What recent representations he has received from pension funds on the effect of his policies on the value of their investments. [683971]

The Treasury receives representations from a range of financial services organisations, including pension funds. The Government have introduced reforms that have delivered, and will continue to deliver, a stable economic environment based on low levels of inflation and sustainable growth. This environment is designed to benefit all investors, including pension providers, because it supports longer-term investment and planning.

I thank the Minister for that reply. We know that she and the Chancellor take a keen interest in the subject of pensions and of early retirement. Is she aware that the Government's changes to the taxation of pensions are now costing each individual contributing to a pension scheme about £500 a year in tax?

The hon. Gentleman is talking absolute nonsense. The changes in the tax credit system were an essential part of a wider range of corporation tax reforms that included cutting both main and small companies' corporation tax rates. They removed a major distortion in the tax system, and were designed to encourage long-term investment.

Does my hon. Friend agree that the trend towards ending final salary pension schemes, which I assume the hon. Member for Rayleigh (Mr. Francois) was hinting at, started long before Labour came into office, about 30 or 40 years ago? The trend has a lot more to do with corporate greed and the pension contribution holidays that were taken in the 1980s during the casino boom that was assisted and encouraged by the then Conservative Government.

My hon. Friend makes some interesting points. The shift from final salary schemes to defined contribution schemes has been going on since the 1960s. There are several reasons for that, including increasing life expectancy. It is not the shift itself which is a disaster, but the fact that companies can use the shift as an excuse to cut contribution rates. Clearly we must establish a consensus. It is the responsibility of employers to provide for their employees. They should not enter into such a shift without giving it very careful consideration.

My hon. Friend the Member for Rayleigh (Mr. Francois) was absolutely accurate in his figure. It is a great shame that the Financial Secretary cannot bring herself to accept what are entirely factual and accurate figures concerning the damage caused by the Government's policies. Will she now accept what everyone knows—that, quite apart from the pensions tax, the disproportionate fall in the London stock market, contributed to by the policies of the Chancellor. has hit pension funds hard?

I find it incredible that the right hon. and learned Gentleman should attempt to blame the Government for a global fall in stock markets. Nor would he expect me, as a responsible financial services Minister, to comment on day-to-day or even month-to-month movements in the stock market. The point is that the economy is fundamentally sound. We, as a Government, are taking the action necessary to make it easier and simpler for people to save and to raise the overall level of saving in the economy.

I am concerned that a number of companies are closing their pension schemes, forgetting that they had the good times and forgetting that they have taken pensions holidays. Does my hon. Friend agree that they are using the downturn in the stock market and supposed Government policies as an excuse to end final salary schemes? We must be more honest. Companies are using those things purely as an excuse. The mark of a good employer should be to have a good pension scheme and ensure that employees are well protected in their old age.

I completely agree with my hon. Friend's point. Employers have a responsibility to their employees to provide reasonable terms and conditions and a package that is attractive both from day to day and in the longer term. We are taking these issues extremely seriously. We have recently had two reviews. One—the Pickering review—considered occupational schemes. The other considered private sector personal provision. Key to this is making the system as simple as possible to administer, making it as easy to save as possible. The Government will be responding to those reviews, together with the Inland Revenue review of tax, in the autumn.

Is the Government's primary concern at present to encourage savings for pensions and long-term investment, or to encourage dis-saving to sustain spending and economic activity?

Of course the Government are committed to increasing long-term levels of saving. I should point out to the House that real gross household savings have been robust in recent years, particularly in long-term retail savings products. Clearly, however, there are issues that we must address. Ron Sandler, when analysing the issues in his recent report, pointed out that long-term savings have been robust, but that there is a problem with middle and lower-income families and their ability to save. That is why he proposed a new range of stakeholder products that will make it easier and simpler for them to do so.

Is it not a sad fact that pensions unfortunately have to suffer the vagaries of what happens on the stock exchange, which is nothing more than a glorified betting shop? During the pit strike, for instance, the index fell to below 1,000 points. Yesterday, after the Leader of the Opposition spoke about the vagaries of the stock exchange and falls in the stock market, I went outside and looked at the figures; the index was up by 160 points half an hour after he spoke.

I thank my hon. Friend for those interesting observations. The important point here is that we have the right framework for pensions, based on a partnership between the state, the individual and industry. It is this Government who have tackled pensioner poverty, bringing in the minimum income guarantee. It is this Government who have enabled all pensioners to share in the country's rising prosperity, and it is this Government who next year will bring in pensioner credit, which will make pensioner households significantly better off.

What his most recent estimate is of the rate of growth in gross domestic product. [68398]

Despite there being no growth at all in world trade last year, the UK grew by just under 2 per cent., the fastest growth rate of the G7. The growth forecast for 2002 of 2 to 2½ per cent. was set out in the Budget. I shall report again to the House in the autumn when the pre-Budget report is delivered.

Ministers may discount warnings about the deteriorating fiscal position and the need for tax increases from Schroder Salomon Smith Barney and PricewaterhouseCoopers on the grounds that they are, after all, accountants. But when Vicky Price, the new adviser to the Department of Trade and Industry, adds exactly the same warning, is it not time that the estimates were reviewed?

The fiscal rules that we set down in 1997 give a stability to the British economy. We have met those fiscal rules every year, despite the Opposition saying every year that they would never be met. We will continue to meet our fiscal rules and disciplines; we will do that so we can finance higher levels of public expenditure while having the fiscal discipline that is necessary.

Does my right hon. Friend agree that one factor that would have an adverse effect on growth in GDP would be if the very low levels of inflation—which, of course, are welcome—were to slide into deflation? Given that over a range of manufacturing goods prices seem to be falling, will the Treasury start thinking about how to avoid deflation, since at times of deflation central banks are usually superfluous?

We made the Bank of England independent and set it an inflation target of 2½ per cent. It is the duty of the Bank to meet that target and it has done so for the past three to four years. It is a symmetrical inflation target; because of that, problems that may arise from deflation are as important as problems that arise from inflation.

Was it a lack of confidence in his growth forecast or an uncharacteristic coyness that caused the Chancellor to duck no fewer than six requests from James Naughtie on the "Today" programme on Tuesday to say whether he envisaged further tax rises in this Parliament?

I said to Mr. Naughtie—I repeat it to the shadow Chief Secretary—that our spending plans until 2006 are financed by the measures that we announced in the Budget. Indeed, our spending plans for the national health service until 2008 were financed by the measures that we put forward in the Budget. It is now up to the Conservatives to tell us whether they support spending on education and health, which is in the national interest.

My right hon. Friend will be interested to know that the experts who appeared before my Committee yesterday said that the spending plans were eminently prudent and that the figures were in the books. That is welcome news in terms of spending for the whole country. However, does my right hon. Friend agree that the question of targets needs to be addressed? There is a proliferation of targets and we must ensure that they do not get in the way of delivery on the ground.

First, targets are important because they set objectives for Departments and services. It is by setting targets and objectives that we are making progress in reducing health service waiting lists; getting up literacy and numeracy standards in our schools; getting more young people to stay on in school; and meeting all our objectives, as we will do during this Parliament and beyond, for health and education. As far as the fiscal position is concerned, my hon. Friend knows from the expert advice that he has been given that not only have we met our fiscal rules but those rules are drawn on a cautious basis with a margin. As far as the current balances are concerned, they will be £3 billion, £9 billion, £7 billion, £9 billion and £7 billion; those are several billions, which is the margin for prudence that I set out in the Budget statement. Again, the issue, which has been being raised all this week, is that we want to spend money on health and education, while the Opposition oppose such spending.

What recent discussions he has had with the Governor of the Bank of England regarding trends in levels of business activity in the United Kingdom. [68399]

What recent discussions he has had with the Governor of the Bank of England regarding patterns of business activity with specific reference to (a) region and (b) sector. [68400]

I last met the Governor of the Bank of England yesterday for the Standing Committee on Euro Preparations, and I am today publishing the sixth progress report on euro preparations. Copies of the report are available in the Vote Office and the Library.

Would the Chancellor nevertheless agree that the level of business activity tomorrow depends critically on the level of investment today, and that that investment depends on business confidence, which has been severely damaged over the past five years by the Government's imposition of £12 billion a year in extra taxes and regulatory burdens on business? It was further damaged by the lack of consultation before the Budget announcement of increases in national insurance contributions and North sea taxes, and will it not be damaged again by this morning's revelation that the Government's union paymasters are demanding a massive expansion of trade union powers and rights in exchange for the continued funding of the Labour party?

What business wants and needs is economic stability. Under the Conservatives, inflation averaged 6 per cent.; under Labour it has averaged 2 per cent. Under the Conservatives, unemployment averaged more than 10 per cent.; under Labour it is averaging 5 per cent.—indeed, it is the lowest it has been since 1975.

Earlier this year, Mr. Michael Large, a small business man, reported in Small Business News:

"I sit here sometimes and think: I am not the managing director of a company, but an unpaid tax collector or filler of forms."

As regards regulation, the shadow Chancellor said about his own Government:

"Conservatives too were less responsive to these concerns, and less effective in deregulating, than we should have been."

Does my right hon. Friend accept that with 28.5 million people with jobs, there are more people in work than ever; that inflation is at its lowest for 27 years at 1.5 per cent.; that interest rates are at their lowest for 38 years; and that wage increases are modest at less than 4 per cent. Does he accept that those are the conditions for business to invest and succeed, and that it will do that under his leadership?

Proportionately, the organisation that has suffered most job losses in the past five years is the Conservative party. It lost so many Members of Parliament in 1997 and was unable to recover in 2001. The Opposition should welcome our actions: 1.5 million more people are in jobs; our measures have led to a 70 per cent. cut in youth and long-term unemployment, and unemployment is lower than in America, Japan and the euro area.

I welcome the Chancellor's statement that the Government have managed to persuade the arrogant four major banks to end the monopoly position on small businesses. As my right hon. Friend knows, that cost small businesses £750 million over three years. Will he assure hon. Members that he will maintain the pressure on the four banks to accept the Competition Commission's other recommendations on their position so that the monopoly that has harmed small businesses and consumers is broken?

I am grateful to my hon. Friend, who, as a member of the Select Committee on the Treasury, takes an interest in such matters. The shadow Chancellor should be on his feet welcoming the fact that the four large banks have accepted the Competition Commission's recommendations and that, therefore, either interest rate charges for many thousands of businesses will be reduced in the next few months, or they will get a free service from the banks. That is the result of a Competition Commission referral that was made under the Labour Government and of recommendations to improve competition in the banking market. I wish that there were all-party support for that, and I hope that Conservative Members will recognise that the 3,000 or 4,000 small businesses in their constituencies will welcome it. Conservative Members should also welcome it instead of opposing it.

The Chancellor is proud of the current very low rate of inflation, but what does it signal? Did he point out to the Governor that the current rate of inflation, whether asymmetrical or not, is considerably below the Bank of England's target? Does he recall that after the 1929 stock market crash, public service index-linked pensions fell year by year until 1936? Does he have any fears that we may move into negative inflation? That would be extremely damaging, as it was in the 1930s, to business activity.

This is the first time that the hon. Gentleman has asked me a question without mentioning the word "Europe". The Opposition cannot have it both ways. When we introduced our spending review in 2000, they said that it was unsustainable and would cause galloping inflation. The Opposition should welcome the current low rate of inflation. However, the shadow Chancellor presided over 10 per cent. inflation, whereas we have 2 per cent. inflation.

Does my right hon. Friend agree that, after hard times, it is good that the manufacturing sector has flipped back into life in the past two quarters? However, does he also agree that, although the news about extra resources and a broader remit for regional development agencies is good, regions that were much more dependent on manufacturing will need even more help? Only this week, we had bad news about a pit closure in Yorkshire. We will need help with jobs, reinvestment and new wealth.

I am grateful to my hon. Friend and recognise the interest that he takes in these matters. The closure over the next two years of the Selby coalfield is something that we all regret. I hope that the measures that have been put in place—there will be a taskforce to create new job opportunities in the area and additional redundancy payments for the miners, including those who have lost their jobs recently—will at least do something to mitigate the blow of the very sad announcement earlier this week.

The Chancellor made no mention of our productivity performance. Back in 1997, he asserted that the first challenge was to increase our productivity, and I agree with him: productivity is the ultimate measure of our economic success or failure. Why, then, has Britain's productivity growth rate over the past five years been half that for the last five years of Conservative government? Why have the figures for the first quarter of this year shown not only lower growth, but an actual fall in productivity?

When we came to power, we inherited a situation in which manufacturing productivity had fallen in 1995 and 1996. We had to rebuild with a number of very difficult measures the conditions for business investment and productivity growth in this country. If the hon. Gentleman considers the situation in 2001, for example, he will see that what happened in the manufacturing sector was this: textiles, footwear and clothing were up by almost 4 per cent.; food, drink and tobacco productivity were up by 4 per cent.; paper, pulp and printing were up; chemicals were up by 7.1 per cent; and rubbers and plastic were up by 3.1 per cent.

Will my right hon. Friend confirm that business investment growth in the past five years has been at 6.2 per cent., in comparison with long-term business investment growth of 3.5 per cent.?

The right hon. Member for Wokingham (Mr. Redwood), who is waiting to pounce on the shadow Chancellor, must despair of those on the Conservative Front Bench and the way in which they put their case about the national economy. We have created greater stability by making the Bank of England independent—but initially the shadow Chancellor opposed that. We have created a better competitive framework by making the Competition Commission independent—and originally the Conservatives opposed it. We have created a new deal that gives people, through responsibilities and rights, the opportunity to get back to work—and the Conservative still oppose the new deal. We are creating the conditions for both stability and growth. It is a pity that on all the major decisions made in the past five years, the shadow Chancellor and the Conservative Opposition were generally against them.

If he will make a statement on the progress of public service agreement targets for the Department of Health. [68401]

A progress report is included in the 2002 Department of Health departmental report, which is published today. Since 1997, more than 100,000 fewer people are on the waiting lists; there are 39,000 more nurses, more than 10,000 more doctors and 37 per cent. more heart operations; more than 90 per cent. of people urgently referred by their GP with suspected cancer now see a specialist within two weeks; and there are 50 per cent. more CT scanners and 80 per cent. more MRI scanners; and last year, for the first time in 30 years, there was an increase in the number of NHS beds.

We all know that the Government favour target setting over reform, and, as the Chancellor said earlier in his answer to the hon. Member for Dumbarton (Mr. McFall), the choice of public service agreement objectives reflects the Government's priorities. In that case, is the absence of a target for the number of care home beds a fair and true reflection of the Government's refusal to acknowledge that there is a real crisis in our care homes today?

The hon. Gentleman should wait for the statement by the Secretary of State for Health about the 6 per cent. real-terms increase in social services expenditure that I announced last Monday, and for the announcements in that statement about new measures that will be introduced. The fact is that, if we want to increase the number of care home beds and to improve social services for the elderly, we are faced with a choice: do we spend more money or less? We will spend the money; the Conservatives would make more charges.

Under the public service agreement, some specific targets have been set for this year. One is that in-patients should not have to wait more than 12 weeks; another is that out-patients should not have to wait more than 26 weeks. May I tell my right hon. Friend that both those targets have been met in full at Warwick hospital in my constituency? Is not this a case of service agreements providing precise targets that are being delivered thanks to the increased investment that the Government are putting in?

There are 300,000 more operations taking place in the national health service, and 100,000 fewer people on the waiting list. The maximum waiting time—which was more than 18 months when we came to power—is gradually being reduced to 15, then 12, nine and six months. Those are the aims that are being pursued in the targets that we have set the national health service. The question is, however, when making the reforms and setting the objectives—including giving more power to the primary care trusts—are we prepared to put the necessary money in to finance the expansion of health care? Everybody agrees—in any report that is produced—that the health service needs more money, except one group of people: the Conservatives, who want charges and cuts instead of spending.

Since about half of all the Government's 1998 and 2000 departmental targets appear to have been unmet, changed, failed or dropped. will the Chancellor oblige us by giving a single example of a Department that has been penalised, and telling us what penalty followed?

The issue about targets is that, when they are not met—

Agriculture.

The Agriculture Department has been completely reorganised

Fat lot of good it has done. It has got worse, much worse.

The hon. Gentleman now says that he opposes what we are doing to give more money to sustainable farming, and the public expenditure announcement that we will give more money to the Department for Environment, Food and Rural Affairs. The important thing is that, when a Department goes wrong, action is taken. Why did the hon. Member for Truro and St. Austell (Matthew Taylor)—who now calls himself the shadow Chancellor; he is the shadow Chancellor who resides in Truro, as opposed to the one who resides in Folkestone—not welcome the action that we proposed on Monday to tackle failing institutions, including hospitals, schools, colleges, prisons and the probation service? In all those areas, we take action if there are failing institutions, and we also take action if permanent secretaries or Departments fail.

Does my right hon. Friend think that new charges for GP visits should be introduced to finance the NHS, or indeed that it is a Stalinist creation?

At the last general election, the Conservative party stood on a policy that the national health service would be free at the point of need. [HON. MEMBERS: "Order."] Since then, a policy of charging, which the Conservatives are now proposing, has been put forward by the shadow Chancellor. The policy of charging is wrong. [Interruption.]

Order. Sometimes I cannot hear what is being said because so many people are shouting. I call the shadow Chancellor.

May I say how greatly I am looking forward to debating the Chancellor's spending plans with him next Tuesday? Meanwhile, will he explain why, in his panoply of new targets set on Monday, that that for NHS efficiency savings has been reduced from 3 to 2 per cent. and that for ensuring that everyone should be expected to achieve the level of the best over five years has been dropped completely?

Order. Before the Chancellor answers, I ask him not to talk about Conservative party policy.

It does not bear talking about.

It is a great pity that the Chancellor could not give a direct answer to that direct question. It is an even greater pity that he introduced yet more fiction to his answer. The Government said in their progress report on the efficiency target that they set four years ago, "There has been slippage." Perhaps it would have been better if the Chancellor had stuck with his adviser's phrase of "increased room for catch-up". What happens when there is increased room for catch-up? Instead of trying harder to catch up, the Government drop the target. Does not that expose as a complete sham all the Chancellor's fine words on Monday about matching resources with reforms and results for patients?

Absolutely not, because we have reduced waiting times and waiting lists. We have also secured a massive devolution of funding to local health authorities, all of which the Conservatives should have done but never did.

What further incentives the Treasury will provide to encourage inward investment into the United Kingdom. [68403]

Announcements made in this year's Budget will further serve to consolidate improvements in the UK's performance relating to inward investment. The extension of R&D tax credits to large companies and the move to exempt corporation tax for capital gains and losses on the most substantial shareholdings in trading companies will make the UK an even more attractive location for foreign investors.

I thank my right hon. Friend for that answer. Does he agree that the extended R&D tax credit introduced for larger companies in this year's Budget will not only help to sustain high inward investment in this country, but encourage foreign companies already located here to follow the example of NCR in my own city and locate more R&D facilities in the UK, thereby strengthening the likelihood that their corporate presence here will continue?

I am grateful to my hon. Friend for the interest that he takes in inward investment generally and the work that he has done in his constituency to promote it. He makes an absolutely accurate point on the impact of the R&D tax credit, but, importantly. linked to Dundee's success in inviting and securing high-tech investment in that constituency are the announcements on science made by my right hon. Friend the Chancellor in the spending review. They will further enhance the competitiveness and success of our efforts to secure inward investment into the UK.

Will the Chief Secretary tell me what the level of inward investment in this country was on 1 May 1997 and what it was on I May this year? If it has gone down, to what extent is that attributable to the £25 billion raid on pension tax credits?

It has no connection whatever with the so-called £25 million raid on pensions. What the hon. Lady must understand—[Interruption.] The hon. Lady wants figures. Let me give her the figures. Direct investment flows to the United Kingdom increased threefold in the four years to the third quarter of 2001, and by 9 per cent. in the four years to the second quarter of 1997. That is the difference between our record of success in government, and the record of failure of the hon. Lady's party.

I welcome the measures that are being taken, but does my right hon. Friend accept that China in particular is attractive to multinational companies at present, and that investment has flowed out of this country and into China? Does he accept the need for analysis of the trading conditions that China is allowing for multinationals, to ensure that we are on a level playing field?

My hon. Friend makes a fair point. China's accession to the World Trade Organisation will no doubt assist that process, but it should be stressed that we in the United Kingdom offer a high skills base in terms of employment. What we offer, and what has been enhanced by the Government's decisions, is a stable economic framework and investment in education and skills. As a result, in a recent survey of developed and developing economies by UNCTAD—the United Nations conference on trade and development—the United Kingdom came second only to the United States in terms of its attractiveness to inward investment. That is a good-news story for UK plc.

If he will make a statement on the impact of recent exchange rate fluctuations on British business. [68404]

The Government publish two assessments of economic developments and prospects each year, one at Budget time and the other in the pre-Budget report. The forecast published in the April Budget was based on all the relevant information available at that time. We will update our assessment of the economy as usual in the autumn pre-Budget report, taking account of all the relevant factors.

In the unlikely event that the Chancellor can declare his five tests for euro entry to have been met, what will concern British business and the rest of the country is the proposed sterling-euro exchange rate at entry. At what stage will the Chancellor declare that rate? Will the Paymaster General confirm that it will be before any referendum, and also that there will be just one assessment during the present Parliament?

The hon. Gentleman will have to be patient, and wait for the assessment of the five economic tests in the Government's announcement.

May I draw my right hon. Friend's attention to an article by Roger Clews of the Bank of England's monetary instruments and markets division? On page 182 of the current "Quarterly Bulletin", he reminds us that the United Kingdom is part of the wider world economy, and furthermore that

"the strength of international influences on domestic financial markets varies over time, being especially high at times of financial market stress."

As my right hon. Friend the Chancellor has repeatedly told the House, what is essential is that the economic fundamentals are sound—which means low inflation, low interest rates, sound public finances and stable growth.

In recent years, the pound has moved much more dramatically against the euro than against the dollar. Does that not show that we are if anything converging with America and not with euroland? Does the Minister agree that there is no point in assessing other convergence criteria while the exchange rate is gyrating so wildly in terms of the euro? Does that not show that we are nowhere near having converged?

The right hon. Gentleman is putting his old proposition. What the Government will do is assess the five economic tests, ensuring that the Government's best economic interests—[Interruption.]—the country's best economic interests are met and the best decisions are made for the country, both by Parliament and by the people.

What plans he has to meet his G8 and EU counterparts to discuss further practical steps on tackling global poverty. [68405]

The Secretary of State for International Development and I will meet churches and non-governmental organisations next week. We will prepare for the International Monetary Fund and World Bank meetings in September, where we will want the announcement that this country is raising development aid from £2 billion in 1997 to £4.9 billion by 2006 to be an encouraging signal for a new international £50 billion financing facility involving all rich countries, the aim being to meet the millennium goals for 2015 of halving poverty, cutting child mortality by two thirds and delivering primary education for every child in the world.

I am sure that my right hon. Friend will be aware that he and the Secretary of State for International Development are seen as the shining stars in the firmament of the developing world for the leadership that they have given in increasing the amount of money that we set aside for overseas aid and other programmes to tackle poverty and ill health in the developing world. Given the fact that the tide of Conservative cuts in development aid has been reversed significantly by this Government, would he like to speculate that we might reach the UN target of a contribution of 0.7 per cent. of GNP by the time of the next election?

My hon. Friend is drawing me to speculate both about the date of the next election, of which I have no knowledge, and about the next spending round, which is two years from now. What I can say is that as a result of the representations made by many of his constituents, as well as by him and many others in the House, 26 countries have debt relief or are in the debt relief process. For the first time in 20 years, the decrease in development aid budgets has been reversed: they will rise over the next few years as a result of what Britain and the European Community have done and what America has announced in the past few months.

I note what the Chancellor has said, but does he not agree that there was at least a feeling from the recent G8 summit in Canada that the developed world had moved more towards putting money into security by giving more to Russia than to eradicating poverty in Africa? What action does he propose to take to ensure that the G8 countries do not lose sight of poverty in Africa?

I do not agree with the hon. Gentleman. At the G8 summit, the Prime Minister led with the African initiative that has been his particular contribution to the G8 process during the past year. He pledged that Britain's aid budget to Africa, which was £300 million in 1997, would rise to £1 billion. At the same time. America pledged $5 billion after 2006 and $5 billion in total until 2006. Then the European Union pledged that it would raise its development aid to 0.39 per cent. of its budget, which is an additional $7 billion. By the time of the G8 summit, an additional $12 billion had been pledged. That is why development aid as a proportion of GDP, which had been falling, is rising for the first time in 20 years. When the hon. Gentleman looks at the overall sums and at what we have to do to build on that, he will recognise that the G8 summit, where the Prime Minister led the delegation from Britain, was a great success in pushing things forward, but we need even greater successes in the months and years to come.

Is my right hon. Friend aware that, in contrast with the perspective offered by the hon. Member for Angus (Mr. Weir), some of us heard at a meeting this morning that this Government had given more bilateral aid to Rwanda than the whole of the EU and any other country? The Government have an excellent record on that and on debt relief. Does my right hon. Friend agree that the recent lobby on trade indicated that there is indeed a need for a new modern Marshall plan? Does he see that as part of the Government's approach?

I am grateful to my right hon. Friend, who takes a big interest in such matters. Over many years he has put the case for aid to Africa and for a constructive and progressive approach to solving international development problems. The issue that we faced was that despite all the good will, net disbursements of aid to Africa had fallen significantly over the 1990s. Only now is that process being reversed. That is why Rwanda, and many other countries, are receiving more money. That is why, for example, Uganda has doubled the number of children in education, and other countries such as Tanzania can do likewise. It is by our collective efforts, and by persuading other countries, that we will build both a development aid budget that is capable of dealing with the problem, and the will to ensure that the money goes, in an untied way, to education, health and anti-poverty programmes.

What assessment he has made of the effect of his policies on public sector pension provision. [68406]

Prudent financial and economic management has ensured that the finances of the public services are on a sustainable basis. Through the spending reviews and other initiatives we ensure that public sector pension schemes are managed efficiently and provide cost-effective recruitment and retention of staff.

The welfare and income of all pensioners must be central in any civilised and caring society, so will the Minister acknowledge the depth of concern felt by millions of public sector pension contributors about the crisis in funded pensions? Will the Government finally admit the connection between that crisis and their £5 billion a year tax on pensions, which has cost each pension contributor £400 a year? The Government must accept some responsibility for the crisis in our pensions today.

I should point out to the hon. Gentleman that the tax changes that affected pension funds do not affect public sector pension funds; those are primarily unfunded schemes.

I said all pensioners.

Of course we take the issue of saving for the long term, especially for pension provision, extremely seriously. That is why the Government commissioned the Sandler report to examine private sector pension provision, and also why we are seriously considering the proposals made by Alan Pickering in his review of the occupational pension scheme. We shall respond to those reports in the autumn, and put forward our proposals.

Most public sector pension schemes are, of course, unfunded, and they are an important part of the rewards package for low-paid workers in local government, health, the fire service and the police. Is it Government policy to continue those public sector schemes on a final salary basis, including survivor benefits and indexation of the pension once it is in payment?

I take it that my hon. Friend is referring to the Pickering review, which proposed some changes in what it is compulsory for employers to offer in their pension schemes. We are, of course, taking those proposals extremely seriously—but at first sight some of them, especially those on compulsory indexation and survivors benefits, do not seem attractive. Against that, however, must be weighed the overall impact on occupational pension schemes. We are taking the issues extremely seriously, and we will make proposals in due course.

What discussions he has had with the Secretary of State for Trade and Industry regarding manufacturing industry competitiveness. [684071]

My right hon. Friend has regular meetings with the Secretary of State for Trade and Industry on a wide range of issues, and we recognise the vital contribution that UK manufacturing makes to the economy, exports and innovation. That is one reason why the Government are now investing so heavily in innovation, with Monday's announcement of the largest sustained increase in the science budget for a decade, and the announcement in April of the extension of the R&D tax credit to all firms—a measure that will overwhelmingly benefit manufacturing industry.

I thank the Minister for that answer, but is it not true that since 1997 UK manufacturing industry has had to suffer an explosion of red tape and bureaucracy, as well as an increase in taxation? No fundamental reform of public services was mentioned in the Chancellor's announcement on Monday, yet he was only too happy to throw the public's money around like a drunken sailor. In that context, I would like the Minister to tell us how the Government square the increase in red tape, bureaucracy and taxation on manufacturing industry with pretending to support an entrepreneurial and enterprise economy.

I must say to the hon. Gentleman that effective regulation has important economic benefits. If it is properly framed, regulation can correct market failures, create a more level playing field for business, and put in place essential protections such as health and safety at work. This Government have a strong record in cutting red tape. As Minister with responsibility for customs, I can say that we have recently raised the threshold for VAT registration, and we are introducing a new VAT flat-rate scheme and new VAT import reliefs. Those changes were welcomed by the British Chambers of Commerce, which said:

"We welcome the Chancellor's attempts to try to simplify the VAT system".

"The Chancellor has left business in no doubt that he is committed to encouraging enterprise. The tax improvements, including the red tape burden, are welcome."

Does my hon. Friend agree that small and medium-sized enterprises are becoming increasingly important to the well-being of the economy, and that the measures on late payments that this Government have introduced incrementally are proving of enormous benefit to SMEs?

My hon. Friend is precisely correct. It is such simplification measures, plus tax cuts targeted precisely at small businesses, that are bringing such benefits. Of course, all businesses also benefit from the greater economic stability that we have seen since 1997, including low interest rates and inflation rates, sound public finances, and steady growth. That is the best support that Government can give to manufacturers small and large— precisely the support that they did not get in 18 years of Conservative Government.

Have not Treasury Ministers cottoned on to the fact that increased costs on business operate at the margin, and have a completely disproportionate effect on competitiveness and profitability? Does the Minister not concede that further increases in labour market regulation are extremely unlikely to buy off labour market and trade union militancy, which sank the previous Labour Government and has returned to haunt this one?

I simply do not recognise the hon. Gentleman's description. On costs for business—particularly small business—I should remind him that, thanks to a series of tax cuts since 1997 that were reinforced in this year's Budget, and to corporation tax reforms, we have the lowest rates in the UK's history. Capital investment for small firms—permanent in the first year—has given a real boost, and research and development investment has been welcomed across the board. The Budget's tax cuts for business across the piece mean that—even after the Budget—12 other European Union countries still have higher tax burdens on business than does the UK.

If he will make a statement on the growth of the credit union movement in the United Kingdom. [68408]

Credit unions have an important role to play in tackling financial exclusion and enhancing opportunity, through the provision of core financial services. That is why we are delivering a programme of strategic deregulation to enable credit unions to offer a greater range of services to their members, thereby helping them to develop and to grow.

I thank my hon. Friend for her reply. Will she join me in congratulating and thanking the many thousands of people who give of their time voluntarily to support the credit union movement in the UK? Does she agree, however, that the term "credit union" is itself problematic, because for many people it implies getting into debt? Does she also agree that we should perhaps re-brand the sector, as has been done in Telford through the Fair Share credit union?

I thank my hon. Friend for his question. I know that he takes a considerable interest in these matters, and I do of course congratulate the thousands of people who provide their services for free to help credit unions prosper. That is why we are undertaking a programme to make the whole credit union sector more attractive, to enable credit unions to offer a greater range of services to their members, and to offer greater protection to members by regulating the sector through the Financial Services Authority.

I join the Minister and others in congratulating the credit union movement and those who have done so much to help their own communities. I also welcome the fact that steps have been taken to strengthen the supervision of credit unions. Am I right in thinking that that has been done not to hinder the credit unions, but to protect them in an age of creative accounting, when people often misuse money? Those measures should not be shunned, but accepted and supported.

I completely agree with the remarks made by the hon. Gentleman. It is important for the sector itself, as well as for its members, that it is appropriately and proportionately regulated. I welcome the fact that thousands of members of credit unions, as well as the organisations themselves, took the opportunity to respond to the FSA's consultation on how that regulation should be carried out. The new framework will increase the reputation and credibility of the sector and it will also offer important investor protection to credit union members, bringing them under the same sort of protection regime as bank and building society depositors.