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Topical Questions

Volume 534: debated on Tuesday 1 November 2011

The core purpose of the Treasury is to ensure the stability of the economy, promote growth and employment, reform banking and manage the public finances so that Britain lives within her means.

Will one of the Treasury Ministers confirm that public sector workers who work part-time earning less than £15,000 will still pay the 3% income tax? Is this fair, and should not the Government negotiate in good faith, and not simply try to ram this through?

The Chief Secretary will shortly set out the full details of our pension offer to the public sector. When people see it, they will see that it is fair to the public sector—people in the public sector will get a much more generous pension than is available in almost any part of the private sector—but it is also fair to the taxpayers. It is, of course, based on the work of John Hutton, a former Labour Pensions Secretary.

T3. Labour-controlled Blackburn with Darwen council has abandoned pensioners and schoolchildren in my constituency because of a £10,000 bus cut, but it can still find £94,500 to fund trade union officials. Does my right hon. Friend think it is right that the taxpayer picks up the tab for trade union officials? (77467)

In central Government we have announced that we are reducing the facility time, as it is called, in the civil service because we do not think it is fair that taxpayers should be paying for so many full-time trade union officials. Obviously, it is up to Blackburn with Darwen council to decide how it spends its council tax payers’ money, but from what my hon. Friend is telling me, it does not look as if the council is spending it particularly well.

Today’s figures have shown that the British economy has grown over the past 12 months, since the Chancellor’s spending review, by just 0.5%, and Treasury officials have apparently admitted to the BBC this afternoon that the economy is now set to worsen. The IMF says that if the British economy continues to undershoot, the Chancellor should change course to boost growth and jobs. How much longer does the country have to wait before the Chancellor will finally listen?

I welcome the right hon. Gentleman back from America. We missed him in our debates last week—even though, by some coincidence, the tone of the debate markedly improved. We have been keeping an eye on what he was saying while he was in America. This is what he told American television: “What the world needs are balanced plans on deficit reduction, and you can’t duck that.” In America he has to say that so that he is not laughed out of the TV studio. Here he not only ducks deficit reduction; he runs away from it. We are clearing up the mess that he left when he was running Britain’s economic policy for 13 years.

I am afraid people watching this will think that was a deeply complacent answer. Today’s figures mean that the Chancellor’s figures for growth will be downgraded. They will undershoot the OECD and the IMF growth forecast as well. He tried to blame the eurozone, but the fact is that our recovery was choked off a year ago. Families watching this programme and struggling with their bills, businesses on the edge and young people losing their jobs will all think the Chancellor is completely out of touch. Why does he not understand that if we are to get the deficit down, the country needs a plan for growth and jobs, and it needs it now? How much longer will we have to put up with this prevarication before it is too late, and the Chancellor finally acts?

The GDP numbers showed this morning that the British economy is growing, and that is positive news. But of course we have a difficult journey to take, from the deepest recession of our lifetimes and the biggest banking crisis in British history, which the right hon. Gentleman presided over when the Labour party was in government—and it is made more difficult by what is happening elsewhere in the world. [Interruption.] Of course that is the case, which is why the growth figures in the British economy are similar to the growth figures in the American economy, or the French economy, or the German economy.

The right hon. Gentleman shakes his head, but in 2011 the British economy has grown at exactly the same rate as the United States economy. It has taken a completely different course from the one that he suggested as shadow Chancellor and yet it has the same growth, which shows that what we are doing is bringing stability to the British economy. Frankly, for him to get up every week and say that we need a deficit reduction plan, but not to give us any details, shows how hopelessly out of touch he is.

What the Greek Prime Minister has apparently offered the Greek people is a referendum on difficult decisions required to get the budget deficit down. That is what he is talking about. We talked about these things in advance of a general election. Two parties here talked about those difficult decisions. We got elected, we are in government and we are now doing it, and we are recovering from the deep mess that the Labour party left us in.

T2. Will the Chancellor intervene to prevent directors’ pay from increasing by another 49% this year? Or if he is not willing to intervene, will he at least explain to those suffering cuts in pay and the loss of their jobs, just how we are all in this together? (77466)

I have made it very clear, and the Prime Minister has made it very clear, that at all levels of society people have to be mindful of the current economic situation, and that includes highly paid directors and people working for the financial services. Bonuses are significantly lower than they were under the Government whom the hon. Gentleman supported, and we are also introducing measures to encourage transparency in pay, and to give shareholders greater control over executive pay as well.

T5. Is my right hon. Friend aware of the TaxPayers Alliance’s excellent report published last week on abolishing national insurance and merging national insurance with income tax? Does he believe that the merger of national insurance and income tax would be a good way to simplify tax in the way that he promised, and will he make it happen? (77469)

My hon. Friend will be aware that the Government are looking into merging the operation of national insurance contributions and income tax. We are actively looking at ways in which we can make the tax system more transparent and simpler to understand, and we will be saying more on that subject shortly.

T8. What does the Chancellor say to the Federation of Small Businesses, which describes his policies as too timid, and out of touch with the sluggishness of the UK’s economy? (77472)

The FSB, like many other business organisations, has supported what we have done to try to get the deficit down—and of course it also welcomes the fact that not only did we reverse the increase that the Labour Government planned in the small companies rate, but we have also been able to reduce the small companies rate and freeze business rates for another year.

T6. Does the Minister agree that new plans for the Government to lend directly to small businesses and start-ups through credit easing will be beneficial to the economy and will create more jobs? Will the Minister also give me examples of how that will be put into practice? (77470)

I do agree with my hon. Friend. We will set out more details of our credit easing plan in the autumn statement later this month, but it is a mark of the Government that we are prepared to think differently and intelligently about how we can use such mechanisms precisely to get small businesses going in this country.

T9. Youth unemployment now stands at a shocking 34% in Tameside and 23% in Stockport. Is not the right thing to do to listen to Labour’s five-point jobs plan, get the bank bonus tax reinstated and invest in 100,000 jobs for young people? (77473)

In his pitch for a job, the hon. Gentleman failed to mention that youth unemployment rose by more than 40% under the Labour Government. There is complete amnesia about the fact that 16 months ago they left this country with high unemployment, a high budget deficit, the deepest recession this country has seen in the last 100 years, and the biggest banking crisis in our history.

T7. Some of the most needy children in the Vale of Glamorgan and across the UK will benefit from today onwards from the Government’s junior ISA. That presents an opportunity to return to a culture of savings among families. What plans have the Government to develop that further? (77471)

We have indeed announced today the launch of the junior ISA, which will enable many millions of parents to save for their children up to £3,600 a year tax free. It should help more than 6 million children who will be eligible for it immediately and many more as they are born and grow up. It is all about trying to foster a savings culture after the age of irresponsibility and the culture of debt that we saw over the past decade.

T10. I can assure the Chancellor of the Exchequer that I am not looking for a job—unlike many of my constituents. He talked earlier about fiscal integration. Does he agree that the possibility of a differential rate of corporation tax within the United Kingdom contains severe dangers? (77474)

As the hon. Gentleman well knows, we are consulting on the possibility of introducing a different corporation tax rate in Northern Ireland, reflecting the fact that the Irish Republic has a much lower corporation tax rate. The consultation is ongoing, and we are of course in discussions with the Northern Ireland Executive. We are clear that Northern Ireland would have to bear the cost of that in forgone revenues, and an important part of the discussions will be working out what exactly those forgone revenues would be.

I am concerned by reports that the Government are considering breaking with the 20-year convention of uprating pensions and benefits by the September inflation figure, now that the CPI has come in at 5.2%. Does the Chancellor recognise that it would be unfair to change the rules of the game suddenly, hurting vulnerable pensioners and disabled people in the process?

We are absolutely committed to the triple lock that we introduced on pensions so that they rise by CPI, earnings or 2.5%, whichever is greater. That is one of the really significant achievements of this Government, which two parties came together to create, and I think that it is something we can be very proud of.

May I tell the Chancellor that what is happening in the economy reminds me very much of the havoc and destruction caused by the Thatcher Government in the 1980s, with mass unemployment and poverty? Is it not perfectly understandable why many people are protesting against the sheer injustice, including those who are protesting, and rightly so, outside St Paul’s?

Again, there is absolutely no recognition that the Government the hon. Gentleman supported presided over the second deepest recession in the entire world. What is the Opposition’s explanation for that? Why was Britain so badly affected? Why was the British economy so unbalanced? Why had the gap between the rich and the poor grown? Why had manufacturing halved as a share of GDP? They have absolutely no answers on Labour’s record in office.

Will the Chancellor, or the Economic Secretary to the Treasury, expand on the advantages that the Warton local enterprise zone in my constituency will bring to businesses, particularly from tax breaks and improved planning rules?

I am very pleased that we were able to announce that additional enterprise zone for my hon. Friend’s constituents, which reflects the fact that the cut in the US defence budget had an impact on BAE Systems. I am glad that we were able to move quickly to create an enterprise zone, not only in the north-west but in east Yorkshire, to take into account the impact of that decision.

If the Government’s overriding priority is to eliminate the deficit by the end of this Parliament, why is the Chancellor having to borrow an additional £46 billion during that period?

We inherited the highest—[Interruption.] The Opposition do not want to hear this. We inherited the highest budget deficit in Britain’s peacetime history. That budget deficit is now coming down, and that has contributed to financial stability in this country, in marked contrast with what we see on our television screens around Europe.

Will my right hon. Friend pass on the message to the Deputy Prime Minister, with his accusations that Conservatives who advocate repatriation and renegotiation are committing economic suicide, that we are facing not only a disastrous two-tier Europe, but now also a two-tier Government?

Of course I do not agree with my hon. Friend on this occasion. The coalition Government have been able to get Britain out of the European Union bail-out that we found ourselves in when we came to office. We have been able to keep the budget increases down—again, in marked contrast with what we found on coming into office. We must now have some serious negotiations to make sure that Britain’s interests are protected in Europe, as the remorseless logic of monetary union—I am sure that he accepts this—leads to greater fiscal integration among eurozone countries. That is the reality of the situation facing us, and I think Britain under this Government will be able to negotiate well in our national interest.

If the Chancellor cannot bring himself to extend the national insurance holiday to small and micro-businesses because the shadow Chancellor suggested it, will that be easier now that the CBI is also recommending it?

The CBI has been absolutely staunch in its defence of our deficit reduction plan, and says that it is crucial for business confidence. If the shadow Chancellor wants to make proposals to increase spending and borrowing, which he is perfectly entitled to do, why does he not also make proposals to cut Government spending and to get the budget deficit down? He talks about providing a medium-term deficit reduction plan, but we have not heard one single line item of it.

Whatever one thinks of the tactics of those who are camping outside St Paul’s and in the middle of my constituency, one issue that they are raising that resonates with the British public is the feeling that people are not paying their fair share of tax. Will my right hon. Friend update us on what progress we are making across the House, particularly on lifetime loans—disguised remuneration?

My hon. Friend raises a good point. At a time like this, people want to make sure that everyone pays their fair share of tax. We have taken action on the situation in Switzerland and on long-stay non-doms, but he raises a third point about disguised remuneration. That is a way in which people, often in financial services, get away with a much lower rate of tax. Guess who in the House voted against that action? The Labour party.

Order. As usual, this event is heavily oversubscribed. I am sorry to disappoint colleagues, but we must now move on.