The Chancellor of the Exchequer was asked—
Reform is necessary at domestic, European and international level to ensure that we have a regulatory system that can effectively monitor and, where necessary, curb risk-taking in the financial services sector.
I thank my right hon. Friend for that reply. On the use of regulatory tools, has he noticed that commentators increasingly suggest that a more equal society is a more effective and efficient society? Will he use those tools to bear down on the very high incomes that we still see particularly in the banking sector?
I agree with my hon. Friend that it is important that we have a fair and just society; that we ensure that, when people are rewarded, they are rewarded for their effort; and, in the banking industry in particular, that the relationship between what somebody does and what they get should be better aligned. That is why we received the agreement of the G20 countries and imposed restrictions on what the banks in which we have shareholdings can do. I hope that over the next short period, banks in this country and others remember that they live in the same world as the rest of us. They ought to show restraint at a time when everybody else is having to pull in their belts.
As the measures already announced by the British and European Governments are widely seen as being inadequate “to stop the second shoe falling”, will the Chancellor do his best to persuade the Financial Stability Board and the European Central Bank to embrace as many as possible of the proposals in the Volcker plan, so that we can have genuinely international bank reform?
I agree with the hon. Gentleman that global agreement on the reforms that we need is highly desirable. The proposals that the United States made 10 days ago, the requirements for increased capital, where necessary, to ensure that the amount of capital held is commensurate with the risk undertaken, and the measures to take forward the work on resolution plans—living wills, if you like—are all very important. They represent a common objective. For the reasons that I explained earlier, I do not take the same view of the proposal that might come from the United States on breaking up large banks. The real problem is the interconnectivity of institutions, and we need reforms on that. However, I certainly agree with the hon. Gentleman that, importantly, regulation in Europe and in the United States should move forward together, and that is one of the things that I shall raise at the G7 Ministers’ meeting in Canada this weekend.
Is it not the case that banks that mainly handle hedge funds are seen by many as casino banks? Is it not time that we looked at that world of hedge funds and separated their activity in banking terms from that of banks that handle everyday mortgage and saving—that is domestic—needs?
I do not think that the division that my hon. Friend provides is quite as simple as that. Hedge funds can perform a useful function, but it is important to ensure that, when banks engage in risky activity, they have sufficient capital behind them if things go wrong. That is why we are very happy to work with some of the proposals from the United States and, indeed, other parts of the world. Most people recognise that the situation is quite complex, and I see that the Opposition have now shifted their position from warmly embracing the break-up of banks to an assurance, which the shadow Chancellor gave to bankers at the weekend in Davos, that they would not do any such thing.
The Chancellor and I have agreed to differ on the Government’s rejection of the Governor of the Bank of England’s advice on breaking up those banks, but now that the President of the United States has made the case that proprietary and, indeed, wider, own-account trading by banks is dangerous and must be separated from traditional banking, do the Government not wish to rethink their position at all?
Interestingly, if one looks at Paul Volcker’s proposals, which he made as part of his Group of Thirty proposals a year ago, one finds that he recognised that proprietary trading could be risky and recommended that greater capital be held against such risky activities. We have expressed that view before, and the issue clearly needs to be looked at. However, we must also bear in mind that most British banks do not engage in that much proprietary trading, and it certainly was not the root cause of the recent problems.
I say to the hon. Gentleman, as I have said to him before, that traditionally the regulatory system was modelled on the basis that if one firm was all right, the entire system was all right. Over the past 18 months or so, however, we have seen that we have to look behind that, because risks were laid off to institutions, which laid them off to further institutions. In some cases, we found that the first firm that had attempted to lay off its risk was buying it back through another part of the empire, without having any idea of what it was doing. The interconnections of financial institutions are the problem, and that is why the hon. Gentleman’s proposals do not fit the bill. In fact, he is rather like a general fighting the last war rather than taking account of where we are likely to be in the future.
The Chancellor says that this is not the basic cause of the problems within the UK system. Is it not true, however, that there were enormous losses within the Royal Bank of Scotland, for example, as well as within the mortgage lenders? Is not the real reason why the Government—and, for that matter, the Conservatives—are not willing to go down this route the fact that they have been persuaded by the City, for its own self-interested reasons, to adopt this position of a level playing field? Whereas the Government took the world lead in the bank rescue operation, they are now lagging behind the rest of the world in dealing with this very dangerous problem.
No, I do not accept that. If the hon. Gentleman reflects on what has happened since 2007, he will see that the problems were partly to do with liquidity. For example, Northern Rock was totally dependent on wholesale funding, and when that dried up, the bank effectively collapsed. However, the other problem was that too many firms, such as RBS, clearly did not understand the extent to which they were exposed, and because of that they got into difficulties. That was a feature of many of the banks that failed. We need, first, to ensure that we have adequate capital that stands behind the banks’ activities, and that that capital is commensurate with the nature of the operations. Secondly, we have to ensure that in the event of a bank getting into difficulties there is a resolution plan—a living will—whereby the regulators of the banks know exactly what needs to be done and who needs to be doing what.
The crucial thing—this comes back to the point raised by the hon. Member for Louth and Horncastle (Sir Peter Tapsell)—is that it is necessary for us to ensure that the regulatory reforms are not just put in place here but done on a broad-based international basis. That is what we need, and it is in all our interests to ensure that it happens. Let us remember that at the end of the day we have to ensure that we have a robust regulatory system, but also a system that ensures that banks are there to provide credit for the economy, which is the objective of all the reforms that are being put in place.
The Chancellor is proving quite a defender of the old model of finance. The President of the United States did not say that he wanted a return to a full-scale Glass-Steagall approach and the break-up of the banks; he said that he wanted to separate retail deposit-taking from large-scale proprietary trading, large internal hedge funds, and large internal private equity funds. I agree with him, and I think that these things should be agreed internationally. Could the Chancellor explain very specifically why he disagrees with the President of the United States?
As I have said before, we have still to see the details of what the President is proposing; I understand that we will see more during the course of this week. I have to say to the hon. Gentleman that we are dealing with a complex set of proposals. On the day that the President made his announcement, according to Robert Peston—[Hon. Members: “Ah!”] Well, I am sure that he is right on this. Robert Peston said that the shadow Chancellor had told him
“explicitly…that a Tory government would impose an identical dismantling of British banks to those suggested by President Obama.”
Yet on 28 January, in The Wall Street Journal, the hon. Gentleman said:
“I fully understand that modern universal banks need to offer their customers investment banking services”—
in other words, a complete climbdown from the position that he had adopted only seven days earlier.
Let me make this clear to the Chancellor of the Exchequer. I agree wholeheartedly with the President of the United States that large-scale proprietary trading should not sit alongside retail deposit taking. If I were in the Chancellor’s job, I would be trying to work on that internationally instead of opposing it.
May I ask the Chancellor about something else that the President proposed in that speech? He said that he wanted a bank levy; and, of course, the Swedish Government have proposed a forward-looking insurance levy. At the Finance Ministers’ meeting, the Prime Minister floated the idea of a Tobin tax, but the Governor of the Bank of England told the Treasury Committee:
“I don’t know anyone on the international circuit who is enthusiastic about it”.
Given that the Governor talks to the Chancellor a lot, presumably the Chancellor is included among those who are not enthusiastic about it. Can we take it that the Tobin tax idea is now completely dead?
On the hon. Gentleman’s first point, I said that where there is common ground between us and those in the United States, we will work closely with them; that is something that I intend to pursue at the G7 meeting this weekend, along with other Finance Ministers. I do not accept the proposition that if we simply break up banks we will sort the problem that needs to be sorted, because of the connections between financial institutions. That needs to be got right. The hon. Gentleman—he is allowed to do this—has changed his mind over a period of all of seven days. Today he was promising a speech on a new economic model; it is clear that we get a new economic model from him every single day.
International levies and an insurance fund are something worth looking at, and we will certainly work not only with the Americans but with other countries on that.
We are concerned about the impact of high-cost credit products on the most vulnerable in society. The Office of Fair Trading is reviewing the market for high-cost credit, and its report is due out in the spring. We will respond quickly to address the issues raised.
I thank the hon. Gentleman for his question and pay tribute to him for his work in protecting vulnerable people and for the number of times he brings these issues to the House to draw attention to them.
Alongside the work that the OFT is doing on a regulatory basis, we are trying to increase the supply of low-cost credit. There is a key role in that for the growth fund, through which £98.75 million has been made available. It is on target to meet the goal of 150,000 affordable loans a year, through credit unions and community development financial institutions, which are trusted in the community and to which people know they can go to get the low-cost credit that they need.
I welcome what my hon. Friend says, but does she agree that the biggest concern is the high interest when people sign up for credit and then the intimidation and bullying that they face in order to get repayments? What more can we do to ensure that there are alternatives, so that people can access the money that they need? How can we promote that, especially through the credit unions?
I certainly pay tribute to the credit union movement for its work. As I said, credit unions are rooted in their communities and provide people that those communities know. They give people the information that they need to make informed choices, so they know that they do not have to go to the high-cost doorstep lenders and that there are places where they can access low-cost credit. As I said, credit unions are a prime example of how they can do that.
Last week the Treasury ruled out a clampdown on store cards because of the impact that it would have on store card issuers. Why are the Government ignoring the risk that shoppers can be sucked into taking out a store card because of the discounts offered on that day’s shopping, but then end up paying one and a half times the interest rate that is normally charged on credit cards? Is it not time to give the OFT the power to clamp down on excessive rates and the marketing of store cards?
As I said, the OFT has been carrying out a quite comprehensive review of high-cost consumer credit and other credit products. It is looking at the attitude and behaviour of consumers and how they use those products, and it is examining evidence from international research. As I said, it will report in the spring, and we are committed to examining that report and taking action on what is put forward.
UK Credit Rating
As the House would expect, Treasury officials meet a wide range of organisations and have done so for a number of years.
The Chancellor will be aware that the Governor of the Bank of England urged him to publish a credible deficit reduction plan or risk losing Britain’s triple A rating. The CBI has said:
“Current plans to halve the deficit over four years are too little, too late. The UK’s AAA credit rating must be put beyond doubt.”
Is it not high time that the Chancellor produced a credible deficit reduction plan so that it could be reduced substantially over the lifetime of a single Parliament?
That is not quite what the Governor said, but I say to the hon. Gentleman that we are committed to halving the deficit over a four-year period, which means a sharp reduction in spending. We propose to do that once we believe that recovery is established, from 2011. The Governor made the point that to withdraw support prematurely would risk damaging the economy. I agree with the hon. Gentleman that it is important to have a firm, credible plan. What is quite clear, though, especially in the past few hours, is that the Opposition do not have a credible plan, or even a plan at all. It is quite obvious that they are living from one day to the next. Their proposals are a complete and utter shambles.
Is it not about time that we looked at the way in which that system works, with faceless individuals who seem to have the power of countries in their hands? Is it not about time we demanded transparency, so that those individuals have to answer for some of the decisions they make after scurrying around, briefing against countries? We want some transparency in the system.
Inevitably in markets, people say things for different reasons, but what is important is that people are left in no doubt that we have a firm proposal to reduce the deficit over a four-year period. When one looks at the pre-Budget report, one will see that the structural deficit, which begins to be reduced next year, comes down by something like two thirds over that period. That is an example of where we are prepared to act.
What undermines credibility is someone saying one week that they need to tear up our plans and that not doing so is moral cowardice, and then the hon. Member for Runnymede and Weybridge (Mr. Hammond), the shadow Chief Secretary, when asked about the proposals, saying, as he did yesterday, “I can’t give you a specific figure now.” When pushed, he said, “Well, it might be £1 billion,” and then he says, “Of course, we don’t have a detailed plan worked out.” That is blindingly obvious. To coin a phrase, he can’t go on like this.
Could the Chancellor reassure the House that he and the Treasury fully understand the consequences of any downgrade of the UK’s triple A credit rating? Apart from the impact on demand for new issues of gilts and the costs of funds, he will be aware that many holders of UK gilts are restricted to holding triple A assets, and therefore that a downgrade risks provoking wholesale disposals by them. Does he have an estimate of the proportion of UK gilts that are held by institutions that hold only triple A rated assets? If he does not, will he ask the Debt Management Office to prepare one and have it available on Ministers’ desks on 7 May?
The only rating that is being downgraded at the moment is the shadow Chancellor’s. I put it to the shadow Chief Secretary that a week ago, the Leader of the Opposition said:
“We cannot go on like this…And you just need to look at Greece to see what happens if we do”
but yesterday, the shadow Chief Secretary, when asked on the television—
Capital Allowances (Plant and Machinery)
Reforms implemented in April 2008 ensure that capital allowances are more closely aligned with true economic depreciation, and that business investment decisions better reflect commercial rather than tax considerations.
At a time when the manufacturing purchasing manufacturers’ index is at last rising strongly, will the Minister assure me that this Labour Government will not slash capital allowances for plant and machinery, as proposed by the Conservatives? Such a cut would devastate manufacturing in the west midlands and the UK, and cause a double-dip recession.
My hon. Friend is right to point to the very promising manufacturing figures that were announced today and to recognise the importance of the capital allowances regime in ensuring investment in our future. Frankly, it is quite ridiculous to have a policy that says, “We’re going to give with one hand, and take away with the other,”—a policy of giving corporation tax reductions but taking away the capital allowances that are needed by manufacturing businesses in this country. I am not against cutting corporation taxes—indeed, this Government have cut them by 5p in the main rate since we came to power—but we should not do it at the expense of investment in our future, which is what the Conservatives would do.
There is a strong case for a lower rate and a simpler structure. However, increasing the cost of labour through increases in national insurance contributions, while having a generous programme of capital allowances, is unbalancing the cost of capital versus labour, when we have 2.3 million unemployed.
The hon. Gentleman cannot get away from the fact that his policy is to reduce capital allowances to 12.5 per cent. and abolish the annual investment allowance. That would mean that more than 400,000 businesses in this country would see an 87.5 per cent. reduction in the tax relief that they can obtain at the moment. That is not a credible policy to support medium-sized businesses or investment in this country.
Fiscal and Monetary Policy
As I set out in the pre-Budget report, we will continue to provide fiscal support during 2010-11, alongside the monetary policy action being taken by the Bank of England.
I very much agree with my hon. Friend. It is important to recognise that across the world, including in this country, it is the support given by Governments that has enabled us to avoid the recession becoming a global depression. It is also one of the reasons why countries are beginning to come back into growth. To remove that support prematurely would run the risk of derailing the recovery. That would be unforgivable, given all the pain that people have had to go through, and that is why we will continue to support businesses and families, to ensure that we get the recovery firmly established. Then we have not only to reduce the deficit, but to ensure long-term growth to provide the jobs in the future.
But cannot the Chancellor see that because he is overspending and over-borrowing in the public sector he is squeezing the private sector, which is having to pay high and rising rates of interest if it can get credit at all? What does he say to people with Skipton mortgages or small businesses that cannot borrow a single penny?
As the right hon. Gentleman will know, we have taken steps to ensure that the banks increase the amount of gross lending that they are putting into the economy. At a time when private sector investment has stopped or reduced, if it had not been for the public sector intervention, the downturn would have been much greater than it is. As it is, we can see signs of increasing confidence—he will have seen the survey of manufacturers published yesterday, which is very encouraging. Across the world, we can see the results of Governments acting together and making a real difference. To remove that support prematurely, if indeed that is the Opposition’s policy today—who knows?—would be the wrong thing to do because it would be damaging to the country.
Does my right hon. Friend accept that the exchange rate is crucial in maintaining a good level of demand in the domestic economy, and that the bounce-back in manufacturing is due largely to the wise and substantial depreciation of sterling? Will he continue the downward pressure on the sterling exchange rate to ensure that our recovery is sustained?
As my hon. Friend knows, the Government’s policy is to target inflation, but it is the combined efforts of fiscal policy and monetary policy that will make a difference and ensure that we can get through this and achieve the sustainable growth that is absolutely essential. It is very important that we secure that growth and we continue to take no risks with the recovery, and that is why the approach of the Conservatives is profoundly wrong.
UK Budget Deficit
The International Monetary Fund sets out estimates of deficits around the world. We remain determined to halve the deficit over four years, and we have set out clear plans to do so.
The Chief Secretary knows full well that in percentage terms this country has the highest budgetary deficit in the entire G20, as well as an extremely anaemic growth rate. What particular failure of Government policy has brought about that fiasco?
We make no apology for intervening to protect businesses and families from the worst economic storm for the last 60 years, but the reason that we had the flexibility to take that action is that we went into this recession with the second lowest level of debt in the G7. If the hon. Gentleman takes the IMF figures for 2014, he will see that the figures for this country are 18 per cent. lower than the average for the G7. Once recovery is set in, we have to take steps to halve the deficit over the course of four years and to bring down the structural deficit by some two thirds, and we have set out clear plans to do so—in sharp contrast to the Conservatives.
Does my right hon. Friend agree that the worst possible thing to do in dealing with the deficit would be to make disproportionate cuts during the lifetime of the next Parliament? That would lead to savage cuts in public services and a catastrophic loss of jobs in the public sector.
My hon. Friend is right. Suggestions have been put to us for reducing public spending next year—for example, reducing eligibility for child trust funds—but of course that would require legislation in this House, which it is unlikely could be delivered within the next financial year. Others have said that we could reduce eligibility for child tax credits, but of course the proposals that we were told would save £400 million would, in fact, save only £45 million. So the Conservative party has offered no credible plans to reduce public spending next year. However, the key point is that it would be the wrong thing to do because it would put at risk the recovery that we have fought hard for.
We detect avoidance early and we tackle it quickly. The disclosure regime has already helped to prevent more than £12 billion in avoidance opportunities, and in the pre-Budget report, we announced further steps to strengthen it. Building on progress at the G20 London summit, we have signed 21 agreements on tax information exchange with other countries since last January.
If the Government are serious about tackling tax avoidance, why have 25,000 jobs in Her Majesty’s Revenue and Customs been cut in the past five years, including recently 20 in my constituency? Surely that hampers the ability of the Minister’s Department to investigate, gather evidence and prosecute dodgers.
No, we have to manage the affairs of HMRC and other Departments in the most efficient and effective way possible. As the hon. Gentleman said, there has been a substantial reduction in the number of people working in HMRC, partly because of the merger between the old Customs and Revenue Departments, which has enabled a more efficient operation. It is doing a better job, and we are reducing the tax gap, bringing in the tax that the Exchequer needs.
May I applaud the Government’s plans to curb bogus self-employment in the construction industry, which costs this country £1.7 billion a year in lost revenue? May I ask the Minister for an assurance that he will resist any opposition to our plans from construction industry bosses who only want to maintain that culture of hire and fire in the industry?
Private Finance Initiative
Financial viability is assessed as part of the consideration of a project’s outlined business case and follows Treasury Green Book rules.
The Economic Secretary will be aware that the country is dependent on a number of waste facilities under private finance initiative projects set when the economy was in a better state. How confident is he that those PFI initiatives will be bid for and met, and that, as a result, the Government will be able to meet their landfill targets?
On waste projects, and many other projects supported through the PFI, the Government have a record of which we can be proud. The hon. Lady will be aware of the Manchester waste project of the last calendar year and of the support for it from the Treasury industry finance unit. A number of other waste projects are currently in the PFI pipeline and extend to £19 billion of potential projects. We want to ensure that those projects are delivered, that they deliver good value for money for the taxpayer, and that they help local authorities to meet their landfill targets and our overall carbon targets.
Fiscal Support (Families)
The child element of the child tax credit will rise by £65 in April; working tax credit and child benefit will rise by 1.5 per cent; tax thresholds will be frozen, providing a real-terms gain for taxpayers; and, from September, free primary school meals will start to be provided to children from lower income working families.
I thank my right hon. Friend for that answer. May I pass on to the Government the thanks of many of my constituents for the working families tax credit—as it says on the tin, “working families”. He knows that one of the major problems that a family can face is unemployment. What more can he do to reduce the fear and possibility of families facing that hardship?
My hon. Friend is absolutely right. Tax credits have played a crucial role, not least in protecting families from unemployment during the downturn, because access to the tax credit system has made reduced hours, instead of job losses, more feasible for people. For example, from April to October last year, 400,000 families whose incomes have fallen have had extra help, averaging £37 per week. Alongside that, of course, we have provided substantial additional resources to Jobcentre Plus, which is why, contrary to many expectations, the number of people in work has remained much more buoyant.
Can the Minister confirm whether Energywatch is right to say that the number of families in fuel poverty, at 5.9 million, is greater than at any time in the past 10 years? Could he also tell the House whether the Government plan to meet the child poverty target that they set for 2010?
It is of course the case that we have provided substantial support to families over the past couple of years during the downturn. That is why, for example, there are so many fewer home repossessions than were expected, while unemployment is less and the crime rate has gone down rather than up. There is still more to be done on fuel poverty. On child poverty, independent estimates are that we will be about two thirds of the way towards the 2010 target, despite the obvious challenges that we have faced during the downturn, and, as the hon. Gentleman knows, we have legislated for a 2020 target as well.
Many parents are unaware of the support available to them to help them pay the costs of child care if they want to go back into work or remain in work. Will my right hon. Friend liaise with colleagues to ensure that parents understand that there is a child care tax credit, that there will be more free child care places later this year and that there will be pilots for low-cost loans to help parents pay up-front child care costs, so that they can remain in work and their children can be lifted out of poverty?
Better Healthcare Closer to Home
Moving health care closer to home is a policy objective of this Government. I think that the hon. Gentleman has in mind a scheme that has been submitted by his local NHS to the Department of Health. That scheme is currently under consideration by that Department and when it comes to me, I can assure him that I will review it thoroughly, but also promptly.
I would like to thank the Health Minister, the right hon. and learned Member for North Warwickshire (Mr. O’Brien), for his support for the project. Would the Chief Secretary be willing to meet concerned local Members of Parliament over the next couple of weeks, so that we can ensure that the pressure is maintained on the different partners involved in the project and ensure that Better Healthcare Closer to Home is delivered for the residents of Sutton and Merton? The next four weeks are critical.
I am always happy to meet groups of right hon. and hon. Members. In particular, I would like to put on record my thanks to my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for her tireless campaigning on behalf of the project. We are proud of the number of hospitals that the Government have built. We said that we would build 100 new hospitals by 2010; in fact, the Department of Health is on course to build 126 by the end of this year. The scheme to which the hon. Gentleman referred is yet to come to me for approval. The House would expect me to look at the business case thoroughly when it arrives, but as I said to him a moment ago, I also understand the need for speed.
My hon. Friend can rest assured on that point. I met the Secretary of State for Health last week to begin our preparations together for considering that particular project. I hope that she will be able to join me and any other hon. Members who would like to get together to discuss that important new development.
Public Sector Debt
As set out in the pre-Budget report, public sector net debt is forecast to peak at 77.7 per cent. of GDP in 2014-15. Projections beyond that are consistent with debt falling as a share of GDP in 2015-16. Although the UK’s public debt is rising in response to the recent shocks, it will remain in line with that of other advanced economies.
That means that the national debt will reach £1.4 trillion. Is the Minister aware that if we repaid debt at the rate of £1 every second, we could repay £1 million in 12 days, but that it would take 44,000 years to repay the total debt to which he has alluded? Does that not strengthen the case for starting early?
As has been made very clear, we want to take action to curb the deficit and reduce debt. We have set out plans to halve the deficit over four years. The right hon. Gentleman should be aware that our figures for net debt compare pretty much with those of France and Germany and with the G7 average this year, not according to the Government’s figures, but according to the International Monetary Fund’s figures. I am sure he will welcome that.
Alcohol (Minimum Price)
There are a number of different approaches available if proposals for a minimum price for alcohol were implemented. The revenue impacts, which could be positive or negative, would depend on the level of any minimum price and the way in which minimum pricing was implemented.
We would have to take such a consideration into account if we were introducing minimum pricing. Duty alone could not deliver minimum pricing for alcohol products, but when we consider changes to duty rates, we have to consider impacts on the industry, as well as on Exchequer revenues.
I thank my hon. Friend for his question. I refer him to the answer that I gave to the original question. We cannot use alcohol duty alone as a mechanism to deliver minimum pricing for alcohol products; there are a number of practical and legislative constraints. We are, of course, always willing to consider the matter further and to consult other colleagues about it.
Like the hon. Member for Bolton, South-East (Dr. Iddon), the Health Secretary appears enthusiastic about minimum pricing, but it would hit responsible drinkers hard, without any benefit to the public finances. I know that much of the Government’s economic policy is back to the 1970s, but setting the price of goods is surely a step too far. Instead of trying to fix prices, should they not try and fix the problem and raise taxes on problem drinks, rather than on responsible drinkers?
I must remind the hon. Gentleman that there is an EU rates and structure directive that means that beers and spirits must be taxed in proportion to alcohol content, and wines and cider must be taxed in bands of alcohol strength, which constrains what we can do on specific drinks. Also, alcohol duty is paid by producers. That applies equally, regardless whether products are sold in pubs or supermarkets. Many of the problems cited by hon. Members are not about responsible drinkers in pubs, but about the prices charged in supermarkets. As I said, alcohol duty alone cannot deliver a solution.
Early Intervention Policies
The Government fully recognise the benefits of early intervention and the value for money that it brings. That is why I announced in the Command Paper that I laid before the House before Christmas a new programme of work designed to test innovative forms of finance aimed at boosting investment in early intervention.
We all seem to be agreed that we need to reduce the deficit by half over four years, but there are two ways to do that—either by reducing public expenditure, or by reducing the need for that public expenditure by intervening early in the problems that much public expenditure is spent on, so that that expenditure is not necessary. Will my right hon. Friend and the Treasury exercise due diligence in looking at the financial instruments that are being developed on the capital markets, which could raise money in the first instance to make sure that early intervention programmes can be sustained?
I would like to put on record my personal thanks to my hon. Friend for the pioneering work that he has overseen in Nottingham, where there is a great deal for policy makers and for politicians to learn. Like him, I am keen that we explore new ways of drawing money into innovative projects focused on early intervention, and I hope the measures that we have announced to create in this country a social investment wholesale bank, together with social impact bonds that will be brought forward by the Secretary of State for Communities and Local Government and, I hope, the Secretary of State for Justice will be a substantial step in testing some of the ideas that are being pioneered now in Nottingham.
Fiscal and Monetary Policy
As my right hon. Friend the Chancellor said some moments ago, we will continue to provide fiscal support during 2010-11, alongside the monetary policy action being taken by the Bank of England.
My hon. Friend will not be surprised to hear that when I met representatives of 3M Health Care in my constituency, it said that it was quite clear that expenditure in the health service over the last 12 months had meant the difference between keeping the company going and it possibly folding. Will he ensure that moneys spent recognise the impact of such expenditure on the private sector as well as on the public sector? Those 600 company jobs in Loughborough are thanks to the excellent work of investing in the national health service.
My hon. Friend is absolutely right to highlight the importance of public procurement in supporting private sector jobs in this country. The figures show that more than 95 per cent. of Government spending on procurement goes to UK firms. I am sure that we all appreciate that. There is a direct link between Government spending, public procurement and jobs in the UK economy. We need to ensure that we get good value for money while at the same time supporting UK firms.
Would the Minister not accept that this country’s elderly can also help to maintain demand in the economy? Bearing in mind that many of them rely on their savings, on which they getting a negative return because of inflation and taxation, is it not time that the taxation system enabled the elderly, who rely upon savings, to get some meaningful return for their responsibility?
I know the hon. Gentleman has always raised the issue of pensioners and is a champion of them. He will be aware, however, that this Government have taken many pensioners out of poverty through the measures we have introduced—for example, by increasing the limits on individual savings accounts in the 2009 Budget and by providing an opportunity for tax-free savings for the over-50s, including pensioners, which is to be extended to all savers from April this year. Those are welcome measures, and as a Government we will always want to acknowledge the vital role pensioners play in contributing to our economy—just because people are retired, it does not mean that they are not economically active citizens and are not contributing to our society.
The Treasury’s responsibilities remain as I have set out on previous occasions.
Given that this Government’s policies have failed to reverse the rising income inequality of the Tory years, does the Chancellor agree that raising the basic tax allowance would help pensioners like Mr. Whitty of my constituency, who has very little and yet still pays income tax?
Over the past 12 years, we have taken measures to take an increasing number of pensioners out of tax precisely by raising their personal allowances. [Interruption.] I am sure that the hon. Lady is being unintentionally distracted by her hon. Friend the Member for Southport (Dr. Pugh), but I was making the point that because we have raised personal allowances for older people, we have been able to take more pensioners out of tax. On top of that, measures such as the winter fuel allowance and others have helped elderly people meet their responsibilities and enjoy a better standard of living than they would otherwise have done.
I would like to assure my hon. Friend that HM Treasury remains fully supportive of carbon capture and storage. We are committed to the demonstration projects in the UK and we welcome the use of EU funds to bring those projects forward. It is correct that the negotiations and discussions in the comitology process are going on today, so I do not wish to prejudice them. Let me nevertheless be clear that any decisions to support the specific proposal will not in any way prejudice future negotiations on the auctioning of allowance under phase 3 of the directive.
Yesterday, in response to a freedom of information request from us, the Treasury published a document to which it had referred—I have it here—citing international examples of spending consolidations. It has redacted pages and pages of it. It has even redacted the front cover. Can the Chancellor explain why?
I am sure that there was a good reason. As the hon. Gentleman and the House know, the Freedom of Information Act provides for advice to Ministers to be withheld. As for the document referred to, for the most part, it brings together contemporary literature on the question of fiscal consolidation.
It seems to me, however, that it is the hon. Gentleman who has the problem. Five times today he was asked what his plans were for next year, and five times he refused to answer.
We have committed ourselves to maintaining spending on Sure Start children’s centres in real terms beyond next year. We will continue that spending in the following two years in order to protect the invaluable help for families that those centres provide, which my hon. Friend rightly supports and from which people across the country are benefiting.
As the hon. Gentleman will remember, there was correspondence later which was followed up. However, I appreciate his concern about the impact of the problem in his area and the potential of the council’s proposals, and I shall be more than happy to look at those proposals again.
We have made a great deal of progress on tax information exchange agreements in the last year. I believe we have made more progress in the last year than in the previous 10 years put together. Last week the OECD published a report showing good progress across the board. In regard to Belize, however, I can tell the House that no agreements have been signed so far.
The House will know that on 10 December last year the Government published a wide range of proposals relating to matters including transaction taxes, increased capital and the insurance levy. All those matters are still being discussed. The IMF has been asked to come up with proposals, which will be discussed at the spring meetings.
As I said earlier, there are problems which we know need to be dealt with at global level. We have constructive proposals for doing that, and we will work with other countries to ensure that this year we implement what we agreed to do last year. That is critical.
My hon. Friend will know of the virtues of the scheme that was introduced in England. It can not only deliver a reduction in families’ heating bills, but have an impact on reducing the country’s carbon emissions. The requisite spending is a devolved matter in Scotland. Barnett consequentials were provided on the £20 million addition that was made to the budget of the Department of Energy and Climate Change, but the argument will of course need to be prosecuted in Scotland.
I certainly will. It is the case that a new computer system is being used for PAYE this year. It is working very well and is enabling HMRC to hold in one place all the records on one person’s employment and pensions, which was not possible in the past. As the hon. Lady has said, there has been an issue about tax codes, and HMRC will be working to iron out the problem well before the start of the new tax year. I will look into the issue about the phone line—for those who are interested, the number is 0845 3000 627.
I can certainly assure my hon. Friend that we are very concerned about these high-cost credit products. That is why the Office of Fair Trading is bringing forward new guidance on irresponsible lending to cover the marketing and selling of credit products. We are determined to tackle irresponsible lenders, and we are sure that we will be able to take action against those who are unable or unwilling to follow the guidance.
Is the Minister aware that businesses in my constituency are suffering because they cannot get the credit that they need to survive? Can he outline what recent instructions he has given to those banks in receipt of billions of pounds of taxpayers’ money to ensure that small businesses can get the credit that they desperately need?
As I said earlier, we have agreements with the Royal Bank of Scotland and Lloyds to increase the amount of money that they are lending to the small and medium-sized enterprise sector. That lending has been issued, although the net figure is affected by the fact that there have been some quite large-scale repayments. In the first instance, the hon. Gentleman should do what I do and write to the branch of the bank that the small business deals with. If that does not work and the hon. Gentleman continues to have difficulties, I will be happy if he gets in touch with me and lets me know what those specific difficulties are. He will appreciate that sometimes the bank may be acting unreasonably, but that at other times there may be a reason why someone has been refused credit.
I listened with interest to the answers that my right hon. Friend the Chancellor gave to Question 1. The Americans appear to favour safe retail banks, guaranteed by the taxpayer, and casino investment banks that would not have such guarantees. I am sure that he would agree that the British taxpayer should not be on the hook for the risky activities of British bankers. Does he also agree that it is important that we get an early decision from the Government on how they intend to proceed?
First, I think that we should wait and see what the final American proposal is because discussions are taking place and it may not be quite as was reported last week. We will see. In relation to my right hon. Friend’s point about what he calls casino banks, the safe investment banks, the problem with that approach was probably demonstrated most vividly in relation to Lehmans. It did not have a single retail deposit in it. The then American Administration let Lehmans collapse and it brought down the world's banking system on top of it. That rather makes the point that it is difficult for any Government to say in advance that they would never step in in relation to a particular bank, especially if there were a systemic crisis, as there was in 2008. That is the difference that I have in relation to approach but I look forward to discussing the matter with the United States Treasury Secretary when I see him in Canada on Friday.
Last Wednesday, the Chancellor made a welcome announcement to encourage greater investment in gas production west of Shetland. Can he confirm that that sends a signal to other investors in the industry that, if they are willing to come to the Treasury with detailed cases, the Treasury will be willing to look at ways to unlock further potential from our resources offshore?
Up to a point; I would not want to raise false hopes. As the hon. Gentleman knows, because he has long taken an interest in these matters, for some time, there has been a lot of discussion on how we can open up the waters to the west of Shetland to get at the oil and gas supplies there. It is estimated that about 20 per cent. of oil and gas supplies are there, waiting to be exploited. The measure that I introduced last week will, I hope, mean that some companies will be prepared to consider investing there. That is very important if we are to safeguard the security of supply of oil and gas, which is important. Of course I am always open to suggestions, but I would not want people to think that they only had to knock on the door and they will get what they want. That is probably not the case.
Will the Minister take a look at the question of the differential interest rates that apply in many private finance initiative contracts? Interest rates were a lot higher when those contracts were signed, and all interest rates are now a lot lower. Cannot an area of equilibrium be found among those currently paying such high interest rates?
My hon. Friend is well aware of how many of these schemes there are and the details of how they operate, so he will know about the contractual obligations that are entered into and what scope there might be for renegotiating some of the existing contracts. We always look at this issue closely and discuss it widely with the PFI community, and I can certainly undertake to take away my hon. Friend’s suggestions and examine them carefully.
Steps to address excessive risk-taking in the financial sector are necessary, but financial regulations must not be introduced at the expense of competitive business. What is the Chancellor doing to ensure that this principle is followed in the negotiations on the directive on alternative investment fund managers?
The hon. Gentleman will no doubt be aware that we are discussing that directive with the Commission and the presidency, which is held by Spain, because we have concerns about it. The hon. Gentleman is absolutely right that we must ensure that at one and the same time we have sufficient supervision and regulation to make the system safer while also remembering that that must operate alongside the ability of financial institutions to generate the finance upon which our economy and those throughout the world depend.
What is the Treasury’s attitude to proposals by the Campaign for Real Ale and the British Beer and Pub Association to the European Commission that countries should be allowed to levy a lower rate of duty on draught beer, thus helping pubs in the same way as a lower rate of duty on small brewers has helped them?
The cost of London Crossrail is £16 billion, with extra money being found from central Government at Westminster, whereas the cost of the Glasgow air link would be a 40th of that. What will the Government who control the UK purse strings do? Will they take the opportunity to provide the extra money for the Glasgow air link?
Well, I have to say to the hon. Gentleman that it was the Scottish National party Government in Scotland who cancelled the Glasgow air link. Therefore, how on earth he has got the gall to stand up and somehow blame someone else really says it all about the nationalists. They cut the rail link; they have to live with the consequences.
Rugby league remains a game rooted in the community. It is not awash with money and players are not paid huge salaries, yet the Leeds Rhinos testimonial committee has told me that testimonials will now be taxed retrospectively. That is unacceptable; how can the Treasury change the rules, which will damage a sport and its players?