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Commons Chamber

Volume 523: debated on Tuesday 8 February 2011

House of Commons

Tuesday 8 February 2011

The House met at half-past Two o’clock


[Mr Speaker in the Chair]

Oral Answers to Questions


The Chancellor of the Exchequer was asked—

Gross Domestic Product

1. What factors he has identified as underlying the fall in gross domestic product in the fourth quarter of 2010. (38618)

The Office for National Statistics attributes the actual fall in GDP to the bad weather in December, but we have been clear that even without that effect, the numbers were disappointing. In the past week, there have been more encouraging survey data showing services, construction, retail and especially manufacturing all growing more strongly—something the Opposition have been mysteriously silent about.

Could the Chancellor please tell the traders on Blackwood High street whom I met this Saturday whether the rise in VAT will help or hinder them this quarter?

The VAT increase, like the other measures we are taking, helps to deal with the record Budget deficit that we inherited from the Labour party. By dealing with that, we have provided financial stability for the British economy. That has also been made clear by the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), who would also have gone ahead with a VAT increase.

Given that the last quarter of last year saw a big real increase in public spending and a further big increase in debt, does that not show that there is no necessary connection between those things and growth and that it would be quite wrong to think that spending and borrowing more would solve the problem?

My right hon. Friend is absolutely correct. Of course, in December, the Government were spending, in real terms, a record amount. I make the point again that we inherited a record Budget deficit. I believe that Labour’s plan, set out in its March Budget, was to start cuts in April this year. We have set out a credible plan and we are awaiting one from Labour.

The figures underline that the economy is not out of the danger zone. Does the Chancellor know of the concern expressed by the Recruitment and Employment Confederation about a new lost generation of unemployed young people of the kind we saw in the ’80s and ’90s? What assessment has he made of measures the Government can take to avoid that problem?

The right hon. Gentleman is absolutely right that unemployment went up by 1 million under the previous Government. We know that even in the good years, the problem of youth unemployment increased and that we as a country were not able to do much about it. This Government are determined to tackle that head-on with reform of the welfare system so that it always pays to work and, at the same time, with the new Work programme, which will give young people the skills and opportunities they need to get off those unemployment rolls.

In giving evidence before the Treasury Committee, Lord Turnbull made it clear that spending as a proportion of GDP should be nearer 40% than the current level of nearly 50%. The OECD has said that the deficit will retard growth. Will the Chancellor make more of the case that action is needed to tackle the deficit not just on financial grounds but to help release the wealth-creating sectors of the economy?

My hon. Friend is clearly correct that it is unsustainable for the Government to be consuming almost 50% of national income. Lord Turnbull observes that under Labour and Conservative Governments in the past, the number was closer to 40%. Of course, the deficit reduction plan that we have set out brings that about.

It is an honour and a great responsibility to shadow the Chancellor of the Exchequer at this critical time for our economy and our country. I pay tribute to my predecessor and thank him for everything he did despite the fact that I seem to have inherited an excessively large number of breakfast meetings from him. It is a good job that I did not have one today, or I would have missed this morning’s rather hurried mini-Budget.

It snowed so badly in December in Britain that airports closed, our economy shuddered to a halt, consumer confidence slumped and unemployment rose. In America, it also snowed so badly that airports closed, but the pace of US economic growth increased, consumer confidence was high and unemployment fell to a two-year low. Could the Chancellor tell the House whether there is something different about snow in Britain—or is there a better explanation as to why the American economy grew and Britain’s did not?

First, I welcome the right hon. Gentleman to his post and congratulate him on his appointment. Now he and the Leader of the Opposition know what it is like to be second choice. The new shadow Chancellor knows, because he was at the Treasury and he is a man with a past, that Britain had the largest housing boom, the biggest banking crash and the largest budget deficit, and as a result, recovering from the deepest recession was always going to be challenging and choppy, but we have set out a credible plan, including an increase in the bank levy, to deal with the budget deficit, which he refuses to deal with because he is a deficit denier.

No answer to the question on America. Perhaps the Chancellor should have spent less time on the ski slopes of Switzerland and more time in the conference halls of Davos, listening to the American Treasury Secretary. Let me tell the right hon. Gentleman what he said:

“You’ve got to make sure you don’t hurt the recovery . . . There are some people who like to move . . . very quickly to do very deep cuts in spending but it is not the responsible way to do it.”

In June, unemployment was falling and growth was forecast to be 2.3% this year. Now unemployment is rising and growth is stalled. With consumer confidence falling, inflation rising, no bank lending agreement, no plan for jobs, no plan for growth, no plan B, does the Chancellor really expect us to believe that he can meet his forecast for economic growth this year, or will he have to stand at the Dispatch Box at the Budget in six weeks and downgrade his very first growth forecast?

The right hon. Gentleman clearly had a lot of time to prepare that, but I am not sure it all came out as he expected. We have had to deal with his economic legacy and he is running away from his past. He was the City Minister who knighted Fred Goodwin. He is the economic adviser whose fiscal policy has led to fiscal disaster. He is the leadership candidate who, for reasons of political positioning, denies the deficit. The truth is this: we have a plan to clear up his mess. He has no plan at all.

Financial Regulation

The tripartite system of financial regulation put in place by the new Chancellor and his advisers in 1997 failed spectacularly and cost the British people billions of pounds. That is why we are replacing the tripartite system with a much tougher and more coherent regime led by the Bank of England. We aim to have that system in place by the end of 2012. I repeat what I just said: we have today increased the rate of the Government’s permanent bank levy for this year in order to raise £2.5 billion net. This will mean that the banks pay more in tax in each and every year of this Government than they did in the last year of the previous Government. Through this new bank tax being made permanent and with the revenue announcement today, the banks will be making a fairer contribution to our economic recovery.

Does my right hon. Friend regret the fact that the system of financial regulation, which was drawn up by the right hon. Member for Morley and Outwood (Ed Balls), failed to prevent the greatest financial crisis in our country in living memory?

Of course I regret it, because we are all having to deal with the consequences. We still do not know—the legislation will come before the House of Commons—whether the Opposition support changing the system of regulation that was established by the right hon. Member for Morley and Outwood (Ed Balls) in 1997. I guess we will find out. The Government are clear—we must fix the system of regulation that went so badly wrong, and we believe that giving the Bank of England the lead responsibility on that will help.

As the Chancellor knows, the Leader of the Opposition has admitted that the previous Government got regulation wrong. One area that was wrong was inadequate customer protection in the consumer credit market. Given considerable recent interest in the subject in the House, can he update us on the creation of the consumer protection agency?

My hon. Friend is right. It was an interesting admission from the Leader of the Opposition that things started to go badly wrong when he was an adviser at the Treasury. Maybe the man he did the photocopying for will make a similar admission. The creation of a consumer protection and markets agency will provide a stronger consumer voice and a consumer champion. It will be a world-class regulator. We are assembling the right team to run that agency, including many talented people who were at the Financial Services Authority. I am delighted that Martin Wheatley has been appointed as the chief executive designate. He has an outstanding record as a regulator around the world and his arrival bodes well for the future of the new agency.

Was the three-way split in financial regulation the worst financial decision taken by the previous Government, or has something else caught my right hon. Friend’s eye?

There is the selling off of the gold at a record low and the pensions tax that destroyed our pensions system, but I have to say that, in terms of sheer cost to the British taxpayer, the system of regulation designed by the shadow Chancellor was pretty catastrophic.

Why did the Chancellor endorse the report published by the right hon. Member for Wokingham (Mr Redwood) just a few weeks before the collapse of Northern Rock, which called for the deregulation of the mortgage market? Does he still support its conclusions?

The new Parliamentary Private Secretary is barracking; what a shame he has moved four Benches down, because he is probably going to get louder. I can tell the hon. Lady that I explicitly disagreed with that recommendation in the report at the time.

It is understood that the new Prudential Regulation Authority intends to do less than the Financial Services Authority did to reduce the probability of bank failure. Given that the failure of any bank, even with a proper resolution regime, could contribute to a systemic crisis in confidence, can I have the Chancellor’s assurance that he will put all the pressure he can on the PRA to ensure that it continues with active supervision to minimise the probability of bank failure at any level?

The hon. Gentleman can rest assured that I will certainly do that. I do not think that he has given a fair representation of the role that we expect the prudential regulator to fulfil. What I will say about the prudential regulator and the fact that it will come under the aegis of the Bank of England is this: I hope that it will exercise discretion and judgment as well as simply making sure that boxes are ticked. The decision to allow Royal Bank of Scotland to buy ABN AMRO in 2007 might have ticked the various boxes in the regulations at the time, but it was clearly the wrong judgment. I expect and hope that in future our new regulator would be able to step in at that point.

Instead of making politically convenient and economically ludicrous pronouncements that it was the UK’s tripartite system of banking regulation that somehow caused the global credit crunch, can the Chancellor explain to the House why his own flagship banking reforms are now running late and why his cosy private talks with the banks on bonuses have failed to materialise? Was not today’s panic announcement just further proof that with this Chancellor, as CBI chief Richard Lambert has said, it is all politics and no economics?

The hon. Lady asks why the legislation is “running late”. The previous shadow Chancellor wrote to me and asked for pre-legislative scrutiny, and I agreed to the request. Obviously, that has not been communicated to those on the Opposition Front Bench.

Manufacturing Growth

The independent Office for Budget Responsibility is responsible for the official economic and fiscal forecast. Returning the UK to sustainable economic growth is the Government’s overriding priority. This includes a strongly performing manufacturing sector. The Chartered Institute for Purchasing and Supply’s purchasing managers’ index for January showed the manufacturing index at a record high. This was accompanied by a rapid increase in manufacturing outputs and the fastest growth in new orders in the survey’s history.

The closure has been announced of the bathroom manufacturer Ideal Standard, which is based in Middlewich in my constituency. Middlewich is a feisty town, as are its people, who want to rise to the challenge that this news presents. What support and resources can the Government provide to enable the people of Middlewich to help themselves to create jobs, develop new industries and go for growth?

My hon. Friend has a great deal of expertise in the business world. In the longer term, it is vital that we get the fundamentals right and have sustainable public finances, and the Government are pursuing policies that will favour growth. In the short term, obviously her constituents have our sympathy. Jobcentre Plus is able to provide a rapid response service in those areas, and I am sure that it will be acting closely with her constituents.

A firm in my constituency manufactures parts for motorbikes, and it plans to move into the full production of motorbikes, so why have the Government decided to cut investment allowance, which will hit firms that are trying to make such moves? How can there be growth with policies that undermine manufacturing?

We announced in the June Budget corporation tax reductions that will benefit all sectors, including manufacturing. As we can see, so far manufacturing is doing well. Of course, we cannot be complacent, but the early signs are that our policies are helping.

I want to ask the ministerial team which piece of recent data they find most interesting: the record level of manufacturing activity, the rebound in consumer confidence or the endorsement by the Institute for Fiscal Studies of this Government’s economic policy in paying off the previous Government’s debt?

It is absolutely clear that this Government are on the right course. There are some encouraging signs, but none the less we must stick to the course. The early indications are, in manufacturing in particular, that that sector of the economy is growing well.

We share the Government’s desire for a strong manufacturing sector, hence our disappointment at Pfizer moving overseas and the Government’s failure to support Sheffield Forgemasters. According to today’s Financial Times, the Deputy Prime Minister, despite his dismal track record on Forgemasters, is leading the drive for more bank lending to small and medium-sized enterprises to secure regional economic growth. Who is now in charge of growth policy? Is it the Chancellor or the Deputy Prime Minister?

It may come as a surprise to Opposition Members, but an entire Government are capable of working together. That was not the experience when the Treasury was being run by the current shadow Chancellor.

Structural Deficit

The structural deficit was 8.8% of GDP in 2009-10. The Office for Budget Responsibility forecast is for it to be 7.6% in 2010-11, falling to 0.3% by 2015-16. More information is in the OBR’s forecast.

OECD figures in November show that Britain entered the financial crisis with the largest structural budget deficit in the G7. Does the Chief Secretary believe that this country entered the crisis led by the biggest deficit deniers in the G7?

That is a very good question. The previous Government were running a structural deficit from 2001-02, with a structural deficit of 2.6% in 2007-08, the largest, as the hon. Gentleman says, in the G7 in 2007. They were deficit deniers then, they are deficit deniers now, and that is why they have no answers to the problems of our country today.

My right hon. Friend will be aware that Tony Blair has said that

“from 2005 onwards Labour was insufficiently vigorous in limiting or eliminating the potential structural deficit”.

How would my right hon. Friend assess the effect of that failure on the current trend in the structural deficit?

Clearly, we as a Government are having to clear up the enormous mess that the previous Government left. That is why we have had to embark on some very difficult decisions on public spending and, indeed, taxation, but it is just worth listening to the OECD, which states that

“the UK was unique in its need for fiscal consolidation, because the deficit had gone completely out of control.

On the basis of what the Chief Secretary has just said, why did the current Chancellor promise in 2008 to match Labour’s spending plans?

Our country’s key problem—the hon. Gentleman should accept it, not deny it like his Front Benchers—is that we have an enormous budget deficit, which was caused by the previous Government’s failures. We have to clean up that mess if our country is going to get back to prosperity, and, until the Opposition accept that very simple fact, they will have no answers at all.

Order. Two things: first, I want to hear both questions and answers; secondly, can I—[Interruption.] Order. Can I just ask Members on both sides of the House to give some thought to how our proceedings are regarded by the people whose support we were busily seeking less than a year ago?

Will the Chief Secretary first confirm that public sector debt was 42.5% in 1997 and 36.5% in 2008, the second-lowest debt of any G7 country? Will he secondly accept that investment during the last two years of the Labour Government was designed to keep people in their jobs and homes, expenditure that he supported at the time? Given the disastrous economic figures and the CBI’s comments before Christmas, will he just admit that what he is missing is a growth strategy, not the cuts that he opposed during the election?

What was missing from that was any reference to the subject of the question, which was the deficit. Labour Members seem keen to talk about everything except the deficit, which they left for this Government to clean up. I do not apologise at all for the tough decisions we have had to take to sort out that deficit, to introduce tax rises and to deal with public spending to ensure that this country gets back on track. They maxed out the credit card; we have to pay it off.

Charities (VAT)

6. If he will take steps to allow charities providing services transferred to them by the NHS to recover value added tax. (38623)

Charities, voluntary sector organisations and social enterprises make a valuable contribution to our communities. That is why the Government provide about £3 billion in tax relief for charities. There are no plans to change the rules which govern the recovery of VAT by charities.

I thank my hon. Friend for that answer. The current thrust of Government thinking is that more hospices and end-of-life care services will be delivered by organisations such as Sue Ryder Care, which runs the excellent Wheatfields hospice in my constituency. When it is run by the NHS, as it is currently, it can recover 48% of VAT on non-business supplies, yet when it is transferred to organisations in the charitable sector such as Sue Ryder, it cannot. That is an anomaly that will damage the thrust of Government thinking. Will my hon. Friend meet me and representatives of Sue Ryder to discuss this matter?

I will happily meet my hon. Friend to discuss it. The VAT that is paid and the VAT that is recovered is taken into account in the funding of the NHS. There are difficulties in trying to resolve this issue without imposing an impractical and complex solution. That is why the focus tends to be on providing tax relief on charitable giving rather than on expenditure incurred by charities.

Bankers’ Bonuses

7. What objectives he has set for the outcome of his discussions to limit the bonuses paid to bankers. (38624)

13. What objectives he has set for the outcome of his discussions to limit the bonuses paid to bankers. (38630)

15. What objectives he has set for the outcome of his discussions to limit the bonuses paid to bankers. (38632)

Our objective in these discussions is to create a banking industry that lends to the British economy, contributes to the Exchequer, and supports economic growth and employment. The Government are in discussions with the banks to see if a new settlement can be reached so that bonuses and remuneration policies are more transparent and levels of bonuses paid are smaller than they would otherwise have been. Alongside this, we are looking at options to ensure that banks make an appropriate contribution to local economies and communities and provide the credit required to support the economic recovery, facilitate growth and create jobs.

Can the Minister tell the House why the Chancellor refuses to adopt Labour’s plan to repeat last year’s £3.5 billion bank bonus tax, as well as the bank levy, and use that money to help create the jobs and growth that so many of our communities badly need?

The hon. Gentleman should remember the words of the former Chancellor of the Exchequer, who said that the bank payroll tax did not work. Labour Members went into the last election ruling out a bank levy; they would not take the action that we have taken to ensure that banks pay a fair contribution to the costs they pose to the economy.

My constituents are appalled that the general attitude of the Government seems to be to withstand all criticism and not to deal with the real problem by making bankers accountable for what they are doing and pay their fair share. We are not all in it together.

I find that quite rich coming from Labour—the party that gave Fred Goodwin his knighthood. The reality is that under our bank levy the banking sector will pay more every year than it paid in one year under the bank payroll tax. That is the action that this Government have taken to ensure that banks pay their fair contribution towards the Exchequer.

The Chancellor must think he is good when he has put hundreds of thousands of public servants on the dole, cut pensions, especially those of the police and armed forces, and cut local government finance. It has been reported in the newspapers that a banker is to receive a £9 million bonus. Why does not the Chancellor get off his backside, get into the banks, and get it sorted?

I will take no lessons from the Labour party on bank bonuses. The shadow Chancellor presided at the Treasury when big bonuses were being paid out in cash, with no clawback and no lock-up. He backed that light-touch regime in government. We have taken the tough decisions on tackling bonuses. The Opposition should be apologising, not criticising.

Do Treasury Ministers agree that the real problem with bankers’ bonuses is that they are paid not out of profits, but out of revenues? Taxing banks after the bonuses have been paid merely depresses dividends, particularly for pension funds. Why are bankers’ bonuses not paid out of profits, as they always were by my very efficient stockbroking firm?

My hon. Friend makes an important point. Of course, under the old regime, there was no clawback when bonuses were paid out in cash, and no lock-up. The new code on remuneration introduced by the Financial Services Authority, which is ahead of international practice, has clear rules on deferral, requires that bonuses be clawed back for poor performance, and requires that bonuses for significantly highly paid members of staff—those who take risks—be paid out principally in shares, not in cash. That will ensure that the interests of bankers are aligned with those of shareholders.

How much has the Minister been constrained in his dealings with the majority state-owned banks by the contracts on payments that were signed by the Labour party before the election?

My hon. Friend puts his finger on the problem. When the previous Government entered into arrangements to bail out RBS and Lloyds, they limited the period of their involvement in the bonus regime. That is why we had to take action this year and why we have engaged with banks through project Merlin to achieve restraint on bank bonuses. We will make an announcement in the next week.

I congratulate the Chancellor on extracting a further £800 million from the banks this morning. Will he take this opportunity to rule out any reduction in his permanent bank levy, should it turn out to raise more money than expected?

My hon. Friend makes an important point, and I thank him on behalf of the Chancellor for his congratulations on the levy. As he recognised, the levy is a permanent feature, not a one-off tax like the previous Government’s bank payroll tax. It will raise more than the bank payroll tax did in its year in operation, on a net basis. We are committed to raising the levy from the banks over the life of this Parliament.

It is clear that the partial U-turn on the banking levy happened today purely by coincidence and had nothing to do with Treasury questions. Has the Minister anything else to tell the House? For example, what is he going to do about excessive bonuses? Perhaps we can coax him into another U-turn on the £1 billion corporation tax cut that he is giving the banks. If he wants to announce that at the next Treasury questions, that is fine.

I do not think that the hon. Gentleman is entirely on top of his brief on this matter. He knows that banks will pay more tax as a consequence of the levy. The tax cuts for the financial sector are far lower than the amount we will raise from the bank levy. This is a permanent measure. The previous Government failed to take action on bank levies and ruled out introducing them on a unilateral basis. This Government have gone ahead and done the right thing for the economy and for the taxpayer.

Government Debt

Public sector net debt doubled in the decade from 2000-01. By the end of last year, it stood at £900 billion. Servicing it costs the taxpayer £120 million every day.

I thank my hon. Friend for that answer. As I am sure she is aware, a debt of some £37,000 hangs over the head of every voter in my constituency of Ealing Central and Acton, thanks to the Labour party. Can she reassure us that there will be no deviation from the path, regardless of siren calls, of getting rid of the deficit as soon as possible, so that this country can move forward to prosperity once again?

Yes, I can, and of course my hon. Friend is not the only person to hold that view. The secretary-general of the OECD said only last week that Britain needed to “stay the course”. He realises, as did the Bank of England Governor Mervyn King when he talked about our deficit as being “clearly unsustainable”, that if we had not set out a credible plan and got a grip on our public finances to tackle the deficit, we would have run the risk of an even sharper fiscal tightening later down the road, a loss of confidence and higher interest rates in future.

It costs £150 to give a person debt advice, and it costs £50,000 to rehouse a family. Will the Economic Secretary explain why Treasury Ministers are cutting the funds to citizens advice bureaux to provide such advice, and why that is a good way to cut the debt?

We are looking at ways in which we can ensure that people still get the debt advice that they need, and of course a lot of the grants are provided by local authorities. There is no point in Opposition Members talking about debt, because it was their party that created the problem in the first place.

High-technology Manufacturing

The Office for Budget Responsibility sets out the official economic and fiscal forecasts. However, high-tech manufacturing is a key part of our growth plan and we need to ensure that Britain is not just open for business but making things again.

Is my hon. Friend aware of the latest data on manufacturing business confidence? January’s purchasing managers indicators show a sharp jump, suggesting annualised growth this year of 2.6%. Intuit, the software survey business, reports that 66% of small and medium-sized enterprise owners say that the VAT rise has no impact on their business, and Investec reports that two thirds of owner-managers plan to hire more staff in 2011. Does that not show that the Government’s policy is working and that the right hon. Member for Morley and Outwood (Ed Balls) is out of touch?

What it shows is that we have the right plan to get our economy back on track. My hon. Friend mentions the purchasing managers index for January, which was at a record high since the series began in 1992. We recognise that our road to recovery will still be choppy, which is one reason why we will bring forward the first phase of the growth review in the Budget that is coming up. That will examine how we can ensure that we create the conditions for our companies to be successful.

Does the Economic Secretary agree with the Institute for Fiscal Studies that the new patent box tax, reducing the patent tax from 28% to 10%, does nothing for new jobs or research and development, and that in fact the Pfizer case, with the loss of 2,300 jobs in Sandwich, is a case in point? It shows that she is doing nothing for modern manufacturing and that choking growth and increasing inflation through VAT is increasing the deficit, not decreasing it.

It is hard not to point out to the hon. Gentleman that his party supported the patent box when it was in government. It is not just that policy that will support high-tech manufacturing. Our policies of reducing corporation tax year on year rather than having it go up, and of reducing national insurance and getting rid of the worst impacts of the jobs tax that was making it harder for companies to keep people employed, will support growth in the economy. His party simply has no idea how to start making that happen.

Private Finance Initiative

The Government are committed to transparency across all areas of public spending, including PFI contracts. All new central Government PFI contracts will be published, and the Treasury website holds PFI statistics that will be updated at the Budget.

I thank the Chief Secretary for that answer. Last week, the Ministry of Defence announced that it had chosen three PFI projects as pilots for a wider renegotiation strategy in order to generate a rebate for taxpayers. I and many other Members have warmly welcomed that news. Is my right hon. Friend planning to encourage other Departments to reopen their own PFI contracts to generate future savings?

I am grateful for the question, and I certainly support the work that the MOD is doing. We are actively encouraging Departments and local authorities to scrutinise their PFI contracts for savings. As my hon. Friend knows, the Treasury has published draft guidance to help contract managers identify PFI savings, and a pilot will test the savings measures in the contracts, which will help to scope out possible savings and ensure that other Departments can make the same progress as the MOD.

Order. I would be grateful if the Chief Secretary could look at the House as he addresses us.

What will the right hon. Gentleman do about the scandal of bunching private finance initiative contracts together and selling them on in the private sector, with no benefit to the public sector? Is he going to take action, and if so, when?

As the hon. Gentleman implies, a vast number of PFI contracts were negotiated under the previous Government. If he, in common with any other hon. Members, has examples of low value for money PFI contracts or other concerns, I would be happy to look at them, as I said at the previous Treasury questions. Since then, no hon. Member except my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) has come forward with such examples. I therefore look forward to hearing from the hon. Gentleman.

Independent Commission on Banking

14. What recent assessment he has made of the progress of the work of the Independent Commission on Banking. (38631)

The Government set up the Independent Commission on Banking to consider reforms to the banking sector. We welcome the progress that the commission has made, and look forward to receiving its report in September 2011.

If the banking commission recommends breaking up the big banks, will the Government judge the Vickers report on its own merits, or will they put the value of their shareholding in the nationalised banks first?

The commission that has been set up is independent. It is looking at the structure of banking in the UK, and its impact on the wider economy and competition, and we await the outcome of its findings later this year.

Value Added Tax

16. What assessment he has made of the effects on consumer confidence of the recent increase in the basic rate of value added tax. (38633)

Sustainable public finances will increase consumer confidence in the medium term. The decisive action taken by the Government in the spending review and June Budget, including the increase in VAT, will put the public finances and spending on a sustainable footing.

Given the increase in VAT and the biggest monthly fall in consumer confidence since 1992, will the Minister update the House with his assessment of job losses in the retail sector?

Unless we get the public finances right, there will be no long-term consumer confidence. Can we imagine what the impact would be if the Government abandoned their approach and just started spending money, like the previous Government did, and failed to tackle the deficit? I am afraid that consumer confidence would go through the floor.

Is it not right to say that to compensate for the increase in VAT, the Government have increased the personal allowance for taxpayers, so that consumers have more money to spend?

My hon. Friend is right to say that we have increased the personal allowance, taking 880,000 people out of income tax, resulting in an income tax cut for millions of people. It is none the less the fact that we must tackle the deficit. To the extent that the Labour party wants to do anything about the deficit, it advocates reducing the deficit by increasing taxes by more. Think what that would do.

Financial Planning

17. What assessment he has made of the effectiveness of support and advice on financial planning and financial literacy for young people and vulnerable groups. (38634)

The Consumer Financial Education Body, which is soon to be renamed the Money Advice Service, has statutory objectives to improve understanding of financial matters among the general public, and to enhance the ability of members of the public, including young people and vulnerable groups, to manage their financial affairs. CFEB is the independent body that is responsible for measuring the effectiveness of its work.

Given people’s reliance on citizens advice bureaux, is the Minister at all worried about the cuts to them, including the closure of all five in Birmingham? How will that help vulnerable people who are seeking reliable financial advice?

The Government take the issue of financial advice very seriously. That is why we have supported the establishment of CFEB, which will be funded through a levy raised on the financial services sector, which is very important. It is also important that CFEB takes forward its work and considers how to reach out to some of the most vulnerable people in society.

Basel III Framework

18. What recent steps he has taken to implement the Basel III framework; and if he will make a statement. (38635)

The Government are taking forward work on the implementation of Basel III. The agreement will be implemented on an EU-wide basis through revisions to the capital requirements directive. Legislative proposals known as CRD 4 are expected from the European Commission before the summer. The Commission is working towards the implementation of CRD 4 in member states including the UK on 1 January 2013, with the majority of measures to be phased in by 1 January 2018.

Does my hon. Friend agree that the Government’s willingness to consider capital control and liquidity reform vastly contrasts with what took place under previous Governments?

My hon. Friend makes an important point. Of course, part of the problem was that the light-touch regime introduced by the previous Government for the regulation of the financial services sector meant that, when losses rose, banks did not have sufficient capital to absorb them. The Basel III reforms will tackle that challenge, and I hope that we will see a stronger and more sustainable financial sector.

Topical Questions

The core purposes of the Treasury are to ensure the stability of the economy, promote growth and employment, reform banking, manage the public finances and generally clear up the mess left by the Labour party.

Will the Chancellor update the House on the progress made in making us one nation in pensions, so that people in the private sector do not have to pay for public sector pensions that they can only dream of receiving themselves?

We are seeking a more equitable balance. Lord Hutton is due to produce his final report just before the Budget, and we await that. However, we have already made it clear that we need to see savings for the taxpayer. Those were set out in the spending review, and, as I said, we are committed to them. However, in conversations with trade unions, I have been prepared to enter into discussions with them on an extended time frame—to June—about exactly how those savings can be found across schemes and different pay scales.

T2. The Chancellor of the Exchequer will be aware of the statement made by the Northern Ireland Justice Minister yesterday. Will he explain the reason for the continued failure to make a decision? (38645)

I assume that the hon. Gentleman is referring to the request for additional support for the security situation in Northern Ireland. It is a request that I have taken very seriously, and we are interrogating the request properly—[Laughter.] I know that it comes as a complete surprise to Labour Members that the Treasury should actually interrogate spending requests from Departments, but we have decided that there is new management in charge at the Treasury, and that we should start doing that. We will treat the request with due diligence, but I am clear that security comes first. That will be my priority.

T3. Is my hon. Friend aware of recently passed US legislation—the Dodd-Frank Wall Street Reform and Consumer Protection Act—that obliges oil, gas and mineral extraction companies listed on US stock exchanges to declare how much they pay directly to a Government for the rights to mine those resources? This has a huge impact in Africa in tackling corruption, increasing transparency and stopping the backhanders that end up being given to Heads of State. Would he agree to meet me to see whether we can introduce such legislation here in the UK? (38646)

I am grateful to my hon. Friend for asking that question. Indeed, last week I had a meeting with representatives of leading non-governmental organisations on this matter, and the Government are actively engaged at a European Union level to see how we can progress it. He raises a fair point.

T7. The Chancellor referred to the need for the regulator to have good judgment. Do Ministers think that the same regulator is using good judgment in all aspects of the retail and mortgage reviews? (38651)

The hon. Gentleman raises an important question about the continued work load of the Financial Services Authority and its work on financial services. He and I would agree that we want better consumer outcomes from retail financial services, and that means that these areas should be reviewed very carefully. However, I am also certain that the outcome of the mortgage market review should take into account the stability of the housing market.

T4. The 2010 North East Research and Information Partnership annual jobs report shows a net increase in employment in the region of about 1,300 jobs over the past year. What are the Government doing to ensure that the private sector recovery in the regions continues? (38647)

The Chancellor announced measures in the Budget on corporation tax and national insurance breaks, particularly for companies in the regions. We have set up local enterprise partnerships, which enable local authorities and businesses to work together to promote their own economic interests, and in due course we will announce the first round of decisions on the regional growth fund, which will help to support exactly the sort of initiatives the hon. Gentleman is concerned about.

Does the Chancellor agree that any credible strategy for growth must include proposals for a fully capitalised, properly independent green investment bank? Will he assure the House that the Treasury has ceased to act as a roadblock to the creation of such a bank?

We are absolutely committed to creating the green investment bank. Indeed, we set aside money in the spending review to achieve that, and we will have an announcement in due course.

T5. As the rising cost of motoring and fuel has such a significant effect on rural constituencies such as mine, can my right hon. Friend update the House on any consideration he is giving to mitigate such problems as part of next month’s Budget? (38648)

I completely understand the pressure that motorists in my hon. Friend’s constituency and others are facing, partly due to the increase in the oil price. We have a proposal, in the Budget introduced by the last Labour Government, for an increase on 1 April. As I have said, we are looking at that. We are also considering the case for a fuel duty stabiliser, and we will have announcements on this, potentially at the Budget.

Does the Chancellor understand the anger that thousands of people in Nottingham feel when they are losing their jobs as a result of his policies, whereas the bankers who caused the credit crisis will be getting huge pay-outs and he has done nothing to stop them?

The reason difficult decisions are being taken is because of the policies of the Labour party. Until the Opposition—and in particular the man who had greater influence over Labour’s economic policy than any other—face up to that, they will not be a credible alternative. We are clear that we need to put in place steps to deal with the budget deficit and to ensure that the banks lend more, including in Nottingham, and pay less in bonuses than they did when Labour was in government. We expect to have announcements on that in the next week, but we need also to reform the way we help people who are unemployed, and that is what the Work programme will do.

T6. Given the astronomical levels of debt left to families in my constituency, can the Chancellor confirm that the planned cuts for this April that he inherited from Labour were just £2 billion less than those of the Government? (38649)

I can indeed confirm that, and this is one of the great paradoxes at the moment. The plan, which the previous Government all appeared to have signed up to, including the shadow Chancellor—that is, the plan put in place by the last Chancellor of the Exchequer—starts in eight weeks’ time and involves billions of pounds of cuts, amounting to just £2 billion less than what we are planning this year. We have not had any proposals from the Opposition; they have eight weeks to come up with a plan.

In Leeds we will lose 11 citizens advice bureaux debt advisers next month because of the cancellation of the financial inclusion fund. Where would the Minister suggest that my constituents who are struggling with debt and excessive and escalating charges from doorstep lenders go for advice?

The hon. Lady will be aware that the financial inclusion fund, which was set up by the previous Government, was coming to a close at the end of March. Other sources of debt advice are available. For example, the Consumer Credit Counselling Service is an effective provider of advice, while the Money Advice Trust provides advice over the phone. There are sources of advice out there, but as I said in response to a question from the hon. Member for Birmingham, Selly Oak (Steve McCabe), the Consumer Finance Education Body, which was set up by the previous Government and which we proposed, will reach out to the most vulnerable people in society to ensure that they get access to high-quality advice.

T8. Will my right hon. Friend join me in welcoming the decision by Moog Aircraft, which is based in my constituency, to invest millions of pounds in a new site to replace its old factory, securing 400 jobs in South Staffordshire? After 13 years of Labour’s decline in manufacturing, is this not a further sign that we are now seeing a manufacturing recovery? (38652)

My hon. Friend makes an excellent point. I join him in congratulating the company on its announcement. Under the last Labour Government the share of the economy taken by manufacturing halved; under this Government we are seeing a manufacturing revival.

Further to his answer to the hon. Member for Ealing North (Stephen Pound), will the Chancellor please confirm for the House that what the Minister for Justice in Northern Ireland has actually requested is not additional funding, but simply that the Treasury stands by the negotiated financial agreement that led to the devolution of policing and justice in the first place?

As I said to the hon. Member for Ealing North, we are carefully considering the request. I am clear that security comes first. Of course the Treasury has to apply due diligence to any request from a Department or devolved authority, but she should take it from me that we put security first.

Our mountain rescue teams are staffed by outstanding volunteers doing professional work, but outrageously they have to pay VAT and vehicle excise duty on life-saving equipment. Is it not time that this Government put an end to this and refunded that VAT?

My hon. Friend is quite right to celebrate the work of the mountain rescue teams. Of course they face additional equipment costs, and that is why we allocated funds in the spending review to help to support mountain rescue teams with those costs. The Department concerned, the Department for Transport, will make an announcement on this in due course.

It is extremely important that the Government are seen to act on the recommendations of the Independent Banking Commission, when they come out, in the national interest rather than in the interest of any particular sector. Does the Chancellor think that it is wise for the Minister, the noble Lord Green, an immediate former chair of the British Bankers Association, to sit on the Cabinet Committee that makes decisions on such matters? He joined that Committee last month, just two months after leaving the chairmanship of HSBC, a bank for which he worked for more than 25 years and which will be profoundly affected by the decisions that the Committee makes.

First, I am glad that the hon. Gentleman welcomes the creation of the Independent Banking Commission. I hope that all hon. Members have an open mind about the recommendations that it will make, and that they agree that we should not close off any options until we have heard from John Vickers. He is doing an excellent job, and we await his final report later this year. The hon. Gentleman is ungenerous in his remarks about Lord Green, who brings enormous experience to the job of Trade Minister. I would just point out that he has replaced Lord Davies, who was appointed by the Labour Government at a time when he was chief executive of Standard Chartered, so it is not as though bringing top bank chiefs into the Government is an innovation.

In the light of the recent appalling press about Her Majesty’s Revenue and Customs’ problems with PAYE and, now, with national insurance contributions matching, is the Minister as concerned as I am about the imminent introduction of online filing for companies, many of which have said that they simply lack the preparedness to deal with it?

I appreciate my hon. Friend’s concerns about online filing. It is the case that one of the providers has been unable to meet the timetable that HMRC set out, although a number of other software providers have been able to do so. We are seeking to ensure that we implement this in a way that is sympathetic to businesses, but we want to stick to the original timetable. Those businesses that have delivered should not be punished because of the failures of another.

Manufacturing has undoubtedly been helped a lot by the depreciation of sterling, which took place under the last Labour Government. That was only possible because Labour wisely kept us out of the euro. There is now a possibility that interest rates might rise. Will the Chancellor be putting pressure on the Monetary Policy Committee not to raise interest rates?

The Monetary Policy Committee is independent of this Chancellor—and, indeed, of previous and future Chancellors—and that is how we intend to keep it. On the hon. Gentleman’s point about the devaluation of the currency, I would just observe that it is incredibly important that the manufacturing industry makes itself even more competitive, and it could use the devaluation as an opportunity to do that. Some Government policies—on taxation and on employment law, for example—will also help in that regard, but the thrust of his question is right: we should not rely solely on the devaluation to make our manufacturing industry globally competitive.

The Chancellor is entirely right to emphasise the need to be careful with public money. Will he therefore please explain his role in approving the deal to make the UK taxpayer liable for billions of pounds to bail out the euro under the European stabilisation mechanism? Will he respond to my freedom of information request, and publish the advice that he was given on the agreement on assuming office?

First, I will look at my hon. Friend’s FOI request, because I have not seen it. The broader point that I would make is that my predecessor as Chancellor, in the weekend between the general election and the creation of the new Government, agreed to the creation of the European stability facility. That involves a UK commitment which takes place on the basis of qualified majority voting; we do not have a veto. I made it clear to the previous Chancellor at the time that I did not support what he had done. However, it has happened and we have to live with the consequences.

In a speech to the City in 2008, several months after the collapse of Northern Rock, the then Leader of the Opposition—now the Prime Minister—complained that the City had been subjected to too much regulation and to “excessive bureaucratic interventionism”. He also said that

“government needs to do less taxing and regulating”.

Can the Chancellor tell us what he meant?

I am reminded of the speech in the City made by the right hon. Member for Morley and Outwood (Ed Balls), when he said in 2006:

“In my first speech as City Minister at Bloomberg in London, I argued that London’s success has been based on…light-touch…regulation”.

He also said that he hoped the City would take comfort from the way the Labour Government had responded to new risks and to events. That is the Bloomberg speech that he likes to forget.

There is a lot of public disquiet about alleged enormous sweetheart deals done with major public companies—Vodafone and others—in the last five years. Three or four months ago, I tabled a question asking how many of these deals had been done, costing more than £100 million at a time. The answer I received was that the information requested was “not readily available” and could be provided “only at disproportionate cost”. I received a similar blocking answer this morning. When is the Minister going to tell the House what HMRC has been up to?

The National Audit Office has investigated and examined that as a matter of course. There is no question of sweetheart deals. The reality is that HMRC is seeking to recover as much tax as is due. That is what it has done in a number of cases. I am not going to comment on individual cases. That is a matter of confidentiality; I do not get to see the details. None the less, I think wild allegations have been made against HMRC, for which there is little or no evidence.

I was just checking and realised that the Government’s own business planning projections show that the proportion of young people on the dole by the end of this Parliament will be reduced by less than 1%. Will the Chancellor explain what his plan is to increase the number of jobs made available to those young people?

This country has a problem with youth unemployment that has been apparent for a decade. Even in the boom years during the middle part of the last decade, youth unemployment was increasing and a whole generation was being left behind. I hope that we can achieve some kind of cross-party consensus on trying to reform our welfare system so that people do not get trapped in poverty and work always pays. We are reforming the new deal and replacing it with the Work programme so that we are more effective at giving young people the training they need and the opportunities that have been lacking for the last decade.

Following on from the question from the right hon. Member for Haltemprice and Howden (Mr Davis), many of us will have seen—and some of us, myself included, will approve of—the demonstrations organised by UK Uncut outside certain high street well-known names. What are the Government doing to tackle corporate tax avoidance schemes by some large corporates; and what is the Chancellor going to do to make sure that the actions of some well-known and popular figures, such as premiership football stars and grand prix drivers, are also tackled?

The fact is that over the spending review period, £900 million is devoted specifically to HMRC for improving the capability of tackling tax avoidance and tax evasion. We take the issue very seriously and we announced proposals in December to reduce the tax gap further.

Russia (Exclusion of Journalist)

(Urgent Question): To ask the Minister to make a statement on the expulsion from Russia this weekend of the journalist for The Guardian, the Moscow correspondent Mr Luke Harding.

On Saturday 5 February Luke Harding, a British journalist and correspondent on Russia for The Guardian, was refused entry to Russia at Moscow airport and sent back to the United Kingdom. Mr Harding is a journalist who knows Russia well and has, over the last four years, given readers of The Guardian genuine insight into that country.

A free media and freedom of expression are a vital element of any free and democratic society—and the Government deplore any restriction on those freedoms. Mr Harding was not given any explanation for his exclusion and it is unclear to us at this stage whether he has the right of appeal against this decision.

My right hon. Friend the Foreign Secretary spoke to the editor of The Guardian over the weekend and subsequently to the Russian Foreign Minister, Sergei Lavrov, by telephone yesterday. My right hon. Friend asked Foreign Minister Lavrov to explain the reasons behind the decision to decline entry to Mr Harding. Mr Lavrov said that he was not aware of the specific reason, but promised to find out and let us know. We are yet to receive a response, but we understand that the Russians are actively looking into the issue. We have since passed this information to the editor of The Guardian.

We understand that Mr Harding had previously been warned by the Russian authorities about several alleged violations of his status as a journalist, including visits without permission to border zones and classified areas. Indeed, last November The Guardian approached us asking for support to secure Mr Harding’s reaccreditation as a journalist when his accreditation had been withdrawn. We then made representations to Moscow at a senior level, and in the event Mr Harding was granted an extension of his accreditation as a journalist.

We have raised our concerns about media freedom in Russia, most recently during our bilateral human rights dialogue with the Russian Government on 18 January. As the House will know, Foreign Minister Lavrov is due to visit this country next week. My right hon. Friend the Foreign Secretary will raise various issues—including, most certainly, human rights and media freedom—during his discussions with Mr Lavrov. Knowing my right hon. Friend, I am confident that he will have this case very much in mind when he does so.

I am grateful to the Minister for his reply. As he has said, Luke Harding is a thorough, meticulous and courageous journalist—qualities that are essential for anyone working as an independent journalist in today’s Russia. His British wife and young children are now stuck in Moscow without him. As the Minister said, when he tried to enter Russia this week he was detained before being put on a plane back to London. I am told that as his passport was handed back to him the Russian police officer told him, “For you, Russia is closed.”

Is this not a pretty chilling state of affairs? Does it not accord with the harassment of the last British ambassador to Moscow, the rigged trial of Mikhail Khodorkovsky, the persecution of journalist Fatima Tlisova, and the murder of her colleague Anna Politkovskaya, with which no one has yet been charged and of which no one has yet been found guilty? Does it not also accord with the revelation that the Russian security service press office which deals with journalists’ inquiries has now been given authority to issue licences for the routine bugging and surveillance of all journalists operating in Russia?

The United Kingdom has vast financial interests in Russia. Will not British businesses be nervous, fearing that this shows a return to the worst practices of the communist era? Will people not think that those who have suggested that Russia is a mafia state or a kleptocracy are not far off the mark?

What actions has the Foreign Office taken on behalf of Mr Harding and his family? I gather that the Russian Foreign Minister—who, as the Minister said, is expected to visit London next week—maintains that he knows nothing of the circumstances. What further representations will our Government make? Will they make it clear that Mr Lavrov is not welcome in this country while British journalists are excluded from Russia? Will they emphasise that, as a member of the Council of Europe, Russia must ensure the freedom of the press within its borders? May I urge all Government Members who are Council of Europe delegates and sit in the same grouping as Russian members of Mr Putin’s party to make absolutely clear to them that these actions are completely unacceptable?

We will certainly offer whatever consular support we are able to give to Mr Harding’s family. The hon. Gentleman will appreciate that events have been moving very rapidly over the past few days. As I said in my original answer, my right hon. Friend the Foreign Secretary will raise both the broader human rights concerns and, as appropriate, the case of Mr Harding—and, indeed, other individual cases—during his discussions with Mr Lavrov when they meet next week.

I think it important for the United Kingdom to continue to talk to Russia. Russia is a significant power in the world in both an economic and political and a military context. There will be issues, relating to counter-terrorism and nuclear proliferation, on which we want to find a certain amount of common cause with Russia, but it is also important—and the hon. Gentleman was right to stress this—that we are unafraid to raise very clearly in our discussions with Russian Ministers and officials issues on which we disagree, and disagree strongly.

While the British Government will continue to support British business in its work around the world, we also make it clear to Russia and, indeed, other countries that if they seek to attract international investment in their economies, it is in their interests to be able to demonstrate that they are governed by the rule of law which respects fundamental human rights, including the freedom of the media.

I endorse the concerns expressed by the hon. Member for Rhondda (Chris Bryant). Does my right hon. Friend the Minister agree that we in this House have always recognised that, although freedom of the press is sometimes uncomfortable, it is absolutely vital to a free society? Does he also agree that the treatment of Luke Harding is a matter of some concern, but that it is of even greater concern that half a dozen or more journalists have been killed or have disappeared in Russia in the past few years? Will he make absolutely sure that those coming to this country from Russia are left in no doubt as to how seriously we regard that?

My hon. Friend makes good and sensible points. We consistently raise both individual cases and the broader issues to which he rightly ascribes importance with Russian visitors to the United Kingdom, but they are also raised by British Ministers and officials when visiting Russia, and we will continue that practice.

I thank my hon. Friend the Member for Rhondda (Chris Bryant) for tabling this urgent question. I am sure that Members on both sides of the House will be extremely concerned about the detention and then the expulsion from Russia of Luke Harding. Freedom of the press should be one of the cornerstones of a modern democratic country. Therefore, this incident can only reflect badly on the Russian Government, especially as it is, unfortunately, not an isolated instance of the negation of press freedom. It is, indeed, of great concern that such a respected and highly regarded journalist as Mr Harding should be treated in such a way.

I am glad that the Government share the Opposition’s concern about what is happening in Russia, and I urge the Government to continue to make urgent and vigorous representations to the Russian Government. I also urge the Government to ask for specific reassurances regarding British journalists. Moreover, can the Minister urge the Prime Minister to raise the case of Mr Harding when he visits Russia later this year?

I can certainly assure the hon. Gentleman that my right hon. Friend the Prime Minister will raise human rights issues when he talks to Russian leaders, whether during his visit to Moscow that we hope will take place later this year, or at the margins of other international gatherings where he might meet members of the Russian leadership. It is very much in the interests of the Russian Government that they start to demonstrate that they respect international norms on human rights and media freedoms, not least because Russia itself has signed up to the various European and international conventions that embody those principles.

Notwithstanding the damage this incident does to Russia’s international image, does my right hon. Friend agree that, at a time when the Russian Government are seeking support for their membership of the World Trade Organisation, their not abiding by international norms does not advance their case?

One of the strongest arguments for wishing to see Russia accede to the WTO is that it would bring Russia into a rules-based organisation governing world trade. I think—I hope—that the Russian authorities will reflect on the impact decisions such as that over Mr Harding and those over many other individual cases will have on how they are seen by countries around the world and international organisations with which they wish to develop stronger relationships.

It is certainly true that Russia has become more oppressive and that it does not respect the agreements that it has signed. Would it not be a great shame if the Council of Europe and the European Court of Human Rights, which are the main protectors of freedom in Russia and many other countries in Europe, were undermined this week by attacks in this House? Should the right hon. Gentleman not urge his hon. Friends to make sure that the valuable work of the ECHR continues?

I will not be drawn into what the House might be debating later this week, but the hon. Gentleman makes a fair point when he says that, alongside those decisions of the ECHR with which we might strongly disagree, we must weigh in the scales its decisions, as in the case of Russia, to uphold firmly basic human rights and personal and media freedoms, and its severe criticism of the Russian authorities for their failure to do so.

Luke Harding’s expulsion is an extremely concerning development amid the complete lack of media freedom in Russia. It comes on the heels of the murder of Anna Politkovskaya and the violent attack on Oleg Kashin in November, and shows the real danger in which both foreign and local journalists operate in Russia, which makes a mockery of Russia’s membership of the Council of Europe. Even if the Russians refuse to see why, morally or liberally, this is totally unacceptable, can they at least be persuaded that it is hugely damaging to their own interests because of its impact on foreign trade, investment and their place in the world?

I agree completely with that last point. We will certainly continue to raise with the Russians the individual cases and general issues that the hon. Lady cited, as we did during the human rights dialogue that took place last month in London. We will also continue to give support to a number of both Russian and international non-governmental organisations that seek to monitor alleged human rights abuses and uphold basic freedoms, especially in the north Caucasus.

In November 1992, I heard the then Russian President, Boris Yeltsin, tell the assembled Commons and Lords that there would be no return to the old ways in his country. Is it not unfortunate that, increasingly, Russia is returning to autocratic ways? It would be a great blow not only to the Russian people but to the international community if the worst aspects of tsarism and communism were to return to that country.

When I look at Russian history what strikes me is how much the Russian people have suffered over the past century. I would dearly love to see Russia playing its full part as a member of the community of nations, including by showing respect for human rights and freedoms. The Government have always welcomed the statements, particularly from President Medvedev, arguing that Russia is moving towards greater acceptance of the rule of law and he is seeking to demonstrate greater respect for liberties in his country. It is important that the Russian authorities realise that we cannot make a judgment on the basis of words alone and that we look at their actions in judging whether those welcome expressions of intent are translated into practical action.

Given the horrific events that the hon. Member for Rhondda (Chris Bryant) has just described, does the Minister agree that Russia is rapidly becoming a rogue state? What can our Government do proactively to help reformers and democrats in Russia properly?

We can help by speaking out about our concerns, both in public and candidly in private to Russian leaders and officials. We can do so both bilaterally and through multilateral organisations, especially the European Union, and we welcome the statement that Baroness Ashton published last November on this matter. We can also continue to help by supporting NGOs that focus on the situation in Russia, be they Russian or international. However, I ask my hon. Friend to accept that on a number of important issues at the United Nations Security Council it has been possible to achieve a measure of constructive agreement with Russia. We would welcome things such as its agreement to tougher sanctions against Iran—that was agreed last year. We very much welcomed the successor to the START—strategic arms reduction treaty—agreement that was negotiated between the Governments of Russia and the United States. We want to see more of that kind of development in the world.

Points of Order

This morning, the Government issued a written statement on the ditching of the privatisation of search and rescue contracts. That written statement provided no answers about the multi-million pound cost to the taxpayer of pursuing that madcap privatisation scheme in the first place. No details were provided about what that will mean for military aircrew who should be remaining on search and rescue flights. No confirmation was given on what should happen to military facilities that operate those search and rescue flights, such as RAF Lossiemouth in Moray or HMS Gannet in Ayrshire. How would it be possible to get a full statement in the House, so that hon. Members who have a constituency or other interest can question Ministers on what is, after all, a lifeline public service?

My concern is similar to that of the hon. Member for Moray (Angus Robertson). That statement should have been made in this place and not on the airwaves, which is what happened. Despite having a constituency interest in the subject, I was given no notice of the statement in the House of Commons Library. Nobody informed me that it had been put there, and I had to seek it out myself, which I find outrageous. It is time that the Government got themselves into check in order that this place remains sovereign—rather than the airwaves of this country.

I am grateful to the hon. Members for Moray (Angus Robertson) and for Central Ayrshire (Mr Donohoe) for their points of order. The timing, form and content of ministerial statements are, as both hon. Members will appreciate, a matter for the Government and not for the Chair. I note what both of them have said about what they regard as the inadequacy of the handling of the matter. Their opinion has been placed firmly on the record.

I say two things in conclusion to them. First, the Leader of the House is present. He will have heard what they have said—he is entitled to respond, but he is under no obligation to do so this afternoon. [Interruption.] The right hon. Gentleman is well able to fend for himself. Secondly, both hon. Members are at liberty and might be wise to approach the Table Office to decide what options are available to them to pursue this very legitimate concern on behalf of their constituents.

If there are no further points of order, we come to the ten-minute rule motion. The hon. Member for Harlow (Robert Halfon) has been waiting patiently. Just before he graces the House with his eloquence, I appeal to hon. Members who are leaving the Chamber—I am sure that there will not be very many—to do so quickly and quietly so that we may hear him.

BBC Licence Fee Payers (Voting Rights)

Motion for leave to bring in a Bill (Standing Order No. 23)

I beg to move,

That leave be given to bring in a Bill to require the BBC to enable licence fee payers to vote on its strategic direction and aspects of senior salaries and programming, including referenda on particular issues; to provide for election of the BBC Trust and the non-executive members of the BBC Executive Board by licence fee payers; to make other provision relating to the governance of the BBC; and for connected purposes.

I welcome the chance to present this ten-minute rule Bill today on democratising the licence fee. I believe that this measure will enhance the BBC rather than weaken it. Like many of our countrymen, I believe that the BBC is a great British institution. It has an umbilical cord to the British people. If it did not exist, we might even have to invent it.

On the question of impartiality, I have issues, which I will raise later in my remarks. Nevertheless, when respected journalists such as Peter Sissons suggest that the BBC has an institutional left-wing bias, ironically in some ways it is good for people like me and other Conservatives. It means that we cannot brook complacency, and that we have to be that much better than the centre-left in presenting our case. When it comes to BBC impartiality, I am reminded of the old maxim of Shimon Peres, who described the BBC World Service as

“making dictatorship untenable, and democracy unbearable”.

It is nevertheless worth having.

I listen regularly to BBC radio, including the World Service, which is central to spreading liberal democracy around the world. However, despite the BBC’s positive attributes, of which there are many, it has fundamental flaws. That is why I am raising this matter today. I have been campaigning for the democratisation of the licence fee for a long time, raising it with the Culture Secretary and tabling several early-day motions. I sometimes feel like the man on the Clapham bus.

Let me outline the problems as I perceive them. First, the BBC is monopolistic, with about a third of TV viewing and half of radio. Monopolies tend to concentrate power in the hands of a few executives and to take power away from ordinary people and customers, which is something we should worry about. Secondly, the BBC is often branded as anti-competitive because it does not have to make a commercial return on its products. One example of that was BBC jam, an online education service that in 2007 was crowding out other education businesses such as Pearson UK in my constituency. In the end, it was rightly withdrawn from service.

Thirdly, the licence fee is a mediaeval anachronism. It is similar to our voting system in the UK before the Reform Acts of the 19th and 20th centuries in that it is taxation without representation and means disfranchisement. We are right not to tolerate that in our politics and we should not tolerate it in our public media either. This point is crucial. If one wants to watch television, which is a basic hope these days, one must buy a licence. The licence fee does not pay for universal infrastructure but is all spent on the BBC. Like all taxes, the licence fee is a coercive system that is backed by the threat of fines and prison, but what if we do not like decisions taken by the BBC Trust and its director-general? Some might feel that the licence fee is a regressive tax which penalises those on low incomes. Others will be upset by the salaries of senior BBC executives and celebrities. Many were angered at the BBC’s assault on the late Norris McWhirter, a war hero and founder of the Freedom Association.

The reality is that licence fee payers want choice. Some might want a beefed-up World Service, paid for by reducing expense elsewhere—perhaps by cutting the £50,000 a day that the BBC spends on taxis, or by abandoning the hugely expensive and unwanted move to Salford. Some might want more spent on Radio 3 or Radio 1. Although licence fee payers will welcome the freeze in the fee that the Government have negotiated, much more needs to be done. If we had choice, we might choose a BBC with twice as many news journalists as broadcasters, paid for by reducing celebrity salaries, but at the moment we are powerless, because the BBC is run like a feudal monarchy. As licence fee payers, we are compelled to pay our dues, and if we do not like that, our only choice is to abandon TV altogether. What recourse do we have? Where is the Independent Parliamentary Standards Authority or level playing field on freedom of information for the BBC?

There is a statutory requirement for the BBC to consult its licence fee payers, but everyone knows that many of the current so-called consultations are a sham, with most decisions having been made well in advance. When he was running for the leadership of the Labour party, the right hon. Member for South Shields (David Miliband) called, in a variant of my idea, for the BBC to become some sort of co-operative. I have no objection to that in principle, but the best way to ensure real democratic control of the BBC is to allow licence fee payers, at individual level, to make key decisions. We must give them the chance to sack grandees if they have grown out of touch with public opinion. Under such a system, licence fee payers would be free to elect the board and chairman of the BBC, agree the annual report and have some say over programme making and the payment of celebrity salaries. It would be similar to shareholders having the ability to hire and fire their board, but with one main difference—every licence fee payer would hold just one share and one vote. Licence fee payers would vote via the internet with a special PIN, keeping administration costs low. The BBC could even call a special referendum for controversial issues, such as whether to allow extremists such as the British National party to appear on “Question Time”. Senior BBC members and outside candidates could compete in primaries against each other. We could spark a genuine debate—a battle of ideas—about the kind of BBC that we want, and how it should spend our money.

To those who say that democracy results only in the lowest common denominator, I say that is untrue. Look at Classic FM and Sky News. There is a real demand out there for quality, and I have a great faith in the British people. The BBC cannot continue—dare I say it—to be a kleptocracy, indifferent to the public who pay for it. Auntie pays out huge salaries to executives and celebrities alike. Her bureaucracy grows exponentially. Her undemocratic licence fee has become an anachronism in the days of multi-channel satellite television. If the BBC really does depend on the licence fee for its survival, then there must be some genuine checks and balances. What better way than democratising the licence fee?

Question put and agreed to.


That Robert Halfon, Nick de Bois, Craig Whittaker, Pauline Latham, David Tredinnick, Priti Patel, Mr James Clappison, Mr Lee Scott, Mr David Nuttall, Laura Sandys, Simon Hart and Nadhim Zahawi present the Bill.

Robert Halfon accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 25 November and to be printed (Bill 142).

Education Bill

[Relevant documents: First Report from the Education Committee, Behaviour and Discipline in Schools, HC516-I.

Uncorrected transcript of evidence taken before the Education Committee on 2 February 2011, on the Annual Report of the Chief Schools Adjudicator 2010, HC 782-i.]

Second Reading

I beg to move, That the Bill be now read a Second time.

What a pleasure it is to appear before you, Mr Speaker, for the third time within 24 hours.

The Bill is a response to three specific challenges that our country faces in this the second decade of the 21st century—the challenge of how to respond to an economic crisis, the challenge of how to respond to the scandal of declining social mobility, and the challenge of how to respond to our educational decline, relative to competitor nations.

We on the Government Benches, both the Conservative and the Liberal Democrat parties, believe that it is only by radically and fundamentally reforming our education system and learning the lessons of the highest performing nations that we can generate the long-term economic growth on which prosperity depends and that we can produce the level of social justice that is appropriate for a modern liberal democracy. I hope that across the House tonight we can develop consensus on the need for fundamental reform.

It was striking that just five years ago across the Dispatch Boxes in the House there was consensus between those on the two Front Benches on the fundamental need for education reform. My right hon. Friend the Member for Witney (Mr Cameron) and the then right hon. Member for Sedgefield both recognised the fundamental need for reform. I hope that we can see the same consensus across the Front Benches tonight. If not, that will tell us something about the state of the Labour party in the second decade of the 21st century.

What about the state of the economy that the Labour party bequeathed the coalition Government—the state of the mess that we have to clear up? It is against that backdrop that we need to appreciate the fundamental need for educational reform. It is only by having a well-educated, capable and highly skilled work force that we can deal with the economic crisis generated by the right hon. and hon. Gentlemen on the Opposition Front Bench. We had a structural deficit for seven years before the banking crisis began. When we entered that period of unprecedented global turbulence, our economy had been undermined by the actions of the previous Government. [Interruption.] I know that Opposition Members find that difficult and that it is painful to be reminded of the desperate position in which they left the country, but the need for urgent reform is underlined by the terrible mess they made—[Interruption.] No matter how much they chunter, object or interject from a sedentary position, these are truths that they and the country have to face. They cannot run away from that fact.

When the OECD graded this country in 2000, we had the best fiscal position in the G7, but in 2007 we had the worst fiscal position, and that was before the banking crisis. By 2010, we had the largest deficit of any G20 country, and today we are paying £120 million a day in debt interest. Manufacturing output fell by 9% as a share of the economy in Labour’s years and we lost 1.7 million manufacturing jobs. According to the World Economic Forum’s ranking of global competitiveness, we moved from fourth to 86th. No country can succeed economically or respond to an economic crisis unless it ensures that its education system is fit for purpose, and under the previous Government it was not.

Can we get back to education? The previous Labour Government tried in their last Bill to bring in compulsory sex education. The Bill before us is an excellent Education Bill, which I fully support, because it is all about devolving power to schools. Will my right hon. Friend assure me that he will resist any amendments on Report that would bring in compulsory sex education for primary schools?

I am grateful to my hon. Friend for, as ever, leaping straight on to sex—I know that it is a subject of great interest to him and to many in this House. I always feel that one should discuss money before discussing sex, because the one and the other are so intimately connected in the minds of so many Members. That is why I was so anxious to ascertain whether Opposition Members were proud of the economic record they bequeathed. I am happy to reassure my hon. Friend that I will not accept amendments in Committee that seek to make the curriculum any more prescriptive or intrusive. The Bill will enhance professional freedom and autonomy, because we recognise that it is only by doing that we can ensure that our economy and education system are fit for the 21st century. It is not only the economy that was undermined by what happened on Labour’s watch; social mobility also worsened.

In due course.

Inequality worsened under Labour and the education system exacerbated it. If we look at the gap between children eligible for free school meals and their more fortunate and privileged counterparts, we can see that as those children moved through the education system and progressed under Labour the gap between rich and poor widened.

In due course.

At age seven, the gap in reading scores between those children who were eligible for free school meals and those who were not was 16 points. At age 11, the gap was 21 points in English and maths. At age 16, the gap was 28 points at GCSE, and only 30% of children eligible for free school meals got five good GCSEs including English and maths. In 2009, only 4% of children eligible for free school meals even sat a chemistry or physics GCSE, and in 2008 40% of those children did not get even a single C in any GCSE.

At A-level the situation is worse still, with the gap between private schools and state schools doubling under Labour: in 1997 only 12% more privately educated students got three As at A-level than their state school counterparts, but by 2010 that figure was 24%. In 2008, no child in Hackney, Newham, Sandwell, Knowsley or Lambeth got three As at A-level including maths and further maths. Only 53 children eligible for free school meals, from an entire cohort of 75,000, even sat further maths A-level.

The number of children eligible for free school meals who made it into Oxbridge under Labour fell. In the last but one year for which we have figures, the number was 45; in the last year for which we have figures, it was 40. No wonder the Sutton Trust found that children’s levels of achievement are more closely linked to their parents’ background in England than in any other developed nation. The truth is that, under 13 years of Labour rule, this country became the sick man of Europe in terms of social mobility. Opportunity was capped, aspiration was depressed and, as a result, the life chances of the most vulnerable were failed by the former Ministers who now sit on the Opposition Benches.

I want to bring the Secretary of State back to his comments on the economy. Up until 2008, the Conservatives were committed to sticking to Labour’s spending plans. In 2007, the current Chancellor wrote an article in The Times entitled, “Tories cutting services? That’s a pack of lies”, in which he made it clear that they were committed to Labour’s spending totals at the time. Why is the Education Secretary pushing through these cuts now? Why the change of heart? Did he not agree with those comments at the time?

I know that there is a worry throughout the country about libraries, but I see that the hon. Gentleman clearly spent quite a lot of time in the cuttings library of the House given the faithful way in which he read out that handout. It was on the watch of the Government whom he supported that we moved from having the best fiscal position in the G7 to the worst. My right hon. Friend was not in charge of the economy then; the right hon. Member for Leigh (Andy Burnham) was Chief Secretary to the Treasury and borrowing money hand over fist. If the hon. Gentleman shares my anger and rage at how his constituents were let down by a debt and deficit mountain that is holding the next generation back and if he is angry about that intergenerational theft, he knows where to point the finger: at the robbers on the Opposition Front Bench.

I am not entirely sure that that was parliamentary language, again, Mr Speaker. I wonder whether you might consider that while I make this intervention.

We know the right hon. Gentleman likes history, but is he not guilty of rewriting it? On the plans that I made as Chief Secretary, his leader called them “tough” at the time, but let me put this point to him, because he has not given us the true picture on social mobility. Is it not the case that, between 2005 and 2007, the number of children on free school meals who went to university increased by 18%, against a 9% increase among the rest of the population?

The total increase as a proportion of the cohort was actually less than 1%, because it was a remarkably low base. The right hon. Gentleman cites a selective statistic, because he chooses only two years from Labour’s record. It is interesting that he chooses only those two years, because, when we look at the broad spectrum of statistics, we see that he cannot gainsay any of them.

If the right hon. Gentleman wants more statistics, why does he not look at the OECD programme for international student assessment—PISA—statistics? He quoted them yesterday, and they tell us what happened on Labour’s watch to every child’s education. We know that the poorest were worst off, but the other set of statistics that he invoked yesterday demonstrates that, actually, all our children were failed by Labour. We moved from fourth to 14th in the world rankings for science, seventh to 17th in literacy and eighth to 24th in mathematics by 2007.

Not yet. I shall be delighted to give way in just a second.

By 2010, we had moved from fourth to 16th, from seventh to 25th and from eighth to 28th in those subjects. In mathematics, 15-year-olds in Shanghai are more than two years ahead of 15-year-olds here. The OECD found that, in this country, the number of 15-year-olds who can generalise and creatively use information based on their own investigations and the modelling of complex problem situations is just 1.8%; in Shanghai, it is 25%—more than 10 times better.

In a second.

The only way in which we will generate sustainable economic growth is by reforming our education system so that we can keep pace with our competitors. How can a country that is now 28th in the world for mathematics expect to be the home of the Microsofts, the Googles and the Facebooks of the future? The only way in which we can hope to compete effectively is not just by educating a minority to a high level, but by utilising the innate talent of every child, and that is what the measures in this Education Bill will do.

Of course it is true that many countries throughout the world are investing in and driving forward their educational standards in a commendable way. However, the PISA study to which the Secretary of State referred and the changes in tables that he described are affected substantially—are they not?—by the fact that the number of countries taking part doubled, so he was not comparing like with like.

I absolutely was comparing like with like, because the whole point about these tables is that they show us how we are doing relative to our competitors. Much as I admire the right hon. Gentleman, and much as I am grateful to him for embarking on a course of reform which, sadly, was thwarted subsequently, I have to acknowledge, as does he, that the statistics produced by the OECD are ungainsayable. I would love to be able to celebrate a greater level of achievement, but I am afraid that this is the dreadful inheritance that our children face as a result of the Government whom he latterly supported from the Back Benches.

The Secretary of State is making a powerful case. If a free school gets a grant to buy land and buildings from a council or other public sector body, will that be classed as a windfall receipt for that council or will there be some adjustment to its capital regime so that it is not a winner from it and we control public spending? That is a live issue, and I would like to know what the position is.

I appreciate that it is a live issue. One of the striking things about how the free schools programme is proceeding is that we are discovering that in some cases local authorities are happy to buy the sites themselves, as was the case in Wandsworth, and in other cases they are happy to lease them for a peppercorn rent. In specific situations where a site is purchased from a local authority, of course we will seek to ensure that the best deal possible is secured for the taxpayer and for the school and the pupils who will be attending it.

As the Secretary of State always has the figures at his fingertips, can he say how much the Department for Education is giving to West London free school to purchase the Palingswick House site in Hammersmith? The school was going to get a capital receipt of £8 million to develop the site for residential accommodation after it had evicted local charities from it. How much is the DFE going to pay for the site via West London free school?

The full details will be disclosed when the funding agreement is signed, but I can reassure the hon. Gentleman that the amount that the DFE is investing in this four-form entry school will be significantly less than the £35 million that had to be invested under the previous Government to secure a school of a similar size. I hope that he will join me in welcoming the fact that there will be at least three free schools in his constituency helping to provide superb education for the children whom he has represented so passionately over the years.

We must all recognise that the reforms that we are talking about, including the creation of new free schools, are the sorts of reforms that we are seeing across the developed world. Ministers such as Arne Duncan and John Key in New Zealand and Julia Gillard in Australia, and countries such as Sweden, Singapore, Finland, Hong Kong, Alberta and South Korea all recognise the need to reform their education systems, and we cannot afford to be left behind. That is why this Bill includes measures to allow us to invest in the early years, improve discipline, remove bureaucracy, and raise standards for all children, with new powers to intervene directly to tackle failure. Above all, it generates more good school places for all children, especially the very poorest.

There is a key test for Labour Members tonight: will they vote against these measures? Will they vote against improvements in discipline? Will they vote against reductions in bureaucracy? Will they vote against powers to intervene early when schools are failing? Will they vote against additional cash for disadvantaged two-year-olds? Will they prove themselves to be old Labour populists or new Labour modernisers?

I would be grateful if the Secretary of State could tell the House why he believes that having unqualified teachers can raise educational standards. Why does he think that teaching is different from any other profession in that people who are totally untrained and unqualified should be allowed into it? He would not do it for a doctor or an engineer—why is teaching different?

As I am sure that the hon. Lady knows, one does not need any training or qualification to be a Member of Parliament—or, indeed, a Labour Government Minister. Mind you, looking at the record of those who have occupied that position, I am prompted to ask a variety of questions. I should point out, of course, that many of the highest performing schools in this country—in fact, some of the highest performing schools in the world—are the fee-paying independent schools, which have earned this country so much foreign currency and have ensured that we continue to have beacons of educational excellence in the fee-paying and state sectors alike. Such schools draw in and welcome a wide variety of highly trained individuals, some of whom do not have qualified teacher status. It is important that we continue to innovate and to learn from the fee-paying independent sector. We must also continue, as we are doing, to invest in high-quality training for all teachers. That is why we are reforming initial teacher training, investing in Teach First, and setting up a new generation of training schools for teachers to develop the best practice from higher education institutions and elsewhere.

I had to come in after the last interesting intervention. Is it not the case that more young people than ever are now taught by unqualified staff, precisely because of the changes rightly brought about by the previous Government, including giving higher-level teaching assistants far more ability in the classroom and bringing instructors into schools to fill gaps caused by staffing problems? The issue of unqualified staff coming into our schools is not new.

My hon. Friend, as a former teacher, always adds to our debates with his experience and authority. He is right that some of the work force changes made by the previous Government mean that a number of children are taught by cover supervisors or teaching assistants. We all want to ensure that everyone who is teaching and who is in the classroom is trained to the highest possible level.

Does the Secretary of State agree that one problem, if we are honest, is that for too long many of us have accepted bad teachers? To get rid of a teacher has been almost unthinkable. The question is not really about unqualified teachers, but about teachers who are not doing the job of raising standards properly.

As so often, the hon. Lady is absolutely right. One problem in the education system is that we need to make it easier for good heads to tackle underperformance by encouraging staff to do the professional development that they need to improve. If they do not improve, they should move on. No one benefits when poor teachers are in the classroom. It not only places an additional burden on hard-working and talented staff, but denies children the chance that they need.

The Secretary of State plans to keep a register of teachers who are barred from teaching. Will he confirm that schools will be able to refer someone who is sacked for gross misconduct to the Secretary of State to be put on the register, but not someone who is fired for incompetence? If that is the case, will he explain the reasoning behind it?

I am delighted to confirm that. We want to ensure that people who are barred for gross misconduct are kept on a central list, which is updated continually. As my hon. Friend and I know, the General Teaching Council, which was responsible for dismissing and barring incompetent teachers, succeeded in barring only 14 teachers over the 10 years that it was in existence. We need to ensure that at school level, head teachers have the power to dismiss those whom they consider to be inappropriate. We must ensure that head teachers who are doing a fantastic job and are generating improved results have freedom and flexibility over the staff that are required to carry on doing that great work.

I agree with the Secretary of State that the previous system was not working effectively. However, that is no reason to believe that we should not have a system that ensures that an incompetent teacher who is removed and sacked—we know how difficult that is, as the hon. Member for Vauxhall (Kate Hoey) just said—does not reappear in another school. That will happen if the Secretary of State does not put that person’s name on a register. I ask him to reconsider this issue.

I am grateful to my hon. Friend for making that point, and we will have an opportunity to consider it in Committee. The phenomenon that he refers to is known in the United States as “the dance of the lemons”, whereby teachers who are not up to the job are removed from it and reappear in another educational setting. We have explored with a variety of professional bodies the best way of ensuring that that cannot happen. There is no consensus that a central list of the kind he mentions is the answer. I am happy to discuss with him, in Committee and elsewhere, how we can ensure that teachers who are not effective do not continue in the classroom.

I mentioned that there are six principal areas in the Bill. The first is investment in the early years. It is critical that Opposition Members appreciate that if they vote against the Bill tonight, they will be voting against additional funding to guarantee 15 hours of learning for all disadvantaged two-year-olds. Under Labour, 20,000 of the poorest two-year-olds would have received 15 hours of free learning. Now, under the coalition Government’s proposals, 120,000 two-year-olds will be able to have the best possible free learning. Because of that investment, we will be able to ensure that those children are school-ready when they arrive at primary school. We can ensure that when we have in place the literacy check at the end of year 1 that we intend to impose, those children will have a grasp of the basic skills required to make the most of their time at primary school.

The Secretary of State makes a very important point about children being school-ready. That need has been expressed to me by children’s centre staff and the parents who use those centres, and he will know of the concern that I have previously expressed about the review of children’s centres in Sefton. Will he comment on the good practice that already exists in Sure Start children’s centres and in early-years provision generally, and on the importance of protecting good practice there and elsewhere rather than throwing out the baby with the bathwater?

I think throwing out the baby with the bathwater would be very poor practice in any Sure Start children’s centre or any other early years setting.

I agree with the hon. Gentleman that Sure Start children’s centres can do a fantastic job, which is one reason why we are providing additional support, w