Charter for Budget Responsibility

Debate between George Osborne and Charlie Elphicke

Tuesday 13th January 2015 Commons Chamber

[Mr Osborne]

The British economy has grown faster than any major European economy over the last four years. It has created 1.7 million new jobs and 750,000 new businesses, and today the Governor of the Bank of England described it as being in a “sweet spot”, but Labour opposed every difficult decision we took to do that. It opposed every spending cut and welfare change. It goes around the country pretending it would reverse these things. It has made £20 billion of unfunded spending commitments. Every day in this Chamber, Labour Members ask for more public money to be spent on more things and complain about the difficult decisions we have taken. It is a totally incredible position from the Labour party and it is being exposed today.

[Charlie Elphicke (Dover) (Con)]

Is it not obvious that the Labour party is stuck in the past, talking about things done years ago and frightened to talk about the future? Did the Chancellor hear Paul Johnson from the Institute for Fiscal Studies say on the “Today” programme that borrowing would be higher under a Labour Government and that debt would be higher in the long run? The IFS says it; the Labour party ought to admit it.

[Mr Osborne]

My hon. Friend is absolutely right. The IFS today confirmed that Labour would borrow £170 billion more. This is its published plan. It is extraordinary that Labour Members are totally silent about it. They are not prepared to talk to the British people about what I assume they believe to be the right economic policy for the country.

I want to make sense of this strange journey that the Labour party has taken on fiscal policy over this Parliament. After all the twists and turns, I think it has managed to end up in exactly the same place as it started. In 2010, as part of his pitch for the Labour leadership—we thought at the time he was a worse choice than the current leader, but given all that has happened, perhaps we were wrong—the shadow Chancellor said we should not be cutting spending. He said that more spending would grow the economy and that the economic growth would eliminate the deficit. That was the position he set out in his Bloomberg speech—his so-called plan B. The problem was it was rejected by the British public and eventually by the Labour party. So two years ago, Labour changed its approach and committed to the original phrase of “iron discipline”. The only problem was there was no iron discipline and instead it made all those spending commitments. Last autumn, it moved on to another approach—the Basil Fawlty approach—which was not to mention the deficit at all. I think the House can agree that the Labour leader executed that strategy brilliantly at the Labour party conference.

In December, at the end of last year, Labour tried something else. The shadow Chancellor announced that he would seek to balance the current budget and get debt falling, but he would not say when, saying just as soon as possible. When pressed on specific dates, he dismissed them; he said he would not sign up to some arbitrary timetable. When challenged specifically to match our plans, he said a month ago, on 11 December, that he was not going to set a timetable to balance the current budget by 2017. Here he is, one month later, saying that he is going to vote in favour of a timetable to balance the current budget by 2017-18.

I thought that was the end of Labour’s journey. They had ended up supporting a charter that they had previously rejected, a timetable to which they had previously refused to sign up and £30 billion of cuts they had previously denounced. Then, this weekend, we were treated to the spectacle on “The Andrew Marr Show” of the Labour leader dismissing the charter altogether, rejecting the £30 billion figure and returning full circle to where the Labour party started four years ago. This is what the Labour leader said on Sunday:

“if we just try and cut our way to getting rid of this deficit, it won’t work.”

That is the latest version of the Labour party’s policy. It is exactly where they were four years ago. The Labour leader has gone full circle and gone back to saying that the answer to our debts is simply to grow the economy. That is economically illiterate when we have a structural deficit, and it is based on the fiddle of trying to upgrade the country’s trend growth rates—exactly the mistake made by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) when he was Chancellor and got us into this mess. Labour has gone from plan B to plan A to no plan at all.

Autumn Statement

Debate between George Osborne and Charlie Elphicke

Wednesday 3rd December 2014 Commons Chamber

[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.

Autumn Statement

Debate between George Osborne and Charlie Elphicke

Thursday 5th December 2013 Commons Chamber

[Mr Osborne]

I am happy to look further at the hon. Gentleman’s point. The rules on pension protection and the pensions regulator are designed to prevent people from deliberately crashing their pension scheme to avoid their liabilities, and for those liabilities to fall on to the state or other companies. I am happy to look at any specific case he has. On his broader point on the economy, unemployment has come down by 11% in his constituency. The measures I announced today—abolishing the jobs tax for young people and the £1,000 discount for shops, cafés and pubs on the high street—are all designed to help small businesses, which are the engine of any recovery.

[Charlie Elphicke (Dover) (Con)]

May I welcome the investment in infrastructure, particularly flood defences? In east Kent in the next 24 hours, we face a difficult time and the investment in the flood defences in the town of Deal, which I represent, will help to keep the town more secure than it otherwise would have been.

[Mr Osborne]

I, with my hon. Friend, wish the people of Dover and Deal the best as they endure this difficult weather. I join him in praising the emergency services who will help people in that area through this difficult time. The flood defences in Deal will mean that such areas are better protected from adverse weather. The only way to afford such schemes is by controlling public spending and putting it into priority areas.

Spending Review

Debate between George Osborne and Charlie Elphicke

Wednesday 26th June 2013 Commons Chamber

[Mr Osborne]

There will be no museum charges; free entry will remain. What we are doing in the museums sector is introducing radical new freedoms, which have been welcomed across the sector. I think that is the right reform, which is to give more freedom to the front line.

[Charlie Elphicke (Dover) (Con)]

As so little has been done about problems of tax avoidance over the past decade, can the Chancellor confirm that HMRC will have the resources and the cultural enthusiasm it needs to tackle tax avoidance? Does he agree—

[Mr Speaker]

Order. One question is enough.

Economic Growth

Debate between George Osborne and Charlie Elphicke

Wednesday 15th May 2013 Commons Chamber

[Mr Osborne]

The euro preparation unit was shut down by this Government in 2010, but the shadow Chancellor does not seem to know what Labour policy is. The Labour party is committed in principle to joining the euro. [Interruption.] The shadow Treasury team do not know what the monetary and currency policy of their own party is—that is absolutely ridiculous.

[Charlie Elphicke]

The Government have set out a clear and costed economic policy, which they are pursuing. Does the Chancellor share my concern that the Opposition cannot set out their costings, cannot say how much they would borrow and cannot even say whether they would back a referendum? The shadow Chancellor has been completely unable to answer any questions put to him in any straight way whatever.

[Mr Osborne]

The shadow Chancellor could not answer the simple question of how much the amendment he is asking us all to vote on this evening would cost. Surely he must reflect a little and realise that each year his appearance in these debates is a source of consolation and comfort to the Government. He must wonder why each year he makes the same arguments for borrowing but there is no improvement in Labour’s economic credibility. He does not seem to understand that the public think that Labour spent too much, wasted their hard-earned money and would do it all again. Does he not feel that he owes it to the British people to apologise for the mistakes he has made and the damage he has inflicted on their living standards? Should he not stand up and say, “I’m sorry, we got it wrong and we won’t do it again”?

--- Later in debate ---

[Charlie Elphicke]

One of the things my right hon. Friend drew attention to was the problems facing our European neighbours and the challenges posed by their welfare states. Our action in getting on top of the problems of welfare, reforming welfare and making sure that work pays is key to dealing with our place in the world and making this country competitive. I draw a distinction between that and the attitude of the Labour party, which has opposed every welfare reform proposed by this Government.

[Mr Osborne]

My hon. Friend is right. There was a ludicrous remark—I do not know whether anyone noticed it—from the shadow Chancellor when he said that Labour supports tough welfare reform. Labour Members have voted against every single welfare proposal put to the House. The shadow Chancellor thinks the benefits cap is “too low” and that it is not set at the right level at £26,000. That is the problem. Any view of Britain, and any view of western nations, is that they need to do more to constrain the growth of entitlement spending and more to make sure that welfare pays, and to spend the money that they save on things such as infrastructure in Northern Ireland, broadband, high-speed trains and the Crossrail project under London—the vital economic infrastructure that our country needs.

Economic Policy

Debate between George Osborne and Charlie Elphicke

Monday 25th February 2013 Commons Chamber

[Mr Osborne]

We are confronting the problems that the hon. Lady’s party left this country. If she is seriously trying to blame us for the fact that there was an 11.5% budget deficit, or for a financial crisis that was brewing while the shadow Chancellor was regulating the City, she needs to read her history books.

[Charlie Elphicke (Dover) (Con)]

Is not the priority to preserve the record low interest rates that have helped hard-pressed families and businesses in an extremely difficult time? Would it not be madness to panic and borrow billions more? Would that not put those low interest rates at great risk?

[Mr Osborne]

My hon. Friend is absolutely right. As I have said before, the Institute for Fiscal Studies says that the Labour plans would add £200 billion extra to borrowing. In the end, the clue is in how one answers the questions, and the shadow Chancellor was asked six times on the radio—many will have heard it—whether borrowing would go up under a Labour Government. He did not want to give a clear answer. Why is that? It is because Labour does not want to admit that borrowing would go up. Finally, on the seventh question, he was forced to admit it, but it is the policy that dare not speak its name.

Autumn Statement

Debate between George Osborne and Charlie Elphicke

Wednesday 5th December 2012 Commons Chamber

[Mr Osborne]

First, may I congratulate the hon. Gentleman on his election in Corby? We were talking earlier about construction projects that had not been started. I saw for myself on an enjoyable visit to Corby, which was ultimately unsuccessful in terms of the by-election, the Corby link road which is being built—I hope he would welcome it. As I say, we have set out the public finance numbers, and we have taken the decision to use the spectrum money to help with further education and to fund the annual investment allowance, which starts in January next year—in this financial year.

[Charlie Elphicke (Dover) (Con)]

What action is my right hon. Friend taking to close the tax gap and enable British business to complete on a level tax playing field, after the serious failure to modernise or enforce our business tax system over the past decade by the previous Labour Government?

[Mr Osborne]

My hon. Friend has been a powerful advocate for a more competitive business tax system in this country, and we have reduced again the headline rate of corporation tax. That makes it even more of an advantage for companies to headquarter and pay their taxes here, and it is part of what we are doing to win the global race. I congratulate him on the advice and support he gives in this area.

Bank of England

Debate between George Osborne and Charlie Elphicke

Monday 26th November 2012 Commons Chamber

[Mr Osborne]

Fiscal policy is the responsibility of the elected Government and the House of Commons, but I would say that all the business organisations have supported our plan to deal with the deficit because they know how important it is to securing low interest rates and stability. Frankly, I have yet to hear what the current alternative is from the Labour party. I will save this for next week, but the Opposition used to have a five-point plan and I have no idea whether they are still committed to it. They claim that they want to be responsible with the deficit, but they have absolutely no plans to cut the deficit. I am just getting warmed up for next week, but we will wait a week to have those arguments.

[Charlie Elphicke (Dover) (Con)]

Will the Chancellor and the new Governor examine the possibility of bringing in depositor preference with a view to reducing the risk of bail-outs and nationalisations of UK banks in future?

[Mr Osborne]

Depositor preference does not exist in the UK, but it does exist in countries such as the United States and Switzerland. It is something that we are planning to introduce and it was one of the recommendations of the Vickers commission.

IMF

Debate between George Osborne and Charlie Elphicke

Monday 23rd April 2012 Commons Chamber

[Mr Osborne]

No we have not failed to get our money back from the IMF. Britain was one of the creators of the IMF, because we understood after the 1930s that if countries just walk away from problems in the world economy, the problem is very much worse. In the north-east, we have manufacturers such as Nissan in Sunderland. Nissan is making a big new investment in the UK. It is doing so, in the end, because it has faith that the world economy will be a more stable place, one of the reasons being that we have strong institutions such as the IMF.

[Charlie Elphicke (Dover) (Con)]

Had other IMF quota members followed the advice of the shadow Chancellor and effectively walked on by, leaving European countries to fend for themselves, what would have been the effect on the UK economy in terms of jobs and money, and what would have been the effect on the economies of developing countries?

[Mr Osborne]

If the world were unable to provide the IMF with the resources it needed, people would see that the world was not able to act as a whole to deal with world problems. By the way, I happen to believe that there is no prospect that the shadow Chancellor would have taken a different decision from the one I have taken if he were doing my job. He takes the position he does simply because he is sitting on the Opposition Benches.

Financial Services Bill

Debate between George Osborne and Charlie Elphicke

Monday 6th February 2012 Commons Chamber

[Mr Osborne]

My right hon. Friend has been entirely consistent in the views he has expressed, and he was right all along about the weaknesses of the tripartite system. On the explicit issue of whether to introduce the actual physical separation of retail and investment banking—in other words, to introduce Glass-Steagall- like legislation in Britain—I asked John Vickers, who everyone accepts was an independent and extremely expert person for the job, to look specifically at this issue with his commissioners. Some of them were probably inclined at the start to believe that physical separation was the right way to go, but when they examined the issues—and they took an enormous amount of evidence—they believed that the same objective of protecting retail customers from the collapse of an investment bank, and giving the authorities of the day greater powers to protect retail customers as they resolved problems in a retail bank, could be achieved through the ring-fencing proposal that the Vickers commission put forward. That would also maintain some of the benefits of one part of the bank being able to support another part in trouble.

The commission explicitly considered the Glass-Steagall issue, but decided that ring-fencing was a better approach. We will introduce legislation that I hope and intend will have pre-legislative scrutiny in the House during the coming Session. I hope that that will be an opportunity for Parliament to examine the issue that my right hon. Friend rightly raised. As a country, we must decide once and for all how to proceed with the structure of our banking industry.

[Charlie Elphicke (Dover) (Con)]

Will the Chancellor give way?

[Mr Osborne]

Yes, but then I should make some progress.

[Charlie Elphicke]

I hesitate to take the Chancellor back to the FSA report on the failure of RBS, which says that political pressures to be light-touch were partly to blame for the bank’s collapse. What exactly were those political pressures, in his understanding, and what lessons can be drawn from them?

[Mr Osborne]

My hon. Friend is tempting me back into the fertile territory of the shadow Chancellor’s role in the banking crash, but not least because I do not want to provoke a reaction, I think that I should probably move on to the flaws of the system that the right hon. Gentleman helped to create as Treasury adviser.

--- Later in debate ---

[Mr Osborne]

We do not want to prescribe in the Bill the qualifications of the external members of the Financial Policy Committee. That would be a mistake. However, I would obviously want to ensure that the external members—I will say something about this shortly—have broad and current experience of the financial system. There is an issue, as I will set out, about how this House—and, indeed, the political system—approaches conflicts of interest. In other words, we have to make a trade-off between appointing as external members to such bodies people who actually know what is going on in financial services and, at the same time, wanting to direct conflicts of interest, being careful not to rule out anyone simply because they work in financial services. The Select Committee on the Treasury and the Joint Committee that looked at the Bill have made an important recommendation for us all: to be careful about creating a system in which no one who has current experience of financial services sits on the bodies that regulate individual firms or, more importantly, system-wide risks, and that includes insurance.

[Charlie Elphicke]

With the tripartite system, of which I believe the shadow Chancellor was the architect, a tick-box culture of regulation grew—a one-size-fits-all approach, and that sort of thing. Will the Chancellor tell the House a bit about how we will get rid of that tick-box culture and move towards a culture of more individual and tailored regulation?

[Mr Osborne]

The key thing is to empower the regulators both to exercise judgment and then to be able to do something about it. One reason for locating both the macro-prudential role and, when it comes to individual firms, the micro-prudential role in the central bank is the culture in central banks—not just in the Bank of England, but in central banks generally—of exercising judgment and acting on it. I very much want to encourage that. My hon. Friend is right: there was no shortage of regulation, in that sense, in 2006-07. RBS complied with every bit of regulation in its decision to try to take over ABN AMRO; it is just that no one felt empowered to say, “Is this the right thing, for this firm and for the financial system, at a point when the financial markets have already frozen up?”

Rather than wait for this Bill to pass through Parliament, we have gone ahead and created the Financial Policy Committee on an interim and non-statutory basis. It is already meeting regularly to assess risks across the financial system, such as the need for banks to provide for adequate capital before determining the distribution of profits, as well as drawing attention to specific products, such as exchange-traded funds, whose excessive use may be a cause for concern. It has already produced two impressive financial stability reports.

Banking Commission Report

Debate between George Osborne and Charlie Elphicke

Monday 19th December 2011 Commons Chamber

[Mr Osborne]

There will be, and part of the new regime will involve a specific authority looking at competition and customer service. In that way, we shall avoid having one institution—namely, the FSA—trying to do both functions of a regulator, which are to look at the point-of-sale service that someone gets to ensure that they are being sold a product correctly, as well as ensuring that the bank itself is being properly managed and is not about to collapse. Separating those functions will be an essential part of our reforms.

[Charlie Elphicke (Dover) (Con)]

May I urge the Chancellor to consider a whole in-country depositor preference system, such as that in the United States, rather than the insurance-based system recommended in the Vickers review? This would, over time, discourage reliance on the wholesale short-term funding markets. It would also reduce the risk to the taxpayer of banks that are too big to fail.

[Mr Osborne]

I am happy to consider my hon. Friend’s views, but we are equally clear that the depositor preference proposals in the Vickers report are the ones that we support in principle; their implementation in practice will be addressed in the White Paper.

Autumn Statement

Debate between George Osborne and Charlie Elphicke

Tuesday 29th November 2011 Commons Chamber

[Mr Osborne]

Of course people who work in the public sector pay taxes and make an enormous contribution to the British economy, but the hon. Lady should recognise that public sector pay restraint and pension reform at a time such as this is one of the ways in which we can reduce the impact of the very large deficit that her Government ran up on the public sector work force.

[Charlie Elphicke (Dover) (Con)]

I give a wholehearted welcome to the announcement concerning the lower Thames crossing, which will make a big difference to Kent, as will the massive help for small business finance. May I make a plea to the Chancellor to look further at small business equity finance? In particular, will he consider whether there is scope for expanding, or possibly floating, the business growth fund?

[Mr Osborne]

I am very happy to look at ideas to enhance the business growth fund, which is principally operated by the banks, under which they have committed to invest in the equity of small companies. We have already announced the seed enterprise investment scheme, which will help angel investments in companies. I am glad that my hon. Friend supports the commitment that we made to the new crossing at the lower Thames.

Eurozone

Debate between George Osborne and Charlie Elphicke

Monday 10th October 2011 Commons Chamber

[Mr Osborne]

We should certainly listen to the sage words of the former Labour Trade Minister.

[Charlie Elphicke (Dover) (Con)]

Deficit reduction has kept us ahead of the curve, so our triple A rating has been maintained and interest rates are lower than they otherwise would be. Is it the same with quantitative easing, that it will keep us ahead of the curve if the eurozone does not make the right decisions in the next three or four weeks?

[Mr Osborne]

As I said, it was an independent decision of the Bank of England. In the explanation that the Governor gave of why the Bank took the decision, he explicitly referred to the situation regarding the euro. I agree with that decision. Work done by the Bank of England suggests that the method can work.

The Economy

Debate between George Osborne and Charlie Elphicke

Wednesday 22nd June 2011 Commons Chamber

[Mr Osborne]

My hon. Friend is absolutely right that a crucial element of our strategy must be to undertake structural reform of the British economy in order to reduce regulation and the burdens on business and make our economy more competitive. We would have to do that in any case, even without the recovery from recession we are having to undertake, but the truth is that it has been made more difficult by the accumulation of all the red tape over the past few years. It is remarkable that when we propose important changes—although not changes that go as far as we would like—to employment tribunal law, Labour opposes them. Those are basic changes that would enable more people to be hired and to be in work, but they are opposed by the Opposition. [Interruption.] We can tell by Opposition Members’ reactions that they simply do not understand what it takes to create jobs in the private sector.

[Charlie Elphicke]

The Opposition not only want to hold back the growth agenda; they also have a series of unfunded spending commitments and go in for gimmicks and bandwagon chasing. They will not be a responsible Opposition, or electable at the next general election, if they carry on in this way.

[Mr Osborne]

My hon. Friend is absolutely right. In the last week alone, not only has the shadow Chancellor made a huge unfunded tax promise, but Labour voted against the welfare Bill, with its billions of pounds of savings. It is perfectly right for an Opposition to say, “I don’t agree with that, and I’ve got an argument with you on this,” but Labour’s voting against the entire welfare Bill was a catastrophic error of judgment, and we will remind it of its failure to reform the welfare system from now until the end of this Parliament. The Labour leader recently said that his party had become known as the friend of the welfare scroungers and the bankers. He was absolutely right about that.

The shadow Chancellor’s central argument was that the reason why we are undertaking this deficit reduction plan is because it is all part of some great partisan ideological plot. I therefore have a question for the shadow Treasury team: presumably therefore, the Bank of England is part of this plot? Is that the case?

Oral Answers to Questions

Debate between George Osborne and Charlie Elphicke

Tuesday 10th May 2011 Commons Chamber

[Mr Osborne]

As I was explaining to the hon. Member for Gedling (Vernon Coaker), the bank bonus tax was introduced by the previous Chancellor of the Exchequer, and it was his judgment that it would not work for another year because the banks would find a way of avoiding it. That is why we introduced a permanent bank levy not just for one year, but for each and every year. In any one year it raises more than the bank bonus tax net, so that is what we have done. It is pretty striking: Labour Members had 13 years in government to introduce a permanent bank tax; they did not do so, and they cannot carp from the sidelines now.

[Charlie Elphicke (Dover) (Con)]

If our gold had not been sold off some years ago, how much would it be worth today?

[Mr Osborne]

The gold was sold, I think on the advice of the current shadow Chancellor, at $3.5 billion—a princely sum, except that it would now be worth $19 billion.

Banking

Debate between George Osborne and Charlie Elphicke

Wednesday 9th February 2011 Commons Chamber

[Mr Osborne]

I thought that the hon. Gentleman might ask a question like that, so I did a bit of research and discovered that one of the biggest donors to the shadow Chancellor’s party leadership campaign was a Michael Sanzone, who started off at ABN Amro, moved to RBS and ended up at Lehman Brothers before supporting his campaign. They are probably the four most catastrophic decisions of recent years.

[Charlie Elphicke (Dover) (Con)]

That gentleman was probably expecting a knighthood and a peerage, like so many of them had in the past. Have we not moved on from excessive bonuses to an emphasis on lending more money to small and medium-sized enterprises? Are we not seeing £10 billion for SMEs and £2.5 billion in total for the new growth fund?

[Mr Osborne]

My hon. Friend is absolutely right. For me, in these discussions the absolute key has been the additional commitment to lend to small and medium-sized businesses. Over the past couple of years, all Members have had people in our constituencies come to us with very difficult stories about the failure of banks to lend to such businesses, and we now have a commitment to increase the lending available by 15%, which is a substantial increase. Alongside that—I did not have time to go into all the detail, but it is being published this afternoon—there will be a new code of practice for the banks to treat their customers much more fairly: for example, they should engage with small businesses a full year before an overdraft comes up for renewal. For me, dealing with that crucial area of the economy—getting credit to small and medium-sized businesses—has been one of the most important parts of the new settlement.

Bank Bonuses

Debate between George Osborne and Charlie Elphicke

Tuesday 11th January 2011 Commons Chamber

[Mr Osborne]

One of the issues that we are talking directly to the banks about is lending into regional economies outside London and the south-east—that is in addition to the contribution that they make to the whole national economy. That regional emphasis is a very specific part of the discussions we are having.

[Charlie Elphicke (Dover) (Con)]

The Chancellor has already told the House that under the banking contract, bonuses were actively encouraged by the previous Government for the current year. Can he tell the House whether lending to cash-strapped small businesses was also encouraged under that contract?

[Mr Osborne]

Nothing meaningful was secured on lending to small businesses by the previous Government at the very moment when they had maximum leverage: when they were bailing out these banks. That is part of what we are dealing with. We are also dealing with the situation in which they bought their very large stake in the Royal Bank of Scotland—as I have said, the deal explicitly says that the bonuses covering the year 2010 should be paid at market rates. I am saying that we want to see the bonus pool smaller and the Royal Bank of Scotland as a back-marker, rather than a front-runner.

Loans to Ireland Bill

Debate between George Osborne and Charlie Elphicke

Wednesday 15th December 2010 Commons Chamber

[Mr Osborne]

It is a reasonable summary. Of course we stand behind the International Monetary Fund as a shareholder of it, as are most countries in the world. I shall come on to the European financial stability mechanism, which I have already talked to the House about on a number of occasions. Like other contributors to the EU budget, we stand behind it. In a sense, the loan that we are proposing today is the direct British taxpayer contribution—or rather, the money that is borrowed on behalf of the British taxpayer. I shall come to the terms of the loan, but of course we expect to be repaid, and repaid with interest. We are doing this because we think it is absolutely in our national interest, for some of the reasons that have been set out.

[Charlie Elphicke (Dover) (Con)]

On that point, may I welcome the fact that the Bill is before the House today and that approval is being sought before the loan is made? Will my right hon. Friend explain how we came to be part of the European financial stability mechanism, what approval the House gave to it and what level of debates there were about it?

[Mr Osborne]

As I explained to the House previously—my predecessor, the right hon. Member for Edinburgh South West (Mr Darling) is here, and might at some point want to give his own version of events—my understanding is that in the period between the general election and the formation of the Government, an emergency ECOFIN meeting was held to address the Greek situation and to provide confidence that the European Union and the eurozone stood behind other member states that were potentially in difficulty.

My predecessor ensured that we stayed out of the eurozone facility—I have acknowledged that in the House —but acquiesced in the use of article 122 of the treaty, which allowed the European Union to disburse funds when a natural disaster, such as an extreme weather event, was affecting a member state, to create a mechanism that could stand behind countries that got into difficulties. The decision on the use of that mechanism is taken by qualified majority voting, so although we could vote against its use in this situation, I did not think that that would achieve anything. I am focused, in a way that I shall describe, on trying to extricate the UK from the EU-27 mechanisms that stand behind eurozone countries. If hon. Members will bear with me, I shall talk about that later, and if people want to intervene at that point, that would be more sensible.

Let me move on to the connections between our banking sectors. Our banking sector has a considerable exposure to Ireland, but I should stress that in the opinion of the Financial Services Authority, the UK banks are sufficiently well capitalised to more than manage the impact of the situation in Ireland. For a long time now the devaluation in Irish asset values has been accounted for and priced in.

One thing is clear. It is undoubtedly in Britain’s national interest to have a growing Irish economy and a stable Irish banking system. In the judgment of both the Irish Government and the international community that was not going to come about without the assistance package we debate today. I would now like to explain to Members the principles of the Bill, and then take them through the heads of terms of the loan agreement.

The Bill has two substantive clauses. Clause 1 sets out the parameters under which the Treasury may make payments under UK loans to Ireland. As I explained earlier, the total international assistance package, including our contribution, is denominated in euros. However, we are making a bilateral loan in sterling so that Ireland bears the exchange rate risk over the coming years. Subsection (3) of the clause includes a cap on the total size of our bilateral loan. It is written on the face of the Bill that

“the aggregate amount of payments made by the Treasury by way of Irish loans...must not exceed £3,250 million”.

In other words, the £3.25 billion we originally agreed will be the maximum total size of our bilateral loan to Ireland. A sunset clause is also, in effect, built into the legislation. The period over which the loans may be offered begins on 9 December 2010, when the Bill was published, and ends on 8 December 2015.

Autumn Forecast

Debate between George Osborne and Charlie Elphicke

Monday 29th November 2010 Commons Chamber

[Mr Osborne]

The Bank of England Monetary Policy Committee sets interests rates, and does so independently. The purpose, in part, of the measures that we have taken to reduce the deficit is to give the Monetary Policy Committee the maximum possible flexibility and freedom in setting the appropriate monetary policy to stimulate demand in the economy. I believe that that has enabled it to keep interest rates low, which helps to stimulate the economy.

[Charlie Elphicke (Dover) (Con)]

Will the Chancellor confirm that the corporation tax reforms that were announced today will make the UK more attractive as a holding company jurisdiction and help to make the UK a pre-eminent corporate headquarters centre, as much as a financial centre?

[Mr Osborne]

My hon. Friend is absolutely right that the reforms will help to do that. They will help the UK to be an attractive place for international companies to locate, invest and create jobs. The changes to the patent regime will help a number of sectors, such as pharmaceuticals. I mentioned GlaxoSmithKline, but of course Pfizer is a big employer near Dover, and I hope that it, too, will benefit from the announcements that we have made.

Financial Assistance (Ireland)

Debate between George Osborne and Charlie Elphicke

Monday 22nd November 2010 Commons Chamber

[Mr Osborne]

At the moment, there is heightened concern around the world about European countries with high budget deficits. One such country is the UK, but there is no heightened concern about us because of the measures that we have taken. If we followed what the hon. Gentleman and Labour Front Benchers propose, and if I were to say at the Dispatch Box tomorrow, “You know what. We are abandoning our fiscal plans set out in the Budget and the spending review, and instead engaging in a loosening of those plans,” I can only imagine what the international reaction would be.

[Charlie Elphicke (Dover) (Con)]

Being there for a friend in need overseas and unbankrupting ourselves at home are right and proper. However, how could it ever be right or proper for a Government voted out of office to engage in major financial commitments for the UK while squatting in Downing street?

[Mr Osborne]

I think my hon. Friend is referring to the period between the general election and the creation of this Government. I have given the House my account of that. I thanked the former Chancellor for keeping us out of the eurozone facility, but I did not agree with his decision to commit us to the mechanism, and I communicated that to him. However, I also made it clear at the time there can only be one Chancellor of the Exchequer operating for the UK, even in the unusual situation between the general election and the formation of this Government. He will account for his decisions and I will account for mine.

Proposed Public Expenditure Cuts

Debate between George Osborne and Charlie Elphicke

Monday 13th September 2010 Commons Chamber

[Mr Osborne]

I respect the fact that the hon. Lady is the Chair of the Select Committee on Work and Pensions, but I must tell her that the number of working-age people who claim disability living allowance has risen by more than 40% in the last decade, which is a substantial increase. When I considered reforms to the allowance, I saw that it would be possible to introduce such reforms as means-testing, but I rejected those. I said that it would be fairer to introduce an up-to-date assessment to help people to receive the benefit and ensure that they were eligible for it in future. I think that that is the fair way in which to proceed with this particular benefit, because I well understand that those who receive it are some of the most vulnerable members of our society.

[Charlie Elphicke (Dover) (Con)]

Can the Chancellor tell us whether, having bankrupted the country, the last Government left any detailed financial restraint, according to Treasury officials? This reminds me of the kids—the yobs—who smash the bus shelter and then throw stones at the people who are trying to clean up the mess. It is a disgrace.

[Mr Osborne]

The last Government left nothing except a letter from their Chief Secretary saying “I am sorry, but there is no money left”.

Office for Budget Responsibility

Debate between George Osborne and Charlie Elphicke

Monday 14th June 2010 Commons Chamber

[Mr Osborne]

For the first time, the OBR has published five-year projections of unemployment and employment. The projection for the coming year, for example, is that employment will fall and unemployment will rise—based, of course, on the pre-Budget measures.

[Charlie Elphicke (Dover) (Con)]

In Dover and Deal, people tell me time and again that they want more jobs, more money and more economic growth, so it is a real shock to come to the House and see the table in today’s report showing that economic growth has been revised downwards, by between 0.5% and 1%. How can that have happened in the three short months since the Budget? Were the Budget numbers fiddled? What has been going on?