Helen Goodman (Bishop Auckland) (Lab)
1. What recent assessment he has made of the effectiveness of the monetary policy framework.
The Chancellor of the Exchequer (Mr George Osborne)
I begin by expressing my own personal sadness and shock at the death of David Cairns, whom I knew pretty well. I went with him on a trip to the United States some years ago and spent some time with him, and I know that he was principled, gentle—in the best sense of the word—and genuinely liked and respected in all parts of the House. His sudden and premature death is a tragedy, and my sympathies—and, I suspect, those of everyone here—go to his partner Dermot and his family.
The Government have set up a new macro-economic framework to restore economic stability. The building blocks of that framework are an independent Monetary Policy Committee that will continue to target inflation, a new Financial Policy Committee to operate macro-prudential tools, so that we can assess overall levels of debt in the economy—something not done in recent years—and, crucially, a credible, coherent and independently monitored fiscal policy that allows interest rates to stay lower for longer while remaining consistent with the inflation target. It is now widely accepted that this framework is far more effective than the one that went before it.
Helen Goodman
May I associate myself with your tribute, Mr Speaker? David Cairns was a highly valued colleague, and I am sure that all our thoughts and prayers are with his partner Dermot and his family.
I am grateful to the Chancellor of the Exchequer for his answer, and I was wondering whether, in his more reflective moments, he would agree that Portugal, Greece and Ireland face a major problem, in that they cannot run an independent monetary policy attuned to their particular needs. That being the case, will he stop making rather childish comparisons between the UK and the eurozone countries?
Mr Osborne
The hon. Lady is right that those countries do not have a flexible exchange rate. That is because they are in the euro, which I campaigned to keep Britain out of. I do not know how she has campaigned in recent years, but the last time I checked I think it was still official Labour party policy to join the euro in principle. Perhaps the shadow Chancellor will clear that up when he gets to his feet. The comparison I make is a good one: a year ago almost to the day, people were looking at the British budget deficit, which was larger than those of Portugal and Ireland, and asking whether Britain could pay its way in the world. Our credit rating had been put on negative watch. Now, however, thanks to the policies of this coalition Government, Britain has economic stability again.
Sir Peter Tapsell (Louth and Horncastle) (Con)
I also wish to pay tribute to the memory of David Cairns. May I ask the Chancellor how the co-ordination is organised to achieve a synthesis between our tight fiscal policy and our lax monetary policy?
Mr Osborne
Obviously, monetary policy is independent—the MPC sets it in the way we all know—so there is no co-ordination in that sense. I do not have a direct influence on monetary policy, but it is clear that by setting a credible fiscal policy, we give the MPC maximum room for manoeuvre and the freedom to keep interest rates lower for longer. The Governor of the Bank of England made that clear when he gave his Mansion House speech last year, and it is an observation also made by many independent observers of the British economy. Interest rates would be higher if we had a less credible fiscal policy.
Ms Angela Eagle (Wallasey) (Lab)
I would like to thank you, Mr Speaker, and the Chancellor for your tributes to David Cairns, our colleague, and to add our tributes from the Opposition side of the House. David was one of those very rare people who caused a change in the law in order for him to be able to take his seat in this place, and when he arrived his presence was not a disappointment to anyone. He was a great colleague and friend, and our hearts go out to his family and friends. We would like to add our deepest condolences at the shocking news of his untimely and very early death today.
Before the last election, both parties now in government pledged no rise in VAT, but with inflation running at double the Bank of England target, people are facing the biggest and longest squeeze in their living standards for 80 years. How does the Chancellor think that increasing VAT by 2.5% has helped them to cope with this issue?
Mr Speaker
Order. Whatever may be said about the question, I am sure that the Chancellor will focus on the monetary policy framework. That is what he can be relied upon to do.
Mr Osborne
Actually, monetary policy is the thing that I am not directly in charge of, but the point I would make is that the VAT rise is part of a credible fiscal policy. The person who was Chancellor of the Exchequer before me has made it pretty clear in interviews since the election that he, too, was considering a VAT rise, and he would probably have gone ahead with one if Labour had been re-elected.
Mr Osborne
The shadow Chancellor shakes his head. I know that in government he tried to do everything to stop a credible fiscal policy being developed, and he is now doing everything in opposition to stop Labour developing a credible economic policy. Long may he continue to do so.
Mr Andrew Tyrie (Chichester) (Con)
The Chancellor will shortly publish draft legislation on financial regulation making the Bank of England the most powerful central bank of its type in the world. The word “Governor” simply does not do justice to the empire over which Mervyn King will shortly preside. What specific proposals does the Chancellor have to ensure full democratic accountability of the reformed Bank to both Parliament and the country?
Mr Osborne
I thank my hon. Friend for advance notice of his important question. Both the Governor of the Bank of England and the Government take the accountability of the Bank very seriously. Clearly the Bank will receive considerable new powers for its prudential regulation of our financial system and in its macro-prudential tools. We are looking at specific ideas for enhancing the Bank’s accountability, including to this House, but it would be appropriate first for me to appear before my hon. Friend’s Committee—I know that he has contacted my office seeking a date—and to await the Treasury Committee’s findings, so that we can listen to what it has to say before coming up with our confirmed proposals.
Tessa Munt (Wells) (LD)
2. What recent assessment he has made of trends in levels of bank lending to small businesses.
The Financial Secretary to the Treasury (Mr Mark Hoban)
Repayment of debt by small businesses is running ahead of lending to the same sector. As a consequence, net lending fell in the first quarter of this year. However, the availability of credit to business in the same period increased.
Tessa Munt
I would like to draw attention to the situation affecting my constituent George Archer, a business man who has had a £5,000 overdraft that was unused for three years, with the exception of four days when he requested a £20,000 extension. The bank—which is one of the big four—offered him £25,000 on rates that he initially refused, before beating it down to acceptable rates. On paper, that bank has increased its lending to a small or medium-sized business by £20,000, but I wonder what the Minister can do to halt this duplicity and ensure that loans are real, active, needed and utilised.
Mr Hoban
I cannot comment on the particular circumstances that my hon. Friend has raised, although I am happy to look at them more carefully. I am sure that she would welcome, as does the whole House, the commitment of banks to increase their capacity to lend to businesses of all sizes.
Chris Leslie (Nottingham East) (Lab/Co-op)
I wonder whether the Minister still thinks that Project Merlin was such a great deal with the big banks. Lending to small businesses continues to fall, while the charges for those loans are rising. The banks’ promise to support the big society bank looks less generous, as we learn that money will be lent only on commercial terms, and now we hear that Santander is pulling out of the business growth fund, which was a key plank of the deal. Is this a failure of Project Merlin or a failure of the Government?
Mr Hoban
It is rather churlish of the hon. Gentleman to be critical of Project Merlin. When his party was in office it was able to secure lending commitments from only two banks. We have achieved a comprehensive package with all banks, including Santander, to increase the amount of money that they will lend to businesses, including small businesses. The business growth fund, which he also raised, is an opportunity for businesses to seek equity finance in a way that is currently not available and that meets the equity gap, which the previous Government did little to resolve.
Esther McVey (Wirral West) (Con)
3. What fiscal measures he is taking to reduce the costs faced by businesses.
The Chancellor of the Exchequer (Mr George Osborne)
As well as dealing with the deficit, this Government are helping business. To support a private sector recovery, we have cut corporation tax by 2% this year, with 3% to come. We have cut small companies’ tax and extended the small business rate holiday for another year. We have stopped Labour’s jobs tax, expanded enterprise and research tax breaks, announced new enterprise zones and, crucially for millions of businesses and families, we have abolished the fuel duty escalator and cut the duty.
Esther McVey
As Merseyside seeks to expand its private sector, it is looking towards its knowledge economy so that it can build on its substantial science base. Predictions show that, by 2022, it could have growth of 15%, which would mean 58,000 jobs. What are the Government doing to incentivise such growth to ensure that those predictions for Wirral and Merseyside become a reality?
Mr Osborne
First, we have increased science funding in the north-west. Although it is not in my hon. Friend’s constituency, there has been additional money for Daresbury, which was announced in the Budget. Also, Mersey Waters in her constituency is going to be an enterprise zone. We have also announced the redevelopment of the Royal Liverpool hospital at a cost of £450 million. So, whether it is medical research, science at Daresbury, the Atlantic Gateway project or the enterprise zones, we are doing all sorts of things to help the Mersey region.
Ed Balls (Morley and Outwood) (Lab/Co-op)
I endorse the sentiments expressed by my hon. Friend the Member for Wallasey (Ms Eagle) and others about the tragic death of our colleague and friend, David Cairns.
I also congratulate the Chancellor on his successful masterminding of the “No to AV” campaign. We all saw how much he enjoyed it over the past week or so, but now that that political campaign is out of the way, perhaps he could drag himself back to his day job for a moment. The flagship measure of his strategy for growth in last year’s Budget was a £1 billion national insurance holiday for new businesses outside London and the south-east. He said that that would benefit 400,000 companies and create 800,000 jobs. Let me ask him a very specific question. Will the Chancellor tell the House how many companies have so far benefited from that scheme, and how many jobs have been created?
Mr Osborne
I thank the right hon. Gentleman for congratulating the “No to AV” campaign, which many of his colleagues supported, even if he did not. I cannot help but notice that he had a big role to play in Labour’s election campaign, during which he said that
“the Scottish elections are a big test”
for Labour. Well, he was certainly right about that.
Let me say something about that national insurance tax break that was announced in the previous Budget. The take-up has been in the low thousands, and that is something that I acknowledged to the Treasury Select Committee. We are seeking to improve the design of the scheme, to ensure that new businesses are more aware of its benefits. As a result of work being done by Her Majesty’s Revenue and Customs, we expect take-up to increase.
Ed Balls
Despite all the bluster, there was not a specific answer to the question in there. We were told by the Business Secretary in February that the Chancellor would announce the details of how he would develop the scheme in the Budget, yet those details still have not arrived. Actually, I have the figures from the Chancellor’s own Department. How many companies have benefited from the scheme? Not 400,000 but just 3,000. How many jobs have been created? Not 800,000 but just 6,000. If that is the flagship measure of his growth strategy, it is no wonder that the economy is flat-lining, that consumer confidence is down and that unemployment is forecast to rise—[Interruption.] Well, if that is not the reason, perhaps the Chancellor will tell us why the economy has been flat-lining in the past six months. Is not the reality that the country is discovering what the Liberal Democrats discovered on Thursday of last week: that this coalition is hurting, but it is not working?
Mr Osborne
The shadow Chancellor is not just out of his depth; he is drowning. The truth is that he has had absolutely no impact in the several months that he has been doing the job. He had one policy, a VAT cut on fuel that the European Union ruled illegal. He had one idea, which was to follow America, but now the Obama Administration have announced a deficit reduction plan as fast and as deep as the UK’s. He had one prediction, which was that there would be a double-dip recession, and that has not happened. We know that he is a man with a past, but we are beginning to discover that he has absolutely no ideas for the future. If we want any proof of that, this is what the CBI said this week when asked what the outcome would be if Britain followed Labour plans:
“The economy would be weaker because of the impact of a loss of confidence”.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
4. What assessment he has made of the effects of the increase in the standard rate of VAT on levels of economic growth in the first quarter of 2011.
The Exchequer Secretary to the Treasury (Mr David Gauke)
At this stage, it is not possible to make a full assessment of the effect of the increase in the standard rate of VAT on levels of economic growth in the first quarter of 2011. The Office for Budget Responsibility forecast released on 23 March projected growth of 1.7% over the course of 2011. That forecast takes full account of the Government’s fiscal policy measures.
Ms Stuart
The Bank of England expects inflation rates to accelerate over the next few months. The markets, however, seem to have taken the view that interest rates will not increase as speedily as was anticipated just a few weeks ago. How does the Exchequer Secretary reconcile the Chancellor’s notion that the economy has grown with the judgment of the markets?
Claire Perry (Devizes) (Con)
May I return to the topic of VAT on fuel? I have just come from a business session in my constituency of Devizes, where I know that despite the decrease, high fuel prices continue to be a real drag on growth for small businesses across the economy. I have a letter from the EU commissioner saying that the recent motion we debated—that a derogation should be made specifically for motoring fuel—is almost certainly illegal and definitely unworkable under EU legislation. May I ask Ministers what proposals we can suggest to help motorists in the real world now that the Labour party’s suggestion has been revealed as yet another—
Tony Baldry (Banbury) (Con)
5. What fiscal measures he is taking to encourage charitable giving.
The Chancellor of the Exchequer (Mr George Osborne)
The Government think that charitable giving needs a great deal more support than it has been getting, so we announced a major package of new tax breaks in the Budget, ranging from the biggest to the smallest donations. This includes the commitment that anyone giving more than 10% of their estate to charity will have their inheritance tax bill cut by 10%. For the first time ever, the first £5,000 of a donation or donations to a charity will automatically attract gift aid. That is automatic tax relief on the collection plate and the collecting tin on the high street. Overall, 100,000 charities could benefit to the tune of £600 million a year. These are the most generous tax changes for a generation.
Tony Baldry
Over the year, some £58 million in loose change is put in collection plates from just Church of England collections, so the small donation gift aid scheme will be very welcome, as it will enable tax to be recovered on that amount. Welcome, too, will be the reduction in inheritance tax for those who give more than 10% of their estate to charity. After all, we can take nothing with us, and it is probably better to leave as much as possible to charity when we go.
Mr Osborne
I thank my hon. Friend for his support. One challenge is to make sure that everyone hears about these schemes over the next couple of years. Because the Budget focused on big issues like fuel duty and the corporation tax cut, the same amount of attention was not given on Budget day to the charitable giving measures. Over the period before they come into effect, I want to make sure that all the charities are aware of the benefits. Every charity will be able to benefit, but small charities will be disproportionately better off.
Kerry McCarthy (Bristol East) (Lab)
Many local charities would disagree with the Chancellor’s statement. Will he explain why he chose in the Budget to focus on tax breaks for the wealthiest owners when many small local charities who will not benefit from such donations are being hit by the triple whammy of a rise in VAT, the end to the gift aid transitional rate and cuts to local government grant funding? What help is he giving to those charities that he expects to form the backbone of his big society?
Mr Osborne
I am not sure who the hon. Lady has been listening to, but this is what the British Red Cross said: “Allowing charities to—”[Interruption.] I am sorry; it seems that we should disregard the views of the British Red Cross. Let me, however, repeat what it said for the benefit of my right hon. and hon. Friends.
“Allowing charities to claim back on up to £5,000 of small donations per year will have a big impact for small charities”.
The Charities Aid Foundation said:
“The Chancellor has today delivered for charities and those who want to support them.”
Instead of carping from the sidelines, why does the hon. Lady not get behind this good scheme and ensure that all charities in all our constituencies make use of it?
Pamela Nash (Airdrie and Shotts) (Lab)
6. What assessment he has made of the effects on families and children of the tax and benefit changes introduced in April 2011.
The Chief Secretary to the Treasury (Danny Alexander)
I echo your tribute to David Cairns, Mr Speaker. I knew him as a very effective Scotland Office Minister, and as a champion of Scottish broadcasting. It is a tragic loss, and he will be very sorely missed by Members in all parts of the House.
Direct tax and benefit changes introduced in April are progressive. On average, households in the bottom 80% of income distribution gain. As a result of the direct tax changes introduced in April, 21 million individuals earning up to about £35,000 per annum will benefit in real terms this year.
Pamela Nash
Let me take a moment to associate myself with the Chief Secretary’s comments on the sad death of David Cairns. David provided me with a lot of support and a lot of laughter during my time here as a parliamentary researcher and, over the last year, as a Member of Parliament.
Families with two or more children will lose up to £1,560 per year as a result of the cuts in the child care element of working tax credit. Does the Chief Secretary accept that that will deter many parents who would otherwise have returned to work from doing so?
Danny Alexander
The vast majority of people on low and middle incomes will benefit from the income tax cuts that will result from the raising of the income tax threshold by £1,000. For families with children, we have increased the child element of child tax credit by £180 above indexation. I agree with the shadow Chancellor, who admitted on the BBC shortly after the Budget that
“only the majority of families”
would benefit from those moves.
Mr Mark Spencer (Sherwood) (Con)
Does the Chief Secretary share my desire to see a welfare system in which hard-working families are better off than those who choose not to work? Does he agree that, as soon as we can afford it, we should enable as many as possible of those hard-working families to benefit from the lifting of the tax threshold?
Danny Alexander
I agree wholeheartedly. That is why we have set ourselves the agenda of both reforming the welfare system and lifting the income tax threshold to £10,000, which will significantly benefit millions of people on low and middle incomes.
Mr David Hanson (Delyn) (Lab)
Value added tax up, losses of about £1,500 for middle-income families, child benefit frozen, child tax credit cut, working families tax credit frozen: can the Chief Secretary tell me why, when such decisions are made, it remains the Government’s priority to cut the 50p tax rate for the highest earners in the community?
Danny Alexander
I am not sure that the right hon. Gentleman opposed any of the items on that list in votes in the House.
As I said earlier, we have cut income tax by increasing the income tax threshold. We have also introduced a triple lock on pensions, increased cold weather payments, and increased the child element of child tax credit. Of course we must look at the way in which the income tax system works, but our priority has been to cut income tax for people on low and middle incomes by increasing the tax threshold. That is the tax priority of this Government.
Harriett Baldwin (West Worcestershire) (Con)
7. What steps he is taking to ensure that the Financial Services Authority exempts from new domestic regulation businesses employing fewer than 10 people and new businesses for the next three years.
The Financial Secretary to the Treasury (Mr Mark Hoban)
Where the Government are granting new powers to the Financial Services Authority through primary and secondary legislation, we will seek to apply the moratorium. The FSA is, however, an independent regulator with powers to make rules under the Financial Services and Markets Act 2000. The Government’s policy on exempting micro-businesses and start-ups from new regulation will therefore not apply automatically to rules made by the FSA.
Harriett Baldwin
In his testimony to the Treasury Committee, the chief executive of the FSA said that up to 10,000 jobs—in many cases, those of small independent financial advisers—could be lost as a result of the retail distribution review. Will the Financial Secretary meet the chief executive of the FSA as a matter of urgency to discuss ways in which the impact could be mitigated?
Mr Hoban
I know that my hon. Friend has campaigned tenaciously for IFAs. I remind her that although the FSA is an independent regulator—this addresses her question directly—it has an obligation to assess the impact of its rules on businesses, including small businesses, and to make its rules proportionate. I should add that it is not planning any initiatives by means of its powers under the Financial Services and Markets Act apart from those that are already under way.
Jim Shannon (Strangford) (DUP)
I thank the Minister for his response. Clearly, if the economy is to be regenerated and rebuilt, it will be small and medium-sized businesses that will achieve that, and one of the things they tell me as their elected representative is that they need rates relief and assistance. What assistance is the Minister considering giving to such businesses?
Mr Hoban
As the hon. Gentleman will be aware, this Government have taken many actions to provide support to small companies. For example, we have cut the small profits rate of corporation tax—which the previous Government sought to increase. We have done a lot to encourage the growth of small businesses, and we will continue to look at what further measures we might take to encourage their future prosperity.
John Stevenson (Carlisle) (Con)
8. What recent estimate he has made of the size of the public sector borrowing requirement.
The Economic Secretary to the Treasury (Justine Greening)
The public sector finances first release published by the Office for National Statistics estimates that the first provisional out-turn for public sector net borrowing in 2010-11 is £141.1 billion, or 9.6% of GDP. That is £15 billion lower than in 2009-10.
John Stevenson
Manufacturing has been undergoing a renaissance under this Government, and clearly has a role to play in helping the economy grow and in reducing the deficit. Does the Minister agree that manufacturing also has a significant role to play in helping to reduce the other deficit: the balance of payments deficit?
Justine Greening
I completely agree with my hon. Friend; he is absolutely right that manufacturing has a vital role to play. In fact, the total trade deficits narrowed in each of the past three months, and that recovery in exports has been driven largely by strong growth in the export of manufactured goods, which accounted for almost 50% of the UK’s total exports. That is not just good news for those businesses; it is good news for jobs, too. It shows that under this Government Britain is not just open for business in the UK; it is open for business abroad, too.
Kelvin Hopkins (Luton North) (Lab)
When the Government’s cuts really start to kick-in, unemployment will rise by hundreds of thousands, if not up to 1 million. That will result in lower tax revenues and higher benefit payments, and the deficit will get worse and public borrowing will increase. Is not the Government’s policy nonsense?
Justine Greening
The hon. Gentleman is giving a critique of his own party’s policy in many respects, because its proposed cuts are nearly as large as ours this year. The difference is that we have set up the Office for Budget Responsibility, and there is clear evidence that we will start to see employment growing year on year and unemployment falling year on year, so by the end of this Parliament we should see a net creation of almost 1 million jobs. Surely, the hon. Gentleman must welcome that? His party leaves unemployment higher when it leaves office.
Mr Marcus Jones (Nuneaton) (Con)
9. What fiscal measures he is taking to support first-time home buyers.
The Financial Secretary to the Treasury (Mr Mark Hoban)
Until and including 24 March 2012, first-time buyers can apply for relief from stamp duty land tax on properties of up to £250,000. The Government are currently reviewing this relief, and will announce the outcome of the review in the autumn. The Government are also investing £250 million in 2011 to assist more than 10,000 first-time buyers to purchase a new-build home of their own through the FirstBuy Direct scheme. That scheme is being co-funded by developers.
Mr Jones
I thank the Minister for his response. First-time buyers are the lifeblood of the residential property market, and while I congratulate the Chancellor and his team on the deposit scheme announced in the Budget to assist first-time buyers to purchase new-build property, will the Treasury team consider apportioning part of that funding to assist first-time buyers who want to purchase second-hand property, in order to give the property market the vital shot in the arm that it needs?
Mr Hoban
My hon. Friend makes an important point, but it is crucial that we target help where it will deliver the greatest economic benefit. By targeting assistance on first-time buyers purchasing new-build property, the FirstBuy scheme helps to unlock stalled developments and stimulate additional house building, with a further 10,000 homes being built for open market sale, supporting 42,000 jobs directly and a further 24,000 jobs indirectly for a year. If we were to pursue the route my hon. Friend suggests, we would potentially lose the benefit of the financing that comes from home builders.
Kate Green (Stretford and Urmston) (Lab)
Is the Minister concerned that the proposed savings cap in the universal credit will make it more difficult for first-time buyers to save for the much higher levels of deposit that lenders increasingly require?
Mr Hoban
Everyone in the House will understand the challenges that face many first-time buyers in trying to save up for a deposit. That is why we announced this scheme at the time of the Budget, which has been widely welcomed. We should also recognise that a number of lenders are now reducing the loan-to-value ratio, to enable more first-time buyers to get on to the housing ladder with a smaller deposit.
Sheryll Murray (South East Cornwall) (Con)
10. What steps he is taking to support investment in the regions.
The Chief Secretary to the Treasury (Danny Alexander)
Returning the UK economy to sustainable economic growth that is more balanced across the regions of this country and across sectors is a key priority. In the recent Budget, this Government took steps to encourage investment and exports as a route to a more balanced economy. In addition, we have introduced 21 new enterprise zones in England and we have allocated £450 million of investment in the first round of the regional growth fund, including to an excellent proposal from the Western Daily Press and the university of Plymouth to support small firms across the south-west.
Sheryll Murray
I thank my right hon. Friend for that reply. Private sector growth is really important in my constituency, but only six of 464 bids to the regional growth fund were from Cornwall. What can the Government do to encourage more bids from Cornwall in the second round?
Danny Alexander
I would urge my hon. Friend and other colleagues from Cornwall to encourage businesses and the local authorities to support bids from private sector businesses. The regional growth fund is there to support private sector-led bids that create growth and jobs and that support economic development across England, and I would urge her to work with chambers of commerce and local enterprise partnerships.
Mr George Mudie (Leeds East) (Lab)
In view of the indifferent growth in the regions, does the Minister regret the Government’s decision to abolish regional development agencies and to give to their authorities no money, no staff and no authority?
Danny Alexander
No, I do not; I think that that was the right decision. The balance of policies that we are putting forward—on enterprise zones, local enterprise partnerships and the regional growth fund—is designed to ensure that ideas that come from the regions have a much greater chance of success. Our decision was the right one, and the hon. Gentleman will have noted that inequality among the regions actually grew during Labour’s 13 years in office.
Nicholas Soames (Mid Sussex) (Con)
11. What steps his Department is taking to promote economic growth.
The Chancellor of the Exchequer (Mr George Osborne)
As my hon. Friend knows, we inherited an economic mess, we have restored economic stability and we are promoting economic growth by cutting business taxes, encouraging investment, expanding exports, improving and investing in skills, and creating jobs. The whole House will be pleased to know that 400,000 private sector jobs have been created since the Government came into office.
Nicholas Soames
I warmly welcome the excellent record of this Government, led by my right hon. Friend the Prime Minister, and the admirable work done by the Chancellor. Does he agree that, in addition to all this work to encourage growth, the deregulation of the economy continues to be extremely important and that it is not proceeding at as fast a pace as it should? Will he do everything he can to encourage his colleagues in the Government to get on with the deregulatory programme?
Mr Osborne
I certainly am doing that. We announced in the Budget the deregulation of £350 million-worth of business regulation, and we also imposed a moratorium for the coming years on regulation on small businesses. On the first anniversary of this Government, it is worth reflecting that 400,000 extra jobs have been created in the private sector, 89,000 fewer people are on the unemployment count, manufacturing output is up by 5%, business investment is up by 11%, exports are up by 12%, our credit rating has come off negative watch, our market interest rates are down and, as I say, economy stability has been restored.
Tristram Hunt (Stoke-on-Trent Central) (Lab)
Would the Chancellor like to associate himself with the views of the Secretary of State for Business, Innovation and Skills on the cumulative effect of carbon reduction measures on the competitiveness of energy-intensive industries? There is real concern in the ceramics sector in my constituency that the Government are in danger of exporting jobs and importing carbon, which is in nobody’s interest?
Mr Osborne
The hon. Gentleman raises a very specific issue—the cumulative impact of the environmental policies of both the previous Government and this one on some very energy-intensive industries such as the one that he represents in Stoke—which is worth consideration. We are examining it, and it is a challenge for the whole House to ensure that we get the right balance between absolutely meeting our carbon reduction requirements, to which we have all signed up as Members of this Parliament, and ensuring that we can do so in a way that enables Britain to continue to have a competitive energy-intensive industry.
David Mowat (Warrington South) (Con)
12. What his policy is on the operation of the Barnett formula in relation to relative need.
The Chief Secretary to the Treasury (Danny Alexander)
As the coalition programme for Government states, the Government
“recognise the concerns expressed…on the system of devolution funding.”
The Government’s priority, however, must be to reduce the enormous budget deficit and therefore any change to the system of funding for the devolved Administrations must await the stabilisation of the public finances.
David Mowat
I thank the Chief Secretary for that reply. He will be aware, however, that the Holtham commission, the House of Lords Select Committee and the noble Lord Barnett are all of the view that the Barnett formula is in need of urgent review and should be replaced by a mechanism based on need. I understand that the priority must be to tackle the deficit, but can we not at least start the process in the course of this Parliament of putting in place a fairer allocation mechanism based on need?
Danny Alexander
No, I am afraid I cannot make that commitment. As I said earlier, our priority is to reduce the deficit. We have the Scotland Bill to take forward here, and in relation to Wales we have a process that is following on from the referendum and we have the Holtham commission to look at specific issues. I think that is the right set of priorities for the moment.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
As the Chief Secretary knows, his Government have announced a Calman-like process for Wales following the successful referendum in March for further powers. Will he confirm that reform of the Barnett formula will be a precondition of any wider financial reforms to the way the Welsh Government are funded?
Danny Alexander
I cannot confirm that, no. We have said that we will consider the issues to do with tax powers raised in the second Holtham report as well as other issues that were brought forward at that stage. We made a commitment to the previous Welsh Assembly Government to engage in a conversation about those things. If the new Welsh Assembly Government want to take that forward, we will be open to that, too.
Mr Gary Streeter (South West Devon) (Con)
13. What recent representations he has received from the licensed trade on alcohol duty.
The Economic Secretary to the Treasury (Justine Greening)
I met a number of stakeholders ahead of this year’s Budget, including the all-party group on beer and the British Beer and Pub Association. We carried out a review of alcohol taxation last summer and members of the licensed trade contributed heavily to that.
Mr Streeter
I thank the Minister for her answer. Given the importance of the licensed trade to the economy and our culture, particularly in regions such as the west country, where tourism is high, is it not now time to seek to reduce alcohol duty on served drinks and to increase it on cheap booze sold by supermarkets?
Justine Greening
My hon. Friend is absolutely right to raise that issue. In fact, it is part of the rationale behind tackling problem drinking. One way we have sought to do that is by introducing the limits on the below-cost selling of alcohol in supermarkets. That will be done by a formula of assessing duty plus VAT as the below-cost level. My hon. Friend is also right to point out that we need to do what we can to support pubs, which are the lifeblood of many local communities. They will also benefit from the various packages of measures we have brought forward to support small businesses, including reduced corporation tax, increased national insurance thresholds and, of course, the plan for growth.
Jeremy Lefroy (Stafford) (Con)
14. What recent discussions he has had with his international counterparts on strategies to reduce budget deficits.
The Exchequer Secretary to the Treasury (Mr David Gauke)
At the G20 summit in Seoul in November, advanced countries committed to formulate and implement credible growth-friendly, medium-term fiscal consolidation plans. The Chancellor has been involved in discussions with our international and European counterparts since the Seoul summit, including in the International Monetary and Financial Committee and the International Monetary Fund spring meetings. As was the case with the previous Administration, it is not the Government’s practice to provide details of all such discussions.
Jeremy Lefroy
I thank the Minister for his reply. The OECD’s recent report says that the UK is striking
“the right balance between addressing fiscal sustainability…on the one hand, and preserving short-term growth on the other.”
In his contact with international colleagues, has my hon. Friend found other support for this view or, indeed, any support for the opposing view?
Mr Gauke
It is quite striking that on one side of the argument, saying that we must be serious about getting the deficit down, there is the OECD, the IMF, the European Commission, the CBI, the Governor of the Bank of England and the US Government, whereas on the other side we have the Labour party. We do not find the Labour party’s case terribly persuasive. On the evidence of last week, nor do the British people.
Ian Austin (Dudley North) (Lab)
Does not what happened in Greece show that measures that hamper growth make tackling the deficit all the harder? Is that not why, six months after the geniuses opposite took stewardship of an economy that was beginning to recover strongly, growth had ground to a halt? Is it now why, far from tackling the deficit, which is what all this is supposed to be about, the small print of the Budget shows that the Government will have to borrow £46 billion more?
Mr Gauke
I know that the hon. Gentleman is close to the former Prime Minister, but it really is disappointing that he is such a deficit denier. He even seems to suggest that the Greeks should not be doing anything about their deficit. If we do not have a credible plan, then the economy is at risk. We do have a credible plan.
Stephen Williams (Bristol West) (LD)
First, Mr Speaker, may I associate myself and my Liberal Democrat colleagues with your remarks about David Cairns at the start of Question Time?
On the deficit, the Government’s plans will reduce the fiscal deficit from last year’s figure of 9.6% to 7.9% this year, but that will still be roughly double the eurozone average and higher than the figures for Germany, France, Italy and Spain. Does the Minister agree that if we did not take this action to reduce the deficit, it would undermine international confidence in this country and our ability to borrow the funds that we still need to fund our programmes?
Chris Kelly (Dudley South) (Con)
T1. If he will make a statement on his departmental responsibilities.
The Chancellor of the Exchequer (Mr George Osborne)
The core purpose of the Treasury is to ensure the stability of the economy, to promote growth and employment, to reform banking and to clear up the mess in the public finances that we inherited so that Britain starts to live within her means.
Chris Kelly
The Chancellor will know that fraud and error have plagued the tax system since it was introduced. What measures is he taking to bear down on this and what financial impacts does he expect those measures to have?
Mr Osborne
I can today report to the House that in the past year Her Majesty’s Revenue and Customs has saved an additional £1 billion by tackling fraud and error in the tax credit system. For many years, the flaws in the shambolic administration of tax credits went completely ignored by the Labour party, causing misery for hundreds of thousands of families and costing the taxpayer billions of pounds, but we are now sorting out this mess.
Mr William Bain (Glasgow North East) (Lab)
T3. Has the Chancellor had an opportunity to note the findings of last week’s report from the National Institute of Economic and Social Research, which show the contraction in public and private demand since emerging from the recession to be higher in this country than in any comparable major economy? Does that not show that the Government are cutting too far and too fast?
Mr Osborne
First, the report recommends higher taxes and higher interest rates—perhaps that has become part of the Labour party’s official policy. I think it is worth looking at what the CBI has said this week. I have already quoted what it said when I was asked what the outcome would have been had Britain followed Labour’s plans—it said there would have been weaker economic growth—but its director general has also said:
“We are rock solid behind the chancellor’s plans to eliminate the structural deficit within a parliament”,
which are an
“essential part of putting the economy back on a stable footing”.
That is the voice of British business’s view of the deficit. [Interruption.] The shadow Chancellor says that is not true. A couple of months ago he was quoting the CBI across the Dispatch Box at me, but now that the CBI says that Labour’s economic policies would lead to weaker economic growth, he is in denial about that too.
John Pugh (Southport) (LD)
T2. What financial stress test will the Treasury impose before allowing the Department of Health to authorise general practitioner or clinical consortia?
The Chief Secretary to the Treasury (Danny Alexander)
I am grateful to my hon. Friend for his question, which raises a very important issue. It is a key part of the Treasury’s engagement with this to make sure that the process for authorising GP consortia ensures that those organisations are fully financially capable, as well as clinically capable, of meeting their objectives before they are authorised on whatever timescale.
Vernon Coaker (Gedling) (Lab)
T7. Does the Chancellor recall his statement to the House in October, when he said:“I completely understand the public’s anger that the banks…should now be contemplating paying high bonuses”?—[Official Report, 20 October 2010; Vol. 516, c. 955.]It is all very well being angry about that, but why do the banks continue to pay high bonuses to their high-ranking directors and why does he not do something about it? Why does he not repeat Labour’s bank bonus tax and reinvest the money in jobs, housing and many other things that the people of this country want?
Mr Osborne
Bank bonuses were higher when the hon. Gentleman was a Minister. There is complete amnesia among the Opposition about their having presided over the collapse of the British banking system and over bonuses that were billions of pounds higher in total than those being paid today, and they have no ideas about how to reform the banking system. The Chancellor who introduced the bank bonus tax to which the hon. Gentleman refers said that it would not work again. We have introduced a permanent bank levy which, I think, the Labour party continues to oppose.
Amber Rudd (Hastings and Rye) (Con)
T4. The economy of Hastings received a tremendous boost today when the Heritage Lottery Fund announced that it would support our bid for £8.7 million for the pier renewal but, sadly, seaside towns in general and we in Hastings suffer from bad transport links, high public sector employment and low wages. Will the Chancellor consider what can be done to support seaside towns under this Government?
Mr Osborne
I join my hon. Friend in celebrating the good news about the successful bid for the renovation of the pier. She is right to point out that there are specific issues associated with seaside towns across the country which are well known to the Members who represent them and well known also to the Government. We intend to come forward with proposals later this year to help those seaside towns.
Ian Mearns (Gateshead) (Lab)
T8. Household debt has been revised upwards by £300 billion, and my constituency, Gateshead, has one of the highest rates of personal insolvency in the country. What is the point of cutting the national debt, only to transfer the burden on to the personal finances of ordinary families? It is blindingly obvious that we are not all in this together—some of us are in this up to our necks.
Mr Osborne
I am afraid the hon. Gentleman misses two important facts. First, the most recent figures—within the past week—for personal insolvencies showed a welcome fall. Secondly, household debt reached a record level under the previous Government. As I said in response to the first question today, we are introducing a Financial Policy Committee to assess overall levels of private debt, including business debt, in the economy so that we do not allow dangerous unsustainable levels to grow. That will now be a judgment for the Financial Policy Committee and it will have the tools to do something about it.
Stephen Mosley (City of Chester) (Con)
T5. Can my right hon. Friend update the House on what discussions he has had about the likelihood of a further bail-out of the Greek economy and whether he has made any assessment of the UK’s likely contribution?
Mr Osborne
The answer is that we have not had discussions about a second Greek bail-out and we have not been asked to make a contribution. The question for Greece is whether it lives up to the commitments that it has entered into. There is currently an International Monetary Fund, European Commission and European Central Bank team in Athens assessing Greece’s progress against the plan that it committed to, and we should await the results of that assessment.
Stephen Timms (East Ham) (Lab)
A year ago the Office for Budget Responsibility was projecting growth in the UK economy of 2.6% this year. Now the forecast is down to 1.7%. What has gone wrong?
Mr Osborne
As I am sure the right hon. Gentleman knows, there are very significant global headwinds of the high oil—[Interruption.] I know that Labour Members live in a complete vacuum but, according to the most recent growth figures for this first quarter, the British economy posted a higher quarterly growth rate than the United States of America. Of course we have the high oil price and the ongoing problem in the eurozone, but what is required above all is a credible deficit reduction plan that keeps Britain out of the financial danger zone.
Oliver Colvile (Plymouth, Sutton and Devonport) (Con)
T6. Given that Plymouth is a low-skills, low- wage economy with 38% of the work force dependent on the public sector, can my right hon. Friend give me the timetable for the creation of enterprise zones? What role could green deal manufacturing play within that?
Mr Osborne
I know that my hon. Friend is a trenchant supporter of his constituency and a promoter of green industry there. He has raised the issue with me on a number of occasions. I know that Plymouth has put forward a bid for the second round of enterprise zones. An announcement will be made later this summer, in July, and I am afraid he will just have to wait until then, but as I say, he has certainly brought to my attention the potential for the green economy in the city that he represents.
Stewart Hosie (Dundee East) (SNP)
May I offer my condolences to the friends, family and colleagues of David Cairns? He was a man who always argued his corner with intelligence and humour, and carried the rare gift of being liked and respected across the Scottish political divide. We will all miss him.
I am sure the House is pleased that both Santander and RBS have access to European Investment Bank funds to issue discounted loans into the economy—£150 million in the case of Santander, and a third tranche of £300 million in the case of RBS. Can the Chancellor confirm that this is new, additional money, or will it be rolled into the gross lending figures already agreed?
Mr Osborne
Let me write to the hon. Gentleman on the specific issue of the Santander loan and the application to the European funds. I take this opportunity to congratulate the Scottish National party on its victory in the Scottish parliamentary elections and say that we respect their outcome. As he knows, my right hon. Friend the Prime Minister contacted the Scottish First Minister to congratulate him personally. I hope that we can work together in the next few months and years to deliver what we both want to see, which is jobs and prosperity in Scotland.
Joseph Johnson (Orpington) (Con)
T9. US Treasury Secretary, Timothy Geithner, recently praised the Government’s fiscal reduction plans, saying that the Chancellor had locked the coalition Government into a set of reforms that were “very good”. What lessons has he drawn from this powerful endorsement?
Mr Osborne
Of course it is welcome to have the support of the US Treasury Secretary. It is interesting that we have been urged for some months by Labour to follow the US example. The Obama Administration, in the speech the President gave at George Washington university, set out a deficit reduction plan—it is not yet legislated for in Congress—that goes faster and deeper than the one we are promoting here in the UK. I suspect that we will not now hear the argument that we have heard for the past few months from the Labour party.
Alison McGovern (Wirral South) (Lab)
May I associate myself with the remarks about our much-missed colleague David Cairns that you, Mr Speaker, and others have made?
Recent commentators have suggested that it is possible that the Government will not meet their target to balance the cyclically adjusted current budget by 2015-16, by the end of this Parliament. If it becomes clear that Tory cuts are not working to reduce the deficit, at what stage will the Chancellor change course?
Mr Osborne
I have just been told by my hon. Friend the Member for Chelsea and Fulham (Greg Hands) something about the hon. Lady that I did not know: she is the Parliamentary Private Secretary to the previous leader of the Labour party. It is presumably not a job with onerous responsibilities, but it sounds as though he may have written that question for her. The Office for Budget Responsibility is the independent body that assesses our ability to hit the fiscal mandate. The reason we set it up was because under the stewardship of the person to whom she is PPS all credibility for Treasury figures was lost.
Mrs Helen Grant (Maidstone and The Weald) (Con)
Only 14% of small businesses are owned by women. What action will the Chancellor take to improve this figure?
Mr Osborne
It is incredibly important to try to increase the number of women who set up their own businesses. The Government have undertaken a number of specific initiatives, driven from No. 10 Downing street, and I will ensure that my hon. Friend is closely involved in them.
Mr Chuka Umunna (Streatham) (Lab)
Yesterday, in a welcome move, the British banking industry abandoned its legal fight with the Financial Services Authority over the mis-selling of payment protection insurance. Does the Chancellor agree that this scandal, as a result of which millions of people in this country were fleeced by the banking sector on a large scale, was an absolute disgrace and that the banks involved should settle the claims that arise, immediately and without further delay?
The Financial Secretary to the Treasury (Mr Mark Hoban)
The hon. Gentleman is right to highlight the mis-selling of PPI. This happened under the regulatory regime that his colleagues set up when they were in government. One aspect of the reforms that we are introducing by setting up the financial conduct authority is to give the regulator more powers to intervene earlier to prevent that sort of scandal happening again.
Duncan Hames (Chippenham) (LD)
Given the Chancellor’s concern for the use of taxpayers’ money, will he really allow members of GP consortia boards to be paid as much as £30,000 a year for just one day’s work a week?
Danny Alexander
As I said in response to my hon. Friend the Member for Southport (John Pugh), one of the things we need to do as part of the listening exercise is hear the concerns about how consortia will work and ensure that the financial regime that is in place is sustainable and puts the maximum amount of resource to the front line.
Bill Esterson (Sefton Central) (Lab)
The Chancellor did not answer the question from my hon. Friend the Member for Gedling (Vernon Coaker), so I would like to give the right hon. Gentleman another chance. Will he repeat the bank bonus tax that was so successful last year and use that money to build the extra affordable homes, to rent and to buy, which are desperately needed by people in this country and by the construction industry, and which would be good for the economy?
Mr Osborne
As I was explaining to the hon. Member for Gedling (Vernon Coaker), the bank bonus tax was introduced by the previous Chancellor of the Exchequer, and it was his judgment that it would not work for another year because the banks would find a way of avoiding it. That is why we introduced a permanent bank levy not just for one year, but for each and every year. In any one year it raises more than the bank bonus tax net, so that is what we have done. It is pretty striking: Labour Members had 13 years in government to introduce a permanent bank tax; they did not do so, and they cannot carp from the sidelines now.
Charlie Elphicke (Dover) (Con)
If our gold had not been sold off some years ago, how much would it be worth today?
Mr Osborne
The gold was sold, I think on the advice of the current shadow Chancellor, at $3.5 billion—a princely sum, except that it would now be worth $19 billion.