George Osborne
Main Page: George Osborne (Conservative - Tatton)Department Debates - View all George Osborne's debates with the HM Treasury
(13 years, 7 months ago)
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Helen Goodman (Bishop Auckland) (Lab)
1. What recent assessment he has made of the effectiveness of the monetary policy framework.
The Chancellor of the Exchequer (Mr George Osborne)
I begin by expressing my own personal sadness and shock at the death of David Cairns, whom I knew pretty well. I went with him on a trip to the United States some years ago and spent some time with him, and I know that he was principled, gentle—in the best sense of the word—and genuinely liked and respected in all parts of the House. His sudden and premature death is a tragedy, and my sympathies—and, I suspect, those of everyone here—go to his partner Dermot and his family.
The Government have set up a new macro-economic framework to restore economic stability. The building blocks of that framework are an independent Monetary Policy Committee that will continue to target inflation, a new Financial Policy Committee to operate macro-prudential tools, so that we can assess overall levels of debt in the economy—something not done in recent years—and, crucially, a credible, coherent and independently monitored fiscal policy that allows interest rates to stay lower for longer while remaining consistent with the inflation target. It is now widely accepted that this framework is far more effective than the one that went before it.
Helen Goodman
May I associate myself with your tribute, Mr Speaker? David Cairns was a highly valued colleague, and I am sure that all our thoughts and prayers are with his partner Dermot and his family.
I am grateful to the Chancellor of the Exchequer for his answer, and I was wondering whether, in his more reflective moments, he would agree that Portugal, Greece and Ireland face a major problem, in that they cannot run an independent monetary policy attuned to their particular needs. That being the case, will he stop making rather childish comparisons between the UK and the eurozone countries?
Mr Osborne
The hon. Lady is right that those countries do not have a flexible exchange rate. That is because they are in the euro, which I campaigned to keep Britain out of. I do not know how she has campaigned in recent years, but the last time I checked I think it was still official Labour party policy to join the euro in principle. Perhaps the shadow Chancellor will clear that up when he gets to his feet. The comparison I make is a good one: a year ago almost to the day, people were looking at the British budget deficit, which was larger than those of Portugal and Ireland, and asking whether Britain could pay its way in the world. Our credit rating had been put on negative watch. Now, however, thanks to the policies of this coalition Government, Britain has economic stability again.
Sir Peter Tapsell (Louth and Horncastle) (Con)
I also wish to pay tribute to the memory of David Cairns. May I ask the Chancellor how the co-ordination is organised to achieve a synthesis between our tight fiscal policy and our lax monetary policy?
Mr Osborne
Obviously, monetary policy is independent—the MPC sets it in the way we all know—so there is no co-ordination in that sense. I do not have a direct influence on monetary policy, but it is clear that by setting a credible fiscal policy, we give the MPC maximum room for manoeuvre and the freedom to keep interest rates lower for longer. The Governor of the Bank of England made that clear when he gave his Mansion House speech last year, and it is an observation also made by many independent observers of the British economy. Interest rates would be higher if we had a less credible fiscal policy.
Ms Angela Eagle (Wallasey) (Lab)
I would like to thank you, Mr Speaker, and the Chancellor for your tributes to David Cairns, our colleague, and to add our tributes from the Opposition side of the House. David was one of those very rare people who caused a change in the law in order for him to be able to take his seat in this place, and when he arrived his presence was not a disappointment to anyone. He was a great colleague and friend, and our hearts go out to his family and friends. We would like to add our deepest condolences at the shocking news of his untimely and very early death today.
Before the last election, both parties now in government pledged no rise in VAT, but with inflation running at double the Bank of England target, people are facing the biggest and longest squeeze in their living standards for 80 years. How does the Chancellor think that increasing VAT by 2.5% has helped them to cope with this issue?
Mr Speaker
Order. Whatever may be said about the question, I am sure that the Chancellor will focus on the monetary policy framework. That is what he can be relied upon to do.
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 Andrew Tyrie (Chichester) (Con)
The Chancellor will shortly publish draft legislation on financial regulation making the Bank of England the most powerful central bank of its type in the world. The word “Governor” simply does not do justice to the empire over which Mervyn King will shortly preside. What specific proposals does the Chancellor have to ensure full democratic accountability of the reformed Bank to both Parliament and the country?
Mr Osborne
I thank my hon. Friend for advance notice of his important question. Both the Governor of the Bank of England and the Government take the accountability of the Bank very seriously. Clearly the Bank will receive considerable new powers for its prudential regulation of our financial system and in its macro-prudential tools. We are looking at specific ideas for enhancing the Bank’s accountability, including to this House, but it would be appropriate first for me to appear before my hon. Friend’s Committee—I know that he has contacted my office seeking a date—and to await the Treasury Committee’s findings, so that we can listen to what it has to say before coming up with our confirmed proposals.
Tessa Munt (Wells) (LD)
2. What recent assessment he has made of trends in levels of bank lending to small businesses.
Esther McVey (Wirral West) (Con)
3. What fiscal measures he is taking to reduce the costs faced by businesses.
The Chancellor of the Exchequer (Mr George Osborne)
As well as dealing with the deficit, this Government are helping business. To support a private sector recovery, we have cut corporation tax by 2% this year, with 3% to come. We have cut small companies’ tax and extended the small business rate holiday for another year. We have stopped Labour’s jobs tax, expanded enterprise and research tax breaks, announced new enterprise zones and, crucially for millions of businesses and families, we have abolished the fuel duty escalator and cut the duty.
Esther McVey
As Merseyside seeks to expand its private sector, it is looking towards its knowledge economy so that it can build on its substantial science base. Predictions show that, by 2022, it could have growth of 15%, which would mean 58,000 jobs. What are the Government doing to incentivise such growth to ensure that those predictions for Wirral and Merseyside become a reality?
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?
Mr Osborne
The shadow Chancellor is not just out of his depth; he is drowning. The truth is that he has had absolutely no impact in the several months that he has been doing the job. He had one policy, a VAT cut on fuel that the European Union ruled illegal. He had one idea, which was to follow America, but now the Obama Administration have announced a deficit reduction plan as fast and as deep as the UK’s. He had one prediction, which was that there would be a double-dip recession, and that has not happened. We know that he is a man with a past, but we are beginning to discover that he has absolutely no ideas for the future. If we want any proof of that, this is what the CBI said this week when asked what the outcome would be if Britain followed Labour plans:
“The economy would be weaker because of the impact of a loss of confidence”.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
4. What assessment he has made of the effects of the increase in the standard rate of VAT on levels of economic growth in the first quarter of 2011.
Tony Baldry (Banbury) (Con)
5. What fiscal measures he is taking to encourage charitable giving.
The Chancellor of the Exchequer (Mr George Osborne)
The Government think that charitable giving needs a great deal more support than it has been getting, so we announced a major package of new tax breaks in the Budget, ranging from the biggest to the smallest donations. This includes the commitment that anyone giving more than 10% of their estate to charity will have their inheritance tax bill cut by 10%. For the first time ever, the first £5,000 of a donation or donations to a charity will automatically attract gift aid. That is automatic tax relief on the collection plate and the collecting tin on the high street. Overall, 100,000 charities could benefit to the tune of £600 million a year. These are the most generous tax changes for a generation.
Tony Baldry
Over the year, some £58 million in loose change is put in collection plates from just Church of England collections, so the small donation gift aid scheme will be very welcome, as it will enable tax to be recovered on that amount. Welcome, too, will be the reduction in inheritance tax for those who give more than 10% of their estate to charity. After all, we can take nothing with us, and it is probably better to leave as much as possible to charity when we go.
Mr Osborne
I thank my hon. Friend for his support. One challenge is to make sure that everyone hears about these schemes over the next couple of years. Because the Budget focused on big issues like fuel duty and the corporation tax cut, the same amount of attention was not given on Budget day to the charitable giving measures. Over the period before they come into effect, I want to make sure that all the charities are aware of the benefits. Every charity will be able to benefit, but small charities will be disproportionately better off.
Kerry McCarthy (Bristol East) (Lab)
Many local charities would disagree with the Chancellor’s statement. Will he explain why he chose in the Budget to focus on tax breaks for the wealthiest owners when many small local charities who will not benefit from such donations are being hit by the triple whammy of a rise in VAT, the end to the gift aid transitional rate and cuts to local government grant funding? What help is he giving to those charities that he expects to form the backbone of his big society?
Mr Osborne
I am not sure who the hon. Lady has been listening to, but this is what the British Red Cross said: “Allowing charities to—”[Interruption.] I am sorry; it seems that we should disregard the views of the British Red Cross. Let me, however, repeat what it said for the benefit of my right hon. and hon. Friends.
“Allowing charities to claim back on up to £5,000 of small donations per year will have a big impact for small charities”.
The Charities Aid Foundation said:
“The Chancellor has today delivered for charities and those who want to support them.”
Instead of carping from the sidelines, why does the hon. Lady not get behind this good scheme and ensure that all charities in all our constituencies make use of it?
Nicholas Soames (Mid Sussex) (Con)
11. What steps his Department is taking to promote economic growth.
The Chancellor of the Exchequer (Mr George Osborne)
As my hon. Friend knows, we inherited an economic mess, we have restored economic stability and we are promoting economic growth by cutting business taxes, encouraging investment, expanding exports, improving and investing in skills, and creating jobs. The whole House will be pleased to know that 400,000 private sector jobs have been created since the Government came into office.
Nicholas Soames
I warmly welcome the excellent record of this Government, led by my right hon. Friend the Prime Minister, and the admirable work done by the Chancellor. Does he agree that, in addition to all this work to encourage growth, the deregulation of the economy continues to be extremely important and that it is not proceeding at as fast a pace as it should? Will he do everything he can to encourage his colleagues in the Government to get on with the deregulatory programme?
Mr Osborne
I certainly am doing that. We announced in the Budget the deregulation of £350 million-worth of business regulation, and we also imposed a moratorium for the coming years on regulation on small businesses. On the first anniversary of this Government, it is worth reflecting that 400,000 extra jobs have been created in the private sector, 89,000 fewer people are on the unemployment count, manufacturing output is up by 5%, business investment is up by 11%, exports are up by 12%, our credit rating has come off negative watch, our market interest rates are down and, as I say, economy stability has been restored.
Tristram Hunt (Stoke-on-Trent Central) (Lab)
Would the Chancellor like to associate himself with the views of the Secretary of State for Business, Innovation and Skills on the cumulative effect of carbon reduction measures on the competitiveness of energy-intensive industries? There is real concern in the ceramics sector in my constituency that the Government are in danger of exporting jobs and importing carbon, which is in nobody’s interest?
Mr Osborne
The hon. Gentleman raises a very specific issue—the cumulative impact of the environmental policies of both the previous Government and this one on some very energy-intensive industries such as the one that he represents in Stoke—which is worth consideration. We are examining it, and it is a challenge for the whole House to ensure that we get the right balance between absolutely meeting our carbon reduction requirements, to which we have all signed up as Members of this Parliament, and ensuring that we can do so in a way that enables Britain to continue to have a competitive energy-intensive industry.
David Mowat (Warrington South) (Con)
12. What his policy is on the operation of the Barnett formula in relation to relative need.
Chris Kelly (Dudley South) (Con)
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, to promote growth and employment, to reform banking and to clear up the mess in the public finances that we inherited so that Britain starts to live within her means.
Chris Kelly
The Chancellor will know that fraud and error have plagued the tax system since it was introduced. What measures is he taking to bear down on this and what financial impacts does he expect those measures to have?
Mr Osborne
I can today report to the House that in the past year Her Majesty’s Revenue and Customs has saved an additional £1 billion by tackling fraud and error in the tax credit system. For many years, the flaws in the shambolic administration of tax credits went completely ignored by the Labour party, causing misery for hundreds of thousands of families and costing the taxpayer billions of pounds, but we are now sorting out this mess.
Mr William Bain (Glasgow North East) (Lab)
T3. Has the Chancellor had an opportunity to note the findings of last week’s report from the National Institute of Economic and Social Research, which show the contraction in public and private demand since emerging from the recession to be higher in this country than in any comparable major economy? Does that not show that the Government are cutting too far and too fast?
Mr Osborne
First, the report recommends higher taxes and higher interest rates—perhaps that has become part of the Labour party’s official policy. I think it is worth looking at what the CBI has said this week. I have already quoted what it said when I was asked what the outcome would have been had Britain followed Labour’s plans—it said there would have been weaker economic growth—but its director general has also said:
“We are rock solid behind the chancellor’s plans to eliminate the structural deficit within a parliament”,
which are an
“essential part of putting the economy back on a stable footing”.
That is the voice of British business’s view of the deficit. [Interruption.] The shadow Chancellor says that is not true. A couple of months ago he was quoting the CBI across the Dispatch Box at me, but now that the CBI says that Labour’s economic policies would lead to weaker economic growth, he is in denial about that too.
John Pugh (Southport) (LD)
T2. What financial stress test will the Treasury impose before allowing the Department of Health to authorise general practitioner or clinical consortia?
Vernon Coaker (Gedling) (Lab)
T7. Does the Chancellor recall his statement to the House in October, when he said:“I completely understand the public’s anger that the banks…should now be contemplating paying high bonuses”?—[Official Report, 20 October 2010; Vol. 516, c. 955.]It is all very well being angry about that, but why do the banks continue to pay high bonuses to their high-ranking directors and why does he not do something about it? Why does he not repeat Labour’s bank bonus tax and reinvest the money in jobs, housing and many other things that the people of this country want?
Mr Osborne
Bank bonuses were higher when the hon. Gentleman was a Minister. There is complete amnesia among the Opposition about their having presided over the collapse of the British banking system and over bonuses that were billions of pounds higher in total than those being paid today, and they have no ideas about how to reform the banking system. The Chancellor who introduced the bank bonus tax to which the hon. Gentleman refers said that it would not work again. We have introduced a permanent bank levy which, I think, the Labour party continues to oppose.
Amber Rudd (Hastings and Rye) (Con)
T4. The economy of Hastings received a tremendous boost today when the Heritage Lottery Fund announced that it would support our bid for £8.7 million for the pier renewal but, sadly, seaside towns in general and we in Hastings suffer from bad transport links, high public sector employment and low wages. Will the Chancellor consider what can be done to support seaside towns under this Government?
Mr Osborne
I join my hon. Friend in celebrating the good news about the successful bid for the renovation of the pier. She is right to point out that there are specific issues associated with seaside towns across the country which are well known to the Members who represent them and well known also to the Government. We intend to come forward with proposals later this year to help those seaside towns.
Ian Mearns (Gateshead) (Lab)
T8. Household debt has been revised upwards by £300 billion, and my constituency, Gateshead, has one of the highest rates of personal insolvency in the country. What is the point of cutting the national debt, only to transfer the burden on to the personal finances of ordinary families? It is blindingly obvious that we are not all in this together—some of us are in this up to our necks.
Mr Osborne
I am afraid the hon. Gentleman misses two important facts. First, the most recent figures—within the past week—for personal insolvencies showed a welcome fall. Secondly, household debt reached a record level under the previous Government. As I said in response to the first question today, we are introducing a Financial Policy Committee to assess overall levels of private debt, including business debt, in the economy so that we do not allow dangerous unsustainable levels to grow. That will now be a judgment for the Financial Policy Committee and it will have the tools to do something about it.
Stephen Mosley (City of Chester) (Con)
T5. Can my right hon. Friend update the House on what discussions he has had about the likelihood of a further bail-out of the Greek economy and whether he has made any assessment of the UK’s likely contribution?
Mr Osborne
The answer is that we have not had discussions about a second Greek bail-out and we have not been asked to make a contribution. The question for Greece is whether it lives up to the commitments that it has entered into. There is currently an International Monetary Fund, European Commission and European Central Bank team in Athens assessing Greece’s progress against the plan that it committed to, and we should await the results of that assessment.
Stephen Timms (East Ham) (Lab)
A year ago the Office for Budget Responsibility was projecting growth in the UK economy of 2.6% this year. Now the forecast is down to 1.7%. What has gone wrong?
Mr Osborne
As I am sure the right hon. Gentleman knows, there are very significant global headwinds of the high oil—[Interruption.] I know that Labour Members live in a complete vacuum but, according to the most recent growth figures for this first quarter, the British economy posted a higher quarterly growth rate than the United States of America. Of course we have the high oil price and the ongoing problem in the eurozone, but what is required above all is a credible deficit reduction plan that keeps Britain out of the financial danger zone.
Oliver Colvile (Plymouth, Sutton and Devonport) (Con)
T6. Given that Plymouth is a low-skills, low- wage economy with 38% of the work force dependent on the public sector, can my right hon. Friend give me the timetable for the creation of enterprise zones? What role could green deal manufacturing play within that?
Mr Osborne
I know that my hon. Friend is a trenchant supporter of his constituency and a promoter of green industry there. He has raised the issue with me on a number of occasions. I know that Plymouth has put forward a bid for the second round of enterprise zones. An announcement will be made later this summer, in July, and I am afraid he will just have to wait until then, but as I say, he has certainly brought to my attention the potential for the green economy in the city that he represents.
Stewart Hosie (Dundee East) (SNP)
May I offer my condolences to the friends, family and colleagues of David Cairns? He was a man who always argued his corner with intelligence and humour, and carried the rare gift of being liked and respected across the Scottish political divide. We will all miss him.
I am sure the House is pleased that both Santander and RBS have access to European Investment Bank funds to issue discounted loans into the economy—£150 million in the case of Santander, and a third tranche of £300 million in the case of RBS. Can the Chancellor confirm that this is new, additional money, or will it be rolled into the gross lending figures already agreed?
Mr Osborne
Let me write to the hon. Gentleman on the specific issue of the Santander loan and the application to the European funds. I take this opportunity to congratulate the Scottish National party on its victory in the Scottish parliamentary elections and say that we respect their outcome. As he knows, my right hon. Friend the Prime Minister contacted the Scottish First Minister to congratulate him personally. I hope that we can work together in the next few months and years to deliver what we both want to see, which is jobs and prosperity in Scotland.
Joseph Johnson (Orpington) (Con)
T9. US Treasury Secretary, Timothy Geithner, recently praised the Government’s fiscal reduction plans, saying that the Chancellor had locked the coalition Government into a set of reforms that were “very good”. What lessons has he drawn from this powerful endorsement?
Mr Osborne
Of course it is welcome to have the support of the US Treasury Secretary. It is interesting that we have been urged for some months by Labour to follow the US example. The Obama Administration, in the speech the President gave at George Washington university, set out a deficit reduction plan—it is not yet legislated for in Congress—that goes faster and deeper than the one we are promoting here in the UK. I suspect that we will not now hear the argument that we have heard for the past few months from the Labour party.
Alison McGovern (Wirral South) (Lab)
May I associate myself with the remarks about our much-missed colleague David Cairns that you, Mr Speaker, and others have made?
Recent commentators have suggested that it is possible that the Government will not meet their target to balance the cyclically adjusted current budget by 2015-16, by the end of this Parliament. If it becomes clear that Tory cuts are not working to reduce the deficit, at what stage will the Chancellor change course?
Mr Osborne
I have just been told by my hon. Friend the Member for Chelsea and Fulham (Greg Hands) something about the hon. Lady that I did not know: she is the Parliamentary Private Secretary to the previous leader of the Labour party. It is presumably not a job with onerous responsibilities, but it sounds as though he may have written that question for her. The Office for Budget Responsibility is the independent body that assesses our ability to hit the fiscal mandate. The reason we set it up was because under the stewardship of the person to whom she is PPS all credibility for Treasury figures was lost.
Mrs Helen Grant (Maidstone and The Weald) (Con)
Only 14% of small businesses are owned by women. What action will the Chancellor take to improve this figure?
Mr Osborne
It is incredibly important to try to increase the number of women who set up their own businesses. The Government have undertaken a number of specific initiatives, driven from No. 10 Downing street, and I will ensure that my hon. Friend is closely involved in them.
Mr Chuka Umunna (Streatham) (Lab)
Yesterday, in a welcome move, the British banking industry abandoned its legal fight with the Financial Services Authority over the mis-selling of payment protection insurance. Does the Chancellor agree that this scandal, as a result of which millions of people in this country were fleeced by the banking sector on a large scale, was an absolute disgrace and that the banks involved should settle the claims that arise, immediately and without further delay?
Bill Esterson (Sefton Central) (Lab)
The Chancellor did not answer the question from my hon. Friend the Member for Gedling (Vernon Coaker), so I would like to give the right hon. Gentleman another chance. Will he repeat the bank bonus tax that was so successful last year and use that money to build the extra affordable homes, to rent and to buy, which are desperately needed by people in this country and by the construction industry, and which would be good for the economy?
Mr Osborne
As I was explaining to the hon. Member for Gedling (Vernon Coaker), the bank bonus tax was introduced by the previous Chancellor of the Exchequer, and it was his judgment that it would not work for another year because the banks would find a way of avoiding it. That is why we introduced a permanent bank levy not just for one year, but for each and every year. In any one year it raises more than the bank bonus tax net, so that is what we have done. It is pretty striking: Labour Members had 13 years in government to introduce a permanent bank tax; they did not do so, and they cannot carp from the sidelines now.
Charlie Elphicke (Dover) (Con)
If our gold had not been sold off some years ago, how much would it be worth today?
Mr Osborne
The gold was sold, I think on the advice of the current shadow Chancellor, at $3.5 billion—a princely sum, except that it would now be worth $19 billion.