Autumn Statement

Wednesday 5th December 2012 Commons Chamber

12:34

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

It is taking time, but the British economy is healing. After the biggest financial crash of our lifetimes, people know that we face deep-seated problems at home and abroad. At home, we live with the decade of debt and the failure to equip Britain to compete in the modern world, and we face a multitude of problems from abroad—the US fiscal cliff, the slowing growth in China, and above all the eurozone, now in recession.

People know that there are no quick fixes to these problems but they want to know that we are making progress, and the message from today’s autumn statement is that we are making progress. It is a hard road, but we are getting there. [Interruption.] Britain is on the right track—[Interruption.]

[Mr Speaker]

Order. I ask the Chancellor to resume his seat. Let us be clear about this. Each side should be heard with courtesy. The House knows well enough by now that I will afford a very full opportunity for questioning of the Chancellor, but the more interruption and the greater the noise, the longer the session will take, and that cannot be right. So I appeal to Members please to give the Chancellor a courteous hearing, as indeed, if it becomes necessary, I will appeal to Government Back Benchers to afford a fair hearing to the shadow Chancellor. That is how it should be.

[Mr Osborne]

Britain is on the right track and turning back now would be a disaster. We have much more to do. The deficit has fallen by a quarter in just two years, and today’s figures show that it is forecast to continue to fall. Exports of goods to the major emerging economies, which were pitifully low, have doubled since 2009. Since this coalition Government came to office, 1.2 million new jobs have been created in the private sector. In a world economy where bond investors are fleeing countries that they regard as risky, investment is flowing into UK gilts, instead of flying from them. We have to keep it that way.

Two years ago, Britain was in the danger zone. Now we are seen as one of the safe havens, able to borrow money at lower interest rates than at any time in our history. Today’s forecast shows a £33 billion saving on the debt interest payments that it was predicted we would have to pay two years ago. That is as much as the entire defence budget. That is why in this autumn statement, we show that this coalition Government are confronting the country’s problems, instead of ducking them.

Today we reaffirm our commitment to reducing the deficit, setting out the details of our spending plans for 2015-16 and rolling forward an outline framework into 2017-18. We show our determination to do this fairly, with further savings from bureaucracy, the benefit bills and the better-off. We go on equipping Britain to succeed in the global race by switching from current spending to capital investment in science, roads and education. We offer new support for business and enterprise, so they can create the jobs we need. In everything we do, we will show today that we are on the side of those who want to work hard and get on.

The Office for Budget Responsibility has today produced its latest economic forecast and it is a measure of the constitutional achievement that it is taken for granted that our country’s forecast is now produced independently of the Treasury, free from the political interference of the past. I want to thank Robert Chote, his fellow members of the Budget Responsibility Committee, Steve Nickell and Graham Parker, and all their staff at the OBR for their rigorous approach.

One of the advantages of the creation of the OBR is that we get not only independent forecasts, but an independent explanation for why the forecasts are as they are. For example, if lower growth was the result of the Government’s fiscal policy, it would say so. But it does not. It says that the economy has “performed less strongly” than expected and forecasts growth this year of minus 0.1%, but in its view

“the weaker than expected growth can be more than accounted for by over-optimism regarding net trade”.

The OBR had previously assumed that the eurozone would begin to recover in the second half of this year. Instead, of course, it has continued to contract, which has hit our exports to those markets and the net trade numbers. The eurozone crisis has also, it says, spilled over into “tighter credit conditions” and

“elevated UK bank funding costs”.

In its words, those problems will

“constrain growth for several years to come”.

There are also domestic problems that the OBR refers to. In the report today the contraction in 2008-2009 is now assessed to be deeper than previously thought, with GDP shrinking by a staggering 6.3%, the largest shock to our economy since the second world war. In the OBR’s view, the aftermath of that shock continues to weigh on the productivity of the UK economy, with credit rationing and impaired financial markets potentially impeding the expansion of successful firms. It says:

“GDP growth is now expected to be lower in every year of the forecast period, as credit conditions take longer to normalise and global growth remains weaker than previously expected”.

As a result, the OBR forecasts that the economy will grow by 1.2% next year, 2.0% in 2014, 2.3% in 2015, 2.7% in 2016 and 2.8% in 2017.

So the economy is recovering, and it is recovering more quickly than many of our neighbours. The International Monetary Fund estimates that next year the UK will grow more strongly than either France or Germany. Our credible fiscal policy allows for supportive monetary policy and, with the Bank of England, we are directly addressing the problems of tight credit through the £70 billion funding for lending scheme. In the OBR’s view, that has reduced UK bank funding costs, lowered interest rates in the real economy and will add to the level of real GDP.

One area where the British economy has done much better than forecast is in creating jobs. Since early 2010, the private sector has created 1.2 million new jobs—600,000 more than predicted—and youth unemployment has been falling. The OBR now expects unemployment to peak at 8.3%, instead of 8.7%. That is at a time when the unemployment rate in Spain is 26%, in France it is 11% and across the whole eurozone it is almost 12%. Employment, which is already at a record high, is set to go on rising each year of the forecast. For every one job less in the public sector, two new jobs are expected to be created in the private sector. Britain now has a greater proportion of its people in work than either the eurozone or the United States of America. More jobs means that the impact of the weaker than forecast GDP on the public finances has been less than some might have expected.

There have been three developments that have each had a significant one-off impact on the public finances, and the report we are publishing today shows clearly and transparently the impact of all three. First, there is the transfer of the Royal Mail pension fund to the public sector as part of its privatisation. That produces a one-off reduction in the deficit of £28 billion this year, but it will add to the deficit in the years after.

Secondly, the previous Government had classified Bradford & Bingley and Northern Rock Asset Management as off balance sheet. Today, they are brought on balance sheet, in line with the judgment of the Office for National Statistics. That adds around £70 billion to our national debt and reminds us of the price the country is still paying for the failures of the past.

Thirdly, the Government have decided, with the agreement of the Bank of England, to transfer excess cash held in the asset purchase facility to the Exchequer. This is sensible cash management, and it is in line with the approach of the Bank of Japan and the US Federal Reserve. I welcome the OBR’s verdict that this is, in its words, “more transparent” than the previous approach. I want to make sure that its impact on the figures is also completely transparent, so we have today published the forecasts for the public finances with and without the impact of the APF decision.

When we came to office, the deficit stood at 11.2%—the highest in our peacetime history. It was forecast to be the largest of any major economy in the world. In the past two years, the deficit has fallen by a quarter. Today’s figures show that with or without the APF coupons, the deficit is forecast to fall this year as well, and cash borrowing is forecast to fall too. Last year, the deficit was 7.9%. This year, with the APF coupons, it is forecast to be 6.9%, but that excludes the impact of the Royal Mail pension assets. It is falling and it will continue to fall each and every year, to 6.1% next year, 5.2% the year after, 4.2% in 2015-16, then 2.6%, before reaching 1.6% in 2017-18.

In 2009-10, the country was borrowing £159 billion. This year, we are borrowing £108 billion. That is forecast to fall to £99 billion next year, £88 billion the year after, then £73 billion in 2015-16, and £49 billion and £31 billion in the two years after that. These are the central forecasts published by the OBR, with the asset purchase facility cash transfer included. When the transfer is excluded, as we show in the document, the deficit also falls, from 7.9% last year to 7.7% this year, then 6.9% next year, and it falls in every single year after that—and cash borrowing falls in every year as well.

There are those who have been saying that the deficit was going up this year—indeed, I think I heard it in Prime Minister’s questions—but any way you present these figures, this is not what the OBR forecasts show today. It says that the deficit is coming down—coming down this year and every year of this Parliament. Yes, the deficit is still far too high for comfort—we cannot relax our efforts to make our economy safe—but Britain is heading in the right direction. The road is hard but we are making progress.

Unlike the previous Government’s golden rule, the regime we have set up means that the Chancellor is no longer judge and jury of their own fiscal rules, and today the OBR has assessed us against those rules. First, the fiscal mandate: this is the commitment that we will balance the cyclically adjusted current budget over the coming five years. I can tell the House that the OBR has assessed that we are, in its words, “on course” to meet our fiscal mandate. In other words, we have a better than 50% chance of eliminating the structural current deficit in five years’ time—that part of our borrowing that does not recover automatically as the economy grows. This is true, again, with or without the transfer of the coupons, so we will meet our fiscal mandate. But the OBR assesses in its central forecast that we do not meet the supplementary objective that aims to have debt falling by 2015-16. The point at which debt starts to fall has been delayed by one year, to 2016-17, and the OBR’s central forecast is that net debt will be 74.7% this year, then 76.8% next year, 79% in 2014-15, and 79.9% in 2015-16, before falling to 79.2% in 2016-17 and 77.3% in 2017-18.

In short, the tougher economic conditions mean that while our deficit is forecast to go on falling, instead of taking three years to get our debt falling, it is going to take four. Confronted with this news, some say we should abandon our deficit plan and try to borrow more. They think that by borrowing more, we can borrow less. That would risk higher interest rates, more debt interest payments, and a complete loss of Britain’s fiscal credibility. We are not taking that road to ruin.

Then there are those who say that despite all that has happened in the world this year, we should cut even more now to hit the debt target. That would require £17 billion of extra cuts a year. Let me explain why I have decided not to take this course.

We have always argued that we should let the automatic stabilisers work. We have not argued that we should chase down a cyclical or temporary deterioration in the economy, particularly one that our own independent body says is largely driven by problems abroad. That is also the judgment of the International Monetary Fund, the OECD and the Governor of the Bank of England.

Our aim is to reduce the structural deficit—the permanent hole in our public finances that will not be repaired as the economy recovers. And we are—we have cut the structural deficit by 3 percentage points in the past two years, more than any other G7 country, and it is set to go on being cut at a similar rate in the years ahead. This lower deficit is delivered by our public spending plans and we are going to stick with those plans. Overall, we are not going faster or slower with those plans; the measures I will announce in this autumn statement are fiscally neutral across this Parliament. There is no net rise in taxes today—any taxes increased are offset by taxes cut.

In last year’s autumn statement, we committed the Government to maintain the same pace of consolidation for two further years beyond the end of the current spending review, into 2015 and 2016-17. In this year’s autumn statement, we extend the consolidation for one further year, into 2017-18. The OBR projects that, as a result, the share of national income spent by the state will fall from almost 48% of GDP in 2009-10 to 39.5% by 2017-18. The document shows that total managed expenditure will continue to fall, and will now be £4.6 billion lower in 2017-18 than if it had been held flat in real terms. No decision to cut spending is ever easy, but those who object must explain whether instead they would have higher taxes, higher borrowing or both.

I also provide further detail of the consolidation plans for 2015-16, the last year of this Parliament. I said two years ago that the correct balance for our fiscal consolidation between spending and tax should be 80:20. I can confirm that by the end of 2015-16, the decisions we announce today mean that we will almost exactly deliver on that 80:20 mix. Total spending will fall in the final year of this Parliament at the same rate as through the current spending review.

I can confirm today that the overall envelope for total managed expenditure will be set at £745 billion. We start with the working assumption that departmental resource totals will continue on the same trajectory as over the current spending review. The detail of departmental spending plans for 2015-16 will be set at a spending review, which will be announced during the first half of next year. What we are doing today is taking steps now to help deliver those spending plans and to go on reducing the deficit in a way that is fair.

This Government have shown that it is possible to restore sanity to the public finances while improving the quality of our public services—crime has fallen, hospital waiting lists are down, school standards are up—and this is with a civil service that is today smaller than at any time since the second world war.

We are today publishing the reports we commissioned from the pay review bodies on market-facing pay. We commit to implementing these reports. This means continuing with national pay arrangements in the NHS and Prison Service, and we will not make changes to the civil service arrangements, either; but the School Teachers Review Body recommends much greater freedom to individual schools to set pay in line with performance, and my right hon. Friend the Education Secretary will set out how that will be implemented.

Through the efforts of individual Government Departments and the support of the Chief Secretary and my right hon. Friend the Minister for the Cabinet Office, we have already generated £12 billion of efficiency savings in Whitehall, but we believe there is room to do even more. If all Departments reduced their spending on administration in line with the best-performing Departments, such as Education and Communities and Local Government, another £1 billion could be saved. If all Departments made greater provision of digital services, rationalised their property estates, as some have done, a further £1 billion could be saved. Today, therefore, we are reducing departmental resource budgets by 1% next year and 2% in the year after.

We will continue to seek efficiency savings in the NHS and in our schools, but that money will be recycled to protect spending in these priority areas. Local government budgets are already being held down next year to deliver the freeze in council tax, so we will not seek the additional 1% savings next year, but we will look for the 2% saving the year after. Although the Ministry of Defence is included in these measures, it will be given flexibility on its multi-year budget to ensure that this will not lead to reductions in military manpower or the core defence equipment programme over the Parliament.

A mark of our values as a society is our commitment to the world’s poorest. We made a promise as a country that we would spend 0.7% of our gross national income on international development and I am proud to be part of the first British Government in history who will honour that commitment and honour it as promised next year. We will not, however, spend more than 0.7% so, as we did last year, we will adjust the Department for International Development’s budget to reflect the latest economic forecasts.

In the medium term these savings across Whitehall will help Departments maintain the right trajectory for the years that follow the spending review and help us to pay off the deficit in future. In the short term, I am switching these current savings into capital—all the money saved in the first two years will be reinvested as part of a £5 billion capital investment in the infrastructure of our country. Despite the fiscal challenges we face, public investment as a share of GDP will be higher on average in this Parliament than it was under the last Labour Government. It is exactly what a Government equipping Britain to compete in the modern global economy should be doing.

We are committing an extra £1 billion to roads, which includes four major new schemes: to upgrade key sections of the Al, bringing the route from London to Newcastle up to motorway standard; to link the A5 with the Ml; to dual the A30 in Cornwall; and to upgrade the M25, which will support the biggest port developments in Europe. I pay tribute to my hon. Friend the Member for Thurrock (Jackie Doyle-Price) for campaigning to achieve this.

We have already set out plans this autumn for a huge investment in rail, and my right hon. Friend the Transport Secretary will set out in the new year plans to take High Speed 2 to the north-west and west Yorkshire. I can today confirm a £1 billion loan and a guarantee to extend the Northern line to Battersea power station and support a new development on a similar scale to the Olympic park.

We are confirming funding and reforms to assist construction of up to 120,000 new homes and delivering on flood defence schemes in more cities. On top of broadband expansion for our countryside and our larger cities, we are funding ultrafast broadband in 12 smaller cities: Brighton and Hove, Cambridge, Coventry, Derby, Oxford, Portsmouth, Salford, York, Newport, Aberdeen, Perth and Derry/Londonderry. In addition to the third of a billion announced this autumn for British science, we are today announcing £600 million more for the UK’s scientific research infrastructure.

Since improving our education system is the best investment in a competitive economy, I am today committing £270 million to fund improvements in further education colleges and £1 billion to expand good schools and build 100 new free schools and academies. Scotland, Wales and Northern Ireland will get their Barnett share of additional capital spending put at the disposal of their devolved Administrations.

On top of the £5 billion of new capital spending in infrastructure and support for business, we are ready to provide guarantees for up to £40 billion more. Today I can announce that projects worth £10 billion have already pre-qualified. We are offering £10 billion-worth of guarantees for housing, too. Our country’s pension funds will launch their new independent infrastructure investment platform next year as well, and we have today published full details of the replacement for the discredited private finance initiative. Since we can all see now that the public sector was sharing the risk, we will now ensure that we also share in the reward, and I commend my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) for his work in this area.

Taken together, this is a revolution in the sources of finance for upgrading Britain’s infrastructure and equipping Britain to win in the global race. Annual average infrastructure investment, which was £29 billion under the last Labour Government, is now £33 billion.

Savings from Whitehall are not enough by themselves to tackle our debts. We need to find other savings, and we need to do so in a way that is fair. Those with the most should contribute the most, and they will, but fairness is also about being fair to the person who leaves home every morning to go out to work and sees that their neighbour is still asleep, living a life on benefits. As well as a tax system where the richest pay their fair share, we have to have a welfare system that is fair to the working people who pay for it.

Let me start with tax. The vast majority of people, rich or otherwise, pay their taxes and make their contribution. However, there are still too many who illegally evade their taxes or use aggressive tax avoidance in order not to pay their fair share. This Government have taken more action against those people than any before us. Prosecutions for tax evasion are up 80%. We will collect £7 billion more a year in tax that is due than the last Government. We are increasing by about 2,500 the number of tax inspectors going after evaders and avoiders. Next year, we will introduce the first ever general anti-abuse rule—something that never happened in the 13 years before we came into office.

Next year, for the first time in our history, money will be flowing from bank accounts in Switzerland to Britain, instead of the other way around. Because of the treaty that we have signed, we expect to receive £5 billion over the next six years from the undisclosed Swiss bank accounts of UK residents. That is the largest tax evasion settlement in British history.

We are taking further steps today. Hundreds of millions of pounds of tax loopholes are being closed with immediate effect, and we are investigating the abusive use of partnerships. HMRC will not have its budget cut over the next two years, unlike other departments. Instead, we will spend £77 million more on fighting tax avoidance, and not just for wealthy individuals.

We want to have the most competitive corporate tax system of any major economy in the world, but we expect those corporate taxes to be paid. We are therefore confirming today that we will put more resources into ensuring that multinational companies pay their proper share of taxes. We are leading the international effort to prevent artificial transfers of profits to tax havens. With Germany and now France, we have asked the OECD to take that work forward and we will make it an important priority of our G8 presidency next year. In total, we expect the action that we are announcing today to increase the amount of money collected from tax evasion and avoidance by a further £2 billion a year.

Fair and necessary as that is, it is not enough by itself to close the deficit. We need to ask more from the better-off. Punitive tax rates do nothing to raise money, and simply discourage enterprise and investment into Britain. Other countries on our doorstep are trying that approach and paying the price. We are not making that mistake. HMRC data reveal that in the first year of the 50% tax rate, tax revenues from the rich fell by £7 billion and the number of people declaring incomes of over £1 million fell by a half. A tax raid on the rich that raises almost no money is a tax con. We are going to have a top rate of tax that supports enterprise and we are going to raise more money from the rich. Here is a simple fact: the richest will pay a greater share of income tax revenues in every single year of the coalition Government than in any one of the 13 years of the last Labour Government.

However, to make sure that the deficit reduction remains fair, we need to raise more. We have already raised stamp duty on multi-million pound homes and next week we will publish the legislation to stop the richest avoiding stamp duty. But we will not introduce a new tax on property. That would require the revaluation of hundreds of thousands of homes. In my view, it would be intrusive, it would be expensive to levy, it would raise little and the temptation for future Chancellors to bring ever more homes into its net would be irresistible, so we are not having a new homes tax.

In this Parliament, we have already reduced the amount of tax relief that we give to the very largest pension pots. From 2014-15, I will further reduce the lifetime allowance from £1.5 million to £1.25 million, and reduce the annual allowance from £50,000 to £40,000. That will reduce the cost of tax relief to the public purse by an extra £1 billion a year by 2016-17. Ninety-eight per cent. of the people currently approaching retirement have a pension pot worth less than £1.25 million. Indeed, the median pot for such people is just £55,000. Ninety-nine per cent. of pension savers make annual contributions to their pensions of less than £40,000. The average contribution to a pension is just £6,000 a year.

I know that these tax measures will not be welcomed by all—ways to reduce the deficit never are—but we must demonstrate that we are all in this together. When looking for savings, I think that it is fair to look at the tax relief that we give to the top 1%.

I want to help the great majority of savers. That is why we are introducing a generous new single-tier pension, so that people know it always pays to save. That is why I will uprate next April the overall individual savings account limit to £11,520. We will also consult on allowing investments in equity markets for small and medium-sized enterprises, such as the alternative investment market, to be held directly in stocks and shares ISAs to encourage investment in growing businesses.

I have also listened to the concerns from pensioners about draw-down limits. I am today announcing that the Government will raise the capped draw-down limit from 100% to 120%, giving pensioners with such arrangements the option of increasing their incomes.

It is also fair to look at the way in which we uprate benefits and some tax thresholds. The basic state pension has this year gone up by the largest cash amount in its history. Next year, thanks to our triple lock, I confirm that it will rise by 2.5%, which is higher than either earnings or inflation. That takes the level of the full basic state pension to £110.15 a week.

When it comes to working-age welfare, we have already made substantial reforms. We have cut £18 billion a year from the welfare bill. Benefits are being capped for the first time, so families out of work will not get more than the average family gets for being in work. We have increased efforts to fight welfare fraud. Today, we announce further measures and checks to save more than £1 billion in the next four years by reducing fraud, error and debt in the tax credit system. Next year, my right hon. Friend the Secretary of State for Work and Pensions will introduce the new universal credit so that it always pays to work. Today, we are setting the key parameters, such as the levels of earning disregards.

We have to acknowledge that over the last five years, those on out-of-work benefits have seen their incomes rise twice as fast as those in work. With pay restraint in businesses and Government, average earnings have risen by about 10% since 2007. Out-of-work benefits have gone up by about 20%. That is not fair to working people who pay the taxes that fund them. Those working in the public services, who have seen their basic pay frozen, will now see it rise by an average of 1%. A similar approach of a 1% rise should apply to those in receipt of benefits. That is fair and it will ensure that we have a welfare system that Britain can afford. We will support the vulnerable, so carers’ benefits and disability benefits, including disability elements of tax credits, will be increased in line with inflation, and we are extending the support for mortgage interest for two more years.

However, most working-age benefits, including jobseeker’s allowance, employment and support allowance and income support, will be uprated by 1% for the next three years. We will also uprate elements of child tax credit and working tax credit by 1% for the next three years, although previously planned freezes will go ahead. Local housing allowance rates, which are a central component of housing benefit, will be uprated in line with the existing policy next April and we will then cap increases at 1% in the two years after that. For that measure, 30% of the savings will be used to exempt from the new cap those areas with the highest rent increases. The earning disregards for universal credit will also be uprated by 1% for two years from April 2014. Child benefit is currently frozen. It, too, will now rise by 1% for two years from April 2014.

Let me be clear: uprating benefits at 1% means that people get more cash, but less than the rate of inflation. Taken together, we will save £3.7 billion in 2015-16 and deliver permanent savings each and every year from our country’s welfare bill. To bring all those decisions on many benefits over many years together, we will introduce primary legislation in Parliament in the welfare uprating Bill. I hope that it will command support from both sides of the House.

We will apply a similar approach to uprating some of our tax thresholds to that that we are applying to welfare. The higher rate threshold will be increased by 1% in the tax years 2014-15 and 2015-16. So the income at which people start paying the 40% rate will go up from £41,450 to £41,865 and then to £42,285. I want to be completely clear with people: this is an increase; in fact, it is the first cash increase in the higher rate threshold in this Parliament, but it is not an increase in line with inflation, so it will raise £1 billion of revenue by 2015-16. Again, there are no easy ways to reduce the deficit, but from year to year, no one will pay a penny more in income tax.

In the same way, the capital gains tax annual exempt amount will be increased by 1% over the same period, reaching £11,100. The inheritance tax nil-band rate, which has been frozen since 2009 at £325,000, will be increased by 1% in 2015-16 to £329,000. Taken with the welfare uprating decisions, that is a fair approach to paying off Britain’s debts.

However, dealing with those debts is only one part of making Britain fit to compete in the global race. Countries like ours risk being out-smarted, outworked and out-competed by the new emerging economies. We asked Michael Heseltine to report on how to make the Government work better for business and enterprise. I think that it is fair to say that his answer has captured the imagination of all political parties.

We will respond formally in the spring, but here is what we will do now. First, Government spending should be aligned with the priorities of the local business community. We will provide new money to support the local enterprise partnerships, and from April 2015, the Government will place more of the funding that currently goes to local transport, housing, skills and getting people back to work into a single pot that LEPs can bid for. Details will be set out in the spending review. Before then, we are putting more money into the regional growth fund, which is helping businesses create half a million new jobs.

Secondly, as Lord Heseltine also recommends, we will support industries and technologies where Britain has a clear advantage. With the support of my right hon. Friend the Business Secretary, we will extend our global lead in aerospace and support the supply chains of advanced manufacturing. We are also taking big steps today to support British companies that export to new emerging markets in Asia, Africa and the Americas. I am increasing the funding for UK Trade & Investment by more than 25% a year, so that it can help more firms build the capacity of overseas British chambers and maintain our country’s position as the No. 1 destination in Europe for foreign investment. We are also launching a new £1.5 billion export finance facility to support the purchase of British exports.

Thirdly, we are addressing credit problems for companies. We are creating a new business bank, and today we have confirmed that we are providing it with £1 billion of extra capital, which will lever in private lending to help small and medium-sized firms and bring together existing schemes.

Fourthly, we are going to cut business taxes still further. Let me explain how. The temporary doubling of the small business rate relief scheme helps more than half a million small firms, with 350,000 paying no rates at all. The previous Government were going to end it in September 2011; we have already extended it to next April, and, today, I extend it by a further year, to April 2014. We also confirm today the tax relief for our employee shareholder scheme.

The Energy Bill provides certainty and support for billions of pounds of investment in renewable energy. Today, we publish our gas strategy to ensure that we make the best use of lower-cost gas power, including new sources of gas under the land. We are consulting on new tax incentives for shale gas and announcing the creation of a single office so that regulation is safe but simple. We do not want British families and businesses to be left behind as gas prices tumble on the other side of the Atlantic.

We are going to help our construction industry, too. The previous Government abolished empty property relief, and, as excellent work done by my hon. Friends the Members for York Outer (Julian Sturdy) and for Wolverhampton South West (Paul Uppal) and others shows, that has blighted development in our towns and cities. The proposal from my colleagues that we create a long grace period before newly completed buildings have to pay empty property rates is sensible, and we will introduce it next October.

The previous Government also planned to increase the small companies tax rate to 22%. We have cut it to 20%. However, I would like to help small and medium-sized firms more, and I thank my hon. Friends the Members for Burnley (Gordon Birtwistle) and for Pendle (Andrew Stephenson) for their thoughts on that matter. Starting on 1 January, and for the next two years, I will increase tenfold the annual investment allowance in plant and machinery. Instead of £25,000-worth of investment being eligible for 100% relief, £250,000-worth of investment will now qualify. That capital allowance will cover the total annual investment undertaken by 99% of all the business in Britain. It is a huge boost to all those who run a business and who aspire to grow, expand and create jobs.

I want Britain to have the most competitive business tax regime of any major economy in the world. I have already cut the main core rate of corporation tax from 28% to 24%, and it is set to fall further to 22%. That has helped British companies and frankly left other countries scrambling to keep up. They will have to try harder, for I am today cutting the main corporation tax rate again by a further 1%. In America, the rate is 40%; in France, it is 33%; in Germany, it is 29%. From April 2014, the corporation tax rate in Britain will stand at 21%. That is the lowest rate of any major western economy. It is an advert for our country that says, “Come here; invest here; create jobs here; Britain is open for business.”

We will not pass the benefit of that reduced rate on to banks, and to ensure that we meet our revenue commitments, the bank levy rate will be increased to 0.130% next year. Making banks contribute more is part of our major reforms to the banking system.

We also have to be on the side of those who want to work hard and get on. I know how difficult many families have found the cost of living. In dealing with the deficit, we have had to save money. However, whenever we have been able to help, we have. We have helped councils freeze council tax for two years running, and we are helping them freeze it again next year. We have put a cap on rail fare rises for the next two years, so commuters are not punished for travelling to work. We are forcing energy companies to move families on to the lowest tariffs for their gas and electricity bills.

We have also helped motorists with the cost of petrol. We have cancelled the last Government’s escalator, and I am moving inflation-only rises to September. Fuel is 10p per litre cheaper than it would have been if we had stuck to Labour’s tax plans, and I want to keep it that way, as I know do my colleagues, like my hon. Friend the Member for Harlow (Robert Halfon). There is a 3p per litre rise planned for this January. Now, some have suggested that we delay it until April. I disagree. I suggest we cancel it altogether. There will be no 3p fuel tax rise this January. That is real help with the cost of living for families as they fill up their cars across the country, and it will help businesses, too. It means that, under this Government, we will have had no increase in petrol taxes for nearly two and a half years. In fact, they have been cut.

We have also helped working people by increasing the amount that they can earn before paying any income tax. When the coalition Government came to office, the personal tax allowance stood at just £6,475; next April, it is set to rise to £9,205.

Twenty-four million taxpayers have seen their income tax cut; 2 million of the lowest-paid have been taken out of tax altogether. Because of the difficult decisions we have taken today, we can go even further. From next April, the personal allowance will rise by a further £235. That means a total increase next year of £1,335—the highest cash increase ever. People will be able to earn £9,440 before paying any income tax at all. This is a direct boost to the incomes of people working hard to provide for their families. It is £47 extra in cash next year. In total, it is a £267 cash increase next year. People working full time on the minimum wage will have seen their income tax bill cut in half, and we are within touching distance of the £10,000 personal allowance. And at this time, I propose to extend the benefits of this further increase to higher rate taxpayers. That decision will stand alongside the decision I have had to take on uprating, meaning that, in real terms, a typical higher rate taxpayer will be better off next year and no worse off in total by the year after.

Today we have helped working people, but I do not want to distract from the tough economic situation we face in the world. The public know there are no miracle cures; just the hard work of dealing with our deficit and ensuring Britain wins the global race. That work is under way. The deficit is down. Borrowing is down. Jobs are being created. It is a hard road, but we are making progress, and in everything we do, we are helping those who want to work hard and get on.

13:21

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

Today, after two and a half years, we can see, and people can feel in the country, the true scale of this Government’s economic failure. The economy this year is contracting. The Chancellor has confirmed that Government borrowing is revised up this year, next year and every year. The national deficit is not rising—[Interruption.] I will say it again. Our economy is contracting this year; Government borrowing and the deficit are revised up this year, next year and every year; and the national debt is rising, not falling. It is people who are already struggling to make ends meet, middle and lower-income families and pensioners, who are paying the price, while millionaires get a tax cut—a £3 billion welfare handout to the people who need it least.

Let me spell out the full facts to the House—[Interruption.] Government Members should listen. They might learn something. In June 2010, the Office for Budget Responsibility forecast that our economy would grow by 2.8% this year. In March this year, it said there would still be growth, but revised it down to just 0.8%. Today, we learn that the Chancellor has not managed even that. Growth has not only been downgraded yet again, but he has confirmed, following the double-dip recession, that our economy is now forecast to actually contract inside this year, by 0.1%.

Let me remind the House what the Chancellor promised over two years ago in the June Budget. He said:

“We have provided the foundations for economic recovery in all parts of our nation”.

He said:

“We have set the course for a balanced budget and falling national debt by the end of this Parliament.”

And he said:

“The richest paying the most and the”

most

“vulnerable protected”.—[Official Report, 22 June 2010; Vol. 512, c. 180.]

That was the promise, but far from the Chancellor securing our recovery, our economy has flatlined since the spending review in 2010. Over the past two years, he was expecting 4.6% growth, but he has actually achieved 0.6% growth, which compares with 1.7% in France, 3.6% in Germany and 4.1% in America. We are falling behind in the global race. We learn today that growth is being downgraded this year, next year, the year after, the year after, and the year after that too—the longest double-dip recession since the second world war now followed by the slowest recovery in the past 100 years.

The result of this stagnation—rising long-term unemployment and long-term damage to our economy, falling behind now as other countries move ahead—is that the Chancellor’s fiscal strategy has been completely derailed. The defining purpose of the Government, the cornerstone of the coalition, the one test they set themselves: to balance the books and get the debt falling by 2015, is now in tatters.

What we have learned today is that Government borrowing has been revised up this year, next year and the year after that. We now know that, compared with the Chancellor’s forecast two years ago, borrowing is now forecast to be well above the £150 billion of extra borrowing that he was forecasting in March—[Interruption.] Government Members should listen to this. The Chancellor has confirmed that the Prime Minister’s pledge to balance the books in 2015 is not met in 2015, it is not met in 2016 and it is not met in 2017. The fact is that there is more borrowing this year, next year and the year after.

The Opposition will look at the detail when we get the figures—it was disappointing that the Chancellor failed to give us the cash figures adjusted for borrowing this year, next year and the year after. The unusual thing is that, just a few weeks ago, the independent forecasters were saying that borrowing would be £6 billion higher this year. We will examine the detail of those figures to see whether there has been any dodgy dealing. We will find out in the coming hours. [Interruption.] I do not know because I have not seen the figures, but I do know that there is more borrowing this year, more borrowing next year and more borrowing the year after.

The result is that the OBR shows more borrowing and higher deficits means higher national debt. The national debt—[Interruption.] The Prime Minister should listen to this, even if it might be rather shocking to find out. National debt will be higher at the end of this Parliament than the level inherited; it will be higher at the end of this Parliament than forecast in the plans he inherited; and it is no longer falling as a percentage of GDP in 2015. It is rising in 2015 and rising again in 2016, breaking the fiscal rule for falling debt upon which the Chancellor said his entire credibility depended. In last year’s Budget, the Chancellor said,

“our deficit reduction plan is on course…we will not waiver”.—[Official Report, 21 March 2012; Vol. 542, c. 795.]

On course? Not waivering? He is not waivering, he is drowning.

The Chancellor is now trying to claim that his failure on growth, his failure on borrowing and the debt, and breaking his own fiscal rule, are not his fault—that no one could have foreseen it. What nonsense; he was warned. He was warned that a tough medium-term plan to cut the deficit, tax rises, spending cuts and pay restraint, which every country had to put in place, could work only if the Government first put in place a plan for jobs and growth. He was warned that it was a huge gamble to go too far, too fast, and to rely on exports to bail him out. He was warned that there was a hurricane brewing in the eurozone, and that it was not the time to rip out the foundations of the house here in Britain. Once again, the Chancellor is trying to blame high oil prices and the eurozone crisis for negative growth this year, but they affected all countries, so why, over the last—[Interruption.]

[Mr Speaker]

Order. I apologise for interrupting. Members must calm themselves. Mr Byles, I thought you were normally a model of restraint and civility. Good heavens man! I do not know what has come over you. Calm yourself—take a pill if necessary, but keep calm. Take up yoga.

[Ed Balls]

Growth down, borrowing up, debt up—they don’t like it, Mr Speaker, do they? They don’t like it at all.

Once again, the Chancellor is trying to blame high oil prices and the eurozone crisis, so let me ask him: why, over the past two years, has Britain grown at just one tenth of the average growth rate of the G20 countries? Why has growth here in Britain been even slower than in the eurozone? It is not the rest of the world’s fault—it is his policies that have failed. He claimed that rising VAT alongside accelerated spending cuts would boost confidence, secure recovery and get the deficit down, but they depressed confidence, choked off our recovery and borrowing has been revised up. Let me ask the Chancellor: whatever happened to his Treasury view—his theory of expansionary fiscal contraction? Expansionary fiscal contraction? It is the economy that has contracted and the borrowing and the debt that have expanded. That is the truth.

When the latest figures show business confidence falling, when the world economy is slowing, when the eurozone is in such chronic difficulty, and when on current plans the Chancellor’s fiscal straitjacket tightens further next year, it is simply reckless and deeply irresponsible of this Chancellor to plough on with a fiscal plan that we all know is failing on the terms he set. That is the truth.

What a wasted opportunity this statement was. Can the Chancellor confirm that the independent OBR looked at the measures he has announced today, and that its verdict is that growth is revised down this year, next year and the year after?

Let me congratulate the Chancellor on taking our advice and stopping January’s fuel duty rise, even though Government Members all voted against it just a month ago. We welcome the U-turns on flood defences, in part, on regional pay bargaining in the NHS, and on capital allowances. After churches, charities, pasties, skips, fuel and caravans, I think this U-turning is catching on, but whatever happened to the plans for the business investment bank? As for yesterday’s announcement on infrastructure spending, the extra money for schools is just a fraction of the cut from the cancellation of Building Schools for the Future.

We have been here before. A year ago, the Prime Minister boasted of a national infrastructure plan; 12 months on, not a single road scheme has even started. Why cannot he see that he will not get the deficit down without a plan for jobs and growth? Why is he not using the 4G money to get 100,000 new homes built? Why is he not offering a national insurance holiday for small firms? Why not have a temporary tax cut for families? Even the Mayor supports that. Why is the Chancellor not repeating the bank bonus tax? The Chancellor says he cannot do any of that because it would lead to higher borrowing. Even his political attacks are backfiring, because this Chancellor’s failed plan has given us more welfare spending, higher borrowing and higher debt too. That is the reality. The truth is that the Chancellor has failed on growth and the deficit, but what is his answer? More of the same.

Let me remind the Chancellor what he told the House in the Budget of 2011. He said that

“we have already asked the British people for what is needed, and…we do not need to ask for more.”—[Official Report, 23 March 2011; Vol. 525, c. 951.]

But 18 months on the Chancellor has come back for more, and who does he think should pay? Not the 8,000 millionaires set to get more than £100,000 each in April. I have to ask the Liberal Democrats: whatever happened to the mansion tax? Do they not realise that, even with the changes in the personal allowance, as a result of the other things they have supported the average family with children on £20,000 is worse off—and that is before the VAT rise?

The Chancellor claims that his decision to restrict pension tax relief will make the tax system fairer at the top. Can he confirm that the £1 billion he is raising is less than the £1.6 billion that he gave back in pension tax relief in June 2010? And it is just a fraction of the top-rate tax cut—a £3 billion top-rate tax cut at the same time as the Chancellor is cutting tax credits for working families, cutting child benefit for middle-income families, raising taxes on pensioners in April and cutting benefits for the unemployed.

We do need to reform and modernise our welfare state and reduce its cost. Those who can work should work—no ifs or buts. We support a benefit cap, done fairly, with a higher level in London, but let us be clear. The Chancellor claimed he would cut the welfare bill, but higher inflation and long-term unemployment mean that the benefits bill is forecast to be billions higher in this Parliament than he boasted. Let me help him: welfare to work—the clue is in the name. We cannot have a successful welfare to work programme without work, and we know that the Work programme has totally failed, with only two people in 100 going into permanent jobs.

We should require every young and long-term unemployed person to take a job—and make sure there is one there. Let me ask the Chancellor about a nurse, one of the thousands cut from the NHS in the past two years, who is now struggling to find a new job. For that nurse, he has announced today that he is cutting her jobseeker’s allowance for the next three years. How can that be fair when he is cutting the top rate of tax? How can it be fair when someone earning £228,000 a year will get a top-rate tax cut of £75 a week in April, which is more than the £71 the nurse gets to live on through JSA?

We learned today that the Chancellor is not just hitting those looking for work. The majority of people who lose from his cuts to tax credits are people in work—millions of families striving hard to do the right thing. What kind of Government believe that you can only make low-paid working people work harder by cutting their tax credits, but you only make millionaires work harder by cutting their taxes, Mr Speaker? I tell you: certainly not a one nation Government.

The Government must really believe that if taxes are cut at the top the wealth will trickle down. Let me remind the House what the Chancellor told the Conservative party conference in October 2009. He said that

“we could not even think of abolishing the 50p rate on the rich while at the same time I am asking many of our public sector workers to accept a pay freeze to protect their jobs.”

Those were the Chancellor’s words. He continued:

“I think we can all agree that would be grossly unfair.”

What has changed? Nothing has changed. It was all a con and the mask has slipped. We now know that this Chancellor cannot say, “We’re all in this together” without a smirk on his face. They wanted us to think they were compassionate Conservatives. Now we find out that they are the same old Conservatives, and the Liberal Democrats have gone along with all of it yet again.

What a pity it is not to see the hon. Member for Mid Bedfordshire (Nadine Dorries) in her place, back from the jungle. She may not have succeeded in talking for the nation on many things but she did speak for the nation when she called the Prime Minister and the Chancellor

“two arrogant posh boys who don’t know the price of milk.”

It is no wonder the Prime Minister keeps losing his temper, because his worst nightmare is coming true—not snakes and spiders in the jungle, but the Government’s fiscal rule broken, their economic credibility in tatters, exposed as incompetent and unfair. Yes, he’s the Chancellor; can’t someone get him out of here? Growth down, borrowing revised up and the fiscal rules broken: on every target they have set themselves, they are failing, failing, failing. They are cutting the NHS, not the deficit; they are borrowing more than £212 billion more than they promised two years ago; and they are cutting taxes for the rich, while struggling families and pensioners pay the price—unfair, incompetent and completely out of touch.

[Mr Osborne]

There is only one person in the Chamber who is drowning, and it is the shadow Chancellor. That was the worst reply to an autumn statement I have ever heard in this House. If one thing changes as a result of this statement, it might be a shadow Cabinet reshuffle.

The shadow Chancellor said one thing that was true. He said it right at the beginning—he said that the national deficit was not rising. It was a Freudian slip, but it betrayed the fact that he had written his response before he heard my autumn statement and before he looked at the OBR forecast. Let me tell him that we do not fiddle the numbers in the Treasury any more—that is what happened when he was there. We have an independent Office for Budgetary Responsibility, and that is the problem he has. His whole policy was about complaining that borrowing and the deficit were going up, but that is not what the OBR forecasts show. Indeed, his prescription is to borrow even more. He complains about debt, but he wants to put it up. It is completely hopeless.

The shadow Chancellor talked about the substance of policies. Here are some simple questions that the Labour party will have to answer. If it is against the cut in the income tax rate from 50p to 45p, will it reverse it? It is the simplest possible question. [Interruption.] The Leader of the Opposition says it has not come in yet. It is coming in—it has been legislated for—so, if he is so against it and thinks it a moral outrage, will he commit to reverse it? Yes or no? That is hopeless position No. 1.

The shadow Chancellor railed at welfare benefits. I have another simple question. Will the Opposition support us or vote against a welfare uprating Bill? What are they going to do? Will they vote for or against the Bill? It is a simple question. For the first time, we have spending plans for 2015-16. He said nothing about whether he supported those plans, even though he hopes to be Chancellor that year. Does he support those spending plans? He talked about 3G. [Interruption.] They are shouting at me.

[Edward Miliband (Doncaster North) (Lab)]

4G.

[Mr Osborne]

The 4G licence, yes. We are using the 4G licence. [Interruption.] May I say something about the 4G licence? The shadow Chancellor had 20 minutes to make his points, but he did not make any at all. We are using the 4G money, in part, for new capital spending, including building further education colleges, one of which is called the Leeds city college, in a town called Morley in west Yorkshire. I am not sure what the local MP would make of the shadow Chancellor’s decision that that is not the best use of the money, but he can look at himself in the mirror and ask that question.

The shadow Chancellor cannot answer these basic questions. He tries to claim that all the problems in Britain began in May 2010 and that they are all the fault of this Government. Literally only the people in the Brownite cabal claim that; there is not a single other person in the Labour party, in any business organisation or in any of the international bodies who believes that. The reason he has to maintain this completely incredible position is that if he admitted that the previous Government were responsible for the problems in our country, he would have to admit that he was responsible for them.

Out of necessity not choice, therefore, the Labour party leader has a shadow Chancellor who is more associated with the economic mismanagement that led to Britain’s problems than anyone else in Britain. He will not let his party move on. He is a man trapped in the past. The one thing the Opposition need to say is: “We’re sorry. We spent too much and we borrowed too much, but we won’t do it again”, but that is the one thing the shadow Chancellor cannot say. Until he does, though, the British public will never trust him or the Labour party with the public finances again.

[Mr Andrew Tyrie (Chichester) (Con)]

What the business community—the bedrock of economic recovery—needs most of all is stability, and I believe that what we have heard today delivers more stability. Does the Chancellor agree that businesses, particularly small businesses, need banks that lend? With that in mind, will he examine the radical options to achieve that—opening up banks to much more competition from new lenders, as the Treasury Committee has recommended; cleaning up bank balance sheets, as the Bank of England has advocated in the financial stability report; and possibly even breaking up one or more of the state-owned banks to improve their funding and hence lending?

[Mr Osborne]

My hon. Friend makes a good point: many of the problems in our economy are borne of the credit constraints and the elevated bank funding costs, which I talked about when I mentioned the OBR’s assessment of the economic forecast. There are several responses. The funding for lending scheme has brought bank funding costs down. That scheme, according to the OBR’s assessment, has had an impact, and it is an important part of our macro response. I agree with him that we must do much more to encourage competition in our banking system. We have some new entrants, but we can go further, and we need a much more competitive banking system that is able to serve the public better.

[David Miliband (South Shields) (Lab)]

This time last year, the Chancellor told me not to worry about youth unemployment on the grounds that his Youth Contract would take care of it. Now we know that 450,000 young people have been unemployed for more than six months and that 179,000 have gone on to the Work programme but only 5,920 have got a job as a result. That is 3% of those going on the Work programme and less than 2% of the long-term youth unemployed. Will he now agree, without point scoring, to look at the level of the wage subsidy to incentivise take-up, at the structure of the Work programme, so that voluntary organisations are not squeezed out, and at the role of a part-time job guarantee to give hope to these young people?

[Mr Osborne]

The right hon. Gentleman often has interesting and intelligent things to say about welfare to work programmes, and I am happy to consider the points he makes. I read some of his work earlier this year—it was quite a good job application for being shadow Chancellor.

[Mr John Redwood (Wokingham) (Con)]

Given that we need sensible amounts of new money and credit to fuel the private sector recovery, will the Chancellor update us on when RBS might be in a position to increase its balance sheets again—prudently—in order to make those loans available and when it might start to make a profit for the taxpayer, and will he consider the comments of those of us who think it needs to be split up to have more competitive and sensible banking?

[Mr Osborne]

I very much respect my right hon. Friend’s observations on the problems in our banking system. There is an aggressive plan to reduce the bad bank elements of RBS, and that plan is on track, but, as I said earlier, I want more to be done. RBS is reducing the size of its investment bank quite considerably. It also recently received advice from the Financial Policy Committee, and I hope it takes that advice into account.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

If I understood the Chancellor correctly, the profile of rising growth that he announced today looks remarkably similar to the profile that he announced in 2010, but which singularly failed to materialise. That, of course, is one reason why he has missed his debt target. Will he tell us why we should have any more confidence in the next set of figures, which show recovery, albeit postponed for several years? Of all the capital projects that he announced today—which I think many of us would support—how many will start this year?

[Mr Osborne]

The first thing I would say to the right hon. Gentleman is that the forecasts we produce are independent—they are produced by the Office for Budget Responsibility. This is the OBR’s best estimate of what will happen to GDP over the next few years. As the OBR says, its forecast two years ago was wrong because of three things, which it talks about. One is that the impact of the financial crisis was greater than it had assessed. Secondly, there was an oil price shock in 2011, which hit all oil-consuming economies. Thirdly, there was the impact of the eurozone, which the right hon. Gentleman has spoken about at length. All those things have had an impact, not just on the GDP of this country but on every western democracy in the world. Indeed, they have also had an impact on some of the emerging economies.

The right hon. Gentleman makes a good point about capital investment. He speaks with experience: it is often difficult to get these projects out the door. We are speeding up the delivery of these projects—the road schemes are under way. The capital we have allocated is for the next two years. The road schemes and the like that I announced are due to start—because they have got planning permission—in the next two years.

[Michael Fabricant (Lichfield) (Con)]

Is the Chancellor aware that since he sat, down the markets—not the Opposition—have given their verdict? The answer is this: the latest 10-year bond rate for Italy is 4.5% and for France it is 2%—just over, in fact—while the rate for British bonds is only 1.8%. It is the markets that count, not the party that caused the problem in the first place.

[Mr Osborne]

My hon. Friend reminds us that we get a daily verdict on the credibility of our economic policy from bond investors. We are borrowing money more cheaply than anyone who has done my job before us, and there is a real benefit for taxpayers and members of the public in that. We have saved £33 billion in debt interest that we were forecast to have to pay in 2010, which, as I said in my statement, is more than the entire defence budget.

[Mr Dennis Skinner (Bolsover) (Lab)]

When the cheering has died down on the Budget statement, it will be just as it was on previous occasions, such as in 2010, when the Chancellor made his first statement. When it was stripped bare, it was a totally different story. In 2010, he promised massively to cut the deficit; but here we are, two and a half years later, and he has cut the nurses and the national health service. This posh boy never changes. Now, instead of being a Bullingdon boy who wrecks the hotel rooms, as Chancellor of the Exchequer he wrecks the economy. It is time he went.

[Mr Osborne]

I am not sure that that personal attack warrants a proper reply.

[Mary Macleod (Brentford and Isleworth) (Con)]

My right hon. Friend mentioned that 1.2 million jobs had been created in the private sector. Examples include Aker Solutions in Chiswick, in my constituency, which has gone from employing 30 staff to planning to employ 1,300 by 2015. Does he agree that this shows the Government are rebalancing the economy and encouraging inward investment?

[Mr Osborne]

My hon. Friend is absolutely right: jobs are being created. Of course the economic situation is tough—it is tough in every western economy at the moment—but we are rebalancing our economy. One of the things I have sought to do in today’s statement—it is not the bit that will attract all the newspaper headlines—is expand our export promotion effort and ensure that UK Trade & Investment is better at encouraging exports and investment and ensuring that British overseas chambers of commerce are better equipped in the emerging economies. All these things are so important, because one of the big strategic mistakes we made as a country over the last 15 years was not to expand our market share—in the way that Germany did, for example—in those emerging economies, which have become so important.

[Mr John Denham (Southampton, Itchen) (Lab)]

I have heard the Chancellor make a number of statements to this House. Is it a fair summary to say that every time he has done so, he has told us that the economy has not grown since the last time he was here, that he is planning to borrow more than the last time he was here, that spending on public services will be cut more than the last time he was here, and that future growth will be less than the last time he was here? In view of that record, should he be looking quite so pleased with himself?

[Mr Osborne]

This Government came in in May 2010, picking up the pieces of an incredibly difficult economic inheritance. We were recovering from the deepest recession since the second world war—which, as I pointed out in my statement, was a contraction of over 6% in the economy, which puts today’s numbers into some context—and we were dealing with the problems in the banking system, and we have been hit with the problems in the eurozone. Despite all that, we have made progress. We have got credibility in the bond markets, as my hon. Friend the Member for Lichfield (Michael Fabricant) said, the deficit has come down, and jobs are being created. It is a difficult situation, but we are on the right track. Going back, as the right hon. Gentleman would suggest, would be a complete disaster.

[Stephen Williams (Bristol West) (LD)]

Liberal Democrat priorities for the coalition have been delivering £10,000 of tax-free pay for every working family in the country, effective taxes on the wealthy, and closing down opportunities for tax evasion and tax avoidance. Does the Chancellor agree that today’s very welcome news of a further rise in the personal tax threshold—to £9,440, putting us within touching distance of £10,000—a restriction on tax relief on pension contributions for the very rich, and more resources to tackle tax evasion and tax avoidance effectively show that the coalition Government are committed to tax fairness even in difficult times?

[Mr Osborne]

I do agree with my hon. Friend. It is worth remembering that we put together these difficult autumn statements and the like in a coalition. We are able to demonstrate to the rest of the world that Britain has strong and decisive government. I am grateful to my Liberal Democrat colleagues who have helped me in this. I hope that Liberal Democrats and Conservatives can celebrate the increase in the personal allowance. There are many Conservatives who also wanted to achieve that, and it was in the Liberal Democrat manifesto too. The fact that we are able to do that shows that we are helping working people even in these difficult times.

[Sammy Wilson (East Antrim) (DUP)]

I acknowledge some of the positive impacts that this statement will have on Northern Ireland, including saving people from increases in their electricity bills as a result of the exemption from the carbon price floor, lifting 8,000 people out of tax, and an additional £135 million of capital spending. However, given the rocky road that the Chancellor has said lies ahead and given his credibility in the markets, could he not find his way to borrowing more money for infrastructure projects to create jobs, rather than paying to keep people on the dole?

[Mr Osborne]

I welcome the hon. Gentleman’s support for some of the measures we have taken to help the Northern Irish economy, which I am well aware has particular problems in the banking system that require even more attention. I have always sought to respond to the Executive’s proposals where there is a specific case for Northern Ireland, as we did with transatlantic flights, for example. More generally, we are committing additional money to infrastructure, and I want some of that additional infrastructure to be in Northern Ireland. We are also guaranteeing infrastructure projects across the United Kingdom, and £10 billion of projects have pre-qualified for that under the legislation we took through Parliament this autumn. That scheme is available to people and companies in Northern Ireland, and if the Executive want to talk to the Treasury about what more we can do to encourage take-up in Northern Ireland, I would be happy for those conversations to take place.

[Mrs Cheryl Gillan (Chesham and Amersham) (Con)]

I welcome my right hon. Friend’s proposals, particularly the extension of the expenditure envelope for infrastructure plans, but will he personally ensure that our transport policy is fully integrated? At present, the proposals for HS2 completely ignore any plans we might have to expand our airport capacity. There is little point in building or announcing any extension to the railway if it does not connect adequately to our major international hub airport. Will he personally look into this?

[Mr Osborne]

Of course I understand why my right hon. Friend speaks on behalf of her constituents who will be affected by the High Speed 2 development, but I think that it is the right infrastructure for our country, and that it will help to change the economic geography of Britain by connecting some of our northern and midland cities with London. I hope she will acknowledge that we have been generous with some of the compensation as well. She asked specific questions about the extension to Heathrow and the design of the route. My right hon. Friend the Transport Secretary would be better placed to answer them, and in the new year he will have more to say about the route to the north-west and to west Yorkshire.

[Dame Joan Ruddock (Lewisham, Deptford) (Lab)]

Bloomberg New Energy Finance has demonstrated that investment in renewable energy has fallen by a half since this Government came to power. Does the Chancellor not agree that we need to look to the future and to invest in green jobs? To that end, will he stop the veto in the Energy Bill of the 2030 decarbonisation target that has been demanded by 1,500 leading companies in this country and recommended by the Committee on Climate Change?

[Mr Osborne]

This Government have introduced the UK Green Investment Bank, which is now making investments. I have also introduced a carbon price floor, which is recognised around the world as an effective way of ensuring the decarbonisation of our economy in a market-driven way. We have just published the Energy Bill and a levy control framework that would allow for new investment in renewables through the rest of this decade. The industry has that certainty, alongside the gas strategy. On the decarbonisation target, we are going to take a power in the Bill to set a target, but that will be a decision for after the next carbon budget, which will happen in 2016. That is a perfectly sensible and rational approach to take.

[Claire Perry (Devizes) (Con)]

I congratulate the Chancellor on a statement that was fair, transparent, business-friendly and pro-growth, and that confirmed that the deficit is not only not rising but falling in every year of this Parliament. With 19 days to Christmas, which of his family-friendly measures—including scrapping the fuel duty increase, freezing council tax and raising the personal allowance next year—does he think will do most to benefit British families?

[Mr Osborne]

We have had to take some difficult decisions on welfare uprating and on tax threshold uprating, but I have tried to help families where I can with the personal allowance and with fuel duty. I have also tried to help businesses, and the annual investment allowance increase to £250,000 will be extremely welcome.

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

How can the Chancellor seriously pretend that he is cracking down on tax avoidance when the £7 billion he referred to today will take up to seven years to realise, at a rate of about £1 billion a year, against a rate of tax avoidance of £35 billion a year? The general anti-avoidance rule that he mentioned is far too narrowly drawn to be effective and—[Interruption.] I hope that he will listen to this. At the same time, he is introducing a tax cut from 23% to just 5% for multinationals in tax havens.

[Mr Osborne]

I do not think that the right hon. Gentleman has the right figures. We are increasing the amount recovered from taxes that should have been paid from £13 billion under the Labour Government to £20 billion. That £7 billion increase, plus the £2 billion that I have announced today, makes a £9 billion increase in the taxes that should have been collected and that we are now collecting. I hope he will welcome and support that. By the way, we have also got rid of the situation that happened when the current Leader of the Opposition and the shadow Chancellor were in the Treasury, in which people in the City were paying lower tax rates than the people who cleaned for them. We have dealt with that problem.

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

Will the Chancellor note that businesses in the north-east will welcome the announcements that he has made today, including that of the removal of bottlenecks on the A1 south of Newcastle, but that there will be concern that he has not yet announced any progress towards dualling the A1 north of Newcastle, a project that his own party promised in 1992?

[Mr Osborne]

I am glad that my right hon. Friend welcomes the decision to increase the A1 to motorway standard between the M25 and Newcastle. He makes a powerful point about the A1 north of Newcastle, and I can tell him that the Chief Secretary to the Treasury is also a powerful advocate of that road scheme. It is one of the things that the Department for Transport will look at as well, so it is certainly not off the cards. What I have committed to today is the dualling of the A1 up to motorway standard all the way to Newcastle.

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

The Chancellor has re-announced the creation of the business bank and the funding for it, which is welcome in itself. However, there is widespread incomprehension in the business community as to how that will facilitate lending to small and medium-sized enterprises. Will he take this opportunity to explain how the bank will fill in for small businesses in a way that the existing banking structure does not?

[Mr Osborne]

My right hon. Friend the Business Secretary will set out more detail about the business bank. What I have confirmed today is the £1 billion of additional capital. Our ambition is that this will help to lever in private sector capital as well. Through the business finance partnership, which is not included in this £1 billion, we have already undertaken work to get more non-bank financing to medium-sized companies in particular. We are looking at similar models for the business bank, and my right hon. Friend will make an announcement on that. We are also going to use the opportunity to bring together all the myriad schemes announced by various Governments on business finance, finance for SMEs and the like, which are sometimes confusing, so that the business community has just one place to go to. As I have said, I have announced £1 billion extra for the business bank.

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

I thank the Chancellor profusely for ending the appalling delay in the building of the A5-M1 link, the construction of which was first announced by the previous Government in 2003. That road will contribute massively to the south Bedfordshire economy, enabling us to contribute to the regeneration of UK plc.

[Mr Osborne]

I thank my hon. Friend for campaigning assiduously for that project. He has made a strong case for how the new link road will open up the prospect of real economic development as well as dealing with traffic congestion. That is exactly the kind of programme that we can undertake—it did not happen under the last Labour Government—because we have made the switch from current spending to capital spending. Again, I congratulate him on the campaign that he has fought, which I think has involved quite a few Adjournment debates in the House.

[Mr David Lammy (Tottenham) (Lab)]

Given the falling number of nurses in the NHS, does the Chancellor recognise that people will view with scepticism what he has said about protecting the NHS? Will he also acknowledge that passing on a 2% cut to local government will involve cuts to adult social services across the country, affecting the vulnerable, the disabled and the elderly?

[Mr Osborne]

We have provided billions more for social care—[Interruption.] I just want to make this point to Labour Members. They want to be in government, and they claim that they want to cut the deficit, but what would they cut? They object to the local government settlement, the defence settlement, the NHS budget and the education budget, even though the budgets on the NHS and schools are going up, so what exactly would they do? It was evident from the shadow Chancellor’s response today that they do not actually have anything to say on these matters. If they had a credible deficit plan, we would listen to their questions about the priorities for these plans.

[John Stevenson (Carlisle) (Con)]

The investment of £270 million in schools and further education colleges is extremely welcome. If schools and colleges in my constituency have plans on the runway that are ready to take off but just need a little additional financial support, will the Chancellor help them to take the leap?

[Mr Osborne]

I am very happy to look personally at the case that my hon. Friend makes for his local education facilities. These are of course decisions for other Departments, but we have provided the money for further education, for new free schools and academies, and for expanding places, and I am sure that Carlisle should be near the top of the list.

[Steve Reed (Croydon North) (Lab)]

Is the Chancellor aware that, because of his continuing inadequate level of funding for school building, which today’s statement does not correct, London Councils—a cross-party body—is estimating that, by 2016, one in every 10 primary school-aged child will not have a permanent school place?

[Mr Osborne]

I should like to take this opportunity to welcome the hon. Gentleman to the House of Commons and to congratulate him on his by-election victory. He rightly wants to speak on behalf of his constituents, but I would point out that the pressure on London school places has existed for some years and was a huge issue when we came to office. We have provided additional capital spending for new school places. We have also announced more than £1 billion today to deal with areas where there is high pressure. He makes a powerful case for Croydon, and I will make sure that my right hon. Friend the Education Secretary hears him.

[Julian Smith (Skipton and Ripon) (Con)]

More money for the regional growth fund and local enterprise partnerships is great news for Yorkshire. Can the Chancellor give further details of that?

[Mr Osborne]

There will be more money for the regional growth fund. That has been helpful in securing and creating up to half a million new jobs. I am glad to say that I am sure businesses across Yorkshire will benefit from that. We are also, of course, investing in enterprise zones and LEPs across Yorkshire, and Yorkshire businesses will benefit from the enhanced capital allowance and the increase in the annual investment allowance.

[Jack Dromey (Birmingham, Erdington) (Lab)]

Seven Government Get Britain Building launches have proved to be false dawns. Housing starts are down; homelessness is up; we have a mortgage market where people cannot get mortgages and rents are at a record high in the private rented sector. Does the Chancellor now accept that his decision to cut £4 billion-worth of investment was directly responsible for a 60% collapse in affordable house building? Will he now accept personal responsibility as the Chancellor of the Exchequer presiding over the biggest housing crisis in a generation?

[Mr Osborne]

House building was at an all-time low under the Labour Government—the lowest, I think, since the 1920s or 1930s. That is what had happened. Of course, things such as problems in the mortgage market were created by the banking crisis and the financial crisis. The banking crisis happened, by the way, when the right hon. Member for Morley and Outwood (Ed Balls) was the City Minister. The funding for lending scheme is bringing mortgage costs down. The Firstbuy scheme helps with shared equity, and the new buy scheme is helping people who cannot afford their first deposit, so we have those schemes out there, helping to repair problems in the financial markets. We are also committing money for additional affordable homes and we are providing guarantees to social landlords to build not just social homes, but homes for the private rented sector. We are dealing with the problems that occurred when the hon. Gentleman’s party was in office.

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

I congratulate my right hon. Friend on his statement, and I would particularly like to welcome the fund that will allow good schools to expand. Can he tell us when that might be in place, as the need is more pressing in some areas than in others, particularly around Basildon, where I would like to see the Lee Chapel primary school expand rapidly?

[Mr Osborne]

My hon. Friend makes a powerful case for Basildon, its schools and the particular school he mentioned. I will make sure that the Education Secretary hears the argument he makes. The money is available over the next two years.

[Gemma Doyle (West Dunbartonshire) (Lab/Co-op)]

What will the Chancellor do to make sure that any Scottish Barnett consequentials from capital projects will be used to create jobs in Scotland, and not in China, which is what we saw the Scottish Government doing in awarding the contract for the Forth road bridge?

[Mr Osborne]

There will be additional capital spending. We have a devolved arrangement so it will be up to the Scottish Government and the Scottish Parliament to make a decision about how that money is spent. Of course, I expect Scottish Members here and Labour, Conservative and Liberal Democrat Members of the Scottish Parliament to hold the Scottish National party to account for the decisions it takes. More broadly, its independence programme would be a disaster for the Scottish economy.

[George Freeman (Mid Norfolk) (Con)]

Families and businesses in my constituency will welcome the news that £76 billion-worth of reductions in the cost of government, £18 billion-worth of reductions in welfare and £33 billion-worth of savings in interest payments have allowed a Conservative Chancellor to lower taxes for the poorest and create a million new jobs. Does my right hon. Friend agree with me that plan B is nothing more than a plan for borrowing and bankruptcy?

[Mr Osborne]

I am not sure that I can add much to that, except to say that I completely agree with my hon. Friend.

[Mr Ronnie Campbell (Blyth Valley) (Lab)]

I have heard mention of at least a dozen Tory MPs in marginal seats getting a lot of money, but I have not heard much about the north-east getting money. I hope the Chancellor will not come and give us what he gave us last year, when he said that the port of Blyth was going to get an enterprise zone. We have 14 hectares. We have put a fence around it and made it into an allotment garden.

[Mr Osborne]

I congratulate the hon. Gentleman on his assiduous campaign for an enterprise zone in the port of Blyth. That enterprise zone is going ahead. As a Conservative Chancellor, may I also congratulate him on his campaign, along with many other hon. Members, for the dualling of the A1 all the way to Newcastle? Since I know that Blyth is north of Newcastle, I point out that, as I said to my right hon. Friend the Member for Berwick-upon-Tweed (Sir Alan Beith), we are looking at further dualling to the Scottish border, but that is for another time.

[Gordon Birtwistle (Burnley) (LD)]

I congratulate the Chancellor on his decision on capital allowances, which I think will be a major boost for industry. Over the next 20 years, the aerospace industry across the world will invest between $6 trillion and $7 trillion on new aeroplanes. This country is the second biggest aerospace provider in the world, and this is twice the capacity we have now. Does the Chancellor agree that we must continue to invest in advanced manufacturing, particularly in aerospace, and that we should carry on trying to get young people involved?

[Mr Osborne]

I completely agree with my hon. Friend. I congratulate him on the work he has done to make the case for capital allowances to help small and medium-sized businesses in Lancashire and in his Burnley constituency. He wrote a report, which I thought was compelling, and he put in the work of listening to his local manufacturers. He is completely right about manufacturing. I have been to some very high-tech manufacturing businesses in north Lancashire, which make components for some of the most up-to-date jet engines in the world. We are investing more money in the aerospace supply chain, and as I announced today, we are investing more in the advanced manufacturing supply chain. With the help of my right hon. Friend the Business Secretary, we are determined to make sure that Britain’s premier place in aerospace is maintained.

[Ian Austin (Dudley North) (Lab)]

If we look at the small print, we see that the only reason why borrowing has fallen this year is that the Government have added in the proceeds of the 4G mobile spectrum auction into this year’s figures, even though Government delays have meant that the auction has not yet taken place. If those figures were not added in for this year and we did not have this £3.5 billion pencilled in for the receipt from that, borrowing would be £2 billion higher this year than it was last year. Is that not the case?

[Mr Osborne]

The deficit and borrowing are falling any way the public figures are presented. We have done this in a completely transparent way. As I was explaining to the shadow Chancellor, the 4G money has been used to refurbish, for example, the further education college in Morley.

[Jane Ellison (Battersea) (Con)]

I warmly welcome the announcement of the Government’s support for the Northern line extension in the important Nine Elms-Vauxhall development. Does he agree that it is not just the 16,000 new homes and 25,000 new jobs that are important, but the message that such a high-profile scheme sends out to the world beyond the UK—that Britain and London are open for business—is also crucial?

[Mr Osborne]

The Battersea power plant development is, as I said in my statement, as big as the Olympic park—it is an enormous project, and I am very pleased that we have our Malaysian partners investing in the site. We have done our bit by providing this loan and this guarantee that will help to pay for the Northern line extension into Battersea power station. I commend my hon. Friend—I have been to the site with her—and I know what an enormous boost this will be, not just for her constituents but for the whole of London and, indeed, Britain.

[Mark Durkan (Foyle) (SDLP)]

Of course I welcome the Chancellor’s confirmation of ultra-fast broadband for Digital Derry, and the announcements on the carbon price floor and the fuel duty, but I am afraid that on personal taxation and benefits, the Chancellor is becoming something of a fiscal drag artist.

On another tax front, I welcome the fact that he has cut through all the Treasury excusery against the general anti-abuse rule, but surely it needs to be more robust. If it is going to be a meaningful priority of the G8 presidency to co-ordinate members against corporate tax conjuring, the Chancellor surely has to start by revisiting the controlled foreign company rules that he made in the last Budget.

[Mr Osborne]

First, I thank the hon. Gentleman for his support of our decision to provide ultra-fast broadband to Derry/Londonderry, and I congratulate the city on a very good bid, which competed against other bids across the UK. He is also right to say that we are helping the Northern Ireland energy sector with decisions on the carbon price floor, which I did not have space in my statement to announce, but they are in the book. I am glad that he acknowledges those aspects. More broadly, Northern Ireland and the rest of the UK will benefit when we help people who work hard and want to get on with the personal allowance and when we help small businesses and motorists with the fuel duty. We are doing all these things and are making sure that they apply to Northern Ireland as well.

[Mr Brooks Newmark (Braintree) (Con)]

Given that income tax has been cut for 25 million people, the income tax of people on the minimum wage has been cut in half and up to 2 million people have been taken out of tax altogether, does my right hon. Friend agree that our Government, and indeed our party, are on the side of ordinary working men and women?

[Mr Osborne]

I entirely agree with my hon. Friend. We have made difficult decisions on welfare uprating—we have asked the rich to pay more—but, as I have said, we have done that not only to help to deal with the deficit, but to help people who work hard and want to get on. That is precisely what we have done today

[Helen Goodman (Bishop Auckland) (Lab)]

Further to the answer that the Chancellor gave my right hon. Friend the Member for Morley and Outwood (Ed Balls), will he admit that in 2010 he cut public spending in the north-east by £2.8 billion, that last year he gave us 0.03% of the capital spend, and that this year he gave us 3%? Far from being fair, does that not mark a transfer of resources from the north to the south?

[Mr Osborne]

Under this Government, the level of capital spending is higher than the level in the plans that we inherited from the last Labour Government—which the hon. Lady supported at the time of the last Labour Budget—and, indeed, we have added to it today. Under this Government, the level of public investment as a proportion of GDP is higher than the average level under the Labour Government. As for investment in the north, there is the investment in the A1, the investment in High Speed 2, and the investment in the northern rail hub. There is a whole load of investment in the transport infrastructure of the north and the north-east because we are helping this country, which suffered so much under the Labour Government, when the gap between the north and the south grew.

[Bob Blackman (Harrow East) (Con)]

I congratulate my right hon. Friend on announcing the abolition of Labour’s expensive private finance initiative schemes, but may I ask him what the impact will be on schemes on which we have already agreed and which are awaiting approval, such as the one involving a replacement for the Royal National Orthopaedic hospital in my constituency?

[Mr Osborne]

We do not intend to disrupt existing PFI schemes—although, sadly, there are not many left, because so many dried up at the very end of the last Labour Government’s time in office owing to financing problems—and the new PFI 2 will help to restart private and public investment. The big difference is that from now on, instead of the public sector bearing the risk and getting none of the reward—as has happened, for example, in the case of a hospital project not in my hon. Friend’s part of London but in south-east London—it will share in the upside as well.

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

Can the Chancellor confirm that the capital spending that he has announced for free schools amounts to less than a third of the cuts in the capital budgets for schools and colleges?

[Mr Osborne]

Capital spending is higher than the level in the plans that we inherited from the last Labour Government. That is simply the case. We inherited big planned cuts in capital spending, and we have increased capital spending, off those plans. We have that new money for schools, and I would hope that the hon. Lady would welcome that.

[Gavin Williamson (South Staffordshire) (Con)]

Can my right hon. Friend confirm that someone earning £10,000 who would have paid £1,180 in national insurance contributions and income tax in 2010-11 will pay £380 in 2013-14? Does that not show that Government Members support people and families on low incomes, unlike the Labour party?

[Mr Osborne]

My hon. Friend speaks very powerfully about the way in which we have helped people. We have helped basic rate taxpayers by increasing the personal allowance, we have taken 2 million of the lowest paid out of work, and we have halved the income tax bill for people on the minimum wage; but, above all, we have helped working families throughout the country with a further income tax cut today.

[Caroline Lucas (Brighton, Pavilion) (Green)]

One glimmer of good news was the announcement of ultra-fast broadband for Brighton, and I thank the Chancellor for that, but there is plenty of bad news about the dash for gas. Not only will it bust our climate targets, but it simply is not cheap. Deutsche Bank, the CBI and the International Energy Agency all say that gas prices will rise. This is the Government who say that they like to make evidence-based policy, so why will the Chancellor not look at the evidence in this instance?

[Mr Osborne]

I am glad that the hon. Lady welcomes the announcement of ultra-fast broadband for Brighton and Hove. As for energy, we are increasing investment in renewable energy. We have set a levy control framework for the period up to 2020, which is a longer time frame than has been set by any Government before us, and that will increase the investment in renewable energy that the hon. Lady wants to see. However, I also think that it is fair for Britain to have a mix of energy sources, and for gas to be part of that. Gas is lower in carbon than the coal-fired generation that is being phased out. We want a proper mix, and we want to do what we can to keep bills down while at the same time allowing investment in new energy infrastructure.

[David Rutley (Macclesfield) (Con)]

It is often said that when a challenge must be faced, two Eds are better than one. Does the Chancellor believe that that applies to economic policy?

[Mr Osborne]

I am not sure that they will be such close friends today after the shadow Chancellor’s response to my statement. However, we do not need to guess what the economic policy of the Leader of the Opposition and the shadow Chancellor might be, because we have lived through it. They caused the biggest boom and the biggest bust in our history, despite advising the then Chancellor at the time to say that he would abolish boom and bust.

[Kevin Brennan (Cardiff West) (Lab)]

In the interests of transparency, will the Chancellor confirm that the only reason he was able to say in his statement that borrowing would be less this year was the inclusion of the proceeds from the 4G sale, which has not actually happened yet?

[Mr Osborne]

As I have said, we have set out the public finance numbers applying to all the different scenarios, and, as I have said, we are spending the 4G money on, for example, the further education college in Morley. We are also using it to increase the annual investment allowance from the beginning of January.

[Stephen Gilbert (St Austell and Newquay) (LD)]

Hundreds of thousands of firemen, police officers, nurses and council workers throughout the country will be very pleased to learn that my right hon. Friend has ruled out the introduction of regional pay, but teachers may have some concerns. Can my right hon. Friend assure us that none of them will lose out in respect of any move towards greater incentivisation in the profession?

[Mr Osborne]

We asked the pay review bodies to make reports, and we have adopted their recommendations. My right hon. Friend the Secretary of State for Education will set out more details of the way in which we will implement the recommendations of the teachers’ pay review body, but it does include the uprating of the minimum and maximum bands in line with general public pay policy.

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

The announcement of additional investment in transport is very welcome, but can the Chancellor assure us that it really is additional spending, and that it will not be paid for by the postponing of existing programmes now that the size of the Department for Transport has been so drastically reduced?

[Mr Osborne]

I can confirm that it is additional capital spending, and that it is not a substitute for any other capital spending on transport. Moreover—I did not mention this in my statement, but it is in the document—we are providing money for road schemes that are in the pipeline, to ensure that the development of new road schemes is not squeezed out by the capital that we are giving to existing ones.

[Mr Philip Hollobone (Kettering) (Con)]

Can my right hon. Friend confirm that since he became Chancellor of the Exchequer, he has abolished Labour’s fuel duty escalator, cut the rate of fuel duty and frozen it at the new levels? As a result, from January the typical motorist in Kettering and throughout the country will pay £5 less every time he fills up at the pump.

[Mr Osborne]

I suppose we are used to opportunism from the Opposition, but we see no greater opportunism from them than that relating to fuel duty. The fuel duty rises that we have cancelled were not part of some mythical plan; they were voted for by Labour Members of Parliament at the time of the last Labour Budget—including, of course, by the shadow Chancellor. My hon. Friend is absolutely right: fuel is 10p per litre cheaper than it would have been if we had adopted the shadow Chancellor’s Budget plans.

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

Let me return the House to an answer that the Chancellor gave about PFI. He slipped the new PFI 2 scheme into his statement today, but is it not being criticised on the grounds that it is not good value for money—that value for money will, indeed, fall—that it will cost the taxpayer more, and that most of the projects will still be off the Government’s balance sheet? What has changed?

[Mr Osborne]

I do not accept that characterisation at all. I talked about this matter in the statement, and, of course, I expect people to look in detail at the document we have published. There are two substantial changes. First, there will be public sector investment alongside private investment. The public sector will have a share in the equity and will have representation on the boards of these projects to make sure both that we share in the upside and that we know what is going on with these projects, instead of the absolute scandal that we saw under the last Government when on many occasions the public sector was ripped off. The hospitals in south-east London are living with the consequences of that.

Secondly, there will be more on balance sheet in future, but there will also be off balance sheet, and we are going to have new off balance sheet totals and controlled totals so that there is more transparency. I will say more in the Budget about how we are going to account for off balance sheet.

[Several hon. Members]

rose—

[Mr Speaker]

Order. The statement covers matters that are already the subject of much public interest and comment, so I am keen to accommodate as many colleagues as possible. If I am to do so within any reasonable time frame, however, some pithiness from Back and Front Benches alike is required, and I am sure we will be led in our mission by Mr Andrew Bridgen.

[Andrew Bridgen (North West Leicestershire) (Con)]

Does my right hon. Friend agree that the Opposition’s plans for £200 billion of extra spending, extra borrowing and extra debt would damage this country’s economic credibility, and ultimately lead to interest rates rising for families and businesses in my constituency and across the whole country?

[Mr Osborne]

My hon. Friend is absolutely right. That is precisely what the Labour party offers: more borrowing, more debt, and a return to the mess it left this country in. People are not going to trust Labour with the public finances again, and they are particularly not going to trust the shadow Chancellor again.

[Ian Lavery (Wansbeck) (Lab)]

In my constituency, 15.9% of young people aged between 18 and 24 are unemployed. That is twice the national average. What is in the autumn statement for them?

[Mr Osborne]

First, of course any young person who cannot get a job is a matter of regret, but youth unemployment has fallen this year. Our welfare to work schemes are helping to get people back to work, and our work experience scheme in particular is doing a great job of getting people into work, so I would ask those young people to go to their jobcentre and see the schemes that are available. As I have said, 1.2 million jobs have been created in the private sector over the past couple of years, in what are very difficult circumstances. I hope that, with the measures we announced today, business will be able to create some more jobs.

[Robert Halfon (Harlow) (Con)]

On behalf of my colleagues and FairFuelUK, I thank my right hon. Friend for putting fuel back into the fuel tanks of white-van Conservatives across the country. Can he confirm that the scrapping of the 3p petrol rise not only for three months, but permanently, as he has said today, will mean the average Harlow motorist will be better off by £80 to £100 next year?

[Mr Osborne]

As I said in my statement, I congratulate my hon. Friend on speaking for motorists and families across the country against Labour’s fuel tax rises. He speaks for Harlow man and woman, and I am glad that, as a result of his campaigning and the difficult decisions we have taken elsewhere to control public spending, we have been able to cancel altogether that fuel duty rise due for January.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

When the Chancellor describes those on benefits as people who sleep while others work, he does himself no credit whatever. Of course the cheats have to be dealt with, but most of these people are decent people—pensioners and parents who are struggling to make ends meet. Given that they already face cuts to their benefits and public services, how can it be right that they are now to have a real-terms cut to their poverty-level incomes while millionaires keep their handouts?

[Mr Osborne]

Out-of-work benefits have increased by 20% over the last five years, while average earnings in the public and private sectors have gone up by 10%. We have to make difficult decisions, and I think it is a fair decision to uprate working age benefits by 1%. We are also uprating the higher-rate tax threshold by 1%. This is a fair decision. If the right hon. Gentleman can recommend other ways of taking substantial sums out of the Government’s bill, let him come forward with them—and I still have not heard from a single Labour MP whether they will be voting for or against the welfare uprating Bill.

[Mr Peter Bone (Wellingborough) (Con)]

One way the Chancellor could produce a lot of money at no expense to the British economy is, of course, by not going ahead with overseas aid at 0.7% of gross national income. How much additional borrowing will be required to meet that commitment?

[Mr Osborne]

My hon. Friend and I have a genuine disagreement on this matter. I think it is right for this country to honour its obligations to the world’s poorest. I think we should be proud to be a part of, and support, what will be the first Government in British history to reach the 0.7% target. I have had to rebase the aid budget because of the GDP forecast, as I do not want to spend more than 0.7% of national income. As a result, the Department for International Development has had one of the biggest adjustments to its budget of all Departments.

[Roberta Blackman-Woods (City of Durham) (Lab)]

Last year the Chancellor announced more money for infrastructure, but, as we know, not one single project has been delivered. Why should we believe the additional funding announced today will be any more productive?

[Mr Osborne]

That claim is simply not true. Road projects are being completed across the country and infrastructure is being deployed. The science infrastructure, for example, has now all been completed, and I have announced £600 million more for science. If the hon. Lady is saying that it takes a long time to get some infrastructure projects going because of the constraints in the planning system, however, she is right. That is why we have also taken steps to streamline the process we inherited so it is easier to get things built by tackling the bureaucracy that has to be dealt with, while at the same time allowing those who have objections to have them fairly heard.

[Mark Menzies (Fylde) (Con)]

I am pleased the Chancellor has today announced that there will be a shale gas regulator office. Can he assure me that its work will be transparent and will lead to my constituents getting the assurances they need that this important process will be safe?

[Mr Osborne]

First, let me say that I completely understand why my hon. Friend wants to make sure, on behalf of his constituents in Lancashire, that any development of shale gas or unconventional gas that is undertaken is environmentally safe and safe for local communities. We are absolutely determined to ensure that that is the case. That is why we stopped the exploration that was taking place until we were sure that it was safe, and a decision on that is still pending from the Energy Secretary. As has been demonstrated in the United States, however, local communities often benefit from the jobs and investment shale gas projects bring. My hon. Friend is right that this new single office must make sure that regulation is straightforward and simple while also being rigorous so that local communities are protected.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

The north-east is the only UK region with an export surplus, which shows that where there is demand, we rise to the challenge, but it is also the region with the highest unemployment rate, so why is the Chancellor attacking the unemployed as workshy scroungers living a life on benefits and doing nothing to get demand and jobs back in the economy?

[Mr Osborne]

I have never used that language at all. What I have said is that we have got to make savings in the benefits bill and, in my view, it is very important that we have fairness in our society. One element of fairness is that people on out-of-work benefits should not be earning more on average than the family that goes to work, which is why we have introduced the benefits cap. I could not quite understand what the shadow Chancellor was saying about Labour’s position on the benefits cap. He certainly led all Labour Members through the Division Lobby time and again against the benefits cap, but I think they will want to check exactly what he said in reply to my statement.

[Steve Baker (Wycombe) (Con)]

This morning City A.M. reported that just 6% of the public appreciate that this Government have been forced to put up the national debt. Will my right hon. Friend confirm that the deficit is coming down, and will he take steps to ensure that discussion in the media is based on the facts, not the incoherence and cruel fairy tales of the Labour party?

[Mr Osborne]

I will certainly work with my hon. Friend and publications such as City A. M. to make sure that happens. The deficit is how much is added to the debt each year, and we are getting the deficit down. We inherited the highest budget deficit in the world, and we have been able to reduce it by 25%.

[Yvonne Fovargue (Makerfield) (Lab)]

The Treasury will benefit by £1.1 billion per annum from the high earners’ pension pot cut and by £3.7 billion per annum from benefit claimants. Is this not just an inconvenience for the rich but a catastrophe for the poor?

[Mr Osborne]

As I say, we have had to make difficult decisions. Are Labour Members against the uprating of welfare benefits by 1%? We will find out when the Bill is before Parliament—at the moment, they are not telling us how they would vote on that measure. We have had to make difficult decisions, but let me repeat what I have said at this Dispatch Box: the rich are paying more as a share of our income tax in every single year of this Government than they did in any one year of the 13 years of the Labour Government. The pensions tax measure is a difficult measure, but we felt it was necessary to take it. We have also increased the amount of money we are getting from dealing with tax avoidance and we have taken decisions such as putting stamp duty up to 7%. We have done all those things, not one of which was done by the Labour party.

[Christopher Pincher (Tamworth) (Con)]

Half a dozen European Ministers, from within the eurozone and outside it, have stated in terms that they do not believe that growth should be used as a pretext for running up more and more debt. Does my right hon. Friend agree that those Ministers show a degree of foresight and common sense that is sadly lacking in the shadow Chancellor?

[Mr Osborne]

That powerful point was made by the Finance Ministers of not only Germany and Sweden but some of the Baltic states. One of the tragedies of British economic management under the last Government is that we went into the crisis with a huge structural deficit. The International Monetary Fund has now assessed that Britain carried the largest structural deficit of any major western economy going into the banking crash, yet extraordinarily the shadow Chancellor goes around saying that there was no structural deficit. If we had managed our public finances like Germany, for example, we would be in better shape.

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

The Treasury-sponsored Silk commission recently recommended the devolution of minor taxes to the Welsh Government and a tax-sharing arrangement for income tax, partially to incentivise the Welsh Government to develop the Welsh economy. When will the Treasury publish a timetable for implementation, as well as the bilateral agreement on borrowing powers?

[Mr Osborne]

We welcome the work that the Silk commission has done. It asks some big questions about the devolution of fiscal powers to Wales. The Treasury and the Wales Office here in London are sitting down with the Welsh Assembly Government to work through the details of the proposals. I hope that the hon. Gentleman understands and accepts that we have taken a big step forward with the Silk commission and now have a text we can work on. How much we can implement will, of course, be a matter for democratic decisions in this House and in the Welsh Assembly in Cardiff.

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

Businesses across south Essex will welcome the commitment that my right hon. Friend has made to improving the road infrastructure around the M25, which is its biggest constraint on growth and job creation. That illustrates the Government’s real commitment to creating more jobs in this vibrant sector. Does he agree that the Exchequer will benefit hugely from the increased tax receipts that will be generated by those increases in jobs and growth?

[Mr Osborne]

I congratulate my hon. Friend on the campaign she has fought on behalf of her constituents, and on behalf of jobs in Thurrock and elsewhere. The junction 30 upgrade will help to secure the largest port investment in the whole of northern Europe—it is a fantastic thing for the area, it will create many jobs and she has played a real part in helping to deliver it.

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

With the average wage 7.9% lower in real terms than it was when this Chancellor took office, does he not share the sense of real disappointment across the country that he did not announce any new measures on child care, the cost of which is rising at twice the rate of inflation? Does that not constitute a significant barrier to work for as many as 1 million women and mean that for many households work does not pay?

[Mr Osborne]

We have announced new entitlements on child care, such as the entitlement for two-year-olds from more disadvantaged families to nursery places, which did not exist under the previous Government. We are also working on new proposals on child care, and I hope in the first half of next year to bring those forward.

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

May I warmly welcome my right hon. Friend’s announcement on personal allowances and say how proud I am to be part of a Government who have halved the income tax on the lowest earners in our society? Which does he think represents the true one nation politician: those who in difficult times have halved the income tax on the lowest earners or those who during the boom times doubled it?

[Mr Osborne]

I suspect Benjamin Disraeli was considerably better at the Dispatch Box than the shadow Chancellor, too. My hon. Friend is absolutely right to say that we have taken decisions to help the working poor, through taking them out of income tax and through the personal allowance increase for 24 million people. Whether Conservative or Liberal Democrat in this Government, we can be absolutely proud of the decision we have taken on the personal allowance in these very difficult times.

[Andy Sawford (Corby) (Lab/Co-op)]

Did the Chancellor hear the very loud message coming from the people of Corby and east Northamptonshire that they believe his economic policies are failing? Does he recognise that they will have heard his statement today and believed it to be complacent and wrong? Can he specifically confirm for the people of Corby and east Northamptonshire the real picture on borrowing? If we take out the £3.5 billion that is counted in for the 4G auction, borrowing will actually be higher this year than last. Will he give us the real cash figures?

[Mr Osborne]

First, may I congratulate the hon. Gentleman on his election in Corby? We were talking earlier about construction projects that had not been started. I saw for myself on an enjoyable visit to Corby, which was ultimately unsuccessful in terms of the by-election, the Corby link road which is being built—I hope he would welcome it. As I say, we have set out the public finance numbers, and we have taken the decision to use the spectrum money to help with further education and to fund the annual investment allowance, which starts in January next year—in this financial year.

[Charlie Elphicke (Dover) (Con)]

What action is my right hon. Friend taking to close the tax gap and enable British business to complete on a level tax playing field, after the serious failure to modernise or enforce our business tax system over the past decade by the previous Labour Government?

[Mr Osborne]

My hon. Friend has been a powerful advocate for a more competitive business tax system in this country, and we have reduced again the headline rate of corporation tax. That makes it even more of an advantage for companies to headquarter and pay their taxes here, and it is part of what we are doing to win the global race. I congratulate him on the advice and support he gives in this area.

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

It is good to hear a UK Chancellor say that the private finance initiative is discredited—10 to 15 years after the Scottish National party did so. It is good, too, to hear of his belated conversion to some capital expenditure for shovel-ready projects—we wasted a couple of years by not listening to the SNP. We have had lost years of ever-growing debt paying for failure rather than growth, and that is projected to last until 2018. I wonder whether the Chancellor will introduce some competition to his job and perhaps return economic powers to Scotland, so that the Scottish Government can show him how it is done and get us out of the mess a little quicker.

[Mr Osborne]

The steps we have taken today, for example, to provide additional capital spending in Scotland, show the strengths of Scotland’s being part of a United Kingdom that is able to borrow money on world markets at exceptionally low rates. The SNP has still not answered the most basic questions about currency, about monetary policy management, and about the cost of debt and the like. Until the SNP can answer those fundamental questions about economic management, I do not think anyone is going to trust it with taking over control of that entire economic management through independence.

[Dr Julian Huppert (Cambridge) (LD)]

One thing I was delighted not to hear in the statement was the Prime Minister’s bizarre idea of scrapping housing benefits for the under-25s. Will the Chancellor tell the House whether it was omitted because he now realises that it would have been a mistake, that not all young people have loving, stable families to live with, and that they need and deserve our support—or was it just that we in the Liberal Democrats would not let him do it?

[Mr Osborne]

I think that is a slightly sour note from my Liberal Democrat colleagues. We have put together an autumn statement as a coalition Government and we have supported the priorities we both share, which include the personal allowance increase, dealing with fuel duty and investment allowances for businesses. We have collectively taken the difficult decision on welfare uprating; it is the best way, at present, to try to make savings in the welfare bill.

[Gloria De Piero (Ashfield) (Lab)]

The regional growth fund has not delivered a penny to Ashfield, and local business leaders across the east midlands are saying that the scheme just is not working. So what changes will the Chancellor make to ensure that my constituents benefit from the regional growth fund?

[Mr Osborne]

I am very happy to look into the specific situation for businesses in Ashfield if the hon. Lady wants to write to me—or we can meet and I will see what I can do to help. Businesses in Ashfield and elsewhere across the east midlands are eligible for the regional growth fund. We have put more money into the fund and made substantial transport improvements in the east and west midlands, which I hope will also benefit businesses in her constituency.

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

I warmly welcome the Chancellor’s statement and pay particular tribute to the increase in the pension draw-down limit and the increase in the ISA allowance. Will the Chancellor tell the House when he expects them to be implemented?

[Mr Osborne]

The ISA uprating takes place as normal. The draw-down limit will be in the Finance Bill, which we will introduce next week.

[Lucy Powell (Manchester Central) (Lab/Co-op)]

Is this Chancellor not presiding over a series of false economies? There is a long list, but let me draw his attention to one of them. Recent analysis has shown that the level of his draconian and unfair cuts to Manchester’s local government budget is the same as the increase to the benefits bill in Manchester since the election. Would it not be better if he invested in our future rather than us all paying the price for his failure?

[Mr Osborne]

I welcome the hon. Lady to the House of Commons and congratulate her on her by-election victory—[Interruption.] I did not find time to visit Manchester Central during the by-election. We are providing a great deal of investment in Manchester. We have the new enterprise zone and we are working with Manchester city council on the northern hub, which will have an enormous impact—in a good sense—on Manchester. We have listened to and worked with the local authority on that. As someone who represents many of the people who go to work in her constituency, I think that over the past couple of years, in working with the local authorities, we have done a great deal to improve Manchester’s prospects.

[Mark Pawsey (Rugby) (Con)]

The Chancellor has set out clearly how, in order to avoid the next generation having to pay for this generation, the Government are entirely right to continue to get the deficit down. May I welcome his support for wealth-creating private business and particularly the relief on business rates for new commercial property, which will both stimulate the construction sector and improve the availability of premises for growing businesses?

[Mr Osborne]

In my statement, I had to choose just a couple of hon. Members who have brought that issue to my attention, but I should put it on record that my hon. Friend was one of those who came to see me to campaign for action on empty property rate relief to mitigate the damage that it has done to some of our cities and towns since its introduction by the previous Labour Government. The 18-month grace period will help the construction of new commercial premises, and I congratulate him on the work he has done on behalf of his constituents to bring that about.

[Toby Perkins (Chesterfield) (Lab)]

The Chancellor has taken on a ghastly, ghostly, deathly pallor that suggests he knows that he has been rumbled. The money from the 4G mobile auction has not come in yet. When it comes in, he can spend it on whatever he likes, but he cannot offset it against borrowing before it has come in. Why does he not come clean and admit that borrowing has gone up and the rest of it is just a con?

[Mr Osborne]

I think we have roughly the same pallor, from looking at the hon. Gentleman. We have been completely transparent. We have published the OBR forecasts. They are independent and people will look at them and draw their own conclusion, which is that under Labour borrowing went up and up whereas under this Government the deficit has come down.

[Mr Robin Walker (Worcester) (Con)]

The claimant count in Worcester today is 500 lower than it was in 2010, when the city had a Labour MP, and youth unemployment is 150 lower. In that context, may I welcome the Chancellor’s early response to the Heseltine review? Extra money for LEPs, the regional growth fund, the increase in capital allowance and investment in infrastructure should mean that that good progress can continue.

[Mr Osborne]

I am delighted that there has been that good news in my hon. Friend’s constituency and I hope that with the new investment allowance for businesses in his area there will be more jobs. He is right to say that the Heseltine review also asks big questions of us as a Parliament about how we spend money locally and whether we should create a single pot for which LEPs could make bids. I have announced that we want to proceed in that direction and we will have much more to say about it when we have our spending review.

[Ann McKechin (Glasgow North) (Lab)]

One in 10 people of working age in Scotland is underemployed. Does the Chancellor consider that that figure will increase or decrease in the next three years?

[Mr Osborne]

Of course our ambition is for employment to increase. That is why we have made further changes to make our businesses more competitive, to help working people and to create a welfare system that encourages those who are in work. I hope she will support that.

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

I congratulate the Chancellor on the good news in his statement for micro-businesses and particularly on what he has done with fuel duty and extending the small business rate tax relief. That is wonderful, but I have a particular concern about rural communities. In the detail, has he considered any further rural rebate for fuel duty in addition to the freeze he has already introduced?

[Mr Osborne]

I am not sure that this is necessarily the answer my hon. Friend wants, but unfortunately the European Union constrains the rural fuel rebates we can give to very remote island areas. That is why we have been able to introduce rebates in some of the Scottish islands and in the Isles of Scilly, but not in more remote parts of rural England, Scotland, Wales and Northern Ireland. We are pressing the Commission to see whether we can extend the definition of remote rural areas so that remote parts of the south-west, for example, can benefit.

[Richard Burden (Birmingham, Northfield) (Lab)]

In the interests of transparency when considering available public finances in the west midlands, is the Chancellor aware of the recent BBC investigation into the fate of £107 billion of assets of the former Advantage West Midlands? I know that he was not a fan of regional development agencies, but does he agree that that money should be available to people in the west midlands and that local taxpayers should not be forced to buy those assets twice? Will he insist on transparency to help west midlands MPs try to get to the bottom of what has gone on?

[Mr Osborne]

I hear what the hon. Gentleman says and I am happy to respond in writing on his specific point about Advantage West Midlands. I will get back to him with the details.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

The average weekly gross pay in my constituency is £490, which is less than the UK average. The huge increase in personal allowance benefits my constituents significantly as well as people across the country, so may I congratulate my right hon. Friend on his work to take so many people out of tax and urge him to continue his efforts to make work pay?

[Mr Osborne]

I will certainly continue those efforts to ensure that work pays and that we have a welfare system that encourages work, in which it always pays to work and in which working people in Harrogate, Knaresborough and elsewhere are rewarded for being in work. The personal allowance increase and the cut in fuel duty plans will help the people my hon. Friend so ably represents in this Parliament.

[Lilian Greenwood (Nottingham South) (Lab)]

In cutting the income tax of those earning more than £1 million a year while cutting the incomes of those people in my constituency who do the right thing by getting up and going out everyday to try to find a job, is the Chancellor not protecting the richest and asking the most vulnerable to pay the most?

[Mr Osborne]

The richest have paid more income tax in every single year under this Government than in any one of the 13 years for which there was a Labour Government and the shadow Chancellor was the country’s chief economic adviser. If the hon. Lady has a problem with the reduction in the 50p rate to a 45p rate, perhaps she can tell me—her colleagues on the Front Bench certainly will not—whether Labour would reverse that policy if it won the next election.

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

I welcome the Chancellor’s announcement on capital spending, particularly the new PF2—private finance 2—scheme he announced today. Does he agree that that scheme would be ideal for the new hospital in Sandwell, which has been identified by the Treasury today as a priority project for that scheme and will greatly benefit people in Sandwell and across the black country?

[Mr Osborne]

We have identified the hospital in Sandwell as a prime candidate for the new PF2. I know that it will help improve facilities for the many people my hon. Friend represents. It is a very good project and I hope that we will be able to proceed with it.

[Julie Hilling (Bolton West) (Lab)]

The Chancellor did not mention the other banks he has created—food banks. Is he not deeply ashamed that under his policies working people are dependent on food handouts to feed themselves and their families?

[Mr Osborne]

As I have said, we have increased the personal allowance to increase the income going to working families. Of course, these are difficult economic times. We are having to take difficult decisions but they are decisions that support those who want to work hard and get on.

[Graham Evans (Weaver Vale) (Con)]

Hard-working strivers in Weaver Vale will welcome my right hon. Friend’s announcement that their personal tax allowance will increase to £9,440. Can he remind the House of the 10p tax fiasco that hit the poorest hardest? Does he agree that it is those on the Government Benches who always make it pay to work?

[Mr Osborne]

My hon. Friend puts it extremely powerfully on behalf of his Cheshire constituents. We remember the income tax decisions of the previous Government—the abolition of the 10p tax rate that hit the poorest. For 13 years, as I said, the rich were paying less in income tax than they are paying in any one year of this Government.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

May I take the Chancellor back to his statement in 2010, when he said that he wanted to see the richest paying most and the vulnerable protected? To press the point raised by many of my hon. Friends, why is he persisting with the tax cut for millionaires when thousands of people across Wales are increasingly relying on food banks, such as the one I visited this weekend?

[Mr Osborne]

We have had to take difficult decisions. We have asked the rich to pay more—new stamp duty rates. We have had to take difficult decisions today on pensions tax relief for the largest pension pots. We have done all those things. We have also had to take difficult decisions on welfare. If the hon. Gentleman objects to those things, perhaps he can tell us whether he will vote against the welfare uprating Bill.

[Mr Marcus Jones (Nuneaton) (Con)]

In Nuneaton since May 2010 unemployment is down, youth unemployment is down, employment is up and we have seen a 22% increase in business start-ups in the past quarter alone. Does my right hon. Friend agree that we cannot be complacent and we need to do more, but that the autumn statement today will show that we are on the right track?

[Mr Osborne]

My hon. Friend is right that we are on the right track. We are making progress. To turn back would be a complete disaster. I congratulate him on speaking on behalf of the businesses that he represents. He has asked me what we can do on capital allowances for plant and machinery and on business rates for small businesses. I hope he can see in the announcements that we made today that we have been listening to him and to the people in his constituency.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Can the Chancellor confirm not only that growth has been downgraded yet again and the welfare bill is rising, but that child poverty and the number of working families living in poverty is increasing? This is happening at the same time as millionaires are getting their tax cuts. Is this fair? Are we really all in it together?

[Mr Osborne]

We inherited a desperately difficult economic situation, where the economy had contracted by 6%. The hon. Lady talks about GDP forecasts. The Labour Government presided over a 6% contraction in the economy. We are dealing with those problems. As I say, she and her colleagues would have more force if they could answer two questions. Will they reverse the 50p tax cut? They will not say that. Will they vote against the welfare uprating Bill? Once they give us answers to those two questions, perhaps we will start listening to what they have to say.

[Margot James (Stourbridge) (Con)]

I warmly welcome the 25% increase in the budget for UK Trade & Investment and the £1.5 billion uplift for export finance facilities, which is much needed by businesses trying to fill orders from abroad. My right hon. Friend also commended the Heseltine review and said that he would respond more fully in the new year. When he does that, may I draw his attention to Lord Heseltine’s recommendations that we increase tactics to improve foreign direct investment by targeting the leading multinational investors more fully and more widely throughout Government?

[Mr Osborne]

I know my hon. Friend speaks with great knowledge on these subjects and she chairs the all-party group on trade and investment. We have provided a 25% increase in UKTI’s budget. We are seeking to strengthen the capacity of overseas chambers. It is not just about exports from this country; it is also about attracting investment into this country, and we want Britain to remain the No. 1 destination for foreign direct investment in Europe.

[Chris Williamson (Derby North) (Lab)]

The reality of this Chancellor’s period in office is that poverty is rising, growth is falling and debt is increasing. Why does he not just admit that his ideologically-driven tea party experiment has been a complete and utter failure?

[Mr Osborne]

I suggest the hon. Gentleman wakes up and smells the coffee of the situation that we inherited. We inherited a country that had just been through the biggest recession and banking crisis in modern history. We have dealt with the question about Britain’s credibility and its ability to pay its way in the world. The deficit has gone down, 1.2 million jobs have been created and he should give us some credit for cleaning up the mess that his party created.

[Andrew Percy (Brigg and Goole) (Con)]

The people of east Yorkshire and north Lincolnshire will welcome the decision to scrap the 13p per gallon planned rise in fuel.

On the £120 million for flood defences, will my right hon. Friend ensure that rural communities can benefit from that, as well as the cities?

[Mr Osborne]

I can absolutely confirm that. We are doing everything we can to support businesses in my hon. Friend’s area and to make sure that all parts of the country benefit from the infrastructure investment that we are making. Having been up to his part of the world, I know that we are making those investments and they are bringing real benefits to the area that he represents.

[Diana Johnson (Kingston upon Hull North) (Lab)]

Can the Chancellor explain to the 1,200 people in and around Hull who are facing private sector job losses announced in the preceding four weeks exactly what is in the autumn statement in terms of jobs and growth for them?

[Mr Osborne]

Of course we regret any decision made by any company to reduce jobs, but we are creating jobs in the economy. In Humberside we have committed to new enterprise zones. We have reduced the tolls on the Humber bridge. We have introduced today new tax allowances from January next year to help small businesses in the hon. Lady’s area to invest. These will all help create jobs, and I hope the people she represents will also welcome the increase in the personal allowance, which will see a reduction in their income tax bill, and the decision not to go ahead with the Labour party’s 3p fuel duty rise.

[Richard Graham (Gloucester) (Con)]

My constituents in Gloucester will appreciate the fact that the Chancellor’s statement increases take-home pay for all workers, gets us off the fuel duty escalator, clamps down on multinational tax avoidance and strongly supports investment in manufacturing, which is vital for growth and jobs in our city and county. Can my right hon. Friend say whether his announcement on funding and reforms for more houses includes the Gloucester proposal for social housing regeneration, which was well received by the Homes and Communities Agency and the Department for Communities and Local Government?

[Mr Osborne]

I will get back to my hon. Friend about the specific point about the bid for new housing in Gloucester. More broadly, we are investing more capital in housing development. We are also standing alongside families trying to buy their first home with our Firstbuy shared equity scheme, and we are also providing guarantees to registered social landlords not only to build social housing, but to build housing for the private rented sector. So in all sorts of ways we are helping the people of Gloucester, and I will look specifically at what more we can do to help.

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

The corporation tax take, VAT take, income tax take and growth are all lower than the OBR predicted in March. The Chancellor is forecast to accrue an increase in national debt in five years greater than Labour accrued in 13 years. Moreover, from now till 2013 the International Labour Organisation unemployment rate increases by 0.2%, as is stated on page 86, table B.1, so how are more people predicted to get jobs when the OBR says completely the opposite?

[Mr Osborne]

I would advise the hon. Gentleman to look at that table on employment. It shows employment going up by 1 million.

[Martin Vickers (Cleethorpes) (Con)]

Along with the initiatives that the Chancellor mentioned a few moments ago to boost the Humberside economy, I particularly welcome confirmation that the A160 upgrade into Immingham docks is going ahead. It provides access to the enterprise zone that he mentioned. I note that there is an additional £60 million available to enterprise zones. Will he look sympathetically on applications from the Humber enterprise zone?

[Mr Osborne]

I will certainly look at the application if one is put forward by the Humber enterprise zone. I know that this benefits people across not only east Yorkshire, but north Lincolnshire, which my hon. Friend represents, and I know that the enterprise zones have some exciting ideas. There is, as I say, additional money in the Book which I did not mention in my statement, but it is there for additional infrastructure in the enterprise zones, and I will take a close look at the bid that he makes on behalf of his constituents in relation to the local enterprise zone.

[Sheila Gilmore (Edinburgh East) (Lab)]

Job creation is vital in order to reduce public spending and increase the tax take. The words the Chancellor used in his statement were very interesting. He said specifically that when counting his 1 million private sector jobs he started from the beginning of 2010. Half of those jobs were created in the first year of that period and arose from the Labour Government’s financial stimulus, so the rate of growth has in fact been decreasing, not increasing. Does he not agree?

[Mr Osborne]

First, unemployment had gone up under the Labour Government and they, like all Labour Governments in history, left office with unemployment higher than when they came into office. Secondly, if the hon. Lady looks at the employment forecasts she will see that, as I was saying to her hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), 1 million jobs are forecast to be created over the coming period. As I have said, we are in a tough economic situation—I am not trying to disguise that from the House today—but I think that the decisions we have taken to help businesses and working people will be warmly welcomed.

[Guy Opperman (Hexham) (Con)]

The improvements to the A1 and the freezing of fuel duty, which was raised 10 times under the previous Labour Government, are warmly welcomed by Government Members. However, may I urge the Chancellor to consider the call from the Chair of the Treasury Committee for local community banking to kick-start lending to small and medium-sized enterprises and local banking in local areas?

[Mr Osborne]

I welcome what my hon. Friend says about the dualling of the A1 up to Newcastle—I hope that in future we can do that as far as the Scottish border—and his comment on fuel duty. He has spoken to me personally about what more we can do to get community banking. There are still many issues to deal with in our banking system. We have to make it more competitive and encourage more entrants, and community banks can be part of the solution.

[Naomi Long (Belfast East) (Alliance)]

Bombardier recently secured the largest order in its history, with the result that its site in my constituency is now secure for the future, which is a welcome investment and also secures the local supply chain, so I welcome the Chancellor’s intention to support the aerospace industry as well as his announcements on fuel duty, which will have a direct impact on those businesses. Another constraint on economic growth in Northern Ireland is air passenger duty, as I have said frequently. Will the Chancellor at least commit to conducting a proper study of the impact of APD on growth in business and tourism, so that an informed decision on the matter can be taken?

[Mr Osborne]

I, too, welcome the investment that Bombardier has made in Belfast and hope that some of my announcements today on help for the aerospace industry, particularly the supply chain for advanced manufacturing, will benefit the hon. Lady’s constituents. On APD, we acted swiftly to deal with the specific issue of the transatlantic flight from Belfast to the United States, and I am glad that we were able, with the Northern Ireland Executive, to come to a satisfactory arrangement on that. More broadly, the point she makes about APD has been made by others. We have had to make some difficult decisions, and sticking with the APD rates we inherited from the previous Labour Government was one of them, although we were able, in the very early years of this Government, to do something to ameliorate that by delaying one of the increases.

[Julian Sturdy (York Outer) (Con)]

I congratulate my right hon. Friend on his statement and thank him for the consideration he has given to our report on empty property rates. The move to give new build commercial properties an exemption from paying empty property rates will be a welcome boost to the economy and will be much welcomed in the industry, but I ask him to keep the wider issue of empty property rates on existing units under consideration.

[Mr Osborne]

As I said in my statement, the report produced by my hon. Friend and some of his colleagues showed powerfully the impact that the empty property rates that the previous Government introduced have had, hitting development in our towns and cities. It is an expensive measure to get rid of, which is why we have been unable to get rid of it all today, but we have listened to him and his colleagues. There was the idea of providing a grace period for new commercial development, and we are now introducing that 18-month grace period. I congratulate him on making the case for it so powerfully.

[Mr Speaker]

I call Mr Dan Byles.

[Dan Byles (North Warwickshire) (Con)]

Thank you, Mr Speaker—I am now in a calm frame of mind.

The average working wage in my constituency of North Warwickshire and Bedworth is less than the national average wage. What does the Chancellor suggest I tell my constituents when they ask me, in bewilderment, how the Labour party can vote against a welfare cap that will prevent people on benefits from taking home a larger disposable income than my constituents who are in work?

[Mr Osborne]

I think that my hon. Friend’s constituents and many people in the country will be completely bewildered that Labour opposes a cap on benefits that simply means that people who are out of work will not get more than the average family get from being in work. It means that in two and a half years’ time or thereabouts, his constituents will have a choice between continuing to return my hon. Friend to Parliament to ensure that their money is well spent and the unlimited benefits that his Labour opponent will be offering.

[Mr Speaker]

I thank the Chancellor and all 90 Back Benchers who questioned him. We are blessed.