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Topical Questions

Volume 507: debated on Tuesday 16 March 2010

I appreciate that the Chief Secretary is pretty embarrassed about his U-turn this morning. Last week, he ruled out VAT increases, presumably to curry favour with the Prime Minister and undermine the Chancellor, so can he simply explain to the House when and why he changed his mind?

I have merely set out the statement made by my right hon. Friend the Chancellor at the pre-Budget report about how we plan to halve the deficit over the next four years by raising taxes by £19 billion. We will do so in a fair way, unlike the Opposition, if they ever get into power, by ensuring that half the taxes that we raise fall on the shoulders of the top 5 per cent. of earners. Alongside that, we will cut capital and current spending by £38 billion. In that way, we will halve the deficit over four years, as set out by the Fiscal Responsibility Act 2010. What we will not do is pursue the Opposition’s approach, which is to introduce cuts now and put the economy into a double-dip recession. We will not follow the approach set out by the shadow Business Secretary this morning by reducing our deficit to 3 per cent. of GDP in 2014-15, because that would require taking out something like an extra £20 billion to £30 billion of public spending—a strategy that has not been renounced by the Opposition Front Bench this afternoon.

As right hon. and hon. Members know, topical questions and answers are supposed to be shorter— a fine example, I know, will now be provided by Mrs. Madeleine Moon.

T3. Low interest rates on savings in the UK can encourage people who receive what appear to be high-interest offers by telephone, e-mail or letter to invest in US share scams—so-called boiler scams. How can we alert the public to those scams so that they avoid those scam savers who are stealing our investors’ money? (322212)

Boiler room scams are completely unacceptable. It is the responsibility of the Financial Services Authority to take action in this area, and it has increased its surveillance capacity quite substantially. My hon. Friend is right to make the point about the importance of savers. People need to have confidence in the savings products in which they invest, and it is the responsibility of the regulatory authorities to ensure that that confidence is not misplaced.

T2. Will Ministers promise to revise the business rate valuation model for rural filling stations, many of which are seeing increases in rates of more than 300 per cent. this year, putting many of them out of business as a result? (322211)

The Valuation Office Agency is directly responsible for the matter. For the past two and a half years it has been involved in discussions with representatives from the industry and their agents. There must come a time when negotiations stop. There are three aspects of the model. They are not exceptional, but I agree that some of the rating valuations appear to be very high. The VOA continues to work on the matter.

T5. If Ministers accepted the advice of the shadow Business Secretary and cut a further £20 billion to £30 billion from the economy, what would be the cost in lost output, employment and services, and who would pay that cost? (322214)

Order. I know the Chief Secretary will be well aware, because he is a clever fellow, that the responsibility of the Government does not extend at Question Time to the costing of the policies of other parties, so I know he will not comment on that.

If I were asked to take £25 billion out of public spending, I would merely point out that that would involve halving the education budget or increasing VAT to 23 per cent.

T4. Does the Chief Secretary accept the reproach from the European Commission that the plans for deficit cutting in this country are unambitious? Which of his various views on VAT were designed to address it? (322213)

I said this morning that we think the European Commission is wrong to say that we should be trying to reduce our deficit to 3 per cent. of GDP by 2014-15, which is the timetable proposed by the Commission. I look forward to members of the shadow Front-Bench team confirming that that is their position, too.

What progress is being made with the G20 in making the international banking industry more responsible by introducing such measures as a Tobin tax?

I welcome the campaign for the Robin Hood tax, as it has been described, for the energy that it has generated and the interest in this important area. Any changes in that direction would need to be made on a global basis, not just on a UK basis, and the IMF will look at that option with others to see how the balance of risk and reward between the banks and taxpayers can be changed for the future.

T6. A few moments ago the Economic Secretary recognised that the laws of economics apply to the Government. As one of the final actions here of a decent and likeable Minister, would he dare take that knowledge to his Prime Minister, who some years ago claimed to have abolished boom and bust and therefore have the laws of economics apply to a higher power? (322215)

I thank the hon. Gentleman for his kind words, which are typically generous of him. I do not think the Prime Minister needs any lectures in economics. He was an outstanding Chancellor of the Exchequer and is a very effective Prime Minister, as I am sure the Opposition will recognise in the course of the upcoming election campaign. I will happily watch it from the sidelines.

Why, in the current economic climate, do we allow the salaries of senior managers in the public sector, such as vice-chancellors of universities, chief executives of local authorities and chief executives of housing associations, to rise way above the rate of inflation, while those same managers are encouraged to keep the salaries of the public sector workers whom they manage at a very low level?

We have repaired the salaries of public service workers in this country. Over the past decade, public sector wages have risen by about 25 per cent., but at a time like this we think it is important that senior leaders in the public sector show an example, which is why, in our evidence to the Senior Salaries Review Body, we recommended a pay rise of 0 per cent. That was the rise that we implemented across the board last week.

T7. Do the Government accept that the staggering rise of 35 per cent. in tax and duty on wine and spirits has had any connection with the loss of 25,500 jobs, and 2,000 jobs in that sector? What plans do the Government have to help that important sector of the economy? (322216)

I do not want to pre-empt any announcements that will be made by my right hon. Friend the Chancellor in the Budget next week. We recognise that alcohol duties play an important part in fiscal consolidation, but we also recognise that the alcohol industry creates many jobs. We will get that balance right.

When the time comes for the Government to sell off their shareholdings in the banks that they rescued last year, what steps will they take to ensure that the taxpayer gets best value for money?

My hon. Friend is absolutely right to raise that as an issue. The Government have made substantial investments in institutions such as Royal Bank of Scotland, Lloyds Banking Group, Bradford & Bingley and Northern Rock, and we need to ensure that we get best value for the taxpayer. We will not be giving these away, and it is the responsibility of UK Financial Investments to manage the Government’s interests in these matters. We do not want to own these for the long term. We do want to make sure that they go back into the private sector. But it has to be done at a price that works for the taxpayer.

T8. For the purpose of furnished holiday letting rules, will the Minister please explain why it is that if a holiday letting provider is providing a static boat, they are deemed to be trading, if they are providing a static caravan, they may or may not be trading, but if they are providing a chalet, they are deemed definitely not to be trading, very much to the detriment of their future business? (322217)

These matters are the result of lengthy application of the law. We have said that the current concession, which applies only to freehold holiday lets in the UK, may not be consistent with European law and therefore we will withdraw the concession from 2011. But the definitions are very well established and familiar in tax law.

The announcement recently by the Treasury to extend the offshore new field allowance to developments west of Shetland, will, I hope, allow the Laggan-Tormore development to go ahead. Has my hon. Friend worked out how much the development of the west of Shetland province could be worth to the British economy in the years that follow?

We certainly wish to assist in the development of fields where it is more difficult to get out the natural resources, not only for the security of supply for the UK but for the benefit of the whole economy. I do not have the exact figure to hand, but I will be more than happy to write to my hon. Friend.

T9. When the Chief Secretary said last week: “We don’t see a need to raise VAT”,what exactly did he mean by that? (322218)

At the risk of repeating myself, we said that over the next four years we will halve the deficit—we have not seen a plan as clear as that from the Conservative party—and we said that we would do that in a fair way. We said that in part we would need to raise taxes, and we set out very clearly how £19 billion of taxes needs to be secured, alongside spending cuts. I hope that during the next week or two we will see a plan of equal clarity from the Conservatives, and I hope that as part of that plan they will renounce the proposal that the shadow Business Secretary set out this morning to take another £29 billion out of public spending by 2014.

I put it to my right hon. Friends that cuts in public spending are not the only way to reduce the deficit. We could, for example, raise the basic rate of income tax, not to as much as it was under Mrs. Thatcher, but by a penny or two.

Our view is that those with the highest incomes should bear the largest share of the burden of consolidation. That is the reason we have announced the introduction of the 50p rate of income tax on the highest incomes, and the restriction of personal allowances also for people with high incomes. We think that that is the right place for the consolidation to start.

T10. Does the Chancellor agree that we now need a dangerous banks Act, with owners who cannot control them refused permission to maintain them? (322219)

That just shows what would happen if the Liberals held the balance of power in a future Parliament.

The Chief Secretary to the Treasury referred to the budget deficit. Is the UK’s budget deficit as a proportion of GDP higher or lower than that of Greece?

We have the highest budget deficit, pretty much, in the G7, but the reason why we have a high budget deficit is that we chose to act to protect jobs, to protect homes and to protect businesses over the course of the past year. As the International Monetary Fund has recognised, the reason why we had that flexibility to act was that we went into the recession with the lowest debt of any country in the G7 apart from Canada.

The Minister prays in aid EU legislation to change the basis of furnished lettings. Will it apply to French gîtes as well?

The proposal that we have announced is to withdraw the concession, so it would not apply to furnished holiday lets outside or inside the UK.

Last week Sutton council granted planning permission for a new patient wing to be built at St. Helier hospital, removing the last obstacle to Treasury approval for the necessary investment. Will the Minister today give my constituents and NHS workers the good news that Treasury approval is coming and coming very soon?

I thank the hon. Gentleman and my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for the consistent way in which they have championed the need for a new hospital in their area. The hon. Gentleman knows that I am in close discussion with the Secretary of State for Health, and we hope to make an announcement on that matter shortly.