Oral Answers to Questions

George Osborne Excerpts

Tuesday 8th June 2010 Commons Chamber

[Tony Lloyd (Manchester Central) (Lab)]

1. What assessment he has made of the effect on economic growth of the programme of expenditure reductions announced on 24 May 2010.

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

The Treasury’s assessment is that the effect will be positive. The in-year reductions in spending are part of the Government’s efforts to bring down the budget deficit, the level of which threatens the recovery. This weekend the G20 stated:

“Those countries with serious fiscal challenges need to accelerate the pace of consolidation. We welcome the recent announcements by some countries”—

including Britain—

“to reduce their deficits in 2010”.

[Tony Lloyd]

I welcome the Chancellor to his place, but will he have the candour to admit that his strategy is very risky, because it risks putting this country back into a double-dip recession? In any case there will be losers, so will he say who they will be?

[Mr Osborne]

Let us be clear about who the losers would be if we did not deal with this record budget deficit. The whole country would lose out, because there would be higher interest rates, more businesses would go bust and international investor confidence would be lost. The hon. Gentleman needs to examine what is happening in the rest of the world, and realise that because Britain has the largest budget deficit of any advanced economy, we have to get on and deal with it.

[Michael Fallon (Sevenoaks) (Con)]

I welcome the Chancellor to his position. Will he give an absolute assurance that the coming Budget, and future Budgets, will always be presented first to Parliament, and that they will not have to be pre-notified to, or approved by, Brussels?

[Mr Osborne]

My hon. Friend has my absolute assurance that I would not sign up to that. Indeed, I have made that position clear to ECOFIN, and my hon. Friend the Financial Secretary to the Treasury, who is taking my place at today’s ECOFIN meeting, has also done so. It is absolutely certain that future Budgets will be presented first to the House of Commons.

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

I, too, welcome the Chancellor to his first Treasury questions. I know that he prefers the safety of the Treasury courtyard, but I am sure that the House will be on its best behaviour with him this afternoon. Since the 1970s, almost no country has cut its deficit significantly without increasing inequality. Will he make it a central goal of his deficit reduction plan to ensure that inequality does not rise?

[Mr Osborne]

I thank the right hon. Gentleman for his welcome. He is Labour’s “man of letters”, and it is good to see him still on the Front Bench. The point that I make to him is that Labour had 13 years in government, and inequality increased during its time in office. What we will do is deal with the very large budget deficit bequeathed to us by him and his colleagues in a way that is fair and reasonable, and protects people across the country.

[Mr Andrew Tyrie (Chichester) (Con)]

It is clear that in the past few days a new system of public expenditure control has been put in place. What will the Chancellor do to ensure that Parliament is fully informed about the new system? Will he publish a full explanation of exactly how it works?

[Mr Osborne]

I think that we have the two candidates for the chairmanship of the Treasury Committee here today. [Interruption.] I do have a vote, but I am not going to exercise it on that matter. The point that I should make to my hon. Friend—I shall speak about this a bit more in our debate on the Queen’s Speech later—is that we are publishing today details of the framework that we will adopt in conducting the spending review. I will say more about that at the time of the Budget—and I will, of course, answer questions about it in detail before the Treasury Committee, whoever is in the chair. Parliament will also have a number of opportunities to discuss it, and when the spending review is finally produced in the autumn it will, of course, be presented to this House. I want all Members of this House, from all parts of it, to engage in the big national challenge of resolving how we get this country to live within its means.

[John Robertson (Glasgow North West) (Lab)]

2. If he will assess the merits of increasing the level of financial assistance to pensioners through the tax system.

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[Chris Skidmore (Kingswood) (Con)]

14. What steps his Department is taking to reduce the level of the budget deficit.

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

In the past month, we have created an independent Office for Budget Responsibility to bring credibility to the Government’s forecasts, undertaken and completed in-year budget reductions of £6.2 billion and, today, laid before the House the process for the spending review that will take place this summer. In two weeks’ time, the Budget will set out a credible plan to accelerate the reduction of the budget deficit so that investors are reassured, interest rates can be kept lower for longer, and the recovery can be put on a stable footing.

[Neil Carmichael]

I note those excellent plans. Will the Chancellor of the Exchequer tell the House how many conversations he has had with colleague Ministers of Finance, and how much support and encouragement he has had from them to deal with our deficit?

[Mr Osborne]

I attended the G20 in South Korea this weekend. The G20 communiqué calls on countries with significant fiscal challenges—we have the highest budget deficit in the G20, so that includes us—to accelerate the reduction in the structural deficit. It has also been part of the European Union discussions that I have taken part in, that countries with significant budget deficits need to get on and reduce them. I am afraid that the Labour party, as it continues to oppose what we are doing, finds itself outside the international mainstream.

[Nadhim Zahawi]

Has my right hon. Friend the Chancellor read yesterday’s International Monetary Fund report, which warns that the current crisis management was no alternative to fundamental economic restructuring? Does he agree that the previous Government either naively or deliberately chose to mislead the nation?

[Mr Osborne]

My hon. Friend is absolutely right. I have, of course, seen the IMF report, and the lesson we learned is that you have to fix the roof when the sun is shining. That is what the previous Government completely failed to do. They had 13 years to fix the national finances, and now it is up to us to clear up the mess that they left behind.

[Karen Lumley]

Has the Chancellor received any apologies from the previous Government for the mismanagement of the economy over the past 13 years?

[Mr Osborne]

No, but we did receive a letter from the former Chief Secretary to the Treasury, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), apologising for the fact that there was no money left. We will discuss this issue in the debate on the Queen’s Speech. I note that the Labour party has tabled a motion, which it is asking us all to vote for, noting

“the need for a clear plan to bring down the deficit”.

I look forward to hearing that clear plan in the shadow Chancellor’s speech.

[Mr Kwarteng]

Has the Chancellor received any more correspondence from the former Chief Secretary?

[Mr Osborne]

No, sadly I have not, but I discovered that he had a large bust of Oliver Cromwell sitting behind his desk, and that when the Irish peace negotiations were being conducted they had to be held in another room.

[Chris Skidmore]

In my constituency, the number of people claiming jobseeker’s allowance has increased by 147% in the past five years. Does the Chancellor agree that unemployed people in Kingswood would be best served by decisive action to tackle Labour’s legacy of debt now?

[Mr Osborne]

I agree absolutely with my hon. Friend. Of course, we inherited rising unemployment from the previous Labour Government and it is a fact that all Labour Governments have left office with unemployment rising—[Hon. Members: “It’s falling.”] Opposition Members say that, but they are not looking at the unemployment figures, which show that unemployment is rising, that we have the highest youth unemployment in Europe, and that a record number of children are growing up in workless households. That is what we have inherited from the Government who had 13 years to sort out these problems. We will sort this out, and give people real life chances.

[Natascha Engel (North East Derbyshire) (Lab)]

I welcome the right hon. Gentleman to his new position. Has he calculated what his announcement of a £125 million reduction in the police grant means, in terms of fewer police officers and fewer special constables in Derbyshire?

[Mr Osborne]

All public services have to find efficiencies, and that is true of the police service, as it is of every other service. I have to say to the hon. Lady, and all Opposition Members, that if they are going to play a serious part in the discussion about how to reduce Britain’s record budget deficit, they need to come up with their own proposals instead of attacking every proposal put forward by the Government.

[Mr David Anderson (Blaydon) (Lab)]

When the most recent Chief Secretary to the Treasury, the right hon. Member for Yeovil (Mr Laws), made his debut two weeks ago—which became, of course, his swansong—my hon. Friend the Member for Manchester Central (Tony Lloyd) asked him whether he could give any idea how many jobs would be lost as a result of the deficit reduction package. His answer was that it is not right to pluck figures out of the air. Can we have some more concrete evidence from the Chancellor?

[Mr Osborne]

Our plan is to increase employment in this country by putting the public finances on a sound footing. It is about time the Labour party understood that it left behind the largest budget deficit in the EU and the G20. All over the world, people are looking at sovereign credit risks. This Government are determined to do something about the problem before people start looking at Britain.

[Mark Durkan (Foyle) (SDLP)]

The Chancellor could take the opportunity today to spell out to us how he and his coalition colleagues hope to popularise their cuts agenda. We seem to be being told that the public will be consulted on which spending should continue and which cuts might be made. How will that “axe factor” approach to government play out?

[Mr Osborne]

I congratulate the hon. Gentleman on the pun—but this is a very serious national challenge, which whoever won the election was going to have to face. The 11% budget deficit will not disappear. A very large part of it is structural, and so will not automatically reduce as growth returns to the economy. We want to make sure that all political parties, including his, and the brightest and best brains across Whitehall and the public sector, as well as voluntary groups, think-tanks, trade unions and members of the public, are all engaged in the debate and discussion about how, collectively, we deal with the problem. After all, it is our collective national debt.

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

First, may I welcome the Chancellor and his team to the Front Bench? I hope that he will join me in sending our good wishes to my right hon. Friend the Member for East Ham (Mr Timms), who remains a member of the Opposition Treasury team and who I am glad to say was in very good heart when I saw him a couple of weeks ago. He is looking forward to returning to the House at an early opportunity.

Unemployment is high today, but it is half what it was in the 1980s. Repossessions in the past couple of years are half what they were in the 1990s. Our economy is growing and our borrowing is coming down. Does the Chancellor accept that all of that is because we, in common with other countries—yes, as part of an international consensus—were prepared to take action to save our economy as we went into recession? Every one of those measures was opposed by him when he was shadow Chancellor.

[Mr Osborne]

It sounds as if we are rerunning the general election campaign. First, may I pay tribute to the work that the right hon. Gentleman did over three years, I think it was, as Chancellor of the Exchequer? He did the job in very difficult times, with the best of motives. Although we did not always agree with each other, as he has just made clear, he was always very courteous to me. I also thank him for the fact that I inherit from him a far more functional and less chaotic Treasury than the one that he inherited from his predecessor.

I make the point to the shadow Chancellor that the situation that we inherited from his Government—I do not say that he is solely to blame for this—is an extremely critical one. We have a very large budget deficit at a time when, as I have said, countries around the world are having to look at sovereign credit risks. We are having to deal with that, and with rising unemployment and growing inequality in our country. Regional disparities are growing as well, and we have to deal with those problems.

The right hon. Gentleman talks about the international consensus. He surely must have noted how, in the month since the general election, the EU, G20, the IMF, the OECD, and of course our own Governor of the Bank of England, have all warned us about the consequences of not dealing early with our budget deficit, and not accelerating the reduction in the budget deficit that he proposed in his March Budget.

[Mr Darling]

I agree that there are many issues that need to be resolved, in this country and others. No doubt we will return to them when the debate on the Gracious Speech resumes.

I want to ask a specific question about the Office for Budget Responsibility that the Chancellor is about to set up. When that body makes its recommendations, will he undertake that it will publish all the underlying assumptions that lead to them? Will he ensure that its deliberations, rather like those of the Monetary Policy Committee, are open and available for all to see?

[Mr Osborne]

I should have joined the right hon. Gentleman in wishing the right hon. Member for East Ham (Mr Timms) a speedy recovery. I understand that he has now sworn in, which is fantastic for everyone here concerned. The fact that he was assaulted in his constituency surgery doing his job as a constituency MP makes the incident all the more chilling, and we all wish him very well.

Let me deal specifically with the right hon. Gentleman’s question. We have set up the Office for Budget Responsibility on a non-statutory basis because we need to pass legislation to make it statutory. The model that we have followed is the approach taken by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) when he set up the Monetary Policy Committee. Sir Alan Budd will be available to answer questions from the Treasury Committee on exactly the kind of points that the right hon. Gentleman raises—such as the underlying assumptions. It is ultimately up to him how he publishes his information, and I do not want to prejudge that, but the purpose of the exercise is for people to have confidence in official figures and growth forecasts, and confidence means transparency. I am sure that the spirit of what the right hon. Gentleman says will be taken on board by Sir Alan.

[Richard Harrington (Watford) (Con)]

4. If he will estimate Government expenditure on external consultants in (a) 1997 and (b) the last year for which figures are available.

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

T1. If he will make a statement on his departmental responsibilities.

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

The core purpose of the Treasury is to ensure the stability of the economy, promote growth and employment, reform the banking system and manage the public finances so that Britain lives within her means.

[Mark Lazarowicz]

Whether the amount lost by tax avoidance or tax evasion is £100 billion or £40 billion a year, it is a lot of money which could go a long way to tackling the deficit. Will the Chancellor tell his ministerial colleagues sitting next to him to give a higher priority to tackling tax evasion and tax avoidance so as to make sure that those who are most able to pay the costs of the deficit do so, rather than those who are least able to pay?

[Mr Osborne]

Yes, we will.

[Mr Philip Hollobone (Kettering) (Con)]

T6. At a time of low investment returns, which mean that many people in the private sector are struggling to fund a pension for their retirement, what steps will be taken to tackle the ballooning public sector pension bill?

[Mr Osborne]

The Government will establish an independent commission to look at public sector pension provision. We will make an announcement on that in due course.

[Mr Graham Allen (Nottingham North) (Lab)]

T3. Has the Chancellor yet had a chance to have a one-to-one with the Secretary of State for Work and Pensions to discuss the thing that would most affect the structural nature of the deficit: early intervention with our babies, children and young people to ensure that we do not accumulate massive costs of failure that need to be met much later? If he has not done that, will he undertake to do so, please?

[Mr Osborne]

I have had several conversations with my right hon. Friend the Secretary of State for Work and Pensions on this issue and on the broader issues of welfare reform. I broadly agree with the point that the hon. Gentleman makes—he made it forcefully in the last Parliament—that support for children in the early years can yield real results later on. We will bear that in mind as we conduct our spending review.

[Tom Brake (Carshalton and Wallington) (LD)]

T2. While the Chancellor is reviewing the projects agreed by the previous Government since 1 January, may I commend to him the Better Healthcare Closer to Home programme and the plans that it has for St Helier hospital? May it draw it to his attention that the plans were very enthusiastically endorsed by the new Secretary of State for Health when he visited my constituency just a couple of days before the general election?

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[Alun Michael (Cardiff South and Penarth) (Lab/Co-op)]

T8. The Chancellor will be aware of the public and cross-party support given to the proposal to turn British Waterways into a sort of national trust for the waterways of the UK. That was given official endorsement in the last Budget. Can the Chancellor confirm his intention to pursue this proposal, and perhaps give an idea of the time scale within which it might be brought about?

[Mr Osborne]

If the right hon. Gentleman will allow me, I will look into the details of the proposal to which he refers and write to him.

[Mr Peter Bone (Wellingborough) (Con)]

T7. In 2008-09, our contribution to the EU was £2.5 billion. This year it will be £6.4 billion. Why does every budget have to be cut except the EU’s, which can increase by 150%? Is it not a case not of ring-fencing, but of gold-plating?

[Mr Osborne]

I am sure that my hon. Friend will be glad to know that in my first ECOFIN I proposed to the Council that we freeze the EU budget, and there was support from other countries around the table. [Interruption.] If the hon. Member for Rhondda (Chris Bryant) is supporting an increase in the EU budget, he should tell the House.

[Ian Austin (Dudley North) (Lab)]

I welcome the Chancellor and his team to their new posts. As part of the consultation on cuts that is being announced today, would he be prepared to visit Dudley, so that we can discuss the importance of maintaining investment in education and training as our No.1 priority, so that we can bring to the area the new industries and jobs on which our future prosperity will depend? While he is there, I can take him to Priory road, and he can see the devastating impact that his decision to cut spending on housing is having on that community.

[Mr Osborne]

I am always very happy to visit Dudley. I have done so many times in the last three or four months—which was half successful.

We have found additional money to support social housing. We discovered that the housing commitments made by the Labour Government just before the general election were completely unfunded. We have found money to fund additional social housing, which during the past 13 years the previous Government almost completely failed to do.

[Bob Russell (Colchester) (LD)]

T9. Further to excellent question of the hon. Member for Bristol East (Kerry McCarthy), can the Minister who was briefed to answer the excellent Question 25, in my name, now give a more substantive answer? What will the Government do to support credit unions such as the excellent one in Colchester?

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[Mr Osborne]

We will be making an announcement on the civil list in due course, but if the hon. Gentleman is looking for cost savings, perhaps early retirement is something that he could consider. [Interruption.]

[Mr Speaker]

Order.

[Mr James Clappison (Hertsmere) (Con)]

Does not part of the contribution to the EU budget result from the surrender of the UK rebate in 2005 by the previous Government, which will cost taxpayers in this country up to £9 billion over six years and was given in return for nothing? Should we not add that to the Chief Secretary’s list of waste by the previous Government?

[Mr Osborne]

My hon. Friend is absolutely right. The former Prime Minister Tony Blair gave away the UK’s budget rebate in return for absolutely nothing. We were promised at the time that it would give us leverage over CAP reform, which never arrived, and I am afraid that that is just one of the many decisions that the previous Government got wrong.

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

Growth throughout the UK economy has often been geographically uneven. Has the Chancellor considered what help a rural fuel derogation might bring to the highlands and, in particular, the islands of Scotland; and can I volunteer my own constituency, Na h-Eileanan an Iar, for any pilot project?

[Robert Halfon (Harlow) (Con)]

Under the previous Government, unemployment in Harlow was the highest in west Essex. Do the Government agree that a low-tax, low-debt economy is the best way to bring jobs back to Harlow?

[Mr Osborne]

May I say how particularly pleased I am to see my hon. Friend in the House? His victory was one that I found particularly satisfying on election night.

My hon. Friend is absolutely right that the ambition of a low-debt, low-tax economy is one to which people who care about the long-term economic future of this country should aspire. The key challenge, of course, is getting there, and that means dealing with the 11% budget deficit.

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

The right hon. Gentleman will know that the budget deficit at the time of the Budget was £22 billion less than was predicted four months earlier in the pre-Budget report, showing that the major engine for reducing the deficit is economic growth. Will he give an undertaking that the cuts that he intends to make will not cut the capacity for economic growth in Britain, thereby increasing the deficit?

[Mr Osborne]

May I congratulate the hon. Gentleman on his return to the House, as we both served on the Public Accounts Committee when I first arrived in the House? I make this point: he makes an original observation that somehow the British budget deficit is low, when, actually, of course, it is an 11% budget deficit and we are borrowing £156 billion—[Interruption.]

[Mr Osborne]

Oh, go and take the pension, please. [Interruption.]

[Mr Speaker]

Order. Can I just remind right hon. and hon. Members of the basic principle of “Erskine May”: good temper and moderation in parliamentary exchanges at all times?

[Mr Osborne]

Mr Speaker, you are absolutely right.

I make this point to the hon. Member for Swansea West (Geraint Davies). The serious observation that he makes about investment in productive economic assets is one that is reflected in the document that the Treasury produced this afternoon.

[Roger Williams (Brecon and Radnorshire) (LD)]

A Select Committee in the other place found that reform of the Barnett formula could lead to a reduction in the budget deficit. In terms of the imperative of achieving that, will not the Treasury team look once again at that Select Committee report?

[Fiona Mactaggart (Slough) (Lab)]

Will unemployment and inequality increase or decrease in the coming year?

[Mr Osborne]

The ambition, of course, is to try to get unemployment falling, but it is rising at the moment. That is the situation that we inherited—as is inequality, which we inherited too.

[Matthew Hancock (West Suffolk) (Con)]

Is the Chancellor aware of the recent Institute for Fiscal Studies report which showed that, going into the recession, the budget deficit in the UK was already one of the highest in the developed world?

[Mr Osborne]

I am absolutely aware of that report, because my hon. Friend drew it to my attention about three months ago, for which I thank him.

[Huw Irranca-Davies (Ogmore) (Lab)]

Everybody is assuming that the budget cuts are based on the Canadian model, which itself was based on 3% growth and not least on strong growth in the American economy. I want to ask the Chancellor something in all seriousness. If there is not equivalent strong growth globally and within the eurozone, will that not mean that we get all the pain and none of the gain?

[Mr Osborne]

There does seem to be collective amnesia on the Labour Benches. They were in government for 13 years, they ran up the largest budget deficit in the European Union and they handed over office to us after an election in the middle of a eurozone crisis. The threat to the British economy is what will happen if we do not deal with this budget deficit. Let me say to the hon. Gentleman and all Labour Members that until they have their own proposals to deal with the problem that they have bequeathed the new Government, they are not going to be taken seriously.

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

I ask my right hon. Friend the Chancellor to outline to the House exactly what not tackling the deficit would mean for my constituents in Elmet and Rothwell and for their mortgages.

[Mr Osborne]

Unfortunately, my hon. Friend would have to tell his constituents that interest rates would start to rise and international investor confidence would be lost. Today, one of the credit rating agencies has published a report that makes the observation that the UK’s deficit reduction plan is particularly weak. That is the situation that we have inherited, and we are going to put it right.

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

Will the Chief Secretary to the Treasury rule out the means-testing of child benefit?

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[Gordon Birtwistle (Burnley) (LD)]

Does my right hon. Friend intend to continue using the very expensive PFI funding for future capital investment in the NHS? The most expensive to date has been in Wythenshawe hospital, where the NHS will pay back 16 times the original capital value. More prudent borrowing in the past would have delivered the investment without adding to the deficit.

[Mr Osborne]

The hon. Gentleman makes a very good observation about the hidden costs of PFI liabilities. After the Office for Budget Responsibility creates an independent set of national economic forecasts, it will go on to look at PFI liabilities. The deficit and national debt that we have been talking about are, of course, only half the story; there is the hidden iceberg of the PFI liabilities that the Labour party ran up over 13 years as well.