The Chancellor of the Exchequer was asked—
High Frequency Share Trading
High frequency trading practices and the firms that use them are subject to existing regulation, which includes provisions covering behaviour and market conduct. The Financial Services Authority will take action if those provisions are breached, and it continues to assess the risks from changing market practices, in consultation with other securities regulators.
The Minister will be well aware that nanosecond ownership of shares fundamentally changes the relationship between the shareholder and the board of directors, and therefore corporate governance. However, small firms that are, in a sense, not suitable for high frequency share trading will find it more difficult to raise equity capital, and such trading is related to a lot of activity that takes place off the exchanges in so-called dark pools. Does he not think that this at least deserves some detailed scrutiny and review before we walk into another disaster involving instruments that we do not understand?
I agree with the hon. Lady that this needs detailed scrutiny and review. She might be aware of the paper that the Treasury issued on Friday entitled “Risk, reward and responsibility: the financial sector and society”, which discusses a number of these issues. I am not sure that I agree with her point about liquidity and small companies, because there is evidence that high frequency trading is an important way of ensuring that there is additional liquidity. She will be aware, however, that the Committee of European Securities Regulators will be giving advice to the Commission next year on the review of the markets in financial instruments directive, which will certainly include the issue of high frequency trading and the nature of the changing equity market.
May I ask my hon. Friend about speculative share trading in Cadbury? The City Minister, Lord Myners, said recently that he thought that it had become far too easy for British companies to be taken over. Does my hon. Friend agree, and if so, what can be done in Cadbury’s case?
I do not think that it would be appropriate to comment on individual cases. The UK has a long-established regime of open markets and a stock market, and all publicly listed companies are for sale; that is the nature of listing. I am confident that Cadbury is a well-run company. It is putting up a strong defence, and it will be up to shareholders to decide how they want to vote and support it.
A substantial amount of targeted support has been provided by the Government to help businesses through the recession.
I have never seen the attraction of a flat tax at the best of times. It would mean that people at the top end of the income scale would pay rather less than those at the bottom, and at this time, of all times, there ought to be fairness. Of course, I do not think that a flat tax would help businesses at all. The targeted measures that we are putting in place, such as giving businesses time to pay their tax, allowing them to carry back their losses and the reduction in VAT, are helping—and will help—business.
I think that I said in my statement on the pre-Budget report that about 850,000 firms had benefited from that measure. It is important that we do everything we can to help small businesses, because after all, they employ a great number of people and will, hopefully, grow into larger businesses.
Is not the reality that businesses in our constituencies still cannot access the credit that they need, and that all this newly printed money is being siphoned off into purchasing gilts to finance the extra borrowing that is a direct result of the Chancellor’s failure to come up with a proper fiscal plan to reduce the deficit?
No. I believe that the quantitative easing measures taken by the Monetary Policy Committee of the Bank of England are helping the process of recovery. The hon. Gentleman has a point, however, about bank lending. As I have said before, the stock of lending is broadly similar to what it was before the crisis. In addition, the banks in which we have major shareholdings —RBS and Lloyds—have lent an additional £50 billion. At the same time, however, there has been a repayment of lending by other businesses, which is why the net figure looks so low. As I said last week, it is necessary that the deficit be reduced, and we will halve it over a four-year period once recovery has been established—but it is important to ensure that we get that recovery established.
This recession is longer and deeper than either of the recessions of the 1980s and 1990s. Unemployment and youth unemployment are higher than they were in 1997, so the decision to add an additional national insurance burden for employers seems to make no sense, as it will weaken businesses’ ability to create jobs. Does the Chancellor not agree with the chamber of commerce in his home town of Edinburgh that that makes no sense, and that he should have been incentivising job creation, not penalising it?
We have introduced a number of measures to help people get into work, and there are 2.5 million more people in work now than there were in 1997. Also, unemployment would have been much higher if we had followed the course of action taken in the 1990s and the 1980s. The measures that we are taking are working, and they are making sure that we are getting people back into work much more quickly than was the case in the past. Most people find work within six months, and many get back into work in a much shorter period. We will continue to do whatever is necessary to maintain jobs. That is important in every part of the country, including Scotland.
May I report back to the Chancellor the information that I was given yesterday by the Volkswagen training centre in my constituency about the car scrappage scheme? I was told that it had been hugely successful in boosting jobs, particularly in the motor retail sector. The centre’s evidence showed that it had been taken up by people who would not have bought cars otherwise, and especially by large numbers of elderly motorists and women. They valued the simplicity of the scrappage scheme and found it very useful.
I met one such customer in Manchester last summer—[Hon. Members: “That’s two, then!”] On the basis of those two anecdotal pieces of evidence, I am sure that we must be on the right track. Rather more importantly, however, since the Budget last year there have been 290,000 orders for new vehicles. We have made a further £100 million available, and the scheme is an example of how a comparatively small amount of money has helped the confidence in the motor industry, which is a major employer in our country. In addition, Honda has announced that it is switching some production from Japan to this country, and Nissan too has reported an increase in production. This is an example of a policy making a difference to a very important part of our country’s industry.
Businesses need a credible plan from the Government to deal with the fiscal deficit. The universal reaction last week from every single business organisation was that that plan does not exist. One important step that the Chancellor could take today is to be honest about the real-terms cut in departmental spending that the figures that he announced last week imply. Will he confirm what Treasury officials told the Treasury Committee this morning and give us, in the Chamber now, the projections for departmental spending that he refused to give last week?
First, we have set out a plan to cut borrowing by half over a four-year period. I understand the hon. Gentleman’s view, which is shared by some others as well, that we could go further and faster. However, I believe that attempting to do what we are doing in a period one year shorter than that would result in taking £26 billion more out of our economy. That would be damaging to our economy and very damaging to our future prospects, which is why I do not think that his policy on this matter is right.
Secondly, in relation to departmental spending, I said in the pre-Budget report last week that I wanted to ensure that we could protect front-line services in the NHS and in schools, and make sure that we had sufficient police on the beat. I made that clear, but I also made it clear that I was not going to fix individual departmental expenditure limits for each Department at this stage, because there is still a lot of uncertainty around. We already have spending for the next year; that remains my position.
I do not think that the Chancellor can be aware of the universal reaction to his PBR statement last week. The international markets believe that there is “no coherent plan” in the UK, that our sovereign credit rating is “vulnerable” and that interest rates are going to be forced higher, leading to the UK losing its “top-notch status” for the first time ever. Every single business organisation slammed the report as being no plan for recovery, and the Chancellor completely betrayed the high responsibility of his office, which would have been to stand up to a Prime Minister who is pursuing a policy of scorched earth and political dividing lines.
I ask the Chancellor a very specific question: will he publish the departmental spending projections? I am talking not about the projections for individual departments, but about the overall departmental expenditure limits that we had to leak after the PBR. His Treasury officials told the Treasury Committee this morning that they would, so will he publish that information this afternoon?
I said to the hon. Gentleman that we had not fixed the spending for individual Departments, and until that time it would not be right to speculate on what each Department might or might not get, because there is so much uncertainty. In relation to the general point that he makes, I believe that what we have done is the right thing for the economy. We are supporting the economy. To start taking money out of the economy now, as he proposes, would damage our prospects for the future. It is important at the same time to set out a clear path for reducing the amount of borrowing, and I have done that as well. We are one of the first countries to do that. That is a sensible way of proceeding, it is the right thing to do to support our economy, and it is the right thing to do to support jobs, which Labour Members, at least, regard as being of paramount importance.
Financial Services (Regulation)
I have regular meetings with the Governor to discuss a wide range of issues.
Does the Chancellor agree that his Government’s decision to remove from the Bank of England its banking oversight and regulatory function was incredibly misguided and short-sighted? Does he also agree that that is one of the main reasons why the banking and financial crisis in Britain is worse than in practically any other country—apart, perhaps, from Iceland?
No, I do not agree with the hon. Gentleman. That had nothing to do with the origins of the crisis in the banking sector. The start of the problem was that too many banks, particularly in the United States in the sub-prime market, took on risk that they did not understand. If the hon. Gentleman was right in his analysis, there would not have been a banking crisis in any other country. The fact is that every developed country has experienced this—and as the hon. Gentleman knows, they all have different models in relation to regulation and supervision. The primary responsibility for any organisation must rest with the board of directors of that organisation, and in too many cases they were found wanting. I do not agree with the hon. Gentleman. I think that his analysis of what happened is wrong.
In his discussions with the Bank of England about regulation, has the Chancellor discussed, or will he discuss, the involvement of Lloyds TSB in the practice of “stripping”—laundering money—from Iran via London into the United States which has caused it to be fined more than $300 million as a preliminary fine, which ordinary people in the UK are having to pay as a consequence of their ownership of Lloyds TSB?
The Chancellor said as recently as 30 November:
that is, the regulatory structure—
“that we have with the Bank and the FSA is the right one.”—[Official Report, 30 November 2009; Vol. 501, c. 876.]
Given that we have seen loan-to-value ratios of 125 per cent. and rampant self-certification in domestic mortgage lending going unchecked, warnings about the asset price bubble going unheeded, a banking system that came within hours of collapse, and total taxpayer exposure to that banking system now equivalent to about £40,000 per family, could he tell the House what kind of disaster it would take to persuade him that that structure was not the right one?
The hon. Gentleman is working on the basis that it was the regulatory structure that caused those problems. Equally, I might ask him how he thinks reversing the FSA into the Bank of England, with the same people doing the same job, would automatically have meant that the problem would not have arisen. I have explained to the House on many occasions what the problem was. Principally, it was a failure in relation to those responsible for running the banks—a failure to understand the risks to which they had become exposed. Yes, there were mistakes in the regulatory system and the supervisory system in every major developed country in the world. There is no doubt about that, but I honestly do not think that putting the FSA into the Bank of England would have prevented the problem from arising in the first place. I remind the Conservative party that just a few weeks before the crisis, the one policy that it had come up with was a policy that it was not necessary to regulate mortgages, because the risk lay with the institutions not with the individuals. Look where that policy would have ended up.
I am happy to look at the case for this research. We understand the pain both of the banking sector and of the public sector quite well, and we are introducing reform to both.
But does the Minister understand the anger that is reflected in the response of public sector workers to the pre-Budget report, when they see the incomes being given, granted to or thrown at the banking sector? Does he not understand that he must take further measures in order to redress the balance? When the economy returns to good health, will he make public sector pay a priority for the Government?
Fixing the very poor level of public sector pay that we inherited was of course a priority for us, and that is why over the past 10 or 11 years the pay of teachers has gone up by 52 per cent., that of police officers by 57 per cent. and that of nurses by 65 per cent. I think that, by and large, we have fixed the investment gap that we inherited from the Conservatives, but as we move into the years ahead we have to prioritise halving the deficit over four years. That is why we are asking for pay restraint in the public sector, starting with public service leaders, whom we are asking to take a pay freeze next year.
On the Government’s proposal to tax banks’ bonus remuneration, are the Government yet in a position to say which of the 192 regulated banks it will apply to; what the main exempted categories are, be they shares or contractual agreements; and, as it will take a long time to suss out the difficult avoidance possibilities, whether they have ruled out the possibility of extending the policy into the next financial year?
I understand that the draft guidance has been published. The proposals that we have introduced are designed to bite on banking groups, but we remain open to the possibility of extending the legislation and the tax if the avoidance measures that some have talked about are put into practice.
But does the Minister not agree that one of the important pieces of unfinished business is the largely taxpayer-owned £1.5 billion bonus pool in RBS? As the board of directors publicly defied the Government over that matter, do the Government propose to take any further action, either by replacing those directors or by giving them fresh instructions about how to deal with that bonus pool?
If my right hon. Friend undertakes the research that my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) suggested, will he look back to 1979 and see how pay levels have changed since then? Will he look in particular at how the take-home incomes of the richest have been affected by the massive tax cuts for the rich that the Tories introduced at the time?
Banks (Penalty Charges)
The Government announced in the pre-Budget report on 9 December that they would work with consumer groups, the Office of Fair Trading and the banks to agree a new framework that will make bank charges fairer, simpler and more transparent. The Government will take action to deliver change if a voluntary approach does not result in a fair outcome for consumers.
I thank the Minister for that very helpful reply. She was given a fairly broad hint by the judgment of Lord Walker in the case of Abbey National and others, when he said that his decision was
“not the end of the matter,”
“Ministers and Parliament may wish to consider the matter further.”
What can she do to review the operation of section 140 of the Consumer Credit Act 1974, which requires fairness in the contractual relationship between banks and customers?
The Office of Fair Trading is still considering that judgment in detail, and on 22 December it intends to make an announcement about what further action will be taken. Our position is very clear: we want to see a fairer and more transparent system of charges, and we are working very closely with the OFT to achieve that.
I welcome the Government’s decision to stop unrequested credit card cheques being sent to consumers, but I urge the Minister also to consider unrequested credit card limits. That is of great concern to consumer organisations and very detrimental to the most vulnerable consumers.
I thank my hon. Friend for his question. He has a long record of standing up for the consumer in such matters. We were very pleased to be able to introduce measures to stop the practice of unrequested credit card cheques, and we continuously keep under review how we can best protect our most vulnerable people.
Financial Services (Regulation)
The Chancellor of the Exchequer has regular discussions with European Finance Ministers on EU regulation of financial services, most recently at the ECOFIN meeting on 2 December.
Government complacency has seen the role of Commissioner for Internal Market and Services go to France, and France and Germany have outmanoeuvred the Government on the alternative investment fund managers directive. Have the Government learned a lesson and put in place a new procedure to ensure early engagement over the proposals for regulation of the financial services industry?
I disagree. It is not the case that we have not been engaged early in all the processes. The Chancellor and our other Ministers have actively and successfully engaged in the EU agenda, both directly in the EU and within the G20, and I can assure the hon. Gentleman that that will continue. With the allies that we have in the EU and the European Parliament, we can do that; I am afraid I cannot say the same for the official Opposition party.
Earlier this year, the Chancellor was thinking aloud about the potential of an independent macro-prudential early warning system linking the Bank of England to European central banks, and a single micro-prudential rule-making body. Can the Minister say what the state of play is in terms of those developments?
Our position is very clear: we do think that we need an EU-wide system to protect financial stability. We are also very clear that that EU-wide system should not have any impact on our fiscal responsibilities. As a result of the discussions at the ECOFIN meeting, we have now secured the fiscal safeguard that we were seeking.
In June the Chancellor said that he was determined to block the moves to force the UK taxpayer to foot the bill for decisions made by the new European supervisory authorities. However, is not the reality that the Chancellor lost that battle in December’s ECOFIN meeting? None of the safeguards that he or the Exchequer Secretary talked about amount to a veto to protect national sovereignty and national taxpayers.
Comprehensive Spending Review
Departmental budgets are set until April 2011. As the Chancellor made clear in his statement, now would not be the time for a spending review, given the uncertainties that remain in the world economy.
Does the Minister not agree that there is a need right across the United Kingdom for certainty as we look forward into 2010 and beyond, not just for the next 12 months but for a period comparable to that covered by a CSR?
If the Chancellor had set out a spending review earlier this year, for example, it would have been pretty likely that those figures and settlements would have had to be revised, as unemployment turned out to be far lower than we initially expected. Indeed, today the Secretary of State for Work and Pensions is setting out the argument for the kind of savings that could be achieved on the welfare bill if, as we hope, unemployment is much lower than it might have been over the next few years. Until that certainty is acquired, it would be wrong to set out to the last pound and the last penny what each individual Department should get. We are very clear that halving the deficit over four years is in the right time frame. Halving it any faster—over three years, for example—would involve taking £26 billion out of public spending. That would mean, for example, putting about 5p on VAT, or halving the education budget.
Since last week’s pre-Budget report we have learned that the Treasury itself does not believe that the Government’s spending plans provide a credible route to restoring our public finances, and that the Schools Secretary was still wringing concessions out of the Treasury after the Chancellor went to bed on Tuesday night. Is it not now clear that even if the Treasury Ministers recognise the scale of the fiscal crisis, they are too weak to do anything about it?
I am sure there must have been a question lurking in there somewhere. I advise the hon. Gentleman not to believe everything he reads in the newspapers. What the Chancellor did last week was set out a clear plan for how we can halve the deficit over four years. It is pretty much the fastest consolidation plan in the G7, and it is also the clearest. We stand by the judgment that four years is the right period over which to halve the deficit. Of course there are people who have advised us to take a different direction and halve the deficit over three years, which would involve some pretty difficult judgments. That is the policy advocated by the Opposition, but they have not yet said whether they would put up VAT by 5p or halve the education budget. Is that because they do not know, or because they will not say?
UK Budget Deficit
In common with that of other G20 countries, UK fiscal policy will continue to support businesses and families until the recovery is secure.
We have seen an unprecedented global downturn, and the debt is going up in all the G7 countries as well as other countries. Of course UK debt was low at the beginning, giving us extra fiscal space, as the International Monetary Fund has pointed out. The additional support that we have provided has meant fewer jobs lost, fewer business failures, fewer homes repossessed and less damage to the economy. As my right hon. Friend the Chancellor has explained, we will now halve the deficit over the next four years and so secure the public finances.
Is not the most important thing the fact that we have a deficit reduction plan, so that we can keep money in the economy, get through the recession and keep up front-line spending, particularly on health services? In Stoke-on-Trent we need the Haywood hospital and we need our schools, and we do not need the deficit.
My hon. Friend is absolutely right. It is vital that we have a plan—as we do—and that we can show how we will continue to live within our means while also providing the investment that her constituency and the public services need. We must also continue to support the economy, given the uncertainty that is still around. The Opposition made the wrong call on the banking crisis and the wrong call on the recession, and now they are making the wrong call on the recovery as well.
UK Credit Rating
We follow the assessments of the credit rating agencies closely. Moody’s restated last week that the UK is a resilient triple A sovereign. Standard and Poor’s reaffirmed the UK’s triple A rating in May, and Fitch did so in July.
Order. I apologise for interrupting the Minister, but there are a lot of private conversations taking place in the Chamber, and it is very unfair both to the Member—[Interruption.] Order. Mr. Fabricant, you know a lot better than that. I know where to look, and I do not require your help. Private conversation is very unfair on the Member asking the question and on the Minister answering it, and I think it would probably be regarded by members of the public as rather rude.
Thank you, Mr. Speaker. It does help that we went into the recession with low debt, as was underlined in the Moody’s note of 26 October. It is also important that we have the plan that we have set out for halving the deficit over the next four years. That is the responsible approach.
Since the events of last October, the Government have acted decisively and comprehensively to support the stabilisation of the banking system and protect depositors. The recent entry of the Royal Bank of Scotland into the asset protection scheme on terms that improve incentives and deliver better risk sharing with the private sector, as well as Lloyds Banking Group’s private capital raising, means that banks are better capitalised and better positioned today to support the economy in its recovery.
Is the Minister aware of the National Audit Office report that says that neither Lloyds nor the Royal Bank of Scotland are meeting targets for lending to business? Bearing in mind that small and medium-sized enterprises in particular need the oxygen of available credit, what action is he taking to ensure that those two banks meet one of the objectives of re-capitalisation following the huge input of taxpayers’ money?
I am certainly aware of the NAO’s report—a couple of questions on the Order Paper cover the same matter. As the hon. Lady will be aware, the situation is that RBS and Lloyds banking group have made significant strides in improving lending to SMEs. However, a lot of small and big businesses have been paying down debt during this recession, which is why the net lending figures do not look so promising. The banks have signed lending commitments, which are binding, and we expect them to keep to them. We continue to monitor the issue very closely.
Banks (Government Support)
The Government welcome the National Audit Office’s recent report, and particularly its conclusion that the support that we have provided to the banks was justified. We will consider the report and respond in the normal way.
It is my understanding that the Treasury did no such thing. We will obviously respond to the report in detail in due course, but I should like to quote paragraph 19 to the hon. Gentleman:
“If the support measures had not been put in place, the scale of the economic and social costs if one or more major UK banks had collapsed is difficult to envision. The support provided to the banks was therefore”
The pre-Budget report forecast that UK gross domestic product will have fallen by 4.75 per cent. in 2009 and will recover to 1 to 1.5 per cent. growth in 2010. The report did not forecast what will happen in other G20 economies, but world GDP is expected to contract by 1 per cent. this year, then to grow by 3.25 per cent. in 2010.
I am grateful to the Minister for those numbers. Given that we are the only G20 country still in recession, he will have to forgive us for not taking his forecast for granted. However, given that over the next couple of years, between pre-crash and post-crash levels, the level of debt in this country will have doubled—in fact, the rise in the debt will be third only to Iceland and Ireland—is the Minister not concerned that our growth levels will be much lower as a result? That will be a dangerous situation for everyone who lives in this country.
Let me first of all reassure the hon. Gentleman about our forecast. We said at the time of the Budget that we forecast 1 to 1.5 per cent. growth in 2010. At that time, most people, including the Opposition, said that that was much too optimistic. Today, however, the consensus has caught up with the forecast that we set out. I hope that the hon. Gentleman will be reassured by that vindication of my right hon. Friend the Chancellor’s forecast.
Right across the world, countries are borrowing more, which is the right thing to do. The stimulus that we provided has reduced uncertainty and helped to prevent a spiral of falling confidence and demand. That is why the impact of this unprecedented global shock has been so much less in the UK than many expected. If we had taken the advice of the Conservatives and let the recession take its toll, the damage and the long-term cost to the economy would have been far greater.
I am sure my right hon. Friend is aware that in certain sectors, there is potential for growth, and those are the ones that the Government need to invest in. I am thinking particularly of so-called green jobs. Intelligent Energy in my constituency is growing as a consequence of not only Government investment but investment from the private sector. That will deliver on jobs, but also from an environmental point of view in, for example, hydrogen fuel cells. Will he ensure that all Government aid is targeted at those future job growth areas, where we will make a significant impact on UK plc?
My hon. Friend is right, and I very much enjoyed my visit to Intelligent Energy as his guest a few years ago. Our “New industry, new jobs” strategy is targeting those parts of the economy with the biggest growth potential—for example, green jobs and the digital sector—and ensuring that we have the wherewithal to do well in the future in those sectors.
Comprehensive Spending Review
I refer the hon. Gentleman to the answer I gave a few moments ago.
Yes, but does he not think that the answer he gave to my hon. Friend the Member for Putney (Justine Greening) bears all the credibility of that of the Prime Minister when, two years ago, he said that his decision not to hold a general election had nothing to do with the fact that the polls were so bad?
Even the hon. Gentleman would admit that there remains a degree of uncertainty in the international economy. We need only look at events in Dubai and the Gulf to see the kind of instability that persists. Indeed, we are only halfway through the measures agreed at the G20 in London, so we are by no means out of the woods yet. Recovery is not guaranteed, and we cannot know how much we should allocate for welfare benefits. Therefore, it is difficult to pin down to the last pound and penny how much each individual Department should have. Last week, my right hon. Friend the Chancellor set out one of the clearest deficit reduction plans in the G7. We set out our priorities for the year to come, including some £15 billion of cuts and efficiencies in lower priority programmes. What we have yet to see is any plan of sufficient clarity from the Opposition.
Treasury Ministers and officials receive representations from a wide range of organisations, including on the issue raised by my hon. Friend. We are taking action to ensure that young people are supported through this recession. As he will be aware, this includes a guaranteed job, work experience or training for those young people who remain unemployed for more than six months. That will ensure that we avoid the long-term detachment of young people from the labour market that was such a feature of previous recessions.
I thank my hon. Friend for that reply. Has he taken note of the recent International Monetary Fund “World Economic Outlook” report, which makes it clear that the fiscal stimulus should be continued next year until recovery is on a firmer footing? What assessment would he make of the effects on youth unemployment if deficit reduction replaced going for economic growth as the main aim of economic policy, as some in this House would prefer?
My hon. Friend is right. The judgment that the Chancellor made at the time of the pre-Budget report was that we needed to take action to secure sustainable public finances, but we needed to do so in a way that did not jeopardise the recovery. That is why we are planning to halve the deficit over four years. That action, as opposed to the more precipitate action that the Opposition prefer, will give us the best chance of ensuring that we have a sustainable economic recovery and can address youth unemployment.
As the hon. Gentleman well knows, we have been going through a recession in the UK, just like most countries around the world. That has obviously had an effect on unemployment, and that is very regrettable. However, the active labour market policies that this Government have introduced have been highly successful in getting people back to work. Youth unemployment continues to be a problem, but more than half of people leave jobseeker’s allowance within three months, and three quarters do so within six months. That is as a result of the programme of policies that we have put in place.
The combined action of the Bank of England and the Government is supporting up to half a million jobs at the moment. The Government believe that, as there are still risks to the economy, it would be risky to consolidate too quickly.
The Government have done a lot to try to help young people during the recession, particularly with the guarantee of a job or training after six months of unemployment. Does the Chief Secretary agree that any attempt to reduce spending immediately would scupper the chances of economic recovery and impact in particular on young people coming into the jobs market?
There are those who believe that we ought to be cutting public spending faster, even now, before recovery has been locked in. We think that that would be a risk and that the price would be paid in higher unemployment and more repossessions. That is why last week the Chancellor set out further measures to help to combat youth unemployment and why we think that the right approach is to say to our young people that if they have been out of work for six months they will be offered a job, a place in training or, of course, community service.
If the right hon. Gentleman looks at other economies in the OECD or the G7, he will see that the levels of debt forecast among them are pretty much in line with our own. This recession has hit us all. However, we are probably the country that has set out the clearest plan to halve that deficit over the next four years.
The Treasury’s responsibilities remain as I have set out on previous occasions.
It is very important that we do everything possible to get a return of private sector investment in the economy. The public sector has been supporting the economy, particularly through public expenditure, over the past year or so. We can continue that until recovery is established, but part of getting recovery established and achieving growth in the future must be to get private investment going again.
No, I do not, although I am aware of the concern on this issue. We are putting furnished holiday lettings and bed-and-breakfast accommodation on a level playing field. However, a query has been raised, for perfectly understandable reasons, about the legality in European law of providing help to furnished holiday letting accommodation purely in the UK and not elsewhere in Europe. It is very important that we comply with international law.
My hon. Friend is absolutely right. It is important that we encourage people back into work, and as part of that, we must ensure that if people do go back into work, they can see the benefit of it. As the House will know, my right hon. Friend the Secretary of State for Work and Pensions will make a statement shortly, and I hope that she will have something further to say about that. However, my hon. Friend is right to emphasise that job vacancies are being advertised everyday. It is our job to ensure that we get people to fill those vacancies as quickly as possible.
In relation to the bank payroll tax, we are trying to change the behaviour of some banks that still want to pay out very large sums in bonuses when we believe that the money would be better applied to building up their capital position. Of course, from next April, people earning more than £150,000 a year—that will include many recipients of these bonuses—will pay tax at the top rate of 50p. In addition, the hon. Lady asked about national insurance. I made the position clear last week. In particular, I made the point that people earning less than £20,000 would not be paying more as a result of the measures that I introduced.
We have invested a considerable amount of money in the railway system in the west midlands. The upgrading of the west coast main line cost between £7 billion and £8 billion, and has meant more services and, above all, more reliable services than in the past. That is an example of what happens when public investment is run down, because that line last had serious investment in the 1970s. We have put that right and we will continue to do what is necessary to ensure that the railways work.
Has the Chancellor seen the helpful comments of the right hon. Member for Norwich, South (Mr. Clarke), with whom he used to sit in the Cabinet, who said yesterday:
“the reason why this Pre-Budget Report has been so disappointing is that the Prime Minister used his constitutional authority as First Lord of the Treasury to ensure that no full account of our economic predicament was provided, no systematic reform of banking was promoted and no clear account of Labour’s approach to closing the fiscal deficit was made”?
The truth is that the Prime Minister and the Schools Secretary overruled the Chancellor of the Exchequer. Sofa government is alive and well, in the form of a Chancellor who bears the impression of the last person who sat on him. Will he take this opportunity to demonstrate his independence and publish the overall departmental spending limit—not for the individual Departments; the overall number, which was leaked by us after the Budget and which he now has an opportunity to publish—after this pre-Budget report? Just answer that question, on the third time of asking.
I did see the article by my right hon. Friend. It is fair to say that he has had his disagreements with the Prime Minister over some considerable time; there does not seem to be anything new there. In relation to the departmental expenditure limits, I made the position clear earlier, and I have nothing further to add to that.
Yes, indeed we have. If we had repeated the experience of the 1990s recession, we would have expected something in the region of two and a half times as many businesses becoming insolvent as have actually done so. The action that we have taken—through the business payment support service, the time-to-pay initiative, the enterprise finance guarantee and other measures that we have taken—has had a genuine impact. There is a distinction to be made between a Government who have provided real help now to businesses through this recession and a Government who, during the 1990s, did nothing and just let companies go to the wall.
I am not sure that I recognise those figures, although I will certainly write to the hon. Gentleman as soon as we have the final figures. However, there is a broader point to be made in relation to Dunfermline building society. It would have been nice if we had not been put in that position in the first place, but unfortunately that building society got itself into difficulties and they had to be resolved. That is precisely what we did. Both the hon. Gentleman and I would have liked the Dunfermline to continue as an independent building society. That was not possible, but the reason was that it got itself into difficulties and we had to sort the problems out.
Can we follow the lead of other European countries and introduce a cap on interest rates for the likes of store cards? People will be using store cards over the next few weeks in the run-up to Christmas. If someone spends £1,000, it will take them 15 years to clear that if they simply pay the minimum. That is totally unacceptable.
I entirely agree with my hon. Friend that there is a problem with the high rates of interest charged by some lenders, particularly to vulnerable people. I am aware that some other EU countries have introduced interest rate caps. However, the evidence from those countries is that introducing a cap has not resolved the problem, as the institutions have got round it by introducing other charges. However, we are still reviewing the position with the Office of Fair Trading.
Given the recent announcement by the Secretary of State for Wales of a floor for devolved spending in Wales relative to England, are the Government guaranteeing, at least as far as Wales is concerned, that they are banishing the Barnett squeeze?
The position in relation to the Barnett formula is that it continues to be the Government’s policy, and it is the basis on which allocations will be made to Wales, Scotland and Northern Ireland. Over the past 10 or 12 years, Wales has benefited from the increase in public expenditure right across the piece.
This is a difficult time of year for many small and medium-sized businesses in the UK, with holiday closedowns, holiday pay, and so on. What more can the Government do to improve the payment methods used by UK companies to encourage them to pay their suppliers more quickly?
We have introduced a number of measures that will help businesses. One of the most effective has been the time-to-pay regulations, which mean that businesses can stagger their payments of tax. That has eased their cash flow. It has also meant that 95 per cent. of the undertakings have been met, which benefits the Revenue as well. In addition, we have provided guarantees for loans, which have benefited firms in Scotland, and tax credits have meant that many people’s income has been supplemented by as much as £37 a week as a result of what we have been able to do.
This is something that we keep under close review. I am well aware that we need to ensure that the larger banks—particularly the two in which we have substantial shareholdings—do not behave in a way that is detrimental to the smaller building societies. This is something that we, along with the Financial Services Authority and the Office of Fair Trading, will continue to keep a close eye on.
This is a difficult time for savers, and they are not being helped by the practice of banks that market savings accounts with a bonus attached to them without telling the savers when the bonus is going to fall away. Could we not require banks to provide that information?
I am very much in favour of making more information available to savers—and, indeed, to borrowers—so that they can understand exactly what the terms and conditions are. I agree with my hon. Friend that, at times, those terms and conditions are not as clear as they should be. We want more people to save, and the best way to achieve that is to be very clear and up front about what the saver will get and when they will get it.
In the aftermath of the pre-Budget report, and given the importance that Members of Parliament in Stoke-on-Trent attach to the relocation of jobs from the south-east, what advice can my right hon. Friend give to people in Stoke-on-Trent on how to ensure that we can get such jobs relocated there?
Over the past few years, we have moved something like 24,000 jobs out of London and the south-east. Just before the pre-Budget report, we said that we would seek to move another 13,000 out over the next few years. I would be very happy to sit down with my hon. Friend and other colleagues from Stoke-on-Trent to talk about how we can maximise Stoke-on-Trent’s chances of getting a big share of those new jobs.
It is understandable that the hon. Gentleman is concerned about debt, and I can tell him that the debt would have been very much higher had we not taken the action that we did to support our economy and to ensure that we got through the recession. Otherwise, the amount of borrowing and debt would have been far greater.
Despite the cheaper pound and rising house prices, stalled industrial output is still holding the economy back. Will the Chancellor tell the House what progress has been made on his plan to diversify the economy away from the financial services sector?
In the pre-Budget report last week, I set out a number of measures to encourage low-carbon industries and to encourage business generally. It is important that we have a diverse economy. The research and development tax credits and the reduced rate of corporation tax for firms that patent discoveries in this country and then develop them here are part of a range of measures all designed to make sure that we have a more diverse economy in the future. In the 1980s, rather too many firms went under and rather too many sectors were badly damaged: we cannot afford to repeat that mistake.
At some stage in the relatively near future, the Chancellor will receive a welcome windfall from the auction of the spectrum release by the digital dividend process, so will he honour the pledge given to users of radio microphones in the “Digital Britain” White Paper and earmark at least a small proportion of those significant revenues fully to compensate those users for their unwelcome eviction from the spectrum?