Amendment of the Law
Debate between Ed Balls and George Osborne(9 years, 8 months ago)
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Ed Balls
We know from the autumn statement that the OBR confirmed that the scale of these spending cuts was agreed by the Prime Minister, the Chancellor, the Deputy Prime Minister and the Chief Secretary, and the same thing is clear about this Budget document. The OBR says:
“This profile is driven by a medium-term fiscal assumption that the Treasury has confirmed ‘represents the Government’s agreed position for Budget 2015’ and that was ‘discussed by the Quad and agreed by both parties in the Coalition.’”
The Liberal Democrats now come along and say that they were not really in favour of the bedroom tax, and not really in favour of these fiscal plans, but we know the truth. That is why we need a fairer and more balanced approach.
We will have sensible spending cuts in non-protected areas. We will cut winter fuel payments for the richest 5% of pensioners. We will cap child benefit at 1% for two years. The shadow Chief Secretary has been setting out in our zero-based review of every pound spent by Government cuts from rooting out waste and inefficiency in policing, in local government, in defence, and in schools. We are going to get rid of the police and crime commissioner elections. We are going to get rid of the free schools. We are going to stop the overpayment of housing benefit. We are going to deal with the issue of—[Interruption.] I meant new free schools. The shadow Chief Secretary has set out ways in which we can make those sensible cuts in non-protected areas.
We will also make fairer choices. We will reverse—[Interruption.] If the Chancellor wants to intervene, I will happily give way.
Tax Avoidance (HSBC)
Debate between Ed Balls and George Osborne(9 years, 9 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Speaker
Order. I do not wish to be pedantic, simply accurate, but I think the wording of the urgent question was “avoidance”—the tax avoidance scandal. The point is on the record.
The Chancellor of the Exchequer (Mr George Osborne)
The allegations about tax evasion at HSBC Swiss are extremely serious and have been the subject of extensive investigation by Her Majesty’s Revenue and Customs. Money has been recovered for the Exchequer, and HMRC continues to be in active discussion with our prosecuting authorities. The chief executive of HMRC and the Director of Public Prosecutions have confirmed that they have the necessary resources to carry out their work on this matter, and if they need more resources they will get them.
The House should know, however, that in each and every case the alleged tax evasion—both by individuals and the bank—happened before 2006 when the shadow Chancellor was the principal adviser on tax policy and economic affairs to the then Labour Government. News that the French had got hold of the files with the names of the bank accounts became publicly known in 2009 when the shadow Chancellor was sitting on the Government Benches, and the files were requested and recovered by HMRC before May 2010, when he was a member of the Cabinet.
The right hon. Gentleman has written to ask me five questions about my responsibilities. I will answer each one directly, and in return he can account for his own responsibilities. He asked about what he calls the selective prosecution policy pursued by HMRC, and whether that decision was made by Ministers. Yes, that decision was made by Ministers, and the Inland Revenue’s overall approach to prosecuting cases of suspected serious tax fraud was set out in the Official Report on 7 November 2002, column 784W, in an answer by the then Chancellor of the Exchequer, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). That was confirmed again when HMRC was created in 2005—again by the right hon. Gentleman. I have increased resources for tackling tax evasion, and as a result prosecutions are up fivefold. I have answered for my responsibility on that question; perhaps the right hon. Member for Morley and Outwood (Ed Balls) will answer for his and tell us whether he drafted that policy.
Secondly, the right hon. Gentleman asked when I was first made aware of the HSBC files, what action I took, and whether I discussed them with the Prime Minister. I first became aware of the existence of the files in 2009 when a story appeared in the Financial Times. I was shadow Chancellor at the time so I could take no action, and I could not discuss it with the then Prime Minister because I was not on speaking terms with him. That is what I knew. The right hon. Member for Morley and Outwood was a Cabinet Minister. When he heard about these revelations, did he speak to the Prime Minister about them?
Thirdly, the right hon. Member for Morley and Outwood asked why we appointed Stephen Green to the Government. We appointed him because we thought he would do a good job as trade Minister, as did the Labour party, which welcomed the appointment. The trade job was not Stephen Green’s first public appointment. That was when he was appointed by the previous Government to be not just a member of the Prime Minister’s business council but its chair—a post he continued to hold after the existence of the HSBC files became public and after HMRC negotiated to recover them under the previous Government. I have explained why we appointed Stephen Green. Perhaps the right hon. Member for Morley and Outwood will explain why he appointed Stephen Green.
Fourthly, the right hon. Gentleman asked about discussions with Stephen Green on tax evasion. I can confirm that the Cabinet Secretary and the director general of ethics at the Cabinet Office carried out the background checks for ministerial appointments that were put in place by the previous Government. Stephen Green’s personal tax affairs were examined by HMRC on behalf of the House of Lords Appointments Commission, again using the procedures put in place by the previous Government. Those are the procedures we followed when we appointed Stephen Green. What procedures did the right hon. Gentleman follow?
Finally, the right hon. Gentleman asked me why I signed a deal with the Swiss authorities in 2012. He does not need my explanation. Listen to what the shadow Chief Secretary at the time, the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), said:
“We support the agreement signed by the UK and Swiss Governments to secure billions in unpaid tax.”––[Official Report, Finance Public Bill Committee, 26 June 2012; c. 655.]
She is right: billions of unpaid tax never collected under a Labour Government. Under this Government, tax evasion is at the top of the G8 agenda. We have collected more money and prosecutions have increased five times over. Ahead of the Budget, I set the Treasury to work on providing further ways to pursue not just the tax evaders, but those providing them with advice. So anyone involved in tax evasion, whatever your role, this Government are coming after you. Unlike the previous Government, who simply turned a blind eye, this Government are taking action now and will do so again at the Budget. So I am happy, any time, to answer for our record on tackling tax evasion. Now, let him account for his.
Ed Balls
Finally, the Chancellor has been dragged to the House to answer questions about the HSBC scandal, which broke a full two weeks ago. At a time when the living standards of working people are squeezed, when our public services are under pressure, when HSBC is paying out high bonuses and when the amount of uncollected tax has gone up under this Government, we need proper answers, not another Chancellor sweeping these issues under the carpet as we have heard today. [Interruption.] I think the hon. Member for Northampton North (Michael Ellis) should listen to these questions and then the Chancellor can tell us whether he actually has any answers. Don’t you agree, Mr Speaker?
Detailed information was passed to this Government in May 2010 about 1,100 HSBC clients—[Interruption.]
Mr Osborne
Well, I do not think that performance will save the shadow Chancellor’s political career. Every single question he asked I had already answered. The whole House can see that the person bringing this question to the House is the person with the most to answer for, and that he has no answers. He has nothing to say about the fact that every single one of these alleged offences occurred when he was the principal tax adviser to the last Labour Government, and nothing to say about the fact that the HSBC files came to light while he was in office. He said I admitted I knew about them in 2009. I read the Financial Times—it was in the newspapers; he was in the Cabinet and did absolutely nothing about it. He said that the information was provided to the Government in May 2010.
Mr Osborne
He nods his head, but the information was provided in April 2010, when there was a Labour Government and he was in the Cabinet. He has nothing to say either about the agreement with the French authorities restricting the use that could be made of this information—an agreement that we are now busily trying to change.
None of these things has the shadow Chancellor admitted to or apologised for, and none of it is of any surprise to Government Members, because the Labour party was the friend of the tax avoiders and the tax evaders when it was in office. When we entered office, City bankers were paying lower tax rates than those who cleaned for them; foreigners were not paying capital gains tax; hedge funds were abusing partnership rules; and the richest in our society routinely did not pay stamp duty at all. We have put at end to all of that, and we will take more action in the Budget. All we have on the Opposition Benches is a bunch of arsonists throwing rocks at the firefighters who are putting out the fire that they started.
The shadow Chancellor comes to the House fighting for his political life. He asks about tax evasion, but he was the principal tax adviser when tax evasion occurred. His economic policy is in tatters, and he cannot name a single business supporter of his business policy. His tax avoidance campaign has turned into a war with his own window cleaner. Now he has lost the confidence of his colleagues and his leader, but he lost the confidence of the country a long time ago.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(9 years, 10 months ago)
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Mr Osborne
My hon. Friend is absolutely right that national insurance is a tax on jobs—
Mr Osborne
My hon. Friend is a champion of businesses in his constituency. That is one of the reasons unemployment has fallen in Windsor and 2,000 businesses in Windsor are benefiting from our employment allowance. We are going to go on reducing national insurance on employing 21-year-olds and apprentices. The alternative path—the path offered by the Labour party—is to put the jobs tax up. That would increase unemployment and return Britain to the economic mess it was in when Labour was last in charge.
Mr Osborne
The new tax relief for theatres has been a real success. It has been taken up by many theatres and is supporting regional productions. Separately, at my hon. Friend’s request, we have also helped the Royal Shakespeare Company to take its plays to China. Orchestra tax relief, the consultation on which we announced last week, will be another huge boost for British culture and music. We will set out further details in the Budget about how it will work, but it will be there to support a thriving orchestra industry—if that is the right word!
Ed Balls (Morley and Outwood) (Lab/Co-op)
First, on a note of consensus, today is Holocaust memorial day. Following our conversation last night concerning today’s report by the cross-party Holocaust commission, on which I am proud to serve, will the Chancellor confirm the cross-party agreement to fund the commission’s recommendations, alongside ongoing funding, for the rest of the decade, for the vital work of the Holocaust Educational Trust, to ensure we have a new and permanent memorial and that future generations never forget that terrible atrocity?
Turning to today’s GDP figures, is the Chancellor, like me, concerned that economic growth is slowing? With just 100 days until the election, will working people be better off than when he became Chancellor, or will they be worse off?
Mr Osborne
First, this being the 70th anniversary of the liberation of Auschwitz, we should remember the inhumanity and the suffering of those who died and those who live with the memories of the holocaust, and we should vow as a nation to keep their memory alive. The right hon. Gentleman and Members from other political parties served on the Holocaust commission, the chairman of which, Mick Davis, briefed the Cabinet today on its proposals for a permanent memorial and an education learning centre. I made it clear in the Cabinet meeting that the Government would provide £50 million to support this brilliant plan, and of course we will continue to fund the work of the Holocaust Educational Trust, which takes Members and many school children to Auschwitz to see for themselves the horror that happened there. Across the House, we can come together to commemorate this day and ensure that the holocaust is never forgotten and that we never repeat its mistakes.
I hope you, Mr Speaker, will allow me a slight change of tone for a couple of seconds. The GDP numbers, which the shadow Chancellor complains about, show that Britain’s was the fastest-growing major economy in the world in 2014. He kept telling me to listen to the IMF—well, the head of that organisation said that few countries were driving growth like America and the UK. Growth is improving, the deficit has been reduced and unemployment is falling, and the President of the United States says we must be doing something right. When the shadow Chancellor complained about the Prime Minister’s going for dinner at the White House, he said, “I haven’t been neglected. They invited me in and gave me coffee and biscuits.” That is all the endorsement he is going to get for his economic plan anywhere in the world.
Ed Balls
It is good we have cross-party agreement fully to fund the Holocaust commission’s report.
If things really were fine and if the economy really were fixed, people would be better off, but instead they are worse off, and the Chancellor would have balanced the books, as he promised, but he has not—he has completely failed to do it. It is because of that failure on the deficit that he is now planning spending cuts in the next Parliament that the IFS calls “colossal” and that the Office for Budget Responsibility says will take us back to levels in our economy not seen since the 1930s—before the NHS existed. Every developed country with spending as low as he is aiming for has widespread charges for health care. Is that not the real Tory economic plan?
Mr Osborne
We have a free-at-the-point-of-use national health service, which we are proud of and will continue to fund. What is clear is the total confusion in Labour’s health policy today. This morning the Labour leader said he was going to use his so-called mansion tax to pay down the deficit; six days ago the shadow Chancellor said that money would be used to pay for his NHS plan. It is total confusion today. The only way to have a strong national health service is to have a strong economy.
Let me end on this note. We read in the last couple of days that the shadow Chancellor has been sidelined from the general election:
“In a major humiliation, party bosses have quietly shunted”
him
“out of the media spotlight”.
Let me reach across the Dispatch Box and offer the hand of friendship. Let us resolve that we are both going to put him at the centre of this general election campaign.
Charter for Budget Responsibility
Debate between Ed Balls and George Osborne(9 years, 10 months ago)
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Mr Osborne
I will give way in a moment, but I want people to remember that the country knew better than to listen to Labour again. The country supported this Government as we took the difficult decisions required to cut our spending, reduce our borrowing and get our country living within its means. Then, when the problems in the eurozone became acute and the currency union on our doorstep was threatened with collapse, we heard again, as we hear now, the siren voices luring us on to the economic rocks. “Stop the cuts,” they said, “Spend more, borrow more, adopt a plan B”. But Britain stayed the course. We did not spend more. We did not spend less. We worked through our plan. The result, in the verdict of the International Monetary Fund, is that no other major economy has achieved such a substantial and consistent reduction in its structural deficit over recent years.
Ed Balls (Morley and Outwood) (Lab/Co-op)
The Chancellor told this House that if Britain was to lose its triple A credit rating it would be a disaster for Britain. Can he remind the House when Britain lost its triple A credit rating? Was he the Chancellor at the time? When are we going to get it back?
Mr Osborne
We retain our triple A credit rating with some credit rating agencies. I can tell the right hon. Gentleman one thing for sure: the only way we will get back our triple A credit rating is by dealing with our debts, cutting our spending and making sure this country can live within its means. If anyone thinks the answer to Britain’s debt problems is to borrow £170 billion more, which is what the Labour party is proposing, they will be leading Britain back into economic ruin.
We remember what the shadow Chancellor said was going to happen if we pursued this plan. He said we would choke off growth and that there would be a double-dip recession. Britain has grown faster than any other major European economy in the past four years. We have grown faster than any major economy in 2014 and the one recession we had was the one big recession, the great recession, on Labour’s watch.
Ed Balls
The Chancellor just said to the House that he has not gone slower on the deficit than he intended to in 2010, but the Office for Budget Responsibility says he has borrowed more than £200 billion more than he planned. Can he explain that remark? I have to say that I think everybody in the country will be totally baffled by the Chancellor’s remark.
Mr Osborne
We have delivered exactly the spending plans we set out in 2010—we have not gone faster, we have not gone slower. Indeed, spending this year is a little bit lower than I predicted in 2010.
Mr Osborne
I will give way in a moment.
There is going to be a test in this debate: will Labour confirm it will borrow more? It cannot complain about our spending cuts if it does not confirm that it would borrow more.
Mr Osborne
Would the shadow Chancellor borrow more? Let us have the B word from him.
Mr Osborne
We have delivered exactly the spending plans that I set out and which the shadow Chancellor opposed. If he is complaining about those spending plans, and if he would like to spend more, he should be honest with the British people and say that a Labour Government would like to borrow more. Why does he not have the courage to tell the truth? The truth is that he does not tell the British people the truth because he knows that when they discover he wants to borrow £170 billion more, they will not let him near Downing street again.
Mr Osborne
The hon. Gentleman can check Hansard now if he likes. I was clear that we stuck to our spending plans—we did not go faster, we did not go slower—and reduced the deficit by a half, and we are going to carry on with the job.
Mr Osborne
I will give way to the shadow Chancellor in a moment, but I want him to understand what he is asking the Labour party to vote for. To their credit, the SNP and the Green party understand that they do not want to agree with our spending cuts.
The charter sets out that the OBR will continue to monitor our fiscal rules. This is a major innovation. We take it for granted now, but only five years ago we had a Labour Chancellor and the team behind him fiddling the figures and making sure they were marked against their own rules. We then commit in the charter to achieving falling national debt by 2016-17 and a surplus on our cyclically adjusted current budget by 2017-18. That requires £30 billion of consolidation. So for the third time, I ask the shadow Chancellor: will he accept that his plans involve borrowing more? What is wrong with the “borrowing” word? He used to give whole lectures about why the country should have a fiscal stimulus and borrow more. Why does he not get up and say, “Yes, Labour would borrow more”?
Ed Balls
We can accept that the Chancellor may have misspoken—we can check Hansard—but will he confirm that he has reduced the deficit much more slowly than he intended and borrowed £200 billion more than he planned? We do not need to debate what he said. Will he just confirm whether he has reduced the deficit much slower than he planned and borrowed a lot more?
Mr Osborne
We have halved a record budget deficit to 5% of national income. The shadow Chancellor says we should have borrowed more, and his plans involve £170 billion of more borrowing, yet he finds himself in the extraordinary position of asking the Labour party to vote for a charter that requires £30 billion of more consolidation. Where should that £30 billion of consolidation come from? To be fair to the Liberal Democrats, they say we should increase taxes to help achieve that consolidation. The Conservatives say it can be achieved by bearing down on spending, the welfare budget and tax avoidance—£13 billion of savings from the Departments, £12 billion from welfare and £5 billion from tax avoidance. That is our clear plan. Labour cannot pretend to support the charter while claiming that the £30 billion does not exist. It is a totally chaotic position.
Mr Osborne
My hon. Friend is absolutely right. The IFS today confirmed that Labour would borrow £170 billion more. This is its published plan. It is extraordinary that Labour Members are totally silent about it. They are not prepared to talk to the British people about what I assume they believe to be the right economic policy for the country.
I want to make sense of this strange journey that the Labour party has taken on fiscal policy over this Parliament. After all the twists and turns, I think it has managed to end up in exactly the same place as it started. In 2010, as part of his pitch for the Labour leadership—we thought at the time he was a worse choice than the current leader, but given all that has happened, perhaps we were wrong—the shadow Chancellor said we should not be cutting spending. He said that more spending would grow the economy and that the economic growth would eliminate the deficit. That was the position he set out in his Bloomberg speech—his so-called plan B. The problem was it was rejected by the British public and eventually by the Labour party. So two years ago, Labour changed its approach and committed to the original phrase of “iron discipline”. The only problem was there was no iron discipline and instead it made all those spending commitments. Last autumn, it moved on to another approach—the Basil Fawlty approach—which was not to mention the deficit at all. I think the House can agree that the Labour leader executed that strategy brilliantly at the Labour party conference.
In December, at the end of last year, Labour tried something else. The shadow Chancellor announced that he would seek to balance the current budget and get debt falling, but he would not say when, saying just as soon as possible. When pressed on specific dates, he dismissed them; he said he would not sign up to some arbitrary timetable. When challenged specifically to match our plans, he said a month ago, on 11 December, that he was not going to set a timetable to balance the current budget by 2017. Here he is, one month later, saying that he is going to vote in favour of a timetable to balance the current budget by 2017-18.
I thought that was the end of Labour’s journey. They had ended up supporting a charter that they had previously rejected, a timetable to which they had previously refused to sign up and £30 billion of cuts they had previously denounced. Then, this weekend, we were treated to the spectacle on “The Andrew Marr Show” of the Labour leader dismissing the charter altogether, rejecting the £30 billion figure and returning full circle to where the Labour party started four years ago. This is what the Labour leader said on Sunday:
“if we just try and cut our way to getting rid of this deficit, it won’t work.”
That is the latest version of the Labour party’s policy. It is exactly where they were four years ago. The Labour leader has gone full circle and gone back to saying that the answer to our debts is simply to grow the economy. That is economically illiterate when we have a structural deficit, and it is based on the fiddle of trying to upgrade the country’s trend growth rates—exactly the mistake made by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) when he was Chancellor and got us into this mess. Labour has gone from plan B to plan A to no plan at all.
Ed Balls
The Chancellor is shouting a lot and sounded a bit rattled. Will he clarify where in the charter for budget responsibility it says that we are going to balance the current budget in 2017-18? It actually says that it will be done
“by the end of the third year of the rolling, five-year forecast period.”
A moment ago, the Chancellor said it would be 2017-18, but where is that in the document? I cannot find it.
Mr Osborne
It does not augur well for someone who wants to be the Chancellor that he thinks three years from now is 2017-18. [Interruption.] He will have his chance. I have been wondering what he has been up to all this time while Labour has got itself into such a mess. Let me make this observation, and then I will give way to him. This gives us a clue to what he has been up to. He said to The Independent a couple of weeks ago:
“If I am sitting”
at the piano
“and I start thinking about the deficit, it all goes wrong. On the piano, you have to be totally focused”—
and with that set of priorities, I think the British people would agree that he should go on playing the entertainer and I will go on being the Chancellor of the Exchequer.
Mr Osborne
The third year in the period is three years; that is 2017-18. Perhaps the right hon. Gentleman should use his piano fingers and count one, two, three.
Ed Balls (Morley and Outwood) (Lab/Co-op)
We have pledged to balance the books in the next Parliament. I said a year ago that the next Labour Government would get the current budget into surplus and our national debt falling as soon as possible in the next Parliament. This charter is fully consistent with our position, so on that basis we will support the motion today. We are not going to change our view about what is in Britain’s best interests, because of another one of the Chancellor’s silly failing games.
If you do not want to take this from me, Madam Deputy Speaker, an interesting press release was issued this morning by the TaxPayers Alliance—not an organisation I normally quote in the House. This is what its chief executive said just an hour ago about this debate:
“This is a meaningless political gimmick of the most transparent kind, and one that serves only to remind taxpayers”—[Interruption.]
The hon. Member for Dover (Charlie Elphicke) should listen to this. The chief executive said that this gimmick
“serves only to remind taxpayers how dramatically this Chancellor has missed his own original targets.”
We are happy to vote to remind people how much the Chancellor has missed his targets.
Mr George Osborne
I have a very simple question. If the right hon. Gentleman thinks it is a gimmick, why is he getting the Labour party to support it? What is his answer to that?
Ed Balls
I will explain that in my speech. What we have before us—this so-called trap—is not a trap at all, as I will explain. I will discuss the new fiscal charter in detail in a moment, but let us first be clear about the background to today’s motion and the new charter before us. This is not the first fiscal charter before us in this Parliament, but the second. The first was presented at the beginning of the current Parliament when the Chancellor lay before the House a charter committing the coalition to balance the books in this Parliament, to get the cyclically-adjusted current budget back into balance and the national debt falling by the coming financial year 2015-16.
As I reminded the House on the day of the autumn statement, the Prime Minister actually went further in 2010. He said that he would balance the Budget in 2015. However, just a few weeks ago, in the autumn statement, independent forecasts from the Office for Budget Responsibility confirmed that this Chancellor was not going to balance the books in 2015, or in 2015-16. In fact, public sector net borrowing in 2015-16 is now forecast to be £76 billion, £7.7 billion higher than was forecast even as recently as the Budget.
The figures on page 15 of the OBR’s “Economic and fiscal outlook” show that this Chancellor, in this Parliament, is borrowing—staggeringly—over £200 billion more than he proposed to spend in the 2010 plans. As a consequence, the national debt, compared to the 2010 forecasts, will be much higher in 2015-16 than he suggested. Back in 2010, he said that in 2015-16 the national debt would be 67.2% of GDP. According to the latest figures, it is now forecast to be not 67.2% but 81.1% of GDP, 14 percentage points higher than the Chancellor’s 2010 figure. Worse than that, according to the 2010 fiscal mandate the national debt would be falling, but the OBR figures show that in 2015-16 it will be rising again, from 80.4% to 81.1%. On the deficit, on the current deficit and on the national debt, the Chancellor made promises in 2010, in a clear fiscal charter, and he has broken every one of them.
Autumn Statement
Debate between Ed Balls and George Osborne(9 years, 11 months ago)
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Ed Balls
We’ll get him out next year, Mr Speaker.
I would like to ask the Chancellor about the air passenger duty proposal. We will support what he has proposed, but following the Smith commission proposal to devolve air passenger duty to Scotland, will the Chancellor urgently lead work across Government, with the Scottish Government, on a mechanism to ensure that English airports, particularly in the north of England, are not disadvantaged by that devolution?
On business rates, while the review is welcome, it will not report, I believe, until 2016. Why can the Chancellor not take immediate action and adopt our plan to cut business rates for small companies? Why will he not increase the bank levy now and increase free child care for working people? Why will he not properly capitalise the business investment bank? Why will he not raise, as a proportion of earnings, the national minimum wage? Why will he not repeat the bank bonus tax and guarantee a compulsory job for all people? On regional devolution, why will he not devolve full growth in business rates to all city and county regions, to give them real control? We need a real plan for good jobs and more balanced growth.
On the subject of growth, the figures that the Chancellor announced reveal that growth has been revised downwards in 2016 from 2.6% to 2.2%, in 2017 from 2.6% to 2.4%, and in 2018 from 2.7% to 2.3%. Why is growth being revised downwards year after year? This is an interesting fact from the OBR: if our economy grew by just 0.5% a year faster than forecast, Government borrowing would come in more than £32 billion lower in the next Parliament. Does the Chancellor not see that those downgrades to growth are bad news? Without decisive action to sustain growth and raise living standards, and without a recovery for the many, not the few, he will carry on missing his deficit targets year after year.
Let me ask the Chancellor about another missed target. Over the past 12 months, net migration to the United Kingdom has been 260,000 people. Can he tell the House—this will be an interesting question to many Back Benchers in all parts of the House—the OBR estimate for net migration over the next 12 months that underpins the growth and public finance forecasts? It seems highly unlikely that it will be anywhere near the Prime Minister’s forecast, which is for tens of thousands. Will it be over 100,000 next year? Over 150,000? Over 200,000? This time, did the Chancellor remember to tell the Prime Minister the facts?
Turning to spending and taxation, the Prime Minister claimed in The Times a month ago that 80% of the planned spending cuts had been made. The Institute for Fiscal Studies says that it is less than 50%. Can the Chancellor clarify who is right and who is wrong? He claims that in the next Parliament he can cut welfare spending by over £10 billion, but in this Parliament, spending on social security is over £20 billion higher than he planned in 2010 because of what happened to housing benefit in particular. He is planning a £3 billion real-terms cut in tax credits that will hit 3 million working people on middle and lower incomes, and once again he is hitting women harder than men.
The Prime Minister rather let the cat out of the bag earlier when he referred to “masosadism”. As I understand it, masosadism is when someone enjoys having pain inflicted on them and enjoys inflicting pain on other people. We know the Chancellor’s views on the first; it seems, from the way he smiled when he announced the tax credits cuts, that he is rather enjoying the second as well. How can it be fair to hit working people with a £3 billion cut to their tax credits when he has spent £3 billion giving a tax cut to people earning over £150,000?
When families are paying £450 more in higher VAT, does the Chancellor really think that people will fall for the Prime Minister’s latest promise of a £7 billion unfunded tax cut in the next Parliament, which even the Business Secretary has called a “fantasy”? Two months on, the Chancellor gave us no details at all of where he will get the money from—not a single penny. Is he planning to pay for that with a further rise in VAT? He said at the weekend that he has no plans to raise VAT. That is what he said before the last general election, and then he raised it after the election. He should stand at the Dispatch Box today and promise that he will not raise VAT again for families and pensioners.
On the national health service, we welcome the Chancellor’s belated recognition that there is a funding crisis. Everyone knows—other than the Prime Minister, it seems—that our health service is going backwards. Accident and emergency department waiting times and GP waiting times are going up, thanks to the Government’s £3 billion reckless reorganisation. The Chancellor announced £2 billion for, he said, every year into the future—paid, it seems, by an underspend every year into the future. I have never heard of a prospective forecast of an underspend being made in quite that way. Will he confirm that that is £2 billion a year for the national health service over a flat, real baseline? We need to know the answer to that one. It seems that the Chancellor has also confirmed that £700 million of the crisis cash is a re-announcement of a re-allocation from within the existing Department of Health budget.
In the Chancellor’s stamp duty reforms, he is accepting that high-value properties are under-taxed, which is welcome. But rather than taxing them only on sale, why does he not have the courage of his conviction? The average person pays 390 times more in annual council tax as a percentage of their property than the billionaire buyer of a £140 million penthouse in Hyde park. Why will the Chancellor not have an annual charge on the highest value properties and use that for a £2.5 billion a year investment in the NHS so that we can have 20,000 nurses and 8,000 GPs every year? Why will he not match that commitment? Our national health service deserves a proper funded long-term plan, not just more short-term sticking plaster.
We then heard the Chancellor’s diversionary stunt. He had to admit today that he has failed to balance the books in this Parliament. He is now trying to divert attention with a vote on balancing the books in the next Parliament. At the time of the Budget, he talked up a vote on the overall budget surplus, but I understand from reports in the Financial Times that he has done a U-turn and retreated to a vote on a current budget surplus in the next Parliament. Will he explain what is going on with that vote and the nature of the problem that he is dealing with? We want to get the current budget back into surplus as soon as possible in the next Parliament, and get the national debt falling, but the lesson of this autumn statement is that a plan to balance the books will work only if it puts good jobs, rising living standards and stronger growth at its heart.
The Chancellor’s diversionary tactics will not work. Since he sat down, I have received the Office for Budget Responsibility’s forecasts. Table 1.2 on page 15 sets out in detail how the latest forecast compares with the forecast at the time of the Budget. It gives us the numbers that the Chancellor failed to tell us in his autumn statement. I will give the country and the House those numbers. Compared with his Budget target—it is here on page 15 in table 1.2—borrowing this year has not gone down. It has been revised up by £4.9 billion. Next year it is revised up by £7.6 billion. Over two years the Chancellor has revised borrowing up by £12.5 billion.
The answer to my other question, which I did not have when I started, is that those figures mean that in this Parliament the Chancellor will have borrowed £219 billion more than he planned in 2010—£219 billion. It is all here in black and white—hard evidence from the Office for Budget Responsibility. The Chancellor’s borrowing targets are all in tatters. We all know that he has changed the way he styles his hair, but he cannot brush away the facts. People are worse off and he has failed to balance the books in this Parliament. For all his strutting, all his preening and all his claims to have fixed the economy—he promised to make people better off—working people are worse off. He promised that we were all in this together, then he cut taxes for millionaires. He promised to balance the books in this Parliament, and that commitment is now in tatters—every target missed, every test failed, every promise broken.
We need a recovery for the many, not just a few. We need to balance the books fairly. We need a long-term plan to save our NHS. That is the autumn statement that we needed. It will take a Labour Government to deliver it.
Mr Osborne
With that performance, we see why the right hon. Gentleman is totally unfit to be put in charge of the nation’s finances in six months’ time. We have had an object lesson in how not to plan an autumn statement reply before hearing the autumn statement. That was what he expected to hear, as we know because he went round the TV studios over the past few weeks predicting it. He said that the deficit would go up this year. He said it last month, he said it last week, he said it on Sunday. I have his words. He said that the Chancellor is going to have to make an autumn statement where he is
“going to have to say that the economy is weakening, the deficit is getting larger”.
I have just quoted independent forecasts which show that the economy is stronger, the deficit is falling and the debt is lower in every future year. The shadow Chancellor got it completely wrong.
It is hardly surprising that his party has such low economic credibility when the shadow Chancellor repeatedly makes predictions about the British economy that turn out to be completely wrong. No more boom and bust, he said—wrong. A double-dip recession, he predicted—completely wrong. He has spent the past three months betting the entire credibility of the Labour party’s response to the autumn statement on the prediction of a massive deterioration in the public finances and the deficit going up, and he got that completely wrong. People say there is a split in the leadership of the Labour party. They are right. It is between people who get the deficit figures completely wrong and people who forget about the deficit altogether.
The Opposition have no economic credibility and they have policies that show that they are not up to the job. The shadow Chancellor mentioned his homes tax. We still do not know what the Labour party’s view is of the stamp duty reforms. I guess we will find out in the next few days. We do not have a clue what its views are on the postgraduate changes or the infrastructure investments that we have announced. The right hon. Gentleman spoke about his homes tax. This is what the Labour party thinks about his homes tax. The Chair of the Public Accounts Committee says:
“I don’t think it’s the world’s most sensible idea.”
The former Housing Minister, the right hon. Member for Greenwich and Woolwich (Mr Raynsford), says that it hits the “cash poor”. The right hon. Member for Tottenham (Mr Lammy) says it is “a tax on London”, and the right hon. Member for Dulwich and West Norwood (Dame Tessa Jowell) says:
“Let’s stop calling it a ‘mansion tax’…these are family homes”.
One of Labour’s council group leaders summed it up best when they said it was “completely bonkers”. That is the housing policy—to put taxes on housing.
The shadow Chancellor asked about our tax cut on apprentices. His jobs tax policy is to increase national insurance. He talks about pensions. His pensions policy is to tax pensions. He asked me a couple of questions about savings in the public finances. I was hoping that he was going to give me some suggestions for savings that we can make in the public finances. I have had to do a bit of research myself about what his party’s policy is.
The Opposition have conducted what is called a zero-based review for the past year and identified two surplus assets that the Government should sell. The first is the Queen Elizabeth II conference centre. The shadow Chancellor first proposed selling that in 2001 and seems to have forgotten that it is the only bit of Government that pays us an income. The other thing they found to pay down the national debt—it is in the Labour party document—is a restaurant in St James’s park, estimated to be worth £6.7 million. That is 0.005% of the national debt, so their national economic policy is literally out to lunch.
That is the problem that we have seen in the right hon. Gentleman’s reply. He has absolutely no answers to the economic challenges that Britain faces. He has no credibility and no workable policies because Labour has no workable plan. We are five months away from a general election in which people will have to choose their Government. The most serious responsibility incumbent on anyone seeking office is to show that they can provide economic stability to the nation and protect the families who live here. The Opposition do not have a clue how to do that. They do not have a plan. Their whole response today shows that they would take Britain back to square one. Britain has pulled itself out of the economic crisis that the shadow Chancellor created, and we are not going to let him take us back there.
EU Budget (Surcharge)
Debate between Ed Balls and George Osborne(10 years ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)(Urgent Question)
To ask the Chancellor of the Exchequer if he will make a statement to clarify his agreement on the European Union budget surcharge.
The Chancellor of the Exchequer (Mr George Osborne)
Last month the previous European Commission presented Britain with a bill for £1.7 billion, which it insisted must be paid by 1 December. The Prime Minister spoke for British taxpayers when he said that that was completely unacceptable, and we set about getting a better deal. Following intensive discussions with the new Commission and at the ECOFIN meeting last week, we have achieved such a deal. I can tell the House that we have halved the Bill, have delayed the Bill, will pay no interest on the Bill, and have changed the rules of the European Union so that such unacceptable behaviour never happens again.
Let me briefly give the House the details. At the European Council last month, the Prime Minister made it clear to the Barroso Commission that while annual adjustments to contributions were a regular part of EU membership, a sudden and unprecedented demand for a £1.7 billion payment on 1 December was unacceptable. He secured the agreement of all 28 Heads of Government that it should be discussed by the Finance Ministers as a matter of urgency. That meeting took place last Friday, and followed two weeks of intensive and constructive discussions with the new Budget Commissioner, Vice-President Georgieva, and other member states.
As a result of those discussions, we achieved unanimous agreement that, first, expecting payment on 1 December was indeed unacceptable. The budget rules will therefore be rewritten to allow for a delay in any payment. In Britain’s case, that means that we will pay nothing this year, and will instead make payments in two instalments in July and September, in the second half of next year. Secondly, the suggestion that we might have to pay interest charges was rejected, and it was agreed unanimously that no interest would be charged on the delayed payments. Thirdly, in our discussion with the new European Commission, it was agreed that a full rebate would apply to the British payment, that the rebate would be specific, that it would be in addition to any other rebate that we might expect next year, and that, for the first time ever, it would be paid at the same time as any money owed.
It had not been clear that we would receive a rebate, let alone such a large one. No one in the House had suggested that we would. Only my right hon. Friend the Member for South Cambridgeshire (Mr Lansley) had even asked a question about it. Indeed, it was only confirmed that we would receive a rebate, and a large one, by Vice-President Georgieva on 6 November, last Thursday evening. This means that Britain’s payments have been halved, from £1.7 billion to about £850 million.
Finally, all member states agreed with us that the entire episode had been unacceptable, and a deal was therefore reached to make a permanent change in European law so that this would never happen again.
In the face of this budget challenge, we have far exceeded the expectations and predictions that preceded Friday’s meeting. We have achieved a real result for Britain. The whole episode reminds us of the reform that we need in Europe—reform that Government Members believe should be put to a vote of the people of Britain.
Ed Balls
If this is such a good deal, why did the Chancellor not offer to make a statement? Why was he dragged to the House this afternoon? Talk about smoke and mirrors, Mr Speaker—I can barely see you through the Chancellor’s fog and bluster!
Is not the truth that the Chancellor failed to reduce our contribution by a single penny? All he is doing is simply counting the rebate that was due anyway—a rebate that was never in doubt—in an attempt to fool people into thinking that the bill has been halved. His so-called victory is nothing more than a con trick.
The Chancellor claims that the rebate was somehow in doubt, but that claim has been contradicted by everyone else. The EU Budget Commissioner was very clear when he said, on 27 October, in a statement on the backdated gross national income revisions,
“the UK will benefit from the UK rebate for the additional payments”.
On Friday, having been asked whether the rebate was in doubt, the Vice-President of the Commission replied, “No, absolutely not.”
On Friday, the Treasury was telling journalists that the Government had legal advice that the UK rebate somehow might not apply. If the legal advice exists, the Chancellor should publish it. Mr Barroso’s spokesperson, Mr Mark Gray, has directly contradicted the Treasury’s claims, saying:
“Commission position on this clear at European Council—rebate was never in doubt”.
The Conservative MEP Daniel Hannan agrees. He said—[Interruption.]
Ed Balls
I’ll tell you what Mr Hannan said. He said:
“it’s not credible to claim that it was ever in doubt”.
The Dutch Finance Minister said that of course this
“mechanism of the rebate will also apply”
on the new contribution:
“So it’s not as if the British have been given a discount today.”
The Austrian Finance Minister said that
“the amount cannot be put in question”,
and the Irish Finance Minister confirmed
“the UK will pay the whole amount.”
They are queuing up to contradict the Chancellor.
Let me ask the Chancellor this: can he name a single Finance Minister who is willing to go along with his desperate attempts to pull the wool over people’s eyes? And it is worse. The Financial Times reported:
“Officials involved in the closed-door negotiations between finance ministers said Mr Osborne did not complain about the overall bill.”
He didn’t even complain about the overall bill, Mr Speaker! I have here the minutes of Friday’s ECOFIN meeting: 21 pages, and not a single reference in those 21 pages to the UK rebate or the amount Britain owes being reduced.
Is it not now clear that the Chancellor totally failed to get a better deal for the taxpayer? He did not reduce Britain’s backdated bill by a single penny. The British people don’t like being taken for fools, and his attempts to fool them have totally unravelled.
Mr Osborne
No, the British people do not like being taken for fools which is why the shadow Chancellor is in opposition. The shadow Chancellor is one of those people who is wise neither after the event nor before the event. How do we know that? He wrote an article in The Guardian last Friday. It appeared alongside another article called “Labour is doomed” by one of his colleagues, and in his article he set out four tests that I had to pass. The first test, he said, was that we needed a coalition of support, and he asked me about that again today. We had unanimous support around the ECOFIN table for the deal that was agreed. The second test he set me before the ECOFIN council was that we needed the support of Germany. Well, we went to Berlin and the German Finance Minister was central to the deal that we did. Thirdly, in this article, he said:
“The Prime Minister should be clear about whether he intends to take the EU Commission to the European Court of Justice if they insist on the deadline of 1 December.”
Well, we do not have a deadline of 1 December any more, because we did not challenge the law; we changed the law.
So three tests passed, and here is the fourth and final test the shadow Chancellor set us: he said that the interest rates on any delayed payments should be fair. Well, I disagree. I do not think we should pay any interest at all, and we are not, but what is revealing about this fourth test is the number he himself gave for the fines Britain might face. He said:
“Britain could face a…fine of £114,000 a day.”
Does he confirm that that is what he said in the article: £114,000 a day? [Interruption.] Well, he has given himself away because £114,000 a day happens to be the EU penal interest on £1.7 billion, so the shadow Chancellor, who stands before us today and says he always knew the rebate would apply, is the same shadow Chancellor who on Friday said we would paying £1.7 billion.
And of course the word “rebate” never appeared once in that article or, indeed, in any intervention from the Labour party on this issue. This whole question from the shadow Chancellor today is based on the absurd charade that he would stand up for Britain’s interests in Europe, but he gave away billions of pounds of the rebate, he signed us up to billions of pounds of eurozone bail-out, and he still refuses to give the British people a say on our future in Europe. May I suggest to him that he should leave the strong leadership in Europe to us, and he should get on with throwing over the weak leadership in the Labour party?
Mr Osborne
I always knew that the hon. Gentleman asked questions that had been prepared by the shadow Chancellor, but I have never before seen those questions being handed over in the Chamber. Nor do I think his embellishment of the question added much to it. If the rebate was always going to apply, and to such an extent, why did neither he nor any other Labour Member raise the matter? Why was it not mentioned in the shadow Chancellor’s article in The Guardian? The shadow Chancellor says that the outcome was obvious, but the estimate of a £114,000 fine was based on a number of—
Mr Osborne
He says no, but the penal rate is 2% above base, and 2% above base per day on a £1.7 billion charge is £114,000. Is that just an amazing coincidence?
Mr Osborne
Some of us remember inheriting a budget deficit of 11.5% from the previous Labour Government. It has fallen by more than a third. We will get the forecasts from the Office for Budget Responsibility in December.
Mr Osborne
Let us get it on the record that the shadow Chancellor says that the budget deficit is going up. We will wait for the forecasts at the beginning of December and see who is right.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(10 years ago)
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Mr Osborne
What I would say to the shadow Chief Secretary to the Treasury is—
Mr Osborne
It is around £7 billion when we add it all up. That would be paid for by lower public expenditure. These are tax cuts that are paid for. I note that that is not the approach taken by the Labour party, which would increase tax, increase borrowing and increase spending, sending the economy back into the mess that it left it in.
Mr Osborne
I certainly congratulate Southend businesses on the apprenticeship schemes they run. Apprenticeship schemes number 2 million in this Parliament and we aim to take that figure to 3 million in the next Parliament. That is all towards achieving our goal of full employment. We have the highest number of people in work, but we want to go further still.
Ed Balls (Morley and Outwood) (Lab/Co-op)
The whole country was shocked to learn on the night the Prime Minister arrived at the European Council that the European Union is demanding from the UK a backpayment of a staggering £1.7 billion. The Prime Minister was unclear on this last week, so may I ask the Chancellor just how long before the Council meeting did he and his Ministers and officials learn that the UK was going to be asked to pay more, and why on earth did he not tell the Prime Minister?
Mr Osborne
First of all, may I say that it is very good to see the shadow Chancellor in his place? We had heard disturbing rumours that there was going to be a shadow Cabinet reshuffle. We waited nervously by the phones, but we are absolutely delighted that he is still in his place.
Let me answer the shadow Chancellor’s question directly. There was a meeting at the Commission on Friday 17 October. On Tuesday 21 October, Treasury officials prepared advice for me, and the Prime Minister was aware of the advice on Thursday 23 October. That is very similar to the timetable that the Dutch Government have set out.
Ed Balls
The revisions of the Office for National Statistics came months beforehand and the Financial Secretary knew weeks before. The Chancellor knew only two days before and he still forgot to tell the Prime Minister. Was he not just asleep on the job?
Let me ask the Chancellor another question about the way in which Europe is affecting the public finances. The Government promised to get net migration down to the tens of thousands. According to the latest figures, net migration is 243,000—up 38% on the previous year. Will the Chancellor confirm that his Budget forecast for net migration has been revised not down, but up? What is his assumption for net migration for the 2015 public finance forecasts?
Mr Osborne
Interestingly, we conducted an independent review by one of the Canadian officials involved in auditing their finances—
Mr Osborne
The right hon. Gentleman says “Come on”, but there were no independent forecasts when he was in the Treasury. He was the economic adviser who cooked up the forecasts, and came to the House and as a result misled this country about its economic fortunes. The OBR is working as an independent institution. The independent review of the OBR said that we should not extend its powers. We do not want the Labour party undermining the independent institution that has brought confidence back to public statistics.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(10 years, 2 months ago)
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Mr Osborne
My hon. Friend is right, of course. The Treasury’s own independent analysis of the Labour party’s approach to public spending shows that it could borrow over £166 billion more in the next Parliament. Labour Members have started to contribute to that with a £21 billion shopping list this summer. Perhaps the shadow Chancellor can get up and explain how he is going to pay for it.
Ed Balls (Morley and Outwood) (Lab/Co-op)
Let me start by welcoming the Exchequer Secretary to her new post on the Front Bench, and by saying to the Chancellor, “Don’t worry—I’m not going to press you on my ice bucket challenge to you today.”
Let me instead ask the Chancellor about another highly topical economic issue, particularly among his Back Benchers. Before the last election, he told the Centre for European Reform that he was a “pro-European”. This week, The Times is reporting that the new chapter in his biography says that the Chancellor has gone cold on Europe—an “unmistakable hardening”—and is now pondering exit. I suspect we may know the answer, but let me ask the Chancellor: what has changed?
Mr Osborne
First, I thank the right hon. Gentleman for nominating me for the ice bucket challenge. I would rather make the extra donation to charity and pour the cold water over his economic policies. When it comes to reading biographies, we do not need a biography to know his life story: he was put in charge of the British economy, and he wrecked it.
On Europe, our position is the one that I think is shared by the majority of the British people, which is that we seek a renegotiation of Britain’s terms of membership of the European Union, and that we will then put that to the British people in a referendum. Why does the right hon. Gentleman not get up and commit the Labour party to letting the people have a say?
Ed Balls
The Chancellor cannot even convince his own Back Benchers of his policy on Europe, let alone anybody else. Let me tell the House what the president of the CBI said last week. He said that the Government’s policy on Europe
“has already, and is increasingly, causing real concern for business regarding their future investment”.
Yet the Chancellor is flirting with exit. We know what has changed: Boris Johnson has said that he is returning to Westminster and that he is flirting with exit, and—surprise, surprise—the Chancellor is too. Let me ask the Chancellor this. I want reform in Europe but, like the CBI, I am determined to put the national economic interest first. Surely the Chancellor should put his leadership ambitions aside and put the national economic interest first too.
Mr Osborne
We put the national economic interest first by fixing the mess that the shadow Chancellor left the British economy in. I have been doing some research on what he has been up to over the summer. I read an article in the Express & Star called, “Out and about with Labour’s Ed Balls”, about when he went canvassing last week. It says:
“as we walk down Essex Drive to another house (there’s no-one in), a group of boys on their bikes look over”.
They say, “Oh look, it’s Gordon Brown.” Even they can spot more borrowing and more debt—it is Gordon Brown all over again.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(10 years, 5 months ago)
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Mr Osborne
The Bank of England now has very powerful tools to deal with the kind of risks that we saw develop in 2006 and 2007, with such catastrophic consequences for our banking system and for our economy. The new powers that it will receive—subject, of course, to parliamentary approval—on being able to limit loan-to-income ratios and loan-to-value ratios for every mortgage or, indeed, as a percentage of mortgage portfolios, are very powerful tools. It is up to the Bank of England to make independent judgments about when to deploy them, because, as we have learnt with such monetary and macro-prudential policies, it is better that the politicians stay out of it.
Ed Balls (Morley and Outwood) (Lab/Co-op)
Under this Chancellor, we have had the lowest level of house building in peacetime since the 1920s. The Financial Times reported a few weeks ago that the Chancellor is “relaxed” about an early rise in interest rates to rein in our unbalanced housing market. Can he tell the House how much a 1% rise in interest rates would add to the average mortgage bill?
Mr Osborne
I am not going to comment on interest rates because, as the right hon. Gentleman should remember, the Bank of England is independent, and it is for the Bank to make its judgment. Let me pick him up on what he says about housing. I absolutely believe that we need to build more homes, and housing starts are now more than double what they were in the last year of the Labour Government, in whose Cabinet the right hon. Gentleman sat. If he supported our planning reforms rather than opposed them, if he supported our approach to spending, which has enabled us to pay for the new social housing, and if he backed Help to Buy, he would have a bit more credibility when he stood at the Dispatch Box. As it is, I prefer to listen to the Labour leader’s speechwriter, who said this week:
“I fell out with Ed Balls because Labour’s economic policy is nonsense.”
Ed Balls
The Chancellor used to boast that record low mortgage rates were a sign that his policy was working. Now, with the Governor warning of an early rise in interest rates as demand outstrips supply, the Chancellor is desperately trying to claim that higher interest rates would be a sign of success as well. Is not the truth that his failure to get house building moving in the last four years is the reason our housing market is so unbalanced and early interest rate rises are on the cards? As for the question about mortgages, let me answer by quoting the Chancellor, who said in the House of Commons that
“a 1% rise on the average mortgage bill would add £1,000.”—[Official Report, 6 December 2011; Vol. 537, c. 147.]
I can tell him that homeowners up and down the country will not be relaxed about that.
Mr Osborne
The shadow Chancellor has got into pretty desperate territory when he says that an exit from exceptionally loose monetary policy, implemented in the middle of a crisis, whenever that comes, is a catastrophe for the British economy. The truth is that under any Bank of England setting, if the right hon. Gentleman was in office, the fiscal policy would be out of control and interest rates would be higher than under this Government.
The Prime Minister and I paid an interesting visit yesterday to the right hon. Gentleman’s constituency, along with the next Conservative MP for Morley and Outwood, Andrea Jenkyns. I will tell him what we found: people who had been unemployed now in work; the number of apprenticeships in the constituency doubled; and the Coca-Cola plant, which we visited, putting more money into Britain. The recovery in Morley and Outwood and the rest of the country is the real thing.
Mr Osborne
Yesterday I had a very good meeting in Manchester with civic leaders from all parties and with universities from the north of England to discuss how we could improve the transport links across the Pennines and through Yorkshire and Lancashire and ensure that we have strong civic governance as well. Today’s investment by Abu Dhabi in Manchester is a good example of the confidence in the northern economy.
Ed Balls (Morley and Outwood) (Lab/Co-op)
The House and the Chancellor should know that the jury has just delivered its verdict and the Government’s former director of communications, Mr Coulson, has been found guilty of conspiracy to hack phones. Does the Chancellor now accept that it was a terrible error of judgment for—
Mr Osborne
Obviously the verdict has been announced while we have been doing Treasury questions. I will go away and study it, and of course if a statement is appropriate from me and the Prime Minister, there will be one—not in Treasury questions, when we are talking about the economy. May I say to the right hon. Gentleman that the person who worked alongside Damian McBride is no person to give lectures on anything?
Mr Osborne
I certainly join the hon. Lady in commending the work that Manchester city council has done. One of the things I talked about yesterday was what we can do to make sure that cities such as Greater Manchester have more powers, perhaps through elected mayors. We should also pay tribute to Lord Deighton, who is in Abu Dhabi at the moment, for negotiating that deal. There was a good partnership between the city council and the Treasury, and it is fantastic news that Abu Dhabi United Group is making that big investment in the UK.
The Economy and Living Standards
Debate between Ed Balls and George Osborne(10 years, 5 months ago)
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Ed Balls
The argument that I am making is that if we as a House—those of us on the left and on the right—are to face up to the challenge of delivering more and better jobs for working people and if we are to see off the pressures for isolation and withdrawal, we cannot take the wrong-headed approach either of denying that there is a problem or of appeasing those who would try to walk away. We need a Queen’s Speech that rises to that challenge. My point is that, in putting all its energy into Europe and the referendum, the Conservative party has the wrong strategy to deal with the challenge that we face.
The Chancellor of the Exchequer (Mr George Osborne)
Just so that we can be absolutely clear, will the right hon. Gentleman make it clear from the Dispatch Box that Labour will not offer a referendum on Britain’s membership of the European Union now or in the manifesto at the general election and will therefore vote against any private Member’s Bill that proposes one?
Ed Balls
We have said very clearly that we do not believe in an ever-closer Union. If there is any proposal to transfer powers to Brussels from London, we will have a referendum in the next Parliament. Our position is clear. We are not turning our face against a referendum. What we are turning our face against is a referendum that would destabilise our country and cause it to lose investment and jobs.
Hon. Members do not have to take my word for it: let me read the conclusion, a year on from the Prime Minister’s decision, of the Chancellor’s biographer in the Financial Times. He stated that Downing street’s three objectives for the referendum were
“to pacify Tory MPs, sap the momentum of the fringe UK Independence party and put the troublesome subject of Europe to sleep until the general election in 2015. On all scores, it failed.”
That must qualify as the understatement of the year. [Interruption.] I have given my view.
Mr Osborne
I ask the shadow Chancellor to answer the question that I put to him. Does he rule out offering, now or in the Labour manifesto at the general election, an in-out referendum on Europe, and will the Labour party therefore vote against any private Member’s Bill that is introduced?
Ed Balls
The answer is no, of course we will not rule that out, because we have a clear commitment that if there is any proposal to transfer powers, we will have an in-out referendum in the next Parliament. That is our position. I gave the Chancellor the answer once, he did not listen and I gave it to him again.
Is not the reality that the Prime Minister’s attempt to appease Tory Back Benchers has failed and that it has not worked very well with the Front Benchers either? Just a few months ago, just after the Budget, the last time we had such a debate, we had read stories in the newspapers about the Education Secretary trying to undermine the leadership ambitions of the Mayor of London—it was briefed, I believe, to The Mail on Sunday at a lunch. Last week, it was the Home Secretary who was targeted by the Education Secretary, this time to The Times over lunch. The first time, the Education Secretary explained that he was tipsy. He has obviously been on the sauce again. There is a pattern here: a rival to the Chancellor tops the “ConservativeHome” leadership poll and the Education Secretary is sent out to try to stop them at all costs. Now we know that when the Chancellor and the Education Secretary have a late-night chat about the Prevent strategy, they are talking about a rather different prevent strategy from the one that we are talking about. It is pretty clear who the Chancellor has tried to prevent through all his interventions.
Mr Osborne
I will come on to say something about the housing market, and I am the first to say that we must be vigilant about housing. But to get a lecture from the party that presided over the biggest housing boom and bust in British history—
Mr Osborne
The shadow Chancellor says “what?” He might forget what happened in 2007-08 when the banks almost went bust because they extended housing loans that people could not afford, house prices fell, housing starts went off a cliff, and the people of Britain paid the price of an economic policy predicated on the fact that there would be no more boom and bust. The people of Britain are living with the consequences of that policy. Will he just accept now that basing an economic policy on the prediction that there would be no more boom and bust was an error of judgment?
Ed Balls
Will the Chancellor like to tell the House how many people went into negative equity after 2007, and how that compares with the number of people—the tens of thousands—who were put into negative equity after the Conservative housing crash of 1989? If he is going to make these statements he ought to be able to make them stand up. While we are here, will he tell us—
Madam Deputy Speaker (Dawn Primarolo)
No, no, no. Mr Balls, sit down. Not “While we are here.” One point at a time.
Mr Osborne
The right hon. Gentleman’s argument seems to be, “My crash was better than your crash.” That is a brilliant argument. I will tell him the answer. He was going to remove a temporary scheme that protects people from mortgage costs when they become unemployed. I extended it year after year after year. I have extended it again in the Budget to make sure that people do not find themselves having their homes repossessed. Can I also tell him that the housing market fell by almost 20%? The price of houses fell and there were people at Northern Rock—[Interruption.] His argument is literally, “I’m sorry we messed it up, but you messed it up in the past as well.” That is an absolutely hopeless argument. I have learned the lesson from the terrible mistake—
Mr Osborne
I was wrong? This is the man who presided over the deepest recession in British modern history and the biggest banking crisis since the Victorian age. He has the nerve to get up and say to the team that is turning the country around that we got it wrong. The truth is that he is the person who got it wrong.
There was a very interesting observation this week by Charles Clarke, who was the Home Secretary when Labour were in office. This is what he said:
“we have rested a great deal on assuming that the Conservative strategy wouldn’t succeed, that ‘plan A’…would not work and that has proved to be an unwise judgment because in fact, the Conservatives have succeeded in getting the economy onto a more positive path which leaves us”—
the Labour party—
“very little place”.
Mr Osborne
My hon. Friend is absolutely right that what we need in our regulation is the exercise of judgment, rather than just process. One of the biggest errors of judgment was the abolition of the Bank of England as an authority that would oversee systemic risks in our economy and monitor levels of debt, and the creation of the tripartite regime, which we have abolished.
One of the new features of the financial regulation landscape is the Financial Policy Committee, which is the group, independent of the Government, that looks at systemic financial risks, seeks to spot asset booms and has the tools to do something about them—something that, sadly, was completely lacking six or seven years ago. We have given the Financial Policy Committee far-reaching powers over capital ratios and mortgage standards, with powers to recommend limits on loans-to-income and even loans-to-value. That is the answer to the question about housing and the impact of housing debt on our financial system and families. I am clear that the Bank of England should not hesitate to use those powers, and any others we make available, should it see serious risks emerging in the housing market. That is a fundamental improvement in the resilience of the British economy.
I agree that we need more homes as well, and the changes to our planning system are now increasing housing supply. Planning permissions and starts are now at a six-year high. The fundamental answer to the challenge of the British housing market is to see more homes built. Frankly, I would ask the Labour party, which opposed the planning changes when they were introduced a couple of years ago, to reconsider its position and confirm that they will remain in place. And by the way, as the hon. Member for Bishop Auckland (Helen Goodman)—who I think sits on her party’s Front Bench—said that Labour should get rid of the Help to Buy scheme, let me tell her that it is helping families across the country, overwhelmingly outside the south-east of England, to buy homes that are well below the national average house price. I am proud that this Government are helping people with the aspiration of buying their own home and providing the support for families who can afford it to get on the housing ladder.
Ed Balls
May I ask for a clarification of what the Chancellor is announcing to the House today and at Mansion House later? He wrote to the Governor of the Bank of England setting the remit for the Financial Policy Committee as recently as March. The Governor of the Bank of England wrote back to the Chancellor with his comments on the remit on 31 March. Is the Chancellor now, a couple of months later, having to add to, revise or supplement that remit? Is that a reflection of the fact that there is widespread and growing concern, including in the Bank of England, that what is happening in the housing market is destabilising, and does he regret that he did not face up to these issues earlier?
Mr Osborne
Well, Mr Deputy Speaker, that was the definition of a cheap political pot shot, and it rather sums up the tone of Labour Members’ approach. They started with a whole spiel about new politics and having to engage with the disenchanted, but after only a few minutes, it has swiftly deteriorated.
Mr Osborne
Let me directly answer the hon. Gentleman’s point and then I shall take a final intervention from the shadow Chancellor before winding up.
We are very clear that we want impartial and free guidance—face to face if people want it. We are talking to consumer groups such as Which?, Saga, and Citizens Advice about how to ensure that we deliver such free and impartial advice through the industry and consumer groups all working together.
Ed Balls
We have welcomed annuities reform and the introduction of collective pension vehicles. The test for us is whether the sums will add up, whether it will cost more, whether it will work in a fair and equitable way and whether the advice and guidance will be sufficient. I put it to the Chancellor that this may be something on which we could try to get a cross-party consensus in the long term rather than play politics.
Mr Osborne
I certainly hope, in the spirit of new politics, that there will be agreement across the House and that the Labour party will support our reforms. There was no agreement on this issue when we were in opposition. My hon. Friends who were Opposition MPs at the time—when, indeed, the right hon. Gentleman was a Treasury Minister—will remember that we tried time and again to get the Treasury to open up annuities and to remove the compulsory requirement to annuitise. We remember the private Member’s Bill proposed by David Curry—and my right hon. Friend the Member for Croydon South (Sir Richard Ottaway) was involved, too—attempting to achieve this objective, with the Conservative party turning up en masse to try to deliver it. We tried. If the shadow Chancellor is telling me that he has had a change of heart and supports this measure, I can say “all well and good”. Perhaps that will help to address the disillusionment of Labour supporters that he he mentioned earlier—[Interruption.] The shadow Chancellor ends like he started. He wanted to give us a big new thing about new politics, but he cannot resist trading the blows across the Chamber.
Mr Osborne
I would argue that the best way to address people’s disillusionment is to create an economy that works for people and grows jobs for people. I enjoyed the right hon. Gentleman’s tour d’horizon of the global economy, and I certainly agree that the Google self-drive car will be an important intervention—and he will probably be one of the first customers for it.
We passed a milestone this week when we learned that 2 million new jobs had been created by our economic plan. We saw new surveys this week showing Britain attracting investment from around the world. The IMF said we would have the fastest- growing major advanced economy in the world and confirmed that deficit reduction strategy at the heart of our approach is the anchor of stability. We saw again today that the shadow Chancellor and the Labour party would be a disaster for the British economy, with more borrowing, more spending, more taxes and a war on business. In this Queen’s Speech, we reject these disastrous policies. Instead, we deliver on the long-term economic plan that is turning Britain around and offers a brighter future for all. I urge the House to support the Queen’s Speech.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(10 years, 6 months ago)
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Mr Osborne
My hon. Friend is right that the gap between the north and south grew under the last Government, who put all their bets on the City of London, which went spectacularly wrong. In his part of the world, which he represents so ably, we are not only helping manufacturing by reducing energy costs, which is important for steelworks in his area and elsewhere, but helping with the tolls on the Humber bridge. We have also had the great news that Siemens will open its new wind turbine factory in the area. Those are all examples of how we will have a more balanced economy than the one that we inherited.
Ed Balls (Morley and Outwood) (Lab/Co-op)
Back in 2010, the Chancellor promised to balance the books in 2015 and said that living standards would rise “steadily and sustainably”. Following today’s welcome news that the economy is finally growing again, will the Chancellor tell us whether he is now on track to keep either of those two promises?
Mr Osborne
I am delighted that the shadow Chancellor is still here. He is the man who, quite literally, crashed the car. On that occasion he fled the scene, but when it comes to crashing the British economy he cannot escape scrutiny of his record. Let me be clear: we said we would get the deficit down, and the deficit has come down; we said we would recover the economy, and recovery is taking place. He predicted that 1 million people would lose their jobs, but 1.5 million jobs have been created. He has apologised to the lady whose car he crashed into—why does he not apologise to the British people?
Ed Balls
If this Chancellor wants to have a discussion about whiplash we can do that any day of the week—Mr, Mrs or Mistress. However, let us not go back to biographies of the past; let us get back to the serious issue. The fact is that the Chancellor has failed to answer my question. For all his promises, he has broken them, even on the deficit, and living standards are not rising but falling year on year on year. People are £1,600 worse off under the Tories. If the Chancellor really thinks that his economic plan is working, let him answer this one simple question: at the next election, after five years of this Chancellor, will working people be better off than they were in 2010—yes or no?
Mr Osborne
Of course Britain will be better off because we will not have the mess of an economy on the brink of collapse, a banking system on its knees, and an 11% budget deficit. The only way to help people in this country is to grow the British economy. What the figures reveal today is that Britain is coming back, but we cannot take that for granted. People are still experiencing the impact of the shadow Chancellor’s economic policies, and the only thing he can say to us is “Why are you not clearing up our mess quickly enough?” That is literally what he is saying; it is absolutely pathetic. His car crash was caused by a seven-point turn that he was trying. Why does he not just get up, make a simple U-turn, admit that he got it wrong and that Britain is growing again?
Charter for Budget Responsibility
Debate between Ed Balls and George Osborne(10 years, 8 months ago)
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Mr Osborne
I will give way in a little moment, but let me make some more progress.
We are creating a welfare state that the country—
Mr Osborne
Of course I will give way, but will the shadow Chancellor confirm, so that we know the terms of this debate, whether he is committed to the specific welfare cap, the list of the benefits included and the level to which the Government have committed? The shadow Work and Pensions Secretary, the hon. Member for Leeds West (Rachel Reeves), said on the radio that Labour would do things differently. Perhaps he could confirm that.
Ed Balls
I will make my speech on the welfare cap in a moment. I want to go back to the remark the Chancellor just made about last night’s vote. We have said that we do not think we should go ahead with the next cut in corporation tax and instead use all the money for a freeze in business rates for small businesses. Is the Chancellor really saying that large companies are business, but small businesses do not count? [Interruption.]
Mr Osborne
If the right hon. Gentleman has something useful to say, let us hear it.
Ed Balls
We are proposing that all the money from deferring the cut in corporation tax goes to small business in a business rates freeze. That is not a rise in the taxes on business, unless the Chancellor thinks that somehow small businesses are second class and do not count. Is that really what the Chancellor is saying?
Mr Osborne
We have cut the corporation tax rate for small businesses. We have capped rates for small businesses. We are giving a £1,000 discount to high street stores. Those are the measures we are taking for small businesses, and we are also cutting the corporation tax rate. The truth is that Labour is now committed to higher business taxes in Britain with a high corporation tax rate.
Mr Osborne
May I just say to the shadow Chancellor that he does not need to talk to me? He needs to talk to the business community of Britain, which knows that he is anti-business. His party is anti-business, anti-job creation and, as I am about to explain, it is the welfare party, too. If he waits a little, he can intervene and answer the question that we need answered.
Mr Osborne
I will give way in a moment. Let me make progress with my speech. [Interruption.] All right, I will give way if the right hon. Gentleman answers this question in his intervention: is Labour committed to a higher rate of corporation tax? Yes or no?
Ed Balls
The Chancellor must not mislead and misrepresent on the welfare state or on business taxes. Labour is not committed to an increase in business tax. He has said that three times. Every time he has said that, he has misled this House. I am saying that all the money from the corporation tax rate will go back to small business. That is the right position. Every time he misleads this House I will correct him, Mr Deputy Speaker.
Mr Osborne
This is desperate stuff from the shadow Chancellor. If Labour had had its way in the vote last night, business taxes would be higher—yes or no?
Mr Osborne
Yes, they would be, because corporation tax would be higher and businesses would be paying more. No wonder Labour does not have a clue about how to fix the economy or how to deal with the welfare system. That is evident from its period in office, when welfare spending, which will be contained by the cap, went up 42% in real terms. Housing benefit went up by £7.6 billion alone, as a real increase—bigger than the entire police budget. Every single one of the pounds the Labour Government spent on working age welfare was not earned, but borrowed—borrowed because Britain could not pay its way in the world. Rather than using valuable public resources to pay for apprenticeships, science, roads and railways, money was spent on an unaffordable, unfair and out-of-control benefits bill. That economic insecurity is being addressed and control is being re-established. We insist that welfare is affordable and we insist that it is fair: fair to those who need it and fair to those who pay for it.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(10 years, 10 months ago)
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Mr Osborne
While no responsible Chancellor rules out tax changes, I believe the remainder of our deficit reduction plan can be achieved by reducing spending. Indeed, the reduction in the deficit has contributed to the economic stability that has been a platform for the economic growth we have seen. Perhaps the shadow Chancellor will get up and welcome that.
Ed Balls (Morley and Outwood) (Lab/Co-op)
After three damaging years of flatlining in our economy—[Interruption.]
Ed Balls
After three damaging years of flatlining, today’s growth figures are welcome, but everything we have seen today from the Chancellor shows he just does not understand that for working people facing a cost of living crisis, this is still no recovery at all. Last week, the Chancellor and the Prime Minister tried to use dodgy figures to tell people they had never had it so good. Why will he not today admit the truth: he has failed to get the deficit down, and since he came to office, working people have been not better off, but worse off?
Mr Osborne
I am not sure that that was worth waiting for. Since we last met, there has been a very important Labour economic announcement, and one that we wholeheartedly support: the decision to keep the right hon. Gentleman in his job until the general election. He welcomes the economic news through gritted teeth, because he said not only that it would not happen, but that it could not happen if we pursued our economic plan. He predicted that jobs would be lost, but 1 million have been created; he predicted that the deficit would go up, but it has come down; he predicted there would be no economic growth, unless we borrowed and spent more. He has been wrong on all these things. What the Opposition need are new crystal balls.
Ed Balls
Very good, Chancellor—a joke about my name being Balls. Fabulous.
The reality is that business investment is still weak, housing demand is outstripping supply, the savings ratio is falling and the average working person is £1,600 a year worse off than they were in 2010. Let me ask the Chancellor about the one thing he has refused to talk about now for four days. He has delivered one massive tax cut for the richest 1% earning more than £150,000, when everybody else is worse off. The Prime Minister and the Mayor of London are now saying that they want to cut the top rate of income tax again, to 40p. Is that really the Conservative party’s priority? If the Chancellor still believes that we are “all in this together”, why will he not stand at the Dispatch Box and rule out another top-rate tax cut from the Conservatives in the next Parliament? Come on, George: stand up and rule it out.
Mr Osborne
I will tell the right hon. Gentleman what the big tax cut was this Parliament: it was for working people through our increase in the personal allowance to £10,000. After last week, it is clear that the shadow Chancellor has learned absolutely nothing from the economic mess he brought upon this country. He said that Labour should have spent more money in the boom; he has set out fiscal plans that allow billions more of borrowing; and on the top rate of tax, he announced a plan that was attacked by Labour Ministers whom he served with in government, by the people who lent the Labour party money and by credible business people across the country—and his costings were shot down by the Institute for Fiscal Studies last night. There cannot have been a more disastrous policy launch in the history of the modern Labour party. On the day we learn that our economy continues to grow, is it not clear that the anti-business Labour party is now the biggest risk to the economic recovery?
Autumn Statement
Debate between Ed Balls and George Osborne(10 years, 11 months ago)
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Ed Balls
I think that on this one the Chancellor is right—it is a turkey of an idea.
On the cost of living crisis, on energy, on supporting families, this Government just do not get it. There is a reason why this Prime Minister and this Chancellor—the Chancellor said it in his statement—believe that people are better-off: it is that the people on their Christmas card lists have seen their bonuses rise and their taxes cut. They have shown that they are willing to stand up for the interests of the energy companies—[Interruption.] We have a Prime Minister and a Chancellor who will stand up for the energy companies, stand up for the hedge funds, and stand up for people earning over £150,000—who get a tax cut—but will not stand up for millions of families and pensioners in our country: people struggling with rising energy bills, falling wages, and rising child care costs.
We all know and agree that rising life expectancy means we are going to have to work longer and that the Chancellor’s failure on growth and the deficit means more tough spending decisions in the next Parliament. But when the country is crying out for a Government who will work with business to promote investment and wealth creation and build an economy that works for the many and not just the few, does this Chancellor really think he can get away with tinkering at the edges, letting the free market rip, and waiting for the wealth to trickle down? Is not what the Chancellor has announced today the clearest evidence yet that the Government just do not understand the scale of the challenge we face to get an investment-led recovery that works for all and not just a few—a strong recovery built to last?
Let me ask the Chancellor—[Interruption.] With the permission of the House, let me ask the Chancellor this: with house building under this Government at its lowest level since the 1920s, does he not see that his Help to Buy scheme to boost mortgage demand can deliver a strong and balanced recovery only if he does what we and the IMF have urged and invests in housing supply—more affordable homes. [Interruption.] Government Members sneer at building more affordable homes. Can the Chancellor tell the House why infrastructure output has actually fallen by 15% since 2010? No wonder the CBI is so upset.
On investment, why has not the Chancellor used the money from the planned increase in spectrum licence fees to endow a proper business investment bank? On tax avoidance, will he tell the House why HMRC has reported that the amount of uncollected tax actually rose last year?
Almost 1 million young people are unemployed; a record number who want to work full time are being forced to accept part-time work; the Work programme is a flop; the welfare bill is rising; and, as we have learned today, universal credit is a complete and utter shambles. There was no mention of universal credit in the statement: IDS—in deep shambles.
Is it not the fact that, for all the shambles and chaos and rising welfare bills, what the Chancellor has announced on youth unemployment is too little, too late? There will be help for under-21s only, and only in the last weeks of this Government in 2015. Why is he not being more ambitious? Why will he not repeat the successful tax on bank bonuses to pay for a compulsory job for all young people—a job they will take or lose?
Why will the Chancellor not remove the winter allowance from the richest 5% of pensioners? Why will he not reverse his tax cut for hedge funds and protect disabled people in our country by scrapping the unfair and perverse bedroom tax this Prime Minister introduced? Why will he not go further on the bank levy and expand free child care for working parents, make work pay and use it to help working parents?
Is not this the truth: will the Chancellor confirm that even after what he has announced today on fuel duty and increases in the personal allowance, his VAT rise, his cuts to tax credits and his cuts to child benefit mean that, on average, families with children are worse off because of his Budgets? That is the truth—giving with one hand, taking away much, much more with the other.
With energy bills still rising this winter, no real action to tackle the cost of living crisis, no proper plan to earn our way to rising living standards for all, surely Britain can do better than this.
This complacent Chancellor sits there and thinks he deserves a pat on the back. I have to say that, with bank bonuses rising and millionaires enjoying a big tax cut, this is a policy that is working for a few. But as this autumn statement shows, with this out-of-touch Chancellor and Prime Minister, hard-working people are worse off under the Tories.
Mr Osborne
The Leader of the Opposition and I agree on one thing: that was a complete nightmare. The only turkey around here is the speech just given. As for denial, the man who said that borrowing would not come down, unemployment would not come down and growth would not happen, and who refuses to apologise for what he did to the British economy, is the very epitome of denial. That is the central problem with his response and, indeed, his whole economic framework. Not only did he predict that the recovery would never come; he went out of his way to say that if we stuck with our plan it could never come.
This is what the right hon. Member for Morley and Outwood (Ed Balls) said in March this year:
“I’ve said consistently…unless there is a government led plan for confidence, for growth and jobs, the economy will get worse but also the deficit won’t come down, it’ll go up”.
He predicted that the economy would get worse and the deficit would go up and that 1 million jobs would be lost, but the economy is growing, 1 million jobs have been created and the deficit has gone down. I have an explanation for what has happened: we do have a Government-led plan for confidence, for growth and jobs. It is our plan, it is working and the right hon. Gentleman should have welcomed it.
The extraordinary thing about the right hon. Gentleman’s performance was that he could not bring himself to welcome any of the better economic news. He has built his whole proposition as shadow Chancellor on the basis that our effort to deal with the public finances would make that growth impossible. That makes me wonder what the right hon. Gentleman has been up to with his time, but he gave a clue in a newspaper interview this week. He said that he had to cancel his grade 3 piano exam, because it was
“exactly the time when George Osborne is standing up to do the Autumn Statement!”
I think he should have gone ahead with the “Chopsticks” rendition. The newspaper article also says that he asked Miss Perrin, his piano teacher:
“‘If I go wrong can I start again?’ She said: ‘I think it’s probably best to keep going.’”
He takes the same approach to economic policy as he does to his piano. The final thing he said is that he hopes to reach grade 8 piano over the next four years. After his performance today, I can see why he expects to have a lot more time to practise.
Let me turn to the points the right hon. Gentleman raised. The central point is that it is not possible to have a cost of living plan without an economic plan. Labour’s silence on the economy goes to the heart of its weakness. It cannot talk about its record, because it had the biggest recession ever. It cannot talk about the deficit, because it has no plan to deal with it. The right hon. Gentleman cannot even talk about infrastructure and his much vaunted plan for a cross-party consensus, because he was the person who tried to break the consensus on the biggest project of all. He cannot talk about housing, because there were 420,000 fewer affordable homes at the end of the Labour Government. He cannot talk about business rates, because they went up 71% under Labour. He cannot talk about support for business, because he wants to put taxes up on business. He cannot ask about standing up to the powerful, because this is the week that Labour caved in to the trade unions. He cannot ask about jobs, because he wants more jobs taxes. And he cannot ask about banking and financial services, because the person Labour hired to advise it was the Reverend Flowers.
The right hon. Gentleman has said that he would be the co-operative Chancellor. Let me end by saying that that is exactly what he would be: borrowing more than he can afford, with catastrophic management of the finances, and a deluded leadership preaching one thing and doing another. It is hard-working people who will pick up the price if it blows up again. He cannot welcome the economic recovery because he is the biggest risk to economic recovery.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(11 years ago)
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Mr Osborne
What a question from a Labour Front- Bench team that wants to spend £27 billion more, and to borrow every penny of it. If this is the hon. Gentleman’s debut performance as shadow Chief Secretary, I am afraid that he will have to do a lot better. His job should be to control the promises that he makes. As for our side, we are paying for the commitments that we are making to the hard-working people of this country.
Mr Osborne
I will tell the right hon. Gentleman how: by sorting out the mess that he created.
Mr Osborne
I completely agree with my hon. Friend. Of course, one of the consequences of the higher borrowing that the Labour party is advocating would be not just higher taxes, but higher interest rates, which would be absolutely disastrous for families. That is precisely why we have to stick with the economic plan that is delivering the recovery.
Ed Balls (Morley and Outwood) (Lab/Co-op)
I welcome the Economic Secretary and the shadow Financial Secretary to their new jobs, and let us not forget the former Treasury Whip, the Treasurer of Her Majesty’s Household, the hon. Member for Chelsea and Fulham (Greg Hands), who has finally got the promotion we have been urging him to get for three years.
On this Chancellor’s watch, the UK is experiencing the slowest recovery for more than 100 years, and with prices, including energy prices, rising faster than wages, for millions of people this is no recovery at all. Yet from the Chancellor’s earlier answers to the Chair of the Treasury Committee, he seems to think he can get away with cutting energy bills by simply shifting the burden of his green levies on to the ordinary taxpayer. Let me ask the Chancellor—[Interruption.]
Mr Osborne
First, I join the right hon. Gentleman in welcoming the two hon. Ladies to their new Front-Bench positions, although I think he got the title wrong of his new shadow Exchequer Secretary. By the way, while I am at it, may I welcome the fact that the right hon. Gentleman did not move in the reshuffle, because he is exactly where we want him to be?
Perhaps one of these days the right hon. Gentleman will welcome the fact that GDP is increasing, that unemployment is coming down and that today we had the best services purchasing managers index since May 1997. I believe we should roll back some of the levies and charges that have been imposed on energy bills. I am not clear whether he agrees.
Ed Balls
After three years of flatlining, people are worse off because of this Chancellor of the Exchequer. As for ordinary people’s rising energy bills, he just does not give an EDF.
Is it not the case that, over the past year, energy prices in the euro area fell by 1.7% while in the UK they have risen by a staggering 7.7%? Simply switching green levies on to the taxpayer is giving with one hand and taking with the other. Why does this Chancellor always hit ordinary families while standing up for a powerful few?
Mr Osborne
With questions like that, the right hon. Gentleman is never going to be npower, is he?
The truth is that the right hon. Gentleman created a situation in our economy whereby living standards were hit hard, because he destroyed jobs and economic prosperity. Like a bonfire on Guy Fawkes night, every single one of his economic predictions has gone up in smoke, and he has nothing credible or serious to say about the British economy.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(11 years, 2 months ago)
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Mr Osborne
I said in the Budget that we would make special ex gratia payments to Equitable Life policy holders who had bought their with-profits annuity before 1992. I said that we would try to make those payments as soon as possible, and I am pleased to be able to tell the House and the constituents of my hon. Friend, who represents them so well, that we can make those payments in this financial year, rather than in the next one as we originally predicted. We will shortly be writing to those annuitants with more information, but I can confirm that they will receive the money directly, without having to make an application. We are doing this not because we are legally obliged to do it but because, quite simply, it is the right thing to do.
Ed Balls (Morley and Outwood) (Lab/Co-op)
On growth, on living standards, on the deficit, on every test that the Chancellor set himself, his economic plan has failed. Since 2010, growth has been not 6.9% but 1.8%, families have been worse off not better off, and the deficit has not gone down to £60 billion but is stuck at £120 billion. How on earth can the Chancellor now claim that his economic plan has worked? After three wasted and damaging years, does he not realise that he cannot just airbrush out his failure?
Mr Osborne
The shadow Chancellor cannot airbrush out his predictions. He said:
“Britain’s double-dip recession is even deeper than first thought”,
but there was no double-dip recession. He also said that it was a “complete fantasy” that private sector job creation would replace losses in the public sector, but it has done so three times over. And three months ago, he said that our policy would choke off the recovery. The fact is that he cannot stand the fact that the economy is recovering and his plan would have been a disaster. Let us fear that the predictions about his own future in the shadow Cabinet turn out to be more accurate than his predictions about the British economy.
Ed Balls
Three years ago, this Chancellor did choke off the economic recovery. That is what happened, and his arrogant complacency will jar with millions of ordinary families who, even with growth returning at last, are still worse off because of his failing plan. Let me ask him who is benefiting from his policies. Can he confirm what the Office for National Statistics reported last month—namely, that the incomes of the highest earners were boosted in April because they delayed receiving their bonuses by a month in order to benefit from the tax cut for people earning more than £150,000 a year? The wealthy might be celebrating with the Chancellor, but everyone else thinks that he is completely out of touch.
Mr Osborne
I hope this is not our last encounter across the Dispatch Box, because we are enjoying this. We are enjoying the fact that the shadow Chancellor simply does not admit to the mistakes he made, not only in office but in opposition. He is increasingly like Monty Python’s black knight defending that bridge. When unemployment falls, he says that it is but a scratch; when business confidence rises, he says, “I’ve had worse”; the recovery—it is just a flesh wound. The limbs are falling off his economic argument, and it would be a comedy if it were not for the fact that Labour’s economic policies were a tragedy for this country.
Spending Review
Debate between Ed Balls and George Osborne(11 years, 5 months ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)
The Chancellor spoke for more than 50 minutes, but not once did he mention the real reason for today’s spending review: his comprehensive failure on living standards, growth and the deficit. We have seen prices rising faster than wages, families worse off, long-term unemployment up, welfare spending soaring, a flatlining economy, and the slowest recovery for more than 100 years. As a result of that failure, for all the Budget boasts, borrowing last year was not down but up. The Chancellor has not balanced the books, as he promised to do, and in 2015 we will see a deficit of £96 billion. There has been more borrowing to pay for the Chancellor’s economic failure, which is why he has been forced to come to the House today to make more cuts in our public services.
Does the Chancellor recall what he said to the House two years ago? He said:
“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.]
We do not need to ask for more! Is not the Chancellor’s economic failure the reason why he is back here today asking for more? More cuts in the police, more cuts in our defence budgets, more cuts in our local services: this out-of-touch Chancellor has failed on living standards, growth and the deficit, and families and businesses are paying the price for his failure.
Of course, it was not supposed to turn out like this. Does the Chancellor remember what he told the House three years ago, in his first Budget and spending review? He said that the economy would grow by 6%, but it has grown by just 1%. He pledged to get the banks lending, but bank lending is down month on month on month. He made the number one test of his economic credibility keeping the triple A credit rating, but on his watch we have been downgraded not once but twice. He promised that living standards would rise, but they are falling year on year on year. He said “We’re all in this together”, but then he gave a huge tax cut to millionaires. He promised to balance the books, and that promise is in tatters.
We see failed tests and broken promises. The Chancellor’s friends call him George, the US President calls him Jeffrey, but to everyone else he is just Bungle—and I see that even Zippy on the Front Bench cannot stop smiling. Calm down, Zippy, calm down.
Did we get an admission from the Chancellor that his plan has not worked, and that Britain needs to change course? Did we get the plan B for growth and jobs that we and the International Monetary Fund have called for? It does not have to be this way. Surely, rather than planning for cuts in 2015, two years ahead, the Chancellor should be taking bold action now to boost growth this year and next. Investment would get our economy growing and bring in the additional tax revenues that would mean that our police, armed forces and public services would not face such deep cuts in 2015. Why did the Chancellor not listen to the IMF, and provide £10 billion in infrastructure investment this year? Given that house building is at its lowest level since the 1920s, why is he not building 400,000 more affordable homes this year and next? If the Chancellor continues with his failing economic plan, it will be for the next Labour Government to turn the economy around and make the tough decisions that will get the deficit down in a fair way.
I have to say to the Chancellor that there is no point in boasting about infrastructure investment in five or seven years’ time; we need action now. I must also say to him that he ought to brief the Prime Minister better for Prime Minister’s questions, because three years after the infrastructure plan was launched, just seven of the 576 projects that were announced have been completed. More than 80% have not even been started, just one school has been provided, and in the first three months of this year, infrastructure investment fell by 50%. On infrastructure, we need bold action now, not just more empty promises for the future.
As for the idea that this spending review will strengthen our economy for the long term, let me ask the Chancellor some questions. Where is the proper British investment bank that business wants? Where is the 2030 decarbonisation target that the energy companies say that they need if they are to be able to invest for the future? Where is the backstop power to break up the banks if there is no reform, which the Parliamentary Commission on Banking Standards called for? And whatever happened to the Heseltine plan’s much-heralded £49 billion single pot growth fund for the regions? A mere £2 billion is pathetic.
Is this not the truth? Instead of action to boost growth and long-term investment, all we got today was more of the same from a failing Chancellor, and we got more of the same on social security and welfare spending too.
We have had plenty of tough talk and divisive rhetoric from the Chancellor and the Prime Minister, but on their watch the benefits bill is soaring. Social security spending is up £21 billion compared with their plans. We have called for a cap on social security, and we fully support the triple lock on the pension—something not even mentioned in the Chancellor’s statement—but the fact is that in 2010 the Chancellor tried to set a cap on social security spending and he has overspent his cap by £21 billion.
If the Chancellor really wants to get social security bills down, why not get young people and the unemployed back to work with a compulsory jobs guarantee paid for by a tax on bank bonuses? Why not get our housing benefit bill down by tackling high rents and the shortage of affordable homes? Why not stop paying the winter fuel allowance to the richest 5% of pensioners? And why not make work pay with a 10p tax band paid for by a mansion tax, instead of huge tax cuts for millionaires?
The Chancellor is making the wrong choices on growth and social security spending, and he is making the wrong choices on departmental spending as well. Let me ask him: when thousands of front-line police officers are being cut, why is he spending more on police commissioners than the old police authorities? Why is he wasting £3 billion on a reckless reorganisation of the NHS that the public do not support? Why is he funding new free schools in areas with enough school places, while parents in other areas cannot get their children into a local school?
We will study the Chancellor’s departmental spending plans for 2015-16. There is a lot of detail that he did not provide for the House. We look forward to seeing whether he will confirm the continuation of free national museum entry—maybe he can tell us in his response—but I have to say to the Chancellor that the country needs to know the detail, so let me ask him: will this spending review mean fewer police officers in 2015-16, on top of the 15,000 we will lose in this Parliament? Will it mean fewer nurses in 2015, on top of the 4,000 we have lost so far? Will it mean fewer Sure Start children’s centres, on top of the 500 that have already closed? And will he continue to impose deeper cuts on local authorities in areas with the greatest need, when already in this Parliament the 10 most deprived local authorities are losing six times the spending per head of the 10 least deprived areas? People up and down the country want to know the answers to these questions, and they should be in no doubt that the scale of the extra cuts the Chancellor has announced today to our police, defence and local services are the direct result of his abject failure to get the economy to grow.
The Chancellor is failing on living standards; they are falling. He is failing on growth; it is flatlining. He is failing on the deficit, and all we got was more of the same: no plan to turn our economy around, no hope for the future, and Britain’s families and our public services are paying the price for this Chancellor’s failure.
Mr Osborne
One thing is for certain after that performance: the right hon. Gentleman is the worst shadow Chancellor for a generation, and we want to keep him right where he is. What is amazing is that he spoke for 11 minutes and never said Labour wants to borrow more. Did anyone hear that in his comments? That is his argument: he wants to borrow more. Why does he not have the courage to get up and make his economic argument at the Dispatch Box? He finds himself in a situation where the entire argument he has been advancing for the last three years has completely collapsed. Where was the reference to the temporary VAT cut? Abandoned. Where was the reference to the five-point plan? Abandoned. He complains about all the cuts; here is a very simple question. We shall spend £745 billion in 2015; what will he spend? Does he match those plans or not? Hands up on the Labour Benches from those who want to match our spending plans. On Saturday, the Labour leader—
Mr Osborne
I fear that it would be jeopardised and this country would be back in intensive care. It is remarkable that the shadow Chancellor did not have the courage at that Dispatch Box to say that Labour would borrow more. Labour did say that for three years and now it has completely gone silent.
Mr Osborne
What I am talking about is that the Labour leader said on Saturday that Labour would not borrow more and the shadow Chancellor said on Sunday that it would. Because there are two alternative Labour economic policies out there, I would quite like to know which one is which.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(11 years, 5 months ago)
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Mr Osborne
In case the hon. Lady had not noticed, stock markets around the world are down. Bank stocks are down—
Mr Osborne
RBS: the world’s largest bail-out, under a Government who completely failed to regulate it. How dare the right hon. Gentleman have the audacity to come here and complain about the Royal Bank of Scotland? We are fixing the problems in the Royal Bank of Scotland. We are looking at the case for establishing a “bad bank”, which, as I said at the Mansion House, should have been done in 2008. We are going to fix the mess in the banking system that Labour left behind.
Ed Balls (Morley and Outwood) (Lab/Co-op)
The whole House will have heard the Chancellor not answer the topical question asked by my hon. Friend the Member for Rochdale (Simon Danczuk). The reason is that, despite all the Budget speech bluster, borrowing last year went not down, but up.
Let me ask the Chancellor another question. The bonuses paid in the financial services sector this April, the first month of the new tax year, were 65% higher than in the same month last year—up by a total of £1.3 billion. Can the Chancellor tell the House why bank bonuses rose by £1.3 billion this April?
Mr Osborne
First, on borrowing, the Labour Government were borrowing £157 billion a year. This Government borrowed £118 billion last year, which represents a fall in borrowing. The deficit is down by a third because we are taking the tough decisions to ensure that Britain lives within its means. On bonuses, they are 85% lower than when the right hon. Gentleman was City Minister.
Ed Balls
The fact is that the Chancellor promised to get the deficit down, but it is rising, and that month-on-month rise in bonuses is the highest since records began in 2000. There is a simple reason why that happened: thousands of very highly paid people deferred their bonuses into the new tax year to take advantage of the Chancellor’s top rate tax cut, which has cost the Exchequer millions of pounds in lost tax revenue. How can the Chancellor still say, “We’re all in this together,” when living standards are falling for everyone else and the economy has flatlined for three years? Is not this economic failure the reason why the Chancellor will not balance the books in 2015 and why he will be coming back to the House tomorrow to ask for more cuts to public services? He is unfair and out of touch, and he is now revealed as totally incompetent.
Mr Osborne
Getting a lesson from the shadow Chancellor on how to balance the books is like getting a lesson from Dracula on how to look after a blood bank. He finds himself in a most extraordinary situation. On Saturday, the Labour leader said that Labour was going to rule out borrowing more. On Sunday, when the shadow Chancellor was asked whether Labour could borrow more, he said, “Yes, yes, of course,” and then, on Monday, the Labour party committed itself to higher welfare spending—it is a complete shambles. On the eve of the spending review, Labour finds itself in the extraordinary situation in which it has completely abandoned the economic argument that it has been making for the past three years, but kept the disastrous economic policy. That is a hopeless position. The shadow Chancellor has led Labour Members up a cul-de-sac and they have to find their way out of it.
Economic Growth
Debate between Ed Balls and George Osborne(11 years, 6 months ago)
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Mr Osborne
Hold on. I have not given way yet. I will give way to any Labour Member who can answer the question: do they rule out an in/out referendum before the next general election? Yes or no?
Ed Balls
To avoid any risk of double-speak, Madam Deputy Speaker, in order to make sure that we have the full facts before us, the Chancellor claimed that he was tackling the welfare bill—[Interruption.] No, no double-speak. Let us be absolutely clear that between 2010-11 and 2012-13, expenditure on benefits has gone up, because of higher unemployment, inflation and other things, by £8.1 billion. To avoid double-speak, will the Chancellor confirm that welfare spending is up by £8 billion in the last two years?
Mr Osborne
We have spent more on pensions, and we are proud that we have done so, and we have a triple lock on pensions and pensioners last year got the biggest ever increase in the state pension. As for other areas of the welfare state, we have cut welfare entitlements by £19 billion a year.
Let me conclude, because there is a five-minute limit on Back-Benchers’ contributions. We have spoken about Europe, but many of the economic challenges that we face remain at home. We spoke about banking regulation, and an important part of the legislative programme this year is the Financial Services (Banking Reform) Bill, which is a carry-over Bill. We are making the changes necessary to fix our banking system, ring-fence our retail banks and make sure that we deal with the too-big-to-fail problem. We also have legislation to support small businesses. It will not be the most controversial Bill, because I suspect that the Labour party will not dare to oppose it, but it will be of enormous help to our constituents and to many businesses throughout the country. Our new employment allowance will cut the tax on jobs—
Oral Answers to Questions
Debate between Ed Balls and George Osborne(11 years, 8 months ago)
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Mr Osborne
My Parliamentary Private Secretary, my hon. Friend the Member for Hastings and Rye (Amber Rudd), has just said in my ear that her constituency is also bidding. I will not take sides, but I know that Southend will put in a very strong bid, as will Hastings. The decision will be announced shortly.
Ed Balls (Morley and Outwood) (Lab/Co-op)
The Chancellor has had plenty of advice over the weekend on how to change his failing economic plan, and it has not all come from me. The former Defence Secretary says that he should cut capital gains tax, the Business Secretary wants a £15 billion housing boost, and even the Home Secretary is making speeches calling for a new growth plan. What is going on? Do Cabinet Ministers not realise that the Budget is in just eight days’ time, or have they lost confidence in the Chancellor of the Exchequer?
Mr Osborne
What people realise is that the right hon. Gentleman’s prescription of borrowing more as a solution to Britain’s borrowing problems is exactly the same prescription that got the country into this mess in the first place. He is like the snake oil salesman selling his miracle cures when people remember that his medicine almost killed the patient. We are not going to listen to him again.
Ed Balls
But it is the Chancellor’s plan that is failing. The Business Secretary said on Monday:
“Well we are already borrowing more”—
[Interruption.] Government Members may cheer behind the Chancellor in public, but they are not cheering in private. An e-mail from the right hon. Member for Wokingham (Mr Redwood) has fallen into my hands. It was sent around within half an hour of the Prime Minister’s speech last Thursday to set out alternative ideas for the Budget from Back Benchers, such as income tax cuts and capital gains tax cuts. He says that “one colleague” says that we should do
“more to help people with childcare costs.”
Just one colleague! It concludes that the Chancellor needs
“to stimulate greater confidence, more enterprise, and to relieve some of the squeeze on the private sector.”
Businesses and families are feeling the squeeze, so why will the Chancellor not act to stimulate the economy and why is it only millionaires who are getting a £3 billion tax cut from him? Is not the truth that his plan is failing? That is why all the Government Members are losing confidence.
Mr Osborne
I am tempted to say, “Look behind you.” With a week to go until the Budget, is that the best that the shadow Chancellor can do? He has produced an e-mail from Conservative Back Benchers who are perfectly entitled to ask for things in the Budget. In this party, we are perfectly prepared for people to express an opinion and to listen to the views of our colleagues, unlike him and the operation that he runs. He is the face of Labour’s economic failure. As long as he remains as shadow Chancellor, it is a great thing for my party.
Economic Policy
Debate between Ed Balls and George Osborne(11 years, 9 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Ed Balls (Morley and Outwood) (Lab/Co-op)
(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on the UK Government’s economic policy following the loss of Britain’s triple A credit rating.
The Chancellor of the Exchequer (Mr George Osborne)
This rating decision is a stark reminder of the debt problems built up in Britain over the last decade, and a warning to anyone who thinks we can run away from dealing with those problems. We on the Government side of the House will not do that.
I can report that we have not seen excessive volatility in the markets today. Ten-year Government gilts are broadly flat—trading at 2.1%—within the trading range of the last week, and near the very lowest rates of borrowing in our history. The FTSE 100 is currently up.
The credit rating is an important benchmark for any country, but this Government’s economic policy is tested day in, day out in the markets, and it has not been found wanting today. Families and businesses see the benefit of that in these very low interest rates.
If we accept the outcome of the rating agency’s decision, we must accept the reasons given for that decision. Moody’s points to the combined impact of what it describes as
“slow growth of the global economy”
and the necessary
“domestic public- and private-sector deleveraging process”—
in other words, the process of winding down the huge debts that built up in our society over the last decade. That is the environment that we are operating in. We are dealing with the very high deficit and debt trajectory that this country had, coming out of the financial crisis, and that was made more difficult by the economic environment abroad.
On the same day as the rating decision, the latest European forecasts showed the eurozone deep in recession, and weaker growth than ours in key economies such as France and Germany. Crucially, Moody’s says that the UK’s creditworthiness remains extremely high because of our
“highly competitive, well-diversified economy”
and a
“strong track record of fiscal consolidation”—
what it calls the “political will” to “reverse the…debt trajectory.” Its message to this Government and this Parliament is explicit: the UK’s rating could be downgraded further if there is a
“reduced political commitment to fiscal consolidation.”
Hon. Members will not get that reduced commitment from this Government. We will go on delivering on the economic plan that has brought the deficit down by a quarter, that has helped to secure 1 million private sector jobs, and that continues to secure very low interest rates, not just for the Government, but for families and businesses in this country.
Ultimately, that is the choice for Britain. We can either abandon our efforts to deal with our debt problems, and make a difficult situation very much worse, or we can redouble our efforts to overcome our debts, make sure that this country can earn its way in the world, and provide for our children a very much brighter economic situation than the one we inherited from our predecessors. That is what I will do, and what this Government will do.
Ed Balls
The downgrading of Britain’s credit rating is, in the Chancellor’s own words, a “humiliation” for this Government. Let me remind the House what he promised at the general election. He said:
“the British people will have eight clear and transparent benchmarks against which they can judge the economic success or failure of the next government”.
Point 1 says:
“We will safeguard Britain’s credit rating”.
The first economic test he set himself has been failed by this downgraded Chancellor. Yet as we have seen today, he remains in complete denial, offering more of the same failing medicine, even though Moody’s now agrees that “sluggish” growth is the main problem. Does he not now regret using the rating agencies as cover for his accelerated tax rises and spending cuts—an economic course he was warned was bound to fail?
The plan has failed. Businesses, families and pensioners are struggling. Our economy has flatlined, and as a result, Government borrowing is set to be £212 billion higher than the Chancellor planned, but despite all that, he spent the last year saying, “I must stick to my plan to keep the triple A rating.” Now that it is clear that his warnings of disaster—of rising mortgage rates and market mayhem—if we downgraded have not come true, what other excuse does he have for sticking to the plan? Over a weekend, he went from saying that he must stick to his plan to avoid a downgrade to saying that the downgrade is the reason why he must stick to the plan. He used to say that a downgrade would be a disaster; today he says it does not matter, but he still warns that a downgrade in future might be a problem—until it comes along; then he will have the same excuses. It is utterly baffling and completely illogical. He is just making it up as he goes along.
No wonder the Chancellor is now besieged by calls from right, left and centre to kick-start the recovery with infrastructure investment and tax cuts. Even the economic adviser to his great political rival, the Mayor of London, has today called for
“more spending by the Government on infrastructure and construction.”
In conclusion, the Chancellor needs to get out of his denial and get a new plan on growth, jobs and the deficit that will work, or else the Prime Minister will need to get a new Chancellor. Does the Chancellor not see that it is his first duty not to put his own political pride first, but to put the national economic interest and families and businesses in this country first?
Mr Osborne
The shadow Chancellor finds himself in the contradictory position of seeking an urgent question on a rating decision which he says we should ignore, about a debt burden that he admits he would add to, in order to attack a Government who are sorting out the mess that he created. What exactly is his policy? Six times on the radio he was asked this weekend whether the answer to too much borrowing is to borrow even more, and he would not answer the question. It is an economic policy that dare not speak its name, from a shadow Chancellor who refuses to be straight with the British people. Finally, he was confronted on the radio by the simple statement:
“I, Ed Balls…would borrow more”
and he admitted,
“Yes, that is what I would do.”
Does not that admission completely undermine his entire argument today? A deliberate decision to borrow more—[Interruption.]
Oral Answers to Questions
Debate between Ed Balls and George Osborne(11 years, 9 months ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)
May I start by welcoming the Chancellor back from his winter mini-break in Davos? I do not know whether he got any skiing in, although he and his chums certainly went out on the piste.
Back to Britain: in August 2010, the Chancellor also made a speech at Bloomberg, in which he claimed that his economic plan would secure the recovery. A few weeks later, his spending review said that by now we would see growth of 5.2%. Let me ask him: since his spending review, how much growth have we actually had?
Mr Osborne
I am glad the right hon. Gentleman noticed that I went to Davos, where I met the last two Labour Prime Ministers as well—and I could not help but notice that both of them were talking about the global economic problems. Of course we have to sort out those problems abroad, but we also have to deal with our problems at home, and of all the people now in Parliament, the right hon. Gentleman bears primary responsibility for putting Britain into this mess. The reason his economic argument is not making more traction is because no one believes that the problems that got us into this mess are the things that will get us out of it.
Ed Balls
How complacent is that? The economy is flatlining and borrowing is rising on the right hon. Gentleman’s watch. Let me tell him the facts. Since the spending review, growth has been just 0.4%, which is 13 times lower than he forecast. Our growth is slower than that of America, France, Germany, Australia, Canada, Mexico, Turkey—the list goes on and on. Let me ask him this: now that the chief economist at the International Monetary Fund, the Deputy Prime Minister and even his dining chum the Mayor of London are losing faith in his plan, when will he listen, stop being so complacent and finally act to kick-start this flatlining economy?
Mr Osborne
There is no complacency about dealing with the mess that the right hon. Gentleman left behind. He talks about the economy over the last couple of years. Let me tell him what has happened in the Morley and Outwood constituency. In his area, the unemployment claimant count went up 190% under the last Government; it has fallen by 7% under this Government. The youth claimant count was 161% up under his Government; it has come down by 10% under this Government. We are fixing the problems that he created. The only job that he is interested in saving is his own. The truth is that while he remains in the post that he is in, he is a reminder to everyone of all the mistakes that Labour made when it managed the economy.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(11 years, 11 months ago)
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Mr Osborne
I am proud to be part of a coalition Government of Conservatives and Liberal Democrats who have delivered that policy and are delivering it. A very substantial increase next year will mean that individuals are £229 better off in real terms as a result just of the increase in April, so that is to be welcomed. As for when we get to £10,000, I have just announced the Budget date and we will have to wait for that Budget for tax decisions, but even if the £10,000 allowance were to increase with our current CPI forecasts from the OBR, it would hit £10,000 in 2015.
Ed Balls (Morley and Outwood) (Lab/Co-op)
In the autumn statement, the Chancellor announced a real-terms cut in tax credits and benefits over the next three years and the Government say they will ask the House to vote on that, so can the Chancellor tell the House the answer to two questions? First, what percentage of families hit by these cuts to tax credits and benefit are in work? Secondly, as a result of the autumn statement tax and benefit changes, including the change to the personal allowance, will the average one-earner couple in work with children be better off or worse off?
Mr Osborne
It is good to see the shadow Chancellor back. Of course tax credits go to some people in work, but we are also helping those people with a personal allowance increase, and working households will be £125 better off. Perhaps he can answer a question, if that is allowed, Mr Speaker: how will Labour vote on the Bill?
Mr Speaker
It is very important that the public are not misled, however inadvertently, by a member of the Government. This is not an occasion for shadow Ministers to answer questions. In our system, they ask questions and Ministers are expected to answer them. That is the situation.
Ed Balls
I will answer, though, Mr Speaker, but before I do it is important that Members on both sides of the House know the answers to the questions I asked the Chancellor. First, 60% of families hit by his tax and benefit changes are in work. Secondly, according to the Institute for Fiscal Studies, as a result of the autumn statement measures a working family—the average one-earner couple—will be £534 a year worse off by 2015. Those are the very families who pull up the blinds and go to work. Every Tory constituency has, on average, over 6,000 of those families who will lose out. In answer to his question, we will look at the legislation, but if he intends—[Interruption.] He asked me a question and I am going to answer it. If he intends to go ahead with such an unfair hit on middle and low-income working families while giving a £3 billion top-rate tax cut, we will oppose it. Why is he making striving working families pay the price for his economic failure?
Mr Osborne
As I have said, working households will be £125 better off. The right hon. Gentleman quotes the Institute for Fiscal Studies, which has been very clear in its response to the autumn statement that people who are in work and paying the basic rate of tax will do better. The reason we are having to take these difficult decisions on public sector pay, on benefits and the like is because of the mess he created. When will he stand up and say, “I’m sorry we borrowed too much and spent too much. We’ll never do it again”?
Autumn Statement
Debate between Ed Balls and George Osborne(11 years, 11 months ago)
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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.
Bank of England
Debate between Ed Balls and George Osborne(11 years, 12 months ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)
I thank the Chancellor of the Exchequer for notice of today’s statement—although not of its content. I join him in thanking the outgoing Governor of the Bank of England, Sir Mervyn King, for his public service and I wish him a long and happy retirement. I commend the Chancellor on his choice of successor, Mr Mark Carney, to be the third Governor of the Bank of England since our decision to make it independent in 1997. We on this side of the House look forward to working with him closely in the coming months and years.
I have known Mark Carney for a number of years and have worked with him closely. He has a long and distinguished record of public service, great financial expertise and a track record of handling tough and complex challenges. He follows in a tradition established in 1997 when the first appointments to the Monetary Policy Committee included Willem Buiter and DeAnne Julius, neither of whom were British citizens at the time. In my view Mark Carney is a good choice and a good judgment, and his experience will be invaluable.
The Chancellor has made a short statement today, but this is a decision of great significance. With the leave of the House, I would like to ask a number of questions of the Chancellor concerning Mr Carney’s appointment and the role that the new Governor will step into.
At a time of economic stress, the new Governor will need to get to grips with a new and massively enlarged central bank that has new, onerous and complex responsibilities in prudential and consumer regulation as well as its role in monetary policy and financial stability. That is a near impossible job for one person, but in our view it is made harder by the way in which the Chancellor has drawn up the Financial Services Bill, which is still being considered in the other place. We remain disappointed that he is continuing to resist the amendments tabled by the Chair of the Treasury Select Committee and ourselves that would enable the complex new arrangements for the Bank of England to be properly scrutinised. In our view, the new Governor would be strengthened and enhanced, not weakened, by greater transparency. Will the Chancellor think again about that matter?
The Chancellor also needs to clear up the deep confusion at the heart of the new arrangements about who is responsible in a crisis, which he has not managed to clear up to our satisfaction under the current Governor. The Bill heaps far too much power on the new Governor, who, when dealing with the Chancellor, will be able to internalise and suppress the inevitable conflicts within the Bank of England between financial stability on the one hand and monetary stability, fiscal risk and moral hazard on the other. It makes no sense that the deputy governors, including the deputy governor who heads prudential stability, will have no undisputed right to put their views directly to the Chancellor, whether or not the Governor agrees. That is neither stable nor sensible. There is obfuscation in the Bill, and it is not good enough simply to have a memorandum of understanding with ad hoc committees. If the new Governor is to have a fair chance of success, the flaws in accountability and crisis management must be resolved. Will the Chancellor agree to sit down with the new Governor and sort this out?
The new Governor of the Bank of England also looks set to inherit a difficult external economic environment, a global economy that still has serious imbalances, the eurozone in continuing crisis, and, here in the UK, challenges to our banking system, to growth and to fiscal policy. So let me ask the Chancellor a further question about the relationship between the Treasury and the Bank of England that the new Governor will inherit.
Given the blurring of the relationship between monetary and fiscal policy following the recent decision to transfer £35 billion from the Bank of England’s quantitative easing programme to the Treasury coffers—a move that is set to reduce short-term Government borrowing and increase the longer-term burden on the taxpayer—I very much hope that the new Governor and the Chancellor will agree with the Institute for Fiscal Studies, which has stated today that they should
“exclude the impact of this change from all figures when assessing compliance with the fiscal targets”.
Is that a matter that the Chancellor has discussed with the present Governor, the new Governor, the Office for Budget Responsibility or the Office for National Statistics? Can he reassure us that the IFS’s recommendations will be taken on board?
Writing in the Financial Times earlier this year, I began an article by saying:
“Wanted, a new governor of the Bank of England. Only superhumans need apply.”
Superhuman or not, the new Governor of the Bank of England, Mr Mark Carney, is well qualified to take on the role at what will be a very difficult time. I am sure that I speak for the whole House when I say that we wish him and his family well.
Mr Osborne
Given the many fierce exchanges that the shadow Chancellor and I have across the Dispatch Box, it is only right for me to acknowledge my real gratitude to him today for welcoming this appointment. He knows Mark Carney, and he knows that he is an outstanding candidate for the job. I shall certainly cherish the words “I commend the Chancellor”, because I will probably never hear them from the right hon. Gentleman again. I sincerely thank him for that.
One of the important things about the independence of the Bank of England, which the right hon. Gentleman helped to establish with the previous Prime Minister, is that it commands cross-party support—it did not at the time; it does now—and we must try to keep the appointment of the Governor out of the day-to-day partisan debate. The right hon. Gentleman has certainly played his role in doing that today. Let me answer specifically his questions about the new role of the Bank of England.
First, on the shadow Chancellor’s point about the new responsibilities, the Bank has heavy new responsibilities because, in our judgment, the tripartite system did not work and was not properly co-ordinated. Indeed, the Select Committee of the last Parliament, which was chaired by Lord McFall—John McFall as he was then—said that it was not clear who was in charge. By insisting that the Bank of England is in charge of macro-prudential and micro-prudential regulation, we bring those things together.
It is also important, secondly, that we recognise that the Government have an important role. When there is a material risk to public funds, there is a clear responsibility in the Bill for the Bank of England to inform the Treasury, without deluging it on a day-to-day basis with everything that is happening and not differentiating the things that are significant and really important. We have taken in the Bill the power of direction that did not previously exist. In the memoirs of my predecessor, the right hon. Member for Edinburgh South West (Mr Darling), he made it clear that at one point he was considering using the almost nuclear power of direction in the Bank of England Act 1946, which no one had ever used, but that he backed away from it because he did not have a more targeted instrument. We now have that targeted power of direction, which the elected Government can use.
Thirdly, we have discussed the role of the deputy governors. Although it is incumbent on any good Governor and any good Chancellor of the Exchequer to try to make sure that views are heard, ultimately the Bank has to reconcile its internal differences rather than, as I have said, allowing the internal differences to be expressed externally without any attempt to resolve them internally. I make it my business in doing my job to see the deputy governors and to make sure that their views are heard.
Finally, let me deal with the asset purchase facility coupons. This was done with the support and acceptance of the Governor of the Bank of England and the Monetary Policy Committee, which discussed it and agreed that that was a more transparent way of accounting for the quantitative easing coupons and how they will affect the public finances through the coming years. I can confirm for the right hon. Gentleman that when the Office for Budget Responsibility produces its report next week for the autumn statement, it will clearly show the impact of the APF coupons on the public finances, both before and after.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(12 years, 2 months ago)
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Mr Osborne
No, I do not. I think it would cost jobs in the British economy and hit prosperity. I hope that all Members of this House, whether they are sponsored by trade unions or not, would condemn all calls on the trade unions to take up a general strike.
Ed Balls (Morley and Outwood) (Lab/Co-op)
May I take this opportunity to welcome the Financial Secretary and the Economic Secretary to their new posts? I wish them good luck in their new positions. May I also congratulate the Chancellor on somehow managing to keep his job in the reshuffle? Clearly, performance-related management has not yet made it to the Cabinet.
Since our last Treasury questions, the Office for National Statistics has published new figures for Government borrowing. We did not get clarity earlier, so let me ask the Chancellor this. What is the total figure for borrowing for the first four months of this financial year? How does that compare with the same period last year, and how does he explain what has happened?
Mr Osborne
It is good to welcome the Member for “Unite West” back from the TUC conference. As the Chief Secretary explained to the House, borrowing in the short term has been higher this year than in the first four months of last year, but he pointed to particular one-off factors, such as the shutdown of the Elgin oilfield. That is why the increase in borrowing comes from weaker corporation tax receipts. I am glad to report to the House that VAT, national insurance and income tax receipts have broadly held up, despite the weaker economic conditions here and around the world. However, the right hon. Gentleman will have to wait until 5 December to get the next economic forecast from the independent Office for Budget Responsibility—because we make these forecasts independently these days.
Ed Balls
I have to say, we are losing patience with the Chancellor’s schoolboy bluster. It is one thing to be heckled by a few trade union delegates at a conference this morning; it is another thing to be booed by 80,000 people—the whole of the Olympic stadium—when he only turned up to give out a medal.
Let me tell the Chancellor the answer. He is right that borrowing has gone up by a quarter compared with last year, but the reason is that our economy is in double-dip recession, tax revenues are down and spending on unemployment is going up. That is why borrowing is going up, on the watch of a Chancellor who said that he would secure the recovery and get borrowing down. So let me ask the Chancellor this. The International Monetary Fund, the British Chambers of Commerce, the TUC, the engineering employers and even Boris Johnson are now calling for action to kick-start the recovery. Is it not time the Chancellor did something the public might cheer: admit he has got it wrong, change course and finally get a plan for jobs and growth?
Mr Osborne
The right hon. Gentleman talks about unemployment; 900,000 private sector jobs have been created in this economy over the past two years, and we are rebalancing the economy away from the dependence on debt and the unaffordable public sector that he presided over when he was in the Treasury. [Interruption.] He says that borrowing has gone up, but we have cut the deficit by 25%. He has also said that Labour needs a credible deficit reduction plan. He has had all summer to think of one. Where is it?
Mr Osborne
Let me say this as politely as I can to the shadow Chancellor and former Treasury Minister. Not once in the 13 years during which Labour was in office did it propose guaranteeing large-scale infrastructure projects, but that is precisely what we are doing. We are breaching decades of Treasury orthodoxy to support the private sector, investing for our country’s future, and I hope that that commands all-party support—in the politest possible way.
Professional Standards in the Banking Industry
Debate between Ed Balls and George Osborne(12 years, 4 months ago)
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Ed Balls
The allegation made about me yesterday in The Spectator is utterly untrue. At no point did I have any communication, directly or indirectly, with Mr Paul Tucker, at any time when I was an adviser, a Minister, or subsequently a Cabinet Minister, and I had no discussion at any time with anyone about the LIBOR market and its operation. [Interruption.] It is not for me to provide the proof; it is for the Chancellor to prove his allegation. If he has any evidence, he should produce it now, in the House. I will take an intervention now. [Interruption.] If the Chancellor will not provide the evidence now, he needs to stand up at the Dispatch Box now, and withdraw this utterly false allegation.
The Chancellor of the Exchequer (Mr George Osborne)
In the last 48 hours we have discovered two things: first, there is the report commissioned by UBS that Baroness Vadera now says she saw and commented upon; secondly, we have learned from the personal account of Bob Diamond’s telephone call with Paul Tucker that senior figures in Whitehall contacted Paul Tucker, and Bob Diamond said in his evidence to the Treasury Committee that they were Ministers. In the last 24 hours, we have had the shadow Chancellor say it might have been Treasury Ministers at the time, and we have had the previous Chancellor of the Exchequer say they definitely were not from the Treasury, but maybe from elsewhere in Government. Will the shadow Chancellor explain what Labour’s involvement was? Who were the Ministers? Who had the conversation? Who were the senior figures? Let him answer for his time in office.
Ed Balls
The House and the public will judge the integrity of a Chancellor who cannot defend here what he whispers to The Spectator magazine. He has no evidence, and he knows it, because what he said is not true, and he knew that too.
Let me read out what he said to The Spectator. He said:
“They were clearly involved…That’s Ed Balls, by the way.”
That is the allegation; it is utterly false and untrue.
I say again to the Chancellor that he should either present the evidence or withdraw the allegation about me right now. I have to say that the sight of a Chancellor who says one thing to the press but cannot defend himself in Parliament is embarrassing to that office.
Mr Osborne
The former chief executive of Barclays said this yesterday to the Treasury Committee. He said what Paul Tucker
“was trying to tell me was, ‘Bob, there are Ministers in Whitehall who are hearing that Barclays is always high. That could lead to the impression that you are not funding yourself.’”
Does the shadow Chancellor know who those Ministers were?
Ed Balls
I am very sorry, but we cannot have a Chancellor of the Exchequer who behaves in this way. He made an utterly personal allegation about me. He said:
“They were clearly involved…That’s Ed Balls, by the way.”
I have said unequivocally that that is utterly untrue. The Chancellor should either provide the evidence or withdraw the allegation. We should not have to wait for an inquiry for the Chancellor to withdraw a false allegation made about me, which he has no evidence for, and which he knows is utterly untrue.
I have to say that the Chancellor’s behaviour will appal the public, who, rightly in my view, are unpersuaded that any of us—any of this generation of politicians, regulators and bankers—are currently rising to the challenge and putting right the wrongs for which they are paying a heavy price.
Mr Osborne
Can I just say this before I give way to anyone? Let us bring the argument to an end today. Let us decide. To enable that decision to happen—and this is why, in Government time, the shadow Chancellor opened this debate—we have adopted a procedure without precedent, which is to allow two motions, one from the Opposition and one from the Government, to be debated today. I hope that although the argument has been a fierce one, and I have no doubt that the partisan attacks will continue—
Mr Osborne
I will give way to the shadow Chancellor if he answers this question for me: if the House votes for a joint parliamentary inquiry, will the Labour party take part in it? If not, he will be blocking any inquiry into this banking scandal.
Ed Balls
My advice to the Chancellor, on the basis of the Attorney-General’s comments, is to stop the speech, withdraw the motion, and come back next week when he has done the homework. But my intervention is on the partisan tone. Let me ask him this: will he provide the evidence to substantiate the allegations—false allegations—that he made about me yesterday, or will he now withdraw and apologise for those false and untrue allegations? Has he the integrity to do so?
Mr Osborne
The right hon. Gentleman was the City Minister during the LIBOR scandal. We know, as I said in my interventions on him earlier, that, first, Baroness Vadera admits that she saw the report that was commissioned on the LIBOR rate; and secondly, that Bob Diamond said that Ministers in Whitehall were putting the bank under pressure through the Bank of England. If he is able to tell me—[Interruption.] I am answering his question. I have said that he has questions to answer. [Interruption.] That is precisely what I have said. I want to know the answer to this question: which Labour Ministers were involved?
Mr Osborne
Let me say exactly what I said, and then the right hon. Gentleman can answer my question. I said, “They were clearly involved”, and we now have that from two sources—[Interruption.]
Mr Osborne
I have never seen Labour Members and the shadow Chancellor so rattled about their time in office. We had one hour of an attempt by the former City Minister to defend his conduct when he was in office and these scandals happened, and we have still not had from him a simple apology for what he did—his failure of regulation. He should get up and say not, “We were all involved in this; there were Governments all over the world doing it”, but “I was the City Minister and I am sorry.”
Ed Balls
The Chancellor knows what I have said in the past. I have said that people from all parts of the House regret what happened. I have apologised to this House before. I have apologised to the House for the failures of regulation. I am asking the Chancellor to apologise now. He has impugned my integrity. He made the allegation in The Spectator and all over the newspapers that:
“They were clearly involved”
in the 2008 LIBOR scandal. He said:
“That’s Ed Balls, by the way.”
I was named. He has made an allegation, but he has no evidence because there is not any, because it is untrue. He knew that there was no evidence because he knew that it was untrue, and he said it anyway because that is the character of the man. I am saying to him that if he has any integrity, on this narrow point of his allegation, he should stand up now, withdraw the allegation and apologise. And he won’t.
Mr Osborne
The idea that I am going to take lessons in integrity from a man who smeared his way through 13 years of Labour government and who half the people who served with him think was a disgrace in his post is another thing entirely. Let him redeem himself today by not blocking an inquiry into what happened under the last Government. Take part in the inquiry. You are not prepared to do that.
Ed Balls
It is clear that there is a wider set of questions, on matters from mis-selling to small businesses to the wider culture and practices of the banking industry, that are outside the scope of the inquiry set out by the Chair of the Treasury Committee and, in our view, cannot be properly addressed by any parliamentary Committee. In our view, the case for a full, open, judge-led public inquiry is stronger at the end of this afternoon, and we will continue to press that case.
It is our view that the Chancellor and the Prime Minister have made a grave error of judgment, and any time future scandals emerge, people will ask why we in this country are not having the full, independent public inquiry that our country needs.
Mr George Osborne
Further to that point of order, Mr Deputy Speaker. I welcome the Opposition’s agreement in principle, as I take it, to take part in a joint parliamentary inquiry into what has happened. I suggest that the usual channels now work on the membership of that inquiry and that the Front-Bench teams and my hon. Friend the Member for Chichester (Mr Tyrie) discuss any concerns that Opposition Front Benchers have about resourcing, the secretariat and so on. What everyone now wants to do is get a resolution that all parties can agree on, which we can bring to the House before it rises, so that we can get the Joint Committee up and running, get to the bottom of what went wrong in our banking industry and with the LIBOR scandal, and make the changes needed to legislation to ensure that it never happens again. I would welcome the Opposition’s support in doing that.
LIBOR (FSA Investigation)
Debate between Ed Balls and George Osborne(12 years, 4 months ago)
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Ed Balls
For my part, I regret—as do Ministers and central bankers around the world—that we did not see the financial crisis building and take action, but let me ask the Chancellor this question: do he and the Prime Minister regret consistently attacking us in the Labour Government for being too tough in our approach to regulation, saying that it would undermine City effectiveness? That is what they said.
As for the future of regulation more widely, let me ask the Chancellor another question. Having rightly commissioned the Vickers report, does he now regret coming to the House a few weeks ago and saying that he was watering down its recommendations and weakening leverage ratios, and arguing, shockingly in the light of recent events, that complex derivatives—the very derivatives that led to the appalling mis-selling of interest rate swaps to small firms—should be inside the retail bank ring fence, contrary to the recommendation of Sir John Vickers? Surely that is one U-turn that we need from the Chancellor.
We all have a responsibility to do better in future, to reform our banking industry and to rebuild trust, but we do not believe that another parliamentary inquiry can do the job, just as we rejected that approach in relation to phone-hacking. The Chancellor said today that we did not need more “navel-gazing when we know what has gone wrong.”
How complacent is that? If the Chancellor and the Prime Minister are so confident that their approach is right, why do they not put two options to a vote, and let the House decide? Labour Members will vote for an independent and open public inquiry, not an inadequate and weak plan cobbled together over the course of this morning. The independent inquiry is what our constituents want, and it is the only way to achieve a lasting consensus on reforms for the future.
Mr Osborne
There was one question that dared not speak its name: who was the City Minister when the LIBOR scandal happened? Who? Put your hand up if you were the City Minister when the LIBOR scandal happened.
The shadow Chancellor was not here on Thursday, so he has had days to think about it, but there was not one word of apology for what happened when he was in charge of regulating the City. He blamed central bankers around the world and he blamed the Opposition of the day, but he did not take personal responsibility for the time he was regulating the City when the LIBOR scandal started, and that is why he will not be listened to seriously until he does. Indeed, we need to know whether he knew anything of what was going on. Did he express any concern about the LIBOR rate? When he was in the Cabinet and Gordon Brown, the right hon. Member for wherever it is, was Prime Minister, was he concerned about the LIBOR rate and Barclays? We shall find out in due course.
Let me now deal with the specific questions asked by the shadow Chancellor. He said that the criminal penalties exist in legislation. As I said, the Serious Fraud Office—which is totally independent of politicians, and rightly so—is looking at the law and seeing what it can do, but Lord Turner himself has said that the Financial Services Authority does not have adequate criminal powers. [Interruption.] Opposition Members are shouting, but let me read to them something a member of their own Front-Bench team has said. Lord Tunnicliffe said this:
“Criminal sanctions are extraordinarily difficult to bring about because of the burden of criminal law. It is fair to say though that you can’t find them in the current legislation. And, yes, OK, it’s our fault. I hope my leaders don’t hear me say that.”
That is a member of the Labour Front-Bench team clearly placing the blame on the late Labour Government, of which the shadow Chancellor was the principal economic adviser. That is the problem with the current law, and we are seeking an urgent review in order to amend it and make sure we can deal with the problem.
The shadow Chancellor talks about our acting belatedly in respect of regulation. He had 13 years in which to regulate properly, yet in the space of two years we are changing the entire system of regulation by getting rid of the FSA and introducing a change to the structure of banking. That is happening because of the recommendations from the committee that we set up under John Vickers, and we have still not heard from the shadow Chancellor whether he supports John Vickers’ proposals. He often gets up and says what is wrong with them—[Interruption.] Well, if he has just welcomed them for the first time, that is very welcome, but he goes out of his way not to do so on other occasions.
The shadow Chancellor then said that, somehow, a parliamentary inquiry would be wrong and that I was complacent to say we knew what had gone wrong. This is what my predecessor, the right hon. Member for Edinburgh South West (Mr Darling), said at the weekend, however:
“We know what went wrong and we don’t need a costly inquiry to tell us”,
so that is not just the view of the current Chancellor.
I hope the shadow Chancellor reconsiders his position. We will have good people from both sides of this House and the House of Lords to consider the matter. We will put the motion to the House. Let us have a serious inquiry, but let us have an inquiry that comes to a conclusion within a measurably short period so that we can amend the law that will be going before the House next year. That is the sensible step to take. In the meantime, the shadow Chancellor should reflect on his role and his responsibility, as the City Minister who let Northern Rock sell those dodgy mortgages, as the City Minister who let RBS explode, and as the City Minister who presided when the LIBOR scandal began.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(12 years, 5 months ago)
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Mr Osborne
I absolutely agree with my hon. Friend that it is very welcome news that inflation is now falling. That will help families. The Government want to help families further by keeping those mortgage costs very low, and the only way we can do that is by having a credible plan for the public finances. We have also frozen the council tax, increased the personal allowance, with another big increase next year, and as my hon. Friend has just heard, frozen fuel duty for the second year running, so that his constituents in Lancashire and people across the whole country can be helped at this difficult economic time.
Ed Balls (Morley and Outwood) (Lab/Co-op)
The Chancellor told the “Today” programme a few weeks ago that the only thing worse than listening is not listening. Well, he certainly listened to the “Today” programme this morning. We have now had U-turns on pasties, churches, charities, caravans and skips, and today a U-turn on fuel, which we welcome. It would be interesting to know at what point this morning the decision was made, and whether the Transport Secretary was even told. Now that the Chancellor is on a roll, will he also do a U-turn on the millionaires’ tax cut and rescind the granny tax rise? There is a vote next week. Will he join us in the Lobby or will he do the U-turn first?
Mr Osborne
It is quite difficult for a Conservative Chancellor to do a U-turn on a Labour policy. I am not sure the Opposition is entirely joined up—or maybe it is because the right hon. Gentleman waited half an hour to come in. The hon. Member for Hyndburn (Graham Jones), sitting directly behind him, who is a Labour Whip, has just tweeted on the fuel duty announcement that it is a deferred rise and cannot improve the economy. If the Labour Whip thinks it will not improve the economy, what does the shadow Chancellor think it will do?
Ed Balls
It is about time this part-time, U-turning Chancellor took some responsibility for his own decisions. What is the reality? A double-dip recession, borrowing rising, family budgets under pressure—his plan has failed. Is it not time he listened to the Opposition and admitted that austerity has failed? Is it not time he did another U-time and adopted Labour’s five-point plan for growth and jobs?
Mr Osborne
We enjoyed reading recently that the right hon. Gentleman has been spending thousands of pounds on commissioning private opinion research about why his economic message is not getting through. It was leaked to the papers, saying that he was seen as “uninspiring” and “untrustworthy”. He had no need to spend thousands of pounds on that. He can ask Labour MPs and get that opinion of the shadow Chancellor. He has had two years to come up with a credible economic policy, and two years to apologise for his part in putting Britain into the economic mess that we are taking Britain out of.
Jobs and Growth
Debate between Ed Balls and George Osborne(12 years, 6 months ago)
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Mr Osborne
Of course we want to help people who are working part time to work full time, if that is what they wish, but four fifths of the people who have taken part-time jobs wanted to work part time. We absolutely must help the fifth who want to turn them into full-time jobs, but I would hope that the hon. Lady, too, welcomes the good news that unemployment has fallen.
Mr Osborne
As I was explaining, four fifths of those who work part-time are getting the part-time work they want. The right hon. Gentleman should celebrate the fact that 400,000 more people are employed than was the case two years ago. Why not get up and welcome that?
If the Opposition’s argument is that we need to do even more, I agree. In the past six weeks alone, we have opened 24 enterprise zones around the country, cut businesses tax to one of the lowest rates in the world, increased support for small business research and development, reformed employment law in the teeth of Labour opposition to double the period before unfair dismissal claims can be made, reinvigorated the right to buy, launched NewBuy mortgage schemes, awarded ultra-fast broadband grants to 10 of our largest cities, frozen council tax across England, launched a £20 billion national loan guarantee scheme that is already delivering cheaper loans to hundreds and thousands of businesses, and increased the personal allowance to cut tax for 20 million working people and lift 1 million of the lowest paid out of tax altogether, with another 1 million to come. That is just in the past six weeks.
Yes, the Government must work harder and do more. The world does not owe this country a living. We will do that, but we have done a great deal already.
Mr Osborne
This is what we have done for small businesses: we have cut the small companies tax rate, which was going to go up under the plans that we inherited and which the Labour party voted for in the previous Parliament; we have got rid of Labour’s jobs tax; and we have frozen the business rates. We will check the record carefully, of course, but I think that in his speech the shadow Chancellor was advocating an increase in national insurance.
Mr Osborne
When my hon. Friends pressed him to explain how he would pay for his package, he said, “We wanted to see national insurance go up.” If he wants to correct the record, he can tell us whether he wants national insurance to go up to pay for his package.
Ed Balls
The Chancellor allocated £500 million for a national insurance tax cut for new firms that were taking on new workers. It has totally flopped and failed, with very little take-up. I said that we should use that £500 million to help existing small firms to take on new employees—a plan that would work, rather than a plan from this Chancellor that is failing. That says it all.
Mr Osborne
So the short answer is yes, he wants higher national insurance for businesses. How on earth will that help companies in the current economic environment? As I have said, we need to do more. We need to help to get more credit to businesses and to housing and infrastructure. We are going to use Britain’s low interest rates to work for us all and we are going to do more to reform our banking system—the epicentre of what went wrong when he was the City Minister.
Mr Osborne
I can tell the right hon. Gentleman that 15,000 businesses have been helped by that scheme. The economic policies that he has drawn up would hurt millions of businesses. What the Labour party wanted and what he campaigned for was an increase in national insurance for all firms and we stopped that.
Mr Osborne
As the right hon. Gentleman well knows, there is already VAT on caravans towed by cars, but there is a consultation on the change. It finishes tomorrow. It is partly due to the good work of my hon. Friends the Members for Beverley and Holderness (Mr Stuart) and for Boston and Skegness (Mark Simmonds), who urged longer consultation, that the period was extended. I propose to allow it to finish and then we will set out our response.
Mr Osborne
I will give way once more, but then I want to say something about the eurozone.
Mr Osborne
I have spent the last 35 minutes explaining how I am digging the country out of the hole that the right hon. Gentleman put us into.
Let me say something about the eurozone crisis. When eurozone central bank governors and Finance Ministers openly speculate on the possibility of Greek exit, the genie is out of the bottle. That and the Greek elections make this a perilous time. We are clear about the three steps the eurozone needs to take if its currency is to function properly.
First, countries in the periphery with high deficits and uncompetitive economies need to confront their problems head-on, as Governments in Ireland, Spain and Italy are. We are doing it in Britain too, but the adjustment our country must go through is made easier by loose monetary policy and a flexible exchange rate. The countries of the eurozone do not have that to help them, so the core of the eurozone, and the European Central Bank, need to do more to support demand and share the burden of adjustment.
Of course, ideas such as the project bonds put forward by the new French Government are worthy of serious consideration, but, fundamentally, the German Finance Minister is right when he says that rising wages in his country and increased domestic demand there can play a substantial role.
Secondly, the eurozone needs to follow what I described a year ago as “the remorseless logic” of monetary union that leads to greater fiscal union. As I said in the same interview, forms of collective support and responsibility must be developed. I echoed the view in many eurozone countries when I spoke of the possibility of eurobonds.
Thirdly, all of us in Europe, including the United Kingdom, need to address our continent’s lack of competitiveness. That involves structural reform to welfare, pensions and labour laws, and completing single markets in services and digital. It means all Europeans, including Britons, rediscovering the ambition and the ethic that made our continent the dynamo of the world economy for so many centuries. It is not that dynamo today. As the Prime Minister says in his speech today:
“The eurozone is at a cross-roads. It either has to make up or it is looking at potential break up.”
No one should underestimate the huge risks of the latter, but Britain will be prepared for whatever comes. We are making the necessary contingency plans. We will take the steps needed to secure our economic stability and protect our financial system. Above all, we will go on with the progress we have made in the last two years on reducing the structural deficit, keeping our credibility in the bond markets and keeping our interest rates low.
Mr Osborne
It is over the last two years. But this points to a greater truth: the right hon. Gentleman had 13 years to prove to the country that he had the right policies to run the British economy, and he delivered the greatest economic disaster in this country’s modern history.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(12 years, 7 months ago)
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Mr Osborne
We want to get small businesses exporting more, and UK small businesses have traditionally not exported as much as, for example, continental European small businesses. That is why UK Trade & Investment, under Lord Green, has set the specific ambition of doubling the number of small businesses helped by the Government. We want small businesses to be ambitious and look to overseas markets.
Ed Balls (Morley and Outwood) (Lab/Co-op)
The Chancellor has had a difficult few weeks since the Budget. To be told by his own side that he is an out-of-touch posh boy who does not know the price of milk must be particularly hard to take. I will ask him today not about the price of milk but—[Interruption.]
Ed Balls
Shall I start again at the beginning of the question? I am going to ask the Chancellor today not about the price of milk but about a price that he surely must have considered at Budget time. I will ask him a specific question. What is—[Interruption.] I am going to ask the Chancellor a specific question that he must have considered at Budget time. What is the price of a litre of unleaded petrol at the pumps today, and what was it on Budget day a year ago?
Mr Osborne
Of course, the price of petrol today is about £1.40 a litre. It was less a year ago, but the international oil price has gone up since—I think it is 10% higher than it was last year. That is why we have cancelled some of the fuel duty increases that the right hon. Gentleman voted for when he was in government, cut fuel duty and got rid of the fuel escalator that he supported in government.
Ed Balls
That is an answer that we will hang around the Chancellor’s neck for the next four months. He has admitted that the price of petrol is higher today than a year ago, when he decided it was too high for petrol duty to go up. Let me ask him a second question. His duty increase is due in August. If the price of petrol is still higher than the £1.33 a litre price of a year ago, will he commit now not to go ahead with the duty rise, or is the truth that he cut taxes for millionaires but does not understand about family budgets? Out of touch, out of friends and way, way out of his depth.
Mr Osborne
The right hon. Gentleman says it is my duty increase, but we are talking about his duty increase, which was set out in the March Budget before the last general election, which he voted for and helped to write.
Mr Osborne
The right hon. Gentleman says I am the Chancellor, and he is right. Since inheriting those fuel duty plans from him, I have cut fuel duty, cancelled the fuel duty increases that he voted for and got off the fuel duty escalator that he supported. That is what I have done to ensure that families are better able to cope with the economic mess he presided over when he was in the Treasury.
IMF
Debate between Ed Balls and George Osborne(12 years, 7 months ago)
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Ed Balls
Finally, Mr Speaker, as for the Chancellor’s claim that the UK has sorted out our problems, unlike the US, the UK is mired with the rest of the euro area in no growth, high unemployment and much more borrowing than was planned, so how out of touch can this deluded Chancellor get? He should have stuck to his guns this weekend. He capitulated. This agreement was bad for the euro area, bad for the IMF, bad for the British taxpayer and bad for the British national interest.
Mr Osborne
First, I congratulate the shadow Chancellor on running the London marathon yesterday and raising money for good causes, but his arguments are a bit like his marathon legs—wobbly and about to collapse. His response started so well. In the first 30 seconds, he said he supported increased resources for the IMF and supported Britain’s contribution to it, but spent the next 10 minutes telling us why he was against those things. He was in favour of the loan before he was against it. I have to say it smacks of the political opportunism and empty opposition that have been the hallmark of his shadow chancellorship.
People in Washington this weekend who know the shadow Chancellor, because he used to help represent Britain at the IMF, were completely astonished by his opposition to the IMF deal. They wondered whether he was the same person who was in the Treasury for all those years and who wrote all those speeches for the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) about the importance of the IMF and of the international architecture being part of global solutions. Is it the same shadow Chancellor who said in November that
“the Labour party supports an increase in the UK’s International Monetary Fund subscription”?
He was asked in an interview why he opposed the Government’s decision and he said:
“I support an increase in resources to the IMF”.
Then, the interviewer said:
“Sorry? I thought you didn’t.”
He said:
“No…I support an increase in resources for the IMF”.
One is led to the conclusion that only political opportunism is driving the shadow Chancellor to the position he takes.
The right hon. Gentleman asked just a couple of specific questions. I think I answered all of them in the statement, which he should have listened to before he asked his questions. The US Treasury Secretary went out of his way to welcome the deal, but pointed out that the US had not made a loan at the London G20 summit and did not do so again because of the swap lines. Since we talked about this in the autumn, the European Central Bank has provided $1 trillion of liquidity support and €200 billion extra to the firewall, but I completely agree that euro countries need to do more to ensure reforms in their own economies.
Is the right hon. Gentleman really saying that, when a request is made for the countries of the world to come together at the IMF to provide increased contributions, Britain should stand apart from it? He represents a Labour party that stands, or used to stand, for internationalism and for the institutions of the world coming together. Now he has led the party down a complete blind alleyway. He even voted against the highlight of the Labour Government—the deal done at the London G20 summit. This is what the shadow Chancellor has done to his party—left it in no man’s land, not taken seriously at home and not taken seriously abroad. If he were ever in charge, we would be getting a bail-out from the IMF, not giving it a loan.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(12 years, 8 months ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)
The Chancellor’s policy on child benefit seems to be that a two-earner family on £84,000 can keep all their child benefit, but a one-earner family on £43,000—whether that is a single parent, or where mum or dad stays at home to look after the kids—will lose all their child benefit, which is £2,500 if the family has three kids. What is fair about that? For the benefit of Labour Members, the Deputy Prime Minister, the Justice Secretary, the Prime Minister and Government Back Benchers, will the Chancellor tell the House what is today’s policy on child benefit?
Mr Osborne
What I would say to the right hon. Gentleman is that I think it is fair to ask those in the top 15% of the income distribution to make a contribution to the fiscal consolidation. I happen to think that that is fair. If we now have a Labour shadow Chancellor who thinks it is not fair to ask people in the top 15% of income distribution to make a contribution to cutting a 9% budget deficit, he has completely lost sight of his party’s values.
Ed Balls
So on the comparison of £43,000 and £84,000, we are none the wiser. Let me ask the Chancellor another question about family finances. A year ago, he promised to get the economy growing and introduce a fair fuel stabiliser, which would cut fuel duty when petrol prices were higher. One year on, he is now indicating that he is going to press ahead with fuel duty increases, even though rising oil prices mean that pump prices have today reached a record high. How can he press ahead when petrol prices are 4p higher than they were in last year’s Budget? What has happened to the stabiliser, or is it not the truth that he cannot do the right thing on child benefit, tax credits or fuel because his plans have failed? A year ago, he said in the Budget that he would put fuel into the tank of the British economy. The fact is that the economy has tanked—on the hard shoulder—and this Chancellor has run out of fuel.
Mr Osborne
There is an inconvenient truth, which is that the fuel duty rises that the right hon. Gentleman refers to are the ones put in place by the Labour Government, which he and any Labour Member who was in the previous Parliament voted for. That is the unbelievable opportunism of the Labour party today. One month it is VAT, another month it is child tax credits and now it is fuel. He is like a pinball machine, bouncing all over the place. He does not have a credible economic policy.
Today, the right hon. Gentleman may have been listening to his Labour leader on Radio 5 Live. This is what a caller from Wakefield—very close to the shadow Chancellor’s constituency—said:
“I voted Labour all my life…but we need to have a credible Opposition…You’re not going to be the Prime Minister of this country by any stretch of the imagination. I’d put my life on that.”
Another Labour voter said:
“It’s really bad what you’re doing.”
The truth is this: they need a credible economic policy to be a credible Opposition and a credible shadow Chancellor and they do not have it.
Financial Services Bill
Debate between Ed Balls and George Osborne(12 years, 9 months ago)
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Mr Osborne
Well, the report names Tony Blair, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) and the shadow Chancellor. One of the interesting things is that the shadow Chancellor was, of course, instrumental, as I understand it, in creating the tripartite committee. We will hear in his response a detailed defence of the decisions he took.
Ed Balls (Morley and Outwood) (Lab/Co-op)
Will the Chancellor share with the House the contents of the conversation I had with him in Downing street in December following the publication of that report and following my conversation with the chair of the FSA?
Mr Osborne
It sounds like the right hon. Gentleman cannot remember it himself. No doubt he will use the time allotted to him to tell us about the role he played both as the adviser at the Treasury during the years when the system was created and as City Minister when the ABN AMRO deal was signed off, and about his role in the Cabinet when it decided on its response to those things.
Ed Balls
When I asked the chair of FSA, he said he could have inserted into the footnotes of that 400-page report any number of quotes from the Chancellor, who was at the time in opposition. Will he remind the House of any of his quotes from that period on the dangers of excessive regulation that could have been included in the FSA report?
Mr Osborne
First, the FSA report on RBS is worth reading and stands by itself. The chairman of the FSA chose to put the right hon. Gentleman’s name in it, which clearly irks him. Secondly, in opposition, we not only voted against the creation of the tripartite committee but consistently warned about growing debt in the economy—not just me, but my predecessors as shadow Chancellor. We will see tonight whether the Opposition vote against our proposed arrangements. We made those warnings; we are now proposing reforms to ensure that those sorts of things do not happen again.
Ed Balls
Perhaps the Chancellor should remind the House that the shadow Chancellor at the time also voted against Bank of England independence. In November 2006, the then shadow Financial Secretary, who is now Financial Secretary, said:
“Effective light-touch, risk-based and principles-based regulation is in the interests of the sector globally.”—[Official Report, 28 November 2006; Vol. 453, c. 995.]
Could that quote have been included in the FSA report?
Mr Osborne
I think the key word is “effective”, which is clearly what was lacking. If the right hon. Gentleman wants me to read out the legion of quotes that we have from him as City Minister, how about this one? He said:
“I believe that we are right to avoid prescriptive, heavy-handed regulation in Britain. Indeed, I believe that while it is Bank of England independence that is regularly cited as the Government’s most significant financial reform, the establishment of the FSA has been as important for Britain”,
and that
“It is important the FSA continues to deliver a light-touch and risk-based regulatory approach.”
We have ended up having a ding-dong across the Dispatch Box, but if he is against what we propose to do to change the system he created, will he vote against the Bill tonight?
Ed Balls
The Chancellor also said in June 2006 that this
“regulation has been burdensome, complex and makes cross-border market penetration more difficult.”
In June 2005, he said that
“we need to build our capacity to deliver world-beating goods and services, whether it is complex financial derivatives pioneered in the City of London”.
Are those quotes that could have been included in the FSA report? There are many more.
Mr Osborne
This series of interventions is a little bit self-obsessed, and it reminds everyone of the right hon. Gentleman’s central role—
Mr Osborne
Well, that is a bit like the John Cleese sketch—the right hon. Gentleman started it by creating the biggest banking crisis in this country’s history. We are trying to clear it up. That is what this Bill is about. In all those interventions, we heard not one word about whether he will support what we are doing to clear up the mess he created.
Mr Osborne
My hon. Friend is tempting me back into the fertile territory of the shadow Chancellor’s role in the banking crash, but not least because I do not want to provoke a reaction, I think that I should probably move on to the flaws of the system that the right hon. Gentleman helped to create as Treasury adviser.
Mr Osborne
Maybe we should just exchange our notes; then we could spare the House.
Mr Osborne
For a while, they did make an awful lot of money. Unfortunately, they then lost an awful lot of money, which is one reason why we are here talking about the legislation.
Before any Minister comes to the House of Commons to ask for an existing regulatory regime to be replaced, it is incumbent on him or her to explain why it is felt to be necessary, so let me explain. Another flaw of the current system is that when the crisis hit in 2007 and 2008, no one knew who was actually in charge. The Treasury Committee of the last Parliament, led by John McFall, said in its report:
“The biggest failings of the Tripartite’s handling of Northern Rock were that it was not clear who was in charge, and, because the Tripartite took a minimalist view of their respective responsibilities, necessary actions fell between three stools.”
The House of Lords Committee, which also did some excellent work on the matter during the last Parliament, said that
“the tripartite authorities in the United Kingdom…failed to maintain financial stability and were found wanting in dealing with the crisis, in part because the roles of the three parties were not well enough defined and it was not clear who was in charge”.
In other words, a whole system of financial regulation had been created by the previous Government, yet no one knew who was in charge.
That led to the third fatal flaw that became apparent. The Government of the day, accountable to Parliament and the public for the use of taxpayers’ money, simply did not have the powers to do what they felt necessary when the crisis hit. My predecessor as Chancellor said in his recent memoir:
“The whole system depended on the chairman of the FSA, the Governor of the Bank and the Chancellor seeing things in exactly the same way. The problem was that in September 2007, we simply did not see things in the same way.”
That, of course, led to the confusion in the autumn of 2007. As he said,
“I could not in practice order the Bank to do what I wanted”,
even when taxpayers’ money was at stake.
On top of all those flaws in the tripartite system, it is not as though customers were being better protected from the mis-selling scandals that have beset the industry for the past 30 years. The payment protection insurance saga happened on its watch. In 2001 alone, firms were forced to pay more than £1 billion-worth of redress to consumers who were mis-sold products.
Those are the flaws of the tripartite system—flaws that cost this country in output more than 10% of our entire gross domestic product, flaws that have led to hundreds of thousands of people losing their jobs, flaws that wiped out the savings of millions of small shareholders, and flaws that saddled an entire country with more than £1 trillion of debt. The British people need to be confident that mistakes have been acknowledged and that lessons have been learned. The legislation that we have put before the House today shows that they have been learned.
Ed Balls
Without wanting to disrupt too much the Chancellor’s political narrative, I ask him to remind the House of the regulatory structure and of who was in charge of regulation during the scandals involving the Bank of Credit and Commerce International, Barings, Equitable Life and Johnson Matthey. Were those scandals all the result of the tripartite structure, or might some of them have preceded it, at a time when the Bank of England had the lead on banking and financial regulation?
Mr Osborne
I would make this important point to the right hon. Gentleman: of course those were failures of regulation, and of course the Bank of England was in charge of banking regulation when they happened, but they were failures of regulation in individual firms—detailed work was done afterwards to find out what went wrong and to try to put it right—not failures across the system. The collapse of Barings did not bring down the whole system, whereas the run on Northern Rock created shockwaves around the world. The decision in 1997 to remove the Bank of England’s macro-prudential role was a fatal mistake.
Mr Osborne
The right hon. Gentleman calls it rubbish, but let me say this: he was instrumental in a way that no one else in the Labour party was in designing the system that I am proposing to dismantle. He is well within his rights to get up and say, “I defend the system that I created. I think that it is the best way of regulating financial services, and what you have come up with is wrong”, but if he believes that, he should have the courage to vote against the Bill tonight. If that is his view, he should get up and say, “I’m going to vote against your approach because I don’t think it’s the right one”, but I do not think that he has the courage to do so, because he is trying to escape his past, rather than defend it.
Ed Balls
I will set out our position in my speech, but the idea that by making the Bank of England independent and adding a second deputy governor with responsibility for macro-prudential financial stability on both the Monetary Policy Committee and the FSA board, the Bank’s role in macro-prudential stability is diminished or removed is plain wrong. The Chancellor should not be allowed to state things that are outwith the facts.
Mr Osborne
The right hon. Gentleman is perfectly entitled to that view, but it is not shared by the Select Committees that have considered the matter, including during the previous Parliament; it is not a view shared in the work by the FSA on what went wrong and the failure to conduct macro-prudential analysis; and it is not a view shared by almost everyone who has looked at the failures of the British regulatory system during the period in question. He is perfectly entitled to his view—I am not surprised that he holds it, given that he was responsible for creating the system—but if it is his view, he should have the courage to vote against our proposals to dismantle it.
Mr Osborne
That is the task that we are giving them. They must ensure that they have the necessary expertise and resources. The interim committee is looking across the piece—I will deal later with the role of regulating individual firms—but it is interesting that its two financial stability reports highlighted a specific financial instrument, the exchange-traded fund, and expressed concern about its rapid growth. I am not aware that the regulatory system that existed in 2006-07 spotted, for example, the rapid increase in the use of collateralised debt obligations. It did not warn about specific instruments and the growth in their use. The financial stability reports of the committee that we have already set up demonstrate an attention to particular complex market instruments and their potential systemic risks.
Ed Balls
Will the Chancellor explain why, if the key is locating regulation in the central bank, those pressures before 2007 were not spotted by the US Federal Reserve, which was the central banker and the regulator? He is giving a very UK-specific analysis. What about all the other examples of central banks failing to spot these growing problems?
Mr Osborne
There are examples of central banks, such as the Canadian and Spanish central banks, which were much more aggressive in counter-cyclical regulation, and which felt empowered to make the decisions. In the United States—I am sure that the right hon. Gentleman has had conversations about this with the United States Treasury Secretary and the Federal Reserve chairman—things have been taken to the opposite extreme. There is a plethora of regulators—too many different regulators. The single biggest problem in the United States probably occurred in the insurance industry, in the American International Group. There was an insurance regulator based in one particular state and it was not something for which the Federal Reserve had a responsibility. Ben Bernanke has talked about the role of central banks, and I shall say something about his view later.
I think it right for us to create a Financial Policy Committee that is on a statutory footing. I have talked about the importance of its having external independent members who are able to provide market expertise and challenge received opinion, but I believe—and this may be something that we can tease out in Committee—that we should think about how we can get the balance right, and avoid conflicts of interest while also bringing in people with real expertise.
What makes the Financial Policy Committee that the Bill will establish such a radical departure in terms of policy making is that we are not only asking it to assess the risks throughout the financial system, but proposing to give it powerful tools with which to do something about those risks. The Monetary Policy Committee assesses the risks of inflation and whether it will overshoot or undershoot the target, and then alters interest rates as appropriate. The Financial Policy Committee will be given macro-prudential tools with which to hit the financial stability objectives set out in the Bill, and to reduce and remove systemic risks to the stability and resilience of the UK financial system.
Mr Osborne
I would certainly be happy to have a debate about that on the Floor of the House. It is a decision for my colleagues, the usual channels and so forth, but in my opinion the important tools given to this body will have a real impact on our constituents. It will affect the kind of house they are able to afford on their income—the bread and butter of people’s daily lives—and it is important for us all to understand that as we create instruments of policy.
We are seeking to address another flaw in the system by making the Bank of England the single point of accountability when it comes to the prudential regulation of banks, large and complex investment firms, building societies and, as my hon. Friend the Member for Cardiff North (Jonathan Evans) reminded us, significant insurance companies. A new prudential regulation authority will be established within the Bank to perform that major new function.
As the shadow Chancellor pointed out, the Federal Reserve in the US already has responsibility for the prudential regulation of major banks, but not of other financial firms. Let me cite what Ben Bernanke said in what I believe was testimony before Congress:
“The Federal Reserve’s role in banking supervision complements its other responsibilities, especially its role in managing financial crises...During the current crisis, supervisory expertise and information have repeatedly proved invaluable in helping us to address potential systemic risks involving specific financial institutions and markets and to effectively fulfil our role as lender of last resort...The Fed’s prudential supervision benefits, in turn, from the expertise we develop in carrying out other parts of our mission—for example, the knowledge of financial and economic conditions we gather in the formulation of monetary policy.”
I raise this matter because at the heart of the new arrangements we are seeking to establish an understanding that today’s financial markets are so interconnected that the failure of a single firm can bring down the whole system, and risks across the system can bring down many single firms. These feedback loops are what proved so devastating in the crisis.
Some critics of the legislation now accept the need for a macro-prudential Financial Policy Committee, but still doubt whether we should give the Bank responsibility for the micro-prudential regulation of individual firms, too. I would argue that because the interconnections are so great, the FPC could not do its job without knowing what is going on in firms, and a prudential regulator could not do its job without knowing about risks across the system. The best way to combine the insights is to put them both under the aegis of the same institution—the central bank.
I understand that the shadow Chancellor is concerned that our Bill does not create additional lines of communication between the deputy governors of the Bank and the Chancellor, bypassing the Governor, so he might like to explain what he meant. I considered the idea, but rejected it. I think we need to force the Bank of England itself to reconcile its internal differences rather than create additional lines of accountability between the Chancellor and a deputy governor. Perhaps the right hon. Gentleman—[Interruption.] He says, “Dear me”, so perhaps he will explain why he wants to institutionalise a regime in which the No. 2 constantly undermines the No. 1.
The Joint Committee and the Treasury Select Committee have raised what I regard as a far more relevant concern—the accountability of the Bank of England, given its important new responsibilities. We have listened carefully to the recommendations from both Committees and while I do not propose to abolish the court of the Bank of England, I do propose to give it important new powers to hold the executive Bank to account. The Governor and the court of the Bank of England have agreed that a new oversight committee, consisting of the non-executive members of the court, should be created. This group of external independent people will ensure that the Bank discharges its financial oversight responsibilities correctly; it will be able to commission both internal and external reports on the Bank’s policy makers’ handling of particular events and particular periods of policy making. Those reports will be published, with market-sensitive information protected, if necessary.
The Governor is of course, as is the case today, a key figure in the arrangements. It is important that he or she is not only independent of the Government of the day, but seen to be so. The recent experience of reappointing Governors after their first five-year term has expired has not been a very happy one. It has created unnecessary uncertainty and called into question political confidence in the Governor. Although I would hope that this Government would handle the whole thing better than their predecessors did, it makes sense simply to eliminate the possibility of discord entirely, so schedule 2 provides that the next Governor of the Bank of England and his or her successors will serve a single eight-year non-renewable term. That is a sensible reform.
The third flaw in the current arrangements was the fact that the Chancellor of the day felt he did not have the necessary powers to act in the interests of taxpayers. This is another area where the work of the Joint Committee and the Select Committee have proved invaluable. The Bill makes it clear that the day-to-day responsibility for financial stability lies with the Bank of England. We do not want the Treasury second-guessing that work. Beyond setting the parameters for the regulatory system, the Chancellor should become involved only if there is a material risk to public funds. The responsibility in this regard is made clear in the Bill, and in the memorandum of understanding that we have drawn up with the Bank. The Bill makes it clear that the Governor has a responsibility to inform the Treasury immediately as soon as there is a material risk of circumstances arising in which public funds might reasonably be expected to be used.
The Bill is also rightly clear that the use of public funds is entirely a decision for the Chancellor, as he or she is the person accountable to Parliament, and through Parliament to the public. My predecessor is, again, revealing about the limitations of the current arrangements in his book:
“My frustration was that I could not in practice order the Bank to do what I wanted. Only the Bank of England can put the necessary funds into the banking system…I asked Treasury officials if there was a way of forcing the Governor’s hand. The fact that we had given the Bank independence had a downside as well as an upside.”
Of course my predecessor had, as any Chancellor does, the general power of direction over the Bank that the Bank of England Act 1946 provides, but that general power of direction has never been used, so it is a nuclear option that might blow up anyone who tries to use it. That was the conclusion that my predecessor reluctantly came to.
That is unsatisfactory. The Bank must, of course, be protected from politicians who want to use its balance sheet against the wishes of the Governor simply because those politicians want to avoid using the Government’s balance sheet, but the Bank should not be able to use that as an excuse to withhold its services as an agent from a Government prepared to use its own Government balance sheet. Otherwise, in many situations that becomes, in effect, a veto on an elected Government’s fiscal decision making.
The Bill and the memorandum of understanding give the Chancellor of the day not only the right to be informed when there is a material risk to public funds, but the right to ask the Bank to analyse different options that might be available to deal with the risk, and in the newly added clause 57 the Bill gives the Chancellor a defined power of direction to require the Bank to provide liquidity to a particular firm or to put a particular firm into resolution or to provide liquidity to the general system, provided that the Chancellor does so using the Government’s own balance sheet, and makes that clear.
Ed Balls
Can the Chancellor envisage a situation in which the Governor of the Bank of England may judge not to inform the Chancellor that there is both a material threat to stability and the need for the use of public funds—and if a Governor were to make such a judgment not to inform the Chancellor, would that be his personal judgment?
Mr Osborne
First, the Bank Governor will have a statutory obligation to inform the Chancellor, so they would be failing in their statutory obligations—
Ed Balls
This is important, so I will ask the question again. Can the Chancellor envisage a situation in which the Governor of the Bank of England would choose not to inform the Chancellor because in the Governor’s view there was not a material threat to financial stability, and therefore no need for the use of public funds? And if the Governor chose not to come to the Chancellor in such a situation, would that be the Governor’s own personal judgment—for example, if the deputy governor for financial stability or the head of the Prudential Regulation Authority took a different view?
Mr Osborne
The legislation makes it clear that that is the Bank’s responsibility. Of course, the Governor is chair of the key committees—the Financial Policy Committee and the Prudential Regulation Authority—that would make these judgments, but we have to require the Bank to resolve its internal differences. Obviously the Bank has its own procedures to deal with any dispute, which it will develop, but we have deliberately created boards and committees that have independent members and external oversight. Of course there are three deputy governors, but ultimately—perhaps that is just going to be a point of disagreement between me and the right hon. Gentleman—I do not think it is right to create different lines of accountability from the Bank of England to the Chancellor of the day. The Chancellor has to deal with the Bank, and with the person of the Governor. However much legislation we write and however many clauses we put in place, those who do my job and that of the Governor also have a very important responsibility to get on with each other and to try to make that arrangement work.
Ed Balls
The problem is that in the legislation, in the memorandum of understanding and in the Chancellor’s own answers there is a gap, a hole and an ambiguity. In his speech he referred to the judgment of the Governor, then he talks about the judgment of the Bank and then he says that the Bank must resolve whether the Governor’s view is the same as that of the rest of the Bank. I repeat my question: can the right hon. Gentleman envisage being concerned by a situation in which the Governor chooses not to come to him asking for funds because the Governor believes that there is not a systemic risk, even if it is coming to the Chancellor’s attention that other senior statutory office holders in the Bank have a different view? Can the right hon. Gentleman envisage such a situation, when the Governor chooses, for example —as he said, this is a judgment for the Governor—that the moral hazard overrides the systemic potential threat?
Mr Osborne
As I say, it is the responsibility of the Bank to inform the Government: that is what the legislation and the memorandum of understanding make clear. The Bank, of course, has its own procedures for coming to a view within the Bank. Creating a system where a deputy governor could bypass the Governor and go directly to the Chancellor would be a recipe for division at the Bank. We have to force the Bank to come to a collective view and then deal with the Government of the day.
Ed Balls
This goes absolutely to the heart of the issue. The reality is that if we have a tripartite or quartet system in which the statutory regulator is not the same as the Governor, the head of the PRA or the head of the Financial Services Authority can have a different view and say that in their judgment the threat to the company and to the system is so great that it justifies action, even if the Governor judges that the moral hazard risks from intervention override that threat, and that therefore there should not be a request for public funds. In the current system, the Chancellor would hear from the head of the FSA—from Adair Turner—whereas under the new system and the memorandum of understanding he will not hear, other than from the person of the Governor. My question to the Chancellor is: does he worry about that and about the potential instability and misinformation to him that could come as a result of the memorandum of understanding that he has drafted?
Mr Osborne
The first point I make to the right hon. Gentleman is that the Bank Governor does not come to the Government when he thinks public funds should be used; he does so when—this is set out in the legislation— there is a material risk that public funds may be required. Of course the decision to use public funds would be one for the Chancellor of the day.
The second point that I make is that the problem with the tripartite committee was one set out in my predecessor’s book: in autumn 2007 there were three different views and there was no way of reconciling them—and there was no clarity about who had power and responsibility. What we are talking about here, and what I am explaining, is a new power of direction. Of course any Chancellor would think very carefully before using it, but this power makes it absolutely clear that once there is a material risk to public funds, the Chancellor of the Exchequer has not only a power, as the current person doing the Chancellor’s job has, to authorise the use of public funds—that is what my predecessor did in respect of the Royal Bank of Scotland—but a power of direction to provide liquidity to an individual firm and liquidity to the system. Those were not powers that my predecessor had. Of course, as I will come on to discuss, there are certain constraints and things that have to be done to inform people before they are used, but these are new powers that we are giving so that the Chancellor of the day does have powers, provided that he or she is prepared to use the Government’s own balance sheet.
Ed Balls
The whole point—this is so important, and goes to the heart of one of the debates in the Committee—is that in the historical examples given by the Chancellor, when the then Chancellor wanted to act and others in the regulatory system did not, the Governor of the Bank of England was one of those who did not. In the situation that the Chancellor has now set up—article 20 of the memorandum of understanding states this clearly—there will be a personal relationship between the Chancellor and the Governor. This ‘twin-peaks’ system is a personalised conversation, in that the Chancellor hears the Bank’s view from only one individual. I ask him again: would he be worried if he did not hear a view in such circumstances? Is this really a matter for the Governor’s judgment, as the MOU says, or should the statutory office holders—the head of the Prudential Regulation Authority, the Financial Services Authority and the deputy governor from the Financial Policy Committee—have not only a view but a right for that view to be heard by the Chancellor and then by Parliament? That is my question.
Mr Osborne
We can explore this at greater length in Committee, but I say to the right hon. Gentleman now that we are trying to avoid a situation in which different people in the Bank think they have a direct line to the Chancellor. We are trying to require the Bank to resolve its internal differences, and we are creating various committees, balancing the membership between external and internal members, but we absolutely see a central role for the Governor of the Bank—and I do not make any apologies for that.
I was not in the room when some of these conversations happened in recent years, but as far as I can see, and as has been reported since, it is clear that personal relations between the Bank Governor and some of the very senior members of the Government completely broke down. That is not a situation we want to see in the future, and I think that the person who does my job and the person who does the job of the Governor of the Bank of England have an obligation to get on with each other and maintain the personal relationship; that is a very important part of both our jobs. No amount of legislation or MOU—[Interruption.] The right hon. Member for Morley and Outwood (Ed Balls) says that it is not about getting on with each other. Frankly, it is about working at this very important relationship at the top of our financial system, and not getting into a situation in which those involved are not able to pick up the phone and talk to each other. Yes, of course we are institutionalising the arrangement, creating memorandums of understanding and so on, but I do not want to detract from the fact that there is also a personal responsibility for the Chancellor of the day and for the Bank of England Governor to ensure that they can work together in the national interest.
Mr Osborne
My hon. Friend makes an extremely good point. This is all about the Governor’s responsibility to do his or her job in managing the Bank, and about the Bank coming to a collective view. The job of the Chancellor of the day is to manage the relationship with the Governor. For all the virtues of the tripartite system that the shadow Chancellor seems to be extolling, I understand that those at the principal level in the tripartite system did not meet for 10 years; perhaps he can correct me, as he was there.
Ed Balls
The tripartite standing committee met every month at the deputy level, from its inception until the crisis. The responsibility for triggering a full meeting of principals was in the hands of the Governor and the head of the FSA. Throughout that entire period either the systemic regulator, the Bank, or the individual firms regulator, the FSA, could have triggered a meeting, but did not. There were two people who could have triggered that, but in the Chancellor’s world there will be only one trigger. That is my concern.
Mr Osborne
The right hon. Gentleman keeps saying there were two people, but there were three principals in the tripartite committee. It was chaired by the Chancellor of the day—the Chancellor whom he advised—but as I understand it, that Chancellor never convened the tripartite regime at the principal level. [Interruption.] I can tell the shadow Chancellor that under the tripartite regime now—that is still the current arrangement—there are meetings on at least a monthly basis with myself, the Governor of the Bank, the chairman of the FSA and so on. In the tripartite system that the shadow Chancellor saw at first hand, the principals, including the Chancellor of the day, never in 10 years—we are not talking about 10 weeks or 10 months—convened a meeting of the principals. The fact that he says that it was entirely the job of the Governor of the Bank of England or the chairman of the FSA to call a meeting, when the chair was the Chancellor, who could have called a meeting at any time he wanted, is very revealing about what went wrong.
Ed Balls
I made it very clear that I was not defending any particular regulatory structure. I do not think the crisis was caused by institutional structures in particular, because other countries with different structures had a crisis as well. We will seek to support the Government in reforming and strengthening the system of financial regulation, including through the addition of the FPC and the new powers of the PRA and FCA. However, all those individual agencies are being given statutory authority in the Bill.
The Bill cannot be setting out a binary or twin-peak system, because there will be the Treasury and the Governor of the Bank of England, then underneath him there will be a deputy governor who is also the head of the PRA, another who is also on the Financial Stability Committee, the head of the FSA—also a statutory office holder—and another deputy governor on the Monetary Policy Committee. The Bill is designed to bring in not a twin-peak system but a quartet system, which will be more complex than a tripartite one.
There may be very good arguments for having a quartet system and for splitting the FSA into the PRA and the FCA, and I support the FPC, but the system will be more complex, not simpler. The Chancellor is trying to fudge the matter by giving the impression in the memorandum of understanding that it will be not a quartet system but a twin-peak system, because things will be sorted out between him and the Governor.
That is not an ad hominem point. Other Chancellors and Ministers from Governments through the ages have known very well that there is an inevitable conflict in financial regulation between the regulator, examining systemic risks from individual firms, and the guardians of the system, who worry about potential systemic risks on the one hand and moral hazard on the other. The Chancellor’s role is as the guardian of the public purse and wider financial stability, so there are different points of view.
My advice to the Chancellor is that to try to subsume all those points of view into a separate institution away from him, without transparency and with multiple and overlapping roles for different statutory office holders, but then say, “I’m only going to deal with the Governor,” is ahistorical, deeply foolish and flawed. If the Chancellor changes and clarifies the Bill, we will be pleased, but at the moment it is a terrible fudge.
Mr George Osborne
I hear the right hon. Gentleman’s criticism of our proposals, but what is his response to what my predecessor says? He has written:
“The whole system depended on the chairman of the FSA, the Governor of the Bank and the Chancellor seeing things in exactly the same way. The problem was that, in September 2007, we simply did not see things in the same way.”
My predecessor, who went through the banking crisis, says that he was dealing with a system in which differences of opinion were not accommodated. The system could not adapt to them, and there was no power of override. What is the shadow Chancellor’s response to my predecessor’s criticism?
Ed Balls
My response to the current Chancellor, who has not yet dealt with such a crisis, is “Welcome to the real world.” In reality, there will be times, as there have been, when the regulator, and potentially the deputy governor for systemic stability, will say, “We are really worried about the potential read-across from this particular large institution to the financial system more widely.” However, the Governor will say that for reasons of moral hazard and the desire not to set false precedent, he does not believe funds should be provided.
As the Chancellor has said, it is really hard when there is a disagreement between the regulator and the prudential systemic overseer or the Governor. The Chancellor has elected to take the power to make the decision in those circumstances. I agree with that strengthening of his powers, but—
Ed Balls
The Chancellor does not listen. He wants to play this game so much that he does not hear. I agree with the increase in his powers. He is right to take them, but he cannot use them unless the Governor comes to him and says, “I fear a crisis may be building,” having made a judgment about moral hazard outwith the views of the heads of the PRA, the FCA and the FPC.
In the structure set out in the Bill, the statutory office holders will be formally kept out of the room under the Chancellor’s own memorandum of understanding, which is foolish. I understand why it has happened—it will be easier to negotiate. In all the years when previous Chancellors wanted clarity, it was hard to negotiate. However, negotiating the wrong clarity in a way that keeps information away from the Chancellor is not stabilising and in the public interest but destabilising, opaque and against the public interest. The Chancellor should take some advice from people who have seen that not working and ensure that he hears the views of the people to whom he is giving statutory responsibility in the Bill. That is my very strong advice, and I hope he will listen to it.
Banking Commission Report
Debate between Ed Balls and George Osborne(12 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Mr George Osborne)
The Government are proposing the most far-reaching reforms of British banking in our modern history. Our objective is to make sure that what happened in Britain never happens again, that taxpayers are protected and that customers get a better service. Last year, the Business Secretary and I set up the Independent Commission on Banking to look at what has been called the British dilemma—that is, how Britain can be home to one of the world’s leading financial centres without exposing British taxpayers to the massive costs of those banks failing.
In the years leading up to the financial crisis, a failure of regulation contributed to the build-up of a debt-fuelled boom. Banks borrowed too much and took on risks they did not understand. When the bubble burst, these banks turned out to be too big to fail, and the last Government had to spend billions of pounds bailing them out. Of course, major financial institutions in other countries were bailed out by their taxpayers, but the British bail-outs were on a different scale. The Royal Bank of Scotland bail-out was the biggest in the world. The recent report of the Financial Services Authority on the failure of RBS attributed that to
“poor decisions made by the RBS management and Board”
against a backdrop of a regulatory regime that failed to stop them. The politicians responsible are named in the report.
This Government are determined to do better at protecting British taxpayers from the cost of failing banks, while at the same time acknowledging the importance of the financial sector to our country. Britain should remain home to one of the world’s leading financial centres and the home of global banks, but the strength of this industry is also a potential weakness to the economy if not properly regulated.
The sector supports nearly 1.4 million jobs—not just in the City of London but across the whole of the UK. The balance-sheet of our banking system is close to 500% of our gross domestic product, compared to 100% in the US and 300% in Germany and France. So while a European and international regulatory response to the crisis is important, we cannot rely on this response alone to make our banking system safe. We in this Parliament have to take action—and under this Government, we are.
We are putting the Bank of England back in charge of prudential regulation; we have created the Financial Policy Committee to look at risks across the financial system; and I welcome today’s report from the Joint Committee on the draft Financial Services Bill. I wanted proper pre-legislative scrutiny. That has happened, and we will respond in the new year so that we improve the legislation. We have also introduced a permanent bank levy on wholesale funding and we have introduced the toughest and most transparent pay regime of any major financial centre in the world. We also need to address the structure of our banks, however. That is why the coalition Government set up the Independent Commission on Banking. I again want to thank Sir John Vickers and the other members of the commission—Clare Spottiswoode, Martin Taylor, Bill Winters and Martin Wolf—for their impressive report.
The report made three main recommendations: first, that everyday high-street banking services should be separated from wholesale and investment banking activities, and that this be done via a ring fence; secondly, that banks be required to have bigger cushions to absorb losses without recourse to the taxpayer; and thirdly, that competition in the banking sector be strengthened by increasing the number of banks on the high street and the power of customers to switch accounts. When the final report was published in September, I made it clear that I welcomed these recommendations in principle and would return to the House by the end of the year. Today, I fulfil that commitment. Let me set out in detail how the Government plan to respond, and invite further views before we publish a White Paper next spring.
First, the Government will separate retail and investment banking through a ring fence. It is important to know that this ring fence will not prevent banks from failing, but it does mean that if banks get into trouble, those elements of the banking system that are vital for families, businesses and for the whole economy can continue without resort to the taxpayer, so the following will be in newly ring-fenced banks: the deposits of individuals and their overdrafts, and the deposits and overdrafts of small and medium-sized businesses. They will all be kept separate from riskier wholesale and investment banking, which will have to be outside the ring fence. Larger corporate deposits and lending and private banking can be either in the ring fence or outside. The ring-fenced bank will be legally and operationally independent; it will be able to finance itself independently and have its own board; and there will be limits on the amount it can lend to the rest of the group. The commission’s interim report proposed a de minimis exemption for small banks that were clearly not systemic, and we invite opinion on whether to proceed with that. Our objective is clear. We want to separate high-street banking from investment banking to protect the British economy, protect British taxpayers and make sure that nothing is too big to fail.
Secondly, we will make sure that banks have bigger cushions, so they are better able to withstand losses. The international Basel III requirement, which the UK was instrumental in negotiating, requires banks to hold minimum equity capital of 7%, and there is a top-up for systemically important banks. We will go further. Large ring-fenced retail banks will be required to hold equity capital of at least 10%, and there will also be a minimum requirement for the loss-absorbing capacity of big banks of at least 17%. This requirement will apply to the UK operations of British banks, and will also be applied to the non-UK operations of UK-headquartered banks unless they can demonstrate that they do not pose a threat to the UK taxpayer.
I can also confirm that the Government will introduce the principle of depositor preference: in other words, the principle that unsecured lenders to banks, who are better placed to monitor the risks that banks are taking on, should have to take losses ahead of ordinary depositors. We seek further views on the best way to implement this principle. This comes on top of the guaranteed protection offered by the Financial Services Compensation Scheme, which covers 100% of eligible deposits up to £85, 000.
Those proposals on loss absorbency will also strengthen the European single market. One of the greatest distortions to the single market in banking is the perceived implicit taxpayer guarantee for all European banks. Through these proposals, the UK is setting out a plan to remove that distortion for UK banks. The European Commission has indicated that it plans to consider what it can do to reconcile it at EU level. I welcome that, and the UK will engage actively in the debate.
This House and other member states have objected to the European Commission's proposals to impose maximum standards for bank capital. These proposals undermine efforts that we and others are making to improve financial stability and the single market, and bodies such as the International Monetary Fund believe that they also water down the international Basel III agreement, giving exemptions to globally active banks in certain European countries. Along with others, we will seek changes to ensure that the EU faithfully implements international agreements.
Thirdly, the Government will take action to increase competition in the banking sector. As a result of the disappearance of banks such as Bradford & Bingley and the last Government’s decision on the merger of Lloyds and HBOS, the banking sector is dominated by a handful of large banks. Last year, just four banks took 70% of the market share. We need new banks to enter the market and provide consumers and businesses with more choice. Last month the Government announced the sale of Northern Rock to Virgin Money, which creates a new competitor in our retail banking sector. In the coalition agreement we made it clear that we wished to foster diversity in financial services, including the promotion of mutuals. We welcome last week's announcement that Lloyds has identified the Co-op as preferred bidder for the divestment of more than 600 branches, which will create a strong challenger in the high street.
We will also make it easier for people to switch their current accounts. This recommendation from the Commission has received less attention from the media, but could be of huge benefit to millions of customers. The idea is that individuals and small businesses can switch to another bank within seven days, and all the direct debits and credits will be switched for them at no cost. The Government have secured the banking industry's agreement that it will implement these proposals by September 2013.
We will support the Treasury Committee's proposal to bring the Payments Council within the scope of regulation, and I can confirm that our financial services legislation next year will specify that one of the objectives of the Financial Conduct Authority is to promote effective competition in the interests of consumers. A new statutory competition remit will provide the FCA with a clear mandate for swifter, more effective action to address competition problems in financial services. Within months of the ICB report, legislation will be introduced to bring the change into force.
That brings me to timing. Some have questioned whether the Government will seek to delay implementation of these reforms—such questions come from people who never even contemplated reform when they were in office. In fact, the reverse is true. On the advice of Sir John Vickers and others, I will introduce separate legislation to implement the ring fence. The Government intend implementation to proceed in stages, with the final changes relating to loss absorbency fully completed by the beginning of 2019 in line with the Basel agreement, but I can confirm that primary and secondary legislation relating to the ring fence will be completed by the end of this Parliament in May 2015, and that banks will be expected to comply as soon as practically possible thereafter. The Government will work with the banks to develop a reasonable transition timetable.
Of course, there are both costs and benefits to these reforms. The Government estimate the total costs to UK banks to be between £3.5 billion and £8 billion, broadly in line with the commission’s estimate. Much of this reflects the cost to them of removing the subsidy that comes from any perceived implicit taxpayer guarantee, which is precisely what we intend. The cost to GDP is estimated by the Government at just £0.8 billion to £1.8 billion, slightly lower than the commission’s estimate. These are far outweighed by the benefits of the ICB’s recommendations. Even a relatively modest reduction in the likelihood or impact of future financial crises would yield an incremental economic benefit of £9.5 billion per year, such is the cost of financial crises to the economy. Since the wholesale arms of non-UK banks would be unaffected by these reforms and the principal recommendations relate to UK retail banking, the competitiveness of the City of London as a location for international banking will not be affected.
We are fixing the banking system to protect taxpayers in the future, but we also need to clear up the mistakes of the past. I have already mentioned Northern Rock and Lloyds, but the biggest call on the taxpayer was the bail-out of RBS. The Financial Services Authority’s recent report was a damning indictment of all that went wrong in this crisis, and those responsible are clearly identified in it. We need to deal with the mess they created. Despite promises from the previous Government that taxpayers would profit from the RBS bail-out, the Government’s shareholding is now worth around £27 billion less.
We are already reforming the regulatory structures that allowed these catastrophic failures to occur. Bonuses are a fraction of what they were four years ago. Early this year we placed a limit of £2,000 on cash bonuses for RBS and Lloyds. We have made it very clear that the bonus pool next year must be lower again, and more transparent. We are also clear that, at a time like this, the Financial Policy Committee’s advice should be followed: bank earnings should be used to build capital levels, not pay out large bonuses.
RBS itself has also made significant changes since 2008, including reducing the size of its investment bank by half, but I believe RBS needs to go further, and the management agree. We are the largest shareholders. Let me set out our view. RBS has already announced that it will further shift its business strategy towards its personal and SME customers and its corporate banking business which serves UK and international companies. We believe RBS’s future is as a major UK bank, with the majority of its business in the UK and in personal, SME and corporate banking. Investment banking will continue to support RBS’s corporate lending business, but it will make further significant reductions in the investment bank, scaling back riskier activities that are heavy users of capital or funding. RBS should emerge a stronger, safer bank able to maintain lending to businesses and customers, and which in time can be returned to full private sector ownership.
The British people are angry about what happened in our banks, and angry at the politicians who let it happen. This coalition Government see two parties working together to clear up the mess of the past and to create a banking system that protects taxpayers and serves customers better. Today we present the most far-reaching changes to banking in our modern history so that we can build an economy that works for everyone. I commend this statement to the House.
Ed Balls (Morley and Outwood) (Lab/Co-op)
Let me start by thanking the Chancellor of the Exchequer for advance notice of his intention to give a statement but, as with the autumn statement, it is deeply disappointing that the statement, and the 75-page document, arrived with us only eight minutes before the Chancellor entered the House of Commons. One has to ask: do the Chancellor and the Business Secretary have something to hide?
I have a number of questions for the Chancellor. We have not had time to read the report so I hope he will make an effort to answer our questions today, but let me thank him for agreeing, at least in part, to our recommendation back in September that he produce an implementation plan for the Vickers commission by the end of the year. It is vital that the Government now implement these important banking reforms without foot-dragging or back-sliding or watering them down.
So will the Chancellor now agree to our second request, also made in September, and ask the Vickers commission to come back in 12 months’ time and publish an independent report on the progress that has been made in implementing its report?
Labour Members are determined to play their part in implementing these proposals in, as far as is possible, a cross-party spirit—taxpayers, customers and businesses, angry at banking recklessness which forced a multi-billion pound bail-out, will expect nothing less. We have apologised for the part that the last Government played in this global regulatory failure. In that same cross-party spirit, perhaps the Chancellor would like to take this opportunity to apologise too: for the role his party played in opposition, and he played as shadow Chancellor, in complaining of “too much regulation”, and for the then Leader of the Opposition calling, as late as spring 2008, for “lower taxes” and “less regulation” for the City. We all made mistakes and perhaps this Chancellor, who opposed financial regulation legislation, who opposed the nationalisation of Northern Rock, RBS and Lloyds, and who opposed Bank of England independence, should show a little more humility as well. If he does, I will, in a cross-party spirit, commend him for that.
I join the Chancellor in commending the excellent work of the pre-legislative scrutiny Committee on the draft Bill and of the Treasury Committee. We will study those reports in detail, and we will approach the Bill and the Chancellor’s reforms to the machinery of financial regulation with an open mind. However, like those Committees, we are concerned that his reforms could make decision making both more complicated and less transparent in future. There is a serious and still unanswered question as to whether there is sufficient accountability to match the massive new powers that the Chancellor plans to delegate to the Bank of England. His so-called “simplification” actually increases the number of deputy governors of the Bank of England from two to three.
Our fear is that he is replacing the tripartite system with a de facto quartet system—the Treasury, the MPC, the FPC and the PRA—with the FCA on the outside. Given that complexity—I can explain the acronyms; they are all different autonomous agencies in the Bank of England—can the Chancellor tell the House why he has still not published the promised memorandum of understanding between the Treasury and the different Bank agencies? I hope it is obvious to the Chancellor that the memorandum of understanding must specify that in any crisis the Chancellor must always hear the direct advice of all three deputy governors—alongside that of the Governor—most importantly that of the deputy governor who is also the chief executive of the independent regulator responsible for ensuring the stability of the banking system. In my view, that is essential if this new, more complex quartet system of financial regulation is to work in an effective and transparent way.
In responding to the Vickers commission, Labour set out three tests that will guide our view of banking reform—let me deal with them in turn. First, to protect taxpayers, we, too, support the commission’s radical reforms on ring-fencing and regulatory standards. Rather than delay, could the Chancellor explain why he is not at least making a start with reforms in the current financial regulation Bill, which will come before the House next year? Can he clarify to the House whether it is his intention to implement, in full, the Vickers recommendation on depositor preference? On the requirement on the biggest UK global banks to have the ability to absorb losses equivalent to between 17% and 20% of risk-weighted assets, can he explain why he is deciding to water down the Vickers proposal by not applying this rule to their full global balance sheets? Is he sure that this will not leave the taxpayer exposed?
The Business Secretary told the BBC yesterday that the Vickers report was being implemented in full, but what we have here is not an implementation report; it is a consultation paper before a White Paper in the spring. Already we learn that the Chancellor is not implementing the Vickers recommendations in full. Will he tell the House whether he really intends full implementation, or have the Liberal Democrats been sold a pup yet again?
On the second test of securing international agreement, given the Prime Minister’s decision 10 days ago to walk away from the negotiating table without securing any protections at all for financial services in those discussions, will the Chancellor tell the House whether he is confident that he can do a better job? In particular, is he confident that he will be able to get the necessary EU-wide agreement, which means a qualified majority vote, to implement the Vickers capital requirement proposals?
On the third test of delivering a banking system that supports the wider long-term interests of the economy, may I ask the Chancellor about competition and the supply of credit? On competition, we argued back in September that any delay or backsliding on competition would leave consumers and small businesses to pick up an unfair share of what he has confirmed is a multi-billion pound bill for tougher capital and regulatory standards. Developments since September have not been encouraging.
On Northern Rock, will the Chancellor reassure the House that his rather hurried trade sale will deliver over the coming years—in two, three, four and five years—a new challenger bank that will compete in the small business and mortgage markets? Will he assure the House that that will be the outcome? Will he confirm that it is as a result of widespread concern that the taxpayer will not get value from his loss-making sale that the National Audit Office has launched an investigation into that decision?
On the sale of Lloyds branches to support a new challenger bank, will the Chancellor explain to the House—perhaps he could explain it to the Business Secretary, too—why he has decided not to implement in full Vickers’s proposals to increase the size of branch sales from Lloyds on divestiture? Why has he not taken the advice of the Vickers commission on competition? Is it not overwhelmingly clear, as we argued back in September, that rather than waiting until 2015 the Chancellor should now commit to a review in 2013—two years’ time—of the impact on competition of these proposals?
The fact is that none of these long-term reforms can address the two immediate threats to the supply of credit and the stability of our already fragile economy and banking system. First, here in Britain, with rising unemployment and a flatlining economy depressing confidence, thousands of small businesses are now struggling—as Members on both sides of the House know and as I heard for myself in Leigh on Saturday—to access the credit they need to survive and grow, with net bank lending to businesses not rising but falling. Alongside the long-term reforms, will the Chancellor tell the House why, rather than cutting taxes for the banks, he is not acting now to ensure that UK banks start to act now to increase their lending to small businesses?
Secondly, finally and most gravely of all, the failure of all our political leaders across Europe to solve the euro crisis and in particular to get the European Central Bank to start doing its job as lender of last resort is now the biggest threat to banks in Britain, businesses in Britain and jobs in Britain. Ten days ago, the Prime Minister walked away. Will the Chancellor reassure the House that he has not walked away, too? Are he and the British Treasury seriously engaged in trying to solve what is now the gravest threat to prosperity in our country in this generation? Is anyone in the rest of Europe listening to the Chancellor any more?
Mr Osborne
First, I apologise if the right hon. Gentleman did not get the statement far enough in advance for him to read it. I am merely following the procedures that he laid down when he was at the Treasury.
Let me deal specifically with the points he raises in detail. First, on the financial services Bill which we will introduce in Parliament early in the next year, I did not talk about it in the statement because we will have the Second Reading debate, I hope, shortly after we come back in January, but it is an important part of what we are doing. I mentioned it in passing. It is about changing the regulatory system to put the Bank of England in overall charge of monitoring levels of debt and systemic risk in our economy—a responsibility that I believe should never have been taken away from the Bank of England back in 1997—and at the same time giving it the powers that it needs to act as a prudential regulator, without which it would not be able to identify those systemic risks.
The reason why I have not produced the memorandum of understanding is that I was waiting for the Joint Committee—the pre-legislative Committee—that has been looking into the Bill. I thought it would be completely inappropriate to produce the MOU before it had reported so, as I explained to the Committee, I was going to wait until I had its report. The report is only being published today and I hope fairly shortly to be able to produce that MOU, having taken into account what both it and the Treasury Committee say.
The right hon. Gentleman says this is all rather complicated. There is a simple principle, which is that the Bank of England is in charge of monitoring risks in our financial system—
Mr Osborne
Well, we have tried the right hon. Gentleman’s approach and look what happened: the entire banking system collapsed. So with the greatest respect, his advice on what is a dangerous approach to regulation we will take with a pinch of salt.
I turn to the right hon. Gentleman’s other points. On international agreement, obviously it is extremely important that we are able to do this under European law. There has been an argument about this. We have a great deal of support. Countries such as Spain and Sweden have written to the Commission to urge it to allow countries to have their own national regimes that sit on top of the minimum capital requirements, and we are encouraged by the very recent Commission quote which says that “Vickers can be implemented fully in the UK in a way that is compatible with EU law”, but we will continue to make our argument. It is encouraging that both the European Commission and the European Parliament have expressed their keen interest in the Vickers report and are doing their own work on that. It is good to see us leading the international debate on that.
The right hon. Gentleman mentions competition. On Northern Rock, we welcome the National Audit Office investigation. It would be very surprising if the NAO did not do a report into such a financial transaction. It has done reports into all the previous financial transactions by this Government and the previous Government. I think what it will demonstrate is that this was a loss-making bank and the independent advice that we received was that it would go on losing money. The people who should be to blame for losing taxpayers’ money are sitting directly opposite me.
On Lloyds and the Lloyds branches, we have spoken throughout this process to John Vickers. Obviously, he can speak for himself and give his view, but we have kept him closely informed of what we are proposing. I think it is consistent with the intention in the report to create a strong challenger out of the divestment of the Lloyds branches.
Let me turn to the timetable that the right hon. Gentleman mentions. As I say, we will be implementing some of the competition requirements in the Vickers report—for example, the new competition remit for the FCA. That will be part of the financial services Bill that we introduce in January. We considered carefully whether to try and put all the Vickers requirements—the creation of the ring-fenced banks—into the financial services Bill that we are introducing early next year.
We did not think that was sensible. That was also the view of John Vickers, who recommended a separate piece of legislation. That is precisely what we are going to do, but our commitment is clear. We will have all the primary and secondary legislation, which is where quite a lot of the detail will be, through by the end of this Parliament. That is exactly what we want to see.
Finally, the right hon. Gentleman has been going around complaining that we are not doing enough, we are in danger of watering down Vickers, and the like. This is from the people who have opposed structural reform to our banking system. When I was sitting on the Opposition Front Bench as the shadow Chancellor under both the previous Chancellor of the Exchequer, who is in his place, and also under the Chancellor of the Exchequer before, who then became the Prime Minister, they opposed structural reform. They did not want to separate the banks. No doubt they can answer for themselves, but for the former City Minister who was in post when RBS made its bid for ABN AMRO, for the City Minister who was in post when Northern Rock was offering those 125% mortgages, for the City Minister who was in post when HBOS was making all those commercial property loans, for the former City Minister to complain that we are not doing enough is ridiculous. This is the man who advised that Fred Goodwin should get a knighthood and who told his boss to go and open the Lehman Brothers headquarters. That is his record, and his mealy-mouthed apology reminds me of that film “Whoops Apocalypse”—I am sorry, I just brought down the entire British economy; can we all please move on now. That is what he has done. Frankly, he has not made a substantive or interesting contribution to this debate on bank reform. Perhaps in the next few months he will.
Mr Osborne
I have already set out the Government’s view on the Royal Bank of Scotland, and the issue of what to do when we come to dispose of the shares will be one that we can all address at the time.
The document and the process have been a very good advertisement for the coalition Government. The Business Secretary and I have worked incredibly closely on the document, which is a joint one from us both, and people will not have read in the newspapers lots of stories about the “splits between us on the issue”—
Mr Osborne
Getting a lecture on “splitism” from the shadow Chancellor, who has been the biggest source of division in the House over the 10 years that I have been in Parliament, adds to his lessons on how to regulate banks properly as something to treasure, but this document is a very good advertisement for the coalition Government and the work that we have done with the Business Secretary.
Mr Osborne
Two of those three politicians are now busy earning quite a lot of money in the financial sector to deal with the fact that they might face a surcharge. Perhaps, with the efforts of my colleagues, we can make sure that the third politician soon follows them.
Mr Osborne
Actually, we are quite happy for the right hon. Gentleman to stay where he is, so I retract my previous comment.
In response to my hon. Friend the Member for Sevenoaks (Michael Fallon), we are confident that we will be able to do this within the regime of European Union law.
The Economy
Debate between Ed Balls and George Osborne(12 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
Transparency should make it clear to the owners of these banks—the shareholders—what the pay and bonus levels and the remuneration levels are; it will then be for them to take action. I am aware of our responsibilities as a shareholder in some banks. As I mentioned at Treasury questions, an encouraging statement was made this morning by the Association of British Insurers, which represents the shareholders who own many of these banks, saying clearly that it does not accept current levels of pay in the financial sector and that it expects reform. As I said, we had a very clear warning from the Financial Policy Committee to the financial system that it should be limiting its distributions at a time like this.
Mr Osborne
I give way first to the shadow Chancellor and then to the member of the Treasury Committee.
Ed Balls
Labour Members welcome the Chancellor’s conversion to transparency in financial affairs. He will know that, following the Walker review, a piece of legislation is on the statute book that requires the publication of the salaries of all employees paid more than £1 million. Given that the legislation is on the statute book but that this Government have chosen not to enact it, will he now enact it and therefore bring about full transparency for anyone in the City earning more than £1 million?
Mr Osborne
I think that, in the interests of transparency, the right hon. Gentleman should have told the House that he was the City Minister who, for several years, had the opportunity to introduce these changes. What about the opportunity that he had to do precisely the things that we are doing today? When it comes to transparency in pay, we have consulted David Walker and others, and we think that this is exactly the right approach. We will introduce the changes unilaterally in the United Kingdom, although it is a significant financial centre, and I think that they will set an example that the rest of the world will follow.
Mr Osborne
The reason they think that is because it is true. This, again, is the absolutely hopeless position that Labour under the shadow Chancellor have put themselves in, but frankly, that is for them to work out. If I may declare an interest, we very much want him to stay in his post for the next three and a half years: he is the best recruiting sergeant we have.
The Governor of the Bank of England—appointed by the right hon. Gentleman, no doubt, when he was the chief economic adviser—said this last week:
“This is exactly the right macro-economic response to the position in which we find ourselves”.
And who is left opposing this credible action, this macro-economic response? The Labour party, which is now advancing this new theory that Britain’s low interest rates in this debt crisis are a sign of policy failure, not policy success. That was the argument we heard last week. The shadow Chancellor talked in his response to my statement of
“the illiterate fantasy that low long-term interest rates in Britain are a sign of enhanced credibility”—[Official Report, 29 November 2011; Vol. 536, c. 812.]
I pointed out that, on that basis, Italy’s rates of 7% were a policy triumph and Greece’s 30% rates were an economic miracle.
In the intervening week, I looked for evidence to support the argument that the shadow Chancellor has been advancing. I have not found it, but I did come across the very interesting “Ken Dixon lecture” to the department of economics at the university of York. It was given in 2004 by the chief economic adviser to the Treasury—Mr Edward Balls. He told a no doubt gripped audience of students about the importance of lower debt, of running surpluses in good times, of keeping deficits under control. He then cited the market interest rates that Britain was paying on its debt, versus neighbouring countries’, as the fruits of economic success. He boasted that the UK was borrowing money more cheaply than Germany and he hailed low interest rates as
“the simplest measure of monetary and fiscal policy credibility”.
Does he still believe that?
Mr Osborne
In the situation we face at the moment, where countries around the world, particularly those in the western world, face a challenge from the markets about their credibility, the countries with credibility have been able to keep their interest rates down and those without credibility have seen their interest rates rise. The right hon. Gentleman said that low “long-term interest rates” are
“the simplest measure of monetary and fiscal policy credibility”.
I want to know whether he still believes that to be the case—yes or no?
Ed Balls
This is the second time that the Chancellor has not understood the question today and has therefore not been able to answer it. Of course it is the case that in a normal operating economy that is how things are, but in a liquidity trap it is different, and that is where we are. That is why when American debt was downgraded in August, America’s long-term interest rates fell; they did not rise. Let me quote to him what the chief economist at Capital Economics said this August:
“Signs that the UK’s economic recovery has ground to a standstill have led markets to revise down their interest rate expectations”.
The National Institute of Economic and Social Research has said:
“The reason people are marking down gilt yields is because”—
they think that the UK—
“economy is weak”.
In a liquidity trap, long-term interest rates are a sign of the growth potential of the economy. It really worries me that the Chancellor does not understand the economics of this.
Mr Osborne
The right hon. Gentleman quoted the chief economist or head of the NIESR, but did not happen to declare to the House the interest that this person used to work for the shadow Chancellor. I do not agree with his analysis.
Mr Osborne
I will explain the economics very simply: if people do not think you can pay your debts in the world, they charge you a lot more interest on those debts.
I have actually bothered to read the right hon. Gentleman’s article in The Times today, in which he says that Labour would take
“tough decisions on tax and public spending.”
Will he get up and give us, either now in an intervention or in his speech, just half a dozen examples of the tough decisions he is prepared to take?
This is the shadow Chancellor who has opposed the increase in the VAT that the previous Government were planning, who opposed the increase in North sea oil taxation and who opposed the increase in capital gains tax—Labour Members do not know that, but he did actually oppose that. He opposes capping housing benefit, which was actually in the Labour manifesto; the reform of employment and support allowance; the changes to tax credits; and reforming legal aid. The Labour party has campaigned against every single change to the Ministry of Defence budget. There is not one single budget in the entirety of Whitehall that the Labour party has proposed cutting.
That is from the shadow Chancellor who says that he would take “tough decisions” on tax and spending. His position is, “We would not take them now. We would take them in the medium term.” That is his argument, if I understand it correctly. In the past seven days, he has opposed our measures to restrain public sector pay after the pay freeze comes to an end; opposed the path for public spending that we have set out for 2015-16 and 2016-17, which is in the medium term; opposed the raising of the state pension age, which is what is being done in Australia, Germany and America—the country he keeps citing. No wonder his economic policy has absolutely no credibility whatsoever. And, of course, he opposes the Government’s active enterprise policy—lower and simpler corporate tax rates; the new enterprise zones; the housing market changes that will revive the right to buy; planning reforms; and the changes to employment law.
Let me discuss just one measure that was announced seven days ago: the seed enterprise investment scheme. A group of entrepreneurs, including those who used to support the Labour party, wrote to the paper and said that the scheme will
“help the next generation of British innovations to become the next generation of great British businesses.”
This country faces some of the most serious challenges in its modern history. We are picking up the pieces of the biggest boom which became the biggest bust, and now we face a sovereign debt crisis in the eurozone. Unlike the shadow Chancellor, we are not the quack doctor promising a miracle cure. The action we have taken will help to take Britain through this storm and lay the foundations of a far more sustainable and balanced prosperity in the future, and I commend the autumn statement to the House.
Ed Balls
Abandon the Darling plan? It is the Chancellor who is borrowing £37 billion more than under the Darling plan. That is because of what is happening to jobs, growth and the living standards of families in our country, with 9,500 families in Tamworth hit by the cut in child tax credit announced last week. I will not read the next figure out; I will spare the hon. Gentleman’s blushes.
As we heard in Treasury questions earlier, the IMF was right: growth is necessary for fiscal credibility. The IMF urged the Chancellor to change course if growth undershot current expectations. The Chancellor did not even know the figures at Treasury questions this afternoon, but in October the IMF advised him to change course and to delay the planned consolidation if growth undershot. At that time the IMF was forecasting 1.1% growth this year; it has come in at 0.9%. For next year it was forecasting 1.6% growth; it is now forecast to be 0.7%. If that is not growth clearly undershooting expectations, I do not know what is.
In May the OECD called for the Government to slow the pace of consolidation if the economy undershot. The Chancellor likes to quote the OECD in support of his policies, so let me tell him what its chief economist said only last week. He told the Chancellor to
“contemplate easing up on spending cuts”
if events turned out to be
“a lot bleaker than even the bleak outlook that we have.”
That is not exactly a ringing endorsement of the Chancellor’s plans.
Mr George Osborne
The right hon. Gentleman has just quoted the OECD’s chief economist. The same person said on 28 November that “plan A is working”. The OECD also said:
“The ambitious fiscal consolidation has bolstered credibility and helped maintain low bond yields, leaving room for automatic stabilisers to work fully”.
The person the shadow Chancellor is quoting in the House of Commons in defence of his policy has said that “plan A is working”. Will he now correct the record?
Ed Balls
Only this Chancellor, out of his depth and out of touch, could come to this House and claim that the forecasts he set out last week showed that plan A was working. How can it be working when we have record levels of unemployment? How can it be working when growth has flatlined? How can it be working when he is borrowing £158 billion more than he planned a year ago?
I have seen the transcript of the Sky interview that the Chancellor is quoting, and I understand the diplomacy of the OECD. However, the chief economist said that the Chancellor should
“contemplate easing up on spending cuts”
if events turned out to be
“a lot bleaker than even the bleak outlook that we have.”
How much bleaker do they have to get? How much bleaker for families? How much bleaker for jobs and young people? How much bleaker for borrowing?
We were told a year ago that the Chancellor would not change course because his plan was working. Now, even though it is clearly not working, the Government still will not change course. The Prime Minister says that we cannot borrow our way out of a crisis, but that is exactly what the Chancellor has been forced to do. He is borrowing billions more to pay for the high unemployment, stagnant growth and rising benefits bill that his plan has delivered. The Chancellor made the wrong choice a year ago. He is now making a second catastrophic choice in sticking to a failing plan, when what Britain needs is a plan that will work.
Any British Government would be borrowing at the moment. There is no doubt about that.
Autumn Statement
Debate between Ed Balls and George Osborne(12 years, 12 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
Planning laws need reform, and so too do employment rules. We know many firms are afraid to hire new staff because of their fear about the costs involved if it does not work out. We are already doubling the period before an employee can bring an unfair dismissal claim and introducing fees for tribunals. Now we will call for evidence on further reforms to make it easier to hire people, including changing the TUPE regulations; reducing delay and uncertainty in the collective redundancy process; and introducing the idea of compensated no-fault dismissal for businesses with fewer than 10 employees.
We will cut the burden of health and safety rules on small firms, because we have regard for the health and safety of the British economy too. This Government have introduced flexible working practices and we are committed to fair rights for employees. But what about the right to get a job in the first place or the right to work all hours running a small business and not be sued out of existence by the costs of an employment tribunal? It is no good endlessly comparing ourselves with other European countries. The entire European continent is pricing itself out of the world economy. The same is true of taxes on business. If we tax firms out of existence, or out of the country, there will not be any tax revenues for anyone. We have set as our ambition the goal of giving this country the most competitive tax regime in the G20. Our corporate tax rate has already fallen from 28% to 26%, and I can confirm that it will fall again next April to 25%.
We are undertaking major simplification of the tax code for businesses and individuals, including, this autumn, consulting on ideas to merge the administration of income tax and national insurance. We are publishing next week rules on the taxation of foreign profits, so that multinationals stop leaving Britain, and instead start coming here, and we will end low-value consignment relief for goods from the Channel Islands, which has been used by large companies to undercut shops on our high streets. We have supported enterprise by increasing the generosity of the enterprise investment scheme. Today, we are extending this scheme specifically to help new start-up businesses to get the seed investment they need. Even at the best of times they can struggle to get finance, and in the current credit conditions that struggle too often ends in failure. From April 2012, anyone investing up to £100,000 in a qualifying new start-up business will be eligible for income tax relief of 50%, regardless of the rate at which they pay tax, and to get people investing in start-up Britain in 2012, for one year only, we will also waive any tax on capital gains invested through the new scheme. We can afford this with a freeze on the general capital gains tax threshold for next year.
I also want to help existing small businesses which find the current economic conditions tough. Business rates are a disproportionately large part of their fixed costs. In the Budget, I provided a holiday on business rates for small firms until October next year. I am today extending that rate relief holiday until April 2013. Over half a million small firms, including one third of all shops, will have reduced rate bills or no rate bills for the whole of this year and for the whole of the next financial year too. To help all businesses, including larger ones, with next year’s rise in business rates, I will allow them to defer 60% of the increase in their bills to the two following years.
I also want to help any business seeking to employ a young person who is out of work. The OBR forecasts that unemployment will rise from 8.1% this year to 8.7% next year, before falling to 6.2% by the end of the forecast. Youth unemployment has been rising for seven years and is now unacceptably high. It is little comfort that this problem is affecting all western nations today. The problem is, of course, primarily a lack of jobs—[Interruption.] But it is made worse by a lack of skills. Too many children are leaving school after 11 years of compulsory education without the basics that they need for the world of work.
Our new youth contract addresses both problems with the offer of private sector work experience for every young person unemployed for three months. After five months, there will be weekly signing on. After nine months, we will help pay for a job or an apprenticeship in a private business. Some 200,000 people will be helped in this way but, as the Deputy Prime Minister has said, this is a contract. Young people who do not engage with this offer will be considered for mandatory work activity, and those who drop out without good reason will lose their benefits.
If we are to tackle the economic performance of this country and tackle Britain’s decades-long problems with productivity, we have to transform our school system too, so that children leave school prepared for the world of work. My right hon. Friend the Secretary of State for Education is doing more to make that happen than anyone who ever had his job before him. The previous Government took six years to create 200 academies. He has created 1,200 academies in just 18 months. Supporting his education reform is a central plank of my economic policy, so today, with the savings that we have made, I am providing an extra £1.2 billion—as part of the additional investment in infrastructure—to spend on our schools.
Half of that will go to help local authorities with the greatest basic need for school places. The other £600 million will go to support my right hon. Friend’s reforms and will fund 100 additional free schools. These schools will include new maths free schools for 16 to 18-year-olds. This will give our most talented young mathematicians the chance to flourish. Like the new university technical colleges, these maths free schools are exactly what Britain needs to match our competitors and produce more of the engineering and science graduates so important for our long-term economic success.
To ensure that children born into the poorest families have a real chance to become one of those graduates, we will take further steps to improve early education. Last year, it was this coalition Government who not only expanded free nursery education for all three and four-year-olds, but gave children from the poorest fifth of families a new right to 15 hours of free nursery care a week at the age of two. I can tell the House today that we can double the number of children who will receive this free nursery care: 40% of two-year-olds—260,000 children—from the most disadvantaged families will get this support in their early years.
On education and early years learning, this is how we change the life chances of our least well-off and genuinely lift children out of poverty and that is how we build an economy ready to compete in the world. It will take time. The damage that we have to repair is great. People know how difficult things are and how little money there is, but where we can help with the rising cost of living, we will. I have already offered councils the resources for another year’s freeze in the council tax. That will help millions of families, but I want to do more.
Commuters often travel long distances to go to work and bring an income home. Train fares are expensive and they are set to go up well above inflation to pay for the much needed investment in the new rail and new trains that we need, but RPI plus 3% is too much. The Government will fund a reduction in the increase to RPI plus 1%. This will apply across national rail regulated fares, across the London tube and on London buses. It will help the millions of people who use our trains.
Millions more use their cars to go to work, and pick up the children from school. It is not a luxury for most people; it is a necessity. In the Budget I cut fuel duty by 1p. The plan was for fuel duty to be 3p higher in January and 5p higher by August next year. That would be tough for working families at a time like this, so despite all the constraints that are upon us, we are able to cancel the fuel duty increase planned for January, and fuel duty from August will be only 3p higher than it is now. Taxes on petrol will be a full 10p lower than they would have been without our action in the Budget and this autumn. Families will save £144 on filling up the average family car by the end of next year. At this tough time, we are helping where we can.
All that we are doing today—sticking to our deficit plan to keep interest rates as low as possible, increasing the supply of credit to pass those low rates on to families and businesses, rebalancing our economy with an active enterprise policy and new infrastructure, and providing help with the cost of living on fuel duty and rail fares—all that takes Britain in the right direction. It cannot transform our economic situation overnight.
People in this country understand the problems that Britain faces. They can watch the news any night of the week and see for themselves the crisis in the eurozone and the scale of the debt burden that we carry. People know that promises of quick fixes and more spending that this country cannot afford at times like this are like the promises of a quack doctor selling a miracle cure. We do not offer that today.
What we offer is a Government who have a plan to deal with our nation’s debts to keep rates low; a Government determined to support businesses and support jobs; a Government committed to take Britain safely through the storm. Leadership for tough times—that is what we offer. I commend this statement to the House.
Ed Balls (Morley and Outwood) (Lab/Co-op)
Let me start by thanking the Chancellor—[Interruption.]
Ed Balls
Thank you, Mr Speaker. They do not like it, but this is the truth. The Government set up the OBR, so maybe they should listen to its forecasts.
This summer the head of the IMF warned the Chancellor that
“growth is necessary for fiscal credibility”,
but he said that a change in his plans would lead to a loss of credibility, even though he has been forced to confirm today that his growth and borrowing targets are wildly off track. Last month the IMF advised the Government that
“If (economic) activity were to undershoot current expectations and risk a period of stagnation or contraction, countries that face historically low yields (for example, Germany and the UK) should also consider delaying some of their planned consolidation.”
With the world darkening and with today’s news that here in Britain we are set to see stagnant growth not just this year, but next, is it not time the Chancellor listened to the IMF? How much worse does it have to get? How many more young people have to lose their jobs, how many more businesses have to go bankrupt, and how many more times does he have to come here to downgrade his growth forecast and upgrade his borrowing forecasts? How many more billions in borrowing do we need to pay for failure before he finally sees sense?
These would be difficult times for any Chancellor, but our fear is that once again in his statement today the Chancellor is making a catastrophic error of judgment. He is refusing to learn the lessons of history or economics; he is refusing to switch to a more balanced plan; he got it wrong 18 months ago, and he is getting it wrong again today. Repeating the mistakes he made last year will only make things worse. Is it not now time to listen to the IMF, to cut taxes and to have a slower pace of spending reduction? Is it not time for him to change course before it is too late?
What do we have instead? We have a cobbled together package of growth measures, which the Chancellor must know, and the OBR forecast confirms, do not address the fundamental problem—that his rapid, reckless and deflationary plan is choking off recovery and pushing up borrowing. We have been here before. This is the third emergency growth package in a year, so the last thing our economy needs is yet another fantasy growth package.
Hon. Members do not have to take my word for it. Let us look at the OBR’s own forecast. Does the OBR think that the Chancellor’s plans are going to boost growth? No, it has revised growth down next year, from 2.5% to 0.7%; and for the following year it has revised growth down from 2.9% to 2.1%. Does the OBR think that the Chancellor’s plans are going to increase employment and cut unemployment? Let me tell the House two things from the OBR forecast which the Chancellor chose not to tell the House. Unemployment is not only higher next year than this year, but higher the year after than this year; and employment is expected to fall by 100,000 next year.
We were promised a game-changer of a statement and a growth plan that would secure recovery. Instead, we have a plan for growth which leads to lower growth and higher unemployment. It is not a game-changer; it is just more of the same.
Let me turn to the measures that the Chancellor has announced. He has announced a new youth jobs fund, but why did he abolish the future jobs fund in the first place? The Government abolished it in their first month in office; their new plan will not be up and running until the middle of next year.
The Chancellor claims to have increased the bank levy, so why is he cutting taxes on banks this year compared with last year—down from £3.5 billion last year to £2.5 billion this year? Why will he not repeat the bank bonus tax and do something proper about youth jobs?
The Chancellor has announced a sensible halt to January’s fuel duty rise, but will he confirm that, as a result of last January’s VAT rise, motorists are paying 3p a litre more on petrol? He has belatedly announced a plan on Labour’s enterprise finance guarantee, relabelled as credit easing, but why did he wait so long, and why did he put his faith in Project Merlin, which has patently failed and, as the Bank of England confirms today, seen net bank lending to small businesses fall over the past year? As for his equally belated decision to set up a new infrastructure fund, this is from the same Chancellor who abolished the Building Schools for the Future programme at a cost of tens of thousands of construction jobs.
How much of this new investment has been pre-announced? How much will happen this year and next year? How much of it is pre-announced funding from the next spending review after the next general election? Will the Chancellor confirm that the new off-budget infrastructure fund will be subject to a National Audit Office value-for-money test to ensure that projects are not more expensive to the taxpayer than direct Government borrowing?
The Chancellor has also announced a rebate for energy intensive industries to correct the chaos caused by his botched carbon floor price. He has reinstated just 10% of his planned £4 billion cut in housing, but even in the past few minutes, as we have studied the small print, and despite all the bluster of the new measures, we have found that because this Chancellor is so determined not to break from his failing plan, he is once again giving with one hand and taking with the other.
How are these new growth measures being paid for? By hitting families and savers. How much will the Chancellor’s cut in tax credits cost a working family on average incomes? With inflation so much higher, is he still meeting the Prime Minister’s pledge to deliver real-terms rises in NHS spending in this Parliament?
As a result, and taking into account pre-announced measures in the Chancellor’s Budget and spending review, are the Government still hitting women harder than men? Are they still increasing child poverty and not reducing it? Given that he has already cut child care support by more than £1.5 billion, is he helping women who want to go out to work, or is he making it harder?
If we are all in this together, why with this Government is it always families, women and children who pay the price? It is clear: the Chancellor’s plan is not working. The OBR knows it, the markets know it, the IMF knows it, we know it and so, increasingly, do the Chancellor’s coalition colleagues. His arch rival, the Mayor of London, certainly knows it.
We all know why the Chancellor cannot change course. We know why he cannot accept the IMF’s advice. We all know why—even as the euro crisis deepens and he is borrowing £158 billion more than he planned—this oh-so political Chancellor will not budge because to change course now would be to admit that he has got the key economic judgments of this Parliament absolutely, catastrophically wrong.
If, after just 18 months, the Chancellor’s plan is leading to falling growth, rising unemployment and £158 billion more in borrowing, the country needs either a new Chancellor or a new plan—a balanced and credible plan on jobs, growth and the deficit. We need real tax cuts, real investment, a real plan for jobs, growth and deficit reduction: Labour’s five-point plan for jobs, growth and deficit reduction.
Protecting our economy, businesses, jobs and family finances is more important than trying to protect a failed economic plan. For his sake, for his party’s sake, and in the national interest, the Chancellor needs to change course, and he needs to do so now.
Mr Osborne
As far as I can tell, the shadow Chancellor complains that we are borrowing too much—and then proposes that we borrow even more. It is completely unconvincing and a reminder to Government Members why we are so pleased that he is in the job that he is doing, for he is a constant reminder of everything that went wrong with Labour’s economic policy—a permanent advertisement for why we should never trust Labour with our money again.
Let me answer the right hon. Gentleman’s specific questions. He welcomes the fact that we have open and honest figures from the OBR. When did we never get them when he was at the Treasury? He complains about the bank levy. He was the City Minister, so why did he not introduce a bank levy? It will raise £2.5 billion a year. In the Labour policy document on the bonus tax that he proposes, his party costs its measure at £2 billion a year. That is less—a tax cut for banks, if can I put it like that.
The right hon. Gentleman complains about off balance-sheet borrowing. That is from Mr PFI. He says that we should have kept the future jobs fund, but 50% of all people who left that scheme were unemployed within 12 weeks, which is in part why we have an unemployment problem.
Yes we are committed to real increases in the health budget, and yes the OBR confirms that we will meet our fiscal mandate and our debt target—[Interruption.] In the terms set out by me in the emergency Budget.
The right hon. Gentleman told the House this extraordinary thing—that the OBR forecasts that growth in the UK will be less than in the euro area. That, I am afraid, is simply not true. I am not going to use unparliamentary language, but it is in the OBR document in black and white: 2012, 2013, 2014, 2015—every single year, growth unfortunately is slow in the eurozone and slower than in the UK. That is one of the problems we are facing.
Let me respond to the three arguments that the right hon. Gentleman advanced in his reply. First, he said that we should try to borrow our way out of a debt crisis; he talked about extra borrowing. His plans—the plans of the previous Government—would have led to an additional £100 billion on top of borrowing over the course of the Parliament. Let us look at the facts. There is not a single credible political party in the entirety of Europe that is proposing more spending at the moment, apart from—and it is not credible—the Labour party. This is what Tony Blair said this morning on the radio—[Interruption.] Go on—have a go at booing him! Tony Blair said on the radio this morning:
“frankly whatever government is in power it is going to be pursuing a pretty tough programme at the moment”.
Blair or Balls—I think the British public made their mind up on Labour politicians long ago.
The second astonishing argument that the right hon. Gentleman deployed was to say that low interest rates in Britain were a sign of failure. Presumably that means that he wants interest rates to be higher in Britain. Presumably the fact that Italian interest rates are over 7% is a sign of success. Presumably the fact that Greek interest rates are 30% is an economic miracle. His policy for higher interest rates would put families’ mortgage bills up, increase debt interest charges for taxpayers, increase the cost of loans for small businesses, and put people out of work. Now people know—you vote Labour, you get higher interest rates.
The third and final argument that the right hon. Gentleman advanced is that the events happening in Europe will have almost no impact on anyone in Britain or on the British economy. [Hon. Members: “That’s not what he said.”] He mentioned it once in passing. That flies in the face of what the Bank of England says and what the OECD said yesterday. He quoted the IMF. The IMF supports our deficit reduction plan. It explicitly asked itself the question, “Should Britain change course?”, and said no. He quoted the independent OBR’s numbers, but he refuses to accept its analysis. Anyone who turns on the television and listens to the news knows that his argument is completely absurd, so we have to ask ourselves why he advances it. Why does he alone advance the argument that Britain is not affected by what has been going on in the world—by the external oil shocks, by the size of the financial crisis, by the eurozone crisis? There is a very simple reason: because if he admits that we are in a debt crisis, then he has to admit that we borrowed too much when he was in office, that the crash here was deeper than anywhere else, and that the effects were longer lasting. It would be an admission of his personal failure.
The right hon. Gentleman was the City Minister who let the City explode. He is the author of the golden rules that failed. He does not have the excuse of the Leader of the Opposition that he was only photocopying orders: he gave the orders; the orders came from him. Labour’s economic credibility will never recover while he remains the shadow Chancellor.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(13 years ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)
Today’s figures have shown that the British economy has grown over the past 12 months, since the Chancellor’s spending review, by just 0.5%, and Treasury officials have apparently admitted to the BBC this afternoon that the economy is now set to worsen. The IMF says that if the British economy continues to undershoot, the Chancellor should change course to boost growth and jobs. How much longer does the country have to wait before the Chancellor will finally listen?
Mr Osborne
I welcome the right hon. Gentleman back from America. We missed him in our debates last week—even though, by some coincidence, the tone of the debate markedly improved. We have been keeping an eye on what he was saying while he was in America. This is what he told American television: “What the world needs are balanced plans on deficit reduction, and you can’t duck that.” In America he has to say that so that he is not laughed out of the TV studio. Here he not only ducks deficit reduction; he runs away from it. We are clearing up the mess that he left when he was running Britain’s economic policy for 13 years.
Ed Balls
I am afraid people watching this will think that was a deeply complacent answer. Today’s figures mean that the Chancellor’s figures for growth will be downgraded. They will undershoot the OECD and the IMF growth forecast as well. He tried to blame the eurozone, but the fact is that our recovery was choked off a year ago. Families watching this programme and struggling with their bills, businesses on the edge and young people losing their jobs will all think the Chancellor is completely out of touch. Why does he not understand that if we are to get the deficit down, the country needs a plan for growth and jobs, and it needs it now? How much longer will we have to put up with this prevarication before it is too late, and the Chancellor finally acts?
Mr Osborne
The GDP numbers showed this morning that the British economy is growing, and that is positive news. But of course we have a difficult journey to take, from the deepest recession of our lifetimes and the biggest banking crisis in British history, which the right hon. Gentleman presided over when the Labour party was in government—and it is made more difficult by what is happening elsewhere in the world. [Interruption.] Of course that is the case, which is why the growth figures in the British economy are similar to the growth figures in the American economy, or the French economy, or the German economy.
Mr Osborne
The right hon. Gentleman shakes his head, but in 2011 the British economy has grown at exactly the same rate as the United States economy. It has taken a completely different course from the one that he suggested as shadow Chancellor and yet it has the same growth, which shows that what we are doing is bringing stability to the British economy. Frankly, for him to get up every week and say that we need a deficit reduction plan, but not to give us any details, shows how hopelessly out of touch he is.
Jobs and Growth
Debate between Ed Balls and George Osborne(13 years, 1 month ago)
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Mr Osborne
I will in a moment, because perhaps the hon. Gentleman can respond to this point.
The shadow Chancellor said, when we debated the matter in August, that he would set out
“a tough, medium-term plan to get our deficit down”.—[Official Report, 11 August 2011; Vol. 531, c. 1110.]
Mr Osborne
He nods, but where on earth is that tough, medium-term plan to get the deficit down? It was promised two months ago. Where are the cuts that he would make? He should give us some examples. We have been waiting for three years for ideas from the Labour party about what it would cut, and none has been forthcoming. The former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), who is in his place, was pretty revealing in his memoir about what was actually going on. He stated that
“the ‘investment versus cuts’ argument…simply wasn’t credible…I did want some examples of things we were prepared to cut. I could see, though, that there was no appetite for this in No. 10.”
And we know who was advising the occupant of No. 10 Downing street at the time.
Ed Balls
The International Monetary Fund has stated that if the UK has a period of stagnation or contraction, the Government should change course and delay their planned tax rise and spending cuts. The economy has flatlined since the autumn, with zero growth. Does that represent the sustained stagnation that would cause the Chancellor to take the IMF’s advice and change course?
Mr Osborne
The right hon. Gentleman quotes the IMF, but its managing director said a month ago that
“in the United Kingdom strong fiscal consolidation is essential to restore debt sustainability… The policy stance remains appropriate.”
The right hon. Gentleman also quoted the OECD, saying that it was telling me to change course, but the OECD’s chief economist, whom he used to quote in the House, says:
“The Government should not change its course. A cut in the VAT…would not be appropriate in our view.”
So before the shadow Chancellor bandies around the recommendations of international organisations, he should quote them properly in the House.
Ed Balls
I will quote them verbatim. The Chancellor quoted the IMF from September and the OECD from before the summer, but let me quote the IMF from October, just two weeks ago. It stated:
“If activity were to undershoot”—[Interruption.]
Let me read it, because the Chancellor has asked for the full quote, which is from October.
“If activity were to undershoot current expectations and risk a period of stagnation or contraction, countries that face historically low yields (for example, Germany and the United Kingdom) should also consider delaying some of their planned consolidation.”
Is that stagnation and contraction in place, and has it been in place for long enough yet to justify his taking the IMF’s advice of just two weeks ago?
Mr Osborne
In precisely the advice that the right hon. Gentleman reads out, the IMF, in its current forecasts for the UK economy, is very specific that the UK should not change its fiscal stance. It has consistently recommended that this country undertake credible deficit reduction. The Government have set out many proposals—controversial proposals—to get our budget deficit down, but in the 16 months that we have been in office we have heard not one single suggestion from the shadow Chancellor on how he would get the deficit down.
Mr Osborne
My hon. Friend reminds me that one of the first things I did in the Treasury was shut down the euro preparation unit. More importantly—
Mr Osborne
The shadow Chancellor, who has just been quoting the IMF, wants to intervene again, but let me say this, because my hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi) reminds me of another important point. Will the shadow Chancellor explain why he led his party—not everyone in his party, because I can see in the Chamber some prominent Labour Members who chose not to vote in that Division—into voting against a quota increase to the IMF, which was a central part of the London G20 summit chaired by the previous Prime Minister? How on earth does he think he could be taken seriously in any of the international meetings taking place at the moment if he had succeeded in winning that vote? Why did he do it?
Ed Balls
As the former chair of the IMF deputies, I am a huge supporter of the IMF. The rise in subscriptions is important, but for the Chancellor to try to ram it through the House before he sorted out the flawed European stability mechanism was a mistake—we voted against because we had doubts about his European policy.
However, to come back to my earlier intervention, let me ask the Chancellor this question again. Unemployment is rising, and output has been flat for a year: how much longer does he have to wait before he takes the IMF’s advice and changes his deficit reduction plan? How bad does it have to get?
Mr Osborne
We are sorting out the mess that we inherited from the Labour party. Much as I wish that that could be done overnight, it cannot. So great was the hole into which they put the British economy that it takes time and effort to come out of it.
Mr Osborne
I will give way in a moment, because I want to ask Opposition Members some questions. The House is today asked to support an Opposition motion that would add another £20 billion to the structural deficit. They maintain the fiction that they are sticking with the so-called Darling plan on the deficit—[Interruption.] That is what they say. Does the shadow Chancellor agree?
Mr Osborne
Okay. The motion tears up the Darling plan—it is £27 billion off the plan set out in the March 2010 Budget. That is the truth.
Mr Osborne
As I was just explaining, a 1% rise in interest rates—I am not talking about the level of interest rates in Spain and Italy—would mean £10 billion in higher mortgage bills for British families. That is the reality of what the shadow Chancellor is proposing.
Mr Osborne
I shall take the right hon. Gentleman’s intervention, and then I shall make some progress and give way again later.
Ed Balls
The former chief economist at the Cabinet Office, who actually drew up the plan B that the Chancellor then shelved, said in August:
“Low long-term interest rates appear to reflect economic weakness and lack of market confidence in the prospects of the UK economy, not the reverse.”
Is the Chancellor saying that the former chief economist at the Cabinet Office, now head of the National Institute of Economic and Social Research, is wrong to say that low interest rates are a sign of lack of confidence and prospects for growth?
Mr Osborne
I am glad that I took that intervention, because the implication is that the shadow Chancellor wants higher interest rates in Britain. That is the revelation we have just heard from him, and it tells us everything about what he is proposing: a catchy five-point plan—the clue is in the title—for a conference speech that would put Britain back at the mercy of the international bond markets, with higher interest rates affecting families and businesses and causing homes to be repossessed and jobs to be lost. We will have no part in it.
Mr Osborne
I have already given way quite a bit. I shall give way again later when I have dealt with this point and when perhaps the shadow Chancellor can answer the questions that I am about to put to him.
Ed Balls
The Chancellor—the Chancellor!—must be the only person in the whole country who thinks that to have Bank of England interest rates at less than 1% for three months is a sign of economic strength, not of the fact that our economy has not grown for a year and that unemployment is rising. The long-term interest rates at the long end of the curve are a reflection of expectations that those interest rates will stay persistently low. The former chief economist said that they
“reflect economic weakness and lack of market confidence in the prospects of the UK economy, not the reverse”.
Is the Chancellor saying that Jonathan Portes, from the National Institute of Economic and Social Research, is wrong?
Mr Osborne
My first point is that Jonathan Portes and I have had our disagreements for the past 16 months. He was not my appointment to the Government, but the shadow Chancellor’s, and he is not working for the Government any more. The second thing I want to say is that he cannot have it both ways. He cannot say that Britain is alone in facing these problems, which was the implication of his speech, and then not look at long-term interest rates—or, indeed, the short-term interest rates—in the United States and Germany, which are lower than ours, although we are close to them. [Interruption.] The shadow Chancellor says that they are weak. One of our problems is that the German, US and French economies have ground to a halt. That is why we also need a solution to the eurozone crisis, which has hit all western economies. His idea that Britain is unique in the world in facing these problems is frankly laughable.
Mr Osborne
Let me make just a little bit of progress and then I shall give way.
There was an absolutely staggering second omission from the shadow Chancellor’s speech, which was any reference—I will take an intervention if I have got this wrong—to Labour’s big new economic policy idea, which was unveiled at the Labour conference two weeks ago. I am referring, in case hon. Members have forgotten, to that great plan to divide British businesses into producers and predators—good and bad—and to levy different tax rates on them. Remember the speech from the Labour leader? Did the shadow Chancellor have any part in writing that speech?
Mr Osborne
At last there is something we agree on. It was absolutely the speech that we wanted to hear from the Labour leader at the Labour conference. I want to know what happened to this great idea, which was the centrepiece of Labour’s growth strategy for the new economy. Two weeks later it is not even referred to in the motion that we are being asked to debate. It is like the Lord Lucan of policy ideas: we do not know whether it is dead already or whether it has just gone missing for ever. I was really disappointed, because we know that the shadow Chancellor likes to cover all the policy areas in the shadow Cabinet and I was hoping for an explanation from him about how the idea was going to work. Are we supposed to grow our economy by levying new taxes and regulations on companies owned by private equity firms such as Boots, T-Mobile, the AA, Saga, Somerfield, Legoland and Chessington World of Adventures, those well-known centres of predatory business activity? [Laughter.] It would be laughable if it were not the centrepiece of the Opposition’s economic policy.
Mr Osborne
The Prime Minister gave his speech, which the shadow Chancellor should have paid close attention to, and made it absolutely clear that people are paying off their credit cards—because of the situation that the Labour party has left this country in—but I would ask the shadow Chancellor this question. He had a chance before; will he please mention—just once, in one intervention—the policy of the Labour leader? Come on, just get up and say you support it.
Ed Balls
I think the research and development tax credit to encourage and incentivise investment in research and development was a good thing. I think our proposal to cut national insurance for small companies that take on more employees is a good policy. It was in the Leader of the Opposition’s speech; it was in our five-point plan; it is in the motion—so why do Government Members not vote for it?
Mr Osborne
I guess that is called an “Ed Balls endorsement”—that is what the last Chancellor and Tony Blair got used to. We increased the R and D tax credit for small businesses in the Budget, so we have taken that idea—which we came up with—and introduced it. I am very pleased that the Labour party now supports it, but what about this idea that a Labour Chancellor would sit there in No. 11 with his home-made scales of justice weighing up the companies he likes and those he does not like and levying different levels of tax on them? What happened to that? It was the centrepiece of the Labour conference two weeks ago, and it shows why Labour simply cannot be trusted to run the economy of this country and why it has become the anti-business party again.
Mr Osborne
I will take interventions in a moment, because I want to know the Labour attitude to these policies that we are proposing.
We are proposing to extend the probation period before a new employee can make an unfair dismissal claim from one to two years. We are also proposing to introduce, for the first time ever, a fee that someone has to pay before they can take a case to an employment tribunal and which they get back if they win. Those are two difficult measures; they are controversial, but they will make it easier and less risky for businesses to hire people. I want to know whether the Labour party will support those measures when they come before the House of Commons. Will it? I want to know whether the right hon. Gentleman will support these things when they come before the House of Commons. Yes or no?
Mr Osborne
It is not going to hit people; it is going to help people into work. I want to know another thing from the shadow Chancellor. I have made it clear that this proposal is going to help people to get into work and help businesses to hire men and women to do jobs without taking the risk that they might bring an unfair dismissal claim within the first couple of years. He kept talking about the Federation of Small Businesses in his speech; it supports the proposal. Does he? It is a simple question. Yes or no?
Mr Osborne
No, no—I am talking about claims for unfair dismissal, and I want to know whether the right hon. Gentleman supports those proposals. This is not about statutory maternity pay; it is about extending the probation period for unfair dismissal.
Here is another question for the Labour party. The trade unions are proposing to go on strike this autumn. That is what they are balloting on. I think everyone in the House would agree that a strike is absolutely the worst thing for the British economy at the moment, and I want to know whether Labour will support that strike or condemn it. Is the shadow Chancellor going to condemn the strike—yes or no? And I do not want any weasel words about a proper negotiation process; I want to know whether, if it comes to a strike, he will condemn it.
Mr Osborne
That is another thing that Labour refuses to condemn. There we have it. We asked the former Labour Work and Pensions Secretary, Lord Hutton, to do a report for us. In his interim report, he set out a case for increased contributions. In his final report, he set out proposals for the defined benefit. We are negotiating on the basis of that. I want to know whether, if it comes to a strike, the people who are paid for by the trade unions are going to condemn trade union activity that would be the wrong thing for the British economy at the moment. Will the shadow Chancellor condemn it?
Mr Osborne
I will make a little progress, as I know that many people want to speak in the debate.
We have taken steps to try to help people who are facing this difficult situation. We have announced a freeze in council tax, not just this year but next year, and we have taken more than 1 million people out of income tax and delivered an income tax cut for 20 million more. The shadow Chancellor often talks about fairness in paying for all those things, but I want to know why, in all the years that he was chief economic adviser to the previous Government, he blocked and never introduced a permanent bank levy. Why did he never introduce a higher charge for long-staying non-doms? Why did he never conclude a tax treaty with Switzerland to get back some of the money that should be paid into the British Exchequer?
Mr Osborne
I will give way to the right hon. Gentleman after I have made this point. His only achievement in that field was to introduce a capital gains tax regime so riddled with loopholes that some of the richest people in this country boasted about paying less tax than the people who cleaned their houses. Is he proud of that record?
Mr Osborne
The IFS says that child poverty is rising, but the reason it is rising is that the right hon. Gentleman put this country into a complete economic mess. I can see my right hon. Friend the Secretary of State for Work and Pensions standing at the Bar of the House. He is introducing universal credit, which will do more than any other measure to bring child poverty down, to give opportunities to people who have none at all, and to ensure that work pays. That is what we are doing, and I want to know whether the shadow Chancellor supports that. Does he?
Ed Balls
I support welfare reform—[Hon. Members: “Ah!”] Of course I do, but I have to say that I hope the Chancellor will give the Work and Pensions Secretary the money to make it work. The IFS said this week that any gain in child poverty through universal credit would be more than swamped by the Chancellor’s other measures, particularly the change from RPI to CPI, so that the fall in child poverty under Labour would be reversed under the Tories. Is the IFS right?
Mr Osborne
I thought that Labour supported the link to CPI. Is the shadow Chancellor changing his mind on that? In the debates, the Labour party supported the link to CPI, and he has just raised the matter. Has he changed his mind? [Interruption.] Thank God he has a new shadow Chief Secretary to give him the answer.
Ed Balls
We have always said that we would support a temporary rise in CPI during this Parliament, but that we would not support a permanent rise. It is a permanent rise that will see child poverty rising year on year under the Tories. Child poverty fell under Labour; it will rise under the Tories. That tells us everything that we need to know.
Mr Osborne
The shadow Chancellor is all over the place. He was asking me about child poverty numbers in 2012, 2013 and 2014, and he said that, according to the IFS, the principal cause of the rise was a policy to link benefit increases to CPI. That is a policy supported for this Parliament—that is, in 2012, 2013 and 2014—by the Labour Opposition, and it is complete hypocrisy for them to complain about it now. Will the shadow Chancellor confirm that he supports the CPI policy for this Parliament—yes or no?
Mr Osborne
We have kept that target, but the right hon. Gentleman has still not confirmed that—[Interruption.] I welcome the shadow Chief Secretary to her position, but I have to tell her that the shadow Chancellor has just raised with me the question of the IFS estimates on child poverty over this Parliament. The IFS says that one of the principal causes is the policy on the link to CPI. That is the IFS’s view, although universal credit will do a huge amount to offset that impact. It is a policy supported by the Labour party, and it is completely hypocritical of the Labour party to come to this Parliament and raise those statistics and complain about that policy when they said they supported it all along.
Eurozone
Debate between Ed Balls and George Osborne(13 years, 1 month ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)
Let me start by thanking the Chancellor for making his statement and for advance notice of it. It is right that he has today updated the House and the country on the ongoing crisis in the eurozone. It is also right that he and I will have the opportunity to debate the ongoing growth crisis in the British economy in the House on Wednesday.
A year ago the Prime Minister told the House that our economy was
“out of the danger zone”—[Official Report, 15 December 2010; Vol. 520, c. 901.]
We warned then that there was a global hurricane brewing in the eurozone, America and across the developed world. We also warned the Chancellor that ripping out the foundations of the house here in Britain with a reckless approach to deficit reduction was the wrong approach. The global hurricane is now swirling around us. With the eurozone crisis deepening, and in advance of Wednesday’s debate, will he tell us today whether he still believes that Britain is out of the danger zone and that we are still a “safe haven” in a turbulent world? With the European Central Bank unwilling to cut its interest rates, is it really the crisis in the eurozone that has prompted the Chancellor to change so radically his views on quantitative easing? Two years ago he called it
“the last resort of desperate governments when all their other policies have failed”.
We will return to the British economy on Wednesday, but the Chancellor is right to say today that the crisis in the eurozone now constitutes a direct threat to our flatlining economy, not least because only Greece and Portugal in the eurozone have had lower growth than Britain in the past year. With no growth, it is no wonder our interest rates are so low. He is also right to say that the threat is not only to our exporters, but to the stability and solvency of our banking system. Can he update the House on his latest estimate of the full exposure of UK banks to euro sovereign debt? Is the House of Commons Library estimate of a $187 billion exposure correct? Is it correct that, as part of his contingency planning, the Treasury has been working on detailed plans to inject further capital into Royal Bank of Scotland?
The Chancellor is also right that it is a great relief that Britain is not a member of the eurozone, although I was rather surprised to hear him last week give the credit to the Foreign Secretary, who was in opposition, on the Back Benches and writing history books at the time. I have long given up hope of getting any thanks from the Chancellor for that vital judgment. Above all, the Chancellor is right: eurozone leaders have prevaricated too long and need to get their act together to put in place a credible plan before next month’s G20 meeting.
Back in July, the Chancellor told the Financial Times in an interview that eurozone leaders had to “get a grip”, and he called for a eurobond, but what has happened since? Precious little. Has he urged eurozone leaders not just to increase EFSF funding, but to widen its role to help recapitalise troubled banks and to put in place first-loss guarantees on sovereign debt to stop contagion in Spain and Italy? Rather than talking to the newspapers over the summer, perhaps the Chancellor should have gone to those meetings and urged a Europe-wide plan for jobs and growth to get unemployment falling and deficits down.
What do we have today from the Prime Minister? Do we have a report back from weekend meetings with President Sarkozy and Chancellor Merkel? No, because our Prime Minister was not at the meetings; he was too busy dealing with a local difficulty. Instead, we have another interview in the Financial Times, and his solution is that eurozone leaders need to get out their “big bazooka”. Their what? He could have called for political backing for the European Central Bank to act as a lender of last resort in return for credible fiscal policies, for a euro area debt guarantee or for a European plan for jobs and growth, but “big bazooka”—what does it mean? Can the Chancellor explain? I made the mistake of looking it up on Google this morning, and I warn hon. Members, “Do not make the same mistake.”
To be fair, and in conclusion, the Prime Minister did call this morning for a five-point plan to deal with the eurozone crisis, although it was not clear from the Chancellor’s statement what those five points are or add up to, but let us hope that, with Britain badly exposed, our growth flatlining, unemployment rising and borrowing set to be higher than planned, when the Chancellor comes back to the House on Wednesday he will agree to back our five-point plan for jobs and growth here in Britain.
Mr Osborne
I welcome the shadow Chancellor to his place. When I heard that the Labour leadership were clearing out their shadow Treasury Front-Bench team today, I was worried that the Conservative party would lose its greatest electoral asset, but it is great to see him still in his place.
Let me address the right hon. Gentleman’s specific questions. First, he asked about the exposures to eurozone nations. The FSA publishes the appropriate information on that, on the exposures overall to peripheral economies and to other eurozone banks, and it is appropriate that it does so. On RBS, I touched specifically on that issue, because there has been speculation, but let me make it very clear: in our assessment, and in that of the FSA, RBS is well capitalised and liquid.
On the eurozone facility, let me answer the right hon. Gentleman’s specific question. I believe that it should be broad in application, as well as deeper in funds, and undertake as many operations as is required. He talks about meetings, but let me reassure him that I have been to many, many meetings over the past few weeks. There has not been a shortage of meetings; there has been a lack of leadership from eurozone leaders in those meetings. But, that is changing, and that is very welcome.
Frankly, it is absolutely astonishing that a shadow Chancellor, who led his entire party through the Division Lobby in July to vote against the increase in IMF resources initiated at the London summit by the previous Prime Minister, should accuse us of a lack of leadership in the international community. Let us just imagine if that vote had been won—presumably the right hon. Gentleman cast his vote hoping to win the Division—we, alone in the world, I think, would not be ratifying the increase in IMF resources, and I would have to turn up at those meetings and explain, “I am very sorry, but the British House of Commons does not want to use the Bretton Woods institutions to help us with one of the greatest financial crises of the century.” As I say, his lectures on leadership come a little thin, and perhaps he should practise what he preaches.
I end by saying this. We will have our debate on the British economy, but it would be hard to imagine the shadow Chancellor coming back from the Labour conference with his party’s economic credibility even lower than it was before he began the conference season, but there is still no recognition from him that his Government spent too much money, ran up a big budget deficit when times were good and spent more money than they had available—even though that is acknowledged by Tony Blair, who was Prime Minister at the time. The shadow Chancellor still thinks that the answer to a debt crisis is to spend more money. His five-point plan is, of course, a complete abandonment of the plan set out by the last Chancellor of the Exchequer, to which, as I understood it, the Labour party was still in theory committed.
When we listen to the combined speeches of the shadow Chancellor and the Leader of the Opposition, they seem to amount to more regulation and more tax on businesses—indeed, they confirm the Labour party’s reputation as the anti-business party. The shadow Chancellor has managed to get the Labour party into an extraordinary position for an Opposition—of complete irrelevance: irrelevant at home and irrelevant abroad. The leader of the Labour party asked a good question—“Why would you bring Fred Goodwin back to run the banks?” But why on earth would we bring the shadow Chancellor back to run the British economy?
Mr Osborne
I did not directly mention the meeting at the weekend between the French President and the German Chancellor, but I alluded to it when I said that there were signs of progress, as the meeting was one of those signs. They have now decided to delay the European Council until the end of next week to give them more time to put together a package, the components of which are becoming clear. The timetable that we first identified of the Cannes summit being the last possible point when we can resolve this is now generally accepted. On the hon. Gentleman’s substantive point about international resources, I commend him for his sensible vote in defying the Whip imposed by the shadow Chancellor.
Mr Osborne
Let me address this. There certainly were some people on my side, and no doubt some of them may ask me about it today. I am very happy to stand up and explain why I think that is wrong, why Britain has been a founding member of the IMF, and why the international institutions like the IMF and the World Bank are absolutely central in trying to get an international response to economic problems. However, there is a big difference between Back-Bench Members of this House deciding to vote against this issue as a matter of conscience and the shadow Chancellor leading the entire Opposition into an official vote against an IMF package that—let us remember this—was supposed to be the crowning achievement of the last Prime Minister’s premiership. When we look back at the last Prime Minister’s premiership, the one thing we say he got right was the London G20 summit, and then the shadow Chancellor leads his party into the Division Lobby against it. That is pathetic.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(13 years, 2 months ago)
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Mr Osborne
My right hon. Friend makes a powerful point. We must learn the lessons of what went wrong in the regulation of our banking system and ask deep questions about how, as an economy, we underwrite that system. That is why the Government asked John Vickers and his fellow commissioners to look at the structure of the banking system and at how we can ensure that Britain can be home to global banks but, at the same time, the British taxpayer can be protected should those banks fail. Of course, John Vickers will publish his final report next week and I am sure that there will be plenty of discussion about it.
Ed Balls (Morley and Outwood) (Lab/Co-op)
With the future jobs fund and education maintenance allowance abolished, Labour Members have been urging the Chancellor to repeat the bank bonus tax on top of the bank levy in order to get young people into work. The Chancellor claims that the economy is recovering, unemployment is falling and that such action is unnecessary, so will he tell the House how many more young people, compared with a year ago, are now not in education, employment or training?
Mr Osborne
The number of 16 and 17-year-old NEETs has actually come down, and more than 500,000 new jobs have been created in the private sector over the past year. The right hon. Gentleman talks about the bonus tax, and I will use not the advice I have been given by Treasury officials to respond, but the advice I have been given by the previous Chancellor of the Exchequer, someone we know he is very close to. The previous Chancellor said this of the bonus tax, and he after all is the man who introduced it:
“It will be a one-off thing because, frankly, the very people you are after here are very good at getting out of these things and... will find all sorts of imaginative ways of avoiding it”.
That is why he did not want it to be anything more than a one-off tax, and that is why we introduced a much more permanent and sustainable tax on the banks, which the right hon. Gentleman never introduced when he was City Minister. It is a permanent bank levy that raises more net every year than the one-off bonus tax did.
Ed Balls
Unemployment is rising and the stock market is plummeting—it is no surprise that the Chancellor does not want to answer the question about youth unemployment. Let me tell the House that the number of young people between 18 and 25 out of work and not in education, employment or training has gone up in the past year by 18%: 119,000 more young people are unemployed. Let me tell the Chancellor what my right hon. Friend the Member for Edinburgh South West (Mr Darling) said on “Newsnight” last night:
“The government, by going so fast, is really strangling the economy…if you go too fast you stall”—
Ed Balls
The question that people will be asking is if the Chancellor will not change his mind on the bank bonus tax, on VAT and on the pace of deficit reduction, why is he now changing his mind on stalling bank reform? He said that we were all in it together. Why is there one rule for the banks and another rule for everyone else?
Mr Osborne
Now we can see why the former Chancellor has said that the Labour party had no credible economic policy. The shadow Chancellor had all summer to think of that question, and the best he came up with was that we were not regulating the banks. He was the City Minister when the City exploded. We have taken action better to regulate the banks. We set up the commission that will report next week. As for downgraded numbers, the fastest falling numbers around here are his economic credibility numbers.
Global Economy
Debate between Ed Balls and George Osborne(13 years, 3 months ago)
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The Chancellor of the Exchequer (Mr George Osborne)
People will be concerned about the turmoil in the world’s financial markets and what it means for economies here and across the globe. I want to update the House on what we are doing to protect Britain from the storm and to help lead a more effective international response to the fundamental causes of this instability.
As of this morning, after heavy losses yesterday, markets in Asia and Europe are a little calmer, although some are still down. Over the past month, the Dow Jones index has fallen by more than 14%, the French market by 23% and the Nikkei by 11%, and it is striking that the German market has fallen by 24%. Even Chinese equities have fallen by 20% since November. Bank shares in all countries have been hit particularly hard. Many sovereign bond markets have also been exceptionally volatile, with market rates for Italian and Spanish debts soaring before falling back in the past three days.
Sadly, Britain is not immune to these market movements. In the past month, the FTSE 100 has fallen by 16% and British bank shares have been hit hard. However, while our stock market has fallen like others, there has been one striking difference from many of our European neighbours: the market for our Government bonds has benefited from the global flight to safety. UK gilt yields have come down to about 2.5%—the lowest interest rates in more than 100 years. Earlier this week, the UK’s credit default swap spread, or the price of insuring against a sovereign default, was lower than Germany’s. That is a huge vote of confidence in the credibility of British Government debt and a major source of stability for the British economy at a time of exceptional instability. It is a reminder of the reckless folly of those who said that we were going too far, too fast. We can all now see that their approach would have been too little, too late, with disastrous consequences for Britain.
It is not hard to identify the recent events that have triggered the latest market falls. There have been weak economic data from the US, including revisions to GDP figures, and the historic downgrade of that country’s credit rating. The crisis of confidence in the ability of eurozone countries to pay their debts has spread, as many feared, from the periphery to major economies such as Italy and Spain. Those events did not come out of the blue and they all have the same root cause—debt. In particular, there is a massive overhang of debt from a decade-long boom, when economic growth was based on unsustainable household borrowing, unrealistic house prices, dangerously high banking leverage and a failure of Governments to put their public finances in order. Unfortunately, the UK was perhaps the most eager participant in that boom, with the most indebted households, the biggest housing bubble, the most over-leveraged banks and the largest budget deficit of them all.
History teaches us that recoveries from such debt-driven, balance-sheet recessions will always be choppy and difficult, and we warned that that would be the case. The whole world now realises that the huge overhang of debt means that the recovery will take longer and be harder than had been hoped. Markets are waking up to that fact. That is what makes this the most dangerous time for the global economy since 2008. We should be realistic about that and set our expectations accordingly. As the Governor of the Bank of England said yesterday and as the head of the Office for Budget Responsibility has noted, the British economy is expected to continue to grow this year. Some 500,000 new private sector jobs have been created in the past 12 months. That is the second highest rate of net job creation in the G7. However, instability across the world and in our main export markets means that, in common with many countries, the expectations for this year’s growth have fallen.
This is what our response must be. First, we must continue to put our own house in order. I spoke again to Mervyn King yesterday and I confirm that the assessment of the Bank, the Financial Services Authority and the Treasury is that British banks are sufficiently well capitalised and are holding enough liquidity to cope with the current market turbulence. We have in place well developed and well rehearsed contingency plans. We must also continue to implement the fiscal consolidation plans that have brought stability to our bond markets.
I believe that the events around the world completely vindicate the decision of this coalition Government from the day we took office to get ahead of the curve and deal with this country’s record deficit. While other countries wrestled with paralysed political systems, our coalition Government united behind the swift and decisive action of in-year cuts and the emergency Budget. While other countries struggled to command confidence in their fiscal forecasts, we created the internationally admired and respected independent Office for Budget Responsibility. Those bold steps have made Britain a safe haven in this sovereign debt storm. Our market interest rates have fallen while those of other countries have soared. The very same rating agency that downgraded the United States has taken Britain off the negative watch that we inherited and reaffirmed our triple A status. That market credibility is not some abstract concept; it saves jobs and keeps families in their homes. Families are benefiting from the lowest ever mortgage rates and companies are able to borrow and refinance at historically low rates thanks to the decisions that we have taken.
Let me make it clear not only to the House of Commons but to the whole world that ours is an absolutely unwavering commitment to fiscal responsibility and deficit reduction. Abandoning that commitment would plunge Britain into the financial whirlpool of a sovereign debt crisis and cost many thousands of jobs. We will not make that mistake.
Secondly, we need to continue to lead the international response in Europe and beyond. In the G7 statement agreed between Finance Ministers and central bank governors this week, we said that we would
“take all necessary measures to support financial stability and growth”.
In the eurozone, there is a growing acceptance of what the UK Government have been saying, first in private and now in public, for the last year—it too needs to get ahead of the curve. Individual countries must deal with their deficits, make their economies more competitive and strengthen their banking systems. Existing eurozone institutions need to do whatever is necessary to maintain stability. We welcome the interventions of the European Central Bank this week through its securities markets programme to do just that.
However, that can only ever be a bridge to a permanent solution. I have said many times before that the eurozone countries need to accept the remorseless logic of monetary union that leads from a single currency to greater fiscal integration. Many people made exactly that argument more than a decade ago as a reason for Britain staying out of the single currency, and thank God we did. Solutions such as eurobonds and other forms of guarantees now require serious consideration. That must be matched by much more effective economic governance in the eurozone to ensure fiscal responsibility is hard-wired into the system.
The break-up of the euro would be economically disastrous, including for Britain, so we should accept the need for greater fiscal integration in the eurozone, while ensuring we are not part of it and that our national interests are protected. That is the message the Prime Minister has communicated clearly in his calls with Chancellor Merkel, President Sarkozy and others this week. I have done likewise with individual Finance Ministers, in ECOFIN and in the G7 call at the weekend, and will do so again at the September ECOFIN and G7 meetings.
This is a global as well as a European crisis. At this autumn’s meetings of the IMF and the G20 we need far greater progress on global imbalances. We need an international framework that allows creditor countries such as China to increase demand and debtor countries to make the difficult adjustments necessary to repay them. Everyone knows what needs to be done, but progress so far has been frustratingly slow, with lengthy disagreements on technical definitions, let alone any concrete actions. The barriers are political not economic, so it is up to the world’s politicians to overcome them. There are no excuses left.
The UK, like the rest of the developed world, needs a new model of growth. Surely we have learned now that growth cannot come from yet more debt and more Government spending. Those who spent the whole of the past year telling us to follow the American example, with yet more fiscal stimulus, need to answer this simple question: why has the US economy grown more slowly than the UK economy so far this year? More spending now, paid for by more Government borrowing and higher debt, would lead directly to rising interest rates and falling international confidence, which would kill off the recovery, not support it.
Instead we must work hard to have a private sector that competes, invests and exports. In today’s world, that is the only route to high-quality jobs and lasting prosperity. In the developed countries, especially in Europe, that means making the difficult structural reforms needed to restore competitiveness and improve the underlying performance of our economies. The EU should cut red tape, not add to it. Internationally, we have the greatest stimulus of all on the table in the form of the Doha round—a renewed commitment to free trade across the world, which should be taken up now.
Here in Britain, the Plan for Growth that we announced in the Budget set out an ambitious path—23 measures have already been implemented and another 80 are being implemented now. On controversial issues, such as planning reform, we will overcome the opposition that stands in the way of prosperity. On tax, we have already cut our corporation tax by 2p, with three more cuts to come in the next three years. We will continue to pursue a radical agenda in welfare and education reform.
However, there is much more we can and must do if we are to create a new model of sustainable growth. All of us in the House must rise to that challenge in the months ahead and confront the vested interests—the forces of stagnation that stand in the way of growth.
In these turbulent times for world markets, we will continue to lead the international response. We will redouble our efforts to remove the obstacles to growth and stick to our plan, which has made Britain a safe haven in the global debt storm. I commend the statement to the House.
Ed Balls (Morley and Outwood) (Lab/Co-op)
The shocking and inexcusable events of recent days in our cities are today rightly the Government’s first and immediate priority. However, looking ahead, the global economic events of recent days are an equal and perhaps even graver threat to our stability and cohesion, putting small businesses, jobs and mortgages at risk throughout our country. It is therefore right that the Chancellor is today updating the House and the country on the parlous state of the global economy and, I am afraid to say, the parlous state of the British economy.
In the same spirit of bipartisan co-operation that we have just seen from the Prime Minister and the Leader of the Opposition, let me set out where Opposition Members agree with the Chancellor of the Exchequer as well as where we have grave concerns. First, the Chancellor is right: we made the right decision not to join the single currency in 2003. We agree with him that the crisis in the eurozone requires more decisive and radical action than we have seen so far. I welcome the fact that he is now, at last, involving himself in those discussions, and preparing contingency plans if British banks come under threat.
Tough fiscal decisions in Europe are vital, but is it not clear that the approach of European leaders so far—demanding ever more austerity from smaller countries—is not working because it does nothing to get those economies growing? Without that, countries find it harder and harder to convince the markets that they can repay their debts. Should not the Chancellor finally take a lead in brokering a plan in Europe for growth, alongside European-wide guarantees to reduce debt service costs, and stop the contagion?
I also agree with the Chancellor that months of political wrangling and uncertainty in the US about the pace of deficit reduction have depressed confidence and US growth. However, does the Chancellor agree with those wise heads who favour a balanced and sensible approach to deficit reduction, and fear that rapid US retrenchment could drive the world back into recession? Or does he agree with his friends—we know he has many in the Republican party and in the Tea party movement—who have urged deeper and faster cuts, and hailed the recent budget deal as delivering 98% of their demands? Is the Chancellor on the side of the Federal Reserve, former Treasury Secretaries and Nobel prize winners, or on that of, in the words of the Business Secretary, “right wing nutters”?
It is also right that G7 finance Ministers are finally discussing a co-ordinated response to a global crisis. However, listening to the Chancellor’s analysis, one would think that Britain was a bystander, watching public debt crises unfold in the eurozone and America that are best solved by individual countries taking their own actions to get debt down—on his analysis, the faster, the better. But the growth crisis is now global.
Does the Chancellor agree that the coming together of powerful negative forces in every continent, including in Britain—continued deleveraging by banks and the private sector, drastic tightening of consumer spending and fiscal retrenchment from Governments—now means that some commentators warn that the crisis could become as grave as that of the early 1930s, when Governments around the world ignored their collective responsibility to promote growth, ploughed on with austerity and retrenchment and ushered in a decade of depression, unemployment, protectionism and political instability? Here in Britain, families and businesses, deeply worried about their jobs and mortgages, will hear the Chancellor’s talk of safe havens and conclude that he is either deeply complacent or in complete denial about what is happening in our country.
Since the Chancellor’s economic policies have started to kick in, well before the latest bout of financial market instability, confidence has collapsed and our economy has flatlined for nine months, growing slower than that of the US and the eurozone. On the latest OBR figures, before growth forecasts—which the Chancellor today confirmed—were to be downgraded yet again, the borrowing forecast was £46 billion higher than the Chancellor planned.
We need a tough, medium-term plan to get our deficit down, but it is the Chancellor’s reckless—[Interruption.]
Ed Balls
The Chancellor’s reckless policies—too far, too fast—have ripped out the house’s foundation and left our economy deeply exposed to the brewing global hurricane. Yet, despite all the evidence and with our stock market falling 10% or more this week, the Chancellor still claims that his policies are working and that we are a safe haven. Despite the evidence of the past two years from credit default swaps and the fact that, in the past week, long-term interest rates have fallen in Britain and in the US, he still claims that falling UK long-term bond yields are a sign of enhanced credibility and not of stagnant growth in our economy. Does he not remember that the Japanese Ministry of Finance briefly took some comfort from low and falling bond yields in the early 1990s, at the beginning of a lost decade of no growth and stagnation? However many times he says that his plan is working, that does not make it true. However, many times he claims that he has restored confidence or delivered on deficit reduction, that does not make it true.
We know that the Chancellor has spent the past fortnight in Hollywood, but he cannot just write the script and watch it come to life. That is not how things work in the real world. If he will not take it from me, perhaps he should hear the words of Paul Krugman, the Nobel prize winner, who said:
“Britain’s experiment in austerity is going really, really badly. But the Chancellor of the Exchequer is finding solace in… fantasy… the wolf is at the door and Osborne thinks it’s the confidence fairy.”
The Chancellor finds the state of the British economy reassuring; we find it deeply worrying. He rejects our call for action now, including a temporary VAT cut, and vows to plough on regardless. We say that this approach is deeply incautious and reckless. The eurozone is in crisis. America is in political paralysis. The British economy is flatlining. Global markets are in turmoil. The world desperately needs strong and united leadership. Here in Britain, we need our Chancellor to get out of his complacent denial and get back to reality before it is too late.
Mr Osborne
I did meet Mickey Mouse in California, and he seems to be writing the Labour party’s economic policy at the moment.
Let me start with the areas where we agree. We agree that it is right for Britain not to join the euro—perhaps the shadow Chancellor will change the official policy of the Labour party in that respect. I would be very happy to offer him a briefing from the tripartite authorities on the contingency plans of the financial system. Obviously, they have to remain confidential, as he will understand, but I am very happy to give him that briefing.
On what the shadow Chancellor says about European countries being forced to reduce their deficits, I would ask him this question. Who is supposed to be lending those European countries the money that he talks about, in this imaginary world where they are not taking action to reduce their deficits? He voted against the decisions that we took to increase the resources of the IMF, and now he turns round and thinks that there is some magical body or some investors out there who are going to lend money to European countries that do not have credible deficit plans. It is completely for the fairies, as he puts it.
Let me talk about the US debate, which the right hon. Gentleman mentioned. He talked about deficit reduction in America and asked where I stand on the measured pace argument. Actually, I agree with the plan that President Obama set out at George Washington university. [Interruption.] Perhaps the Leader of the Opposition does not know what is going on in America at the moment, but actually, the President of the United States has set out a deficit reduction plan that is at the same pace and on the same scale as the one that we are pursuing in Britain. That is what the President has set out; it is his offer in the debate. Indeed, the composition of tax increases and spending reductions that he has put forward is the same as the spending consolidation that we announced last year, and is based on some of the ideas put forward by the bipartisan Bowles-Simpson commission, which we spoke to after the event. It said that it looked to the UK for inspiration for some of its ideas.
The shadow Chancellor says that there is a global economic crisis. He is right about that, and we agree, but it is caused by an enormous debt overhang. That is what all serious economists are saying at the moment. He is also right when he says that the Labour party needs a tough deficit reduction plan. I agree with him about that. Where is this tough deficit reduction plan? We have just spent two and a half hours listening to Labour MP after Labour MP getting up and complaining about spending cuts and the deficit reduction plan—they are all nodding their heads—but where is the tough deficit reduction plan that he promised? The shadow Chancellor is now almost alone in the world in making the argument that he makes. He talks about international leadership, but if he turned up at the G7, the IMF, the G20 or ECOFIN with his plans to borrow more and increase our deficit, he would be laughed out of that meeting. He is completely irrelevant to where the international debate has gone. I am afraid that he is living proof of why the public will never again trust the Labour party with their money.
Mr Osborne
As I have said, the British economy is growing and it is the assessment of the Bank of England and the Office for Budget Responsibility that it will continue to grow. The growth in the last six months has actually been stronger than in the United States, and half a million jobs have been created in the private sector in the last year—
Mr Osborne
In the past 12 months. So that is all good news. Where does the right hon. Member for Oldham West and Royton (Mr Meacher) expect the money to come from for additional Government borrowing? Who in the world would lend to a country that abandoned its deficit reduction plan at a time like this, especially a country such as Britain which, unfortunately, has the highest budget deficit in the G20?
Mr Osborne
Of course, stock market falls affect pension investments and other equity investments. Our stock market has fallen—not as much as some, but it has nevertheless fallen—
Mr Osborne
It is because of the global lack of confidence in Governments’ abilities to deal with their deficits. We have not seen turbulence in our bond markets precisely because we have in place a credible deficit reduction plan. I note that I have been answering questions for more than an hour and it has almost been an hour since the shadow Chancellor said that the Labour party needed a credible deficit reduction plan, but has a single Labour MP got up and proposed any component of that reduction plan? No, they have not.
Sovereign Grant Bill
Debate between Ed Balls and George Osborne(13 years, 4 months ago)
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Mr Osborne
We do not propose to add anything in. Frogmore is part of the Windsor castle estate, or part of the Windsor Great park, which I am sure the hon. Gentleman knew before he made his intervention.
Let me sum up this rather lengthy clause 1 stand part debate. We do not want a cut-price monarchy; nor do we want an excessively lavish monarchy. What the country wants is a monarchy properly funded to do the job we ask of it. It does that job well. Long may that continue. I commend the clause to the Committee.
Ed Balls (Morley and Outwood) (Lab/Co-op)
I commend your patience and flexibility, Mr Hoyle, in allowing this clause stand part debate to include the status of mausoleums and the role of English Heritage, which somewhat stretches the clause. Having a Second Reading-type debate on clause stand part in this way is probably a revolutionary approach to parliamentary procedure. After the events of the last few days, that may not be surprising. However, I should reassure the hon. Member for North East Somerset (Jacob Rees-Mogg) that he need not feel destabilised by my use of the word “revolutionary” in this context.
A fortnight ago, during the debate on the financial motion relating to the Bill, the Opposition made it clear that
“the monarchy continues, and must continue, to play a vital role in the affairs of our nation in the new century, but that to play this role and to command public support, the royal household must… be financed in a proper, open and fair way”.
We expressed our intention to support the Chancellor’s proposals to reform the current 250-year-old arrangements and
“to strike a fair and workable balance between the legitimate needs of the household and the interests of the taxpayer.”
However, we also made clear that it was
“the responsibility of Her Majesty’s Opposition to scrutinise the actions of the Government to make sure that it is done in a fair and proper way”.
Those are the guiding principles that lie behind today’s debates on clause 1 and, more widely, our amendments.
In that debate a fortnight ago, I cautioned the Chancellor that
“At a time when many families and businesses are under real financial pressure”
there was more work to be done, and a need for more “detail and reassurance” on Second Reading—which we have not had—or in Committee
“to establish a consensus not only across the Dispatch Box but in the country as a whole in support of these reforms.”—[Official Report, 30 June 2011; Vol. 530, c. 1150.]
I also asked the Chancellor to provide more clarity and detail on the level of the sovereign grant and the wider costs of the royal household, the arrangements for regular parliamentary scrutiny, and the mechanisms for uprating the grant.
I thank the Chancellor for the detailed way in which he has sought to answer those questions in the debate so far, and for the serious consideration that he has given to our amendments. I am also grateful to him for giving Members more information than they were given two weeks ago. However, it is difficult to hold a debate such as this when time is so constricted, and I share the concern expressed about that by Members on both sides of the House. As I said to the Chancellor earlier, I think that he could have provided even more information to help Members to understand the debate.
Mr George Osborne
As was acknowledged by the shadow Chancellor, we have taken on board what I consider to be the most significant amendments in tabling our own manuscript amendments. There will now be a review in 2016, and there will be a review every five years after that. If the House accepts our amendments we shall be able to prevent some windfall from offshore renewable energy from not being taken into account before it comes about. We will have a chance to do that in 2016, and that is partly because we have accepted the Opposition’s amendments.
I have already dealt to some extent with the point raised by the shadow Chancellor, and by amendment 8, about whether some other mechanism is needed. A fair number of checks are already in place. If the grant turns out to be more than the royal household needs—and the assessment of need will be checked by the National Audit Office—it will go into a reserve. If the reserve hits 50% of the grant, the trustees will step in and reduce the amount of money coming in. They will turn down the taps. That is a sensible mechanism, and it means that we will not be having an annual debate in the House about royal finances, entertaining though the last few hours have been.
The hon. Member for Bristol East (Kerry McCarthy) specifically asked why the figure for 2012-13 was £31 million. In a sense, that question lies at the heart of the issue. I accept that this is a complicated concept. The royal family have been relying on grants from Parliament—either the civil list or the royal travel or royal palaces grant—and supplementing them with a reserve which has been built up, with the use of public money, in the last decade or two. In 2012-13 the royal family will get the £31 million, but they will also expect to draw on the last of the reserve that was built up in the 1990s and 2000s. They will, in effect, receive more than £1 million from public money—money raised through taxation—because they will be using the last of that reserve.
Ed Balls
When I said that there would be a 3.2% real-terms rise from next year until the end of the Parliament, I did not mean a rise in the grant; I meant a rise in total expenditure. Total expenditure in 2012-13 will be £33 million and will rise to £35.5 million, which, in 2010-11 prices, is a rise from £31.3 million to £31.9 million. Although the Chancellor has made an important historic point about the reserves, the 3.2% real-terms is not driven by the reserves: it is merely an overall rise in total expenditure. I do not think that the Chancellor was entirely right on that point.
Mr Osborne
The point I was making was that, although there are lumpy movements in individual years—in 2010-11, for various reasons, some capital works were delayed and will be undertaken next year—the average of £34 million, which was £37 million two years ago, amounts in effect to a cash freeze and a real-terms reduction.
Mr Osborne
Over the Parliament. But the point is that it strikes the right balance between too much and too little.
I think that the checks are adequate, and for that reason, although I have accepted a couple of the Opposition’s amendments, I do not wish to accept amendment 8.
Manuscript amendment A agreed to.
Manuscript amendment made: B, page 6, line 8, leave out paragraph (b) and insert—
‘(b) every period of 5 years beginning at the end of another review period.’—(Mr George Osborne.)
Amendment proposed: 8, page 6, line 8, at end add—
‘(6) The Trustees shall also review the percentage for the time being specified in Step 1 of section 6(1) as soon as practicable if, over the financial year immediately preceding the base year, the income account net surplus of the Crown Estate increased by more than the trend rate of GDP growth.
(7) In subsection (6), “the trend rate of GDP growth” means the estimate of the trend rate of GDP growth most recently published by the Office for Budget Responsibility which is applicable to that year.
(8) Subsections (2) to (4) shall also apply to a review carried out under subsection (6).’.—(Ed Balls.)
Question put, That the amendment be made.
Civil List
Debate between Ed Balls and George Osborne(13 years, 4 months ago)
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Ed Balls
The hon. Gentleman raises an important question. It is good that Parliament has an opportunity to scrutinise the proposals in the coming weeks or months. We are in an unusual situation. This debate is not a statement, so it is inappropriate for me to ask questions of the Chancellor today and expect him to respond. The debate is also on a Bill that we have not yet seen, which is obviously awkward. I am in a stronger position to ask detailed questions than everybody else, because I knew some of the content of the proposals in advance, but I do not know all the detail.
Today we are setting out questions and issues on which the Government might want to provide more detail between now and the debate on Second Reading. We will certainly expect more detail and debate then. I am sure that in reaching that deal over past months, the Chancellor and members of the royal household scrutinised the kind of issue that the hon. Gentleman raises. However, we need to find out the detail of that scrutiny, what analysis was looked at before that agreement was reached, and the impact of the proposals on a number of things. I mentioned security and the uprating formula, and the hon. Gentleman asks the very important question of whether the measures will enhance the Crown Estate or deter it from seeking to make new investments. I do not know the answer to that, but it is a good issue for debate.
Mr George Osborne
The right hon. Gentleman is right: this is not a statement. It is a rather archaic procedure, but if it is any consolation, it is a lot less archaic than it was in the early 1970s—through discussions with the Chair, we managed to reduce some of that procedure. I am unable to respond to the points that he makes, but I shall use this intervention to say that I thank him for the support in principle that he has given to the measure. He has asked some good questions, to which I hope to respond on Second Reading, and other hon. Members will raise other issues. I was not able to publish the Bill until this resolution has been passed by the House. I appreciate the right hon. Gentleman’s approach. The debate on Second Reading will be an opportunity for hon. Members to go into the detail of the Bill after they have studied it.
Ed Balls
I was in no way criticising the approach that has been taken. I was simply noting the rather odd situation that we are in: I am able to say some things that, potentially, nobody else fully understands because they have not had the briefing from the Chancellor that I had, but I totally understand the Chancellor’s position.
The Economy
Debate between Ed Balls and George Osborne(13 years, 5 months ago)
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Mr Osborne
I will take interventions, but let me make this point.
Since this is an Opposition day, let us examine the latest idea of a £51 billion—£13 billion a year—unfunded commitment on tax. This means that the shadow Chancellor has presumably abandoned the Darling plan for this year, because the commitment was not funded in that plan, and that members of the Opposition Front-Bench team were not only too embarrassed to mention it at Treasury questions yesterday but, as we now know, they were not consulted. The shadow Cabinet was not consulted.
I will give way on this point. On television at lunchtime, the previous Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), was asked eight times whether he supported the policy of the shadow Chancellor and he did not give an answer. Perhaps the shadow Chancellor will tell us whether the last Labour Chancellor of the Exchequer supports his plan—yes or no.
Ed Balls
The previous Chancellor was the last man to cut VAT temporarily to get the economy moving. What is the right hon. Gentleman talking about? Let me ask him a very precise question. He says the cost of this temporary VAT cut, which I said should be in place until the recovery is secured, would be more than £50 billion. Exactly how does he get that figure, and how many years does that mean we will have to wait before the recovery is secured, following his reckless deficit reduction plan?
Mr Osborne
The figure is calculated like this: if we implemented it, we would be in a fiscal crisis. That would delay the recovery by at least four years. That is how I come to £51 billion.
Mr Osborne
The interesting thing is that in the United States the debate in the Congress has turned to discussions about the US budget deficit. The proposal from President Obama in his speech at George Washington university bears some striking similarities to the British Government’s plan, and is similar in pace, scale and composition between tax and spending measures. It shows that this is the discussion that the world is having, but it is not a discussion of which the shadow Chancellor is a part.
Ed Balls
To follow up the question from my hon. Friend the Member for Cardiff West (Kevin Brennan), and because this is a serious matter, I would like to give the Chancellor a second opportunity to answer. I answered his questions and questions from the Government Back Benches on my conversations with the Leader of the Opposition. Did the Chancellor have any advance knowledge or sight of papers taken from me which went to The Daily Telegraph without my knowledge? I would like him to answer the question.
Mr Osborne
We all read those papers in The Daily Telegraph. They revealed that the shadow Chancellor knew before the then Chancellor of the Exchequer came to the House of Commons that the 10p tax rate that Labour Members all voted for would hit the poorest in our country.
Ed Balls
I set out our position on these matters very clearly on Sunday. We agree that we need pensions reform and are studying the detail of the Hutton report, as everyone is. We thought that the increase in contributions before it was published was a complete abuse of the report and that the way the Government are rushing to increase the age of retirement is deeply unfair, especially to women in their 50s. The whole handling of this by the Chancellor and the Chief Secretary to the Treasury has been totally and deeply shambolic.
Mr Osborne
Let me take that answer and dissect it. First, the shadow Chancellor deliberately confuses the state pension age with public sector pension because he does not want to answer the question. Secondly, he says that he is studying the Hutton report, but how long does it take him to read it, because it has been out for three months and an interim report was produced last year. Unbelievable.
I will end my speech shortly, because Mr Speaker requested that we ensure that many Members get into the debate. The third thing that is required, which was totally unmentioned by the shadow Chancellor, is a plan to reform the banking system and financial services. That is a central part of any British Government’s economic policy, but we heard not a word on it from him. We know why, of course. It is the same reason that we discussed on the deficit: he was the man who designed the regulatory system that failed. He was the man in the Treasury who designed the tripartite system of regulation; it was his idea, and it failed.
This is what the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), said—and he does not say this kind of thing very often:
“We set up the FSA believing the problem would come from the failure of an individual institution. That was the big mistake. We didn’t understand just how entangled things were. I have to accept my responsibility.”
When the former Labour Prime Minister accepts responsibility, is it not time that the man who was advising him accepted his responsibility, too, and admitted that the tripartite system failed and needs to be replaced?
Ed Balls
The tripartite system was put in place following the repeated failure of self-regulation and of the regulation of the Bank of England in the period before 1997. I have said on the record loud and clear that we did not regulate the banks in a tough enough way, but throughout that period the current Chancellor personally attacked me for being too tough with regulation and for going too far. The idea is to replace a tripartite system with a quartet system that is even more complicated and byzantine, and we will look at that in detail in the coming months, but the Chancellor is playing a very dangerous game.
Mr Osborne
The right hon. Gentleman did not apologise for the tripartite system; he defended it. That is what he just did.
Now, the shadow Chancellor has just—I think for the first time—set himself against the regulatory changes that we propose. He says that he wants to study them, but I set them out at the Mansion House not this year, but last year, so he has had more than one year to study them.
Mr Osborne
And he says that he is really worried about them.
So, there we have it: the shadow Chancellor is against putting the Bank of England back in charge of prudential regulation; against the financial policy committee; and against the financial conduct authority, which is going to be tougher on behalf of consumers. The independent banking commission, which includes experts from throughout the banking field, has been working on the issue and come forward with an interim report. We have backed the principles of that report, but what does the shadow Chancellor have to say? Absolutely nothing—absolutely nothing about the plan that he would put in place. That is the truth.
Mr Osborne
Of course, I welcome the hon. Lady to her—[Interruption.] I will answer the question that she puts. I have merely observed in the past that being the Parliamentary Private Secretary to someone who never comes to Parliament is not a very onerous job, but that is good, because she can think up important questions to ask me.
Our judgment, with which the hon. Lady is entitled to disagree, is this: what was missing from the tripartite system was an ability to assess systemic risks throughout the economy. No one was looking at overall debt or leverage levels—[Interruption.] The shadow Chancellor says, “Rubbish”. When the Royal Bank of Scotland wanted to buy ABN AMRO after the credit markets had closed and after the run on Northern Rock, the regulatory system allowed RBS to do so. That is what went wrong, and if the right hon. Gentleman wants to go on defending the system that led to the biggest banking crisis in our entire history he can be my guest.
Ed Balls
When we reformed the Bank of England in 1997, we introduced a second deputy governor for financial stability. It was the job of the deputy governor in the Bank of England to monitor those things, and what has the Chancellor now done? He has added a third deputy governor, so there are now going to be three, and that is a more complex system. He is making a political case, but I do not know whether he even understands the financial and economic case.
Mr Osborne
What I understand is that the system the right hon. Gentleman put in place to ensure financial stability completely failed, and the scales have fallen—
Oral Answers to Questions
Debate between Ed Balls and George Osborne(13 years, 5 months ago)
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Mr Osborne
I am always happy to discuss the ideas of my right hon. Friend or other Members on how we dispose of those bank shares. The House will know that we announced last week that we are putting Northern Rock up for sale—the good bank in Northern Rock, of course; the state will hold on to the bad bank for many years to come. We want to exit from our shareholdings in RBS and Lloyds in due course, but we do not judge now to be the right time.
Ed Balls (Morley and Outwood) (Lab/Co-op)
I am very much looking forward to our debate on the economy tomorrow, on the anniversary of the Government’s first Budget. I do hope that the Chancellor is looking forward to the debate too, but today let me ask him about another matter of great importance to our economy, our national debt and our wider national interest. Three months ago the Chancellor told the House that the cost of the intervention in Libya, which the Opposition support, would be
“in the order of tens of millions of pounds, not hundreds of millions.”—[Official Report, 22 March 2011; Vol. 525, c. 850.]
That was followed the next day by headlines—which would have been read by the Gaddafi regime—saying that the Chancellor and the Government thought that the campaign would be over in a month. Does the Chancellor now accept that that was a mistake? Will he tell the House how much has been spent so far? Will he also give the House his latest estimate of what the full cost of the campaign is likely to be and what its impact on the national debt will be?
Mr Osborne
I see that the shadow Chancellor is following his former master’s habit of straying from the direct area of his brief, but there we go. Let me deal directly with Libya. What I told the House at the time was that the cost estimated at the time by the Ministry of Defence was in the tens of millions of pounds, and the Ministry of Defence is planning to provide an update to the House on the full costs, I think within the next week.
Ed Balls
This is a Treasury matter. It is about Treasury spending from the reserve, and it has a direct bearing on the national debt as well as on our national interests. It seems rather odd that, at the outset of the campaign, the Chancellor was happy to give a detailed answer, yet he now says that he cannot do so. Does he not know, or is he not prepared to do so? Just a few weeks ago, the White House provided the US Congress with a 34-page document giving details of the costs up to 3 June and the likely costs up to September. Will the Chancellor now agree to provide this House with similar information on the cost of Britain’s involvement in Libya, and to make a full Treasury statement to the House?
Mr Osborne
If the right hon. Gentleman had been listening, he would have heard me say that the Ministry of Defence was going to provide an update on the costs within the next week. I know that, when he was in the Treasury, everything was a Treasury matter, but in this Government we let the Ministry of Defence talk about defence operations, just as we let the Department for Education talk about schools and the Department of Health talk about the NHS. The Ministry of Defence will provide an update on the costs within the next week. The costs come from the special reserve, as the right hon. Gentleman well knows, and I can tell him that they are very much lower than those of the ongoing operations in Afghanistan.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(13 years, 6 months ago)
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Mr Osborne
Actually, monetary policy is the thing that I am not directly in charge of, but the point I would make is that the VAT rise is part of a credible fiscal policy. The person who was Chancellor of the Exchequer before me has made it pretty clear in interviews since the election that he, too, was considering a VAT rise, and he would probably have gone ahead with one if Labour had been re-elected.
Mr Osborne
The shadow Chancellor shakes his head. I know that in government he tried to do everything to stop a credible fiscal policy being developed, and he is now doing everything in opposition to stop Labour developing a credible economic policy. Long may he continue to do so.
Mr Osborne
First, we have increased science funding in the north-west. Although it is not in my hon. Friend’s constituency, there has been additional money for Daresbury, which was announced in the Budget. Also, Mersey Waters in her constituency is going to be an enterprise zone. We have also announced the redevelopment of the Royal Liverpool hospital at a cost of £450 million. So, whether it is medical research, science at Daresbury, the Atlantic Gateway project or the enterprise zones, we are doing all sorts of things to help the Mersey region.
Ed Balls (Morley and Outwood) (Lab/Co-op)
I endorse the sentiments expressed by my hon. Friend the Member for Wallasey (Ms Eagle) and others about the tragic death of our colleague and friend, David Cairns.
I also congratulate the Chancellor on his successful masterminding of the “No to AV” campaign. We all saw how much he enjoyed it over the past week or so, but now that that political campaign is out of the way, perhaps he could drag himself back to his day job for a moment. The flagship measure of his strategy for growth in last year’s Budget was a £1 billion national insurance holiday for new businesses outside London and the south-east. He said that that would benefit 400,000 companies and create 800,000 jobs. Let me ask him a very specific question. Will the Chancellor tell the House how many companies have so far benefited from that scheme, and how many jobs have been created?
Mr Osborne
I thank the right hon. Gentleman for congratulating the “No to AV” campaign, which many of his colleagues supported, even if he did not. I cannot help but notice that he had a big role to play in Labour’s election campaign, during which he said that
“the Scottish elections are a big test”
for Labour. Well, he was certainly right about that.
Let me say something about that national insurance tax break that was announced in the previous Budget. The take-up has been in the low thousands, and that is something that I acknowledged to the Treasury Select Committee. We are seeking to improve the design of the scheme, to ensure that new businesses are more aware of its benefits. As a result of work being done by Her Majesty’s Revenue and Customs, we expect take-up to increase.
Ed Balls
Despite all the bluster, there was not a specific answer to the question in there. We were told by the Business Secretary in February that the Chancellor would announce the details of how he would develop the scheme in the Budget, yet those details still have not arrived. Actually, I have the figures from the Chancellor’s own Department. How many companies have benefited from the scheme? Not 400,000 but just 3,000. How many jobs have been created? Not 800,000 but just 6,000. If that is the flagship measure of his growth strategy, it is no wonder that the economy is flat-lining, that consumer confidence is down and that unemployment is forecast to rise—[Interruption.] Well, if that is not the reason, perhaps the Chancellor will tell us why the economy has been flat-lining in the past six months. Is not the reality that the country is discovering what the Liberal Democrats discovered on Thursday of last week: that this coalition is hurting, but it is not working?
Amendment of the Law
Debate between Ed Balls and George Osborne(13 years, 8 months ago)
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Ed Balls
The reality was that we had a long period of sustained growth and low inflation, and we reversed the high unemployment of the 1980s and 1990s. We put behind us the instability of the Tory years by making—[Interruption.] If the Chancellor wants to make an intervention, we are still waiting.
The Chancellor of the Exchequer (Mr George Osborne)
Is the shadow Chancellor saying that the last Government abolished boom and bust?
Ed Balls
I noticed that the Chancellor did not choose to intervene with the answer that I was hoping for, but there we are. The fact is, when we came into government in 1997, we made the Bank of England independent and he opposed it.
We had a period of sustained growth and rising employment. The Conservatives said that the national minimum wage would cost jobs, but employment went up. Under the Conservatives child poverty doubled; under Labour it came down.
We had the longest sustained period of investment in the NHS since the second world war, but there was a global financial recession, which affected countries around the world. Who dealt with that? The British people should be thankful that it was not the Chancellor and his friends, because opposing nationalisation of the Royal Bank of Scotland and Northern Rock would have been a catastrophe for the British economy.
Ed Balls
There has been some confusion on this over the past 24 hours. We know from the OBR that it was told of the 1p cut in fuel duty so late that it could not even get it into its economic forecast. The Chancellor realised at the weekend that he was behind the curve, that he was not setting the agenda, that living standards were a rising issue and that Labour was making the case for fuel tax cuts, so he jumped in late with his 1p cut, but he did not have the courage to reverse his 3p rise. That is the reality. Had the Chancellor done things properly—I can give him some advice on this, because I know how to do things properly on North sea oil tax—he would have consulted the oil companies in plenty of time, explained what was happening, made the case, got their agreement, and then announced the policy in the Budget. I think that many of the oil companies did not find out about it until it was announced in the Budget. That was the problem.
Yesterday afternoon the Chief Secretary to the Treasury—as always, he is not here—was on a television programme about the Budget. He was asked, “How will you stop the oil companies simply passing on the cost in consumer prices?” He said that he did not know, but that he would monitor the oil companies closely. That was the problem. The Government did not do the work, and this was cobbled together at the last minute. That is why it has caused so much confusion and consternation in the past 24 hours. He needed a headline and a flourish to his speech, but he did not want to announce that they were cutting the winter fuel allowance—an announcement we would never have had at the end of a Labour Budget—so instead he announced a cobbled-together, last-minute 1p cut in petrol tax.
The Chancellor is not listening.
Mr George Osborne
I can see that the right hon. Gentleman wants to get this point on the winter fuel payment going. Will he confirm, therefore, that I am only following the plan set out in the last Labour Budget on the winter fuel payment?
Oral Answers to Questions
Debate between Ed Balls and George Osborne(13 years, 8 months ago)
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Mr Osborne
Yes, we will support enterprise and innovation in tomorrow’s Budget, but my hon. Friend will have to be patient and wait until then to hear about the precise measures that are involved.
Ed Balls (Morley and Outwood) (Lab/Co-op)
Manufacturers up and down the country and the whole House are awaiting the Chancellor’s long-delayed growth strategy to be published tomorrow, but I have a copy of that document with me today. It says:
“Growth comes first for this Government”
and that their strategy will
“underpin private confidence, investment and job creation.”
The Chancellor has no need to worry however, as I will not be handing this document to the press. I read it last night and, frankly, there is nothing in it worth leaking. Has this document been audited by the Office for Budget Responsibility? Is the Chancellor really clear that getting rid of maternity and paternity rights and enterprise zones will boost jobs and growth in our economy? Is this going to be enough to stop the Budget growth forecast tomorrow being downgraded for this year and next?
Mr Osborne
I am not sure that that is the document in question—but if the right hon. Gentleman hands it over, I will have a look—because we are not getting rid of maternity and paternity rights, so I do not know where he got that from. Besides, I have a copy of his document, and it contains all the spending commitments he has been making. If he cannot control his own Front-Bench colleagues, how on earth is he going to control the nation’s finances?
Ed Balls
Is this really the best the right hon. Gentleman can do? I bet he will have Treasury officials scrabbling around all afternoon trying to deliver a further 1p cut in corporation tax tomorrow and a further tax cut for the banks. Let us wait and see. The fact is that a year ago inflation was low and unemployment was falling, and a year on, as we see today, inflation is up to 4.4% and borrowing is higher than a year ago, not to mention unemployment. If the Chancellor will not listen to me, will he listen to his colleague who said:
“We must not cut Government spending too soon and risk plunging a fragile recovery back into recession. Cuts without economic growth will not deal with the deficit”?
The Business Secretary was right. Why will the Chancellor not listen?
Mr Osborne
The right hon. Gentleman really needs to brush up on his question practice, but let me say this to him: the idea that we were somehow left a fantastic economy by the Labour party is quite the most ludicrous claim in the country, and the only reason he makes it is because he was responsible for the economic mess that left this country on the brink of bankruptcy.
Banking
Debate between Ed Balls and George Osborne(13 years, 9 months ago)
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The Chancellor of the Exchequer (Mr George Osborne)
The near-collapse of the British banking system more than two years ago still generates today deep feelings of anger and cries for retribution. I understand that, for the link between risk and reward that underpins our free market was completely broken.
Bankers who had made the most catastrophic mistakes walked away with huge payouts and pensions. Those entrusted by us to regulate those bankers and run our economy washed their hands. Meanwhile the rest of the country is left paying every day for their failures. The new coalition Government must pick up the pieces. Let me set out how we will do that.
First, we will make sure that this never happens again. We are replacing entirely the tripartite system of regulation that was introduced by a previous Chancellor and his advisers in 1997, and which completely failed. Next week we will publish the detailed proposals to give the Bank of England responsibility for prudential regulation, and to create a new consumer protection and markets authority that will protect the interests of bank customers. We will then undertake pre-legislative scrutiny, as requested by the House, before introducing the Bill. I hope it will command support from both sides.
Later this year we will receive the interim and final reports of the Independent Banking Commission that this Government established, and which I asked Sir John Vickers to chair. Sir John and his fellow commissioners are asking the difficult questions that need to be asked about how we protect the British taxpayer from future bank failures so that never again is a bank too big to fail. We look forward to receiving their recommendations. I should make it very clear that nothing that I will say today about the settlement that we have reached with Britain’s banks, including references to a level playing field, in any way prejudges the outcome of the commission. That includes both the commission’s recommendations and the Government’s response.
The second task facing the Government is to make sure that we get the maximum sustainable tax revenues from the financial sector. Her Majesty’s Revenue and Customs confirms that the one-off bank payroll tax introduced in the dying months of the previous Government raised £2.3 billion net, but as my predecessor—the Chancellor who introduced the tax—has pointed out, it could not be repeated without massive tax avoidance. I agree with him and we will not repeat the bank payroll tax.
Instead, we have implemented a new and permanent bank levy, and that is why yesterday I announced an increase in that levy so that it raises £2.5 billion this year. This will bring the total raised by the new bank levy to £10 billion over the Parliament, and it means that in each and every year of this Government we will raise more in bank taxes than the previous Government raised in any single year. We have also required all the major banks operating in the UK to comply in spirit and by the letter with the code of practice on taxation. The code was announced with a fanfare by the previous Government, but I discovered that when they left office only two banks had signed up to it. Today all the major banks have signed.
The third task facing the new Government was to reach a new settlement with the banks so that they could contribute to Britain’s economic recovery. Some prominent people in the House were predicting just 24 hours ago that my tax announcement meant that our discussions with the banks on lending were falling apart. The House will be pleased to know that that prediction was completely wrong. This morning the heads of the major British banks—Barclays, RBS, Lloyds and HSBC—reached a new settlement with the Government. I want to thank John Varley, the former chief executive of Barclays, for the huge amount of time and personal commitment that he has given to this project.
The essentials of the new settlement are exactly as I set out last month, and I am today publishing an exchange of letters between John Varley and myself. The banks will lend more money, especially to small business; pay more taxes; pay less bonuses; be more transparent about the bonuses that they do pay; and make a greater contribution to our regional economy and society. In return the Government commit to the success of a strong, resilient, stable and globally competitive financial services sector in which UK banks can compete with the best banks in the world on a level playing field, and in which London is a world centre for finance. That is good for jobs and growth in our country.
Let me go through each part in detail, starting with pay and bonuses. Most of us find the levels of pay in financial services to be completely out of kilter with what the rest of society would regard as fair or reasonable. We are determined to bring responsibility and constraint, and make sure that pay is properly taxed. Four years ago, at the height of the banking boom, the City paid £11.5 billion in banking bonuses, most of which was in cash, most of which could not be recovered when the banks collapsed, and too much of which went untaxed. The new remuneration code introduced last month and the tax avoidance measures that we are taking will change that.
Today I can tell the House that the four major British banks have also agreed that total bonuses for their UK-based staff will be lower than last year and lower than they would have been without today’s settlement. The independent non-executive director who chairs each bank’s remuneration committee will have to confirm personally in writing to the Financial Services Authority that their pay deal conforms with today’s commitments. For the first time, the banks have agreed to seek explicit approval from their board’s remuneration committee for the pay of the 10 highest paid employees in each of their main business units. That did not happen in banks such as the Royal Bank of Scotland before the crisis, where the board was ignorant of what was going on.
We have also insisted that the banks be far more transparent about who and how they pay. From this year onwards, the four major banks have committed to disclose the pay details not just of their executive board members, but of the top five highest paid executives not on the board. This will mean that the salary details of at least seven executives at each bank will be published this year. That compares with five individuals in the United States of America and Hong Kong, and only board executives in Germany and Japan. By disclosing individual pay levels the settlement goes further than the Walker report recommended, on which we are seeking international agreement.
We will consult on whether to make it a mandatory requirement from 2012 on all large UK banks to publish the pay of the board plus the eight highest paid senior executive officers. That would mean that Britain had the toughest and most transparent pay regime of any major financial centre in the world.
Let me provide an update on the situation at the Royal Bank of Scotland and Lloyds. The previous Government signed an agreement with RBS that explicitly said that it would in 2010
“enable pay arrangements in line with the market”.
Despite that constraint, which we inherited from the previous Government, United Kingdom Financial Investments Ltd, the arm’s length body which manages the Government’s stake in those two banks, has agreed the following: for all staff at RBS and Lloyds, the maximum up-front cash bonuses will be limited to a maximum of £2,000 this year; all executive directors, including the chief executives, have agreed to receive this year’s bonuses entirely in the form of shares; and directors will have to wait until 2013 to convert these shares into cash.
As the Prime Minister made clear last month, the bonuses at RBS and Lloyds will in total be smaller than they were last year under the previous Government and so, crucially, will the compensation ratios be. They will backmarkers in the industry, instead of the front runners that they once were.
Let me turn from pay to the additional support that the British banks have committed today to provide to the regional economy. At the end of last year the industry pledged £1.5 billion to a new business growth fund, which will invest in the kinds of expanding small businesses that hold the key to Britain’s more balanced economic future. Today they commit to make an additional £1.2 billion contribution to society. The four major banks commit to an additional £l billion for the fund and an additional £200 million to capitalise the big society bank. The business growth fund contribution will be front-loaded over the next couple of years, so that more help can be given to businesses sooner. This money will be in addition to the lending commitments and additional to any funding already allocated from dormant bank accounts.
Finally, at the heart of today’s settlement is a commitment from the four major banks, as well as Santander, to make much more money available for lending to small and medium-sized business. Last year these banks lent £66 billion to such businesses. Today the banks commit to lend £76 billion this year. That is £10 billion more gross new lending to small and medium-sized businesses, a massive 15% increase, materially higher than they had been planning to lend this year and materially higher than anyone who has followed these discussions would have expected. It comes alongside a very welcome commitment from the banks greatly to improve their customer service to small businesses, with a free mentoring service, published lending principles, transparent appeals and improved access to trade finance. Overall, gross new lending to all businesses, large and small, will increase from £179 billion to £190 billion, and the banks will make a commitment to lend even more if demand materialises.
Absent this deal, the banks were actually expecting lending to fall this year. To ensure that progress against these lending commitments can be monitored, the Bank of England has agreed to collect the relevant data and publish them quarterly. To help to ensure that today’s agreement is honoured, for the first time the pay of the chief executives of each bank, as well as of the relevant business area leaders, will be linked to their performance against these SME lending targets. Of course, if the banks fail even then to live up to their promises, the Government reserve the right to return to the issue and take further measures, but I sincerely hope that will not be necessary.
The anger at the terrible mistakes of the banking industry and the failure of those who regulated it will long remain, and rightly so, but let us as a country confront this hard truth: anger and retribution will not bring one percentage point of economic growth or create one single new job. The anger will remain, and I understand that, and we must never make the same mistakes again, but Britain needs to move from retribution to recovery. Today we get the banks to commit, with more lending—£10 billion more for small businesses— for our regional economies and society, £10 billion more in bank taxes, lower bonuses and the most transparent pay regime in the world. In return, let us build a banking industry that creates jobs for hundreds of thousands of our citizens and that competes in the world. Above all, let us ensure that the economic catastrophe that befell this country can never be repeated. That is how this new Government will clean up the mistakes of the previous Government. I commend this statement to the House.
Ed Balls (Morley and Outwood) (Lab/Co-op)
Given that this statement was not on the Order Paper, I thank the Chancellor for the eight minutes’ advance notice he gave me of it. Yesterday, he confirmed in his “Today” programme mini-Budget that he is cutting taxes for the banks this year, compared to last year. [Interruption.] Today we find out what the Chancellor has got in return from the banks, after weeks and months of negotiations with the UK banking industry, culminating in the complete shambles of the past 24 hours, and the result is: precious little. From a Chancellor who talked so tough in opposition and who even yesterday continued to promise much, this is a pitiful outcome and an embarrassing climbdown. [Interruption.]
Ed Balls
Thank you, Mr Speaker. They tend to heckle when they are worried.
A “damp squib” is defined in the dictionary as something potentially explosive but that fails to perform because it has got wet. That is this Chancellor all over. This negotiation has turned from Project Merlin into “The Wizard of Oz”: the curtain has been pulled back and there is nothing there. Of the leading players on the Government Front Bench, who is the one without courage, who is the one without a brain and who is the one without a heart?
Let us review what the Chancellor has achieved. On lending, he claims to have secured an agreement with the banks to lend £190 billion this year, but financial experts are clear that the deal he has announced is vague, toothless and unenforceable and not a proper substitute for proper competition. How will he be able to measure in detail whether the deal is delivered? Can he tell us the detail of how it will be enforced? Is there a sanction if the lending does not materialise? Was not a senior banker right when he told the Daily Mail on Monday that this lending agreement is “meaningless”? Is not the Financial Times right to say today:
“With much noisy showmanship, the Conservative-Liberal Democrat coalition is puffing demands that are little more than cosmetic”?
Is not that the truth?
On pay transparency, again we have a damp squib. The Chancellor claims that we will now have the most open regime in the world, but what does it actually add up to? The answer is transparency for pay and remuneration of only the seven most senior bank executives, whose anonymity is still fully protected. The Government are demanding that local authorities publish the salaries of anyone in local government earning more than £58,200, but he is allowing a taxpayer-owned bank and publically quoted companies in the financial sector to continue to pay staff millions of pounds in pay and bonuses with no transparency at all.
Why is the Chancellor not activating the legislation that we put on the statute book that would require the publication of the remuneration of any individual paid more than £1 million? It is there on the statute book and ready to go, so why not just sign the order and get on with it? Why has he failed so abjectly to make any progress in international negotiations with European and global Governments on transparency? There has been no progress because there is no sign that he has even tried.
On bonuses, I am afraid that the country will conclude that the Chancellor has thrown in the towel in the face of extensive lobbying by people with whom he and his Conservative colleagues have just become too close and too cosy. Does he remember what the Prime Minister said just two years ago—when Leader of the Opposition—when attacking the previous Government? He said:
“Because of this dithering we could see bonuses paid out for a second year to executives in taxpayer owned banks, which is unacceptable.”
After months of dithering from this Chancellor, what will we see over the next fortnight? We will see exactly that: bonuses running into millions of pounds, in cash and shares, paid to executives in taxpayer-owned banks. What he should be doing today is announcing proper reform of corporate governance and taking up our proposal to repeat last year’s £3.5 billion bank bonus tax, in addition to his levy, and use the money to support jobs and growth to kick-start his stalled recovery.
I have told the Chancellor that I will support him on long-term banking reform, enforceable lending agreements and proper statutory action on transparency and pay. Our economy badly needs a reformed, transformed, vibrant and globally competitive financial services industry for the future. He is right that hundreds of thousands of jobs depend upon it. However, this is not an agreement to secure the long-term future of our economy, but a short-term and shabby political deal. There have been talks that dragged on for weeks, a mini-Budget on the “Today” programme, crisis conference calls with the banks yesterday afternoon, a hasty compromise cooked up overnight and a Chancellor finally coming to the House with little to offer in return for his tax cuts for the banks.
I have to say that this is a Chancellor who, as the former CBI head has said, puts politics before economics. He talked tough in opposition, but in government he looks increasingly out of his depth and out of touch. We have rising VAT, rising fuel prices, rising unemployment and deep spending cuts hitting living standards of families, and yet his first priority is a tax cut for the banks. Millions of families up and down the country will now be asking, whose side is this Government on?
Mr Osborne
Well, that has to be one of the feeblest replies to a statement that I have heard. The only person who seems to be out of his depth at the moment, rather surprisingly, is the shadow Chancellor. There was one thing missing from that rant: an apology. He was the City Minister. I will move on to all the things that we need to do to regulate the City, but I will first remind him that he stood at this Dispatch Box for two years as City Minister and could have done any of the things that were either in my statement or in his reply, but he did not. The truth is that he is man with a past, and we will not let him forget it—even if he does. I took the opportunity to look at his website on which he lists all his achievements in politics, but he does not mention the fact that he was City Minister. He does not mention the fact that he invented the system of City regulation that failed so spectacularly. He might have forgotten what he did not do in government; we will not.
Let me deal specifically with some of the right hon. Gentleman’s questions. He asks how the lending targets will be monitored. I told him in the statement that the Bank of England is going to monitor them. [Interruption.] “How are they going to be enforced?”, Opposition Members cry. The chief executive’s pay will be linked to the targets, and I made it very clear in the statement that, of course, if the deal is not met we will return to the issue.
The right hon. Gentleman talks about transparency. In 13 years, the previous Government never implemented transparency in the City of London. Some £11.5 billion of bonuses were paid in the year in which he was the City Minister, but we are introducing the most transparent regime of any major financial centre in the world.
The right hon. Gentleman continues deliberately—because I know he must know the numbers—to get the sums wrong on the bank payroll tax and bank levy. Her Majesty’s Revenue and Customs confirmed that there is a £2.3 billion net receipt from the bank payroll tax, and that is spelled out in the March 2010 Budget book, which the Labour Government published. We are raising £2.5 billion every year from a bank levy that he opposes— right?—unless he has changed his mind on that. [Interruption.] He now supports it. Well, that is good news.
Perhaps, then, the right hon. Gentleman will listen to the right hon. Member for Edinburgh South West (Mr Darling). The right hon. Member for Morley and Outwood (Ed Balls) quoted quite a lot from the newspapers in his reply. Well, this is from The Daily Telegraph: “Bankers’ bonus tax failed, admits Alistair Darling,” who said:
“I think it will be a one-off thing because, frankly, the very people you are after here are very good at getting out of these things and...will find all sorts of imaginative ways of avoiding it in the future.”
That is from the then Chancellor who actually introduced the tax on which the right hon. Gentleman now pins his entire economic prospects.
Let me end by saying this: the right hon. Gentleman calls for things that he simply did not do in government. On pay and bonuses, he says control them in the nationalised banks; he did not do that last year when he was in the Cabinet, and he did not do it at all when he was in the Treasury. He calls for transparency; he did not introduce it when he was in the Cabinet or in the Treasury. He talks about reforming the banking system; he is the person who designed the banking regulatory system that failed, but he does not admit it. He talks about the bank levy; he wrote 11 Budgets and never put one in. And on lending, he tried as a member of the Government to secure lending agreements throughout the banks, and he completely failed. The truth is this: he is a man running away from his past, with no plan for the future.
Oral Answers to Questions
Debate between Ed Balls and George Osborne(13 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
My hon. Friend is clearly correct that it is unsustainable for the Government to be consuming almost 50% of national income. Lord Turnbull observes that under Labour and Conservative Governments in the past, the number was closer to 40%. Of course, the deficit reduction plan that we have set out brings that about.
Ed Balls (Morley and Outwood) (Lab/Co-op)
It is an honour and a great responsibility to shadow the Chancellor of the Exchequer at this critical time for our economy and our country. I pay tribute to my predecessor and thank him for everything he did despite the fact that I seem to have inherited an excessively large number of breakfast meetings from him. It is a good job that I did not have one today, or I would have missed this morning’s rather hurried mini-Budget.
It snowed so badly in December in Britain that airports closed, our economy shuddered to a halt, consumer confidence slumped and unemployment rose. In America, it also snowed so badly that airports closed, but the pace of US economic growth increased, consumer confidence was high and unemployment fell to a two-year low. Could the Chancellor tell the House whether there is something different about snow in Britain—or is there a better explanation as to why the American economy grew and Britain’s did not?
Mr Osborne
First, I welcome the right hon. Gentleman to his post and congratulate him on his appointment. Now he and the Leader of the Opposition know what it is like to be second choice. The new shadow Chancellor knows, because he was at the Treasury and he is a man with a past, that Britain had the largest housing boom, the biggest banking crash and the largest budget deficit, and as a result, recovering from the deepest recession was always going to be challenging and choppy, but we have set out a credible plan, including an increase in the bank levy, to deal with the budget deficit, which he refuses to deal with because he is a deficit denier.
Ed Balls
No answer to the question on America. Perhaps the Chancellor should have spent less time on the ski slopes of Switzerland and more time in the conference halls of Davos, listening to the American Treasury Secretary. Let me tell the right hon. Gentleman what he said:
“You’ve got to make sure you don’t hurt the recovery . . . There are some people who like to move . . . very quickly to do very deep cuts in spending but it is not the responsible way to do it.”
In June, unemployment was falling and growth was forecast to be 2.3% this year. Now unemployment is rising and growth is stalled. With consumer confidence falling, inflation rising, no bank lending agreement, no plan for jobs, no plan for growth, no plan B, does the Chancellor really expect us to believe that he can meet his forecast for economic growth this year, or will he have to stand at the Dispatch Box at the Budget in six weeks and downgrade his very first growth forecast?
Mr Osborne
The right hon. Gentleman clearly had a lot of time to prepare that, but I am not sure it all came out as he expected. We have had to deal with his economic legacy and he is running away from his past. He was the City Minister who knighted Fred Goodwin. He is the economic adviser whose fiscal policy has led to fiscal disaster. He is the leadership candidate who, for reasons of political positioning, denies the deficit. The truth is this: we have a plan to clear up his mess. He has no plan at all.