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Treasury

Volume 550: debated on Tuesday 11 September 2012

The Chancellor of the Exchequer was asked—

Tax Avoidance

This coalition Government have dramatically increased the pressure against those who avoid and evade taxes. As a result of our efforts, tax revenues from our compliance and enforcement are £3 billion higher than when we came to office. We have tackled disguised remuneration, we are dealing with stamp duty enveloping and we are introducing a general anti-abuse rule. None of those things, of course, happened over the previous 13 years.

My constituents do not mind paying taxes, so long as everyone pays their fair share. Given that the tax gap widened under the previous Government, will the Chancellor confirm that this Government are committed to tackling all forms of aggressive tax avoidance as well as tax evasion?

We are committed to doing that. My hon. Friend is right that the tax gap—the amount of money that should be collected but is not collected—rose from £35 billion to £39 billion under the previous Government. As I have said, our compliance and enforcement efforts have already increased the amount raised by £3 billion, and later this week we will confirm that we have raised £500 million more in extra tax from high net worth individuals as a result of our efforts through Her Majesty’s Revenue and Customs. We are taking action, but need it to be supported, yet the Labour party recently voted against the changes to disguised remuneration, which were an attempt to clamp down on a particularly egregious form of tax avoidance.

One group of people who could not avoid paying tax are the disabled Remploy staff who were recently made redundant. They were put on an emergency code, with the result that their holiday and notice pay was taxed at almost 50%. HMRC has promised refunds, but will the Chancellor go back to his Department and ensure that the payments are made as a matter of urgency and within the current tax year?

Many Members of this House have told me of their deep concern about the development of retrospective tax measures, and the Treasury Committee shares those concerns. Does the Chancellor agree that the best way to prevent loss of revenue from avoidance schemes is to work much harder to create a simpler tax system in the beginning?

Yes, I agree that that is of course the best approach, but in the tax code of a western democracy there will inevitably be opportunities for abuse and avoidance, which we need to deal with. When it comes to retrospection, I say to my hon. Friend, the Chair of the Treasury Committee, that I think the House of Commons should sanction retrospective taxation only when it is very clear that the explicit wishes of Parliament have been abused and avoided. For example, in the case of a particular UK bank that his Committee and I have corresponded about, we acted retrospectively because there was a clear breach of what Parliament had expressed, and I am very pleased to note that the bank’s new chief executive has today said that the bank will be scaling down its tax structuring activities.

A year ago the Chief Secretary to the Treasury made a speech in which he said he would employ 2,000 more tax inspectors, but in March this year it transpired that there were almost 1,300 fewer people in compliance than there had been when the Government came to power. Can the Chancellor tell us when we will see any of those 2,000 new inspectors, or are we to take it that that was simply a conference flourish speech and that there is no real determination to clamp down on tax avoidance as the Chancellor has said?

The number of specialist tax people at HMRC dealing with compliance is going up over this Parliament. We are also committing an extra £900 million to the organisation specifically for that activity. As I have just explained to the House, we are collecting £3 billion more in tax as a result of compliance over this Parliament and, as we will confirm later this week, we are collecting £500 million more from high net worth individuals because of the high net worth unit and its better than expected performance over the past two years.

Following the Government’s very good initiatives so far on dealing with tax avoidance, will the Chancellor look at those private sector companies that are monopoly providers of public sector services, which have billion-pound turnovers, pay no corporation tax and often channel their money through offshore accounts in places such as the Caribbean and the Channel Islands?

I repeat the general observation that we are making every effort, through legislation and enforcement activity, to reduce tax avoidance and to stop tax evasion. If my right hon. Friend has specific examples that he wants to bring to my attention, he should please do so, and if necessary we will investigate.

Infrastructure

3. What assessment he has made of the effect that investment in infrastructure will have on the economy. (120136)

A competitive market economy such as Britain needs modern infrastructure if it is to succeed, yet in areas such as roads, energy and broadband, the last decade saw us fall behind the rest of Europe. This Government are righting those wrongs by overseeing a £250 billion investment in infrastructure—double the amount in the previous Parliament, even in these straitened times. Our new legislation will guarantee billions more in investment from the private sector. This will bring the new roads, the superfast broadband to our cities, and the new rail connections such as the northern hub. We are also cutting through the delays in Whitehall and in the planning system to make sure that we deliver faster than Labour did.

I welcome all that investment in infrastructure, particularly the investment in electrification of the trans-Pennine rail route and the full funding of the northern hub rail project. Will my right hon. Friend continue to invest in infrastructure so that we can recover from the shocking situation we inherited whereby for every 10 jobs created in London and the south-east under the previous Government, only one was created in the regions?

My hon. Friend points to the stark truth that, as he says, for every 10 jobs created in the private sector in the south of England only one was created in the north of England. In a region as important as the west midlands, for example, private sector employment fell during Labour’s period in office, and that was before the crash. We are investing in the infrastructure. The trans-Pennine electrification is incredibly important. The stretch between Liverpool and Manchester is already under way, and of course it then crosses the Pennines. We are also fully committing to the northern hub—something that was not done under the previous Government.

I support the Government’s national infrastructure plan. I particularly welcome specific projects such as the dualling of the A11 and the potential new A14 toll road in Cambridgeshire near my constituency. Is not the lesson of such discrete local transport infrastructure projects that they deliver a much more profound impact on jobs and growth than grandiose projects such as High Speed 2, the business case for which is fatally flawed?

I agreed with my hon. Friend until his last sentence. He is right to say that it is not just the big projects announced from this Dispatch Box that count; the local projects in Peterborough and elsewhere will also unlock jobs, development and investment. Of course, we cannot make all those announcements here in the House of Commons. However, we have provided local authorities with the funds to make those transport changes and improvements. We call it the Growing Places fund, and it is worth about £500 million. In the city deals that we are striking with different cities, we are improving road and rail connections to create jobs and get the private sector growing, which is what we all want to see.

The huge contraction in our construction sector is one of the reasons we are in a double-dip recession. We have seen two reshuffles—one in the UK Government and one in the Scottish Government. In Scotland, the new Cabinet Secretary for Infrastructure, Investment and Cities will be building not the case for schools, hospitals and railways but the case for independence, and we have a UK Chancellor who thinks that a credible economic policy is just about rolling up his sleeves. When we will see a change in direction from this Government to make sure that we are creating investment and jobs right across the UK?

In this case, I agreed with the first half of the question. I do not think that the Scottish Government are focused on the priorities of the Scottish people, and I made that case when I spoke to CBI Scotland in Glasgow last week. However, I disagree with his attempt to compare the record of the Labour Government with that of this coalition Government. We are spending more on capital investment than the previous Labour Government planned to spend in this period, as they set out just before the general election. We are spending more on capital investment in the essential infrastructure of this country than they did. We are also taking tough decisions on welfare and the like in order to get the deficit down and get money spent where it can create jobs.

Will the Chancellor consider extra investment in the ports of Neath, Port Talbot and Swansea in order that they become recognised by the European Commission as core ports and therefore trigger TEN-T—trans-European transport network—investment in an area where it is much needed?

I am keen to see further investment in our ports. I am happy to engage in a specific conversation with the hon. Gentleman about his proposal and, if necessary, speak to the Welsh Government about it.

Does the Chancellor agree that the projects that have the most beneficial impact on the economy are those that are fully self-financing in the private sector because they are popular?

I agree that we want to see private sector investment, and tens of billions of pounds of private sector investment is coming into the United Kingdom. Indeed, today the Chinese company Huawei has announced a $2 billion investment in the UK. I absolutely agree with my right hon. Friend. We want to create the low-tax, competitive conditions for the UK economy in which the private sector can grow, but I think he would recognise that there is a role for public money in providing large-scale transport infrastructure, for example, which these companies need to succeed.

In a speech yesterday, the Chief Secretary to the Treasury declared that

“infrastructure is at the centre of our strategy to kick-start our economy.”

With that in mind, will the Chancellor tell the House whether the value of orders for infrastructure investment made by the private sector rose or fell between 2010 and 2011?

For a start, we have just announced £40 billion of additional guarantees for private sector infrastructure. If the hon. Lady wants the figures, £113 billion was invested over the period from 2005 to 2010, and £250 billion of investment for both the private and public sectors has been announced in this Parliament.

As the Chancellor will know, there is a difference between announcing something and actually delivering it. The answer to my question is that those orders fell by a fifth, from £7.3 billion in 2010 to £5.9 billion in 2011—a result of the collapse in business confidence that the Chancellor’s disastrous decision to cut too far and too fast has resulted in.

Is it not the truth that next week’s Infrastructure (Financial Assistance) Bill is necessary only in order to create the impression of activity and to distract from this Government’s complete and utter failure to deliver the infrastructure investment that they have been promising and that the country is crying out for?

There is a difference between announcement and delivery: Labour announced no more boom and bust, and delivered the biggest boom and the biggest bust. We know all about the record of the last Labour Government. One of the quite extraordinary things is that, despite spending and borrowing all that money, they did not actually invest in the modern infrastructure that the private sector needs to create sustainable jobs. That is the lesson that the hon. Lady should learn from their last period in office.

We are told by the Government that we urgently need more airport capacity, so could the Chancellor explain why his only policy on the issue is to commit the Government to doing nothing at all for three years, until after the next election? Surely he appreciates that voters need to know where the Government stand before they vote.

As my hon. Friend knows better than pretty much anyone else in this House, we made a very firm commitment that we would not proceed with a third runway in this Parliament, but Howard Davies is now looking at all the options for airport capacity in the south-east. This issue has evaded Governments of all political colours for the past 30 years, and it is time that we tried to achieve some cross-party consensus, because I am absolutely clear—[Interruption.] If the Labour party was so good at building airports, where are they? Where are these additional airports that it built? The truth is that the south-east of England needs additional airport capacity. The question is where we place it and I think that Howard Davies is the right man to advise us all.

Pensioner Tax Allowances

The impacts of the reforms to age-related allowances were set out alongside Budget 2012. Half of those over the age of 65 pay no income tax, and nobody will pay more tax in 2013-14 than in 2012-13 as a result of these changes. The Government remain committed to supporting pensioners and have introduced the triple guarantee for the basic state pension, ensuring that it will increase each and every year by the highest of earnings, prices or 2.5%.

Will the Minister explain to my constituents why people with small occupational pensions are paying more while millionaires are paying less in tax?

The right hon. Gentleman will be aware that the policy announcements in the last Budget resulted in millionaires paying more in tax, not less. As far as this Government’s record on pensioners is concerned, let us not forget that the state pension is going up by £120 more compared with the Opposition party’s plans.

For a long time, some pensioners, by virtue of having their personal allowance clawed back, have found themselves paying an effective rate of income tax far higher than many working people on a similar income. Will the Government’s policy of raising the personal allowance mean that that unfairness is eventually brought to an end?

I am pleased to say that my hon. Friend is right. Our policy will reduce complexity in the tax system and reduce the need for high marginal rates for pensioners through the taper system.

Public Sector Borrowing

5. What assessment he has made of the implications for his policies of the public sector net borrowing figures in the current fiscal year. (120138)

Public sector borrowing figures have been higher than expected, primarily because of short-term factors, including lower corporation tax receipts caused by the Elgin shutdown and the lower than expected oil price. With eight months of the year remaining, it is too early to draw conclusions about the year as a whole, but the Government remain committed to returning the public finances to a sustainable path, while allowing the automatic stabilisers to operate in response to the weakness in the global economy.

The Chancellor boasted in his 2010 Budget speech that the borrowing requirement this year would be £89 billion. The Office for Budget Responsibility is suggesting that the figure will be £120 billion—a 33% overshoot. Can we have an explanation of why the Chancellor got it so wrong?

The hon. Gentleman, as he knows, is referring to the OBR’s forecasts. Of course, a number of problems in the global economy, not least those in the eurozone, have become more serious since those forecasts were made. I would have thought that he would applaud the fact that our plan is sufficiently flexible to allow the automatic stabilisers to support our economy when there is weakness in the global economy.

No one in the House underestimates the size of the economic challenge before us or the importance of supporting manufacturing and exports, which make up a fifth of the gross domestic product in my constituency, but at a time when the employment figures are encouraging, our manufacturing indices are outstanding and our global competitiveness has risen by two places, does my right hon. Friend agree that two impediments to business confidence are the threat of strikes by unions and the chorus of despair from the Opposition?

My hon. Friend is right to highlight some of the positives in the UK economy, especially the employment figures. My experience of dealing with trade unions is that one should not pay much attention to the rhetoric at their conferences. When one gets down to business with the trade unions, as I did on public service pensions, the majority of them are willing to behave responsibly. That said, and as the shadow Chancellor has said, the British public and trade union members do not want to see strike action in this country.

Borrowing is rising because of the scale and speed of the cuts, as we warned it would. Is it not the case that the economic policy brought in by the right hon. Gentleman and his friend the Chancellor has backfired?

Before asking that question the hon. Gentleman should have reflected on the fact that the policy of his party’s Front Benchers is to increase borrowing yet further. They recently announced a new approach, known as pre-distribution. We now know what that means: spend money before it has arrived, in the hope that it might arrive in future. That is the policy that failed this country for 13 years and we will not go back to it.

Does my right hon. Friend agree that the 900,000 extra private sector jobs that have been created since the last election will go a considerable way towards easing the fiscal position, as well as cast some doubt over the output figures of the Office for National Statistics?

I certainly would not wish to question the integrity of the ONS’s figures. However, I join my hon. Friend in highlighting the excellent record of many private sector businesses in creating jobs in all parts of the country over the past two years.

Household Expenditure

The Government have taken wide-ranging action to support households. For example, we cut fuel duty last year and have deferred various increases planned by the Labour party. We are also helping those in work by raising the personal allowance by £1,100 in April next year, which is the largest cut in income tax for median earners in more than a decade. That is a substantial record of dealing with the big questions in the cost of living for families.

I thank my right hon. Friend for that answer. There are concerns that fuel companies delay the reduction in petrol prices when the cost of crude oil falls. What action are the Government taking to ensure that companies pass on savings to motorists?

The hon. Gentleman raises an important point, and I sympathise greatly with families up and down the country who face the problem that he describes. That is why we have made decisions on fuel duty that mean that the price of petrol is roughly 10p a litre less than it would have been had we followed through the Labour party’s plans. The Office of Fair Trading has recently announced a call for information on the problem, and I urge him and Members in all parts of the House to pass on any information that they have. Having spoken to Clive Maxwell of the OFT, I know that it is committed to ensuring—

Order. I am greatly obliged to the Chief Secretary, but from now on we need rather shorter exchanges if I am to maximise the number of Back-Bench contributors.

The Chief Secretary will know that one thing that is really hitting people at the moment is the rising cost of food. A huge number of people, even those in work, are having to resort to going to food banks. What action are the Government taking to address that situation?

The hon. Lady will also know that the substantial increases in the personal allowance are putting more money in the pockets of people on low incomes who are working hard. We protected the lowest-paid public sector workers from the impact of the pay freeze, and she will also know that out-of-work benefits went up by 5.2% this year.

Returning to the high cost of petrol, diesel and heating oil, I am sure the Chief Secretary is aware that in the past few days FairFuelUK has published a statement from a whistleblower alleging that the oil commodity trading market is being rigged in a similar way to LIBOR. Will he confirm that he will back the call for a wider investigation and inquiry into the UK oil trading market by the Financial Services Authority or the Bank of England, whichever is more appropriate?

I applaud the work of the FairFuelUK campaign in drawing attention to such issues. Having discussed the matter with Clive Maxwell of the Office of Fair Trading, I can reassure my hon. Friend that if the call for information in which it is currently engaged yields evidence of real problems in the fuel market, it will launch a full investigation.

In four months’ time, more than a million families will see their cost of living rise, with the loss of child benefit and a complex tax change costing the Exchequer £100 million more just to administer. Can the Chief Secretary tell the House how many more families will have to fill out a self-assessment tax form for the privilege of losing their child benefit, and when will those complex forms begin to arrive?

Letters to people who are likely to be affected by that change will go out in October—[Hon. Members: “Which year?”] October of this year. I am surprised to hear that the hon. Gentleman objects to the change, given that it is a necessary part of our fiscal consolidation, and particularly part of our asking the wealthiest in this country to make a contribution to deficit reduction. His party should support that.

Beer Duty

7. What assessment he has made of the effect on pubs of the continuation of the beer duty escalator. (120140)

The Government recognise the important contribution that pubs throughout the country make to their local communities and the wider community. Given the large number of factors contributing to the decline in pub numbers, including shifting social trends, the relationship between beer duty and the pub industry cannot easily be determined.

I welcome the new Minister to his post and thank him for that answer. In my constituency, the beer and pubs sector supports around 1,300 jobs. At a time when household incomes are static and pubs have seen a reduction in trade as a result of the smoking ban and other nanny state impositions by the Labour Government, does he agree that the Treasury needs to provide further support to the industry by reversing the trend of rises in beer duty, which has grown by more than 40% since 2008?

As the incoming Economic Secretary, I note that I have been given responsibility for some of the more popular duties and taxes.

There will be no further changes to alcohol duties beyond those designed and pre-announced by the previous Government, but I hope that the minimum unit pricing system that the Government have announced will make a difference to pubs, along with other measures that we have announced to help small businesses such as reducing the corporation tax rate, the extension of the small business rate relief holiday and the reduction of the small profits tax rate.[Official Report, 12 September 2012, Vol. 550, c. 2MC.]

Tax Simplification

The Government are committed to simplifying the tax system. Since 2010 we have set up the Office of Tax Simplification and acted on a range of its recommendations. We have abolished 43 tax reliefs, and from April 2013 we will introduce a new cash basis for calculating tax, benefiting up to 3 million small self-employed businesses. Her Majesty’s Revenue and Customs is also improving tax administration for small businesses, as set out in its publication at the time of the 2012 Budget.

I thank the Minister for that response. The 2020 Tax Commission found that UK tax administration costs were double those of Norway, triple those of Estonia, and almost five times higher than in Switzerland, so I welcome the Minister’s drive for simplification. What progress has been made on merging national insurance and income tax, and other areas affecting business, that could yield an estimated £5 billion each year for the British economy?

The Government are continuing to explore the potential of merging the operation of income tax and national insurance contributions. We also want to make the tax system as transparent as possible, and one of the steps we have taken is the introduction of personal tax statements that will make it clearer to taxpayers how much they are paying in both income tax and national insurance.

The Minister will be aware that his colleague the Chancellor presented the granny tax as a tax simplification in the Budget. Is the Minister confident that further measures of tax simplification will be more successful and less unpopular than the granny tax?

We believe that tax simplification is important. A simpler tax system makes it easier for taxpayers to see how much they are paying, easier for businesses to comply, and easier to tackle avoidance. It is something the Government believe in.

Market Interest Rates

My hon. Friend is right: low interest rates are secured by credible, economic and fiscal policy, and delivered by the independent Bank of England. Sir Mervyn King has been an outstanding Governor of the Bank, and has helped set monetary policy to support our economy through one of its most challenging periods in modern history. He is serving his second and final term as Governor, and will retire on 30 June 2013.

I can tell the House today that I have decided that the appointment of his successor will be conducted through fair and open competition. For the first time in history, the post will be advertised and the advertisement will appear in the press later this week. As with Mervyn King, we are seeking a Governor of intelligence, independence and integrity, and we intend to announce the successful candidate by the end of the year.

I thank the Chancellor for that response, and I welcome his announcement.

Those looking for a home in my Winchester constituency want to know that their Conservative council is building new council homes for the first time in 25 years. Those looking to buy in the private sector want to know that they can get on the housing ladder and get a mortgage, with some certainty that they can repay the money over the years to come. Will the Chancellor reassure my constituents that, unlike the Labour party, he understands that even a small rise in interest rates will have a punishing effect on family budgets?

My hon. Friend is absolutely right. Low interest rates are crucial to the recovery, and a loss of confidence in the UK’s ability to pay its way in the world will lead to an increase in market interest rates, an increase in mortgage costs for millions of families, and, of course, an increase in borrowing costs for businesses. It would be a disaster, and that is why the Government do not take the path advocated by the Labour party. We also want to ensure that low interest rates are felt by families, which is why the funding for lending scheme announced jointly with the Bank of England is already leading to banks offering cheaper mortgages. The combination of our Firstbuy and NewBuy schemes is also helping families to buy their first home.

Many people do not have access to those kinds of interest rates, and are depending on high street, rip-off schemes such as Wonga and so on. What is the Chancellor doing to protect ordinary families who cannot get loans and who need to depend on rip-off merchants?

We have toughened up the regulation of consumer credit, and next year there will be a tough new consumer agency, the financial conduct authority, which we are creating in order to deal with the bad advice that is sometimes provided to families. Indeed, Martin Wheatley, its chief executive, gave an interesting speech about that last week, and about the impact of sales commissions and the like on the provision of bad advice and bad products to families. We are taking action to do that, but as I said, the worst possible thing for all those families, and everyone else in the country, would be a sharp rise in interest rates, which a loss of confidence in the Government’s fiscal policies would bring about.

VAT (Retail Sector)

10. What estimate he has made of the effect of the level of VAT on the retail sector in the last 12 months. (120143)

The Government aim to provide a climate of economic stability that will benefit all businesses. That would not be possible without a credible plan to deal with Government debt, and a VAT increase is an important component of that plan.

Since January this year, 42 retail businesses in Wales have gone to the wall. What message does the Minister have for Welsh business leaders who have called for a reduction in VAT to breath new life into the high street?

Retail sales growth has generally been positive over the past year. Let me underline this point: if the biggest problem faced by the economy at the moment is that we are not borrowing enough, that is, I am afraid, a very strange diagnosis.

If the Government were to adopt that unfunded mandate and the other £200 billion of unfunded borrowing suggested by the Opposition, what would be the effect on interest rates and our national credit rating?

There is no doubt that such a policy would be taking an enormous risk with interest rates and our credibility. This Government are not prepared to take that risk.

Air Passenger Duty

11. If he will commission research to determine the effect of air passenger duty on UK holidaymakers, employment and economic growth. (120144)

12. What assessment he has made of the effect of air passenger duty on tourism and the regional economy. (120145)

The Government undertook an extensive consultation on air passenger duty last year. The consultation gathered views and evidence from stakeholders—more than 500 responses were received from all sectors. The Government published our response to the consultation on 6 December 2011 and we have no plans to commission further research.

As the Minister is aware, the issue of direct long-haul flights has been dealt with. However, that is a small but important part of the market—most people will travel to or through another UK airport, and passengers from Northern Ireland will pay APD twice, because there is a restricted number of through-carriers. Do the Government believe there would be merit in reviewing APD generally so that it is more supportive of tourism and business, and of growth?

The hon. Lady is passionate about this issue, and I thought she would welcome the measures that the Government have taken, which have made a significant contribution. I hope she joins me in realising that the Government have made substantial progress. He also knows that the Chancellor announced in the previous Budget that the Government are looking at other things that can be done to boost the Northern Ireland economy.

I thank the Minister for his answer, but could he advise the House on what discussions he has held with the Northern Ireland Executive on the need to scrap APD for short-haul flights between Northern Ireland and Britain and Europe?

I have not had any such discussions since I was appointed, but I look forward to having them in future and will report to the hon. Lady when I do.

I congratulate my hon. Friend on his appointment to the Front Bench. I am sorry to ask him a difficult question to begin with, but what consideration has been given to the impact of APD on our Commonwealth cousins? It is having an impact on many economies. We would not want our Commonwealth cousins to turn to the black economy or illegal activities, or even to require more overseas development aid. Will he look again at the impact of the policy on the Commonwealth?

I thank my hon. Friend for his warm welcome and for his characteristically strong question. As far as I am aware, the Government have not looked specifically at the impact on the Commonwealth, but I am willing to do so and will get back to him.

I welcome my hon. Friend to his new position. Will he look at the position of the Caribbean in that regard? Will he also look at the conclusions of the all-party group on aviation report on APD and at the impact APD is having on regional economies such as Yorkshire that compete as tourism destinations for people coming from China and the US?

I thank my hon. Friend for her welcome. I will take a look at that, but given the amount of money from APD on which the Government rely to deal with the fiscal deficit we inherited, it is appropriate to point out that, if we changed the banding, APD might have to rise for others.

Families with Children (Tax and Benefits)

13. What assessment he has made of the effect on families with children of the tax and benefit changes made in 2012-13. (120146)

The Government have taken unprecedented steps to increase the transparency of decision making. All but the highest income decile have on average gained from direct tax changes. The Government continue to help and protect the most vulnerable with, for example, increases in the child element of the child tax credit by £180 per annum above inflation in April 2011.

Up to 1,000 households in my constituency face having their tax credits withdrawn this year, and 275 families with 625 children faced losing working tax credit if parents could not increase their hours. Why is the Chancellor trying to balance the books on the backs of hard-working families, and will he concede that children are bearing the brunt of this Government’s failed policies?

Under the previous Government, spending on tax credits was out of control, having risen from £18 billion in 2003 to £30 billion in 2010, meaning that nine out of 10 families with children were eligible for tax credits. This Government have reduced that to six out of 10 by taking a more targeted approach. It is important that we support those on the lowest incomes while ensuring that those who can contribute to deficit reduction do so. There is nothing fair about running huge deficits for our children.

In Birmingham, 283,000 people have benefited from a tax cut of £220. Will the Minister assure me that we will continue to try to protect the low-paid by reducing how much tax they pay?

That is a central plank of the Government’s policy, and I am sure that my hon. Friend will agree that some of the changes we have already announced, such as those contained in the personal allowance, which I know he supports, are doing exactly that.

I congratulate the Minister on his appointment, but the Government’s tax and spending cuts have hit women and children the hardest, leaving families struggling and child poverty on the rise. The last time there was no woman in the Treasury was 17 years ago under the last Tory Government. Although I welcome him to his place, does he think that the Government’s record with women will get worse or better with no female voice at the table?

The Government’s policies, including those of the Treasury, are helping women. The change I mentioned previously—to the personal tax credits—will take 1.1 million people out of income taxation altogether, which will disproportionately benefit women.

Personal Allowances

14. What assessment he has made of the effect on the cost of living of the increase in the personal allowance. (120147)

In this year’s Budget, we announced a £1,100 increase in the personal allowance for 2013-14—the largest ever cash increase. The combined increases that the coalition has announced will reduce the tax paid by a typical basic rate taxpayer next year by £350 in real terms and £546 in cash terms.

Given that the policy of significantly increasing the personal allowance has been hugely successful, would the Chief Secretary agree that the long-term goal should be to link the personal allowance with the minimum wage, thereby ensuring that anybody on the minimum wage does not pay income tax?

I am grateful for my hon. Friend’s endorsement of the policy. The coalition Government have committed to increasing the personal allowance to £10,000—a policy that was on the front page of the Liberal Democrat election manifesto—but I agree that the long-term objective, which I and my party share, should be to link the personal allowance to the minimum wage. However, a considerable cost would be attached to that.

May I bring the Chief Secretary back to the reality faced by my constituents, who see their cost of living rising all the time, with food prices increasing in the shops, and Government borrowing rising nationally? Which part of the Government’s record is he least proud of?

As the question that the hon. Lady is following up on concerns the personal allowance, let me limit my answer to that, Mr Speaker. Her constituents, in common with other Members’ constituents, are benefiting from the fact that the Government have introduced the most radical policy for many years by putting more money back into the pockets of hard-working families across the country. She would do well to accept that.

Cost of Credit

Goodness. Thank you. I feel like Boris Johnson.

The Government and the Bank of England have launched the funding for lending scheme to enable banks to make loans cheaper and more easily available to households and businesses. In addition, 19,000 cheaper loans have been offered to smaller businesses under the national loan guarantee system.

I welcome my right hon. Friend to his new post and wish him every success. Many businesses in South Staffordshire face a great challenge in raising finance to grow and recruit new workers. Will he explain how the measures that he has outlined will help small and medium-sized businesses in my constituency to grow and expand?

I am grateful for my hon. Friend’s question. He knows what he speaks of because he is an ex-manufacturer himself—appropriately enough, as a Staffordshire MP, in the Potteries. One of the early successes of the funding for lending scheme is that banks are now targeting manufacturing firms. Just yesterday, RBS said that the scheme would be used for mid-sized manufacturers. RBS has cut interest rates from 3.45% to 2.75% and is looking to increase lending to mid-sized manufacturing businesses, which have so much potential.

May I push the Minister on this issue and what is happening in the real world? As even Boris would explain to him, the fact of the matter is that we have low interest rates, but people cannot get mortgages to get into the housing market and my constituents, along with people in business across Yorkshire, cannot get decent loans to start businesses or, more importantly, expand their businesses. In the real world, it is not working. What is the Minister going to do about it?

The hon. Gentleman will know, because he has studied the figures, that mortgage lending has actually been increasing. The point of the funding for lending scheme is precisely to make more funds available. When he studies the detail—I am happy to meet him and go through it with him—he will be able to promote the scheme in his constituency, because his constituents, whether they are businesses or households, can benefit from it.

Topical Questions

The core purpose of the Treasury is to ensure the stability of the economy, promote business and employment, reform banking and manage the public finances so that Britain starts to live within her means. I can also tell the House today that the autumn statement will be on Wednesday 5 December.

No, I do not. I think it would cost jobs in the British economy and hit prosperity. I hope that all Members of this House, whether they are sponsored by trade unions or not, would condemn all calls on the trade unions to take up a general strike.

May I take this opportunity to welcome the Financial Secretary and the Economic Secretary to their new posts? I wish them good luck in their new positions. May I also congratulate the Chancellor on somehow managing to keep his job in the reshuffle? Clearly, performance-related management has not yet made it to the Cabinet.

Since our last Treasury questions, the Office for National Statistics has published new figures for Government borrowing. We did not get clarity earlier, so let me ask the Chancellor this. What is the total figure for borrowing for the first four months of this financial year? How does that compare with the same period last year, and how does he explain what has happened?

It is good to welcome the Member for “Unite West” back from the TUC conference. As the Chief Secretary explained to the House, borrowing in the short term has been higher this year than in the first four months of last year, but he pointed to particular one-off factors, such as the shutdown of the Elgin oilfield. That is why the increase in borrowing comes from weaker corporation tax receipts. I am glad to report to the House that VAT, national insurance and income tax receipts have broadly held up, despite the weaker economic conditions here and around the world. However, the right hon. Gentleman will have to wait until 5 December to get the next economic forecast from the independent Office for Budget Responsibility—because we make these forecasts independently these days.

I have to say, we are losing patience with the Chancellor’s schoolboy bluster. It is one thing to be heckled by a few trade union delegates at a conference this morning; it is another thing to be booed by 80,000 people—the whole of the Olympic stadium—when he only turned up to give out a medal.

Let me tell the Chancellor the answer. He is right that borrowing has gone up by a quarter compared with last year, but the reason is that our economy is in double-dip recession, tax revenues are down and spending on unemployment is going up. That is why borrowing is going up, on the watch of a Chancellor who said that he would secure the recovery and get borrowing down. So let me ask the Chancellor this. The International Monetary Fund, the British Chambers of Commerce, the TUC, the engineering employers and even Boris Johnson are now calling for action to kick-start the recovery. Is it not time the Chancellor did something the public might cheer: admit he has got it wrong, change course and finally get a plan for jobs and growth?

The right hon. Gentleman talks about unemployment; 900,000 private sector jobs have been created in this economy over the past two years, and we are rebalancing the economy away from the dependence on debt and the unaffordable public sector that he presided over when he was in the Treasury. [Interruption.] He says that borrowing has gone up, but we have cut the deficit by 25%. He has also said that Labour needs a credible deficit reduction plan. He has had all summer to think of one. Where is it?

T3. Building our energy infrastructure is a key element of the national infrastructure plan. Preparations by EDF are already under way at Hinkley, and I hope that they will soon start at Sizewell in my constituency. Will my hon. Friend assure me that the Treasury will strain every sinew to ensure that EDF can make a positive investment decision later this year and build the power stations that that lot on the Labour Benches did not build? (120162)

My hon. Friend is passionate about this issue, and she will be pleased to hear that the Government are removing unnecessary obstacles to investment in nuclear power plants and that new power stations will come forward. For example, the Government are undertaking electricity market and planning reforms and introducing an energy Bill. As it happens, I am meeting representatives of EDF later this afternoon, and I would be happy to share her concerns with the company.

In case the right hon. Gentleman had not noticed, the eurozone is in recession. He talks about France and Germany, but the International Monetary Fund—[Hon. Members: “Answer!”] I am about to give him the answer. The IMF’s latest forecasts for growth next year show the UK growing at almost twice the speed of France, and the same with Germany. If the question is, “Why isn’t the British economy more like Germany’s?”, I will give him the answer. It is because we did not invest in skills over the past decade. We did not build our export links with China and India and the growing parts of the economy. We put all our bets on the City of London when the right hon. Member for Morley and Outwood (Ed Balls) was the City Minister and it all went spectacularly wrong. We are now clearing up the mess.

T4. Small businesses in my constituency regularly raise with me the issue of the administration and service levels at Her Majesty’s Revenue and Customs. Those problems constantly add to the administrative burden of small businesses. What more can the Government do to make HMRC more efficient, in order to unburden our small businesses and let them get on with the day job? (120163)

My hon. Friend will be aware of the paper that HMRC produced at the time of the last Budget, in which it set out the ways in which we would reduce the administrative burden on small businesses, including cash accounting. He mentioned the difficulties in getting through to HMRC and the problems with the contact centres. HMRC is making further investments and employing an additional 1,000 people in order to improve the performance at its contact centres.

T7. The Chief Secretary to the Treasury was asked earlier about the cost of living, but he said nothing in his reply about what the Government were doing about rising food, transport and energy prices. Have he and his colleagues had discussions with the Energy Secretary about getting a grip on the energy companies and sorting out the soaring energy prices and the profits that the companies are making as a result? (120166)

I have certainly had conversations with the Energy Secretary about initiatives such as the green deal, under which people’s energy costs will be brought down by insulating their homes. The hon. Gentleman mentioned fuel costs, but he must be aware that the price of a litre of fuel is 10p less than it would have been if we had stuck with the plans that the previous Government put in place. That was their approach to the cost of living, and this is ours.

T8. Big increases in the funding of vital rail infrastructure projects in the north-west of England, such as the Todmorden curve, the northern hub and High Speed 2, are hugely welcome and will provide jobs and opportunities that would not have been available under the previous Government. Will my right hon. Friend confirm that, without his decisive action on the public finances, such high levels of spending on infrastructure would simply not have been possible? (120167)

My hon. Friend is right. It is precisely because we have taken difficult decisions—for example, to cut £18 billion from the welfare budget—that we are able to invest in rail and road improvements that will help to create jobs in Lancashire and across the north-west. The northern hub is a project that has been talked about for many years, but it is under this coalition Government that it is being delivered.

May I specifically ask the Chancellor whether, notwithstanding the recent reshuffle, the Government are still committed to achieving 0.7% GNI for overseas aid? If so, when can we expect the Bill?

The short answer is yes, we are. It is not about legislation; it is about delivering the money. [Interruption.] Labour Members say “Ah”, but we can legislate as much as we like; the question is whether we are prepared to take the difficult decisions to deliver the money. [Interruption.] They say they do not trust us, but this is the Government who will deliver the 0.7% aid commitment that all parties signed up to.

T9. As the TUC meets in sunny Brighton, what message does my right hon. Friend think an irresponsible strike will send to the millions of hard-working people who are worried about our economic recovery? (120168)

I think it sends a terrible message to my hon. Friend’s constituents in Brighton and across the country. The last thing this country needs at the moment is a series of strikes. We have struck a good deal for the public sector on public sector pensions that will ensure that people continue to enjoy some of the best pensions in Britain, while at the same time reducing the cost to the taxpayer by 50% over the long term. We are also instituting public sector pay restraint so we do not have to make even more difficult decisions about job losses. That is because we are dealing with a very difficult economic situation with a very large deficit. I would hope that the trade unions would understand that rather than try to take their members out on strike.

Will the Chancellor tell us how money can be taken out of the banks and put into small and medium-sized businesses right across the United Kingdom? Without it, we are certainly not going to kick-start the economy.

This is, of course, the key challenge in these difficult financial conditions, which have endured for five years or so. I know that there is a particular challenge in Northern Ireland, where the collapse of the banking system in southern Ireland has had a real impact. The funding for lending scheme, launched last month, is an £80 billion Treasury/Bank of England scheme to reduce bank funding costs so that banks are able to lend to businesses and households. A number of banks, such as Barclays and Lloyds, have already launched products that will bring those lower interest rates to the hon. Gentleman’s constituents.

The fact that the deficit has come down by a quarter enables the British Government to borrow at roughly the equivalent rate of the United States Government—a rate lower than every EU member state apart from Germany. Does the Chief Secretary agree that this enables the Government to contemplate infrastructure investment and to use the strength of our balance sheet to facilitate and guarantee private sector infrastructure investment?

My hon. Friend is absolutely right. We can use the strength of the balance sheet that has been built up as a result of this Government’s fiscal credibility to provide, for example, £40 billion of guarantees to infrastructure investment and £10 billion of guarantees to registered social landlords. The Labour party may oppose these guarantees, but they have been widely welcomed by infrastructure providers, by the business community and, in the latter case, by housing associations. That shows precisely the benefit of the tough fiscal policy decisions this Government have taken.

Will Ministers look urgently at the length of time it is taking to process tax credit applications? My constituents are being declined their tax credits simply because they are on fixed-term contracts that come to an end before the tax credit application is considered.

I certainly take the hon. Lady’s comments on board. It is our intention to deal with tax credit applications as swiftly as possible. We will look at individual cases, so if she wants to contact me or the permanent secretary at HMRC, either of us would be happy to take the case up.

The Government are to invest £17 billion in phase 1 of HS2, which will transport someone from London to Birmingham 20 minutes quicker, yet there are students in my constituency today who cannot accept their place in Bedford college because of the lack of a local transport network, and constituents who cannot accept offers of work because they cannot get to the train stations via a bus network. Would it not be a better use of that investment to put it into regional transport networks so that people can get to work and to college?

I think we can do both; we can invest in local and regional transport networks. If my hon. Friend has specific schemes in Bedfordshire that she wants to bring to my attention or that of the Department for Transport, we will look at them very carefully, but that does not preclude us as country from taking the big infrastructure decisions—as we did with the M25 and as our predecessors did with the railways centuries ago—to invest in a railway system for the future. High-speed rail will connect the north to the south of England.

Today, the Public Accounts Committee exposed very poor management of the Government’s regional growth fund. Can the Chancellor tell us how many extra jobs will be created by the national infrastructure plan which was announced last autumn?

I can write to the hon. Gentleman providing a specific jobs total for this year, but I can tell him now that the national infrastructure plan is already seeing the development of the trans-Pennine electrification, which we discussed earlier, the creation of 700 jobs in the north-east as we spend £600 million on new inter-city trains, and the huge Crossrail development across London, which, as I have seen, is employing many hundreds if not thousands of people. The plan is not just a plan for this year; it is also a plan for the future, and it shows that making difficult decisions about things such as welfare enables us to spend on things that will help the private sector to create jobs.

I congratulate the Financial Secretary on his new post. Would he be willing—when the dust settles, and in the wake of the LIBOR scandal—to look again with fresh eyes at the possibilities of full bank account portability, which could be a game-changer for British banking, and try to get our economy going again once and for all?

My hon. Friend is a distinguished member of the Treasury Committee. The Independent Commission on Banking has considered the matter, and has made some proposals for easier transfer between accounts. It has said that that should be under review, but I shall be happy to meet my hon. Friend, and I understand the case that she is making.

The number of young people in my constituency who have been unemployed for more than 12 months has risen twelvefold since May 2010. Why does the Minister think that is, and was it a mistake to get rid of the future jobs fund within weeks of taking office?

I thought that the hon. Lady might start by congratulating the Government on the fifth consecutive fall in unemployment. She will know that one of the key planks of the Government’s policy for dealing with youth employment is the provision of apprenticeships. She might also welcome the 68% increase in the number of apprenticeships in her constituency.

What are the Government’s intentions regarding transition regions in the next round of EU funding? I am told that four Departments are slightly at odds over that. May I surprise my hon. Friends by saying that in the south-west those in the Treasury are seen as the good guys, in this context at least? Will they impress on their Government colleagues the fact that if these schemes are to help areas such as North Devon and Torbay, which have been shown to be at more risk of going into poverty than Cornwall, they will need to operate bottom-up and not top-down?

My hon. Friend is right to say that transition status has benefited regions such as his—and, indeed, mine in the highlands and islands—during the current multiannual financial framework period. Our principal objective in relation to the budget negotiations is to bring down the total EU budget in recognition of what is going on around Europe, but we will happily discuss further with him his concerns about the issues that he has raised to ensure that we secure a fair deal for impoverished regions of this country as well.

Legislation for Government borrowing guarantees to help to fund infrastructure is due to be presented to the House next week. The Chancellor is right to try to use the power of government in this way, so why has it taken two and a half years, and nine months of double-dip recession, for him to decide to do it?

Let me say this as politely as I can to the shadow Chancellor and former Treasury Minister. Not once in the 13 years during which Labour was in office did it propose guaranteeing large-scale infrastructure projects, but that is precisely what we are doing. We are breaching decades of Treasury orthodoxy to support the private sector, investing for our country’s future, and I hope that that commands all-party support—in the politest possible way.

I am sorry to disappoint colleagues. Demand was extremely high on this occasion, and they could not all be satisfied.