ECOFIN

George Osborne Excerpts

Tuesday 16th December 2014 Written Statements

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

A meeting of the Economic and Financial Affairs Council was held in Brussels on 9 December 2014. Ministers discussed the following items:

Financial transactions tax

The presidency provided a state of play update on the financial transactions tax, outlining work which will be taken forward under the next presidency. The UK is not taking part.

Current legislative proposals

The presidency provided an update on the status of current legislative files.

Single resolution mechanism—single resolution fund contributions

The presidency presented ECOFIN with an amended proposal for an implementing act specifying how contributions to the single resolution fund should be calculated.

Measures in support of investment

Ministers discussed measures to support investment ahead of discussion at December European Council.

Review of the Europe 2020 strategy

The Council held a follow-up discussion on the Europe 2020 review ahead of General Affairs Council.

Economic governance

Ahead of discussion at December European Council, the Commission presented a suite of documents, including the annual growth survey 2015, the alert mechanism report 2015 and a communication on the six-pack and two-pack review. Ministers then held an exchange of views on these items.

Annual report of the Court of Auditors on budget implementation

The President of the European Court of Auditors presented the Court’s annual report on the implementation of the budget for the financial year 2013.

Code of conduct—business taxation

The Council endorsed the report on the progress of the code of conduct group during the Italian presidency.

Letter by Finance Ministers Sapin, Schaeuble and Padoan to Commissioner Moscovici

Ministers received an update on a letter from France, Germany and Italy to Commissioner Moscovici outlining views on ways forward to tackle tax avoidance.

Charter for Budget Responsibility

George Osborne Excerpts

Monday 15th December 2014 Written Statements

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

Today the Chief Secretary to the Treasury (Danny Alexander) and I have published and laid before Parliament an updated Charter for Budget Responsibility. This charter must be approved by the House of Commons before it is brought into force. A debate and vote on the charter will be scheduled in the House of Commons for early in the New Year.

The Charter for Budget Responsibility sets out the Government’s approach to operating fiscal policy transparently and managing sustainable public finances in the long-term interests of the UK. The purpose of the charter is to improve the transparency of the Government’s fiscal policy framework. It sets out the Government’s commitment to managing fiscal policy in accordance with clear objectives and targets.

The autumn statement 2014 update of the Charter for Budget Responsibility presents a revised fiscal framework, following a review by the Government.

The existing fiscal mandate, set in 2010, reflected the exceptional fiscal challenge the Government faced. In 2010 the Government said that they would revisit the fiscal rules once the public finances were closer to balance. Since then, the Government have made significant progress on their fiscal consolidation.

Public sector net borrowing as a percentage of GDP has fallen by more than a third since 2009-10 and is forecast to have fallen by half by the end of 2014-15. The Government are forecast to meet their fiscal mandate two years early in 2017-18, having reduced the cyclically adjusted current Budget deficit from its peak of 4.7% of GDP in 2009-10 to 2.6% of GDP in 2013-14. On the OBR’s central forecast, the cyclically adjusted current Budget will be in surplus by 0.7% of GDP in 2017-18.

In this context the horizon on the fiscal mandate can safely be shortened to create a tighter constraint on future fiscal policy choices. The new framework presented today sets a three-year rolling horizon. At Budget 2015, therefore, the target year for the fiscal mandate will be 2017-18.

Both parties in the coalition Government are committed to reducing public sector net debt (PSND) as a percentage of GDP. The OBR forecast that PSND will peak in 2015-16 at 81.1% of GDP, a year later than the current supplementary debt target. The revised Charter for Budget Responsibility sets a new supplementary target for debt to be falling as a percentage of GDP in 2016-17.

Meeting the fiscal mandate and putting debt on declining path will require further difficult decisions to be made by Government. The Government have set out detailed spending plans for 2015-16. Choices will need to be made about the composition of further consolidation beyond 2015-16. In order to meet the fiscal mandate and supplementary debt target set out in the updated charter the Government estimate that on current forecasts around £30 billion of discretionary consolidation is likely to be required over the following two years 2016-17 and 2017-18.

ECOFIN

George Osborne Excerpts

Tuesday 9th December 2014 Written Statements

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

A meeting of the Economic and Financial Affairs Council will be held in Brussels on 9 December 2014. Ministers will discuss the following items:

Financial transactions tax

The presidency will present a short state of play update on this file, both in light of work carried out during its semester and work which will be taken forward under the next presidency.

Current legislative proposals

The presidency will provide an update on the status of current legislative files.

Single resolution mechanism—single resolution fund contributions

The presidency will seek political agreement on a proposed regulation regarding ex ante contribution by participants to the single resolution fund.

Measures in support of investment

Ministers will discuss measures to support investment ahead of discussion at December European Council.

Review of the Europe 2020 strategy

The Council will hold a follow-up discussion on the Europe 2020 review ahead of General Affairs Council in December.

Economic governance

Ahead of discussion at December European Council the Commission will present a suite of documents, including the annual growth survey 2015, the alert mechanism report 2015 and a communication on the six-pack and two-pack review. Ministers will then hold an exchange of views on these items.

Annual report of the Court of Auditors on budget implementation

The President of the European Court of Auditors will present the court’s annual report on the implementation of the budget for the financial year 2013.

Code of conduct (business taxation)

The Council will be invited to endorse the report on the progress of the code of conduct group during the Italian presidency, and to adopt accompanying Council conclusions.

Letter by Finance Ministers Sapin, Schaeuble and Padoan to Commissioner Moscovici

The presidency will provide information on a letter from France, Germany and Italy to Commissioner Moscovici outlining views on ways forward to tackle tax avoidance.

Autumn Statement

George Osborne Excerpts

Wednesday 3rd December 2014 Commons Chamber

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

Four years ago, in the first autumn statement of this Parliament, I presented the accounts of an economy in crisis. Today, in the last autumn statement of this Parliament, I present a forecast which shows that the United Kingdom is the fastest growing major economy in the world. Back then, Britain was on the brink. Today, against a difficult global backdrop, I can report higher growth, lower unemployment, falling inflation, and a deficit that is falling too. Today, the deficit is half what we inherited. Our long-term economic plan is working.

Now, Britain faces a choice. Do we squander the economic security that we have gained, and go back to the disastrous decisions on spending, borrowing and welfare that got us into this mess, or do we finish the job, and go on building the secure economy that works for everyone? I say: we stay the course. We stay on course for prosperity.

Today, we do not shy away from the problems that remain unresolved in the British economy. Although the deficit is falling, it remains too high, so the measures that I announce today are not a net giveaway, but actually tighten the public finances a little. I could have eased up on our determination to deal with our debts; I have not.

Although business investment is rising strongly, we know that there is still much more to do on productivity, so today we boost our skills, our exports, our science and our infrastructure. Although employment is at a record high, we must never give up on the task of finding work for all young people, so today we move further towards full employment by supporting the businesses that create jobs and apprenticeships. For decades our economy has been too unbalanced, so we do more now to build the northern powerhouse. And today we back aspiration—the aspiration to save, to work, and to own your own home—in stark contrast to those who would hit people’s pensions and jobs and homes with higher taxes, for that is an approach that we entirely reject. Instead, we support people who want to work hard and get on, and it is for their sakes that we resolve to stay on course for prosperity.

I now turn to the report from the Office for Budget Responsibility. Let me again thank Robert Chote and his team for their hard work, and for restoring integrity and independence to our country’s economic forecasts.

Since the Budget, new international statistical standards have changed the assessment of the British economy in recent years. We now know that, contrary to claims that were made at the time, there was no recession in this Parliament, and no double dip. Indeed, the only recession was the great recession under the last Labour Government. We also know that the economy has grown faster than previously reported. It is up by more than 8% over the current Parliament: that is the third fastest growth in any major advanced economy since 2010. We know, too, that growth has been more balanced. We were told that business investment had risen by 4% over this Parliament; in fact, it has risen by 27%.

That is what we know about the recent past. Let us turn to the future. The warning lights are flashing over the global economy. Japan is in recession, the eurozone is stagnating, and the geopolitical risks are rising. I can tell the House that the OBR has therefore revised down its forecast for global growth this year and in every year. It notes that the slowdown is particularly acute in our main export markets, such as Europe, where growth is a full 1% lower this year than previously forecast. It makes it even more imperative that we connect British firms to the faster growing emerging economies of Africa, Asia and south America. Today I am providing a £45 million package to do that and to provide new support to first-time exporters.

As one of the most open trading economies in the world, with a large financial sector, Britain cannot be immune to the risks in the global economy, but nor are we powerless—provided we go on working through our plan to put our own house in order.

That brings me to today’s forecast. In the Budget, I reported that the OBR had revised up its forecasts for growth this year. A year ago, we expected GDP to grow by 2.4%. In March we expected 2.7%. Today, the British economy is forecast to grow by 3%. Over the last year we have grown two and half times faster than Germany; over three times faster than the eurozone; and over seven times faster than France. I think we can safely reject the advice of those in this House who told us on the steps of the Élysée palace that we should be doing to Britain what has been done to France.

Growth in the UK next year is also forecast a little higher at 2.4%, with quarterly growth moderating as it returns to trend, then 2.2% in 2016, 2.4% the year after, then 2.3% in 2018 and 2019, and the growth we are now seeing is more balanced. Manufacturing is growing faster than any other sector, and investment is set to be up 11% this year—growing faster in the UK than in any other major advanced economy.

This balanced growth is creating jobs, too, with a record number in work. At the Budget, the OBR expected that over the last year employment would rise by 265,000. Today, I can tell the House that it doubles that number. Over the last year, half a million new jobs have been created. In March, it forecast that in the first three quarters of the year the number claiming unemployment benefit would fall by 7%. Today, it says that it actually fell by 23%. The number of young people on long-term unemployment benefit has almost halved in the last year alone. Unemployment is revised down in every single year of the OBR forecast, falling from the 8% we inherited to 5.4% next year, before settling at 5.3%.

On average, for every day this Government have been in office, 1,000 new jobs have been created, 1,000 new opportunities for people, new economic security for 1,000 families every single day. Britain’s long-term economic plan is working.

In response to the caricature that some like to draw—that these jobs are being created only in London, that they are part time with women losing out—I say, look at the facts. How many of the jobs being created are full-time? Eighty-five per cent. Where are the jobs being created fastest right now? In Scotland and in the north of England. What is happening to the gender pay gap? It has just fallen to its lowest level in the entire history of this country. That is progressive politics in action.

Regular earnings growth is now faster than inflation. For those in full-time work for over a year, earnings grew 4% over the last year. The compositional effect of many more people finding work, particularly young people, is weighing down on overall average earnings, but the OBR today predicts that “meaningful real wage growth” will pick up through next year and grow above inflation for the next five years. Indeed, I can tell the House that GDP per capita has grown faster on average in this Parliament than over the last two Parliaments combined.

Living standards are also supported by our robust monetary policy arrangements with the Bank of England. Today, there is welcome news that the OBR has significantly revised down its forecast for inflation: it is expected to be down to 1.5% this year, 1.2% next year and 1.7% the year after, before it returns to target. So we have lower inflation, lower unemployment and higher growth.

That brings me to the forecasts for debt and deficit. There are those in this House who have been predicting from the Opposition Dispatch Box in recent weeks that I would have to announce today that the deficit was rising and that borrowing this year would be higher than last year. We discover today—I am afraid not for the first time—that their predictions are wrong: the deficit is falling this year and every year, and, not only that, but in the final four years of the forecast, borrowing is actually lower than predicted in the Budget. [Interruption.] The Office for National Statistics has made revisions to the way the national accounts are measured—[Interruption.]—and one of the advantages of having created an independent OBR is that it has ensured that the figures presented today are comparable on a like-for-like basis with the forecast made in the Budget. [Interruption.] On this revised basis, the forecast at the Budget would have shown borrowing falling from the £150 billion we inherited to £99.3 billion last year, £86.4 billion this year, £68.3 billion next year, then £41.5 billion, £15.8 billion, and then a small surplus of £3.7 billion in 2018-19. [Interruption.] That is the Budget forecast. [Interruption.] Today’s forecast shows borrowing falling from £97.5 billion last year to £91.3 billion this year, then £75.9 billion next year, then £40.9 billion, £14.5 billion, and then a surplus of £4 billion in 2018-19. So borrowing falls every year. It falls slightly less than expected in the first two years, but then falls slightly more than expected in the four years after that. [Interruption.] We end in a marginally stronger position than expected at the Budget, and I can tell the House that by 2019-20 Britain is now predicted to have a —[Interruption.]

[Mr Speaker]

Order. There is now excessive noise in the Chamber. The Chancellor should not have to shout in order to make himself heard, and to some degree he is having to do so at the moment, and that is not right. The House knows the track record: I facilitate the fullest possible questioning of the Chancellor—always have done, always will do—but colleagues must, please, give the Chancellor his head.

[Mr Osborne]

I can tell the House that by 2019-20 Britain is now predicted to have a surplus of £23 billion—out of the red and into the black for the first time in a generation, a country that inspires confidence around the world because it seeks to live within its means.

As a percentage of GDP, today the deficit is also forecast to fall this year, down by 0.6% of GDP—down from what the OBR describes today in its own report as

“the post-war record deficit of 10.2% of GDP”

in 2009-10 to 5% this year. The deficit is no longer down by a third, but is now cut in half. It is still too high, but with our plan it falls again to 4% next year, then 2.1%, then 0.7% before we move into surpluses of 0.2% and 1% of GDP. The structural deficit also falls and moves into surplus at the same pace over the next five years, as forecast at the Budget.

We continue to meet the debt mandate a year late and the fiscal mandate two years early. Again, because of the statistical revisions and the reclassification of Network Rail—given that Labour tried to put it off balance sheet—the OBR has given us a like-for-like comparison on debt as a share of GDP. On the new basis, it is 80.4% this year, next year it peaks at 81.1% —half a per cent. lower than previously forecast at the Budget—and it is then lower in every subsequent year, at 80.7% in 2016-17, 78.8% the year after, then 76.2%, before reaching 72.8% in 2019-20. Again, this is less than was forecast at the Budget.

Borrowing is falling. The deficit is down this year to half what we inherited. Debt is falling in the same year predicted, and lower in every year thereafter. There will be a surplus that is higher and by the end of the period worth £23 billion. Britain is back living within its means. Our long-term economic plan is on course.

The House will want to know why the public finance numbers are much better than some were predicting, even though tax receipts have deteriorated. The answer is that we cannot look at taxes alone; we have to look at spending, too. As has been widely reported, tax receipts have not been rising as quickly as the OBR had previously predicted. The OBR now forecasts that revenues will be £23 billion lower by 2017-18. However, that is more than offset by three things. First, we are paying less in welfare and saving money on public service pensions because of lower inflation and more people being in work. That saves £4 billion a year.

Secondly, the revisions to our national accounts have slightly increased the measured rate of spending cuts in this Parliament. We have a choice: we can ease up, or we can continue with our plans. Our policy of continuing the spending cuts in the first two full years of the next Parliament, at the same pace as we achieved in this Parliament, now produces £4 billion less spending. Thirdly, and crucially, the interest we pay on our national debt is £16 billion lower in that year. That is, by a large margin, the biggest saving and demonstrates the value of our fiscal credibility around the world. Some have pointed to lower tax receipts and put forward policies for higher taxes. I prefer lower tax receipts offset by lower debt interest payments, and that is what we are seeing today.

I do not hide from the House that in the coming years there are going to have to be very substantial savings in public spending. Next week we will publish a new charter for budget responsibility that will reinforce our commitment to finish the job in the next Parliament, and we will ask the House to vote on it in the new year. However, no charter, valuable as it is, can be a substitute for the hard work of identifying real savings in the cost of government and delivering them in practice. That is what we have done in this Parliament, and it is what we will have to do in the next.

The work starts with our spending plans for 2015-16, which save £13.6 billion. We have published the detailed and specific departmental proposals that will achieve them. There will be two further years where decisions on this scale will be required and, as I have said before, we are going to have to go on controlling spending after those years if we want to have a surplus and keep it. Of course, people are already saying it will be impossible to achieve those levels of savings. We heard exactly the same thing in 2010, often from exactly the same people. In fact, we have come in under budget every year of this Parliament. This year I can confirm that we will be spending £10 billion less than set out in our original spending plans.

There are those who say we should cut even faster, and those who say we should cut more slowly. But we have got the pace right, as is clearly demonstrated by the fact that our economy is growing faster than almost any other. And because of careful management, we can afford to put part of that underspend money into our national health service to cope with the pressures it faces: £2 billion every year to the front line of the NHS—not money that busts our plans, but extra money that is available because we have a plan.

Instead of returning the foreign exchange fines paid by the banks to the City, as happened under the previous Government, we are using that windfall for a £1.2 billion investment in GP services across the UK. That is a down-payment on the NHS’s own plan, proving definitively for anyone in any doubt that we cannot have a strong NHS without a strong economy. I can also tell the House that we will help with the employment of carers, who do so much, by extending the £2,000 employment allowance to include them.

We have shown in this Parliament that we can deliver spending reductions without damaging front-line public services if we are prepared to undertake reform. Crime is down. Satisfaction with local government services is up. Savings and reform—and we will do exactly the same again. Continuing to reduce departmental spending in the first two years of the next Parliament would mean at least £15 billion off Whitehall budgets. Our control of public sector pay in the past four years has delivered £12 billion of savings. By continuing to restrain public sector pay, we expect to deliver commensurate savings in the next Parliament until we have dealt with the deficit. Today I can confirm that we are committing to complete the public service pension reforms proposed by Lord Hutton, bringing total savings of £1.3 billion a year. Administration costs in Whitehall are already down 40% over this Parliament. Today, the Minister for the Cabinet Office and Paymaster General, my right hon. Friend the Member for Horsham (Mr Maude), is publishing a plan for a further £10 billion of efficiencies.

I am also confident that in the next Parliament we can continue to crack down on tax avoidance and evasion, and aggressive tax planning. Doing so at the same rate as in this Parliament would raise at least another £5 billion, and today I commit to delivering that. Then there is the new welfare cap that we have introduced to control the one sixth of public spending that was subject to absolutely no control at all. The OBR today reports that

“the Government is on track to meet the welfare cap commitment”.

Today we undertake further steps to control benefit spending by freezing universal credit work allowances for a further year, cutting tax credits when overpayments are certain, and ending unemployment benefits for migrants with no prospect of work. Total welfare spending is now set to be £1 billion a year lower than forecast at the Budget and it will go on falling as a share of our GDP. And, as I have made clear, I believe that we need to freeze working-age benefits for two years, saving billions more.

Decisions to control public spending are never easy, but the impact on people’s lives when economic stability is lost is far, far greater. I have always believed that we should be straight about what is required to restore stability and what is required to stay on course. Our task is made easier by the deal we secured for this country when we got the European Union budget cut. Some people claimed that our payments to the European Union would go up this year. Instead, I can confirm that the OBR’s forecast today shows Britain’s net payments to the EU falling by around £1 billion for this year and next year, and falling in real terms over the next five years. That is the dividend we receive thanks to a Prime Minister who fights hard for our national financial interest in Brussels.

Another bill that has gone down is the cost of our overseas military operations. The end of our operations in Afghanistan allows us to save an additional £200 million this year from the special military reserve. I join the rest of the House in saluting the brave men and women of our armed services who for more than a decade have risked their lives for our security in Iraq and Afghanistan. Even as we speak, they are tackling the horrific Ebola virus in west Africa, a fight that reminds us all of the value of Britain’s commitment to 0.7% in development aid. Today I am extending our inheritance tax exemption to cover our aid workers who lose their lives in dealing with humanitarian emergencies. LIBOR fines will continue to support our military and emergency service charities with support for our armed services benevolent charities and the Gurkhas and £10 million for veterans with hearing problems. We will ensure that the first world war continues to be properly commemorated, and this morning I have announced we will repay the entire outstanding national debt incurred to fight the first world war.

We will extend the cathedral renovation fund to cover repairs to our country’s churches. Thanks to the brilliant campaigns run by my hon. Friends the Members for Filton and Bradley Stoke (Jack Lopresti) and for Bristol North West (Charlotte Leslie) and others, we will use the LIBOR money for new helicopters for the Great Western air ambulance, and the Kent, Surrey and Sussex air ambulance, too. I will go further and refund VAT for our search and rescue and air ambulance organisations across the UK. Our hospice charities also make an enormous contribution to our communities. They have long been subject to unfair rules that force them to pay VAT, when the NHS does not. I am today refunding the VAT that these hospice charities incur.

I turn now from those who have paid too much tax to some of those who have paid too little. First, we will make sure that big multinational businesses pay their fair share. Some of the largest companies in the world, including those in the tech sector, use elaborate structures to avoid paying taxes. Today, I am introducing a 25% tax on profits generated by multinationals from economic activity here in the UK which they then artificially shift out of the country; that is not fair to other British firms and it is not fair to the British people either—today, we are putting a stop to it. My message is consistent and clear: low taxes; but low taxes that will be paid. Britain has led the world on this agenda and we do so again today. This new diverted profits tax will raise more than £1 billion over the next five years.

Secondly, I am taking action today to make sure that our banks pay their fair share, too. Under the rules we inherited, banks can offset all their losses from the financial crisis against tax on profits for years to come. Some banks would not be paying tax for 15 or 20 years, which is totally unacceptable. The banks got public support in the crisis and they should now support the public in the recovery. I am today limiting the amount of profit in established banks that can be offset by losses carried forward to 50%, and delaying relief on bad debts, which together will mean that banks contribute almost £4 billion more in tax over the next five years. We will also put in place internationally recognised measures on hybrids and the reporting of tax by country.

That is multinationals and banks paying their fair share, and so should people aggressively trying to avoid their tax—that is the third step. I am taking measures to prevent the disguising of fee income by investment managers; the avoidance of tax through special purpose share schemes, miscellaneous losses and payments of benefits in lieu of salary; the avoidance of stamp duty on takeovers; and unfair benefits from the transfer of some intangible assets on incorporation. Those measures and others set out in the document raise £2.8 billion. We are also consulting on other measures, including the use of so called “umbrella companies” to deprive people of basic employment rights such as the minimum wage, and, as a result, to avoid tax.

Fourthly, I want to preserve the non-dom status that makes our country attractive, but I want these people to pay a fair contribution while having certainty about their future arrangements. In the next Parliament, the £30,000 annual charge will remain unchanged, but those who have been here for 12 of the last 14 years will see their payment rise to £60,000; and I am introducing a new £90,000 charge for those resident in this country for 17 of the past 20 years. To tackle the continued use of enveloped properties to avoid stamp duty, I am increasing the new annual charge by 50% above inflation on properties worth over £2 million. All these tax measures I have announced amount to £9 billion over the next five years The distributional analysis the Treasury publishes today shows that the decisions across this Parliament mean that the rich are making the biggest contribution to deficit reduction. In fact, the net contribution of the richest 20% will be larger than that of the remaining 80% put together, proving that we are all in this together.

We will make further reductions in Government spending and welfare, and we will make sure taxes are paid, but ultimately our future living standards depend on Britain earning its way in the world, so we must increase our productivity. Today, we take steps to back business, support science and invest in infrastructure. This Government have succeeded in making Britain the most entrepreneurial economy in Europe, and today we want to go further. To ensure that our growing smaller businesses have access to credit, we will expand the British business bank and act to encourage peer-to-peer lending. With the Governor of the Bank of England, I am extending the funding for lending scheme by a further year and focusing it exclusively on smaller firms. We will strengthen entrepreneurs’ relief and the social investment tax relief. We will accept almost all the recommendations of the Office of Tax Simplification to reduce the administrative burden on firms, and I thank Michael Jack and John Whiting for their work.

Our tax breaks have ushered in a golden age for Britain’s creative industries as well. Today, we will extend our new theatre tax break to orchestras; and we will help one area of television production that has been in decline, with a new children’s television credit, alongside our new animation credit. I know that the whole House has been saddened to hear that Wallace and Gromit may no longer be produced because the man behind Wallace’s voice has retired, but after next May I am sure the whole House will unite behind a suitable and by then available candidate.

We also want to help British businesses do more research and development—that is crucial to our productivity. Today, I am increasing the R and D tax credit for small and medium companies to 230% and the credit for larger firms to 11%. This Government have repeatedly helped small business deal with the burden of business rates and we do so again today. We will double small business rate relief for yet another year. The last Government were going to close it, but it benefits half a million firms and means a third of a million firms pay no rates, and we are going to continue to fund it. I will also continue to cap the inflation-linked increase in business rates at 2%. I am also announcing a full review of the structure of business rates, and I urge business groups to engage with us on that. Last year, to help our high street shops, pubs and cafes, I introduced a new £1,000 discount on their rates. With the brilliant small business Saturday this weekend, I am increasing that help for the high street by 50%, to £1,500 next year.

The fall in the global oil price has meant a welcome boost to much of the British economy and to families. There is record investment this year in the North sea, but the lower oil price clearly presents a challenge to this vital industry. My right hon. Friend the Chief Secretary to the Treasury will set out our full proposals in Aberdeen tomorrow, but I can tell the House today that we will go ahead with an immediate reduction in the rate of the supplementary charge from 32% to 30%; we will expand the ring-fenced expenditure supplement from six to 10 years; and we are introducing, with immediate effect, a new cluster area allowance. That demonstrates our commitment to the tens of thousands of jobs that depend on this great British industry.

Despite falling fuel prices, let me make this absolutely clear: we have cut fuel duty and we will keep it frozen—with my hon. Friend the Member for Harlow (Robert Halfon) sitting right behind me, I would not dare do anything else. Just as we demand that falls in oil prices should be passed on to people at the pumps, other fuel price surcharges should also come down. We are going to require airlines to list the charges separately from the taxes on tickets, but I also want to reduce the cost of those tickets for families directly. My hon. Friends the Members for Altrincham and Sale West (Mr Brady) and for North West Leicestershire (Andrew Bridgen), and many others, have asked me to help reduce air passenger duty for children on economy flights, so from 1 May next year APD for children under 12 will be abolished. I will go further than they asked: from the following year, we will get rid of APD for children under 16 altogether.

Improving productivity for all businesses also demands a major investment in our nation’s infrastructure. Because we have controlled our day-to-day spending, I can confirm that we will invest more as a share of our GDP over this Parliament and the next than was achieved under the whole period of the last Labour Government. This week we have set out plans for the biggest road building programme for a generation. We have committed billions to our flood defences, and today I take forward the recommendation of my hon. Friend the Member for Waveney (Peter Aldous) and expand tax relief on business investment in those flood defences, too. It is all brought together in the national infrastructure plan, which is now helping our country attract more investment from around the world than any other single country in Europe.

Britain is raising its ambition, and nowhere is that clearer than in our commitment to science. It is a personal priority of mine as Chancellor. Scientific advance is a human endeavour worthy of support in its own right, but it is also crucial to our economic future. When this Government came into office, the UK was ranked 14th in the global innovation index—today, we are ranked second. But we aim to be the best. A year ago, I abolished the arbitrary cap on the total number of undergraduates at our universities. Today, I am going to revolutionise the support for our postgraduate students, too. Until now, there has been almost no financial support available, and the up-front costs of postgraduate degrees deter bright students from poorer backgrounds. Today, across all disciplines, we will make Government-backed student loans of up to £10,000 available, for the first time ever, to all young people undertaking postgraduate masters degrees.

The next step is the allocation of £6 billion on the biggest ever sustained programme of investment in the research facilities of our scientific community. This includes money for major new scientific challenges, including the search for advanced materials, ground-breaking work on ageing and the exploration of the universe. The Rosetta comet mission captured the nation’s imagination. I can tell the House that, yesterday, Britain was awarded the lead role in the next international effort to explore the planet of Mars. We on the Government Benches have often gazed at the barren and desolate wastelands of the red planet, and we have long given up hope of finding intelligent life there, but signs of any life at all would be a major advance.

Many of the new science investments will be made in the north of England. One of the great challenges of this country is to create a more balanced national economy—a challenge that has eluded Governments for generations. Our ambition is to build a northern powerhouse as a complement to the strength of our capital city, bringing together our great cities of the north. Since I set out that ambition less than six months ago, we have proposed, reported on, and given the green light to the concept of High Speed 3. This week, we commit billions of pounds to other road and rail improvements across the whole of the north of England. I can today confirm that we will tender for new franchises for Northern Rail and the TransPennine Express, replacing the ancient and unpopular Pacer carriages with new and modern trains.

When I set out the ingredients of a northern powerhouse, I promised to make progress. Today, I deliver. A few months ago, there were no proposals for major scientific institutions in the north of England. Today, we commit to a massive quarter of a billion investment in a new Sir Henry Royce Institute for advanced materials science in Manchester, with branches in Leeds, Liverpool and Sheffield. We back the brilliant work on ageing being conducted at Newcastle university, and big data computing at Hartree.

We are also committing to the industry of the north, with investment in new high-value manufacturing research. We are supporting new academy schools, and we are announcing a new sovereign wealth fund for the north of England so that the shale gas resources of the north are used to invest in the future of the north. The cultural life of the north will get a boost too, including a major new theatre space in Manchester. Manchester city council proposes to call it the Factory Manchester. Anyone who is a child of the ’80s will think that that is a great idea.

Six months ago, people would have said it was completely impossible to get the 10 local authorities of Greater Manchester to come together with the Government to agree a major devolution of power to the city and the creation of a new directly elected mayor. We have delivered in Manchester, and my door is open to other cities who want to follow its cross-party lead. I said that I had put the northern powerhouse at the heart of this autumn statement, and with billions of investment in science, transport and new civic power in our great northern cities, that is exactly what we have done this week. We show today what can be achieved if we have the determination and ambition to deliver a truly national recovery.

We will also respect and fully implement the devolution settlements across the nations of our United Kingdom. Today, I announce that we recognise the strongly held arguments for devolving corporation tax-setting powers to Northern Ireland. The Treasury believes it can be implemented provided that the Northern Ireland Executive can show that they are able to manage the financial implications. The current talks will see whether that is the case. If it is, the Government will introduce legislation in this Parliament.

In Wales, we are working towards a cross-party agreement on further powers for next March. I confirm today that we have reached agreement with the Welsh Government on the full devolution of business rates. This is a great opportunity to grow the Welsh economy. Last week, the Government supported the proposals of Lord Smith’s commission on Scotland. They will lead to the devolution of income tax rates and thresholds and other powers and ensure that the Scottish Government are responsible not just for spending money but for raising the taxes to pay for it. We will publish the draft clauses in the new year. The sheer scale of the devolution to Scotland now makes unanswerable the case for English votes for English laws.

To improve the productivity of our economy, we back business, build infrastructure and support growth across the whole UK. But in the end, Britain’s future lies in the hands of its people and their aspirations—aspirations to save, to work and to buy a home. Today we support each one.

First, on saving, from next April, we will trust people with control over their own pensions. In this autumn statement, I confirm that the 55% death tax that currently applies when a person passes an unused pension pot on to their loved ones will be abolished. People will be able to pass on their pensions to their loved ones tax free. I can also tell the House today that we will ensure that people who die before the age of 75 with a joint life or guaranteed-term annuity can pass that on tax free, too.

Next week, we will publish the market-leading rates on our new 65-plus pensioner bonds, which will be available from January. Our £15,000 new individual savings accounts are hugely popular with savers, too. Next April, we will increase the limit to £15,240. But we will do something more. At the moment, when someone dies, the savings in their ISA lose their tax-free status and their spouse starts paying tax on that money. From today, I can announce that when someone dies, their husband or wife will be able to inherit their ISA and keep its tax-free status. Pass on your ISA tax free and pass on your pension tax free. We are delivering fairness to savers and to those who aspire to work, too.

The number of young people on unemployment benefits has halved. Our goal is to abolish youth unemployment all together. To support businesses that take on young people, we are already, from next April, abolishing national insurance contributions for employing anyone under the age of 21. Today, I can go further. Under this Government, almost 2 million people have taken up an apprenticeship. The Prime Minister has set this country an ambition of 3 million apprentices in the next Parliament. We back the businesses that employ apprentices, especially young apprentices under the age of 25.

At the moment, we charge national insurance on businesses that employ apprentices. Today, I can announce that the jobs tax on young apprentices will be abolished altogether. When a business gives a young person a chance in life, we will support them, not tax them.

We also back people of all ages in work, which is why the Government have raised the tax-free personal allowance to £10,000. Next year, the tax-free personal allowance, which was set to rise to £10,500, will rise instead to £10,600. That is a total wage boost for working people of £825 a year. It means that 3.5 million of the lowest paid will now be taken out of tax altogether. That shows that we on the Government Benches do not sneer at people who want to work hard and get on. [Interruption.] I just wanted to flag that up.

It is the first step to the new goal that we have set of raising the personal allowance to £12,500 so that people working full time on the minimum wage pay no tax at all. Today, I can also announce that, unlike previous increases in the personal allowance threshold, this increase will be passed on in full to higher-rate taxpayers paying 40% tax. So the higher-rate threshold goes from £41,865 this year to £42,385 next year. That is the first increase in the higher threshold in line with inflation for five years. This year’s increase means that 138,000 fewer people will pay the higher rate than would otherwise be the case. It is a down-payment on our commitment to raise the higher-rate threshold to £50,000 by the end of the decade.

There are those who have said that it was impossible to control public spending, improve public services, reduce the deficit and still cut income taxes for hard-working families on low and middle incomes. Today, we have settled that argument: it is possible, provided that we hold to our long-term economic plan, and we are doing it.

I turn now to my final measure. As well as the aspiration to work and to save, there is the aspiration to own our own home. Today, I am announcing the complete reform of a tax that has been described as one of our worst designed and most damaging. Stamp duty is charged at a single slab rate on the whole purchase price of a home. It means big jumps in tax when house values tip into a new band. The distortions can be particularly damaging at the lower end: someone buying a property worth £250,000 pays £2,500 in tax, but if they buy a house worth just £1 more, they pay over £7,500—three times as much. In recent years, the burden of stamp duty has increased on low and middle-income families trying to buy a new home as prices have risen. That makes it even more difficult to get together the cash deposits that buyers need. It is time that we fundamentally changed this badly designed tax on aspiration, so I am today abolishing the residential slab system altogether. In future, each rate will apply only to the part of the property price that falls within that band, like income tax.

Here are the new marginal rates: you will pay no tax on the first £125,000 paid; and then 2% on the portion up to £250,000; 5% up to £925,000; 10% up to £1.5 million; and 12% on everything over that. As a result, stamp duty will be cut for 98% of home buyers who pay it. Someone buying an averagely priced house of £275,000 will pay £4,500 less in tax. The average home in London will see a similar reduction. As I said, 98% will pay less, and the whole reform represents a tax cut of £800 million per year. Only homes that cost just over £937,000 will see their stamp duty bill go up under this system—gradually to start with, rising to more substantial sums for the most expensive homes. A £5 million house will see its stamp duty rise from £350,000 to £514,000, but, of course, this is a charge that is paid only once, when the property is bought.

I can tell the House that these changes to stamp duty become effective from midnight tonight. Anyone who has exchanged contracts but not completed by midnight will be able to choose whether to pay under the old system or the new, so no one in the middle of moving house will lose out. The changes will apply in Scotland until the Scottish Government’s new regime comes into effect next April. At the end of the statement, I will move a motion to introduce this. There will be a debate tomorrow and legislation will follow.

There has been a debate in this country about taxing houses. The system that I introduce today replaces a badly designed system that has distorted our housing market for decades. It reduces stamp taxes for 98% of people who pay them in this country. It increases the taxes on the most expensive 2% of homes, but asks people to pay that tax only when they buy the house and they have the money. It does not involve a revaluation of hundreds of thousands of homes in this country. Today I am cutting stamp duty for millions of home buyers in this country—98% will be better off. That is a fair, workable, lasting reform of the taxation of housing, and it is in stark contrast to the shambles of the anti-aspirational, unworkable homes tax that the Labour party wants to impose.

Four and a half years ago, our economy was in crisis. People questioned whether Britain could remain among the front-rank economic nations of the world, but we set a course to restore stability, to get on top of our debts and to show that Britain was not going to be counted out. Through the storm we have stayed the course. Now Britain is on course for surplus, on course for lower taxes, on course for more jobs, on course for higher growth and on course for a truly national recovery—a long-term economic plan on course to prosperity.

[Several hon. Members]

rose—

--- Later in debate ---

[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.

[Mr Kenneth Clarke (Rushcliffe) (Con)]

Does my right hon. Friend recall, as I do, that the shadow Chancellor was the right-hand man of the Chancellor who presided over the credit crunch, the banking collapse and the incurring of the biggest deficit in the G20, and does he not find his conversion to rigid fiscal discipline and the pursuit of fiscal surpluses absolutely quaint and ridiculous?

On a more serious note, my right hon. Friend is proposing to devolve considerable powers, in a very welcome way and to varying degrees, to the different nations and cities of the United Kingdom. Can he reassure us that he will combine that with firm and enforceable commitments to financial responsibility so that he and the UK Treasury can retain overall responsibility for the stability of sterling and our economy, because not every local government Labour leader can be trusted to follow the clear and effective path that he has followed in getting our debt back under control?

[Mr Osborne]

My right hon. and learned Friend makes a good observation about the shadow Chancellor’s career. I should pay tribute—probably for the first time—to the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who this week announced his retirement: first, for his commitment to advancing international development and to British aid, which I fully support; and secondly, because when he was shadow Chancellor, as we all remember, he built up a really compelling case for fiscal discipline. That, in part, is why the Labour party won the 1997 general election. That stands in such marked contrast to the shambles we see from the pair sitting opposite me now, who subsequently advised him.

On my right hon. and learned Friend the former Chancellor’s good point about devolution, of course both local government and the different nations of the United Kingdom—the devolution arrangements apply to both—will have in place robust arrangements that protect taxpayers across the United Kingdom. That is certainly an important part of the Smith commission report and how we must take it forward. It is also at the heart of the devolution settlements that we have discussed with English local authorities.

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

I am sure that the House will want to return to that last point on the UK Government’s ability to control their finances. Did I hear the Chancellor correctly when he was claiming credit for having halved the deficit over the course of this Parliament, because his view used to be that that would not be a terribly good thing? We are still borrowing £90 billion this year, and the reduced growth forecasts for the next five years, which we see in the OBR report, show that it will slow down, so can he tell us what impact that will have on the likely tax revenues, which of course have a bearing on our ability to pay down the deficit?

--- Later in debate ---

[Mr Osborne]

Let me also pay tribute to the former Chancellor for his work on the Scottish referendum campaign. To be fair to him, what we did not know in the debate before the previous general election, but which has subsequently been revealed in the various memoires that have been written about the Government he was at the heart of, is that he was arguing internally for the Government to set out the spending cuts that they would make. Indeed, he argued that the Labour Government should commit to a VAT increase, which of course the Labour party, somewhat hypocritically, opposed several months later when we had to take that step. What we know about his role in the previous Government does him great credit.

On the right hon. Gentleman’s point, as I explained in my statement, although borrowing falls in each year, the OBR has revised up the borrowing for the first two years but then revised it down, compared with the Budget, in the years after that. The structural deficit continues to fall at the same pace as in the Budget. This is not the big deterioration in the public finances that everyone has been predicting—it was on the front pages of many newspapers, and indeed the shadow Chancellor went about repeating it. That has not happened. With regard to lower tax receipts, I gave the tax receipts forecast but pointed out that one of the reasons why there has not been that deterioration in the public finances is the big reduction in debt interest payments.

[Mr Andrew Tyrie (Chichester) (Con)]

The OBR forecasts that over the course of this Parliament the eurozone will grow at a little over 2% and the UK will grow at nearly 9%, which of course is a tribute to the capacity of UK businesses, particularly small businesses, to adapt to the huge economic shock of the euro crisis. However, just doing a bit better than the eurozone is not enough; our prosperity will depend on whether we can absorb the annual shock of increased global competition. Is not it therefore crucial, as we have seen with the pressure on Northern Ireland’s corporation tax rate, that we do much more to sustain a globally competitive tax system?

[Mr Osborne]

My hon. Friend is absolutely right. It is not enough just to do better than our neighbours, because of course they have their own problems and are stagnating. If one looks at all the various indexes of global tax competitiveness and global innovation, one sees that the UK is climbing up the ranks. We in the Treasury certainly seek to mark ourselves against the most competitive economies in the world, not just those on the continent of Europe. The steps I have outlined today, which probably will not make it on to the front pages of the newspapers, such as the increase in the small business research and development tax credit, the large company tax credit and changes to entrepreneurs’ relief and its relationship with the enterprise investment scheme, are all designed to support research and development and entrepreneurial business in this country.

[Margaret Hodge (Barking) (Lab)]

I sincerely welcome the Chancellor’s announcement of the new measures to crack down on tax avoidance, particularly by challenging the mismatch between the form of a company’s structure and the substance of its activities, which is a key recommendation from the Public Accounts Committee. This week, Starbucks announced that it will pay no corporation tax in the UK for the next three years. Can he tell the House when the measures that he has announced will be implemented and how they will prevent Starbucks from sticking two fingers up to the British people?

[Mr Osborne]

Of course, the legislation needs to pass through the House of Commons before the tax can be levied, so the diverted profits taxes are from April next year, and the hybrids taxes are from a little later, in 2017. It is complex tax legislation, but we aim to get it through. I suspect that, in order to get it through before the general election—the right hon. Lady might be helpful in this—we might need the co-operation of the Opposition in passing those clauses in the Finance Bill.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

With several hundred job losses already announced in the north-east of Scotland, I certainly welcome the UK Government’s decision to send a signal that we want to maximise investment in the North sea. That would have been a necessary signal whether or not the price of oil was falling, and it will build the jobs base in the UK and a great export industry. Will the Chancellor confirm that such a move is possible because we are part of the United Kingdom’s diversified economy?

[Mr Osborne]

My hon. Friend makes a good point. Of course, what is very striking, if one looks at the receipts revenue forecasts from the OBR, is that they are wildly different from those produced by the Scottish Government before the recent referendum. As he will see tomorrow, when his colleague the Chief Secretary to the Treasury sets out in Aberdeen what we are doing, the tax cuts we announced today, which will come into effect in the coming weeks, will have an immediate effect, but we are also going to try to set out a longer road map for the direction we want to head in. As he well knows, industry investment decisions are made over long cycles and people need predictability about the future of the British oil and gas tax regimes so that we get the maximum amount of oil out of the basin.

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

With average wages still suffering the longest and biggest fall since Victorian times, productivity still one of the lowest in the OECD, business investment still flat and below pre-crisis levels, the deficit on traded goods now the biggest in British history and, to cap it all, the budget deficit is clearly beginning to rise because of the fall in tax receipts, how can the Chancellor, against that background, continue with austerity when its consequences are clearly now causing the deficit to rise?

[Mr Osborne]

I am afraid that the right hon. Gentleman is just wrong. Business investment is not flat; it is up 27% and is rising faster in the UK than in any other major advanced economy in the world. The deficit, according to the OBR document, was 10.2% under the previous Labour Government; it is now 5%. The idea that that is an increase is obviously nonsense. Indeed, it falls in every future year, just as it has fallen this year.

[Sir Tony Baldry (Banbury) (Con)]

Does not providing potentially up to £100 million in infrastructure investment to make Bicester an exemplar of a garden town for the 21st century, and ensuring that 13,000 new houses are built as speedily as possible, demonstrate that a key part of the Government’s long-term economic plan is building new homes and creating communities of which we can all be proud for generations to come?

[Mr Osborne]

My right hon. Friend is absolutely right. I commend him and the community leaders in Bicester for working with us to secure this extra investment in the town, to create the vision of a garden town, and to make sure that there are housing and jobs for the town’s population while preserving its beautiful character.

[Stewart Hosie (Dundee East) (SNP)]

I welcome some of the individual measures announced today, but they do not amount to a long-term economic plan. At its heart, what the Chancellor said was that the target to see debt fall as a share of GDP this year has not been met; that the current account will not be in the black next year, as he promised; and that borrowing then, far from being £20 billion, will be almost four times that, at £75 billion. Why should the public believe that if the Government do the same things over the next two or three years, that will be any different from their failure in doing them first time round?

[Mr Osborne]

At the moment, we see Britain as the fastest growing major economy in the world. We also see a record fall in unemployment, and the highest rate of job creation occurring in Scotland. That is the United Kingdom delivering for the people of Scotland. Now we have proposals from the Smith commission, jointly agreed between the different parties, whereby the Scottish Government, and the Scottish Parliament, can take more responsibility for raising their own taxes to pay for their own expenditure. Then we will have an even better debate in Scotland on how things are paid for.

[Margot James (Stourbridge) (Con)]

I was glad to hear my right hon. Friend confirm that there has been no new recession in the years since 2010. It would have been a strange recession that resulted in unemployment falling by 45% and average weekly pay being up by 12.5% in my constituency and in 4,000 new businesses opening in my borough. Will he join me in congratulating the thousands of people who have got into work and started new businesses in my constituency in the past four years?

[Mr Osborne]

My hon. Friend has been a real champion for small businesses and for exporters in her Stourbridge constituency, and for attracting investment into the black country. I pay tribute to the work she has done. The measures we have taken today to help high street stores by increasing the business rate discount to £1,500, to take the smallest businesses out of business rates, and to back exporters and to increase the research and development tax credit for firms in the west midlands are all tribute to the work she has done and the issues she has raised in Parliament.

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

The Chancellor presented things as being very rosy, but a survey that came out today says that 72% of the British public feel no sense of recovery whatsoever. Why is he so out of touch?

[Mr Osborne]

In the hon. Lady’s own constituency, unemployment is down. In her own constituency, economic security has increased as people can see that the country is not in the crisis it was in four or five years ago. She has to ask her constituents this: do they want to return to the economic instability and crisis that everyone remembers under the previous Labour Government, or do they want to stay on course to prosperity? I think the British public will conclude that they want to stay on course to prosperity.

[Mr David Willetts (Havant) (Con)]

May I warmly congratulate the Chancellor on extending the new loans to postgraduates? With increasing numbers of jobs requiring a postgraduate qualification, that really does remove a significant barrier to social mobility. Does he agree that if more people are able to stay on and do masters courses, that is an opportunity to look at broadening the range of subjects that they study at early stages of their education?

[Mr Osborne]

My right hon. Friend is absolutely right. Of course, he knows that we embarked on this work on how to extend support to postgraduates when he was Minister for Universities and Science—it might have been him who first proposed the idea to me—and I am absolutely delighted that it has come to fruition. This is one of the biggest reforms I have announced today. It will provide real support for postgrads, who do not currently get any support. In almost all the reports that one reads on social mobility, including the report by Alan Milburn, that has been identified as a barrier to entry for people from low-income backgrounds into the professions. It is a really important step forward. Again, I suspect that it will not be the headline in tomorrow’s newspapers, but that does not mean that it is not going to change lots of people’s lives.

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

Yesterday, the right hon. and learned Member for Rushcliffe (Mr Clarke), a former Chancellor, gave an extended interview to the BBC in which he said, among other things, that the Government should keep tax increases in the locker in case they are needed. Does the Chancellor intend to consult former Chancellors on his long-term economic plan? If not, will he now deny that a VAT rise will be imminent after the next election?

[Mr Osborne]

I have set out today how our plans to bring the deficit down and bring borrowing down can be achieved through spending reductions in Departments and through welfare savings, and therefore do not require tax increases. I also explained that if we were to achieve over the next period the same as we have achieved during this Parliament in dealing with tax avoidance, tax planning and aggressive tax evasion, we could achieve £5 billion of savings, or extra revenue, in that space of time as well. That is a better way to proceed, and that is the course we have set.

[Mrs Cheryl Gillan (Chesham and Amersham) (Con)]

The Chancellor will be aware that I, and many colleagues in this House, have been working with the CLA, which is actively campaigning for reform of compulsory purchase to deliver fairer compensation for landowners who are affected by infrastructure projects such as HS2. I greatly welcome his announcements on stamp duty. Will he go a bit further and consider abolishing stamp duty land tax on the purchase of replacement property by landowners who are so badly affected by infrastructure projects?

--- Later in debate ---

[Mr Osborne]

Like my right hon. Friend, I too have the challenge of HS2 going through my constituency, although of course she is further along in the process because her constituency is affected by the first phase of the route. I know, from my experience and from talking to her, that this has a big impact on communities. We have tried to make the compensation generous and to make the process for accessing it easier. It is certainly a lot easier than when I, as a constituency MP, had to deal with the compensation relating to the second runway at Manchester airport. Of course, I will look at any ideas that she puts forward, but any measure has to be affordable. I should also point out that in today’s document we set out further reforms that we intend to make to the compulsory purchase regime.

[Fiona O’Donnell (East Lothian) (Lab)]

The Chancellor talked tough on tax evasion today, but so far none of the Crown dependencies or overseas territories has committed to a public register of beneficial ownership. I know that my right hon. Friend the shadow Chancellor will act tough on this issue. Why will not this Chancellor and his Government make some progress on it?

[Mr Osborne]

Frankly, the hon. Lady is not being fair to the Government or to those territories and dependencies. There had been no progress at all when we came into office. They have all now committed to the automatic exchange of information; they all attended the conference in Berlin where they made the international commitment to do that; and they are all consulting, right now, on the creation of these registries. They are doing that because my right hon. Friend the Prime Minister put this issue centre stage on the G8 agenda in Lough Erne.

[Sir Bob Russell (Colchester) (LD)]

The Chancellor said that the end of our operations in Afghanistan will allow this country to save an additional £200 million this year from the special military reserve. There is also the sale of surplus Ministry of Defence radio frequencies, which he did not mention. Will he agree to ring-fence both sums to pay to modernise the family homes of the brave men and women of our armed services, whom he says he salutes?

[Mr Osborne]

We do have a programme, which we have extended, to renovate the accommodation of service families. We are all aware of the challenges that many families face with that accommodation. The special military reserve was created to fund overseas military operations—that is what it exists for. When we came into office, this country was spending £4 billion a year on operations in Afghanistan. The special military reserve is now down to about £1 billion; I have been able to reduce it a little today. Despite what the reserve is for, I am always willing to consider specific requests for support. I did not have time in my speech to set out the very many military good causes that we are supporting with the LIBOR money.

[Caroline Lucas (Brighton, Pavilion) (Green)]

New analysis shows that an ambitious energy efficiency programme would create up to 108,000 new jobs, generate £1.27 in tax revenues for every £1 invested by the Government and end fuel poverty. Will the Chancellor explain why this statement fails to direct one penny of the infrastructure budget towards tackling the cold homes crisis in places such as Brighton?

[Mr Osborne]

We have proposals to help, for example, off-grid consumers with energy efficiency, and we also have the energy companies obligation programme to help with energy efficiency. We have announced this week a commitment to look at the idea of the Swansea bay tidal lagoon project, which could be a very interesting project for renewable energy generation in the future.

[Mr Peter Bone (Wellingborough) (Con)]

Under 13 years of Labour, unemployment went up in east Northamptonshire, there were no road improvements and shops closed. That is why Tom Pursglove, our excellent candidate for Corby, and I launched a joint listening campaign to improve things in east Northamptonshire. Unemployment is now 30% lower, and we now have the Rushden Lakes retail development on line and, thanks to the Chancellor this week, the Chowns Mill and the A45 dualling improvements. Will the Chancellor visit east Northamptonshire so that Tom Pursglove and I can carry him shoulder-high through the streets of Rushden, Higham Ferrers, Stanwick, Raunds and Irthlingborough to cheering crowds?

[Mr Osborne]

That is quite an offer. I met Tom Pursglove and my hon. Friend to discuss the infrastructure improvements that they wanted in the east midlands. We have been able to deliver what they have so successfully campaigned on and attracted so much local support for. That is a good combination of two strong local campaigners working for their local area to deliver improvements that, frankly, were never delivered under a Labour Government and that Labour MPs have never asked me for.

[Stephen Timms (East Ham) (Lab)]

The Chancellor has recognised that he will not deliver on his commitment to eradicate the deficit in this Parliament. Will he also recognise that a large part of the reason for the failure is that, as the OBR has acknowledged, tax receipts have been hard hit by the fall in real wages since the general election?

[Mr Osborne]

I acknowledged in my statement that tax receipts are £24 billion below what we forecast for 2017-18, but I pointed out that people have focused only on the tax side, not the spending side of the equation: lower unemployment and lower inflation have an impact on welfare payments and debt interest payments—we are paying £18 billion less in debt interest than was forecast—which is of course why we have not seen the big deterioration in the public finances that he and others predicted.

[Eric Ollerenshaw (Lancaster and Fleetwood) (Con)]

If we are to have a shale gas industry, I welcome the idea of a sovereign wealth fund. Does the Chancellor agree that northern money for northern investment could be a real game changer? When he sets up the fund, will he take into account the fact that it looks as though the majority of the gas will come from Lancashire, not Yorkshire? [Interruption.]

--- Later in debate ---

[Mr Osborne]

My right hon. Friend the Leader of the House, who is sitting next to me, said, “Oh, really”. I said that the sovereign wealth fund should be for across the north of England so that I did not get into any trans-Pennine, war of the roses dispute.

My hon. Friend is absolutely right that many of the immediate opportunities are in Lancashire, in or near the area he represents. I have spoken to him about what more we can do to make sure that local communities see the benefit of the jobs, investment and resources that we will get as a result of this important energy exploration and extraction. Of course, we now have the new college in the area—that has just been announced—so local people will have the right skills to get those jobs.

[Mark Reckless (Rochester and Strood) (UKIP)]

If the economy is doing as well as the Chancellor says, why are we borrowing more than France, Italy, Spain and Greece?

[Mr Osborne]

The reason is that we started with a 10.5% budget deficit, which we have had to reduce. Interestingly, the International Monetary Fund assesses that we have had the longest and most sustained reduction in the structural deficit, and that we are forecast to have the strongest reduction in the headline and the structural deficit in the future. The IMF assessment of how we have done shows that we are restoring economic stability to this country.

[Anne Marie Morris (Newton Abbot) (Con)]

May I again congratulate the Chancellor on being a friend to small and micro-businesses? His autumn statement is first class. His extension of national insurance and business rate reliefs is much appreciated, and it is inspirational that he is going to have a full review of business rates, the most-hated tax for all small businesses. While he is feeling inspired in the demolition business—getting rid of the slabs in stamp duty—will he look at the cliff in VAT? It is a real barrier to growth, despite the fact that it is a European tax.

[Mr Osborne]

As my hon. Friend knows—this is the problem of previous Governments having handed over various powers and rights of this country to Brussels—we are constrained by the VAT threshold that we can levy in this country. I think that it is already the highest in Europe, so we are restricted in what we can do. That is why we are seeking to help small businesses in her west country constituency both through the measures on business rates, and through investment in infrastructure, such as the A303, the Dawlish rail line and the Kingskerswell bypass. As I saw a few weeks ago, the bypass is proceeding very well in her constituency.

[Chris Bryant (Rhondda) (Lab)]

Instead of wasting his time in Northamptonshire with a dead-beat candidate, may I suggest that the Chancellor comes to the Rhondda, particularly to visit the Conservative club in Tylorstown? I say the Conservative club, but it has closed and, ironically enough, is now a food bank. If he came to that food bank, he would learn from those who run it that the vast majority of people that they are helping with 2.5 tonnes of food every year are in work. That is because of the sanctions regime, low hours, zero-hours contracts and, most importantly, the bedroom tax. Why does he not deal with any of those facts?

--- Later in debate ---

[Mr Osborne]

First, what the hon. Gentleman’s question reveals is, of course, that when the Labour party says it is committed to fiscal discipline, it does not mean that at all. It opposes welfare changes that bring the welfare budget down, and it opposes all the difficult decisions required to bring public expenditure under control. Because we are able to take those difficult decisions on day-to-day spending, we are able to make investments in infrastructure that will really help all parts of the United Kingdom. A shining example of that is the electrification of the valley lines, which the Prime Minister went to south Wales to talk about. That never happened in all the years that the hon. Gentleman was a Labour Minister and represented the seat as a Labour MP.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

May I, on behalf of the Orchestra of the Swan, thank the Chancellor for the tax relief, which of course comes on top of the tax relief for the Royal Shakespeare Company? Savers were among the hardest hit under Labour’s great recession. Does not today’s autumn statement and the help that we are providing to savers demonstrate that this Government and the Conservative party are on the side of savers, who would be put at risk if Labour ever got anywhere near his position?

[Mr Osborne]

First, may I say that I know the Royal Shakespeare Company does a brilliant job? We were able to help it earlier this year with support for touring around the world. Such people are looking at the theatre tax break and at what they can do to use it. I hope that the orchestra tax break is of help to the Orchestra of the Swan, which my hon. Friend mentioned.

On savers, I have announced today that people can pass on their ISAs to their spouse tax free. That major step forward in the ISAs regime comes on top of the increase to £15,000 for the new ISA and, of course, the new freedoms on pensions.

[Ian Lucas (Wrexham) (Lab)]

One thing the Chancellor did deliver in 2010 was an increase in VAT. Can he explain the difference between his statement in 2010 that he had no plans to increase VAT and his statement last weekend that he has no plans to increase VAT?

[Mr Osborne]

The plans that I have set out involve spending reductions and welfare reductions. By the way, the Labour party is the first to attack me for them. People have seen the decisions and the approach that we have taken on spending. We will go on reducing spending and reducing welfare, and we do not need tax increases.

As I remarked in my exchange with the right hon. Member for Edinburgh South West (Mr Darling), the previous Labour Chancellor planned to increase VAT after the general election—he put that in his memoirs—and those of us who were in that Parliament will remember that the Labour Treasury produced, by mistake, a document that said VAT would go up, which caused the Government great embarrassment at the time. As I say, our plans involve spending reductions and welfare reductions, and that is what we are committed to do.

[Dr Sarah Wollaston (Totnes) (Con)]

I warmly thank the Chancellor for investing the extra billions of pounds in our NHS. There is not only extra revenue, but a transformation fund that will transform the NHS into the service that we need for the future. Does he share my concern, however, that our endorsement of the NHS’s forward view—our long-term plan for the NHS—would be put at risk if we handed it over to a Government who had no long-term economic plan to fund it?

[Mr Osborne]

My hon. Friend is right. The transformation fund is an important part of the NHS’s forward view, which has been looked at and endorsed by the Health Committee, which she chairs, the various health charities and the royal colleges. The head of the NHS, Simon Stevens, who drew up that plan, welcomed what we announced at the weekend and travelled with me to Homerton university hospital to explain how the transformation can take place. My hon. Friend is right that it is impossible to have a strong NHS unless we have a strong economy: we are delivering both.

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

Does the Chancellor agree with the Deputy Prime Minister that:

“There is not a single developed economy anywhere in the world that has balanced the books and only done so on the backs of the working-age poor, which Osborne has now confirmed several times he wants to do”?

Does the Chancellor realise how damaging those policies are to constituencies such as mine?

[Mr Osborne]

In constituencies such as the right hon. Gentleman’s and, indeed, in constituencies right across the country, unemployment has come down and people have come off the claimant count. That is a big positive development. The distributional analysis that we have published today, which was examined by the Treasury Committee, shows that the richest 20% in our society have made the biggest contribution to deficit reduction—bigger than the other 80% put together. Then there is the stamp—

[Mr Clarke]

So why is the Deputy Prime Minister unhappy?

[Mr Osborne]

The Deputy Prime Minister is unhappy because the Conservative party is trying to win his seats off him.

[Mary Macleod (Brentford and Isleworth) (Con)]

I thank the Chancellor for announcing the review of the structure of business rates. That has been called for by the Chiswick traders’ group, the Federation of Small Businesses, the British Retail Consortium and others. Will he reassure small businesses in my area that the review will start as soon as possible?

[Mr Osborne]

Yes, the review will start as soon as possible. I urge businesses and business organisations to engage with it. It has to be fiscally responsible, but it is appropriate to look at the structure of the modern economy to see how it has changed and how the business rates regime can reflect that.

[Sammy Wilson (East Antrim) (DUP)]

I welcome the additional resources that will come to the Northern Ireland Executive as a result of the Barnett consequentials of the additional spending, and the Chancellor’s commitment to devolve corporation tax to Northern Ireland, albeit on the basis that we show that we can manage the financial implications in our budget. Given that my party has defended fiscal responsibility, we have no fear of that. Will he confirm that the implication of what he has said is that the Northern Ireland Executive must make a decision on the implementation of welfare reform? Is that how he defines being

“able to manage the financial implications”

of the devolution of corporation tax?

[Mr Osborne]

I do not want to go into too much of the detail that will be on the table in the important cross-party talks, but clearly one challenge that the Northern Ireland Executive face is that they have not implemented some of the welfare reforms, which has led to a hole in their budget. There are not currently credible proposals on the table from all the parties—I use the term “all” in the collective sense. There is not yet collective agreement on how to address the challenges that the lack of welfare reform has created. That is why I phrased my statement as I did. We have the cross-party talks and we have an important couple of weeks ahead, as Members from Northern Ireland know. Let us hope that we make real progress in those talks.

[Ian Swales (Redcar) (LD)]

I warmly welcome the new £28 million national formulation centre, which I believe is heading for Sedgefield in the north-east. That was one of the key asks of the chemistry growth partnership and is listed in the green book. Will the Chancellor continue to support the chemical industry, which is the UK’s biggest manufacturing exporter and is helping to make the north-east one of the fastest growing regions of the UK?

[Mr Osborne]

My hon. Friend is right that the new catapults that we have set out—the formulation centre and the investment in the high-value manufacturing catapult—will help the north of England, particularly around the area that he represents. Support for the chemical industry is important. The changes to energy taxation in the Budget will help the chemical industry. There might be an opportunity to look at specific things that we could do to help the chemical industry further, rather than all energy-intensive industries. I am happy to have that discussion with him and other Members who represent constituencies with chemical manufacturers.

[Mr Ronnie Campbell (Blyth Valley) (Lab)]

If the Chancellor is right that the UK is the leading world economy, why does he not give health service workers their 1% increase?

[Mr Osborne]

Of course, our pay settlement does give health service workers 1%. For those on progression pay, we are saying that there should be a 1% pay rise in total. We are able to afford a strong national health service, to put the money into the national health service that we have announced over the past few days and to support the NHS’s forward plan about its bright future only because we have a strong economy. In the north-east of England, as the hon. Gentleman knows, we are investing in jobs and roads. I would have hoped that he would welcome the news this week on the A1 Gateshead bypass and the A1 north to Ellingham.

[Mr Mark Hoban (Fareham) (Con)]

Stamp duty has often been a barrier to families in my constituency owning a home of their own or moving house. The reforms that the Chancellor announced today will save £1,300 on the cost of an average house in Fareham. Does that not demonstrate that it is the Conservative party that is on the side of the home owner and aspiration, in stark contrast to the Labour party?

[Mr Osborne]

My hon. Friend is absolutely right. It is a major reform of stamp duty that gets rid of the very distorting slab system. The current stamp duty system has attracted huge criticism from all sorts of groups, including property websites, those who help people to move home and, of course, home buyers. [Interruption.] The hon. Ladies on the Opposition Front Bench say, “Do it in the Budget.” I am doing it now so that people can benefit from it now.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

The Chancellor did not pay significant attention to productivity in the south-west in his speech. Our devastated rail line is just getting crumbs from the table, and those are buried in the national infrastructure plan. We have a feasibility study that is semi-permanent, with no guarantee of investment until 2019-20. The Prime Minister said that money was no object when we had the storm damage, but he clearly did not mean it. People in the south-west will not forget and will be angry.

[Mr Osborne]

What the hon. Lady says does not bear a resemblance to what has been announced this week. The south-west is one of the biggest winners from the infrastructure plan that we have announced, with a massive upgrade of the A303 and the A358. In all the years of the Labour Government, nothing happened to those roads. The Dawlish rail line had problems when the storms came, which I guess says something about the investment that the Labour Government put into it, but I will move on from that. Not only have we repaired the rail line; we are looking at an alternative route to increase resilience to the south-west. We have also provided new trains on the sleeper route and made local road improvements, such as the—

[Alison Seabeck]

They’re crumbs!

[Mr Osborne]

This is billions of pounds of investment into the south-west of England that never happened under the Labour Government. The Labour Government completely neglected the south-west of England, and the Labour MPs who represented those constituencies got absolutely nothing from them. Conservative candidates and Members of Parliament are delivering for the south-west.

[Chloe Smith (Norwich North) (Con)]

Rail passengers in East Anglia deserve a fair deal, and my hon. Friends the Members for Ipswich (Ben Gummer) and for Witham (Priti Patel), my right hon. Friend the Member for Chelmsford (Mr Burns) and I have worked hard for our constituents. I welcome the Chancellor’s commitment to the East Anglian economy, not just the road improvements but specifically his backing for two key recommendations of the Great Eastern main line taskforce and the work of its thousands of supporters, including the new Anglia local enterprise partnership. I also welcome his commitment to track improvements and new trains.

--- Later in debate ---

[Mr Osborne]

I pay tribute to my hon. Friend, who has done a brilliant job in bringing to my attention, and that of Parliament, the needs of Norfolk, Norwich and East Anglia. Because of her campaigning, and that of my hon. Friend the Member for Ipswich (Ben Gummer), we have the Norwich in 90 and Ipswich in 60 campaigns, and the report. We are committing new trains to speed up those journeys, as well as a massive road investment on the A47, A11, A12 and A14. None of those things happened under a Labour Government, and East Anglia was completely neglected in terms of infrastructure for the future. That is not the case any more and my hon. Friend has put East Anglia on the map.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

When I was a teacher of children with learning difficulties, some of the children did not finish the race but were still given a prize. The Chancellor is different: he has run only half the distance he promised by the next election. Instead of apologising for not getting rid of the deficit as he promised, he wants us to applaud him. He says we are all in it together, but for the people I represent, yes, the claimant count has gone down, but the real value of their income has gone down by £2,000 per household. Last weekend, at Tesco, the warm-hearted people of my constituency had a massive collection for food banks. When will the Chancellor deliver for those people, instead of the millionaires who he claims are all in it together with them?

[Mr Osborne]

I have taken measures to reform stamp duty in a progressive way and introduced a tax, which could have been introduced in any Budget by a Labour Chancellor, to deal with multinational companies that divert their profits overseas. I have ensured that profits cannot be written off against losses incurred during the financial crisis—again, any Labour Chancellor could have done that but they did not. I am determined to ensure that the richest in our society make a contribution and that businesses pay our low taxes. More generally, the result of a pro-business policy is that in the hon. Gentleman’s constituency alone—I think he just dismissed this out of hand—unemployment has fallen by 20% in the last year. I would have thought he would welcome that.

[Mr Robin Walker (Worcester) (Con)]

In our nation of shopkeepers there will be relief at the decision to extend small business rates relief and increase the benefit for small shops and cafés to £1,500. In his review of business rates, may I urge the Chancellor to take account of the Business, Innovation and Skills Committee report that urged a fundamental reform? The Conservative party believes in low taxation, and it needs to reform fundamentally a tax that can only ever go up.

[Mr Osborne]

My hon. Friend is a champion of small businesses in Worcester and infrastructure investment in Worcestershire and that part of England, and I thank him for his representations. In part because of those representations, we have been able to help with business rates and high street shops in the statement. We now want a review of business rates, but it must be done in a way that is consistent with stable public finances. It is appropriate to consider how the modern economy has changed and the impact of things such as the internet, and that is why we are undertaking that big review.

[Barry Gardiner (Brent North) (Lab)]

Will the Chancellor confirm that the £2.3 billion identified for flood defences was originally announced last year, and that of the 1,400 schemes he says are going forward, 1,119 are not fully funded but rely on 80% partnership funding and a 10% efficiency saving that has yet to be made? Will he also confirm that the 300,000 households he says will have a reduced flood risk are going from “low” to “very low” risk, and that households at “significant” or “high” risk will rise from 490,000 to 800,000 in the next six years?

[Mr Osborne]

I know the hon. Gentleman represents a constituency named after a river, but he has not been fair about our flood defence policy. Did we set out the money last year? Yes, we did. We then said, “Let’s have a plan for how to spend that money”, and this week we have announced all the different schemes that show how it can best be used. That is an increase on the capital funding that the previous Labour Government provided. Flood defence schemes have always involved a contribution from businesses, and today I announced—the hon. Gentleman did not mention this—that we are expanding the tax relief available for those contributions.

[Martin Vickers (Cleethorpes) (Con)]

Unlike the hon. Member for Brent North (Barry Gardiner), my constituents welcome the Chancellor’s announcement on flood defences, particularly this week which marks the first anniversary of the tidal surge that flooded so many homes and businesses in my constituency. Cleethorpes has enormous potential for growth, as the Chancellor and Government have recognised, and to maximise that growth and support the rail franchises that my right hon. Friend referred to—particularly the south trans-Pennine route—it is essential to maintain coast-to-coast, east-to-west connections. Will the Chancellor do all he can to ensure that?

[Mr Osborne]

I certainly give my hon. Friend that assurance. He is a doughty champion for Cleethorpes and its strong road and rail links. He has raised train services with me and I am looking at that, as is the Transport Secretary. We are determined to provide a great service to the people he represents, and ensure that they travel in comfort. Today’s announcement about replacing outdated Pacer trains with new, modern trains will be welcomed across the north of England.

[Teresa Pearce (Erith and Thamesmead) (Lab)]

The Chancellor spoke about fiscal discipline and welfare reduction, yet it seems that the Office for Budget Responsibility might not agree. Its “Blue Book” shows that the bill for housing benefit for people not on jobseeker’s alliance will rise year on year. More worryingly, despite repeated assurances from the Work and Pensions Secretary in this House that universal credit is on time and on budget, the OBR has reviewed all the evidence and states that there remains “considerable uncertainty” around its delivery, and “broader uncertainties” over the eventual cost. In whom does the Chancellor have more faith: the OBR or the Secretary of State for Work and Pensions?

[Mr Osborne]

Universal credit is a change to our welfare system that makes sure that it always pays to work. I pay tribute to my right hon. Friend the Work and Pensions Secretary because he is pioneering what I think are important far-reaching changes to the incentives in our country that encourage work and support people in work. We have introduced a welfare cap. That is a brand new mechanism for controlling welfare spending, including identifying pressures such as rising housing benefit bills that were completely ignored in the past by the Labour Government. If a Government are not prepared to address increases in one benefit with reductions or measures on other benefits, they are required to come before the House and ask for a vote because they have reached the cap. We have not done that because we are within the cap, as the OBR report confirms.

[Ben Gummer (Ipswich) (Con)]

Last October, youth unemployment in Ipswich fell to the lowest point since records began—a fall directly attributable to the Chancellor’s policies. The future of young people in Ipswich is now much brighter because of his commitment to the Great Eastern main line and I thank him for that. Will he comment on the fact that the only way that scheme will not happen is if the Labour party stops the franchising process, which is precisely what it has promised to do?

[Mr Osborne]

I pay tribute to my hon. Friend. I have been to Ipswich and seen what he has done to attract businesses and jobs, and to champion big infrastructure improvements, such as in relation to the A14 and the Ipswich in 60 campaign. Those things would be under threat under a Labour Government. The Labour party’s rail franchising policy would prevent the improvement in train services to East Anglia. Big infrastructure projects that never happened under a previous Labour Government would almost certainly never happen under a future Labour Government.

[Jack Dromey (Birmingham, Erdington) (Lab)]

After another broken promise made in 2010 that front-line policing would be protected, 16,000 police officers have gone, including 8,000 from the front line. The Association of Chief Police Officers has said that, based on the Chancellor’s plans for the future, at least another 16,000 police officers will go, the majority from the front line, threatening its ability to discharge its statutory duties and protect the vulnerable. Is ACPO right?

[Mr Osborne]

Because of the hard work of the police and the reform that has been undertaken, crime is down and there is more policing on the front line. That shows that savings can be made to the Home Office budget while achieving reform. The hon. Gentleman’s question again reveals the default position of the Labour party. The shadow Chancellor attempts to say that it has newly converted to fiscal discipline and that it would take the difficult decisions. Every single Labour MP then gets up and complains about future spending and welfare decisions. That just shows that they are totally unreformed and unreconstructed.

[Iain Stewart (Milton Keynes South) (Con)]

I thank my right hon. Friend for the additional help he has given to hospices. Will he join me in paying tribute to the staff and volunteers at Willen hospice in Milton Keynes, which provides patients and their families from my constituency, the constituency of my hon. Friend the Member for Milton Keynes North (Mark Lancaster) and indeed your constituency, Mr Speaker, with incredible support?

--- Later in debate ---

[Mr Osborne]

I think everyone in this House knows what an incredible job the hospice movement and hospice charities do. I am a patron of the East Cheshire hospice. From the conversations I have had with my hon. Friend and his colleagues, I know what a brilliant job the hospice in his area does. This measure is something that hospices have long asked for. They have been unfairly discriminated against, in comparison with the NHS, when it comes to VAT. We are going to refund that VAT and give the hospice movement the support it deserves in recognition of the brilliant job it does.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

The Chancellor has made a number of statements today on infrastructure, but of course developing our infrastructure requires a thriving UK steel industry and supply chain. Will he explain why he and the Secretary of State for Business, Innovation and Skills have chosen not to bring forward the energy-intensive industries compensation package that he announced in the Budget earlier this year? Does he believe that the UK steel industry faces a level playing field, and if not, what is he going to do about it?

[Mr Osborne]

I have long thought that there is a challenge in ensuring that commitments to reduce carbon are consistent with having a vibrant and successful steel industry and other energy-intensive industries. What we hear when we go to Port Talbot and elsewhere is a real concern that UK energy prices could be higher than they are on the rest of the continent of Europe if we adopt measures such as a decarbonisation target. That is why the Conservative party is not in favour of a decarbonisation target. Unfortunately, the Labour party is in favour of it and the steel industry might be one of the industries that will bear the cost.

[Gordon Birtwistle (Burnley) (LD)]

I congratulate the Chancellor on his plan to reduce the job tax on apprentices up to the age of 25. The country is obviously on the rise and manufacturing industry is booming, but we have a big problem with skills shortages. I am sure this measure will go a long, long way towards training young people to do the jobs of the future that this country will desperately need.

[Mr Osborne]

My hon. Friend has been a consistent champion of apprentices in Burnley and of the apprenticeship policy. He sends me and other colleagues in the Government a regular report of what is going on in Burnley and what more we can do to support apprentices. I am careful to make sure that I read that report each time it comes in. It is partly because people like him have been raising this issue with us that we have taken the big decision today to abolish the job tax when it comes to employing young apprentices. It is a major step forward in supporting apprentices and I think it will open the path to having 3 million apprentices in the next Parliament.

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

It is very encouraging that the Chancellor recognises the importance of transport investment for creating the powerhouse of the north, but he has not committed to a funded programme to implement the changes that are required right across the north. Why did he single out the Manchester-Leeds link, which is just a part of what is required?

[Mr Osborne]

First, we have announced this week important changes to support infrastructure in and around Liverpool, including to the port of Liverpool, which is a very exciting source of economic development on Merseyside. Secondly, the trans-Pennine link supports journeys from Liverpool all the way over to Leeds and Hull, but we also want investment in the rail services in and around Merseyside. That is why we are electrifying the lines in that part of the north-west and why we are looking for major investment in HS2, so that journeys from Liverpool to Birmingham and London will be much quicker once the train joins the track at Crewe. Those are all measures that we are taking to support Liverpool.

I also announced major investment in science in the north, and Liverpool will be one of the beneficiaries of that. This is all about trying to work together. I am very happy to do that on a cross-party basis, with Members of Parliament representing Liverpool, Joe Anderson—the mayor of Liverpool—and the Government, to see what more we can do to increase the economic potential on Merseyside.

[Mr David Burrowes (Enfield, Southgate) (Con)]

As we approach small business Saturday, I, on behalf of my high streets, welcome the package of measures to reduce the impact of business rates. What should I tell my businesses about the impact of following the shadow Chancellor’s proposal to increase corporation tax?

[Mr Osborne]

The shadow Chancellor and the Labour party want to increase corporation tax. That is their stated policy on the legislation this House has passed. They make it pretty clear that they would increase national insurance if they ever came to office. That would be devastating for the small businesses of Enfield, and indeed of the whole country. We know what happens when there is a Labour Government. We know the impact on businesses: the high unemployment and the business closures they would create, because that is exactly what happened five years ago.

[Ms Margaret Ritchie (South Down) (SDLP)]

I welcome the commitment to the devolution of corporation tax to Northern Ireland, but there remains uncertainty on the cost to the block grant. Will the Chancellor outline the possible cost to the block grant over an estimated period, and will he outline the timeline for devolution, predicated on the outcome of cross-party talks?

[Mr Osborne]

The costs of Northern Ireland reducing, for example, corporation tax rates to the level seen in the Irish Republic have been set out and are the subject of discussions that we have had over the past year with the Northern Ireland Executive. We need to be sure—this is about the taxpayers across the whole of the UK—that if we go ahead with this step, which we are very well disposed towards, the Northern Ireland Executive will be able to manage the pressure on their resources. That will be one of the topics for discussion in the cross-party talks. If the cross-party talks are successful we could, as I said in the statement, introduce legislation in this Parliament.

[David Morris (Morecambe and Lunesdale) (Con)]

In the past four-and-a-half years, my constituency has benefited from the Chancellor’s policies. Some £700 million has been invested in my constituency, and I thank him for that. The greatest gift of all is the Government’s absorption of VAT on hospices. Does he agree that that will help St John’s hospice, and that the policy is long overdue? I thank him for listening.

[Mr Osborne]

My hon. Friend is a great champion of his constituency in Lancashire. He has raised with me and the rest of the Government the great work that St John’s hospice does and the unfair treatment, in comparison with the NHS, that it and other hospices have endured because of VAT. We have listened to him and to other hon. Members and have taken this step forward. We wish the staff at St John’s well with all the great work they do.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I welcome the belated recognition from the Chancellor of the importance of investment in the regions, but may I remind him that the west midlands has the second highest number of unemployed and the second lowest growth in employment in the country? What provisions are there in the Budget to respond to the proposals in the joint submission by the Black Country and Greater Birmingham and Solihull local enterprise partnerships? Those proposals are designed to expand the black country enterprise zone and the transport infrastructure between the two areas to ensure that Birmingham and the black country become the powerhouse of the west midlands.

[Mr Osborne]

I am absolutely ready to engage with authorities, including of course Labour authorities, in Birmingham and in the rest of the west midlands on what more we can do to invest in the west midlands. We have had a good and productive cross-party relationship with the Labour leaders in Manchester, and I would like to see that replicated in Birmingham, with Albert Bore, and with the Conservative, Labour and Liberal Democrat authorities in the black country. We are willing to do that and to hear their good ideas.

A number of proposals have been made on enterprise zones. We will make an announcement in the Budget. A lot of good ideas have come in. We were not ready to assess all the different bids to make a decision in time for the autumn statement, but we will do that in time for the Budget.

[James Morris (Halesowen and Rowley Regis) (Con)]

I welcome the Chancellor’s statement, particularly his commitment to new spending on the NHS. Does he agree that we can invest in things such as the new Midland Metropolitan hospital in Sandwell and improved services at Rowley Regis hospital only if we stick to our long-term plan and have strong economic growth?

[Mr Osborne]

I have visited with my hon. Friend the great local NHS that he does so much to support and have seen his commitment to major capital investment in new hospital services. I hope his area will also benefit from the new £1 billion fund for improving primary care facilities so that we can deliver secondary care-style services in our communities, working with our GPs. That will be a huge investment, on top of the big investment he has already secured for his area.

[Lilian Greenwood (Nottingham South) (Lab)]

Given that one in five workers are earning less than the living wage, that wages have fallen further in this Parliament than in any Parliament since Victorian times, and that the Chancellor is spending billions of pounds more on tax credits and housing benefit for working people, is it any wonder that tax receipts are lower than expected and borrowing is higher? Does he finally understand that the cost of living crisis he has created for my constituents is self-defeating and the very reason he has had to break his promise on the deficit?

[Mr Osborne]

The hon. Lady neglected to say that in her constituency unemployment has fallen by 17%—[Interruption.] That seems to be a source of disappointment to the local Labour MP. It should be a source of encouragement to people living in Nottingham South that jobs are being created and that people can get them. However, we have to ensure that people have the right skills to get those jobs, which is why we are supporting apprentices in her constituency. Of course, people in Nottingham would see themselves returned to the economic instability and crisis of the past if there were another Labour Government.

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

I thank my right hon. Friend for his comments about postgraduates and science investment and for the billions of pounds he is proposing to invest in south-west transport infrastructure. Does he recognise that Plymouth’s priority is a sustainable railway line that delivers more three-hour train journeys between London and Plymouth and ensures that we get trains into Plymouth before 9 am in order to deliver the city deal?

[Mr Osborne]

My hon. Friend has been a great champion for Plymouth—I have visited some of the economic developments taking place there with him—including for better rail services, and the work on how to improve those services is under way because of his interventions. In addition, there are now major improvements on roads into the south-west. There was never any investment into the south-west when there was a Labour MP representing his constituency. This is all proof that Conservatives in the area are champions for the south-west and are delivering for the region.

[Jonathan Ashworth (Leicester South) (Lab)]

The Chancellor asked in 2010 that we judge him on whether he balanced the books by 2015, and he is set to fail that test. Will he explain why, compared with March, he has had to revise up borrowing for this year and next by £12.5 billion?

[Mr Osborne]

The hon. Gentleman, like the shadow Chancellor, neglects to say that borrowing has been revised down for the following three years of the forecast and that the structural deficit continues to fall at the same rate. The problem for Labour is that it has been parading around the television studios for the past two weeks saying, “Wait for the autumn statement and the big deterioration in the public finances.” Unfortunately for them, it has not happened. That is the problem with a shadow Chancellor who keeps staking the credibility of the Labour party on his terrible economic predictions.

[Andrew Percy (Brigg and Goole) (Con)]

In the Humber before the last election, youth unemployment was rising, unemployment was rising, there was no real rail investment—which is hard to say with our accent—there were no significant road improvements and we were becoming worse off compared with the south of England, but now our bridge tolls have been halved and there is massive investment in our flood defences. I thank the Chancellor for his announcements. Will he assure me that our joint bid to him and the Prime Minister will be considered seriously and that the £1 billion funding over the next 15 to 20 years will be considered quickly so that we can get certainty as soon as possible?

[Mr Osborne]

As we said this week, we are giving serious consideration to the bid that my hon. Friend, his colleagues and others in the Humber estuary area put forward for major improvements in flood defences. We are already investing in flood defences this week, which was welcome news, and his proposal is a big and well-argued one to which we are giving serious consideration. As he rightly said, on top of that we have seen major improvements into the Humber and, thanks partly to his campaigning, the Humber bridge tolls came down and traffic has increased.

[Phil Wilson (Sedgefield) (Lab)]

I welcome the news that the national formulation centre will be based in Sedgefield at the North East technology park in my constituency, which was opened 10 years ago by my predecessor. Is the Chancellor aware that the chemical and other industries in the Tees valley use Durham Tees Valley airport to reach global markets and that this could be affected by the devolution of air passenger duty to Scotland? What plans does he have to ensure that small regional airports, such as Durham Tees Valley airport, in the north of England are not disadvantaged by these changes?

[Mr Osborne]

I am pleased to say that the current Member for Sedgefield probably gets a better hearing at the Treasury than the last Member for Sedgefield ever did. The formulation centre is great news for the north-east and Sedgefield, but the hon. Gentleman raises a serious point that we will have to look at. The Smith commission—and, to be fair, the Calman commission before it —recommended the devolution of air passenger duty, and we absolutely accept that recommendation. However, we will have to consider the impact, particularly on the airports in the north-east of England, which are geographically close to some of the Scottish airports. The shadow Chancellor raised the same point. I am happy to work with the hon. Gentleman and the Labour Front-Bench team, on a cross-party basis—we worked together like that on the Smith process—to see what we can do to support airports in the north-east.

[Charlie Elphicke (Dover) (Con)]

The Chancellor used to receive representations that he was doing too much, too fast, but now Labour Members think he did not go quickly enough. Given their muddled and confused position, if we were to adopt a plan from these people, what would be the implication for interest rates in particular and economic policy and growth in general?

[Mr Osborne]

Of course, Labour economic policy would increase unemployment, reduce GDP and potentially put Britain back into recession. We know that its feeble commitments on borrowing would allow at least £26 billion of extra borrowing every single year, and as has been demonstrated over the past hour or so, every Labour MP actually wants to spend more money and increase welfare bills. That is the real Labour party, and of course it would bankrupt the country again.

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

The Chancellor made just one passing reference to wages in his statement, some 42 minutes in, and small wonder. Will he confirm that the OBR has this afternoon revised down its forecast for income tax and national insurance contribution receipts through to 2018-19 by a further £11.8 billion, with £9 billion of that down to lower than forecast growth in wages? How can the worst Chancellor on wages for 140 years ever be the answer to higher living standards in the next Parliament?

[Mr Osborne]

I actually talked about tax receipts and earnings early on in the statement. I pointed out that although tax receipts were lower, crucially they were offset by lower debt interest payments, which is why we have not seen the big deterioration in the public finances that was forecast. Borrowing was lower towards the end of the period than was forecast at the last Budget; the surplus is higher than predicted; and the structural deficit is on course for the reductions we set out. That is because although tax receipts were lower, debt interest payments were also lower.

[Rehman Chishti (Gillingham and Rainham) (Con)]

I very much welcome the Chancellor’s statement, and I would like to thank him for the previous measures he introduced, which have led to youth unemployment going down and overall unemployment going down in Gillingham and Rainham, with businesses and jobs going up there. Linked to that, I thank the Chancellor for the £30 million previously given to Medway through the growth deal to support the infrastructure. Linked to that, I thank him today for the specific support given to small businesses, which are at the heart of my constituency, in creating jobs and prosperity. Linked to that, I thank him for his visit to MEMS Power Generation in my constituency, which was very much appreciated.

[Mr Speaker]

The hon. Gentleman can also thank me for my indulgence.

[Mr Osborne]

I fondly remember my visit to Gillingham and the Gillingham town strip I was given when I was there. My hon. Friend is a great champion of Gillingham’s businesses and transport links in the town. Many of the small business rate decisions we have taken today are in no small part due to the campaigning my hon. Friend has done on behalf of Gillingham’s businesses.

[Gemma Doyle (West Dunbartonshire) (Lab/Co-op)]

As the Chancellor’s Parliamentary Private Secretary passes him whatever fact is useful in answering my question, let me tell the right hon. Gentleman that earlier this year, long-term youth unemployment in West Dunbartonshire had rocketed by 625% on his watch. That is nothing to be proud of. He has driven down the living standards of my constituents and he has driven down the value of their wages. When is he going to admit that he has failed on the economy? Will he apologise to people in West Dunbartonshire for the misery he has caused them?

--- Later in debate ---

[Mr Osborne]

The Labour Chancellors in the last Government who came from Scotland in the end gave this country the highest budget deficit in its peacetime history. They left a country with high unemployment, and questions were being asked about Britain’s ability to pay its way in the world. We have turned that around: unemployment has fallen across the United Kingdom and in Scotland, and the part of our UK that is seeing the fastest rate of job creation at the moment is Scotland.

[Julian Smith (Skipton and Ripon) (Con)]

The Chancellor’s northern powerhouse vision is seeing the greatest transfer of powers and money south to north for generations. Will he confirm that in doing more to devolve powers to northern cities, rural and county areas will not lose out?

[Mr Osborne]

I can give my hon. Friend that assurance. This is a policy not just for cities, but for the shire counties that surround them. Rather like him, I represent a shire country seat outside a great northern city. This is about strengthening the transport links between the shire counties and the cities; it is about making sure that superfast broadband is available in our rural areas; it is about supporting towns and not just cities in the north of England. It is about ensuring that the whole thing is connected up in a way that it has not been before, so that the north of England has the economic clout of a great global city. I think we are well on the way to developing that.

[Sheila Gilmore (Edinburgh East) (Lab)]

Before the Chancellor of the Exchequer tells me the unemployment figures in my constituency, I of course welcome the fact that the claimant count is down—but that is not necessarily the same as unemployment, as the right hon. Gentleman knows. We are now getting closer to the point where we were through the whole of the first 10 years of the last Labour Government, so we have only gone back to where we were. However, a £6 billion increase on overall housing benefit spending over the course of this Parliament has contributed to the Chancellor’s failure to meet his deficit reduction targets. When will his Government actually tackle the underlying causes, which are high rents and low wages?

[Mr Osborne]

First, it is no good saying that the first 10 years of that Labour Government were great and that we should forget about the last three, which brought about the greatest recession since the 1920s. It is a bit like Mrs Lincoln being asked about that play.

We have taken a number of steps to try to cap housing benefit, rent increases and the housing benefit associated with them; we have introduced a cap on housing benefit payments. When we came to office, there were examples of some people receiving over £100,000 a year from taxpayers in housing benefit, which is of course totally unacceptable. We have taken those steps, and now we have the welfare cap as well. All I can say is that every time Labour Members stand up, we hear about a proposal to add to the housing welfare benefit bill, and that it would be good to hear some proposals from them to reduce it.

[Jason McCartney (Colne Valley) (Con)]

rose—

--- Later in debate ---

[Jason McCartney]

Thank you, Mr Speaker. It is my marathon training, and in that vein, I ran the London marathon for the Forget Me Not children’s hospice this year. Along with it and my local Kirkwood hospice I would therefore like to thank the Chancellor for the measures he has taken in refunding VAT. The Forget Me Not children’s hospice is recruiting two apprentices at the moment, so will my right hon. Friend continue to support apprenticeships, 4,200 of which have been created in my constituency since 2010?

[Mr Osborne]

It seems like the autumn statement is a tailor-made package for the marathon run that my hon. Friend is undertaking. In view of the brilliant work that he does in his community and the brilliant work of the Forget Me Not hospice, I am pleased that the VAT refund, along with the abolition of the jobs tax on apprenticeships, will be so welcome. My hon. Friend must send me a sponsorship form. Every year I sponsor the shadow Chancellor, so the least I can do is to sponsor my hon. Friend.

[Mr David Lammy (Tottenham) (Lab)]

As a former universities Minister, I welcome the loan scheme for masters students in the statement. However, could not the Chancellor say more about the structure of the economy? The reason why the tax receipts are so low is partly because Britain has lost 1.2 million jobs in the skilled middle section of the economy—the plumbers and the mechanics, for example. Many of those jobs have been replaced by customer services, which certainly forms the increase in London. Will the Chancellor say something about how to restructure the economy, as we have heard nothing about that today?

[Mr Osborne]

I think the right hon. Gentleman is being a little unfair about the autumn statement, but I agree with the challenge he presented to us—how to improve the productivity of the United Kingdom. The measures we take to support postgraduate loans and to support apprenticeships, alongside the education reforms at primary and secondary level that my right hon. Friends the Education Secretary and her predecessor have implemented, are all designed to try to improve the skills in the country. We are all working together to try to address the productivity challenge that we face. Frankly, we faced it for a long time in the past, as our productivity lagged behind some of our European competitors, let alone that of the rest of the world. We need to do more. That can be achieved in London partly by investments in infrastructure, including those in the Tottenham area.

[John Stevenson (Carlisle) (Con)]

For the people of Carlisle, average wages and house prices are lower than the national average. The announcements on the raising of the personal allowance and the stamp duty reforms will be extremely welcome. I fully support them. Does the Chancellor agree that when it comes to discussions about the northern powerhouse, and particularly about local government and civic reform, it is also vital that Carlisle and Cumbria are not forgotten?

--- Later in debate ---

[Mr Osborne]

My hon. Friend is, of course, absolutely right. He came to No. 11 Downing street with representatives of businesses from the whole of the north-west, and particularly with those businesses that create and support jobs in Carlisle and across Cumbria. My hon. Friend, of course, has been instrumental in getting the Government to look at the A69 and the A66 to see what more can be done to support those east-west links across the very north of England. Without him as MP for Carlisle, that study would not have happened.

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

Why does the Chancellor consistently forget to mention Hull when he is talking about the northern powerhouse, particularly when people in Hull seem to think that the northern powerhouse is a new electrical store that is opening and not the joined-up plan for the whole of the north that it is? He can redeem himself, however, by announcing today the privately financed initiative to electrify the line to Hull, for which we are all waiting.

[Mr Osborne]

Of course, we are waiting for it partly because under 13 years of the Labour Government, it never happened. We are looking at improving rail connections to Hull. I was there fairly recently and talked to Lord Haskins, the head of the local enterprise partnership. I go out of my way to say that Hull should be part of the northern powerhouse, and I have talked about the links between Liverpool, Manchester, Leeds and Hull across the east-west link of the north of England. I think there are real opportunities, alongside the flood defence programme in the Humber estuary that we have talked about. The investment in the enterprise zones there and the Siemens investment in Humberside are important. There are lots of great things happening in Hull, and the “Hook up Hull” campaign is yet another example of a great campaign that we are looking to support.

[Bill Wiggin (North Herefordshire) (Con)]

Can the Chancellor explain why he wants to introduce his stamp duty changes at midnight rather than a little further down the road?

--- Later in debate ---

[Mr Speaker]

He might have left the Chamber? In that case, we cannot take his question.

[Mr Osborne]

It was quite a good question.

[Mr Speaker]

It might be. Go on, get in there.

[Mr Osborne]

The stamp duty changes must be introduced with immediate effect today because otherwise transactions in the housing market would stop as people waited for them. Given that 98% of home buyers will see a tax reduction, that would freeze quite a large part of the market. [Interruption.] I am told that the figure in Herefordshire is 99%.

May I take this opportunity to thank you, Mr Speaker, and the Clerks for the discussions that we have had over the last few days to make this possible.

--- Later in debate ---

[Nia Griffith (Llanelli) (Lab)]

The Chancellor is quick to blame the eurozone. However, the UK now languishes as 22nd out of the 28 EU countries in terms of export growth. What specific measures will he take to improve it?

[Mr Osborne]

As I said in my statement, we face a major challenge when it comes to increasing our exports. As the Office for Budget Responsibility made clear, it has been a challenge for the British economy for the past 20 years. If anything, however, the decline in our exports has slowed down slightly in recent years, compared to what was happening under the last Government. Today I have committed myself to a £45 million fund, which will be available both to UK Trade & Investment and to the Foreign Office, to increase our trade links with the new emerging economies of the world, and to support first-time exporters in particular. Lord Livingston is doing a great job as Trade Minister, and I want to back him.

[Dr Julian Huppert (Cambridge) (LD)]

There is much to welcome in the autumn statement, including investment in the NHS and, in particular, investment in mental health. Strangely, that has not been mentioned in any of the questions so far.

I especially welcome the excellent news about the introduction of income-contingent postgraduate loans. I agree with what was said earlier by the right hon. Member for Havant (Mr Willetts). Indeed, when he was a Minister I worked with the National Union of Students and CentreForum to persuade him to do exactly this, so it is great to see it happening. More people from disadvantaged backgrounds obtain undergraduate degrees, but then find that they cannot afford to engage in postgraduate study. This welcome and long-awaited change will lower a barrier to social mobility.

[Mr Osborne]

I thank my hon. Friend for what he has said. I should have been extremely disappointed if my announcement of a big improvement in our support for postgraduate students had not been welcomed by the Member of Parliament for Cambridge. He is absolutely right: the lack of financial support available to people doing post-grads is indeed a barrier, which falls particularly on those from low-income backgrounds, and which has been identified as a real problem in a number of reports on social mobility. I am glad that we have been able to work together to bring about this change.

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

The OBR’s analysis clearly states that borrowing over the forecast period will increase above and beyond what was forecast back in March, predominantly as a result of the reduction in tax receipts. Far from rebalancing the economy, and failing to meet his own deficit reduction targets, the Chancellor is presiding over a low-pay, zero-hours-contract economy in which one in five people—one in three in my constituency—are paid below the living wage. Is it not an insult to the 3 million people on the lowest incomes, and an insult to the value of British fair play, that the Government will be hammering them yet again with a potential cut in tax credits?

[Mr Osborne]

Today we have increased the personal allowance, which increases the number of low-paid people taken out of income tax to 3.5 million.

It is interesting to look at the caricature of what is happening in this country that Labour Members have tried to present. They said that all the jobs were part-time; it turns out that 85% of them are full-time. They talked about the gender pay gap; of course that remains a challenge, but it is at its lowest level in British history, and has fallen since the period of the last Labour Government. They complained about the abuse of zero-hours contracts; I had to sit there for 13 years listening to Labour Chancellors, and never once did they introduce a reform of zero-hours contracts. That reform is now taking place, and we are ending the abuse that comes with the exclusive contracts.

Ultimately, the people who suffer most when the economy fails—when economic stability is destroyed and unemployment rises—are the poorest people in the country. That, sadly, was their experience under a Labour Government, but under this Government, employment is growing and economic security is returning.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

I warmly welcome the statement. I welcome, for instance, the support for small businesses, apprenticeships and the NHS, but the news that the Pacer trains will go from the northern franchise will be particularly welcome in my constituency. Will my right hon. Friend continue to prioritise infrastructure investment as a driver of economic growth?

[Mr Osborne]

Yes, I will. When it comes to these Pacer trains—[Interruption.] Labour Front-Benchers had all those years in which they could have got rid of the Pacer trains. They complain about them now, but what about all the endless Labour Transport Secretaries who did nothing about them? This is happening now, with a Conservative Chancellor, a Conservative Transport Secretary, and a Conservative Member of Parliament for Harrogate and Knaresborough.

[Guy Opperman (Hexham) (Con)]

People in the north-east will welcome the news about the NHS, hospices—including those in my constituency—carers, who will set great store by the Chancellor’s announcement, and home buyers. I also welcome the Chancellor’s comments about northern airports and air passenger duty. May I urge him to revisit the north-east in the spring, when we will introduce him to a region that has the most technology start-ups outside London, and has experienced the fastest rate of growth in private sector businesses over the last quarter?

[Mr Osborne]

Of course I am always very happy to visit the north-east. I was there quite recently, and will be going again very shortly.

There have been a number of great pieces of news for the north-east this week. There are the improvements to the A1 around Newcastle and Gateshead and up to Ellingham, and the commitment to look at dualling beyond that. There are the improvements that we are looking at for the A69 and the A66, which is something that my hon. Friend has raised with me personally. There is also the big investment in science in the north-east. I am particularly pleased to support investment in the brilliant work that Newcastle university does on ageing.

[Mr Speaker]

I will shortly call the Chancellor of the Exchequer to move a provisional collection of taxes motion. Copies of the motion are available in the Vote Office.

In accordance with our Standing Order No. 51 on ways and means motions,

“A Minister of the Crown may without notice make a motion for giving provisional statutory effect to any proposals in pursuance of section 5 of the Provisional Collection of Taxes Act 1968; and the question on such a motion shall be put forthwith.”

I call Mr Chancellor of the Exchequer to move the provisional collection of taxes motion formally.

ECOFIN

George Osborne Excerpts

Wednesday 26th November 2014 Written Statements

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

A meeting of the Economic and Financial Affairs Council was held in Brussels on 7 November 2014. Ministers discussed the following items:

State of play of budget negotiations

The Council recognised the unprecedented scale of this year’s revisions to VAT and GNI balances and invited the Commission to propose a revision to the regulation on own resources enabling member states concerned to defer the required payment, without incurring any interest.

Parent subsidiaries directive

The Council discussed the proposal for a Council directive amending directive 2011/96/EU on the common system of taxation applicable in the case of parent companies and subsidiaries of different member states. The Council will aim to agree the text at the Council meeting on 9 December 2014.

Financial transaction tax

The Council held a state of play discussion on the proposal for a Council directive implementing enhanced co-operation in the area of a financial transaction tax.

Standard VAT return

The Council held a state of play update on the proposal for a Council directive amending directive 2006/112/EC on the common system of value added tax, as regards a standard VAT return.

EU statistics

Ministers adopted the annual set of Council conclusions on EU statistics.

Preparation of the 20th conference of parties to the United Nations framework convention on climate change (UNFCCC)

Ministers agreed a set of Council conclusions in preparation of the 20th conference of parties to the United Nations framework convention on climate change (UNFCCC), which will take place in Lima from 1 to 12 December 2014.

EU Budget (Surcharge)

George Osborne Excerpts

Monday 10th November 2014 Commons Chamber

[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?

[Hon. Members]

More!

[Mr Andrew Tyrie (Chichester) (Con)]

This is almost like Budget day. Was it not crass insensitivity on the part of the Commission to make such a demand on several countries in this way? The Government have negotiated an interest-free deferment and a reduction in the sum outstanding, and exactly what those are worth is something that the Treasury Committee will want to examine with the Chancellor in public session in due course. In the meantime, will he give us further details to assure us that such demands will not be made on us or any other country again?

[Mr Osborne]

I welcome my hon. Friend’s support for what has been announced. There was agreement around the table that we should permanently change the EU budget rules. We shall have to consult the European Parliament on that, but it does not have a veto. We should change those rules so that if there is an exceptionally large payment or adjustment in future, as there was this time, member states cannot be bounced with a bill like this. There was strong support around the table for that change.

[Mr Frank Roy (Motherwell and Wishaw) (Lab)]

On the UK rebate, will the Chancellor give us the name of just one European Finance Minister who changed their mind after listening to him?

[Mr Osborne]

As the hon. Gentleman should know, the rebate involves a discussion between member states and the European Commission, which is why we were discussing with the Commission, in parallel, the size of the British rebate. Frankly, any question from Labour Members about the rebate is a bit rich, given that they gave up half of it.

[Sir William Cash (Stone) (Con)]

My right hon. Friend is to be congratulated on getting rid of these punitive interest rates. I hope that he will refer the new rules that were decided at ECOFIN last Friday to my Committee so that we can scrutinise them properly. Is there any sound reason for our making any payment at all if those rules do not deal with the problem of other member states including their black economy in the statistical base that they use when putting forward their proposals? That greatly affects the whole basis on which the calculations are made.

[Mr Osborne]

My hon. Friend raises an important point about the quality of the statistics. It was raised by the European Court of Auditors last week; it was also made forcefully by the Dutch Finance Minister at ECOFIN. The key point is that we can examine the numbers, and if there are errors we will get money repaid to us at the end of next year.

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

Can the Chancellor explain why the EU Commissioner said on 27 October that the UK would benefit in any event from the rebate that was due? Also—this is at the heart of the problem—what evidence does the right hon. Gentleman have to suggest to the House, other than in a gross act of deception worthy more of Goebbels than of the British Chancellor of the Exchequer—

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[Mr Speaker]

We are grateful.

[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—

[Ed Balls]

indicated dissent.

[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 Andrew Lansley (South Cambridgeshire) (Con)]

I congratulate my right hon. Friend on securing the deal last Friday. He was good enough to recall that, two weeks ago in the Chamber, I said that the rebate should apply to the additional demand on the UK’s contributions. Despite the shadow Chancellor’s assertions just now, the Leader of the Opposition said nothing about the rebate two weeks ago; he said nothing until my right hon. Friend actually secured it. Will my right hon. Friend confirm that the rebate will still apply to UK net contributions in future years, as it would have done before? [Interruption.]

[Mr Osborne]

I am sorry that the hon. Member for Stoke-on-Trent Central (Tristram Hunt) wants to leave, because we were just talking about the presence of the Labour leader. As the hon. Gentleman said at the weekend:

“‘I never believed the answer to Labour’s problems was to show people more of Ed Miliband.”

My right hon. Friend the Member for South Cambridgeshire (Mr Lansley) is right; on 27 October, he asked my right hon. Friend the Prime Minister about the position of the rebate. The Prime Minister said it was:

“One of the important questions that needs to be asked and properly answered”.—[Official Report, 27 October 2014; Vol. 587, c. 30.]

He said that that is what we are seeking to do. So my right hon. Friend the Member for South Cambridgeshire is right to have asked the question—of course nobody from the Labour party did—and that is why we were engaged in the intensive discussions to nail down the rebate.

[Kate Hoey (Vauxhall) (Lab)]

Does the Chancellor not agree that this whole fiasco just shows that we are paying far, far too much to the European Union, that we should be seeking ways of getting back control of our country, our own borders and our own system of justice, and that the sooner we get a referendum, the better?

[Mr Osborne]

I completely agree with the hon. Lady, which is why I made the point at the end of my remarks that the whole episode demonstrated why we needed reform in Europe. She, of course, is one of a growing number of Labour MPs who join us in wanting to see that referendum—I hope she can persuade the Labour Front-Bench team.

[Mr Kenneth Clarke (Rushcliffe) (Con)]

Does the Chancellor agree that whatever deal he had obtained last Friday—even if he had come back bearing sackfuls of tribute in gold—it was wholly predictable that hard-line Eurosceptics would immediately say that this was robbery by Brussels and that the shadow Chancellor would immediately claim that, in some mysterious way, he could have produced some superior outcome for this country? Would the Chancellor accept my congratulations on a surprisingly good result that he achieved at that meeting, which I strongly suspect was a friendly discussion between 28 Finance Ministers and a Commissioner on a technical subject, and did not resemble the gunfight at the O. K. Corral, which is how everybody has to present European Council meetings and the debates we have on these subjects in this House?

[Mr Osborne]

I thank my right hon. and learned Friend for his support; he is not always fulsome in his support of our European policies, so that is particularly appreciated. He is right that around the table were other members states that had been hit by this very large payment—the Dutch, the Italians, the Greeks and others—and therefore there was a lot of sympathy for trying to change the rules. In parallel, as he would know, there is a discussion with the Commission about the British rebate, which is properly a matter for the discussion with the Commission rather than ECOFIN.

[Mr Nigel Dodds (Belfast North) (DUP)]

Does the Chancellor accept that, whatever is said about the rebate, this substantial bill for the United Kingdom still represents an EU penalty for stronger economic performance? Does he not think that there are better ways to spend £850 million than handing it over, albeit next year, to the European Union?

[Mr Osborne]

I agree with the right hon. Gentleman that the European Union could spend the money far better than it does through reform—that is the reform we are seeking to achieve. Of course membership of the European Union does mean adjustments to the payments each year, and sometimes Britain has been a beneficiary of them—indeed, when the shadow Chancellor put the country into recession we received a tiny bit of money back from the EU. That is one of the regular features of membership but, as the right hon. Gentleman says, it demonstrates why we need further reform in Europe.

[Martin Horwood (Cheltenham) (LD)]

The last time the shadow Chancellor mentioned the EU rebate in this House appears to have been in 2005. Does the Chancellor agree that, if the shadow Chancellor really thought the bill we were being presented with by the Commission was £800 million out, it is curious that he did not find time to mention it before this week?

[Mr Osborne]

My hon. Friend is absolutely right about that. Of course the only involvement the shadow Chancellor has ever had with the rebate is giving away half of it.

[Stewart Hosie (Dundee East) (SNP)]

The rules that determined this payment were agreed in May, without discussion. The UK participated fully in those discussions, and had two formal opportunities to respond but did not do so—indeed, there was not a single signal from the UK that there was a problem until late October. Is the truth not that this performance by the UK Government has less to do with payments to Europe and more about pandering to the open wound of anti-Europeanism from the Members who sit behind the Chancellor?

[Mr Osborne]

If the separatists had had their way, Scotland would not be in the European Union. But I make this point: Commission Vice-President Georgieva confirmed in the press conference afterwards that there was no way that member states could have known the net figure until 17 October, which was when the official meeting took place in Brussels. That has also been confirmed by the Dutch Prime Minister and the President of the European Commission. Again, this is one of those examples in which the shadow Chancellor says that he knew better than the rest of us, but those Heads of Government confirm that Britain could have known only in late October.

[Heather Wheeler (South Derbyshire) (Con)]

Does my right hon. Friend agree that not only is this a superb deal for the UK, but if the people vote for a Conservative Government in May 2015, the people will have a vote in a referendum about it?

[Mr Osborne]

As my hon. Friend says, the key point is that we are offering the people of Britain a vote on the membership of the European Union, which we will then seek to reform. Interestingly, it is not only the hon. Member for Vauxhall (Kate Hoey) who has made her point on Europe, but the last Labour Chancellor, who says he now supports a referendum on Europe. It would be interesting to see what the shadow Chancellor really thinks.

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

I am still trying to find a serious commentator who did not think that the rebate would apply to the British contribution. All this banter covers the fact that the Chancellor has not made any progress in reforming the system that led to this completely absurd demand, which made Britain pay and France and Germany receive money.

[Mr Osborne]

I agree that this was a totally unacceptable approach from the previous European Commission. To be fair to the new budget Commissioner, she has engaged constructively and got the rules changed so that it does not happen again. On the hon. Lady’s comment about finding a serious commentator who thought the rebate might not apply, I know the shadow Chancellor is not a serious commentator but he did not at any point raise this issue. The calculation on interest payments that he used in The Guardian on Friday was based on the assumption that we would pay £1.7 billion—that is how he came up with the number that he used to make his point. As a result, he did not expect the rebate to be applied or to be applied at this rate.

[Sir Edward Leigh (Gainsborough) (Con)]

The shadow Chancellor says that this reduction is entirely down to the rebate. So, if Tony Blair had not given away half the rebate, would we have got a 100% reduction?

--- Later in debate ---

[Mr Osborne]

Sadly not is the short answer to my hon. Friend’s question. The Prime Minister we should credit for the rebate is Margaret Thatcher.

[Paul Flynn (Newport West) (Lab)]

May I try to help the Chancellor? He is in danger of becoming illiterate as well as innumerate. The word “result”, which he used once today and three times last week, can mean a win, a loss or a draw or, as in this case, a confidence trick.

[Mr Osborne]

I take it as a win for Britain. Again, I do not want to follow lessons from Labour MPs about how to negotiate in Europe when they gave up much of the rebate, signed us into the eurozone bail-outs, gave up many of our vetoes over many years and refused to give the British people a say in referendums in key treaties.

[Mr David Nuttall (Bury North) (Con)]

Does my right hon. Friend know who my constituents believe is most in need of this money, the UK or the EU?

[Mr Osborne]

At a time when budgets are tough, I completely understand why people want the maximum amount of money possible to be spent at home, but the truth is that we have been able to get a reduction in the EU budget because of the tough negotiations of the British Prime Minister. That is what we are able to achieve by standing up for Britain’s interests in Europe.

[Mark Durkan (Foyle) (SDLP)]

Will the Chancellor help us better to understand what he is presenting as a masterful feat by telling us: what he did not know; when and for how long he did not know it; and why he did not know it?

[Mr Osborne]

It was not clear that this exceptional demand for a payment would have the British rebate applied or indeed to what extent the rebate would be applied. The amount was confirmed to us only last Thursday evening.

[Chris Heaton-Harris (Daventry) (Con)]

Is the Chancellor surprised by the number of EU budget experts who now seem to be appearing on the Opposition Benches? Does he, like me, wonder where they all were when former Chancellors were happily signing off flawed EU accounts or giving away our rebate?

[Mr Osborne]

My hon. Friend is absolutely right; they gave into all Europe’s demands and handed over more and more British taxpayers’ money. They were neither wise before this event, nor particularly wise after it.

[Barry Gardiner (Brent North) (Lab)]

Can the Chancellor confirm that when the EU budget is reconciled, it will show that the surcharge to the UK was paid in full, that it will show quite separately that there was a rebate that was applied, and that therefore his attempts to link the two are simply nonsense?

[Mr Osborne]

What we achieved was the simultaneous application of the rebate, so we will pay only £850 million.

[Mr Robin Walker (Worcester) (Con)]

I congratulate my right hon. Friend on maintaining the application of the UK rebate in a way that the Opposition utterly failed to do when they were in power. Would he have been strengthened in that position had he maintained a euro preparations unit in the Treasury?

[Mr Osborne]

The first and kindest cut of all was closing down the euro preparations unit, which I discovered in the Treasury on coming to office.

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

I know that the Chancellor did not want to answer the question from my hon. Friend the Member for Motherwell and Wishaw (Mr Roy), but I will try again. Can he please name one EU Finance Minister who supports his version of events?

[Mr Osborne]

All 28 countries, and therefore 27 other Finance Ministers, agreed to our plan, and the plan put forward by other member states, to change the rules so that we do not have to pay on 1 December, to enable us to delay payment, to ensure that no interest will be paid during that delay, to ensure that any errors in the accounts will be rectified and that we will be compensated for them next year, and to ensure that this never happens again. We got that coalition of support around the table. The discussions on the rebate, as I am sure the hon. Lady knows, happen between the UK and the European Commission.

[Duncan Hames (Chippenham) (LD)]

After all the to-ing and fro-ing over who should pay what, would not the best way to thank our European friends be to show them how to make savings in the cost of Brussels so that the costs paid by each country becomes more affordable, both for us and for their shrinking economies?

[Mr Osborne]

We want to achieve reform in Europe. The hon. Gentleman mentions Brussels, and I suggest that they could make a start by staying there and not going to Strasbourg.

[Graham Stringer (Blackley and Broughton) (Lab)]

Some €1 billion is still an exceptional surcharge on this country’s finances. Will the Chancellor put his deal to a binding vote in this House?

[Mr Osborne]

We have the normal scrutiny methods. Indeed, the Chair of the Treasury Committee and I have already discussed my happily answering questions from members of the Committee, and of course my hon. Friend the Member for Stone (Sir William Cash) has his Committee as well.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

Does my right hon. Friend agree that it is worrying that the shadow Chancellor forgot to mention the rebate before today? Has my right hon. Friend had a chance to make a detailed calculation of exactly how much less Britain would have to pay had Labour not given away the rebate in the first place?

[Mr Osborne]

Of course, giving away the rebate cost Britain billions a year. My hon. and learned Friend is right to draw attention to the pattern of forgetfulness on the Opposition Front Bench. They forget about the deficit and about immigration, and now they forget about the rebate. It reminds everyone why the British public are quite clear that they are unfit for government.

[Sammy Wilson (East Antrim) (DUP)]

Regardless of whether the bill has been rebated, does the Chancellor not recognise that for many UK citizens facing cuts in public services, £850 million extra going to a body which has not had its accounts signed off for 19 years, wastes billions through fraud and spends money on vanity projects, is not good value and that they object to it?

[Mr Osborne]

I completely understand the anger and frustration felt by all our constituents at the way money is spent by the European Union. That is why we are seeking reform and why both the hon. Gentleman and I would like to see the British people asked for their consent in a referendum.

[Sir Tony Baldry (Banbury) (Con)]

Was my right hon. Friend surprised to see the shadow Chancellor in his place here today? My reading of the Daily Mirror was that the shadow Chancellor was going to make a speech in support of the Leader of the Opposition—I apologise to the House; I misread that. The shadow Chancellor is going to be making a speech in support of the Leader of the Opposition in the next fortnight.

[Mr Philip Hollobone (Kettering) (Con)]

Confirmation that the rebate will be applied is clearly to be welcomed, but the blunt truth is that this country faces a bill £850 million larger than it faced two weeks previously. Given that we now pay more than £10 billion a year as our membership fee for this organisation, my constituents in Kettering feel that the bill is too large. Will the Chancellor confirm that a majority Conservative Government will renegotiate the membership fee after the next election?

[Mr Osborne]

As I say, I understand the frustration that many people feel about the way their money—hard-earned taxpayers’ money—is spent in Europe. That is why we are seeking a reform of Britain’s relationship with Europe and a reform of the way Europe works for all its citizens, and why we are seeking to put that to the British people in a referendum. With reference to my right hon. Friend the Member for Banbury (Sir Tony Baldry), it is good to see the shadow Chancellor here, breaking off from the Balls family pastime of undermining the Leader of the Opposition.

[Nia Griffith (Llanelli) (Lab)]

The Chancellor read out to us the Prime Minister’s response to the right hon. Member for South Cambridgeshire (Mr Lansley) about the rebate, but can he explain why, in all that feigned anger, the Prime Minister did not explain about the rebate? Was it because the Chancellor had not shared that knowledge with the Prime Minister, or was it because the pair of them were in it together, ready to pull out a white rabbit last Friday?

--- Later in debate ---

[Mr Osborne]

I am not sure what a white rabbit has to do with it, but it was not clear that the rebate would apply. That is precisely why we were engaged in intensive discussions with the European Commission, and it is why, universally in this House and in the media, people were talking about a figure of £1.7 billion. It was not clear, but we achieved the application of the rebate, and as a result the bill is £850 million.

[Mr James Arbuthnot (North East Hampshire) (Con)]

I think I am missing something here. Can my right hon. Friend confirm that the only reason we are discussing the payment of an EU surcharge at all is because of the stunningly impressive handling of the economy by my right hon. Friend?

[Mr Osborne]

My right hon. Friend is very kind. One of the reasons why this surcharge, as he puts it, has arisen is because of the strong UK economic performance relative to the continent of Europe. We should not be happy about the poor performance of the European continent. We want the European continent to be performing better.

[Mr David Crausby (Bolton North East) (Lab)]

Has not Britain had the rebate for a very long time? Can someone therefore tell me why the Chancellor has only just found out how it works? He was taken by surprise by the £1.7 billion bill in the first place, and now he belatedly discovers the rebate. How can the House have any confidence that the Chancellor knows what is going on?

[Mr Osborne]

The House can have confidence that this Government fight for Britain’s interests in Europe, because we have cut the EU budget, got us out of those disastrous eurozone bail-outs that the Labour Government put us into, and had the rebate applied—a rebate which, of course, the hon. Gentleman’s party wanted to get rid of.

[Ben Gummer (Ipswich) (Con)]

Given the fact that the shadow Chancellor and almost everyone on the Opposition Front Bench with him has been completely absent from the airwaves in the past few days in support of their leader, one would have thought that they had ample opportunity to proffer advice on the rebate. I did not hear it. Did my right hon. Friend hear it privately from them?

[Mr Osborne]

I do not want to discourage members of the Opposition Front-Bench team from taking to the airwaves and criticising their leader, because it is very good. It is only after the event that we hear that they think he is useless. They did not tell us that beforehand. My hon. Friend is right. The Opposition did not raise the issue—[Interruption.] The shadow Chancellor calls me to the House of Commons, he has nothing to say for himself and he has no answer to the fact that his own article reveals that he thought we were going to be paying £1.7 billion. It just confirms that he is not up to the job.

[Clive Efford (Eltham) (Lab)]

I think the Chancellor should calm down when it comes to leadership and loyalty. Why did we have a by-election last month that his party lost to the UK Independence party and why do we have another one this month? Will he confirm that the ECOFIN Ministers he discussed the rebate with are of the opinion that we will pay no less than we would have done if we had paid the full £1.7 billion on 1 December and then received our rebate?

[Mr Osborne]

As I have already said, it was not clear that the rebate would apply, which is why the shadow Chancellor, in his article in The Guardian, uses a number that assumes that we are going to pay £1.7 billion. That is what he thought we were going to pay, but we negotiated hard and had intensive discussions, and as a result we have got this result for Britain.

[Mrs Cheryl Gillan (Chesham and Amersham) (Con)]

Will my right hon. Friend confirm that it was the UK’s leadership in Europe that resulted in the deal being struck that has enabled all nine countries that were being surcharged by the EU to delay their payment until 1 September next year? Does he agree that such leadership in Europe bodes well for our renegotiations next year, after the Conservative party has won the next general election?

[Mr Osborne]

My right hon. Friend is absolutely right. Of course, we needed the agreement of all the member states for this budget deal. Any one of them could have blocked the deal, but we got the support of all the other 27 member states, not just to delay the payment and have no interest applied but permanently to change the rules.

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

For the fourth time, I think, in this House, may I press the Chancellor to tell us which Foreign Minister or which Commission official agrees with his interpretation of the rebate?

[Mr Osborne]

As I say, it required the agreement of all 28 member states to get the budget deal at ECOFIN. The discussion on the British rebate was a discussion had with the Commission. The Commission confirmed that the rebate would apply, and apply in the amount it did, only on Thursday night. The hon. Gentleman also serves on the Treasury Committee. If he, like every other Labour Member, was so wise about the number, why were they not saying this beforehand? Not a single Labour MP, either in the Chamber of the House of Commons or on the media, said anything other than that we would be paying £1.7 billion. They are trying to be wise after the event, and they have been found out.

[Mark Pritchard (The Wrekin) (Con)]

Does the Chancellor agree that one additional way to help the EU budget would be to clamp down on corporate tax evasion in places such as Luxembourg?

[Mr Osborne]

My hon. Friend is right that we need fair tax arrangements. The European Commission is looking at that through some of its state aid action on particular tax deals done in some member states. However, we do not want to move to a common tax policy across Europe whereby there is a single corporation tax rate and the like. I am in favour of competitive business taxes, but competitive business taxes that are fairly paid. That is the policy that we pursue in the UK and that we are seeking international agreement on and making a lot of progress on.

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

Since the Council meeting on Friday, the Finance Ministers of Ireland, Austria and the Netherlands have all said that the UK will still pay the full amount. Is the Chancellor seriously arguing that they are wrong, and if so, can he point to a single measure that will cut the overall bill for the UK taxpayer over the next two years?

[Mr Osborne]

We were presented with a bill for £1.7 billion and we are going to pay about £850 million, so in my book that is a cut.

[Mary Macleod (Brentford and Isleworth) (Con)]

May I congratulate the Chancellor on the excellent deal that he has achieved in Europe? As a better woman than me once said, there is no such thing as Government money, only taxpayers’ money. Does he agree that the people who benefit from this negotiation are hard-working British taxpayers?

[Mr Osborne]

My hon. Friend is right. Of course, this is not the Government’s money: it is the people’s money—taxpayers’ money. People work very hard to earn money and then they pay taxes on it, and it is the policy of the Conservative party to keep taxes as low as possible.

[Gavin Shuker (Luton South) (Lab/Co-op)]

Given that the relationship between GDP and the European Union budget was understood before this series of events, and yet the Government appeared to be asleep at the wheel, what was the reason for their reluctance in getting their act together properly in the first place? Was it the Chancellor’s unwillingness to fess up to the Prime Minister or to stand up to his Back Benchers?

[Mr Osborne]

I am not sure it was worth waiting 45 minutes for that question. The Prime Minister of the Netherlands, the President of the European Commission and the vice-president of the European Commission with responsibility for the budget all said that it was not clear until late October what the amount would be. That is why, the moment we found out, we got it on the European Council agenda, and the European Council agreed that it would be discussed at ECOFIN.

[Paul Uppal (Wolverhampton South West) (Con)]

This weekend marked the 19th year in which the European Union has failed to sign off its accounts. Does that not make the case for a referendum and reform compelling? The harsh binary truth is that during this parliamentary Session the only Members who have pushed that agenda are sitting on this side of the House.

[Mr Osborne]

My hon. Friend is absolutely right. We are pushing the case for reform in Europe while the Opposition want no reform in Europe. The people of Wolverhampton and elsewhere in the country have a very clear choice at the election. If they vote Labour, they will pay more to Europe; there will be no reform in Europe; Europe will continue to hold back the British economy because it is unreformed; and, of course, they will have no say. If they vote for the Conservative party, they will get a say on Britain’s future in Europe.

[Wayne David (Caerphilly) (Lab)]

The Irish Finance Minister has said:

“My understanding is that the UK will pay the whole amount”.

Is the Chancellor seriously saying that the Irish Finance Minister is wrong?

--- Later in debate ---

[Mr Osborne]

As I have already explained, the negotiation and discussion on the rebate are had with the European Commission. The full amount, which was universally discussed in this House beforehand and by the shadow Chancellor in The Guardian, was £1.7 billion. As a result of our negotiation and intensive discussion, we will be paying £850 million.

[David Rutley (Macclesfield) (Con)]

I am pleased that my right hon. Friend has secured a change in the way that the surcharge formulas are calculated. Can he confirm that the UK will never be penalised in this way again for a strong economic performance?

[Mr Osborne]

We will never face such a large payment or such an unexpected period of time in which to pay, which is why we are getting permanent changes to the budget rules. That requires the consent of all member states, and we have that.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

The UK’s deficit at the moment is the worst in the European Union. Will the Chancellor be selling that as a result as well?

[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.

[Ed Balls]

It’s going up!

[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.

[Mr Marcus Jones (Nuneaton) (Con)]

I congratulate my right hon. Friend on this deal, but the situation adds to the frustration that many of my constituents have with the EU. Does that not show that we need to renegotiate such matters and then give people in my constituency, my right hon. Friend’s constituency and constituencies across the country an in/out referendum so that they can decide whether they want to stay in the EU?

[Mr Osborne]

My hon. Friend is absolutely right. People in Nuneaton and across the country will have their chance to vote on whether Britain stays in the European Union. I want to see reform in Europe and I want to put that reform to the British people. The only way the British people will have that say is if they vote for my hon. Friend and other Conservative Members.

[Kerry McCarthy (Bristol East) (Lab)]

My constituents would have expected the Chancellor to negotiate the best possible deal on a rebate. They would also have expected him to negotiate down the surcharge. Is it not the case that he has not done the latter at all? It is not a penny less than it would have been and the accounts will show that the figure is still £1.7 billion.

--- Later in debate ---

[Mr Osborne]

My hon. Friend makes a good point that the hon. Lady would have paid the whole lot. We are paying £850 million because of the application of the rebate.

[Andrew Bridgen (North West Leicestershire) (Con)]

I congratulate the Chancellor on halving the recent EU demand in record time. I wish he had just continued a little longer, because with his skills he might have got us a net refund. Does he agree that for those for whom this result is not enough, nothing would ever have been enough? Does he also agree that, however distasteful we might find it, while we are in a club we have to abide by the rules, and that only a future Conservative Government will give the people a say—and a chance to leave the club—in a referendum in 2017?

[Mr Osborne]

My hon. Friend is right. Part of the reform we seek in Europe is reform to make sure that the money that British taxpayers pay is well spent. Indeed, we want to make sure that the money of all European citizens is well spent in Europe. He is absolutely right that the only way to get that reform is with a Conservative Government, and then the British people can decide in a referendum.

[Ian Lucas (Wrexham) (Lab)]

Will the Chancellor name one European Commission official who asserted to him, or will he release correspondence from the European Commission indicating, that the rebate did not apply in this case?

[Mr Osborne]

As I have already said, the rebate and its size were only confirmed to us by the European Commission—by the vice-president for the budget—last Thursday night.

[David Mowat (Warrington South) (Con)]

Roughly speaking, the previous Government gave away 20% of our rebate. Based on that logic, they have just cost us a further 20% of £1.7 billion. Does the Chancellor agree that they have just cost us another £340 million?

[Mr Osborne]

My hon. Friend underestimates what the previous Labour Government cost us. They actually cost us billions of pounds a year in the rebate that they gave away. That is yet another reason why the idea that they could fight for our interests in Europe is obviously false: we saw what they did when they were in office.

[Bill Esterson (Sefton Central) (Lab)]

My constituents want a Chancellor who will work with our European partners to create well-paid jobs for ordinary people to reverse the decline in living standards over which he has presided. What they do not want is a Chancellor who tries to pull the wool over their eyes after failing to negotiate with our partners, while making false promises and claims about a budget rebate that was always going to happen.

[Mr Osborne]

As I have said, we worked with the other member states to achieve the deal at ECOFIN. We needed the agreement of the other member states on the delay, paying no interest and the permanent change in the rules. It is always good to get lectures from Labour Members about working with and supporting colleagues, so we look forward to the shadow Chancellor’s speech supporting his leader in the next couple of weeks. [Interruption.] The right hon. Gentleman nods, and I know that he is a man true to his word.

[Mark Garnier (Wyre Forest) (Con)]

Much of this discussion has centred on the rebate, but has my right hon. Friend done any calculations of the value of the forgone interest that would be paid as a result of the extension of the date for this payment from 1 December to the middle of next year?

[Mr Osborne]

Of course, the shadow Chancellor estimated that it would cost £114,000 a year, which is the EU penal rate on £1.7 billion. If interest had been charged even on the rebateable amount, it would of course have been about half that figure.

[Richard Drax (South Dorset) (Con)]

May I congratulate my right hon. Friend on getting half the money back? That is certainly a step in the right direction. However, does it not show that one economic cap does not fit all in the EU, and never ever will?

[Mr Osborne]

My hon. Friend is right. That is why previous Conservative Governments achieved things such as the opt-out from the single currency, even though the previous Labour Government toyed with the idea of joining the single currency, which reveals—

[The Treasurer of Her Majesty’s Household (Greg Hands)]

It is still their policy.

[Mr Osborne]

The Government Deputy Chief Whip reminds us that it is still official Labour policy to join the single currency. My hon. Friend the Member for South Dorset (Richard Drax) is right that different economic models and different economic policies are appropriate for different countries, but I would make the broad point that freer markets and lower taxes seem to help most countries.

ECOFIN

George Osborne Excerpts

Friday 7th November 2014 Written Statements

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

A meeting of the Economic and Financial Affairs Council will be held on Brussels on 7 November 2014. Ministers are due to discuss the following items:

Revision of VAT and gross national income (GNI) own resources balances 1995 -2013

The Commission will provide information on adjustments to EU budget contributions, focusing on the revision of VAT and GNI own resources balances between 1995 and 2013.

Financial transaction tax

The Council will hold a state of play discussion on the proposal for a Council directive implementing enhanced cooperation in the area of a financial transaction tax.

Standard VAT return

The Council will hold a state of play update on the proposal for a Council Directive amending directive 2006/112/EC on the common system of value-added tax, as regards a standard VAT return.

Parent subsidiaries directive

Ministers will aim to reach political agreement on the proposal for a Council directive amending directive 2011/96/EU on the common system of taxation applicable in the case of parent companies and subsidiaries of different member states.

EU statistics

Ministers will be asked to agree the annual set of Council conclusions on EU statistics.

Preparation of the 20th conference of parties to the United Nations Framework convention on climate change (UNFCCC).

Ministers will be asked to agree a set of Council conclusions in preparation of the 20th conference of parties to the United Nations framework convention on climate change (UNFCCC), which will take place in Lima from 1 to 12 December 2014.

Oral Answers to Questions

George Osborne Excerpts

Tuesday 4th November 2014 Commons Chamber

[John Stevenson (Carlisle) (Con)]

13. What progress he has made on his policy to create a northern powerhouse for the UK economy.

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

In July I set out my plan to build a northern powerhouse to connect the great cities of the north with the counties that surround them—and, of course, north Wales—by investing in transport science, and by devolving powers from Westminster to elected city mayors. We now have plans for High Speed 3 and for major new science investment. Yesterday I signed an historic agreement with the civic leaders of Greater Manchester to create the first directly elected metro-wide mayor outside London, with powers over transport, economic development and policing. I hope that Manchester will be the first of many cities to take advantage of the greater devolution of powers. Today I have opened my door to discussions with any metropolitan authority that wants to adopt a new model of governance. All that is part of our ambition to reduce the decades-old gap between north and south, which is central to our long-term economic plan.

[Mr Jones]

Does my right hon. Friend agree that key to the northern powerhouse vision is the improvement of transport connectivity throughout the region, and does he agree that north Wales is well placed to benefit from such improvement?

[Mr Osborne]

As a Cheshire Member of Parliament, I know that the north Wales economy is closely connected with the economy of the north-west of England. We have already committed ourselves to reopening the Halton curve, re-establishing a regular direct rail link between north Wales and Liverpool for the first time since the 1970s. That is something that my right hon. Friend asked me to do, and campaigned for. Moreover, High Speed 2 gives us the potential of a station at Crewe, which will greatly increase capacity for journeys to north Wales and reduce journey times. We are ready to listen to further ideas for ensuring that prosperity is experienced in north Wales as well.

[Graham Evans]

For 13 years Labour neglected jobs and growth in the north, including Weaver Vale, thus creating an economy that was dangerously unbalanced. Does my right hon. Friend agree that it is only the Conservative party, with its long-term economic plan, that will deliver job security for the whole United Kingdom, not just the south?

[Mr Osborne]

My hon. Friend is absolutely right. A record number of people are now employed in the north of England, but the gap between north and south grew under those 13 years of Labour government. If the House wants one example of a project that was waiting to be completed but was entirely neglected by the Labour Government, it is the Mersey Gateway bridge, which this Government are now building and to which they are committed—and, thanks to my hon. Friend’s campaigning, there will be no tolls for local residents.

[Paul Maynard]

I welcome the Chancellor’s obvious commitment to the northern economy. Does he agree that a commitment to exports will be at the heart of its regeneration, and will he join me in praising Victrex, a company in my constituency, which exports 97% of what it produces? Is that not what will drive a northern renaissance?

[Mr Osborne]

My hon. Friend, who is a powerful champion of the businesses in his constituency which employ local people, has told me about Victrex and its exporting success. That success is being replicated by other manufacturers in the north of England which are increasing their exports. The energy revolution in the Fylde area and on the Blackpool coast is creating the potential for a national college to develop the engineering and other skills that will be required. My hon. Friend has made a strong bid for that college to be in his constituency, and I am listening very carefully to the case that he is making.

[Andrew Stephenson]

I welcomed what my right hon. Friend said when he was in Manchester yesterday. However, a northern powerhouse must not just be about our biggest cities. In Pendle we have landmark regeneration projects such as the £30 million redevelopment of Brierfield Mill, which is in need of my right hon. Friend’s support. Will he tell me what benefits the northern powerhouse will bring to my constituents, and how his investments in transport and regeneration will help them?

[Mr Osborne]

Crucial to the vision of the northern powerhouse is not just supporting the great cities of the north, but ensuring that they are connected with the towns and counties surrounding those cities. We are investing hugely to improve transport links in Lancashire. My hon. Friend, who is such a champion of his constituency, has raised with me the Brierfield Mill site, which is now called Northlight. We are taking a close look at what we can do to redevelop the area and bring more jobs to his constituency, and that is due to his campaigning efforts.

[John Stevenson]

The idea of a northern powerhouse is welcome, as is the introduction of an elected mayor, which I am sure will provide real leadership. However, it is vital for smaller places such as Carlisle to benefit as well, which will mean ensuring that the next generation has the right skills to enable local businesses to succeed and prosper. How will the Chancellor ensure that that happens?

[Mr Osborne]

Thanks in part to the efforts of my hon. Friend and the support he has given to investment in Carlisle, we have seen a 34% fall in the unemployment claimant count in Carlisle in the last year alone. We are also devolving more responsibility for setting the skills agenda to local businesses, so we can have skills that are specific to the Carlisle area. I am always happy to talk to my hon. Friend and to meet people he would bring to see me, to see what more we can do to make sure that Carlisle is part of the strong economic revival of the north of England.

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

The Chancellor opened the door for other metropolitan areas to go down the route of the northern powerhouse. Has he given any consideration to what he regards to be an optimum size for those units? In the west midlands, would that be a Greater Birmingham and black country metropolitan area or an entire west midlands metropolitan area?

[Mr Osborne]

I do not think any one area is the same as any other area. There is a specific model for Greater Manchester, and of course the Greater Manchester councils had worked well together as a combined authority. Clearly Birmingham city council is much larger than Manchester city council alone, so I would like to have a conversation with the hon. Lady, and with Albert Bore and other civic leaders in Birmingham, about whether we can move to a mayoral model, perhaps just in the city. That is a discussion to be had with local people, however.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

I must congratulate the Chancellor of the Exchequer on his organisational brilliance by peppering us with all these planted questions on this subject, but I tell him, as the co-chair of the Yorkshire group of MPs, that we are a bit canny in Yorkshire; we are a bit worried about this northern powerhouse. We agree with it and support it, but it is a bit close to the general election. Where has he been for four and a half years, and where is the money coming from? We have not seen any resources for it.

[Mr Osborne]

We have already made investments over the last four years in things such as the northern hub and the electrification of the trans-Pennine railway, which of course will have helped the hon. Gentleman’s constituency. I welcome his support for the northern powerhouse. This agreement with Greater Manchester was struck with Labour leaders of Manchester councils as well as the Conservative leader of Trafford and the Liberal Democrat leader of Stockport. I want to work across party divides with local Labour civic leaders and local Labour MPs to see what we can do for Huddersfield and other towns in the north of England so that they are connected to the northern powerhouse.

[Chris Ruane (Vale of Clwyd) (Lab)]

Can we see the colour of the Chancellor of the Exchequer’s money? How much is being allocated for so-called HS3, and has he ring-fenced the amount of funding for north Wales?

[Mr Osborne]

We will have developed and costed plans for HS3 from—[Interruption.] There was no proposal for HS3 from the Labour party for 13 years in government and then for four years in opposition. Labour Members are now complaining that I came up with a proposal four months ago. We already have detailed support for that proposal from David Higgins and we are going to have a costed plan for it. There was absolutely no attempt to connect the north of England from east to west under the last Labour Government. It is happening under this Conservative-led Government.

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

Is not the best way to have a northern economic powerhouse to have full fiscal autonomy for Scotland? After all, the Prime Minister did say that all options for devolution are there and all are possible. Does the Chancellor agree, or is he afraid of the competition from a more socially just Scottish treasury making better policies for the people of Scotland?

[Mr Osborne]

We will honour the commitments made during the referendum campaign by all the Unionist parties to devolve further fiscal powers to Scotland. We will honour the commitment we made, and I would ask the Scottish National party to honour the promise it made that this was a referendum which would settle the issue of Scottish independence at least for

“a generation…perhaps for a lifetime”—

I am quoting Alex Salmond. Perhaps the SNP should stop trying to reopen the question that was resolved, and work with us to make sure that Scotland has a great economic future.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

The Chancellor talks about creating a northern powerhouse, but really is he not just struggling to play catch-up, because while he has been shifting funds from northern cities to wealthier parts of the country, the unemployment rate in the north-east is the highest in the country, wages for working people in the north have fallen by even more than the national average and across the north the number of people unemployed for a year or more is up 62% since the last election? Why will he not match Labour’s plan to devolve real power and £30 billion of funding not just to the north, but to all city and county regions?

[Mr Osborne]

Labour ran one of the most centralised Governments in history. It did not devolve any powers to anyone—

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

We did in Scotland.

[Mr Osborne]

Not in England. In regard to playing catch-up, I would say to the hon. Lady that we have heard from Labour’s civic leaders in Greater Manchester that they want a directly elected mayor. We have heard from the Conservative Chancellor of the Exchequer. What is the view of those on the Labour Front Bench on this proposal? Last week, the Labour leader was in Manchester saying that the Labour party would never sign up to such a deal, but four days later all his civic leaders did so. What is the policy of the Labour party?

[Jackie Doyle-Price (Thurrock) (Con)]

2. What plans he has to bring forward legislative proposals to change income tax allowances and thresholds.

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

By next year, the personal allowance threshold will have reached £10,500. This will mean an £805 cut in income tax for the typical basic-rate taxpayer, and 3 million people being taken out of income tax altogether. Under a Conservative Government in the next Parliament, we would go further.

[Jackie Doyle-Price]

Enabling people to keep more of what they earn is the best thing any Government can do for ordinary hard-working taxpayers. Can the Chancellor tell me how many of my constituents in Thurrock will be likely to benefit from these proposals?

[Mr Osborne]

My hon. Friend is a champion for the hard-working people in her constituency. Not only have our personal tax cuts helped many thousands of those people, but if we go ahead with our plans to raise the personal allowance to £12,500, more than 5,500 people in Thurrock would be lifted out of income tax altogether and 58,000 of the people she represents would benefit.

[Kate Green (Stretford and Urmston) (Lab)]

Raising tax thresholds disproportionately benefits men, because many women earn so little that they do not even reach the lowest threshold. On the other hand, consumption taxes have a disproportionate effect on women who are responsible for managing the family budget. Will the Chancellor rule out any increase in VAT, in order to ensure that our tax system can be fair to both genders?

[Mr Osborne]

We do not need to raise VAT, because our plans are paid for by the Government living within their means. Does the hon. Lady speak for the Labour party, because she seems to be opposing the increase in the personal income tax threshold? That is a policy that has lifted many low-paid women out of income tax altogether, and I find it surprising that once again the Labour party is against the interests of hard-working people.

[Mr Andrew Tyrie (Chichester) (Con)]

By raising the personal allowance, the Chancellor has pulled 3.2 million people out of tax altogether. At the same time, however, he has dragged 1.6 million people into paying the higher rate of 40p. It is the marginal rates that matter, and that is a massive disincentive to wealth creation in this country. Does he acknowledge that, as soon as the fiscal room to do so is available, it will be essential to act to take as many people as possible out of higher-rate taxation altogether?

[Mr Osborne]

As my hon. Friend knows, people earning up to £100,000 who are paying the higher rate have seen the benefit of the increase in the personal allowance. They have seen their income tax bills fall. He is right to say that more people have been pulled into the 40p rate, however, and that is why we are proposing to increase the threshold to £50,000. That will be in our election manifesto, and it is something that we can deliver in the next Parliament so that people on middle incomes, as well as those on lower incomes, can benefit from a tax-cutting Conservative Government.

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

The Chancellor did not give us the small print relating to the promises that he has just repeated: terms and conditions apply. Will he acknowledge that there is a price tag attached to those promises, and will he tell us specifically what the cost of those commitments would be?

[Mr Osborne]

What I would say to the shadow Chief Secretary to the Treasury is—

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

What is the answer?

[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.

[Chris Leslie]

So we have established that this would mean £7 billion of lower public expenditure. What elements of public expenditure would be involved? Would the Chancellor cut the police again? Would he take the money from schools and hospitals? Or are we to judge him on his usual track record, which would mean that after the election he would simply add it on to VAT?

[Mr Osborne]

What we have seen under this Government is a party that is able to bring our public finances under control; to reduce the welfare bill; and to make sure the egregious waste in Westminster and Whitehall that took place under the previous Government no longer takes place. We will fund that by lower public expenditure, because once we get the public finances under control we are going to keep them under control.

[Ian Murray (Edinburgh South) (Lab)]

3. What assessment he has made of the effect of tax receipts on the deficit in the last 12 months.

--- Later in debate ---

[Mr Dennis Skinner (Bolsover) (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.

[Mr Skinner]

How on earth can the Chancellor of the Exchequer justify a tax cut of £3 billion to those getting more than £150,000—like Nigel Farage—while at the same time cutting the wages of nurses and midwives? What a load of hypocrisy.

[Mr Osborne]

We have cut taxes for 25 million working people. In Bolsover, there are more people in work, fewer people unemployed and the claimant count is down by a third. It is the Conservative party that is the party of the working people now.

[Mr David Amess (Southend West) (Con)]

T4. Does my right hon. Friend agree that the level of employment is a good economic indicator? If so, will he join me in congratulating Southend businesses on their outstanding apprenticeship schemes, which have helped a huge number of young people and reduced youth unemployment by 47%?

[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]

The reason there has been an increase in European migration is that the British economy is succeeding while the economies in Europe sadly are not. That is why we want to seek a different relationship with the European Union, to take into account that and other features of our relationship. I notice that the last Labour Chancellor now supports a referendum on Britain’s membership of the European Union, but the shadow Chancellor does not. The truth is this: we will set out our forecasts to the independent Office for Budget Responsibility, but the idea that Labour would get a better deal in Europe is total fantasy, alongside the shadow Chancellor’s fantasy that Labour left us with a golden economic legacy and that he has been right all along and everyone else is wrong. The right hon. Member for Lewes (Norman Baker) has resigned, so there is now a vacancy for a conspiracy theorist at the Home Office—the shadow Chancellor should apply.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

T7. Small businesses and retailers are the backbone of our economy. With small business rate relief, a relief for businesses re-occupying long-term empty properties and other discount schemes, this Government have shown their support for small business. Will my right hon. Friend go further and review the business rate system to ensure that it is fair and does not deter investment?

[Mr Osborne]

My hon. Friend makes a good point about the impact of business rates. That is of course why we have extended small business rate relief and helped 360,000 small properties. It is why we have offered the £1,000 high street discount to stores in Harrogate and elsewhere around the country. We are going to review the business rate system to make sure that it is simpler, fairer, more transparent and more responsive to economic circumstances, and he is very welcome to take part in that review.

[Gavin Shuker (Luton South) (Lab/Co-op)]

T2. What is the link between the Chancellor’s £7 billion of unfunded tax cuts and his blocking of the OBR from auditing the tax and spend plans of other political parties ahead of the election? I suggest that the clue is in the question.

[Mr Osborne]

Interestingly, we conducted an independent review by one of the Canadian officials involved in auditing their finances—

[Ed Balls]

Oh, come on!

[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.

[Margot James (Stourbridge) (Con)]

T8. Last week, the Queen opened a new Jaguar Land Rover plant in Wolverhampton, which is creating 1,400 new jobs. The enterprise zone and the black country city deal are set to create nearly 10,000 more new jobs. Does my right hon. Friend agree that we could go even further in Birmingham and the black country if our local authorities followed the example set by those of the northern powerhouse?

[Mr Osborne]

The investment by Jaguar Land Rover is very welcome. I was at one of the Jaguar Land Rover plants in September, and saw the incredible investment that is going in there. The new engine plant in the black country is a huge and welcome investment in the west midlands. I take very seriously my hon. Friend’s suggestion that we should talk to authorities in the west midlands to see if we can build on what has been achieved in Greater Manchester. I would be very happy to start those discussions with civic leaders and local MPs.

[Heidi Alexander (Lewisham East) (Lab)]

T3. Will the Chancellor confirm that the only way to reduce the £1.7 billion bill from the EU and avoid paying interest requires the UK to secure support from a qualified majority of EU members on rule changes and get a vote in the European Parliament on delaying the deadline for payment? How confident is he that he can achieve that?

[Mr Osborne]

We are operating under a tough set of rules. The rules were put in place in 2007.

[James Morris (Halesowen and Rowley Regis) (Con)]

T10. There are now 1,217 fewer people claiming unemployment benefit in my constituency than in 2010. Does the Chancellor agree that we need to continue the job of reducing business taxes to incentivise business to create jobs, rather than to adopt the policy of slapping higher taxes on business, which will only have the effect of destroying jobs?

[Mr Osborne]

My hon. Friend is absolutely right. I have been lucky enough to visit successful manufacturing businesses in his constituency with him and, indeed, to see the investment that as a result we are able to make in new hospitals in the west midlands. He of course makes the very strong point that if you increase business taxes—that is the official policy of the Labour party—in such a competitive world, you will destroy jobs, reduce revenues and not be able to fund good public services.

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

T5. Will the Chancellor, as the self-styled champion of the north, now look again at his early decisions and their impact, and will he commit to a fairer funding settlement for north-east councils?

[Mr Osborne]

The whole United Kingdom has had to make difficult decisions because we inherited a record budget deficit, but I am willing to work with councils in the north-east to see whether we can build on what we have achieved in Greater Manchester. There is real potential to do that and to make key investments in the infrastructure of the north-east. For example, I think there is a strong case for the A1 north of Newcastle to be dualled.

[Richard Graham (Gloucester) (Con)]

This Government’s support for apprenticeships has hugely helped the 40% drop in youth unemployment in Gloucester. Will my right hon. Friend confirm that the Government will continue to look constructively at new and innovative vocational schemes in sectors where there are jobs available—such as HGV drivers, haulage companies, and electroplaters for the Poeton company—but a shortage of skills at the moment?

[Mr Speaker]

Order. I try to get in as many Members as possible, but I think some colleagues have forgotten—or perhaps never learned—that topical questions are supposed to be shorter. Please do not abuse the process because you are spoiling it for other people.

[Mr Osborne]

I know that my hon. Friend the Member for Gloucester (Richard Graham) has worked with local employers to improve skills, and I visited a successful apprenticeship and training scheme with him. We want to ensure that local employers are involved in shaping those apprenticeships and further education courses, and that is precisely what we are now setting up.

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

T6. The Institute for Fiscal Studies has forecast that under the Chancellor’s current policies 900,000 more children will be in relative poverty by 2020 compared with 2011. Is his real attitude towards the working poor in this country too much stick and too little carrot?

[Guy Opperman (Hexham) (Con)]

May I urge the Chancellor to meet me and my hon. Friend the Member for Carlisle (John Stevenson) so that we can make the case for including the dualling of the A69 in the autumn statement? Hopefully such a meeting could be before the autumn statement takes place.

[Mr George Osborne]

My hon. Friends the Members for Hexham (Guy Opperman) and for Carlisle (John Stevenson) have made a strong case for improving transport links in the north of England and between the north-east and Carlisle. They have already brought the A69 to my attention, and I would be happy to have that meeting.

[Karl Turner (Kingston upon Hull East) (Lab)]

T9. Given that the Chancellor is claiming to be the champion of the north, will he explain why he has given a £3 billion tax cut to people who earn £150,000 a year, while people in Hull are on average £1,600 a year worse off?

[Mr Osborne]

We have cut taxes, including taxes for people in the north of England, for 25 million working people. Under the Labour Government, the gap between the north and south increased. We are working across party divides with local authority leaders to get in the investment and change this decade-long imbalance in our country.

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

The last Labour Government cancelled the Supertram scheme in Leeds and then told the city that it could only have a bus-based solution. Does my right hon. Friend agree that as well as devo-max and “devo Manc”, we also need “devo Yorks”?

[Douglas Carswell (Clacton) (UKIP)]

The Chancellor has rightly said that Europe is in danger of pricing itself out of the world economy, and one way in which it is making itself uncompetitive is through its costly renewable energy agenda. Will he try to persuade his neighbour in Downing street to abandon that dogma and liberalise the UK energy market?

[Mr George Osborne]

The Prime Minister achieved a good deal for the United Kingdom, and got away from the solid and fixed renewables target that the Labour Government signed up to. If the hon. Gentleman wants Britain to leave the European Union, that will be achieved with a Conservative Government offering a referendum, and him having a vote and seeing what the outcome is. [Interruption.] Under the Conservative Government, the British people will get a referendum. We will make the argument for staying in a reformed Europe, and the hon. Gentleman can make the case he wants to make. That will not happen under a Labour Government.

[Caroline Dinenage (Gosport) (Con)]

May I urge the Chancellor to support the Secretary of State for Business, Innovation and Skills in calls for banks not to shut the last branch in a town? HSBC is about to shut its last branch in Lee-on-Solent, leaving businesses with no banking support at all.

Public Spending

George Osborne Excerpts

Monday 3rd November 2014 Written Statements

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

I am pleased to announce that Greater Manchester will be getting its own directly elected city-wide mayor with powers over transport, housing, planning and policing, as part of an agreement I have reached with the civic leaders from Greater Manchester.

This is a key part of our plan to create a northern powerhouse, to maximise the economic potential of the north and build a more balanced economy.

Under the agreement, Greater Manchester will see the first metro-wide elected mayor outside London and the Government will devolve a comprehensive set of powers to Greater Manchester. In addition to powers over transport, housing and planning, Manchester will also be given new powers to support business growth, skills, and help to join up health and social care budgets.

These mayoral proposals will create a powerful devolved administration with strong political leadership that can drive through policy to stimulate economic growth and plan strategically across the city, as well as representing the city nationally and internationally.

I hope that Manchester will be the first of many big cities to take advantage of greater devolution of powers. Any other city that wants to receive more powers and move to a new model of governance with an elected mayor should bring forward their proposals.

A new, directly elected mayor of Greater Manchester will receive the following powers:

Control of a £300 million housing investment fund.

Powers over strategic planning, including the power to create a statutory spatial framework for the city region. This will need to be approved by a unanimous vote of the mayor’s Cabinet.

Responsibility for a devolved and consolidated transport budget, with a multi-year settlement to be agreed at the next spending review, and responsibility for franchised bus services (subject to consultation by Greater Manchester) across the Greater Manchester region, and for integrating smart ticketing across all local modes of transport.

Control of a reformed earn back deal, within the current envelope of £30 million a year for 30 years, this gives Greater Manchester the certainty they need to extend the Metrolink to Trafford Park.

Take on the role currently covered by the police and crime commissioner.

The Greater Manchester combined authority will receive the following powers:

Responsibility for securing integrated business support services, including through the Growth Accelerator, Manufacturing Advisory Service and UK Trade & Investment (UKTI) export advice.

Control of the Apprenticeship Grant for Employers in Greater Manchester and power to re-shape and re-structure the Further Education (FE) provision within Greater Manchester.

Control of an expanded Working Well pilot, with central Government funding linked to good performance up to a fixed DEL limit in return for risk sharing.

Opportunity to be a joint commissioner with Department for Work and Pensions (DWP) for the next phase of the Work programme.

The GMCA and Greater Manchester clinical commissioning groups will be invited to develop a business plan for the integration of health and social care across Greater Manchester, based on control of existing health and social care budgets.

The Government will now prepare legislation to enable these changes with the potential for the mayoral election to take place in 2017.

Further powers may be agreed over time. The Government will keep Parliament fully informed.

Fair and Effective Markets Review

George Osborne Excerpts

Tuesday 28th October 2014 Written Statements

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

On 12 June 2014, the Government announced a joint review by HM Treasury, the Bank of England, and the Financial Conduct Authority (FCA) into the way wholesale financial markets operate.

Wholesale fixed income, currency and commodity (FICC) markets underpin major financial transactions in the global economy. These markets also play a vital role in determining the costs of borrowing for households, business and government, exchange rates, and commodity prices that affect the real economy in Britain. In recent years we have seen abuse and misconduct in FICC markets, and allegations continue to circulate. The Government are determined to take action to help restore trust and integrity and to ensure that the highest standards are expected of those who operate in these FICC markets. It is important that this is done in a way that preserves the UK’s position as the global financial centre for many of these markets, with all the jobs and investment that brings.

Action has already been taken both domestically and in the EU to respond to recent market abuses by regulators, legislators and market participants. In the EU, key changes to the regulatory structure have been agreed under MiFID II and the market abuse regulation. Domestically, as well as enforcement action taken by the Financial Conduct Authority (FCA), the Government have taken steps to ensure that robust measures can be taken to tackle abuse and raise standards. This includes legislation to introduce a new criminal offence imposed on people who manipulate the LIBOR benchmark, and legislating to implement recommendations from the Parliamentary Commission on Banking Standards. The Government have also launched a consultation on extending the new legislation put in place to regulate LIBOR to cover further benchmarks in these markets, including benchmarks in the markets for gold, silver, crude oil and foreign exchange.

These are important steps, but the Government are committed to go further in ensuring that markets are fair and effective for the British economy. The Government welcome the progress that has already been made by the Fair and Effective Markets Review. The consultation document “How fair and effective are the fixed income, foreign exchange and commodities markets?” published on 27 October is comprehensive, balanced and rigorous and asks the right questions on what needs to change to address recent misconduct and reinforce fairness and effectiveness in these markets. The consultation document is available on the gov.uk website: https://www.gov.uk/government/news/fair-and-effective-markets-review-announced-by-chancellor-of-the-exchequer

The Government look forward to the review’s final recommendations in June 2015.