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Topical Questions

Volume 518: debated on Tuesday 16 November 2010

The purpose of the Treasury is to ensure economic stability, restore sanity to the public finances, ensure employment growth, make sure our banking system is properly regulated and get this country back on its feet.

During the past five years, North Tyneside council has made year-on-year transformation savings without affecting front-line posts, but I fear that because of the comprehensive spending review, front-line jobs will now be lost. What message, other than fictitiously blaming the previous Labour Government for what has been a global recession, does the Chancellor have for North Tyneside?

First, the Government have given all councils, including North Tyneside, greater freedom about how to spend their resources by removing a lot of ring-fencing. Secondly, of course, as I said in the spending statement, this was a difficult local government settlement—I completely accept that. But even the Labour party was signed up to £44 billion of spending cuts. If Labour Members are telling us that those would not have included local government, that is not really credible. We have had to take difficult decisions and we should be supported for that.

T2. The Chancellor is heading to an ECOFIN meeting tomorrow and I hope he will continue to press our colleagues in the European Union for some restoration of fiscal sanity in their economic policies. The flag that will be fluttering so merrily over the proceedings will be the blue and yellow one—those are colours that we rather enjoy. Does he agree that unless we see some return to fiscal sanity and some abandonment of the policy of fiscal recklessness, perhaps the colour of the flag should be changed from blue and yellow to brown? (23989)

Of course we are urging fiscal restraint on the European Union. I should pay tribute to my colleague, the Economic Secretary, who has been out to Brussels twice in the past few days to argue vigorously for restraint in the European Union budget with considerable success. One of the problems we are dealing with is that the previous Government gave up half the rebate and that is one of the reasons why the budget is increasing.

T5. The unemployment rate in my constituency was 10.7% in September. After the announcement in the comprehensive spending review of the slashing of jobs, services and skills, what does the Chancellor think will be the unemployment rate in my constituency in 12 months’ time? (23993)

The whole point is that we have given these forecasts to an independent body, rather than just relying on the forecasts given by the Chancellor of the Exchequer at this Dispatch Box, so that people can believe in their independence and credibility. The Office for Budget Responsibility will produce its autumn forecast on 29 November. But of course the OBR figure that all Labour Members seem to use is the one for the public sector head count, but they seem to forget that this same body made a forecast of an increase in net employment, which sadly they never use.

What steps can the Chancellor take to ensure that the Financial Services Authority’s mortgage market review proposals do not have a disproportionate effect on home buyers and the housing market, particularly at a time when we are trying to encourage growth through the private sector?

My hon. Friend makes an important point and the FSA’s mortgage market review is seeking to learn some of the lessons from how the mortgage market was regulated before the financial crisis and some of the problems that that regulation created. What I think is important is that the FSA should consider very carefully the impact on home ownership and particularly on those people who are looking to move shortly.

T8. May I give those on the Treasury Front Bench the opportunity to answer the question on child benefit that they failed to answer earlier? How do they justify taking child benefit off a single-earning family on £45,000 and allowing a family that earns £80,000 to retain child benefit? An answer this time would be appreciated. (23997)

As the hon. Gentleman knows—and as the whole House knows—the justification for the measure that we took was to ensure that the cost of the spending review fell equally across the population so that those with the broadest shoulders would bear a greater share of the burden. In those circumstances, it is right that child benefit should be taken away from families with higher rate taxpayers. I would have thought that the Opposition would support that, not oppose it.

In the spending review, we took a number of spending decisions that will support social mobility. We chose to invest in early-years education for disadvantaged two-year-olds—a new investment—and to maintain the 15-hours entitlement for three and four-year-olds, something that was introduced under this Government. We chose to invest in a pupil premium that will give additional support to the most disadvantaged children. In tough financial times, that is the strongest investment in social mobility made by any Government in this country for many a long year.

The White Paper last week stated that HMRC will be taking on new responsibilities in collecting and processing real-time pay data for the calculation of universal credit. How much has been allocated for the IT to deliver that change?

The response to the consultation on real-time information—the next stage of it—will be published shortly. We will outline the details in that, but additional sums have been identified as part of the spending review process to pay for the real-time information project.

T6. More than 20% of my constituents in Cannock Chase are employed by manufacturing centred small businesses. Will the Chancellor assure them that the small business tax review will simplify and reduce taxes for small businesses rather than complicate and increase them? (23994)

Yes, I can give that assurance. I also note that the actions that the Government have taken have kept the small companies rate down, avoiding the rise in the rate that we inherited.

The comprehensive spending review contained a proposal to cut the mobility element of the disability living allowance for those in residential care. Why did the Government make that decision—because it was fair or to reduce the fiscal deficit?

In the spending review we took a number of difficult decisions, including decisions on welfare. We sought to identify the savings that we thought were most justified. As far as I understand it—although I am happy to be corrected—the DLA changes have been supported by the Opposition.

T7. Fiscal discipline is, if anything, more essential in opposition than in government. Will the Chancellor tell us whether he has received any support or advice from the Opposition on how to achieve that fiscal discipline? (23996)

I am told that they have plans to cut £44 billion from public expenditure, but they have not told me what those plans are.

What is the economic case for HMRC’s sacking professional tax collectors and hiring novice private sector debt collectors to collect liabilities of tax below £10,000?

The intention is to strengthen HMRC’s capability to collect taxes. If that involves making use of private sector expertise to collect additional debt, which is the intention, that is surely a good thing that should be welcomed by all parties.

Given that the Irish Government have said that they neither want nor need a bail-out, will the Chancellor support them at ECOFIN and put off those people in the EU who seem to want to make a crisis out of a problem?

There is an enormous amount of speculation about Ireland at the moment to which I do not propose to add. The Irish Government have said clearly that they have not sought assistance and that they are taking difficult steps to deal with their fiscal situation. They will make further announcements about their Budget situation in the next few weeks. I make the general observation that what is going on at the moment highlights the fact that concerns about sovereign debt issues have not disappeared and we should be grateful that, thanks to the actions of this Government, we have moved Britain out of the financial danger zone.

What does the Chancellor say to fixed-income pensioner households in my constituency and his who will be faced with the additional VAT burden in just over 50 days?

I would say to them what I would say to everyone in this country: that we inherited the largest fiscal—[Interruption.] Well, I do not know how many times Opposition Members have to hear this but it is the truth. They left us the largest Budget deficit in the G20 and the European Union at a time of heightened sovereign debt concern. They can either be part of the debate that the rest of world is taking part in on how to deal with the deficits or they can completely ignore that debate and become irrelevant.

Does the Chancellor agree that he should ignore the advice of the Opposition on all matters fiscal relating to the European Union, because it is still their policy to join the euro and because their MEPs voted to double our contribution this year?

As you will remind me, Mr Speaker, I cannot speak for the policy of the Opposition or say whether they have changed their official position which is to support joining the euro, but I make it clear to my hon. Friends and others that we certainly will not join the euro while this Chancellor and this Prime Minister are in place.

It was this Chancellor who agreed a 2.9% increase in contributions to the EU and to cede certain powers to Brussels—that is in the papers he signed—so has he not joined that glorious list of British politicians who go to Brussels, lose their wallets and their trousers and then come back and tell us what a great deal they have got?

I think that the hon. Gentleman is thinking of Tony Blair rather than of this Government. We voted against the increase in the European budget, but we were outvoted because it was a qualified majority vote. We are dealing with the fact that the previous Government gave up half the budget rebate, which is why British contributions are going up, and we are very clear that, although we want fiscal rectitude across Europe, we do not propose to hand over substantive new powers to the European Union.

There is much support around the country and in the House for the broad principles of the Robin Hood tax campaign. The coalition Government have made a good start with the permanent bank levy. Will the Chancellor confirm that he expects the Independent Commission on Banking to consider the taxation of bankers’ bonuses and bank profits so that the banks pay their fair share in this country?

The commission that we have set up is looking principally at the structure of the banking sector, which is another very important issue. We have said that we want the banks to make a contribution, which is why we introduced the permanent banking levy; we did not agree with the previous Government that that should not happen. We followed the best practice set out by the International Monetary Fund, which outlined two taxes that could be pursued—one was a bank levy and the other was a financial activities tax, which we also said that we would consider in the Budget. On the broader point of the Robin Hood tax, or the financial transactions tax, which is sometimes discussed at ECOFIN, I think that everyone accepts that it would have to be introduced internationally or else it would be almost impossible to collect any revenue.

Can the Chancellor or another Minister tell us what assessment has been made regarding potential job losses due to changes in the benefit system? Much concern has been expressed in my constituency, particularly yesterday in the local press, that up to 700 jobs might be lost in the HMRC office in Dundee as a result of such changes. What assurances can Ministers give me and my constituents that that will not be allowed to happen?

The welfare reforms that we are proposing are designed to support people off benefit and into work. That is the whole point of the reforms that the Secretary of State for Work and Pensions outlined last week. The reforms that will create a universal credit and some of the changes that we announced in the spending review are all there to help people off benefit and into work, and to help people get jobs, which is what the hon. Gentleman should support.

I did see that rather remarkable comment from the shadow Chancellor over the weekend. We are doing what we are doing because we have to—because of the size of the Budget deficit.

The Federation of Small Businesses North East and the insolvency trade body R3 have wound up one in 10 businesses that were unprepared for the 2.5% increase in VAT next year. Kingston university also recently showed that small businesses in the north-east intend to shed staff. Is not VAT the real jobs tax?

As I say, we are doing that because we need to deal with the Budget deficit. I thought it was the policy of the hon. Gentleman’s party that a greater share of the consolidation should be borne by tax rises; I thought that that was now the official policy. It is also clear that the previous Government were planning a VAT rise. Businesses have had plenty of notice of the increase that is coming in in January, and I am sure they will be able to cope in the same way as they coped with the VAT rise at the beginning of this January.

All of us are all too aware of the record deficit and debt that we inherited from the Opposition. Will my right hon. Friend agree to publish a regular scorecard showing how that deficit and the debt are reducing, so that taxpayers and the public sector can see the benefit of the Government’s policies?

We have created the independent Office for Budget Responsibility so that the fiscal forecasts for the United Kingdom are no longer produced by the Chancellor of the Exchequer and sometimes influenced by the political judgments of the Chancellor of the Exchequer, but instead are done independently.

On child benefit, can the Chief Secretary explain why he believes that families earning £45,000 have broader shoulders than those earning £80,000?

It should be obvious to the hon. Gentleman that higher rate taxpayers have greater means than those at the bottom of the income spectrum. It is a basic principle of fairness that underlies the spending review that we need to ensure that those with the broadest shoulders bear a greater share of the burden. As I said in response to the question earlier, asking higher rate taxpayers not to collect child benefit seems to be one of the decisions in the spending review that the Opposition should find it easiest to support.

As my right hon. Friend says, it is right that in reducing the deficit, those with the broadest shoulders should bear the greatest burden, but do the Government understand the genuine anger that the public feel when it seems as though wealthy individuals and large companies can get away without paying their tax bills? What reassurance can the Minister give my constituents that the richest in society will pay their fair share?

We have taken a number of decisions to make sure that the burden is fairly shared. We have introduced the bank levy, and we are taking child benefit away from higher rate taxpayers, although that is clearly opposed by Labour. We are also seeking to conclude a number of deals with countries that have a reputation for attracting tax avoidance and tax evasion, such as the deal that we are negotiating with Switzerland. That will ensure that there are further revenues coming into the Exchequer from those who can afford it.