House of Commons
Monday 14 June 2010
The House met at half-past Two o’clock
[Mr Speaker in the Chair]
Business Before Questions
Queen’s Speech (Answer to Address)
The Vice-Chamberlain of the Household reported to the House, That Her Majesty, having been attended with its Address of 25th May, was pleased to receive the same very graciously and give the following answer:
I have received with great satisfaction the dutiful and loyal expression of your thanks for the speech with which I opened the present Session of Parliament.
That there be laid before this House Returns for Session 2009-10 of information and statistics relating to:
(1) Business of the House;
(2) Closure of Debate, Proposal of Question and Allocation of Time (including Programme Motions);
(3) Sittings of the House;
(4) Private Bills and Private Business;
(5) Public Bills;
(6) Delegated Legislation and Legislative Reform Orders;
(7) European Legislation, etc;
(8) Grand Committees;
(9) Panel of Chairs; and
(10) Select Committees.—(The Chairman of Ways and Means.)
Oral Answers to Questions
Work and Pensions
The Secretary of State was asked—
Jobcentre Plus Advisers
I have no current plans to increase the amount of information that Jobcentre Plus advisers can provide to local health practitioners and Sure Start children’s centres. Social security information can be shared with those parties with the consent of its customers.
One hopes that the new Government will still support Sure Start children’s centres. Certainly, an inquiry of the former Children, Schools and Families Committee showed that the sharing of information was absolutely crucial. Does the hon. Lady agree that the sharing of information, knowing how our children are surviving and thriving and when they are in trouble, is vital to children’s future health and welfare?
I thank the hon. Gentleman for his question. As he will be aware, the coalition Government have protected Sure Start from in-year cuts, and I am sure that he and the whole House will welcome that announcement. He has looked at this issue in detail, and in the most recent report of the CSF Committee, of which he was the Chairman, there was no clear evidence that data sharing between Jobcentre Plus and children’s centres was a problem. However, there can be such a problem between children’s centres and health professionals. The Government believe that early intervention is absolutely vital in the work that we are doing to alleviate poverty and that co-ordination and signposting between those organisations are important. That is one of the reasons why we have put Sure Start health visitors in Sure State children’s centres.
In agreeing with the hon. Gentleman about the importance of co-ordination, may I ask whether my hon. Friend agrees that most of the worst disasters that affect children that have become public are concerned with a lack of information shared between the authorities? Does she agree that it is extremely important that all those who are involved in these matters truly understand what each hand is doing?
My hon. Friend is obviously talking about a great many different data sources. As I said, information-sharing difficulties between Jobcentre Plus and children’s centres is not a particular issue of concern, but I take his point and I am sure that our new Cabinet Committee on social justice may want to consider it to ensure that nothing is being missed.
Will the Minister explain how sharing and co-ordinating between those agencies will be helped by the reduction in the working neighbourhoods fund, which joins lots of different Departments and local agencies? As a result of the Government’s recent announcement, £1.2 million has been taken away from that fund in Nottingham. That money pays for apprenticeships, welfare rights advice and helping to reduce teenage pregnancies. How will that reduction help such work?
Undoubtedly, the hon. Gentleman will be very pleased about the coalition Government’s announcement of 50,000 additional apprenticeships, which will provide the sort of long-lasting job opportunities that his constituents want. Obviously, other decisions on budget taking are made locally, and it is for local authorities to make important decisions on how best to use their local resources.
One of our top priorities is to reduce the number of people—nearly 5 million—on incapacity, lone parent or jobseeker’s benefits. We will reform the benefits system to make work pay and reassess the position of people on incapacity benefit, through a single, integrated package of support, to give people the personalised support that they need to find work.
I congratulate my right hon. Friend on his appointment. He might be aware that this subject was raised regularly on the doorstep in Southend West, since when I have found out from the Department that 1.4 million people have been on out-of-work benefits for nine or more of the past 10 years. How does he intend to deal with that situation fairly but firmly?
My hon. Friend is absolutely right. The figures are somewhat worse than that—the UK has a higher proportion of children growing up in workless households than almost any other EU country. We have had a very high level of residual unemployment for far too long. The key to dealing with that is the integrated Work programme, which will look at ways of trying to get back into work some of those long-term unemployed—many of whom have been parked on incapacity benefit and forgotten about—and support those who have not been contacted. Something like 40% of unemployed people had not been contacted for over six years; no one had bothered even to speak to them. We will also try to reform the benefits system so that when someone can go to work they will straight away see that it is worth their while to do so, whereas at the moment work simply does not pay, or appears not to.
The first thing I can say to my hon. Friend is that one of the key coalition drives is to stop the would-be jobs tax, the national insurance charge, that was to be imposed by the last Government when they were in power because that would have taken away a great many opportunities for young people. The other thing is to make sure that the targeted Work programme, which the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling), will be speaking about in more detail later, helps the youth unemployed get back to work. We must remember that after all the money that was spent by the other Government, youth unemployment is now higher than it was when they came into office in 1997.
Last week, the new Government announced that the jobcentre in Deptford, serving 2,500 of my constituents, is to be closed. Will the right hon. Gentleman meet me urgently to discuss how he plans to help the unemployed in my area, or is this to be the first example of how the coalition seeks to protect the poorest and most vulnerable from its savage cuts?
I am very happy to meet the right hon. Lady at a moment of her convenience. I understand that the centre had reached the end of its lease, and we are trying to find a way of ensuring that there is support in the area. I am happy to meet her and deal with those specifics.
The Secretary of State says that he wants more people off benefits and in work. He will know that that depends on their having jobs to go to. Can he tell the House exactly how many of the 205,000 jobs planned under the future jobs fund he is cutting as a result of his plans?
The right hon. Lady will know that we are not cutting any jobs at all. We are saying that we will stop the part of the programme relating to jobs that were not contracted for. All the other jobs that are contracted for will go ahead. Originally it was estimated that that meant that 140,000 jobs would be found. In fact, we understand the number to be about a third fewer than that—about 100,000—although we will know when we get closer to the time.
I say to the right hon. Lady that the money that we save will go towards preventing the jobs tax—the national insurance tax—that her party was going to impose on those people when they took work, which would have meant fewer people being in work. We will also have the money to make sure that 50,000 new apprenticeships, which are sustainable jobs, come into existence under this Government.
Can the Secretary of State confirm that the Office for Budget Responsibility, which today issued its forecasts based on the previous Labour Government’s tax and spending plans, in fact confirmed that unemployment would continue to fall in future years, including the plans for national insurance contributions? Can he also confirm that the Labour Government’s plans set out at the Budget were for 205,000 jobs under the future jobs fund this year and next, and his Department’s website says that only 111,000 jobs will be funded? Can he confirm that 205,000 take away 111,000 is 94,000, and that he will therefore be cutting nearly 100,000 job opportunities for young people and the long-term unemployed—cutting support for the jobless when they need it most?
I know that the right hon. Lady feels personally wedded to this programme, but those figures are quite ludicrous. She poses notional figures of jobs that she might have created had the scheme worked against jobs that we believe are likely to be there, so a silly game is being played out.
Whether the right hon. Lady likes it or not, had she got into government—heaven help us—she would have had to cut back on various budgets, as her own Government at the time said they would. Where would she have made those savings? She cannot, now that she is in opposition, simply say no to everything. Her Government went on a spending spree like drunks on a Friday night, and we have all got the hangover now.
Would my right hon. Friend agree that the right way to get people back into work is to support our thriving small business and entrepreneurial sector? One of the key measures is to see that the small business sector has access to finance—something that, under the last Government, Labour Members failed to achieve.
My hon. Friend is absolutely right. What is so often forgotten by Labour Members is the need to make sure that jobs are created by a vibrant small business sector. Of course, the first thing that would have damaged that sector would have been the rise in national insurance, which we have managed to stop as a result of our changes.
Business and the economy are, as the right hon. Gentleman knows, devolved matters. However, Jobcentre Plus in Wales is notified of thousands of vacancies each month. Jobcentre Plus advisers ensure that jobseekers know of all sources of vacancies, and that is included in the review of jobseekers’ job search activity every two weeks. That focus on jobs will also be a key part of the support offered to people who are migrating from incapacity benefit to the employment and support allowance. Jobcentres in Wales also regularly hold jobs fairs to highlight employment and training opportunities.
Could the right hon. Gentleman tell the House how he thinks cutting £320 million from the future jobs fund will assist job creation in Wales, and will he give me a guarantee today that the almost 10,000 jobs that have been agreed under the future jobs fund, from Rhyl to Rhondda, will not be cut by his Government?
What the right hon. Gentleman needs to understand is that Wales and every other part of the United Kingdom need sustainable employment, and that is why we needed to stop the jobs tax that the last Government were planning to introduce. That is also why we need to provide incentives for small employers—those employing fewer than 10 people—to take on people by giving them a discount on their national insurance contributions. Those are measures that can and will make a difference.
Many of my constituents have Welsh connections—[Interruption.] It is true. What would the Minister say to a constituent of mine who is physically very fit, but who has mental illness? How will we help people with mental illness back into work?
That is particularly relevant to the situation in Wales, where there are substantial numbers of people claiming incapacity benefit or employment and support allowance, as there are in other parts of the country, such as in my hon. Friend’s constituency. We need to ensure that we provide the best possible support, so that we give those people an opportunity to move into work. That is what we will do from later this year, when we begin work on migrating people from incapacity benefit to the employment and support allowance. I am confident that we can give many of those people an opportunity to get back into the workplace and make more of their lives.
The hon. Gentleman is absolutely right: it is necessary for us to support employment in the private sector, particularly among small employers; that is why I made particular reference to our plans regarding national insurance contributions for small employers. I know, because we in the Department for Work and Pensions have already looked, that we have a good record on paying small employers, and I hope that my colleagues across Government will do everything that they can to support those small businesses, as they will provide the jobs of the future. It is not Government schemes that will create wealth and employment in future, but real business people, building real businesses.
Child Maintenance and Enforcement Commission
The whole issue of tackling child poverty and supporting families is the key objective of this Government. A significant component of that is that parents should take responsibility for their families, even if both parents do not live together. However, the Government have inherited a significant debt package of £3.8 billion, and some of that debt dates back to before the Child Support Agency was amalgamated into the Child Maintenance and Enforcement Commission. Furthermore, I understand that CMEC has not set a target for the recovery of the debt. I am meeting the chief executive of CMEC this week, and I intend to ask him to do a review on how arrears are collected, and I will insist that he sets a target for the collection of such arrears as soon as possible.
I am concerned that the Child Support Agency and its successor body often do not pursue absent fathers who are paying nothing and file those under “Too difficult,” and instead target people who are already paying to try and screw more out of them. Will my right hon. Friend ensure that the Child Maintenance and Enforcement Commission goes back to what it was set up to do—to target absent parents who pay nothing, rather than trying to get more and more money out of the many people who are doing their best?
I can guarantee to my hon. Friend that that is exactly what we will try to do. It is not the easiest set-up. There will be changes later in the year to the CSA, but I can promise him that we want it to make sure that those who owe that money pay it. The previous Government let them off the hook.
There are already plans for the organisation to make sure that it improves the quality of its work. It was set up to make sure that absent parents, for whom we all have to pay because they are not paying their way, ante up to their responsibilities, which is good both for their children and for the whole of society.
Departmental Pay Rates
The figure of £7.60 per hour to which the hon. Lady refers was the London living wage until last week, and I can confirm that all directly employed DWP staff in London are paid £7.60 or above and, indeed, are paid more than the new London living wage of £7.85 announced by the Mayor of London on 9 June.
I am sure the Minister is aware of the economic as well as the moral case for the living wage that was most recently advanced by the Mayor of London. In the light of that, will the hon. Gentleman confirm that as well as the directly employed staff, contracted-out staff in his Department, such as cleaners, will also be employed on the living wage because they do such important work for the people of this country?
The hon. Lady is right to point to the position of contracted staff. She will be aware that long-term private finance initiative contracts were entered into by the Labour Government which involve paying people less than the living wage. We have inherited that practice. However, I understand that Telereal Trillium, with which we have our principal contract, including for cleaners, has an agreement with the relevant trade unions to pay higher rates on new tenders.
Section 14 of the coalition document confirms the Government’s commitment to ending child poverty in the UK. We believe that the best way to tackle this issue is to address the root causes of poverty, because it is only by doing this that we can improve outcomes for children in the most effective way. Over the next 12 months we will put in place a robust, sustainable strategy to end child poverty.
It is impossible to look at the situation of a child without looking at their family situation. To that end may I highlight the pioneering work that is being done by Save the Family in Chester and north Wales under the leadership of Edna Speed MBE? Has the Minister any plans to encourage the expansion of such pioneering family-based schemes across the country?
I thank my hon. Friend for bringing the important work of Save the Family to the attention of the House. I am familiar with the project in north Wales, and my right hon. Friend the Secretary of State has visited it. Keeping families together is important, and I will do all I can to encourage colleagues who are considering child poverty across Government to consider the work being carried out by Save the Family. Family stability is vital and I am sure it will form part of the strategy that we work on to end child poverty.
One of the root causes of child poverty is teenage pregnancy. Before he assumed office, the Secretary of State—I congratulate the team on their new positions—did important work on the links between poverty and teenage pregnancy. What talks were held last week with the Secretary of State for Education before he announced cuts to local authority education and children’s budgets, which will, among other things, undermine the future of teenage pregnancy projects?
I thank the right hon. Gentleman for his question. Teenage pregnancy is a critical part of the poverty strategy and one of the issues that will be considered in the cross-departmental Cabinet Committee on social justice which we will establish. It is important for the House to remember that, under the previous Government, not enough progress was made on that matter, but we will put that record right.
Can the Minister confirm that the decision taken in recent days not to extend entitlement to free school meals to primary school children whose parents are on working tax credit will mean 50,000 more children living in poverty than otherwise would have been? Yes or no?
We should be absolutely clear that the rules for determining eligibility for free school meals have not changed, and all pupils who currently qualify for free school meals will continue to be eligible. The issue was dear to the hon. Lady’s heart and something that she pushed forward when she was in government, and I should like to reassure her that there are pilots in place in Newham, Durham and Wolverhampton to see whether there is a robust case for extending free school meals. We feel that the extension was prematurely announced, without evidence from the pilots, so I ask her why, if she felt so strongly about the issue, she did not push it forward earlier in the 13 years of a Labour Government.
Unemployed Disabled People (Welfare Support)
The Government recognise that some people will not be able to work, or prepare for work, because of a disability. Those people will receive unconditional support and be able to have help to find employment on a voluntary basis. Financial support for those who are unable to work will be through cash benefits, such as the disability living allowance and the employment and support allowance, replacing incapacity benefits.
I thank the Minister for her reply. Royal British Legion Industries, based in my constituency, provides an important service to people with disabilities. Will the Minister assure the House that the Government will use the expertise of such organisations to help people with disabilities get back to work?
I thank my hon. Friend for her question and also pay tribute to the Royal British Legion and its work, because it plays a vital role in supporting disabled people into work and helping those who are furthest from the workplace to acquire the skills that they need. The specialist knowledge of such organisations is absolutely vital and will be an important part of the Work programme that the employment Minister, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling) has already announced, because those organisations have the on-the-ground knowledge of how best to support disabled people.
As a former Minister for disabled people, I wish the Minister well in standing up for the rights of disabled people throughout government. Will she therefore tell me what plans there are for the access to work programme? Will the Government honour the previous Government’s commitment, or will access to work disappear amid the one, single Work programme?
I thank the right hon. Lady for her kind comments and congratulate her on the work that she has done to support disabled people. It is absolutely vital that we recognise that a reform of work programmes in this country is long overdue. The Work programme will meet a great many people’s needs, but not absolutely everybody’s, so specialist programmes such as residential training colleges, Remploy’s work and others will continue in order to meet the needs of particular disabled people.
In looking at the support for those with disability, will the Minister ensure that the work capability test is reviewed in order to see how it applies to cancer patients facing chemotherapy? At the moment, they seem to be assessed as fit for work when they are quite clearly going to be unfit and unable to work.
I should like to welcome all Ministers to their positions on the Government Front Bench. Does the Minister agree with me and her colleague the pensions Minister that it is important to ensure that those who cannot work for reasons of disability or age receive all the benefits to which they are entitled, and that the 13,000 home visits a week that the DWP local service currently makes to vulnerable households play a vital role in ensuring that that is the case? Does she agree also that, if the local service is cut in the spending review, the most vulnerable households will be the hardest hit?
Many people in areas of long-term deprivation are also long-term benefit recipients. We will introduce the Work programme to give those benefit recipients access to tailored back-to-work support through an integrated system. Within that, we are actively considering how best to support those with complex barriers to work.
I thank the Minister for that answer. Does he agree that many of Labour’s top-down schemes, such as the new deal for communities in the areas of Moulsecoomb and Whitehawk in my constituency, have failed to deliver any real difference to people’s lives, despite having cost tens of millions of pounds? Does he also agree that this new Government’s empowerment of individuals and communities is a much more sensible way forward?
Labour in government had planned and funded 50,000 jobs for older people in areas of high unemployment and high deprivation under the future jobs fund. Will the Minister confirm how many of those jobs will be scrapped and what, if anything, will be put in their place?
As the hon. Lady knows, jobs that are already contractually bound will go ahead. However, she falls foul of the old new Labour fallacy—that just because the Government temporarily fund a job, that makes it into a real, lasting job. I am afraid that life is not like that; the Government’s payment of a temporary subsidy does not make a permanent job. We will be investing in long-term, sustainable employment, which will benefit older people far more.
My constituents in Burnley suffer more deprivation than most, with areas of high unemployment left to rot by the previous Government. Will the Minister ensure that the Department managing the apprenticeships scheme looks into areas such as Burnley to ensure that they are given a fair chance of providing apprentices for the future?
My hon. Friend makes a powerful point. Part of the reason why he is here in this House, apart from his highly effective campaigning, is the record left by the Labour Government in Burnley and similar constituencies. The new apprenticeships will indeed go to areas such as my hon. Friend’s constituency, where they will provide training that leads to lasting jobs, which are what we want to be provided.
Youth unemployment is unacceptably high. We will introduce the new single Work programme in the first half of 2011, which will offer young people targeted, personalised help. That will be delivered through the best of private and voluntary sector providers. We will ensure that young people continue to have access to employment support prior to the implementation of the Work programme.
I thank the Minister for that reply. The Tories are the party of mass unemployment; they had left thousands of young people in long-term unemployment in the mining areas and elsewhere in this country when they were turfed out of office in ’97. Will the Minister confirm last week’s authoritative report that said that the fiscal strategy that the coalition is adopting will lead to there being another half a million people—many of them young people—in the dole queues for at least the rest of this Parliament?
The hon. Gentleman ought to remember that the level of youth unemployment today is higher than it was in 1997, when the Labour party took office. He should also remember that year after year, despite all the last Government’s promises about apprenticeships, which could have provided long-term, sustainable opportunities for young people, the Labour Government consistently missed their targets and promises for apprenticeships. We will take no lessons from Labour about youth unemployment.
When the Minister is looking at the issues involved in providing more jobs for the young unemployed, will he consider the impact of the Pension Protection Fund, particularly on long-standing manufacturing companies, which may be inhibited from providing new apprenticeships by their future commitments to the PPF?
My hon. Friend makes an important point. The Minister of State, my hon. Friend the Member for Thornbury and Yate (Steve Webb), will be considering that. It is important to provide the right balance between protecting the pensions of those whose pension provision for old age may be at risk and ensuring that we do not drive businesses out of business as a result. We will be looking at this carefully and attempting to find the right balance.
Does the Minister accept that the future jobs fund offered real opportunities for the young people who were drowning in the prospects of employers’ refusal to give them work while at the same time it provided the Government with their only genuine test of whether somebody really wanted to work? Why, therefore, is it being cut when no other Government programme will achieve both those objectives?
The right hon. Gentleman knows that what his constituents and other people on Merseyside really need is sustainable, long-term opportunities. The future jobs fund will continue to offer tens of thousands of opportunities over the next few months, but what the young people of Merseyside really need is apprenticeships that can take them into proper long-term opportunities. That is what this Government will provide.
12. How much funding he expects to allocate to programmes for the young unemployed in 2010-11. (1862)
We have allocated more than £600 million for programmes to support unemployed young people back to work. That includes the cost of specific employment support programmes targeted at young people and the support provided through the flexible new deal.
I thank the Minister for that response. According to a recent survey by the Federation of Small Businesses, 95% of businesses are unaware of the wage contributions that are on offer to train apprentices. Indeed, 69% of apprentices work in workplaces where there are 30 or fewer employees. The same research has revealed that even more apprenticeships could be created if the system were simplified or modified.
I am all in favour of systems being as simple as possible. One of the things that I aim to ensure will happen when we introduce the single Work programme is that providers build links with local employers and explain to employers the support and opportunities that exist. We need to ensure that we maximise the employment opportunities that are out there for people without work, whether young or older.
First, I congratulate the hon. Lady on her election to the position of Chair of the Work and Pensions Committee. My colleagues and I look forward to meeting her and her Committee in the weeks ahead.
The most important thing that we can do is to deliver first-class back-to-work support to help some of the people who have been stranded on benefits for long periods and often do not have a clear sense of what they need to do to get back into the workplace. That will be a key focus for us in trying to ensure that those people get back into work. In addition, my right hon. Friend the Secretary of State is examining the benefits system and how we remove some of the disincentives within it that sometimes make it financially disadvantageous for people to get back into work, which cannot be right.
Future Jobs Fund
13. What representations he has received on his plans for the future jobs fund; and if he will make a statement. (1863)
I have so far received virtually no direct representations on our plans for the future jobs fund.
I thank the Minister for his response. The future jobs fund affirms the right to work, and it has done that for young people in Middlesbrough South and East Cleveland. Does he share the view of previous Tory Governments that there is a natural level of unemployment?
Our job is to get as many young people, indeed people of all ages, as possible back into government—[Interruption.] I mean back into employment. Well, our manifesto did say that we wanted everyone to be part of the task of trying to make things work. We need to get every young person we possibly can back into the workplace, and we need to get as many people as possible off benefits and into the workplace. That will be the purpose of the single Work programme, our apprenticeships plans and of the reductions that we are going to make in taxation on small business employers; and it is the reason we are not going ahead with the Labour party’s job tax, which would have damaged employment in the hon. Gentleman’s area and other parts of the country. Those differences of approach are what the country really needs.
Is the Minister aware that many employees in future jobs fund placements, especially part-time workers on the minimum wage, took home less each month than their placement cost the fund? In future, will he ask for fairer partnerships with employers that provide better value for money for the taxpayer?
I can confirm that we will look for better value for money for the taxpayer and the maximum possible effectiveness in getting people into work; not work that lasts just six months, but work that gets them into sustainable, long-term careers that can make a difference to them—not the sort of short-term scheme that characterised the previous Government’s last few months.
The Office for Budget Responsibility has found that unemployment would have fallen under Labour’s plans. The Chartered Institute of Personnel and Development survey in April also said that unemployment was close to its peak. However, the Minister will know that it has recently revised its forecast and, as a result of the change in policies by the new Conservative-Liberal Government, it predicts that public sector jobs will be cut by 750,000 and unemployment will increase to nearly 3 million. Does the Minister think that it is talking nonsense or does he agree that his proposals for cuts will hit jobs hard?
I am afraid that Labour Front Benchers remain in fantasy land about the current financial position. They left a huge debt overhang for the country that will do long-term, lasting damage to every single person in the country if it is not addressed. They themselves had prepared plans for big public spending cuts, but they are now pretending that they never planned those cuts. They should look at the books and in the mirror and ask themselves why the country is in the current financial mess. It is their fault.
Unemployed Disabled People (Welfare Support)
I refer my hon. Friends to the answer I gave my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) earlier.
Many charities and voluntary organisations act as a mainstay for many people with long-term disabilities who are unable to work. Near my constituency, the superb Vassall centre and the excellent disability action group come to mind. What measures will my hon. Friend take to empower those organisations to have a greater say and play a greater role in supporting those with disabilities?
I thank my hon. Friend for his question. He is right that the Vassall centre plays a pivotal role in Gloucestershire in bringing together many different organisations, which provide support for some of the disabled people most in need of it. As I said previously, the Work programme will offer such organisations the opportunity to bring local expertise and knowledge to supporting disabled people into employment or in other ways. I also hope that, through other specialist programmes, we can continue to harness that expertise.
As the Under-Secretary knows, many people with disabilities depend heavily on carers. During a visit in carers week to the Oxfordshire carers forum, it became abundantly obvious that, despite the drunken spending spree to which the Secretary of State referred, carers remain chronically under-supported. Will the Under-Secretary please comment on the Government’s plans to improve support for carers and to reduce the bureaucracy, which too often prevents them from accessing the help that is available?
I am also delighted to support in carers week the work that carers do. I am particularly looking forward to visiting Barnet carers centre on Thursday as part of that. Obviously, carers receive benefits through carer’s allowance, and important support through Jobcentre Plus in partnership management. However, I reassure my hon. Friend that the Government are committed to widening the support available to family carers, and will establish an independent commission on funding long-term care this year.
Conservative Members are right to highlight the work of voluntary groups in supporting disabled people. Is the Under-Secretary also aware of organisations such as Pedal Power in my constituency, a voluntary group that works with disabled people, which recently relied heavily on the future jobs fund for support for its work? What estimate has she made of the impact of the decision to cut the future jobs fund on the very organisations that she thinks can help build a big society?
If the hon. Gentleman had listened to some of the earlier exchanges, he would have known that we feel strongly that we need to have proper, long-term jobs in place. We will achieve that better through our apprenticeship announcements than through the future jobs fund. However, it is important that organisations such as Pedal Power—which, I am sure, supports disabled people in the hon. Gentleman’s constituency—get the support that they need. I am happy to talk to him about that if he has concerns.
On the subject of carers week, will the Under-Secretary assure us that carer’s premium will be protected for those who are unable to find work or need support to stay in work as a result of looking after severely disabled relatives?
The Government want to see all pensioners have a decent and secure income in retirement. We will restore the earnings link for the basic state pension from April 2011, with a triple guarantee that pensions are raised by the highest of earnings, prices or 2.5%. We will also protect key benefits for older people.
I thank my hon. Friend for his answer. What action, if any, is he able to take on a problem he himself identified, namely, the cliff-edge situation of women who have completed 30 years employment and who have made the necessary national insurance contributions, but who were born one or two days too early to get the pension that they deserve?
My hon. Friend raises an important point—in fact, it sounds vaguely familiar—and she is quite right that introducing changes in a cliff-edge manner, as the previous Government did, creates unfairnesses of the sort that she identifies. As she will know, when women are short of the necessary number of years, they can buy voluntary contributions, under a fairly restricted set of circumstances. That will allow some women to get closer to the full pension than they would otherwise have been able to get. However, she is absolutely right that the way in which the scheme was implemented by the previous Government creates an unfair cliff edge.
The hon. Gentleman is quite right to point out that when public finances are tight, all sectors of society risk having services threatened in the way that he describes. One of the incoming Government’s concerns was the huge hole in the public finances, which a Labour Government would also have had to fill. It would be interesting to know which cuts he thinks should be made, because there has been a silence from the Labour party on that very subject.
Today in Britain, nearly one in five pensioners is living in poverty, and as I said earlier, more than 5 million people are on working-age benefits, and the country has one of the highest proportions of workless households in the European Union. Therefore, the case for radical welfare reform is clear. That is why this Government will establish a new Work programme and simplify our complex benefits system to provide greater support for the poorest.
At the same time, we are rising to the challenge of long-term demographic change in how we support an ageing society. It is more important than ever that we build strong foundations for the future of the basic state pension, which is why, for the first time, as the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb) just said, this Government will introduce the triple guarantee for the basic state pension with immediate effect. That guarantee will restore the earnings link and ensure that any future uprating is set at the highest of earnings, prices or 2.5%. I am enormously proud that this coalition Government are doing that. Those are important first steps towards the reform of the whole system.
Last week, one of my constituents in Crewe told me how exasperated she had become after wading through the application form for her pension credit, because of the complexities within it and the never-ending series of phone calls that seemed to follow. With one in three pensioners who are entitled to claim pension credit still not doing so, in part owing to the major administrative barriers in their way, what does the Secretary of State propose to do to simplify the system, and to make it fairer and more transparent?
First, I say to my hon. Friend that one of the most important steps that we will be taking towards helping those pensioners is re-linking the basic state pension to earnings. That will hugely improve take-up, because that money will go to everybody and people will not be required to claim for it. The other thing that my hon. Friend the Minister will be doing is reviewing the complexity and looking for ways in which we can simplify the process and make it easier, so that the take-up for those who need it—this point is critical—is better. I can assure my hon. Friend that we will do that.
T2. Did the right hon. Gentleman have many constituents, including people from young families who do not have a lot of money and who need the extra money to get by, coming up to him during his general election campaign to tell him that they were worried about working tax credits? What will he do to ensure that the working tax credit is maintained and that the ravages of the cuts are taken care of for the people who need that cover more than anybody else. (1876)
The purpose of this Administration is not to penalise those in most need. We will do our level best to ensure that during these changes—and given the necessity of reducing the budget—we try to protect as many of those people as possible. Ultimately the best thing that we can do for them across the board is to simplify the benefit system so that the take-up is greater and ensure that going to work pays, with people retaining more of what they earn when they go to work than they do at the moment.
Our colleagues in the Treasury are establishing a commission to look at public sector pensions, and we have already had a meeting with our colleagues to try to ensure a fair deal both for the hard-working people who work in the public sector and for the taxpayers who are making a very large contribution to those pensions. It is important that the true cost is made transparent, which it clearly is not at present.
T5. At a time when unemployment is forecast to increase to 3 million, this so-called coalition Government have decided to cut 100,000 jobs from the future jobs fund, but will not replace them until next summer. Is that just another example of unemployment being a price worth paying for this Government? (1879)
I am afraid that the hon. Gentleman has not been listening. There will be tens of thousands of new jobs created under the future jobs fund in the months ahead. However, we have changed the priorities, because we believe that long-term, sustainable employment is better supported by a programme of extra apprenticeships than by a short-term job creation measure of the kind envisaged by the previous Government.
T4. Given the shocking number of young unemployed people in my constituency and in the country as a whole, I welcome the proposals for mentoring schemes, whereby young people spend time with the self-employed and other business people. Will those schemes be introduced quickly and efficiently, because they will be very important? (1878)
I agree with my hon. Friend. The use of mentoring, both to encourage young people into the workplace and to create a sense of belief in their ability to build their own businesses, will be central parts of the Work programme. We are working on the details as rapidly as we can, and I can give him an assurance that mentoring will be a central part of the way in which the Work programme works.
T9. The cuts to the future jobs fund are causing real concern in my constituency. From listening to Ministers this afternoon, I understand that the expectation is that these job losses will be replaced by a growing private sector. Can the Minister share with me the detailed analysis that the Government have undertaken that shows that these jobs will be created, when they will be created and that they will be created in the north-east? (1883)
The cuts to the future jobs fund are not cuts. We have stuck to the contracted jobs already in existence, which will run until next year. We are talking about the notional jobs that might have been created but were not contracted for, so we are dealing with a game of vague figures. The best thing that we can do for the hon. Lady’s constituents is to ensure that the cost of employing people does not rise, which was the plan of the previous Government in raising national insurance. Most of all, the 50,000 apprenticeships that we will create will provide long-term jobs for all her constituents.
T6. Will my hon. Friend be reviewing the rule on annuities? Many people with occupational pensions resent the fact that they have to invest 75% of their accumulated funds in that way and would prefer to put some in other places. (1880)
The coalition Government are sympathetic to the idea of giving people greater choice over annuities. We already have a commitment to scrapping the rule that forces people to annuitise at 75. We also want to look at how people can achieve better value for money from the annuities that they buy, and possibly also have earlier access to accrued pension funds. We take the view that it is their money, not the Government’s money.
T10. Has the Minister had any discussions with the Treasury regarding the pay-out for Equitable Life, bearing in mind that when they were in opposition, that crowd over there on the Government Benches hounded us week in and week out about a pay-out? Now can they deliver? (1884)
The hon. Gentleman will know that Sir John Chadwick will produce his report in July. I understand from discussions with the Treasury that a compensation package will be produced on the basis of that, and legislation to bring that forward was included in the Queen’s Speech.
T8. As Ministers are no doubt aware, the withdrawal rate of housing benefit and council tax benefit combined can be up to 85p in every pound earned, thereby contributing significantly to the poverty trap. Do the Government have any plans to review the withdrawal rate and the tapers? (1882)
My hon. Friend puts his finger on a crucial point. We both believe that work needs to pay, but one of the crucial problems at the moment is that as people improve themselves, work harder, train and do overtime, too much of that money is clawed back through the benefit tapers and tax rates that he has described. My right hon. and hon. Friends will be bringing forward quite radical proposals for benefit reform that are designed to tackle precisely the point that he has raised.
I know that this will surprise everyone, but I want to return to the future jobs fund and the answer that the Minister of State, the right hon. Member for Epsom and Ewell (Chris Grayling) gave earlier about not having received any representations on it. Has he at least made the effort to consult, for example, some of the voluntary and charitable sector organisations that represent young people and support them into work on the effect that cutting the future jobs fund will have on their work? If so, what have they said to him?
Yes, we have indeed spoken to those organisations, which will continue to create thousands of new jobs under the future jobs fund during the remainder of this year. However, there is general agreement, particularly among those who have been working with us on the Work programme, that we need apprenticeships, lower employment costs and sustainable long-term jobs in the private sector, not in the public sector—too many of the future jobs fund jobs are in the public sector. We need to create sustainable, long-term employment opportunities for young people and older people on benefits in this country.
Is the Minister aware of early-day motion 159, which is about jobcentres and foodbanks? Is he also aware that charities in my constituency, such as the excellent Harlow foodbank, have been stopped by Jobcentre Plus from giving out food vouchers to the unemployed because of regulations introduced by the previous Government? Does he agree that that is an example of Labour bureaucracy hurting the poor most, and will he take steps to reverse this policy as soon as possible?
I thank my hon. Friend for raising that issue. Foodbanks have an important role to play in our local communities. It is important that we ensure that people who might benefit from the services that they offer know that they are available, and we will certainly be reviewing whether it is possible to highlight the availability of local foodbanks through Jobcentre Plus.
Will the Minister say what help to get off benefits and into work will be available for young people between the future jobs fund ending, which he said would happen in a couple of months, and the Government’s new single Work programme, which he said would not be available until March 2011?
We will be maintaining all the existing programmes, and in particular the flexible new deal, right up until the start of the Work programme next year. The flexible new deal is by far the largest programme that the previous Government put in place to support young people and older people into employment. It is important to ensure that we maintain continuity of support right up to the point when the Work programme is ready to be launched.
The Minister will know that spending on welfare doubled under the previous Administration, yet the number of those living in poverty increased. Does he agree that what the previous Administration succeeded in doing was to create the most expensive poverty in history?
My hon. Friend is absolutely right. Record levels of spending on benefits have left us with 100,000 extra children living in poverty since 2004, and the gap between the richest and the poorest has grown wider than at any time since the 1960s. What we need to do is tackle the root causes of poverty to break that cycle of disadvantage, and not do what the previous Government did.
I would be happy to speak to the hon. Gentleman’s constituent with him, but I also guarantee to the hon. Gentleman that the role of carers in society will be one that we continue to support and value. The reality is that if we did not have that informal care in society, the state could never pick up the bill. We look to enhance and support that role, ensuring that carers are valued throughout what we do, and I should be happy to see the hon. Gentleman’s constituent, if he wishes.
The Secretary of State knows as well as anyone that what he calls notional jobs are nevertheless factored into the Government’s spending projections. Can he tell the House how long it will be before the proposed savings in the future jobs fund will be wiped out by the increased cost of keeping more young people on the dole?
With respect to the hon. Gentleman, he is playing a game of notional figures—[Interruption.] I know what it is like in opposition, and I must tell Labour Members that they must start to get real about the fact that they were in government three months ago and it was they who went on the spending spree. They would also have had to find savings. We need to use the savings that we have found for this year, and ensure that we do not have the job tax. There will also be a much better chance for longer-term jobs through the apprenticeship scheme, involving some 50,000 people. That is real decision making.
Self-evidently, if the providers who work for us under the Work programme are successful in getting someone into work, we will reward them on the basis that they provide post-employment mentoring and stay with the person to ensure that they stay in work—
One of the successes of the future jobs fund has been in the area of sports. I heard the Minister say earlier that he would stop future contracts, but full-time jobs in sport have been found at the end of the period, and I hope that he will look again at that decision.
Absolutely; I also expect sport to take advantage of some of the apprenticeship opportunities. There will be tens of thousands of further opportunities under the future jobs fund, as well as additional apprenticeships and further opportunities provided through the Work programme. We intend to do everything we can to ensure that, when this Government leave office, youth unemployment is lower than it is today—unlike the record of the Labour party in its 13 years in government.
With permission, Mr Speaker, I would like to make a statement on Afghanistan. First, I am sure that the whole House will want to join with me in paying tribute to Private Jonathan Monk from 2nd Battalion the Princess of Wales’s Royal Regiment and Lance Corporal Andrew Breeze from 1st Battalion the Mercian Regiment, who have both died in Afghanistan. Our thoughts and prayers are with their families and friends. Their service and sacrifice for our country must never be forgotten.
It was my fifth visit to Afghanistan, but my first as Prime Minister. I held talks with President Karzai and visited our troops in Helmand. I want to set out for the House how this Government will approach our mission in Afghanistan, and how that mission is progressing, but first let me stress the importance of such updates. The whole nation is touched by the heroism of this generation of our armed forces, who are fighting to protect us in harsh conditions far from home, and I believe that the country, and this House, are entitled to the facts. That is why this statement will be the start of a pattern. There will be regular updates to the House, with quarterly statements by the Foreign Secretary or the Defence Secretary, and we will publish on a monthly basis much more information on the progress we are making. This will include updates on the security situation, on recruiting, training and retaining the Afghan security forces, on progress in appointing and supporting provincial and district governors, and on progress in development work, including health and education.
Our main focus, however, will be on the security situation. For example, in the six months to March 2010, the Afghan national army grew by almost 20 %, with more than 17,000 people joining the ranks, but the Afghan police are assessed to be ineffective or barely able to operate in six of the 13 key provinces in General McChrystal’s plan. Good news or bad, we want to take the country with us in what is this Government’s top foreign policy priority.
Let me address the first question that people are asking. Why are we in Afghanistan? I can answer in two words: national security. Our forces are in Afghanistan to prevent Afghan territory from again being used by al-Qaeda as a base from which to plan attacks on the UK or on our allies. Of course, the al-Qaeda training camps and the Taliban regime that protected them were removed from Afghanistan in the months after 9/11, and the presence of NATO forces prevents them from returning, but Afghanistan is not yet strong enough to look after its own security. That is why we are there, and with the help of the greater efforts of the Pakistanis to hunt down al-Qaeda in their own country, we are now placing al-Qaeda under pressure on both sides of the border. Eighteen months ago, the then Prime Minister told this House that some three quarters of the most serious terrorist plots against Britain had links to the border area. Today I am advised that the threat from al-Qaeda from Afghanistan and Pakistan has reduced, but I am also advised that if it were not for the current presence of UK and international coalition forces, al-Qaeda would return to Afghanistan and the threat to the UK would rise.
The next question is how long must we stay. The Afghan people do not want foreign forces on their soil any longer than necessary, and the British people are rightly impatient for progress. Our forces will not remain in Afghanistan a day longer than is necessary, and I want to bring them home the moment it is safe to do so. The key to success is training and equipping the Afghan security forces at every level to take on the task of securing their country, so that Afghans can chart their own way in the world without their country posing a threat to others, and our forces can come home, the job done, their heads held high.
That is why we back the strategy developed by General McChrystal, commander of the international security assistance force, and endorsed by President Obama and NATO. That strategy involves protecting the civilian population from the insurgents, supporting more effective government at every level, and building up the Afghan national security forces as rapidly as is feasible. We want to transfer security responsibility for districts and provinces to Afghan control as soon as they are ready, but that must be done on the basis of the facts on the ground, not a pre-announced timetable.
The current year is the vital year. We are six months into an 18-month military surge, and we must now redouble our efforts to drive progress. Central Helmand has, along with Kandahar, been the heartland of the Taliban. It is from there that they gave safe haven to the al-Qaeda network in Afghanistan. That is why the operation in central Helmand is crucial to the success of the whole mission. Four years ago, we went into Helmand with 3,000 troops. I do not think anyone now seriously argues that that was sufficient. Today, there are around 30,000 troops there, with 8,000 British working alongside 20,000 US Marines. In total, we have more than 10,000 troops in the country as a whole. With the arrival of reinforcements and the continued growth of the Afghan security forces, we are now evening out the ISAF presence in the main populated areas in Helmand.
That is an absolutely crucial point. In the past, we have simply not had enough soldiers per head of population for an effective counter-insurgency campaign. Today, although the rebalancing is still work in progress, the situation is much improved. The arrival of a US Marine expeditionary force, combined with additional contributions from other ISAF partners including the UK, has given a huge boost to the resources available to ISAF in Helmand. For example, the Marines have arrived with some 80 aircraft and helicopters of their own, which are now available to support all ISAF forces in Helmand.
It is clear that we have made real progress in central Helmand this year. A degree of normal life has returned to places such as Nad Ali, where the bazaar is open again and people are going about their daily business in an area that was until recently completely infested with insurgents, but the progress is not yet irreversible. Inevitably, there will be tough fighting as Afghan forces, with ISAF support, hold the ground we have taken and push the insurgents out of further towns and villages.
During my visit, I was able to announce a further £67 million to double the number of counter-improvised explosive device teams, to tackle the most serious threat facing our young men and women. So with the improvements made in the past year, many of the acute shortages that hampered us so severely in our initial deployment in Helmand have been dealt with, but I do not pretend that every equipment shortage has been resolved. We will need to adapt constantly and deal with problems as they arise.
The whole country is incredibly proud of our armed forces, and I believe we need to do more to recognise these remarkable men and women and place them at the front and centre of our society. That is why I announced a doubling of the operational allowance for service in Afghanistan, backdated to 6 May; and that is why I believe it is right that we renew and reaffirm our commitment to the military covenant, that crucial contract between our country and those who risk their lives to ensure our security.
I do not pretend that we can succeed, either in Helmand or in Afghanistan, by military means alone. Insurgencies usually end with political settlements, not military victories, and that is why I have always said that we need a political surge to accompany the military one. We need better to align our development spending with our overall strategy, and I have announced £200 million to be spent on training, strengthening the police services and government institutions; and, crucially, we need a political process to help bring the insurgency to an end.
As a first step, that means getting individual Taliban fighters to put down their weapons, renounce violence and reintegrate into Afghan society, and the successful peace jirga earlier this month should enable that process to move ahead more swiftly. However, it means more than that. For there to be long-term political stability, everyone in Afghanistan, including those in the south, must feel that the Government is theirs, that it is their country, and that they have a role to play. As I agreed with President Karzai, we must start working towards a wider reconciliation process, leading to a political settlement that works for all the peoples of Afghanistan.
We are seeing a good example of that in Kandahar where, importantly, the process getting under way is largely Afghan-led. Alongside military operations by Afghan security forces together with international forces, it includes, for example, the shura of several hundred local elders conducted yesterday by the local governor, which President Karzai attended, and a major drive by the Afghan Government, with our support, to improve public services and the rule of law. From now on, what is happening around Kandahar and in Helmand should reflect a deeper understanding of the influence of tribal structures in Afghanistan. In the past, we simply have not paid enough attention to that and to the unintended consequences of some of our policies. I want us, for example, to take a careful look at the contracting policy of ISAF, to ensure that the money going into the local economy from the huge contracts that are let has a positive impact and does not help fund local militias or, even worse, the insurgents.
This is the vital year. We have the forces needed on the ground and we have our very best people, not just those in the military, but those leading on the diplomatic and development front. I do not pretend that it will be easy and I must warn the House that we must be ready for further casualties over the summer months, as the so called “fighting season” resumes and as ISAF extends its activity. But I say to the House what I said to our young servicemen and women in the dust and heat of Helmand on Friday: they are fighting thousands of miles away to protect our national security here at home. Like their predecessors, they have the support and gratitude of the whole nation. When we have succeeded in enabling the Afghans to take control of their own security, our troops can begin to come home. Even after our troops have left Afghanistan, the relationship between Britain and Afghanistan must continue as a strong and close one. Likewise, we want to continue to build on our relationship with Pakistan. These long-term relationships are, quite simply, essential for our national security. I commend this statement to the House.
I join the Prime Minister in paying tribute to the two soldiers who have been killed, Private Jonathan Monk from 2nd Battalion The Princess of Wales’s Royal Regiment and Lance Corporal Andrew Breeze from 1st Battalion the Mercian Regiment. Our thoughts are with their families and on the grief of their loss.
I thank the Prime Minister for his statement. I welcome both his early visit to Afghanistan since coming into government and the increase in the operational allowance that he announced. All those serving in Afghanistan should know that they have the admiration and respect of the whole country and of Members from all parts of the House. Will he continue with Armed Forces day on 26 June?
May I restate Labour’s support for our mission in Afghanistan, which is, as the Prime Minister rightly said, first and foremost to protect our national security. As this was his first statement to the House on Afghanistan and the first occasion on which we have responded as the official Opposition, may I assure him that as he proceeds to take difficult decisions in the best interests of our mission in Afghanistan and of our troops, he will have our full support. In that spirit, I welcome the £67 million that he has announced to help tackle the IED threat. Will he inform the House in more detail as to what that will be spent on? We understand that there will be 13 extra Mastiff vehicles, and we welcome that. Will they be in addition to the £67 million? As there is also a need for well protected vehicles with greater manoeuvrability, will the Prime Minister confirm that the Government will proceed with a second batch of 200 light protected patrol vehicles?
On the strategy in Afghanistan, the Prime Minister has reaffirmed that, despite the challenges, progress has been made. Will he confirm that the Government are continuing the strategy that the UK has been pursuing and that it has not changed? If it has changed, will he tell us in what respects? It is common ground that our work in Afghanistan needs to bring together security, development and diplomatic efforts. Will the Prime Minister update the House on the discussions he has had with President Karzai? I assure him that the Government will have our support to take through a strategy that sees that the Afghans are strong enough to take responsibility for their own security and prosperity. I welcome the £200 million that he announced for building up the Afghan army, police and civil service. Will he reassure the House that that will not be at the expense of vital existing development programmes elsewhere in the world?
Will the Prime Minister update the House on discussions that he has had with US Defence Secretary Gates and on whether they have addressed the proposed withdrawal of Canadian forces in 2011? A stable Afghanistan requires a stable Pakistan. Will the Prime Minister update the House on the discussions he has had with President Zardari and Prime Minister Gilani of Pakistan?
On the families of our troops, will the Prime Minister follow through on the important work that the former Defence Secretary was doing, with my support, to back up the wives, partners and families of our armed forces?
On the strategic defence review, will the Prime Minister reassure the House that the front line will not be weakened? In opposition, the Prime Minister and his Defence Secretary argued for a bigger Army and for the expansion of the Army by three battalions. Will that go ahead?
Finally, will the Prime Minister explain to the House the reasons for the departure of Sir Jock Stirrup and Sir Bill Jeffrey? Will he confirm that they will both play a role in the strategic defence review and that they will remain until it is completed? May I ask him to join me in paying tribute to Sir Jock Stirrup and Sir Bill Jeffrey for their service to the nation?
I thank the right hon. and learned Lady for her response—both for what she said and the way in which she said it. I know that we will have our differences across these Dispatch Boxes, but on the issue of Afghanistan there is great unity on the Labour and coalition Benches—[Interruption.] Well done; well spotted. That is important, because our troops like to know that everyone in the House is behind what they are doing.
On the specific questions that she asked, Armed Forces day will go ahead as planned on 26 June. She asked about the £67 million spent on countering the IED threat and whether it is in addition to the patrol vehicles that are already on order. Yes; I can confirm that it is. She asked about the strategy generally and what has changed. What I would say—I note what the Foreign Secretary said in his speech on the Queen’s Speech—is that we are six months into the McChrystal-Obama strategy of the military and political surge and we want to see that strategy through, so there is continuity in that regard. We must be absolutely clear in our focus on the national security perspective of what we are doing. That is not to say that development work and the building of schools, hospitals and other things are not important—it is just to get our priorities straight. In the end, our route home and our route to a successful Afghanistan is to put security first. That needs to be very clear. On the question about development aid, the £200 million is additional to the existing work we are doing in Afghanistan.
I very much agree with what the right hon. and learned Lady said about backing the wives, partners and families of all those who serve in our armed forces. In recent years, we have put enormous pressure on those families and we need to do more to help them. I have RAF Brize Norton in my constituency and I know the very severe pressures that we put on people. In all the issues around military families—whether it is about the schools their children go to, the health centres they use or time for leave—we want to do more to help, and we are going to give real focus to that.
The right hon. and learned Lady asked about the strategic defence review and whether it would cover the size of the Army. Of course, it will cover all of the issues in defence. Finally, she quite rightly paid tribute to Sir Jock Stirrup and Bill Jeffrey, and I join her in paying tribute to them. They both have been, and are, extremely strong and dedicated public servants, and everyone in this country owes them that thank you. Sir Jock Stirrup, as the right hon. and learned Lady knows, actually extended his time as Chief of the Defence Staff before the election because he wanted to see continuity—he wanted to see that service continue—and I was very pleased that that happened. For some time he has had in mind standing down in the autumn, at the end of the strategic defence review—at the end of October—and that is indeed what he is going to do, and what Bill Jeffrey is going to do. That will give the new Government time to put in place a proper transition for a new Chief of the Defence Staff to take on the vital work that Sir Jock has done. Let me say again that he has done a superb job as Chief of the Defence Staff. I am working with him extremely well. He came with me on the trip to Afghanistan, and he deserves the gratitude of the House of Commons.
Does my right hon. Friend agree that there is a risk of conflicting messages? We are saying on the one hand to the Taliban that we will not cut and run and that we will stay for as long as is needed to do the job, but on the other we are saying to the Afghan Government that there is urgency for them to sort out their corruption and their governance. Does my right hon. Friend give priority to leaving as soon as possible or staying for as long as is necessary?
First, I congratulate my right hon. Friend on his successful election as Chairman of the Select Committee on Defence. I look forward to reading his reports over the course of this Parliament.
I do not think that there is a contradiction, because I think people in Afghanistan want to know that foreign troops will not be on their soil for an extended period, and it is right not to set an artificial deadline about when troops will leave but to do all the work we can to build up the Afghan security forces to give us the chance to leave, and to put pressure—yes, it is pressure sometimes—on the Afghan Government to do all they can to cut out corruption and put in place good governance. It is important that we get on with this work but, as I said, not to set artificial timetables that we then cannot meet.
Order. Several hon. and right hon. Members are seeking to catch my eye. Colleagues will be conscious that there are a further two statements to follow, and two debates, so single, short supplementary questions and—I know—economical replies are the order of the day.
The Prime Minister referred very briefly to Pakistan and he did not take the opportunity to respond to the questions about Pakistan asked by my right hon. and learned Friend the Leader of the Opposition. Can he give us his assessment of Pakistan’s role, for good or ill, across the Durand line, in a political solution and regional stability involving Afghanistan?
The hon. Gentleman is absolutely right. The role of Pakistan in this is vital. What is encouraging is that in all the conversations I have had with President Karzai across the past five years I have never heard him as positive about his relationship with Pakistan as now. Clearly, a stable Pakistan and a stable Afghanistan are two sides of the same coin. The encouraging thing right now is that the Pakistan Government and the Pakistan military are pursuing al-Qaeda in South Waziristan and other parts of the tribal areas, and that is making a difference. But of course we have to convince both the Pakistan Government and the Afghanistan Government that we are there for the long term—not the long term with troops, but the long term with support, aid, diplomacy and development—so that they do not think that we will leave them in the lurch once again.
May I commend the Prime Minister for confirming that our only justification for being in Afghanistan is not corruption or the poppy trade but national security? On that basis, will he also confirm that the decision when we start to withdraw our troops should be based not simply on the Afghan army having increased in size or training, but when we are satisfied that it has reached the level of training and ability to ensure that al-Qaeda cannot return?
My right hon. and learned Friend is right. It should be a focus on national security and when we can safely leave the job of securing Afghanistan to Afghan forces. That is not about numbers; it is about capability and he is right to measure it in that way.
On 26 May, during the Queen’s Speech debate, I said:
“It is time to assert the principle that war is too important a matter to be left to generals. We need to assert the authority of this House and the authority of a politically elected Government over the lack of strategy in Afghanistan.”—[Official Report, 26 May 2010; Vol. 510, c. 246.]
Therefore, I welcome the Prime Minister’s keen interest. We have had too much of this war dictated by the red tops, with their jingoism, and the red tabs, with the generals’ priorities before those of the nation. I wish the Prime Minister well in what is clearly a change of strategy, with a politically elected Government in charge.
I thank the right hon. Gentleman. I was once told that the first sign of madness is to read out one’s own speeches, but I agree very much with a lot of what he said. It is important that the military feel that they can give unvarnished, clear advice to Ministers, but it is also important that Ministers test, probe and challenge that advice. That is how policy should be developed, and that is how it should be done in future.
Given that one of the problems in Afghanistan in the past has been mission creep, may I thank the Prime Minister for the clarity of his statement? He pointed out that we are still in the United States military surge phase. Can he assure me that, although the US military are already beginning to talk about a future draw-down, we will keep in constant touch with them to ensure that we operate on the same timeline? Will he keep in touch with not only the US but our NATO allies on this point?
I congratulate my hon. Friend on his election as Chairman of the Foreign Affairs Committee, and I look forward to the work that it will do.
My hon. Friend is absolutely right: making sure that we work together with the Americans and our NATO allies is absolutely vital to success. One of the things that strikes me when I go to see what our troops are doing in Helmand is just how close that work is. Sometimes people wonder whether it is right that British troops in Sangin are under American command, and it is right to point out that all the American troops in Kandahar are under British command. Our forces work incredibly closely together, including in the hospitals, and it is a great sight to see.
Could the Prime Minister update the House on the progress made on opium and poppy production and say whether there is now a prison in Afghanistan that is secure enough to hold any of the opium traders should they be arrested?
I am grateful for that question. There has been progress, as the hon. Lady will know. The province with the worst record of opium production has tended to be Helmand, but production is significantly down this year. There is a question mark about how much of that is due to poppy blight, how much of it is due to the excellent wheat-seed substitution programme that the British Government have been supporting and how much of it is due to security efforts. It is important as part of the picture that, as we see a more secure Afghanistan, we see more farmers pursuing alternative livelihoods. But again, we need to get the order of priorities the right way around.
May I welcome both the Prime Minister’s statement and his visit, join him in paying tribute to the soldiers who have lost their lives and to all those who serve, and assure him that his—our—Liberal Democrat colleagues stand four square behind him in the policy that he has announced? May I ask him a question about the implications for policy at home? Will he now review the work of our domestic Departments to ensure that returning troops have full support for their mental, emotional and physical needs, including their housing, after they have served in theatre in Afghanistan?
I am grateful for that question. We have said that we will examine every part of the military covenant and ensure that we fulfil it in all the ways that we should. Housing is clearly a key part of that, and the previous Government, to be fair, were putting money into forces housing, which we need to go on improving. Mental health is the area that needs the most attention. If we think of the combat stress that has been placed on those young men, now year after year, we should really recognise that this is something that needs to go through the rest of their lives, and we need to learn from countries, such as America, where much more is done to follow up mental health issues. My hon. Friend the Member for South West Wiltshire (Dr Murrison) is particularly looking at this area, working between the Ministry of Defence and the Department of Health.
Further to that question, may I ask the right hon. Gentleman whether he will meet a small delegation, together with me, sometime in the future to discuss this very issue? I serve on a panel of inquiry appointed by the Howard League for Penal Reform to consider this issue and why so many returnees end up in the criminal justice system. Will he spare some time to meet us sometime in the future?
I thank the hon. Gentleman for his question, and either I or the Defence Secretary would be happy to meet him and other colleagues. He makes a very good point: because the whole problem of mental health issues has not had enough attention, we are seeing former soldiers fall through the net and, as he says, too often end up either homeless on the streets or, on occasion, in the criminal justice system.
Does my right hon. Friend agree that, if we are to achieve lasting security success in Afghanistan, it is imperative that we exert the maximum possible pressure on al-Qaeda and the Taliban on both sides of the border? Is it the Government’s policy to continue the programme of bilateral counter-terrorism co-operation between the British Government and the Pakistan Government initiated by the previous Government here?
Yes, it absolutely is our policy to continue that work. The vital role that will be played by Pakistan will encourage it to go on driving al-Qaeda out of the badlands of the tribally administered areas. That is taking place, partly because there is good security and military co-operation, and there is a sense among the Pakistan Government and military that both the British and the Americans are there for a long-term relationship, to help them with this vital work.
Given that our forces are engaged in Pakistan, does the Prime Minister share my anger about how the departure of the Chief of the Defence Staff was announced—in an interview between the Defence Secretary and a national newspaper? Did not the CDS deserve rather better than that?
As I said, the Chief of the Defence Staff had for some time been intending to stand aside in the autumn after seeing through the strategic defence review, which is a vital piece of work. That is an appropriate time for him to do so. This is a good moment to pay tribute to the work that he has done, which has been genuinely good—I saw it myself in Afghanistan—and the very good leadership that he has given our armed forces.
I join my right hon. Friend and the right hon. and learned Member for Camberwell and Peckham (Ms Harman) in their tributes to two more of our fallen heroes. As some of us in all parts of the House have been pointing out ad nauseam since 2006 that this was an undermanned and underequipped Army, how does my right hon. Friend think it came about that four successive Labour Defence Secretaries were so uninformed?
My hon. Friend takes a very strong view about this issue, and I have listened to him talk about it many times. He is right to say that we went into Helmand province with far too few soldiers and without a clear enough idea of how dangerous the insurgency could become. We also—I made this criticism in opposition—did not have sufficient helicopters and did not move fast enough on vehicles and other equipment programmes. We have to start from where we are and ask ourselves what it is right to do now, and it is right to give this new strategy set out by Stanley McChrystal and President Obama time to work by having a correct number of forces on the ground to deliver proper counter-insurgency and build up the Afghan army and police force so that we can bring those troops back home. The point in the end is, what will make our country safer? Our country will be safer if we can leave behind an Afghanistan that, although it may not be a perfect democracy or a brilliant society, has some level of stability so that it is not a haven for terrorism.
Next year the British and American troops will have been 10 years in Afghanistan. It has cost the lives of hundreds of coalition soldiers and thousands of Afghan people, and the war has spread into Pakistan and created instability in the region. Is the right hon. Gentleman utterly convinced that this strategy of long-term military engagement with Afghanistan is not the cause of future problems and that we should not be thinking of an alternative process of involvement and negotiation rather than constant military activity?
Let me try to find some common cause with the hon. Gentleman. I agree with him to this extent: we will not solve this problem by military means alone. There should be a political process, a process for the Taliban to lay down their arms and rejoin Afghan society and, yes, a process led by the Afghan Government of engaging with the Taliban. However, there have to be some red lines. There has to be an acceptance of the Afghan constitution, an acceptance that everything must be done by peaceful means and, above all, the severing of any link with al-Qaeda. So a political process, yes, but let us not pretend that that will come if we walk away militarily.
Does the Prime Minister accept that al-Qaeda, as an international terrorist organisation, if it is suppressed in Afghanistan and Pakistan will begin to operate from any one or more of half a dozen other potential harbouring states? Given that it is out of the question that we could ever try to tackle that problem in the extremely costly way that we have tackled Afghanistan, will he undertake to view with an open mind the sovereign base bridgehead solution, which I hope to have an opportunity to discuss with him presently?
I thank my hon. Friend for his question, and I know that he has considerable expertise in this area. He is right to say that there are other parts of the world where al-Qaeda is, regrettably, quite strongly established, including Yemen and Somalia, but it seems to me that that does not negate the need to do what is possible to deliver a basic level of security in Afghanistan, so that at least that country cannot once again become home to al-Qaeda. Doing that at the same time as working with the Pakistan Government can actually help to stabilise a region from which huge amounts of terrorism have come. In terms of the sovereign base idea, I am happy to look at it, and to discuss my hon. Friend’s ideas with him, but I think that a military surge that is part of a counter-insurgency must be given time to work.
In accepting that security and a political solution are of the utmost importance, will the Prime Minister be mindful of the need to advance human rights in Afghanistan? What progress can he report? Will he confirm that there will be no return to the oppression, particularly of women, that was suffered in Afghanistan in the Taliban years?
I am grateful for the hon. Lady’s question. I think that some progress has been made. When I say, “Look, we’re not going to end up with a perfect democracy or a brilliant society,” it does not mean that those things do not matter; they do. It is just about ordering our priorities. For instance, at the recent peace jirga, something like 20% or more of the representatives were women. I noted at my press conference with President Karzai that whereas the entire British press were made up of young, white men, all the questions from the Afghan press were from women, which I thought was a sign in itself.
The Prime Minister has rightly recognised how important the integrated nature of the military operation is, and how the coalition forces are together trying to achieve security for Afghanistan. Does he have a commitment from our coalition partners that they have understood the message that we can leave only once security is established, as the population in Afghanistan has to believe that we have the commitment to see the job through to the end?
The hon. Gentleman makes a very important point. He will know that the Canadians and the Dutch have made their own decision about timetables, but it is very important to do all that we can to encourage other NATO allies—I met representatives of the Danish and Estonian military while in Afghanistan—and to ensure that all other NATO partners remain committed to the task, particularly in this most vital year, when the number of troops has increased in the way that I have described, and when there is a real chance of delivering a proper counter-insurgency strategy that protects the people, pushes the Taliban out and delivers that basic level of stability that we want to see.
The Prime Minister will be aware that the 1st Battalion the Mercian Regiment includes many of my constituents who were formally of the Cheshire Regiment, so I thank him for his statement. He rightly says that the military effort must be the highest priority in the campaign but, given his visits and the reports that he has received, may I ask him to reflect on the engineering resource on the ground? There is no doubt that the engineering resource helps massively with the military effort, but it also helps to rebuild communications, which can in turn help the governance of the country. Is he satisfied that it is at the right level?
The hon. Gentleman makes a good point. No, I do not think that we have made as much progress as we should have done on the engineering front. Let us take, for instance, the issue of the Kajaki dam: that should be delivering a lot more electricity to a lot more people in Afghanistan. Progress has not been anything like as fast as we would have hoped. That is the sort of tangible progress that people in Afghanistan want to see, to demonstrate that life is now better than it was under the Taliban. We have to deliver that as part of the message of security and stability that will enable us to leave.
May I commend and support my right hon. Friend’s determination and commitment personally to take responsibility for what our armed forces are seeking to achieve in Afghanistan? Is he aware, however, that there has for a long time been a widespread perception that while we are fighting a war in Afghanistan, Whitehall has not been on the same wartime footing and has not been tackling problems with the urgency that those in our armed services would expect? What is he doing to put Whitehall on a war footing and, in his absence, will he appoint a Secretary of State for Afghanistan to drive things forward?
My hon. Friend takes a great interest in these matters. We have put Whitehall on much more of a war footing, not least by appointing a National Security Council and a national security adviser, who met on day one of the new Government. That is a difference, and it is driving the policy. That message has got through clearly to the Ministry of Defence. Obviously, there are sometimes time lags in getting equipment out to the front line, but we are doing everything we can to make sure that that happens and that the commitment is there.
The Prime Minister has focused most of his remarks on security issues—rightly and understandably so. Can he say a little more about the development angles of our strategy in Afghanistan, and in particular, what, if any, changes he sees in the overall development strategy, how he feels about the so-called whole Afghanistan strategy which looks beyond Helmand and Kandahar to other parts of Afghanistan, and how he feels about the use of instruments such as the Afghan reconstruction trust fund for the disbursement of assistance? Finally, will he revisit the International Development Committee’s report from nearly two and a half years ago, which still has relevant messages to give about development strategies in Afghanistan?
I agree with what the hon. Member for Birmingham, Northfield (Richard Burden) says about a whole Afghanistan strategy. We must be careful not to be over-focused on Helmand province, although I make no excuse for that, as that is where troops are. In the end, the whole campaign and mission will be judged by progress in Helmand. With reference to how we are changing our strategy, it is to make sure that it is focused, particularly on the issues of security and helping to deliver that security. On too many occasions in the past five years, people working hard for DFID have not been able to get out into Afghanistan to deliver aid projects because there is not enough security, so we have to get that right first.
One of the many problems with our involvement in Afghanistan is that there has in the past been confusion about the key objective, so I welcome my right hon. Friend’s statement today, although I remain to be convinced that it can be achieved. Given that there has to be a political solution as well as a military one, how worried is he by the recent resignations from President Karzai’s Government of the chief of intelligence and the Interior Minister? Will he support President Karzai in seeking the compromise that is needed?
I discussed with President Karzai the resignation of the two Ministers, to which my hon. Friend referred, and the prospects for political settlement and for reintegration. That, combined with the military surge, will be vital to securing the future of Afghanistan and enabling us to bring our troops back home. In the end, particularly in southern Afghanistan, people must feel that they are part of the Government, and that it represents them. That process of reintegration, with the red lines that have been laid down, is a vital part of making that country more secure.
I am grateful to the Prime Minister for his commitment not just to the House, but to Afghanistan. It has been clear that our forces over there were undermanned. Instead of fighting one five-year war, we have been fighting five one-year wars. The various bases along the Helmand valley where British troops are now taking down the flags should be handed over not to the Afghans, but to the Americans. This is a repeat of Basra. Will the Prime Minister, along with the Defence Secretary, commit himself to counter-insurgency? We have always been good at that, but now we have been leapfrogged by the Americans.
I am grateful for the question and I know that my hon. Friend has great experience of Afghanistan, including having travelled there a great deal. I do not agree with him, though, that there is somehow a repeat of Basra, as he put it. Under the counter-insurgency strategy we are making sure that we have the correct number of forces spread across Helmand and across Afghanistan to deliver counter-insurgency. In some cases, as he knows, that means moving forces from one place to another to make sure that they are thick enough across the whole ground. It is welcome that there are now 20,000 US marines in Helmand. That should enable us to deliver such security, so we should not be in any way worried or ashamed or anything like that if we move the disposition of our forces around Helmand with our US allies. That is part of delivering a successful outcome.
I welcome the Prime Minister’s statement. This autumn, soldiers from 16 Air Assault Brigade, from Colchester garrison, will be deployed to Afghanistan for the third time. In the Prime Minister’s statement on equipment, he did not mention unmanned aerial vehicles. Bearing in mind that UAVs are a very welcome tool in identifying insurgents and those who lay improvised explosive devices, will he give a commitment that UAVs will be very much there and part of the equipment programme?
I can give the hon. Gentleman that reassurance. On previous trips to Afghanistan, I have had proper presentations on the work of UAVs, drones, Predators, Reapers and other such projects, and what they are able to do is incredibly impressive. A great deal of British investment is going into those technologies, too, and we will ensure that they can be deployed as quickly as possible.
When I recently spoke to soldiers from the Grenadier Guards who had just returned from Afghanistan, they made the point that the Afghan national police equipment is incredibly poor but the police themselves are very good, so will my right hon. Friend the Prime Minister please address that as a key issue?
I am grateful to my hon. Friend for that question. The problem has been not just equipment but recruiting, training and retaining good police officers, and obviously we had that appalling incident at Nad Ali last year. This cause has come out among Members from all parts of the House: for too long not enough focus was given to the most important things in Afghanistan, of which training the police was absolutely key. The effort is now going in. I met American and British police trainers, and the police training college in Lashkar Gah is now turning out very good police officers, but for too long that particular issue was ignored.
Certainly I had a presentation out in Afghanistan on the equipment now being used and the training undertaken, and what our troops are able to do is incredibly impressive. The truth—I am sure that the former Defence Secretary will agree—is that we have to keep on investing and catching up with the latest technologies that the enemy use, because they are incredibly cunning at trying to find new ways of making those things even harder to find.
Office for Budget Responsibility
With permission, Mr Speaker, I should like to make a statement on the Office for Budget Responsibility, which the Government created on coming into office.
This morning, for the first time in British history, we have opened up the Treasury books and allowed the publication of an independent and comprehensive assessment of the public finances. From now on, Governments will have to fix the budget to fit the figures, instead of fixing the figures to fit the budget. I should like to thank Sir Alan Budd, the members of the budget responsibility committee and all their staff for the impressive work that they have done in short order. A copy of their report has been placed in the Vote Office and in the Libraries.
There has been some interest in whether the OBR would publish all the relevant underlying assumptions and judgments driving the forecast. Today’s report does more than that: there are more than 70 pages of detailed material, much of which has never been published before. For the first time ever, the Government are publishing the assumptions that lie behind the estimates for average earnings, property prices, interest rates and financial sector profits, and, crucially, a five-year forecast for annually managed expenditure. That includes a forecast for the amount of debt interest that we as a country will pay over the coming years.
The creation of the OBR has already impressed the international community and been praised by the International Monetary Fund and the G20. We will now move to put the OBR on a statutory footing with legislation that was included in the Queen’s Speech. From now on, Members of Parliament sent to this House to scrutinise how the Government spend taxpayers’ money will have access to honest and independent figures.
Let me now turn to those figures and what the OBR has uncovered. First, there are the forecasts for growth in the economy. The OBR is forecasting that growth will reach 1.3% this year and 2.6% next year. In future years, the OBR’s forecast is for growth of around 2.8% in 2012 and 2013, and then 2.6% in 2014. Sadly for our country, the forecasts for growth are lower in every single year than the figures announced by the previous Chancellor at the time of the last Government’s Budget in March. He told us that growth would soar to 3.25% in 2011, and then to 3.5% in 2012. When those forecasts were given, neither the Bank of England nor 28 of the main 30 private institutions producing forecasts for the UK were offering such an optimistic central view of the economy; we can only speculate as to why such rosy forecasts for a trampoline recovery were produced only weeks ahead of a general election.
I turn to the OBR’s forecasts for the public finances. The latest outturn data show that public sector net borrowing for last year was £156 billion. The OBR is forecasting that it will be £155 billion this year. It is the highest budget deficit of any country in the European Union with the exception of Ireland. It is £10 billion less than the forecast given only a month before the end of the last fiscal year, but I can tell the House that, based on the OBR’s figures, that £10 billion advantage that we start with decreases to only £3 billion by the end of the Parliament.
The reason for that is that the cyclically adjusted current balance, commonly known as the structural deficit, is forecast to be higher in every single year than what this House was told in March. That is perhaps the most important figure in the report, because the structural deficit is the borrowing that remains even when growth in the economy returns. It is the structural deficit that is a key determinant of whether the public finances are sustainable. This year, the structural deficit is forecast to reach 5.2% of GDP—that is, £9 billion higher than we were told in March. Next year, the structural deficit will be £12 billion higher than we were told before the election.
The OBR’s forecast sees debt rising as a share of GDP throughout the Parliament—and the interest on that debt, which we as taxpayers have to pay, also grows every year. Let me be the first Chancellor in modern history to give Parliament those numbers for the coming years. The OBR forecast is that this is what Britain will have to pay for its debts: £42 billion of debt interest this year, rising to £46 billion next year, then £54 billion, then £60 billion and reaching £67 billion in debt interest payments by 2014-15. Over the course of this Parliament, more than a quarter of a trillion pounds will come from the pockets of taxpayers simply to service the debts left by the previous Government.
The figures produced by the OBR also give us a new insight into the spending plans that we inherited as a Government. They show that, given the OBR’s assumptions, the previous Government would have had to find £44 billion of spending cuts in departmental budgets to deliver their published plans. I can confirm that I have found no evidence at the Treasury for how even a single pound of that £44 billion was ever going to be achieved.
There are two other very important considerations that relate to these pre-Budget forecasts and understate the situation that we inherited. First, these are central forecasts with a fan chart around them to represent the great uncertainty that exists, rather than Treasury forecasts based on an arbitrary reduction in the trend level of output. As a result, they understate the increase in the structural deficit and the reduction in growth. Secondly, and crucially, these projections have been based on recent market interest rates, which are about a third of a percentage point lower in Britain than at the time of the general election. As is widely acknowledged, that in part reflects investors’ confidence that the new coalition Government will take action to deal with the deficit. As a result, as Sir Alan points out in his report:
“In present conditions the likely result is that these economic forecasts are biased upwards”.
That is absolutely crucial to understanding today’s figures, because if we followed the fiscal path set out by the previous Government, that would, again in Sir Alan’s words in the report,
“lead to higher interest rates and so lower economic activity”
than forecast today.
Let me conclude with this point. The independent report published today confirms that this coalition Government have inherited from their predecessor one of the largest budget deficits in the world, forecasts for growth lower than the country was told at the time of the election, a larger structural deficit than had been previously admitted, and a debt interest bill larger than the schools budget.
It is indeed worse than we thought. The public would not have known any of this if we had not set up the Office for Budget Responsibility. Next week, I will return to the House to explain what we will do about it. In the meantime, I commend this statement to the House.
I thank the Chancellor for his statement. My thanks would be more heartfelt had I not received it just 25 minutes ago. There was a time when statements were supposed to be in the hands of the Opposition an hour before the statement was made, and then 45 minutes. I do accept, before the Chancellor says it, that in my time there were occasions when he did not get as much notice as he wanted. All I would say, in the nicest possible way and in the spirit of consensus, is that if we could try to get these statements in the Opposition’s hands rather earlier, that would be very helpful.
Turning to the substance of the Chancellor’s statement, I welcome the measured approach taken by Sir Alan Budd, and his colleagues in the Office for Budget Responsibility, in presenting his report this morning. Higher borrowing by the Government, as the OBR acknowledges today, continues to support the economy. Indeed, without it, there was a grave risk that a recession could have tipped into a depression; that is why the expenditure was necessary in this country and in other countries across the world. However, as I have said repeatedly, borrowing needs to come down as the economic recovery is established. Has not the OBR forecast that borrowing will be £30 billion lower than I anticipated in my Budget, and does not that flatly contradict the Prime Minister who said last week that
“the overall scale of the problem is even worse than we thought”?
Does not the report say that borrowing is lower not just this year, for which the OBR forecasts borrowing at £8 billion lower than I did, but in each and every one of the next five years? Borrowing is down by more than £30 billion in total. Can the Chancellor confirm whether he and the Prime Minister knew what the OBR’s borrowing forecasts were prior to the Prime Minister making his speech last Monday? If he did not, he was just plain wrong; if he did, he owes us an apology. At the election, the Chancellor and the Prime Minister said that they had no need to raise VAT. Now that borrowing is in fact lower than they thought, is that still their policy?
Turning to growth, the OBR has confirmed my forecast for this year, but it has set out a lower growth forecast for future years—just 2.6% next year. This change is driven partly by what Sir Alan has today labelled “recent events”, particularly events in Europe, where growth is sluggish at best. Is it not the case that what is happening in Europe, our largest export market, will impact on growth here in the UK? Does not that reinforce the need to put in place measures to secure growth here and in other countries in Europe? Does not the Chancellor agree that the impact of action taken across Europe to reduce deficits runs the risk of depressing demand and setting back the recovery unless accompanied by measures to stimulate growth? Does he not accept that growth is essential to cut borrowing? Japan provides an example of what happens if one gets this wrong—recovery is choked off, growth becomes stagnant, and debt rises.
It was because the private sector was weak as the global crisis hit that the public sector stepped in to support our economy. Sir Alan Budd and his colleagues understand that point, because Sir Alan says in his report, at paragraph 3.20:
“Private sector demand contracted sharply in the recession, while government spending contributed positively to GDP growth.”
So much for the claim that our spending was irresponsible and unnecessary. In the same paragraph, he goes on to say:
“For this year”—
“it is government consumption and inventory accumulation that make the largest contribution to growth.”
In other words, without it there would not have been growth this year. The risk of taking large sums out of the economy is that the recovery will be derailed. Is it not also the case that confidence is being affected by the scaremongering that we see from the Prime Minister and the Chancellor? The Chancellor will have noticed the survey of business confidence this morning showing a reduction in business confidence. That shows that what he is saying is, unfortunately, having a very real impact on the economy.
The Chancellor asked us to focus on the structural deficit. However, he will have read Sir Alan’s very clear statement, at paragraph 4.40 of the report, that
“forecasts of cyclically-adjusted aggregates are subject to particular uncertainty.”
In other words, there is a great deal of uncertainty about what the structural deficit is. But if the Chancellor does take the estimate of structural borrowing from today’s forecasts as the barometer of success, he needs to be clear with people what that means. Will he confirm that it is still his policy to remove the entire structural deficit over this Parliament? If so, will he confirm that, on the numbers published today, he would need to find £118 billion by 2014-15? That is £118 billion of spending cuts, tax rises or both, which will affect millions of people and businesses in this country.
Since the Budget, there has been slightly faster growth at the beginning of this year. There is lower borrowing as tax receipts have come in higher than previously thought. Far from providing political cover for the Conservatives and Liberal Democrats for cuts and tax rises next week, does not the report remind us that growth is still fragile, the recovery is not yet secured and growth is essential, not only to cut borrowing but to secure jobs and a lasting recovery?
The report reminds us of the complete mess that the economy was in when there was a change of Government.
Let me deal with the right hon. Gentleman’s points. First, I apologise that he received the statement only 25 minutes before it was delivered. I was following the normal practice that had been established in the Chancellor’s private office. Despite having been on the wrong end of that for three years, I note his complaints about the very first statement, and I will look into that.
Let me answer directly the right hon. Gentleman’s question, towards the end of his remarks, about the fiscal mandate. It will be set in the Budget. There is no credible fiscal mandate in place in Britain because we have inherited from the previous Government a commitment, which most of the rest of world does not believe is a serious and credible effort to reduce the deficit. The fiscal rules never amounted to very much either when the crisis came, but we will put in place new fiscal architecture.
The right hon. Gentleman talks about borrowing and economic growth. I remind him that the whole point about the structural deficit is that it is not the part of the deficit that reduces as growth returns. According to the OBR report, it is increasing above the estimates that were given in the March Budget. That is striking given that the out-turn for borrowing last year was, indeed, lower than the Chancellor forecast just three or four weeks, as far as I can tell, before he received the out-turn numbers. He gave a figure in the Budget and out-turn numbers were lower. It is therefore all the more striking that the structural deficit—the crucial part of the numbers: the black hole in the public finances—is higher by a significant amount than he forecast. Of course, we are all concerned about the situation in the eurozone, but 28 out of 30 independent bodies that look at the British economy did not believe that the figures that he gave in the March Budget were accurate. Indeed, we pointed that out at the time. [Hon. Members: “You haven’t answered a single question.”] I did not think that the right hon. Gentleman asked many questions; I have answered both of them.
The right hon. Gentleman makes a point about spending cuts and so on. He pencilled in £44 billion of spending cuts. Until a single member of the Opposition provides us with a clue as to how they would even have begun to achieve those £44 billion of cuts, they will not be taken seriously. The leadership contenders are busily taking their party leftwards into the margins of British politics. They are not addressing the central issue about their fiscal plans, which were not credible. Where would the spending cuts have come from? We are prepared to answer that question. Until they do, they are not contenders for being taken seriously in British politics.
Let me remind the right hon. Gentleman of what one of his Ministers, Paul Myners, said. This was the man whom he appointed—or at least agreed to have appointed—to the Treasury, and the man who sat with him in all those meetings over the years. He said:
“There is nothing progressive about a Government who consistently spend more than they can raise in taxation, and certainly nothing progressive that endows generations to come with the liabilities incurred by the current generation.”—[Official Report, House of Lords, 8 June 2010; Vol. 719, c. 625.]
That is the truth about the Labour party’s position.
The right hon. Gentleman says, “Apologise”. He is the person who should apologise. More to the point, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), wherever he is, should come here and apologise for the complete economic mess in which he left the country.
May I congratulate my right hon. Friend on this unprecedented increase in transparency and openness on economic forecasting? Is it not the case that the increase in the structural deficit as a percentage of gross domestic product means that a robust deficit reduction plan is needed now more than ever?
If the Chancellor accepts Sir Alan Budd’s estimate that around three quarters of the current deficit—about £120 billion—is structural, and if he intends to eradicate that entirely during this Parliament through public spending cuts and tax increases, where does he expect the growth to come from to prevent unemployment from increasing to 3 million and staying there for the next five years?
The fiscal mandate will be set out in the Budget. I am disappointed that the right hon. Gentleman was not elected as Chair of the Public Accounts Committee, but perhaps from his current position he will begin to propose cuts—as I said, cuts were even pencilled in to the previous Government’s plans—before concerning himself with our proposals.
While sharing my right hon. Friend’s dismay at the inheritance he has acquired—the picture is even worse than it once appeared—may I urge him to accelerate the plans that the Conservatives set out at election time to encourage lending by the banks, especially to small businesses, because the money supply figures are at an almost unprecedented low, and there is a real danger that we could see a further downturn?
I thank the Chancellor for his statement and the early advance sight of it. That is different from what happened under the previous Government, when such statements tended to come in very late indeed.
There is no doubt that the OBR forecasts show that the previous growth forecasts were too high and the deficit forecast, which is now £155 billion, was also too high. Will the Chancellor reflect that that is not simply a green light to tax and cut more, but that it demonstrates the imperative for sustained and sustainable above-trend growth, which is the real solution to tackling the structural deficit?
I thank the hon. Gentleman for thanking me for the early sight of the statement—we are trying to improve on things in the Chancellor’s office.
My point to the hon. Gentleman is that the threat to the United Kingdom at the moment is, in part, our very large budget deficit. Indeed, the Governor of the Bank of England identified it as the single greatest economic challenge that we face. Whether we are Scots or English, and wherever we live in the UK, we must deal with that deficit. I would welcome engagement with the Scottish Government in moving forward and identifying sensible savings, so that we can reduce the budget deficit and give our country and future generations a bright future.
May I welcome you to your role, Mr Deputy Speaker?
According to the House of Commons Library, the Treasury has, in the past 10 years, been at least as good at accurately forecasting growth as independent forecasters. The background work on the new projections has actually been done by a secretariat provided by the Treasury, and according to Sir Alan, the changes are
“within the normal range of uncertainty”.
Therefore, in all honesty, ought we to regard the new independent forecast as a simple downgrade of Treasury forecasts, and avoid unnecessary point scoring on what is a matter for the whole nation?
I am always against unnecessary point scoring. I say this to my hon. Friend: I think the new process is a big departure in how Budgets are put together. It is worth reflecting for a moment on what I did in this statement. I have read out what would normally be the first part of the Budget. Everyone now knows the forecasts and the assumptions behind them. He says that the forecasts were produced with the help of Treasury people, but Sir Alan Budd is an enormously respected independent person, and I do not think his independence can be questioned. We now have a set of accurate national accounts. Indeed, when the OBR is on a statutory footing, I want it to do more work on the true state of the national accounts, with regard to private finance initiative liabilities and the like. The big difference is that I must now fit the Budget to the figures, rather than fit the figures to the Budget.
I welcome you to the Chair, Mr Deputy Speaker.
Page 11 of the OBR forecast has an illuminating table about the contribution that various elements of spending—in this case, Government investment—make to GDP growth. For 2011, it shows a potential minus 19% effect in one year. Will the Chancellor confirm that his Budget and the spending review will not worsen that contribution to GDP, and will the OBR report on an analysis of the Budget and the spending review in terms of those components shortly after they take place?