House of Commons

Wednesday 22nd June 2011 Commons Chamber

Wednesday 22 June 2011

The House met at half-past Eleven o’clock

Prayers

Wednesday 22nd June 2011 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Wednesday 22nd June 2011 Commons Chamber

The Secretary of State was asked—

[Graeme Morrice (Livingston) (Lab)]

1. What recent discussions he has had with the Chancellor of the Exchequer on the effects on Scotland of the rate of inflation.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

I have regular discussions with my right hon. Friend the Chancellor of the Exchequer on a wide range of issues, including the state of the economy. Inflation is being pushed higher by rising global commodity prices. This is a global problem that requires global solutions.

[Graeme Morrice]

I thank the Minister for his answer. It is now clear that the Government’s VAT hike in January helped to drive up inflation, which is squeezing family incomes, hitting consumer spending and holding back strong growth. Will the Minister now speak up for families and businesses in Scotland and urge the Chancellor to reverse the VAT rise to help to boost consumer confidence and bring down inflation?

[David Mundell]

As the hon. Gentleman knows, the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), said that he would have done exactly the same in relation to VAT, and a cut in VAT would do nothing to reverse global commodity price rises. It would, however, do a lot to reverse the Government’s hard-won credibility for getting the deficit down. Of course, credibility on economic matters does not seem to be important to the Opposition.

[Mr Mike Weir (Angus) (SNP)]

In answer to my written parliamentary question, the Office for National Statistics confirms that, in four of the past five years, the rise in domestic gas prices far outstripped the rate of inflation—this is before the latest rise—while family incomes are at best static. What steps can the Government take to protect already hard-pressed families from these escalating costs in the coming winter?

[David Mundell]

The Government are concerned about the rise in fuel prices, especially gas prices. One of the measures we have taken is to ensure that the poorest families have protection in relation to their fuel costs.

[Ann McKechin (Glasgow North) (Lab)]

I am sure that the Minister will welcome the inquiry Ofgem announced today into Scottish Power’s price rise and the way in which it announced the change to consumers. Does he agree that it is completely inappropriate for energy companies to add to the increased cost of living in Scotland by deciding to hike domestic bills? What personally is he doing about this?

[David Mundell]

There is widespread concern in Scotland about these actions, especially about the recent fuel cost rises announced by Scottish Power. As the hon. Lady knows from previous questions, the Secretary of State and I have raised these issues with the energy companies.

[Ann McKechin]

Although it is very nice to meet up, I think that Scottish consumers are looking for action as they face a rise of an average of £198 a year in their bills while wages are being frozen, prices are rising at well above the target inflation rate and borrowing is now £46 billion higher than expected because of the decrease in economic activity. Does the Minister agree that it is now time for a plan B, and for the temporary cut in VAT that Labour has called for?

[David Mundell]

It will not surprise the hon. Lady when I say most certainly not. In setting out those woes, she has not acknowledged her part as a Minister, and that of her party, in bringing this country to the verge of bankruptcy, or the need to take the tough action that this Government have taken. She also knows that the shadow Chancellor is in a majority of one in setting out his proposals—

[Mr Speaker]

I thank the Minister, but we must move on.

[John Stevenson (Carlisle) (Con)]

2. What recent assessment he has made of the benefits to Scotland of the Union; and if he will make a statement.

[Graham Evans (Weaver Vale) (Con)]

11. What recent assessment he has made of the benefits to Scotland of the Union; and if he will make a statement.

[Mr Philip Hollobone (Kettering) (Con)]

13. What recent assessment he has made of the benefits to Scotland of the Union; and if he will make a statement.

[The Secretary of State for Scotland (Michael Moore)]

The Government firmly believe that Scotland benefits from being part of the United Kingdom, and that the United Kingdom benefits from having Scotland within it.

[John Stevenson]

I agree wholeheartedly that Scotland benefits from being part of the Union. I represent a seat that is just over the border in England. Does the Minister agree that England benefits from being part of the Union, and that it is in the interests of all of us that Scotland and England remain part of the United Kingdom?

[Michael Moore]

I wholeheartedly endorse what my hon. Friend has just said.

[Graham Evans]

The Union is of great benefit to all the United Kingdom, but my constituents still want fairness between Scotland and England. Bearing that in mind, what plans does the Secretary of State have to review the Barnett formula?

[Michael Moore]

My hon. Friend will recall from last night’s debate on the Scotland Bill that we recognise that this is an issue across the United Kingdom. However, we are committed to reviewing it when we have resolved the current financial problems that we inherited from the Labour party.

[Mr Hollobone]

Would not a separate Scotland simply not have been able to survive the global banking crisis on its own, and if it had been separate would it not now be heading the way of Ireland and Greece?

[Michael Moore]

The hon. Gentleman makes an important point because the scale of the financial disaster that befell the Royal Bank of Scotland and Halifax Bank of Scotland would have placed a crippling burden on Scotland. By being part of the United Kingdom we shared the risks; we are now sharing the recovery, which is the right way forward.

[Angus Robertson (Moray) (SNP)]

Does the Secretary of State agree with me that while the future of the constitution is hotly debated, there is no place for leading Unionists to describe the supporters of Scottish independence as neo-fascists?

[Michael Moore]

I think it is incumbent on us all to ensure that we use moderate and appropriate language in this debate.

[Angus Robertson]

In view of what the Secretary of State has just said, is it of benefit to the Union and Scotland that the Scottish Affairs Committee is chaired by someone who last night described Scotland’s majority party of government as neo-fascist?

[Michael Moore]

The hon. Gentleman should take up the issue with the hon. Gentleman himself. In this House, we do not challenge one another’s honour or otherwise. It is a matter for the hon. Gentleman to raise as he will. [Interruption.] I have made my position clear—it is important to be careful about our language and to debate the substance of the issues.

[Harriett Baldwin (West Worcestershire) (Con)]

3. What recent discussions he has had with the Deputy Prime Minister on establishing a commission on the West Lothian question.

[Mr Andrew Turner (Isle of Wight) (Con)]

5. What recent discussions he has had with the Deputy Prime Minister on establishing a commission on the West Lothian question. My right hon. Friend the Secretary of State and I have regular discussions with my right hon. Friend the Deputy Prime Minister on a range of issues. The Government remain committed to establishing a commission later this year to consider the West Lothian question. Does the Minister agree that timing is of the essence here? This is a difficult question and the commission will need to consider its recommendations, after which this House will need time to consider the outcome. It would be much better if this were done at a time of constitutional peace rather than at a time of constitutional crisis. I respect my hon. Friend’s passion on this subject. She, of course, has a Bill before the House that touches on these issues. I understand that it will be heard on the first Friday of the September sitting, which will give the whole House an opportunity to debate the issues. I will convey my hon. Friend’s call for urgency to the Deputy Prime Minister.

[Mr Turner]

Does my hon. Friend agree that the last thing we want, having passed the Scotland Bill and with new powers devolved to Wales, is another expensive parliamentary assembly or talking shop in England, as the British Parliament here can cope with English matters, but decided by English MPs?

[David Mundell]

I agree with my hon. Friend. I have always expressed the view that there is no desire for an English Parliament—and the same two people have always written to me afterwards to say that I am wrong.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does the Minister agree that this issue is much more complex than Conservative Members sometimes allow? A good example arose in the debates on university tuition fees before Christmas. That might have been regarded as a purely English issue, but it had tremendous consequences for Scotland.

[David Mundell]

I acknowledge the hon. Lady’s point. This is a complex issue, which is why the coalition Government are committed to establishing a commission to look at it. I hope that it will be able to take evidence from people such as the hon. Lady.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

I am sure the Minister is right when he says that there is no great demand for an English Parliament. Does he not accept that the proposal to have two classes of MPs in this House, which is coming from many supporters of the proposals of the hon. Member for West Worcestershire (Harriett Baldwin), effectively amounts to setting up an English Parliament in this building? Is that not inevitably the road that his Government will go down if they accept having two classes of MPs in this House?

[David Mundell]

I do not acknowledge the hon. Gentleman’s point because the devolution settlement means that different MPs in this House already have different responsibilities, depending on whether they are from Scotland, England, Northern Ireland or Wales. The Government are committed to look at the West Lothian question, which is a substantive issue that the previous Government ignored, and will set up a commission later this year.

[Alun Cairns (Vale of Glamorgan) (Con)]

4. What steps the Government plan to take to ensure a stable economic environment for businesses in Scotland.

[David Rutley (Macclesfield) (Con)]

12. What steps the Government plan to take to ensure a stable economic environment for businesses in Scotland.

[The Secretary of State for Scotland (Michael Moore)]

“The Plan for Growth” published in the March Budget set out a programme of reforms to create the right conditions for private sector-led growth. This month the Government launched the next stage of the growth review with the central purpose of creating the right conditions for businesses to be established, to invest, to grow and to create jobs.

[Alun Cairns]

At a time when the Treasury is bringing about stability to the banking sector and banking regulation, does my right hon. Friend agree that the SNP’s drive for further independence in Scotland could destabilise Scotland’s financial markets?

[Michael Moore]

There is no question but that uncertainty over the nature, number and timing of the questions that will be asked about independence will be no good for the Scottish economy.

[David Rutley]

In Scotland and across the United Kingdom, small and medium-sized companies are vital engines of growth and job creation, for which improving access to funding is a vital priority. Will my right hon. Friend tell the House what steps he is taking to address the challenge and whether those steps include working with organisations such as the Federation of Small Businesses in Scotland?

[Michael Moore]

My right hon. Friend is absolutely right to highlight the critical issue of access to finance. Unless we get enough lending to small and medium-sized businesses, among others, we will not get the economy growing again. That is why creating the conditions in which businesses start, grow and invest appropriately is central to “The Plan for Growth”, and it is why Project Merlin sets out very tough targets for lending to businesses across the UK.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

Does the Secretary of State agree that businesses’ access to fast broadband is also essential for business growth? Does he share my concern that many constituencies in Scotland, such as mine, do not have such access? What discussions has he had with the Scottish Government regarding that?

[Michael Moore]

That was one of the key issues that the hon. Lady wanted to raise when I met her a week or so ago to discuss the economy in Ayrshire. As a Government, we are committed to the implementation of superfast broadband across the United Kingdom, and we are in discussions with the Scottish Government on how they should go about that in Scotland. Such provision is vital in Ayrshire, the borders and all parts of the country. I am happy to work with her and others, including the Scottish Government, to ensure that we achieve it.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

Has the Secretary of State had an opportunity to read the Government expenditure and revenue study published this morning, which shows that the Scottish economy is outperforming that of the UK and carrying a lower deficit? Will he take the opportunity to congratulate the Scottish Government on their efforts to promote stability through economic growth and recovery?

[Michael Moore]

That is a typically interesting interpretation of the figures in this morning’s report, which show that, on pretty well every measure, Scotland is running at a deficit. That highlights the volatility and difficulties associated with the different measures. It is vital that we get Scotland’s economy back on the right footing. That is why, as a Government, we are cutting corporation tax, keeping interest rates low and reducing the burden on national insurance. I am happy to work with the Scottish Government, who have fantastic powers at their disposal to ensure that the economy grows. We need to work in partnership.

[Mr Alan Reid (Argyll and Bute) (LD)]

6. What recent discussions he has had with the Secretary of State for Transport on the Clyde coastguard station in Greenock.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

I have regular discussions with my right hon. Friend the Secretary of State for Transport on a range of issues of mutual interest, including the future of Scottish coastguard stations.

[Mr Reid]

May I pay tribute to David Cairns, who had been campaigning to save the Clyde coastguard station before his tragic early death? The waters around Argyll and Bute, with all its islands, peninsulas and sea lochs, present a unique challenge to seafarers. If the Clyde coastguard station is closed, however, all the valuable local knowledge of the area held by the people who work there will be lost. Will the Minister draw that to the attention of the Secretary of State for Transport and urge him to keep Clyde coastguard station open?

[David Mundell]

It is appropriate that there is mention of David Cairns, who gave distinguished service as a Scotland Office Minister, at this first Scottish questions since his tragic death. I assure my hon. Friend that his points will have been heard, as they were in the recent Westminster Hall debate in which he took part. The Department for Transport will make no announcement on the future of coastguard stations until the Transport Committee has reported.

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

I associate myself with the comments that have been made about David Cairns.

As the Minister will know, concern is sometimes expressed in Scotland about what he actually does. In a spirit of co-operation, may I offer him an opportunity to allay that concern by expressing, in clear and unambiguous terms, his opposition to the disastrous plans of the Department for Transport to close the coastguard centre in Greenock? Will he stand up for Scotland in that regard?

[David Mundell]

As the hon. Gentleman knows, the Scotland Office always makes the case for Scotland, and for facilities and resources in Scotland. I welcome the approach of my colleagues in the Department for Transport, who say that they will listen to all representations following their consultation and await the report of the Select Committee on Transport.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Clyde coastguard is important to the west coast of Scotland. As one who represents a west coast constituency, I believe that we have already suffered from the loss of Oban coastguard a decade or so ago. Does the Minister agree that—as the doughty fighter Anne McLaughlin is always reminding me—we need Stornoway, Shetland and Clyde coastguards on the west coast as a maritime insurance policy?

[David Mundell]

I would characterise the hon. Gentleman himself as a doughty fighter for the station in Stornoway. He has made significant representations, and they have been heard. My colleagues in the Department for Transport will announce their conclusion after the Select Committee has delivered its report.

[Ian Lucas (Wrexham) (Lab)]

7. What recent discussions he has had with the Secretary of State for Business, Innovation and Skills about the transfer to the Scottish Parliament of the power to set rates of corporation tax.

[The Secretary of State for Scotland (Michael Moore)]

I have regular discussions with Cabinet colleagues on a wide range of issues. The Scottish Government included the devolution of corporation tax among its requests for amendments to the Scotland Bill. To date, the Government have not received any detailed proposals from the Scottish Government.

[Ian Lucas]

On the same day the Business Secretary said that the logic of devolving corporation tax was irresistible, he subsequently said that he fully supported the Government’s position in opposing it. Is not the Business Secretary a bit of an embarrassment both to Scottish business and to the Government, and is it not about time he started speaking to the Secretary of State for Scotland about important matters such as corporation tax?

[Michael Moore]

I assure the hon. Gentleman that the Business Secretary and I are at one on the issue.

[Anne Marie Morris (Newton Abbot) (Con)]

8. What recent discussions his Department has had with representatives of the Scottish agriculture industry.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

My right hon. Friend the Secretary of State and I regularly discuss a range of devolution issues with the Advocate-General. We regularly discuss devolution issues in relation to the Scotland Bill, which is delivering the Government’s commitment to strengthening the devolution settlement.

[Anne Marie Morris]

No doubt the Minister is acutely aware of the importance of reform of the common agricultural policy to farmers both in Scotland and elsewhere in the United Kingdom. Given the importance of agriculture to the economy, does he agree that it is essential that we secure a deal for our farmers that is fairer and more transparent?

[David Mundell]

rose—

[Mr Speaker]

Order. The Minister’s mellifluous tones diverted me from the fact that the content of his answer did not relate to the question that had been asked. I am sure that he will now talk about agriculture and not about devolution.

[David Mundell]

Thank you, Mr Speaker. I can inform the hon. Member for Newton Abbot (Anne Marie Morris) that my right hon. Friend the Secretary of State for Scotland was in Brussels last week, where he made the very points that she has just made.

[Miss Anne McIntosh (Thirsk and Malton) (Con)]

9. What recent discussions he has had with the Advocate-General on devolution issues.

[David Mundell]

I refer my hon. Friend to my previous answer.

[Miss McIntosh]

As ever, I am grateful to my hon. Friend. Has the Advocate-General yet received an update on the progress made by the expert group set up by the Scottish Government, which is examining the role of the United Kingdom Supreme Court?

[David Mundell]

The Advocate-General wrote to the chair of the Scottish Government expert group, Lord McCluskey, offering a meeting, but has now received a response from the group’s secretariat saying that, owing to their timetable, members of the group have not had time in the first instance to receive submissions or hear evidence. What appears to have happened is that an expert group is set up by the First Minister one week, meets the following week—with no evidence taken in any week—and reports the week after.

[Pete Wishart (Perth and North Perthshire) (SNP)]

That was a most disappointing response. Will the Government start supporting the integrity and independence of Scots law, work constructively with the Scots group chaired by the eminent Lord McCluskey and promise to do nothing to reform the Supreme Court until the group has reported?

[David Mundell]

I should have hoped that the hon. Gentleman, like his colleague, Jim Sillars, the former deputy leader of the Scottish National party, would have sought to disassociate himself from the appalling comments that the First Minister has made about Lord Hope, which Jim Sillars described as “foolish” and “juvenile”. [Interruption.]

[Mr Speaker]

Order. There are far too many private conversations taking place in the Chamber. It is very discourteous to the Member asking the question and to the Minister answering it. I want to hear Sir Menzies Campbell.

[Sir Menzies Campbell (North East Fife) (LD)]

What possible confidence can we have in the findings of a group that is unwilling to meet the Advocate-General, who last year established an inquiry for precisely the same purpose as this group has been established?

[David Mundell]

The right hon. and learned Gentleman makes an extremely good point. As I said in my initial response, it seems incredible that a group set up to consider this very complicated issue is not going to take evidence or receive submissions. I am pleased that the Advocate-General has in any event made his information available to the group, so that might give us some confidence in the report it produces.

[Mark Menzies (Fylde) (Con)]

10. What steps he is taking to promote Scotland as a destination for international inward investment.

[The Secretary of State for Scotland (Michael Moore)]

The trade White Paper sets out a strategy for creating opportunities and providing the conditions for private sector growth through trade and international inward investment. My hon. Friend the Minister for Trade and Investment will visit Scotland in July.

[Mark Menzies]

Does the Secretary of State share my fear that the Scottish Government’s plans for a referendum on separation will undermine this Government’s efforts to create jobs in Scotland?

[Michael Moore]

My hon. Friend is right to highlight what we are focusing on as a Government. “The Plan for Growth” seeks to give us the most competitive tax system in the G20, to ensure we are the best place in Europe to start, grow and finance a business and to bring about further investment and a flexible work force. None of that can be done if we have the uncertainty that the independence referendum casts over the Scottish economy.

[John Thurso (Caithness, Sutherland and Easter Ross) (LD)]

Does my right hon. Friend agree that the Olympics offer a splendid opportunity for promoting inward investment to Scotland? In that regard, is it not tragic that the torch, having visited Land’s End, will fly over John O’Groats?

[Michael Moore]

My hon. Friend makes his point as eloquently as I would expect him to and I am sure that those who are organising the trip will have heard his points.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

14. What assessment he has made of the outcomes of his recent visit to Central Ayrshire.

[The Secretary of State for Scotland (Michael Moore)]

The seminar I hosted in Irvine last month discussed how to tackle the high level of youth unemployment in Ayrshire. The Scotland Office is working with key partners such as Jobcentre Plus to focus resources on the most challenging areas identified at the seminar. We look forward to working with the Scottish Government on this complex issue.

[Mr Donohoe]

I thank the Secretary of State for that answer. One of the areas of major concern identified at the seminar was the high unemployment among those aged between 16 and 18, which seemed to have slipped off the radar. It was the Secretary of State for Work and Pensions, who was present at the meeting, who made that very important point. What is the situation, what assessment has been made by the Secretary of State for Scotland and what is going to be done about that issue?

[Michael Moore]

First, may I thank the hon. Gentleman for his full participation in the seminar? It was the first in a series that we will hold across Scotland to tackle a deep-rooted problem, not just in Ayrshire but elsewhere, that has defied Governments through the ages. He rightly points out that my right hon. Friend was at that seminar; we continue to discuss the serious challenges in relation to youth employment and I will be happy to discuss those further with the hon. Gentleman in due course.

[Katy Clark (North Ayrshire and Arran) (Lab)]

As the Secretary of State knows, Ayrshire has some of the worst rates of unemployment and youth unemployment in Scotland. In 2007, Scotland had the highest levels of employment in Britain, but it now has the lowest levels of employment and the highest levels of unemployment. What more can the Westminster Government do to work with the Scottish Government to take concrete steps to address the problem?

[Michael Moore]

I make two observations to the hon. Lady. First, we need to get the economy into a place from which we can see sustained, strong and balanced growth, which would be a complete contrast to the situation we inherited from her Government. On her second point about working with the Scottish Government, she is right to highlight the serious economic powers that they already have and it is vital, as I said to the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) earlier, that we work together to ensure that we do the best for people across Scotland.

[David Mowat (Warrington South) (Con)]

15. What discussions he has had with members of the Scottish Executive on the funding of the Forth road bridge replacement.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

This issue was raised in discussions between my right hon. Friends the Deputy Prime Minister and the Secretary of State for Scotland and the First Minister on 9 June. As announced by my right hon. Friends the Chancellor and the Secretary of State on 13 June, the Government are bringing forward to 2011 the power for Scottish Ministers to make prepayments, which will allow work on the Forth replacement crossing to begin.

[David Mowat]

I thank the Minister for that reply. He will be aware that two major bridge schemes are about to take place in the UK: the Forth road bridge, to be funded by the Treasury and by the means that he has just given us, and the Mersey gateway in Cheshire, to be funded substantially by tolls. How can the Government justify that difference in the same country?

[David Mundell]

The justification is devolution; it is a decision of the Scottish Government to proceed with the Forth replacement crossing on the basis that there will be no tolls on it.

The Prime Minister was asked—

[Kerry McCarthy (Bristol East) (Lab)]

Q1. If he will list his official engagements for Wednesday 22 June.

Happy anniversary, Mr Speaker.

[The Prime Minister (Mr David Cameron)]

I was unaware of that event, Mr Speaker, but I join the hon. Lady in wishing you a very happy anniversary.

I am sure that the whole House will wish to join me in paying tribute to Craftsman Andrew Found from the Royal Electrical and Mechanical Engineers, Corporal Lloyd Newell from the Parachute Regiment and Private Gareth Bellingham from 3rd Battalion the Mercian Regiment. They were talented, brave and dedicated soldiers who have made the ultimate sacrifice overseas for the safety of British people at home. We send out our deepest condolences to their families, their friends and their colleagues.

This morning, I had meetings with ministerial colleagues and others, and in addition to my duties in the House, I shall have further such meetings later today.

[Kerry McCarthy]

I thank the Prime Minister for that response, and may I associate myself and my constituents with the moving tributes that he has just paid.

A year ago today, the Chancellor stood up in the House to deliver his first Budget. Given that on the Government’s own assessment, their efforts will have a statistically insignificant impact on child poverty, may I recommend that the Prime Minister watch the BBC documentary, “Poor Kids” to find out how the other half lives? Does he regret allowing his Chancellor to take money away from families with children, rather than from the bankers who caused the financial crisis in the first place?

[The Prime Minister]

I will certainly look at the programme that the hon. Lady mentions; but even in a difficult time, this Government put more money into child tax credits for the poorest families. We have frozen the council tax, and we have actually taken steps to help working families. Neither that Budget nor the subsequent Budget actually raised child poverty, because of the steps that we took. We inherited a complete mess from the Labour party, but we are dealing with it in a way that protects families.

[Angie Bray (Ealing Central and Acton) (Con)]

Can the Prime Minister confirm that this country will not contribute a penny towards the Greek bail-out, other than what we contribute to the International Monetary Fund?

[The Prime Minister]

My hon. Friend is right. We are senior members of the IMF. We sit on the IMF board. We obviously have responsibilities as members of the IMF, but what I am clear about is that we were not involved in the first Greek bail-out; we are not members of the eurozone; and we are not going to become members of the eurozone as long as I am standing here. I do not believe that the European financial mechanism should be used for Greece. We have made it very clear within Europe that we do not think that that is appropriate, and I do not think that that should happen.

[Edward Miliband (Doncaster North) (Lab)]

May I join the Prime Minister in paying tribute to Craftsman Andrew Found from the Royal Electrical and Mechanical Engineers, Corporal Lloyd Newell from the Parachute Regiment and Private Gareth Bellingham from 3rd Battalion the Mercian Regiment? They all served their country with dedication and bravery, and our hearts go out to their families and friends.

Armed Forces day is coming up this Saturday, and that is an opportunity to remind us all of the service that is provided by our armed forces in Afghanistan, Libya and all around the world. It is a moment to recognise the service that they provide with honour and courage for our country.

We support the mission in Libya, but in the past week, both the First Sea Lord and the Commander-in-Chief, Air Command have raised concerns over the prospect of an extended campaign. Will the Prime Minister take this opportunity to assure the House that sufficient resources are in place to maintain Britain’s part in the mission at the current rate of engagement?

[The Prime Minister]

I join the right hon. Gentleman in paying tribute to our armed forces and particularly in looking forward to Armed Forces day on Saturday, when we will be celebrating the contribution they make to our national life and the enormous amount they do to keep us safe.

The mission in Libya, similar to the mission in Afghanistan, is funded out of the reserve, so it does not put additional pressures on the defence budget. I have sought and received assurances from the Chief of the Defence Staff, General Sir David Richards, that we are capable of keeping up this operation for as long as it takes. That is vital. I would argue that the pressure is building on Gaddafi. Time is on our side, not on Gaddafi’s side. When we look at what is happening in Libya, where we see a strengthening of the revolt in the west of Libya, more people deserting Gaddafi’s regime, the growing unpopularity of his regime and our coalition holding strong, I think time is on our side, the pressure is growing, and I believe we will take it to a satisfactory conclusion.

[Edward Miliband]

I am absolutely with the Prime Minister that we should keep up the pressure on the Libyan regime. As he knows, we provide our full support for the mission, but do not the concerns that have been expressed by members of our armed forces point to something very important—the need to look again at the strategic defence and security review, precisely to make sure that we have the right capability and the right focus? The Foreign Secretary described the Arab spring as a more important event than 9/11, but the national security strategy published last year does not mention Libya, Egypt or Tunisia. Is it not right, in the light of the changes we have seen, to look again at the strategic defence and security review to make sure that we can sustain the conflict in Libya?

[The Prime Minister]

I am grateful for the question, because that is an important point. One of the reasons for having a National Security Council that sits weekly is all the time to ask whether we have the right resources and the right strategy. We have had a review of the national security and defence review over the past year, but that strategic defence review put in place mechanisms to take account of the fact that we may well be fighting two conflicts at the same time. It also established the necessity of having very flexible armed forces for exactly the sort of operations that we are fighting and dealing with in Libya. Having not had one for 10 years, it seems strange to want to have two strategic defence reviews within one year. We have the right flexibilities in our armed forces and they are performing magnificently in Libya. If anything, I would like to speed up the implementation of the strategic defence review because so much of the new equipment that we are looking to have—drones and so on—would be more helpful if we had it right now. So, far from being the wrong strategic posture, it is right and it is good that we are putting it in place.

[Edward Miliband]

I think it will come as news to the wider defence and security community that there has been a review of the original strategic defence and security review. If indeed there has been a review since the Arab spring took place, why does not the Prime Minister publish the results of that review? Let us have a consultation with the experts who know about these issues. As he will see, there is clear concern across our military about some of the issues. Finally, let me say to the Prime Minister in all sincerity that when our military chiefs raise legitimate concerns about the conduct of our operations, surely, “You do the fighting, I’ll do the talking” is not the right thing to say. In retrospect, was that not very crass and high-handed?

[The Prime Minister]

I have huge respect for the people who run our armed services. They do an incredibly good job. They are highly professional people and they are involved in the National Security Council. They were involved in drawing up the strategic defence review. The only point that I have tried to make in recent days is that when we are at war, as we are in both Afghanistan and Libya, it is extremely important, whether one is a political leader or a military leader, to think very carefully about what one is about to say.

[John Thurso (Caithness, Sutherland and Easter Ross) (LD)]

Is the Prime Minister aware of the decision, abruptly made, to close the passport office in Wick, which has obliged a six-year-old boy to make a 300 mile round trip for an interview and another constituent to travel to Newcastle? Is that acceptable?

[The Prime Minister]

Obviously, I will look closely at the point my hon. Friend raises, but in the modern age we have all sorts of ways of carrying out interviews that do not necessarily involve people having to travel to a passport office. What matters is having an efficient service so that people can get the documentation they need so they can go on the holiday they want.

[Mrs Mary Glindon (North Tyneside) (Lab)]

Q2. Given the number of U-turns the Prime Minister has made, including on sentencing, NHS reform, the forestry sell-off and school sports, it is a wonder that he knows which way he is facing, but will he now have the front to ensure that relief measures are put in place for those women who are hardest hit—[Interruption.]

[The Prime Minister]

I am afraid I did not hear the entire question, but that is the trouble with—[Interruption.]

[Mr Speaker]

Order. It is a reminder of the importance of Government Back Benchers keeping calm and quiet, not least so that the Prime Minister can hear what is being said. How helpful that would be!

[The Prime Minister]

It would probably also help if Members did not read out the Whips’ bit at the beginning of their question, so that we could hear the second part of the question, which in this case was, I think, about the important issue of women and pensions. I do think it is right to equalise the pension ages of men and women at 65, and that is going ahead, and I also think it is important to raise the pension age to 66, because the fact is that people in our country are living longer. That is a good thing, but we have to make sure we can pay for good and decent pensions for the future. The alternative is that we stick our head in the sand and end up either cutting pensions or building up debts for our children, which, frankly, would be irresponsible. This Government are taking difficult decisions, but they are the right ones.

[Iain Stewart (Milton Keynes South) (Con)]

Does the Prime Minister agree that there is still too much homophobia in sport, especially football, and that the event he is hosting today in Downing street will go some way towards tackling that prejudice?

[The Prime Minister]

I completely agree, and I am delighted to be hosting a party for Britain’s lesbian, gay and transgender community at No. 10 Downing street today. That there are so few out players in all sports is an issue. I applaud those who have come out and will be attending my party tonight, and I hope that that will encourage schoolchildren to recognise that homophobic bullying is completely unacceptable in our society today.

[Jessica Morden (Newport East) (Lab)]

Q3. If the Prime Minister is serious about tackling the issue of runaway fathers, as he said last week, why is he making it harder for single mothers to get maintenance payments, by charging them to use the Child Support Agency?

[The Prime Minister]

We are going to carry on funding a child support agency mechanism—it is right that we do—but it is not wrong to ask people to make a contribution to that. Taxpayers are currently putting in a huge amount of money, and they will carry on doing so, but to ask the people concerned to pay towards the costs does not reduce the impact of what I said last week at all. People walking away from their responsibilities and not funding their children should not be allowed to happen in Britain today.

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

Q4. Next year will be the centenary of the death of Captain Robert Falcon Scott of the Antarctic. Does my right hon. Friend recognise that this brave historic son of Plymouth left a significant scientific legacy that is still helping to shape the world’s environmental agenda today?

[The Prime Minister]

I thank my hon. Friend for raising that issue. That centenary is important, and I am very pleased that so much is going on across the country to celebrate it, especially in his home city of Plymouth. It is not just the scientific discoveries that are important; so too is the inspirational figure—the adventurer, the explorer—and Captain Scott’s incredible sense of duty and adventure. That is what inspires young people today.

[Edward Miliband]

The Prime Minister has been forced to abandon his original sentencing plans. Will he now change his mind on the proposal to prevent police from holding the DNA of those arrested for, but not charged with, rape?

[The Prime Minister]

We inherited an unacceptable situation, with a DNA database that had grown out of control, and without proper rights for people. We put in place a better system. There is always room to see whether it can be further improved, but we have taken a big step forward from the mess we were left by the last Government.

[Edward Miliband]

It is a bit late to be looking at the proposal; it is in the House of Commons and about to have its Report stage. Let me explain to the Prime Minister his own policy. Around 5,000 people each year are arrested on suspicion of rape but not charged—[Interruption.] I know he wants some help from the Home Secretary. In certain cases those individuals have gone on to commit further offences and been convicted as a result of their DNA being held on the national database, but his proposal is that the DNA of those arrested but not charged will be disposed of straight away. I ask him again, why is it right to discard the DNA of those arrested but not charged with rape?

[The Prime Minister]

I know that there is some concern—[Interruption.]

[Mr Speaker]

Order. The answer of the Prime Minister will be heard. I remind the House that the more noise there is, the greater the difficulty in getting down the Order Paper.

[The Prime Minister]

I understand that there is some worry that in this Government we actually talk to each other. That is clearly not the case—[Interruption.] The shadow Chancellor has raised this issue, but it is perfectly clear that he and the leader of the Labour party do not speak to each other at all. I have the proof, because this week the shadow Chancellor made a huge announcement on a massive VAT cut, and yet it was only—[Interruption.]

[Mr Speaker]

Let us focus on an answer to the question, or we will move on to the next question. I call Mr Ed Miliband.

[Edward Miliband]

Let me give this lesson to the Prime Minister: it would be better to talk to his colleagues before they put forward a policy, not after. Instead of listening to the Home Secretary, why does he not listen to Angie Conroy from Rape Crisis? She says:

“with the reporting of rapes on the increase and conviction rates still shockingly low, the evidence this database provides is vital. The more of this data we hold, the more chance we have of catching rapists.”

She goes on to say:

“This really is a no brainer.”

Is this not another policy on crime that is careless, not thought through and out of touch? Why does he not think again?

[The Prime Minister]

First, if the right hon. Gentleman actually understood the policy, he would know that the police are allowed to apply to keep DNA on the computer, which is not something he mentioned. What we tend to find with his questions is that he comes up with some idea, gets it completely wrong in the House of Commons and we all find out afterwards that he has given us a partial picture. That is what his questions are all about. It is not surprising that he does not want to talk—[Interruption.]

[Mr Speaker]

Order. The answer of the Prime Minister must be heard.

[The Prime Minister]

I am not surprised that he does not want to talk about the issues his party has put forward this week, because I do not suppose he knew about them.

[Several hon. Members]

rose—

[Mr Speaker]

Order. The House needs to simmer down and take whatever tablets are necessary.

[Mr Marcus Jones (Nuneaton) (Con)]

As a parent, I am appalled that the Labour party advocates burdening our children with ever more unsolicited debts, which it is putting forward with its reckless raft of unfunded tax cuts and spending commitments, of which the VAT cut is the latest—[Interruption.]

[Mr Speaker]

Order. The hon. Gentleman will now resume his seat. I call Valerie Vaz.

[Valerie Vaz (Walsall South) (Lab)]

Q5. There are 400 avoidable deaths from epilepsy and related conditions each year. My ten-minute rule Bill asks for two things: an immediate referral to a tertiary specialist and; in education, support for children, with an assessment and additional support so that they can fulfil their potential. Will the Prime Minister meet me, the Joint Epilepsy Council and Professor Helen Cross to see how we can progress those provisions, which will save not only costs, but more importantly, lives?

[The Prime Minister]

I would be delighted to meet the hon. Lady and Helen Cross, whom I know well. She works at Great Ormond Street hospital and is an absolutely brilliant clinician. I am keen to improve the support that we give to people with epilepsy. Obviously, one of the steps that we are taking is to put in place more personal budgets and more single assessments, which I think will help with epilepsy. My understanding is that, although there are many good things in the hon. Lady’s Bill, there is some concern that it could have too much of a medical approach to special educational needs, something that I actually have some sympathy with, but which I know many professionals have concerns about, so perhaps we could talk about that when we meet.

[Stephen Phillips (Sleaford and North Hykeham) (Con)]

Could my right hon. Friend tell the House whether the Government have made an assessment, and if so the results, of what a proposed cut in VAT would do to the British economy at this stage of the cycle?

[The Prime Minister]

My hon. and learned Friend makes an important point, which is that to make an unfunded cut in VAT right now, when the concerns are about debt and deficit, would actually be the height of insanity. What is now clear is that Labour’s plan B stands for bankruptcy.

[Helen Jones (Warrington North) (Lab)]

Q6. The Prime Minister frequently tells us that we are all in this together, so can he explain why banks have been rewarded with a £2 billion tax cut on their obscene bonus pools while parents of disabled children are being penalised with a benefit cut of £1,400 a year? How is that fair?

[The Prime Minister]

I will tell you what this Government have done, and that is to put in place a £2.5 billion bank levy, raising more than Labour’s bonus tax every single year, but I have to say that, if Opposition Members want to see irresponsible people who are earning a lot of money pay proper taxes, perhaps they will explain this: why did they vote against the measures on disguised earnings in the Finance Bill which will raise £800 million from people who are giving loans to themselves to dodge taxes? [Interruption.] Well, I think that that is probably a detail that the leader of the Labour party was not really aware of.

[Andrew George (St Ives) (LD)]

Although of course we should not make a unilateral contribution to the Greek bail-out, does the Prime Minister not agree that we have something which would help regenerate the Greek economy and put right a 200-year wrong—the marbles, which we should give back?

[The Prime Minister]

I am afraid that I do not agree with the hon. Gentleman—[Interruption.]

[Mr Speaker]

Order. I want to hear the Prime Minister’s views on marbles.

[The Prime Minister]

The short answer is that we are not going to lose them.

[Mr William Bain (Glasgow North East) (Lab)]

Q7. Is the Prime Minister aware that 670,000 people, two thirds of whom, according to his Government’s equality impact assessment, have a disability, will lose up to £13 a week because of his changes in housing benefit under-occupancy rules? Is not that a complete betrayal of his Chancellor’s promise not to balance the Budget on the backs of the poor?

[The Prime Minister]

I have looked carefully at that issue, and I know there are concerns, but the point I would make is this: I think it is right that we reform housing benefit, because the costs had got completely out of control under the previous Government, rising to £22 billion; and I think it right that housing benefit reflects the size of a family rather than the size of a house. But, we have actually made an exception for people with carers so that allowance is made for that in housing benefit. So, I think that that is fair, but I have to say to Opposition Members, it is no good saying that you are in favour of welfare reform and cutting the costs of welfare while never being able to find a single part of the Bill to agree with.

[Greg Mulholland (Leeds North West) (LD)]

Q8. Will the Prime Minister join me in welcoming the new report by the all-party paediatric mobility reform group, “My Wheelchair is My Shoes”, showing how, through partnership working, we can deliver the wheelchairs that transform young people’s lives? Will he meet me and Whizz-Kidz ambassadors to discuss how the Government might take that forward?

[The Prime Minister]

Certainly. I know Whizz-Kidz well. It is an excellent charity that does a brilliant job, and I will certainly arrange a meeting for the hon. Gentleman. The point I would make on wheelchairs is that that is exactly where the health reforms, with greater choice and with greater opportunities for GPs and patients to choose, should come in, so that people can get the wheelchair of their choice when they need it, rather than as it is at the moment where you have to take what you are given.

[John Mann (Bassetlaw) (Lab)]

In four of the last five years, there have been no mistakes made in setting school examination papers. Since 16 May this year, there have been 10 such mistakes made. What does the Prime Minister intend to do for those among the 250,000 young people affected who will lose out either on their university of choice or on university completely because of this staggering incompetence?

[The Prime Minister]

The hon. Gentleman is right; this is not an acceptable situation. I have discussed it this morning with the Education Secretary, who in turn has discussed it with Ofqual, which is taking the toughest possible action to root out this failure and to make sure that it does not happen again.

[George Eustice (Camborne and Redruth) (Con)]

Q9. The Prime Minister will be aware that the former Labour Secretary of State, Lord Hutton, has described current proposals on pension reform as the best chance we have to deliver a sustainable system that is fair both to scheme payers and to the taxpayer. Does my right hon. Friend agree that when it comes to these major, long-term issues, we should build the broadest possible consensus; and will he seek the support of Members on both sides of the House for his proposals?

[The Prime Minister]

I thank my hon. Friend for his question and for the way he puts it. The Hutton report is a good report. This is not about attacking or downgrading public sector pensions; it is about a way of making really good public sector pensions affordable into the long term and respecting all the accrued rights that people have. We need to win this argument on the basis of fairness. It is right for the taxpayer to put money into public sector pensions, but we need to know that they are affordable for the long term. The steps that Lord Hutton puts forward are therefore absolutely right. I hope that the Labour party will take a responsible view and recognise that we need to make this change for the long-term good of our country.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

Q15. Eighteen months ago, one of my constituents required knee surgery and was pleased to hear that he had to wait only six weeks. He now needs another operation and has been told that he has to wait 10 months. He is in agony and unable to walk. He is understandably angry and wants to know if this is what the Prime Minister meant when he said that the NHS was safe in his hands.

[The Prime Minister]

If the hon. Lady gives me the details of the individual case, I will certainly take it up and look at it. The fact is that we have not changed the waiting list targets that have been in place in the NHS for a long time—in particular, the 18-week target that is part of the NHS constitution. Average waiting times have actually come down in recent months. The clear lesson is this: were it not for this Government putting in an extra £11.5 billion—money that Labour does not support—we would see all waiting times going up.

[Mr Douglas Carswell (Clacton) (Con)]

Q10. On 18 July last year, the Economic Secretary to the Treasury stated, with regard to the decision to sign Britain up to the eurozone bail-out mechanism:“While these decisions were taken by the previous Government, this Government judges them to be an appropriate response to the crisis.”Does this remain the Government’s position?

[The Prime Minister]

I know that my hon. Friend is pursuing this issue with his normal dogged tenacity. The facts of the case are very clear. The last Government—at the death, as it were, after the election but before the new Government were formed—signed us up to the European financial mechanism that we are still having to pay out under. This Government have got us out of that by tough negotiation in Brussels so that we will not have to contribute after 2013.

[Dan Jarvis (Barnsley Central) (Lab)]

May I associate myself with the Prime Minister’s and the Leader of the Opposition’s expressions of condolence for the soldiers who have fallen in Afghanistan? Those who serve are the lions of our country, and we must always do everything we can to repay the debt of gratitude we owe them.

The October 2010 strategic defence and security review has been overtaken by events, and the world is now a fundamentally different place. May I therefore ask the Prime Minister again: will he do the right thing for the armed forces and for the country and order a new chapter to this now outdated review?

[The Prime Minister]

I very much respect what the hon. Gentleman says, particularly his fitting tribute to the armed forces, but the idea of totally reopening the defence review at a time when our armed forces are engaged and are doing such a fantastic job is the wrong one. The defence review was all about making sure that we have flexible armed forces so that they can be committed to different parts of the world and have the backing they need. It was about getting rid of the main battle tanks in Germany and putting money into the enablers and the forces of the future. Libya shows that it is working, and I think we should stick with it.

[Stuart Andrew (Pudsey) (Con)]

Q11. Will my right hon. Friend welcome those campaigning outside Parliament today for high-speed rail in order to bring thousands of much-needed jobs to the midlands and help to address the north-south divide, and will he confirm that it will come to Yorkshire?

[The Prime Minister]

I happily confirm all those things. I believe that if we are really serious about rebalancing our economy and ensuring that we get growth across the country, and not just in the south-east, the time for high-speed rail has come. That is why it has my strong support.

[Mr Wayne David (Caerphilly) (Lab)]

Q12. The Secretary of State for Wales has said that she is prepared to be sacked because of her opposition to Government policy on high-speed rail. Will the Prime Minister take her up on that very kind offer?

[The Prime Minister]

I prefer to focus on the fact that in one year as Welsh Secretary, she has secured something that 13 years of Labour Welsh Secretaries never achieved, which is the electrification of the line between Paddington and Cardiff.

[Mr Aidan Burley (Cannock Chase) (Con)]

An agoraphobic man from Middlesbrough received so much money from state benefits that he set up his own illegal loans company. At the trial, the judge described him as receiving a staggering amount of money on benefits. Does that not show that our welfare system is broken, and will the Prime Minister pledge to redouble his efforts to reform it?

[The Prime Minister]

My hon. Friend is absolutely right that the people who send us here want us to sort out the welfare system. They want it to be there for people who genuinely need help, but they want us to ensure that anyone who can work and is offered a job cannot live a life on welfare. Government Members have put forward the legislation and voted for it. What a pity that the Labour party talks about it, but did not have the guts to back it when the crunch came.

[Simon Danczuk (Rochdale) (Lab)]

Q13. Most people know that Rochdale is the home of co-operation. Next year is the United Nations international year of co-operatives. Will the Prime Minister consider visiting Rochdale to show support for mutualism in the 21st century?

[The Prime Minister]

I note the excellent record of Prime Ministers visiting Rochdale, and what can happen to them when they get there. I will certainly put it in the diary. I am a strong supporter of co-operatives and mutuals. I think that they have a huge role to play not just in our economy, but in the provision of public services. We will make some announcements about that, perhaps in Rochdale, in the months to come.

[Paul Uppal (Wolverhampton South West) (Con)]

Earlier this year, the Prime Minister demonstrated his strength of character in talking about multiculturalism. In view of the fact that I have a Christian first name and a Sikh surname, I try to combine the best of my traditional Indian values with my core British values. Does he agree that we can learn a lot from our Indian partners in this respect, many of whom define themselves by their nationality first and foremost, regardless of their ethnic or religious background?

[The Prime Minister]

I pay tribute to my hon. Friend and his work on this issue. It is vital that, as a country, we build a stronger national identity. Of course people can have all sorts of religious and cultural identities, but it is very important that we build a strong British identity. He is living proof of that.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

Q14. Tomorrow, the European Parliament will decide whether to increase the EU’s carbon reduction target to 30% by 2020. That was a commitment in the coalition agreement. According to reports, the vote will be very close, but it will not pass because just one Conservative MEP out of 25 will vote for the 30% target. Will the Prime Minister guarantee that all his MEPs will honour the coalition agreement and vote for the 30% target tomorrow?

[The Prime Minister]

Let me be absolutely clear that we are committed to the 30% target and nothing is going to change that. I will do a deal with the hon. Lady. I will work on my MEPs if she promises to work on hers, who in recent months have voted for a higher EU budget and new EU taxes, and against an opt-out on the working-time directive. They even voted against scrapping first-class air travel for MEPs. Perhaps she would like to fly over and give them a talking to.

[Mr Speaker]

Last but not least, I call Mr Robert Buckland.

[Mr Robert Buckland (South Swindon) (Con)]

With the National Audit Office estimating the cost to the economy of criminal reoffending at £10 billion a year, does my right hon. Friend agree that the need to reduce reoffending from the unacceptably high rates that we inherited from the previous Government must be the priority of any penal policy?

[The Prime Minister]

I completely agree with my hon. Friend, who has considerable experience in this matter from his career before coming to this place. We have inherited a system in which each prison place costs £45,000, half of prisoners reoffend within a year of getting out, half of prisoners are on drugs, and more than 10% of prisoners are foreigners who should not be in this country in any event. The key thing we have to do is reduce costs in the criminal justice system by making prison work and reforming prison, rather than by cutting sentences.

Petition

Wednesday 22nd June 2011 Commons Chamber

Mr Adrian Sanders (Torbay) (LD)

- Hansard - - Excerpts

I rise to present a petition from the residents of Torbay on the recommendations in the Walker review and the Government’s response to that review, which my petitioners are asking to be implemented. I am talking about the additional support for people on low incomes, the extension of the Water Sure scheme and an annual payment to South West Water in order to bring water and sewerage charges closer to the national average, rather than 40% higher.

Following is the full text of the petition:

[The Petition of residents of Torbay,

Declares that the Petitioners welcome the Government's commitment to fair and affordable water and sewerage services; and further notes the recommendations contained in paragraph 4.18 of the consultation document “Affordable water: a consultation on the Government's proposals following the Walker Review on Charging”.

The Petitioners therefore request that the House of Commons urges the Government to enhance the Water Sure scheme, to introduce a social tariff to benefit water consumers on low incomes and to introduce an annual payment of £40 million to South West Water from public funds to reduce water bills so that they are close to the national average for identical services.

And the Petitioners remain, etc.]

[P000931]

Points of Order

Wednesday 22nd June 2011 Commons Chamber

12:34

[Angus Robertson (Moray) (SNP)]

On a point of order, Mr Speaker. May I seek your guidance? [Interruption.]

[Mr Speaker]

Order. May I ask Members who are leaving the Chamber to do so quickly and quietly, affording the same courtesy to the hon. Gentleman that they would want to be extended to them in such circumstances?

[Angus Robertson]

I seek your guidance, Mr Speaker, about Standing Order No. 122C, which governs rules for motions of no confidence in a Select Committee Chair, and states:

“A resolution by a committee expressing no confidence in its chair shall not have effect”

unless

“the majority of the membership of the committee, including at least two members from the largest party represented on the committee, and at least one member from another party, vote in favour of the resolution.”

Will you confirm that the membership of the Scottish Affairs Committee is five Labour, four Conservative, one Liberal Democrat and one from the Scottish National party? Does that not mean, then, that it will fall to two Labour members of the Committee to decide whether it is acceptable for the Committee Chairman to remain in office after describing the Scottish National party as “neo-fascists”?

[Mr Speaker]

The hon. Gentleman has quoted the Standing Order and offered his analysis of the situation, and it falls to the Committee to decide what, if any, action it wishes to take. There is no matter of order on which I need rule.

[Mr David Winnick (Walsall North) (Lab)]

On a point of order, Mr Speaker. It is not my wish to extend Prime Minister’s Question Time, and I realise the number of Members who were trying to catch your eye. However, in order that there should not be any misunderstanding, may I say that, although the point of view on Libya put forward from the Front Benches may, for all I know, remain the majority view in the House, there is a different point of view? That is the desire to bring about a genuine ceasefire as soon as possible. It should be understood that the view that has been expressed in the House today is not by any means the view of all of us.

[Mr Speaker]

The hon. Gentleman, in a disorderly but engaging way, has now made the position as far as he and perhaps others are concerned very clear. We are grateful to him.

Smoking in Private Vehicles

Wednesday 22nd June 2011 Commons Chamber

Motion for leave to bring in a Bill (Standing Order No. 23)

12:37

[Alex Cunningham (Stockton North) (Lab)]

I beg to move,

That leave be given to bring in a Bill to require the Secretary of State to make provision for a ban on smoking in private vehicles where there are children present; and for connected purposes.

My constituency is ranked 15th in the British Lung Foundation’s ranking of constituencies for children at most risk of passive smoking. The parent smoking hot spots table shows that almost 29% of households in Stockton North contain parents who smoke. In addition, the number of adult smokers is significantly higher than the England average, as are deaths from smoking. Also, more women smoke in pregnancy than the national average.

We are all aware that passive smoking is harmful to children’s health. According to the tobacco advisory group at the Royal College of Physicians, more than 300,000 children in the UK present to their GP with passive smoking-related illnesses every year. It also estimates that passive smoking causes about 20,000 new cases of wheezing and asthma in UK children each year, and makes a conservative estimate that that costs the NHS £22 million a year in hospital admissions and treatment costs.

In north-east England we are working hard to address the issue, including through action by charities such as Fresh, and we have had some great success. Smoking rates in the region dropped from 29% in 2005 to 22% in 2009, a welcome step forward in the fight against tobacco. Fresh tells me, however, that some 84,000 children in north-east England are still exposed to second-hand smoke in the home, a figure that must come down.

A recent YouGov poll showed that 90% of smokers in the north-east of England worry about the impact of smoking around children, and that 78% support a ban on smoking in cars carrying children younger than 18. That support is even higher elsewhere. When the British Lung Foundation teamed up with Mumsnet to find out the views of parents on smoking, it found that more than 85% of them supported a proposed ban on smoking where children are present. The research also showed that 83% of smoking parents said they would support legislation to protect children.

The science is clear. Experts say that children are particularly vulnerable to passive smoke, as they have quicker breathing rates. It goes without saying that consistent exposure to second-hand smoke can lead to a lifetime of respiratory problems. The Chartered Institute of Environmental Health has shown that smoking in cars is dangerous to children even after the cigarette is extinguished. Levels of second-hand smoke in cars can be extremely high, because of the restricted area in which the smoke is circulated.

A study by Aberdeen university showed that smoking in a car exposes children to levels of smoke that compare with the levels in a smoke-filled pub, which we fortunately no longer have to endure. The fact that children can be exposed to such an environment in cars is reason enough to introduce a ban on smoking in private vehicles when they are present.

In the Government’s tobacco control plan for England, “Healthy Lives, Healthy People”, they say that they want people to recognise the risk of second-hand smoke and to decide to make their homes and cars smoke free. Frankly, that is not good enough. We need a ban, and healthier children. I am told that the Government’s marketing strategy for tobacco control will set out further details on how they will support efforts to encourage smoke-free homes and family cars. Perhaps they will take the right action, but they need to be decisive.

We already have legislation to ban smoking in vehicles carrying passengers in the course of paid or voluntary work, including buses, trains, planes and taxis. I remember when it was considered normal for people to light up on public transport. Most would agree that attitudes have changed significantly. I cannot see how it can be a real hardship to anyone to stop smoking in private vehicles. The benefits will be tremendous. Given the significant health impact on children, who are unable to remove themselves from such cars, the Government should not dismiss calls for a ban.

Some will say that the car is a private space in which the Government should not intervene, but is the space in the back of a car not the child’s private space? Some adults invade it with dangerous smoke—[Interruption.] They do! They invade it with dangerous smoke. Some have asked why I am not pushing for a blanket ban on smoking in private vehicles. I believe that adults can make up their own minds about the dangers of smoking. We need to protect children.

Opinion research by the British Lung Foundation highlights the growing consensus among parents and children for legislation to protect children from passive smoke while they are travelling in cars. Its petition calling for legislation has already been signed by more than 16,000 people. The foundation’s research shows that just over half of eight to 15-year-olds surveyed were exposed to cigarette smoke when confined in a car, and that 86% of children in the UK want people to stop it. Rather worryingly, almost a quarter of the children surveyed reported that they had said nothing when someone smoked in the car, because they were too embarrassed. One in 10 said that they were too scared to say anything.

I would ask those who believe that legislation would be ineffective to look at car legislation on seat belts, mobile phones and drink-driving. Most if not all people adhere to such laws without the police becoming heavy-handed. For example, information provided to me by the House of Commons Library demonstrates that when wearing seat belts was made compulsory in 1983, the wearing of seat belts increased significantly. Before the law, 40% wore a seat belt, and 90% afterwards. A 1985 report estimated that that change saved around 7,000 fatal or serious casualties, and 13,000 slight casualties in the first year alone.

There are precedents from elsewhere for a ban such as the one I propose. Were such a ban introduced, we would be joining several countries where smoking in cars carrying children is prohibited. In the USA, legislation has been introduced in states including California and Maine; in Canada, there is legislation in British Columbia and Ontario; and in Australia, Queensland and Tasmania have introduced legislation.

Professor John Britton from Nottingham City hospital has looked at the lessons from Canada, where a national media programme was supported by legislation in some provinces. Data provided to him demonstrate that provinces that implemented legislation on smoking in cars with children saw a dramatic drop in exposure to smoke compared with states that focused only on education. In one case, the proportion fell from 21.4% to 13%.

UK politicians want action too: 36 MPs signed my early-day motion, and 78 signed early-day motion 214, sponsored by my hon. Friend the Member for Gateshead (Ian Mearns), which is on a similar issue. In Wales, the chief medical officer, Dr Tony Jewell, announced that he wants to start a debate on smoking in cars carrying children, and the public health department in Jersey is currently considering whether to ban smoking in cars altogether.

The health costs can be illustrated no better than by someone who has spoken openly and honestly about her smoking. Sharon Gould from Leicester told the British Lung Foundation that she started smoking when she was 14. Throughout her son Ben’s childhood she tried to give up smoking but did not manage to quit until three years ago. She would occasionally smoke in the car when he was present—always with the window down—and she also smoked in the home. She always thought, “Just one won’t hurt.” However, she was not aware of the serious dangers of passive smoking on Ben’s health—a child who was found to be asthmatic. Sharon is unaware of any family history of lung disease, so believes that her son’s asthma has been caused, in part, by passive smoking. She said:

“I don’t know if passive smoke was the whole cause of Ben’s asthma, but I know that it’s part of it…. It is vital that all parents understand the dangerous effects of passive smoke on developing young lungs.”

I have had particular support for the Bill from many members of the all-party group on asthma, who I am sure have all heard similar stories to the one told by Sharon. I would also like to thank the organisations that have lent their support to this cause, including the British Lung Foundation, Action on Smoking and Health, Fresh in the north-east and the British Heart Foundation. I am especially pleased to have secured support for the Bill from Members on both sides of the House. Polling indicates that the public are strongly in favour of a ban, and I hope that all Members will seek to protect the health of children in their constituencies. That is why I have brought the Bill before the House.

12:46

[Philip Davies (Shipley) (Con)]

My opposition to the Bill is not based on self-interest: I do not smoke, I have never smoked and I am unlikely ever to start smoking. In fact, as it happens, I do not actually enjoy going into smoky places. However, many of my hon. Friends might not be surprised to see me here today, because I also voted against the smoking ban in 2006. My opposition to this Bill is similar to my opposition to the original ban, and is threefold: first, it is rooted in my strong belief in freedom; secondly, it is rooted in my belief in parental responsibility for bringing up children; and thirdly it is based on the complete lack of evidence surrounding the proposal. I am not surprised that the hon. Member for Stockton North (Alex Cunningham) is continuing to champion the extension of the nanny state into every aspect of the British public’s lives, because it is something that the Labour party excelled at during its time in office, and is still trying to do today. The proposal is excessive, intrusive and insulting to British parents who smoke.

In England, smoking has already been banned in a vehicle unless it is used primarily for private purposes by a person who owns it or has the right to use it, or is used at work by only one person or has an open cab. The suggestion of banning smoking in private vehicles while a minor is present is yet another unwarranted intrusion on individual freedom. The Government should have no role in regulating the private lives of adults making decisions as adults. Adults should be free to smoke in a private vehicle providing they do not light up or smoke in a way that distracts from safe driving. Of course adults should show courtesy to others in a private vehicle, but that does not require the nanny-state legislation proposed by the hon. Gentleman.

I would like to know how the hon. Gentleman would implement and enforce his proposal. Perhaps he envisages a scenario where children go around informing the authorities that their parents might have broken the law. Given that the Labour party is so upset about cuts to the police budget, does he really think that the police should be taking time out from catching burglars, rapists and other serious offenders to go around stopping cars to see whether anyone might have smoked in them while a child was on board? Does he think it a serious enough matter for the police to concentrate on? I presume that he would also like cars to go around with tinted windscreens, which might be the only upshot of his proposal. The whole thing is completely ludicrous.

On top of that, there is a substantial lack of evidence surrounding the hon. Gentleman’s Bill. The scaremongers have bandied about the claim that second-hand smoke is 23 times more toxic in a vehicle than in the home. However, in a journal for the Canadian Medical Association, MacKenzie and Freeman failed to locate any scientific source for this claim, and it remains unsubstantiated.

I wonder why the Government give such credence to the opinions of people at ASH, or Action on Smoking and Health. Members of the anti-smoking lobby, including ASH and SmokeFree, have received a large amount of Government funding, despite being charities. In 2009, the Department of Health gave ASH £191,000 for a report called “Beyond Smoking Kills”, which came on top of a direct grant from the Department to the tune of £142,000. Surely public policy should be protected from the vested interests of any single-issue group, including the pharmaceutical industry on the one hand, and vociferous, substantially taxpayer-funded lobby groups such as ASH on the other. In addition, the Department published a report by Professor Linda Bauld, who was commissioned to provide an academic review of the smoke-free legislation that was implemented in 2007. However, Linda is a member of ASH, so there was surely a clear conflict of interest in the report that the Government commissioned.

This proposal is also a solution looking for a problem. Let us look at the evidence on second-hand smoke exposure. A study carried out by Sims et al concluded that second-hand smoke exposure in children declined by nearly 70% between 1996 and 2006—that is, before any ban on smoking was even introduced, which reinforces the point that this Bill is clearly over the top and unnecessary. A survey of smokers showed that 85.3% do not smoke in a car with children in any event, while 6.5% said that they would seek permission before doing so. Again, this proposal is a solution looking for a problem.

We are here to defend the freedoms of people in this country, not to interfere in every aspect of everybody’s lives, as the Opposition would like us to do. This proposal would be one infringement on people’s liberties too far. Whether hon. Members decide to vote against it or allow it to wither in the long grass is a matter for them, but one thing I know for sure is that the Government should have nothing to do with such a ludicrous infringement on our liberties.

Question put (Standing Order No. 23).

12:52

Division 303

Ayes: 78

---

Labour: 46
Conservative: 13
Liberal Democrat: 11
Democratic Unionist Party: 5
Social Democratic & Labour Party: 3
Alliance: 1
Green Party: 1
Plaid Cymru: 1

Noes: 66

---

Conservative: 53
Liberal Democrat: 7
Labour: 5

Ordered,

That Alex Cunningham, Mark Durkan, Caroline Lucas, Mrs Jenny Chapman, Ian Mearns, Julie Elliott, Stephen Lloyd, Mrs Sharon Hodgson, Bob Blackman, Stephen McPartland, Mr David Amess and Bob Russell present the Bill.

Alex Cunningham accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 25 November, and to be printed (Bill 207).

Opposition Day

Wednesday 22nd June 2011 Commons Chamber

[18th Allotted Day]

The Economy

Wednesday 22nd June 2011 Commons Chamber

[Mr Speaker]

I should notify the House that, as a consequence of the fact that no fewer than 38 right hon. and hon. Members have applied to speak in the debate, I have imposed an eight-minute limit on Back-Bench contributions. There is no time limit on speeches from the Front Benches, but it would be appreciated by the House if Front Benchers would tailor their contributions accordingly. I inform the House that I have selected the amendment tabled in the name of the Prime Minister.

13:06

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

I beg to move,

That this House notes that on 22 June 2010 the Chancellor announced his first Budget with a target to eliminate the structural deficit by 2015-16 through an additional £40 billion of spending cuts and tax rises, including a VAT rise; further notes that over the last six months the economy has not grown, in the last month retail sales fell by 1.4 per cent. and manufacturing output fell by 1.5 per cent. and despite a welcome recent fall in unemployment, the Office for Budget Responsibility predicts that future unemployment will be up to 200,000 higher than expected; believes the Government’s policies to cut the deficit too far and too fast have led to slower growth, higher inflation and higher unemployment, which are creating a vicious circle, since the Government is now set to borrow £46 billion more than previously forecast; calls on the Government to adopt a more balanced deficit plan which, alongside tough decisions on tax and spending cuts, puts jobs first and will be a better way to get the deficit down over the longer term and avoid long-term damage to the economy; and, if the Government will not change course and halve the deficit over four years, demands that it should take a step in the right direction by temporarily cutting VAT to 17.5 per cent. until the economy returns to strong growth and by using funds raised from repeating the 2010 bank bonus tax to build 25,000 affordable homes and create 100,000 jobs for young people.

A year ago today, in his first Budget statement to the House, the Chancellor of the Exchequer made a clear choice. He said that rapid deficit reduction was the overriding priority, and that it would involve fiscal tightening of such scale and severity that it would have to begin immediately. He said that the faster we cut, the better it would be for confidence. He said that there was no choice, and that the markets demanded this action. He also said that no alternative was possible and that anyone who said otherwise was a deficit denier.

The Chancellor ignored the evidence that budget deficits had risen rapidly in every country after a global financial crisis caused by the irresponsible behaviour of banks around the world, claiming instead that the root cause of Britain’s deficit was too much spending on the NHS, schools and the police. He ignored the evidence that Labour’s balanced deficit reduction plan to support jobs and halve the deficit over four years was working, that the UK economy was already recovering, that tax rises and spending cuts had been pre-announced, and that we were over-achieving on our deficit reduction plan in line with the G20 commitment.

[Christopher Pincher (Tamworth) (Con)]

rose—

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

rose—

[Ed Balls]

I will give way in a moment.

The Chancellor claimed that he would cut faster than any other major country—

[Several hon. Members]

rose—

[Ed Balls]

I will take as many interventions as hon. Members want me to, but I am going to establish my argument first. I think that the House knows that I enjoy interventions, and I will absolutely take them all—Members should not worry!

The Chancellor also ignored the fact that we were not in the euro, that our debt maturity was long—

[Nadhim Zahawi]

Will the hon. Gentleman give way?

[Ed Balls]

No; perhaps I need to say this to the hon. Gentleman again. I will take his intervention after I have established my argument.

The Chancellor ignored the fact that we were not in the euro, and that—[Interruption.]

[Mr Speaker]

Order. I know that I have done this many times before, but I appeal to right hon. and hon. Members to have some regard to the way in which our proceedings are viewed by the people whose support we were seeking only 13 months ago. I do not care whether this sort of behaviour was traditionally thought to be a good thing; it is not, and if people behave like this and expect to be called, they will be disappointed.

[Ed Balls]

Thank you, Mr Speaker.

In the Budget debate, I took 16 interventions from Members on the Government side of the House. I will take interventions, but not from people who shout and are aggressive while I am still establishing my argument. Let me establish my argument; then I will take interventions. I will start with the hon. Member for Sevenoaks (Michael Fallon) in just a moment.

The Chancellor insisted, despite the fact that we were not in the euro, that our debt maturity was long and that our long-term gilt yields were historically low and had started to fall well before the election. He made the economically illiterate and preposterous claim that, like Greece, Britain was on the brink of bankruptcy. Having already abolished the child trust fund and the future jobs fund, he announced in the Budget immediate plans to take billions more out of the economy through a combination of deep spending cuts and tax rises. That included an increase in VAT to 20% and a cut in tax credits for thousands of families. It also included cuts to housing benefit, pensions and disability benefits. The Chancellor boasted in that speech that the Budget was progressive, not regressive, and that it would be an extra £40 billion fiscal hit in this Parliament. Labour Members warned him of the dangers, but the Chancellor said it would work. Let me cite what he said a year ago:

“These forecasts demonstrate that a credible plan to cut our budget deficit goes hand in hand with a steady and sustained economic recovery, with low inflation and falling unemployment.”—[Official Report, 22 June 2010; Vol. 512, c. 168.]

Things did not turn out that way last year.

Since the Prime Minister foolishly said in October that the economy was out of the danger zone, we have had the biggest fall in consumer confidence for 20 years; our economy has flatlined and not grown at all since the autumn; inflation is now higher than in every country except for Estonia and Turkey; the Institute for Fiscal Studies has declared the Chancellor’s Budget to be regressive, not progressive; and child poverty is expected to rise this year, next year and the year after, with women hit harder than men and families with children hit hardest of all. I have to say that this anniversary—unlike your anniversary, Mr Speaker—is not one worthy of celebration. It is certainly not an anniversary worthy of a 40th birthday party bash at Dorneywood. I do not know whether you were invited to the party at the weekend, Mr Speaker. I was not, which might be because I am not a Knight of the Garter.

[Michael Fallon (Sevenoaks) (Con)]

I am grateful to the shadow Chancellor for giving way so early in his speech. While we are on the issue of credibility, will he explain why his sudden, completely unfunded £13 billion tax cut did not appear to be either agreed or even discussed with the shadow Cabinet? When the former Labour Chancellor was asked nine times this morning whether he agreed with it, he failed to endorse it. Why is the shadow Chancellor so isolated?

[Ed Balls]

The former Labour Chancellor is not in the shadow Cabinet, as the hon. Gentleman will know—[Interruption.] He chose not to stand for the shadow Cabinet. We voted against the VAT rise earlier this year. The Leader of the Opposition said some months ago that it should be reversed. I repeated that claim last week and what I know, as it happened last week, is that when I go to speak to my leader, he understands the issues and backs me up, which is more than could be said for the Education Secretary, the Health Secretary, the Environment Secretary, the Lord Chancellor—and, I fear, quite possibly for the Chancellor of the Exchequer, too, if things carry on as they are.

[Christopher Pincher]

I am grateful to the right hon. Gentleman for giving way. He says he talks to his leader, so will he tell us when he released this information about the VAT cut to his leader—was it before he told the shadow Cabinet or did he treat his leader like just any other member of it?

[Ed Balls]

I have to say that that is a ridiculous question. At a time when the economy has flatlined, confidence is down and our borrowing is up, is it surprising that I am asked questions like that? Of course I discussed all aspects of my speech with the Leader of the Opposition some days before I gave it. We agreed on this strategy because we think this VAT rise is a mistake. Families in the hon. Gentleman’s constituency are being hit by having to pay £450 more in VAT, so one would have thought that he would be backing rather than opposing our plan to give them some help.

[Christopher Pincher]

rose—

[Ed Balls]

I am not giving way to the hon. Gentleman again now; I might do later.

The reason why the VAT cut is needed now is that things are getting worse, not better. In recent weeks, we have seen manufacturing output and job vacancies falling and the biggest fall in retail sales for more than a year. The Chancellor likes to boast that a net 370,00 jobs have been created in the last 12 months; what he does not like saying is that 70% of those extra jobs were created in the six months before the spending review and only 29% in the six months after it. That is why his Budget forecasts of a year ago have gone so badly awry.

The Office for Budget Responsibility forecasts for growth have been downgraded three times. Unemployment is now forecast to be 200,000 higher, while inflation is forecasted to be well above target this year and next year. The result of this stalled recovery, higher unemployment and higher inflation is that the Government are now forecast to borrow a further £46 billion more than was forecast in last year’s spending review. Public borrowing in the first two months of this year is higher than it was in the first two months of last year.

[Toby Perkins (Chesterfield) (Lab)]

The Chancellor said yesterday that he does not want to comment regularly on the OBR’s updates. Given that it is downgrading its forecasts every time he opens his mouth, it is hardly surprising.

[Ed Balls]

Whether or not the Chancellor comments, the fact remains that since the last OBR forecast, Britain’s growth forecasts have been downgraded by the International Monetary Fund, the OECD, the CBI, the British Chambers of Commerce and the National Institute of Economic and Social Research. Everybody else is downgrading growth forecasts; we will have to wait for the OBR finally to catch up.

[Nadhim Zahawi]

rose—

[Ed Balls]

I happily give way to the hon. Gentleman.

[Nadhim Zahawi]

I thank the shadow Chancellor for finally giving way. I must push him a little bit harder. When did he discuss his VAT cut with the shadow Cabinet? Will he tell us that?

[Ed Balls]

That tells you, Mr Speaker, how on the defensive Conservative Members are about the economy. The shadow Cabinet decided—[Interruption.] Look, just shouting does not get people to listen; the hon. Member for Stratford-on-Avon (Nadhim Zahawi) has got to learn that. The shadow Cabinet decided that the Opposition would oppose the VAT rise. In January, the Leader of the Opposition said it should be reversed. Last week, two days before I made my speech, I discussed the matter in detail with the Leader of the Opposition—[Hon. Members: “Aah!”] What do they mean, “Aah”? I discussed it 48 hours previously with the Leader of the Opposition, who backed me 100%—in marked contrast to the Prime Minister’s inability to grasp the detail, to stick with a policy or, most importantly, to support his own Cabinet members.

[Several hon. Members]

rose—

[Ed Balls]

Who shall we have? The hon. Gentleman.

[Charlie Elphicke (Dover) (Con)]

I am grateful to the right hon. Gentleman for giving way. On that particular point, why is the right hon. Member for Dulwich and West Norwood (Tessa Jowell) reported as being unhappy and feeling that she had not been consulted? Why did he not consult the shadow Cabinet?

[Ed Balls]

I do my politics on the record. I am not going to comment on that kind of trash. [Interruption.] In view of all the Cabinet Ministers who have been briefed against in recent weeks by the Treasury—the Defence Secretary, the Health Secretary, the Lord Chancellor—perhaps the Chancellor should take a leaf out of my book on how to do things.

It is the contention of Labour Members that the Chancellor is wreaking long-term, as well as short-term, damage on British investment, incomes and employment. We know from the downgraded OBR forecast that our economy is already £5.6 billion worse off than it would have been if the Chancellor had got it right. The danger is that these policies will have a long-term impact, leading to a return of the long-term unemployment of the 1980s, a new lost generation of jobless young people and a permanent dent in our nation’s prosperity.

[Christopher Pincher]

rose—

[Andrea Leadsom (South Northamptonshire) (Con)]

rose—

[Ed Balls]

I will give way in a few seconds.

The test for the Treasury is not whether it can eventually get back to growth, but where it will make up the lost ground in jobs and living standards.

In this debate, I challenge the Chancellor to agree with me on three propositions: first, his plan is not working; secondly, he has the opportunity to change course; and, thirdly, there is a better and fairer alternative economic policy for our country—better for jobs, better for living standards, and a better, fairer way to get the deficit down.

[Several hon. Members]

rose—

[Ed Balls]

I give way to my hon. Friend first.

[Ian Austin (Dudley North) (Lab)]

Why does the shadow Chancellor think the Government are so surprised that he has announced a policy of cutting VAT when we cut VAT during the downturn and we voted against the increase in VAT that they imposed? Does he think that it is a sensible political strategy for the Government to highlight the fact that we want to cut VAT and they want to put it up?

[Ed Balls]

I find that baffling as well. The fact is that cutting VAT was an effective stimulus, as the IFS said, which led to strengthening growth and falling unemployment a year ago. Now that cut has been reversed, and our position on the policy has been consistent. We propose not a move all the way from the Government’s deficit reduction plan to halving the deficit in four years, but a step along the road. That would be the right thing to do, and it would deliver for the constituents of Government Members a boost of £450 a year for a family with children, and of £275 a year for a pensioner couple. Why do they oppose action that would put money in people’s pockets and help to get the deficit down in a fairer way?

[Harriett Baldwin (West Worcestershire) (Con)]

The right hon. Gentleman says that he likes to do his politics on the record. On the “Daily Politics” show on 14 March, he said:

“We’ve made no commitments at all, it would be totally irresponsible for an opposition to behave”

in that way. What is responsible about an unfunded £51 billion tax cut?

[Ed Balls]

If that was written by the Whips, they will have to do better. What I said was that it would be completely irresponsible for me as shadow Chancellor to make a commitment now to a reverse in the VAT rise for our next election manifesto. Of course I cannot make an unfunded commitment for the next manifesto. The rise in VAT this January was a mistake. It was the wrong tax to raise, it was unfair, and it has depressed confidence and stopped people spending at the wrong time for the recovery. The Chancellor does not have to agree with us that he should not have raised VAT, but he should agree that he did it at the wrong time, and he should temporarily reverse it until the recovery is secure. We now hear from Conservative Central Office that the proposal to cut VAT only temporarily until the recovery is secure would have to be in place for four years of this Parliament. That tells us that the Conservatives think that the recovery will not be secure for the whole of this Parliament, which is precisely the argument that I am making.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

Is it not the fact that the deniers here today are the Government who deny the collapse in consumer confidence? No one on the Government Benches is doing anything about it, and the economy will not kick-start again unless we tackle it.

[Ed Balls]

My hon. Friend is right, and that is why the Chancellor must break out of his current state of growth denial before it is too late.

[Several hon. Members]

rose—

[Ed Balls]

I will give way in a second.

The fact is that the scale of the fiscal hit to demand and growth in Britain this year and next is unprecedented. It is happening when interest rates are already low, so they cannot be cut, and when other countries are trying to reduce their deficits at the same time. Confidence is also hit by the public debate about when mortgage rates will have to go up because of the Chancellor’s own-goal on inflation through the rise in VAT. That is why there is a problem. Instead, all we get from the Chancellor and the Conservative party is excuse after excuse.

[Ben Gummer (Ipswich) (Con)]

The right hon. Gentleman has already mentioned the OBR, the IMF, the EU, the OECD and the CBI, each of which supports the Government’s policy and says that any deviation would be a mistake. What is his answer to them?

[Ed Balls]

It is good to see the IMF supporting the Government of the day. The IMF not supporting the Government of the day would be a catastrophe, and exactly the same has always been true, historically, for the OECD. There is no doubt that business has a growing worry about what is going on. There is also a growing worry in Ipswich, not least shown by a Labour local election victory there just a few weeks ago. I am disappointed that the hon. Gentleman’s colleague the hon. Member for West Suffolk (Matthew Hancock) is not in the Chamber, but obviously this local campaign is catching on. I congratulate the hon. Member for Ipswich (Ben Gummer) on his campaign to save school crossings, to get more funding for them from schools or parent-teacher associations, and his lobbying of the Secretary of State for Education to ensure that education in Ipswich gets the extra money it needs. “Save Sure Start from Cuts”—it is obviously all catching on.

[Ben Gummer]

rose—

[Ed Balls]

I have plenty more; we will come to them in a second. Just think, “Good publicity, good publicity, it’s all good publicity.” It did not do the hon. Member for West Suffolk any harm; it did not do him any good either.

We do not hear much from the Chancellor these days about snow being the explanation for the contraction of the economy at the end of the year, because as he knew at the time, it also snowed in America, Germany and France, and they all posted stronger growth. In fact, Denmark, Ireland, Greece and Portugal were the only other countries with falling output in the last quarter of 2010. The Chancellor of all people, a regular skier on Europe’s slopes, should have known that even in winter it does not snow in Greece and Portugal. Instead we hear a new weather-related line. He blames the global headwinds, factors outside his control—rising oil prices, food prices, the eurozone, the Japanese earthquake, all reasons why prudent Chancellors should always be vigilant and choose caution over complacency. It is ironic to hear the Chancellor and the Prime Minister blame the rest of the world for Britain’s economic difficulties, as they did the opposite for their last four years in opposition.

Compared with other countries facing the same global headwinds, we are doing worse. We have gone from being in the top half of the EU economic league, to fourth from bottom in the past few months. It is no wonder that the OECD Deputy Secretary-General said a few weeks ago that

“we see merit in slowing the pace of fiscal consolidation if there is not so good news on the growth front”.

Even the IMF has said that

“there are significant risks to inflation, growth and unemployment”.

The excuses are not working, and the Chancellor is starting to be rumbled.

[Andrea Leadsom]

Does the right hon. Gentleman recognise that when the Government took office, our country was on credit watch for a downgrade? Does he welcome the fact that this country’s borrowing rates are similar to those of Germany and nowhere near those of Portugal and Greece? Does he further recognise the impact that his proposal effectively to reduce VAT rates right now, unfunded, would have on our current national deficit?

[Ed Balls]

The irony of a Conservative MP opposing tax cuts in VAT for families while allowing a tax cut, compared with last year, for the banks, is almost overwhelming. As everyone who studies the figures and not the political spin knows, we went into the crisis with lower national debt than France, Germany, America and Japan. Every country had a rise in its deficit, so of course we did. The fact is, however, that our gilt yields were very low and falling month by month before the general election, even as the opinion polls narrowed—

[Nadhim Zahawi]

On that point, will the right hon. Gentleman give way?

[Ed Balls]

No, no, no.

Three months before the general election, the polls said that the Conservatives would get a majority. As the polls narrowed, our long-term interest rates fell, entirely disproving the point that the hon. Member for South Northamptonshire (Andrea Leadsom) makes.

[Kwasi Kwarteng (Spelthorne) (Con)]

The right hon. Gentleman spoke about responsibility earlier, but does he take responsibility for the appalling fiscal position we were in when we had the largest debt in peacetime?

[Ed Balls]

It is fine for the hon. Gentleman to be thinking of his intervention rather than listening to the answers, but the fact is that we had a lower budget deficit and lower national debt than we inherited in 1997. The IFS, in its report, “The public finances: 1997 to 2010” said:

“By 2007–08, the public finances were in a stronger position than they had been when Labour came to power in 1997.”

That entirely disproves his point.

[Andrea Leadsom]

Will the right hon. Gentleman give way?

[Ed Balls]

Not again. I will make a little more progress. [Interruption.]

[Several hon. Members]

rose—

[Ed Balls]

I give way to my hon. Friend the Member for Swansea West (Geraint Davies).

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does my right hon. Friend accept that one reason for the remarkable fact that the world economy is growing steadily while Britain is flatlining, is the report from UK Trade & Investment that says that although UK inward investors are coming forward to build factories and growth in Britain, they are not being drawn down as the RDAs have been abolished? The Government are destroying the engines of growth.

[Ed Balls]

I am sure that was one of the proposals in the so-called strategy in the Chancellor’s Budget.

As I have said, there is growing concern in the business community. There is even concern in the Conservative fraternity. As my friends on The Daily Telegraph said in a recent editorial:

“These figures should be giving George Osborne some sleepless nights.”

They should indeed be giving the Chancellor sleepless nights at No. 11.

[Christopher Pincher]

Will the right hon. Gentleman give way?

[Ed Balls]

Give me five minutes.

The Chancellor has clearly been paying some attention. There is no plan B yet, but there has been a change in the rhetoric. Now the Chancellor says that the economy is “choppy”, but that

“Changing course would be a disaster for our credibility”

and would lead to a Greek crisis here in Britain—a Greek crisis that the Chancellor now absurdly claims he has narrowly avoided in the past.

[Chris Ruane (Vale of Clwyd) (Lab)]

A Greek tragedy. [Laughter.]

[Ed Balls]

Well, at least that was not an animal noise.

Something has been puzzling me in recent months. Why does this Chancellor have such a love of the nautical metaphor? Navigating through choppy waters, steering a steady course, sailing into strong global head winds—where does he find all those boating metaphors? But this, of course, is the Chancellor who likes to spend his summers gossiping on the yachts of his friends.

I have said many times in the past year that the Chancellor must learn the lessons of history if he is to avoid repeating the mistakes of history. I am sorry to have to raise that rather unfortunate episode in his history again. I know that it is a bit irritating for Members, even a bit annoying, but the Prime Minister said that I was the most annoying person in politics, and I must live up to my reputation.

As a matter of fact, my reign at the top table did not last very long. A few days later, The Sunday Times conducted a poll asking the public who was the most annoying person in British politics. It turned out that the Prime Minister is just as annoying as me, it turned out that the Chancellor of the Exchequer is more annoying than me, and it turned out that the Deputy Prime Minister is more annoying than all of us. But who is the most annoying person in British politics today? It is still Lord Mandelson, the Chancellor’s yachting partner.

I know Lord Mandelson well. He is a good friend of mine. [Laughter.] He is, actually, and I know that he will agree with me on this. If the Chancellor and his friend the Prime Minister have found us annoying so far, they should bear in mind that this is only the beginning; and when the Chancellor boasts that he narrowly avoided a summer Greek crisis, we know what he is really remembering.

[Christopher Pincher]

A man is known by his friends, and I think the shadow Chancellor has just proved that.

The right hon. Gentleman has talked a fair amount about the newspapers that he reads, such as The Daily Telegraph, The Times and the Eastern Daily Press. It must be very interesting for the shadow Home Secretary in the evenings. Perhaps he has also read the Tamworth Herald, which has revealed that unemployment in Tamworth has fallen to the lowest level since 2008 and that investment has been made in Tamworth by Ocado and BMW. If the right hon. Gentleman thinks that we are doing so badly, how does he explain those developments?

[Ed Balls]

rose—

[Mr Speaker]

Order. I am glad that the exchanges so far have been good-natured, but may I remind colleagues of the merits of brief interventions? A lot of Members want to make speeches, and I want to help them to do so.

[Ed Balls]

I think the question that people will be asking in the hon. Gentleman’s local newspaper is this: why does he oppose a tax cut that would provide £450 for every family this year, and would boost failing confidence?

The hon. Member for West Suffolk does not seem to have turned up. It is so disappointing that he is not here, as he was last time, because I had a very good contribution for him.

Let me now set aside the Chancellor’s wild and nonsensical political attempts to draw parallels between Britain and Greece, and make a serious point about what is happening in Greece and how it affects the United Kingdom. The issue now is not whether Britain does or does not contribute to a further EU financial package for Greece. Like the Chancellor—I think—I believe that that would be the wrong thing for our country to do. It seems to me that we have reached a point at which talk of more temporary liquidity austerity packages, and further tough talking, is no longer working.

EU Finance Ministers must face the fact that Greece needs economic growth to succeed. Otherwise, it will be stuck in a debt trap. It is now very hard to see how Greece can stay in the single currency without a change of strategy on fiscal austerity and a substantial restructuring. The fact is, however, that it is precisely because the UK is outside the eurozone—and thank goodness we are; I will take an intervention on that if any Member wishes to intervene—and because our banks are less exposed to Greek debts than those in Germany and France that Britain should be an honest broker in these discussions. We are in a position to present an objective argument for immediate and co-ordinated action to restore jobs and growth and start reducing the debt, along with a sustainable, long-term plan for its reduction. However, we can do that without being accused by the people of Greece that we are merely looking after our own interests.

[Mr John Redwood (Wokingham) (Con)]

Will the right hon. Gentleman give way?

[Ed Balls]

No.

What happened this week when there was the chance to show some leadership? Throughout the crisis, our Chancellor’s only concern has been to make short-term domestic political capital out of the crisis.

[Mr Redwood]

Will the right hon. Gentleman give way?

[Ed Balls]

No. I am making a serious point.

In every crisis since 1997—the Asian crisis, the dotcom crisis, the Russian crisis, and the global financial crisis of 2008—Britain was constantly at the centre of discussions attempting to establish a solution for the future.

[Mr Redwood]

Will the right hon. Gentleman give way?

[Ed Balls]

In one second.

For the first time in 14 years we have a Chancellor and a Prime Minister who are on the sidelines, silent, irrelevant and ignored. I believe that whatever the outcome of the present crisis—whatever happens in the eurozone and to Greece—people will say that we had a Chancellor of the Exchequer who was not there, who did not deliver, who was out of his depth, and who could not contribute to the long-term reforms that were needed.

[Mr Redwood]

rose—

[Ed Balls]

Now I will give way to the right hon. Gentleman.

[Mr Redwood]

The right hon. Gentleman is making a very important point. The United Kingdom can make an important contribution to the debate, but it obviously should not lend money directly to Greece. Is he saying that he thinks the only way out for Greece now is a rescheduling of its debt and agreement on the fact that there must be a change of pattern to secure the necessary growth and enable the economy to accelerate?

[Ed Balls]

In a moment I will deal with the parallel with the United Kingdom. Let me say first, however, that the lesson of history shows that it is not possible to deal with a solvency crisis by providing liquidity package after liquidity package, because that does not reach the heart of the issue. On the contrary, it makes the position worse and worse. At some point people will have to face up to that. Package after package has been agreed, but that has not worked. The debt has not gone down; it has gone up.

History teaches us that three things are necessary to the credibility of a plan, whether it involves monetary policy or fiscal policy. First, the plan must be for the medium term; secondly, there must be political support for it; and thirdly, it must work. If it does not work, that will eventually rebound on political support, as we have seen in Greece in recent weeks.

[Kelvin Hopkins (Luton North) (Lab)]

I entirely agree with what my right hon. Friend has said about both Greece and the need for a plan, but if a plan is to be implemented the country concerned must have control of its exchange rates, interest rates and fiscal policy, and that is not possible inside the eurozone.

[Ed Balls]

Let me deal with precisely that point by returning to the subject of the United Kingdom. Notwithstanding what I consider to be a rather tawdry attempt to use what seems to be a political claim that a sovereign debt crisis exists here in the UK to give the Liberal Democrats an excuse to ditch everything in their manifesto and support a Conservative party policy, the fact is that the plan is not working here either.

The Chancellor likes to play this game. A few weeks ago, he told the “Politics Show” that if he “abandoned” his plan,

“Within minutes Britain would be in financial turmoil.”

As I have just said, the Greek Prime Minister’s experience shows that simply talking tough does not make someone credible and does not boost market confidence if the plan is not working.

The reason why there is now a question mark over the Chancellor’s credibility is that in recent weeks and months we have had an economy that has not been growing; fewer people in work and paying tax than there should be; and more people on benefits than there should be. That makes it harder to get the deficit down. We have had stagnant output for six months and we have forecasts being downgraded left, right and centre. This is not about bad news now and short-term pain. All that makes it harder to get the deficit down and undermines our long-term credibility, investment and confidence. As the former chief economist at the Cabinet Office, who is now head of the National Institute of Economic and Social Research, said:

“You do not gain credibility by sticking to a strategy that isn’t working.”

That is the situation we are now in.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

Whichever number we use—the £12 billion or the £51 billion unfunded tax cut—can the right hon. Gentleman tell us where that money might come from, or is he happy to bundle up further debt that we can then pass on to our children and grandchildren?

[Ed Balls]

I have just made it absolutely clear that if we do not have a credible plan that works, it makes it harder to get the deficit down, not easier. Borrowing is now going to be £46 billion higher because of an economic plan that is not working. That is the reality.

[Several hon. Members]

rose—

[Ed Balls]

No, no, no.

A year ago, we had a balanced plan: people paid their fair share, there were spending cuts and there were tax rises, but it was cautious and was not a pre-ordained political timetable or a headlong lunge. That is what the Chancellor should be doing now. He should be adopting a more sensible approach to deficit reduction, which would allow him temporarily to reverse the VAT change right now. He should also reopen the spending review and have a steady approach to spending cuts. A 20% cut in police budgets, front-loaded, is complete criminal justice madness. He should take up our plan to repeat the bank bonus tax, build houses and get young people back to work. As I have said, a temporary VAT cut now would put money into people’s pockets, boost confidence, push inflation down and give our flatlining economy the jump-start it urgently needs. That would be a better way of getting the deficit down.

[Barry Gardiner (Brent North) (Lab)]

My right hon. Friend will know that the UK taxpayer will still be contributing to any bail-out of Greece through the International Monetary Fund, but will he comment on the fact that if Greece does fail and subsequently other countries follow that failure into default, that could precipitate the end of the IMF? The loans that the UK taxpayer is making to the IMF would then never be repatriated.

[Ed Balls]

The IMF is there to help countries through situations like this. We are a shareholder and a contributor to the IMF and that is quite right. It is a different matter our putting liquidity money into a eurozone strategy that patently is not working because it is flawed. My argument to the Chancellor is that it is ironic to see a British Conservative Chancellor backing the German Finance Ministry’s view over sanity and common sense. We have not seen that in our country for a very long time.

[Charlie Elphicke]

I put it to the shadow Chancellor that this is not just about the business of the unfunded VAT cut that he proposes; it is also about some £10 billion-plus of spending commitments on the Welfare Reform Bill. Billions here, billions there—that does not add up to a credible economic policy from the Opposition.

[Ed Balls]

“I’ll protect border services, blasts Elphicke”, reads the headline.

“The UK Border Agency will not suffer due to Government spending cuts,”

claims the Dover MP. If the hon. Gentleman wants to have a debate with me about credibility and support for spending cuts, I will have it every day of the week.

It is the Chancellor’s credibility that is in trouble.

[Several hon. Members]

rose—

[Ed Balls]

I have taken lots of interventions and I am coming to my conclusion.

That is why we have consistently said that the Chancellor should have a plan B. At the end of August 1992, three weeks before Black Wednesday, the then Prime Minister and his then special adviser stood in front of the Treasury at 8 am and said:

“There are going to be no devaluations, no leaving the ERM. We are absolutely committed to the ERM. It is at the centre of our policy. We are going to maintain sterling’s parity and we will do whatever is necessary, and I hope there is no doubt about that at all.”

That was almost certainly written by the current Prime Minister. Hon. Members have to learn these lessons. It is true, as my hon. Friend the Member for Luton North (Kelvin Hopkins) said a moment ago, that back then the pound was constrained by a fixed exchange rate. It was very hard for the Prime Minister and the Chancellor of the day to change course, even though they could see that their policy was not working. Had we joined the euro—and as we have all said, thank goodness we did not—that would have been an even greater constraint on UK economic policy, but neither constraint exists now. The objectives for monetary and fiscal policy have lain squarely in the Chancellor’s gift and this is the fundamental problem: he has made a political decision to set a political timetable for a political goal that defies economic logic, and the evidence is growing week by week that he has got this wrong. The lesson of monetary and fiscal policy too, over the past 20 years, is that changing course when things are not working is not a knee-jerk reaction and does not damage credibility. It is the only way of being in control of our destiny and averting the crisis being forced on us.

Let me quote some wise words:

“The weak thing to do is just to keep ploughing on and say, ‘I can’t possibly change, because I might have a difficult time at a press conference.’ The tough, strong thing to do is say, ‘Yes, we can make these plans better’.”

That is what the Prime Minister said yesterday, explaining the U-turns on sentencing and the NHS. He has obviously learned some lessons from his time as special adviser to Norman Lamont. My only plea today is that the Chancellor starts learning the lessons of history too. The cautious thing to do is not to plough on and hope for the best, but to act now before we lose more ground. Unlike Norman Lamont, who was tied to the exchange rate mechanism, the Chancellor can choose. He does not have to box himself in this way, so stubbornly. He does not need to make the Major-Lamont ERM mistake all over again.

[Margot James (Stourbridge) (Con)]

The right hon. Gentleman referred to the previous Government’s policies when they embarked on a very timid programme of tax increases and public expenditure cuts a year and a half ago. Does he not accept that that was completely inadequate then and that the only reason it was accepted was because the international markets knew that there was a general election coming and that his party was way down in the polls? They lived for a better day.

[Ed Balls]

I have been, in a friendly way, critical of the Chancellor’s engagement and participation in international affairs and matters of global economic management, but he does go to the meetings and sign up to the communiqués. As the Chancellor in June 2010, after the general election, he went to the G20 and signed up to the communiqué that said that Governments should halve the deficit in the next four years, which was precisely the plan we had, which they tore up. We are not going to take lectures from the Conservatives on credibility. As I have said, the credible approach is not to plough on regardless when things are not working but to change course before it is too late.

This is my conclusion.

[Several hon. Members]

rose—

[Ed Balls]

I have taken loads of interventions and I am not going to do doubles.

The fact is that the path that our economy is being taken down is, I think, the wrong one, and the evidence is supporting that. It could prove very dangerous for growth, for jobs, for public services, for our living standards, for the deficit and for our mortgage rates too.

[Several hon. Members]

rose—

[Ed Balls]

No, I am going to conclude.

At the very least, it looks set to be a path of slower growth and higher unemployment than needed to be the case. There is an alternative, it is more credible than the current plan, not less, and it is not too late to change course. The Chancellor has a choice; he is not stuck, this time, in the ERM or the euro. He cannot fall back on the idea, as back then, that Labour supports his policies, because we have set out a very clear and different alternative, including on VAT, this year. Most of all, he cannot say he has not been warned. We are on a path of slower growth, higher unemployment and more child poverty than was forecast a year ago. The Chancellor has a choice. On the anniversary of his first Budget, he should agree with our motion and admit he got it wrong. If he is prepared to start putting economics before politics, it is not too late to change course.

13:49

[The Chancellor of the Exchequer (Mr George Osborne)]

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“welcomes the fact that in the last year a record 520,000 new private sector jobs were created, with the second highest rate of net job creation in the G7, exports grew by 13 per cent. and manufacturing activity was 4.2 per cent. higher and the latest labour market data showed the largest fall in unemployment for more than a decade; notes that the Government inherited a budget deficit forecast to be the largest in the G20; further notes that the previous administration and now Opposition has no credible plan to deal with the deficit and that the Shadow Chancellor’s recent proposal for a temporary cut in VAT has been widely criticised for lacking credibility and would put the stability of the economy at risk; notes that the Government has introduced a permanent bank levy that raises more revenue than the previous administration’s one-off bonus tax and that the Government has set out a credible plan that has been endorsed by the IMF, OECD, European Commission and the CBI, that has led to greater stability, lower market interest rates and an affirmation of the UK’s credit rating that had been put at risk by the previous administration; and notes that this stability provides a platform for rebalancing the economy and the Government’s Plan for Growth that includes reducing business taxes, investing in apprenticeships, creating a new Green Investment Bank, reforming the planning system, reducing the burden of regulation and reforming the welfare system to make work pay.”

I very much welcome this debate, and it was certainly worth attending for that priceless phrase, “I do my politics on the record”. That is right up there with, “There will be no whitewash at the White House”, “I did not have sexual relations with that woman” and “No more boom and bust”. Really, we must put that phrase away, because we will need it in the weeks ahead.

It is good that we are discussing the economy, and the shadow Chancellor made a speech about what has happened to the economy over the past year—the subject of this debate—but he completely failed to mention that exports are 13% up, manufacturing is 4% up, investment is 6% up and, most importantly, the 520,000 net new jobs in the private sector. Remember the question a year ago, “Where will the jobs come from over the next year?” Well, we have had 500,000 answers from businesses around this country—indeed, the second highest job creation rate in the G7—but that is not a fact that we are likely to hear from the Opposition, because they are determined to talk this economy down. That is the truth.

[Kevin Brennan (Cardiff West) (Lab)]

What estimate is the Chancellor using for the time lag between his fiscal actions and their effect on growth?

[Mr Osborne]

The decisions that we took in the first few weeks on coming to office provided stability for the economy. That can be seen in the fall in market interest rates and the affirmation of our credit rating. Those things happened within weeks. Of course, some of the structural reforms that we are taking will take longer to come into effect, but that is why our package includes immediate action to bring stability; medium-term action to bring down tax rates, which is happening now; and of course the long-term reforms that I will talk about. That is the point that I should like to make to the hon. Gentleman and others.

I said a year ago, not recently, that the recovery would be choppy. How could it be anything other than choppy, when we are recovering from the greatest recession since the 1930s, the biggest banking crisis in our history, landed with the biggest budget deficit in peacetime? That is the inheritance that the Government has had, and yes, there have been other factors—international headwinds, such as the oil price—[Hon. Members: “Oh.”] Well, there has been a 60% rise in the oil price, which has apparently passed the Opposition by. In the words of the International Monetary Fund, despite all this,

“the repair of the UK economy is underway”,

and the truth is that the Opposition simply do not want to hear it. They broke it, and they cannot bear to see anyone else fixing it.

[Nadhim Zahawi]

I can inform the Chancellor that, in the west midlands, unemployment has fallen by 28,000 this quarter. At the height of the previous Government’s economic drive, employment in the west midlands still shrank.

[Mr Osborne]

My hon. Friend makes two good points. First, there was a very welcome recent reduction in unemployment—the biggest fall for a decade. Secondly, he draws attention to one of the most staggering facts about the past decade: private sector employment in the west midlands fell in the decade leading up to the financial crisis. That shows how unbalanced the British economy became under the last Labour Government.

[Toby Perkins]

rose—

[Mr Osborne]

I will give way, and then I will come on to the shadow Chancellor.

[Toby Perkins]

If the Chancellor feels that the economy was so unbalanced, can he explain why he was still saying in 2008 that he would follow Labour’s spending plans?

[Mr Osborne]

We fought the 2005 election and, sadly, lost it, saying that Labour’s plans were unaffordable. In 2008, we made it clear that we were coming off Labour’s spending plans. [Hon. Members: “You didn’t.”] We did. I happened to be there—I am not sure that the hon. Gentleman was. We came off Labour’s spending plans in 2008, and thank God we did, because we earned a mandate to make the necessary changes to put the economy back on track.

[Several hon. Members]

rose—

[Mr Osborne]

I will take a couple of interventions in a short while, but let me make the point that, since the shadow Chancellor took office, two things have happened. The first thing is that the measured economic credibility of the Opposition has steadily fallen, and the other thing is that the reported divisions in the Labour party have steadily increased. If anyone wants to know why its economic credibility is falling and why the divisions are increasing in the Opposition, the speech that we have heard told it all: not one word of apology, not one passage of serious reflection about why it all went wrong. The shadow Chancellor started talking about the fact that the Prime Minister was the special adviser in the early 1990s. He himself was the special adviser for the past decade in the Treasury—not a mention of the fact that he was the chief economic adviser when the advice was so catastrophic, not one mention of the fact that he was the City Minister when the City exploded. That is the record of the right hon. Gentleman.

The amnesia reached new heights in the right hon. Gentleman’s speech last week to the London School of Economics. Consider this recent quotation from the speech that he gave—this is from the man at the centre of British economic policy making for last decade:

“when I am asked in interviews what I would be doing differently to cut the deficit, the first thing I say is that I wouldn’t be starting from here.”

I can assure him that none of us would like to be starting from here, but the main reason why we are is sitting right opposite me.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Does my right hon. Friend agree that it says everything that we need to know about the Opposition’s economic policy when the shadow Chancellor’s immediate reaction to the IMF report was, “They don’t know what they’re talking about”?

[Mr Osborne]

It went beyond that—my hon. Friend makes a good point—not only did the shadow Chancellor attack the IMF, but he also attacked in the speech that I have just mentioned the IMF’s acting managing director. So he laid into the Governor of the Bank of England a couple of months ago, and he is now laying into the IMF’s acting managing director. Anyone who disagrees with the shadow Chancellor, which means most of the world, has become his political opponent.

[Ian Austin]

rose—

[Mr Osborne]

Of course, I give way to one of the henchmen.

[Ian Austin]

I want to apologise to the Chancellor for something that I said yesterday. On who said what in 2008, I said yesterday that the Chancellor had praised the previous Government’s spending plans in 2008, despite now condemning what he refers as a decade of over-investment. I was wrong, and I want to apologise. In July 2008, it was in fact the Prime Minister who praised Labour’s then spending plans. He said:

“we are sticking to Labour’s spending totals.”

It was in 2007 that the Chancellor said that a Conservative Government would match our spending plans.

[Mr Osborne]

The hon. Gentleman should get better handouts if he is one of the shadow Chancellor’s close advisers. [Hon. Members: “Answer the question.”] I have answered the question. At the 2005 general election, we fought against Labour’s spending plans. In 2008, the year that he mentions, we came off Labour’s spending plans. Thank God that we did, because it has given us the mandate and the power to put the public finances back on track.

The extraordinary thing about the shadow Chancellor is that he takes credit for the things that went right. On Bank of England independence, he has completely written out of the script the then Prime Minister and Chancellor. He now takes sole credit for keeping Britain out of the euro, although, as far as I am aware—I am happy to take an intervention—the Labour party’s official policy is still that we join the euro in principle. Is that right? I do not know whether the policy has changed. [Interruption.] We have heard quite a lot from the Labour party in the past couple of hours about being on top of the detail. Surely, the shadow Chancellor knows what his party’s policy is on the euro. [Hon. Members: “He doesn’t.”] Oh, dear. Let me give him a clue. When I became Chancellor, I had to close down the euro preparations unit in the Treasury.

Of course, the shadow Chancellor takes credit, but he is nowhere to be seen when the discussion turns to the fiddled fiscal rules, the failed tripartite regulation, the doubling of the debt, the bank collapses and the destruction of our pensions—none of those things has anything to do with him at all. Now, he is at it again. This is what a member of the shadow Cabinet said a couple of weeks ago:

“he increasingly thinks his party is heading for the buffers and doesn’t want to be in the cab when the collision comes.”

His boss was called Macavity, and it turns out that Macavity has a kitten—son of Macavity. There is a reason for all this: because he cannot construct a credible story about the past that does not cast himself as a villain, he lunges forward in opposition from one incredible uncosted policy to another.

[Barry Gardiner (Brent North) (Lab)]

Will the Chancellor give way?

[Mr Osborne]

I will take interventions, but let me make this point.

Since this is an Opposition day, let us examine the latest idea of a £51 billion—£13 billion a year—unfunded commitment on tax. This means that the shadow Chancellor has presumably abandoned the Darling plan for this year, because the commitment was not funded in that plan, and that members of the Opposition Front-Bench team were not only too embarrassed to mention it at Treasury questions yesterday but, as we now know, they were not consulted. The shadow Cabinet was not consulted.

I will give way on this point. On television at lunchtime, the previous Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), was asked eight times whether he supported the policy of the shadow Chancellor and he did not give an answer. Perhaps the shadow Chancellor will tell us whether the last Labour Chancellor of the Exchequer supports his plan—yes or no.

[Ed Balls]

The previous Chancellor was the last man to cut VAT temporarily to get the economy moving. What is the right hon. Gentleman talking about? Let me ask him a very precise question. He says the cost of this temporary VAT cut, which I said should be in place until the recovery is secured, would be more than £50 billion. Exactly how does he get that figure, and how many years does that mean we will have to wait before the recovery is secured, following his reckless deficit reduction plan?

[Mr Osborne]

The figure is calculated like this: if we implemented it, we would be in a fiscal crisis. That would delay the recovery by at least four years. That is how I come to £51 billion.

[Several hon. Members]

rose—

[Mr Osborne]

I give way to the former forestry tsar.

[Barry Gardiner]

The right hon. Gentleman will recall that a year ago the predictions in terms of unemployment did not reflect the 510,000 new jobs which he boasted at the Dispatch Box today about having created in the economy. He will also remember that the OBR predicted 2.6% growth, which has not happened. How does he account for the fact that, despite the 500,000 extra jobs in the economy, growth has flatlined and the 2.6% growth predicted has not been achieved?

[Mr Osborne]

The hon. Gentleman draws attention to the 520,000 net private sector jobs that are being created. It is also the case, as we saw yesterday, that the tax receipts have not only held up, but are ahead of forecast. The IMF said that an interesting question arises when that is put alongside the GDP figures. These forecasts are independent. That is one of the fundamental changes that we made. The Office for Budget Responsibility is independent. It is also a central forecast, rather than a cautious forecast, as used to be the case. That was another important change we made. We shall see as the economic data come in. We should welcome the public finance data last week and we should certainly welcome the unemployment data.

I give way to my constituency neighbour.

[Graham Evans (Weaver Vale) (Con)]

I am grateful to the Chancellor. Does he agree that manufacturing is the key to the long-term prosperity of our country, and that under Labour the number of people employed in manufacturing halved?

[Mr Osborne]

Indeed. The share of manufacturing as a proportion of our economy halved as well. That is how unbalanced the British economy became. Financial services boomed—we all know that; manufacturing halved as a share of our economy. One of the things that we are seeking to do is rebalance our economy.

[Geraint Davies]

rose—

[Mr Osborne]

Let me make a little progress and then take some more interventions.

We are all being asked to vote tonight on the proposition put forward by the shadow Chancellor. We are all being asked to support his motion calling for a big unfunded tax cut. This is what the Financial Times commented when it heard about that. It said that the shadow Chancellor’s argument “increasingly sounds irrelevant”

and that it is

“favoured by those who are unwilling to face up to the true problems facing Britain’s economy today.”

The Economist said that the shadow Chancellor’s speech was

“steeped in cynical electoral politics, thinly disguised as an economics lecture.”

Well, there is always The Guardian, isn’t there? Not on this occasion. The Guardian said that the shadow Chancellor’s economic policy was the “wrong prescription”

and went on to say:

“The big job for Labour . . . is not to dream up a couple of policies but to work out a cogent position on the deficit”

and that there is

“No sign of that yet.”

No sign of a cogent position on the deficit—that was not a comment from the Government, the right-wing press or the IMF, but from The Guardian. That shows just how alone the shadow Chancellor is.

[Several hon. Members]

rose—

[Mr Osborne]

Let me make this point, then I will take interventions.

The position is worse even than that. Hon. Members might remember reading a couple of weeks ago about those leaked documents about project Volvo, the secret plan drawn up by the shadow Chancellor to rebrand his party. The president of Volvo Cars rushed out a statement saying:

“If only the Labour Party had been like today’s Volvos—dynamic, agile and innovative—perhaps the UK economy would have been in a better place than it finds itself today.”

[Kevin Brennan]

While the Chancellor is on that subject, can he give a simple answer to a question—yes or no? Did he have advance knowledge that The Daily Telegraph had obtained the shadow Chancellor’s private papers, or any advance knowledge of the stories that it planned to write—as he raised the issue, yes or no?

[Mr Osborne]

This is a debate about the economy. We all enjoyed reading those papers in The Daily Telegraph.

To get the better economy that we all want to see requires the three things that this Government have provided—

[Alec Shelbrooke]

Is it not also telling that after the Opposition have spent a year banging on about the American model and what the Americans were doing, we heard nothing today about the fact that President Obama had to introduce austerity measures because his massive input of billions into the economy did nothing except raise unemployment and increase the deficit?

[Mr Osborne]

The interesting thing is that in the United States the debate in the Congress has turned to discussions about the US budget deficit. The proposal from President Obama in his speech at George Washington university bears some striking similarities to the British Government’s plan, and is similar in pace, scale and composition between tax and spending measures. It shows that this is the discussion that the world is having, but it is not a discussion of which the shadow Chancellor is a part.

[Ed Balls]

rose—

[Mr Osborne]

Maybe he wants to be part of it.

[Ed Balls]

To follow up the question from my hon. Friend the Member for Cardiff West (Kevin Brennan), and because this is a serious matter, I would like to give the Chancellor a second opportunity to answer. I answered his questions and questions from the Government Back Benches on my conversations with the Leader of the Opposition. Did the Chancellor have any advance knowledge or sight of papers taken from me which went to The Daily Telegraph without my knowledge? I would like him to answer the question.

[Mr Osborne]

We all read those papers in The Daily Telegraph. They revealed that the shadow Chancellor knew before the then Chancellor of the Exchequer came to the House of Commons that the 10p tax rate that Labour Members all voted for would hit the poorest in our country.

[Kelvin Hopkins]

rose—

[Mr Osborne]

The hon. Gentleman may not have voted for it, but the rest of his colleagues did. That is the absolutely astonishing revelation from those papers.

[Kelvin Hopkins]

I hope the Chancellor will not describe me as a henchman. Writing yesterday, Lord Skidelsky said that taking £112 billion out of the economy in the next four years will be a massive fiscal contraction, and he described it as

“the royal road to stagnation, not recovery.”

What does the right hon. Gentleman have to say to Lord Skidelsky?

[Mr Osborne]

Of course there are economists, including Lord Skidelsky, who have made their views clear, but there are just as many—indeed, more—economists on the other side of the argument. The economic institutions that govern our world—the IMF, the OECD, and the European Commission, which does not govern our world, but produced a recent report on the British economy—all made the same point. We can set ourselves completely against world opinion, as the shadow Chancellor has done, because he cannot admit that the country had huge problems coming up to the financial crisis. He cannot do that or he would put himself centre stage. That is what this is all about, but the world has moved on and the Labour party has not yet moved on with it.

[Mr Redwood]

The Red Book says that current public spending will rise 3.8% this year in cash terms and it is running a little higher than that at present. Given that there is to be a public sector pay freeze, is it the intention that there should be a real increase in public spending this year? Does that not put the debate into some kind of context?

[Mr Osborne]

My right hon. Friend draws attention to the fact that although we have had to take very difficult decisions—everybody understands and sees that—we are not facing the sort of catastrophic scenario painted by the Opposition. The shadow Chancellor talked about Greece perhaps having to default and leave the euro, and as it is not in primary balance and it has a big budget deficit, that would lead to even more draconian cuts. The truth is that if we had not put in place a credible, measured, staggered plan to reduce the budget deficit, we would have been forced by the international markets into making much deeper cuts.

[Several hon. Members]

rose—

[Mr Osborne]

I have taken several interventions, and I will take some more after I have made a little progress.

The Government have put in place three measures: first, a credible plan to deal with the deficit; secondly, a plan for growth that supports the private sector and rebalances our economy; and thirdly—astonishingly, the shadow Chancellor did not mention this—a plan for the banking sector, to ensure that we deal with the problems we currently face while also preventing a repeat of the banking crisis in future.

Let me address each of those in turn. In terms of the budget deficit, our understanding is based on the following points. Britain has a large structural deficit; it emerged before the recession began; it will not go away automatically as the economy recovers; and it puts our whole economy at risk. We only have to look at what is happening in other parts of Europe to see that that is the case. Almost all the independent observers of the British economy agree with those points, including the crucial fact that we had a structural deficit before the crisis struck. The OECD and the International Monetary Fund estimate that before the crisis Britain had the largest structural deficit of all the G7 countries.

Tony Blair states in his memoirs that

“from 2005 onwards Labour was insufficiently vigorous in limiting or eliminating the potential structural deficit.”

[Interruption.] The shadow Chancellor says, “Rubbish.” I thought that he conducted his politics on the record, and I am not sure that Tony Blair would have agreed with that; the last time he checked, he was the Prime Minister and First Lord of the Treasury in 2005.

My predecessor as Chancellor, the right hon. Member for Edinburgh South West, says that by 2007

“we had reached the limits of what I thought we should be spending.”

What is the shadow Chancellor’s view? It is this:

“I don’t think we had a structural deficit at all”.

No one agrees with him on that; he is in complete denial.

[Andrew Selous (South West Bedfordshire) (Con)]

At that point in 2007, what did the then Government do? They increased spending by £90 billion, far above the level of inflation, and going against the advice we now know they got from the Treasury. Was that not seriously negligent?

[Mr Osborne]

The entire economic record of the previous Government was negligent, which is why no one is going to trust Labour with the economy again.

[Lilian Greenwood (Nottingham South) (Lab)]

I hear what the Chancellor says, but just before the collapse of Northern Rock in 2007 did he not write in The Times that his party would match Labour’s spending totals? Why is he now pretending that did not happen?

[Mr Osborne]

I have already been asked that question three times, and I have answered it, explaining that—[Interruption.] Well, I will repeat it. We fought the general election in 2005 arguing that Labour was borrowing too much. We came off Labour’s spending plans in 2008, in the approach to the last general election, and thank God we did, because it gave us the mandate to take the difficult decisions we have had to take.

[Several hon. Members]

rose—

[Mr Osborne]

Let me just make the following point before taking another intervention. The majority of Labour Members voted for the right hon. Member for South Shields (David Miliband) to be their leader. He did not get the job however, but this is what he would have said in the acceptance speech he never delivered, and it goes to the heart of the challenge we face:

“Step one is to recognise what is obvious: that we did not abolish the business cycle. We should never have claimed it. You can’t in a market economy. And public spending plans cannot depend on it. Nor can you write your own fiscal rules and then be the judge and jury for how they are calculated and when they are met.”

That is absolutely right, and it is why last May we created the Office for Budget Responsibility, a step that the shadow Chancellor opposed in Parliament when he was a Treasury Minister, although I hope his party now accepts it. That is also why a year ago we introduced the budget plan to get the deficit down and have a credible programme for recovery—and which is why we are having this debate today.

[Mr William Cash (Stone) (Con)]

The Chancellor’s analysis of what went wrong under the Labour Government is completely right. However, does he agree that our current strategy must be about growth as well as reducing the deficit through making cuts? I know he understands that and would like to achieve growth, but we cannot achieve it, either in our own economy or in Europe, if 4% of our GDP is taken up with the costs of over-regulation, as has recently been suggested. The bottom line is that we have to deregulate, but we cannot deregulate European legislation without overriding it, and negotiation is not working.

[Mr Osborne]

My hon. Friend is absolutely right that a crucial element of our strategy must be to undertake structural reform of the British economy in order to reduce regulation and the burdens on business and make our economy more competitive. We would have to do that in any case, even without the recovery from recession we are having to undertake, but the truth is that it has been made more difficult by the accumulation of all the red tape over the past few years. It is remarkable that when we propose important changes—although not changes that go as far as we would like—to employment tribunal law, Labour opposes them. Those are basic changes that would enable more people to be hired and to be in work, but they are opposed by the Opposition. [Interruption.] We can tell by Opposition Members’ reactions that they simply do not understand what it takes to create jobs in the private sector.

[Charlie Elphicke]

The Opposition not only want to hold back the growth agenda; they also have a series of unfunded spending commitments and go in for gimmicks and bandwagon chasing. They will not be a responsible Opposition, or electable at the next general election, if they carry on in this way.

[Mr Osborne]

My hon. Friend is absolutely right. In the last week alone, not only has the shadow Chancellor made a huge unfunded tax promise, but Labour voted against the welfare Bill, with its billions of pounds of savings. It is perfectly right for an Opposition to say, “I don’t agree with that, and I’ve got an argument with you on this,” but Labour’s voting against the entire welfare Bill was a catastrophic error of judgment, and we will remind it of its failure to reform the welfare system from now until the end of this Parliament. The Labour leader recently said that his party had become known as the friend of the welfare scroungers and the bankers. He was absolutely right about that.

The shadow Chancellor’s central argument was that the reason why we are undertaking this deficit reduction plan is because it is all part of some great partisan ideological plot. I therefore have a question for the shadow Treasury team: presumably therefore, the Bank of England is part of this plot? Is that the case?

[Mr David Hanson (Delyn) (Lab)]

It is a Tory plot.

[Mr Osborne]

So it is a Tory plot, is it, and the Bank of England is part of it? What about the IMF; is it part of this Tory plot? The right hon. Gentleman probably thinks the CBI is part of it.

What about PIMCO, the world’s largest bond fund: is it part of the Tory plot? It is based in Los Angeles, so it must represent the international branch of the Tory plot. It said this:

“We think the UK is implementing what is probably the best combination of fiscal and monetary policies”

in the western world. These groups—the serious commentators—have all come to the same conclusion as the coalition Government: that we need a credible deficit reduction plan to get our market interest rates right—to make sure that, even though we inherited a budget deficit higher than Portugal’s, our market interest rates are similar to those of Germany.

[Kate Green (Stretford and Urmston) (Lab)]

Who is paying the price for this approach to reducing the deficit? The Institute for Fiscal Studies recently pointed out that the inflation rate being experienced by the poorest families is 60% higher than that being experienced by the highest-earning families.

[Mr Osborne]

The truth is that the whole country has paid the price for the disastrous economic policies of the previous Government. There is no easy way to reduce the largest deficit in our history, but the Opposition oppose every single measure we introduce. That is incredible and it is precisely why they have been rumbled—rumbled by the serious economic press and by everyone else.

[Mr Aidan Burley (Cannock Chase) (Con)]

Is the truth not that the Opposition’s two policies—cutting VAT and halving the structural deficit over this Parliament, rather than eliminating it—mean just one thing: more borrowing? Does more borrowing not just mean one thing: us paying more interest? Is it not morally disgusting that when we came into government a year ago we were spending £120 million a day just to service the interest on their debt, which they now want to increase?

[Mr Osborne]

My hon. Friend is right. The debt interest payments would have increased to £180 million a day if we had not pursued our current policies. That became one of the largest Budget items under the Labour Government. Deficit reduction has avoided the interest payments that we would have had under Labour.

[Mark Durkan (Foyle) (SDLP)]

The Chancellor will be aware that Ireland is locked into a serious deficit reduction plan. He may also be aware that next week, as part of its budget for jobs, a targeted VAT cut to 9% will kick in for the tourism sector and last for 18 months. It follows similar cuts made by France and Germany to 7% and 5.5% respectively. Does he rule out targeted VAT cuts to support jobs and growth in particular sectors at the same time as deficit reduction, because that is what other countries are doing?

[Mr Osborne]

We put forward in the Budget targeted cuts for business. We are cutting corporation tax by 2% this year and a further 3% in coming years. We have put in place more generous research and development tax credits to help businesses. We have cut the small companies tax rate—

[Mr Hanson]

We supported that.

[Mr Osborne]

The right hon. Gentleman says that they supported it, but the plans I inherited from Labour’s March 2010 Budget, which presumably he voted for, were to increase the small companies tax rate. We reversed that and cut taxes. We are also taking more than 1 million low-paid people out of tax and trying to get the unemployed back into work.

I was in Northern Ireland on Friday, meeting the political leaders and visiting a very successful manufacturing business in Ballymena, and the point I make to the hon. Member for Foyle (Mark Durkan) is that we are consulting on the future of corporation tax rates there, reflecting the fact that it shares a land border with the Republic of Ireland, which has a much lower rate of corporation tax.

[Several hon. Members]

rose—

[Mr Osborne]

Let me make some progress before taking any more interventions.

[Chris Ruane]

From this side.

[Mr Osborne]

I have just taken an intervention from that side.

The first requirement to fix the mess is a plan to deal with the deficit. The second requirement is the plan for growth. While the shadow Chancellor was letting the debt build up, the underlying competitiveness of our economy declined and the UK fell from fourth place to 12th in the international rankings. More than 1 million jobs were lost in manufacturing. Regional inequality, which we heard about during Prime Minister’s questions, worsened during Labour’s 13 years in government as the gap between the regions increased. As I pointed out earlier, private sector employment in the west midlands fell. Those imbalances have become deeply entrenched and cannot be fixed overnight, but we are undertaking the long-term structural reforms necessary to make that happen.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

It is emerging that there has been a 17% increase in home repossessions. How can the Chancellor justify his plan to the families affected and say that it is working?

[Mr Osborne]

We have extended the mortgage interest relief scheme—I inherited a plan for it, too, to end—and of course are trying to avoid repossessions, but there was a large number of repossessions under the Labour Government, and that is because—[Interruption.] I certainly inherited a huge economic mess from the Labour party. The truth is that one of the problems we are having to deal is the enormous housing boom, which was bigger than that experienced in any other major western economy, including the United States of America. We are putting in place those structural reforms, cutting corporation tax, creating more apprenticeships than the country has ever seen, lifting the low paid out of tax, reforming our planning system, reducing the burden of regulation, accelerating education reform, introducing the green investment bank and passing the landmark welfare legislation.

[Fiona O’Donnell (East Lothian) (Lab)]

Will the Chancellor give way?

[Mr Osborne]

I will make some progress.

All those policies involved difficult decisions, but they have been opposed by the Labour party. There is one live example that I want to raise: public sector pension reform. The Government want to reform our public sector pensions system to ensure fairness for public sector workers and taxpayers. We asked Lord Hutton, Labour’s former Work and Pensions Secretary, to propose a solution. He produced an interim report and a final report. It is comprehensive, excellent and fair and the coalition Government back it. As everyone knows, we are in negotiations with the public sector trade unions on how it should be implemented. Sadly, a minority of union leaders seem more interested in strike action than in trying to reach a fair deal. At least their position is clear. What is the view of the Labour party? Complete silence. Will someone intervene and answer that?

[Kevin Brennan]

Will the Chancellor give way?

[Mr Osborne]

Right, what is the hon. Gentleman’s view of John Hutton’s report?

[Kevin Brennan]

The Chancellor is not asking the questions; I am intervening. Where is the Chief Secretary to the Treasury? Why is he going out in the middle of negotiations and breaching the good faith of those he is negotiating with? That is the question we need an answer to.

[Mr Osborne]

We are engaged in those negotiations, which the Chief Secretary and the Minister for the Cabinet Office are leading for our side. I have asked a very simple question: does the Labour party back public sector pension reform as set out by John Hutton? [Interruption.] That says it all.

[Chris Bryant (Rhondda) (Lab)]

Will the Chancellor give way?

[Mr Osborne]

Will he answer my question? No? I am not taking an intervention. [Interruption.] The question we have here was put by John Hutton himself—

[Nadhim Zahawi]

On a point of order, Madam Deputy Speaker. Should not the hon. Member for Rhondda retract the disparaging remark he has just made about the Chancellor?

[Madam Deputy Speaker (Dawn Primarolo)]

Nothing has been said that is unparliamentary, but some of the behaviour in the Chamber could be a little better than it is currently. That is not a point of order for me, but a matter for each Member of the House.

[Mr Osborne]

John Hutton said that he would like the leader of the Labour party

“to endorse the report I produced, yes, because I think it does strike the only fair balance”.

[Chris Ruane]

He would do—it is his report.

[Mr Osborne]

It is his report, Labour’s former Work and Pensions Secretary, and I want to know whether the Labour party backs it. [Interruption.] Unbelievable. Will the shadow Chancellor shake his head or nod?

[Ed Balls]

I set out our position on these matters very clearly on Sunday. We agree that we need pensions reform and are studying the detail of the Hutton report, as everyone is. We thought that the increase in contributions before it was published was a complete abuse of the report and that the way the Government are rushing to increase the age of retirement is deeply unfair, especially to women in their 50s. The whole handling of this by the Chancellor and the Chief Secretary to the Treasury has been totally and deeply shambolic.

[Mr Osborne]

Let me take that answer and dissect it. First, the shadow Chancellor deliberately confuses the state pension age with public sector pension because he does not want to answer the question. Secondly, he says that he is studying the Hutton report, but how long does it take him to read it, because it has been out for three months and an interim report was produced last year. Unbelievable.

I will end my speech shortly, because Mr Speaker requested that we ensure that many Members get into the debate. The third thing that is required, which was totally unmentioned by the shadow Chancellor, is a plan to reform the banking system and financial services. That is a central part of any British Government’s economic policy, but we heard not a word on it from him. We know why, of course. It is the same reason that we discussed on the deficit: he was the man who designed the regulatory system that failed. He was the man in the Treasury who designed the tripartite system of regulation; it was his idea, and it failed.

This is what the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), said—and he does not say this kind of thing very often:

“We set up the FSA believing the problem would come from the failure of an individual institution. That was the big mistake. We didn’t understand just how entangled things were. I have to accept my responsibility.”

When the former Labour Prime Minister accepts responsibility, is it not time that the man who was advising him accepted his responsibility, too, and admitted that the tripartite system failed and needs to be replaced?

[Ed Balls]

The tripartite system was put in place following the repeated failure of self-regulation and of the regulation of the Bank of England in the period before 1997. I have said on the record loud and clear that we did not regulate the banks in a tough enough way, but throughout that period the current Chancellor personally attacked me for being too tough with regulation and for going too far. The idea is to replace a tripartite system with a quartet system that is even more complicated and byzantine, and we will look at that in detail in the coming months, but the Chancellor is playing a very dangerous game.

[Mr Osborne]

The right hon. Gentleman did not apologise for the tripartite system; he defended it. That is what he just did.

Now, the shadow Chancellor has just—I think for the first time—set himself against the regulatory changes that we propose. He says that he wants to study them, but I set them out at the Mansion House not this year, but last year, so he has had more than one year to study them.

[Ed Balls]

I am really worried about them.

[Mr Osborne]

And he says that he is really worried about them.

So, there we have it: the shadow Chancellor is against putting the Bank of England back in charge of prudential regulation; against the financial policy committee; and against the financial conduct authority, which is going to be tougher on behalf of consumers. The independent banking commission, which includes experts from throughout the banking field, has been working on the issue and come forward with an interim report. We have backed the principles of that report, but what does the shadow Chancellor have to say? Absolutely nothing—absolutely nothing about the plan that he would put in place. That is the truth.

[Alison McGovern (Wirral South) (Lab)]

rose—

[Chris Bryant]

rose—

[Mr Osborne]

Let me conclude—

[Nadhim Zahawi]

Will my right hon. Friend give way?

[Mr Osborne]

I will certainly give way.

[Nadhim Zahawi]

That goes to the heart of this debate—the credibility that the shadow Chancellor talks about. The public are deaf to the Opposition’s arguments because of their political opportunism and the cynical way in which they are dealing with the most important issue facing our nation.

[Mr Osborne]

My hon. Friend is absolutely right, and I am glad that I gave way to him so that he could make that important point.

[Alison McGovern]

Will the Chancellor give way?

[Mr Osborne]

Let me conclude—

[Chris Bryant]

Come on!

[Mr Osborne]

I think that the hon. Lady is the Parliamentary Private Secretary to the former Prime Minister, and given that he will never be here to speak for himself, she must speak for him.

[Alison McGovern]

I thank the Chancellor for giving way, and I am proud to be the PPS to my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown).

The Chancellor was so busy yesterday calling me “new” that he did not answer my question, and he did not listen to the shadow Chancellor just then or answer his question, either. Will he explain how his increased complication of the regulatory system will prevent further bank failure?

[Mr Osborne]

Of course, I welcome the hon. Lady to her—[Interruption.] I will answer the question that she puts. I have merely observed in the past that being the Parliamentary Private Secretary to someone who never comes to Parliament is not a very onerous job, but that is good, because she can think up important questions to ask me.

Our judgment, with which the hon. Lady is entitled to disagree, is this: what was missing from the tripartite system was an ability to assess systemic risks throughout the economy. No one was looking at overall debt or leverage levels—[Interruption.] The shadow Chancellor says, “Rubbish”. When the Royal Bank of Scotland wanted to buy ABN AMRO after the credit markets had closed and after the run on Northern Rock, the regulatory system allowed RBS to do so. That is what went wrong, and if the right hon. Gentleman wants to go on defending the system that led to the biggest banking crisis in our entire history he can be my guest.

[Ed Balls]

When we reformed the Bank of England in 1997, we introduced a second deputy governor for financial stability. It was the job of the deputy governor in the Bank of England to monitor those things, and what has the Chancellor now done? He has added a third deputy governor, so there are now going to be three, and that is a more complex system. He is making a political case, but I do not know whether he even understands the financial and economic case.

[Mr Osborne]

What I understand is that the system the right hon. Gentleman put in place to ensure financial stability completely failed, and the scales have fallen—

[Margot James]

rose—

[Andrea Leadsom]

rose—

[Mr Osborne]

Let me conclude now.

The scales have fallen from the eyes of Labour MPs. They realise that they have a shadow Chancellor who has to spend the next four years defending his record, and they are completely silent as they realise that they are going to be talking about the past, not the future.

[Chris Bryant]

Will the Chancellor give way?

[Mr Osborne]

I am not giving way. Let me conclude my speech.

That is because the shadow Chancellor is a man—

[Chris Bryant]

Give way!

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Can we be a little calmer? Mr Bryant, I know you are very excited, but I am sure that people will give way.

[Mr Osborne]

The shadow Chancellor is a man with a past, but no ideas for the future. The Leader of the Opposition may be uncomfortable having him in the shadow Cabinet, but we are not, because he is going to be a living reminder that people can never trust Labour with the economy again. Meanwhile, the rest of us have got to get on and clear up the mess he left behind.

14:35

[Mr Nick Raynsford (Greenwich and Woolwich) (Lab)]

May I draw attention to my interests as registered in the Register of Members’ Financial Interests?

My remarks will concentrate on the housing market, their theme being that that sector, which is fundamental to the healthy operation of the overall British economy, and after showing good signs of a recovery a year ago, is currently stagnant. It is in an extremely parlous position, and there is no evidence of the growth that is fundamental to delivering the jobs and the future prosperity that we need, but while the Government continue with their current policies, we will continue to see a seriously underperforming housing market which, in turn, will contribute to a seriously underperforming British economy.

The interrelationship between the housing market and the wider economy is widely understood. The recession of 2008 had its origins very much in housing. We saw the beginnings in the American subprime housing crisis; the contagion spread rapidly; and it was no coincidence that Northern Rock constituted the first evidence in the UK of the problems that were to engulf us. The crisis was the product of unsustainable lending that had fuelled an unsustainable bubble in this country and a number of others, and the consequences were dire.

That was not the first time we have seen such a process of adjustment after unsustainable growth in the housing market. It has been a pattern over the past 40 years, because there were growth bubbles in the 1970s, the 1980s and the mid-2000s. However, unlike the adjustment after the bubble of the Lawson boom in the late 1980s, the consequences for the public of the recent adjustment—which was painful in many ways and had a dramatic impact, as house prices fell by some 20% and the output of new homes fell by slightly more than a half—were far less damaging and severe than those of the previous recession of 1990-91.

Repossessions have been mentioned, and the following is very telling. Although in 1990-91 repossessions reached some 75,000 annually, with the disaster and tragedy for all people affected matched of course by a huge incidence of negative equity, this time, although the fall in the value of houses was more extreme, the level of repossessions was very much lower—peaking at about 40,000 and falling away, although, sadly, the evidence is that it is rising again—and the problem of negative equity did not blight the lives of millions of people as it did during the 1990s. The difference was that the Government and the Monetary Policy Committee had recognised the importance of swift and clear action to respond to the unprecedented challenges of the recession—through low interest rates plus a series of measures designed to restore confidence in the market, and through public sector investment to help to mitigate the impacts of the declines of private investment and people to retain their homes rather than suffering repossession. All those actions helped to mitigate the impacts of recession.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

I recognise that the low interest rate is one of the reasons that the number of repossessions was so low. On the other hand, the Monetary Policy Committee’s remit was to tackle inflation, and yet we are now seeing the challenges that an ongoing low interest rate present to people on fixed incomes, whom he seeks to defend because they are suffering as a result.

[Mr Raynsford]

I will not go into a detailed diversion on the whole issue of inflation. The Governor of the Bank of England has made very clear his view that the inflationary factors are not such as to create a fear of long-term damaging consequences and that it is right and appropriate to maintain the low-interest regime to ensure that we do not damage further the prospects for growth—the main theme of my remarks.

[Kelvin Hopkins]

I am listening to my right hon. Friend with interest, and I agree with what he is saying. While the interest rate reduction has helped on this occasion, on the previous occasion under the exchange rate mechanism strategy the deflationary effects of high interest rates created 1 million extra unemployed, and that unemployment, certainly in my constituency, caused many people to hand over their keys and walk away from their mortgages.

[Mr Raynsford]

My hon. Friend makes an important point. These factors are all interrelated. The lower impact of unemployment in this latest recession, compared with those of the 1980s and the 1990s, is undoubtedly one of the factors that has contributed to its having less severe consequences.

A year ago, before the Chancellor presented his first Budget, we were seeing recovery in the housing market. New housing starts were beginning to rise and confidence was returning, and it was reasonable to expect that real growth would be sustained through 2010 and 2011. Instead, the market has stalled. Prices are static or slightly falling. There has been a continuing very low level of starts, and consumer confidence is at catastrophic levels. For only the third time in its 37-year history, the GfK NOP consumer confidence barometer has been below the -30% level. That is an indication of just how devastating is the lack of confidence in current market circumstances.

Why are we in this situation? In part, it is the consequence of the Chancellor’s overall economic strategy and the way in which he is managing the British economy and damaging confidence. The confidence issue is not unique to the housing market. It is a much wider issue, as everyone will recognise, although it has a devastating consequence for the housing market. The situation is also the consequence of maladroit policies being pursued by the Government. I would be interested to know how the Chancellor approaches the Localism Bill, which his colleagues from the Department for Communities and Local Government are taking through Parliament with the confident claim that it will devolve more and more control to local neighbourhoods to be able to say no to developments that they do not like. As we heard in his latest Budget, he wants the default position on housing and other planning applications to be yes, but I am afraid that the truth is that most of the communities who have been given the prospect of far greater control over planning decisions want the default position to be no. There is a fundamental tension between the growth aspirations that he talks about and the actions of this Government, which are in many ways damaging growth.

[Henry Smith (Crawley) (Con)]

Does the right hon. Gentleman concede that during the last decade of the Labour Government housing starts were at their lowest since the 1920s because of top-down planning control that did not work?

[Mr Raynsford]

The hon. Gentleman should be aware that during the period leading up to the recession we saw a continual increase in housing output. Net additions to the housing stock—the measure favoured by the DCLG as the best and most accurate measure—showed growth of 10,000 to 15,000 a year from 2001 to 2007. In 2007, net additions to the housing stock, at over 200,000, were the highest for 20 years. That was the position: there was a growth trend. We were seeing increased housing output and getting near to the target of 230,000 homes that the Barker report had indicated was necessary. All that has been put at risk. The number of new starts is now only just over 100,000; consumer confidence is absolutely shattered, as I have described; and the confidence of developers is severely damaged by the fear of such maladroit changes to the planning regime.

We have also seen inept cuts in public expenditure. The Homes and Communities Agency played an absolutely vital role in helping the housing sector through the crisis of the recession and giving confidence back to developers through schemes such as Kickstart and HomeBuy Direct and investment in housing associations. All those programmes have been cut back, except one. Six months after HomeBuy Direct was cut, the Government realised that they had made a terrible mistake, so they rebadged it as Firststart, or something like that. However, I am afraid that the others have gone, and the investment levels of the Homes and Communities Agency, at 65% below what they were under the previous Government, mean that the outlook for affordable and social housing is extremely grim.

We have a Government who talk about growth, but their actions are damaging to growth. The housing market, as a microcosm of the overall economy, shows that while current policies continue we have no prospect of getting the growth we need, the homes we need, and the jobs that will come from that, because the housing market has huge multiplier consequences for the economy as a whole. I hope that the Chancellor will not continue to base his case merely on the arithmetic of deficit and will look at what is happening in the real economy and the damage that his policies are doing.

14:47

[Sajid Javid (Bromsgrove) (Con)]

I found many of the comments in the shadow Chancellor’s speech absolutely astounding. He began by talking about economic illiteracy despite the facts that he was in the Treasury when the previous Government announced that they had abolished boom and bust, and just a few days ago he proposed an unfunded cut in VAT costing £13 billion a year and £50 billion over the course of the next four years—a £50 billion increase in our national debt. Clearly, when he was talking about economic illiteracy, he was talking about himself.

The truth is that in 1997 Labour inherited a golden legacy. National debt was low, growth was robust, and the budget deficit was a third of what it is today and falling rapidly. Now we find ourselves in a situation that could not be worse. The national debt has grown from £350 billion in 1997 to £920 billion today. Servicing that debt costs £43 billion in interest this year—more than we spend on the defence of our country or on the education of our children—and, despite the effect of the fiscal actions that this Government are taking, it will rise to almost £70 billion in four years’ time.

[James Wharton (Stockton South) (Con)]

My hon. Friend is making an excellent point about the levels of debt that the Government inherited. It is also important to put on the record that many economists and observers of the national finances say that the debt may be significantly higher, depending on how we measure it and which liabilities we take into account. The situation we inherited, as bad as it sounds in his description, could be even worse if we factor in all the liabilities that the previous Government left behind.

[Sajid Javid]

My hon. Friend is absolutely right. There are some very reliable estimates of unfunded liabilities of central Government standing at over £1 trillion, which would more than double the national debt—not to mention private finance initiative liabilities potentially worth £300 billion.

How can we prevent this from happening again once this Government have brought down our debt? There is a possibility that some time in the future, the public may, against their better wisdom, elect another Labour Government. Perhaps we should consider capping the national debt at a percentage of GDP, so that future Governments who think that they can spend like there is no tomorrow are held back. I am pleased to announce that on 12 July, I will present a ten-minute rule Bill, provisionally titled the national debt cap Bill, to suggest just such a measure.

We have heard a lot from the Labour party about the cuts being savage and reckless. It is easy to make those accusations without looking at the facts. The fact is that the cuts have not even started yet. The first fiscal year of cuts will be this year. It is important to go into the specific numbers. There will be cuts of 0.6% in real terms this year, 1.1% next year, 1.3% the year after and 0.8% in 2014-15. That averages out as a cut of about 0.9% in real terms each year. That is a total cut of 3.7% in real terms. Although such a cut cannot be dismissed, that is the absolute minimum that is necessary to bring sanity back to our public finances.

[Mr David Anderson (Blaydon) (Lab)]

The hon. Gentleman has gone through the figures. Will he say what they will mean in reality for public sector workers in Bromsgrove? How many will lose their jobs?

[Sajid Javid]

What it will mean for all workers in Bromsgrove, including public sector and private sector workers, is that there will be more jobs. They are essential to restore economic credibility. As a result of the announcement of the Government’s credible plan, interest rates are lower in Britain than they were before. Importantly, despite the deficit still being at 10% of GDP, which is higher than in Spain and many other European countries that are facing problems, our interest rates are almost on a par with Germany’s.

If hon. Members want to talk about savage cuts, why do we not consider the great example of Denis Healey? The country was brought to its knees and a bankrupt Britain was ordered by the International Monetary Fund to make cuts that amounted to 3.9%, not over three or four years, but in one year. If that is not a good enough example, let us consider what is happening in the United States, which failed to put its house in order when it had the opportunity and did not introduce a credible plan to tackle its deficit. As a proportion of GDP, its deficit and its national debt are not too different from ours. It is now being forced to introduce cuts in one year of 3.8% in real terms. It is no wonder that the IMF, the CBI, the Federation of Small Businesses and the OECD are all behind us.

[Henry Smith]

My hon. Friend makes a powerful point about the United States, where unemployment is rising because it failed to tackle its deficit early enough. In contrast, in my constituency, Siemens has just announced 600 new jobs. That is proof that our Government’s policies are starting to work.

[Sajid Javid]

I absolutely agree with my hon. Friend.

If we want to make the cuts less painful, that is possible. This does not all have to be about losing jobs. I noticed yesterday that local councils are still advertising for walking co-ordinators, obesity strategy officers, cycling officers and energy island administrators. If the public sector wants to make the cuts less painful, it has the power to do so.

Hon. Members talk about the unfairness of the cuts, but let us look at some of the changes that the Government have boldly introduced. We have put a cap on the amount of benefit that people can claim at the equivalent of about a £35,000 gross salary. What is unfair about that? Why should a family on benefits receive more than the average working family receives in salary? We have put a cap on housing benefit to ensure that claimants cannot live in better accommodation than ordinary, hard-working families. We recently suggested a cap on how much someone living in social housing can earn. There are Opposition Members who are earning a household income of more than £100,000 a year and who continue to live in social housing for about £175 a week. That is unacceptable and the public will find it unacceptable too.

The Chancellor asked why the Opposition do not have a policy on public sector pensions. I suggest that one reason is that the leader of the Labour party was elected and put in place by the trade unions and that many Labour Members get the majority of their funding from trade unions. I would therefore expect nothing else from them.

What alternatives do we have? That question brings me back to economic illiteracy. The shadow Chancellor seems to think that we can force the bond markets to buy our bonds. He seems to think that despite this country being forced to issue £4 billion in bonds a week—that is the amount we borrow plus the amount we have to refinance—and despite the competitive nature of the bond market, bond investors will just purchase our bonds willy-nilly. That is unacceptable economic illiteracy. The truth is that bond investors have a choice. Because of that, we are stranded and have no choice but to deal with the deficit.

In my last two minutes, let us look at the countries that have failed to take action. I have already mentioned the United States, which had huge quantitative easing programmes of $600 billion and $1.7 trillion. It has reached the ceiling on its debt cap and is in serious trouble. It will shortly have to follow similar plans to ours. The shadow Chancellor mentioned the eurozone. He was right to point out the problems in Greece, but wrong to suggest that he has never supported membership of the euro. It is the policy of the Labour party to join the euro, and its last manifesto offered a referendum on the euro. The problem with the euro was created by political dishonesty. Politicians in Europe were not willing to tell the truth about the euro and say that there could not be a single currency without fiscal union.

I suggest that there is similar political dishonesty from the Labour party. It is a party that, like Alice, lives in Wonderland. It believes that one can keep spending without any consequences and that one can abolish boom and bust.

14:57

[Pamela Nash (Airdrie and Shotts) (Lab)]

It is said that there are three stages of a Government’s life. First, they blame their predecessors for all the wrongs of the world, including the decisions that they are making themselves. They then get into their stride and take responsibility for their own policies. Eventually, they make decisions that make the public unhappy, and things go downhill from there. I suspect that this Government may get through all three stages rather quickly.

As we have heard, today marks a year since the Government gave their first Budget. I hope that this anniversary marks the beginning of the Government entering the second stage and taking responsibility for the pain that they have inflicted on families in my constituency and throughout the country over the past 12 months.

We have heard repeatedly from Government Members that the previous Labour Government were wasteful with taxpayers’ money. That is simply not true. The Government should stop patronising the electorate and stop using the unhelpful credit card analogy. The national debt is in no way analogous to a credit card. The balance sheet contains both assets and liabilities. The Labour Government paid for additional infrastructure, roads, schools and hospitals. Even so, until the collapse of Northern Rock, we had a lower national debt than we had inherited from the previous Tory Government in 1997. We should ask how much our assets are worth compared with our liabilities, as one would if one inherited a home worth £200,000 with a £20,000 mortgage on it. The next generation will receive not only the debt, but the assets. One example is Building Schools for the Future.

Government borrowing was invested in production, such as the planned loan to Sheffield Forgemasters, which would have aided an export-led recovery. The country would have seen a return on that investment. Instead, this Government took yet another decision that led to the stagnation of growth and the rotting of assets, which will be passed on to the next generation. That is typical of Government policy over the past year. They have made quick, deep cuts that have saved a little money in the short term, but they have had no adequate plan for the future and blame the Labour party for the consequences.

Labour’s bail-out of the banks was universally seen as essential to combat the effect of the global financial crisis on Britain. I will concede that mistakes were made on our part in banking regulation, but the Tories in no way opposed our measures at the time. In fact, until recently deregulation has been central to Tory policy. For months after the collapse of Northern Rock, the Prime Minister continued to promote bank deregulation. He stated that plainly in a speech to the Institute of Directors in April 2008.

It is, of course, more comfortable for the Government to blame everyone else, but it is time they took stock of the effect that they are having on the people of this country. For example, since last year’s Budget consumer confidence has clearly collapsed, with the figures consistently showing consumer spending dropping. That drop in personal spending power is the first since the 1980s.

[Margot James]

Does the hon. Lady not accept that there is bound to be restraint on the part of consumers considering the enormous level of household debt? Should not the Government learn from the public? The public are holding back, and the Government need to hold back.

[Pamela Nash]

I would argue that the Government’s policies in the past year have done nothing to increase the confidence of this country’s consumers. The British Retail Consortium and KPMG’s retail sales monitor shows that the total value of retail sales last month represented

“the worst drop in total sales since we first collected these figures in 1995…high inflation and low wage growth have produced the first year-on-year fall in disposable incomes for thirty years.”

Worse still, according to the BRC the main cause of inflation is not just wages or consumer-driven increases but external shocks such as the VAT increase.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I agree with many of the points that the hon. Lady is making in her thoughtful speech. However, my recollection of last year’s Finance Bill debate is that the House divided on a Plaid Cymru and Scottish National party motion to overturn the decision to increase VAT, and the Labour party abstained. Can she explain why?

[Pamela Nash]

I cannot explain why, but I hope that our shadow team will answer the hon. Gentleman’s query at the end of the debate.

The VAT increase has already had a considerable effect on stretched budgets in homes throughout the country. It has hit the poorest in our society hardest, as have this Government’s two Budgets as a whole. It has meant that people are living in fear for their personal domestic budgets, as they do not know what the future will hold. The decision to increase VAT, a regressive tax, illustrates the priorities of the Tory-led Government.

The Chancellor’s claim in the Chamber a year ago today that the emergency Budget was “progressive” was frankly laughable. The Institute for Fiscal Studies has confirmed that it was regressive, and that half a million more children in the UK will end up in relative poverty by 2013. That is disgraceful. The Government are feeding the cycle of poverty and repeating the mistake of Thatcher’s Government in the ’80s. The Prime Minister stood at the Dispatch Box today and claimed that his Government were helping people out of poverty, but the experts beg to differ.

Young people are particularly affected, and they have a right to feel victimised by the Government. There have been a series of failures, leading to their generation being hard done by. Thousands of young people will now be saddled with up to £40,000 of debt after completing a degree. I am glad that my constituents still benefit from Government-funded higher education in Scotland, but even they leave university with considerable debt from the living and material costs of what is usually a longer term of four years at university.

When a young person graduates from uni, they then have to find a home. Unfortunately, the average age at which a person in the UK can afford their first home has risen to 37 under this Government. The national drop in house prices has had a smaller effect in Scotland, as the prices were much less inflated originally than in the south of England. Despite that, Scots are still just as affected by the difficulties in obtaining a mortgage without the considerable deposit of about 10% that is often now required.

After leaving university with so much debt, people have to cope with low and frozen salaries, if indeed they are lucky enough to get a job. Many remain without a job, as unemployment is hitting young people and Scotland in particular. We had the lowest unemployment rate in the UK in 2007, but we are now closer to the highest after four years of the SNP’s budget mismanagement.

The scrapping of the future jobs fund was yet another massive blunder by the Government. To label it a waste of money and say that the jobs created were not real is frankly offensive. I have met numerous future jobs fund workers in Airdrie, Newarthill and Shotts who enjoyed their six months in the programme, learned essential skills, improved their self-confidence and, in many cases, ended up creating a role for themselves and being kept on. At the very least, they were helped to find a similar job once they left their placement.

Unfortunately, the new Work programme is more likely to make the poor poorer than it is to get Britain back to work. There are two major problems with it. First, the promise that it will give 2.4 million unemployed people jobs over the next five years depends entirely on economic growth, evidence of which remains to be seen. There are currently 2.43 million people unemployed and 2.4 million out of the labour force, but in the last quarter there were only 469,000 vacancies. Secondly, the Work programme operates on a payment-by-results basis. Although I welcome the fact that good results are required for taxpayers’ money to be spent, in today’s limited job market are not private companies much more likely to pick individuals who are not long-term unemployed?

The majority of unemployed people are looking for a job. Many have the wrong skills, or are in the wrong place, and unfortunately they have little hope of gaining funding for retraining at the moment. The housing market also makes it almost impossible for them to relocate. With limited means, people are supposed to pay for increased food bills and sky-high energy bills. Despite the fact that I now spend almost half my time in Westminster, away from home, I still received a letter last week, like many people in Airdrie and Shotts, telling me that my electricity and gas bill is going up by £20 a month.

Fuel bills are also rocketing, and people are rapidly finding themselves struggling to cope. At a recent meeting with my local citizens advice bureau, we discussed the fact that the people who are now coming to us for advice are not just those on benefits or very low salaries but people in a variety of salary brackets, who are seeing their wallets empty much earlier in the month. If those on half-decent salaries are struggling, how are those on benefits and the minimum wage even beginning to cope?

The Government have spent their first year in power causing successive growth forecast reductions and prolonging the effects of the recession on both families and businesses, and a generation of young people has been put on the scrap heap. When are the Government going to stop blaming everyone else and find a plan B that will get the UK working again?

15:07

[Jackie Doyle-Price (Thurrock) (Con)]

It is a pleasure to follow the hon. Member for Airdrie and Shotts (Pamela Nash), who spoke with considerable passion about the plight of some of her constituents. However, I am sure she will recognise that the best way of tackling the poverty that she described is by getting our economy working more effectively, incentivising people who want to create wealth and spreading more jobs. That is the way to tackle the problems that she articulated.

On that note, I congratulate the Chancellor of the Exchequer and the Treasury team on sticking with the tough decisions that will rebuild our economy and prevent it from spiralling further into debt, and in so doing lay the foundations for future growth. We must stick with our plan. There is no need for a plan B.

Let us get this correct: we inherited an economy built on credit and public spending. That is not a climate that will encourage wealth creation. We cannot keep taxing private enterprise in order to fund an expanding public sector. We need to incentivise our wealth creators and set the economy free. It is clear from recent economic figures that the economic fundamentals are strengthening. Indeed, John Cridland, the director general of the CBI, said this weekend that we are well into recovery, even though it does not quite feel that way.

[Lilian Greenwood]

I understand what the hon. Lady is saying, but does she not share our concern that although we are supposed to be in recovery, the growth figures keep being downgraded?

[Jackie Doyle-Price]

I was just getting to the explanation for that, which is the one that my right hon. Friend the Chancellor of the Exchequer gave at the Mansion House last week. He dissected the growth figures, which showed that although financial services were contracting, in the rest of the economy we were in a period of growth. We need to rebalance our economy, and to take it away from a large financial services sector and more towards manufacturing and other sectors.

I shall continue, because time is brief and many colleagues want to contribute, by bringing the debate to life with some real-life examples, and by drawing the attention of the House to some areas where we are making considerable progress. First, there is a genuine improvement in manufacturing—the Government amendment mentions an increase in activity of 4.2%. I have the privilege to represent a considerable amount of manufacturing industry, which is situated particularly in the west Thurrock area and in Purfleet. Among the large operations in my constituency is a Unilever plant that manufactures, among other things, Hellmann’s mayonnaise, Flora margarine and other spreads. The company very recently relocated its manufacturing operation for jars of Hellmann’s mayonnaise from the Czech Republic to Purfleet. Why? Because it was more cost effective. Do not let it be said that the UK cannot compete internationally for manufacturing presence.

[Owen Smith (Pontypridd) (Lab)]

The latest manufacturing output numbers show a clear decline, not an increase. There was an increase over the last year, but that was largely because people restocked after running their inventories down during the crisis. Does the hon. Lady concede that manufacturing now is going in the wrong direction?

[Jackie Doyle-Price]

The hon. Gentleman wilfully ignores what I just said. I gave one illustration of inward investment and an improvement in manufacturing in this country. That decision was taken by a thriving company because it is cheaper to produce here than in eastern Europe. He should look at the evidence instead of constantly talking the economy down.

Jobs are increasing. My father has lived all his working life in Sheffield, and many hon. Members are familiar with the economic problems in South Yorkshire. He has spent his entire working life as a builder and labourer. For much of the past decade, he struggled to find work, and has been in and out of work on short-term contracts. When he was laid off last year, he did not hold out much hope of finding more work, given the prevalence of eastern European gangs in that area of work, but last week, the day before his 63rd birthday, he re-entered the world of work, in Sheffield, so it is clear that the economy is indeed moving in the right direction.

[Paul Blomfield (Sheffield Central) (Lab)]

Will the hon. Lady give way?

[Jackie Doyle-Price]

I shall press on, if that is okay.

The Government’s measures will encourage more people to fill newly emerging jobs. I am delighted that in the last Budget, we began to move towards increasing the income level at which income tax is paid, which will make the most difference at the margin. With our welfare reforms, that will incentivise people to get back into work.

There has also been an improvement in investment. The biggest inward investment in the UK is for the London Gateway port, which is being constructed in the borough of Thurrock. That will add to the area’s existing port facilities at Tilbury, which this year celebrates its 125th anniversary—we all wish it many more years of success—and Purfleet, where the roll-on/roll-off container business is again booming. Even before DP World opens, the tonnage landed in Thurrock exceeds that of Dover and Felixstowe. That is a good sign that in my constituency at least, the economy is definitely moving in the right direction.

Having spoken of all that is going well, I would like to tell my colleagues on the Treasury Bench about matters on which the Government need to raise their game, so that we make the most of the economic opportunities that are available to us. First, we need to do more to encourage investment. We need to make investment easy and to ensure that there are no barriers in its way, particularly in the planning system. Some firms have had to pay absolute fortunes to protect species on brownfield sites, and section 106 agreements seem to be used by local authorities, and indeed on occasion by Government Departments, as cash cows to fund projects that go beyond the benefit needed. Our overall objective is to encourage economic growth and job creation, so we need to ensure that those measures do not act as barriers to investment, but encourage it.

On the banking sector, I thoroughly support the objectives behind Project Merlin and agree that there is a need to ensure that our banks lend to people who want to buy their own homes and to businesses. However, we need to bear in mind that businesses are much less risk averse, and that they are looking at other ways of financing investment where possible. We must avoid putting the taxpayer in the position of lender of last resort for projects that are riskier than projects that we should support.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

I thank the hon. Lady for giving way before she leaves the subject of Project Merlin. She will have seen the lending figures for the first quarter. To put it mildly, the figures for lending to small and medium-sized business are disappointing. Does she believe, as I do, that the Government need to take firmer action to ensure that the banking sector lives up to its Project Merlin commitments?

[Jackie Doyle-Price]

We should absolutely encourage more lending to sustainable businesses and business propositions, but we should not encourage banks to lend just to meet that target. Lending must be based on real demand, which, as I said, is falling, because firms are finding other ways to fund investment. It must also be based on an appropriate degree of risk, because it is inappropriate for the taxpayer to stand as guarantor of such loans.

In conclusion, there is more realism in the economy. We are building an economy on real wealth creation, not credit or an inflated public sector. There is much to celebrate, despite the best efforts of Opposition Members to talk our economy down. They must consider the impact of their words. Confidence is central to economic growth—confidence is all, and every negative message undermines it. When confidence is undermined, the recovery will slow. This is not about partisan games; it is too important. We all need to recognise the real progress that we are making.

15:17

[Mr Iain Wright (Hartlepool) (Lab)]

The hon. Member for Thurrock (Jackie Doyle-Price) mentioned last week’s speech by the Chancellor at the Mansion house, which came at the end of his first year at the Treasury. He concluded his speech by saying:

“I believe that sentiment of cautious optimism has been borne out by events in the twelve months…The British economy is recovering.”

If current economic performance is cause for cautious optimism, I dread to think what deteriorating performance and cause for pessimism would look like.

The fact of the matter is that the Chancellor has failed even on his narrow policy on growth and investment. In his Budget a year ago today, the Chancellor stated:

“The Government has set out a credible deficit reduction plan that should provide businesses with the confidence they need to plan and invest, supporting the necessary recovery in business investment.”

That simply has not happened. Business confidence is almost 12 percentage points lower than it was a year ago, according to the confidence monitor report by the Institute of Chartered Accountants in England and Wales, of which I am a member, and Grant Thornton. Business investment in the first quarter of this year, according to the Office for National Statistics, was 7.1% lower than the previous quarter and 3.2% lower than a year ago. As the hon. Member for Thurrock said, bank lending to small and medium-sized enterprises—a necessary precondition for growth—is behind schedule, as set out in Project Merlin by the Business, Innovation and Skills Secretary.

Retail sales––an important barometer of the health and confidence of the economy, because the retail sector constitutes one tenth of the economy and employs 11% of our work force—fell sharply by 1.6% last month, which was much worse than commentators’ estimates. That reflects consumers’ lack of confidence for the future.

Ministers often cite growth in manufacturing, but the purchasing managers index for manufacturing fell to a 20-month low of 52.1 last month. Since a welcome boost in January, the purchasing managers index figure has fallen every month this year, indicating a worrying and slowing pace of growth in the manufacturing sector. After a relatively robust growth spurt immediately after the recession—largely the result of the Labour Government’s actions—growth has effectively stalled and stagnated for the past six months. I am pleased that my hon. Friend—my good friend—the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) is here because I have to conclude that growth predictions are being revised down faster than Middlesbrough’s chances in the championship next season.

In the Budget a year ago today, the Chancellor forecast that growth would be 2.3% this year, 2.8% in 2012 and 2.9% in 2013. No credible economic forecast predicts that, and nor does the Chancellor. In November, he predicted that growth this year would be 2.1%, and then, in his March Budget, he forecast that growth in 2011 would be 1.7%. The OECD has recently forecast that growth will be 1.4% this year, not 2.3% as forecast one year ago, and 1.8% in 2012, not 2.8%. Every time the Chancellor stands at the Dispatch Box, confidence in the economy falls. He should stay out of the House more often.

This comes at a time when public service cuts and public sector redundancies have not necessarily started to gain pace, so the problem of no growth is only likely to get worse. The economic growth forecasts are below those for France, Germany, the US and even Japan after its natural disasters and the eurozone after its economic difficulties. Why on earth is this the case? Why is the British economy not bouncing back in the way that our competitors seem to be doing? In his opening remarks in announcing last month’s inflation report, the Governor of the Bank of England stated:

“the recent pattern of revisions to the projections over the next year—downward to growth and upward to inflation—has continued”.

The Governor went on to state that risks and negative factors within our economy—high levels of inflation, squeezes on wages and household incomes, weak levels of activity in the economy and uncertainty about the speed at which net exports will pick up—are persisting.

These factors are persisting for far longer than the Treasury and the Bank of England foresaw. Inflation has been much, much higher for a longer period than was anticipated, exports are not as buoyant as they were forecast to be at this stage, especially given the weakness in sterling, and economic activity is weaker than was expected. The Governor concluded:

“the outlook for growth and inflation is likely to remain unusually uncertain. No one knows how the economy will evolve over the next few years; nor how policy will need to respond.”

Given those comments and the huge and persistent uncertainties that exist, is it not ridiculous for the Chancellor not to concede that an alternative economic approach might be necessary?

Let us contrast what is happening in the UK with what is happening elsewhere in comparable economies. In Germany, the export-led recovery is leaping ahead, despite a slow-down in global economic growth. Domestic demand and private consumption are increasing, contributing to growth, wage increases are taking place as well as rises in employment levels, and Government finances have benefited from strong economic growth, to help offset the fact that Government debt in Germany rose significantly in 2010 to stabilise the banking sector. Despite all the deep-seated problems that it is facing, even Europe is expected to grow significantly faster than us, at 2.5% this year and 2.5% again the following year.

These economies will grow faster than ours and put themselves in a better position to take advantage of a growing global economy in the years to come, because they realise that a single-minded focus on deficit reduction, to the exclusion of everything else, particularly a disregard for the long-term social and economic consequences of such a move, is detrimental to the long-term interests of their economies. In his remarks today, the Chancellor mentioned PIMCO. Only yesterday, Bill Gross, the manager of PIMCO, which is the world’s largest bond fund company, said that to remain on the road to economic recovery, the US needed to focus on job creation instead of fiscal tightening and budget reforms. The conclusion he came to is pertinent to the British experience.

[Claire Perry (Devizes) (Con)]

I am grateful to the hon. Gentleman for giving way because I have just joined the debate—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I know that the hon. Lady is an enthusiastic Member, but she should not just walk into the Chamber, give it about five seconds and then intervene. It is not fair. It is up to the hon. Gentleman whether he gives way, but it is discourteous to everyone else who wishes to speak.

[Claire Perry]

I apologise, Mr Deputy Speaker, but I have been tied up with constituency business. I just wanted to say that I welcomed the reference to Bill Gross, who, as the hon. Gentleman will be aware, also described the UK’s economy as sitting on a bed of nitroglycerine ahead of the election.

[Mr Wright]

I hope that the hon. Lady, who has not listened to the rest of the debate, will take into account the conclusion drawn by the manager of the largest bond fund company in the world. He stated that the budget reforms

“are long-term requirements for a stable and healthy economy, but the move towards it, in fact, if implemented too quickly, could stultify economic growth.”

That seems an eminently sensible conclusion.

[Alun Cairns (Vale of Glamorgan) (Con)]

Why should we accept the hon. Gentleman’s version of events when the OECD, the CBI, the Institute of Directors and the Federation of Small Businesses are calling for fiscal tightening in order to ensure the stability in the economy necessary to provide growth, as is happening?

[Mr Wright]

The growth projections are falling rapidly, and have been downcast three times. When I speak to my constituents and businesses in Hartlepool, they are concerned about a lack of confidence and a lack of investment in the future of this country that will undermine our long-term ability to fight the global downturn.

[Mr Anderson]

Is it not the case that, like me, my hon. Friend has been here before, when the Conservative party did exactly the same thing not just in our lifetime, but our fathers’ lifetimes? We know that the actions that the Conservative party takes will result in ordinary people paying the price for its failures.

[Mr Wright]

My hon. Friend represents a seat in the north-east, as I do, and he knows full well that our region has borne the brunt of this recession, like we bore the brunt of the 1980s recession. It does not have to be like this. We have got enormous economic potential in our region that can really contribute to wealth creation in our country, but that is simply not happening.

[Richard Graham (Gloucester) (Con)]

Will the hon. Gentleman give way?

[Mr Wright]

No, I am not going to give way, because I do not have long left.

There is an acute need for a more balanced economic policy, focusing not merely on deficit reduction, but on incorporating job and wealth creation measures, on weeding out inefficiencies—that is true—on raising our productivity, on improving our infrastructure and on rewarding enterprise and ambition. In fact, a more balanced view would help to reduce the deficit faster. An emphasis on growth and jobs would increase output, raise tax receipts and reduce benefit bills, thereby helping to cut the debt. Given the lack of growth in the economy and persistent uncertainties about inflation, economic activity and net exports, for the good of our country and economy, will the Chancellor concede that he might—just might—be wrong?

15:27

[Stephen Williams (Bristol West) (LD)]

The hon. Member for Hartlepool (Mr Wright) rightly set much of his speech in the international context. I want to start by doing much the same, by comparing the UK’s record with that of our fellow EU member states, particularly the unfortunately named PIGS—Portugal, Italy, Greece and Spain—around the Mediterranean periphery. We have all seen or read about the extraordinary scenes in Greece in recent weeks and hours. The Greek Government debt currently has a triple C rating from Standard and Poor’s, which is as low as it can go without it effectively being a recommendation that no one should buy, whereas the UK has a triple A rating. That might surprise hon. Members given the underlying economic data on our budget deficit. Even after the difficult decisions that the coalition Government took in their first year in office, our budget deficit is currently 9% of GDP for 2011, as compared with the eurozone, where the figure is 4.3%, and Greece, whose budget deficit is lower than the United Kingdom’s, at 8.4% this year. That surprising difference in bond ratings is accounted for by the fact that people who want to lend to countries are just the same as those who want to lend to companies and individuals. They are looking for the confidence and certainty that comes when an institution that is in trouble realises that it is in trouble and takes the necessary measures to get to grips with it. That is what this coalition Government are doing.

[Sheila Gilmore (Edinburgh East) (Lab)]

Is the hon. Gentleman concerned that Ireland and Greece, the two countries with the greatest difficulties, have both gone through austerity programmes that were not enough, both had to have further bail-outs and implement more austerity programmes, and both still have difficulties? Does that not give him pause for thought about whether austerity programmes will lead to recovery?

[Stephen Williams]

I specifically mentioned Greece, and those who have been following events in Greece from afar will know that the reason why the international community is so concerned about Greece is that it has felt until recently that the Greek Government have simply not got to grips with the plan, or have announced a plan but not adhered to it. That is the key difference. This Government have announced plans—difficult plans—to deal with deficit reduction and we are sticking with them, no matter how painful they might be.

[Margot James]

My hon. Friend mentions the views of the bond market, and the previous speaker talked about what PIMCO thinks. Is he aware that PIMCO said just days ago,

“we think the U.K. is implementing what is probably the best combination of fiscal and monetary policies”?

[Stephen Williams]

I thank my hon. coalition colleague for her intervention, which reinforces my points.

The Government response to the stark situation that we inherited in May 2010 has been to tackle the deficit—the yawning gap—in our public finances, but also to build a business climate that is conducive to growth, because as several hon. Members have said, it is through growth that the economy will provide the resources to get our finances back on track.

[Clive Efford (Eltham) (Lab)]

Will the hon. Gentleman give way?

[Stephen Williams]

I have taken two interventions, so I will take no more until near the end, perhaps.

This Government do have a growth strategy: we want to rebalance growth, including rebalancing it geographically. We have just heard about the plight of the north-east. Perhaps it was a failure of the last Labour Government not to rebalance the economy sufficiently, away from the south-east of England and towards other regions and nations of the United Kingdom. Perhaps the hon. Member for Hartlepool (Mr Wright) ought to have a stiff word with some of his colleagues. After 13 years, the economies of some of our regions were still very fragile and unable to withstand external shocks. We also wish to rebalance the different sectors of the economy, away from over-dependence on the City of London, important as it is, and the resources that it generates towards more sustainable parts of the economy, in particular growth from digital media. The Government have announced the establishment of a network of enterprise zones around the country. My local enterprise partnership—the West of England Local Enterprise Partnership—has just announced that it will be based around Temple Meads station in my constituency, where we want to build the country’s leading media hub and business growth area, with a particular focus on digital media.

We also want future growth to be sustainable in a green way. This country has a huge economic opportunity to grow a low-carbon economy. In the Energy Bill, which is just completing its passage through the House, we have something quite revolutionary: the green deal, which gives every household in the country a fantastic opportunity to retrofit their houses to reduce energy bills and help us cope with meeting the demanding climate change targets that we have set, on which there is cross-party consensus and agreement. There is also a fantastic opportunity for British business, and for people to be trained in the skills needed to retrofit our housing stock. On a rather larger scale, the Government have also announced—the Chancellor confirmed this in the Budget—the creation of the green investment bank, in order to provide finance for schemes that might otherwise find it difficult to secure funds in the market. As the country’s green capital, the city of Bristol has a good case for being made the future home of the green investment bank.

A further way in which the coalition Government are going to make a fundamental difference in turning the economy around and reducing unemployment is by making work pay. My hon. Friend the Member for Thurrock (Jackie Doyle-Price) mentioned that the coalition agreement would deliver the Liberal Democrat policy of reducing income tax and taking out of income tax completely those people who are earning up to £10,000 a year. That will be achieved before the end of this Parliament. Our programme of welfare reform and the introduction of universal credit was mentioned earlier by the Chancellor in his confrontation with the shadow Chancellor. The Opposition rather recklessly voted against the entire Welfare Reform Bill.

Reform is also needed in the banks. The Opposition motion calls for a reintroduction of the tax on bankers’ bonuses. It is worth pointing out, however, that the people receiving large bonuses will now pay 50% income tax, rather than 40%, that national insurance has doubled for those on the higher rate of tax, and that employers will pay more national insurance on those bonuses as well. The taxation on those bonuses will certainly increase.

[Alec Shelbrooke]

If a banker pays 50% income tax on his bonus, does not that represent a greater tax take than if the money were left in the bank, where it would be liable to only 28% corporation tax?

[Stephen Williams]

My hon. Friend makes a good point.

What should we do with RBS and the Lloyd’s banking group, which were bailed out in 2008 adding £67 billion to our national debt? Earlier this year, I wrote a pamphlet on what the Government should do with their holdings in the banks. It was called “Getting your share of the banks: giving the banks back to the people” and it was published by the think-tank CentreForum in March. My proposal was to give those shares to every citizen in our country and, when they sold them in the future, the Government would get back the cost of their investment in 2008 while the citizens would keep the result of any growth. That would mean that we would reduce our national debt by £67 billion over time, and that every citizen in the country—each of us who has felt the pain of bailing out the banks—would see some benefit from this upside to the situation. I am pleased that my right hon. Friend the Deputy Prime Minister has been endorsing that proposal today on his trade mission in Latin America.

What have we heard from the official Opposition today? What is their grand idea for turning round the country’s finances and getting our economy back on track? They have opposed all the cuts that we have debated in the Chamber. I have never heard a Labour Member of Parliament stand up and say that they are in favour of any of the measures in our Bills, whether in this Chamber or in the Bill Committees on which we serve. Today, the Opposition have come up with a completely reckless proposal for an unfunded cut in VAT. It has no economic justification and there is no evidence that it would make any difference to the economy. Let us contrast that with the record of the coalition Government. We are determined to have a fair tax burden, and we have plans for sustainable growth and deficit reduction. Both plans have international credibility. That is what this country needs right now: credibility at home and abroad, rather than the reckless opportunism that we have seen from the Opposition today.

15:38

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

This is a timely economic debate, and I am pleased that the Opposition have tabled this motion for a whole-day debate at this crucial time. We are one year in, and we can now begin to form a view of whether the Government’s policies are working. It is always difficult for the Opposition, particularly on issues such as employment and the impact of economic policies on the well-being of our country and our constituents, when they have to come out and be negative about what is being achieved. Inevitably, and much to the resentment of Opposition Members, that leads to a chorus of unjustified remarks from across the Chamber that we want to talk the economy down or that we do not want good news. In the name of our constituents, we are desperate for good news. We want good news on employment, for example.

[Richard Graham]

The hon. Gentleman said that his constituents were desperate for good news. May I refer him to the very useful economic indicators update provided by the Library? It shows that consumer confidence rose by 10% in May, that manufacturers’ output expectations have risen by 13%, and that the EU economic sentiment indicators for Britain are up by 2.6 points. Does he not agree that those are all positive indicators? I would welcome him sharing them with his constituents and all his colleagues on the Opposition Benches.

[Mr Robinson]

All we know at the moment is what has happened and many forward-looking forecasts are no better than those of the OBR, which was set up by the Government to provide a so-called independent forecast. Let us be clear that we welcomed and accepted that. All we can look at is what has been achieved; we will come on to the forecasts in a few moments. If we show a moment’s hesitation or doubt about them, I hope that Government Members will understand why. I followed the first 10 years of the Labour Government very closely, and I do not think that we ever had to revise any forecast three times in a matter of six months. If we do not listen to the forecasts and do not treat them as if they had already been achieved, I hope that the hon. Gentleman will understand why.

There are some things we can welcome. We can welcome the good effort in job creation in the private sector. According to the Chancellor this afternoon, that means 520,000 jobs, so let us welcome that. The trouble is, however, that the OBR says—this is the bible we have to go by—that before the end of this Parliament, 200,000 more people are going to be unemployed than it originally thought. We have 520,000 on the one hand and 200,000 more on the other. There is always a negative balancing out the positive in all these areas. If we take inflation, for example, it has gone through the roof at 4.5%. Manufacturing output has been a good effort up until the last quarter, but it is now down again. It is not surprising that an intake of jobs in the private manufacturing sector has supported that output, built on the back of the previous Government’s policies. [Interruption.] No, they do not like to hear it, but it is a fact. Why did more than two thirds of the private sector increase in employment take place before the spending round announcement? It happened on the back of the reflationary policies of the previous Labour Government.

[Alun Cairns]

rose—

[Mr Robinson]

I will give way in a few moments.

Those are the facts and that is the situation. If we look at the balance sheet of the Government’s economic policy in its first year, we see that even in the two areas where the Government had until recently done relatively well, the signs are now bad, so I find it hard to believe that there are any factual or objective grounds for thinking that they have done well overall or that their policies are going to work. The Chancellor continues to say that the plan is working, but all he is really saying is that he is retaining the support of those he set out to gain support from in the first place by adopting an essentially old-fashioned, deflationary bankers’ policy of cutting demand in the economy. That is what he set out to do and that is what he is doing. The prospects of it succeeding are poor.

[Alun Cairns]

rose—

[Mr Robinson]

I will take the intervention later, if I may.

We are now at the stage where we have to make up our minds whether the Government’s economic policies are going to work or not. In a very good article published in today’s edition of The Guardian, Robert Skidelsky argues that the choice between the two economic policies has to be made by anyone wanting to make a serious stand on these issues. He says that the theories or sets of policies have been set out by all the famous, much-lauded figures in the Bank of England, the International Monetary Fund and all the rest of them. If we are dealing with what economists think—it is not the only thing that matters—we should also mention people like Stiglitz and Krugman who say that the policy is wrong.

If we look at the history, we find that it tends to be the people who are not part of the conventional wisdom or not part of the establishment, so to speak, who get it right and that the establishment nearly always gets it wrong. There is no attempt to get out of the box into which the Government have so constrained their policies—they like it and feel it is their comfort zone. I am talking about bankers and international organisations that are intent on deflation, which they are inflicting in the present crucifixion of the Greek economy—where they effectively continue to throw good money into failed policies.

Let me briefly read from the article:

“The Keynesians…among whom I number myself”—

and I am happy to be there, too—

“will have to eat their words if growth picks up and unemployment falls in the next 12 months”.

That is to say, if the Government’s policy comes right, the debt falls and deficit crisis is met, we could then celebrate the success of the policy. On the other hand, it might not work—and it is time for Members to decide where they stand on this. I happen to believe that there is no evidence to suppose that it will, much as I would like it to work: it will not work; it never has worked in history. It is not working in Greece or in Ireland. Greece has had two further doses of deflation and two goes at decreasing VAT, and it is still not working. It is getting worse, because they are not dealing with the root of the problem, as the shadow Chancellor made clear in his speech.

What could be done? Given that the Government will not want to change their policy, they have only one way out: another heavy incidence of quantitative easing. This time, the Government will have to stand up to the Bank of England for once in their life, and say, “We want this money to be put to productive ends.” We create the money, but nobody knows where it goes, except to make bankers’ profits in overseas investment markets. The Government should say, “We want the money to be made available through a bank”—such as the green investment bank, which could be much expanded—“to the British economy for, above all, investment in small and medium-sized enterprises.” The argument from the Governor of the Bank of England will be, “We can’t distort capital markets, you know. This is interfering in the market.” Of course it is; it is an attempt to avert the wastefulness that we have seen from so many of the policies so far.

Where should that money be channelled? In a very good contribution earlier, my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) said that the housing market is dead on its feet at the moment. The new housing market is, I think, at an all-time low. The money, therefore, should go into housing, and into transport, which is desperate not for HS2 but for sensible things such as the four-tracking of the line between Coventry and Birmingham, about which I know something, and at other points such as in Wales. The other good thing would be that the railway policy could be executed much more quickly and fully.

Will the Government change course? No. Will their policy work? No. Are there alternatives? Yes. I understand why they do not want to touch VAT, but they could at least get the Governor of the Bank of England to do quantitative easing of a large scale, £200 billion, and ensure that, instead of being dissipated into overseas markets, a good part of that money is used for the productive sectors of the British economy. That would make a big difference and be a start to the change of policy that we need from the Government.

15:47

[David Rutley (Macclesfield) (Con)]

The emergency Budget will certainly be remembered for robustly tackling the record Budget deficit, but I believe that its reputation will become much bigger, because it started a shift in the debate on public finances away from spending and cuts to how real value for money must be delivered for taxpayers. That is why it will be seen as a rare game changer in how Government expenditure is measured, managed and even talked about.

We have seen other big Budgets before: Geoffrey Howe’s in 1981, which tackled the rapid inflation that was wreaking havoc in the economy at that time; Nigel Lawson’s 1988 Budget, which significantly lowered the burden of taxes on individuals and created greater incentives for businesses to invest in the UK.

[Mr Denis MacShane (Rotherham) (Lab)]

In my constituency, according to the National House Building Council, building started on just four new houses in the first quarter of this year. Is it part of the game change to destroy for ever housing construction in our nation?

[David Rutley]

No, it is part of the lamentable legacy of the Labour party. We are cleaning up the mess; you are just talking about it. [Interruption.] Does the right hon. Gentleman want to intervene again?

However, no other Chancellor of the past 50 years had to face a budget deficit of the scale that confronted the current Chancellor after the election. He was bold and did not duck the challenge. The comprehensive spending review in September last year built on the foundation, and set out the details of how the Government would bring spending under control and achieve their fiscal mandate. As we have heard in the debate, the Government’s action has won plaudits from the IMF and OECD among others. More importantly, on the doorstep during the local elections, I found a pragmatic acceptance that strong action is needed. One year on, the principles underpinning the emergency Budget continue to win the argument about how the deficit should be tackled.

Clearly, in facing the nation’s finances, the opportunity and the Chancellor’s ambitions go well beyond reducing costs. The economic imperative and the tangible change in public mood represent an important moment in time that must be seized. The Government have a once-in-a-generation opportunity to put the spotlight on value for money and bring about a cultural change in the way in which it is delivered to taxpayers, and in confronting that task they are actively learning from positive role models in the public sector. When I worked as a senior executive at ASDA, the aim of lowering the cost of living for customers motivated colleagues throughout the company. Cost control was a vital part of the culture that was committed to delivering value for money to our shoppers. At board meetings, customer outcomes and the return on investment were what counted, not how much money should be thrown at a problem. That commitment creates value for money for hard-working families day in, day out.

Earlier Governments have found it difficult to engender a similar culture in the civil service and our public services, but the sad fact is that the last Government did not even try. Their ill-conceived experiment with “big government” backfired, and despite a period of unprecedented economic growth, the United Kingdom was left with a structural deficit—before the economic crisis—that was consistently bigger than the eurozone average for five years. Just as worrying, but not so often talked about, is the fact that public sector productivity fell by 3.4% between 1998 and 2007, at a staggering annual cost of £58 billion, which equates to 41% of last year’s deficit. That is a legacy that will continue to haunt the Labour party in its struggles to rebuild the credibility of its economic policy.

The coalition Government, however, are committed to putting value for money at the centre of fiscal policy and creating a new yardstick by which future Governments will be judged. They are driving major changes in three main areas: institutions, management tools and, most important, the hearts and minds of both the public and our public servants. They are making strong progress in each of those areas.

The creation of the independent Office for Budget Responsibility is one institutional change that will constitute a lasting legacy from the present Chancellor. The creation of an independent body to forecast and analyse public finances means that Government will no longer be able to cook the books or indulge in what Lord Turnbull, giving evidence to the Treasury Committee, described as “wishful thinking”. The OBR will give both Parliament and the public greater confidence in Government spending plans, and a greater ability to hold the Government to account.

Beyond institutions, change is needed in the way in which public finances are managed. That requires new objectives for civil servants, in which value for money is a critical factor in the judging of their performance and their ability to achieve their promotion objectives. I am pleased to note that the Government are raising the bar in terms of the minimum standard of financial understanding that is required for civil servants. In the past, senior civil servants have been more concerned about avoiding bad headlines or the size of their budgets than about finding more effective ways in which to deliver public services. Those days are now long gone.

Sir Philip Green’s review of expenditure showed that Government need to improve dramatically the way in which they gather information on spending across Departments, and the new efficiency and reform group in the Cabinet Office is identifying ways of tackling that task. It plans to improve the co-ordination of procurement across Government, which will lead to savings of about £3 billion a year. Initiatives like those will help to reverse the downward trend in public sector productivity that we saw under the last Government.

However, the focus on value for money must not be only about the things that Government buy. Public sector pay and benefits represent the largest cost for any Government, and the present Government have had little choice other than to focus seriously on public sector pay and push ahead with much-needed pension reforms. That must happen if a more level playing field is to be created between the public and private sectors which will encourage business-led job creation while also making the taxpayer’s bill more affordable.

The ultimate test of whether value for money has become a real focus of attention lies not in institutions or management tools but in whether there has been a fundamental change in the way that people talk about public funds. I am pleased that the debate is now turning to results and outcomes and not just to the price that is paid for them. Government Members want to move away from and beyond the tired debate about cuts and spending to focusing on value for money for taxpayers.

In the motion, the Labour party looks forward to what it calls “strong” economic growth. Personally, I prefer to think about sustainable economic growth as a far better objective. We saw what happened under the Labour Government when they pressed for strong economic growth fuelled by uncontrollable spending. Labour seems to believe that return to growth is an automatic certainty or a God-given right. One year on, it has completely failed to articulate a credible alternative to explain how it would address the economic crisis. It is as though it has taken a leaf out of the Tommy Cooper school of economics and believes that growth will return magically, “Just like that.” [Interruption.] I will work on it. We on the Government side know that growth will be earned through the hard work and dedication of thousands of businesses across the country. The Government’s deficit reduction plans are creating a platform for the sustainable, private sector-led growth that the country so urgently needs.

15:56

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

One year on, it is now abundantly clear that last year’s emergency Budget hit women much harder than men. Some 72% of the cuts are being borne by women, whether they are cuts in the health in pregnancy grant, in tax credits, in Sure Start maternity grants or in child benefit. What is more shocking is that it did not even occur to the Chancellor at the time to consider the impact that his savage cuts would have on women and that he failed to carry out his legal duty of undertaking an equality impact assessment before his policy decisions were taken. Indeed, such was the blatant unfairness and scale of the impact on women of the Chancellor’s first Budget that the Fawcett society stated that it showed

“a whole new level of disregard for the importance of equality law and everyday women’s lives.”

The Chancellor’s first Budget also showed a whole new level of disregard for children and families, flying in the face of the Prime Minister's promise to be the “most family-friendly Government”. One year on, I am particularly concerned about the impact on child poverty—an issue that directly links to the impact of the cuts on women. Although good progress was made by the previous Government, the number of children living in poverty remains unacceptably high. Figures recently published by the End Child Poverty campaign suggest that almost one third of all children in Newcastle are living in poverty. The coalition’s policies of cutting funding to Sure Start centres, removing the health in pregnancy grant, cutting tax credits, increasing VAT, cutting housing benefit and dramatically reducing local government funding will have a serious impact on household incomes, which I fear will lead to more children growing up in poverty. My fears are backed up by the OECD, which recently reported:

“Progress in child poverty reduction in the UK has stalled, and is now predicted to increase, and so social protection spending on families...needs to be protected.”

Of course, the cuts imposed by the Chancellor’s first Budget are also hitting home at a time that is already particularly difficult for women.

[Kwasi Kwarteng]

Will the hon. Lady give way?

[Catherine McKinnell]

I will give way just this once, as I know that many of my colleagues want to speak.

[Kwasi Kwarteng]

Can the hon. Lady tell the House what kind of savings the Labour party would have made in public spending?

[Catherine McKinnell]

This is not the opportunity for me to set out what the shadow Chancellor has already set out—the way in which we would tackle the deficit. I do not want to take up precious time that my colleagues want to spend giving speeches in this very important debate.

Women are particularly affected in the north-east, where about 46% of all working women are employed in the public sector. Those women face being one of the 30,000 public sector workers anticipated to lose their jobs in the region; most of those job losses will affect low-paid female workers. They also face pay freezes and the ever-increasing costs of balancing work with family life.

[Claire Perry]

Will the hon. Lady give way?

[Catherine McKinnell]

No, I will not, because I want to leave time for other Members.

It is not just women who are bearing the brunt of the cuts and stalled economic growth. One year on, after the Chancellor’s first Budget, a key concern in the north-east remains youth unemployment, with about 19% of 16 to 24-year-olds in the region not in education, employment or training, compared with 15% nationally. Of particular concern is the fact that, over the past 12 months, the number of 18 to 24-year-olds claiming jobseeker’s allowance has increased by 10% in the north-east.

Since being elected to the House, I have been a passionate advocate of the important role that apprenticeships can play in supporting young people into the workplace, thereby helping to prevent a lost generation of young people as a result of the Government’s policies. However, Ministers need to recognise that there is a real difference between making limited funding available for apprenticeships—I welcome that and it has been promised—and ensuring that good-quality apprenticeships are offered by businesses in the areas of our economy where we require those skills.

I implore the Government to consider some serious and genuine risks today. We should not allow the number of apprenticeships offered to override the importance of their quality, thus ticking the box but failing to provide young people with a decent start to their working lives. To reach such targets, we risk simply converting existing jobs into apprenticeships, when in reality no genuine new employment opportunities are created.

Following the abolition of the regional development agencies—today, we mark the anniversary of that dreadful decision—we have lost the joined-up thinking of bringing the business community, educational providers and RDAs together in a working partnership to ensure that we prevent the over-supply of certain skills and the under-supply of the skills that we need in the areas that we rely on for future growth. The result will be a failure to stimulate growth to ensure that we have the skilled work force of the future and to reach out to those young people who are most in need of the best start to their working lives.

While we are focusing on the impact of the Chancellor’s first Budget in June last year, I should like to turn briefly to two policies that he announced that are particularly relevant to Newcastle. In his Budget speech, the Chancellor announced the creation of 21 new urban enterprise zones, one of which will be located on Tyneside. I should like him to clarify today what progress has been made on this issue. Will he explain, as I did not receive an answer to the question that I asked during the Budget debate, what steps he is taking to ensure that the zone does not simply lead to jobs being transferred from one part of Tyneside to another?

A further issue is that of tax incremental financing, which the Chancellor promised to rollout in his Budget this year, to give cities such as Newcastle borrowing powers to finance much needed job-creation schemes and regeneration projects. In Newcastle alone, it is thought that about 5,000 jobs could be created over the next two decades if the council—now safely back in Labour hands—could borrow about £13 million for important projects such as Science Central and the redevelopment of the East Pilgrim street area. That is particularly important at time when we have lost the investment of our RDA, One North East, and when private sector investment for many major projects has dried up. Yet it appears that cities will not be given those powers until 2014, thus risking three years of wasted growth opportunities and lost jobs. Why are the Government dragging their feet on this important issue, when we need such support more than ever?

As we are marking one-year anniversaries, I point out that the Prime Minister promised last May to create Ministers for big cities such as Newcastle to breathe economic life into the towns and cities outside the M25, by ensuring that Whitehall blockages to economic development were dealt with. Thirteen months on, we are still waiting for further details or confirmation of that announcement. Unlike the previous Administration, no one in the Government is championing the needs of Newcastle and the north-east—a task that was so ably undertaken by my right hon. Friend and colleague the Member for Newcastle upon Tyne East (Mr Brown), during his time as the Regional Minister. Indeed, the vacuum has recently been criticised by the North East chamber of commerce, which said:

“We’d be really keen to see the Coalition appoint City Ministers. We don’t have any Cabinet or Ministerial-level representation from the North East. And having senior Government Ministers not only aware of the issues, but actively resolving them is absolutely the right thing to do.”

I realise that the Conservatives are fairly limited in their knowledge and experience of the north-east and might find it difficult to find a candidate for my city and region, but will the Minister say when that policy will materialise, or will it be another example of a broken promise?

One year on, this Government’s policies are hitting women, children and families, as well as young people, in places such as Newcastle that can least withstand it. I hope the Chancellor will listen to the concerns expressed today, stem the damage and help to return our north-east economy to its trajectory of growth.

16:05

[James Morris (Halesowen and Rowley Regis) (Con)]

I shall focus my remarks on the challenges faced by the black country economy and the west midlands to illustrate some of the challenges that the Government face over the next period.

As the Chancellor pointed out, one of the most extraordinary statistics in the west midlands economy is that even in the boom years we saw a 6% decline in private sector jobs in the west midlands, compared with 3.4% growth in private sector jobs nationally. Worse still, after 13 years of Labour, not only was unemployment higher in the west midlands, but productivity was down, the skills gap was widening, the rate of innovation in the west midlands was poor compared with other regions, the rate of new business formation was weak, and the imbalance between the west midlands region and the rest of the country was growing. There was a lack of support for manufacturing businesses and a considerable decline in private sector jobs.

When the coalition Government took over one year ago, that was the picture that we faced in relation to the dynamics of the west midlands economy. It would have been madness to continue to pursue the policies that had comprehensively failed the west midlands region. Recently, I held a manufacturing summit in Cradley Heath with the Sandwell chamber of commerce. Companies such as Westley Plastics reported that they were enjoying strong growth in their order book and seeing considerable growth in export opportunities. Whatever the Opposition say, it is manufacturing that is leading the recovery in the west midlands and in the entire country.

In the west midlands and the black country we still have a vibrant manufacturing and industrial base. Companies in my constituency such as Somers Forge and Thompson Friction Welding are innovative, dynamic and capable of creating the high-quality jobs that we desperately need in the west midlands, but we must do more.

[Owen Smith]

May I point the hon. Gentleman to unemployment figures for the west midlands? We have heard a lot about those 520,000 net private sector jobs. As the hon. Gentleman no doubt knows, the west midlands has not seen any of those jobs. In fact, the last figures showed that minus 6,000 jobs, public and private, had been created in the west midlands.

[James Morris]

As I said, one year in, following the policies being implemented by the coalition Government, we are beginning to see clear signs that private sector jobs are coming back into the west midlands after 13 years in which, despite quarter after quarter of economic growth, we saw substantial declines in private—

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

rose—

[James Morris]

I will not give way. I will make progress.

The Government faced a considerable challenge when they came to power. With the growth plan that they have begun to implement, in addition to the important steps that they are taking on deficit reduction, we are moving in the right direction. In the west midlands and the broader black country economy, skills is the No. 1 issue that we need to tackle. It is holding business back. We are investing considerably more in high-quality apprenticeships, involving the voluntary sector and other parts of the economy in making sure that we build a proper skill base in the black country and the wider west midlands economy. We are beginning to build better relationships between small and medium-sized enterprises and institutions of further education, such as Halesowen college and Sandwell college. We are beginning the job that the previous Government did not address, and making sure that we match appropriate supply of skills with demand in the local economy.

As “The Plan for Growth” recognises, we also need a more local approach to stimulating economic development. That is why I have been a strong advocate for the black country local enterprise zone. I have been working with its representatives to define the best way to drive economic growth in the black country, and on how to maximise the potential of the Chancellor’s Budget announcement on enterprise zones to stimulate new investment and new jobs and ensure that the local enterprise partnership is able to drive economic development.

[Mr Love]

There is a lot of evidence from the 1980s about employment zones, and it shows that the cost of the jobs created was very high compared with alternative models, and that all that employment zones did was shift employment around the borders of the LEP. What leads the hon. Gentleman to believe we will be more successful this time?

[James Morris]

There is huge potential to stimulate growth in the black country. Especially now when public spending is limited, we need to find creative ways to stimulate economic growth in the various areas of the black country, and we might do so by starting with one enterprise zone, which then develops into more of them so that we seed the black country economy and drive real economic growth. That is what we need to achieve, and I believe that the LEPs have a better chance than many other possible methods of tackling some of the deep-seated economic problems we face in the west midlands.

As many Members have pointed out, bank lending is still an issue; getting credit to the right places in order to stimulate the economy is still a problem, and it may hold back the recovery. There are organisations in the broader black country, such as the Black Country Reinvestment Society, that are developing innovative models to get microfinance to small and medium-sized enterprises, but we need to do more to fill the credit gap. I welcome the Chancellor’s Project Merlin announcement, particularly its emphasis on encouraging the banks to invest in the regional economy, because they have a moral obligation to do so. As the Chancellor recognises, the banks have a critical role to play in developing the regional economy, but if there continue to be problems with the availability of credit we might need to consider measures such as counter-cyclical regulation, encouraging the banks not to hoard capital but to get it to the small and medium-sized enterprises in areas such as the black country.

The key decisions that the Government have taken over the past year to tackle the deficit, to restore confidence in Britain’s financial institutions and to build a platform for growth have been crucial in getting the country back on an even keel, but we need to build on what the Government have achieved so far. We must continue to drive innovation. That is particularly important in areas such as the black country. We must address how we can sustain innovation and build on the capabilities that are in place in advanced manufacturing. We also need to continue to support and develop our manufacturing base in the west midlands, so that technologies and vital jobs do not get shipped abroad. Labour market productivity in the black country is increasingly globally competitive, and we need to ensure that businesses continue to invest in domestic manufacturing. The Government must also identify emerging technologies that we can capitalise on and where we have the skills to exploit and commercialise them.

However, the most important signal this Government have sent to the world is that the country is open for business, and in particular that the black country is open for business.

14:29

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

It is encouraging to see so many Members wearing “Yes to High-Speed Rail” badges. That is a much-needed programme to encourage growth, but it absolutely flies in the face of the argument that the Chancellor has made today. The campaign is contrary to his supposed economic growth strategy because it supports a public finance-led project that aims to encourage follow-up investment by private sector capital. There are very few examples of that now, unlike under the previous Administration, when public sector capital was used to encourage and attract private sector investment.

We have heard today that, 12 months after the decision to cut further and faster than any other major economy, the recovery has been choked off, with zero growth over the past six months. The VAT rise has helped push inflation up to more than double the target rate, consumer confidence has fallen and both manufacturing output and retail sales fell last month. There was a welcome fall in unemployment in the last two months, mainly in part-time working, which the Government have started to refer to as “mini-jobs”. Vacancies are down, job creation has slowed in the six months since the spending review and unemployment is set to increase over the coming years to 200,000 higher than was expected in the past few months.

[Ben Gummer]

Will the hon. Gentleman state the precise source of the 200,000 figure that he has given for the increase in unemployment?

[Tom Blenkinsop]

The estimate will be from the OBR, so it is from a Government-sponsored body that assesses the Government’s own figures.

[Ben Gummer]

Will the hon. Gentleman give way?

[Tom Blenkinsop]

I am sorry, but I want to continue. I will give way to someone else later.

The Tories are creating a vicious circle in our economy by cutting too far and too fast, hitting families and costing jobs. In fact, they are set to borrow £46 billion more than they had planned last autumn because of slower growth, higher inflation and higher unemployment, which are the consequences of the decision, announced in the Chancellor’s first Budget, to cut too far and too fast.

In the 12 months since the emergency Budget, all the key economic forecasts have worsened. On borrowing, for example, the OBR has steadily increased its forecasts for Government borrowing over the next five years, which means that the Chancellor is now forecast to borrow £46 billion more than he expected to last November.

[Gordon Birtwistle (Burnley) (LD)]

Will the hon. Gentleman give way?

[Tom Blenkinsop]

Sorry, no.

That is because slower growth and higher unemployment, which means more people claiming benefits, makes paying down the deficit harder.

[Gordon Birtwistle]

On that point, will the hon. Gentleman give way?

[Tom Blenkinsop]

No.

The best way to reduce the deficit in the long term is by focusing on growth and jobs in order to get people into work and off benefits. Since the emergency Budget, the UK’s GDP for this year has been downgraded twice by the OBR, and three times since it analysed Labour’s plans. It is not only the OBR that has downgraded its growth forecasts; other respected organisations have done the same. The OECD, in its most recent forecast, downgraded the UK’s growth in 2011 to 1.4%, and to 1.8% for 2012. The British Chambers of Commerce, in its recent quarterly forecast, downgraded growth in 2011 to 1.3%, and to 1.2% for 2012. The International Monetary Fund, in its latest report on the state of the UK economy, downgraded its growth forecast to 1.5% in 2010, down from 2% last autumn. The OBR is now forecasting higher unemployment and a larger number of people claiming jobseeker’s allowance in every year of this Parliament. Its latest forecast now expects inflation to peak at 4.2% this year, up from 1.6% last June when it evaluated Labour’s plans.

The international comparisons are stark. Recent figures show that in the first quarter of 2011 the French and German economies grew by 1% and 1.5% respectively, compared with the 0.5% growth in the UK, which merely cancelled out the 0.5% contraction of the previous quarter. Over the past six months, the UK’s growth has been flat. The Business Secretary has admitted that it is “worrying” that we are lagging behind France and Germany. The OECD’s deputy secretary-general and chief economist told The Times that he sees merit in slowing the pace of fiscal consolidation if growth continues to be slow.

[Gordon Birtwistle]

Will the hon. Gentleman give way?

[Tom Blenkinsop]

No.

This pattern is borne out in my constituency and the local area. Recent figures from the Office for National Statistics show that the volume of new construction orders in the first quarter of 2011 fell by 23%, compared with the fourth quarter of 2010. Orders are also down 18% from that time last year. That coincided with 1,500 job losses in the steel industry at the Skinningrove steel works in my area, in Hartlepool, at the Teesside beam mill, and also down the road in the constituency of my hon. Friend the Member for Scunthorpe (Nic Dakin). This Government have taken away public sector orders in steel that provided 46% of the Teesside beam mill’s orders, which have just vanished. Figures published on 10 June show that the seasonally adjusted index of production in April 2011—

[Gordon Birtwistle]

Will the hon. Gentleman give way?

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Mr Birtwistle, just to save your legs, I do not think that Mr Blenkinsop is keen on allowing you an intervention.

[Tom Blenkinsop]

Figures published on 10 June show that the seasonally adjusted index of production in April 2011 fell by 1.2% when compared with April 2010. In addition, the seasonally adjusted manufacturing figures saw output fall by 1.5%, and in my area, again, Teesside beam mill has shut down, the Ensus biofuels plant is on a four-month shutdown and the former Enron-run Teesside power station has been half mothballed. That has all happened during the tenure of this Government. We heard from the Chancellor how he believes that the economic ramifications of his policies occur within weeks, so it would be quite refreshing to hear Ministers take responsibility for the manufacturing downturn in my area.

Prospective packages from INEOS have been blocked, because it is looking for certainty, and a Government who rely on a weak pound for exports to lead their economic recovery are living in a fantasy land, given the constant credit squeeze from the Asian growth markets. The governing parties are quite willing to take the credit for manufacturing output increases, but they are still below 2008 levels and also match other manufacturing increases across the globe. They have nothing to do with the Government’s policies; they are about manufacturing at this moment in time across the globe.

The British Chambers of Commerce described the latest trade figures as “mediocre”, adding that

“the monthly underlying fall in the volume of exports is a matter for concern.”

What concerns me is that a Government who laud the benefits of manufacturing are also imposing ahead of their EU competitors a carbon floor-pricing policy that will stifle the very industries on which they rely for their growth. How are the Government going to get tax revenues from those industries when they no longer exist or move abroad? That is the stark reality, and we have to wake up to the fact that the biggest sectoral exporter in the country is the chemical industry, which will also be the most affected industry as a result of that policy.

In last year’s Budget, the Chancellor chose to increase VAT to 20%, despite the Tories repeatedly denying in their election that they had any plans to do so. The Treasury’s own figures show the estimated impact of the rise in VAT. The 2.5 percentage point rise will cost an average couple with children £450 a year and a pensioner couple £275 a year.

The rise will also have an impact on growth. The Office for Budget Responsibility forecasts that the increase in VAT to 20% will have the effect of reducing GDP during this financial year by about 0.3%. If we had a temporary reduction in VAT across the board, we would provide a boost for consumers by putting more money directly into people’s pockets, and we would be able to maintain it until there were certain figures, proved empirically, to show that an economy recovery was beginning.

The fact that this Government are not prepared to give former regional development agency assets to local enterprise partnerships, which are supposed to be this country’s local economic drivers, is an absolute demonstration that the Chancellor has no confidence in his own economic plan. The LEPs will have no rights to those assets, and that means that the Chancellor has no confidence in those local businesses that are engaged with them.

16:23

[Margot James (Stourbridge) (Con)]

“The economy one year on”: I admire the Opposition’s gall in inviting us to recollect the state of the economy just one year ago. Let me remind hon. Members, if I may, of a few facts. This country this time last year had the worst budget deficit in the G20. We were paying interest of £120 million a day on our borrowings, and there was rising unemployment. There was also massive household debt, which at the end of 2009 was 171% of disposable income, yet Opposition Members are surprised that consumers show a little reticence about spending their depleted moneys.

There was also a massively unbalanced economy. My hon. Friend the Member for Halesowen and Rowley Regis (James Morris), in an excellent speech, reminded us of the situation in the west midlands and, in particular, our black country under the previous Government. Over the five years to 2008, private sector employment grew by 5.3% across the nation generally, but in the black country it grew by a measly 1.1%. Of course, that is due largely to the decline in manufacturing. That began several decades ago, tragically, and accelerated under the last Labour Government, when, in just over a decade, manufacturing declined from 21% of our economy to 12%.

The legacy was not just one of irresponsible borrowing and irresponsible public spending in every year since 2001; in addition, so much of the money was spent so unwisely. Let me remind my hon. Friends of the unsustainable property boom, almost as bad as Ireland’s, with PFI-built hospitals and schools that have loaded impossible burdens of debt on to those institutions for the next two decades. Our own local hospital in Dudley, Russells Hall, has to pay out 16% of its revenues to service the PFI debt with which it is saddled. I suggest that Labour Members try to attend tomorrow’s Westminster Hall debate on PFI called by my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman). They will find it very uncomfortable listening.

[Alec Shelbrooke]

To expand my hon. Friend’s point about wasted money, does she agree that it was an absolute disgrace to spend £5 million a year of taxpayers’ money on sponsoring British superbikes for 10 years?

[Margot James]

My hon. Friend makes an extremely good point and I thank him for his intervention.

[Mr Bailey]

rose—

[Margot James]

I will certainly give way to the Chairman of the Business, Innovation and Skills Committee, of which I am a member.

[Mr Bailey]

I thank the hon. Lady, as a fellow black country Member of Parliament, for giving way, particularly as the other black country Member on the Conservative Benches, the hon. Member for Halesowen and Rowley Regis (James Morris), refused to take an intervention from me.

We can talk for a long time about the unemployment statistics in the black country over the past decades. I recognise that the hon. Lady is prepared to acknowledge that this problem started long before the previous Labour Government. She is correct that the local hospital was financed by PFI. Would she prefer not to have had that hospital built or to have had it built out of public expenditure, thereby increasing the national debt?

[Margot James]

I thank the hon. Gentleman for his intervention. Clearly, I would not have wanted the hospital not to be built. However, I think that Labour took a good idea, PFI, which was started by a previous Conservative Government, and ran amok with it, accepting deals on far too generous terms so that our hospitals are stuck with being forced to pay absurd, non-competitive rates for all sorts of services from their PFI partners.

[Mr Love]

Will the hon. Lady give way?

[Margot James]

I would like to make progress and bring my remarks to a conclusion.

Throughout the boom years, nearly 2 million people were living off benefits, at huge expense to the economy, while three quarters of the new jobs went to people from abroad. That was a scandal. It is ironic that the Opposition motion calls for the Government to spend all sorts of money that we do not have on 100,000 jobs for young people. I remind Labour Members that the unemployment figures for people between 16 and 24 started out at 650,000 in 1997 and ended up at 930,000 in 2010, at the end of their Government’s tenure. That is an unacceptable increase.

[Owen Smith]

rose—

[Alison McGovern]

rose—

[Margot James]

I will take an intervention from the hon. Gentleman, who was a member of the Health and Social Care Public Bill Committee.

[Owen Smith]

The hon. Lady cites a number that we have heard many times from Conservative Members. If she cares to look at what the number was at the end of 2008, just before Lehman Brothers collapsed and the financial crisis ensued, she will find that it was significantly lower than it was in 1997—and we all know it.

[Margot James]

If the hon. Gentleman has those statistics at his disposal, I am sure that he will enlighten the House later. I cannot precisely recall that figure from 2008. Suffice it to say that youth unemployment went up by more than 250,000 during Labour’s period in office.

We now see signs of recovery, thanks to this Government’s grasp on the deficit, which is the root of the problem that we have to confront. I commend the Government and the Chancellor for at last getting a grip. There are people in my constituency who voted for the previous Government three times in a row and turned on them because they knew that this country was living way beyond its means, which the previous Government just could not accept. One year on, those people are saying to me on the doorstep, “We elected you to sort out the public finances. You are doing what needs to be done. Get on with it.” They are right. We now have a credible plan that has the backing of the OECD, the IMF, the European Central Bank, the Bank of England and PIMCO, which is probably the most crucial of all. It would be utterly absurd and extremely dangerous to abandon that plan just because for one quarter manufacturing did not do quite as well as it was doing a few months before. We have plans to stimulate growth and get that back on track.

Opposition Members were clinging to the fact that the US was continuing with its highly risky spending policies. However, as the consequences of those policies have come home to roost, with unemployment in the US now standing at more than 9%, they have accepted that even the mighty USA is not exempt from the basic rules of economics. In the end, one has to live within one’s means. As the great lady once said, “You can’t buck the market.”

This was the first recession in my lifetime when low interest rates prevailed. That is crucial to the recovery of exports and manufacturing, and to the stability that the economy needs to lean on. Unemployment went down by 80,000 last month and the predictions that it would reach 3 million have not come to pass. Although I sympathise greatly with public sector workers in my constituency who have lost their jobs, we can celebrate the fact that private sector jobs have increased by 520,000 over the last 12 months. That is a record of which we can be proud. The Government have a growth agenda, to which I am wholeheartedly committed, including the lowering of corporation tax, research and development tax credits, a record number of apprenticeships, entrepreneurs’ capital gains tax relief, the protection of the science budget, the exemption of micro-businesses from onerous employment regulations, of which I hope to hear more, the regional growth fund, and enterprise zones, of which there will be one in my area of the black country.

The main challenge for the Government is now deregulation. It is a big problem that we are not getting on top of quickly enough, although I understand the difficulties. I echo the intervention of my hon. Friend the Member for Stone (Mr Cash), who challenged the Government on European regulation. We need to have a strategy to fight back on that, because it will be the death knell if we do not. I will not give an example, because time is running out.

In conclusion, it would be irresponsible to start proposing spending increases and tax cuts, as the Labour party is doing. That is the way back to instability, the loss of confidence and escalating interest rates, which would do for my constituents who face mortgages and other difficulties. An escalation in interest rates would be catastrophic at this time, and that is where Labour’s policies would inexorably lead.

16:34

[Owen Smith (Pontypridd) (Lab)]

We have heard a lot today about learning the lessons of history, but what we heard from the hon. Member for Stourbridge (Margot James) shows that the Government clearly have not learned the lessons of their own history. In the last years of the Labour Government, we listened to the Conservative party talk about wanting more deregulation and complain that we were over-regulating. We concede now that we were not regulating the banking sector as vigorously as we should have done, yet still we hear calls for further deregulation. That is a lesson that Conservative Members really ought to learn.

Equally, Conservative Members ought to look much closer, and with a far less jaundiced and more objective eye, at the Government’s past year of performance. Any objective reading, any audit of how they have performed economically, must tell them, as it tells us, that it has been a disastrous year. Unemployment is higher by 1.5%, inflation is higher by 1.6%, output is down by 0.7% and manufacturing, which went up for a period as there was restocking and which boomed partly because of big deflation in the value of the pound, has now ground to a halt. We are not seeing a manufacturing-led recovery. Critically, growth, the key driver of our economy, is flat, non-existent, zero.

[Alun Cairns]

The hon. Gentleman focuses on manufacturing, but how does he contrast performance over the past 12 months with that over the previous 12 years, when manufacturing in Wales in particular, and in the west midlands, fell dramatically from representing close to a third of the economy to nearer 20%?

[Owen Smith]

I answer candidly that we have already said that we need a rebalancing of our economy. On both sides of the House, there was far too great an emphasis on the belief that we were in a post-industrial society and manufacturing was not an important part of the mix. We have learned the lessons, as I hope Government Members have. I hope that there will therefore be an active industrial policy from the Government, like the one that the Opposition are talking about. That is the only way in which we will improve manufacturing.

[Gordon Birtwistle]

Will the hon. Gentleman give way?

[Owen Smith]

I cannot resist.

[Gordon Birtwistle]

Does the hon. Gentleman agree that, if the country takes on the debts that the Opposition suggest by cutting VAT and spending vast sums, interest rates will rise? That alone will stifle any economic growth.

[Owen Smith]

No, I do not agree with that for a moment. A VAT holiday right now would stimulate the economy. We saw it work previously and it would work today, and that is why we advocate it. The hon. Gentleman is entirely wrong.

It is clear that the past year has been disastrous, so let us look ahead. Let us not rely on the Opposition or the Government, but instead examine the Office for Budget Responsibility’s projections. It projects lower growth than it did last time, lower in fact than in its last three projections. It projects increased unemployment, with 200,000 more people unemployed by the end of this Parliament. Most critically and damningly of all, it projects ballooning borrowing, with £50 billion extra in borrowing in this Parliament as a result of the dreadful mistakes that the Government are making. [Interruption.] That is the reality—borrowing went down by £20 billion last year as a result of the stimulus, and it is now going up. No amount of shouting can get Members away from that fact.

What do those desiccated numbers mean for ordinary working people in this country? They mean heartache and misery. As one leading economist said last week when reflecting on a market survey that showed household income going down and household debt rising at the fastest rates since the depths of the crisis,

“The grim figures show household finances deteriorating at the fastest pace since”

2008-09, with people

“eroding their savings and taking on more debt to finance strong rises in living costs”

and reductions in their wages. That is the reality, as the Governor of the Bank of England recognised when he said that we were facing the biggest squeeze on living standards and wages since the 1920s. We can lay the blame for that directly at the door of the Conservative party.

In Wales, my part of the country, we are feeling the pinch harder than most. We have already heard the number of people unemployed in the midlands, the area that we hear the Chancellor have the temerity to talk about from the Dispatch Box. Employment there was down by 6,000 in the last period. In Wales it is barely creeping above the positive line, and in the north-east it is down by 14,000. The notion that there is a private sector-led jobs recovery spreading equitably across the country is absolute fantasy, and we must expose it.

Consumer Focus Wales, the body that looks after ordinary working people’s rights, says that some of the most vulnerable people in our society, including older people, those on low incomes and those with long-term conditions, are right now cutting back on essentials such as groceries and energy usage. That is a disgrace in this day and age, and the Conservative party must face up to it.

In my constituency of Pontypridd, three times the number of people are looking for every job this year than last year. That is the reality of employment in my constituency. Three people on jobseeker’s allowance looked for every job in the jobcentre last year, but now nine are looking for it. The citizens advice bureau is in jeopardy as a result of another of the Government’s cuts—the cut to legal aid—but in one single year, there has been a 20% increase in the number of people going to the CAB for advice about debt, family breakdown and job insecurity. That is the largest increase in the history of that CAB. Those are all clear indicators that it is not working but it is hurting. More austerity and pouring misery on misery will not help my constituents, just as it is not helping Greece.

[Alun Cairns]

The hon. Gentleman talks about the number of people looking for jobs in his constituency this year compared with last. What would he say to the Welsh Government about that, and what is their responsibility for it? They have contributed to the greatest decline in Welsh gross domestic product over the past 12 years, making Wales the poorest part of the UK, which it was not previously.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Before the hon. Member for Pontypridd (Owen Smith) answers that intervention, I ask hon. Members please to keep interventions very short, because a lot of hon. Members wish to speak.

[Owen Smith]

Thank you very much, Mr Deputy Speaker.

I completely reject that entirely false characterisation of the Welsh economy. Most importantly, the Labour Government in Wales understand that growth will deliver improvements to our economy, not austerity, cutting or increasing the viciousness of the circle. The hon. Member for Vale of Glamorgan (Alun Cairns) ought to read The Times from this morning, because it is not only Labour Members who are worried that they have got no economic plan for growth from the Chancellor, but the chief executive officers of this country. On page 2, a reflection on the CEO summit states:

“There is...a real fear that a long, slow, feel-bad recovery will leave Britain a helpless bystander as the new economies of Asia, Africa and Latin America storm ahead.”

What does the article go on to say? It says that we need a plan for growth, that plan A is not working, and that we need an industrial strategy that highlights growth sectors, just as the Labour Government in Wales have highlighted life sciences, digital economy and advanced manufacturing.

We need to target and invest in such sectors in a serious, intelligent and structured way, but we are not doing so. As the CEO of Vodafone, which is not exactly a Marxist-led workers’ co-operative, says in The Times today, we in Britain have a “faith” that

“the market will sort it out”—

a misplaced faith that the market is always the answer. That is another lesson that Conservative Members have not learned. The market alone cannot deliver growth in this country. The Government need to intervene and direct intelligently. That is what history teaches us.

Finally, I was not going to talk about banking reform, but the Chancellor ended his speech by saying that Opposition Front Benchers did not talk about it, which admittedly they did not. We will wait and judge Government Members and the Chancellor by what they do on banking reform, but we do not know exactly what will happen on that yet, do we?

We know that the Chancellor has cancelled the bonus tax, and we know that he is talking about looking at banks’ capital-to-asset ratios and trying to ensure that the leveraging they have on their debts is brought into line, but we will see whether the Government make good on those promises, whether they go beyond Basel III and whether they do what the OECD, which has been prayed in aid several times today, is telling them to do and split off high-risk investment banking from commercial banking. These are the tough decisions that have to be taken by a party that likes to listen to its erstwhile colleagues in the banking sector—there are probably a few Conservative Members who used to work there. These are the people who speak and whisper in the Chancellor’s ear. He is not listening to ordinary working people in this country. He needs to start doing that, understand the pain he is causing and move to plan B.

16:45

[Kwasi Kwarteng (Spelthorne) (Con)]

I was not expecting to be called so early in this debate, Mr Deputy Speaker, but I am very grateful.

It is easy in this environment and this highly partisan—[Interruption.] I know exactly what I am going to say, so please hear me out. It is easy to lose sight of the big picture in terms of where we were when we came into government in 2010, and it is easy for Labour Members to forget the huge deficit and the terrible mess they made of the country’s finances.

[Mr Bailey]

The hon. Gentleman talks about the big picture, but will he acknowledge that when the Labour Government came to power in 1997, the national debt as a proportion of GDP was 6% higher than when we left it?

[Kwasi Kwarteng]

I will acknowledge that the budget in 1997 was balanced, in that we took in £315 billion of revenue and spent £315 billion. I also have to acknowledge—I have to be candid—that under the first Labour Administration, between 1997 and 2001, the budget remained in balance. That was the prudent Chancellor whom many in the House will remember. We did not get into fiscal trouble with an increasing deficit until the 2001 to 2005 Parliament, in which, as people will remember, we had sustained growth. However, just at the moment when we were growing sustainably, the naughty, imprudent Chancellor took over. Having been prudent in the first four years of the Labour Government, between 2001 and 2005 he turned on the taps, to speak metaphorically.

[Mr Bailey]

I am following the hon. Gentleman’s argument, but it is somewhat incoherent given that, in 2008 I think, the current Chancellor, then in opposition, said that he would match the Labour Government’s public spending plans.

[Kwasi Kwarteng]

The principal point—if the hon. Gentleman will listen—is that Labour gambled with the country’s economy. It sincerely believed that it had abolished boom and bust, so it made spending commitments on the basis that the economy would grow indefinitely year after year. Unfortunately those spending commitments could not be rescinded when reality dawned—when the economy faltered and the revenues collapsed, leaving us with huge spending commitments and creating this unprecedented peacetime deficit.

It is unfair and wrong for Labour Members to say that it was a global phenomenon. Our deficit was not comparable to Germany’s. As far as I know, Germany operates in the same global space and is a competitor in many of the same markets as us, yet its deficit-to-GDP ratio was 3%. Ours, I believe, was 12.8%—the highest in the OECD and the G20. These facts are known to everybody, including all economists and many journalists—everyone knows them—yet consistently, ever since I have been a Member of Parliament, Labour Members have completely denied any responsibility and have given every reason under the sun for the appalling fiscal position we were left in. It is vital that every single Member bears in mind those big facts. Labour’s stewardship of the public finances was catastrophically negligent.

[Mr Bailey]

Will the hon. Gentleman give way?

[Kwasi Kwarteng]

This is the third time that the hon. Gentleman has tried to intervene, and I am afraid that I must press on. I am willing to take interventions from other colleagues, but he has had his say and I would like to have mine.

We have had a difficult time over the last year, during which time my right hon. Friend the Member for Tatton (Mr Osborne) has been Chancellor of the Exchequer. No one will dispute that: the situation has been tough. However, it would have been far worse if we had followed the policies of the right hon. Member for Morley and Outwood (Ed Balls) and not tackled the deficit in the rather aggressive but timely way in which we decided to. Hon. Members referred earlier to Greece, which has indeed been a Greek tragedy. People are on the streets, the Government are practically insolvent and there is a real risk of some kind of political revolution—I am choosing my words carefully, but the situation is very unstable. The situation facing this country was, I confess, not as bad. However, if we had not been serious about tackling the deficit, there was every likelihood that the international markets would have forced our interest rates up, that our cost of borrowing would have increased and that markets would not have bought gilts in the way that, over the past year, they have. The consequent rise in interest rates would have affected every family in this country, who would have had to pay high interest rates simply because the Government did not have the courage or the conviction to deal with the deficit.

[Toby Perkins]

As for the comparison with Greece, does the hon. Gentleman recognise that if we had followed the advice of the Chancellor when the recession struck back in 2008, although events here might not have followed what happened in Greece, they would quite probably have followed what happened in Ireland, which saw huge public spending cuts? Ireland went into a cycle of more and more cuts, and more and more people being put out of work. The result of those cuts was not that Ireland’s deficit shrank, but that public services and poverty got worse.

[Kwasi Kwarteng]

I accept the hon. Gentleman’s point about Ireland, but let us look at what happened last year and the situation that we faced going into the general election in May. The shadow Chancellor quite rightly observed that the market price of gilts was rising and that interest rates on them were coming down in the period before the election. It is true that in the six weeks before the election, interest rates on gilts came down, but that was only because the market realised that there would be an end to the Labour Government. The market anticipated the result of the general election, after it became clear that, as a consequence of Labour’s total irresponsibility, the end of a Labour Government would mean a new Government who were serious about dealing with our financial position. It is true—I remember this—that the rates came down from mid-March, but that was only as a consequence of people in the markets literally rejoicing because Labour was going to leave. The shadow Chancellor was quite right to make that point; I just felt that we needed a bit more context.

[Owen Smith]

Will the hon. Gentleman give way?

[Kwasi Kwarteng]

The hon. Gentleman has had his say, but I will give way to him.

[Owen Smith]

I cannot help but point out that if the markets had been so omniscient and all-seeing, surely they would have spotted that the Tory party was not going to win the election.

[Kwasi Kwarteng]

The only question that the markets were interested in at that point was whether Labour would be re-elected. When it became obvious that Labour would not secure a majority in the House, they started buying lots of British Government debt, and the interest rates in the six weeks before the general election came down quite rapidly. Those are the facts, and one could find them out from the Financial Times, Bloomberg or any other information provider in financial services.

[Nigel Adams (Selby and Ainsty) (Con)]

Since the last election, when we got a Conservative-led coalition, unemployment has fallen in my hon. Friend’s constituency of Spelthorne by almost 5%. Does he think that we would have achieved such a fall if we had followed the Opposition’s policies?

[Kwasi Kwarteng]

I can give my hon. Friend a very short answer: there is no way that any businessman in Spelthorne—[Interruption.] Well, the short answer is no, but the longer, slightly more involved answer is that there are lots of small businesses in my constituency, and a lot of them are related to Heathrow, and the international market and trade. As a consequence of Labour’s complete failure over the previous 13 years, no Labour councillors were returned to our borough council. In fact, Labour contested only one of the 13 wards in the borough, which is only 35 minutes on the train from Waterloo. That is indicative of Labour’s utter failure to make any headway.

Let me tell the House why Labour was completely wiped out. The people in Spelthorne realise that Labour does not understand anything about the economy. Time and again when I have knocked on doors in Ashford, Sunbury and Shepperton—and even in Stanwell, which was traditionally a Labour area—I have met people who realise what this Government have to do. They say to me, “You’ve been put into power to clear up the mess that the other lot created.” I shall not repeat the unparliamentary language, but they tell me to “something well get on with it.”

16:56

[Stephen Twigg (Liverpool, West Derby) (Lab/Co-op)]

I am delighted to follow the hon. Member for Spelthorne (Kwasi Kwarteng). Reflecting on the lack of Labour representation in Spelthorne, I am reminded of the similar lack of Conservative representation in Liverpool. I am prepared to bet the hon. Gentleman that Spelthorne will get a Labour councillor before Liverpool gets a Conservative one.

We have seen some extraordinary complacency on the other side of the House today, given the economic circumstances that people are facing in communities up and down the country. Sometimes we forget the human cost of the decisions that are made in this House.

[Kwasi Kwarteng]

The hon. Gentleman talks about the human cost of economic mismanagement. Could he tell us more about the human cost of Labour mismanagement over the past 10 years?

[Stephen Twigg]

I thank the hon. Gentleman for that intervention, but it is the only one that I will take. I want to give other colleagues on both sides a chance to speak. We have heard a lot about Labour’s legacy, and about where Labour stands, and we get severely misrepresented by the Government parties opposite. We are not denying the deficit. We adopted a plan to halve it over the four years of a Parliament. We have been very clear that we would have made cuts in public spending, that we support some of the cuts that are now being made, and that certain tax increases would have happened under a Labour Government.

The real challenge in this debate is to address the questions of growth and employment. There is no value in cutting public spending as the Government are doing if it damages the prospects for growth. The impact on the economy is that tax revenues go down, unemployment goes up, benefit costs therefore rise and the deficit position gets even worse. My right hon. Friend the shadow Chancellor reminded the House earlier about what both the parties that are now in government said when they were in opposition. My hon. Friend the Member for Dudley North (Ian Austin) has pointed out that the then Leader of the Opposition, now the Prime Minister, said in July 2008 that

“we are sticking to Labour’s spending totals.”

That was the view on the Conservative Front Bench in July 2008. In fact, my hon. Friend did not quote him in full; the right hon. Gentleman went on to describe those Labour spending totals as “tight”. The views that the current Prime Minister and Chancellor of the Exchequer are now expressing are not the ones that they held at that time.

A year ago, in the emergency Budget, the Chancellor of the Exchequer said:

“In this Budget, everyone will be asked to contribute…everyone will share in the rewards when we succeed. When we say that we are all in this together, we mean it.”—[Official Report, 22 June 2010; Vol. 512, c. 167.]

Our motion today welcomes the recent fall in unemployment, and I have heard hon. Members on the Government Benches talk about falls in unemployment in their constituencies, but are we really all in it together? Let us look at the figures.

[Ben Gummer]

Will the hon. Gentleman give way?

[Stephen Twigg]

I will not take any more interventions, for reasons of time.

We have seen a small increase over the past year in the number of jobseeker’s allowance claimants. I want to compare two different constituencies in the north-west: my own, and another one just down the road, called Tatton. In Liverpool, West Derby, we have seen the number of JSA claimants rise over the past year by almost 5%. In Tatton, the number has fallen by 4%. [Interruption.] Well, I would love to know who the MP is who can make that much difference in a year. Somehow I doubt that that is possible. There are 4,000 JSA claimants in my constituency, and 1,000 in that of the Chancellor of the Exchequer. I sometimes think that Government Members underestimate the scale of anger in constituencies such as mine, which went through the experience of living through a Tory Government in the 1980s and have a sense that they are going through exactly the same experience again now.

[Mrs Louise Mensch (Corby) (Con)]

rose—

[Stephen Twigg]

I am not taking any more interventions.

As I say, there are 33 JSA claimants chasing each vacancy in my constituency, but only two and a half in the Chancellor of the Exchequer’s constituency not that far away.

If we are going to recover and see jobs and growth, we need capital investment. My right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) spoke about the importance of housing investment and my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) spoke about high-speed rail, so let me say something about schools.

The decision to cancel the Building Schools for the Future programme has not only had an impact on educational opportunities for children and young people in constituencies like mine, as it has had a devastating effect on the construction industry. I urge the Government to look again—not at recreating the Building Schools for the Future programme, as we have moved on from that, but at the critical importance of investment in schools in our communities.

My hon. Friends have already mentioned the future jobs fund, from which more than 90,000 young people directly benefited—6,500 in the city of Liverpool alone. The Government’s own study from the Department for Work and Pensions this January described the fund as

“successful in preparing customers for work…The improvements to customer skills sets are likely to remain for the long term.”

I want to address a specific question to the Economic Secretary, who is responding to the debate. Last night, I tabled early-day motion 1960 on the issue of asset sales by regional development agencies. Nationally, these assets are valued at about £500 million, and the Treasury plans to have a fire sale of these assets throughout the country—except in Greater London, where the assets of the London Development Agency have been gifted to the Mayor. I have no quarrel with that decision. It is a good decision, and I do not disagree with what is being done in London, but I do not see why we cannot have the same decision for local authorities and local economic partnerships outside London. I asked that very question at Business, Innovation and Skills questions recently and I was told that the reason was that the London Development Agency had been merged with the Greater London Authority. Actually, that has not happened, as the legislation is still going through Parliament. I urge the Treasury to think again, because if assets can be gifted to Boris Johnson, why on earth cannot they be gifted to local authorities and local economic partnerships outside London?

Let me deal now with the issue of fairness. I have already drawn one contrast between my constituency and the Chancellor’s. Another contrast is on the scale of the cuts. Of course there have to be cuts to local government funding—we accept that—but Liverpool city council has seen its spending power cut by 8.8%, resulting in cuts of £91 million this year. Cheshire East, which is where the Chancellor’s constituency is based, has had a cut of 1.7%. That is why people are angry—not because they deny the deficit, but because they see the burden of deficit reduction falling far more on some of the most deprived communities in the country. The Government need to think again.

Even in these tough times, Labour’s Liverpool city council is working to improve things. It is working on a plan B for Building Schools for the Future. I urge the Government to engage with it. The council is working with the Government on the enterprise zone and it is creating 133 new apprenticeships to give opportunities to Liverpool’s young people.

Finally, on the cost of living, in the year to April, we saw average weekly earnings rising by 1.8% while inflation was at 4.5%. For a family on average earnings with both adults working, that is loss of £1,000 to the household income each year. The pain is not being shared. When the Government abolish the bankers’ bonus tax, yet go ahead with that cut in real earnings for average families, it is not about protecting low and middle-income Britain.

An economic gamble is being played by the two parties in the coalition. The speed and scale of deficit reduction could itself damage our ability to reduce the deficit, by damaging growth and increasing unemployment. Yes, we need cuts; yes, we need to reduce waste: but we need to protect the front line as far as we possibly can. If the Government continue down this path, there is a serious danger that they will both weaken the prospects for economic recovery and create an even more divided society in our country. I urge them to think again.

17:05

[Priti Patel (Witham) (Con)]

I thank the Opposition for this debate, which provides Government Members with the opportunity to remind the country of the economic disaster that the Labour party presided over, and the appalling legacy that they left for this Government to deal with. I find it pitiful but ironic that Labour Members have the audacity today to make sweeping claims and generalisations about the economy, when it was their former Chief Secretary to the Treasury who left that dreadful note to his successor that said, “There is no money.”

Rather than being advocates for job creation, enterprise growth and the private sector in their constituencies up and down the country, Labour Members have consistently talked down the economy in this debate. They complain that the Government are not spending enough hard-pressed taxpayers’ money, but that would lead to further deficit. As everyone knows, the Labour party left the economy on the verge of bankruptcy.

This time last year, my right hon. Friend the Chancellor stood in the Chamber and set out a robust plan to rid the UK of its worst ever peacetime budget deficit. As we all know, deficit denial syndrome is rife on the Labour Benches, so let me repeat: the aim of the emergency Budget was to rid the country of its worst ever peacetime budget deficit. There is a strong message to the country: Labour should never again be allowed to run our economy into the ground.

[Several hon. Members]

rose—

[Priti Patel]

I will take one intervention, from my hon. Friend there.

[Alec Shelbrooke]

I am most grateful to my hon. Friend for giving way. Labour Members like to harp on about the ’80s, but if we are going to go that far back in history, let us go back to the ’70s, when again a Labour Government completely bankrupted the country. They have learned nothing.

[Priti Patel]

I thank my hon. Friend for that comment. The 1970s was also the era of strikes, and as we all know, strikes cost jobs, they do not create them. Before last year’s Budget, we had the deepest recession, record rates of job losses, and national debt increasing to a peacetime record—

[Mr Anderson]

Will the hon. Lady give way?

[Priti Patel]

I have said that I will take only one intervention, because of pressure of time; other Members want to speak.

Families and businesses across the country, and across my constituency, have faced genuine hardship, and I speak as someone from a small family business background. Let us not forget that 12 months ago the country faced a severe sovereign debt crisis. The prospect of Ministers having to go with a begging bowl to the IMF, as Labour did in 1976, was daunting. The Government should be congratulated on bringing Britain back from the brink.

Last year’s emergency Budget was about rescuing the nation’s finances and paying for Labour’s mistakes and its scorched earth policy. The Government have absolutely the right focus: reforming the economy, ensuring jobs and growth for the future, and doing what we can to help families with the cost of living. Last year’s Budget marked the first step towards rebalancing the British economy on to the path of long-term sustainable growth.

I want to highlight three areas in which the Government have laid the foundations for future growth: first, the promotion of business and job creation in the private sector; secondly, focusing on getting people into work, with the creation of half a million private sector jobs, which Labour Members seem to be mocking, which is completely insulting to the people in those jobs; and thirdly, restoring confidence in the British economy. The Government are doing the right thing: sticking to the plan, backed by the IMF, OECD, PIMCO and every major business body in the country, the key objective of which is to put the public finances back on track, after the Labour party maxed out the nation’s credit card.

Instead of being positive and optimistic, Labour Members have the audacity to talk our economy down. They sneer at this, but when they do so they talk down to the enterprising individuals who run independent shops and small businesses, who create jobs and have the initiative to invest, start new businesses and generate welcome prosperity for our country. That should not be overlooked. The Opposition’s dogmatic attitude to those who work hard, pay their taxes and contribute to our economy is starkly obvious, and I believe that they should never again be trusted with the nation’s economic finances.

The Government are boosting manufacturing, jobs and growth by cutting key taxes for business and entrepreneurs and scrapping much regulation, although I think that we could scrap even more, particularly the gold-plated stuff that comes out of Europe. They are also giving more support to young people by providing 50,000 more apprenticeships, as well as work experience schemes. At long last we can start making things in this country again.

Let me end by making a salutary point. There is no doubt that it will take time for the economy to recover fully given the extent of our dreadful legacy, but throughout the business world, from investors in the City to small shopkeepers and small businessmen, it is recognised that we have a business-friendly Government who are committed to cutting the deficit and promoting job creation and investment.

17:10

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

We were treated to a typically Panglossian picture by the Chancellor, as though there were nothing currently wrong with the economy. The Chancellor is not a man who does humility. When challenged, he could cite only three developments that he regarded as successes. The first was the rise in exports, but he failed to mention that imports are rising faster. The second was the increase in jobs, which, although certainly welcome, will be soon swamped by the increase of 1 million in unemployment in the public and private sectors that has been forecast by the Office for Budget Responsibility. The third was the improvements in the manufacturing sector, which, as has been said many times, have now sadly embarked on a downturn.

[Mrs Mensch]

rose—

[Andrew Griffiths (Burton) (Con)]

rose—

[Mr Meacher]

I will give way only once. As the hon. Member for Burton (Andrew Griffiths) has had plenty of opportunities to intervene, I will give way to the hon. Lady.

[Mrs Mensch]

Is the right hon. Gentleman not a little put out by the fact that the IMF, the OECD and every major economic organisation backs my right hon. Friend the Chancellor, and that his party is entirely on its own in its view of the situation?

[Mr Meacher]

I am afraid that the hon. Lady is behind the curve. The fact is that there has been a major change in the IMF’s view of the balance between cuts and the promotion of growth. I shall say more about that later.

The negatives that the Chancellor ignored are far more numerous than the positives. Let me begin with an important one. The latest figures for public sector net borrowing—which show levels 50% higher than last year, just before the election—are the first clear sign that the Chancellor’s massive cuts strategy is not just in serious trouble, but going backwards. That comes as no great surprise to people like us who have constantly argued that lower growth—and growth has been nil over the last six months—and the prospect of a prolonged period of stagnation will lead to a fall in tax receipts that will swamp the effects of expenditure cuts. That is central to this whole debate, but the Chancellor did not mention it.

Real incomes fell last year for the first time since 1981, and are on course to fall again this year. Inflation is higher, and consumer confidence has slumped to levels that we saw during the depths of the recession. High street retailers are sending out profit warnings and, to cap it all, the Government have been forced to revise upwards the forecasts for the budget deficit. We should not forget that driving down the deficit is the Holy Grail of Government policy, but it is going in the wrong direction.

Where is the evidence that Britain is enjoying what the Chancellor ironically calls expansionary austerity, on the spurious ground that the knowledge that the Government are getting a grip on the public finances will produce confidence and will encourage spending by the public to replace the cuts in public spending? That policy relies on a tighter fiscal policy while allowing a looser monetary policy to remain loose, but if the monetary policy was already ultra-loose—as it was when the Government came to power—there is certainly no scope for it to be made any looser. Any tightening of fiscal policy, let alone the massive tightening that we have seen in the Budget and the comprehensive spending review, is bound to lead to a lower level of aggregate demand in the economy. That is exactly what we are now seeing. Despite two years in which the bank rate has been almost on the floor at 0.5%, there is a marked reluctance to borrow. Mortgage demand is running at half the levels it was in the 10 years up to the financial crash and lending to business is not picking up.

The key question for this debate is: where is the growth to come from? Even Martin Wolf, the distinguished right-wing commentator for the Financial Times has acknowledged that the only plausible source of increased final demand is export growth, but export growth is in effect blocked off, because almost all EU markets are depressed as they all try to export their way out of crisis at the same time. To cap it all, the likely eventual Greek default could severely depress further any prospect of early EU recovery and therefore of UK export markets in the EU.

I repeat the question: where is the growth to come from?

[Lorely Burt (Solihull) (LD)]

Will the right hon. Gentleman give way?

[Mr Meacher]

I have not got time, I am afraid.

Incredible as it might seem, the last straw that the Chancellor is clutching at is a huge increase in personal and household borrowing, which is already at more than £1.5 trillion—well above the level of Britain’s entire gross domestic product. Although it was falling at the last election, the OBR is now forecasting that it will reach £2.13 trillion by 2015—half as large again as Britain’s entire GDP. That is an extraordinary admission. The Government’s only way of imposing massive public expenditure cuts is by pumping up a gigantic financial bubble in the private sector, which can only end in another colossal financial crash. I would be the first to admit that that depends on the private sector’s being willing to load up on hugely more debt, but the other side of that coin is that if households save more, as they are very likely to do because they are extremely worried about their prospects, demand is going to plummet and the economy is likely to hit the wall with an almighty crash. I ask again: where is the evidence for this expansionary austerity that we are being told about? It is not in the balance of payments figures, which are getting worse, not better; it is not in the high street, because consumers would need an increase of about 6% in their incomes to compensate for the price rises and tax increases of the past year; and it is not in the business community, where investment has fallen.

The latter point has an important story behind it. In the commercial private sector there is currently a huge net corporate financial surplus that is almost without precedent. Among the banks and the rest of the financial sector, that now amounts to £44 billion, while for the big corporations in the non-finance sector, it is larger still at £67 billion. Together, the corporates are running an unprecedented surplus that is nearly equal to 8% of Britain’s GDP. Still, however, the banks are not lending—they are already well short of their Merlin targets after only a couple of months—and the big companies are not borrowing. Why? It is because they see little prospect of demand for their products and services to justify their investment. That is the problem and it is not resolved by the current strategy. That is exactly the opposite of what they were expected to do by the Chancellor, who predicted that as the public sector was cut back, the private sector would surge forward to fill the gaps.

It is tragic that the historical evidence that expansionary fiscal contraction has never worked has not been learned. It has been tried three times in the past century. It did not work in the huge public expenditure cutbacks of 1921 to 1923—the so-called Geddes axe, which was very similar in size to the current Osborne axe; it did not work in 1931 to 1935 in the great depression; and it appeared to work in the Howe Budget of 1981 only because it was accompanied by a sharp reduction in interest rates and the major US-driven international recovery of the early 1980s, neither of which applies today. What is not just tragic but deeply culpable is that the same approach is being imposed today, not because there is any evidence that it makes economic sense, but because it is really driven by an underlying ideological motive to shrink the state and to maximise the privatisation of the economy. And it is not working and will not work.

17:20

[Ben Gummer (Ipswich) (Con)]

It is a pleasure to follow the right hon. Member for Oldham West and Royton (Mr Meacher). He spoke after my maiden speech, and he is a man whom I respect greatly for his integrity, honesty and the consistency with which he has held his views over the years. However, he has also been consistent in his economic views, and over 30 years he has been consistently wrong—in his judgment of Mrs Thatcher’s economy, John Major’s economy and Tony Blair’s economy. The fact that his views now come into the same alliance as that of the shadow Chancellor of the Exchequer tells us all that we need to know about where the Opposition’s economic policy has gone.

[Kwasi Kwarteng]

Will my hon. Friend remind the House about the consequences of the 1981 Budget and what happened at the subsequent general election?

[Ben Gummer]

I do not know what position my hon. Friend took against the 1981 Budget, but all that I can say is that that Budget, which was opposed by Labour Members, started the rebuilding of the British economy, much as we are doing now.

I was not planning to speak today, but I entered the Members’ Lobby and looked at the Opposition’s motion on the Order Paper, which is entitled, “The economy one year since the Government’s first Budget”. I thought, “That’s brave of them, to pick a fight on this, but I’ll give them a chance.” I read on and thought, “This will be amusing.” The motions says:

“That this House notes that on 22 June 2010”—

there is a preamble, and we agree with that bit, because there was an excellent Budget this time last year—and it continues:

“further notes that over the last six months”.

I thought, “Hang on a minute. I thought we were talking about after a year,” but they have chosen six months for the economic growth figures. Why six months? It is because over a year the economy has grown, has it not? Already, in the terms of their own motion, the Opposition are failing, because they have to pick a six-month figure. Do hon. Members know why they pick that period?

My hon. Friend the Member for Witham (Priti Patel) talked earlier about businesses. Her parents run a business in my constituency. She understands businesses. She understands that, with a difficult start-up, some weeks are not as good as others and that things are rocky and choppy. Not many Opposition Members have ever seen a balance sheet or a profit-and-loss account in their lives, and that is why they might not understand what she explained earlier. That is why, after a year, the economy is growing—but after six months, it was flat, because we are having a choppy recovery, as the Chancellor said.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

Will the hon. Gentleman give way?

[Ben Gummer]

I have taken one intervention; I will not take any more.

I am afraid that the Opposition are falling down already with their motion, but let us go on to the next phrase:

“in the last month retail sales fell by 1.4 per cent.”

[Interruption.] If hon. Members listen carefully, they might find that their interventions are prefigured. Not content with six months’ worth, the Opposition have to go to the last month, but let us go back to the motion and what has happened over the past year. In the past year, retail sales have grown by 4.5%. I congratulate the Opposition on their motion, as we are seeing growth in the two key figures—GDP and retail sales—that we have considered so far.

The next thing in the Opposition’s motion is manufacturing output, which, it says, “fell by 1.5%” over the last month; but actually, over the year, it has risen by 1.3%.

[Alison McGovern]

I am going to skate briefly over the hon. Gentleman’s comments about Labour Members never having seen a balance sheet. I hope that he will discuss economic variables and lag times and say whether, in fact, what happened in the previous six months might have been attributable to the last Government and that we need to allow time to feel the impact of this Government’s policies. Will he cover that?

[Ben Gummer]

The hon. Lady makes a perfectly reasonable point, but it is not one that she has conveyed to Opposition Front Benchers, because they chose as the subject of the motion, “The economy one year since the Government’s first Budget”. I am merely commenting on that, not on the rather crass detail in the motion. So far, we have growth in manufacturing, growth in retail sales and growth in the economy. Let us go on to the next thing that they are talking about.

The motion refers to

“a welcome recent fall in unemployment”.

The Opposition concede that. It was not just welcome; it was the largest fall in unemployment for 10 years—88,000—and larger than that achieved at any point when the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), whose Parliamentary Private Secretary questioned me a moment ago, was Prime Minister.

[Andrew Griffiths]

Returning to the point about manufacturing, is my hon. Friend aware that under the premiership of Tony Blair and Gordon Brown, we saw a sharp—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. The hon. Gentleman must refer to another hon. Member by his constituency.

[Andrew Griffiths]

Does my hon. Friend agree that manufacturing declined more sharply under the previous Government than it did under the premiership of Margaret Thatcher? Under the Labour Government, we saw an unprecedented decline in manufacturing.

[Ben Gummer]

My hon. Friend is entirely right. In my constituency manufacturing fell more quickly in the 1970s than it did in the 1980s. The last bit that was left in the 1980s was stolen by Robert Maxwell, a previous Member of Parliament for the Labour party, though happily not in my constituency.

Let us move on and go through the motion, which says that

“the Office for Budget Responsibility predicts that future unemployment will be up”

by 200,000. The Opposition Front-Bench team fail to be able to read a fan chart. That is the upper part of the forecast, but there is also a 200,000 dip at the bottom end of the fan chart. The OBR has said that unemployment is performing much as it had predicted. The forecasts are not changing and unemployment is going down more quickly than the OBR estimated in March.

A series of suggestions from the Opposition Front-Bench team follows. I wonder if I can prompt an intervention from the shadow Minister, the hon. Member for Wallasey (Ms Eagle). The announcement on VAT mentioned in the motion was mentioned to her before it was mentioned to the shadow Cabinet or to the London School of Economics. She tuts me away. It is, according to the Financial Times, the biggest change in Opposition economic policy since the general election. I wondered whether the hon. Lady could comment on when it was announced to her colleagues, so we must take it that it was not.

We then come to the gravamen of the motion. It refers to the

“long-term damage to the economy”

caused by the Government’s policies. Let us look at underlying trends, which are probably the best indication of how the economy is performing. The savings ratio is higher now than it was at any point, apart from one quarter, in the whole of the previous Government’s time in office. The investment intention of the private sector from the CBI industrial trend survey is also higher than at any point in the 13 years of the previous Government. It reached that level previously only in the first quarter of 1997. Export orders are at a 15-year high, and CPIY—underlying inflation, excluding tax rises—is within the Bank of England remit.

We know that tax increases are coming through into inflation, and that there was a massive injection of cash into the economy through quantitative easing by the previous Chancellor of the Exchequer. It is the combination of those and the necessary tax increases to deal with the appalling deficit which is causing the unfortunate inflation figures now, but the underlying figure is at about 2.4% or 2.5%, and I hope that in time it will return to that, as the OBR predicts.

The last part of the increasingly risible motion refers to

“temporarily cutting VAT to 17.5 per cent.”

When VAT was put up in the emergency Budget, I remember hearing from those on the Opposition Front Bench that that was an iniquitous rise that should never happen, but now it is to be temporary. Can the shadow Minister tell us why she is proposing a temporary cut rather than a permanent one, as she was proposing this time last year?

The motion mentions the bank bonus tax, a canard put out constantly by the Opposition. The bank bonus tax raised £2.4 billion on the best estimate, but £2.6 billion has been raised by our bank levy, which will be set every year in this Parliament, unlike the bonus tax which, by the previous Chancellor’s own admission, was a one-off event.

Finally, we come to the two most egregious statements in the entire motion. First, there is the reference to the need for “25,000 affordable homes” from the party that built fewer affordable homes in every single one of its years in office than were built in every single year of the Major and Thatcher Governments—but Labour does not admit to that shocking record in its motion. Secondly, we return to the issue of jobs. The motion calls for the creation of

“100,000 jobs for young people”

just days after we have heard of the greatest fall in youth unemployment in 10 years.

So the Opposition have come to this House with a motion judging the Government on the economy one year after our first Budget, yet they cannot choose one single figure by which to judge the Government’s record, and in the end they put forward a series of disingenuous statements by which their own record would look very poor.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. To enable more Members to contribute to the debate, the time limit for speeches is now being reduced to six minutes.

17:30

[Nic Dakin (Scunthorpe) (Lab)]

It is a pleasure to follow the hon. Member for Ipswich (Ben Gummer), who enriched us by deploying such a rich lexicon in dissecting the motion. Indeed, this debate is, in part, about language. I began my working life as a teacher of English, and although I have moved on from that, I can still identify a good yarn when I read or hear one, and that is what the Conservatives have been spinning since the general election. They have been spinning a good yarn—a seductive fable—but in truth it is a Tory tale of woe, with brief Lib Dem notes in the appendices. Regardless of how seductive and engaging people have at times found this yarn, it is not an accurate account, because the reality is very different.

The truth is that the country is facing difficult times because there has been a global banking crisis that required strong and decisive action to avoid a global catastrophe. That action was partly led by the then Prime Minister of this country. The situation is still challenging for our economy and others across the western world, as we have heard in the debate, but we must tackle the challenge in a sensible way.

In the general election campaign, the people of this country had every opportunity to hear the different arguments about how best to tackle that challenge, and they mostly supported candidates who proposed addressing the deficit in a serious and sensible way by halving it over the lifetime of a Parliament. The electorate voted for more candidates who supported that than Conservative candidates who, quite fairly, proposed a different approach. This is in part a sorry tale, therefore, because there is no mandate for the Government position.

When Labour left office a year or so ago, the economy was starting to grow strongly: inflation had fallen, and unemployment was falling month by month. As a result, in 2009-10 the Government borrowed more than £21 billion less than had been expected. Yet a year ago today, the Chancellor announced in his Budget speech that instead of following Labour’s plan to halve the deficit over four years—the plan that had been backed by the British people through votes cast in ballot boxes only a month earlier—he would eliminate the structural deficit by the end of this Parliament. That was a reckless decision; it was a choice to go too far, too fast, and the country is now facing great difficulties as a result.

In our debate, my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) has highlighted that figures for construction and retail sales have been falling, that the consumer prices index target rate is higher than hoped, and that VAT has stimulated inflationary pressures. We have also heard that we have flat growth and that seasonally adjusted trade figures also remain flat.

The European Commission has just published the full results of a survey that shows a high level of dissatisfaction with the Government’s laissez-faire approach to tackling unemployment. The survey’s 22,560 respondents were asked whether they agreed that the economic crisis means that we should increase public deficits to create jobs. Two third’s of the UK respondents agreed with the statement, which is a much higher proportion than in any other major western country. They agreed that there should be investment in infrastructure. The Government have pulled Building Schools for the Future and various other infrastructure programmes, which has had a devastating impact on the construction industry.

In the community I represent, which is still quite dependent on steel jobs, the collapse in demand for construction has led to Tata Steel’s announcement of 1,500 job losses in its long products business. It is not surprising that Karl-Ulrich Köhler, when he came to Scunthorpe to make that announcement, gave two reasons for the decision: the fall in demand for section steel, both globally and domestically; and the threat of carbon taxes rising in 2013.

The Government’s decisions are having an impact today and for tomorrow on British manufacturing. We need to get behind projects such as the high-speed rail endeavour, which we hope, if it goes ahead, will be built with British steel. The Government have failed to deliver on their promises to invest in the British people. They have brought severe medicine to the country, much severer than was needed. There is real danger that the country will be left in a very difficult situation, after the legacy of an improving economic situation that they were left, which should have been—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I call Dr Thérèse Coffey.

17:36

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

I always enjoy these occasions and think that it was a very good birthday present from the Opposition to allow the Government to defend their record. As my hon. Friend the Member for Witham (Priti Patel) said, the debate gives us an opportunity to remind the British public not only of the legacy we inherited, but of the positive action we have taken.

I always enjoy the contributions of the right hon. Member for Morley and Outwood (Ed Balls), which I find quite jovial occasions, although I was disappointed that he would not allow me to intervene. The only slight challenge about listening to the right hon. Gentleman, who seems to live on planet Balls or in la-la land, is that I wake up and realise that I have participated in a horror show. The hon. Member for Scunthorpe (Nic Dakin) seems to be adding to Aesop’s fables with his portrayal of a golden legacy that we apparently inherited. So what do we end up with? A second-choice shadow Chancellor asking for a second chance. Hopefully, the British public will realise that his plan B just means more boom and bust, more borrowing and potential bankruptcy. Frankly, I do not see the British public voting for that again in the near future.

The hon. Member for Pontypridd (Owen Smith) referred to a plan B and quoted the CEO of Vodafone. Normally Labour Members are not the biggest fans of Vodafone when it comes to aspects of its contribution to the economy. He will probably not be impressed by the conversation I had with the CEO, who criticised the Government for not cutting fast enough or deep enough and said that, by not making quicker progress on that, we would make a rocky road for ourselves.

The right hon. Gentleman used to cite the USA in support of his plan, but we now see the Obama Administration stepping up the pace of deficit reduction, which they need to do.

[Thomas Docherty]

I suspect that the hon. Lady was not here in May, but I certainly recall President Obama making it absolutely clear that he did not agree with the current Government’s policies on the deficit.

[Dr Coffey]

Well, perhaps he did not, but he seems to have changed his mind and is stepping up the pace of deficit reduction.

Plan C is the VAT cut that the shadow Chancellor announced, unknown to some of his shadow Cabinet colleagues, it seems. Yet again, it is another unfunded tax cut. I was not a Member the last time that happened, in 2008, but many people will remember that earlier that year the 10p tax rate was abolished, and what was the impact of that? The economy continued to contract, leading CEOs said that £12.5 billion had been wasted on that tax cut, and hon. Members may recall the Federation of Small Businesses survey, in which 97% of its members said that their earnings had not increased.

In spite of all that, the right hon. Gentleman has wheeled out the plan again, and eight times today the right hon. Member for Edinburgh South West (Mr Darling) refused to endorse it. We have been told that we need a credible plan with public and political support, but perhaps the shadow Chancellor needs to start with his Back Benchers, rather than by trying to persuade the British public.

I know brotherly love is a big feature of the Labour party, so perhaps the right hon. Gentleman will start with his brother, who I understand works for PIMCO, the world’s biggest bond fund, which has publicly stated that the UK has the best combination of fiscal and monetary policies in the G20—and so say all of us. No wonder in a Populus poll last week, only 23% of the population supported the Labour leadership in its desire to control the economy, a reduction of 10% in the past three months.

Instead, the British public have responded to the two parties on the Government side of the House, which just over a year ago came together in the national interest to form a coalition, and which with wide political support have put together a credible plan to restore fiscal sanity. Government Members have demonstrated a proactive attitude in starting to untangle red tape; in incentivising the creation of small businesses and entrepreneurs; in the significant policy of welfare reform, whereby we have been very clear that people will be better off if they work, unless they cannot; in the extra money going into apprenticeships, building on the good work—I recognise—of the former Government; and in funding infrastructure.

I was a little surprised at the contribution of the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), who seemed to have forgotten the amount of money that the Government are spending on infrastructure. Indeed, we recognise that we need to do so.

Reference has been made to RDAs, but a PricewaterhouseCoopers report last year suggested that generally they have been poor value for money, and despite spending those billions, the prosperity gap has widened.

The hon. Member for Liverpool, West Derby (Stephen Twigg) referred to life in the ’80s in Liverpool, but I grew up in Liverpool and was there in the ’80s. I am going to do a lame Welsh accent, because it was a Labour council—a Labour council—that fired 30,000 employees to stave off bankruptcy—[Hon. Members: “By taxi”]—by taxi. Those people were understandably fed up with the Labour council leader, and they did not just take the ferry across the Mersey to Birkenhead; they left Liverpool. We have seen that with the reduction in the number of people living there, and in the money that is left, too. Ironically, the port of Felixstowe in my constituency benefited from the situation, but it has been a great shame, because I am very proud of where I grew up.

The Conservatives went in and put in investment.

[Alison McGovern]

The hon. Lady cannot mention our home city of Liverpool without acknowledging the previous Government’s role in rebuilding it and in restoring the pride that we take in it. Will she acknowledge their role, because her comments do not paint a true picture?

[Dr Coffey]

The hon. Lady is absolutely right. I am very proud of my home city, but I hope that she will also credit Lord Heseltine. We started back in the ’80s, we saw the Albert dock and other aspects of the city transformed, and some of that continued under the previous Government, but investor confidence in the city was knocked by that legacy of the ’80s which was referred to earlier.

The right hon. Member for Morley and Outwood also seemed to use marine terms, trying to suggest something about fancy yachts and the similar. The previous Government, in marine terms, were possibly the equivalent of the Titanic. People took their eye off the ball—holed by an unseen disaster, perhaps—with unintended, tragic consequences. That is the state of the economy which has been left behind, however, with tens of thousands of pounds of debt being loaded on to every child born and on to children not yet born.

The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) referred to the impact of the Budget last year on mothers and families, but every mother and family I know has to cope with a household budget which means that they have to try to balance the books every month. That is absolutely key.

[Sheila Gilmore]

Will the hon. Lady give way?

[Dr Coffey]

No, I have already given way a couple of times to Opposition Members.

It is absolutely key to ensure that when one has already maxed out the credit card, one cannot not keep spending but has to stop and start paying it back.

Staying with the nautical terms, I recognise that it is not going to be plain sailing ahead, but I can assure members of the British public that Conservative Members will be firmly on watch. We may need to tack and jibe to reach our final destination, but that destination is fiscal sanity, a growing economy, and a prosperous working Britain. That is why I will support the amendment to the motion.

17:45

[Mr David Anderson (Blaydon) (Lab)]

The past 13 months have been framed by Conservative Members talking about deficit denial, but the truth is that what we have gone through is deficit deceit. They have spun a tale that ignores the fact that what we went through when we saw the failure of the big banks was a failure of capitalism in this country. They never mentioned the fact that Lehman Brothers, HSBC, Lloyds and Northern Rock had collapsed. They ignored the fact that we had light-touch regulation, which they had criticised for not being light enough. The situation that we got into was not just about what our party had done—it was supported by the Tories and by the capitalist system.

When the collapse happened, we took tough decisions not to repeat Tory mistakes—not only those of the ’80s and ’90s, but of the 1930s. We refused to accept, and we still do, that unemployment was a price worth paying. The reality is that the Conservatives still believe that and always have believed it. They ignored the fact that the Labour Government were praised at the G20 meeting in Pittsburgh and by the OECD for the work that we did. In fact, the OECD said that the Labour Government had led the world and prevented a recession from becoming a depression.

The Tories must have been happy, because all they wanted to do was stand back and let the market take the course. We have seen them do that in the past. They did it in the 1930s when my father was 14 years old and was sent to work in the coal mines—one of the most dangerous jobs in the world. One thousand men a year were being killed in British coal mines—one every six hours—and someone was injured every two minutes. They went home to houses that were not fit to live in. They had poverty wages, desperate living conditions at home and at work, and no respite. It took a world war and a Labour Government to address those appalling conditions.

The Tories have a long memory, and when they got back into power in the 1980s they went back to the same programme that they had in the 1930s. Under the banner they are flying today—“There is no alternative”—they attacked working people and closed mines, steelworks and shipyards. They used the same language when they outsourced hundreds of thousands of workers from councils, hospitals and universities. They cut their terms and conditions, undermined their security and decimated the services they delivered. Does that sound familiar? Yes, because they are doing it again today, and the Liberal Democrats—those who are here—are backing them up.

[John Hemming (Birmingham, Yardley) (LD)]

The hon. Gentleman’s party’s solution is to borrow more money. From whom is it going to borrow it and how much interest is it going to pay?

[Mr Anderson]

My party’s policy is not to borrow more money—it is to increase taxes on bankers and make those people pay.

[John Hemming]

rose—

[Mr Anderson]

Sit down and shut up.

The Tories have made deliberate decisions and claimed that there are no alternatives. When my party came back into government in 1997, the people from where I came from said they wanted us to put right the attacks that had happened in the 1980s. They said, “We’re sick of living in second-class conditions.” That is why I am proud, and my party is proud, of what we did.

[Mr Hanson]

May I remind my hon. Friend that at the last election the Liberal Democrats wanted to spend more than the Labour party?

[Mr Anderson]

I was not going to discuss the Liberal Democrats because they are obviously not relevant to this country any more. I thought that perhaps they were outside unveiling a new placard about the bombshell or signing a few pledges; obviously, they are too busy to come in here.

[John Hemming]

rose—

[Mr Anderson]

I am not going any further.

I am proud of what we did. We put record investment into the national health service. We had the Decent Homes programme, which, in my local council area, provided £360 million to put right homes that were desperately in need of it. There was a huge improvement in school results. We had more doctors, nurses and police on the beat. We had the national minimum wage, peace in Northern Ireland, new schools and hospitals, better health outcomes, and record numbers at university and in work. We also had—Conservative Members have not mentioned this while attacking the economic progress of our Government—a record period of growth over more than 11 years before we were hit by the global crisis.

What is certain is that the Conservatives and their yellow human shields, the Liberal Democrats, will never learn from history. They want to ignore the history of ordinary men and women. Indeed, when the Chancellor was asked in 2007 about his memories of the miners’ strike, he said:

“I’m trying to see if I can honestly remember.”

What we have is a party that selectively forgets the past, including the suffering and misery of a generation of people whose only crime was to want to live in security, bring their kids up well, have a good life and go to work. The Conservatives refuse to remember those things. They are doomed to repeat the mistakes of the past, and ordinary people will pay for those mistakes.

17:50

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

I want to start by putting an end to the myth that the Government have no mandate for the action they have taken. [Interruption.] Already I can hear somebody saying from a sedentary position that there is no mandate. Let us look at the figures. I do not think anybody in the House would deny how unpopular the Conservative Government of 1997 were. That led to the Labour landslide. I therefore wonder how the Labour party managed to take an even lower share of the vote in 2010 than the Conservative party took in 1997.

We went into the last general election saying that we would get the budget and the deficit under control, and that we would introduce welfare reform. Everybody heard that message, not least because the Labour party kept delivering leaflets to everybody’s houses saying that we were going to do those things.

[Sheila Gilmore]

I do not dispute that the Conservative party went into the election with those things in its manifesto. The point is that the Conservative party did not secure a majority and its coalition partner went to the electorate with a completely different prospectus.

[Alec Shelbrooke]

I am not sure that I quite understand the hon. Lady’s point.

[John Hemming]

The hon. Lady claims that the Liberal Democrats fought the election on the basis of not dealing with the deficit. We fought it on dealing with the deficit and that is what we are doing.

[Alec Shelbrooke]

Absolutely. It is a salutary lesson in the history of British politics that it has taken two parties to come together to deal with the mess that that lot left behind.

Labour Members say that there is no mandate, but nobody in this country was in any doubt about what the Conservative party would do in government, and they voted for us. [Interruption.] I have already given way twice and I will not give way again because I have only six minutes. The public voted for the Conservative party in big numbers. The only reason that it did not end up with a majority was the in-built advantage to the Labour party. Even with that, Labour could not win the election.

Labour Members have learned nothing from their election defeat a year ago. As far as they are concerned, there was nothing wrong with the economy and they knew how to sort things out. They think that the only reason they are in opposition is because people accidentally voted Conservative, and that we are in government only because of the Liberal Democrats. Well, I point out that we have a majority of 83 in this House. As I said, two of the main parties have come together to deal with the mess left by the Labour party. When I was campaigning up and down the country, that is what the British public wanted. They wanted a coalition Government and they got a coalition Government because this mess needed to be sorted out. I think that we should be proud of our record over the past year: job creation in the private sector—up; export growth—up; manufacturing growth—up; the largest fall in unemployment for more than 10 years; 50,000 apprenticeships; 100,000 work experience places; and millions invested.

What is Labour’s plan? From what we can work out, it is to cut taxes and carry on borrowing. What would be the consequences of that? If we had carried on borrowing money at the rate at which it was being borrowed, the people lending us the money would have thought, “Will they be able to pay it back?” They would have said, “Here, have some money, but I’m charging a higher interest rate.” This country faced the danger of unfettered borrowing, which would have meant higher interest rates in the gilt markets and everywhere else. That would have worked through to people’s mortgages. We have spent the last 12 years on interest rates of about 3% to 4%, which were seen as historically low. If the interest rate went back to 3% or 4% tomorrow, it would cause real damage to the people of this country, who for almost 18 months have been on an interest rate of 0.5%. A responsible Government must ensure that frivolous spending and unfettered borrowing do not end up with the people about whom the hon. Member for Blaydon (Mr Anderson) just spoke suffering the consequences of not being able to borrow, not being able to afford their mortgages and not being able to live within their means.

It was interesting that the shadow Chancellor had clearly spent a long time looking into details about Government Back Benchers whom he though might intervene on him, instead of looking into a credible policy. He picked out statements from Government Members to paint the picture that we were all demanding higher spending. Of course, the reason why he thinks that is that the Opposition have no concept of governing for the long term. They do not understand that when my hon. Friend the Member for Dover (Charlie Elphicke) talks about the policies that he wants to have in his constituency, he is talking about the long term. I am sure my hon. Friend will expand on that when he speaks.

I am sure that the shadow Chancellor, having a neighbouring constituency to mine, had a few choice phrases ready for me. I have made no secret of the fact that I would like a better rail infrastructure in my city. However, I have always made it quite clear that my aspirations are for the long term and do not have to be achieved tomorrow. We do not have to borrow trillions of pounds to put them in place now, but such infrastructure could be built up in the next decade or even two.

[John Hemming]

Does the hon. Gentleman agree that by reducing the rate of interest and the amount of interest paid, in the long term we will be able to spend more on infrastructure than the Opposition would?

[Alec Shelbrooke]

Absolutely, and I am very grateful to my hon. Friend for making that point. I have said in the House before that when we tell people that we have a deficit of £1 trillion that will go up to £1.4 trillion, they look at us blankly and think, “What’s a trillion?” It is such a huge number. However, when we tell them that every day of every year we are giving £120 million to foreign countries—that is the money that we borrow—they recognise the mess we are in. They recognise that we cannot give schools the improvement that they need, because of the absolute shambles of the private finance initiative projects in Building Schools for the Future. Money was wasted once again on bureaucracy.

Labour Members have banged on about regional development agencies all afternoon, but they were a great way to spend bureaucratic money. The RDAs very proudly said that they had created x number of jobs, but they did not create those jobs, the private sector did. The jobs that they created were paid for out of the public purse. Where did that money come from? From the wealth creators in this country. Everybody understands that if I want to spend £1.25 and I have only £1 in my pocket, I cannot afford to do so. We understood that idea, and the country understood it, which is why Labour Members sit on the Opposition Benches and we sit on the Government Benches.

17:57

[Toby Perkins (Chesterfield) (Lab)]

I think the hon. Member for Elmet and Rothwell (Alec Shelbrooke) forgets that the reason he sits on the Government Benches is that the Liberal Democrats changed their policies and decided to let him sit over there.

[John Hemming]

rose—

[Toby Perkins]

It is so good to see a Liberal Democrat turn up that I have to let him in. It will encourage him to come again.

[John Hemming]

I simply point out to the hon. Gentleman that we have not changed our policies. He is asking for more money to be borrowed. Where would it be borrowed from, and what would the interest rate be?

[Toby Perkins]

It is interesting that the hon. Gentleman assumes what I am going to say already. I am only three seconds into my speech. I will come to that point.

The hon. Member for Elmet and Rothwell said that he was proud of the Government’s record so far. I would not like to be here when he is ashamed. Government Members would like this debate to be about whether we need to reduce the deficit, but that is not what it is about at all. Everyone recognises that we need to do that, and that in 2008, prior to the onset of the biggest global economic crisis in history, we had a lower deficit as a ratio of GDP than in 1997 when we came into power. It was only the scale of the economic crisis that forced the Labour Government to spend money to stop the awful situation that ordinary people were finding themselves in, with jobs being lost and the danger of houses being repossessed. We are proud of the decisions that we made at the time, which were supported by the IMF. It said strongly that this country, under the Labour Government, showed leadership when the rest of the world did not know what to do in the face of a terrible global economic crisis.

[Kwasi Kwarteng]

rose—

[Toby Perkins]

Because the hon. Gentleman was so generous to me, I will allow him to intervene.

[Kwasi Kwarteng]

I believe in debate—it is good that interventions are taken. If the problem was global, why was our deficit to GDP ratio four times higher than that of the Federal Republic of Germany?

[Toby Perkins]

Each country was in a different situation. Our ratio was much lower than Japan’s. There are a number of reasons why the German economy was different from ours. We over-relied on financial services and our manufacturing sector was reduced. We had high increases in housing prices. I do not remember any point in the past 13 years when Conservatives jumped up and down saying that they wanted the Government to engineer a house price crash.

[Claire Perry]

Will the hon. Gentleman give way?

[Toby Perkins]

I think I have given way enough. I am grateful for the fact that the hon. Lady has turned up for the debate, but I shall carry on.

As someone who for the five years prior to coming to this place ran a business that relied on people having money in their pockets to buy non-essential items, I know very well how important it is that decisions on our economy are balanced between the need to support growth and the need to reduce the nation’s borrowing. However, we are debating the economy today because since the Chancellor’s Budget a year ago, the OBR’s initial predictions get worse at every stage. The OBR now predicts £46 billion more borrowing than it predicted a year ago. The Government have discovered that the policies that they are pursuing are not working, so why do they not listen to the advice, change course and ensure that we protect not only the growth that we need in our economy to reduce the budget deficit, but the people on the ground in our constituencies—that includes the constituencies of Conservative Members—who are struggling to get by, whose houses are being repossessed? Repossessions are increasing.

[John Hemming]

Will the hon. Gentleman give way?

[Toby Perkins]

I have given way to the hon. Gentleman once. I am grateful for the fact that he has turned up, but I do not want to give him any further encouragement.

The scale of the deterioration in the OBR’s forecasts is stark. The OBR, which was set up to provide an independent view of the state of Government finances, has downgraded its forecasts three times. The Chancellor told us of all the steps he is taking to stimulate growth, but even taking those into account, the forecast is that public sector net borrowing will increase by £46 billion over the next five years, which demonstrates the failure of those policies.

The Chancellor might be failing to get our economy growing, but the same cannot be said of unemployment. Government Members are celebrating, as we all do, the fact that unemployment is down in the last month, but unemployment over the course of the Conservative-Lib Dem Government will go up. Youth unemployment is up. The OBR forecast is that unemployment will rise––[Interruption.] Going forward, the OBR is now predicting that in every year over the next five years unemployment will be higher than in its prediction of a year ago.

[Ben Gummer]

The hon. Gentleman is factually wrong. The OBR says that unemployment will peak at the end of this year and the beginning of next year, and that it will fall in every successive year.

[Toby Perkins]

The hon. Gentleman did not hear what I said. The OBR suggests that unemployment will be higher in every one of the next five years than it suggested in its predictions a year ago. That is what I said.

Alongside the increase in unemployment, we are seeing increases in inflation and interest rates. We have been here before: growth stagnating; unemployment rising; businesses failing; and inflation, interest rates and house repossessions increasing. Who was the economic genius who advised the Chancellor the last time a Tory Government led Britain down that road? The current Prime Minister. Should we be surprised?

The Prime Minister has a pedigree as an economic failure, but what about the Chancellor? The Chancellor is the master of hindsight. This was the man who told us that bank regulations were too stringent when Labour was in power. This was the man who, up until 2008, told us that the Conservative party supported Labour’s spending plans, but who now claims that Labour overspent for 10 years. We told him that he was cutting too far and too fast, but he then delivered a damp-squib Budget for growth because we had been right in the first place. He is the man who will soon gain huge dividends because of Labour’s sensible decision to nationalise Northern Rock at a time when he was still a rabbit staring into the headlights of an economic crisis that shook all his assumptions about the sanctity of the markets.

When the IMF was still praising Britain following Labour’s response to the international crisis, the now Chancellor was encouraging us to follow Ireland’s example of massive cuts at the heart of a recession. He is fond of his international comparators, so let me give him some. When he was supporting our economic plans, Britain’s net public spending as a proportion of GDP was 6% lower than when Labour came to power. We have seen an unprecedented clean-up of the disgraceful state in which the previous Conservative Government left our public services. At that time, our debt, as a proportion of GDP, was the second lowest in the G7. Now the growth that he promised to return Britain to lags behind every single country in Europe except for the absolute backmarkers.

People in business, whether in plumbing or double-glazing or the sports goods industry, as I was, need their customers to have money and confidence, but under this Government the amount of money in people’s pockets has shrunk, the cost of goods has risen because of the VAT increase, and people have no confidence that the economy is going to grow and so are not spending money. That is why we are not seeing growth in our economy. We all want the deficit shrunk, but that will happen only if we get growth back into the economy now.

18:06

[Richard Graham (Gloucester) (Con)]

It is a pleasure to follow the hon. Member for Chesterfield (Toby Perkins). He, I and all of us in the House agree that the goal now is to increase growth in the country. The challenges are, first, the revisionist history we have heard today, and secondly the road through which we achieve that growth.

Today’s debate started with the shadow Chancellor talking about the lessons of history and highlighting the need for an economic plan that works. Let me begin with a quick analysis of recent history, because we know that those who do not learn from their errors and from history are destined only to repeat them. The shadow Chancellor was the man who, with his then boss, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), had the clear economic goal of abolishing boom and bust. Thirteen years later and after the worst bust of all time, the right hon. Member for South Shields (David Miliband), as the Chancellor mentioned today, rightly came to the conclusion that it was wrong ever to pretend in a capitalist country that anyone could abolish the economic cycle.

It was a pity that the right hon. Gentleman did not arrive at that conclusion many years earlier, but he has learned an important lesson from recent history. Have the shadow Chancellor and other Labour Members done the same? Have they accepted that the heart of the shadow Chancellor’s last great plan was rotten to the core, was mission impossible, and so ended inevitably in tears? I do not think that Labour Members understand that they and their economic spokesmen will simply not be credible until they accept that key fact.

[Alison McGovern]

If the hon. Gentleman thinks that the previous Government’s economic policy over a decade lacked credibility, why have the current Government accepted, though amended, the golden rule on investment over the economic cycle?

[Richard Graham]

First, the hon. Lady is inaccurate, and secondly no Government Member believes that we can abolish boom and bust.

The details of the shadow Chancellor’s plan were no more successful than his goal. The golden rule on Government spending to which the hon. Lady referred was continually fudged under the previous Government, most spectacularly through the £300 billion of off-balance sheet financing—private finance initiatives—which was almost as bad as anything done by the investment banks. Does the shadow Chancellor accept the accusation by the right hon. Member for South Shields that this was a fundamentally dishonest way of measuring the golden rule? Even the right hon. Member for Kirkcaldy and Cowdenbeath has recognised that the tripartite system of regulating finance did not work. Does the shadow Chancellor accept that too?

These dry details, on things such as PFI and the tripartite system of regulation, do not resonate with our constituents, but their consequences will—the hospitals that have to cut services to patients because of the interest being paid on their PFI financing, and banks not lending enough to individuals and businesses in our constituencies because of bad decision making by themselves, inept regulation and inadequate Government oversight. The consequences of living beyond our means are the essential link between the shadow Chancellor’s policies, and our inheritance and this Government’s efforts to forge a better economic future.

We come to the crucial part of today’s motion: how are we doing, one year on? Opposition Members have piled in like a choir singing the hymn “Abide With Me”—“Gloom and despair in all around I see”. They all seem to have enormous confidence that the economy is failing, that the coalition will not plan, and that the coalition plan would not and could not work anyway, leaving them to talk down our country and their own constituencies. I wonder whether any of them are doing anything to help. Where were they, for example, when I led a debate on apprenticeships and small businesses two weeks ago? Not a single Opposition Member was there. We all need to do our bit to support business growth in our constituencies. We know today that not everything is perfect, but the evidence suggests the following facts. Unemployment is down slightly on a year ago. The savings ratio has improved and business growth—

[Thomas Docherty]

On a point of order, Mr Deputy Speaker. Could you clarify whether I could find out from Hansard whether a Member had actually turned up for their own debate?

[Mr Deputy Speaker (Mr Nigel Evans)]

That is certainly something that you could find out from Hansard, but it is not something that you can find out from me.

[Richard Graham]

I am glad to see that Opposition Members are focused on the topic of today’s debate.

As I was saying, the manufacturing recovery has softened slightly over the last month or two, but it is still strongly up on where it was a year ago. There is a lot to be done, but I would like now to highlight a few things that this Government have done in my constituency, and on which I am working with my constituents.

[Lilian Greenwood]

Will the hon. Gentleman give way?

[Richard Graham]

No, we have had enough of the hon. Lady’s discussion of the past.

I welcome this Government’s commitment to redouble the Swindon-to-Kemble line, which will be an important infrastructure improvement for our railways. I welcome the transfer of assets from the former regional development agency to our city, which will make a difference to our regeneration. I also welcome the funding that the Secretary of State for Education has given for a new-build Gloucester academy, which will help some of our young in their education. I am proud to have worked with my constituents to organise the Gloucestershire apprenticeship fair, the women for engineering seminar and, last week, the Barton jobs fair, alongside Linking Communities and Black South West Network, from which some of our young unemployed black and minority ethnic constituents have found new jobs. There are jobs available if only we can help our constituents to find them. All of us in this fragile situation have options.

[Mrs Jenny Chapman (Darlington) (Lab)]

rose—

[Richard Graham]

All of us including the hon. Lady. We can do nothing, we can say, “It won’t work,” and we can let our constituents down; or, we can get stuck in and work with our businesses to help our constituents back into work. These things have other fruits as well, such as the prizes that I gave at the Gloucestershire Wildlife Trust half an hour ago to those companies that are supporting environmental good causes.

I agree that we need to do more to boost growth. I have been asking the Government to do more to help small businesses take up apprenticeships. I believe that the return of business rates to councils will incentivise them to drive up support for our businesses. I believe strongly in enterprise zones, and I hope that the Government will look carefully at the enterprise zone for my constituency.

I also believe that the Treasury is correct to sort out the banks and manage the risks to the taxpayer. However, today’s Opposition plan is not a plan at all; it is simply an unfunded, undiscussed and unsupported VAT cut. It would simply increase spending, push up debt and lead to higher interest rates, with more to be paid every month on mortgages by our constituents. It is not so much jam tomorrow as enormous pain tomorrow and for many years, which is why I will have no hesitation in rejecting the motion.

18:13

[Chris Evans (Islwyn) (Lab/Co-op)]

It is always a pleasure to follow the hon. Member for Gloucester (Richard Graham), whose constituency always brings back happy memories for me—we like to visit friends there.

One thing that I have noticed in this debate is that there has been a lot of rewriting of history on the Government Benches. Straight away, all we have heard is, “Labour got it wrong in 13 years of government.” Well, if Labour got it wrong, why were those who are now on the Government Benches so quiet? We did not hear a word. We did not hear them say anything. In fact, in September 2007, a month before Northern Rock went down the plughole, the then shadow Chancellor said, “We’re going to follow Labour’s spending commitments for the next few years.”

[Alun Cairns]

rose—

[Chris Evans]

A voice from Wales. I hope that it is sensible.

[Alun Cairns]

I am grateful to the hon. Gentleman for giving way, but the conclusion that Labour got it wrong was demonstrated 12 months ago in the last general election.

[Chris Evans]

Why did I bother giving way? That is another complacent attitude.

When the Government talk about deficit denial, they miss the point completely. There seem to be two theories. If we follow the Chancellor’s logic, cutting the deficit by £112 billion will encourage the private sector to create jobs. The private sector is going to come to the rescue and all those people who worked in the public sector will get jobs in the private sector. Wonderful—if it works. The other theory is that the Chancellor’s taking £112 billion out of the economy is doing nothing for consumer confidence. When I talk to the shopkeepers on the high street in Blackwood, they say, “The cuts haven’t even bitten yet, Mr Evans, but we are already feeling the pinch.” I am worried about that.

We talk about short-termism, and there seems to be no realisation that the policies to cut the deficit that we put in place today will have ramifications down the generations. There has been a lot of talk about the ’80s. I know that Conservative Members like to worship at the altar of Baroness Thatcher, but when I say that name to anyone in the valleys, they think of two things: fear and hurt. We have had problems with Scottish Power putting its prices up, affecting the most vulnerable in society, but we could do absolutely nothing about it because everything was sold for short-term gain. In 1992, I remember talking to a friend down the pub, and he was in tears. He had gone for a job as a grass cutter and when I asked him what was wrong, he told me that he had not got the job because there had been 60 applicants. “I’m not good enough to cut grass”, he said.

Now, those people have children of their own, and they are worried, too. Figures released in June show that one third of jobseeker’s allowance claimants in my constituency are young people under the age of 24, and I am seriously worried that we are going to have another lost generation. People talk about all this anger against the Labour party, but the only anger I have heard is against the banks. Privately, those on the Government Benches will admit that it was the bankers who did it, but for reasons of political point scoring and advantage, they would rather say that it was the Labour Government who did it—[Interruption.] That is the truth.

[John Hemming]

Does the hon. Gentleman acknowledge that Tony Blair said in his memoirs that it was the Labour Government who did it?

[Chris Evans]

No, he did not. This debate would be far more honest if we said that it was the banks. This is like the sword of Damocles hanging over our heads. The banking sector is too large. We have too many large banks. I welcome some of what the Chancellor has said about this—he said that there needs to be ring-fencing between the banks’ retail and investment operations—but if we do not break those banks up and just one of the big six goes under, the economy will be back in trouble. However, we have sent the banks a message that we would send to no other business. We have said to them, “What you’re doing is okay. However you run your businesses, we will bail you out.”

[Matthew Hancock]

I am listening to the hon. Gentleman trying to blame everything on the banks. The question is, who designed the regulation of the banks?

[Chris Evans]

We have heard about the FSA, and we have admitted that that did not work, but before that, there was self-regulation. There was no attempt to tie them down, and there is still no such attempt. When the Minister responds to the debate, we need to hear from her what the future of the banks will be. We need to know that.

This is the problem that I have with the entire debate. People say, “It was the Labour Government overspending”, but faced with the same problem of the banks going under, what would the present Chancellor have done? He would have done one of two things. Since his road to Damascus experience, he wants to cut everything, and following that logic, he would have done nothing. The economy would have gone under, and everyone with a mortgage would have been written off. Alternatively, bearing in mind his mates in the City, I suspect that he would have bailed the banks out just like we did. He would have been faced with a deficit, just like we were. We never hear anything about the future of those banks from Members on the Government Benches.

[Susan Elan Jones (Clwyd South) (Lab)]

Conservative Members seem to forget what the Prime Minister said. In speech to the CBI, he said that the Government were sticking to Labour’s spending totals. Just weeks before the collapse of Northern Rock and for several months after it, he said to the Institute of Directors that if it wanted lower taxation and less regulation, he would—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I think that the hon. Gentleman has got the point.

[Chris Evans]

I thank my hon. Friend. After the debacle of the intervention by the hon. Member for Vale of Glamorgan (Alun Cairns), she proves that we have some sensible voices in Wales.

Let me comment on the blasé attitude that these policies are going to work. That is what Government Members say, but what if they do not? I suspect the Chancellor would say, “Not my fault, guv. It was the snow.” It could be hailstones next time or perhaps it will even be too sunny. I imagine that his plan B is quantitative easing. It is all very well printing money, but the key to it is spending. We have to prove to people—[Interruption.] I mean consumer spending—we will speak about the other issue tomorrow. We need to give people the confidence to spend in our shops and ensure that people are in jobs.

[Bob Stewart (Beckenham) (Con)]

This is not particularly my field, but when the hon. Gentleman says that the key to it is spending, I have to ask “With what?”, as there is nothing left.

[Chris Evans]

That is just a PR question. As I say, consumer spending is about giving people the confidence to spend their wages in the high streets so that shops can thrive. That is what it is about: consumer confidence is down. I support the motion. Let us cut VAT and bring a bit of confidence to the high street. Let us get Britain back on track.

18:19

[Charlie Elphicke (Dover) (Con)]

It is a real privilege and an honour to follow the hon. Member for Islwyn (Chris Evans), who has spoken quite brilliantly. I cannot understand why he has not caught the eye of the Leader of the Opposition before now. He richly deserves to do so, particularly after delivering such a fine speech as we have heard a few moments ago.

I shall now deal with the motion. This is a case of fantasy economics. It advocates the idea of building 25,000 affordable houses and creating 100,000 jobs for young people from a bank bonus tax, which raises less money than the Government’s own banking levy. There is a double-counting issue there, which causes me substantial concern, added to which the Opposition voted against £800 million being raised from tax avoiders. Yet again, Labour Members talk about all these wonderful things that people want, because they want to seem populist, while in reality supporting the very rich. The people on whose side we need to be are the grafters and hard-working people; we should ensure that they get better jobs.

[Ms Angela Eagle (Wallasey) (Lab)]

I thank the hon. Gentleman for giving way. To clarify the issue, the vote on the Finance Bill happened as a result of hundreds of amendments being tabled with almost no notice. The shadow Minister responsible said that we supported the intent behind the measure, but we wanted the Government to bring it back and review it. That is all on the record. The hon. Gentleman should not mislead the House in that manner.

[Charlie Elphicke]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. An hon. Member has been accused of misleading the House. I assume that the hon. Lady meant unintentionally misleading it. She should withdraw that comment.

[Ms Eagle]

I am happy to withdraw it, but the hon. Gentleman is presenting the House with a narrative that is so partial that it is very difficult to understand what he meant.

[Charlie Elphicke]

I am grateful to the hon. Lady for the U-turn she has announced.

When I intervened on the shadow Chancellor, he attacked me for opposing the weakening of our border controls. The previous Government were not well known for being strong on border security or on immigration controls, yet he criticised me for standing up and defending my constituency. Just as the motion before the House is fantasy economics, it was the shadow Chancellor’s fantasy that this Government cut our border controls. It was the previous Government who cut our border controls, such was the commitment of the previous Prime Minister to keeping our borders safe. He had the grand plan of selling off our English borders at Dover in a privatisation, so much did he care about England. In many ways, I wish that he were in the Chamber more often, rather than hidden away in Portcullis House, so that we could set forth to him our concerns about the policies he pursued. The recession and misery that have been brought upon people up and down the land by his serial mismanagement of the nation’s finances are nothing short of a disgrace.

The Labour party has gone from government to opposition, but has learned nothing and forgotten nothing. It has proposed a £13 billion unfunded VAT cut—populist but unrealistic. It has made £10 billion of welfare reform spending commitments—nice for the base of people in dependency culture, but unrealistic and unaffordable. We need to ensure that work pays.

[Sheila Gilmore]

Will the hon. Gentleman give way?

[Charlie Elphicke]

No.

We already have a situation in which our debt interest costs us £49 billion a year. We cannot afford to carry on like this. We need to get the nation’s books back into balance, and the country back under control. The Government are doing exactly that.

Let us look at the detail of the Opposition’s motion. It refers to 25,000 new affordable homes, but the reality is that in the five years of the previous Conservative Government, 34,786 affordable housing units were built on average each year, compared with 24,560 under the last Labour Government. That is a 30% fall in the amount of affordable housing built. The Labour party should not be proud of such a record, and no one reading the motion before the House can have any trust in the Labour party on the issue. The motion refers to jobs, which Labour destroyed during the latter part of their period in office.

[Lilian Greenwood]

The hon. Gentleman is fond of statistics, so is he not concerned that while in 2010 there were 3.9 jobseekers for every vacancy in his constituency, that has risen to 8.1? What does he have to say to that?

[Charlie Elphicke]

Employment has gone up in my constituency, and unemployment has been falling, which is welcome. We are going in the right direction: across the nation, there are 520,000 new private sector jobs, while public sector employment has fallen by 143,000, so we see a net rise. The most recently announced figures show unemployment falling sharply by 88,000.

[Toby Perkins]

Will the hon. Gentleman give way?

[Charlie Elphicke]

No. Time is pressing, and I need to allow time for the wind-ups.

Youth unemployment has also started to move strongly— although perhaps not as strongly as wider unemployment —in the right direction. Surely the House must welcome that. Manufacturing output is also moving more in the right direction, after being halved in the Labour years, and now being about 11% of our economy. I hope that the economy will rebalance under this Government so that we are less dependent on banks and fat cats—for party donations, frankly—on handing out knighthoods and on bonuses, and more dependent on much more productive service and manufacturing industries. We need less of financial services and housing, and more of making things, producing things, servicing things, and—yes—education.

The narrative of what this Government are doing is to ensure that our economy is stronger, that our work force are more incentivised to work by making work pay through universal credit, and that they are not only incentivised to work but given the skills to work under the Government’s skills and education agenda. We can have a country that is more productive, where more people want to be in employment, where we do not suck in people from overseas to do the jobs, and where we ensure that our countrymen are encouraged to get into work, do their part, fulfil their potential and have more of a sense of dignity, happiness and well-being. That will allow us to build a Britain that is fit for this decade, and it will ensure that we steam ahead, further ahead, of our European colleagues, and do well. The Government are working on that, and deficit reduction is part of it, but the growth, rebalancing, welfare reform and skills and education agendas are parts of the narrative that add up to a much stronger, much more vibrant economy—a much more exciting Britain-to-be where people will be able to benefit from much more success, much more money and much more good fortune, built on a solid foundation for the long term.

18:30

[Geraint Davies (Swansea West) (Lab/Co-op)]

I know that the parliamentary soul from Dover hoped that the Back-Bench speeches would end at half past six, and I am sorry to disappoint him. It is a great pleasure to be able to speak in such an important debate, which draws a line under the time when the Conservatives were playing their cracked record which consisted of two false messages: that the deficit had been caused by Labour, and that the only way to sort it out was to clear it all in four years and in one way, by destroying jobs and services and punishing the benefits that go to the weakest in society.

Both those messages are false. The reality is that the last Labour Government were very successful economically. We created 2 million more jobs, and the tax from those jobs has funded much bigger health and education services and more opportunity throughout Britain. The deficit was the price paid to avoid a depression sparked by the bankers. Figures from the Institute for Fiscal Studies clearly show that two thirds of the deficit was the banking crisis, while the remaining third, yes, was excess investment over income, which was investment in the future. A fiscal stimulus, generated by the previous Prime Minister and supported by Obama and the world community, was required to keep the banks going and to keep growth moving. In the latter months of the previous Administration we saw growth rising, but now we have seen it stagnating.

The choice now is whether to halve the deficit in four years, as Labour intended—the European Community agreed with that, and, as we heard, the Chancellor signed up to it, although he was embarrassed when that was pointed out earlier in the debate—or whether to go at it and get rid of it all in just four years, even though it is three times the level it was planned to be. Is that sensible for growth? No. The second choice is how we do it. Should we focus solely on cuts in benefits, jobs and services, or should we adopt a balanced approach that focuses primarily on economic growth but also ensures that the bankers pay their fair share and involves savings, yes, but shallower savings over time. For example, the 8% difference between 20% and 12% represents the difference between getting rid of front-line police and not getting rid of them.

Those are the choices that face us. What does the evidence show? It shows that a year ago the deficit was £21 billion less than had been forecast in the pre-Budget report. Why? Because economic growth was faster. Now it is £6 billion higher than forecast. Why? Because the growth is lower than forecast.

[Claire Perry]

The facts also show that interest rates, and particularly the spread over German interest rates—the risk in the British economy—has dropped by 80% since the election, and that the pound has risen by 9%. There is lots of confidence in the British economy that the hon. Gentleman is not referencing.

[Geraint Davies]

The hon. Lady will know that long-term interest rates hit an all-time low shortly after we made the Bank of England independent. We experienced the biggest period of ongoing growth ever seen under the Labour Government, despite a number of crises in the world economy. Now the world economy is growing healthily, but in Britain we are stagnating. We have seen no net growth for the last six months. The evidence shows that there was growth and deficit reduction under Labour, and that we are now at a standstill.

[Ben Gummer]

Will the hon. Gentleman give way?

[Geraint Davies]

No, I will not.

In March, the forecasts for growth over the next five years were increased by £46 billion, nearly £1,000 per person, which is a complete disaster. Obviously Government Members have commented on the IMF, saying “The IMF really loves us,” but they should put themselves in the position of the IMF. While it is concerned about a prolonged period of growth stagnation and is suggesting that there may be a case for temporary tax cuts such as in VAT, its focus is naturally on ensuring that Ireland, Greece, Portugal and Spain implement structural changes to keep them on track. They are in danger of kicking the euro out of bed, so the last thing the IMF is going to do is get involved in a debate about the rate of change, in terms of deficit reduction, and the balance between cuts and growth, which we are here to determine. That is the debate we are having today.

Finally, let me say one thing about the future economic strategy being considered by the Tories—whether to allow private sector entrepreneurs into public sector service delivery. On that, I would say that the reason why the Germans are so successful is that the focus of their entrepreneurial activity is on export-driven growth. If we suck all our small business capability into delivering cheaper and worse public services, we will be poorer for it.

[Ben Gummer]

The hon. Gentleman makes an interesting point about Germany and the involvement of the private sector. How can he reconcile that with the fact that the private sector plays a larger part in the German health system than does the public sector?

[Geraint Davies]

The situation there is that the Germans are very focused on ensuring that their economy is focused on the growth of the developing economies of China and India. Obviously, there is a difference in the complexion of the German health service. The real focus is on generating export-driven growth, and that is what has happened.

[Matthew Hancock]

Will the hon. Gentleman give way?

[Geraint Davies]

No, I will not.

Let me give an example. Every business in Germany is tied into a chamber of commerce, and every chamber of commerce is required to provide tailor-made apprenticeships and training to focus on industrial growth. We do not have that. There is a lot to learn, and we should go out and learn it. We should focus on growth and stop making these ridiculous cuts.

18:36

[Alison McGovern (Wirral South) (Lab)]

In the very short time available, I want to focus on three brief points. First, we have a lot of discussion about who is rewriting what history, and we can all accuse each other, but what we need are the facts about what happened in the crash that caused the deficit. We also need the Government to answer some questions about what comes next. The liquidity crisis of 2008-09 was built on a sub-prime bubble in America and Europe and we must never allow that situation to happen again. That is why I asked the Chancellor earlier to explain a bit more about his banking reforms. He declined to do so, but I am sure that he will in due course. It is highly important that we get financial regulation correct; that is why we built the tripartite system, with an independent Bank of England and an independent regulator separate from Government.

The question is: how do we make sure that we have the right powers of oversight? How do we ensure that we have Government regulators who understand as much and more about the very complicated financial services sector that we have in a modern economy and who are able to have proper oversight? The responsibility for developing that system now rests with the Chancellor of the Exchequer and his team, and I trust that he will say some more about how we are going to do that, so that we can offer proper scrutiny. The Government have a political agenda in blaming the deficit on overspending, but the Chancellor has again failed to answer why he supported that spending in 2007. However, we must not let that political agenda cloud the important decisions that we now have to make about financial regulation.

Secondly, on growth, let me say briefly that although we can ask questions about whether the current growth, stumbling and choppy though it is, is good enough, and whether there is a decent enough comparison with the post-1992 growth, I am also interested in inclusive growth. That is why I have asked Ministers to focus on the UK Trade & Investment strategy and whether there is really enough emphasis on regional balances, manufacturing and other sectors rather than just on getting UKTI to stand up for exports in existing successful sectors. It has to focus on the sectors that will help us to rebalance the economy and on making sure that jobs are brought to places where there are not enough. We need true, inclusive growth in this country.

Finally, on employment, in 2010 in my constituency there was a ratio of five people seeking a job to every vacancy at the jobcentre, but now there are eight jobseekers for every vacancy. That is a very worrying statistic that we must watch. There simply are not enough job vacancies to enable the Work programme to do its job in getting people back to work, and we have really to focus on that. I am incredibly worried about youth unemployment, especially as the Government have already told me that they expect young people’s unemployment to fall by less than one percentage point by 2015. I say to them that surely to goodness we can do better than that.

18:40

[Ms Angela Eagle (Wallasey) (Lab)]

We have had an interesting debate. On this very day a year ago, the Chancellor came to the House to announce what he and his spin doctors from Tory central office characterised for reasons of base propaganda as his unavoidable Budget. In reality, they and he knew that it was nothing of the kind. He used such misleading language because he wanted to disguise the central feature of his purpose that day. His aim was to create the image of a Chancellor with little option, as he fought to defend the country from the attentions of the bond vigilantes, stalking the world’s treasuries, looking for countries to kill.

In fact, the reality was very different. The Chancellor deliberately talked up the dangers in the bond markets by irresponsibly claiming that Britain had been on the brink of bankruptcy. He knew then, and he knows now, that it was all overblown rhetoric designed to disguise the fact that his Budget was actually a political choice made by the Conservative-led Government and their Liberal Democrat human shield, and it was an extreme choice. At a time when the economic recovery had not been locked in, he made a political choice to embark on a programme of tax increases and spending cuts greater than any which had ever been tried in Britain’s peacetime history.

[Nadhim Zahawi]

Will the hon. Lady give way?

[Ms Eagle]

No, I will not give way.

The Chancellor’s choice to cut further and faster than was economically necessary ensured that the UK plan to deal with the deficit went from one that was in line with the plans of other G20 countries to one that was far more extreme than anything undertaken in any other advanced economy. In other words, it was a reckless and risky experiment with our economic future.

[Several hon. Members]

rose—

[Ms Eagle]

No.

The Chancellor’s choice meant breaking promises that he made before the general election by scrapping the future jobs fund, cutting tax credits for people on incomes under £50,000 and increasing VAT to 20%. For the hapless Liberal Democrats, his choice meant that they had to do the exact opposite of what they had promised in their election manifesto. Before the election, they promised a £3.1 billion stimulus package; just after it, they went along with a £6.2 billion cut. They campaigned for an end to tuition fees and then trebled them. They warned about a VAT bombshell and then voted for it.

[Alec Shelbrooke]

Will the hon. Lady give way?

[Ms Eagle]

No.

How strange, then, that the Liberal Democrat election slogan was, “No more broken promises”.

[Matthew Hancock (West Suffolk) (Con)]

Will the hon. Lady give way?

[Ms Eagle]

No, I am not giving way, especially not to the hon. Gentleman, who has not even deigned to be present in the House until now. [Interruption.]

[Mr Speaker]

Order. Government Back Benchers must not engage in rhetorical stalking. The hon. Lady has made it clear that she is not giving way, so the position is clear.

[Ms Eagle]

The Chancellor’s choice meant that only Ireland and Iceland have been expected to deliver more austerity measures. The result has been that only Greece, Ireland and Denmark have grown less fast than the UK has managed in the past year. Back then, in what he so theatrically described as his emergency Budget, the Chancellor stood at the Dispatch Box and told us that

“we are all in this together”.—[Official Report, 22 June 2010; Vol. 512, c. 167.]

Well, we do not hear that phrase cross his lips quite so often these days. True, that ludicrous claim was blown apart the day after the Budget by the Institute for Fiscal Studies, but a year on, even the Chancellor seems to have given up on it. Perhaps it has been consigned to the dustbin of history, along with his pre-election pledge to ensure that no one working for a nationalised bank would take home a bonus of more than £2,000. Perhaps it has joined the Government’s promise that there would be no top-down reorganisation of the NHS.

The Chancellor also promised fairness, but a year ago today, he delivered a budget that hits women and children first and hardest, and he was cheered to the rafters by both Government parties in scenes of sadistic jubilation at the cuts that I, for one, and many of our constituents will remember for many years to come.

One year on, the Chancellor’s Budget of extreme austerity is inflicting nothing but pain and hardship on the British people. One year on, people are suffering the biggest squeeze in their living standards for more than 80 years. Food prices are up, petrol prices are up, energy prices are up, transport prices are up—

[Several hon. Members]

rose—

[Ms Eagle]

VAT is up, wages are frozen, hours are falling and real standards of living are sinking fast. It is certainly hurting, but it does not seem to be working.

The Government’s choice to put deficit reduction above every other consideration means that, one year on, they have developed no credible strategy for growth and jobs. All the important economic indicators are warning that the British economy is moving in the wrong direction. The Chancellor’s irresponsible scaremongering about bankruptcy and his reckless decision to compare us to Greece talked consumer confidence down to a 20-year low in January. Inflation, which was falling last year, is now more than twice the Bank of England target and the third highest in the OECD. Unemployment is set to be 200,000 higher than predicted in every year of this Parliament, with youth unemployment blighting one in five of all our young people. Despite all of the talk of being a pro-growth Government, the truth is that growth forecasts have been downgraded, thanks to his choices, again and again and again.

Things were getting better when we left office, but after a year of the present Chancellor and his political choices, they are getting worse. He has created a vicious circle in the British economy. He has put this country into the economic slow lane. By choosing to cut too far, too fast many more people are out of work, claiming benefits and not paying taxes. As a result, the Government have to borrow £46 billion more in the coming years than they expected only last autumn.

We on the Opposition Benches warned the Chancellor last year that huge and rapid cuts in public expenditure risked stifling the economic recovery. We said that his plan to cut billions from public spending last June, when the economy was still fragile, was reckless and irresponsible. Now more people are expressing their doubts about his plan. We have consistently called for a steadier and more balanced approach to reducing the deficit, but instead this ideologically blinkered and arrogant Government continue to claim that there is no alternative. This is irresponsible, it is complacent and it risks putting a permanent dent in our future prosperity.

[Several hon. Members]

rose—

[Ms Eagle]

A temporary VAT cut could help kick-start our stalling economy and the Government should certainly consider it until growth returns. Instead of giving the banks a tax cut this year, the Government should repeat the bank bonus tax and use the revenue to create 90,000 youth jobs, build 25,000 much-needed houses and support more regional growth. The Chancellor badly needs to change course.

It is not as though the Government are not used to retreating, backsliding, U-turning and executing 180° handbrake turns. They have had enough practice recently. The list is long and growing: decimating school sport in the run-up to the Olympics—abandoned; flogging off our forests—abandoned; ensuring anonymity for rape victims—[Hon. Members: “Abandoned.”]; reinstating weekly bin collections—[Hon. Members: “Abandoned.”]

Only yesterday in the House after Treasury questions the Government executed two huge policy retreats on their proposals to offer 50% discounts on prison sentences and the massive car crash that is their wasteful top-down reorganisation of the NHS. Their Back Benchers might not like it, but they have learned to live with it. They are even learning to adapt their behaviour to accommodate it. Just look at what some of them are saying on the ConservativeHome website. One said:

“When I get a torrent of emails about a controversial issue now, I leave them for seven days before replying, because there is an increasing chance that the line is going to change.”

Another is being even more sensible. He wrote:

“I let the letters and emails on anything where there is a hint of a U-turn pile up for thirty days. Frankly I don’t want to make myself look stupid by defending a policy only for it to change a few days later.”

Another complained that the Whips asked them to write letters defending the Government’s reform plans then the next day abandoned them, stating:

“Ten times bitten, eleventh time shy.”

The reason for all these U-turns and policy retreats is that this is a reckless Government who act first and think later. This is a Government who rush to ideological judgments, act recklessly, and cause chaos and then have to retreat, causing uncertainty and waste. That pattern perfectly describes the Chancellor’s irresponsible first Budget. His decision to cut too far and too fast set the context of rapid cuts against which so many of the recent U-turns have had to be performed.

As the Prime Minister said yesterday:

“Being strong is about being prepared to admit you didn’t get everything right the first time”.

I could not agree more. It is time for this Chancellor to follow his Prime Minister’s example and be strong on the economy. It is time for a plan B.

18:51

[The Economic Secretary to the Treasury (Justine Greening)]

This has been an important and excellent debate, with good contributions from both sides of the House. The best Opposition contributions were made by newly elected Labour Members, and I have no doubt that they will look back on this period as the dark days of deficit denial by the Labour party. [Interruption.]

Throughout this important debate, the Opposition failed to mention, let alone welcome, that in the last year exports are up, industrial production is up, manufacturing is up, investment is up, employment is up, unemployment is down and, most importantly—[Interruption.]

[Mr Speaker]

Order. The Minister must be heard by the Opposition, and also, one would hope, with some respect by her own side.

[Justine Greening]

Most importantly of all, the private sector has created half a million jobs, and I would have hoped that the whole House could have agreed that that is good news for the country, as my hon. Friends the Members for Witham (Priti Patel) and for Thurrock (Jackie Doyle-Price) said. We must not talk down the economy, but the Opposition have persistently done so.

As the International Monetary Fund has said,

“repair of the UK economy is underway.”

Of course that is a difficult task, and of course recovery will be choppy, but that is because our predecessors left us with an unprecedented and unenviable challenge, as was eloquently pointed out by my hon. Friends the Members for Dover (Charlie Elphicke), for Gloucester (Richard Graham) and for Elmet and Rothwell (Alec Shelbrooke). They understand the problem the country faces, and their constituents knew that, which is why they chose a different and a better Government.

Many people in our country will be incredulous that the Opposition have had the gall to come here today and lecture MPs about economic credibility, because the shadow Chancellor and the Labour party have absolutely none. Their legacy to the British people was higher unemployment, a broken economy and enormous debt. The shadow Chancellor said a lot, but there was one word missing from his speech that people would have liked to have heard: sorry. There was no apology for the disastrous mess his party left on leaving office, and no acceptance of responsibility for its actions. The shadow Chancellor is still in denial about there even being a structural deficit—if he wants to confirm that he does think there is a structural deficit, he can intervene on me now.

If the shadow Chancellor had spent less time when he was a Minister plotting with his political master, he might have done a more effective job. He was the architect of the tripartite banking regulatory scheme that failed so badly. He was the City Minister when the City went off the rails. He was the economic adviser to the former Chancellor and Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), when he ran up a structural deficit that the OECD described as a snowballing of debt.

Many people in our country would not put the shadow Chancellor in charge of their household finances, let alone the nation’s finances, yet he called for a debate on the economy today. We might have expected him to have something meaningful to say, therefore, but he did not. There were no plans to tackle the deficit at all; not a word on how to rebalance the economy and replace some of the 1 million manufacturing jobs that were lost between 1997 and 2007; nothing on financial services reform; and hardly any mention of his party’s VAT proposal. That seems to have fallen apart within days. Members on the Government Benches talked more about that than Labour Back Benchers. When the VAT rise went through last year, what did the Opposition do? They abstained. They did not stand up and say that it was wrong. A few months later, however, they decided that there should be a VAT reduction on fuel, and now, even before the Finance Bill has completed its passage, they want a VAT reduction on everything. This is policy made on the hoof.

Today’s motion refers to halving the deficit, but we have heard not a word from the shadow Chancellor on how he would do that or on their spending plans. The bottom line is that those plans do not exist. He is trapped by misguided, discredited and irrelevant policy, and yet he still runs with it. He used to be a bruiser, but now he is a kitten. He is Macavity’s kitten trapped in his own ball of policy wool which he has woven around himself, churning out the same old lines that will take neither his party nor the country forward.

We heard many contributions from Labour Members, but I must say that they were let down by their Front Benchers, who clearly have no economic alternative. All they have is pointless opposition. We heard a lot of amnesia from them on employment. Let us remember that they left unemployment higher, just as every Labour Government before them did. Presumably they will say that that was the result of the recession. Presumably they think it is a coincidence that every Labour Government leave Britain’s economy in crisis. The amnesia goes deeper. We heard amnesia on social housing. Somehow they think that they created lots of social housing.

[Ed Balls]

Will the hon. Lady clarify something for the House? During Prime Minister’s questions today the hon. Member for Clacton (Mr Carswell) said that the hon. Lady had signed a memo on the European financial stabilisation mechanism after the election stating that cross-party consensus had been agreed on the matter. Will she clarify whether she signed the letter and whether such a consensus had been reached? If so, was the Prime Minister wrong when he said today that there was no consensus?

[Justine Greening]

Well, there is a cross-party consensus, because his party agrees with it. We are now in government, so I do not think that that is particularly complicated. He is trying to waste my time, so I will make a little more progress.

The bottom line is that the Labour party has only one economic policy: spend, spend, spend. When times are good, their policy is to spend, spend, spend, because they can afford to. When times are bad, their policy is to spend, spend, spend, because they cannot afford not to. It is no wonder that this Government ended up mired in debt when Labour left office. The hon. Member for Airdrie and Shotts (Pamela Nash) talked about the previous Government’s record but was unaware that she had abstained on the VAT rise. As we have seen with the overall VAT policy, there is clearly a huge disconnect between their Front and Back Benches. After all that spending and the creation of the structural deficit, even Labour Members asked themselves, “We’ve spent all this money, but what have we got for it?” The answer is, “Not enough”.

When the Opposition called this debate, people might have been entitled to think that they had something relevant to say on the economy, but they do not, and we have seen that demonstrated again. We do have a plan. As my hon. Friends the Members for Bromsgrove (Sajid Javid), for Spelthorne (Kwasi Kwarteng) and for Ipswich (Ben Gummer) all pointed out, it is a plan backed by the IMF, which described it as essential. It is a plan backed by the OECD, which described it as vital. It is a plan backed by the CBI, the rating agencies and pretty much everyone who understands why it is important that we get our economy back on track and our public finances back in order.

We have a plan to rebalance the economy, generate growth and ensure that those communities that can most benefit from the new jobs do. We have a plan to create the most competitive business tax regime in the G20. We have plans for more apprenticeships and work placements—

[Mr Alan Campbell (Tynemouth) (Lab)]

claimed to move the closure (Standing Order No. 36).

Question put forthwith, That the Question be now put.

Question agreed to.

Question put accordingly (Standing Order No. 31(2)), That the original words stand part of the Question.

18:59

Division 304

Ayes: 208

---

Labour: 201
Democratic Unionist Party: 2
Plaid Cymru: 2
Social Democratic & Labour Party: 1
Green Party: 1
Independent: 1

Noes: 305

---

Conservative: 255
Liberal Democrat: 47
Alliance: 1

Question put forthwith (Standing Order No. 31(2)), That the proposed words be there added.

19:14

Division 305

Ayes: 299

---

Conservative: 252
Liberal Democrat: 44

Noes: 206

---

Labour: 196
Democratic Unionist Party: 2
Plaid Cymru: 2
Scottish National Party: 2
Social Democratic & Labour Party: 1
Liberal Democrat: 1
Alliance: 1
Green Party: 1

The Speaker declared the main Question, as amended, to be agreed to (Standing Order No. 31(2)).

Resolved,

That this House welcomes the fact that in the last year a record 520,000 new private sector jobs were created, with the second highest rate of net job creation in the G7, exports grew by 13 per cent. and manufacturing activity was 4.2 per cent. higher and the latest labour market data showed the largest fall in unemployment for more than a decade; notes that the Government inherited a budget deficit forecast to be the largest in the G20; further notes that the previous administration and now Opposition has no credible plan to deal with the deficit and that the Shadow Chancellor’s recent proposal for a temporary cut in VAT has been widely criticised for lacking credibility and would put the stability of the economy at risk; notes that the Government has introduced a permanent bank levy that raises more revenue than the previous administration’s one-off bonus tax and that the Government has set out a credible plan that has been endorsed by the IMF, OECD, European Commission and the CBI, that has led to greater stability, lower market interest rates and an affirmation of the UK’s credit rating that had been put at risk by the previous administration; and notes that this stability provides a platform for rebalancing the economy and the Government’s Plan for Growth that includes reducing business taxes, investing in apprenticeships, creating a new Green Investment Bank, reforming the planning system, reducing the burden of regulation and reforming the welfare system to make work pay.

Business without Debate

Wednesday 22nd June 2011 Commons Chamber

Delegated Legislation

Wednesday 22nd June 2011 Commons Chamber

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Parliament

That the draft Ministerial and other Salaries Act 1975 (Amendment) Order 2011, which was laid before this House on 21 March, be approved.—(Stephen Crabb.)

Question agreed to.

Banks and Banking

Motion made, and Question put forthwith (Standing Order No. 118(6)),

That the draft Distribution of Dormant Account Money (Apportionment) Order 2011, which was laid before this House on 9 May, be approved.—(Stephen Crabb.)

Question agreed to.

DRAFT HOUSE OF LORDS REFORM BILL (JOINT COMMITTEE)

Motion made,

That this House concurs with the Lords Message of 7 June, that it is expedient that a Joint Committee of Lords and Commons be appointed to consider the draft House of Lords Reform Bill presented to both Houses on 17 May (Cm 8077).

That a Select Committee of thirteen Members be appointed to join with the Committee appointed by the Lords to consider the draft House of Lords Reform Bill (Cm 8077).

That the Committee should report on the draft Bill by 29 February 2012.

That the Committee shall have power—

(i) to send for persons, papers and records;

(ii) to sit notwithstanding any adjournment of the House;

(iii) to report from time to time;

(iv) to appoint specialist advisers;

(v) to adjourn from place to place within the United Kingdom.

That Gavin Barwell, Mr Tom Clarke, Ann Coffey, Bill Esterson, Oliver Heald, Tristram Hunt, Mrs Eleanor Laing, Dr William McCrea, Dr Daniel Poulter, Laura Sandys, John Stevenson, John Thurso and Malcolm Wicks be members of the Committee—(Sir George Young.)

[Hon. Members]

Object.

Response to DEFRA Consultation on Water Charges in the South West Water Area

Wednesday 22nd June 2011 Commons Chamber

19:28

[Mr Adrian Sanders (Torbay) (LD)]

I rise to present a petition from the residents of Torbay on the recommendations in the Walker review and the Government’s response to that review, which my petitioners are asking to be implemented. I am talking about the additional support for people on low incomes, the extension of the Water Sure scheme and an annual payment to South West Water in order to bring water and sewerage charges closer to the national average, rather than 40% higher.

Following is the full text of the petition:

[The Petition of residents of Torbay,

Declares that the Petitioners welcome the Government's commitment to fair and affordable water and sewerage services; and further notes the recommendations contained in paragraph 4.18 of the consultation document “Affordable water: a consultation on the Government's proposals following the Walker Review on Charging”.

The Petitioners therefore request that the House of Commons urges the Government to enhance the Water Sure scheme, to introduce a social tariff to benefit water consumers on low incomes and to introduce an annual payment of £40 million to South West Water from public funds to reduce water bills so that they are close to the national average for identical services.

And the Petitioners remain, etc.]

[P000931]

Maternity Services

Wednesday 22nd June 2011 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Stephen Crabb.)

19:30

[Margaret Hodge (Barking) (Lab)]

I am most grateful to you, Mr Speaker, for enabling us to debate the maternity services on which people in my constituency and neighbouring constituencies depend. On behalf of those people, I hope that the Minister will feel able to respond positively to the proposals that I wish to make, which I know are supported by neighbouring MPs.

Let me preface my remarks by saying that I know there are many dedicated and committed individuals working in the NHS in Barking, Dagenham, Havering and Redbridge who give their all to the maternity services in the borough. I fully acknowledge and warmly thank them for what they do. However, my overriding responsibility and duty is to all the women in the area who want to be certain that when they have their babies, there will be a bed for them, and enough experienced and appropriately qualified midwives looking after them, and that the care they receive during their pregnancy and birth will be of a consistently high quality, giving mothers the support they need and ensuring that we can all be confident that the pregnancy and birth will be safe for both mother and baby.

That is not a lot to ask and expect, but shockingly, it is not delivered and guaranteed at present to all mothers dependent on our hospital trust. Barking, Havering and Redbridge University Hospitals NHS Trust has one of the highest birth rates in the country, with just under 10,000 babies born in trust facilities last year. In my constituency, the birth rate went up by more than a third between 2002 and 2010. Across all the communities served by the trust, the number of births has been growing year on year by 500 additional births, and everybody believes that this trend will persist for the foreseeable future. However, a report from the Care Quality Commission this March expressed major concerns about the quality of care at one of the trust hospitals—Queen’s hospital in Romford—which is a huge indictment of the service and a dreadful worry for families who are having their babies.

The CQC found that maternity services at Queen’s were failing to meet essential standards of care, and that the trust was not taking all proper steps to ensure the safety of women in the maternity unit. Inspectors stated that services were so understaffed that mothers and babies were at risk. They found that too many staff did not have the right skills and that the appropriate equipment was sometimes missing. Inspectors reported mothers in labour being left alone for long periods without the pain relief that they needed. They also found significant delays in patients going to theatre and said that babies were being born in what they termed “inappropriate locations”. Inspectors expressed concerns about respecting and involving mothers in their own care, and found that the trust did not give bereaved mothers proper facilities in a separate room, away from other new mothers who had had their babies safely.

Sadly, the CQC confirmed what all of us already knew—we knew it from the fact that more women die while under the care of the trust than elsewhere. Four women have died in BHRT maternity units in the past 12 months, with five dying in the past 18 months. Maternal deaths there are five times greater than the national average. The trust has paid out £15 million in compensation in the past five years on claims against the obstetric services. That is one of the biggest compensation bills across the whole of the NHS. Those statistics are heart-rending. What should be moments of joy for mothers and their families become experiences filled with fear and pain—and, at their worst, loss and grief. As local MPs, we are told of far too many cases of people having to put up with terrible care, particularly at Queen’s hospital.

One of my constituents gave birth at Queen’s in July last year. She was kept waiting for hours in reception when she was already in labour, with other patients waiting in the same area. She was told that staff were too busy to give her an epidural. The same staff then failed to give her an episiotomy, and she suffered second degree tears and had to have 20 stitches in her vagina. Yet she had to wait for three hours to be stitched because, the hospital told us,

“not all midwives have had the required training to perform this procedure.”

Another constituent went to Queen’s when she was two weeks overdue. She had been having contractions for over a week and was losing weight. But, instead of inducing her there and then, the hospital sent her away. Shortly afterwards, she gave birth to a stillborn baby. A third constituent was supposed to have a home birth. The midwives arrived late, and without enough pain relief or oxygen. After an hour, she was in such agony that she had to go to Queen’s where she had to have an emergency caesarean. The trust later accepted that she had not been properly examined while she was in labour at home.

There have also been some high-profile cases recently of women who have tragically lost their lives at Queen’s because the care that they received was so lacking. Sareena Ali and her unborn baby died after staff failed to identify that she had a ruptured womb which triggered a heart attack and a major organ failure. She had not been checked for two hours, despite her husband begging staff to check whether anything was wrong because she was in consistent agony. She had an emergency caesarean —on the antenatal ward in front of other women in labour—but the baby was stillborn. Staff tried to resuscitate Sareena with a disconnected mask; it was her sister-in-law who spotted this. Sareena died five days later—a death that could have been avoided.

Earlier this month, Violet Stephens went to Queen’s at 31 weeks pregnant with dreadful gastric pain and high blood pressure. After four days in hospital, she was eventually diagnosed with a life-threatening complication called HELLP syndrome. She had an emergency caesarean and, although the baby was delivered healthily, she died. Violet had had similar symptoms during her previous pregnancies, but the system failed her and her case is currently under investigation. In August last year, Saira Choudhri was sent home from Queen’s even though she was having contractions every two minutes. She was found blood-soaked and in agony by two nurses in the car park. Thankfully, her baby survived.

This litany of tragic instances of unacceptably poor care has to stop, and the Minister and her Secretary of State must take responsibility for improving our maternity services. In part, the problem lies with shortages of staff, and shortages of properly qualified and experienced staff. The new chief executive is recruiting midwives from abroad and I welcome that, but we have been here before, and the trust has to find ways of retaining as well as recruiting good midwives over the longer term.

Mothers talk about the lack of respect for them as patients and the failure to involve them in decisions about their care. Most women see a different community midwife at every appointment. All of that suggests a deeply worrying cultural problem among the midwifery staff who work for the trust. When Sareena Ali died, there was a full complement of staff on duty and there was no unexpected pressure on them. They blatantly failed to do their job and to take proper care of her. There appears to be a poor working culture, with midwives not co-operating effectively together as a team and with individuals not accepting their proper personal responsibility. All too often, they seem literally not to care.

Furthermore, the trust’s complaints procedure is not working. Individuals complain, but the trust’s response is all too often incomprehensible and it seems never to learn the lessons from past mistakes. Saira Choudhri, the woman who was almost forced to give birth in a car park, complained to the trust about the attitude of staff and the care that she received. Her complaint was brushed off with a technical response that completely failed to address the real issue, and nothing seems to have changed. If the trust had an open, rigorous and patient-focused complaints protocol and acted on those complaints in order to improve care, some of those tragedies might have been avoided. If it had listened and learned from what patients were telling it, other women might not have had to go through similar ordeals and Sareena Ali might now be at home with her husband and baby. There is going to be a full inquest into the death of Sareena Ali, which I trust will help to ensure that nothing like this ever happens again.

All the local MPs believe that the health authority’s determination to close the maternity service at King George hospital is complete madness. Birth rates in the area are rising and the quality of care at Queen’s is simply unacceptable. What on earth do the bureaucrats think they are up to? The Government’s health reforms are supposed to put the patients’ interests at the heart of what is done, but that is not the case in Barking and Dagenham. Decisions appear to be driven by money, not patients, and by consultants’ convenience, not women’s interests. Queen’s hospital simply cannot cope and things will only get worse if the King George goes.

Local GPs in my area are also strongly opposed to the proposal, and across north-east London, tens of thousands of my and my colleagues’ constituents have signed a petition against it. This is not a bit of MP nimbyism. It is a common-sense conclusion, with the support of a cross-party group of MPs, based on a proper understanding of what local people should be entitled to from our national health service.

I know the decision on the King George hospital has been referred to the independent review panel, but I would urge the Minister to ask the Secretary of State to exercise his power to halt the proposed closure. The Department, NHS London and the trust need to sort out the quality and the finances, not shut the door for patients by killing off the hospital.

Worse still, we campaigned for years—ever since I became the MP more than 16 years ago—to get new health services, including maternity services, built on the old Barking hospital site, which was closed in the 1980s. My constituents want high-quality maternity services close to home, with babies born in Barking again.

We finally won that battle and now we have a brand-new, state-of-the-art maternity unit on the site literally standing empty while Queen’s hospital continues to fail. I have been told today that no babies will be born in Barking hospital until March 2012. That is an outrageous scandal. It was supposed to open last year and the building has been ready for months. I ask the Minister to confirm in her reply that she will investigate the reasons why this unit has not opened and instruct her officials to get it open and working as soon as possible.

Lastly, but most crucially, I ask the Minister to establish a full, independent and impartial inquiry into maternity services at Queen’s. We have had enough, and we want somebody with extensive experience in their profession to be appointed by the Secretary of State to establish what is wrong and to prescribe action to put it right. I sincerely say to the Minister that I have now concluded that nothing less will do.

Perhaps the Minister will listen to the words of some women who have been through the experience of having a baby at Queen’s. One woman said:

“All of my friends that have had their babies at Queen’s have all received such poor treatment that it’s really made them think twice whether to have any more children.”

Another said:

“I struggle to see how closing a maternity unit that is better performing in favour of one that is in effect under notice to improve can be the right decision for local people.”

A third woman said:

“If I have another baby I flat refuse to go to Queens.”

I ask the Minister to listen to those women, to act to support their best interests and to protect mothers and babies in our corner of north-east London by delivering a safe, patient-focused service in which we can all have confidence.

19:44

[Mr Lee Scott (Ilford North) (Con)]

I congratulate the right hon. Member for Barking (Margaret Hodge) on securing this debate. I would like to follow what she said by outlining the position of myself and my hon. Friend the Member for Hornchurch and Upminster (Angela Watkinson), who, as a Government Whip, cannot speak in this debate. She has met the new chief executive and has been given assurances about the changes happening to improve the dreadful situation we have just heard about.

I would like to speak briefly about the King George hospital. As the right hon. Member for Barking said, it cannot make sense for maternity services at King George hospital to cease, not only because Queen’s hospital is not giving as good a service as King George at the present time, but because, with the birth rate rising, it simply will not be able to cope.

We have heard of the tragic, unnecessary loss of life over the past 18 months, and of the high level of medical negligence payments that have had to be made and that are a drain on already strained NHS resources, as the trust has one of the highest deficits in our country. The situation will only get worse if King George hospital ceases to operate maternity and A and E services, and that would be unacceptable. Were that to happen, I fear that there will be further tragic loss of life. Whichever side of the Chamber one sits on, and whatever one’s political views, we are elected to stop that occurring. That is why hon. Members from both sides of the House have united to try to save the services. I hope that the review panel and Ministers are listening, and I am pleased that the matter was sent to a review panel, with a view to overturning this ridiculous recommendation by the NHS. As Members, we will unite to save the services for our constituents. If we do not do so, it will be a regrettable event.

19:46

[Mike Gapes (Ilford South) (Lab/Co-op)]

I congratulate my right hon. Friend and neighbour the Member for Barking (Margaret Hodge) on securing the debate. It is also a pleasure to follow my friend and neighbour the hon. Member for Ilford North (Mr Scott); we have campaigned together for five years to keep the services at King George hospital in my constituency.

Let me quote an e-mail that I received today:

“My wife had a baby in King George hospital and had a wonderful experience. My brother’s wife had a baby at Queens Hospital and found it traumatic and suffered complications up to 6 weeks after the birth.”

That is one of a series of e-mails and phone calls that I have been receiving for the past two years. Although some improvements have been seen at Queen’s, in the reception area and other aspects, the fundamental problems remains. My right hon. Friend the Member for Barking referred to a culture, and I believe that the issue is one of culture and of management, as well as of quality of care. It is an absolute disaster to contemplate closing the maternity unit at King George hospital, taking 2,000-plus births out of the equation each year, and as a result adding to the existing unbearable pressures on Queen’s hospital. It does not make sense. We have had a maternity hospital in Ilford since 1926, when the population was 85,000. The London borough of Redbridge now has a population of 280,000. We need to keep the maternity service—people have a right to be born in Ilford. I am pleased that we have such a united campaign, and I hope that the independent reconfiguration panel, the Secretary of State and the Minister are listening to the loud and clear message that we must keep the maternity service in Ilford.

19:48

[The Parliamentary Under-Secretary of State for Health (Anne Milton)]

I congratulate the right hon. Member for Barking (Margaret Hodge) on securing the debate, and thank her for bringing this important issue to wider attention. Her message came across loud and clear. She has campaigned vigorously in support of her local health services for many years, both on the Government and Opposition Benches, and Members are to be congratulated on their vigilance in doing exactly what they were elected to do.

It is never good enough for patients anywhere to experience poor-quality health care, and it is clear that the problems at Queen’s maternity unit must be fixed now, so that the people of north-east London can regain trust in their maternity units. Regaining such trust is never an easy business. When mothers go to a maternity unit to give birth, they implicitly trust that they will receive the best-quality care. That is a vital part of maternity services, and it means that mothers can feel comfortable and safe with midwives, wards and hospitals. The shocking deaths at Queen’s maternity unit have put that relationship and that trust at risk, and I know that local concern is running extremely high. I offer my heartfelt sympathy to the families involved. To lose someone at what was expected to be a time of celebration is especially traumatic, and no words that I can say today will console those families. However, I believe that the message has been conveyed by the right hon. Member for Barking, the hon. Member for Ilford South (Mike Gapes) and my hon. Friend the Member for Ilford North (Mr Scott).

I understand that two investigations of maternal deaths are taking place at the unit; I hope Members will understand that I cannot comment on them at this stage. I know that the Care Quality Commission found that maternity services at the trust were failing to meet essential standards of quality and safety, but, although that was partly due to unsuitable staffing levels, they are not the only issue.

Unfortunately we cannot turn the clock back, but what we can do is ensure that decisive action is taken immediately to improve the position and ensure that the Queen’s maternity unit performs as it should have all along. In response to the CQC’s report, the trust has drawn up an urgent action plan and is taking steps to improve its maternity services. I understand that it has recruited an extra 60 midwives, and that a further 60 are shortlisted for interview. I also understand that it has revised the training programme for all midwives, created a new triage system enabling all women in labour to be seen by an experienced midwife within 15 minutes of arriving at the unit—the right hon. Lady particularly mentioned waiting times—and introduced a telephone triage system so that women can get advice even before they leave home. That is a start, although it is a start from a very low base. Although all those facilities should have been in place already, it is good that they are there now.

I have met Averil Dongworth, the new chief executive of the trust. She has assured me that everyone at the hospital—particularly the midwives and the support staff in the unit—is determined to improve standards and rebuild confidence. That may sound hollow to the Members who are present, who have probably heard it before, but Averil Dongworth struck me as an impressive woman with a steely determination to turn things around. She has also promised to keep in touch with and meet the local Members of Parliament regularly. I think it important for them to feel that, on behalf of their constituents, they are monitoring the position regularly and frequently. I have asked Averil Dongworth to keep me up to date. The position is very simple: nothing but the best will do for anyone who is seen in the NHS.

I also understand that NHS London, the local strategic health authority, is taking action to improve clinical leadership. It is important for that leadership to be in place, because its absence is often the reason why things go wrong, particularly midwifery in this instance. I understand that the authority has asked a senior obstetrician and an experienced midwife to spend time working in the team.

The right hon. Lady mentioned the health for north-east London review, which includes proposals to change the way in which Barking, Havering and Redbridge University Hospitals NHS Trust delivers maternity care. As Members have mentioned, under those proposals King George hospital would continue to provide antenatal and postnatal care, but would no longer provide maternity services during delivery. Maternity services would be consolidated at Queen’s with a new midwife-led unit that could deliver more than 2,500 babies a year. I understand that the unit is empty. The situation is extremely disappointing, but the proposals have been referred to my right hon. Friend the Secretary of State for Health, and the independent reconfiguration panel will advise him within the month, no later than 22 July. I know that Members look forward to hearing the decision, but obviously I cannot prejudge it.

The financial payouts in litigation that the right hon. Lady mentioned really pale into insignificance when compared with the human cost. There is not just the human cost when things go tragically and irreversibly wrong, but the poor experience that women have had, which is a very bad start to their new family life. Nothing can compensate for any of those things. She mentioned Sareena Ali and the unresponsive nature of the trust in relation to complaints. That has to change and I sincerely hope that Averil Dongworth will turn that around so that local people can start what will be a very long and slow journey to building that trust.

The right hon. Lady also mentioned that the problem is not just about recruiting staff but keeping them. That is the real challenge. When local people have lost faith in a local NHS organisation, the recruitment of staff becomes increasingly difficult. Keeping up morale is very important, which is why I think it is an important step in that journey for the chief executive to keep in touch with local MPs.

The right hon. Lady rightly said that this should be about the care of women and their babies and families, and not about other people’s convenience. My hon. Friend the Member for Ilford North reiterated many of the same points and I am always impressed when there is cross-party support on issues such as this. This place does not always have a good reputation but at times like this our reputation should soar because that cross-party working is extremely important to get things done. The hon. Member for Ilford South also spoke about the cross-party support and referred to the culture and institutional problems, the issues that are so very difficult to dig into and turn around. I sincerely hope that we can start to do that.

The Government are doing all we can to stamp out instances of sub-standard care. As I have said, nothing but the best will do for anyone. New standards of care are being developed for antenatal services and the management and care of women in labour, as well as for delivery and post-natal care. We are also keeping up the record number of midwives entering training—nearly 2,500 this year and 2,500 next year. I want to see the potential of the whole maternity team being realised. There are new technologies out there and new techniques improve care and deliver value for money while improving the experiences of women, their babies and the wider family. We will continue to work with the Royal College of Midwives to make sure that we have an appropriately resourced but also skilled maternity work force with the leadership they need. Of course, that will be of scant consolation to many of the families involved, but sadly I cannot turn the clock back.

[Margaret Hodge]

I am grateful for the Minister’s remarks, but in the last couple of minutes available, may I ask her to comment on two other specific issues? First, I think that we need an independent inquiry. I recognise all that has been done, but will she respond to that point? Secondly, will she respond to my point about the Barking hospital site where we have a brand-new, state-of-the-art maternity unit that is being kept closed?

[Anne Milton]

I thank the right hon. Lady for making those points, but I honestly do not know that an inquiry is the right way forward. The tragedy of this is that we know what some of the problems are and there has been a failure to turn them around. Certainly, an empty building and a midwife-led unit that could deal with 2,500 deliveries a year for women of low risk would be an important development, but I do not want to prejudge the Secretary of State’s decision on that. I hope that the right hon. Lady, her constituents and the families involved will at least take some heart from the fact that steps are going to be taken to prevent any of this from ever happening again. I will make sure that those efforts remain at the top of the trust’s agenda. I can assure her, my hon. Friend the Member for Ilford North and the hon. Member for Ilford South that I will take a personal interest in this and make sure that we monitor progress towards giving local people what they deserve—the very best from their local NHS.

Question put and agreed to.

19:59

House adjourned.