As set out before, the core purpose of the Treasury is to ensure the stability of the economy, promote growth and jobs, reform banking and clear up the mess in the public finances that we inherited.
T4. Dr Adrian Steele, the managing director of Mercian Labels in Cannock, has just been named as one of the midlands’ most promising entrepreneurs. His company supplies labels and barcodes to the medical industry and employs 32 people. Does the Chancellor agree that it is small business entrepreneurs such as Dr Steele who will grow our economy back to strength, and will he continue to support manufacturers, who were shamefully neglected by the Labour party? (60800)
My hon. Friend is right. Manufacturing halved as a share of our economy under the Labour Government and financial services grew dramatically over that period. Since the last election, manufacturing output is up 4.2% and the private sector has created more than 500,000 new jobs net, which is all good news. The example he brings to the Chamber is just one of many companies that are investing and employing people, and despite a choppy recovery we should celebrate that.
T7. On 14 February the Governor of the Bank of England told the Chancellor that his VAT rise had caused inflation. On 16 May the Governor again told him that his VAT rise had caused inflation. Will he tell me how he is measuring the impact of his VAT rise on the rest of our economy and whether it was a rise too far, too fast? (60803)
The Governor of the Bank of England had his opportunity at the Mansion House to comment on the macro-economic policies pursued by the Government, and he said that
“to change the broad policy mix would make little sense.”
That is the judgment of the Governor of the Bank of England, and the hon. Lady may now find herself, like the shadow Chancellor, against the IMF, against the IFS, against the Governor of the Bank of England and against the CBI. It leaves the right hon. Gentleman completely alone, and it leaves the Labour party’s economic policy absolutely isolated in the world. Now, she is a new Member, and I know that she has been saddled with being the former Prime Minister’s private secretary, but she can break away from the nonsense being spouted by Opposition Members.
T5. Does my right hon. Friend agree that the shortest suicide note in history consists of just five letters—plan B? (60801)
T9. About 20,000 UK citizens, including some of my constituents, have lost their savings by investing in the fund management company, Arch Cru. Will the Chancellor step in and investigate the role of the Financial Services Authority in the failure of that company? (60806)
The hon. Gentleman may well be aware that today an announcement was made of a voluntary scheme that we have put together to make available £54 million of compensation to Arch Cru investors. That, together with a previous payment to consumers, means that they will have recovered about 70% of the value of their holdings in Arch Cru funds as of the date when the funds’ trading was suspended. That is a welcome move for Arch Cru investors, the FSA is continuing to look at the matter, and it would be inappropriate to make any further comment on it.
T6. Has the Chancellor had cause to regret a decision, made by one of his predecessors, to sell the UK gold reserves a decade ago at the bottom of the market, a decision that has cost this country just under £10 billion? (60802)
My hon. Friend is right: it is a decision of great regret. The gold was sold at £2.3 billion, and it would now be worth £12 billion, which as he says is a £10 billion loss. The Labour party, on the advice of the shadow Chancellor, managed to sell gold at its record low price. Indeed, gold traders now call it the Brown bottom. That is how they know the number, and it is yet another disastrous decision after which we are having to clean up.
The Chancellor will be aware of the recent Office for National Statistics finding that the regressive nature of VAT means that the UK tax system is doing almost nothing to prevent income inequality. In that context, will he pay particular attention to a Fawcett Society report, to be launched tomorrow, which shows that his fiscal policies, such as increasing VAT, cause particular harm to lone parents, 92% of whom are women?
May I also point out that our tax policies include taking hundreds of thousands of people out of income tax altogether? On the particular subject that the hon. Lady raises, of those taken out of income tax following the announcement in the Budget earlier this year, 56% will be women.
T8. Which does the Chancellor think is better for low-paid workers in Worcester: the Government taking 1 million of the lowest paid out of tax altogether; or the previous Government’s move to double their tax by scrapping the 10p tax rate? (60804)
As my hon. Friend points out, we have taken more than 1 million low-paid people out of income tax. We are committed to further such moves through this Parliament, and that is in stark contrast to the 10p tax raid in the previous Parliament. Of course, we now discover that, before the decision was made, the shadow Chancellor knew all about its impact on the poorest fifth in our society.
The Chancellor thought it proper in his Mansion House speech to give the bankers of the City first go on his views about the ring-fencing of banks. Apart from that being discourteous to the banking commission, which he set up, does he not think it discourteous to this House that he is prepared to give bankers that information but not to come and explain it to the House and take questions?
First, the announcement was made with the consent of the Independent Commission on Banking. Secondly, it is established that the Chancellor is able to give the Mansion House speech each year. I seem to remember that the last-but-one Chancellor announced the renewal of the nuclear deterrent at the Mansion House without coming to the House of Commons to do so. If the hon. Gentleman will allow me to say something about banking reform at the Mansion House in the years to come, I will therefore be grateful.
The spending review said that employee contributions to public sector pensions would need to increase in order to make the funds sustainable for the future. Does my right hon. Friend agree that that rate should not be applied uniformly in order to protect the lowest-paid public sector workers and encourage them to stay within public sector pension schemes?
I am grateful for the question. I agree with my hon. Friend. In fact, a similar point has been made by several trade union representatives in the very constructive talks that we are having at the moment, which will be going on over the next few weeks. In applying the increase in pension contributions, it is very important to protect the low-paid so as to minimise the risk of opt-out.
Repossessions are rising and are up by 17% on the last quarter. That is very reminiscent, sadly, of the conditions under the Conservative Government in the 1990s and the cost and misery caused to families. Will the Chancellor, and perhaps the housing Minister, tell us what direct action he is going to take to support those affected and to restore confidence to the housing market?
The hon. Lady is right to highlight the increased number of repossessions. We want to see a strong and stable housing market. The Government have taken action to support those who wish to stay in their homes through an extension of the scheme for mortgage interest support. We are continuing to make sure that advice is available to people who are facing difficulties in meeting their mortgage payments. The important thing, however, is to keep interest rates as low as possible for as long as possible so that families are not faced with an increase in their mortgage payments.
As my right hon. Friend will know, the supply-side reforms that were set out in the growth review, including the reduction in corporate tax rates, are key. At the same time, as banks’ balance sheets inevitably contract after the credit crunch and after the dramatic increase in the size of balance sheets over recent years, we need to ensure that we try to protect small and medium-sized businesses from the effects of that. That is why we concluded the Merlin deal with the banks.
The Minister will be aware that the claimant count has continued to rise in the past three months and that unemployment in many inner-city constituencies such as mine remains stubbornly high. Why will he not consider taxing the banks sufficiently to fund an inner-city youth jobs programme to help the young people on the estates in my constituency?
We have introduced a permanent bank levy that applies each and every year. There was a bank bonus tax for one year of the 13 years of the Labour Government; other than that, there were no charges on the banks. The former Chancellor of the Exchequer—my immediate predecessor—said that we could not repeat that because the bankers would find a way round it. We therefore looked to the advice of international bodies such as the IMF, and we introduced a bank levy that will raise more each and every year, net, than the Labour Government raised from the banks in any one year. That shows that we are asking the banks to make a decent contribution to the economy.
My hon. Friend is right to refer to the importance of the aviation sector. As he will know, the consultation on reform of air passenger duty closed last Friday, and we have received a number of different representations from stakeholders. He will be aware that this is partly about looking at what we can do to support regional airports, but we certainly do not want to do that at the expense of our other key airports in the south-east.
Several figures have been cited about the number of jobs created over the past 12 months. What percentage of those jobs were created before the spending review and are arguably attributable to the last Government, and what percentage have been created since?
I am happy to provide the hon. Gentleman with an exact breakdown based around the date of the spending review. What is clear, however, is that we said that we wanted the private sector to lead the recovery and that that was absolutely essential. That is the view of virtually every credible economist and business organisation in the country. He should be celebrating the fact that over 500,000 net new jobs have been created by the private sector in the past year.
Last week, I met development campaigners from Bradford-on-Avon at the “Tea time for change” rally. They welcome the Chancellor’s support for transparency in companies operating in developing countries. Will he press for effective legislation internationally, and for country-by-country, project-by-project financial reporting for companies in the resource extractive industries?
My hon. Friend raises a good point, which commands the support of MPs from all parts of the House. We want to see greater transparency in the extractive industries. I raised the matter at the G20 meeting in Paris earlier this year. We want measures to be introduced at a European level and shortly after that at a G20 level to ensure that they have the maximum possible impact around the world.
Diolch yn fawr, Mr Speaker. The Governments of Northern Ireland and Scotland will soon have greater financial autonomy. What requests has the Chancellor received from the new Welsh Assembly Government for similar job-creating levers?
The hon. Gentleman knows that we made a clear commitment that if the outcome of the referendum in Wales was a yes, we would set up a Calman-like process that would come to an agreed set of proposals—I hope they will be agreed across many parties, as was the case with Calman in Scotland—on greater financial responsibility for the Welsh Assembly. We are engaging in that process now. One reason why Calman has worked well—I know that we will come on to discuss the Scotland Bill later—is that at least three parties in the House of Commons, Labour, the Liberal Democrats and the Conservatives, were able to agree on a set of proposals. I hope that we can achieve similar agreement in Wales.
I am sure my right hon. Friend is aware that if every small and medium-sized enterprise in the UK employed one additional person, we would have an employment surplus. What plans does he have directly to incentivise SMEs to take on additional staff?
First, we offer a national insurance tax break for new employees in new companies. We have cut the small companies tax rate, which was due to go up when I came to office. We are also cutting the headline rate of corporation tax by 2% this year and then by a further 3%, making it a 5% reduction over the course of the Parliament.
Is the Chancellor who now complains about a decade of over-investment by the previous Government related to the George Osborne who wrote an article in The Times in 2008 not just praising that Government’s spending plans, but promising to stick to them?
I think the hon. Gentleman has his years wrong, for a start. We fought the 2005 general election warning that Labour was spending too much and we fought the 2010 general election giving that warning. The British people listened to us, and realised that people like him had been supporting a Government who had brought our country to the brink of bankruptcy.