impact on the public finances. At the Budget, given the extreme uncertainty at the time, I made a provisional £50 billion estimate of the possible taxpayer losses from our interventions in the financial sector. Those risks have now significantly diminished because of the successful intervention of Governments to support the global financial system. Lloyds Banking Group, for example, has been able to raise capital from the markets and is not receiving Government support in the asset protection scheme. We have also restructured RBS’s participation in that scheme, so there are no expected losses for the taxpayer. Other banks are also in a much more stable situation. As a result, I can revise down my provision for any potential impact on the public finances from £50 billion to around £10 billion, but our objective remains to get all the taxpayers’ money back, on top of the fees charged for supporting banks through this crisis.
I have made clear that support during the downturn must go hand-in-hand with steps to rebuild our fiscal strength once recovery is firmly established. Backed by legislation introduced today, the Government will ensure that public sector net borrowing as a share of GDP falls every year and is more than halved by 2013-14, and that net debt as a share of GDP is falling in 2015-16. I believe that that is a sensible timetable. To consolidate too soon, too quickly or too indiscriminately, as some have proposed, would risk delaying the recovery and threatening a longer recession. When Japan tightened prematurely in the 1990s, it pushed the economy back into recession, making debt and deficits higher, not lower.
Taken as a whole, this pre-Budget report secures a fall in borrowing each year until 2013-14 to meet our deficit reduction plan. In the Budget, I forecast that public sector net borrowing would be £175 billion this year and would then fall to £97 billion in 2013-14. Because of the severity of the recession, my forecast for this year’s borrowing is £178 billion. Next year it will fall to £176 billion. As the economy recovers and the deficit reduction plan starts to take effect, it will fall to £140 billion and then to £117 billion, and will reach £96 billion in 2013-14—a slightly lower level than I forecast in April—before falling to £82 billion in 2014-15. As a share of GDP, borrowing will be 12.6 per cent. this year, 12 per cent. next year, then 9.1 per cent, then 7.1 per cent., and 5.5 per cent. in 2013-14. It will fall to 4.4 per cent. in 2014-15. If we exclude public sector investment, or capital spending, and take the economic cycle into account, the budget deficit is expected to fall to 1.9 per cent. at the end of the forecast period.
Public sector debt has increased in every G20 country as a result of this global recession. Net debt as a share of GDP is expected to reach 82 per cent. in Germany, 83 per cent. in France, and 85 per cent. in the United States. As a result of the lower provision for possible losses in our financial sector this year, I can forecast that net debt will reach 56 per cent. of GDP. It will then rise to 65 per cent. next year, and to 78 per cent. by the end of the forecast period in 2014-15. However, net debt as a share of GDP will fall the year after that. Even at its peak, debt will be in line with the average for the other G7 economies.
I believe that we have made the right choices to help the country through the recession when we could have chosen to do nothing. We also need to make the right choices to reduce the deficit. In the Budget, I set out how we would do that by encouraging growth now and in the future, with fair tax increases and with tighter control of public spending. I now want to set out further details of how we will achieve this deficit reduction plan.
The combination of the talents of the British people and today’s low inflation and low interest rate environment provides us with a strong platform to meet our ambition of long-term sustainable growth—so does having the most flexible labour market in Europe, the lowest rate of corporation tax in the G7, and a competition regime that is among the best in the world. That is why ours is judged to be one of the best locations in which to do business and attract inward investment. I am determined to build on those strengths today by maintaining our leadership in the low-carbon sector, boosting investment in our national infrastructure and skills, and supporting our world-class high-tech industries.
In line with the overall neutrality of this pre-Budget report, two thirds of the targeted measures that I shall now announce come from within existing budgets. If businesses are to expand and grow, they need access to credit. Following the intervention by the Government, total bank loans to businesses today are above where they were when the crisis hit in 2007. We have seen over £50 billion in new business loans from RBS and Lloyds alone. But unsurprisingly, at the same time other businesses have reacted to the uncertainty by repaying existing loans, which is why net lending as a whole is down. I am very aware that some small and medium-sized businesses still encounter difficulties in obtaining loans. As recovery gets under way, we shall need to ensure that SMEs obtain the credit they need. We must work with the banks to ensure that that happens. We are also working to secure a contribution from major banks towards a £500 million growth capital fund which will invest specifically in small businesses. We will announce further details shortly.
In January we launched the enterprise finance guarantee, which has already offered Government guarantees on bank loans to over 6,000 businesses. Today I have decided to extend the scheme for a further 12 months, which will guarantee a further £500 million of loans to small businesses.
This week sees the start of the UN conference on climate change, an historic opportunity for the reaching of a universal agreement to tackle global warming. We can be proud that the UK has led the way: on meeting Kyoto targets, introducing carbon budgets, and recognising that developing countries need help to reduce their own emissions. Tackling climate change will bring new opportunities for new low-carbon industries, and that will create the high-skilled, high-paid jobs that are crucial to our future prosperity.
Today I can redirect existing funding and invest in wind power, renewable energy and other green industries. Through the innovation investment fund and the Carbon Trust’s venture capital scheme, we will support at least £160 million of public and private investment in low-carbon projects. We will also invest £90 million in the European Investment Bank’s new 2020 fund, which will enable €6.5 billion of finance to be made available for green infrastructure projects. I can also tell the House that we will double our commitment to finance four carbon capture and storage demonstration projects, which will make us world leaders in that vital area.
As well as investing in clean and low-carbon technologies, we must all become more energy-efficient and cut emissions as well as household bills. The roll-out of smart meters, which will be completed in 2020, will help families to identify how to become more energy-efficient. Improving home insulation is key. A quarter of all the country’s emissions come from households. Already 235,000 homes have benefited from the Warm Front scheme to provide more efficient heating and insulation for the most vulnerable. Today I can announce an additional £200 million, from April, to help with energy efficiency. An extra 75,000 households will benefit from an extension of the scheme. That will go alongside further requirements, amounting to up to £300 million overall, for the energy companies to provide discounts on energy bills for a further 1 million low-income households.
Inefficient domestic boilers add over £200 to household bills and 1 tonne of carbon to the atmosphere each year. I therefore want to build on the successful car scrappage scheme. I want to help 125,000 homes to replace those inefficient boilers with new models. I can also announce changes to the climate change levy, company car tax, and fuel benefit charge.
I have three more targeted measures to announce. From April, people with home wind turbines or solar panels who plug excess power into the national grid will receive, on average, £900 a year. I intend to make that payment tax-free. To help to boost the number of electric cars on our streets, I have decided to exempt them from company car tax for five years. I can also announce 100 per cent. first-year capital allowances for electric vans.
A key component of our growth strategy is investment to keep goods and people moving. The Government have made huge strides in rebuilding the national infrastructure following years of neglect. Continued public investment here is essential to growth. This year public sector investment reached a 30-year high, and has delivered more than 70 road and motorway schemes and improved journey times across the rail network. Work is now under way on Crossrail, the Thameslink project and, from this month, the upgrade of the M1. All that work will continue; so will the rail electrification programmes for the Great Western main line and the north-west that were announced in July.
I have given the go-ahead to further plans for rail electrification between Liverpool, Manchester and Preston. My right hon. and noble Friend the Secretary of State for Transport will announce further details shortly. The Government will also respond, early next year, to the proposals for a new high-speed rail line from London to the west midlands and to the north and Scotland.
Since 1997, we have helped millions of people gain qualifications or training. The number of apprenticeships has doubled. New advanced apprenticeships will meet the skills needed in key growth areas, such as advanced manufacturing, low carbon, digital technologies, and the biosciences. We also want to break down informal barriers that close off some careers to undergraduates, particularly from poorer backgrounds, so I can announce that we will offer financial support for up to 10,000 undergraduates from low-income backgrounds to take up short-term internships in industry, businesses and the professions. This will give them a taste of careers that they may not otherwise have considered. We will announce further details shortly.
We are modernising the UK’s digital infrastructure and, in the process, creating thousands more skilled jobs. We have provided funding to help extend the opportunities of the broadband network to more remote communities. We now want to go further, so that we can provide the next generation of super-fast broadband to 90 per cent. of the population by the end of 2017. That will be funded through a duty of 50p a month on landlines, which will be included in the Finance Bill.
The oil and gas industry is an essential part of our economy. To encourage further investment, I am today relaxing the criteria of the field allowances, to support the development of up to eight known fields and to encourage further exploration. We will work with industry to look at how best to ensure the development of infrastructure to the west of Shetland.
We already have a tremendous track record in key growth industries. We have the leading medical biotechnology sector in Europe. Our aerospace industry is the second largest in the world. Our creative sector has increased exports by 60 per cent. since the beginning of this decade. All of that has been supported through our investment in science and our targeted tax policy. This country has a remarkable record of ideas and innovation. We have won more Nobel prizes than any other country of our size. We need to do more to support this ingenuity and ensure this creativity is harnessed by this country. I want to encourage research and development in the pharmaceuticals and biotech industries in particular. So, following consultation with business, I will introduce a new 10 pence corporation tax on income that stems from patents in the UK. This will help maintain jobs in science and technology in this country.
I also want to build on our world-class achievements in medical research. With the Wellcome Trust, Cancer Research UK and University college London, we are working on plans to establish the largest institute in Europe for research into long-term medical challenges. The new strategic investment fund, set up in April, has already agreed vital support to hi-tech projects such as Airbus in Wales and the life sciences in Scotland. We will expand this work through £100 million of redirected funds and an extra £100 million. By supporting the low-carbon sector and investing in our vital infrastructure and our world-class industries, we will secure growth, create new jobs and provide the revenue to help rebuild our fiscal strength.
Supporting growth is vital to provide the future revenue to halve borrowing over the next four years, but, as I have said, it also requires us to take some tough decisions on tax now. I am determined that any tax increases will continue to be guided by our values of fairness and responsibility. Last year, the banks made collective losses of £80 billion in this country alone. This would have been much higher without the unprecedented level of support from the taxpayer. There is no bank that has not benefited, either directly or indirectly, from this help. This should be a time for banks to rebuild their capital base and become stronger. A tax on profits, as has been suggested, would prevent them from doing that, so I have decided against a windfall tax. However, there are some banks who still believe their priority is to pay substantial bonuses to some already high-paid staff. Their priority should be to rebuild their financial strength and increase their lending, so I am giving them a choice: they can use their profits to build up their capital base, but if they insist on paying substantial rewards, I am determined to claw money back for the taxpayer. I have decided to introduce from today a special one-off levy of 50 per cent. on any individual discretionary bonus above £25,000. This will be paid by the bank, not the bank employee, and anti-avoidance measures will be introduced with immediate effect. High-paid bank staff will, of course, also have to pay, as usual, income tax at their top rate on any bonus they receive. On a cautious assumption, which includes our expectation that some banks will rein back on bonuses, this levy is expected to yield just over £500 million. That additional money will be used to pay for the extra measures that I have already announced, such as help for the young and older unemployed to get back into work.
Under the existing rules, the highest earners benefit disproportionately from tax relief on pensions. At present, a quarter of all the money spent on pensions tax relief goes to the top 1.5 per cent. of earners. To make this fairer, I announced in the Budget that we would reduce pension tax relief for people with incomes of over £150,000. I want to do that as fairly as possible, and to treat individuals the same regardless of whether they receive their pay as current salary or as a future pension benefit, and prevent avoidance, so I have decided to include employer pension contributions in the definition of income for this tax measure. To provide certainty, I will introduce a floor so that, irrespective of the size of employer pension contributions, no one with an income below £130,000 will be affected.
I believe it is right that parents should be able to pass on savings to their children. Before the financial crisis rocked the global economy, I enabled married couples to combine their inheritance tax allowances, and this will continue. I also said then that allowances would rise to reflect inflation and the expected continued increase in house prices, but I do not believe that raising this allowance can possibly be a priority given the impact of the downturn on the country’s finances, so I have decided to freeze the individual allowance at £325,000 for the next year. That will still mean that fewer than 3 per cent. of estates will pay inheritance tax.
I have decided against any further changes to income tax rates or thresholds next year, except for some changes in what can be tax-deductible. Because RPI inflation was negative in September, this will provide a real-terms benefit relative to inflation, but in April 2012 I have decided to freeze the point at which people start to pay income tax at 40 per cent. for one year. No one with income below £43,000 will be affected by this change.
It is also fair that those who should pay tax do not escape their responsibilities. I am determined to tackle activities such as avoidance and evasion, which undermine tax receipts. Since the Budget, Her Majesty’s Revenue and Customs has asked for details of at least 100,000 offshore accounts held at over 300 financial institutions. This pre-Budget report sets out anti-avoidance and smaller tax measures to deliver additional revenues and protect £5 billion a year of existing revenues.
These are tough, but necessary, measures to increase tax, but I have done this in a fair way: those on modest incomes are protected; those on middle incomes will pay more, depending on their earnings; but the biggest burden will fall on those with the broadest shoulders. Today’s measures, combined with those from the Budget and last year’s pre-Budget report, mean that over half of the additional revenue raised will be paid by the top 2 per cent. of earners.
Fairness in tax is a crucial part of maintaining fiscal sustainability, but the majority of the reduction in borrowing will have to come from slower growth in overall public spending. We have already set out our spending plans until April 2011, but I believe it would be dangerous, as the head of the International Monetary Fund said only a couple of weeks ago, to reduce spending too soon, so to continue to support jobs and the economy, we have decided to stick to our spending plans for next year. In 2010-11, total public spending will increase by £31 billion, a growth rate of 2.2 per cent. in real terms, providing continuing strong support for the wider economy until the recovery is firmly established. Once recovery is secured, we must, as I made clear at the time of the Budget, reduce the rate of growth in public spending, and meet our ambitious target to halve the deficit.
We take these decisions from a position of strength. In 1997, our public services were in crisis. Chronic under-investment in health and education had taken its toll: hospitals with too few nurses and doctors to meet the needs of patients; schools with too few teachers, textbooks and computers. The country had failed, too, to invest in transport and national infrastructure, all of which was damaging to our economy and prosperity. That was the record we inherited and that was the record we had to deal with. We have worked to turn it around, through a combination of strong investment and far-reaching reform.
So, although the period ahead is going to be challenging, our public services are in a better state they have been for decades. However, we have to be realistic: the spending environment will be tough over the next few years. For as long as extraordinary uncertainties remain in the world economy, this is not a time for a spending review. We have already set out clear and firm departmental budgets for the next financial year, but to try to fix each Department’s budget now for the next five years is neither necessary nor sensible. We can, however, set out a clear direction, based on our economic priorities and our values as a Government.
We are clear that, following the investment made over the past decade, current spending growth can be set lower than in the past and fall to an average of 0.8 per cent. a year between 2011-12 and 2014-15. That will mean cuts to some budgets, as programmes come to an end or resources are switched, and it will mean that some programmes will need to be stopped altogether. We believe that if Departments can find further savings and cuts within their existing budgets, as many are already announcing, that will release resources so that they can continue to provide services. Already individual Departments have made great strides in finding savings—£10 billion in the NHS, £800 million in education and more than £400 million in the police—but even in this much tighter financial environment we are determined to protect front-line services and sustain the improvements that have been delivered over the past decade. The pre-Budget report sets out our plan to do that while halving the deficit.
First, we must make sure that we get maximum value for every pound we spend. Between 2005 and 2008, we delivered £26.5 billion of annual efficiency savings, and between 2008 and 2011 we are delivering further efficiencies worth more than 3 per cent. of total departmental spending per year. This week, we announced plans to deliver another round of savings, amounting to £12 billion a year by 2013-14. We will abolish quangos, cut consultancy and marketing costs, improve procurement and streamline back-office functions. We will also sell those assets that can be managed better by the private sector.
Secondly, we need to focus better on those areas that make most difference to people’s lives. We have begun a root-and-branch review to examine every area of Government spending to drive through efficiency, to cut waste and to cut lower priority budgets. Today, I am able to announce £5 billion of savings from spending programmes. This includes: phasing-in the roll-out of pension personal accounts; cutting back on the scope of major IT projects; reforming legal aid and outsourcing inefficient prisons; refocusing regeneration spending, so that it is spent where it is most needed; and cutting the cost of residential care by supporting older people to stay in their own homes. Those are necessary choices.
Thirdly, on public sector pay and pensions, public pensions need to be broadly in line with those offered in the private sector. So, by 2012 contributions by the state to public sector pensions for teachers, local government, the NHS and the civil service will be capped, saving about £1 billion a year. Public sector workers will make a greater contribution to the increasing value of pensions, with those earning more than £100,000 paying more. Public sector pay makes up about half of departmental spending. The senior civil service will take the lead with a cut in its pay bill of up to £100 million over three years, and any new Government appointment of someone on more than £150,000 and all bonuses of more than £50,000 will require explicit approval by the Treasury. I can announce that for the two years from 2011 we will ensure that all public sector pay settlements are capped at 1 per cent. [Interruption.]
As with previous pay decisions, we will recognise the special circumstances of the armed forces. There will be savings of £12 billion from greater efficiency, of £5 billion from scaling back or cutting lower priorities, and of more than £4.5 billion from reducing the cost of public sector pay and pensions. These are difficult choices, but they are essential if we are to stick to our plan to halve the deficit and protect the front line.
Our first priority today must be to ensure that our armed forces have all the resources they need. The whole House, especially this week, will want to join me in praising the dedication and valour of our troops, especially those engaged in the conflict in Afghanistan. They deserve all our support and we must match that support with resources. For the next year, I can announce that a further £2.5 billion will be set aside for military operations in Afghanistan. At the same time, we will continue to improve the effectiveness of core defence spending, reducing the civilian work force and restructuring the Department. I also want to do more to help those who have served in combat zones and are retiring from the forces, so I can announce that £5 million will be allocated from the strategic investment fund to help ex-service personnel who want to set up their own businesses.
In 2005, we led the way towards abolishing the debts of the poorest countries, and we have committed to doing more in the fight against global poverty. Spending on overseas aid remains a very small proportion of our overall budget, but it does make a huge difference to the lives of millions of people, as well as creating a fairer world, helping to build markets for our goods and countering extremism. I can confirm that we will honour our commitments, so spending on overseas aid will rise to 0.7 per cent of gross national income by 2013.
Our priority is to protect those services that are absolutely essential to the health of our society and the strength of our economy: the health service, which is crucial for our well-being; the police force, which is crucial for our safety; and our schools, which are crucial for our future. I am determined that we will protect improvements in those front-line services, on which millions of people rely. That cannot be done without a further difficult decision. I intend to increase all employer, employee and self-employed rates of national insurance by a further half pence from April 2011. But to protect those on modest incomes, I have also decided to raise the starting point from which national insurance is payable, and no-one earning less than £20,000 will pay more contributions as a result. This will raise £3 billion a year from 2011-12.
As a result, I am today able to offer guaranteed minimum real-terms increases in front-line NHS and schools spending for two years from 2011, as well as providing sufficient funding to maintain the number of police and community support officers. That means that I can confirm not just that we will increase spending as planned next year on hospitals, schools and policing, but we can pledge that spending on these crucial front-line services will continue to rise over and above inflation after 2010-11, so that we can meet the improved public service guarantees and entitlements that we have set out. There will of course be Barnett consequentials for Scotland, Wales and Northern Ireland.
I have one further announcement to make: because of my decisions today, I am able to extend free school meals to 500,000 primary school children of low-income working parents who previously would not have been eligible. Once that is fully rolled out, it will lift an additional 50,000 children out of relative poverty and will be a step towards our target of abolishing child poverty by 2020.
The decisions the Government have made have helped support businesses and families through the deepest global recession for more than 60 years. These are decisions that have been followed across the world but, of course, have been opposed by some here. The steps that I have announced today are aimed at securing recovery, reducing borrowing and, through targeted investment, providing a springboard for long-term growth. The choice facing the country is between securing recovery and wrecking it; between investment to build a fair society where all prosper or a divided society that favours the wealthy few; and between ambition driven by the values of fairness and opportunity or austerity driven by an outdated dogma. I commend this statement to the House.
Today, confronted with the biggest budget deficit in our peacetime history, the right hon. Gentleman faced a choice: would he take the tough spending decisions before the general election or would he completely duck them? We were promised a pre-Budget report and what we got was a pre-election report. The Government have today lost all the moral authority to govern. Instead, the full scale of the economic disaster that Labour has visited on this country is clear to us all: the biggest debt we have ever known; spending cut on almost everything; taxes up on anyone who earns more than £20,000 a year; Labour’s new tax on jobs; and higher interest rates to pay for the higher borrowing. Every family in the country will be forced to pay for years for this Prime Minister’s mistakes. At the end of their period in office, they have indeed adhered to the greatest of golden rules: “Never trust a Labour Government with your money again.”
Everything that the Government have told us on the economy collapses in the face of the truth. They told us that they would be prudent, and the figures that they have produced have shown us that Labour has quadrupled the national debt while in office. They told us that Britain was better prepared than other countries, and now our budget deficit is higher than that of any other comparable country anywhere else in the world. They specifically told us—this Prime Minister told us—that Britain would lead the world out of recession, and now the rest of the world leaves Britain behind as it recovers.
We are the only G20 economy in recession, and that Prime Minister used to stand at the Dispatch Box on occasions like this and say that he had rewritten the laws of economics, that he had abolished the trade cycle, and that he had abolished boom and bust. The numbers that the Chancellor has given us confirm that this Prime Minister inflicted on us the deepest and longest recession in our modern history. No one will ever believe a word they say on the economy again.
Faced with this catastrophe, the Chancellor had three tasks today: first, to restore confidence in the Treasury forecasts; secondly, to produce at last—we hoped—a credible plan to deal with Britain’s record debts; and finally, to show the world that Britain is open for business again and can create jobs. He failed on all three accounts.
First, the forecasts. Every single time this Chancellor has come to this House, he has got his forecasts wrong, and today was no different. He confirmed that the GDP figures for this year show a contraction of 4.75 per cent. That is not only a full percentage point worse than the figure in the Budget—it is almost four times worse than when he delivered the last pre-Budget report. I noticed in his speech a little sleight of hand. He gave the annual contraction figure for the UK and the total contraction figure for every other country. The total contraction figure for the UK is 5.9 per cent., the worst since the 1930s.
It would be difficult to imagine that this year’s forecast for borrowing would be an underestimate, but so it turned out to be. I am told that they are having a row in Downing street: the Prime Minister wants to get his forecasts wrong on purpose, while the Chancellor prefers to get them wrong by accident. Either way, Britain is borrowing £178 billion this year and £176 billion next year. This is a figure that he did not give: £789 billion of additional borrowing over the next six years, and that is based on some pretty heroic growth assumptions in future years. Of course, a sneaky fiddling of the definition of the structural deficit was buried in the report. It all amounts to the fact that he is doubling the national debt from where it is today to £1.4 trillion—£23,000 for every child born today.
Without a hint of irony or contrition, the Chancellor publishes today what is farcically called a Fiscal Responsibility Bill—as if we needed a law to tell us that their irresponsibility has been criminal. This is what one of the Prime Minister’s own appointments to the Monetary Policy Committee has just said about their law:
“Fiscal responsibility acts are instruments of the fiscally irresponsible to con the public.”
The Chancellor should have introduced our plan for a proper, independent office for budget responsibility that will keep the Chancellor honest and ensure that never again can a Government fail to fix the roof when the sun is shining.
So, the Chancellor has not restored confidence in Treasury forecasts. That was his first task. His second was to set out a credible plan to deal with the debt crisis. Yesterday, as he well knows, another credit rating agency warned that that the UK was at risk of a downgrade. Even this morning, the deputy leader of the Labour party was admitting on television that markets are getting more nervous than they were about Government borrowing. The Governor of the Bank of England says that we must
“eliminate a large part of the structural deficit”
over the lifetime of this Parliament. I agree with the man in charge of monetary policy in this country. Yet today the Chancellor is sticking with the same plan that he set out in the Budget—the plan that the Bank of England, the CBI and the OECD have all told him is not credible. The whole object of policy going forward as we come into recovery is to keep interest rates as low as possible for as long as possible. That is not what his recipe provides today.
As the debts have become bigger, so the Government’s response gets smaller. What the Chancellor had to say to the House today on spending is just not credible. He promises more efficiency savings, but coming from the people who have just admitted that they wasted £4 billion on an NHS computer system, that rings a little hollow. As for the waste advisers who wrote those reports that the Chancellor is publishing today, they have lived up to their names by deciding that they will not waste any more time with him: they are working with us.
Then there are the proposals on bankers. We warned the Chancellor two months ago that he should try to stop big cash bonuses being paid out. I said in my conference speech that we should look at the tax system. Let us be clear: the Government are going to pay out a load of bankers’ bonuses that they should not have been paying out in the first place, then put a one-year windfall tax on them and declare it a triumph. The real test of this new tax will be whether it curbs bank bonuses instead of curbing bank lending. Let us hope that it is more effective than those binding lending agreements that we once heard so much about at that Dispatch Box.
The Government say that they will use the money on youth unemployment, because instead of abolishing it, as promised, the Prime Minister has led youth unemployment to a record high. We need a real, lasting plan to get Britain working and to deal not just with the million or more people who have lost their job under Labour, but the millions more who have never had a job under Labour.
On spending, the Chancellor is prepared to tell us what he will spend money on, but he stays almost totally silent on where the real axe will fall. He is achieving the previously impossible trick of ring-fencing a black hole. He said, with understatement, that this is not the time for a comprehensive spending review. This is from a Chancellor who said that that he was acting from a position of strength! Why is it not the time for a comprehensive spending review? The Government have all the figures and they have access to all the information that they need. They had spending reviews just before the 2001 election and just before the 2005 election. Now, suddenly, the spending review has to wait until after the 2010 election. That spending review is the massive missing piece of this pre-Budget report. They have given us lavish detail on the few things that they say that they are protecting, and almost nothing on the many things that they are planning to cut. They are not being honest with the British people about the real price of their incompetence. This has got nothing to do with protecting front-line services and everything to do with protecting themselves. What we see today is not a credible plan on the debt, and the Chancellor has failed his second task.
The Chancellor’s final task was to set out a real plan for growth. What does he propose? A higher tax on jobs. That is his answer to Britain’s unemployment problem—higher costs for struggling businesses and more money taken from families. That is yet another thing that we could have avoided if this Government had taken the hard decisions in the good years.
Let me just say this about some of the tax measures that the Chancellor has announced in the Budget, the last pre-Budget report and this pre-Budget report. The message to aspiring families from these tax changes is pretty clear: if you want to get on in life, if you want to own your own home, save for a pension or leave something for your children, then the Labour party is not for you anymore. All that work Labour did to drag the party on to the centre ground of British politics, as well as all the effort it made to persuade the country that it was for enterprise and aspiration, is gone. Instead, it has erected a sign over the country that says, “Closed to enterprise and wealth creation,” all for the sake of narrow political dividing lines. Instead of telling the country that we are all in this together, Labour now pretends that it can solve our problems by setting one part of the country against another. At the next election, it will be the few who support this approach and the many who reject it.
Instead of a plan for growth and jobs, the Chancellor’s plan means higher taxes, higher taxes on jobs, higher interest rates and turning his back on aspiration and enterprise. His third and final task—failed. There is no confidence, no credible plan, no growth and aspiration is being abandoned.
Why is it that every Labour Government have taken this country to the brink of bankruptcy? Each one in turn seems to ignore the most basic rule of finance: if you keep on spending more than you earn, sooner or later you run out of money. How difficult can it be for them to remember this simple point? The country now faces a choice. There is Labour’s route, which has been set out for us today: higher debts leading to higher taxes and higher interest rates; the recovery choked off; and Britain reduced again to being the sick man of Europe. Or people can choose our route, which is to face up to the problem; set out to eliminate a large part of the deficit in the Parliament for which we are accountable; expect everyone to share the burden, but protect the lowest paid; keep interest rates lower for longer; send the message out loud and clear that Britain is open for business; and transform the economy that Labour built on debt into one in which we save and invest for our future. That is not going to happen under this Government.
The Prime Minister—[Interruption.]
The Prime Minister always called himself the nation’s bank manager, and so he has been. He bet the nation’s finances on a never-ending property bubble and a City bonanza, and now, like every other failed master of the universe, he is coming to the taxpayer and asking to be bailed out, but he should remember this: most bail-outs start with a change at the top.
I have listened to the shadow Chancellor speak for the past 10 minutes or so, and there is one word that he did not mention—one word that he finds quite impossible to let pass his lips: “growth”. Not once did he mention the possibility of achieving growth. He did not mention it in his conference speech, and he did not mention it today, because it is the one thing that the Conservative party seems quite incapable of realising—that we must secure long-term sustainable growth in this country. The alternative that he offered—[Interruption.]
Growth is absolutely essential for our long-term future. The hon. Gentleman also barely mentioned unemployment and the need to take measures to get unemployment down. He did not say whether or not he supports the measures that I have put before the House today to get people back into jobs and to make sure that people do not find that a short spell on benefit ends up being a lifetime in long-term unemployment. He did not say where he stands on our priorities of ensuring that we protect the front-line NHS, ensuring that we have got schools for the future and making sure that we have got enough policemen on the beat. He says absolutely nothing about that.
Fundamentally, yes there is a big issue before us. Because of this downturn, we, like every other country in the world, face much higher borrowing than we would like. It has resulted in debt increases, but the question is this: at what rate and how quickly do we reduce that borrowing and debt, and how do we do that? Perhaps the hon. Gentleman should have a word with the Leader of the Opposition, who seems to be talking to himself just now. On Sunday, when the Leader of the Opposition was speaking to the BBC and was asked about our proposals to reduce the debt, he said:
“I don’t think it is fast enough.”
On Tuesday—another day, another audience—when he was asked about reducing deficit, he replied:
“Of course, there is a danger, if you do too much too early, you would choke off some demand.”
That is precisely the argument between the two political parties. Certainly on Tuesday, the Leader of the Opposition seemed to agree with our point of view that, yes we have to reduce the deficit, but we have to do it in a way that is orderly and does not damage demand.
Of course, that comes to the heart of the problem that the Conservatives have. They cannot tell us what action they would take. Not once in the 10 minutes that he spoke did the shadow Chancellor actually say what he would do either in protecting services or in reducing debt. Indeed, all we do know is that he is committed to taking action more quickly. He gave the impression just now that he wanted to cut the deficit, perhaps in the next Parliament, but if we do that we will end up having to cut something like £25 billion more. If that is his policy, he will have to spell out where he is going to take that money from. Who would feel the brunt if that money were taken away?
The shadow Chancellor went on to criticise us for having a lack of aspiration. Both of us expect to be judged—the British public will choose—but I have to tell him that I represent a constituency in which people are aspirational. They want to get on and they want to do the best they can for themselves and their families, but they honestly do not see that the first priority in that is giving a tax break to a tiny minority of the top estates in this country. I really think it is time that he rethought his priorities. We believe that public services help many people in this country. People accept that they have to be paid for and they accept the value of hospitals and of the schools that their children go to, but they also want to make sure that as we come through this crisis, just as we had to take difficult decisions with the banks over a year ago, we take difficult decisions now but in a way that reduces the deficit but does not damage our economy at the same time. Yes, all of us need to be fully engaged in that, and all of us are. What we have heard from the shadow Chancellor today is long on politics and very short on good ideas.
I thank the Chancellor for sending me his statement, even though it was missing 43 paragraphs.
What is clear from the statement is that the economic position of the country is still very grave. We know now that we are 5 per cent. poorer than we were a year ago, and that the Government estimates of borrowing for this year and next year are higher than even they had forecast. What we needed was a national economic plan, but what we have got is an election manifesto.
There have been genuinely great Labour Chancellors in the past—Stafford Cripps and Roy Jenkins, among others—but they would not have been obsessed, as the Chancellor is today, with drawing tactical dividing lines. There are small things that one welcomes, such as initiatives on jobs for young people, on technology and on environmental policies. This is a good Budget for bingo and boilers; I think that is what it boils down to.
The underlying problem, however, is that for the past decade or more, the British Government have been over-dependent for their revenues on the fickle fortunes of the banking industry. We have had an economy that has been built on sand—on the assumption that property prices rise for ever, and on consumer borrowing—and the economy is now being rebuilt on sand, because the only signs of real recovery that we have are rising house prices and booming bank profits at a time when industry is continuing to decline.
Let me speak specifically about the banks. The Chancellor has clearly been provoked into action by the extraordinarily stupid and arrogant behaviour of the RBS board. What he has come up with, to the extent that it is intelligible, is an extraordinarily complex mechanism. Will he explain precisely how he will stop the banks converting their bonuses into basic salary? He talks about avoidance measures, but how is he going to stop that? Will he give us a worked example of what it means in reality?
Let us take as an example Mr. Bob Diamond of Barclays Capital, who has just walked away with £27 million on the back of a taxpayer guarantee. How would that be affected by the Government’s proposal? Surely it makes more sense, as I think the Prime Minister entertained when he went to the G20 summit, not to try to tax bankers separately from other high earners, but to have a levy on bank profits because the banks depend on a taxpayer guarantee. Until they can be broken up and can stand on their own two feet, they have to pay for the insurance that the taxpayer provides.
The heart of the Chancellor’s statement was about the borrowing requirement and the long-term problem of the structural deficit. What we needed was a clear, long-term way of dealing with this problem. What we had, to the extent to which we can understand the early statement that he made, was that there is an increase in tax—approximately £6 billion to £7 billion a year—much of which will be in the form of national insurance. Let us be clear about what will now happen. Any worker earning more than £7,000 a year will pay 32 per cent. marginal income tax and 12 per cent. national insurance contributions. All the money raised in additional tax will go to public spending, and none will be used to pay down the borrowing requirement and the deficit. That is a complete distortion of the priorities that the Government should surely have.
In respect of timing, it is obviously right that we heed the advice of the Governor of the Bank of England and others that, if the economy is continuing to stagnate, it makes no sense to embark on rapid cuts in public expenditure and reducing the deficit. That is the problem that the Conservatives have got themselves into, but it is also right that, if there is rapid growth, the Government must get on with dealing with the deficit. What the Government have assumed today is that there will be high rates of economic growth—3.5 per cent. in 2011—but what is the basis for that assumption?
It is a little like the old story of the economist who is given a tin of food to eat and says, “Let’s assume the existence of a tin opener.” The Government are saying, “Let’s assume economic growth.” Why? Have they made any estimate of the very real risk that the economy will revert to a double-dip recession or continue to stagnate? What is the risk of those things happening—is it one in 10, one in five, or one in two? Surely we cannot operate on the basis of a single-line forecast that is based entirely on optimism and very little else.
To the extent that we can understand what the Government are doing about cutting public spending growth, it comes down to two items. Perhaps the Chancellor will confirm that. One of the items involves hitting low-paid workers by cutting the proposal for personal allowances, which I understand has been postponed or deferred. The other is the approach adopted to public sector pay. On the assumption that the Government have made, a 1 per cent. increase for a low-paid manual worker is a real cut. Of course, it is worth 10 times as much for a permanent secretary on £150,000 a year as it is to a worker on £15,000 a year. If there is to be restraint—and we have argued for it—surely it should be a flat sum across the board. We have argued that it should be £8 a week for everyone. That is the heart of the issue of fairness, which the Chancellor claimed was at the heart of his statement.
Of course it is right that we should be concerned with fairness in the tax system and in public spending priorities. The hon. Member for Tatton (Mr. Osborne) keeps saying that we are all in this together, but that is simply not right: we are not all in this together, as some people have done much better than others.
The Government’s claims to fairness are absolutely bogus. The Chancellor’s big, totemic step of the last year was to introduce a 50 per cent. tax rate, but he has delivered a gift-wrapped invitation to tax avoidance by keeping capital gains tax at 18 per cent. He had an opportunity today to deal with that, but he has done absolutely nothing about it. Unless there is fairness, the public will not accept the fact that, for the next five years or longer, there is going to be a real hard slog for the economy. The Chancellor has not set out the way forward that we need.
I disagree with the hon. Gentleman. We have set out a plan to reduce the country’s deficit over a four-year period, and I believe that that will be done in a sensible way that will not damage public services or the fabric of the economy. Yes, the settlement will be tighter and it will be difficult, but I am surprised that the hon. Gentleman did not set out some of his proposals in relation to universities, for example.
I think that choices will have to be made, but I believe that people will recognise that, with public spending having grown over the last 10 years, we can proceed with a much tighter settlement than we have had in the past. However, as I said earlier, I believe that we can protect front-line services at the same time.
I listened to what the hon. Gentleman had to say about tax. He did not say what he would do, but that is one of the luxuries of being on his Benches. I think that using national insurance is a fair approach, and I said I would take steps to make sure that people earning under £20,000 would not be affected.
The hon. Gentleman asked about growth. I have set out my forecasts, which are not dissimilar to those of the Bank of England. Indeed, I remember that after the last Budget he and many others criticised my forecast that the economy would grow by between 1 and 1.5 per cent. next year, whereas the consensus among most commentators now is that that is broadly right.
The hon. Gentleman asked about the financial services industry. Yes, it has been a major part of our economy. I am not sure where he stands on these things nowadays, but I believe that it will remain an important part of the economy. It employs 1 million people in this country and, properly supervised and regulated, it is important. However, I think—and I think the hon. Gentleman thinks so too—that people responsible for banks should bear it in mind that they have had a lot of public support, directly or indirectly, and that their priority should be to rebuild the banks’ capital. He asked how the system would work. He seemed to hint that he would have imposed a windfall tax on the banks. I think that would be a mistake, because it would amount to telling the banks to build up their capital position while at one and the same time taking the money away from them. Some of the banks that might be affected by such an approach are those that, arguably, did a little bit less to contribute to some of the problems in the first place.
The way that the system will work is quite simple—there will be a levy of 50 per cent. on bonuses of more than £25,000, and there will be anti-avoidance measures. The hon. Gentleman asked what will happen if people get the money paid in income, and the answer is relatively simple—they will pay income tax on it. That is how the system operates and, unless he is saying that there should be an incomes policy for all bankers, which would be difficult to operate, I disagree with him.
The hon. Gentleman said that I was searching for tactical dividing lines; I have rarely been accused of doing that. I think that the divisions between us and the Conservatives, and between us and the Liberal party, are perfectly there to be seen. We do not have to go looking for them.
It is right for the Government to use this pre-Budget report to maintain investment in the economy. The private sector is on its knees at the moment because of the banking catastrophe that we are experiencing. It is only the Government, through the help that they are giving to business and individuals, who are keeping the economy going.
However, given the need in the future to cut the fiscal deficit, increase capital liquidity requirements for financial institutions, unwind the £200 billion of quantitative easing and eventually to move interest rates away from zero, will the Chancellor consider further developing a macro-economic framework to deal with those issues?
My right hon. Friend is absolutely right. The priority is to deal with the aftermath of this downturn and I set out proposals for that. I will continue to take every step possible to ensure that we get the deficit down. It is absolutely a prerequisite for making sure that we have sustainable long-term growth in the future. It is something that must remain a priority for the Chancellor at all times.
Order. Twenty-two hon. and right hon. Members are seeking to catch my eye. As usual, I should like to accommodate everybody, and therefore I reiterate my usual appeal and exhortation that each hon. Member ask a single brief supplementary question, and of course that the Chancellor of the Exchequer provide an economical reply.
There has been no growth in the last year for perfectly obvious reasons. Because of the crisis in the banking sector that has affected this and every other country in the world, there has been a very severe downturn. I would have thought that that was very obvious.
Politics is clearly the language of priorities, and I am delighted that my right hon. Friend has set out this Labour Government’s priorities of supporting young people into jobs and apprenticeships. That stands in stark contrast to priorities of the Conservatives who have chosen to benefit the 3,000 wealthiest estates in the country.
Will my right hon. Friend ensure that his measures to support apprenticeships are directed to communities like mine in Salford where, in the last Tory recession, 75 per cent. of young people were without jobs and hope? We need these measures to build on our success.
The previous Gershon efficiency savings were found, after independent audit by the National Audit Office, to be largely unproven. Given that, it is difficult to believe that these new efficiency gains will be backed by evidence. To prove me wrong, will the Chancellor pass all his assumptions and proposals on efficiency savings to the NAO for independent audit?
I do not accept the general premise underlying the hon. Gentleman’s question that efficiencies cannot be made. For example, we managed to reduce the amount of money that we were paying to drug companies from the NHS. I remember from my time at the Department for Work and Pensions that we reduced the number of middle management employees to ensure that the then Benefits Agency, which formed part of Jobcentre Plus, was more efficient. So I simply do not accept the premise that underlies his question.
Does my right hon. Friend really believe that a one-off, short-term bonus tax is sufficient to achieve his aim of permanently changing City culture? How does he justify the prospect of cutting public services and still not imposing a windfall tax on banks, when those bank profits have been fortuitously inflated by quantitative easing, by the offsetting of £80 billion of past losses against tax, by the elimination of rivals in the financial crash and by a vastly expanded market in Government bond sales?
My right hon. Friend should bear it in mind that if—when—banks return to profitability, which must be one of the objectives in the longer term, they pay corporation tax on those revenues. On tax and bonuses, I want to try to get banks to think long and hard about paying out large sums when, frankly, they ought to be building up their strength. I have said often enough in the House that I am not against the payment of bonuses in themselves—they can be a good way to reward and incentivise people—but if banks are going to pay those very high bonuses, it is right that the taxpayer should see some benefit from that.
I said in my statement that, yes, national insurance will go up, and that is necessary because we want to ensure the services that the hon. Gentleman’s constituents and mine receive. If they are unfortunate enough to go to hospital or they go to see their doctors or schools, they recognise that they get a benefit from that. I certainly do not think that they want to go back to the days of the past, when a lot of those services were very seriously run down.
I welcome the statement, particularly for the wealth-creating sectors and manufacturing up north—in 1997, we inherited industrial deserts, particularly in areas such as South Yorkshire—and the investment has been made by Rolls-Royce in the Advanced Manufacturing Park. May I prevail on the Chancellor to consider the short-termism of the marketplace? Indeed, I think that everyone appreciates that the statement today tries to tackle some of the problems, but long-term investment in wealth creation and our manufacturing is not four or five years, but five, 10 and 15 years. I hope that that is borne in mind and that the Treasury and the shareholding Executive will get that change of culture.
My right hon. Friend represents a part of the country that was at the wrong end of the 1980s recession. On many visits to his part of the country, I have found it impressive to see how former coke works and coal mining areas have been completely transformed and, on the same sites, high-tech industries and cutting-edge developments in advanced engineering employing a lot of people. He is absolutely right to say that we need to encourage that not just for the next five or 10 years, but for decades after that.
The Chancellor applauded the flexibility of working tax credits, but no additional support has been offered to two of my constituents who work in a factory and whose hours have been reduced to a three-day week since July. They are not entitled to working tax credits, redundancy pay or jobseeker’s allowance. Was it not an omission not to include support for them in the pre-Budget report?
We have tried over a number of years to improve the help that we give to people who lose their jobs or go on to short-term working. Yes, we are always looking to see how we can improve that, but it is partly constrained by what we can do. The hon. Member for Twickenham (Dr. Cable), who speaks for the Liberals from the Front Bench, rather gave the impression that he wants the Government to spend less rather than more, but the hon. Lady is absolutely right to say that we need to ensure that we help people to stay in work.
May I compliment the Chancellor of the Exchequer on how he has acquitted himself not only today but for the whole period that he has been Chancellor? It has served the public interest well. Given that the Bank of England will shortly cease to print money to buy Government debt and that the Government will have to go into the real world to raise that money, what will be the impact over the coming year on long-term interest rates, given what he has announced on public expenditure levels for the same period?
First, I am grateful to my right hon. Friend. On quantitative easing, the Monetary Policy Committee will have to reach a decision on when it stops that work and then on how it unwinds what it is doing. It is very conscious of the fact that it needs to do that in an orderly way that complements what the Government are doing. Indeed, I think that I made it clear when I announced the scheme that there will be some discussion when it is wound down to ensure that that is done in the right way.
Yes, but the OECD is not arguing for going far faster and therefore damaging jobs and the fabric of the economy. I can assure the hon. Gentleman that—whether it is the OECD, or the International Monetary Fund of which 186 countries are members—none of them support the sort of approach that the Conservatives are advocating.
I thank the Chancellor for listening to those of us who were pressing for an extension to the free school meals programme, because it is an important measure in helping to reduce child poverty, but does he agree that it is quite wrong for the Liberal Democrats to lecture us on reducing child poverty when the first thing that Hull, which is a Liberal Democrat-controlled council, did was to withdraw its free school meals programme?
I fully recognise the constraints placed on the Chancellor in balancing and restoring public finances, while not damaging economic growth. One concern, however, for devolved Administrations is to have some certainty about Government spending plans for 2011 and beyond. When will he be able to give that assurance? When looking at those plans, will he bear in mind the House of Lords report that has indicated that Wales and Northern Ireland have greater needs than other parts of the United Kingdom?
I hope that, one way or another, the Government have recognised Northern Ireland’s special needs, not just in the regular spending rounds but, as the hon. Gentleman well knows, in other discussions as well. As I have said, the Barnett formula will apply to the announcements that I have made today where appropriate in the usual way. All the devolved Administrations know the spending that they are getting for the rest of the spending review, but spending reviews have been fixed for three years in the past to give some certainty. I think that people will accept just now that, given what is happening, it is not possible to set out definitely what spending might be in three or five years’ time, but they have that certainty for the next year, which will help them.
I note that the Chancellor’s statement included the welcome reference to the fact that anyone who moves off benefits into work will not be worse off. Will he please explain how that will affect people who live in expensive private rented accommodation and receive housing benefit at the moment, but lose all or most of their housing benefit on going into work and thus end up considerably worse off and, in extreme cases, can even be rendered homeless as a result?
The Chancellor has announced increased funding for current operations, but after the increased costs of the redundancy of kit and the uplift in troops announced by the Prime Minister earlier this month, what will be left for the repair and replacement of our inadequate helicopter fleet, which is putting at risk the lives of our servicemen?
First, as I said in the statement, we are making available further sums to the Ministry of Defence. The Secretary of State for Defence will in due course set out how the MOD is reorganising what it does to ensure that it can provide support, particularly on the front line. I have said often enough before that it is important if we send troops into Afghanistan that they are properly equipped and supported. That means some reprioritisation in the MOD. I think that the hon. Gentleman would accept that, and my right hon. Friend the Secretary of State will be able to say something about it.
Does the Chancellor agree with the leader of the Conservative party that the problem is big Government and that there was too much regulation, or does the Chancellor agree with me that Government have a big role to play in protecting people and that the banking problems came about from too little regulation?
Despite being posed such a difficult question, I am probably more on my hon. Friend’s side than the Leader of the Opposition’s. The problem was partly caused by regulation that was not tough enough, but partly caused also by the fact that too many at the top of some banks clearly did not know what they were doing. There was a failure of corporate governance as well as a failure in regulation. That situation has undoubtedly had consequences, however, and every Government in the world have had to deal with those consequences. The question before us now is, how do we manage to deal with that situation in an orderly way?
The Chancellor was incorrect in saying that when the banks return to profit, they will pay corporation tax, because there will be £80 billion of losses to set off first. Does he not think that the citizens of the United Kingdom will be amazed by the fact that banks will be making billions of pounds in profit and not paying a single penny of corporation tax?
I know that our right hon. Friend the Secretary of State for Children, Schools and Families is very concerned about that issue, as should we all be. It is very important that children who are at risk are properly looked after, and I very much hope that we can continue to do that.
Even if the deficit falls as planned, based on pretty heroic growth forecasts, the national debt will continue to rise, on the Treasury calculation, to £1.7 trillion, which is 91 per cent. of gross domestic product. That is in the Green Book. The Chancellor is right to say that we need a budget for growth, but this was not a budget for growth. This pre-Budget statement specifically confirmed the cut announced earlier this year in both the resource and the capital departmental expenditure limit for Scotland. Why did the Chancellor not take the advice of even his own colleagues in Scotland and have a further year’s reprofiling of capital expenditure to protect the recovery, instead of ensuring that the cuts come now and weaken Scotland’s ability to recover?
I say this to the hon. Gentleman: yes, we did bring capital spending forward, and the situation in Scotland would have been infinitely better had the Scottish National party not turned its face against continuing to work with the private sector. The SNP had a vanity project to try to replace the private finance initiative, and as a result, as I know from my constituency and others, the only things being built under the schools building programme, for example, are schools that the previous Labour Administration authorised. The nationalists should have a long hard look at what they have done in Scotland over the past two years, because in just about every single case where they made a promise, they have failed to deliver it, partly because of dogma and partly because they have simply over-promised and overreached. It is no wonder that people are beginning to see through what the nationalists actually do.
I warmly welcome the Chancellor’s announcement of the innovation investment fund for research into the development of the green economy, which is led significantly by Teesside’s chemical process industry. Will One NorthEast administer that fund, giving local companies an easy opportunity to get advice and access to it? If not, which Department will administer the fund and from what date?
I understand that the Secretary of State for Business, Innovation and Skills will make the situation clear very shortly. The regional development agency, One NorthEast, will of course be closely involved in everything that we do in relation to Teesside. It is important that Jobcentre Plus, the regional development agency and other public bodies all work very closely together, but I shall ensure that my hon. Friend is given that information by the Secretary of State.
I congratulate the Chancellor on adopting the proposal that I included in an early-day motion on the boiler scrappage scheme and on also adopting an EDM proposal for an effective 75p rate on banker bonuses. However, if such a rate is to be effective, measures to stop avoidance by increasing salaries or rolling over pay to a following year will have to be in place. What proposals does he have to ensure that such avoidance cannot happen? If he cannot do that, he will be far better off sticking with the proposals made by my hon. Friend the Member for Twickenham (Dr. Cable).
I do not know whether the proposals from the hon. Member for Twickenham are to be found in an EDM, but it was not clear to me what his proposals actually were. Anti-avoidance measures will be introduced as part of the Finance Bill. On the other measures that the hon. Member for Teignbridge (Richard Younger-Ross) has proposed, I cannot claim to have read the EDMs, but I am glad that he supports the policies.
I am glad to hear that there is common ground on this issue, because, certainly in my first 10 years in this House, it was not accepted that we lost far more manufacturing than perhaps we should have in the early 1980s. I think that manufacturing in this country, despite the downturn and despite the difficulties, is well placed for the future. We have a lot of manufacturing of which we can be genuinely proud, and in the past 10 years, through our investment in science and our support for universities, we have seen a lot more projects come out of universities and develop for the future. Much of what I had to say this afternoon was about encouraging such growth in the future. The policy of the hon. Member for Tatton (Mr. Osborne) is not to reverse the situation at all, but, it seems, to make it worse.
In the month when the Holtham commission, which the Labour-led Administration in the National Assembly for Wales appointed, has reported that the people of Wales are losing out to the tune of £400 million a year as a result of the Barnett formula, why did not the Chancellor use this opportunity—perhaps the final opportunity for some time for a Labour Chancellor—to implement the proposal for a needs-based formula and finally deliver justice to the people of Wales and, as we heard from the hon. Member for East Antrim (Sammy Wilson), to Northern Ireland as well?
I believe that, certainly over the past 12 years, Wales has seen a significant increase in funding because of the increases in spending on health, education, science and research. Wales has benefited from that—tremendously so. If I have a disagreement with the nationalists, it is that I fail to understand what possible justification there can ever be for Welsh independence. I cannot see how on earth it could benefit that country.
The return to growth that is forecast in later years is predicated on consumers generating more GDP growth than they have in the past. The Chancellor suggests that 2 per cent. of GDP growth will be driven by private consumption, but between 2000 and 2007 only 1.75 per cent. of GDP growth was driven by consumer consumption. Does he think that wise, given that consumers are paying down their debt? Why does he think that he should rely on consumers backtracking, when they have worked out that they have a debt crisis even if the Government have not?
I think that many members of the public will be reducing the amount of debt that they carry, and that is a good thing. However, it is also true that people can at the same time maintain their spending, and some people increase their spending. Of course, as unemployment starts to fall and employment starts to grow, more people will be in work and more people will be able to spend their money on goods and services in this country.
As politicians are to blame, like bankers, perhaps the top 25 per cent. of our salaries should also be taxed at 90 per cent. However, the Chancellor mentioned in his speech a £550 million yield from the special tax levy, which is the equivalent of £1.1 billion in paid bonuses. Is he implying that the measure is a ban on bonuses? Otherwise, bankers will either redefine themselves as working for hedge funds or non-bank banks, or domicile themselves outside the UK to receive such bonuses.
The figure I mentioned is our estimate of what we will get after behavioural changes in terms of both payment of bonuses and, I suspect, people saying, “Okay, I will take my wage in salary.” As I said earlier, the problem is not bonuses in themselves; the problem is when we start paying excessive bonuses or rewarding people for doing things that they really should not do. That is where we get the problems.
Points of Order
On a point of order, Mr. Speaker. I know how keen you are for this House to hear news from the Government first. In the past, when a Budget statement has been made—this is, effectively, an autumn Budget—MPs have been sacked for leaking the information to the media first. Clearly, the BBC and Sky had important knowledge relating to this Budget, so will you look into this to see whether there has been a leak and what can be done about it?
It is not, of course, a Budget. I note, however, the very important point that the hon. Gentleman has raised. I know that there has been a considerable amount of speculation, but I would be reluctant to say more than that. I am happy to reflect on the matter. I know how assiduous the hon. Gentleman is in these important matters.
On a point of order, Mr. Speaker. I need to bring to the attention of the House a separate, very important and worrying matter. Enterprise Inns is Britain’s most notorious pubco. Its reputation is shown by its incredible litigiousness. It has tried to sue local media and national media, and has indeed threatened hon. Members of this House. I do not know if you are aware of this, but Enterprise Inns has sought by way of legal threat and intimidation to prevent the Business and Enterprise Committee from carrying out its scrutiny of the activities of the pub company—
Order. I have listened very carefully to what the hon. Gentleman has said, which is certainly a matter of the highest importance to him and to many others. However, I have to say to him at this stage that if he has a complaint about a breach of the privilege of the House, that is a matter about which, in the first instance, he should come to me, or it is open to him to write to me, but he should not in the first instance raise it on the Floor of the House. Those options are open to the hon. Gentleman. If he wishes to pursue the matter with me in one or other of the ways that I have suggested, I will be all agog to hear what he has to say.
Presentation and First Reading (Standing Order No. 57)
Mr. Chancellor of the Exchequer, supported by the Prime Minister, Ms Harriet Harman, Mr. Liam Byrne, Mr. Stephen Timms, Sarah McCarthy-Fry and Ian Pearson, presented a Bill to make provision for and in connection with the imposition of duties for securing sound public finances.
Bill read the First time; to be read a Second time tomorrow, and to be printed (Bill 13) with explanatory notes (Bill 25-EN).
Child Poverty Bill
[Relevant Document: The Twenty-eighth Report from the Joint Committee on Human Rights of Session 2008-09, Legislative Scrutiny: Child Poverty Bill, HC 1114.]
Consideration of Bill
New Clause 1
The relative low income after housing costs target
‘(1) The relative low income after housing costs target is that less than 10 per cent. of children who live in qualifying households live in households that fall within the relevant income group.
(2) For the purposes of this section, a household falls within the relevant income group, in relation to a financial year, if its equivalised net income for the financial year is less than 60 per cent. of median equivalised net household income after housing costs for the financial year.’.—(Steve Webb.)
Brought up, and read the First time.
With this it will be convenient to discuss the following: new clause 2—The reduction in the causes of poverty targets—
‘The Secretary of State shall make regulations setting out reduction in the causes of poverty targets.’.
New clause 3—2010 Target—
‘(1) The Secretary of State must, before the end of the period of three months beginning with the day on which the Act is passed, publish and lay before Parliament a report setting out an assessment of progress made towards meeting the 2010 target.
(2) The 2010 target is that in the financial year beginning with 1 April 2010, fewer than 1.7 million children live in households that fall within the relevant income group as defined by section 2(2).’.
Amendment 1, in clause 1, page 1, line 7, at end insert—
‘(b) the relative low income after housing costs target in section [The relative low income after housing costs target],’.
Amendment 23, page 1, line 10, at end insert—
‘(e) the reductions in the causes of poverty targets contained in regulations made by the Secretary of State under section [The reduction in the causes of poverty targets].’.
Amendment 33, in clause 6, page 3, line 9, at end insert—
‘(ba) the circumstances in which a child living in communal accommodation may be regarded as living in a qualifying household;’.
Amendment 2, page 3, line 15, after ‘costs’, insert
‘except when calculating household income for the purposes of section [The relative low income after housing costs target] (the relative low income after housing costs target)’.
Amendment 3, page 3, line 20, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 34, page 3, line 22, at end insert—
‘(4A) Before making regulations under subsections 1(a) and 1(ba), the Secretary of State must request the advice of the Commission as to what statistical surveys can reasonably be expected to be undertaken.’.
Amendment 4, in clause 8, page 4, line 30, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 24, page 4, line 34, at end insert—
‘(iii) describe the progress that the Secretary of State considers needs to be made in dealing with the causes of poverty in order to meet the targets in sections 2 to 5.’.
Amendment 5, page 4, line 43, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 6, in clause 9, page 5, line 14, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 7, in clause 10, page 6, line 3, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 8, page 6, line 15, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 9, page 6, line 25, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 10, in clause 11, page 7, line 13, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 11, page 7, line 26, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 12, page 7, line 37, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 13, in clause 13, page 8, line 29, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 14, in clause 14, page 9, line 14, at end insert—
‘(b) the percentage of children living in qualifying households in the United Kingdom in the target year who were living in households that fell within the relevant income group for the purposes of section [The relative low income after housing costs target] (Relative low income after housing costs target);’.
Amendment 15, page 9, line 32, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 16, page 9, line 34, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 17, in clause 16, page 10, line 12, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 18, in clause 24, page 14, line 38, after ‘or’, insert
‘section [The relative low income after housing costs target] (Relative low income after housing costs target) or’.
Amendment 19, in schedule 2, page 20, line 9, after ‘5’, insert
‘and section [The relative low income after housing costs target]’.
Amendment 20, page 21, line 23, at end insert—
‘(b) the percentage of children living in qualifying households in the United Kingdom in the renewed target year who were living in households that fell within the relevant income group for the purposes of section [The relative low income after housing costs target] (Relative low income after housing costs target);’.
A wry smile crosses our faces when it is announced that this Bill is the main business of the day, but in fact it is, in the sense that child poverty is a crucial issue. That view is certainly shared by all those who served on the Committee that considered the Bill.
New clause 1 arises from the discussions that we had in Committee about the most appropriate method of measuring poverty. Hon. Members will know that there are in the Bill four measures or targets relating to poverty, which combine various facets of income, material deprivation, persistence of poverty, and relative and absolute poverty. Clearly, it is welcome that the Bill does not settle on a single definition but recognises that poverty is multi-faceted and that one statistic does not do justice to the whole problem.
In Committee, we discussed the most appropriate treatment of housing costs. My hon. Friend the Member for Edinburgh, West (John Barrett) and I proposed that, for the purpose of income measures, we should measure income after the deduction of housing costs. One of the arguments that the Treasury Minister who responded to our proposal made against it was that replacing the before-housing-costs measure would cause a problem, because we would not have comparable statistics for use in international comparisons. In other words, if we got rid of the before-housing-costs measure and imposed an after-housing-costs measure, our statistics would not line up with those from other EU countries and the OECD.
The point of debates in Committee is to reflect on such issues and then to come back on Report with revised amendments, and that is what we have done in this case. Rather than suggest that we replace the before-housing-costs measure with an after-housing-costs measure, we now suggest in new clause 1 that we do not replace the four existing targets but add a fifth—income after housing costs. That definition will be familiar to the House. It relates to information that is published regularly in the “Households Below Average Income” statistics, so it requires no additional statistical work. The figures are already there, but they would be given the same force as the other four targets in the Bill.
I should say in passing that amendments 1 to 20 are consequential to the inclusion of new clause 1, so wherever the Bill lists the four targets, there would be a list of five. The wording of new clause 1 exactly mirrors the target relating to the before-housing-costs measure and would simply insert “after housing costs”. Another, slightly more involved, consequential change is that where the Bill says that certain things cannot be deducted, one of which is housing costs, it would have to state that that does not apply to the provisions of the new clause, under which housing costs would be deducted.
I have been reflecting on the arguments that the Government might use against making the change proposed in new clause 1. First, however, it is worth making the case for an after-housing-costs measure. We believe that there is added value in looking at people’s living standards after they have had to meet their housing costs, first and foremost because housing is a very large part of most people’s budget and a very big determinant of their living standards. To look at people’s standard of living without taking any account of whether they have high, low or next to no housing costs is to miss a very important part of the picture. Because it is such an important determinant of living standards, the absence from the Bill of an income measure that takes account of housing costs is a significant omission.
I strongly support the new clause and my hon. Friend’s arguments for it. Does he agree that the proposal is particularly salient in low-income areas such as my constituency, because many of my constituents cannot afford the basics after they have paid rent, for the simple reason that rents have not come down with the recession, whereas in many cases incomes have declined?
I am grateful to my hon. Friend for making that very important point. The Bill measures income, including housing benefits and so forth, but takes no account of the impact of housing costs coming out of that income. Many households are in poverty, and if one compares the statistics on income before housing costs and after housing costs, the poverty rate is much higher on the after-housing-costs measure. It is interesting that he should raise that question, because the general assumption is that taking account of housing costs is an urban issue that relates to big cities with high housing costs, but it is clearly relevant in areas such as his, where housing costs can also take a big part of people’s incomes.
Housing costs are a big part of household budgets, and people often have quite limited choices in that regard. It could be argued, “Well, if you have big housing costs it’s because you live in a big house. You have chosen a higher living standard, so why should we deduct your housing costs? That would be like deducting your caviar expenditure. You’ve chosen to spend more and you’re better off as a result, so we shouldn’t deduct it.” However, the reality, particularly for many people in rural areas or others with low means, is that housing is not one of those things that they shop around for, like wondering what tin of beans to buy this week. People in poverty often have very constrained choices about housing, so the level of housing expenditure is not discretionary in the way that spending on a luxury item would be. It really is a necessity, and people have very constrained choices and have to live with the consequences of making them. Assessing income after housing costs have been met would give us another facet. I am not suggesting that it is the only way of looking at things, but it is an additional way.
The second reason why this is important is that the regional impact of housing costs varies considerably, and if we look only at income before housing costs, we do not capture that. Obviously, on average, housing costs will be substantially higher in London and certain other housing hotspot areas. One of the perverse aspects of the measure of income before housing costs is that it includes housing benefit. If that is the only measure we have, we end up with the strange situation where somebody with a huge rent that is being met wholly or largely by housing benefit seems to be relatively well off because all that housing benefit is included in their income, but no account is taken of the fact that it has an equal and opposite cost on the other side of the equation. That bit would never get measured under the Bill as it stands.
Let us take as an example two pensioner households living next door to each other, both with identical pension income. One person has paid off their mortgage and owns their house outright, and the other is on housing benefit and getting their rent paid in full. On the before-housing-costs measure, the person with the housing benefit is much better off than their neighbour because they have housing benefit, but after housing costs they are both in the same position because they just have their pension once they have met their housing costs. Clearly, the measure we propose provides a fairer assessment of relative living standards than saying that the person on housing benefit is better off. Indeed, one could argue that the person who owns their house outright is better off, because they have an asset, from which one might impute an income. The before-housing-costs measure puts people the wrong way round in that sense, so it is not an ideal definition.
I mentioned in response to the intervention by my hon. Friend the Member for Montgomeryshire (Lembit Öpik) that poverty is greater after housing costs than before them. That is not a reason to put it in the figures, but it demonstrates that, once income including housing benefit is measured, housing costs are seen to take up a bigger proportion of the incomes of the poor than of the rich, which is an important facet of measuring people’s poverty.
We want reliable measures over time. My hon. Friend mentioned the problem of rent inflation. It has been the policy of successive Governments to deregulate social rents, so they have risen far faster than inflation for many years. If we only use the before-housing-costs measure, that makes people appear better off, because their housing benefit shoots up every time their rent does. That seems perverse in the extreme. If we measure income after housing costs, we will strip out the effect of rental inflation, which, as he said, has been very significant. There are strong reasons for having the additional target—it would give us a new lens through which to view child poverty without taking away from any of the existing measures, and it would catch an important facet of poverty.
As I said, I have thought about the responses that Ministers might give. One might be, “Well, we can’t add another target to the Bill. We’ve got four targets, we can’t have five.” If they were to say, “We’ve got four targets, we can’t have 99,” I would probably accept that, but we wish to add one additional target. Why do the Government have four, and not three or two? Each target needs to stand on its own feet as an important indicator of poverty and give us new insights that we would not get without it. That should be the test of each target in Bill. As I said in Committee, I believe that the absolute low income target could go. If we could have only four, I would take that one out, but there seems no substantive reason why five good targets that provide a more comprehensive measure of poverty are worse than four. It is a difference not of kind but of degree, and given the added value of the after-housing-costs measures, the additional target is justified.
When we discussed the matter in Committee, Ministers said, “Ah, yes, but housing is in the Bill. You don’t need to worry, it is already covered.” I apologise if I am running through the Minister’s bullet points for her. The Bill does contain provisions on housing, such as the material deprivation measure, which contains a few questions about housing, but nothing that will capture the cost of housing as a measure of income after housing costs would. The difference between the poverty figures before and after housing costs is, as it says on the tin, all to do with housing costs. They should not be buried as a sub-factor in part of a measure. That is the problem. Although the material deprivation measure has a few housing-related matters in it, there are also a lot of non-housing matters. It would be incredibly difficult to strip out details of housing costs and be clear about whether they, rather than some other facet of material deprivation, were driving the figures. It will be as plain as a pikestaff that housing costs are causing the problem if we use figures for income after rather than before them.
The Minister might say that housing costs are about housing quality. I hope that I addressed that point earlier. The two are not wholly uncorrelated, but they are not very well correlated. Higher housing costs are often the product of necessity and of the part of the country in which people live. Often, as many people who live in private rented accommodation would say, they are not a good proxy for the quality of housing. Deducting housing costs and having both before and after-housing-costs measures, so that one can assess their impact on the figures, therefore seems to us an entirely sensible approach.
Drawing those threads together, the reason why there is not just one target in the Bill is that child poverty is multi-faced. The Government have alighted on four targets, but they could have alighted on three or five. Once one has accepted that there should be more than one, having five rather than four does not seem to make a substantive difference, and there is huge added value in the after-housing-costs approach.
I shall briefly address other amendments and new clauses in this group. I am sure that the hon. Member for South-West Bedfordshire (Andrew Selous) will speak to new clause 2, which suggests that there should be
“reductions in the causes of poverty targets.”
I had to read that several times to work out where the pause came—I think it means reductions in the causes of poverty rather than in the targets. Clearly we should examine the causes of poverty, not just the outcomes. We discussed the matter in Committee, in the light of which the hon. Gentleman has obviously refined the new clause. I look forward to hearing him make the case for it. New clause 3 argues for an assessment of progress on the 2010 target. We supported the idea in Committee and anticipate doing so again.
Amendments 33 and 34 were prompted by the discussions of the Joint Committee on Human Rights, and I believe that my hon. Friend the Member for Oxford, West and Abingdon (Dr. Harris) may be planning to speak to them. They raise some important points about who counts as a child in a qualifying household and whether there are two tiers of children in the Bill. There are children who appear in the household surveys on which all the statistical data are based, and there are other children who come under the Bill’s more general wording about deprivation but who are not covered by the statistical targets.
I do not mean to be in any way critical of the Joint Committee, but in a sense it is easier to point out the problem than to work out what one should do about it. The Committee referred to Gypsy and Traveller children, some of whom are in the statistics because they live in households picked up in the surveys—for example, if they are on local authority or private Traveller sites. However, the most transient might not get picked up in the figures. It is incredibly difficult to think how one might meld them into the statistics, so although it is important that they are not treated as second-class children, I am not entirely sure how we can add them to a measure based on household equivalent income.
Likewise, we discussed in Committee children who are in care. Their well-being is clearly crucial, but trying to measure the living standard of a child living in an institution, for example, is very difficult. A child being cared for in a private household, perhaps having been fostered, will be picked up in the normal statistical surveys, but it is difficult to identify the living standards of a child living in an institution whose meals are provided, but for whom there is no parental or household income that one can measure. It is difficult to know whether their income is 50 or 70 per cent. of the median, or how they could be melded into a living standard measure based on households. I am sure that my hon. Friend would accept that. The real question is whether there should be another statistical target or whether we should give greater weight to the parts of the Bill that refer more broadly to socio-economic disadvantage. I look forward to hearing his suggestions.
New clause 1 need not divide us along party lines, and I welcome the support that the hon. Member for Regent's Park and Kensington, North (Ms Buck) has given it. She was a member of the Public Bill Committee and is much respected on these issues, and she rightly believes that housing is a crucial aspect of living standards. I can understand why she would take that view as a London MP. I hope that all parties will support the new clause. I hope for a conciliatory response from the Minister, because I know that my noble Friends in another place attach great importance to housing costs and they will want to return to the matter if we cannot get a better measure into the Bill—one that would improve it and help the Bill to achieve the goal that we all share of ensuring that child poverty is abolished.
In speaking to this group of amendments, I hope to achieve two objectives. The first is to praise the Government for their determination in setting the objective in the Bill. It is an audacious thing to do, and I do not want the debate to pass without that being said. However, I also wish to raise some questions about the balance of the Government’s approach, not in the Bill but up to this point in their campaign to abolish child poverty. I shall question whether they have been far too mechanical in seeing the solution as coming largely from benefits rather than through trying to balance people’s immediate need for more money with an examination of the long-term causes of poverty. I take new clause 2 to be about that matter.
First, on a point of congratulation, no Government in the post-war period, or indeed ever, have set the objective of abolishing poverty in the way that this Government have. At the time they set that objective, I was Minister with responsibility for welfare reform, but I learned about it from a television broadcast. That suggested something about the relationship between the two powers in Downing street and the rest of the Administration, but I was pleased to read more recently that No. 11 was not even consulted before the objective was set in the famous Toynbee Hall speech by the then Prime Minister.
The objective certainly marked this Government out from previous ones, but for most of our stewardship we have thought of poverty—naturally enough—in material terms, and of solutions in money terms. Therefore, the whole effort of the Government’s engineering at the bottom of the income scale has been to raise benefit levels disproportionately to other incomes, so that one took children and their families across a poverty line. As far as one’s first moral responsibility of helping the poor goes, who could fault the Government on that?
However, at least two things have happened since. First, the money has run out, even though the Chancellor was not too willing to admit that in his earlier statement, and perhaps he will not do so for another year. Secondly, the Government have engaged in the debate in a very responsible way, taking that crude initiative and broadening it out. One sees that in the Bill. It is about not only money, but what some of us in the House would refer to as causes.
Although I have not participated in a debate on the Bill before, I have read reports of them, and I have been struck by how they have been captured by Seebohm Rowntree. He was the chocolate manufacturer’s son—his father, Joseph Rowntree, made his name building up that great firm in York and elsewhere. His son made his name—
Order. I am reluctant to interrupt the right hon. Gentleman, but I am not quite sure how far he is going to stray from new clause 1. I am prepared to allow a certain amount of latitude, but he will bear in mind that we have new clauses and amendments before us.