George Osborne
Main Page: George Osborne (Conservative - Tatton)Department Debates - View all George Osborne's debates with the HM Treasury
(12 years ago)
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Mr Edward Leigh (Gainsborough) (Con)
1. What plans he has for future private finance initiatives.
The Chancellor of the Exchequer (Mr George Osborne)
Last week, the Government announced the details of a new approach to replace the private finance initiative with private finance initiative 2, which is a more transparent approach to securing investment in public infrastructure. The Government will become a shareholder in future projects. We can all see now that the public sector was sharing the risk under PFI. We will now ensure that we also share in the rewards.
Mr Leigh
I looked at PFI for nine years on the Public Accounts Committee. I am sure people will agree that it was a good system that was scandalously misused to rip off tomorrow’s taxpayers for the sake of today and to rip off the public sector in favour of the private sector. How can the Chancellor assure the House that, if he is to use PFI 2 to pay for large infrastructure projects, we will not repeat the mistakes of the past?
Mr Osborne
I sat on the PAC under my hon. Friend’s chairmanship and I remember our investigations into various hospital and prison schemes that had gone wrong. As we saw it, there were three problems. First, contracts were very inflexible, so it cost a huge amount to do things such as change light bulbs or clean hospitals and the like. Secondly, the private sector got all the upside of the projects and made more money than expected. Thirdly, there was no control on the overall off-balance sheet total. We are addressing all three: we are creating more flexible and transparent contracts; we will share in the upside by taking a public sector stake and having the public sector on the board; and at the Budget we will set out a control total for PFI 2 liabilities.
Helen Goodman (Bishop Auckland) (Lab)
The Chancellor says that things are getting better, but Essex county council has issued a social impact bond on which it proposes to pay 12%—six times the price of gilts—and the Government are putting £20 million into subsidising this financing. Why are the Government wasting money like that at a time of austerity?
Mr Osborne
I think that most people in the House—I thought this was the case in all parties—welcome the innovative work being done on social financing and social impact bonds. Sir Ronald Cohen is one of the leading advocates of this and has been advising the Government. It is all about trying to get new forms of financing into improving our society. I would have hoped she would have welcomed that, rather than criticising it.
Mr Andrew Tyrie (Chichester) (Con)
Many on the Treasury Select Committee are already concerned that Whitehall Departments might again find themselves addicted to the “get something now, pay later” culture that bedevilled PFI the first time round. What is also concerning us is that a number of the proposals set out by the Government—I refer, in particular, to page 13 of the document produced—look more like motherhood and apple pie than something substantive enough to offset that Whitehall pressure. Will the Chancellor assure the House that, excluding value-for-money considerations, all accounting incentives to remove PFI from balance sheets will now be closed off to Departments?
Mr Osborne
I say to the Chair of the Treasury Select Committee that we will set out at the Budget—of course, he will want to scrutinise this carefully—a new control total for the off-balance sheet liabilities of PFI. We already now publish the whole-of-Government accounts so that people can see the liabilities built up under the previous Administration. The country now has more than £280 billion of PFI debt, of which only £40 billion has been paid off, so he is absolutely right to hold our feet to the fire to ensure that we properly account for this and remove perverse incentives in Whitehall. We want the private sector investing with us in public services, however, so it is important that we have the right regime.
Mr Geoffrey Robinson (Coventry North West) (Lab)
The House will be pleased that the Chancellor is not trying to get rid of PFI, but trying to improve it in those areas where it can be improved. What does he mean, however, when he says that the Government will take a stake in the projects? How will he do that? It will need more than a director on the board, which I heard him say.
Mr Osborne
We propose to take a public sector share and put in an equity stake on behalf of the public sector. It will be a minority stake, but it means that we will share in the upside, and, of course, in order to keep an eye on our investment, we will have a director on the board representing the public sector, which was not the case in previous projects.
Tim Farron (Westmorland and Lonsdale) (LD)
Cumbria’s health service is under immense pressure because of PFI deals going back a decade and more. What can the Chancellor do to go toe-to-toe with the private sector to renegotiate existing PFI deals to ensure that more money goes to front-line health services?
Mr Osborne
We are seeking to renegotiate existing contracts to get better value for money for taxpayers and local communities. I have a figure here showing that in north Cumbria the public were being charged £466 to replace a light fitting under the PFI contract that was signed. That is completely unacceptable—it is people being ripped off. That is what we are seeking to end.
Mr John Baron (Basildon and Billericay) (Con)
2. What steps he is taking to support business creation.
Richard Graham (Gloucester) (Con)
9. What steps he is taking to encourage private sector job creation.
The Chancellor of the Exchequer (Mr George Osborne)
Some 1.2 million private sector jobs have been created since the first quarter of 2010. Last year more new businesses were created than in any other year on record. In the autumn statement we took further steps to support job creation and business creation by reducing the corporation tax rate to 21%, extending the small business rate relief scheme to support 500,000 small businesses and increasing by tenfold the annual investment allowance to £250,000.
Mr Baron
The Labour Government more than doubled the national debt. This Government have done well to reduce the deficit by 25%, but this still means that we are adding to our debt, albeit at three quarters the pace. Financial repression and quantitative easing will ease the debt somewhat through higher inflation, but may I encourage the Chancellor, despite some positive measures in the autumn statement, to be bolder in encouraging economic growth, including by cutting small business corporation tax, which is the only credible way—
Mr Osborne
My hon. Friend is right that the deficit is how much we add to the debt each year. That is why we have to bring the deficit down—it has come down by 25%—but he is also right that we have to have a competitive private sector. We have to have a private sector-led recovery, which is why we have increased the annual investment allowance, for example. He recommends a cut in the small company corporation tax rate. [Interruption.] The shadow Chancellor from a sedentary position said, “That’d be a good idea,” but he was going to put the rate up when we came into office. We have cut the rate to 20% and increased the annual investment allowance.
Chris Skidmore
Does the Chancellor agree that increasing the annual investment allowance from £25,000 to £250,000 will make a huge difference to local small businesses and lead to additional and vital job creation in the private sector?
Mr Osborne
I think it will help, alongside the reduction in the small company rate. I am pleased that the Federation of Small Businesses said we had listened to the concerns of members, and the chambers of commerce were also supportive. Over the next two years this measure will encourage investment from small and medium-sized businesses, although all businesses that invest will benefit.
Andrew Jones
As someone who has set up small businesses myself, I think that encouraging small business creation is part of the solution to the country’s economic problems. Does my right hon. Friend agree that it is a sign of the strength of the private sector in this country that we have seen new businesses created in such record numbers and that this has been one of the factors in generating the 1 million-plus private sector jobs created since the election?
Mr Osborne
It is welcome that more than 1 million jobs have been created in the private sector. We now have record female employment, which is also welcome, while the number of those on out-of-work benefits has fallen by 190,000, which is something I hope everyone would welcome.
Mr Pat McFadden (Wolverhampton South East) (Lab)
May I congratulate the Chancellor on his U-turn on capital allowances for manufacturing industry? When did he realise that his previous stance of dismissing them as complex reliefs was wrong and at total variance with the Government’s stated aim of supporting manufacturing? When did his conversion to supporting these allowances take place, as long called for by Labour Members and the Engineering Employers Federation?
Mr Osborne
The first thing I would say is that we reduced the small companies rate—which would have gone up to 22% under the plans put in place by the last Labour Budget—to 20%. We have now introduced a £250,000 annual investment allowance for small and medium-sized businesses for the next two years. The right hon. Gentleman says that the Labour party had been calling for this. It had 13 years to introduce a £250,000 annual investment allowance. There were all those Budgets that the shadow Chancellor wrote and he did not put it in place.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
The Chancellor will know that the all-party parliamentary groups on Yorkshire and North Lincolnshire and on manufacturing welcome the change in attitude towards the capital allowances. However, businesses in Yorkshire are saying that they are looking for some leadership and some light at the end of the tunnel, and they ended up feeling thoroughly depressed after watching the autumn statement. When is the Chancellor going to show more leadership? Let us see some light at the end of the tunnel.
Mr Osborne
I have to say that the reaction to the autumn statement from the business organisations of Britain was very positive. It was warmly welcomed because we are maintaining control of the public finances, which is a prerequisite for stability and recovery, and because we are taking steps to cut the corporation tax rate and increase the annual investment allowances. I still do not know whether Labour supports the cut in corporation tax. Its Front Benchers have been sending out confused messages on that over the past couple of days. Perhaps we will hear from the shadow Chancellor when he gets to his feet.
Rachel Reeves (Leeds West) (Lab)
The Chancellor knows that business success is key to getting our economy growing, to getting the deficit down and to creating jobs. Will he therefore tell us what was the judgment of the Office for Budget Responsibility on the impact on growth of the measures that he announced in the autumn statement last week?
Mr Osborne
The Office for Budget Responsibility said that there was a measurable impact on growth in the short term, and of course we have to pay for this in the long term, so it has taken that into account. I have always said that we want to improve the long-term supply potential of the British economy, and one of the most encouraging signs is that the UK, which was becoming a less and less competitive place to do business, is now back in the world’s top 10 competitive economies.
Rachel Reeves
I am not surprised that the Chancellor does not want to answer my question, because the OBR’s assessment is that his measures will add just 0.1% to UK gross domestic product by 2018. That must also be set against the fact that growth has been downgraded this year, next year and every year of this Parliament. Is it not the truth that the Chancellor has no plans for jobs and growth, and that that is why the Government are set to borrow an extra £212 billion during the course of this Parliament, breaking the fiscal rules that he gave to this country?
Mr Osborne
When the Labour party was in office, its approach led to the economy shrinking by 6% of GDP. We have set in place plans to ensure that the deficit it left us is dealt with and that our economy is more competitive. I would have thought that the hon. Lady would welcome the fact that we have over 1 million new jobs in the economy and a record rate of small business creation. That is something to celebrate in our economy.
Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)
May I welcome the Government’s announcement in the autumn statement to put more resources into ensuring that multinationals pay their fair share of tax? That is a key measure to help UK-based business creation. May I also suggest that the Chancellor consider introducing a requirement on multinationals to disclose in advance significant connected party transactions as a way of speeding up transfer pricing inquiries?
Mr Osborne
My hon. Friend makes a good point. Obviously, everyone is frustrated when they see multinational companies breaking the tax laws or interpreting them in such a way that they basically avoid paying corporation tax. That situation is not acceptable. We are putting more money into the enforcement of the rules and working with countries such as France and Germany to change the international rules so that we can have a better situation in the future. It would not work if we just acted unilaterally, because these are by definition multinationals. That is why we have to work with other countries.
Yvonne Fovargue (Makerfield) (Lab)
4. What recent assessment he has made of the effect of the Government’s fiscal policies on the level of child poverty.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
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 and prosperity of the economy. I can announce today that Budget 2013 will be on Wednesday 20 March.
Michael Connarty
I thank the Chancellor for probably the most complete answer he has given today, at a time when every city in our countries has food kitchens feeding the poor and in London people are queuing up to get second-hand reject food from stores and Pret A Manger. I know that the Chancellor borrowed £425 million from the good causes fund of the lottery for the Olympics, and the National Audit Office has said there is an estimated £377 million profit from the Olympics. Could he now return that to the good causes so they can give it to the charities looking after the poor in our country, which he clearly is not?
Mr Osborne
It is a credit to those who delivered the Olympic games that they came in under budget. The Olympic underspend is money which, if we spent it, would add straight to the deficit. It is not a pot of money sitting in some Government bank account. That would be a difficult decision to take and would have to be balanced alongside other decisions, but I make a broader point: we are trying to sort out the economic problems that this Government inherited. The problems that the hon. Gentleman talks about are problems caused by the deepest recession and the biggest financial crisis of the 21st century, and perhaps one day a Labour MP will get up and apologise for it.
Geoffrey Clifton-Brown (The Cotswolds) (Con)
T6. As somebody who has had a long interest in exempting some of the poorest people in this country from tax—incidentally, an idea I held long before the Liberals pinched it from me—I congratulate my right hon. Friend on almost achieving this target in his autumn statement. When economic circumstances allow, could he be even bolder?
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”?
Mr Speaker
Order. May I gently explain to the hon. Gentleman two things? First, topical questions are supposed to be brief, and secondly, they are supposed to relate to the policy of the current Government, not that of the previous one. A short one-sentence reply will, I am sure, suffice—no?
Mr Osborne
Will you allow me, Mr Speaker, to spend a little time on this? We put down a written statement at half-past 11 today because of an error originating in 2008, when Northern Rock was in public ownership. Some customers with certain types of mainly unsecured loans were not given all the mandatory information in their statements to which they were entitled by law. As a result, interest payments on these loans are not legally enforceable. UK Asset Resolution, which manages Northern Rock—[Interruption.] Can I just make this point? One hundred and fifty—[Interruption.]
Mr Speaker
Order. I do not require any help from the hon. Gentleman; he should concentrate on the pursuit of his own duties to the best of his ability. I would say to the Chancellor that if the written ministerial statement has been made it is not entirely obvious to me why we need its terms to be repeated before the Chamber. [Interruption.] Order. I will use my discretion. The right hon. Gentleman can have a few seconds more, but then I really must proceed with topical questions, for which allowance will have to be made.
Mr Osborne
Mr Speaker, 152,000 customers have been affected. These are people with loans of less than £25,000. The cost to UK Asset Resolution is estimated at £270 million. UK Asset Resolution has ordered a full inquiry into what happened in 2008, and we will come to the House with more information when we have it. I wanted to bring this news to the House at the very first opportunity, and I find it pretty extraordinary that the Opposition do not want the public to hear it.
Teresa Pearce (Erith and Thamesmead) (Lab)
T7. New research from Which?—[Interruption.]
Nick Smith (Blaenau Gwent) (Lab)
T10. Eleven jobseekers are chasing every vacancy in Blaenau Gwent. Does the Chancellor think that the Work programme will prove to be good value for money?
Mr Osborne
Yes, I do, and the CBI has welcomed it. I hope that the hon. Gentleman welcomes the fact that we have record employment in our country—a record number of women are working—and that youth unemployment has fallen recently as well.
Alun Cairns (Vale of Glamorgan) (Con)
Benefits have increased at twice the rate of earnings since the onset of the financial crisis. Could the Chancellor reassure me that, in spite of criticisms from those on the Opposition Benches, he will not veer from the 1% commitment that he made last week?
Mr Osborne
My hon. Friend has that reassurance. We have discovered an extraordinary thing today, namely that Labour will vote against yet another measure to deal with the deficit. Labour would have a higher benefits bill as a result of that decision and it will have to explain that to the hard-working people of this country.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
I listened carefully to the Chancellor’s answer to the question asked by my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty) about food poverty, but he did not actually answer it. Is he ashamed that, under his watch, by the end of this year a quarter of a million people across the country will have accessed emergency food aid?
Mr Osborne
We are dealing with the economic mess that the previous Government left behind, when unemployment rose, the economy shrank by 6% and people were put into poverty. That is the cause of these problems and Government Members are dealing with them and clearing up the mess that that man—the right hon. Member for Morley and Outwood (Ed Balls)—left behind.