Oral Answers to Questions

Danny Alexander Excerpts

Tuesday 10th May 2011 Commons Chamber

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

6. What assessment he has made of the effects on families and children of the tax and benefit changes introduced in April 2011.

[The Chief Secretary to the Treasury (Danny Alexander)]

I echo your tribute to David Cairns, Mr Speaker. I knew him as a very effective Scotland Office Minister, and as a champion of Scottish broadcasting. It is a tragic loss, and he will be very sorely missed by Members in all parts of the House.

Direct tax and benefit changes introduced in April are progressive. On average, households in the bottom 80% of income distribution gain. As a result of the direct tax changes introduced in April, 21 million individuals earning up to about £35,000 per annum will benefit in real terms this year.

[Pamela Nash]

Let me take a moment to associate myself with the Chief Secretary’s comments on the sad death of David Cairns. David provided me with a lot of support and a lot of laughter during my time here as a parliamentary researcher and, over the last year, as a Member of Parliament.

Families with two or more children will lose up to £1,560 per year as a result of the cuts in the child care element of working tax credit. Does the Chief Secretary accept that that will deter many parents who would otherwise have returned to work from doing so?

[Danny Alexander]

The vast majority of people on low and middle incomes will benefit from the income tax cuts that will result from the raising of the income tax threshold by £1,000. For families with children, we have increased the child element of child tax credit by £180 above indexation. I agree with the shadow Chancellor, who admitted on the BBC shortly after the Budget that

“only the majority of families”

would benefit from those moves.

[Mr Mark Spencer (Sherwood) (Con)]

Does the Chief Secretary share my desire to see a welfare system in which hard-working families are better off than those who choose not to work? Does he agree that, as soon as we can afford it, we should enable as many as possible of those hard-working families to benefit from the lifting of the tax threshold?

[Danny Alexander]

I agree wholeheartedly. That is why we have set ourselves the agenda of both reforming the welfare system and lifting the income tax threshold to £10,000, which will significantly benefit millions of people on low and middle incomes.

[Mr David Hanson (Delyn) (Lab)]

Value added tax up, losses of about £1,500 for middle-income families, child benefit frozen, child tax credit cut, working families tax credit frozen: can the Chief Secretary tell me why, when such decisions are made, it remains the Government’s priority to cut the 50p tax rate for the highest earners in the community?

[Danny Alexander]

I am not sure that the right hon. Gentleman opposed any of the items on that list in votes in the House.

As I said earlier, we have cut income tax by increasing the income tax threshold. We have also introduced a triple lock on pensions, increased cold weather payments, and increased the child element of child tax credit. Of course we must look at the way in which the income tax system works, but our priority has been to cut income tax for people on low and middle incomes by increasing the tax threshold. That is the tax priority of this Government.

[Harriett Baldwin (West Worcestershire) (Con)]

7. What steps he is taking to ensure that the Financial Services Authority exempts from new domestic regulation businesses employing fewer than 10 people and new businesses for the next three years.

--- Later in debate ---

[Sheryll Murray (South East Cornwall) (Con)]

10. What steps he is taking to support investment in the regions.

[The Chief Secretary to the Treasury (Danny Alexander)]

Returning the UK economy to sustainable economic growth that is more balanced across the regions of this country and across sectors is a key priority. In the recent Budget, this Government took steps to encourage investment and exports as a route to a more balanced economy. In addition, we have introduced 21 new enterprise zones in England and we have allocated £450 million of investment in the first round of the regional growth fund, including to an excellent proposal from the Western Daily Press and the university of Plymouth to support small firms across the south-west.

[Sheryll Murray]

I thank my right hon. Friend for that reply. Private sector growth is really important in my constituency, but only six of 464 bids to the regional growth fund were from Cornwall. What can the Government do to encourage more bids from Cornwall in the second round?

[Danny Alexander]

I would urge my hon. Friend and other colleagues from Cornwall to encourage businesses and the local authorities to support bids from private sector businesses. The regional growth fund is there to support private sector-led bids that create growth and jobs and that support economic development across England, and I would urge her to work with chambers of commerce and local enterprise partnerships.

[Mr George Mudie (Leeds East) (Lab)]

In view of the indifferent growth in the regions, does the Minister regret the Government’s decision to abolish regional development agencies and to give to their authorities no money, no staff and no authority?

[Danny Alexander]

No, I do not; I think that that was the right decision. The balance of policies that we are putting forward—on enterprise zones, local enterprise partnerships and the regional growth fund—is designed to ensure that ideas that come from the regions have a much greater chance of success. Our decision was the right one, and the hon. Gentleman will have noted that inequality among the regions actually grew during Labour’s 13 years in office.

[Nicholas Soames (Mid Sussex) (Con)]

11. What steps his Department is taking to promote economic growth.

--- Later in debate ---

[David Mowat (Warrington South) (Con)]

12. What his policy is on the operation of the Barnett formula in relation to relative need.

[The Chief Secretary to the Treasury (Danny Alexander)]

As the coalition programme for Government states, the Government

“recognise the concerns expressed…on the system of devolution funding.”

The Government’s priority, however, must be to reduce the enormous budget deficit and therefore any change to the system of funding for the devolved Administrations must await the stabilisation of the public finances.

[David Mowat]

I thank the Chief Secretary for that reply. He will be aware, however, that the Holtham commission, the House of Lords Select Committee and the noble Lord Barnett are all of the view that the Barnett formula is in need of urgent review and should be replaced by a mechanism based on need. I understand that the priority must be to tackle the deficit, but can we not at least start the process in the course of this Parliament of putting in place a fairer allocation mechanism based on need?

[Danny Alexander]

No, I am afraid I cannot make that commitment. As I said earlier, our priority is to reduce the deficit. We have the Scotland Bill to take forward here, and in relation to Wales we have a process that is following on from the referendum and we have the Holtham commission to look at specific issues. I think that is the right set of priorities for the moment.

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

As the Chief Secretary knows, his Government have announced a Calman-like process for Wales following the successful referendum in March for further powers. Will he confirm that reform of the Barnett formula will be a precondition of any wider financial reforms to the way the Welsh Government are funded?

[Danny Alexander]

I cannot confirm that, no. We have said that we will consider the issues to do with tax powers raised in the second Holtham report as well as other issues that were brought forward at that stage. We made a commitment to the previous Welsh Assembly Government to engage in a conversation about those things. If the new Welsh Assembly Government want to take that forward, we will be open to that, too.

--- Later in debate ---

[John Pugh (Southport) (LD)]

T2. What financial stress test will the Treasury impose before allowing the Department of Health to authorise general practitioner or clinical consortia?

[The Chief Secretary to the Treasury (Danny Alexander)]

I am grateful to my hon. Friend for his question, which raises a very important issue. It is a key part of the Treasury’s engagement with this to make sure that the process for authorising GP consortia ensures that those organisations are fully financially capable, as well as clinically capable, of meeting their objectives before they are authorised on whatever timescale.

[Vernon Coaker (Gedling) (Lab)]

T7. Does the Chancellor recall his statement to the House in October, when he said:“I completely understand the public’s anger that the banks…should now be contemplating paying high bonuses”?—[Official Report, 20 October 2010; Vol. 516, c. 955.]It is all very well being angry about that, but why do the banks continue to pay high bonuses to their high-ranking directors and why does he not do something about it? Why does he not repeat Labour’s bank bonus tax and reinvest the money in jobs, housing and many other things that the people of this country want?

--- Later in debate ---

[Duncan Hames (Chippenham) (LD)]

Given the Chancellor’s concern for the use of taxpayers’ money, will he really allow members of GP consortia boards to be paid as much as £30,000 a year for just one day’s work a week?

[Danny Alexander]

As I said in response to my hon. Friend the Member for Southport (John Pugh), one of the things we need to do as part of the listening exercise is hear the concerns about how consortia will work and ensure that the financial regime that is in place is sustainable and puts the maximum amount of resource to the front line.

[Bill Esterson (Sefton Central) (Lab)]

The Chancellor did not answer the question from my hon. Friend the Member for Gedling (Vernon Coaker), so I would like to give the right hon. Gentleman another chance. Will he repeat the bank bonus tax that was so successful last year and use that money to build the extra affordable homes, to rent and to buy, which are desperately needed by people in this country and by the construction industry, and which would be good for the economy?

Finance (No. 3) Bill

Danny Alexander Excerpts

Tuesday 26th April 2011 Commons Chamber

[The Chief Secretary to the Treasury (Danny Alexander)]

I beg to move, That the Bill be now read a Second time.

The clauses that we are here to debate are another important step on the long road to economic recovery. They will promote growth and provide support for households and small businesses under pressure. They will encourage investment as well as enterprise, and they will help us to clean up the mess that the previous Government left behind.

As we start this debate, it is worth recalling the state of the economy that this Government inherited nearly a year ago. Britain had endured the longest and deepest recession in living memory. We were borrowing one pound for every four we were spending. We had the largest budget deficit in our peacetime history, one of the largest in Europe and the largest in the G20, yet no detailed plan was in place to deal with it—and that was not the end of the story. In the preceding decade Britain had slipped down the international league of competitiveness from fourth to 12th. We had seen our share of world exports decline, and we were considered to be a worse place to start a business than many of our European neighbours.

That was the coalition Government’s inheritance, which is why we have set about restoring confidence and stability to our economy, with a clear strategy for growth. At its heart is a credible plan to tackle the enormous deficit—a plan we are already implementing—so that the current structural deficit will fall in each and every year of this Parliament, and is forecast to be eliminated by 2015. National debt is forecast to fall as a proportion of gross domestic product in the same year, so that we can finally start to reduce the huge interest payments with which this country has been saddled—the lasting legacy of Labour’s failure.

The action we have taken on the deficit has shown that Britain’s economic future is now in safe hands, that this is a Government who know how to manage the country’s finances and that we have a credible plan to deliver the strong, sustainable and rebalanced growth that this country needs.

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

If things are so rosy, why has the Office for Budget Responsibility forecast for growth gone down from 2.6% to 1.7%? Why has it projected that unemployment will increase by 200,000 as a result of this and previous Budgets? Why is it that we are doing so badly under this Government?

[Danny Alexander]

I do not think I said that the position was rosy. I was going out of my way to describe the calamitous state of the public finances that the Labour party left.

I would like to touch on growth first. In the Budget we set out four economic ambitions: that Britain should have the most competitive tax system in the G20; that Britain should be the best place in Europe to start, finance and grow a business; that we should be a more balanced economy by encouraging exports and investment; and that we should have a more educated work force who should be the most flexible in Europe. The clauses in the Bill set us on the road to meet those objectives.

For the past decade Britain has been losing ground in the world economy. While other nations have reduced their business tax rates, ours have lost competitiveness. While other countries have removed barriers to enterprise, ours have grown higher still. We cannot afford this to continue. Instead, our plan for growth is based on private sector enterprise, not public sector borrowing—growing businesses, not growing debts—and on securing sustainable long-term investment.

Essential to that is creating a competitive tax system—one that enables our businesses to compete on a global stage. That is why clause 4 will see our corporation tax rate fall by 2% this year. As the House already knows, we will implement further cuts of 1% in each of the next three years, so that by 2015 we will have the lowest corporate tax rate in the G7, allowing businesses to invest more of the money that they earn, hire more workers, export more goods and support the recovery.

[Dame Anne Begg (Aberdeen South) (Lab)]

The right hon. Gentleman says that in order to encourage business growth he will drop corporation tax. Why has he taken a completely opposite approach to those who are developing the North sea oil and gas reserves?

[Danny Alexander]

For the simple reason that the very high price of oil on the world markets is having a direct effect on consumers and, I am sure, on motorists in the constituency of every Member. It is right, I think, to ask the one industry that is benefiting substantially from the high price of oil to make an additional contribution to help us to reduce fuel duty.

[Dame Anne Begg]

rose—

[Danny Alexander]

I will deal with the supplementary charge in more detail later, and the hon. Lady might want to come back to me at that stage, but I shall make some progress now, if I may.

An efficient tax system is not just about lower rates. To be competitive we must also look at how we tax, how that affects our businesses, and what has been holding them back in the past. The Bill legislates for reform of the taxation of foreign branches, as well as making interim changes to the outdated controlled foreign companies rules—a process started and consulted on under the previous Government. This will stem the tide of businesses leaving our shores for more favourable climes, and will ensure that the UK is an attractive place to locate and headquarter. This shows that Britain is once again open for business.

[Mr Andrew Tyrie (Chichester) (Con)]

Has the Chief Secretary had a chance to look at the six tax principles set out in the Treasury Committee’s recent report? Will he tell us whether he agrees with those principles, and if so, how the changes in the North sea tax regime accord with one of them—namely, that there should be certainty over time to enable businesses to plan?

[Danny Alexander]

I have looked at those principles. The Government will, of course, respond to the Committee’s report—along with other reports—in the usual way, but the principles seem very sensible.

In fact, this is among the Finance Bills on which there has been the most consultation in advance. I believe that 260 of its 390-odd pages were published in draft some months before its publication. [Interruption.] I am replying to the question asked by the hon. Member for Chichester (Mr Tyrie). We have taken on board some of the principles to which he referred, but the Government must be able to respond to economic circumstances with their tax policy. As I have said, one of the predominant economic circumstances that we face is the high price of fuel. The Government considered that in order to relieve motorists of some of the burden on them—which we felt was incredibly important—we should ask the oil industry to pay a little more tax in the form of a supplementary charge.

[Dame Anne Begg]

At what point—it was certainly not during any discussions, because there were none—did the Chief Secretary discover that slightly more than 50% of the business of offshore oil operators is in gas, and that the price of gas is the equivalent of about $55 a barrel?

[Danny Alexander]

As the hon. Lady knows, the price of gas has also been on an upward path. However, we have discussed the matter with representatives of the industry, including Centrica, which has raised it directly with me and with other Ministers. We said in the Budget that we were willing to consider extensions of the field allowance regime to provide breaks for particular fields in the event of particular problems, and we are doing that at the moment. Existing rules allow breaks for very deep oil wells and heavy oil, for example. The discussion continues. It is right for us to engage with the industry openly, in recognition of the issue raised by the hon. Lady.

[Stewart Hosie (Dundee East) (SNP)]

rose—

[Danny Alexander]

I will give way to the hon. Gentleman, but I must make progress once I have heard his intervention.

[Stewart Hosie]

The right hon. Gentleman says that the price of gas is rising. It will be driven up by, possibly, a third because the $75 trigger point established by the Government is equivalent to about 80p a therm. The gas price is currently about 57p a therm. The Government’s actions will drive the price up to an extraordinary extent. Did they not understand that before they set their Budget?

[Danny Alexander]

I do not accept the hon. Gentleman’s analysis. As he will know, we are currently consulting and engaging with the industry on precisely that question of the trigger price.

I am sure Members in all parts of the House agree that on the road to sustainable growth, access to finance is also a critical issue. For that reason, clause 42 increases the relief available for the enterprise investment scheme to 30%, encouraging further investment in small and growing businesses; clause 9 doubles the lifetime limit on entrepreneurs’ relief from £5 million to £10 million; and clause 43 raises the rate of research and development tax credits for small and medium-sized enterprises to 200%. As we announced in the Budget, from next year it will rise again to 225%, providing real support for small firms investing in research and development.

Small and medium-sized enterprises are the driving force behind the recovery. They employ 60% of Britain’s work force, and contribute to about 50% of all output. Their success will help to define the future of our economy. The last Government planned to increase the small profits rate of corporation tax, but we have chosen to do the opposite. Clause 6 will reduce the rate paid by small businesses to just 20%. The Budget also revealed that we would continue to provide business rate relief for small firms for another year, which will support growing businesses up and down the country.

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

Many firms will, of course, be grateful for the reduction in corporation tax, but will not the slashing of investment allowances go a long way towards offsetting any benefit that might have been gained by small companies in particular? According to the Institute for Fiscal Studies, the real beneficiaries of both measures will be the less capital-intensive service sector,

“historically typified by the financial sector”,

rather than the small companies that export and depend on investment which the Chief Secretary is seeking to help.

[Danny Alexander]

I believe that the reduction in corporation tax will benefit businesses in all sectors. As for the question of capital allowances, the changes in relation to short-life assets have been welcomed throughout the business community, and particularly by the Engineering Employers Federation.

In 2007 the last Government reduced the writing down allowances from 25% to 20%, and we are reducing them from 20% to 18%. That is a balanced move which will ensure that firms in all sectors, including manufacturing, benefit from the new corporation tax environment that we are introducing.

[Ms Angela Eagle (Wallasey) (Lab)]

The Chief Secretary has mentioned small business. It is clearly agreed throughout the House that the SME sector will make a vital contribution to future growth in the economy. Does it worry him that, once again, it has been demonstrated that lending to small business fell in the first quarter of this year, despite the attempts to boost it in Project Merlin? What is he going to do about that?

[Danny Alexander]

Of course I am worried if lending to small businesses is falling. The Merlin agreement, which we announced at the end of February, was an agreement with the major United Kingdom banks to secure an additional £10 billion of lending to small businesses this year. We will monitor the position, the figures will be made available, and we will watch the banks like a hawk to ensure that they deliver on the agreement. That is critically important: this Government have acted as the last Government did not manage to.

[Ms Eagle]

rose—

[Danny Alexander]

I am going to press on now. I want to deal with the issue of fairness.

Although growth is key to improving everyone’s prospects in the medium term, we know that many families face real financial pressure now. The Bill therefore includes measures to help hard-working people with low and middle incomes, and to support families who are struggling to make ends meet. The Government are committed to real increases in the personal allowance every year, until no one earning less than £10,000 is caught in the income tax net. Clause 3 takes the first step towards meeting this objective by increasing the personal allowance by £1,000 for this tax year. That is the largest single rise in history. It means that 23 million taxpayers in Britain will be £200 better off this year in cash terms, and that more than 800,000 people will be taken out of income tax altogether.

The Budget also revealed the next step in the process. An increase of £630 next year will keep us on track to deliver the £10,000 allowance by 2015, as promised. That is progressive action by a coalition Government who recognise that those with the broadest shoulders should continue to bear the largest burden, and that those on the highest incomes should pay their fair share.

The Bill includes 11 new measures to close tax loopholes that have remained open for too long. For example, clause 26 will help to end the unfair practice of disguised remuneration. No longer will highly paid employees be offered virtually tax-free lifetime loans which, in truth, will never be repaid. Such arrangements are completely unacceptable. We will ensure that they cannot continue, and that all income is properly taxed. We have consulted to ensure that the impact of the legislation on commercial arrangements is limited, and we intend to make further changes when the Bill is considered in the Public Bill Committee.

Those measures will give us more resources to help families who pay their taxes, but who are struggling with the daily cost of living. The same motivation lies behind clause 7, which increases the supplementary charge on the large profits being made from oil and gas extraction in the North sea.

I understand that the increases in the supplementary charge are controversial, at least in the oil and gas sector. Given that the sector is benefiting hugely from the rapid rise in the world oil price, which currently stands at $124 a barrel, it was right to ask it to share some of its profits with motorists, but we are listening carefully to its concerns about specific investments. As we said in the Budget, we are discussing with several firms the possibility of using the field allowance regime to continue to support investment. The industry is understandably concerned about the stability of the tax regime, given the long-term nature of investments in the North sea. That is why we committed ourselves in the Budget to working with the sector to provide certainty about the long-term future of decommissioning relief, and why we announced a fair fuel stabiliser to reduce the supplementary charge if oil prices fall below an agreed trigger level.

However, we should not lose sight of the fact that this money is financing a much-needed package of support for motorists. First, it is funding the 1p reduction in fuel duty to which clause 19 refers. Secondly, it has helped to cancel Labour’s inflation uprating until January next year. As a result of these two changes, fuel is 6p a litre cheaper now that it would have been under the plans we inherited.

I should also remind the House that this Government inherited plans for above-inflation increases in fuel duty for 2011, 2012, 2013 and 2014. The increase in the supplementary charge has allowed us to abolish this fuel duty escalator, so that duty will not rise above inflation for the rest of this Parliament. As with fairness, so in understanding the issues facing hard-pressed motorists it is this coalition Government who are looking to share the burden of higher oil prices.

Let me now turn to the issue of taxing Britain’s banks. The previous Government announced and implemented a temporary tax on bonuses for one year only. Indeed, it was the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), who advised against repeating that. Clause 72 introduces a permanent levy on bank balance sheets, which will raise £2.5 billion in each and every year of this Parliament. That amounts to £10 billion of additional tax from the banks over the next four years, and, thanks to the decision announced by the Chancellor in February, an extra £800 million for this year too. There will be extra money to help us support jobs and growth this year, such as by providing the finance for an additional £100 million of investment in new science facilities at Cambridge, Norwich, Harwell and Daresbury, and £250 million of investment in the FirstBuy scheme for new-build homes, giving a helping hand to 10,000 people as they climb the first rung of the property ladder.

The Bill will also deliver fairness over the longer term. The changes to the requirements on annuitisation set out in clause 65 have long been called for, and will give people more control over their finances. They will allow those approaching retirement to make their own choices about how they use their pension savings, and they will offer greater flexibility in planning for old age. The introduction of automatic enrolment that is supported by the taxation changes in clauses 68 to 71 will help ensure that a low-cost pension scheme is available for the 5 million employees expected to save in the National Employment Savings Trust. The simpler, fairer rules on pensions tax relief in clauses 66 and 67 will limit the amount of tax relief received by those who make the highest pension contribution. From this year, the annual allowance will be set at £50,000 and the lifetime allowance will be reduced to £1.5 million. That will generate about £12.5 billion by the end of this Parliament, and it will ensure that the pension system remains generous for savers, is fair to taxpayers, and is affordable for the Exchequer. At the other end of the age range, clause 40 introduces individual savings accounts for children, offering a simple and tax-free way to save for a child’s future

Turning to the environment, the introduction of a carbon price floor in clause 77 is a revolutionary move. It demonstrates this Government’s commitment to being the greenest Government ever, and it makes us the first country in the world to introduce such a measure for the power industry.

[Joan Walley (Stoke-on-Trent North) (Lab)]

Does the right hon. Gentleman accept, however, that there is concern about the amount of hidden subsidy for the nuclear industry in the Finance Bill, and given the coalition agreement that there is to be no subsidy for nuclear power, does he share my concern on behalf of manufacturers, particularly in my constituency, that if there is any windfall tax it should be directed to promoting energy and waste-resource efficiency in terms of manufacturing? Is there not a complete mismatch here?

[Danny Alexander]

I understand the concern, and I know that it has been expressed by a number of lobby groups, although I have to say that I think it has been grossly exaggerated. The purpose of the carbon price floor is to ensure a stronger, and strengthening, market over future years for investment in low-carbon energy. It will deliver a genuine incentive for green and renewable energies to be developed and invested in. Meeting the carbon reduction targets, which I think all Members support, will require several tens, or even hundreds, of billions of pounds of new investment in renewable and other energy sources, and I think that introducing a carbon price floor is exactly the right mechanism to achieve that.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Does the right hon. Gentleman not accept that raising the carbon price floor initially to such a level above the EU emissions trading scheme will not actually reduce emissions across Europe because they are fixed on a European basis, will risk investment moving to the other end of the interconnectors, and will move us substantially away from consultation on the issue of £1 above EU ETS, which I think most people would have accepted as a starting point for a longer-term carbon price floor to move towards the 2030s? Does he accept that he has got that price floor wrong, and that he needs to review it so as to make it actually work by genuinely increasing investment and reducing emissions?

[Danny Alexander]

No, I do not accept that we have got this wrong; I think we have got it right. The level of the carbon price floor was set out in the consultation. A range of options were given, and we have taken a mid-point of the various responses we received. I think it is right that this country is the first country to introduce a carbon price floor. That is a very important mechanism to help us deliver on the low-carbon power generation to which I thought those on the hon. Gentleman’s side of the House were as committed as we are on this side. Of course this will have an impact; it is designed to have an impact. It is designed to have the impact of ensuring that companies and industries seeking to invest in low-carbon power generation have a clear sense of certainty about the price they will receive for that energy over future years. As a result of that, our country can ensure that we deliver on our targets for renewable energy and carbon emissions reduction, which are, I hope, very important to every Member of this House.

[Sammy Wilson (East Antrim) (DUP)]

Does the right hon. Gentleman not see any contradiction in terms in what he has said about making industry more competitive by giving it tax breaks? Introducing a carbon price floor will take more money from industry than corporation tax reductions give to it. Does he not recognise the point made by the hon. Member for Southampton, Test (Dr Whitehead): that in places like Northern Ireland this will simply push investment in electricity into the Irish Republic because of the single electricity market, rather than keep electricity production in Northern Ireland?

[Danny Alexander]

I recognise the force of the hon. Gentleman’s concerns, and I have great respect for the detailed way in which he puts them forward, which I have learned about through the relationship we have had as a result of his role as Finance Minister in the Northern Ireland Assembly Government. On this point however, I have to say that I think he is wrong. I hope that the carbon price floor will, alongside other measures, encourage investment in low-carbon power generation, including in Northern Ireland. That is what we are seeking to achieve through this mechanism. I think he also referred to energy-intensive industries, and we have announced that the climate change agreements, which are to the benefit of such industries, are to be rolled forward for another phase and that the relief given through those agreements is to be significantly increased. I hope that will ensure that such energy-intensive industries will be able to make the transition to lower, or different, energy use in a way that does not have the economic effects he describes.

[Joan Walley]

Given what the right hon. Gentleman has just said about the importance of investment, does he agree that the Budget should actually be giving the advantage to energy efficiency? Because of the delays in developing the green investment bank, are there not now real concerns about where we are going to get the resource efficiency from?

[Danny Alexander]

I agree that energy efficiency is important, of course. That is precisely why the Department of Energy and Climate Change has been working so hard to bring forward the green deal scheme, which will start next year. It is designed precisely to give additional encouragement and incentive, and to provide a mechanism for people to engage in the sort of action on domestic energy efficiency in which they have not previously engaged over the years, which I hope the hon. Lady agrees is very important. Also, there are not delays in respect of the green investment bank. Quite the contrary; we announced in the Budget both a trebling of the amount of public money going into the bank, partly through asset sales, and that it will start its operations in September next year, thereby providing yet another strand to the additional investment we all want to see in green energy.

The measure I have been discussing will make us the first country in the world to introduce a carbon price floor for the power industry. It will help to provide an incentive for the billions of pounds of investment in cleaner sources of energy that this country needs, so ensuring we are on course to meet our carbon reduction targets. We have also preserved the link between the climate change levy and prices, through clause 23, to act as a further incentive to low-carbon investment.

The Bill will also help to address other important social issues. The new duty on high-strength beers in clause 15 will help to tackle problem drinking, increasing the cost of a typical can of high-strength lager by 25p. That is coupled with a reduction in the duty on lower-strength beers to help encourage the consumption of alcohol in a more responsible way.

[Andrew Griffiths (Burton) (Con)]

I agree with the intention of the measure, which is to encourage people to drink lower-strength beers. However, does the Chief Secretary agree that what would help both the industry and the health of the nation would be if the Government were to go to Europe to argue for that level to be raised from 2.8% to 3.2% or 3.4%, so that brewers could brew something tasty and drinkable that would nudge people to reduce their alcohol consumption?

[Danny Alexander]

The hon. Gentleman makes a very good point. He will perhaps know that the Economic Secretary, having taken this measure forward, is making that case for greater flexibility at a European level. As this country has taken a lead on having greater flexibility in beer duties, we are in a stronger position to argue this case. Similarly, as this country has taken the lead on deficit reduction, we are in a stronger position to argue the case that we must argue at a European level, which is that further increases in the EU budget are unacceptable. So in a number of ways the actions this Government have taken put us in a position to make strong cases at European level.

[Kelvin Hopkins (Luton North) (Lab)]

Are the Government not just tinkering with the alcohol measures, rather than facing up to the reality of the drink problem that Britain faces? Would it not be much better to have a significant unit price for alcohol, which would not affect pubs, beer drinkers in pubs or the average bottle of wine, but would raise the floor price for those who drink to excess, particularly the young?

[Danny Alexander]

If the hon. Gentleman were being fair, as I hope he would be, he would recognise that this Government have taken a number of measures to tackle problem drinking and that our approach on beer taxation, which is the subject of part of the Bill, will send further right signals. I hope that many hon. Members would agree that the consumption of high-strength beer is a particular problem in relation to antisocial drinking, and that allowing this sort of differentiation within the tax system should help to send the right signals. The Bill also includes a further step to help people to stop smoking, as clause 16 raises the duty on tobacco.

In conclusion, the Bill sets out changes that will enable our businesses to grow and succeed, supports the necessary plan to deal with the deficit, helps to tackle the rising cost of living, supports growth and supports fairness. I commend it to the House.

Oral Answers to Questions

Danny Alexander Excerpts

Tuesday 22nd March 2011 Commons Chamber

[Mike Gapes (Ilford South) (Lab/Co-op)]

8. What assessment he has made of the effect on levels of employment of the increase in the standard rate of value added tax.

[The Chief Secretary to the Treasury (Danny Alexander)]

The Government have taken urgent and unavoidable action to tackle the deficit and to put the public finances on a sustainable footing. That is essential for jobs and growth. Raising the standard rate of VAT is an important element of the plan and, in November, the Office for Budget Responsibility’s forecast, which took full account of the VAT increase, was for total employment to rise by 1.1 million in 2015.

[Lindsay Roy]

I thank the Minister for that answer. Will he tell us what impact the VAT rise has had so far on himself and his family?

[Danny Alexander]

The VAT rise of course leads to increased prices in the shops, and that affects everyone in the House.

[Mike Gapes]

The Chief Secretary to the Treasury had a meeting—a crisis meeting, according to The Daily Telegraph—with senior retailers a few weeks ago. Was there any discussion of the impact of the VAT rise at that meeting?

[Danny Alexander]

I did indeed meet senior retailers from the British Retail Consortium and we discussed a whole range of issues in a private meeting. If the hon. Gentleman is interested in the consortium’s views, he should listen to what its director general said on 20 October, the day of the spending review. He said that delays in public expenditure cuts

“would just store up more pain for later, risking increased borrowing costs, higher taxes and more job losses.”

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

Which does my right hon. Friend think is the lesser evil: a rise in VAT that does not apply to food or children’s clothes, or taking almost 1 million of the lowest paid workers out of income tax altogether?

[Danny Alexander]

I certainly think that our Government have got their priorities right when it comes to lifting the burden of income tax on low-income workers. The increase in the personal allowance by £1,000, which will come into effect in April this year, will ensure that 880,000 low-income workers will no longer pay income tax. Furthermore, 23 million basic rate taxpayers will see a tax cut of £200 next year.

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

Has my right hon. Friend considered the letter sent to him by the chair of the tourism group of the Sutherland Partnership, which outlined the importance of tourism for employment in the area and the barriers that VAT is creating, particularly in relation to road fuel? Is there anything that the Government can do to mitigate that effect?

[Danny Alexander]

I have seen that letter and, as a fellow highland MP, I am fully aware of the impact that high fuel prices have on families and individuals. We have already taken steps to deliver a 5p duty discount to island communities, and I hope that we will be able to do what we can tomorrow, but that will be a matter for the Chancellor to announce in the Budget statement.

[Mr Speaker]

Eric Joyce is not here. I call Andrew Stephenson.

--- Later in debate ---

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

9. If he will review the pace of proposed reductions in public expenditure to take into account GDP figures for the fourth quarter of 2010.

[The Chief Secretary to the Treasury (Danny Alexander)]

I welcome the hon. Lady to the House. The short answer to her question is no. Of course, growth in the final quarter of last year was disappointing, but, as we always said, the recovery in the early stages would be choppy. Deficit reduction is the essential precondition for growth, and the OBR’s November forecast stated that we would see growth in every year of the forecast.

[Debbie Abrahams]

Will the Chief Secretary explain to my constituents who are either unemployed or facing redundancy how his Government’s catastrophic economic policy is in the interests of the country? Clearly, we are not all in this together.

[Danny Alexander]

I hope the hon. Lady will take the opportunity to explain to her constituents that it is the legacy of the previous Labour Government that has caused the enormous mess and all the problems in our economy. They left us with the largest Budget deficit in Europe, and one of the largest in the world. Countries in our position have to take the sort of action we have taken, or risk being in a much deeper mess. If that is what she is advocating, I suggest she tells her constituents.

[Margot James (Stourbridge) (Con)]

We are spending £120 million a day on debt interest—£1 billion by the end of next week. How many representations has my right hon. Friend received from reputable international and national organisations advising him to slow the pace of deficit reduction?

[Danny Alexander]

None. The hon. Lady will be aware of the report that the OECD published last week, which strongly endorsed our plans. Its general secretary, Angel Gurría, said that the fiscal position we inherited was “clearly unsustainable” and that the

“consolidation measures and plans that the”—

Government—

“have put in place were therefore vital.”

I agree with that.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Today’s inflation figures show a sharp leap in the retail prices index to 5.5%, the highest level in 20 years. That hits not only living standards, but public service expenditure plans. Is the Chief Secretary sticking to the coalition agreement guarantee of real-terms growth for the NHS in each year or is he resolutely sticking to his plan A, regardless of economic realities?

[Danny Alexander]

We are sticking to the spending plans that we set out in the spending review, and that is the right thing to do. Of course I understand that inflation has an effect on people’s living standards, which is why it is particularly important to emphasise the increase in the personal income tax threshold—£1,000 extra on the threshold—that comes into force this April, which will put £200 back into the pockets of hard-working people in this country. That is the action this Government are taking to help people through these difficult times.

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

10. By what date he expects revenue to the Exchequer to match levels of public expenditure.

--- Later in debate ---

[The Chief Secretary to the Treasury (Danny Alexander)]

The Secretary of State for Work and Pensions is bringing forward proposals to reform the disability living allowance system and replace it with a new personal independence payment. I am sure that he will have heard what the hon. Gentleman said and will be very happy to discuss the matter with him.

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

The previous Government’s beer duty escalator was damaging to pubs, ill-considered and did not raise the revenue that it should have done. Considering that the Prime Minister has said that he wants this to be a pro-pub Government, will we get some good news for pubs tomorrow?

--- Later in debate ---

[Stephen Barclay (North East Cambridgeshire) (Con)]

The Chancellor has a strong commitment to open and transparent government. Will he therefore ask his officials to look again at the number and value of special severance payments paid by foundation trusts, which must be reported to his Department but which his Department is not currently willing to disclose?

[Danny Alexander]

I should be very happy to look again at the matter and to talk to the hon. Gentleman about it.

[Several hon. Members]

rose—

Pensions Consultation

Danny Alexander Excerpts

Thursday 3rd March 2011 Written Statements

[The Chief Secretary to the Treasury (Danny Alexander)]

The Independent Public Service Pensions Commission interim report, led by Lord Hutton of Furness, recommended that the Government undertake a review of the fair deal policy. The Government confirmed their plans to take forward this recommendation at the spending review and have today launched a public consultation.

The Government welcome contributions from all interested groups.

The consultation document has been deposited in the Libraries of both Houses and can be found on the HM Treasury website at:

http://www.hm-treasury.gov.uk/consult_fair_deal _policy_publicsector.htm

and will close on 15 June 2011.

Oral Answers to Questions

Danny Alexander Excerpts

Tuesday 8th February 2011 Commons Chamber

[The Chief Secretary to the Treasury (Danny Alexander)]

The structural deficit was 8.8% of GDP in 2009-10. The Office for Budget Responsibility forecast is for it to be 7.6% in 2010-11, falling to 0.3% by 2015-16. More information is in the OBR’s forecast.

[Rehman Chishti]

OECD figures in November show that Britain entered the financial crisis with the largest structural budget deficit in the G7. Does the Chief Secretary believe that this country entered the crisis led by the biggest deficit deniers in the G7?

[Danny Alexander]

That is a very good question. The previous Government were running a structural deficit from 2001-02, with a structural deficit of 2.6% in 2007-08, the largest, as the hon. Gentleman says, in the G7 in 2007. They were deficit deniers then, they are deficit deniers now, and that is why they have no answers to the problems of our country today.

[John Howell]

My right hon. Friend will be aware that Tony Blair has said that

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

How would my right hon. Friend assess the effect of that failure on the current trend in the structural deficit?

[Danny Alexander]

Clearly, we as a Government are having to clear up the enormous mess that the previous Government left. That is why we have had to embark on some very difficult decisions on public spending and, indeed, taxation, but it is just worth listening to the OECD, which states that

“the UK was unique in its need for fiscal consolidation, because the deficit had gone completely out of control.

[John Cryer (Leyton and Wanstead) (Lab)]

On the basis of what the Chief Secretary has just said, why did the current Chancellor promise in 2008 to match Labour’s spending plans?

[Danny Alexander]

Our country’s key problem—the hon. Gentleman should accept it, not deny it like his Front Benchers—is that we have an enormous budget deficit, which was caused by the previous Government’s failures. We have to clean up that mess if our country is going to get back to prosperity, and, until the Opposition accept that very simple fact, they will have no answers at all.

[Several hon. Members]

rose—

[Mr David Hanson (Delyn) (Lab)]

Will the Chief Secretary first confirm that public sector debt was 42.5% in 1997 and 36.5% in 2008, the second-lowest debt of any G7 country? Will he secondly accept that investment during the last two years of the Labour Government was designed to keep people in their jobs and homes, expenditure that he supported at the time? Given the disastrous economic figures and the CBI’s comments before Christmas, will he just admit that what he is missing is a growth strategy, not the cuts that he opposed during the election?

[Danny Alexander]

What was missing from that was any reference to the subject of the question, which was the deficit. Labour Members seem keen to talk about everything except the deficit, which they left for this Government to clean up. I do not apologise at all for the tough decisions we have had to take to sort out that deficit, to introduce tax rises and to deal with public spending to ensure that this country gets back on track. They maxed out the credit card; we have to pay it off.

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

6. If he will take steps to allow charities providing services transferred to them by the NHS to recover value added tax.

--- Later in debate ---

[Jesse Norman (Hereford and South Herefordshire) (Con)]

12. What his policy is on transparency in private finance initiative contracts.

[The Chief Secretary to the Treasury (Danny Alexander)]

The Government are committed to transparency across all areas of public spending, including PFI contracts. All new central Government PFI contracts will be published, and the Treasury website holds PFI statistics that will be updated at the Budget.

[Jesse Norman]

I thank the Chief Secretary for that answer. Last week, the Ministry of Defence announced that it had chosen three PFI projects as pilots for a wider renegotiation strategy in order to generate a rebate for taxpayers. I and many other Members have warmly welcomed that news. Is my right hon. Friend planning to encourage other Departments to reopen their own PFI contracts to generate future savings?

[Danny Alexander]

I am grateful for the question, and I certainly support the work that the MOD is doing. We are actively encouraging Departments and local authorities to scrutinise their PFI contracts for savings. As my hon. Friend knows, the Treasury has published draft guidance to help contract managers identify PFI savings, and a pilot will test the savings measures in the contracts, which will help to scope out possible savings and ensure that other Departments can make the same progress as the MOD.

[Mr Speaker]

Order. I would be grateful if the Chief Secretary could look at the House as he addresses us.

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

What will the right hon. Gentleman do about the scandal of bunching private finance initiative contracts together and selling them on in the private sector, with no benefit to the public sector? Is he going to take action, and if so, when?

[Danny Alexander]

As the hon. Gentleman implies, a vast number of PFI contracts were negotiated under the previous Government. If he, in common with any other hon. Members, has examples of low value for money PFI contracts or other concerns, I would be happy to look at them, as I said at the previous Treasury questions. Since then, no hon. Member except my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) has come forward with such examples. I therefore look forward to hearing from the hon. Gentleman.

[Steve Rotheram (Liverpool, Walton) (Lab)]

14. What recent assessment he has made of the progress of the work of the Independent Commission on Banking.

--- Later in debate ---

[James Wharton (Stockton South) (Con)]

T4. The 2010 North East Research and Information Partnership annual jobs report shows a net increase in employment in the region of about 1,300 jobs over the past year. What are the Government doing to ensure that the private sector recovery in the regions continues?

[The Chief Secretary to the Treasury (Danny Alexander)]

The Chancellor announced measures in the Budget on corporation tax and national insurance breaks, particularly for companies in the regions. We have set up local enterprise partnerships, which enable local authorities and businesses to work together to promote their own economic interests, and in due course we will announce the first round of decisions on the regional growth fund, which will help to support exactly the sort of initiatives the hon. Gentleman is concerned about.

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

Does the Chancellor agree that any credible strategy for growth must include proposals for a fully capitalised, properly independent green investment bank? Will he assure the House that the Treasury has ceased to act as a roadblock to the creation of such a bank?

--- Later in debate ---

[Tim Farron (Westmorland and Lonsdale) (LD)]

Our mountain rescue teams are staffed by outstanding volunteers doing professional work, but outrageously they have to pay VAT and vehicle excise duty on life-saving equipment. Is it not time that this Government put an end to this and refunded that VAT?

[Danny Alexander]

My hon. Friend is quite right to celebrate the work of the mountain rescue teams. Of course they face additional equipment costs, and that is why we allocated funds in the spending review to help to support mountain rescue teams with those costs. The Department concerned, the Department for Transport, will make an announcement on this in due course.

Public Service Pensions

Danny Alexander Excerpts

Thursday 3rd February 2011 Written Statements

[The Chief Secretary to the Treasury (Danny Alexander)]

Legislation governing public service pensions requires them to be increased annually by the same percentage as additional pensions (state earnings-related pension and state second pension). Public service pensions will therefore be increased from 11 April 2011 by 3.1% in line with the annual increase in the consumer prices index up to September 2010, except for those public service pensions which have been in payment for less than a year, which will receive a pro rata increase.

Oral Answers to Questions

Danny Alexander Excerpts

Tuesday 21st December 2010 Commons Chamber

[Joseph Johnson (Orpington) (Con)]

15. What recent assessment he has made of the effectiveness of the private finance initiative.

[The Chief Secretary to the Treasury (Danny Alexander)]

In the spending review the Government abolished the private finance initiative credit system, which provided Departments with a ring-fenced budget that could be used only to support local authority PFI projects. The change levelled the playing field between PFI and other forms of procurement.

[Rehman Chishti]

What does the Chief Secretary think of the comments made by the former Paymaster General, who said that PFI contracts were far too generous and too expensive?

[Danny Alexander]

That has a striking comment, coming from a Minister who was in the Department responsible for those things, and it reflects the general attitude towards public money that was prevalent under the previous Administration. There is a great deal of work that we can do as a Government to ensure that in future PFI is used only where it is absolutely necessary, and that we get best value for public money. That is how we should approach these things.

[Dr Coffey]

One of my constituents thinks that the PFI contracts that have been negotiated are one of the greatest scandals ever, if only because one of his relatives has made millions out of one. Apart from the potential £875 cost of a Christmas tree, which PFIs have caused the Minister the most angst?

[Danny Alexander]

I am not sure that it would be appropriate for me at this stage to pick out individual examples. The important thing to say is that, in common with the work that we are doing to ensure that we get better value from our suppliers across Government and that those suppliers are making a contribution to reducing the deficit, we are working on examining the future costs of PFI, so that where we can we reduce those costs. That is very important for ensuring that we reduce the deficit effectively and have the maximum amount of money left for front-line services.

[Tony Baldry]

A reduction of just 0.05% in contractors’ fees could save some £500 million a year. What can we do to help the Chief Secretary and the Chancellor bring pressure to bear on equity holders and key industry PFI players to persuade them to cut voluntarily their annual charges for rentals and services?

[Danny Alexander]

I am grateful to the hon. Gentleman for his festive offer of assistance with these matters. I urge him and other colleagues on both sides of the House to draw the Government’s attention to areas where they see PFI schemes being wasteful, or to examples that they would like to bring to our attention. I would be only too delighted to pick those up if he drew them to my attention.

[Joseph Johnson]

Has my right hon. Friend had a chance to read the Public Accounts Committee’s recent report on PFI in the credit crunch? It suggested that many projects are locked into very high financing costs for periods of up to 30 years. I wonder what scope there is to claw back some of the gains in the event of any refinancing.

[Danny Alexander]

The Treasury will respond in the normal way to that report, and it would not be proper for me to comment on it until we have published the relevant Treasury minute. The Treasury and the Cabinet Office are working closely together to ensure that the PFI industry contributes its fair share of savings from operational projects.

[Kelvin Hopkins (Luton North) (Lab)]

PFI was, of course, invented by the Tories; I may be in a small minority in having consistently opposed PFI and urged that we should have public investment instead. In making an assessment of PFI, will the Government make comparisons with superb public investment projects such as Luton sixth-form college, which has been rebuilt at far less cost than it would have been under PFI?

[Danny Alexander]

I am grateful for that comment. I hope that the hon. Gentleman will welcome the decision that we took in the spending review to end the PFI credit system. Departments now have to look at the best way of funding projects within their own budgets; effectively, the PFI credit system meant that they could top-slice local government funding for local authority projects. The change that we have made means that Departments will have to make a proper comparison between PFI costs and the sorts of costs that the hon. Gentleman has described. I am sure that the House will have heard what he has said.

[Mr Jim Cunningham (Coventry South) (Lab)]

As my hon. Friend the Member for Luton North (Kelvin Hopkins) said, PFI was an invention of the previous Tory Government, who were having difficulties building new hospitals. Is it beyond the wit of the Chief Secretary, who knows that most of those PFIs were local negotiations and have break clauses in them, to use his imagination and look into the break clauses?

[Danny Alexander]

The hon. Gentleman makes an important point. As for the politics of the matter, it was, of course, the previous Government who oversaw a massive expansion of PFI. It does not come well from the hon. Gentleman and other Opposition Members to be criticising an approach that ballooned under the previous Government.

[Bill Esterson (Sefton Central) (Lab)]

My constituent Jeanette May wrote to me recently about the cancellation of the PFI at Maghull prison in my constituency to say that cutting the prison will affect the local economy, especially the immediate population. Does the Chief Secretary understand the impact that cuts such as the cancellation of Maghull prison will have, and how they will hit jobs and growth in communities across the country?

[Danny Alexander]

I am bound to say that that is yet another example of a saving that is necessary to tackle the terrible inheritance left by the previous Government, which Opposition Members now seem to be opposing. They also oppose every single cut, yet do not recognise that the consequence of such an approach would be to put this country back in the economic mess that they caused.

[Phil Wilson (Sedgefield) (Lab)]

7. What recent steps he has taken to reduce bonuses paid by banks to their staff.

--- Later in debate ---

[Fiona Mactaggart (Slough) (Lab)]

11. What recent representations he has received on the overview of the impact of the spending review 2010 on equalities; and if he will make a statement.

[The Chief Secretary to the Treasury (Danny Alexander)]

Throughout the spending review process, the Treasury looked closely at the impact that decisions might have on different groups. We published “Overview of the impact of Spending Review 2010 on equalities” on 20 October, alongside the spending review document. Departments will consider the impact on equalities of decisions that are made as a result of the spending review, in the light of their legal obligations. On the day of the spending review, the decision to publish that document was welcomed by, among others, the Equality and Human Rights Commission.

[Fiona Mactaggart]

The Chief Secretary will recall that the document said that it

“would not…be meaningful to assess the impact”

on gender of the reductions in employment “at this stage”. Given that women’s unemployment exceeds 1 million and is at its highest level since 1988, when will the Government apologise to women for making them bear the brunt of their economic policies?

[Danny Alexander]

I do not accept that analysis. For the sake of completeness, the hon. Lady should recognise that the Government are cleaning up a mess left by the previous Government. If she is interested in the impact on women, she should consider the pay freeze that we have imposed in the public sector, which will protect jobs, and women’s jobs in particular. It is also of benefit to women that we are allowing pay rises for people earning less than £21,000, a disproportionate number of whom are female. For the sake of completeness, she should consider those facts.

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

Will the Chief Secretary join me in explaining to the hon. Member for Slough (Fiona Mactaggart) that the Government’s policies will reduce inequalities between men and women, particularly given our more flexible approach for part-time workers? Will he reduce other inequalities, such as in spending in rural and urban areas, and ensure that the balance is restored in favour of rural constituencies, such as his and mine?

[Danny Alexander]

The hon. Lady has made some important points. Throughout this process we will have regard to the impact that spending decisions have on different groups, including people who live in rural areas, and in particular the most disadvantaged. Our investment in early years education and the pupil premium are important to ensure that the most disadvantaged have the better life chances that we all want them to have.

[Kerry McCarthy (Bristol East) (Lab)]

Does the Chief Secretary accept the independent analysis that the poorest 10% of people will suffer 15 times more than the richest as a result of the Government’s spending decisions? With women and children being hit the hardest, support for people with disabilities being cut, and the Business Secretary suggesting that the winter fuel allowance is being lined up for the axe, no wonder there is growing public anger about big corporations and wealthy individuals seeming to be able to get away without paying tax altogether. What will he do to restore a sense of fairness and justice to the economic system?

[Danny Alexander]

I think that the hon. Lady was trying to get every subject into one question before Christmas. I do not accept the analysis that she offers. She should study more carefully the analysis in the spending review, which took into account the impact of taxation, spending reductions and welfare changes. It showed that as a share of people’s income, and taking account of benefits in kind from the state, people in the wealthiest quintile make a greater contribution to deficit reduction than the poorest. That is in keeping with the Government’s stated ambition of carrying through the unavoidable deficit reduction plan, which is necessary because of the mess that the previous Government left, in a way that is fair and supports economic growth.

[Mr Dominic Raab (Esher and Walton) (Con)]

12. What plans he has to implement the recommendations of the Dyson report on new technology.

--- Later in debate ---

[Chris Skidmore (Kingswood) (Con)]

16. What assessment he has made of the Office for Budget Responsibility’s report on the likely effect of the outcome of the comprehensive spending review on the budget deficit.

[The Chief Secretary to the Treasury (Danny Alexander)]

The spending review set out more than £80 billion of spending reductions by 2014-15, and in its latest forecast, published on 29 November, the independent Office for Budget Responsibility judged that the Government’s overall plan had a greater than 50% chance of balancing the structural current deficit in 2014-15, a year ahead of our mandate. Of course, I welcome that judgment.

[Chris Skidmore]

This year, the country faces a deficit of about £148.5 billion. Action taken by this Government will, according to the OBR, reduce that to £18 billion by 2015-16, yet there are those who reject that action and would prefer to do next to nothing. Does the Chief Secretary agree that to do nothing would cripple future generations with unbearable amounts of debt for which they were not responsible?

[Danny Alexander]

I agree completely, and it is worth adding that if the Government did not have a plan to reduce the deficit, as the previous Government did not, and we lost control of our public finances, the poorest in society would suffer most from that failure to take decisive action.

[Derek Twigg (Halton) (Lab)]

We read this morning that the Business Secretary has said that the Conservatives wanted to cut the winter fuel allowance in the comprehensive spending review. Will the Chief Secretary put it on the record today that there will be no cut to the winter fuel allowance and no change in the eligibility criteria during this Parliament?

[Danny Alexander]

We are sticking to the winter fuel allowance. We announced that in the spending review, and we have not changed our position. In addition, we have made permanent the £25 a week level of the cold weather payment. The previous Government had planned to return it to £8.50 a week. Imagine what that would be doing now to the millions of families who are suffering in the cold.

[Matthew Hancock (West Suffolk) (Con)]

What assessment has the Chief Secretary made of the impact of the CSR on business confidence, and especially the ability to take on new people? For instance, the Dalton’s peanut factory in my constituency is taking on more people because of the confidence in the stability plans set out by the Government.

[Danny Alexander]

I am glad to hear about the companies in my hon. Friend’s constituency, which share the confidence of many businesses that we have a Government who have got to grips with the public finances. That gives companies the confidence to invest, which is an important part of ensuring the private sector-led recovery that we need.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

17. What plans his Department has to ensure greater transparency in remuneration in the financial services sector.

--- Later in debate ---

[Henry Smith (Crawley) (Con)]

18. What estimate he made of the effect on public finances of the introduction of a graduate tax.

[The Chief Secretary to the Treasury (Danny Alexander)]

I agree with the assessment of the graduate tax that the Chancellor gave in answer to earlier questions. I add that, under a graduate tax, those on the lowest incomes after leaving university would pay more than they do under our proposals. From a progressive point of view, there is an important argument against a graduate tax.

[Henry Smith]

I am grateful to my right hon. Friend for that answer. Does he agree that a graduate tax is neither fair nor progressive and that it would do nothing to help the 17% of my constituents who go on to higher education?

[Danny Alexander]

I agree. Our proposals, which the House has agreed, ensure that no one will make a payment up front when they go to university, or start repaying until they earn more than £21,000 after leaving university. I note that some hon. Members now advocate a graduate tax. They have said that they will produce their detailed plans by the end of the year, and we greatly look forward to seeing them.

[Hugh Bayley (York Central) (Lab)]

19. What steps his Department is taking to stimulate economic growth.

[The Chief Secretary to the Treasury (Danny Alexander)]

As the Chancellor said earlier, the Government have launched a growth review—a fundamental assessment of how each part of government can contribute to private sector success by addressing the barriers to growth that industry faces. That will report at the time of the Budget.

[Hugh Bayley]

When a private business wants to grow, it invests, yet the Government are slashing not just current expenditure but investment. What are they planning to do to increase private sector investment? In particular, what are they doing to get banks to lend to small and medium-sized businesses?

[Danny Alexander]

The hon. Gentleman may not be aware of the previous Government’s plans for capital investment, but the plans that we set out in the spending review put slightly more into capital investment than the previous Government planned. In particular, we are expending more on capital investment in transport infrastructure—the sort of investment that is most valuable to many businesses—in the next four years than was spent in the past four years. He should give the Government some serious credit for that.

[George Freeman (Mid Norfolk) (Con)]

As all the indicators are beginning to show that the Government’s deficit programme encourages private sector investment and growth, would my right hon. Friend like to comment on the rumours in this morning’s financial pages following the recent summit with the President of the United States that the Americans are beginning to view us a model of how to promote growth by tackling deficits?

[Danny Alexander]

I am happy to restrict my comments to this country’s plans rather than remarking on those of other countries. However, our approach to reducing the deficit has been firm and clear. It has established confidence and is putting in place a firm platform—a precondition—for economic growth in future. It is therefore vital to stick to and deliver the plans that we set out in the spending review.

[Stuart Andrew (Pudsey) (Con)]

20. What discussions he has had with his international counterparts since the G20 Seoul summit on co-ordination of efforts to reduce Government deficits.

--- Later in debate ---

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

What specific equality impact assessment did the Treasury carry out on the potential effects on women of the two-thirds reduction in Warm Front scheme funding next year announced in the comprehensive spending review?

[The Chief Secretary to the Treasury (Danny Alexander)]

As I said in answer to questions earlier, we carried out an impact assessment, which we published, of the spending review. Individual impact assessments were also carried out. The matter to which the hon. Lady refers was decided by the Department of Energy and Climate Change, and it is the responsibility of that Department to carry out a specific impact assessment. The Treasury undertook its responsibilities fully in relation to the spending review as a whole.

[Mr John Baron (Basildon and Billericay) (Con)]

What progress is the Chancellor making on the Government’s review of the complex rules surrounding foreign earnings inherited from the Labour party, given that those rules are encouraging a number of companies to leave these shores? Those companies include WPP, Wolseley and United Business Media. That means a loss of revenue to the UK Exchequer.

--- Later in debate ---

[Mr Speaker]

Order. I assume that the hon. Gentleman is requesting a visit in which the Minister will talk about the policies of the Government.

[Danny Alexander]

I am certainly not going to let the hon. Gentleman know of my intentions in advance, but it is characteristic of the attitude on his side of the House that Opposition Members do not have a single question to ask that offers a proposal for dealing with the economic problems that they caused. It is economic common sense on the Government side of the House; just nonsense on the Opposition side.

[Duncan Hames (Chippenham) (LD)]

Many jobs today require a university degree, yet compared with the position on funding employees’ vocational training, there is no equivalent tax shield for employer contributions to higher education. Will the Chancellor explore changes to tax rules to encourage voluntary contributions from employers towards their graduate recruits’ higher education?

Infrastructure Cost Review

Danny Alexander Excerpts

Tuesday 21st December 2010 Written Statements

[The Chief Secretary to the Treasury (Danny Alexander)]

The Government have today published the report of an investigation into how to reduce the costs of delivery of civil engineering works for major infrastructure projects.

The report identifies a number of drivers for the higher cost of construction in the UK compared to other EU countries and supports the view that higher costs for UK infrastructure are mainly generated in the early project formulation and pre-construction phases. Efficiency improvements could lower the costs of delivery and realise potential benefits of £2 billion to 3 billion per annum. A number of specific areas where the Government are considering taking action to deliver these benefits have been identified. A prioritised work programme for implementation will be finalised and announced around the time of Budget 2011.

Copies of the document have been deposited in the Libraries of both Houses and are available on the Treasury website at: www.hm-treasury.gov.uk.

Unfunded Public Service Pension Contributions

Danny Alexander Excerpts

Thursday 9th December 2010 Written Statements

[The Chief Secretary to the Treasury (Danny Alexander)]

The Government announced at the spending review their plans to take forward recommendations made by the Independent Public Service Pension Commission in its interim report. These plans included a commitment to undertake a review of the discount rate used to set contributions in the unfunded public service pension schemes.

Today the public consultation on the discount rate has been launched and the Government would welcome comments from all interested groups. The consultation document has been placed in the Libraries of both Houses, can be found at: http://www.hm-treasury.gov.uk/consult_unfunded_pensions.htm and will end on 3 March.

Oral Answers to Questions

Danny Alexander Excerpts

Tuesday 16th November 2010 Commons Chamber

[Philip Davies (Shipley) (Con)]

9. What recent assessment he has made of the effectiveness of the outcome of the comprehensive spending review in reducing the budget deficit.

[The Chief Secretary to the Treasury (Danny Alexander)]

The Office for Budget Responsibility will update its forecast of the deficit on 29 November, taking into account the spending review. Other assessments have backed the Government’s plans, with the International Monetary Fund, for example, stating that our consolidation plan

“greatly reduces the risk of a costly loss of confidence in fiscal sustainability and will help rebalance the economy”.

That backs our view that the spending review was fair and supports growth.

[Philip Davies]

One of the big winners from the comprehensive spending review was, of course, the European Union. The EU has not had its accounts signed off by auditors for 16 years running, so if the Government are looking for a popular way to reduce the deficit, may I suggest that they go to the EU and say that it will not get another penny-piece out of the UK until it has had its accounts signed off?

[Danny Alexander]

Of course, the European Court of Auditors report, which fails to qualify the accounts for the 16th year in succession, is disappointing, as my hon. Friend observes. We will continue to champion reform through engagement with European institutions and other member states. It is worth him bearing in mind that the Government’s most important priority for the forthcoming budget negotiations is to reduce and to keep under control the EU budget, not just next year, but in subsequent years, in recognition of the fact that many EU countries are facing tough financial circumstances, as we are.

[Ms Angela Eagle (Wallasey) (Lab)]

The Chancellor’s reckless choice to cut deep and fast at home means that UK jobs and growth are now reliant on achieving booming exports on a scale not seen for more than 60 years. We know that Europe is our single largest export market. Will the Minister share with the House the latest evidence of the growth of demand in that market?

[Danny Alexander]

There is evidence of export growth in many sectors of the economy, and the Government have played a significant role in promoting exports, as the recent trade delegation to China showed. The hon. Lady has a poor record of predicting the economy. In April 2008, she was engaged in a debate that observed that there was an extreme bubble in the housing market. She described that as a “colourful and lurid fiction” that

“has no bearing on the macro-economic reality.”—[Official Report, 2 April 2008; Vol. 474, c. 825.]

I would rather take the forecast of the Office for Budget Responsibility than hers.

[Mr Andrew Tyrie (Chichester) (Con)]

The CSR is virtually silent on privatisation’s contribution to reducing the deficit. Will the Chief Secretary confirm that those receipts, which normally score in the accounts as negative spending, as he knows, will, when they come, be additional to and not a substitute for the spending reductions already announced in the CSR?

[Danny Alexander]

I can confirm that.

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

The Chartered Institute of Personnel and Development has revised upwards its forecast of the number of jobs lost in the public sector. It also suggests that the VAT increase will raise unemployment in the private sector. Reputable forecasting organisations, including the CBI, suggest that there will be an increase in unemployment overall in the next year. Does the Chief Secretary now accept that unemployment will increase as a result of the CSR, and is that why the Government have bumped off the autumn forecast of the OBR to the end of this month?

[Danny Alexander]

I am content to rely on the forecast of the independent Office for Budget Responsibility, which forecasts a reduction of 490,000 over the next four years in the head count in the public sector, but a net increase of jobs in the private sector of 1.6 million, leading to additional jobs being created in the economy. Of course, the hon. Gentleman will look forward, as I do, to its forecast on 29 November.

[Mr Brian Binley (Northampton South) (Con)]

10. What recent steps he has taken to increase levels of bank lending to small and medium-sized businesses.

--- Later in debate ---

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

16. What estimate he has made of the cost to the Exchequer of redundancy and retraining requirements arising from implementation of proposals contained in the comprehensive spending review.

[The Chief Secretary to the Treasury (Danny Alexander)]

The total cost of work force reforms will depend on the decisions of hundreds, if not thousands, of employers up and down the country. Detailed decisions regarding the number of redundancies and the associated costs that may be required have yet to be finalised in most cases, so it would not be appropriate for the Treasury to speculate on any aggregate numbers at this stage.

[Diana Johnson]

In the police service alone, major job losses are already being announced, such as in the west midlands, Greater Manchester and Lincolnshire, so not only will there be up-front redundancy costs, but there will be the loss of skills and experience. Does the Chief Secretary agree that the cost of redundancies could be as high as £8 billion?

[Danny Alexander]

I have to say that that sounds like rather an overestimate, but the hon. Lady is right to say that employers are spelling out their own plans for redundancies and for managing their work force in an appropriate way. I recognise that many staff will be very concerned about that, but I believe that it is right that they hear about specific plans from their own management, rather than draw conclusions from higher level aggregate numbers.

[Glyn Davies (Montgomeryshire) (Con)]

17. What recent discussions he has had with his international counterparts on the co-ordination of efforts to reduce Government deficits.

--- Later in debate ---

[Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)]

T8. May I give those on the Treasury Front Bench the opportunity to answer the question on child benefit that they failed to answer earlier? How do they justify taking child benefit off a single-earning family on £45,000 and allowing a family that earns £80,000 to retain child benefit? An answer this time would be appreciated.

[The Chief Secretary to the Treasury (Danny Alexander)]

As the hon. Gentleman knows—and as the whole House knows—the justification for the measure that we took was to ensure that the cost of the spending review fell equally across the population so that those with the broadest shoulders would bear a greater share of the burden. In those circumstances, it is right that child benefit should be taken away from families with higher rate taxpayers. I would have thought that the Opposition would support that, not oppose it.

[Mrs Helen Grant (Maidstone and The Weald) (Con)]

T4. What fiscal action will be taken to increase social mobility and to stimulate it in our country?

[Danny Alexander]

In the spending review, we took a number of spending decisions that will support social mobility. We chose to invest in early-years education for disadvantaged two-year-olds—a new investment—and to maintain the 15-hours entitlement for three and four-year-olds, something that was introduced under this Government. We chose to invest in a pupil premium that will give additional support to the most disadvantaged children. In tough financial times, that is the strongest investment in social mobility made by any Government in this country for many a long year.

[Stephen Timms (East Ham) (Lab)]

The White Paper last week stated that HMRC will be taking on new responsibilities in collecting and processing real-time pay data for the calculation of universal credit. How much has been allocated for the IT to deliver that change?

--- Later in debate ---

[Jim McGovern (Dundee West) (Lab)]

Can the Chancellor or another Minister tell us what assessment has been made regarding potential job losses due to changes in the benefit system? Much concern has been expressed in my constituency, particularly yesterday in the local press, that up to 700 jobs might be lost in the HMRC office in Dundee as a result of such changes. What assurances can Ministers give me and my constituents that that will not be allowed to happen?

[Danny Alexander]

The welfare reforms that we are proposing are designed to support people off benefit and into work. That is the whole point of the reforms that the Secretary of State for Work and Pensions outlined last week. The reforms that will create a universal credit and some of the changes that we announced in the spending review are all there to help people off benefit and into work, and to help people get jobs, which is what the hon. Gentleman should support.

[Penny Mordaunt (Portsmouth North) (Con)]

Can the Chancellor confirm that, unlike the shadow Chancellor, he is not an instinctive cutter?

--- Later in debate ---

[Danny Alexander]

It should be obvious to the hon. Gentleman that higher rate taxpayers have greater means than those at the bottom of the income spectrum. It is a basic principle of fairness that underlies the spending review that we need to ensure that those with the broadest shoulders bear a greater share of the burden. As I said in response to the question earlier, asking higher rate taxpayers not to collect child benefit seems to be one of the decisions in the spending review that the Opposition should find it easiest to support.

[Jo Swinson (East Dunbartonshire) (LD)]

As my right hon. Friend says, it is right that in reducing the deficit, those with the broadest shoulders should bear the greatest burden, but do the Government understand the genuine anger that the public feel when it seems as though wealthy individuals and large companies can get away without paying their tax bills? What reassurance can the Minister give my constituents that the richest in society will pay their fair share?