Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 7th June 2016 Commons Chamber

[Mr Osborne]

Where was Labour’s apprenticeship levy—before they complain about what we are doing? If Labour wants to contribute to this important debate about how we make our economy more productive, we will need a better contribution. The hon. Lady’s Parliamentary Private Secretary has been in an email exchange with the hon. Member for Bishop Auckland (Helen Goodman) in which the latter complained about these questions at Treasury Questions, saying that the brief she had just been sent was a disgrace and demonstrated that the Labour Treasury team—

[Mr Speaker]

Order. The Chancellor should remain seated. If that is the sum total of what he has to contribute on his feet in response to that question, frankly it was not worth the breath. It was utterly feeble and constitutionally improper. Learn it—it is very simple!

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[Mr Osborne]

It is absolutely clear that we need additional runway capacity in the south-east of England. That is what the Davies report suggested. Of course, the Government now need to come forward with a conclusion to that report, but we wanted to address the issue of air quality. When we raised that issue, some people asked whether it was necessary to look into it. If we look at the debates in the mayoral contest over the past few months, we see that air quality is an important issue to get right. We are close to finishing that work, and then we will report back on the Davies commission and future airport capacity.

[Mr Speaker]

Order. Before I call the hon. Member for Denton and Reddish (Andrew Gwynne) to put his urgent question, I should explain that, on account of the subsequent business, its importance and the likely level of subscription to it, the UQ will run for a maximum of half an hour, so the limits on the Front Benchers and Back Benchers involved do need to be observed.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Wednesday 25th May 2016 Commons Chamber

[Mr Speaker]

We now come to questions to the Prime Minister.

[The First Secretary of State and Chancellor of the Exchequer (Mr George Osborne)]

rose—

[Mr Speaker]

Order. The right hon. Gentleman is a bit ahead of himself. There is a process to be followed. He can wait his turn.

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[Mr Osborne]

We increased resources for HMRC to tackle tax evasion and avoidance. We have introduced a diverted profits tax so that companies such as Google cannot shift their profits offshore anymore, and have made sure that banks pay a higher tax charge than they ever did under the last Labour Government. I come back to this question. The hon. Lady was a Treasury Minister. She stood at this Dispatch Box. She is asking me what we have done to tackle tax evasion and avoidance. When she was Exchequer Secretary, did she ever raise the tax affairs of Google? We should know that before she asks questions of this Government. [Interruption.]

[Mr Speaker]

Order. Members must calm themselves, and remain calm. Members on both sides should take their lead from the right hon. and learned Member for Rushcliffe (Mr Clarke), who always sits calmly and in a statesmanlike manner. That is the way to behave.

[Ms Eagle]

We all have a great deal of respect for the right hon. and learned Member for Rushcliffe (Mr Clarke). The Chancellor of the Exchequer will know that the Exchequer Secretary deals with taxes on vices, not on Google. I did my job in taxing vices when I was in the Treasury. The Chancellor will be judged on results. He has been in office for six years. Given that France is demanding 10 times more from Google than he is, the public will make their own judgment.

Labour is campaigning to ensure that the UK remains in the European Union because that is the best way to defend rights at work as well as jobs and prosperity, but the Conservative party is split right down the middle and is descending into vicious acrimony. Last week the Minister of State for Employment called for Brexit, so that there could be a bonfire of workers’ rights. Does the Chancellor agree with her, or does he agree with Len McCluskey that a vote to stay in the European Union is the best deal for Britain’s workers?

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 19th April 2016 Commons Chamber

[Mr Osborne]

To be frank, representations are not going to be enough with some of these jurisdictions. That is why we want international agreement to a blacklist that jurisdictions will go on if they do not comply with the norms that we are establishing on transparency, exchange of information and the like. Once they are on the blacklist, they are subject to penalties and punitive action—sanctions, if you like—so that it is clear that they cannot carry on doing business in the way they have been. If the whole world comes around on that—there was welcome support for this British-promoted concept at the G20 last week in Washington—so that we get that blacklist and that punitive action, I think that we will help to solve this problem.

[Mr Speaker]

We have to move on—far too slow.

Budget Resolutions and Economic Situation

Debate between George Osborne and John Bercow

Tuesday 22nd March 2016 Commons Chamber

[Tim Farron]

I thank the Chancellor for giving way, and I want to associate myself with the remarks that he made earlier about the appalling situation in Brussels.

Does the Chancellor agree with me that the one thing that is more dangerous for our economy than his remaining Chancellor is that we might leave the European Union; and does he agree that his being called out by his former colleague as acting not in the economic interests of the country, but in a short-term political way, introduces a risk that the referendum will be a referendum on him, not on the future of our role in Europe? Will he act in the national interest and resign?

[Mr Speaker]

May I remind Members that interventions should be brief? We want to hear from both Front Benchers, and I want to hear from dozens of Back Benchers. I repeat that interventions should be brief.

[Mr Osborne]

That was like one of those interminable interventions at ECOFIN. I happen to think that it is better to be in that council than not, but that is a debate for another day. We are talking here about the reforms we are making to welfare and to our economy.

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[Mr Osborne]

I have already said that we are not going ahead with those changes. [Interruption.] I have addressed these issues. The truth is that that family and many more families are getting increased support under this Government. We would not be able to provide any of that support unless we had a strong economy and we controlled public spending, because the people who suffer most when the economy—[Interruption.]

[Mr Speaker]

Order. I apologise for having to interrupt the Chancellor. [Interruption.] Order. Members are yelling—in some cases, from sedentary positions—very noisily. If people put questions to the Chancellor, they must leave him to respond. The same will go for Government Back Benchers when they no doubt challenge Members speaking from the Opposition Benches. Let us try to restore some sort of order to this debate.

[Mr Osborne]

Mr Speaker—

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 1st March 2016 Commons Chamber

[Mr Osborne]

The point I make to my hon. Friend is that, of course, we will have to handle the situation if the British people choose to exit, and I would always want to stress that we are a great country to invest in, but I think that that argument will be weaker if we are not in the EU.

[Mr Speaker]

We are deeply grateful, but we must try to attend to the questions asked, and to do so in a timely way, because progress is desperately slow. Members can do better than that, one would hope.

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

Would there not be a double whammy if Britain left the EU? First, there is the widely predicted risk of depreciation, which will lead to higher interest rates. Secondly, any notion that our exporters would benefit from a cheaper pound is more than offset by the additional tariff barriers that those firms would encounter worldwide.

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[Helen Goodman (Bishop Auckland) (Lab)]

The Chancellor chose to give a puff to his desire for Sunday trading liberalisation, but is he aware of the study produced yesterday which showed that all there will be is a switch of activity from small shops to big shops, and that that will mean a loss of thousands of jobs? [Interruption.]

[Mr Speaker]

The hon. Member for Lichfield (Michael Fabricant) says that the Chancellor has already dealt with that question. As I have often had cause to observe, repetition is not a novel phenomenon in the House of Commons.

[Mr Osborne]

To repeat myself, Mr Speaker, I do not agree with the hon. Lady, because it has been the case that when we have extended opening hours we have not seen not a displacement of jobs, but an increase in jobs. That is the assessment from the retail industry. Of course, these arrangements exist in Scotland, in many European countries and in the United States. Many of those are countries with strong Christian faiths, so I do not think there is a contradiction there. We cannot in this House constantly say that we worry about our high street and then not allow high street stores to open on the day when the biggest level of internet shopping takes place. This is one of the answers to helping our high street. It is not the only one, but it is an important one.

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[Mr Osborne]

We are providing support to Scotland, and that support is entrenched in the fiscal framework that we have agreed with the Scottish Government. The hon. Gentleman cannot duck his responsibilities. He wanted Scotland to be independent on 24 March—this month. If we had gone ahead with that—if the Scottish people had voted for it—there would have been a fiscal catastrophe in Scotland, because oil revenues have fallen by more than 90%. We had a question earlier from a Scottish National party Member—[Interruption.]

[Mr Speaker]

Order. I apologise for interrupting, but that was a very unseemly gesticulation by the hon. Member for Na h-Eileanan an Iar (Mr MacNeil). I remind him of his status in this House as the Chair of a Select Committee. He is an aspiring statesman and must conduct himself accordingly.

[Lucy Frazer (South East Cambridgeshire) (Con)]

In response to an earlier question on productivity, my right hon. Friend mentioned the drivers of growth being investment in schools and investment in science and technology. Does he, like me, welcome the Government’s commitment to train 17,500 more teachers in science, technology, engineering and maths, and does he think that there is absolutely no time to waste in recruiting those teachers?

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 19th January 2016 Commons Chamber

[Mr Osborne]

We have set out our capital budget and our energy policy, which will see a doubling of the investment in renewable energy over the next five years.

[Mr Speaker]

Robert Jenrick—I am calling you, man; don’t leave the Chamber.

[Robert Jenrick (Newark) (Con)]

Thank you, Mr Speaker. You are very kind. My superb hon. Friend and neighbour the Member for Sherwood (Mark Spencer) had already asked the question, but I will ask it again as that is not unusual in this place. My parents formed their small business in the first enterprise zone created by Margaret Thatcher in Telford in 1984. My right hon. Friend the Chancellor has carried on in that great Conservative tradition. Will he afford the same opportunities to get on in life and create jobs to my constituents and those of my hon. Friend the Member for Sherwood by backing Thoresby colliery as the next and best enterprise zone?

[Mr Osborne]

My hon. Friend has just demonstrated that he is a very smart thinker on his feet. He is always ready to stand up for the interests of his Newark constituents. As I said to our hon. Friend and his neighbour the Member for Sherwood (Mark Spencer), I would love to get the Thoresby colliery enterprise zone into a condition where we can give it the go-ahead, and I give him and my hon. Friend his neighbour my personal commitment that we will try to do that over the next year or two.

[Mr Speaker]

Of course, as colleagues know, the fact that a question has been asked does not stop others asking the same question. Repetition is not a novel phenomenon in the House of Commons.

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[Mr Osborne]

We will absolutely deliver the plan in these more difficult economic conditions. As I say, the IMF has not revised down the UK’s growth forecast even though it has today revised down the global economic forecast. In Croydon and south London, we will continue with important transport infrastructure, and, indeed, do everything we can to back homeowners in my hon. Friend’s constituency—a group of people he particularly champions.

[Mr Speaker]

Last but not least, I call Alison McGovern.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Wednesday 9th December 2015 Commons Chamber

[Mr Osborne]

I thank my hon. Friend for raising this important issue. Let me briefly update the House on the military action that has taken place since we met last week. We have 16 aircraft conducting strikes, as well as our Reaper drones. The Royal Air Force has flown 11 missions and conducted four strikes, principally against the oilfields, and we are also supporting Iraqi security forces. My right hon. Friend the Foreign Secretary will be in New York next week for talks on trying to bring an end to the horrendous conflict in Syria. As for the damage that is being done to the cultural artefacts in the area, we are providing £30 million as part of the cultural fund—I have discussed that with the director of the British Museum—and as for the Hague convention, that process is now moving apace.

[Mr Speaker]

I call Angela Eagle.

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[Mr Osborne]

rose—[Interruption.]

[Mr Speaker]

Order. Let us hear the Chancellor.

[Mr Osborne]

Let me say something surprising: we talk to each other in this Government! The Cabinet actually gets round the table and has meetings. We discuss things, we agree, and then we move forward—the Labour party should try it.

The Office for National Statistics is independent, but Britain is doing its bit by taking 20,000 refugees from the Syrian refugee camps. We have always provided a home for genuine asylum seekers.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 1st December 2015 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP)]

T5. As the Chancellor was on his feet last week, the Department of Energy and Climate Change quietly issued a statement to the stock exchange on the removal of £1 billion of funding for carbon capture and storage. That was a breach not only of the Tory party manifesto, which is not surprising, I suppose, but of a promise to the people of Scotland during the referendum campaign. How can he justify that decision, which jeopardises 600 jobs in Peterhead?

[Mr Speaker]

Thank you. We need to be much pithier.

[Mr Osborne]

We are doubling investment in renewable electricity and energy, and much of that is going into Scotland. We also increased the capital budget for the Scottish Government, so instead of lobbying us for capital projects, they now have the resources to pay for such things themselves.

--- Later in debate ---

[Mr Osborne]

I was very excited, Mr Speaker, to hear about the skills show in Birmingham. My hon. Friend is right: by investing in apprenticeships and creating 3 million apprentices we address one of the great weaknesses of the British economy that has emerged over many decades, which is the low skill base.

[Mr Speaker]

Unfortunately, the Chancellor’s excitement is of no interest to the Chair. What is of interest is pithiness and progress, and everybody ought to be able to grasp that point.

[Pat Glass (North West Durham) (Lab)]

T8. The Chancellor is a leading member of the Cabinet’s economic Sub-Committee that is considering airport expansion. The outcomes of that Committee are vital to growth in the north, and we were promised a response to it by Christmas. When can we expect that response?

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[Mr Osborne]

Of course we want entrepreneurs’ relief to be directed at entrepreneurs, and that is why we made the changes earlier this year, but during our time in office Conservative members of the Treasury team have doubled and redoubled that relief. We very much support that help for our enterprise economy.

[Mr Speaker]

Last, but not least—and with commendable brevity, I feel sure—I call Mr Mulholland.

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

Thank you, Mr Speaker.

British pubs currently have 0.5% of British turnover, but pay 2.8% of business rates. Will the Chancellor meet me and officers of the save the pub APPG to discuss how we can better support pubs in the taxation system?

Spending Review and Autumn Statement

Debate between George Osborne and John Bercow

Wednesday 25th November 2015 Commons Chamber

[Clive Lewis (Norwich South) (Lab)]

Wow, it’s magic.

[Mr Speaker]

Order. Mr Lewis, get a grip of yourself, man. Calm. Take up yoga—you will find it beneficial, man. Now look, the record shows that the Chancellor stays for a very considerable period after his statement to respond to questions, and Members will always find the Chair a friend if they wish to question a Minister—[Interruption.] Yes, they will. Those who have questions to ask will be heard. Meanwhile, the Chancellor will be heard.

[Mr Osborne]

Mr Speaker, I am looking forward to it.

On that new measure, debt was forecast in July to be 83.6% of national income this year. Now, today, in this autumn statement, the OBR forecasts debt this year to be lower at 82.5%. It then falls every year, down to 81.7% next year, down to 79.9% in 2017-18, then down again to 77.3%, then 74.3%, reaching 71.3% in 2020-21. In every single year, the national debt as a share of national income is lower than when I presented the Budget four months ago.

This improvement in the nation’s finances is due to two things. First, the OBR expects tax receipts to be stronger—a sign that our economy is healthier than thought. Secondly, debt interest payments are expected to be lower, reflecting the further fall in the rates we pay to our creditors. Combine the effects of better tax receipts and lower debt interest, and overall the OBR calculates that it means a £27 billion improvement in our public finances over the forecast period, compared with where we were at the Budget.

This improvement in the nation’s finances allows me to do the following. First, we will borrow £8 billion less than we forecast, making faster progress towards eliminating the deficit and paying down our debt—fixing the roof when the sun is shining. Secondly, we will spend £12 billion more on capital investments, making faster progress to building the infrastructure our country needs. Thirdly, the improved public finances allow us to reach the same goal of a surplus while cutting less in the early years. We can smooth the path to the same destination.

That means that we can help on tax credits. I have been asked to help in the transition as Britain moves to the higher-wage, lower-welfare, lower-tax society the country wants to see. I have had representations that the changes to tax credits should be phased in. I have listened to the concerns. I hear and understand them. Because I have been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether. Tax credits are being phased out anyway as we introduce universal credit.

What that means is that the tax credit taper rate and thresholds remain unchanged. The disregard will be £2,500. I propose no further changes to the universal credit taper or to the work allowances beyond those that passed through Parliament last week. The minimum income floor in universal credit will rise with the national living wage.

I set a lower welfare cap at the Budget. The House should know that helping with the transition obviously means that we will not be within that lower welfare cap in the first years, but the House should also know that, thanks to our welfare reforms, we will meet the cap in the later part of this Parliament. Indeed, on the figures published today, we will still achieve the £12 billion per year of welfare savings we promised. That is because of the permanent savings we have already made and further long-term reforms that we announce today.

The rate of housing benefit in the social sector will be capped at the relevant local housing allowance—in other words, the same rate that is paid to those in the private rented sector who receive the same benefit. That will apply to new tenancies only. We will also stop paying housing benefit and pension credit payments to people who have left the country for more than a month. The welfare system should be fair to those who need it and fair to those who pay for it.

Improved public finances and our continued commitment to reform mean that we continue to be on target for a surplus. The House will want to know the level of that surplus, so let me give the OBR forecasts for deficit and borrowing. In 2010, the deficit we inherited was estimated to be 11.1% of national income. This year, it is set to be almost a third of that, 3.9%. Next year, it falls to less than a quarter of what we inherited, 2.5%. The deficit is down again to 1.2% in 2017-18 and down to just 0.2% the year after that, before moving into a surplus of 0.5% of national income in 2019-20, rising to 0.6% the following year.

Let me turn to the cash borrowing figures. With housing associations included, the OBR predicted at the time of the Budget that Britain would borrow £74.1 billion this year. Instead, it now forecasts that we will borrow less than that at £73.5 billion. Borrowing falls to £49.9 billion next year and then continues to fall. It falls to lower than was forecast at the Budget in every single year after that: to £24.8 billion in 2017-18 and down to just £4.6 billion in 2018-19. In 2019-20, we will reach a surplus—a surplus of £10.1 billion.

That is higher than was forecast at the Budget—Britain out of the red and into the black. In 2020-21, the year after that, the surplus rises to £14.7 billion.

So the deficit falls every year; the debt share is lower in every year than previously forecast; we are borrowing £8 billion less than we expected overall; and we reach a bigger surplus. We have achieved this while at the same time helping working families as we move to the lower-welfare, higher-wage economy, and we have the economic security of knowing our country is paying its way in the world.

That brings me to our plans for public expenditure and taxation. I want to thank my right hon. Friend the Chief Secretary, our other ministerial colleagues at the Treasury and the brilliant officials who have assisted us for the long hours and hard work that they have put into developing these plans.

We said £5 billion would come from the measures on tax avoidance, evasion and imbalances. Those measures were announced at the Budget. Together we go further today, with new penalties for the general anti-abuse rule, which this Government introduced, and action on disguised remuneration schemes and stamp duty avoidance, and we will stop abuse of the intangible fixed assets regime and capital allowances. We will also exclude energy generation from the venture capital schemes, to ensure that they remain well targeted at higher-risk companies.

Her Majesty’s Revenue and Customs is making efficiencies of 18% of its own budget. In the digital age, we do not need taxpayers to pay for paper processing or 170 separate tax offices around the country. Instead, we are reinvesting some of those savings, with an extra £800 million in the fight against tax evasion—an investment with a return of almost 10 times in additional tax collected.

We are going to build one of the most digitally advanced tax administrations in the world in this Parliament, so that every individual and every small business will have their own digital tax account by the end of the decade in order to manage their tax online. From 2019, once these accounts are up and running, we will require capital gains tax to be paid within 30 days of completion of any disposal of residential property. Together, these things form part of the digital revolution we are bringing to Whitehall with this spending review. The Government Digital Service will receive an additional £450 million, but the core Cabinet Office budget will be cut by 26%, matching a 24% cut in the budget of the Treasury, and the cost of all Whitehall administration will be cut by £1.9 billion. These form part of the £12 billion of savings to Government Departments that I am announcing today.

In 2010, Government spending took up 45% of national income. This was a figure we could not sustain, because it was neither practical nor sensible to raise taxes high enough to pay for that, and we ended up with a massive structural deficit. Today the state accounts for just under 40% of national income, and it is forecast to reach 36.5% by the end of the spending review period. The structural spending that this represents is at a level that a competitive, modern, developed economy can sustain, and it is a level that the British people are prepared to pay their taxes for.

It is precisely because this Government believe in decent public services and a properly funded welfare state that we are insistent that they are sustainable and affordable. To simply argue all the time that public spending must always go up and never be cut is irresponsible and lets down the people who rely on public services most.

Equally, to fund the things we want the Government to provide in the modern world, we have to be prepared to provide the resources. So I am setting the limits for total managed expenditure as follows. This year, public spending will be £756 billion. Then it will be £773 billion next year, then £787 billion the year after, then £801 billion, before reaching £821 billion in 2019-20, the year we are forecast to eliminate the deficit and achieve the surplus. After that, the forecast public spending rises broadly in line with the growth of the economy and will be at £857 billion in 2020-21.

The figures from the OBR show that over the next five years, welfare spending falls as a percentage of national income while departmental capital investment is maintained and is higher at the end of the period. That is precisely the right switch for a country that is serious about investing in its long-term economic success.

People will want to know what the levels of public spending mean in practice and the scale of the cuts we are asking Government Departments to undertake. Over this spending review period, the day-to-day spending of Government Departments is set to fall by an average of 0.8% a year in real terms. That compares with an average fall of 2% over the last five years, so the savings we need are considerably smaller. This reflects the improvement in the public finances and the progress we have already made. Indeed, the overall rate of annual cuts that I set out in today’s spending review is less than half of those delivered over the last five years. So Britain is spending a lower proportion of its money on welfare and a higher proportion on infrastructure; seeing the budget balanced, with cuts half what they were in the last Parliament; making the savings we need, no less and no more; and providing economic security to the working people of a country with a surplus that lives within its means.

This does not, of course, mean that the decisions required to deliver these savings are easy. But nor should we lose sight of the fact that this spending review commits £4 trillion over the next five years. It is a huge commitment of the hard-earned cash of British taxpayers, and all those who dedicate their lives to public service will want to make sure it is well spent. Our approach is not simply retrenchment, it is to reform and rebuild.

These reforms will support our objectives for our country: first, to develop a modern, integrated health and social care system that supports people at every stage of their lives. Secondly, to spread economic power and wealth through a devolution revolution and invest in our long-term infrastructure. Thirdly, to extend opportunity by tackling the big social failures that for too long have held people back in our country. Fourthly, to reinforce our national security with the resources to protect us at home and project our values abroad. The resources allocated by this spending review are driven by these four goals.

The first priority of this Government is the first priority of the British people—our national health service. Health spending was cut by the Labour Administration in Wales, but we Conservatives have been increasing spending on the NHS in England, and in this spending review we do so again. We will work with our health professionals to deliver the very best value for that money. That means £22 billion of efficiency savings across the service; it means a 25% cut in the Whitehall budget of the Department of Health; and it means modernising the way we fund students of healthcare. Today there is a cap on student nurses—over half of all applicants are turned away, and it leaves hospitals relying on agencies and overseas staff. So we will replace direct funding with loans for new students, so that we can abolish this self-defeating cap and create up to 10,000 new training places in this Parliament.

Alongside these reforms, we will give the NHS the money it needs. We made a commitment to a £10 billion real increase in the health service budget, and we fully deliver that today, with the first £6 billion delivered up front next year. This fully funds the five-year forward view that the NHS itself put forward as the plan for its future. As the chief executive of NHS England, Simon Stevens, said,

“the NHS has been heard and actively supported.”

Let me explain what that means in cash. The NHS budget will rise from £101 billion today to £120 billion by 2020-21. This is a half a trillion pound commitment to the NHS over this Parliament—the largest investment in the health service since its creation.

So we have a clear plan for improving the NHS. We have fully funded it, and in return patients will see more than £5 billion of health research in everything from genomes to antimicrobial resistance, a new dementia institute and a new, world-class public health facility in Harlow. And more—800,000 more elective hospital admissions; 5 million more out-patient appointments; 2 million more diagnostic tests; new hospitals funded in Cambridge, in Sandwell and in Brighton; cancer testing within four weeks; and a brilliant NHS available seven days a week.

There is one part of our NHS that has been neglected for too long, and that is mental health. I want to thank the all-party group led by my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell), the right hon. Member for North Norfolk (Norman Lamb) and Alastair Campbell for its work in this vital area. In the last Parliament we made a start by laying the foundations for equality of treatment, with the first ever waiting time standards for mental health. Today, we build on that with £600 million of additional funding, meaning that by 2020 significantly more people will have access to talking therapies, perinatal mental health services and crisis care—all possible because we made a promise to the British people to give our NHS the funding it needed, and in this spending review we have delivered.

The health service cannot function effectively without good social care. The truth we need to confront is that many local authorities will not be able to meet growing social care needs unless they have new sources of funding. That, in the end, comes from the taxpayer, so in future those local authorities that are responsible for social care will be able to levy a new social care precept of up to 2% on council tax.

The money raised will have to be spent exclusively on adult social care, and if all authorities make full use of it, it will bring almost £2 billion more into the care system. It is part of the major reform we are undertaking to integrate health and social care by the end of the decade. To help to achieve that I am today increasing the better care fund to support that integration, with local authorities able to access an extra £1.5 billion by 2019-20. The steps taken in this spending review mean that by the end of the Parliament, social care spending will have risen in real terms.

A civilised and prosperous society such as ours should support its most vulnerable and elderly citizens. That includes a decent income in retirement. More than 5 million people have already been auto-enrolled into a pension thanks to our reforms in the last Parliament. To help businesses with the administration of that important boost to our nation’s savings, we will align the next two phases of contribution rate increases with the tax years. The best way to afford generous pensioner benefits is to raise the pension age in line with life expectancy, as we are already set to do in this Parliament. That allows us to maintain a triple lock on the value of the state pension, so never again will Britain’s pensioners receive a derisory increase of 75p.

As a result of our commitment to those who have worked hard all their lives and contributed to our society, I can confirm that next year the basic state pension will rise by £3.35 to £119.30 a week. That is the biggest real-terms increase to the basic state pension in 15 years. Taking all our increases together over the past five years, pensioners will be £1,125 better off a year than they were when we came to office. We are also undertaking the biggest change in the state pension for 40 years to make it simpler and fairer by introducing the new single-tier pension for new pensioners from April of next year.

I am today setting the full rate for our new state pension at £155.65. That is higher than the current means-tested benefit for the lowest income pensioners in our society and another example of progressive government in action. Instead of cutting the savings credit, as in previous fiscal events, it will instead be frozen at its current level where income is unchanged.

So the first objective of this spending review is to give unprecedented support to health, social care and our pensioners. The second is to spread economic power and wealth across our nation. In recent weeks, great metropolitan areas such as Sheffield, Liverpool, the Tees Valley, the north east and the west midlands have joined Greater Manchester in agreeing to create elected mayors in return for far-reaching new powers over transport, skills and the local economy. It is the most determined effort to change the geographical imbalance that has bedevilled the British economy for half a century.

We are also today setting aside the £12 billion we promised for our local growth fund and I am announcing the creation of 26 new or extended enterprise zones, including 15 zones in towns and rural areas from Carlisle to Dorset to Ipswich. But if we really want to shift power in our country, we have to give all local councils the tools to drive the growth of business in their area and the rewards that come when they do so, so I can confirm today that, as we set out last month, we will abolish the uniform business rate. By the end of the Parliament, local government will keep all of the revenue from business rates. We will give councils the power to cut rates and make their area more attractive to business, and elected mayors will be able to raise rates, provided they are used to fund specific infrastructure projects supported by the local business community.

As the amount we raise in business rates is in total much greater than the amount we give to local councils through the local government grant, we will phase that grant out entirely over this Parliament and we will also devolve additional responsibilities. The temporary accommodation management fee will no longer be paid through the benefits system. Instead, councils will receive £10 million a year more, up front, so they can provide more help to homeless people. Alongside savings in the public health grant, we will consult on transferring new powers and the responsibility for its funding, as well as elements of the administration of housing benefit.

Local government is sitting on property worth a quarter of a trillion pounds, so we will let councils spend 100% of the receipts from the assets they sell to improve their local services. Councils increased their reserves by nearly £10 billion over the last Parliament. We will encourage them to draw on those reserves as they undertake reforms.

That amounts to a big package of not only new powers but new responsibilities for local councils. It is a revolution in the way we govern this country and if we take into account both the fall in grant and the rise in council incomes, it means that by the end of the Parliament local government will be spending the same in cash terms as it does today.

The devolved Administrations of the United Kingdom will also have available to them unprecedented new powers to drive their economies. The conclusion last week of the political talks in Northern Ireland means additional spending power for the Executive to support the full implementation of the Stormont House agreement. That opens the door to the devolution of corporation tax, which the parties have now confirmed they wish to set at a rate of 12.5%. That is a huge prize for business in Northern Ireland and the onus is now on the Northern Ireland Executive to play their part and deliver sustainable budgets so that we can move forward. Northern Ireland’s block grant will be more than £11 billion by 2019-20 and funding for capital investment in new infrastructure will rise by more than £600 million over five years, ensuring that Northern Ireland can invest in its long-term future.

For years, Wales has asked for a funding floor to protect public spending and now, within months of coming to office, this Conservative Government are answering that call and providing that historic funding guarantee for Wales. I can announce today that we will introduce the new funding floor and set it for this Parliament at 115%. My right hon. Friend the Secretary of State for Wales and I also confirm that we will legislate so that the devolution of income tax can take place without a referendum. We will also help to fund a new Cardiff city deal. So the Welsh block grant will reach almost £15 billion by 2019-20, while the capital spending will rise by more than £900 million over five years.

As Lord Smith confirmed earlier this month, the Scotland Bill meets the vow made by the parties of the Union when the people of Scotland voted to remain in the United Kingdom. It must be underpinned by a fiscal framework that is fair to all taxpayers and we are ready now to reach an agreement. The ball is in the Scottish Government’s court. Let us have a deal that is fair to Scotland, fair to the UK and built to last. We are implementing the city deal with Glasgow, and negotiating deals for Aberdeen and Inverness too. Of course, if Scotland had voted for independence, it would have had its own spending review this autumn. With world oil prices falling, and revenues from the North sea forecast by the OBR to be down 94%, we would have seen catastrophic cuts to Scottish public services.

Thankfully, Scotland remains a strong part of a stronger United Kingdom, so the Scottish block grant will be more than £30 billion in 2019-20, while the capital spending available will rise by £1.9 billion through to 2021—the UK Government giving Scotland the resources to invest in its long-term future. For the UK Government, the funding of the Scotland, Wales and Northern Ireland Offices will all be protected in real terms.

We are devolving power across our country, and we are also spending on the economic infrastructure that connects our nation. That is something that Britain has not done enough of for a generation. Now, by making the difficult decisions to save on day-to-day costs in departments, we can invest in the new roads, railways, science, flood defences and energy that Britain needs. We made a start in the last Parliament, and in the last week Britain topped the league table of the best places in the world to invest in infrastructure. In this spending review, we go much further. The Department for Transport’s operational budget will fall by 37%, but transport capital spending will increase by 50%, to a total of £61 billion—the biggest increase in a generation. That will fund the largest road investment programme since the 1970s—for we are the builders.

That means that the construction of High Speed 2 to link the northern powerhouse to the south can begin and that the electrification of lines such as the trans-Pennine, the midland main line and the Great Western can go ahead. We will fund our new Transport for the North to get it up and running, London will get an £11 billion investment in its transport infrastructure, and having met my hon. Friend the Member for Folkestone and Hythe (Damian Collins) and other Kent MPs, I will relieve the pressure on roads in Kent from Operation Stack with a new quarter of a billion pound investment in facilities there. We are making the £300 million commitment to cycling that we promised, we will spend more than £5 billion on roads maintenance this Parliament, and thanks to the incessant lobbying of my hon. Friend the Member for Northampton North (Michael Ellis), Britain now has a permanent pothole fund.

We are investing in the transport we need, and in the flood defences too. The day-to-day budget of the Department for Environment, Food and Rural Affairs falls by 15% in this spending review, but we are committing more than £2 billion to protect 300,000 homes from flooding. Our commitment to farming and the countryside is reflected in the protection of funding for our national parks and for our forests—we are not going to make that mistake again. In recognition of the higher costs they face, we will continue to provide £50 off the water bills of South West Water customers for the rest of this Parliament—a Conservative promise made to the south-west, and a promise kept.

Investing in the long-term economic infrastructure of our country is a goal of this spending review, and there is no more important infrastructure than energy. So we are doubling our spending on energy research with a major commitment to small modular nuclear reactors. We are also supporting the creation of the shale gas industry by ensuring that communities benefit from a shale wealth fund that could be worth up to £l billion. Support for low-carbon electricity and renewables will more than double. The development and sale of ultra-low emission vehicles will continue to be supported, but in light of the slower than expected introduction of more rigorous EU emissions testing, we will delay the removal of the diesel supplement from company cars until 2021.

We support the international efforts to tackle climate change, and to show our commitment to the Paris talks next week, as the Prime Minister just explained, we are increasing our support for climate finance by 50% over the next five years. The day-to-day resource budget of the Department of Energy and Climate Change will fall by 22%, we will reform the renewable heat incentive to save £700 million, and we will permanently exempt our energy intensive industries, such as steel and chemicals, from the cost of environmental tariffs, so we keep their bills down, keep them competitive and keep them here.

We are introducing a cheaper domestic energy efficiency scheme that replaces the energy company obligation. Britain’s new energy scheme will save an average of £30 a year from the energy bills of 24 million households, because the Government believe that going green should not cost the earth. And we are cutting other bills too. We will bring forward reforms to the compensation culture around minor motor accident injuries, which will remove over £l billion from the cost of providing motor insurance. We expect the industry to pass on this saving, so that motorists see an average saving of £40 to £50 per year off their insurance bills.

We are a Government who back all our businesses, large and small, and Conservative Members understand that there is no growth or jobs without a vibrant private sector and successful entrepreneurs. So this spending review delivers what business needs. Business needs competitive taxes. I have already announced in the Budget a reduction in our corporation tax rate to 18%. Our overall review of business rates will report at the Budget, but I am today helping 600,000 of our smallest businesses by extending our small business rate relief scheme for another year.

Businesses also need an active and sustained industrial strategy. That strategy, launched in the last Parliament, continues in this one. We commit to the same level of support for our aerospace and automotive industries, not just for the next five years but for the next decade. Spending on our new catapult centres will increase. We will protect the cash support we give through Innovate UK—something we can afford to do by offering £165 million of new loans to companies instead of grants, as France has successfully done for many years. That is one of the savings that helps us reduce the budget of the Department for Business, Innovation and Skills by 17%.

In the modern world, one of the best ways to back business is to back science, and that is why, in the last Parliament, I protected the resource budget for science in cash terms. In this Parliament, I am protecting it in real terms, so that it rises to £4.7 billion. That is £500 million more by the end of the decade, alongside the £6.9 billion capital budget. We are funding the new Royce Institute in Manchester, and new agri-tech centres in Shropshire, York, Bedfordshire and Edinburgh. And we will commit £75 million to a transformation of the famous Cavendish laboratories in Cambridge, where Crick and Rutherford expanded our knowledge of the universe. To make sure we get the most from our investment in science, I have asked another of our Nobel laureates, Paul Nurse, to conduct a review of the research councils. I want to thank him for the excellent report he has just published. We will implement its recommendations.

Britain is not just brilliant at science; it is brilliant at culture too. One of the best investments we can make as a nation is in our extraordinary arts, museums, heritage, media and sport. Now, £1 billion a year in grants adds a quarter of a trillion pounds to our economy—not a bad return. So deep cuts in the small budget of the Department for Communities and Local Government are a false economy. Its core administration budget will fall by 20%, but I am increasing the cash that will go to the Arts Council, our national museums and galleries. We will keep free museum entry and look at a new tax credit to support their exhibitions. I will help UK Sport, which has been living on diminishing reserves, with a 29% increase in its budget, so we go for gold in Rio and Tokyo. The right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson), a former Home Secretary,has personally asked me to support his city’s year of culture, and I am happy to do so with a grant. His campaign has contributed to the arts, while his Front-Bench team contributes to comedy.

The money for Hull is all part of a package for the northern powerhouse that includes funding the iconic new Factory Manchester and the Great Exhibition of the North. In Scotland, we will support the world famous Burrell collection, while here in London we will help the British Museum, the Science Museum and the V&A move their collections out of storage and put them on display, and we will fund the exciting plans for a major new home for the Royal College of Arts in Battersea. We are also increasing the funding for the BBC World Service, so that British values of freedom and free expression are heard around the world.

All this can be achieved, as my right hon. Friend the Prime Minister said, without raiding the Big Lottery Fund, as some feared. It will continue to support the work of hundreds of small charities across Britain. So too will our £20 million a year of new support for social impact bonds. There are many great charities that work to support vulnerable women, as was mentioned in Prime Minister questions. My hon. Friend the Member for Colchester (Will Quince) has proposed to me a brilliant way to give them more help. Some 300,000 people have signed a petition arguing that no VAT should be charged on sanitary products. We already charge the lowest rate—5%—allowable under European law and we are committed to getting the EU to change its rules. Until that happens, I will use the £15 million a year raised from the tampon tax to fund women’s health and support charities. The first £5 million will be distributed between the Eve Appeal, SafeLives, Women’s Aid, and The Haven, and I invite bids from other such good causes.

It is similar to the way we use LIBOR fines—and today I make further awards from them, too. We will support a host of military charities, from the organisation for guide dogs for military veterans to Care after Combat. We renovate our military museums, from the Royal Marines and D-Day museums in Portsmouth to the National Army museum, the Hooton Park aerodrome, and the former HQ of RAF Fighter Command at Bentley Priory. In the Budget, I funded one campaign bunker, but more have emerged since then.

At the suggestion of my right hon. Friend the Member for Mid Sussex (Sir Nicholas Soames), we will support the fellowships awarded in the name of his grandfather by funding the Winston Churchill memorial trust. We will fund the brilliant Commonwealth War Graves commission, so it can tend to over 6,000 graves of those who died fighting for our country since the second world war; and we will contribute to a memorial to those victims of terrorism who died on the bus in Tavistock square 10 years ago. That is a reminder that we have always faced threats to our way of life, and have never allowed them to defeat us.

We deliver security so we can spread opportunity. That is the third objective that drives this spending review. We showed in the last five years that sound public finances and bold public service reform can help the most disadvantaged in our society. That is why inequality is down, child poverty is down, the gender pay gap is at a record low and the richest fifth now pay more in taxes than the rest of the country put together. The other side talks of social justice; this side delivers it because we are all in this together.

In the next five years, we will be even bolder in our social reform. It starts with education, because that is the door to opportunity in our society. This spending review commits us to a comprehensive reform of the way it is provided from childcare to college. We start with the largest ever investment in free childcare, so working families get the help they need. From 2017, we will fund 30 hours of free childcare for working families with three and four-year-olds. We will support £10,000 of childcare costs tax free. To make this affordable, this extra support will now be available only to parents working more than 16 hours a week and with incomes of less than £100,000. We will maintain the free childcare we offer to the most disadvantaged two-year-olds. To support nurseries delivering more free places for parents, we will increase the funding for the sector by £300 million. Taken together, that is a £6 billion childcare commitment to the working families of Britain.

Next, schools. We build on our far-reaching reforms of the last Parliament that have seen school standards rise even as exams become more rigorous. We will maintain funding for free infant school meals, protect rates for the pupil premium and increase the cash in the dedicated schools grant. We will maintain the current national base rate of funding for our 16 to 19-year-old students for the whole Parliament. We are going to open 500 new free schools and university technical colleges, and invest £23 billion in school buildings and 600,000 new school places. To help all our children make the transition to adulthood—and learn about not just their rights, but their responsibilities—we will expand the National Citizen Service. Today, 80,000 students go on National Citizen Service. By the end of the decade we will fund places for 300,000 students on this life-changing programme pioneered by my right hon. Friend the Prime Minister.

Five years ago, 200 schools were academies: today, 5,000 schools are. Our goal is to complete this school revolution and help every secondary school become an academy. I can announce that we will let sixth-form colleges become academies, too, so that they no longer have to pay VAT. We will make local authorities running schools a thing of the past, which will help us save around £600 million on the education services grant.

I can tell the House that as a result of this spending review, not only is the schools budget protected in real terms but the total financial support for education, including childcare and our extended further and higher education loans, will increase by £10 billion. That is a real-terms increase for education, too.

There is something else I can tell the House. We will phase out the arbitrary and unfair school funding system that has systematically underfunded schools in whole swathes of the country. Under the current arrangements, a child from a disadvantaged background in one school can receive half as much funding as a child in identical circumstances in another school. In its place, we will introduce a new national funding formula. I commend the many MPs from all parties who have campaigned for many years to see this day come. The formula will start to be introduced from 2017, and my right hon. Friend the Education Secretary will consult in the new year.

Education continues in our further education colleges and universities—and so do our reforms. We will not, as many predicted, cut core adult skills funding for FE colleges; we will instead protect it in cash terms. I announced in the Budget that we would replace unaffordable student maintenance grants with larger student loans. That saves us over £2 billion a year in this spending review, and it means we can extend support to students who have never before had Government help.

Today I can announce that part-time students will be able to receive maintenance loans, helping some of our poorer students. We will also, for the first time, provide tuition fee loans for those studying higher skills in FE, and extend loans to all postgraduates, too. Almost 250,000 extra students will benefit from all this new support that I am announcing today.

Then there is our apprenticeship programme—the flagship of our commitment to skills. In the last Parliament, we more than doubled the number of apprentices to 2 million. By 2020, we want to see 3 million apprentices. To make sure they are high-quality apprenticeships, we will increase the funding per place, and my right hon. Friend the Business Secretary will create a new business-led body to set the standards. As a result, we will be spending twice as much on apprenticeships by 2020 compared with when we came to office.

To ensure that large businesses share the cost of training the workforce, I announced at the Budget that we will introduce a new apprenticeship levy from April 2017. Today I am setting the rate at 0.5% of an employer’s pay bill. Every employer will receive a £15,000 allowance to offset against the levy, which means over 98% of all employers and all businesses with pay bills of less than £3 million will pay no levy at all. Britain’s apprenticeship levy will raise £3 billion a year and will fund 3 million apprenticeships, with those paying it able to get out more than they put in. It is a huge reform to raise the skills of the nation and address one of the enduring weaknesses of the British economy.

Education and skills are the foundation of opportunity in our country. Next we need to help people into work. The number claiming unemployment benefits has fallen to just 2.3%—the lowest rate since 1975. But we are not satisfied that the job is done; we want to see full employment. So today we confirm we will extend the same support and conditionality we currently expect of those on jobseeker’s allowance to over 1 million more benefit claimants. Those signing on will have to attend the jobcentre every week for the first three months. We will increase in real terms the help we provide to people with disabilities to get them into work. This can all be delivered within the 14% savings we make to the resource budget of the Department for Work and Pensions, including by reducing the size of its estate and co-locating jobcentres with local authority buildings. It is the way to save money while improving the front-line service we offer people and providing more support for those who are most vulnerable and most in need of our help.

We cannot say we are fearlessly tackling the most difficult social problems if we turn a blind eye to what goes on in our prisons and criminal justice system. My right hon. Friend the Lord Chancellor has worked with the Lord Chief Justice and others to put forward a typically bold and radical plan to transform our courts so they are fit for the modern age. Under-used courts will be closed, and I can announce today that the money saved will be used to fund a £700 million investment in new technology that will bring further and permanent long-term savings and speed up the process of justice.

Old Victorian prisons in our cities that are not suitable for rehabilitating prisoners will be sold. This will also bring long-term savings and means we can spend over £1 billion in this Parliament building nine new modern prisons. Today, the transformation gets under way with the announcement that the Justice Secretary has just made. I can tell the House that Holloway prison—the biggest women’s jail in western Europe—will close. In the future, women prisoners will serve their sentences in more humane conditions, better designed to keep them away from crime.

By selling these old prisons, we will create more space for housing in our inner cities, for another of the great social failures of our age has been the failure to build enough houses. In the end, spending reviews like this come down to choices about what your priorities are. I am clear: in this spending review, we choose to build. Above all, we choose to build the homes that people can buy, for there is a growing crisis of home ownership in our country. Fifteen years ago, around 60% of people under 35 owned their own home. Next year, the figure is said to be just half that. We made a start on tackling this in the last Parliament, and, with schemes such as our Help to Buy, the number of first-time buyers rose by nearly 60%, but we have not done nearly enough yet, so it is time to do much more.

Today we set out our bold plan to back families who aspire to buy their own home. First, I am doubling the housing budget to £2 billion a year. We will deliver, with Government help, 400,000 affordable new homes by the end of the decade. Affordable means not just affordable to rent, but affordable to buy. That is the biggest house building programme by any Government since the 1970s. Almost half of them will be our starter homes, sold at 20% off market value to young first-time buyers, and 135,000 will be our brand new Help to Buy: Shared Ownership, which we announce today. We will remove many of the restrictions on shared ownership—who can buy them, who can build them and who they can be sold on to.

The second part of our housing plan delivers on our manifesto commitment to extend the right to buy to housing association tenants. I can tell the House that this starts with a new pilot. From midnight tonight, tenants of five housing associations will be able to start the process of buying their own home.

The third element of the plan involves accelerating housing supply. We are announcing further reforms to our planning system so that it delivers more homes more quickly. We are releasing public land suitable for 160,000 homes and re-designating unused commercial land for starter homes. We will extend loans for small builders, regenerate more run-down estates and invest over £300 million in delivering at Ebbsfleet the first garden city in nearly a century.

Fourthly, the Government will help address the housing crisis in our capital city with a new scheme—London Help to Buy. Londoners with a 5% deposit will be able to get an interest-free loan worth up to 40% of the value of a newly built home. My hon. Friend the Member for Richmond Park (Zac Goldsmith) has been campaigning on affordable home ownership in London. Today we back him all the way.

The fifth part of our housing plan addresses the fact that more and more homes are being bought as buy-to-lets or second homes. Many of them are cash purchases that are not affected by the restrictions I introduced in the Budget on mortgage interest relief, and many of them are bought by those who are not resident in this country. Frankly, people buying a home to let should not squeeze out families who cannot afford a home to buy. So I am introducing new rates of stamp duty that will be 3% higher on the purchase of additional properties, such as buy-to-lets and second homes. It will be introduced from April next year and we will consult on the details so that corporate property development is not affected. This extra stamp duty raises almost £1 billion by 2021, and we will reinvest some of that money in local communities in London and places like Cornwall, which are being priced out of home ownership. The funds we raise will help build the new homes.

This spending review delivers: a doubling of the housing budget; 400,000 new homes, with extra support for London; estates regenerated; and right to buy rolled-out, paid for by a tax on buy-to-lets and second homes, and delivered by a Conservative Government committed to helping working people who want to buy their own home. For we are the builders.

The fourth and final objective of this spending review is national security. On Monday, the Prime Minister set out to the House the strategic defence and security review. It commits Britain to spending 2% of our income on defence, and it details how these resources will be used to provide new equipment for our war-fighting military, new capabilities for our special forces, new defences for our cyberspace, and new investments in our remarkable intelligence agencies.

By 2020-21, the single intelligence account will rise from £2.1 billion to reach £2.8 billion, and the defence budget will rise from £34 billion today to £40 billion. Britain also commits to spend 0.7% of our national income on overseas development, and we will reorientate that budget so that we both meet our moral obligation to the world’s poorest and help those in the fragile and failing states on Europe’s borders. It is overwhelmingly in our national interest that we do so, so our total overseas aid budget will increase to £16.3 billion by 2020.

Britain is unique in the world in making these twin commitments to funding both the hard power of military might and the soft power of international development. It enables us to protect ourselves, project our influence and promote our prosperity. We do so ably supported by my right hon. Friend the Foreign Secretary and our outstanding diplomatic service. To support them in their vital work, I am today protecting in real terms the budget of the Foreign and Commonwealth Office.

But security starts at home. Our police are on the frontline of the fight to keep us safe. In the last Parliament, we made savings in police budgets, but thanks to the reforms of my right hon. Friend the Home Secretary and the hard work of police officers, crime fell and the number of neighbourhood officers increased. That reform must continue in this Parliament. We need to invest in new state-of-the-art mobile communications for our emergency services, introduce new technology at our borders and increase the counter-terrorism budget by 30%. We should allow elected police and crime commissioners greater flexibility in raising local precepts in areas where they have been historically low. Further savings can be made in the police as different forces merge their back offices and share expertise. We will provide a new fund to help with this reform.

I have had representations from the shadow Home Secretary that police budgets should be cut by 10%, but now is not the time for further police cuts. Now is the time to back our police and give them the tools to do the job. I am today announcing that there will be no cuts in the police budget at all. There will be real-terms protection for police funding. The police protect us, and we are going to protect the police.

Five years ago, when I presented my first spending review, the country was on the brink of bankruptcy and our economy was in crisis. We took the difficult decisions then. Five years later, I report on an economy growing faster than its competitors and public finances set to reach a surplus of £10 billion. Today we have set out the further decisions necessary to build this country’s future. Those decisions are sometimes difficult, yes, but they build the great public services families rely on; build the infrastructure and the homes people need; build stronger defences against those who threaten our way of life; and build the strong public finances on which all these things depend.

We were elected as a one nation Government. Today we deliver the spending review of a one nation Government. The guardians of economic security, the protectors of national security, the builders of our better future—this Government, the mainstream representatives of the working people of Britain.

--- Later in debate ---

[Alison Thewliss (Glasgow Central) (SNP)]

First, I associate myself with the comments made by our Labour sisters about the tampon tax. I am glad to see that the Chancellor is helping the SNP to implement at least one aspect of our manifesto.

I have been asking the Chancellor since his statement in July how he intends to make women prove that they had their third child as a result of rape. There are still no answers on that and the two-child policy still applies, despite his U-turn on the tax credit cuts.

I would also like to ask about the limiting of housing benefit and pension credit to four weeks for claimants who go abroad. Will there be protection for people who have to go abroad as a result of a bereavement in their family?

[Mr Speaker]

All those matters are of the highest importance and I know that the Chancellor will respond diligently, but sometimes Members suffer short-term memory loss, so perhaps I should just remind the House of the merits of pithy questions.

[Mr Osborne]

The last point that the hon. Lady raised was a perfectly fair one. At the moment, people can leave this country for up to 13 weeks and continue to receive housing benefit and pension credit, without any explanation of why they left. That is a very long time for the people she represents and the people I represent to pay the housing benefit of someone who is not even in the country and is not living in the house for which the housing benefit is being paid. We are reducing that to a month, which is still quite a long period. There will be arrangements and discretionary support to help people who face exceptional circumstances of the kind that she describes, such as a bereavement.

As part of the Welfare Reform and Work Bill, we will come forward with the results of the work and consultations that we have undertaken on the issue she raises about rape and violence.

--- Later in debate ---

[Mr Osborne]

It is now SNP policy that it wants a higher oil price, so presumably all the motorists would have to pay more for their car journeys in SNP Members’ constituencies and all the non-oil businesses would have to pay more as well. The truth is that not even the Scottish nationalist party is in control of the world oil price. It changes, and we have to ensure that that brilliant industry in the North sea is supported through the ups and downs of the world oil price cycle.

We have made huge cuts to North sea oil taxation this year and provided additional support for exploration. We have stepped in, with the industry, to create the Oil and Gas Authority for the UK and make sure it does everything it can so that we get every drop of oil we can out of the North sea, and indeed get the gas out too. I would have thought the hon. Gentleman wanted to work with us to make that possible. Of course, that kind of support would never be possible if Scotland were independent.

[Mr Speaker]

Last but never least, Mr Jim Shannon.

[Jim Shannon (Strangford) (DUP)]

Thank you, Mr Speaker. It is always a pleasure to speak in the House. I thank the Chancellor for the good things that he is doing for Northern Ireland, which have been confirmed today. Other Members have spoken about them.

Next Tuesday will be World AIDS Day. The latest figures for the United Kingdom show a rise in HIV and sexually transmitted diseases. In the news today, the talk was that many clinics where diagnosis of sexually transmitted infections takes place would have their funding reduced. Can the Chancellor confirm that the extra moneys set aside for health will ensure that those clinics remain open so that STIs can be diagnosed at an early stage?

[Mr Osborne]

The hon. Gentleman is right to draw attention to World AIDS Day, and to the fact that we are funding the national health service and so can support screening for and research into sexually transmitted disease and provide support for people with HIV/AIDS. We have included in our announcements this week the £1 billion Ross fund, named after Ronald Ross, a Nobel laureate of this country. That will go towards disease research, which could well include the disease that the hon. Gentleman mentions.

[Mr Speaker]

I thank the Chancellor, the shadow Chancellor and all colleagues. Three hours and 10 minutes later, subject to their other commitments, they can have a cup of tea.

Royal Assent

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 27th October 2015 Commons Chamber

[Mr Osborne]

We will deliver the welfare savings that we were elected to deliver in this Parliament. We will help people in the transition to that lower welfare, higher wage economy. I remember a time when the Labour party used to support moving from welfare to work; it has entirely abandoned that approach. We will be the party that stands up for working people, and working people need controlled welfare and a country that lives within its means.

[Mr Speaker]

I call Naz Shah. She is not here.

[Mr Andrew Tyrie (Chichester) (Con)]

Does the Chancellor agree that whatever our views may be in this House on the tax credit dispute, in overturning the settled will of the elected Chamber, the unelected Lords has exercised the powers of a Chamber of Parliament in the tax area, whereas for at least 100 years it has been well established that it has, and should have, only the legitimacy of a consultative assembly?

Charter for Budget Responsibility

Debate between George Osborne and John Bercow

Wednesday 14th October 2015 Commons Chamber

[Helen Goodman]

Will he—[Interruption.]

[Mr Speaker]

Order. The hon. Lady is pressing the point. The Chancellor is not giving way at this stage.

[Mr Osborne]

I think, quite frankly, that a period of silence from the hon. Member for Bishop Auckland (Helen Goodman) would be very welcome.

Monetary financing is a very old argument in the economic history of the world and we know that it invariably leads to rising prices, soaring inflation, savings being wiped out, money being debased, stability being destroyed, jobs being lost and total economic chaos. It might sound new and attractive, but it is in fact very old and very dangerous.

This is what current and former Labour Members have said about that approach. The right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), the former Chief Secretary to the Treasury, warns that it is “really bad economics”. Jack Straw, pointing to the history of Weimar Germany and Venezuela, said it was

“bound to end in tears”.

The last Labour—[Interruption.] The Labour party now dismisses the views of Jack Straw and the right hon. Member for Normanton, Pontefract and Castleford. It probably also dismisses those of the hon. Member for Nottingham East (Chris Leslie), who said to me a few weeks ago, “This approach will hurt the very people we should be standing up for, they will pay the price—the poor and the vulnerable.” Yet it is the much advertised economic policy of the shadow Chancellor and his Labour leader. It has been supported by the Labour movement, and it must be challenged and defeated.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 21st July 2015 Commons Chamber

[Mr Osborne]

We entirely acknowledge that we need to improve the productivity of the British economy. That is why, after the Budget, we published the productivity plan, which will introduce, for example, an apprenticeship levy to ensure that young people are given the skills and training that they need, and roads funds that will help to ensure that we have the right infrastructure for our country’s future.

As the hon. Gentleman acknowledged this morning in an interesting tweet, I think it was, the Labour party is going back to the 1980s. Those were his words. Unfortunately, the sensible voices of the old intake—

[Mr Speaker]

Sit down!

[Mr Osborne]

—are being drowned by those of the new intake.

[Mr Speaker]

Chancellor, sit down, man! I told you to sit down, so sit down! Mr Andrew Tyrie.

[Mr Andrew Tyrie (Chichester) (Con)]

I am sorry about that, Mr Speaker. I thought that the Chancellor was just getting into gear.

Growth will, of course, depend partly on what the Bank of England does. Over the past five years, the Chancellor and Parliament have granted the Bank huge new powers over not only monetary but, in particular, financial policy, which directly affect millions of people. Does that not make the reforms of the way in which the Bank runs itself that the Chancellor will propose, along with greater accountability for its new board—for which the Treasury Committee, among others, has been pressing for a long time—all the more essential?

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[Stewart Hosie]

That is a fascinating answer, because of course the real answer is that in cash terms the spending is down—from 2015-16 onwards down £1.2 billion, £0.8 billion, £0.9 billion, £0.7 billion, and £1.3 billion by the time we get to 2019-20. So we know the forecasts are reduced, we know the Chancellor is cutting more than he needs in order to run a balanced budget, and we know he is undermining the potential for long-term growth, so why did he ignore all the advice, particularly from the OECD who told him two days before the Budget that “gross investment is low” and

“Transport infrastructure investment is poor”?

Does he really expect us to believe every—

[Mr Speaker]

Order. Questions are too long. We have got the general drift of the argument; let’s hear the answer.

[Mr Osborne]

We are investing a record amount in our transport system, and the new roads fund will help with transport investment in England, but there will be consequentials and money for Scotland as well. I make this general observation to the hon. Gentleman: if the Scottish Government think we are not spending enough in Scotland, they can raise taxes on the Scottish people and spend all the money in Scotland. They should have the courage to make that argument to the Scottish people.

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[Ian Blackford]

We hear from the Institute for Fiscal Studies that the gross impact of the higher minimum wage will be about £4 billion, but that the cuts to tax credits represent about £6 billion. The proportion of children in poverty who are from families in work rose from 54% to 63%, and that statistic can only get worse. It is little surprise that the Government want to redefine child poverty. To change a definition is to change the truth—

[Mr Speaker]

Order. I thought the hon. Gentleman had a background in the financial world. He cannot have been allowed to prate on at that length when he was busy making important decisions with commercial substance involved. He will really have to practise.

[Mr Osborne]

Let me give the hon. Gentleman a figure: 200,000 workers in Scotland will gain from the new national living wage, which is 9% of the workforce. The Budget is offering people in Scotland and across the United Kingdom higher wages, lower taxes and, yes, lower welfare, as part of a new contract whereby this country lives within its means. That is one reason why jobs are being created in Scotland.

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[Mr Speaker]

I hear everything in this Chamber.

[Mr Osborne]

What the hon. Gentleman and the Labour party fail to understand is that we cannot stand up for working people unless we create a strong economy that lives within its means. I would only make this observation: he has a Labour party he is very happy with now, and so do I.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Wednesday 17th June 2015 Commons Chamber

[Mr Osborne]

My hon. Friend rightly draws attention to one of the great engineering marvels of the world—the fantastic Crossrail tunnel that has been built under one of the oldest capital cities on the planet. [Interruption.] Hon. Members ask, “How much did it cost?” It did cost money, but I tell you what: this Government are investing in the infrastructure to provide the jobs in the future, and if we were not making the savings in the Government budget elsewhere, we would not be able to provide for our children. [Interruption.]

[Mr Speaker]

Mr Campbell, it is all that hot curry; it is getting to you. Calm yourself, man! Calm down! A bit of yoga would help.

[Mr David Lammy (Tottenham) (Lab)]

Q3. It is both sad and disturbing that the number of reported rapes in Greater London has risen by 68% in the last 10 years. Sexual crime is up by 35% in the last year. Will the Chancellor commit the extra resources to the police to ensure that they catch and jail the perpetrators, and that they continue to support organisations working with women in the most sensitive manner?

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[Mr Osborne]

I will certainly pass on the request. My hon. Friend is right to draw attention to the success of these elections, which did not exist before the Conservatives came into office. I am not sure that his own election is the best possible example, as I think he is unelected and unopposed in his own election.

[Mr Speaker]

Well, elected unopposed, anyway. I think that is what the right hon. Gentleman meant.

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

Q9. I, too, want to add my tribute to CAFOD, Christian Aid and the thousands of others who are outside today making the case for a tough deal on climate change. Will the Chancellor explain what the Government are doing diplomatically to support a tough global deal and to ensure that there is a level field for carbon-efficient companies in the UK, such as Celsa Steel UK in my constituency, so that global emissions are not simply increased by being offshored to places such as China?

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 16th June 2015 Commons Chamber

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

I am proud that the coalition Government sought to start the rebalancing of the British economy and introduced the northern powerhouse scheme, which I support. It seems clear that we will have to have a mayor in the Leeds city region. Will the right hon. Gentleman seriously consider the possibility of having a Yorkshire-wide mayor to rejoin together that wonderful county, which could be a real powerhouse for the whole of this nation?

[Mr Speaker]

Order. We have got the gist of it.

[Mr Osborne]

I am not trying to impose a model on any particular area. It is up to local metro areas to come forward with their proposals. I am clear that if we are to see a massive transfer of power from national Government to local government, there has to be a single point of accountability: someone who carries the can and drives the process forward. The authorities of Greater Manchester have agreed with me that that should be an elected mayor, but, as I say, how the authorities of West Yorkshire, and indeed the whole of Yorkshire, want to proceed is up to them. My door is open to a conversation.

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[Mr Speaker]

Order. I am sure that the hon. Gentleman, who is a seasoned hand, was asking a question about the Government’s intentions. I am sure that he was not asking about Opposition policy, and that the Chancellor will not answer about Opposition policy.

[Mr Osborne]

Of course. Perish the thought, Mr Speaker. The Government will introduce their new approach to fiscal policy in the Budget. It will include a commitment to a surplus in normal times, and we look forward to wide cross-party support for that approach.

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[Mr Osborne]

I gave the original speech on the northern powerhouse in Lancashire, if we count Manchester as being in the traditional county—[Interruption.]

[Mr Speaker]

Order. Mr Jones, it is unseemly. I thought you were on an apprenticeship to become a statesman, but it has a long way to travel. It is courteous to hear the Chancellor. Let us hear him.

[Mr Osborne]

I think it will be one of those four-year apprenticeships, at this rate. I will say to the hon. Gentleman something which I know is not universally agreed with: I think the potential for shale gas in the north of England is a massive boost to the local economy there. I know it is not always popular with some local communities. That is why we have made sure that the benefits go to local communities, and we committed in our manifesto to creating a sovereign wealth fund for the north of England from the revenues from shale gas exploration so that we get a lasting benefit to the natural resources of that part of our country.

The Economy

Debate between George Osborne and John Bercow

Thursday 4th June 2015 Commons Chamber

[Mr Osborne]

I am answering the hon. Gentleman’s intervention.

[Mr Speaker]

Order. We deal with these matters in an orderly and sequential manner. The Chancellor is seeking to respond to the intervention; the hon. Member for Eltham (Clive Efford) can always try his luck again in a moment. Ministers should not be hectored in these circumstances. Let the Chancellor reply first.

[Mr Osborne]

The point I make to the hon. Gentleman is that national debt started rising in the very first years of the beginning of this century—in 2001 and 2002. It rose through the boom years, when the Labour Government should have been paying down the debt and should not have been running a deficit. One of the things on which the various leaders of the Labour party all seem to agree at the moment is that the deficit was too high going into the crash.

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[Mr Speaker]

Whether the hon. Gentleman wanted to or not, I am happy to concede that he was not doing so.

[Mr Osborne]

I am not feeling particularly intimidated by the hon. Gentleman because he is spouting the same old anti-aspiration, anti-sound public finances nonsense that we have heard from the Opposition for the past five years.

Let me make progress and come to the central point. We have to tackle the endemic weaknesses in the British economy that no Government have been able to solve in the past: we are not productive enough and we do not export enough, save enough, train enough or build enough.

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[Chris Leslie]

On a point of order, Mr Speaker. It is the usual convention, if there are significant changes to the estimates and supply that support public services, that the documentation and details for every single Department are laid before the House of Commons, so that all Members can be informed of what is happening with our public services within a financial year. This is ripping up any semblance of long-term continuity, and it is a shabby way to treat Parliament and the public services.

[Mr Speaker]

The shadow Chancellor has spoken, but this is not a matter with which the Chair needs to deal. He has made his point and it is on the record, but the Chancellor will now continue.

[Mr Osborne]

We made this announcement to the House of Commons, and the detail is there for people to examine. There will be estimates debates as usual, but there is a very simple question: does the Labour party support further savings in public expenditure? If it does not, that means the Labour party wants to increase borrowing, increase taxes and take this country back to square one and repeat all the mistakes it carried out in office—and, indeed, repeat all the political mistakes that meant it went down to a historic election defeat just a month ago.

Tax Avoidance (HSBC)

Debate between George Osborne and John Bercow

Monday 23rd February 2015 Commons Chamber

[Mr Speaker]

Order. I do not wish to be pedantic, simply accurate, but I think the wording of the urgent question was “avoidance”—the tax avoidance scandal. The point is on the record.

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

The allegations about tax evasion at HSBC Swiss are extremely serious and have been the subject of extensive investigation by Her Majesty’s Revenue and Customs. Money has been recovered for the Exchequer, and HMRC continues to be in active discussion with our prosecuting authorities. The chief executive of HMRC and the Director of Public Prosecutions have confirmed that they have the necessary resources to carry out their work on this matter, and if they need more resources they will get them.

The House should know, however, that in each and every case the alleged tax evasion—both by individuals and the bank—happened before 2006 when the shadow Chancellor was the principal adviser on tax policy and economic affairs to the then Labour Government. News that the French had got hold of the files with the names of the bank accounts became publicly known in 2009 when the shadow Chancellor was sitting on the Government Benches, and the files were requested and recovered by HMRC before May 2010, when he was a member of the Cabinet.

The right hon. Gentleman has written to ask me five questions about my responsibilities. I will answer each one directly, and in return he can account for his own responsibilities. He asked about what he calls the selective prosecution policy pursued by HMRC, and whether that decision was made by Ministers. Yes, that decision was made by Ministers, and the Inland Revenue’s overall approach to prosecuting cases of suspected serious tax fraud was set out in the Official Report on 7 November 2002, column 784W, in an answer by the then Chancellor of the Exchequer, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). That was confirmed again when HMRC was created in 2005—again by the right hon. Gentleman. I have increased resources for tackling tax evasion, and as a result prosecutions are up fivefold. I have answered for my responsibility on that question; perhaps the right hon. Member for Morley and Outwood (Ed Balls) will answer for his and tell us whether he drafted that policy.

Secondly, the right hon. Gentleman asked when I was first made aware of the HSBC files, what action I took, and whether I discussed them with the Prime Minister. I first became aware of the existence of the files in 2009 when a story appeared in the Financial Times. I was shadow Chancellor at the time so I could take no action, and I could not discuss it with the then Prime Minister because I was not on speaking terms with him. That is what I knew. The right hon. Member for Morley and Outwood was a Cabinet Minister. When he heard about these revelations, did he speak to the Prime Minister about them?

Thirdly, the right hon. Member for Morley and Outwood asked why we appointed Stephen Green to the Government. We appointed him because we thought he would do a good job as trade Minister, as did the Labour party, which welcomed the appointment. The trade job was not Stephen Green’s first public appointment. That was when he was appointed by the previous Government to be not just a member of the Prime Minister’s business council but its chair—a post he continued to hold after the existence of the HSBC files became public and after HMRC negotiated to recover them under the previous Government. I have explained why we appointed Stephen Green. Perhaps the right hon. Member for Morley and Outwood will explain why he appointed Stephen Green.

Fourthly, the right hon. Gentleman asked about discussions with Stephen Green on tax evasion. I can confirm that the Cabinet Secretary and the director general of ethics at the Cabinet Office carried out the background checks for ministerial appointments that were put in place by the previous Government. Stephen Green’s personal tax affairs were examined by HMRC on behalf of the House of Lords Appointments Commission, again using the procedures put in place by the previous Government. Those are the procedures we followed when we appointed Stephen Green. What procedures did the right hon. Gentleman follow?

Finally, the right hon. Gentleman asked me why I signed a deal with the Swiss authorities in 2012. He does not need my explanation. Listen to what the shadow Chief Secretary at the time, the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), said:

“We support the agreement signed by the UK and Swiss Governments to secure billions in unpaid tax.”––[Official Report, Finance Public Bill Committee, 26 June 2012; c. 655.]

She is right: billions of unpaid tax never collected under a Labour Government. Under this Government, tax evasion is at the top of the G8 agenda. We have collected more money and prosecutions have increased five times over. Ahead of the Budget, I set the Treasury to work on providing further ways to pursue not just the tax evaders, but those providing them with advice. So anyone involved in tax evasion, whatever your role, this Government are coming after you. Unlike the previous Government, who simply turned a blind eye, this Government are taking action now and will do so again at the Budget. So I am happy, any time, to answer for our record on tackling tax evasion. Now, let him account for his.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 27th January 2015 Commons Chamber

[Mr Osborne]

I will not make any commitments in relation to the Budget, but my hon. Friend is right to point out that our support for the pub industry and for motorists has provided huge boosts for industries and families in Lancashire and throughout the country. Of course, we do not encourage people to mix the two.

[Mr Speaker]

Last but not least, and very pithily, Alison McGovern.

[Alison McGovern (Wirral South) (Lab)]

Will the Chancellor confirm that he has ruled out a further VAT increase in the next Parliament?

Autumn Statement

Debate between George Osborne and John Bercow

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.

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[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.

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[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.

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[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.

EU Budget (Surcharge)

Debate between George Osborne and John Bercow

Monday 10th November 2014 Commons Chamber

[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—

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 4th November 2014 Commons Chamber

[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.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 24th June 2014 Commons Chamber

[Mr Osborne]

As Robert Chote has set out, there would be very serious implications if the OBR, a new institution which, of course, the Labour party did not support when in government—[Interruption.] I remember proposing it time and again as shadow Chancellor and hearing Ministers say at this Dispatch Box that it was not a good idea. The proposal would make big changes to the role of the civil service as well as that of the OBR. Robert Chote is right to say that, while we can consider it in the next Parliament:

“To embark on this exercise in a rush, or with insufficient resources, could be…very damaging to the OBR.”

[Mr Speaker]

Very briefly, Greg Mulholland.

[Mr Speaker]

Put the long version in the Library.

[Mr Osborne]

I am happy to look into the freedom of information request, but we have been working very closely with the Business Secretary on these proposals, and I would hope that the hon. Gentleman would welcome the legislation we are introducing to make sure that local pubs and publicans get a good deal.

[Mr Speaker]

Last but not least, Lucy Powell.

[Lucy Powell (Manchester Central) (Lab/Co-op)]

May I take this opportunity to welcome today’s announcement of the partnership between Manchester city council and the Abu Dhabi United Group to build 6,000 new homes in my constituency? Does the Chancellor agree that that shows that when we give freedoms, powers and budgets to good local authorities, they can increase housing supply in their areas and build the economy locally?

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 29th April 2014 Commons Chamber

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

This Government will freeze fuel duty for the rest of this Parliament. As a result, petrol will cost a full 20p per litre less than if we had stuck with the previous Government’s hated fuel duty escalator. We can afford to do this because we have got a grip on the public finances.

The House will also want to know that today we learned that GDP grew by 0.8% in the first quarter of this year. That is 3.1% over the year and today’s figures show that Britain is coming back. We cannot take that for granted. We have to go on working through our long-term economic plan, but for the first time in a decade all three main sectors of the economy—manufacturing, services and construction—have grown by at least 3% in the past year.

The impact of the great recession is still being felt, but the foundations—

[Mr Speaker]

Order. The Chancellor will resume his seat. The answer was not just too long—it was far too long.

--- Later in debate ---

[Mr Speaker]

I think the hon. Gentleman is planning an Adjournment debate on the subject. I have that distinct sense, although some people may think he has already had it.

[Mr Osborne]

The jobs being created by Dyson at Malmesbury are excellent news. Many people will know Dyson’s products, but its facility at Malmesbury, which I have visited, is fantastic. We went to James Dyson to ask how we could replicate some of that success elsewhere in our economy. He came forward with proposals—which became our innovation and catapult centres—to bring applied science to commercial success. We are building on the success of Dyson, not just for the people my hon. Friend represents, but for the whole country.

Autumn Statement

Debate between George Osborne and John Bercow

Thursday 5th December 2013 Commons Chamber

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

Britain’s economic plan is working, but the job is not done. We need to secure the economy for the long term, and the biggest risk to that comes from those who would abandon the plan. We seek a responsible recovery, one in which we do not squander the gains we have made, but go on taking the difficult decisions, and one in which we do not repeat the mistakes of the past, but this time spot the debt bubbles before they threaten financial stability. We seek a responsible recovery, in which we do not pretend we can make this nation better off by writing cheques to ourselves, and instead make the hard choices. We need a Government who live within their means, in a country that pays its way in the world.

Three and a half years ago, I set out our long-term economic plan in the emergency Budget. That plan restored stability in a fiscal crisis, but it was also designed to address the deep-seated problems of unsustainable spending, uncompetitive taxes and unreformed public services for which there are no quick fixes. Over the last three years we have stuck to our guns and worked through the plan. We have done so in the face of a sovereign debt crisis abroad, and at home in the face of opposition from those who got Britain into this mess in the first place and have resisted every cut, every reform, and every effort to get us out of that mess. We have held our nerve while those who predicted there would be no growth until we turned the spending taps back on have been proved comprehensively wrong.

Thanks to the sacrifice and endeavour of the British people, I can today report the hard evidence that shows our economic plan is working, but I also report the hard truth that the job is not yet done. Yes, the deficit is down, but it is still far too high, and today we take more difficult decisions. Yes, the forecasts show that growth is up, but the same forecasts show growth in productivity is still too low, and today we set out further economic reforms. Yes, jobs are up and unemployment is down, but too many of our young people lack the skills to fill those jobs and the opportunities to acquire them, so now we take bold steps to remove that cap on aspiration. Yes, businesses are expanding, but business taxes are still too high and exports are too low and we must address that. And yes, real household disposable income is rising, but the effects of the financial crash on family budgets and the cost of living are still being felt. So where we can afford to help hardworking families, we will continue to do so—[Interruption.]

[Mr Speaker]

Order. Mr Ruane, calm yourself, man. Your bellicose barracking is detectable several miles away.

[Mr Osborne]

The hard work of the British people is paying off, and we will not squander their efforts. We will secure the economy for the long term, and this statement sets out how.

Let me turn to the report from the Office for Budget Responsibility. Again, I thank Robert Chote and his team for their rigorous and independent work. The OBR report notes that the Office for National Statistics has reassessed the depth of the great recession. The fall in GDP from peak to trough between 2008 and 2009 was not 6.3% as previously thought, but was instead an even more staggering 7.2%; £112 billion was wiped off our economy—about £3,000 for every household in this country—in one of the sharpest falls in the national income of any economy in the world. That is a reminder of the economic calamity that befell Britain and of the simple fact that our country remains poorer as a result of it. A lot of work still remains to be done to put that right. The data revisions also showed something else: there was no double-dip recession.

Let me turn to the future. At the time of the Budget in March, the OBR forecast that growth this year would be 0.6%. Today, it more than doubles that forecast and the estimate for growth will be 1.4%. Next year, instead of growth of 1.8%, it is now forecasting 2.4%. Faster growth now means that it has revised the following four years to 2.2%, 2.6%, 2.7% and 2.7%, so growth over the forecast period is significantly up. It is still not as strong as we would like it to be, but this is the largest improvement to current year economic forecasts at any Budget or autumn statement for 14 years. I can report that Britain is currently growing faster than any other major advanced economy: faster than France, which is contracting; faster than Germany; and faster even than America. That contrast itself points to the risks that remain for the UK from abroad, and the weakness of many of our main trading partners.

The first risk the OBR identified to our economic recovery is a recurrence of the damaging instability in the eurozone. Even with the relative calm of recent months, the OBR still forecasts that the euro area as a whole will shrink by 0.4% this year. Its growth forecasts for the US and emerging markets have also been revised down, and world trade has been weaker than it expected in March. While our exports are growing, they are not growing as fast as we would like. That is because we are too dependent on markets in Europe and north America. The Prime Minister’s visit to China this week is the latest step in the Government’s determined plan to increase British exports to the faster growing emerging markets, something our country should have done many years ago. Today, I am doubling to £50 billion the export finance capacity available to support British businesses, expanding the help available to firms in these emerging markets and ensuring that our excellent new trade Minister, Lord Livingston, has all the firepower he needs.

Let me turn to the forecast for employment. Today in Britain, employment is at an all-time high and the OBR has revised up its forecast for the future. It was expecting jobs to stay flat over the year, but it now expects the total number of jobs to rise by 400,000 this year. This is being felt right across the country. Since 2010, the number of jobs in Carlisle and on the Wirral, and from Selby to south Tyneside, has grown faster than in London. Meanwhile, the number of people claiming unemployment benefit has fallen by more than 200,000 in the past six months—the largest such fall for 16 years. Unemployment is also lower than in 2010, and is forecast to fall further from 7.6% this year to 7% in 2015, before falling even further to 5.6% by 2018. We have the lowest proportion of workless households for 17 years.

There were those who said it was a “fantasy” to believe that businesses could create jobs more quickly than the public sector would have to lose them. What they should have said was that it would be fantastic if it happened. So I have good news for them. Businesses have already created three jobs for every one lost in the public sector, and the OBR report today forecasts that this will continue, with 3.1 million more jobs being created by businesses by 2019, which, in its words, “more than offsets” the million or so reduction in the public sector headcount. Far from the mass unemployment predicted, we have a record number of people in work, hundreds of thousands fewer on welfare, and unemployment lower than when we came to office, and we will have 2 million more jobs than in 2010—an economic plan that is working and a Government who are seeking a job-rich recovery for all.

Let me turn now to the forecasts for Government borrowing and debt. When this Government came into office, the deficit was 11% of GDP. That was the highest level in our peacetime history. One pound in every four was being borrowed, and a former Chancellor and a former Prime Minister have now joined the consensus that spending was too high. The borrowing posed a huge risk to the economic stability and credibility of the United Kingdom, and we have taken many difficult decisions to bring that deficit down—every one contested and opposed.

I can report today, however, that the effort is paying off. The OBR uses a measure of what it calls “underlying public sector net borrowing”, which excludes the impact of the Royal Mail pension scheme and asset purchase facility transfers. I can tell the House that this underlying measure of the deficit, like the other deficit measure, has been revised down substantially since March. From the 11% back in 2010, the underlying deficit now falls to 6.8% this year, instead of the 7.5% the OBR forecast back in March. It then falls to 5.6% next year, then 4.4%, 2.7% and, in 2017-18, 1.2%. By 2018-19, on this measure, the OBR does not expect a deficit at all. Instead, it expects Britain to run a small surplus. These numbers mean that the Government will meet their fiscal mandate to bring the structural current budget into balance and meet it one year early.

Let me turn to the forecasts for cash borrowing on this same underlying basis. At the autumn statement last year, there were repeated predictions that borrowing would go up. Instead, borrowing is down—and down significantly more than was forecast. In their last year in office, the previous Government borrowed £158 billion. This year, we will borrow £111 billion, which is £9 billion less than was feared in March. That falls next year to £96 billion, then down to £79 billion in 2015-16, £51 billion the year after and £23 billion the year after that. So we are set to borrow £73 billion less over the period than was forecast in March. That means that we are borrowing the equivalent of £2,500 less for every household in this country.

In 2018-19, on this cash measure too, the OBR forecasts that the Government will not have to borrow anything at all. Instead, we will run a small cash surplus. Of course, this will only happen if we go on working through our long-term plan, delivering the reductions in the deficit we plan this year, next year and in the three years after. If we gave up on the plan now, we would be saddled with a deficit still among the highest in Europe, and the Government side of the House is not prepared to take that risk.

While the deficit remains, it adds to our national debt every year. The OBR today expects debt this year to come in at 75.5% of GDP, which is £18 billion lower than was forecast in March. It rises to 78.3% next year, before peaking at 80% the next year—5% lower than forecast at the Budget. In 2016-17, it then falls, albeit slightly, to 79.9%; then falls again to 78.4% and then to 75.9%. By 2017-18, debt is over £80 billion pounds lower than forecast in March. The supplementary debt target is for debt to be falling in 2015-16. At the Budget, the OBR forecast debt to be falling in 2017-18. It is now forecast to fall in 2016-17, which is one year earlier.

But let me enter this note of caution. The OBR is clear that this is a cyclical improvement. The forecast for the continuing fall in the structural deficit has not improved. The structural deficit is the borrowing that stays behind even when the economy improves. Thanks to our actions, it has fallen from the 8.7% we inherited to 4.4% today—more than in any other major advanced economy. It goes on falling, but no faster than was previously expected because, as we have always argued, the central task of reforming government and controlling spending does not simply dissolve when growth returns. It supports the case we have made all along that economic growth alone was never going to be enough to repair Britain’s broken public finances. An improving economy does not let us off the hook for taking the difficult decisions to make sure that the Government live within their means.

The single most important economic judgement I make today is this: we will not let up in dealing with our country’s debts; we will not spend the money from lower borrowing; we will not squander the hard-earned gains of the British people. The stability and low mortgage rates, the lower deficit and falling borrowing have been hard won by this country, but let us be clear that they could easily be lost. That is why we must work through our plan to secure the British economy for the long term.

So this autumn statement is fiscally neutral across the period. Indeed, I can announce today that we will take three new steps to entrench Britain’s commitment to sound public finances. First, we will bring forward next year an updated charter for budget responsibility and ask Parliament to support it. I can say today that both parties of the coalition have agreed that we must ensure that debt continues to fall as a percentage of GDP, including using surpluses in good years, for this purpose. In other words, this time we will fix the roof when the sun is shining.

We will look to see whether the five-year time horizon of the fiscal mandate could be shorter and even more binding now that the public finances are closer to balance, and we will see how fiscal credibility could be further enhanced by a stronger parliamentary commitment to the path of consolidation already agreed for 2016-17 and 2017-18. The answers will be written into an updated charter for budget responsibility, which will be presented to Parliament a year from now and voted upon.

The second step we take today to entrench Britain’s commitment to sound public finances is this: we will cap overall welfare spending. Welfare budgets were completely out of control when we came to office and the number of households where no one had ever worked nearly doubled. We have taken very difficult decisions to bring benefit bills down; we have saved £19 billion a year for the taxpayer. We need to maintain that discipline. The percentage of spending in the UK subject to fixed spending controls is very low by international standards—at just 50%. So from next year, we will introduce a new cap on total welfare spending.

I have had representations that the basic state pension should be included within that cap, but that would mean cutting pensions for those who have worked hard all their lives because the costs on, say, housing benefit for young people had got out of control. That is not fair, so we will not include the state pension, which is better controlled over a longer period. We will also exclude from the cap the most cyclical of benefits for jobseekers. All other benefits—from tax credits to income support to the vast majority of housing benefit—will be included in the cap.

At the beginning of each Parliament, the Chancellor of the day will set the welfare cap for the coming years, and will ask the House of Commons for its support. If the cap is breached, the Chancellor will have to explain why, and hold a vote in the House. The principle is clear: the Government have a responsibility to taxpayers to control their spending on welfare, and Parliament has a responsibility to the country to hold the Government to account for it.

That brings me to our third step. Ultimately, the test of fiscal credibility is whether you are prepared actually to make the difficult decisions that will keep spending under control. Tight discipline means that most Departments are now living well within their set budgets. This year they are expected to underspend by £7 billion, which is testimony to good financial management. We can therefore be confident in reducing the contingency reserve by £1 billion this year, and reducing departmental budgets by a similar amount in the next two years. That will save a further £3 billion in total. The protections for the NHS and schools will apply, and the security and intelligence agencies and Her Majesty’s Revenue and Customs will be exempt. The Barnett formula means that over the next two years, the budgets for Scotland, Northern Ireland and Wales will see a net increase. We will not apply those additional savings to local authorities, because we expect them to freeze council tax next year.

This year, Britain becomes the first G8 country to meet our promise to the poorest in the world to spend 0.7% of our national income on development., but we do not have to increase the budget of the Department for International Development further in order to do that. The effectiveness of the British Government’s aid effort in the Philippines, matched by the generosity of the British public, is a reminder of what marks us out as a nation, and we in this country can be very proud of it.

We are also immeasurably proud of the work of Britain’s armed forces. As they wind down their operations in Afghanistan, the budget that we spend there is also falling fast, so we can reduce the military special reserve by a further £900 million this year while still funding all operational costs. To reflect our society’s debt of gratitude to our servicemen and women and their families, I want to make a further £100 million of LIBOR fines available to our brilliant military charities, and to extend that support to those who care for the work of our police, fire and ambulance services. I think the whole House will agree that the terrible events in Glasgow this weekend, and the work that those services are doing right now to cope with the adverse weather conditions, remind us how much we owe to them.

Discipline with the public finances means more than just words. It means making difficult decisions, and being prepared to stick to them. It means using surpluses in good years to keep debt falling, so that we fix that roof when the sun is shining. It means capping welfare to keep it under control, and, when we do want to spend more money, it means finding extra ways in which to pay for it.

One of the biggest single items of Government spending is the basic state pension. I am proud to be in a Government who have introduced a triple lock that ensures a fair and generous increase in the state pension every year for those who have worked hard all their lives. I can confirm that next April the state pension will rise by a further £2.95 a week. That increase, and the other increases that have been made under this Government, mean that pensioners will be more than £800 better off every year. I can announce that we are also going to offer current pensioners an opportunity to make voluntary national insurance contributions to boost their income in retirement, and that we will extend that opportunity to those who reach pension age before the introduction of the single-tier pension. That will help those who have not built up much entitlement to the additional state pension, especially women and the self-employed.

However, we must also guarantee that the basic state pension is affordable in the future, even as people live longer and our society grows older, and the only way in which to do that is to ensure that the pension age keeps pace with life expectancy. The Pensions Bill, which is currently going through Parliament, puts in place reviews of the pension age every five years. We have set the principle that will underpin those reviews. We think that a fair principle is that, as now, people should expect to spend up to a third of their adult lives in retirement. Based on the latest life expectancy figures, applying that principle would mean an increase in the state pension age to 68 in the mid-2030s and to 69 in the late 2040s. The exact dates will be set by the future statutory reviews and in line with the most up-to-date demographic data, of which the next update is published next week. This is one of those difficult decisions that Governments have to take if they are serious about controlling the public finances. Future taxpayers will be saved around £500 billion. Young people will know that our country can afford to give them a proper pension when they retire. That is this generation fulfilling its obligations for fiscal responsibility to the next generation, not saddling them with the debts and the decisions we were not prepared to deal with ourselves.

Having sound public finances also means making sure that we collect the taxes that are due. Most wealthy people pay their taxes and make a huge contribution to funding our public services; the latest figures show that 30% of all income tax is paid by just 1% of taxpayers. We have given incentives to enterprise and cut punitive tax rates, and this year the rich pay a greater share of the nation’s income taxes than was the case in any year under the last Labour Government. But alongside those paying the most tax are those who try to avoid paying their fair share of tax. So today we set out in detail the largest package of measures to tackle tax avoidance, tax evasion, fraud and error so far this Parliament. Together it will raise over £9 billion over the next five years.

We are going to tackle the growth of intermediaries disguising employment as false self-employment, depriving work forces of basic employment rights such as the minimum wage in a bid to avoid employer national insurance. We will halve the final period exemption for capital gains tax private residence relief. We will end the abuse of dual contracts, offshore oil and gas contracting, derivatives linked to profits and share buy-backs. And we will ensure the tax advantages of partnerships are not abused either. We are introducing a new, limited power that requires people to pay their taxes up front where the scheme they used has already been struck down by the courts. We are going to strengthen Whitehall’s capacity to prevent error and tackle fraud in the benefit and tax credit systems, and expand its efforts to recover money that is owed.

There is one personal tax change we make today which is not about avoidance, but is about fairness. Britain is an open country that welcomes investment from all over the world, including investment in our residential property. But it is not right that those who live in this country pay capital gains tax when they sell a home that is not their primary residence while those who do not live here do not—that is unfair. So from April 2015, we will introduce capital gains tax on future gains made by non-residents who sell residential property here in the UK.

I can also announce that from 1 January next year the rate of the bank levy will rise to 0.156% and its base will be broadened in ways we have consulted on. The levy will raise £2.7 billion in 2014-15 and £2.9 billion each year from 2015-16. The country stood behind the banks in the crisis, and now it is right that they support the country in recovery.

Having a Government who live within their means is essential to secure the economy for the long term, but it is not sufficient. Britain has to earn its way in the world. Our infrastructure needs to be overhauled. We have to help our businesses compete. Above all, our young people need the skills to succeed in the modern world. This autumn statement takes the next big steps in all these areas.

Let me start with infrastructure. We are going to be spending more on capital as a proportion of national income on average over this decade than over the whole period of the last Government. That has involved making tough choices about priorities in spending and sticking to them. But that is not the most difficult decision in this area. We have to decide whether we are serious as a country about competing in the modern world and say to people that we need the new roads and the new railways, including the northern hub and High Speed 2. We have to say that we are prepared to push the boundaries of scientific endeavour, including in controversial areas, because Britain has always been a pioneer. We should say that the country that was the first to extract oil and gas from deep under the sea should not turn its back on new sources of energy such as shale gas because it is all too difficult, and the country with the world’s first civil nuclear programme should not be a country that says we can do this no longer.

Yesterday, my right hon. Friend the Chief Secretary and Lord Deighton published the update to the national infrastructure plan. That includes a co-operation agreement with Hitachi on the next nuclear power station in Anglesey and a deal with the insurance industry to invest at least £25 billion in UK infrastructure. We published the strike prices that support long-term investment in offshore wind and prioritise it over onshore wind. Today we go further, with a commitment to invest in quantum technology, and a new tax allowance to encourage investment in shale gas that halves tax rates on early profits. In the week in which Professor Peter Higgs travels to Stockholm to collect his Nobel prize for physics, we commit to build a new centre in his name at Edinburgh university, because science is a personal priority of mine.

Some of the most important infrastructure for British families is housing and we must confront this simple truth: if we want more people to own a home, we have to build more homes. The Office for Budget Responsibility is absolutely right today to draw attention to the weakness of housing supply in this country. The good news is that the latest survey data showed residential construction growing at its fastest rate for a decade. Our hard-won planning reforms are delivering a 35% increase in approvals for new homes, but we need to do more.

This week, we are announcing a billion pounds of loans to unblock large housing developments on sites in Manchester and Leeds and across the country. We will increase the housing revenue account borrowing limit by £300 million. Aspiration is not only for people who can afford their own home. We want to regenerate some of our most run-down urban housing estates. Councils will sell off the most expensive social housing, so they can house many more families for the same money. We are going to give working people in social housing a priority right to move if they need to for a job.

Right-to-buy applications have doubled under this Government, and we will expand it more. The very same spirit of aspiration that underpins right to buy is what drives this Government with Help to Buy. It is not enough to build more houses if families who can afford mortgages do not have the large deposits that the banks have demanded. Help to Buy is now helping thousands to own their own home. I can today announce that Aldermore and Virgin, two challenger banks, expect to join the scheme this month.

Help to aspiring families and building more homes: that is what we stand for. We must also avoid the mistakes of the past decade. We want a responsible recovery. That is why I am the first Chancellor to give the Bank of England the responsibility and the power not only to monitor overall debt levels, but to take action to deal with asset bubbles if they threaten our stability.

We want a functioning, stable housing market. The OBR’s latest house price forecast today, while higher, still has real house prices 3.1% lower in 2018 than at their peak in 2007. Together with Governor Carney, I acted last week to focus the funding for lending scheme away from mortgages on to small business lending, where its support is still needed. It is precisely because the authorities can act in this targeted and pre-emptive way, and because our public finances are under control, that the Bank can keep overall interest rates lower for longer and support the rest of the economy.

Investing in the physical infrastructure of our country is critical to our future. But in this global economy, it is better education and skills that hold the key to long-term national success. This week’s programme for international student assessment—PISA—scores show how much ground this country has to make up. My right hon. Friend the Education Secretary is doing more to transform school standards and raise the aspirations of pupils from the poorest families than anyone who has done that job before him. His expansion of free schools and academies has the full backing of this Chancellor.

We also know that children do better at school when they have a proper meal inside them. This autumn statement has found the financial resources to fund the expansion of free school meals to all school children in reception, year 1 and year 2, announced by the Deputy Prime Minister and supported by me.

But today we also focus on what happens when our young people leave school—and we do more to help them. First, we will not abandon those who leave school with few or no qualifications. At present, Jobcentre Plus does almost nothing to help 16 and 17-year-olds who are not in work or education. We will change that and will now fund the jobcentres to support these very young adults to find an apprenticeship or a traineeship.

Without basic maths or English, there is a limited chance any young person will be able to stay off welfare, so we are taking a new approach. Starting in some areas at first, anyone aged 18 to 21 signing on without those basic skills will be required to undertake training from day one or lose their benefits. If they are still unemployed after six months, they will have to start a traineeship, take work experience or do a community work placement—and if they do not turn up, they will lose their benefits.

A culture of worklessness becomes entrenched when young people can leave school and go straight on to the dole with nothing expected in return. That option is coming to an end in our welfare system.

The second reform is to apprenticeships. We have doubled the number of apprenticeships and now we will transform the way they are provided by funding employers directly through HMRC. I can tell the House there will now be an additional 20,000 higher apprenticeships over the next two years. I can also announce a big expansion of start-up loans, through which a new generation of entrepreneurs is being created: 50,000 more people will be helped to fulfil their aspiration to start their own business. We are extending the new enterprise allowance, too.

This year is also the 50th anniversary of the Robbins report, which challenged the nonsense that university was suitable only for a small few. In 1963, Robbins said:

“Courses of higher education should be available for all those who are qualified by ability and attainment to pursue them and who wish to do so.”

That was true then, and I believe it should remain true today. Our reforms to student loans, difficult as they were, have put our universities on a secure footing. Some predicted that applications from students from poor backgrounds would fall. Instead, I can report that this year we have had the highest ever proportion of young people from disadvantaged backgrounds applying to university.

But there is still a cap on aspiration. Each year, about 60,000 young people who have worked hard at school, got the results, want to go on learning and want to take out a loan to pay for it are prevented from doing so because of an arbitrary cap. That makes no sense when we have a lower proportion of people going to university than even the United States, let alone countries such as South Korea. Access to higher education is a basic tenet of economic success in the global race, so today I can announce that next year we will provide 30,000 more student places, and the year after we will abolish the cap on student numbers altogether.

Extra funding will be provided to science, technology, and engineering courses. The new loans will be financed by selling the old student loan book, allowing thousands more to achieve their potential.

Education underpins opportunity. It is business that provides those opportunities and the best way to help business is by lowering the burden of tax. KPMG’s report last week confirmed for the second year running that Britain has the most competitive business tax system in the world. Some in this House suggest that our response to this good news should be to increase corporation tax from 20%. Today, we publish the first of our studies of the dynamic effects of tax changes that shows that our corporation tax cuts increase investment and raise productivity—so much so that more than half the cost of the tax cut to the Treasury will be recovered because of higher growth. Putting up corporation tax hits investment, cuts productivity, costs jobs and raises much less. We thank the hon. Members for their submission, but we think it would be economic madness to pursue it.

Quite the reverse, today we take further steps to make our business taxes yet more competitive. The Budget announcement that we would abolish stamp duty on AIM shares was applauded around the world. Today, we also abolish stamp duty for shares purchased in exchange traded funds to encourage those funds to locate in the UK. We are making our successful film tax relief even more generous, and looking to extend the principle, including to regional theatre. We set out major reforms to encourage employee ownership of the kind that makes John Lewis such a success. And from April, we will be one of the first countries in the world to introduce a new tax relief for investment in social enterprises and new social impact bonds. I want to thank Sir Ronnie Cohen and the charities Minister, my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd), for all their help in putting this innovative scheme together.

Business rates impose a heavy burden on businesses of all sizes. Today, we will help ease that burden—and here is how. The last Government wanted to halve small business rates relief—a relief that helps cut rates bills for half a million companies and means a third of a million of the smallest businesses pay no rates at all. If we had followed that plan, small businesses would have faced a rate increase of up to £3,375. So we have rejected that plan. Instead, we have extended that rate relief scheme year after year. It was due to expire next April. We will now extend it for another whole year. We have also listened to the small business groups and will relax the rules that discourage these firms from expanding and opening extra premises.

But that does not go far enough. All businesses are expecting rates to rise by 3.2% next year. Instead, I will cap the inflation increase in business rates for all premises at 2% from next April. We will also allow businesses to pay their rates in 12 monthly instalments. We will clear almost all the backlog of valuation appeals by July 2015, with reform of business rates on the agenda for 2017 revaluation.

There is one group of businesses that has found the recession especially hard, as it has coincided with a rising challenge from the internet that is only getting stronger. These are our local retailers—the shops, the pubs and the cafés that make up our high streets across Britain. With small business Saturday this weekend, I want the Government to do all we can to help them. We are already changing the planning rules to help town centres compete. To get the vacant shops that blight too many town centres to open again, I am introducing a new reoccupation relief that will halve the rates for new occupants.

But we can do more, and I want to thank my hon. Friends the Members for Wolverhampton South West (Paul Uppal), for Nuneaton (Mr Jones), for Hastings and Rye (Amber Rudd) and for Brentford and Isleworth (Mary Macleod) and many others for their campaign. Like them, I also want to help those who have struggled hard on our high streets—often working long hours for not enough in return. So I can announce today that for the next two years every retail premise in England with a rateable value of up to £50,000 will get a discount on their business rates. This discount will be worth £1,000 off their bills.

This is what we offer: business rates capped; for the smallest firms, no rates at all; and help for the high street, with £1,000 off for small shops, pubs, cafés and restaurants across our country. The people in these businesses epitomise the hard-working values this Government support, and we are backing British businesses all the way.

And we are backing British families. Next April, the personal allowance will reach £10,000. This Government are delivering an income tax cut worth up to £700 a year to over 25 million hard-working people. Under the last Government, council tax doubled. We are now helping councils freeze it for the whole of this Parliament. Tax-free child care is being introduced and free school meals are on their way. But there is more we are doing to help.

This autumn statement confirms that from April 2015 we will introduce a new transferable tax allowance for married couples. Available to all basic rate taxpayers, it enables people to transfer £1,000 of their personal allowance to their wife, husband or civil partner. It is just a start. And I confirm today that we will introduce a new uprating mechanism that ensures the new married couples tax allowance is automatically increased in proportion to the personal allowance. Four million families will benefit, many of them among the poorest working families in our country. This measure, along with the others we take today, ensures that across this Parliament our policies are progressive, showing that we are all in this together, with the very rich paying the most.

We are also helping families with their energy bills, not with a transparent con by pretending that we can control the world oil price, but instead by focusing on the thing that Government can and should control—the levies and charges that previous Energy Secretaries piled on bills. [Interruption.] This week we deliver on the promise made by the Prime Minister—[Interruption.]

[Mr Speaker]

Order. The statement must be heard.

[Mr Osborne]

This week we deliver on the promise made by the Prime Minister to roll back those levies. The result: an average of £50 off family bills. We are doing this in a way that supports the lowest income families, reduces carbon, supports investment in our energy infrastructure and, as the document shows, does not add a penny to the tax bills that families pay. My political philosophy is clear: instead of penalising people with more taxes and more regulation, give them incentives by reducing their taxes and their bills. As I have often said, going green does not have to cost the earth.

That brings me on to fuel duty. We inherited from the previous Government the hated fuel duty escalator that would have inflicted hardship on families and small firms alike. Instead of those rises, we abolished the escalator, and we have cut and then frozen fuel duty. I have had further representations from many, many hon. Friends, from my hon. Friends the Members for Blackpool North and Cleveleys (Paul Maynard) and for Argyll and Bute (Mr Reid), and of course my hon. Friend the Member for Harlow (Robert Halfon), who is a champion of the people he represents.

I said earlier this autumn that if we could find the money, I would like to go on freezing duty. Today I can report that because we have taken difficult decisions to control the public finances, I can deliver on that promise. Next year’s fuel duty rise will be cancelled. Instead of petrol taxes going up by 2p a litre, they will stay frozen. That means that, compared with the previous Government’s plans, petrol will be 20p a litre less. That is £11 less every time you fill up—a saving for drivers over this Parliament of £680, and double that for a small business with a van.

Cancelling fuel duty rises has been a major priority of the Government—a £22 billion demonstration that we are on the side of hard-working people in this country. A married couples allowance; £50 off energy bills. We are helping those who drive a car and we are helping those who get the train, too. Fares next January were going to go up by 1% above inflation. We are going to keep average fares flat in real terms.

We on the Government Benches know that there is one thing more than any other that has supported families through these difficult times, and that is being in work. At the heart of our economic plan is support for the creation of more jobs. That is why we opposed the last Government’s plan to increase the jobs tax. That is why we reversed the most damaging part of that increase in the very first Budget after we came to office. That is also why in the last Budget I introduced the employment allowance, which eliminates the jobs tax for half a million small businesses. And that is why we will go further still. We are going to abolish the jobs tax on young people under the age of 21. Employer national insurance contributions will be removed altogether on a million and a half jobs for young people. We are not going to leave young people behind as the economy grows. We are going to have a responsible recovery for all.

The cost for a business of employing a young person on a salary of £12,000 will fall by over £500. For someone on £16,000, that is over £1,000 off. I want to commend my hon. Friends the Members for Braintree (Mr Newmark) and for Carlisle (John Stevenson) and the Million Jobs campaign for highlighting this issue. The change requires legislation. It will come into force in April 2015, and it will not apply beyond the upper earnings limit.

This country is working through its long-term plan: bringing down the deficit and dealing with the debt; spending less on welfare and making the big decisions on infrastructure; living within our means and cutting tax on business; making work pay and letting people keep more of what they earn; and with confidence in the next generation, as they make their way in education and in the workplace. This statement shows that the plan is working. It is a long-term plan for a grown-up country. But the job is not done. By doing the right thing, we are heading in the right direction. Britain is moving again. Let us keep going.

--- Later in debate ---

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

I congratulate the Chancellor on pulling us out of the mire the last Government left us in. To help bolster growth and provide the building materials needed for what is going on thanks to his efforts, a brickworks that closed down in 2010 in my constituency on the borders will reopen at the end of this month. I invite the Chancellor to come to the reopening. I also congratulate him on helping to get youth unemployment down by 15% in the last three months in Morecambe and on his comments about business rates for shops. The Visitor newspaper has been running regular articles on getting our shops restarted in Morecambe, and this will help immeasurably. May I also—

[Mr Speaker]

Order. The hon. Gentleman really has overdone it. I exercised a degree of leniency. I wonder whether he was seeking an Adjournment and then realised he had already had it.

[Mr Osborne]

Mr Speaker, there are so many good things happening in Morecambe that I am not surprised my hon. Friend wants to bring them to the attention of the House. Under this Government, not only is unemployment down and not only will many businesses be helped by the measures we have announced today on business rates, but, as he said, the construction materials industry is doing well, as construction continues apace. If I come and visit the beautiful Morecambe bay area with him, I will ensure we pop into the brickworks.

--- Later in debate ---

[Mr Osborne]

I agree with my hon. Friend. The good news is that businesses are expanding, and jobs are being created in Halesowen and across the black country. We have got to make sure we support that, with enterprise zones, with transport links, with links to the rest of the country and, indeed, with the European continent, through High Speed 2, and by investing in important things such as his local hospital. In all these areas we are backing his constituents, and because they have him as their Member of Parliament, they are heard in this place.

[Mr Speaker]

I thank the Chancellor and all participating colleagues.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 10th September 2013 Commons Chamber

[Chris Williamson (Derby North) (Lab)]

T5. Yesterday, the Chancellor said that those who opposed austerity had lost the argument, but wages are falling, child poverty is increasing and he is presiding over the slowest economic recovery in over 100 years. Unless the Chancellor is living in cloud cuckoo land or residing on planet Zog, he will surely admit that his record of economic competence has been less than satisfactory—

[Mr Speaker]

Order. I am sorry, but we have a lot to get through, so much shorter questions are required.

[Mr Osborne]

On planet earth, we inherited an economic mess, and we are putting it right. As I say, if Labour Members are serious about advocating an alternative economic plan, perhaps they would tell us today—perhaps someone will stand up and tell us—whether they oppose our spending cuts and would reverse them. We have not heard that today.

--- Later in debate ---

[Mr Speaker]

I will grant the right hon. Gentleman an Adjournment debate on the matter if he judges it to be necessary after he has heard the reply to his question. We shall see—but I am grateful to him.

[Mr Osborne]

Let me say first that the shadow Chancellor was in effect the deputy Chancellor for 13 years, when the economy became so unbalanced and we experienced the biggest crash in modern history.

My right hon. Friend raised a serious question about the separation of retail and investment banking and about, in effect, Glass–Steagall-like reforms or a Volcker rule in the United Kingdom. We asked John Vickers— whom he mentioned—to look into the issue, along with a serious commission of experienced people, and they concluded that ring-fencing retail banks was a better solution. That is what we are legislating for, and it shows that we are learning from the mistakes of what went so badly wrong when that deputy Chancellor was in charge of the City.

Spending Review

Debate between George Osborne and John Bercow

Wednesday 26th June 2013 Commons Chamber

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

This coalition came into office with a commitment to address with firmness and resolve one of the biggest economic crises of the post-war era. The action we have taken, together with the British people, has brought the deficit down by a third, helped a record number of people into work, and taken our economy back from the brink of bankruptcy; and it allows us to say that while recovery from such a deep recession can never be straightforward, Britain is moving out of intensive care, and from rescue to recovery.

Today we announce the latest action to secure the recovery. We act on behalf of every taxpayer and every future taxpayer who wants high-quality public services at a price our country can afford. We act on behalf of everyone who knows that Britain has got to live within its means. We have applied three principles to the spending round I will set out today: reform, to get more from every pound we spend; growth, to give Britain the education, enterprise and economic infrastructure it needs to win the global race; and fairness, making sure we are all in it together by ensuring those with the broadest shoulders bear the largest burden and making sure the unfairness of the something-for-nothing culture in our welfare system is changed.

We have always understood that the greatest unfairness was loading debts on to our children that our generation did not have the courage to tackle ourselves. We have always believed, against much opposition, that it is possible to get better public services at lower cost—that you can cut bureaucracy and boost enterprise by taking burdens off the back of business. In the face of all the evidence, the opposition to these ideas has collapsed into incoherence. We have always believed that the deficit mattered—that we needed to take tough decisions to deal with our debts—and the opposition to that has collapsed into incoherence too. Today I announce the next stage of our economic plan to turn Britain around.

Let me start with the overall picture on spending. In their last year in office, the previous Government were borrowing £1 in every £4 that they spent. It was a record for a British Government in peacetime and a calamitous risk with our economic stability. As the note we saw again this week from their outgoing Chief Secretary put it,

“I’m afraid there is no money.”

So we acted immediately. Three years ago, we set out plans to make savings and to reduce our borrowing. Instead of the £157 billion the last Government were borrowing, this year we are set to borrow £108 billion pounds: that is £49 billion less in borrowing. That is virtually the entire education budget.

So we have made real progress, putting right what went so badly wrong. But while we have been acting, the challenges from abroad have grown: a eurozone in crisis, rising oil prices, and the damage from our own banking crisis worse than anyone feared. The truth is that we have to deal with the world as it is, not as we would wish it to be, so this country has to continue to make savings. I can report to the House that the biggest single saving we have made in government is the £6 billion a year less we are paying to service our debts than the previous Government budgeted for. Bear that number in mind when you hear the Opposition complaining about cuts.

The deficit has come down by a third, yet at over 7% it remains far too high, so we must continue to take action—not just because it is wrong to go on adding debts to our children’s shoulders, but because we know from the global turbulence of the last few years that the economic risks are real and the recovery has to be sustained. If we abandoned our deficit plan, Britain would be back in intensive care. So the figures today show that until 2017-18, total managed expenditure—in other words, the total amount of Government spending—will continue to fall in real terms at the same average rate as it is falling today.

The task before us today is to spell out what that means for 2015-16. Total managed expenditure will be £745 billion. To put that huge sum into context, consider this: if Government spending had been allowed to rise through this Parliament at the average rate of the last three decades, that total would have been £120 billion higher. This Government have taken—[Interruption.]

[Mr Speaker]

Order. The Chancellor must not have to shout to be heard. Members know that I will always accommodate the interests of Back Benchers on both sides in scrutinising these matters intensively, but the Chancellor and, in due course, the shadow Chancellor must be properly and fairly heard.

[Mr Osborne]

This Government have taken unprecedented steps to achieve that expenditure control. Now we need to find £11.5 billion of further savings. I want to pay a personal tribute to my right hon. Friend the Chief Secretary for the huge effort that he has put into delivering them. Finding savings on that scale has not been easy. These are difficult decisions that will affect people in our country, but there never was an easy way to bring spending under control. Reform, growth and fairness are the principles. Let me take each in turn.

I will start with reform and the obligation that we all have in this House to ensure that we get more for every pound of taxpayers’ money that we spend. With the help of my right hon. Friend the Minister for the Cabinet Office, we have been combing through Whitehall, driving out costs, renegotiating contracts and reducing the size of government. Cutting money that the previous Government were spending on marketing and consultants, reforming Government IT and negotiating harder on behalf of the taxpayer have already saved almost £5 billion. In this spending round, we will find a further £5 billion of efficiency savings. That is nearly half of the total savings we need to achieve.

We are reforming pay in the public sector. We are holding down pay awards, and public sector pay rises will be limited to an average of up to 1% for 2015-16. However, the biggest reform that we will make on pay is to automatic progression pay. That is the practice whereby many employees not only get a pay rise every year, but automatically move up a pay grade every single year, regardless of performance. Some public sector employees see annual pay rises of 7%. Progression pay can at best be described as antiquated; at worst, it is deeply unfair to other parts of the public sector that do not get it and to the private sector that has to pay for it. So we will end automatic progression pay in the civil service by 2015-16, and we are working to remove automatic pay rises simply for time served in our schools, NHS, prisons and police. The armed forces will be excluded from those reforms.

Keeping pay awards down and ending automatic progression pay means that, for every pound we have to save in central administration, we can better limit job losses. I do not want to disguise from the House the fact that there will be further reductions in the number of people working in the public sector. The Office for Budget Responsibility has forecast that the total number of people working for the Government will fall by a further 144,000 by 2015-16. I know that for those who are affected that is difficult. That is the consequence of the country spending far beyond its means.

When I presented the spending round three years ago, I said that about half a million posts in the public sector were forecast to have to go. That is indeed what has happened, and we are saving £2 billion a year, with a civil service now smaller than at any time since the war. I also said three years ago that I was confident that job creation in the private sector would more than make up for the losses. That prediction created more controversy than almost anything else at the time, including with the Opposition. The shadow Chancellor called it “a complete fantasy”. Instead, every job lost in the public sector has been offset by three new jobs in the private sector. In the last year, five new jobs have been created for every job cut in the public sector. The central argument of those who fought against our plan is completely demolished by the ingenuity, enterprise and ambition of Britain’s businesses. I pay tribute to the hard-working people of this country who proved their pessimism wrong.

In this spending round, the Treasury will, as one would expect, lead by example. In 2015-16, our resource budget will be reduced by 10%. The Cabinet Office will also see its resource budget reduced by 10%. However, within that we will continue to fund support for social action, including the National Citizen Service. Ninety thousand places will be available for young adults in the citizen service next year, rising to 150,000 by 2016. It is a fantastic programme that teaches young people about their responsibilities as well as their rights, and we are expanding it.

Local government will have to make further savings too. My right hon. Friend the Communities and Local Government Secretary has set an example to all his colleagues by reducing the size of his Department by 60% and abolishing 12 quangos. He is a model of lean government, and has agreed to a further 10% saving in his resource budget. But we are committing to more than £3 billion capital investment in affordable housing and we will extend the troubled families programme to reach 400,000 more vulnerable families who need extra support. We are proving that it is possible to save money and create more progressive government. That is the right priority.

Here is another of the Government’s priorities: helping families with the cost of living. Because we know that times are tough, we have helped to keep mortgage rates low, increased the personal allowance, cut fuel duty and frozen council tax. That council tax freeze is due to come to an end next April. I do not want that to happen, so I can tell the House today that because of the savings we have made we can help families with their bills. We will fund councils to freeze council tax for the next two years. That is nearly £100 off the average council tax bill for families, and brings savings on these bills for families to £600 over this Parliament. That demonstrates our commitment to all those who want to work hard and get on.

There is one more thing that we can do to help with the cost of living in one part of the country. For years, Members from the south-west of England have fought on behalf of their constituents who face exceptionally high water bills. Nothing was done until we came to office. Now we have cut those water bills by £50 per household every year until 2015. My hon. Friend the Member for Camborne and Redruth (George Eustice) and many others have campaigned to extend that rebate beyond 2015. I am happy to confirm today that we will do that. Taking money out of the cost of government and putting it in the pockets of families—that is what we mean by reform.

Local government has already taken difficult decisions to reduce staff numbers, share services and make savings. I pay tribute to Sir Merrick Cockell for all he has done in showing how this can be achieved. We were told by the scaremongers that savings in local government would decimate local services. Instead, public satisfaction with local council services has gone up under this Government. That is because, with our reforms, communities have more control over their own destiny. That is because we have devolved power and responsibility to manage budgets locally. That is because we have let councils benefit from the tax receipts that come when the local economy grows. Today, we give more freedom, including greater flexibility over assets, and we will drive greater integration of local emergency services. I thank my hon. Friend the Member for Bournemouth East (Mr Ellwood) for his fresh thinking in this area, which has helped to inform us.

We are also embarking on major reforms to the way we spend money locally through the creation of the single local growth fund that Lord Heseltine proposed. This will be £2 billion per year, which is at least £10 billion over the next Parliament. Local enterprise partnerships can bid for that sum, and the details will be set out tomorrow. Our philosophy is simple: trust people to make their own decisions and they will usually make better decisions. But in return for those freedoms, we have to ask local government for the kind of sacrifices central Government are making. The local government resource budget will be reduced by 10% in 2015-16, but when all the changes affecting local government that I will set out are taken into account, including local income and other central Government funding, local government spending reduces by approximately 2%.

I set out today the block grants to the devolved Administrations. Because we have prioritised health and schools in England, this feeds through the Barnett formula to require resource savings of about 2% in Scotland, Wales and Northern Ireland. The Scottish resource budget will be set at £25.7 billion, and Scotland will benefit from new capital borrowing powers of almost £300 million. Being part of the UK means that Scotland will see its capital spending power increase by almost 13% in real terms in 2015-16. It is rightly for the Scottish Parliament to decide how best to use it. That is devolution within a United Kingdom delivering for Scotland.

The Welsh resource budget will be £13.6 billion, and we will shortly publish our response to the Silk commission on further devolution of taxation and borrowing. When we do so, we will be able to say more about the impressive plans to improve the M4 in south Wales that my hon. Friend the Member for Vale of Glamorgan (Alun Cairns) and others have been campaigning for. The Northern Ireland resource budget will be £9.6 billion. We have agreed to provide an additional £31 million in 2015 to help the Police Service of Northern Ireland tackle the threat posed by terrorism. Those police officers do an incredibly brave job on our behalf, and we salute them. Separately, we will make 10% savings to the Scotland, Wales and Northern Ireland Offices.

We believe that the cultural heritage of our nations is not just an economic asset, but has intrinsic value. When times are tough, they too must make a contribution to the savings this country requires. The Department for Culture Media and Sport will make savings of 7% in its resource budget. Elite sports will be protected and the funding of community sports, arts and museums will be reduced by just 5%, but because we recognise the value of our greatest museums, galleries and English Heritage, we are giving them much greater freedom from state control, which they have long called for, applying our reforming principles across the board and empowering those on the front line who know best—what the director of the British Museum called:

“good news in a tough economic climate”.

And while we are at it, we will make sure that the site of the battle of Waterloo is restored in time for the 200th anniversary to commemorate those who died there and to celebrate a great victory of coalition forces over a discredited former regime that impoverished millions.

We still have the finest armed forces in the world, and we intend to keep it that way. The first line of national defence is sound public finances and a balanced defence budget, and my right hon. Friend the Defence Secretary is helping to deliver both. He and his predecessor, my right hon. Friend the Member for North Somerset (Dr Fox), have filled the £38 billion black hole they inherited in the finances of the Ministry of Defence. We will continue to ensure we get maximum value for money from what will remain, which, at over 2% of our GDP, is one of the largest defence budgets in the world. The defence resource budget will be maintained in cash terms at £24 billion, while the equipment budget will be £14 billion and will grow by 1% in real terms thereafter. We will further reduce the civilian work force and their allowances; renegotiate more of the hopeless private finance initiative contracts signed in the last decade; and overhaul the way we buy equipment.

My right hon. Friend the Prime Minister has rightly been clear throughout, however, that he is not prepared to see a reduction in Britain’s military capabilities. This spending round not only protects those capabilities, but enhances them with the latest technologies. We will not cut the number of soldiers, sailors or airmen—we need them to defend our country—and we will give them the best kit to do that job: new aircraft carriers, submarines, stealth fighters, destroyers and state-of-the art armoured vehicles. We also make a major commitment to invest in cyber. It is the new frontier of defence and a priority for the Government.

We will look after families who have lost their loved ones and those injured protecting us long after the wars they fought in are over. We previously committed to fund the military covenant for five years, and today I commit to funding the armed forces covenant permanently. We will do that with the money we have collected from the LIBOR fines, so those who represented the very worst values will support those who represent the very best of British values. Our veterans will not be forgotten.

The intelligence services are on the front line too. Silently, and often heroically, these fellow citizens protect us and our way of life, and so we will protect them in return, with a 3.4% increase in their combined resource budget. The Foreign Office is the public face of our diplomacy, and my right hon. Friend the Member for Richmond (Yorks) (Mr Hague) is quite simply the best Foreign Secretary we have had in a generation. He, too, has demonstrated how we can make our taxpayer pound go further. While making savings in his budget, he has managed to expand our network of embassies in the emerging world and focus his diplomats on British commercial interests. There will be further savings in that budget of 8% in 2015, but he is still committing to strengthen our embassy network in high-growth markets, from Shanghai to Abuja.

The Foreign Office projects our values abroad, and the Home Office protects our values here in Britain.

--- Later in debate ---

[Mr Osborne]

One thing is for certain after that performance: the right hon. Gentleman is the worst shadow Chancellor for a generation, and we want to keep him right where he is. What is amazing is that he spoke for 11 minutes and never said Labour wants to borrow more. Did anyone hear that in his comments? That is his argument: he wants to borrow more. Why does he not have the courage to get up and make his economic argument at the Dispatch Box? He finds himself in a situation where the entire argument he has been advancing for the last three years has completely collapsed. Where was the reference to the temporary VAT cut? Abandoned. Where was the reference to the five-point plan? Abandoned. He complains about all the cuts; here is a very simple question. We shall spend £745 billion in 2015; what will he spend? Does he match those plans or not? Hands up on the Labour Benches from those who want to match our spending plans. On Saturday, the Labour leader—

[Mr Speaker]

Order. May I just say—[Interruption.] No help from the hon. Member for Colne Valley (Jason McCartney) is required; he would not have the foggiest idea where to start. Let me just say to the Chancellor of the Exchequer that there is a way in which these matters are handled, and it is not by the Minister responding to questions posing a series of questions. That is in breach of parliamentary protocol, it is not proper, and it must stop right away—and others, including at the very highest level, ought to take note of that for future weeks. Let’s be clear about it.

[Mr Osborne]

I will leave it to the country to ask these questions. I make this point. In this spending plan I have set out total managed expenditure of £745 billion, and it is up to all Members of this House to decide whether they support that. We do not know the position of the Opposition, because on Saturday the Labour leader said there would be no more borrowing, but on Sunday the shadow Chancellor said “yes, of course” there would be, so we will see what the position of the Opposition is on this.

The shadow Chancellor mentions what has been said in this House before. Well, let us be clear about what he said in this House before, and how we have responded to it in this spending plan. On 6 June 2011 he said there would be a return to mass unemployment. We have set out welfare plans that help people get back into work. Does he support those or not? That is the question the public will ask of him. He said in October 2010 that we were taking a huge risk with crime. Crime is down 10% or more. He said in July that year that the university reforms would shut out those from disadvantaged backgrounds from university, but actually a record proportion of pupils from disadvantaged backgrounds applied to go to university. He said, in his own words, that the cuts to the border agency would mean we would be unable to enforce our immigration policy. That was wrong, too. Every prediction he has made, including the prediction that there would be no more boom and bust, has proved to be completely wrong, so why would anyone believe a word he has got to say about this?

The simple point is this: we have set out our plans—we have set out our economic strategy, we have set out our spending plans—and those who disagree with them should advance an alternative or retreat from the battlefield, because the shadow Chancellor finds himself in no man’s land. He has abandoned his economic argument but stuck with a disastrous economic policy of borrowing more, and in the end, if we want to know why, we only need to hear what he said this month:

“Do I think the last Labour government was profligate, spent too much, had too much national debt? No, I don’t think there’s any evidence for that.”

All people want Labour to say is, “We’re sorry, we got it wrong, we borrowed too much and we spent too much, and we won’t do it again.”

To answer the specific question that the shadow Chancellor asked me, yes we will have free museum charges—so that people can go to our museums and see the antiquated economic policy advanced by the Opposition, which brought this country to its knees and gave us the worst economic crisis for a generation, and they can learn how this Government cleared up that mess.

These reductions and the control of public expenditure are absolutely essential. That will bolster the credibility of fiscal policy in the markets and it creates room for the private sector to lead the recovery and create the jobs we need, particularly in small businesses in our constituencies, which are desperately trying to find the funding to expand.

--- Later in debate ---

[Mr Osborne]

Bank bonuses are down 85% since the previous Government left office. We have curbed irresponsibility in our City, which was rife when the shadow Chancellor was City Minister. In all the years for which the hon. Gentleman was a Member of Parliament for Croydon and sat on the Government Benches, I do not remember him getting up and saying, “I want a higher top rate of tax, Gordon Brown”—sorry, I mean the right hon. Member for Fife. We did not hear that. The truth is that the tax rate for rich people is higher under this Government than it was when the hon. Gentleman represented the good people of Croydon.

[Mr Speaker]

It is good of the Chancellor to refer to the former Prime Minister by the title of his constituency, but it is an even better idea to get it right as Kirkcaldy and Cowdenbeath.

[Steve Baker (Wycombe) (Con)]

The Bank of England’s Andy Haldane recently told the Treasury Committee:

“Let’s be clear, we have intentionally blown the biggest government bond bubble in history.”

What contingency plans have the Government made to cope with that bond market bubble bursting?

--- Later in debate ---

[Mr Osborne]

Child poverty projections are made independently, but I say to the hon. Lady that we are doing everything we can to give children from poorer backgrounds the very best start in life, with measures such as the pupil premium.

[Mr Speaker]

Following the example of the Hilling handbook, I call Mr Andrew Selous.

[Andrew Selous (South West Bedfordshire) (Con)]

Will the Chancellor confirm that there will be a cap on benefits and not on the state pension in future?

--- Later in debate ---

[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.

[Mr Osborne]

The short answer is yes, and the Exchequer Secretary is doing an excellent job in changing that culture, with the Department.

--- Later in debate ---

[Mr Osborne]

As I said, we are maintaining capital investment in the way that I set out in the statement.

[Mr Speaker]

Fifty-five Back Benchers contributed in 47 minutes of exclusively Back-Bench time, so I am grateful to colleagues, including, of course, the Chancellor.

Bill Presented

Railways Bill

Presentation and First Reading (Standing Order No. 57)

Caroline Lucas, supported by John McDonnell, Ian Lavery, Katy Clark, Jeremy Corbyn, Mr Elfyn Llwyd, Jonathan Edwards, Hywel Williams, Kelvin Hopkins, John Cryer, Grahame M. Morris and Martin Caton, presented a Bill to require the Secretary of State to assume control of passenger rail franchises when they come up for renewal; and for connected purposes.

Bill read the First time; to be read a Second time on Friday 18 October, and to be printed (Bill 81).

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 25th June 2013 Commons Chamber

[Mr Osborne]

rose—

[Mr Speaker]

Order. The Chancellor is not responsible for Labour policy. A very short one-sentence reply will suffice, then we must move on. Members must ask questions that are orderly, not disorderly.

[Mr Osborne]

My short answer is thank God I am not responsible for Opposition policy.

Economic Policy

Debate between George Osborne and John Bercow

Monday 25th February 2013 Commons Chamber

[Mr Osborne]

The shadow Chancellor finds himself in the contradictory position of seeking an urgent question on a rating decision which he says we should ignore, about a debt burden that he admits he would add to, in order to attack a Government who are sorting out the mess that he created. What exactly is his policy? Six times on the radio he was asked this weekend whether the answer to too much borrowing is to borrow even more, and he would not answer the question. It is an economic policy that dare not speak its name, from a shadow Chancellor who refuses to be straight with the British people. Finally, he was confronted on the radio by the simple statement:

“I, Ed Balls…would borrow more”

and he admitted,

“Yes, that is what I would do.”

Does not that admission completely undermine his entire argument today? A deliberate decision to borrow more—[Interruption.]

[Mr Speaker]

Order. Government Back Benchers, whatever their intentions, are in danger of shouting down their own Chancellor. Mrs Perry, calm yourself. There is always another day.

[Mr Osborne]

Government Back Benchers are as baffled as I am by the shadow Chancellor’s economic policy, which he has just had a few minutes to explain and still there is no explanation. His answer to a debt crisis is to borrow more. His answer to too much borrowing is to add to it. That is the problem he has, ultimately—that he is responsible for the mistakes that got Britain into this economic mess. This is the verdict from the leading Citi economist, Michael Saunders, today:

“In our view, the underlying causes of the UK economy’s weakness—and hence the rating downgrade—stem from the surge in private credit and public spending during 2000-2007.”

Who was in charge of economic policy during that period? The right hon. Gentleman is the architect of the mistakes that gave Britain its debt problem. He ignores the solution to that debt problem. He is condemned to repeat those mistakes and, as a result, his party is condemned never to be trusted with the public finances again.

--- Later in debate ---

[Mr Speaker]

I am bound to tell the hon. Member for Burnley that I am always very grateful to him for his advice, but I think that on the whole I can probably get by without it, and only by a very generous interpretation—I am in a generous mood—could that be considered to be in order, but I will happily have the Chancellor briefly respond.

[Mr Osborne]

My hon. Friend is right that what is completely extraordinary is that we have constant criticism from the shadow Chancellor of our fiscal policy but not a clue from him about what he would do except add to borrowing. He has made it very clear that he would add to borrowing, although he has not said by how much, and he has not said which of the cuts he would stick with and which he would oppose, so until we have a credible alternative, we will not have a credible shadow Chancellor.

--- Later in debate ---

[Mr Osborne]

We inherited an incredibly difficult situation. The economy had contracted by 6%; we were experiencing the deepest recession in the country’s modern history, and arguably the worst financial crisis in its entire history. Since then we have made difficult decisions, but they have seen interest rates stay low, they have seen the deficit come down, and they have seen the creation of a million jobs. The hon. Gentleman should be welcoming that.

[Mr Speaker]

I call Mr Flello. Is Mr Flello still with us to give us his views?

[Robert Flello (Stoke-on-Trent South) (Lab)]

I am most grateful, Mr. Speaker. This is definitely worth waiting for. I have handwritten notes.

If one of the Chancellor’s pals in one of the banks had lost that bank’s triple A credit rating, he would have gone. Will the part-time Chancellor now either become full-time and change his plan, or go?

--- Later in debate ---

[Mr Osborne]

He asks where it is; it is being built at the moment. For 13 years people wanted that road and it was not produced, but it is now being produced under this Government.

[Mr Speaker]

I thank the Chancellor of the Exchequer and, for that matter, the 69 Back-Bench Members who contributed in 57 minutes of exclusively Back-Bench time for their notable succinctness.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 29th January 2013 Commons Chamber

[Mr Osborne]

I do not think that the hon. Lady is being completely straight with the House about the numbers she is using—[Hon. Members: “Withdraw.”]

[Mr Speaker]

Order. Hon. Members may leave this to me. The Chancellor is very versatile in his use of language and he can rephrase that. No Member would be other than straight with the House. He should withdraw that term and use another, and I feel sure that he will do so.

[Mr Osborne]

Of course I withdraw it and would simply say that the hon. Lady has been very creative in the use of the numbers that she has put before the House. The number she is using is the amount of money that Labour was spending on capital before the general election, but it set out plans to cut capital after the general election. We have exceeded those plans, and it is completely hypocritical for the Labour party to claim that it would have spent more on capital when it clearly would not have.

Points of Order

Debate between George Osborne and John Bercow

Tuesday 11th December 2012 Commons Chamber

[Mr Speaker]

I will hear the Chancellor the Exchequer on this matter, and then I will give a verdict.

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

Further to that point of order, Mr Speaker. There was no pre-empting of the announcement. It was laid as a written statement one hour ago. I thought that it would be appropriate to illuminate the written statement in oral questions, as Ministers frequently do from the Dispatch Box. There is, of course, a debate on the economy this afternoon, during which we can answer questions. It relates to errors that took place in Northern Rock in 2008 that have affected a number of customers. Customers will be receiving letters from Northern Rock. As I said, I thought that it would be helpful to illuminate the details of the written statement, but apparently that is not the case.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 11th December 2012 Commons Chamber

[Mr Baron]

The Labour Government more than doubled the national debt. This Government have done well to reduce the deficit by 25%, but this still means that we are adding to our debt, albeit at three quarters the pace. Financial repression and quantitative easing will ease the debt somewhat through higher inflation, but may I encourage the Chancellor, despite some positive measures in the autumn statement, to be bolder in encouraging economic growth, including by cutting small business corporation tax, which is the only credible way—

[Mr Speaker]

Order. We have got the gist of it; it was simply too long.

[Mr Osborne]

My hon. Friend is right that the deficit is how much we add to the debt each year. That is why we have to bring the deficit down—it has come down by 25%—but he is also right that we have to have a competitive private sector. We have to have a private sector-led recovery, which is why we have increased the annual investment allowance, for example. He recommends a cut in the small company corporation tax rate. [Interruption.] The shadow Chancellor from a sedentary position said, “That’d be a good idea,” but he was going to put the rate up when we came into office. We have cut the rate to 20% and increased the annual investment allowance.

--- Later in debate ---

[Mr Osborne]

It is welcome that more than 1 million jobs have been created in the private sector. We now have record female employment, which is also welcome, while the number of those on out-of-work benefits has fallen by 190,000, which is something I hope everyone would welcome.

[Mr Speaker]

I call Richard Graham. Not here.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

May I congratulate the Chancellor on his U-turn on capital allowances for manufacturing industry? When did he realise that his previous stance of dismissing them as complex reliefs was wrong and at total variance with the Government’s stated aim of supporting manufacturing? When did his conversion to supporting these allowances take place, as long called for by Labour Members and the Engineering Employers Federation?

--- Later in debate ---

[Mr Osborne]

It is good to see the shadow Chancellor back. Of course tax credits go to some people in work, but we are also helping those people with a personal allowance increase, and working households will be £125 better off. Perhaps he can answer a question, if that is allowed, Mr Speaker: how will Labour vote on the Bill?

[Mr Speaker]

It is very important that the public are not misled, however inadvertently, by a member of the Government. This is not an occasion for shadow Ministers to answer questions. In our system, they ask questions and Ministers are expected to answer them. That is the situation.

[Ed Balls]

I will answer, though, Mr Speaker, but before I do it is important that Members on both sides of the House know the answers to the questions I asked the Chancellor. First, 60% of families hit by his tax and benefit changes are in work. Secondly, according to the Institute for Fiscal Studies, as a result of the autumn statement measures a working family—the average one-earner couple—will be £534 a year worse off by 2015. Those are the very families who pull up the blinds and go to work. Every Tory constituency has, on average, over 6,000 of those families who will lose out. In answer to his question, we will look at the legislation, but if he intends—[Interruption.] He asked me a question and I am going to answer it. If he intends to go ahead with such an unfair hit on middle and low-income working families while giving a £3 billion top-rate tax cut, we will oppose it. Why is he making striving working families pay the price for his economic failure?

--- Later in debate ---

[Mr Speaker]

Order. May I gently explain to the hon. Gentleman two things? First, topical questions are supposed to be brief, and secondly, they are supposed to relate to the policy of the current Government, not that of the previous one. A short one-sentence reply will, I am sure, suffice—no?

[Mr Osborne]

Will you allow me, Mr Speaker, to spend a little time on this? We put down a written statement at half-past 11 today because of an error originating in 2008, when Northern Rock was in public ownership. Some customers with certain types of mainly unsecured loans were not given all the mandatory information in their statements to which they were entitled by law. As a result, interest payments on these loans are not legally enforceable. UK Asset Resolution, which manages Northern Rock—[Interruption.] Can I just make this point? One hundred and fifty—[Interruption.]

[Mr Speaker]

Order.

--- Later in debate ---

[Mr Speaker]

Order. I do not require any help from the hon. Gentleman; he should concentrate on the pursuit of his own duties to the best of his ability. I would say to the Chancellor that if the written ministerial statement has been made it is not entirely obvious to me why we need its terms to be repeated before the Chamber. [Interruption.] Order. I will use my discretion. The right hon. Gentleman can have a few seconds more, but then I really must proceed with topical questions, for which allowance will have to be made.

[Mr Osborne]

Mr Speaker, 152,000 customers have been affected. These are people with loans of less than £25,000. The cost to UK Asset Resolution is estimated at £270 million. UK Asset Resolution has ordered a full inquiry into what happened in 2008, and we will come to the House with more information when we have it. I wanted to bring this news to the House at the very first opportunity, and I find it pretty extraordinary that the Opposition do not want the public to hear it.

--- Later in debate ---

[Mr Osborne]

We are dealing with the economic mess that the previous Government left behind, when unemployment rose, the economy shrank by 6% and people were put into poverty. That is the cause of these problems and Government Members are dealing with them and clearing up the mess that that man—the right hon. Member for Morley and Outwood (Ed Balls)—left behind.

[Mr Speaker]

Last but not least, Mr Bob Blackman.

Autumn Statement

Debate between George Osborne and John Bercow

Wednesday 5th December 2012 Commons Chamber

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

It is taking time, but the British economy is healing. After the biggest financial crash of our lifetimes, people know that we face deep-seated problems at home and abroad. At home, we live with the decade of debt and the failure to equip Britain to compete in the modern world, and we face a multitude of problems from abroad—the US fiscal cliff, the slowing growth in China, and above all the eurozone, now in recession.

People know that there are no quick fixes to these problems but they want to know that we are making progress, and the message from today’s autumn statement is that we are making progress. It is a hard road, but we are getting there. [Interruption.] Britain is on the right track—[Interruption.]

[Mr Speaker]

Order. I ask the Chancellor to resume his seat. Let us be clear about this. Each side should be heard with courtesy. The House knows well enough by now that I will afford a very full opportunity for questioning of the Chancellor, but the more interruption and the greater the noise, the longer the session will take, and that cannot be right. So I appeal to Members please to give the Chancellor a courteous hearing, as indeed, if it becomes necessary, I will appeal to Government Back Benchers to afford a fair hearing to the shadow Chancellor. That is how it should be.

[Mr Osborne]

Britain is on the right track and turning back now would be a disaster. We have much more to do. The deficit has fallen by a quarter in just two years, and today’s figures show that it is forecast to continue to fall. Exports of goods to the major emerging economies, which were pitifully low, have doubled since 2009. Since this coalition Government came to office, 1.2 million new jobs have been created in the private sector. In a world economy where bond investors are fleeing countries that they regard as risky, investment is flowing into UK gilts, instead of flying from them. We have to keep it that way.

Two years ago, Britain was in the danger zone. Now we are seen as one of the safe havens, able to borrow money at lower interest rates than at any time in our history. Today’s forecast shows a £33 billion saving on the debt interest payments that it was predicted we would have to pay two years ago. That is as much as the entire defence budget. That is why in this autumn statement, we show that this coalition Government are confronting the country’s problems, instead of ducking them.

Today we reaffirm our commitment to reducing the deficit, setting out the details of our spending plans for 2015-16 and rolling forward an outline framework into 2017-18. We show our determination to do this fairly, with further savings from bureaucracy, the benefit bills and the better-off. We go on equipping Britain to succeed in the global race by switching from current spending to capital investment in science, roads and education. We offer new support for business and enterprise, so they can create the jobs we need. In everything we do, we will show today that we are on the side of those who want to work hard and get on.

The Office for Budget Responsibility has today produced its latest economic forecast and it is a measure of the constitutional achievement that it is taken for granted that our country’s forecast is now produced independently of the Treasury, free from the political interference of the past. I want to thank Robert Chote, his fellow members of the Budget Responsibility Committee, Steve Nickell and Graham Parker, and all their staff at the OBR for their rigorous approach.

One of the advantages of the creation of the OBR is that we get not only independent forecasts, but an independent explanation for why the forecasts are as they are. For example, if lower growth was the result of the Government’s fiscal policy, it would say so. But it does not. It says that the economy has “performed less strongly” than expected and forecasts growth this year of minus 0.1%, but in its view

“the weaker than expected growth can be more than accounted for by over-optimism regarding net trade”.

The OBR had previously assumed that the eurozone would begin to recover in the second half of this year. Instead, of course, it has continued to contract, which has hit our exports to those markets and the net trade numbers. The eurozone crisis has also, it says, spilled over into “tighter credit conditions” and

“elevated UK bank funding costs”.

In its words, those problems will

“constrain growth for several years to come”.

There are also domestic problems that the OBR refers to. In the report today the contraction in 2008-2009 is now assessed to be deeper than previously thought, with GDP shrinking by a staggering 6.3%, the largest shock to our economy since the second world war. In the OBR’s view, the aftermath of that shock continues to weigh on the productivity of the UK economy, with credit rationing and impaired financial markets potentially impeding the expansion of successful firms. It says:

“GDP growth is now expected to be lower in every year of the forecast period, as credit conditions take longer to normalise and global growth remains weaker than previously expected”.

As a result, the OBR forecasts that the economy will grow by 1.2% next year, 2.0% in 2014, 2.3% in 2015, 2.7% in 2016 and 2.8% in 2017.

So the economy is recovering, and it is recovering more quickly than many of our neighbours. The International Monetary Fund estimates that next year the UK will grow more strongly than either France or Germany. Our credible fiscal policy allows for supportive monetary policy and, with the Bank of England, we are directly addressing the problems of tight credit through the £70 billion funding for lending scheme. In the OBR’s view, that has reduced UK bank funding costs, lowered interest rates in the real economy and will add to the level of real GDP.

One area where the British economy has done much better than forecast is in creating jobs. Since early 2010, the private sector has created 1.2 million new jobs—600,000 more than predicted—and youth unemployment has been falling. The OBR now expects unemployment to peak at 8.3%, instead of 8.7%. That is at a time when the unemployment rate in Spain is 26%, in France it is 11% and across the whole eurozone it is almost 12%. Employment, which is already at a record high, is set to go on rising each year of the forecast. For every one job less in the public sector, two new jobs are expected to be created in the private sector. Britain now has a greater proportion of its people in work than either the eurozone or the United States of America. More jobs means that the impact of the weaker than forecast GDP on the public finances has been less than some might have expected.

There have been three developments that have each had a significant one-off impact on the public finances, and the report we are publishing today shows clearly and transparently the impact of all three. First, there is the transfer of the Royal Mail pension fund to the public sector as part of its privatisation. That produces a one-off reduction in the deficit of £28 billion this year, but it will add to the deficit in the years after.

Secondly, the previous Government had classified Bradford & Bingley and Northern Rock Asset Management as off balance sheet. Today, they are brought on balance sheet, in line with the judgment of the Office for National Statistics. That adds around £70 billion to our national debt and reminds us of the price the country is still paying for the failures of the past.

Thirdly, the Government have decided, with the agreement of the Bank of England, to transfer excess cash held in the asset purchase facility to the Exchequer. This is sensible cash management, and it is in line with the approach of the Bank of Japan and the US Federal Reserve. I welcome the OBR’s verdict that this is, in its words, “more transparent” than the previous approach. I want to make sure that its impact on the figures is also completely transparent, so we have today published the forecasts for the public finances with and without the impact of the APF decision.

When we came to office, the deficit stood at 11.2%—the highest in our peacetime history. It was forecast to be the largest of any major economy in the world. In the past two years, the deficit has fallen by a quarter. Today’s figures show that with or without the APF coupons, the deficit is forecast to fall this year as well, and cash borrowing is forecast to fall too. Last year, the deficit was 7.9%. This year, with the APF coupons, it is forecast to be 6.9%, but that excludes the impact of the Royal Mail pension assets. It is falling and it will continue to fall each and every year, to 6.1% next year, 5.2% the year after, 4.2% in 2015-16, then 2.6%, before reaching 1.6% in 2017-18.

In 2009-10, the country was borrowing £159 billion. This year, we are borrowing £108 billion. That is forecast to fall to £99 billion next year, £88 billion the year after, then £73 billion in 2015-16, and £49 billion and £31 billion in the two years after that. These are the central forecasts published by the OBR, with the asset purchase facility cash transfer included. When the transfer is excluded, as we show in the document, the deficit also falls, from 7.9% last year to 7.7% this year, then 6.9% next year, and it falls in every single year after that—and cash borrowing falls in every year as well.

There are those who have been saying that the deficit was going up this year—indeed, I think I heard it in Prime Minister’s questions—but any way you present these figures, this is not what the OBR forecasts show today. It says that the deficit is coming down—coming down this year and every year of this Parliament. Yes, the deficit is still far too high for comfort—we cannot relax our efforts to make our economy safe—but Britain is heading in the right direction. The road is hard but we are making progress.

Unlike the previous Government’s golden rule, the regime we have set up means that the Chancellor is no longer judge and jury of their own fiscal rules, and today the OBR has assessed us against those rules. First, the fiscal mandate: this is the commitment that we will balance the cyclically adjusted current budget over the coming five years. I can tell the House that the OBR has assessed that we are, in its words, “on course” to meet our fiscal mandate. In other words, we have a better than 50% chance of eliminating the structural current deficit in five years’ time—that part of our borrowing that does not recover automatically as the economy grows. This is true, again, with or without the transfer of the coupons, so we will meet our fiscal mandate. But the OBR assesses in its central forecast that we do not meet the supplementary objective that aims to have debt falling by 2015-16. The point at which debt starts to fall has been delayed by one year, to 2016-17, and the OBR’s central forecast is that net debt will be 74.7% this year, then 76.8% next year, 79% in 2014-15, and 79.9% in 2015-16, before falling to 79.2% in 2016-17 and 77.3% in 2017-18.

In short, the tougher economic conditions mean that while our deficit is forecast to go on falling, instead of taking three years to get our debt falling, it is going to take four. Confronted with this news, some say we should abandon our deficit plan and try to borrow more. They think that by borrowing more, we can borrow less. That would risk higher interest rates, more debt interest payments, and a complete loss of Britain’s fiscal credibility. We are not taking that road to ruin.

Then there are those who say that despite all that has happened in the world this year, we should cut even more now to hit the debt target. That would require £17 billion of extra cuts a year. Let me explain why I have decided not to take this course.

We have always argued that we should let the automatic stabilisers work. We have not argued that we should chase down a cyclical or temporary deterioration in the economy, particularly one that our own independent body says is largely driven by problems abroad. That is also the judgment of the International Monetary Fund, the OECD and the Governor of the Bank of England.

Our aim is to reduce the structural deficit—the permanent hole in our public finances that will not be repaired as the economy recovers. And we are—we have cut the structural deficit by 3 percentage points in the past two years, more than any other G7 country, and it is set to go on being cut at a similar rate in the years ahead. This lower deficit is delivered by our public spending plans and we are going to stick with those plans. Overall, we are not going faster or slower with those plans; the measures I will announce in this autumn statement are fiscally neutral across this Parliament. There is no net rise in taxes today—any taxes increased are offset by taxes cut.

In last year’s autumn statement, we committed the Government to maintain the same pace of consolidation for two further years beyond the end of the current spending review, into 2015 and 2016-17. In this year’s autumn statement, we extend the consolidation for one further year, into 2017-18. The OBR projects that, as a result, the share of national income spent by the state will fall from almost 48% of GDP in 2009-10 to 39.5% by 2017-18. The document shows that total managed expenditure will continue to fall, and will now be £4.6 billion lower in 2017-18 than if it had been held flat in real terms. No decision to cut spending is ever easy, but those who object must explain whether instead they would have higher taxes, higher borrowing or both.

I also provide further detail of the consolidation plans for 2015-16, the last year of this Parliament. I said two years ago that the correct balance for our fiscal consolidation between spending and tax should be 80:20. I can confirm that by the end of 2015-16, the decisions we announce today mean that we will almost exactly deliver on that 80:20 mix. Total spending will fall in the final year of this Parliament at the same rate as through the current spending review.

I can confirm today that the overall envelope for total managed expenditure will be set at £745 billion. We start with the working assumption that departmental resource totals will continue on the same trajectory as over the current spending review. The detail of departmental spending plans for 2015-16 will be set at a spending review, which will be announced during the first half of next year. What we are doing today is taking steps now to help deliver those spending plans and to go on reducing the deficit in a way that is fair.

This Government have shown that it is possible to restore sanity to the public finances while improving the quality of our public services—crime has fallen, hospital waiting lists are down, school standards are up—and this is with a civil service that is today smaller than at any time since the second world war.

We are today publishing the reports we commissioned from the pay review bodies on market-facing pay. We commit to implementing these reports. This means continuing with national pay arrangements in the NHS and Prison Service, and we will not make changes to the civil service arrangements, either; but the School Teachers Review Body recommends much greater freedom to individual schools to set pay in line with performance, and my right hon. Friend the Education Secretary will set out how that will be implemented.

Through the efforts of individual Government Departments and the support of the Chief Secretary and my right hon. Friend the Minister for the Cabinet Office, we have already generated £12 billion of efficiency savings in Whitehall, but we believe there is room to do even more. If all Departments reduced their spending on administration in line with the best-performing Departments, such as Education and Communities and Local Government, another £1 billion could be saved. If all Departments made greater provision of digital services, rationalised their property estates, as some have done, a further £1 billion could be saved. Today, therefore, we are reducing departmental resource budgets by 1% next year and 2% in the year after.

We will continue to seek efficiency savings in the NHS and in our schools, but that money will be recycled to protect spending in these priority areas. Local government budgets are already being held down next year to deliver the freeze in council tax, so we will not seek the additional 1% savings next year, but we will look for the 2% saving the year after. Although the Ministry of Defence is included in these measures, it will be given flexibility on its multi-year budget to ensure that this will not lead to reductions in military manpower or the core defence equipment programme over the Parliament.

A mark of our values as a society is our commitment to the world’s poorest. We made a promise as a country that we would spend 0.7% of our gross national income on international development and I am proud to be part of the first British Government in history who will honour that commitment and honour it as promised next year. We will not, however, spend more than 0.7% so, as we did last year, we will adjust the Department for International Development’s budget to reflect the latest economic forecasts.

In the medium term these savings across Whitehall will help Departments maintain the right trajectory for the years that follow the spending review and help us to pay off the deficit in future. In the short term, I am switching these current savings into capital—all the money saved in the first two years will be reinvested as part of a £5 billion capital investment in the infrastructure of our country. Despite the fiscal challenges we face, public investment as a share of GDP will be higher on average in this Parliament than it was under the last Labour Government. It is exactly what a Government equipping Britain to compete in the modern global economy should be doing.

We are committing an extra £1 billion to roads, which includes four major new schemes: to upgrade key sections of the Al, bringing the route from London to Newcastle up to motorway standard; to link the A5 with the Ml; to dual the A30 in Cornwall; and to upgrade the M25, which will support the biggest port developments in Europe. I pay tribute to my hon. Friend the Member for Thurrock (Jackie Doyle-Price) for campaigning to achieve this.

We have already set out plans this autumn for a huge investment in rail, and my right hon. Friend the Transport Secretary will set out in the new year plans to take High Speed 2 to the north-west and west Yorkshire. I can today confirm a £1 billion loan and a guarantee to extend the Northern line to Battersea power station and support a new development on a similar scale to the Olympic park.

We are confirming funding and reforms to assist construction of up to 120,000 new homes and delivering on flood defence schemes in more cities. On top of broadband expansion for our countryside and our larger cities, we are funding ultrafast broadband in 12 smaller cities: Brighton and Hove, Cambridge, Coventry, Derby, Oxford, Portsmouth, Salford, York, Newport, Aberdeen, Perth and Derry/Londonderry. In addition to the third of a billion announced this autumn for British science, we are today announcing £600 million more for the UK’s scientific research infrastructure.

Since improving our education system is the best investment in a competitive economy, I am today committing £270 million to fund improvements in further education colleges and £1 billion to expand good schools and build 100 new free schools and academies. Scotland, Wales and Northern Ireland will get their Barnett share of additional capital spending put at the disposal of their devolved Administrations.

On top of the £5 billion of new capital spending in infrastructure and support for business, we are ready to provide guarantees for up to £40 billion more. Today I can announce that projects worth £10 billion have already pre-qualified. We are offering £10 billion-worth of guarantees for housing, too. Our country’s pension funds will launch their new independent infrastructure investment platform next year as well, and we have today published full details of the replacement for the discredited private finance initiative. Since we can all see now that the public sector was sharing the risk, we will now ensure that we also share in the reward, and I commend my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) for his work in this area.

Taken together, this is a revolution in the sources of finance for upgrading Britain’s infrastructure and equipping Britain to win in the global race. Annual average infrastructure investment, which was £29 billion under the last Labour Government, is now £33 billion.

Savings from Whitehall are not enough by themselves to tackle our debts. We need to find other savings, and we need to do so in a way that is fair. Those with the most should contribute the most, and they will, but fairness is also about being fair to the person who leaves home every morning to go out to work and sees that their neighbour is still asleep, living a life on benefits. As well as a tax system where the richest pay their fair share, we have to have a welfare system that is fair to the working people who pay for it.

Let me start with tax. The vast majority of people, rich or otherwise, pay their taxes and make their contribution. However, there are still too many who illegally evade their taxes or use aggressive tax avoidance in order not to pay their fair share. This Government have taken more action against those people than any before us. Prosecutions for tax evasion are up 80%. We will collect £7 billion more a year in tax that is due than the last Government. We are increasing by about 2,500 the number of tax inspectors going after evaders and avoiders. Next year, we will introduce the first ever general anti-abuse rule—something that never happened in the 13 years before we came into office.

Next year, for the first time in our history, money will be flowing from bank accounts in Switzerland to Britain, instead of the other way around. Because of the treaty that we have signed, we expect to receive £5 billion over the next six years from the undisclosed Swiss bank accounts of UK residents. That is the largest tax evasion settlement in British history.

We are taking further steps today. Hundreds of millions of pounds of tax loopholes are being closed with immediate effect, and we are investigating the abusive use of partnerships. HMRC will not have its budget cut over the next two years, unlike other departments. Instead, we will spend £77 million more on fighting tax avoidance, and not just for wealthy individuals.

We want to have the most competitive corporate tax system of any major economy in the world, but we expect those corporate taxes to be paid. We are therefore confirming today that we will put more resources into ensuring that multinational companies pay their proper share of taxes. We are leading the international effort to prevent artificial transfers of profits to tax havens. With Germany and now France, we have asked the OECD to take that work forward and we will make it an important priority of our G8 presidency next year. In total, we expect the action that we are announcing today to increase the amount of money collected from tax evasion and avoidance by a further £2 billion a year.

Fair and necessary as that is, it is not enough by itself to close the deficit. We need to ask more from the better-off. Punitive tax rates do nothing to raise money, and simply discourage enterprise and investment into Britain. Other countries on our doorstep are trying that approach and paying the price. We are not making that mistake. HMRC data reveal that in the first year of the 50% tax rate, tax revenues from the rich fell by £7 billion and the number of people declaring incomes of over £1 million fell by a half. A tax raid on the rich that raises almost no money is a tax con. We are going to have a top rate of tax that supports enterprise and we are going to raise more money from the rich. Here is a simple fact: the richest will pay a greater share of income tax revenues in every single year of the coalition Government than in any one of the 13 years of the last Labour Government.

However, to make sure that the deficit reduction remains fair, we need to raise more. We have already raised stamp duty on multi-million pound homes and next week we will publish the legislation to stop the richest avoiding stamp duty. But we will not introduce a new tax on property. That would require the revaluation of hundreds of thousands of homes. In my view, it would be intrusive, it would be expensive to levy, it would raise little and the temptation for future Chancellors to bring ever more homes into its net would be irresistible, so we are not having a new homes tax.

In this Parliament, we have already reduced the amount of tax relief that we give to the very largest pension pots. From 2014-15, I will further reduce the lifetime allowance from £1.5 million to £1.25 million, and reduce the annual allowance from £50,000 to £40,000. That will reduce the cost of tax relief to the public purse by an extra £1 billion a year by 2016-17. Ninety-eight per cent. of the people currently approaching retirement have a pension pot worth less than £1.25 million. Indeed, the median pot for such people is just £55,000. Ninety-nine per cent. of pension savers make annual contributions to their pensions of less than £40,000. The average contribution to a pension is just £6,000 a year.

I know that these tax measures will not be welcomed by all—ways to reduce the deficit never are—but we must demonstrate that we are all in this together. When looking for savings, I think that it is fair to look at the tax relief that we give to the top 1%.

I want to help the great majority of savers. That is why we are introducing a generous new single-tier pension, so that people know it always pays to save. That is why I will uprate next April the overall individual savings account limit to £11,520. We will also consult on allowing investments in equity markets for small and medium-sized enterprises, such as the alternative investment market, to be held directly in stocks and shares ISAs to encourage investment in growing businesses.

I have also listened to the concerns from pensioners about draw-down limits. I am today announcing that the Government will raise the capped draw-down limit from 100% to 120%, giving pensioners with such arrangements the option of increasing their incomes.

It is also fair to look at the way in which we uprate benefits and some tax thresholds. The basic state pension has this year gone up by the largest cash amount in its history. Next year, thanks to our triple lock, I confirm that it will rise by 2.5%, which is higher than either earnings or inflation. That takes the level of the full basic state pension to £110.15 a week.

When it comes to working-age welfare, we have already made substantial reforms. We have cut £18 billion a year from the welfare bill. Benefits are being capped for the first time, so families out of work will not get more than the average family gets for being in work. We have increased efforts to fight welfare fraud. Today, we announce further measures and checks to save more than £1 billion in the next four years by reducing fraud, error and debt in the tax credit system. Next year, my right hon. Friend the Secretary of State for Work and Pensions will introduce the new universal credit so that it always pays to work. Today, we are setting the key parameters, such as the levels of earning disregards.

We have to acknowledge that over the last five years, those on out-of-work benefits have seen their incomes rise twice as fast as those in work. With pay restraint in businesses and Government, average earnings have risen by about 10% since 2007. Out-of-work benefits have gone up by about 20%. That is not fair to working people who pay the taxes that fund them. Those working in the public services, who have seen their basic pay frozen, will now see it rise by an average of 1%. A similar approach of a 1% rise should apply to those in receipt of benefits. That is fair and it will ensure that we have a welfare system that Britain can afford. We will support the vulnerable, so carers’ benefits and disability benefits, including disability elements of tax credits, will be increased in line with inflation, and we are extending the support for mortgage interest for two more years.

However, most working-age benefits, including jobseeker’s allowance, employment and support allowance and income support, will be uprated by 1% for the next three years. We will also uprate elements of child tax credit and working tax credit by 1% for the next three years, although previously planned freezes will go ahead. Local housing allowance rates, which are a central component of housing benefit, will be uprated in line with the existing policy next April and we will then cap increases at 1% in the two years after that. For that measure, 30% of the savings will be used to exempt from the new cap those areas with the highest rent increases. The earning disregards for universal credit will also be uprated by 1% for two years from April 2014. Child benefit is currently frozen. It, too, will now rise by 1% for two years from April 2014.

Let me be clear: uprating benefits at 1% means that people get more cash, but less than the rate of inflation. Taken together, we will save £3.7 billion in 2015-16 and deliver permanent savings each and every year from our country’s welfare bill. To bring all those decisions on many benefits over many years together, we will introduce primary legislation in Parliament in the welfare uprating Bill. I hope that it will command support from both sides of the House.

We will apply a similar approach to uprating some of our tax thresholds to that that we are applying to welfare. The higher rate threshold will be increased by 1% in the tax years 2014-15 and 2015-16. So the income at which people start paying the 40% rate will go up from £41,450 to £41,865 and then to £42,285. I want to be completely clear with people: this is an increase; in fact, it is the first cash increase in the higher rate threshold in this Parliament, but it is not an increase in line with inflation, so it will raise £1 billion of revenue by 2015-16. Again, there are no easy ways to reduce the deficit, but from year to year, no one will pay a penny more in income tax.

In the same way, the capital gains tax annual exempt amount will be increased by 1% over the same period, reaching £11,100. The inheritance tax nil-band rate, which has been frozen since 2009 at £325,000, will be increased by 1% in 2015-16 to £329,000. Taken with the welfare uprating decisions, that is a fair approach to paying off Britain’s debts.

However, dealing with those debts is only one part of making Britain fit to compete in the global race. Countries like ours risk being out-smarted, outworked and out-competed by the new emerging economies. We asked Michael Heseltine to report on how to make the Government work better for business and enterprise. I think that it is fair to say that his answer has captured the imagination of all political parties.

We will respond formally in the spring, but here is what we will do now. First, Government spending should be aligned with the priorities of the local business community. We will provide new money to support the local enterprise partnerships, and from April 2015, the Government will place more of the funding that currently goes to local transport, housing, skills and getting people back to work into a single pot that LEPs can bid for. Details will be set out in the spending review. Before then, we are putting more money into the regional growth fund, which is helping businesses create half a million new jobs.

Secondly, as Lord Heseltine also recommends, we will support industries and technologies where Britain has a clear advantage. With the support of my right hon. Friend the Business Secretary, we will extend our global lead in aerospace and support the supply chains of advanced manufacturing. We are also taking big steps today to support British companies that export to new emerging markets in Asia, Africa and the Americas. I am increasing the funding for UK Trade & Investment by more than 25% a year, so that it can help more firms build the capacity of overseas British chambers and maintain our country’s position as the No. 1 destination in Europe for foreign investment. We are also launching a new £1.5 billion export finance facility to support the purchase of British exports.

Thirdly, we are addressing credit problems for companies. We are creating a new business bank, and today we have confirmed that we are providing it with £1 billion of extra capital, which will lever in private lending to help small and medium-sized firms and bring together existing schemes.

Fourthly, we are going to cut business taxes still further. Let me explain how. The temporary doubling of the small business rate relief scheme helps more than half a million small firms, with 350,000 paying no rates at all. The previous Government were going to end it in September 2011; we have already extended it to next April, and, today, I extend it by a further year, to April 2014. We also confirm today the tax relief for our employee shareholder scheme.

The Energy Bill provides certainty and support for billions of pounds of investment in renewable energy. Today, we publish our gas strategy to ensure that we make the best use of lower-cost gas power, including new sources of gas under the land. We are consulting on new tax incentives for shale gas and announcing the creation of a single office so that regulation is safe but simple. We do not want British families and businesses to be left behind as gas prices tumble on the other side of the Atlantic.

We are going to help our construction industry, too. The previous Government abolished empty property relief, and, as excellent work done by my hon. Friends the Members for York Outer (Julian Sturdy) and for Wolverhampton South West (Paul Uppal) and others shows, that has blighted development in our towns and cities. The proposal from my colleagues that we create a long grace period before newly completed buildings have to pay empty property rates is sensible, and we will introduce it next October.

The previous Government also planned to increase the small companies tax rate to 22%. We have cut it to 20%. However, I would like to help small and medium-sized firms more, and I thank my hon. Friends the Members for Burnley (Gordon Birtwistle) and for Pendle (Andrew Stephenson) for their thoughts on that matter. Starting on 1 January, and for the next two years, I will increase tenfold the annual investment allowance in plant and machinery. Instead of £25,000-worth of investment being eligible for 100% relief, £250,000-worth of investment will now qualify. That capital allowance will cover the total annual investment undertaken by 99% of all the business in Britain. It is a huge boost to all those who run a business and who aspire to grow, expand and create jobs.

I want Britain to have the most competitive business tax regime of any major economy in the world. I have already cut the main core rate of corporation tax from 28% to 24%, and it is set to fall further to 22%. That has helped British companies and frankly left other countries scrambling to keep up. They will have to try harder, for I am today cutting the main corporation tax rate again by a further 1%. In America, the rate is 40%; in France, it is 33%; in Germany, it is 29%. From April 2014, the corporation tax rate in Britain will stand at 21%. That is the lowest rate of any major western economy. It is an advert for our country that says, “Come here; invest here; create jobs here; Britain is open for business.”

We will not pass the benefit of that reduced rate on to banks, and to ensure that we meet our revenue commitments, the bank levy rate will be increased to 0.130% next year. Making banks contribute more is part of our major reforms to the banking system.

We also have to be on the side of those who want to work hard and get on. I know how difficult many families have found the cost of living. In dealing with the deficit, we have had to save money. However, whenever we have been able to help, we have. We have helped councils freeze council tax for two years running, and we are helping them freeze it again next year. We have put a cap on rail fare rises for the next two years, so commuters are not punished for travelling to work. We are forcing energy companies to move families on to the lowest tariffs for their gas and electricity bills.

We have also helped motorists with the cost of petrol. We have cancelled the last Government’s escalator, and I am moving inflation-only rises to September. Fuel is 10p per litre cheaper than it would have been if we had stuck to Labour’s tax plans, and I want to keep it that way, as I know do my colleagues, like my hon. Friend the Member for Harlow (Robert Halfon). There is a 3p per litre rise planned for this January. Now, some have suggested that we delay it until April. I disagree. I suggest we cancel it altogether. There will be no 3p fuel tax rise this January. That is real help with the cost of living for families as they fill up their cars across the country, and it will help businesses, too. It means that, under this Government, we will have had no increase in petrol taxes for nearly two and a half years. In fact, they have been cut.

We have also helped working people by increasing the amount that they can earn before paying any income tax. When the coalition Government came to office, the personal tax allowance stood at just £6,475; next April, it is set to rise to £9,205.

Twenty-four million taxpayers have seen their income tax cut; 2 million of the lowest-paid have been taken out of tax altogether. Because of the difficult decisions we have taken today, we can go even further. From next April, the personal allowance will rise by a further £235. That means a total increase next year of £1,335—the highest cash increase ever. People will be able to earn £9,440 before paying any income tax at all. This is a direct boost to the incomes of people working hard to provide for their families. It is £47 extra in cash next year. In total, it is a £267 cash increase next year. People working full time on the minimum wage will have seen their income tax bill cut in half, and we are within touching distance of the £10,000 personal allowance. And at this time, I propose to extend the benefits of this further increase to higher rate taxpayers. That decision will stand alongside the decision I have had to take on uprating, meaning that, in real terms, a typical higher rate taxpayer will be better off next year and no worse off in total by the year after.

Today we have helped working people, but I do not want to distract from the tough economic situation we face in the world. The public know there are no miracle cures; just the hard work of dealing with our deficit and ensuring Britain wins the global race. That work is under way. The deficit is down. Borrowing is down. Jobs are being created. It is a hard road, but we are making progress, and in everything we do, we are helping those who want to work hard and get on.

--- Later in debate ---

[Mr Osborne]

As I said in my statement, the report produced by my hon. Friend and some of his colleagues showed powerfully the impact that the empty property rates that the previous Government introduced have had, hitting development in our towns and cities. It is an expensive measure to get rid of, which is why we have been unable to get rid of it all today, but we have listened to him and his colleagues. There was the idea of providing a grace period for new commercial development, and we are now introducing that 18-month grace period. I congratulate him on making the case for it so powerfully.

[Mr Speaker]

I call Mr Dan Byles.

[Dan Byles (North Warwickshire) (Con)]

Thank you, Mr Speaker—I am now in a calm frame of mind.

The average working wage in my constituency of North Warwickshire and Bedworth is less than the national average wage. What does the Chancellor suggest I tell my constituents when they ask me, in bewilderment, how the Labour party can vote against a welfare cap that will prevent people on benefits from taking home a larger disposable income than my constituents who are in work?

[Mr Osborne]

I think that my hon. Friend’s constituents and many people in the country will be completely bewildered that Labour opposes a cap on benefits that simply means that people who are out of work will not get more than the average family get from being in work. It means that in two and a half years’ time or thereabouts, his constituents will have a choice between continuing to return my hon. Friend to Parliament to ensure that their money is well spent and the unlimited benefits that his Labour opponent will be offering.

[Mr Speaker]

I thank the Chancellor and all 90 Back Benchers who questioned him. We are blessed.

Bank of England

Debate between George Osborne and John Bercow

Monday 26th November 2012 Commons Chamber

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

I would like the House of Commons to be the first to know about the future leadership of the Bank of England, and the identity of its next Governor.

Sir Mervyn King has served as Governor with great distinction and unquestioned integrity for almost a decade, five years of which have been during the most difficult period of economic policy making of the modern age. He will continue to do his vital work until 30 June next year, and there will be opportunities then to thank him for his service to our country.

Today’s task is to appoint his successor in good time and in good order. We have, for the first time in the history of the Bank, advertised the post, invited applications and put together an experienced panel to interview potential candidates. I want to thank my permanent secretary, Sir Nicholas Macpherson, and the chairman of the court of the Bank of England, Sir David Lees, for conducting this new, open process in a very professional way.

I also want to thank the many individuals who put themselves forward for the job. I have myself interviewed in London all the very distinguished candidates shortlisted by the panel for the job, any one of whom would have made a good Governor. I have made my recommendation to the Prime Minister, who in turn has made the same recommendation to the Queen, and she has today approved the appointment.

I can tell Parliament and the public that the next Governor of the Bank of England is to be Mark Carney. He is currently Governor of the central Bank of Canada and chair of the world’s Financial Stability Board. He is quite simply the best, most experienced and most qualified person in the world to be the next Governor of the Bank of England and to help steer Britain’s families and businesses through these difficult economic times.

Britain needs the very best at a time such as this, and in Mark Carney we have got him. Mr Carney is unique among the potential candidates in combining long experience of central banking, huge international credibility in economics, deep expertise in financial regulation and first-hand experience of private sector financial institutions. He is acknowledged as the outstanding central banker of his generation, and I believe he will bring the strong leadership and external experience that the Bank of England needs as it takes on its heavy new responsibilities for regulating our banking system.

In that respect, Mr Carney will bring a fresh new perspective. During his five years as the Bank of Canada Governor, Canada was acknowledged to have weathered the economic storm better than any other major western economy. Bank bail-outs have been avoided and sustained growth has returned, and it says something of Mark Carney’s abilities and the regard he is held in that he was chosen by his fellow central bank governors and regulators around the world to be the chair of the FSB—the body tasked with strengthening and co-ordinating global financial regulation. That gives him the experience to bring better regulation to the world’s largest global financial centre here in London and other financial centres across the UK.

Subject to the views of other members of the board, he could expect to remain chair of the FSB until 2018. While the appointment as Governor will be for eight years, Mark Carney has indicated that he intends to serve for five years and to stand down at the end of June 2018. That will align with the timing of his role at the FSB, and reflects the fact that by then he will have served for 10 years as a central bank governor. I have spoken to my opposite number in Canada, Finance Minister Jim Flaherty, and the Prime Minister has spoken to the Canadian Prime Minister. I am grateful for the constructive way they have handled this transition, as Members would expect from one of our closest friends and allies.

Mark Carney will continue as central Bank Governor of Canada until the end of May next year. My statement today is matched by a simultaneous announcement in Ottawa at a press conference currently being held by Mr Carney and the Canadian Finance Minister. Mr Carney will be answering questions about his decision to take this new job, but he has made it clear that he will not be commenting at length on British economic policy until he takes up his new post on 1 July 2013. There is one exception to that: Mr Carney has said to me that he would like to appear before the Treasury Select Committee at a mutually convenient time for a pre-commencement hearing, where he will of course expect rigorous questioning about British monetary and financial policy. This will be the first time ever that a new Governor has appeared before a Committee of this House before their term of office begins.

Mr Carney’s pay and benefits are a matter for the non-executive members of the court of the Bank of England. The chair of the court, Sir David Lees, has today confirmed that Mr Carney will be paid a total pay and pension package that is broadly equivalent to the current Governor’s salary and membership of the now closed pension scheme available to the current Governor and deputy governors. The package is also lower than that of other senior regulators, such as the recent chief executive of the Financial Services Authority—even though the Bank now takes on many of that organisation’s responsibilities—and is less than that of the current chief executive of the Financial Conduct Authority. As Mr Carney is moving from Canada with his wife and four children, the non-executive members of the court of the Bank of England have said that they will consider in addition a relocation and accommodation package, which one would expect with such moves.

Mark Carney is not a British citizen, but he is a subject of the Queen. His wife is British, his four children have dual British citizenship and he has lived, worked and studied in Britain for a decade. Although not required of the role, he will apply for British citizenship in the normal way, with no special favours. Let me also say something about—[Interruption.]

[Mr Speaker]

Order. These are very serious matters. I am pleased that the House is hearing about it first, but the House will hear only if it wishes to hear—and it should wish to hear. Let us hear what the Chancellor has to say.

[Mr Osborne]

Let me also say something about the deputy governor for monetary stability, Dr Charlie Bean, whose term in office expires at the same time as Mervyn King’s. Charlie Bean is a world-class macro-economist and a powerful voice on the Monetary Policy Committee. To ensure a smooth transition next year, he has agreed to my request that he serve for one more year as deputy governor. I am most grateful to Charlie Bean for his continuing service.

The role that the Bank of England plays in our economy cannot be overestimated. It is tasked with keeping prices under control; it sets interest rates, which affect what home owners pay for their mortgages and businesses for their loans; and, following this Government’s reforms, it plays a lead role in keeping our banking system safe. My job brings with it many responsibilities, but few are greater than ensuring that the next Governor of the Bank of England is a person of real quality. Mark Carney is a quality Governor. He is the outstanding central banker of his generation, with unparalleled expertise in financial regulation. He will bring a fresh perspective. He has got what it takes to help British families and businesses through these incredibly challenging economic times. My responsibility was to get the best for Britain, and with Mark Carney we have got that. I commend his appointment to the House and to the country.

--- Later in debate ---

[Mr Osborne]

I hope that my hon. Friend will contain her excitement when she has a chance to question Dr Carney, when he appears before her Select Committee. As she knows, from next year we will have full account-switching, which means that people will be able to switch their bank accounts, including direct debits and so on, within seven days. That will make switching much easier. My hon. Friend has advanced strong arguments for going further and introducing account portability, and we are studying that idea closely. There are pros and cons, which the Vickers commission considered, but she has put her case very powerfully.

[Mr Speaker]

The father of the hon. Member for South Northamptonshire (Andrea Leadsom) is a distinguished constituent of mine. I do not know what he would make of it if I allowed her to jump up and down in the Chamber. It scarcely warrants contemplation.

[Mr George Mudie (Leeds East) (Lab)]

The present Governor has commented on the dire state of the economy. The new Governor has international commitments, will face European commitments, and new regulations going through the other House give him many other responsibilities. Will the Chancellor please genuinely reconsider the number of posts that the new Governor will be forced to hold under the new arrangements? The grimness of the economic situation demands his full attention, and the posts are far too many for one person.

LIBOR (FSA Investigation)

Debate between George Osborne and John Bercow

Thursday 28th June 2012 Commons Chamber

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

I would like to update the House on the Financial Services Authority’s investigation into the manipulation of the setting of the LIBOR and EURIBOR interest rates and the Government’s response. The London interbank offered rate, or LIBOR, and the Euro interbank offered rate, or EURIBOR, are the benchmark reference rates that are fundamental to the workings of the UK, European and international financial markets, including markets in interest rate derivatives contracts. Those contracts might sound exotic but they are the bread and butter of our financial system and are used by businesses and public authorities every day, and they affect the mortgage payments and loan rates of millions of families and hundreds of thousands of firms, large and small.

LIBOR and EURIBOR are by far the most prevalent benchmark reference rates used in euro, US dollar and sterling interest rate derivatives contracts. The outstanding interest rate contracts alone are estimated to be worth $554 trillion. Yesterday, the FSA published notice that Barclays had on numerous occasions acted inappropriately and breached principles 2, 3 and 5 of the FSA’s principles for businesses. As a result, the FSA has imposed a financial penalty of £59.5 million on Barclays. In other words, the FSA reports that this bank, on numerous occasions, did not conduct its business with due skill, care and diligence, that this bank did not take reasonable care to organise its affairs responsibly and effectively, with adequate risk management systems, and that this bank did not observe proper standards of market conduct. As the FSA puts it:

“Barclays’ misconduct…created the risk that the integrity of LIBOR and EURIBOR would be called into question and that confidence in or the stability of the UK financial system would be threatened.”

Barclays are not alone in this. The FSA is continuing to investigate the conduct of a number of other banks in relation to LIBOR, to commit significant resources to its investigations into potential attempts to manipulate LIBOR and to work with its counterparts overseas and with other authorities in the UK.

The investigations concern a number of institutions based both in the UK and overseas, but it is already clear that the FSA’s investigation demonstrates systemic failures at the heart of the financial system at the time. I want to thank Adair Turner and the team at the FSA for a very thorough piece of work, but it prompts three vital questions. First, how were such failures allowed to continue undetected and unchecked, particularly in the two years before the financial crisis, which is when the FSA is clear that the most serious breaches occurred, for which the only motive was greed? Secondly, what changes are needed to our regulatory system in the future to prevent such abuse from occurring again and to make sure that the authorities have every power they need to hold those responsible fully to account? Thirdly, what further investigations are required into the activities at Barclays, what sanctions are available and what questions must the chief executive answer?

First, the FSA report is a shocking indictment of the culture at banks such as Barclays in the run up to the financial crisis. The e-mail exchanges between derivative traders and the LIBOR submitters read like an epitaph to an age of irresponsibility. Through 2005, 2006, and early 2007 we see evidence of systematic greed at the expense of financial integrity and stability. They knew what they were doing:

“Keep it a secret”,

one trader told another in February 2007,

“If you breathe a word of this I’m not telling you anything else”.

Yet no one at Barclays prevents them, no one in the tripartite regulatory system knows anything about it and the Government of the day are literally clueless about what is going on.

The FSA is clear that the most serious breaches of its principles for businesses occurred in the years leading up to the financial crisis. Once the crisis is under way, Barclays’ concern switches from the greed of traders to concern from the management about the reputational risk to the firm. To be fair, Barclays itself raised concerns about LIBOR with the FSA in late 2007 and in 2008. Yes, the financial system was experiencing a severe stress and markets were frozen, but it is clear that Barclays—and potentially other banks—were still in flagrant breach of their duty to observe proper standards of market conduct and give citizens and businesses in this country and elsewhere proper transparent information about the true price of money.

Britain’s tripartite system of regulation failed us in war and in peace and the country has paid a very heavy price for that. That brings me to the second question of how we prevent this from happening again. The Government are getting rid of the whole tripartite system. The Financial Services Bill now before Parliament will create a new and far tougher regulatory system. A new Financial Conduct Authority will focus razor-like on market abuse and protecting consumers. We have been reviewing with the FSA and the Bank of England the operation of the LIBOR regime, which was not regulated under the previous Government’s Financial Services and Markets Act 2000. The market is already changing and the role of LIBOR is changing with it. As part of our review into LIBOR and the strength of the financial regulatory—[Interruption.] May I just say to the Opposition that I think a little more silence would do, and perhaps an apology for the mess that this Government are trying to clean up? [Interruption.]

[Mr Speaker]

Order. Rather more silence is needed on both sides; the Chancellor is quite justified in making his point. I gently remind the junior Whip on the Treasury Bench that although his oratorical talents might be deployed in the future—we look forward to that with eager anticipation and beads of sweat on our brows—for now his role is to fetch and carry notes and to nod in the appropriate places. Silence is required.

[Mr Osborne]

Mr Speaker, my hon. Friend the Member for Chelsea and Fulham (Greg Hands) does far more than that and he is very good at it.

Let me get back to the serious matter in hand. As part of our review into LIBOR and the strength of the financial regulatory architecture, we will examine if there are any gaps in the criminal regime inherited by this Government and we will take the necessary steps to address them. I cannot comment today on possible criminal investigations into individuals involved in this activity. The authorities are exploring every avenue open to them but, shockingly, the scope of the FSA’s criminal powers, granted by the previous Government, does not extend to being able to impose criminal sanctions for manipulation of LIBOR. As part of our review into LIBOR and the strength of the financial regulatory architecture, we are examining whether strengthening the criminal sanctions regime for market abuse and market manipulation is warranted, and if so, we will provide for these powers quickly.

Next week, the Government will be publishing a consultation in response to the report on the failure of RBS and will consider the possibility of criminal sanctions for directors of failed banks when there is proven criminal negligence. Under the previous Government’s regime, fines paid to the FSA are used to reduce the annual levy other financial institutions are asked to pay. I am far from convinced that in all cases that is the best use of the money and we are considering amendments to the Financial Services Bill that ensure that fines of this nature go to help the tax-paying public, not the financial industry.

I have also asked my officials to investigate urgently whether that legislation could be applied to the fine imposed on Barclays bank. It is clear that what happened in Barclays, and potentially in other banks, was completely unacceptable and was symptomatic of a financial system that elevated greed above all other concerns and brought our economy to its knees.

That brings me to my final point. As I have said, a number of individuals are under formal investigation by the FSA, and that number is expected to increase as the investigations continue. The Serious Fraud Office is aware of the matters under investigation and there are ongoing discussions between the FSA and the Serious Fraud Office about the evidence as it develops. The chief executive of Barclays has some very serious questions to answer today. What did he know and when did he know it? Who in Barclays’ management was involved and who therefore should pay the price? It is quite right that the Treasury Committee has asked him to appear urgently to account for himself and his bank, and I congratulate the Chair of the Committee on doing that. We all want to hear his answers. The story of irresponsibility is not over yet.

Our financial services should be a source of economic strength and national pride for this country, but failures in our banks and financial system have cost the country billions and put thousands out of work. Those responsible should be held responsible. We want our financial services to support the creation of jobs and prosperity for millions. This Government are sweeping away the regulatory system that failed. We will protect taxpayers, punish wrongdoing and put right the wrongs of an age of irresponsibility.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 26th June 2012 Commons Chamber

[Chris Williamson (Derby North) (Lab)]

Britain is the only G20 country in a double-dip recession, youth unemployment is at record levels, poverty is on the increase, public services are in meltdown, and the Government are borrowing around £4 billion more this year than they did last year. The lessons of the 1930s demonstrate that the austerity programme that the Chancellor is pursuing will not work. Will he learn the lessons of history—

[Mr Speaker]

Order. We are extremely grateful, but I am afraid that we do not have time to go back to the 1930s now. We have the gravamen of the hon. Gentleman’s question.

[Mr Osborne]

I suggest that tonight and tomorrow the hon. Gentleman turns on the television and watches the evening news, because he will see that there are problems facing many economies around the world. The Labour idea that somehow Britain alone faces these challenges because the Government are trying to deal with the debt is absolutely ridiculous. There are all these European economies in recession, the US economy had disappointing jobs data, and the Chinese economy is slowing. These are difficult times, but we are doing everything we can to help the British economy deal with the problems we inherited.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 24th April 2012 Commons Chamber

[Mr Osborne]

The plans we set out for public expenditure were measured, but they involved reducing the deficit. That has been very important. The public finance figures, published today, show that we are on track to meet our deficit targets. At the same time, we have found resources for things such as extra nursery education for disadvantaged youngsters, the pupil premium and all sorts of other things that support our objectives of a fairer and more balanced economy. [Interruption.]

[Mr Speaker]

There is plenty of scope for a debate, I think.

IMF

Debate between George Osborne and John Bercow

Monday 23rd April 2012 Commons Chamber

[Mr Osborne]

First, I congratulate the shadow Chancellor on running the London marathon yesterday and raising money for good causes, but his arguments are a bit like his marathon legs—wobbly and about to collapse. His response started so well. In the first 30 seconds, he said he supported increased resources for the IMF and supported Britain’s contribution to it, but spent the next 10 minutes telling us why he was against those things. He was in favour of the loan before he was against it. I have to say it smacks of the political opportunism and empty opposition that have been the hallmark of his shadow chancellorship.

People in Washington this weekend who know the shadow Chancellor, because he used to help represent Britain at the IMF, were completely astonished by his opposition to the IMF deal. They wondered whether he was the same person who was in the Treasury for all those years and who wrote all those speeches for the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) about the importance of the IMF and of the international architecture being part of global solutions. Is it the same shadow Chancellor who said in November that

“the Labour party supports an increase in the UK’s International Monetary Fund subscription”?

He was asked in an interview why he opposed the Government’s decision and he said:

“I support an increase in resources to the IMF”.

Then, the interviewer said:

“Sorry? I thought you didn’t.”

He said:

“No…I support an increase in resources for the IMF”.

One is led to the conclusion that only political opportunism is driving the shadow Chancellor to the position he takes.

The right hon. Gentleman asked just a couple of specific questions. I think I answered all of them in the statement, which he should have listened to before he asked his questions. The US Treasury Secretary went out of his way to welcome the deal, but pointed out that the US had not made a loan at the London G20 summit and did not do so again because of the swap lines. Since we talked about this in the autumn, the European Central Bank has provided $1 trillion of liquidity support and €200 billion extra to the firewall, but I completely agree that euro countries need to do more to ensure reforms in their own economies.

Is the right hon. Gentleman really saying that, when a request is made for the countries of the world to come together at the IMF to provide increased contributions, Britain should stand apart from it? He represents a Labour party that stands, or used to stand, for internationalism and for the institutions of the world coming together. Now he has led the party down a complete blind alleyway. He even voted against the highlight of the Labour Government—the deal done at the London G20 summit. This is what the shadow Chancellor has done to his party—left it in no man’s land, not taken seriously at home and not taken seriously abroad. If he were ever in charge, we would be getting a bail-out from the IMF, not giving it a loan.

[Mr Speaker]

Sir Peter Tapsell?

[Sir Peter Tapsell (Louth and Horncastle) (Con)]

I had rather changed my mind about asking a question because of the extremely unappealing way in which the shadow Chancellor put his case; but in order to be consistent with everything that I said in October and November, I am bound to say now that I regard it as the prime duty of Germany to solve the European problem, and that I hope that this further support from the IMF will not weaken the pressure on the German Government to do exactly that.

--- Later in debate ---

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

The Chancellor is now in a position to tell us whether he intends to honour his commitment of 0.7% gross national income for overseas aid by 2013. When can we expect the legislation, which I understand is now sitting on the desk of the Secretary of State for International Development?

[Mr Speaker]

Order. I am sure that the Chancellor will relate the answer to the IMF, to which I feel sure the right hon. Gentleman was seeking indirectly, and without saying so, to relate the matter.

[Mr Osborne]

We are going to honour that 0.7%. That is in the aid budget. It is in the budget of the Department for International Development. We can talk about the merits of legislation, but we do not need a piece of legislation. The proof is whether the money is being provided, and this Government are providing the money. I for one am proud that we will be the first Government in British history to hit the 0.7% of international aid.

Banking Commission Report

Debate between George Osborne and John Bercow

Monday 19th December 2011 Commons Chamber

[Mr Osborne]

rose—

[Mr Speaker]

Order. In framing his response, the Chancellor of the Exchequer should be aware that if it is related in any way to banks, he is welcome to answer, but he is not obliged to do so. The question must relate to the specifics of the statement. It is up to the Chancellor.

Autumn Statement

Debate between George Osborne and John Bercow

Tuesday 29th November 2011 Commons Chamber

[Mr Speaker]

Order. The statement by the Chancellor must be heard, and he should not have to fight to be heard.

[Mr Osborne]

Secondly, the OBR today has shown new evidence that an even bigger component of the growth that preceded the financial crisis was an unsustainable boom, and that the bust was deeper and had an even greater impact on our economy than previously thought. The result of that analysis is that the OBR has significantly reduced its assumptions about spare capacity in our economy and the trend rate of growth. That increases the OBR’s estimate of the proportion of the deficit that is structural—in other words, the part of the deficit that does not disappear even when the economy recovers. Our debt challenge is therefore even greater than we thought, because the boom was even bigger and the bust even deeper, and the effects will last even longer. Britain has had the highest structural budget deficit of any major economy in the world and the highest deficit in the entire history of our country outside war—and the last Government left it to this Government to sort that mess out.

The OBR’s analysis feeds directly through to borrowing numbers that are falling, but not at the rate that had been forecast. In 2009-10, the last Government were borrowing £156 billion a year. During the first year of this Government, that fell to £137 billion. This year the OBR expects it to fall again, to £127 billion, then to £120 billion next year, followed by £100 billion in 2013-14, £79 billion in 2014-15, then £53 billion in 2015-16 and £24 billion a year by 2016-17. However, I can report that because of the lower market interest rates that we have secured for Britain, debt interest payments over the Parliament are forecast to be £22 billion less than predicted.

The House might also like to know, given the economic events described by the Office for Budget Responsibility, what would have happened to borrowing without the action that this Government have taken. The Treasury today estimates that borrowing by 2014-15 would have been running at well over—[Interruption.]

[Mr Speaker]

Order. I am sorry, I know that the Chancellor is proceeding, but his statement must be heard. There are strong passions on this subject. There will be plenty of time for people to come in on the back of the statement, but the statement must be heard with a degree of courtesy.

[Mr Osborne]

The Treasury today estimates that borrowing by 2014-15 would have been running at well over £100 billion a year more and that Britain would have borrowed an additional £100 billion in total over the period. If we had pursued that path, we would now be in the centre of the sovereign debt storm.

The crisis we see unfolding in Europe has not undermined the case for the difficult decisions we have taken; it has made that case stronger. We held our deficit-reduction Budget on our terms last year, not on the market’s terms this year, as so many others have been forced to. In that Budget we set out a tough fiscal mandate: that we would eliminate the current structural deficit over the five-year forecast horizon. We supplemented the mandate with a fixed debt target: that we would get national debt as a proportion of national income falling by 2015-16. To be cautious, I set plans to meet both those budget rules one year early. That headroom has now disappeared, but I am clear that our rules must be adhered to, and I am taking action to ensure that they are. As a result, the OBR’s central projection is that we will meet both the fiscal mandate and the debt target.

The current structural deficit is forecast to fall from 4.6% of GDP this year to become a current structural surplus of 0.5% in five years’ time, and the debt-to-GDP ratio, which is forecast to stand at 67% this year, is now set to peak at 78% in 2014-15 and to be falling by the end of the current Parliament. So borrowing is falling, and debt will come down. It is not happening as quickly as we wished, because of the damage done to our economy by the ongoing financial crisis, but we are set to meet our budget rules, and we are going to see Britain through the debt storm.

There is a suggestion from some in the House that if you spend more, you will borrow less. That is something-for-nothing economics, and the House should know the risks that we would be running. Last April, the absence of a credible deficit plan meant that our country’s credit rating was on negative outlook and our market interest rates were higher than Italy’s; 18 months later, we are the only major western country whose credit rating has improved. Italy’s interest rates are now 7.2%, and what are ours? They are less than 2.5%. Yesterday we were even borrowing money more cheaply than Germany. Those who would put all that at risk by deliberately adding to our deficit must explain this.

Just a 1% rise in our market interest rates would add £10 billion to mortgage bills every year: 1% would mean that the average family with a mortgage would have to pay £1,000 more; 1% would increase the cost of business loans by £7 billion; 1% would force taxpayers to find an extra £21 billion in debt interest payments, much of it going to our foreign creditors. In other words, 1% dwarfs any extra Government spending or tax cut funded by borrowing that people propose today—and that is the cost of just a 1% rise. Italy’s rates have gone up by almost 3% in the last year alone. We will not take this risk with the solvency of the British economy and the security of British families.

The current environment requires us to take further action on debt to ensure that Britain continues to live within its means. This is what we propose to do. First, there is no need to adjust the overall totals set out in the spending review. Taken all together, the measures that I will set out today require no extra borrowing and provide no extra savings across the whole spending review period. Secondly, I am announcing significant savings in current spending to make the fiscal position more sustainable in the medium and long term; but in the short term—over the next three years—we will use these savings to fund capital investments in infrastructure, regional growth and education, as well as help for young people to find work. Every pound spent in this way will be paid for by a pound saved permanently. That includes savings from further restraint on public sector pay.

For some work forces the two-year pay freeze will be coming to an end next spring, and for most it will be coming to an end during 2013. In the current circumstances, the country cannot afford the 2% rise assumed by some Government Departments thereafter, so instead we will set public sector pay awards at an average of 1% for each of the two years after the pay freeze ends. Many people are helped by pay progression—the annual increases in salary grades to which many are entitled even when pay is frozen. That is one of the reasons why public sector pay has risen at twice the rate of private sector pay over the last four years. While I accept that a 1% average rise is tough, it is also fair to those who work to pay the taxes that will fund it. I can also announce that we are asking the independent pay review bodies to consider how public sector pay can be made more responsive to local labour markets, and we will ask them to report back by July next year. This is a significant step towards the creation of a more balanced economy in the regions of our country which does not squeeze out the private sector. Mr Speaker—[Interruption.] Departmental budgets will be adjusted in line with the pay rises I have announced, with the exception of the NHS and school budgets, where the money saved will be retained in order to protect those budgets in real terms. This policy will save over £1 billion in current spending by 2014-15.

The deal we offer on public sector pensions is also fair to both taxpayers and public servants. The reforms are based on the independent report of John Hutton, a former Labour Pensions Secretary, and he says:

“It is hard to imagine a better deal”

than this. I would once again ask the unions why they are damaging our economy at a time like this and putting jobs at risk. I say call off the strikes tomorrow, come back to the table, complete the negotiations and let us agree generous pensions that are affordable to the taxpayer.

Let me turn to other areas of public spending, starting with overseas aid. This Government will stick by the commitments they have made to the poorest people in the world by increasing our international development budget—and the whole House should be proud of the help our country is providing to eradicate disease, save lives and educate children—but the spending plans of the Department for International Development meant that the UK was on course to exceed 0.7% of national income in 2013. That I do not think can be justified and so we are adjusting those plans so we do not overshoot the target.

Turning to welfare payments, the annual increase in the basic state pension is protected by the triple lock introduced by this Government. This guarantees a rise either in line with earnings, prices or 2.5%, whichever is greater. It means that the basic state pension will next April rise by £5.30 to £107.45—the largest ever cash rise in the basic state pension and a commitment of fairness to those who have worked hard all their lives. I wanted to make sure that poorer pensioners did not see a smaller rise in their income, so I can confirm today that we will also uprate the pension credit by £5.35 and pay for that with an increase in the threshold for the savings credit.

I also want to protect those who are not able to work because of their disabilities and those who, through no fault of their own, have lost jobs and are trying to find work, so I can confirm that we will uprate working-age benefits in line with September’s consumer prices index inflation number of 5.2%. That will be a significant boost to the incomes of the poorest, especially when inflation is forecast to be considerably less than that by next April. We will also uprate with prices the disability elements of tax credits, and increase the child element of the child tax credit by £135 in line with inflation too. But we will not uprate the other elements of the working tax credit this coming year; and given the size of the uprating this year, we will no longer go ahead with the additional £110 rise in the child element, over and above inflation, that was planned. By April 2012, the child tax credit will have increased by £390 since the coalition came into power. The best way to support low-income working people is to take them out of tax altogether, and our increases in the income tax personal allowance this year and next will do that for over 1 million people.

Let me turn to future public spending. Today, I am setting expenditure totals for the two years following the end of the spending review period: 2015-16 and 2016-17. Total managed expenditure will fall during that period by 0.9% a year in real terms—the same rate as set out for the existing period of the spending review, with a baseline that excludes the additional investments in infrastructure also announced today. These are large savings and we will set out in future how resources will be allocated between different areas of government.

I am also announcing a measure to control spending which is not for today or next year, or even for the next decade, but it directly addresses the long-term challenge Britain and so many other countries face with an ageing population. Our generation has been warned that the costs of providing decent state pensions are going to become more and more unaffordable unless we take further action.

Let us not leave it to our children to take emergency action to rescue the public finances; let us think ahead and take responsible, sensible steps now. Starting in 2026, we will increase the state pension age from 66 to 67, so that we can go on paying a decent pension to people who are living longer. Australia, America and Germany have all taken similar steps. This will not affect anyone within 14 years of receiving their state pension today. By saving a staggering £59 billion, it will mean a long-term future for the basic state pension.

We are showing a world that is sceptical that democratic western Governments can take tough decisions that Britain will pay its way in the world. That is the first thing that the Government can do in the current environment: keep our interest rates low and protect our country from the worst of the debt storm. But we need to make sure that those low interest rates are available to families and to businesses. It is monetary and credit policy that is, in a debt crisis, the principal and most powerful tool for stimulating demand.

Last month, the Bank of England’s Monetary Policy Committee decided to undertake further quantitative easing, and I have authorised an increase in the ceiling on its asset purchases to £275 billion. This will support demand across the economy, but we must do more to help those small businesses who cannot get access to credit at an affordable price.

We have already extended the last Government’s enterprise finance guarantee scheme, and we are today expanding it to include businesses with annual turnovers of up to £44 million and accrediting new lenders, such as Metro Bank. But this scheme is by itself not nearly ambitious enough and never will be within the constraints of state aid rules, so the Government are launching a major programme of credit easing to help small business. We have set a ceiling of £40 billion. At the same time, I have agreed with Mervyn King that we will reduce by £40 billion the asset purchase facility that the previous Government gave the Bank to buy business loans. Only a small proportion of the facility was ever used. I am publishing my exchange of letters with the Governor today.

We are launching our national loan guarantee scheme. It will work on the simple principle that we use the hard-won low interest rates that the Government can borrow at to reduce the interest rates at which small businesses can borrow. We are using the credibility that we have earned in the international markets to help our domestic economy. New loans and overdrafts to businesses with a turnover of less than £50 million will be eligible for the scheme, so that it stays focused on smaller companies. We expect that it will lead to reductions of 1 percentage point in the rate of interest being charged to these companies, so a business facing a 7% interest rate to get a £5 million loan could instead see its rate reduced to 6% and its interest costs fall by up to £50,000.

We have developed with the Bank of England a mechanism to allocate funding to different banks based on how much they increase both net and gross lending to firms. There will be a clear audit trail to ensure the banks comply, for we will use the experience of the European Investment Bank’s loans for SMEs programme here in the UK to ensure that it works. We are getting state aid approval, so that the national loan guarantee scheme will be up and running in the next few months. Initially, £20 billion-worth of these guarantees will be available over the next two years. Alongside it, we are also launching a £1 billion business finance partnership. That is aimed at Britain’s mid-sized companies—a crucial part of our economy, neglected for too long and now identified by the CBI director general and others as a future source of growth. The Government will invest in funds that lend directly to these businesses, in partnership with other investors such as pension funds and insurance companies. It will give these mid-cap companies a new source of investment outside the traditional banks.

If the business finance partnership takes off, I stand ready to increase its size; and we will develop further partnerships ideas and ideas for new bond issuance to help Britain’s small and medium-sized companies. No Government have attempted anything as ambitious as this before. We will not get every detail perfect first time round, but we do not want to make the best the enemy of the good. With the strain on the financial system increasing, the important thing is to get credit flowing to Britain’s small businesses.

The Government can use the low interest rates that we have secured to help young families, too, who want to buy a home but cannot afford the very large deposits that banks are now demanding. We will use mortgage indemnities to help 100,000 such families to buy newly built homes. We will also help construction firms that cannot get bank finance with a £400 million fund that will kick-start projects that already have planning permission; and we are going to reinvigorate the right to buy. This was one of the greatest social policies of all time. It brought home ownership within the reach of millions of aspiring families. It was slowly and stealthily strangled by the last Government, as discounts were cut and cut again. We will bring it back to life. Families in social housing will be able to buy their own homes at a discount of up to 50%. We will use the receipts to build, for every home purchased, a new additional affordable home—so new homes for families who need them; new home ownership for families who aspire to it; and new jobs in the construction industry, so that we get Britain building. That is what our new right to buy will bring.

In the years leading up to the crash, our economy became dangerously over-dependent on the success of a poorly regulated City of London. Meanwhile, employment by businesses in a region such as the west midlands actually fell. By 2007, the previous Government were relying on finance for £1 in every £8 raised in taxation. That left Britain completely exposed when the banks failed, and I can confirm that, next month, we will publish our response to the report that we commissioned from John Vickers to protect taxpayers better.

It is this Government’s policy to ensure that we remain the home of global banks and that London is the world’s pre-eminent financial centre. That is why we will not agree to the introduction of an EU financial transaction tax. It is not a tax on bankers; it is a tax on people’s pensions. Instead, we have introduced a permanent bank levy to make sure that the banks pay their fair share. I have always said that we wished to raise £2.5 billion each and every year from this levy. To ensure we do that, I need to raise the rate of the levy to 0.088%. That will be effective from l January next year. We will also take action to stop some large firms using complex asset-backed pension funding arrangements to claim double the amount of tax relief that was intended. This will save the Exchequer almost £500 million pounds a year.

Financial services will always be a very important industry for the UK, but we have to help other parts of the private sector in other parts of the country to grow. That means uncongested roads and railways for businesses to move products that cannot be reduced to a screen on a City trading floor. It means providing secure power sources at reasonable prices. It means creating new superfast digital networks for companies across our country. These do not exist today. If we look at what countries such as China or Brazil are building, we see why we risk falling behind the rest of the world. So today we are publishing the national infrastructure plan. For the first time, we are identifying over 500 infrastructure projects that we want to see built over the next decade and beyond: roads, railways, airport capacity, power stations, waste facilities and broadband networks. We are mobilising the finance needed to deliver them, too.

The savings that I have announced in the current Budget have enabled me today to fund, pound for pound, £5 billion of additional public spending on infrastructure over the next three years. New spending by Network Rail, guaranteed by the Government, will bring £1 billion more. We are committing a further £5 billion to future projects in the next spending period, so that the planning can start now. This is public money. By exploring guarantees and letting city mayors borrow against future tax receipts, we are looking for new ways to deploy it. But we need to put to work the many billions of pounds that British people save in British pension funds and get those savings invested in British projects. You could call it British savings for British jobs, Mr Speaker.

The Government have negotiated an agreement with two groups of British pension funds to unlock an additional £20 billion of private investment in modern infrastructure. We can today give the go-ahead around the country to 35 new road and rail schemes that support economic development. In the north-west, we will electrify the trans-Pennine express between Manchester and Leeds, build the Manchester airport and Crewe link roads and work with Merseyside to turn the vision of the Atlantic gateway into reality. In Yorkshire and Humber, there will be new stations and new tram capacity, and we will halve the tolls on the Humber bridge. I want to pay tribute to my hon. Friends the Members for Beverley and Holderness (Mr Stuart) and for Brigg and Goole (Andrew Percy), and indeed other local MPs who have campaigned for years to make this happen. Under this Government it has.

In the north-east, we will bring forward investment on the Tyne and Wear Metro. In the midlands, the A45, the A43, the A453, the Kettering bypass, the Ml and M6 will all be improved. In the south-west, the Bristol link road and the A380 bypass will go ahead. For families across the south-west facing the highest water charges in Britain, the Government will cut the household bills of all South West Water customers by £50 a year. In the east of England, we are going to make immediate improvements to the Al4. In the south-east, we will build a new railway link between Oxford, Milton Keynes and Bedford that will create 12,000 new jobs. We are going to start working on a new crossing of the lower Thames, and we will explore all the options for maintaining the UK’s aviation hub status, with the exception of a third runway at Heathrow.

Here in London, we will work with the Mayor on options for other new river crossings, for example at Silvertown. We are going to support the extension of the Northern line to Battersea, which could bring 25,000 jobs to the area. Devolved Administrations in Scotland, Wales and Northern Ireland will get their Barnett share, and we are working with them to improve the links between our nations, such as the M4 in south Wales and the overnight rail service to north of the border.

This all amounts to a huge commitment to overhauling the physical infrastructure of our nation. We will match it by overhauling the digital infrastructure, too. The Government are funding plans to bring superfast broadband to 90% of homes and businesses across the country, and extend mobile phone coverage to 99% of families. This will help to create a living, economically vibrant countryside.

Our great cities are at the heart of our regional economies, and we will help bring world-leading, superfast broadband and wifi connections to 10 of them, including the capitals of all four nations. We will go ahead with the 22 enterprise zones already announced, plus two further zones in Humber and Lancashire confirmed today. I can also confirm that capital allowances of 100% will be available to encourage manufacturing and other industries into the zones in Liverpool, Sheffield, the Tees valley, Humber and the black country. Those allowances will also be available to the north-eastern enterprise zone, and we will consider extending to the port of Blyth to create new private sector jobs there, too. [Interruption.] This Government’s new regional growth fund for England has already allocated £1.4 billion to 169 projects around the country. For every one pound we are putting in, we are attracting six pounds of private sector money alongside it. I am today putting a further £1 billion over this Parliament into the regional growth fund for England, with support as well for the devolved Administrations. If we do not get the private sector to take a greater share of economic activity in the regions, our economy will become more and more unbalanced, as it did over the last 10 years.

Government should not assume that this will happen by itself. We must help businesses to grow and succeed, and we can do that at a national level too, with our commitment, for example, to British science. At a time of difficult choices, we made ours last year when we committed to protect the science budget. Today we are confirming almost half a billion pounds for scientific projects, from supercomputing and satellite technology to a world-beating animal health laboratory, and Government can encourage many more of our small firms to export overseas for the first time. We are doubling to 50,000 the number of SMEs we are helping, and extending support to British mid-caps, who sometimes lack the overseas ambition of their German equivalents.

We will make it easier for UK-based firms to compete for Government procurement contracts and make new applications out of government data. We will provide funds for smaller technology firms in Britain that find it difficult to turn their innovations into commercial success. We have listened to the ideas from business groups about encouraging innovation in larger companies, and we will introduce a new “above the line” research and development tax credit in 2013 that will increase its visibility and generosity.

We will give particular help to our energy-intensive industries. I have not shied away from supporting sensible steps to reduce this country’s dependency on volatile oil prices and reduce our carbon emissions. I am the Chancellor who funded the first ever Green investment bank and introduced the carbon price floor. Our green deal will help people to insulate their home and cut their heating bills. I am worried about the combined impact of the green policies adopted not just in Britain but by the European Union on some of our heavy, energy-intensive industries. We are not going to save the planet by shutting down our steel mills, aluminium smelters and paper manufacturers. All we will be doing is exporting valuable jobs from this country, so we will help them with the costs of the EU trading scheme and the carbon price floor, increase their climate change levy relief and reduce the impact of the electricity market reforms on those businesses, too.

This amounts to a £250 million package over the Parliament, and it will keep industry and jobs here in Britain. It is a reminder to us all that we should not price British businesses out of the world economy. If we burden them with endless social and environmental goals, however worthy in their own right, not only will we not achieve those goals, but the businesses will fail, jobs will be lost, and our country will be poorer.

Our planning reforms strike the right balance between protecting our countryside while permitting economic development that creates jobs, but we need to go further to remove the lengthy delays and high costs of the current system, with new time limits on applications and new responsibilities for statutory consultees. We will make sure that the gold-plating of EU rules on things such as habitats do not place ridiculous costs on British businesses. Planning laws need reform. So too—[Interruption.]

[Mr Speaker]

Order. The House needs to calm down. One hon. Member has probably shouted enough for one day.

[Mr Osborne]

Planning laws need reform, and so too do employment rules. We know many firms are afraid to hire new staff because of their fear about the costs involved if it does not work out. We are already doubling the period before an employee can bring an unfair dismissal claim and introducing fees for tribunals. Now we will call for evidence on further reforms to make it easier to hire people, including changing the TUPE regulations; reducing delay and uncertainty in the collective redundancy process; and introducing the idea of compensated no-fault dismissal for businesses with fewer than 10 employees.

We will cut the burden of health and safety rules on small firms, because we have regard for the health and safety of the British economy too. This Government have introduced flexible working practices and we are committed to fair rights for employees. But what about the right to get a job in the first place or the right to work all hours running a small business and not be sued out of existence by the costs of an employment tribunal? It is no good endlessly comparing ourselves with other European countries. The entire European continent is pricing itself out of the world economy. The same is true of taxes on business. If we tax firms out of existence, or out of the country, there will not be any tax revenues for anyone. We have set as our ambition the goal of giving this country the most competitive tax regime in the G20. Our corporate tax rate has already fallen from 28% to 26%, and I can confirm that it will fall again next April to 25%.

We are undertaking major simplification of the tax code for businesses and individuals, including, this autumn, consulting on ideas to merge the administration of income tax and national insurance. We are publishing next week rules on the taxation of foreign profits, so that multinationals stop leaving Britain, and instead start coming here, and we will end low-value consignment relief for goods from the Channel Islands, which has been used by large companies to undercut shops on our high streets. We have supported enterprise by increasing the generosity of the enterprise investment scheme. Today, we are extending this scheme specifically to help new start-up businesses to get the seed investment they need. Even at the best of times they can struggle to get finance, and in the current credit conditions that struggle too often ends in failure. From April 2012, anyone investing up to £100,000 in a qualifying new start-up business will be eligible for income tax relief of 50%, regardless of the rate at which they pay tax, and to get people investing in start-up Britain in 2012, for one year only, we will also waive any tax on capital gains invested through the new scheme. We can afford this with a freeze on the general capital gains tax threshold for next year.

I also want to help existing small businesses which find the current economic conditions tough. Business rates are a disproportionately large part of their fixed costs. In the Budget, I provided a holiday on business rates for small firms until October next year. I am today extending that rate relief holiday until April 2013. Over half a million small firms, including one third of all shops, will have reduced rate bills or no rate bills for the whole of this year and for the whole of the next financial year too. To help all businesses, including larger ones, with next year’s rise in business rates, I will allow them to defer 60% of the increase in their bills to the two following years.

I also want to help any business seeking to employ a young person who is out of work. The OBR forecasts that unemployment will rise from 8.1% this year to 8.7% next year, before falling to 6.2% by the end of the forecast. Youth unemployment has been rising for seven years and is now unacceptably high. It is little comfort that this problem is affecting all western nations today. The problem is, of course, primarily a lack of jobs—[Interruption.] But it is made worse by a lack of skills. Too many children are leaving school after 11 years of compulsory education without the basics that they need for the world of work.

Our new youth contract addresses both problems with the offer of private sector work experience for every young person unemployed for three months. After five months, there will be weekly signing on. After nine months, we will help pay for a job or an apprenticeship in a private business. Some 200,000 people will be helped in this way but, as the Deputy Prime Minister has said, this is a contract. Young people who do not engage with this offer will be considered for mandatory work activity, and those who drop out without good reason will lose their benefits.

If we are to tackle the economic performance of this country and tackle Britain’s decades-long problems with productivity, we have to transform our school system too, so that children leave school prepared for the world of work. My right hon. Friend the Secretary of State for Education is doing more to make that happen than anyone who ever had his job before him. The previous Government took six years to create 200 academies. He has created 1,200 academies in just 18 months. Supporting his education reform is a central plank of my economic policy, so today, with the savings that we have made, I am providing an extra £1.2 billion—as part of the additional investment in infrastructure—to spend on our schools.

Half of that will go to help local authorities with the greatest basic need for school places. The other £600 million will go to support my right hon. Friend’s reforms and will fund 100 additional free schools. These schools will include new maths free schools for 16 to 18-year-olds. This will give our most talented young mathematicians the chance to flourish. Like the new university technical colleges, these maths free schools are exactly what Britain needs to match our competitors and produce more of the engineering and science graduates so important for our long-term economic success.

To ensure that children born into the poorest families have a real chance to become one of those graduates, we will take further steps to improve early education. Last year, it was this coalition Government who not only expanded free nursery education for all three and four-year-olds, but gave children from the poorest fifth of families a new right to 15 hours of free nursery care a week at the age of two. I can tell the House today that we can double the number of children who will receive this free nursery care: 40% of two-year-olds—260,000 children—from the most disadvantaged families will get this support in their early years.

On education and early years learning, this is how we change the life chances of our least well-off and genuinely lift children out of poverty and that is how we build an economy ready to compete in the world. It will take time. The damage that we have to repair is great. People know how difficult things are and how little money there is, but where we can help with the rising cost of living, we will. I have already offered councils the resources for another year’s freeze in the council tax. That will help millions of families, but I want to do more.

Commuters often travel long distances to go to work and bring an income home. Train fares are expensive and they are set to go up well above inflation to pay for the much needed investment in the new rail and new trains that we need, but RPI plus 3% is too much. The Government will fund a reduction in the increase to RPI plus 1%. This will apply across national rail regulated fares, across the London tube and on London buses. It will help the millions of people who use our trains.

Millions more use their cars to go to work, and pick up the children from school. It is not a luxury for most people; it is a necessity. In the Budget I cut fuel duty by 1p. The plan was for fuel duty to be 3p higher in January and 5p higher by August next year. That would be tough for working families at a time like this, so despite all the constraints that are upon us, we are able to cancel the fuel duty increase planned for January, and fuel duty from August will be only 3p higher than it is now. Taxes on petrol will be a full 10p lower than they would have been without our action in the Budget and this autumn. Families will save £144 on filling up the average family car by the end of next year. At this tough time, we are helping where we can.

All that we are doing today—sticking to our deficit plan to keep interest rates as low as possible, increasing the supply of credit to pass those low rates on to families and businesses, rebalancing our economy with an active enterprise policy and new infrastructure, and providing help with the cost of living on fuel duty and rail fares—all that takes Britain in the right direction. It cannot transform our economic situation overnight.

People in this country understand the problems that Britain faces. They can watch the news any night of the week and see for themselves the crisis in the eurozone and the scale of the debt burden that we carry. People know that promises of quick fixes and more spending that this country cannot afford at times like this are like the promises of a quack doctor selling a miracle cure. We do not offer that today.

What we offer is a Government who have a plan to deal with our nation’s debts to keep rates low; a Government determined to support businesses and support jobs; a Government committed to take Britain safely through the storm. Leadership for tough times—that is what we offer. I commend this statement to the House.

--- Later in debate ---

[Mr Osborne]

I do not think that a decision has been taken on stations, but I agree with my hon. Friend that we need to bring home to the people of Buckinghamshire the benefits of high-speed rail.

[Mr Speaker]

Hmm, yes.

[Naomi Long (Belfast East) (Alliance)]

The Chancellor stressed the importance economically both of regional connectivity and infrastructure. Can he confirm whether the Northern Ireland Barnett consequentials of the infrastructure changes will be ring-fenced? Further, can he offer any good news on air passenger duty for those who rely entirely on regional flights for that connectivity?

--- Later in debate ---

[Mr Osborne]

We are basing our pension reforms on the report from Lord Hutton. He particularly focused on the benefit, but he said that there was a case for the increase in contributions. He also said recently that it was frankly difficult to imagine a better deal. That was the former Labour Pensions Secretary. What I do not understand is what exactly the Labour party’s policy is on this. It is absolutely silent. Are you in favour of increased contributions? [Interruption.] If you are not in favour of the increased contributions, where in your so-called five-point plan are you spending the money to stop those contribution increases? It is completely economically illiterate—[Interruption.] The hon. Member for Dudley North (Ian Austin) talks about negotiations. Why do he and his party not condemn the strike, urge the unions to sit round the table and negotiate with us to get a deal, especially as the former Labour Pensions Secretary, John Hutton—a man I know the hon. Gentleman really admires—says that it would be difficult to get a better deal?

[Mr Speaker]

Order. I may or may not be economically illiterate, but I gently, tentatively and courteously point out to the Chancellor that I do not have a five-point plan.

[Robert Halfon (Harlow) (Con)]

I thank the Chancellor for listening to millions of hard-pressed motorists and the Fair Fuel UK campaign and for not raising fuel duty next year. Is he aware that that will save 37,000 Harlow motorists more than £1 million next year? Will he listen to Essex man once again and set up a commission to look at the long-term problems of petrol and diesel price rises and see whether anything more can be done?

--- Later in debate ---

[Mr Osborne]

If I may, I will write to my hon. Friend with a specific answer on when the diggers will start on the widening of the A14 Kettering bypass and on the Corby link road, but these are commitments for this spending review so it is in the next few years and not at some future date. I know how important both those roads are for the local economy and for local people, and I am really pleased that, thanks in part to the campaign and the support of the local Member of Parliament, we have been able to give them the go-ahead.

[Mr Speaker]

We look forward to hearing about the dates for the diggers, as I am sure do the people of Kettering.

[Jonathan Ashworth (Leicester South) (Lab)]

May I push the Chancellor a little further on borrowing, because so far in the exchanges he has not quite brought himself to admit that he is going to be borrowing £158 billion more than he planned to borrow a year ago? Will he confirm that that is the case—yes or no?

--- Later in debate ---

[Mr Osborne]

We should not be having a strike tomorrow. Negotiations are ongoing and we want those negotiations to conclude. I urge the unions, even at this late hour, to call off the strike and stop doing something that will damage the British economy and potentially cost jobs. Let us get around the table and try to get a deal, because I think that what is on offer is not only generous to the public sector and people who rely on public sector pensions but is also fair to the taxpayer. As Lord Hutton, the former Labour Pensions Secretary, has said,

“it is hard to imagine a better deal”.

I urge the trade union movement to take the deal.

[Mr Speaker]

I am grateful to the Chancellor and to colleagues, whose succinctness has enabled 96 Back-Bench Members to question the Chancellor in 97 minutes of exclusively Back-Bench time. That shows what can be done.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 1st November 2011 Commons Chamber

[Mr Speaker]

Order. The question refers to a reduction in tax avoidance and evasion.

[Mr Osborne]

Tackling tax evasion and avoidance—to which the question refers—will help us to reduce both the deficit and the debt. We have the fiscal mandate and the debt target. That has been independently verified by the Office for Budget Responsibility—which is in marked contrast to the situation when the right hon. Gentleman was in the Cabinet—and on 29 November it will provide its update.

Independent Banking Commission Report

Debate between George Osborne and John Bercow

Monday 12th September 2011 Commons Chamber

[Mr Osborne]

We are in near constant discussion with the Irish authorities about the Irish banks and their impact on the rest of the UK, including, of course, Northern Ireland. In the next few weeks, the UK will disburse the first part of its loan to Ireland, which formed part of the Bill that was passed through this House at the end of last year. Because we passed that Bill and made the loan to Ireland, we are around the table having that discussion all the time with the Irish authorities about the impact of the Irish banks on the rest of the UK. I do not think we would be at that table if we had not made that loan, and I assure the hon. Lady that both I and the Financial Secretary have been spending a huge amount of time on the Irish banks, and we are well aware of the impact on Northern Ireland. If she wants to talk to us about that at any time, we would be very willing to have that meeting.

[Mr Speaker]

I am grateful to the Chancellor.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 6th September 2011 Commons Chamber

[Mr Osborne]

rose—

[Mr Speaker]

Order. I am grateful to the hon. Member for Montgomeryshire (Glyn Davies), but his question bears no relation to the responsibilities of the current Government and we will therefore leave it there.

[Mr Julian Brazier (Canterbury) (Con)]

Would my right hon. Friend accept that the fact that the euro has strengthened as a currency indicates that the markets believe that the weaker countries will not be able to push water up hill for much longer and are bound to drop out of the euro before very long?

--- Later in debate ---

[Mr Osborne]

As I have been saying in recent weeks, we need to follow the remorseless logic of monetary union. That was one of the reasons I was against Britain joining the euro—I thought it would lead to greater fiscal integration and common budget policies. There is obviously an active debate about what that might mean, and I would suggest that the first thing that the eurozone countries need to do is to implement the package agreed on 21 July.

May I correct the hon. Gentleman? It is not the case—sadly—that Britain has the slowest growth in Europe. Actually, the problem is that German growth in the last quarter was 0.1% and French growth for Q2 was zero. That is the challenge—a eurozone where growth is faltering, and the situation in the United States. We have to deal with these international problems as well as addressing the very serious problems that we inherited.

[Mr Speaker]

I am grateful to the Chancellor. We do not want the slowest growth, but neither do we want the slowest questions and answers.

[Mr Andrew Tyrie (Chichester) (Con)]

The Chancellor has made it clear that he thinks that a monetary union requires a fiscal union. Can a credible fiscal union be put in place without a treaty change?

--- Later in debate ---

[Ms Eagle]

I do not think that the Chancellor knew the answer to that question, but today’s euro figures have revealed that only two countries—Romania and Portugal—have done worse on growth than the UK in the past year. Only yesterday, the Minister of State, Department for Communities and Local Government, the right hon. Member for Tunbridge Wells (Greg Clark), said from the Dispatch Box that there is a crisis of growth in this country. Was not the Chancellor’s friend, the new head of the IMF, Christine Lagarde, right at the weekend when she said that

“growth is necessary for fiscal credibility… We know that slamming on the brakes too quickly will hurt the”

economy “and worsen job prospects”?

We know that he will not listen to us, but why does the Chancellor not listen to sound advice from his friends, including, we hear, on this weekend’s draft G7 statement, which aims to slow the pace of deficit reduction—

[Mr Speaker]

Order. I am extremely grateful to the hon. Lady. I think that we have got the gist of it.

[Mr Osborne]

I can tell the House that Christine Lagarde will be in London on Friday. We will hear what she has to say then.

Global Economy

Debate between George Osborne and John Bercow

Thursday 11th August 2011 Commons Chamber

[Mr William Cash (Stone) (Con)]

The Chancellor will know that our trade balance between 2002 and 2009-10 with the other 26 member states has gone up from minus £14 billion to minus £53 billion in one year? Does he not agree that even Edward Heath would have repudiated and vetoed a fiscal union with a hard-core Europe with such an incredible trade deficit against us? The coalition agreement, according to the latest answer I got from the Prime Minister, determines our relationship with the European Union. Does the Chancellor disagree with the Deputy Prime Minister, because we must have radical renegotiation of the treaties and the repatriation of powers so that we can achieve growth for all our businesses?

[Mr Speaker]

I enjoy listening to the hon. Gentleman’s words so much that it is in my interest, Parliament’s interest and the national interest that they should be suitably rationed.

[Mr Osborne]

My hon. Friend and I will have to agree to disagree on this issue. The remorseless logic of monetary union leads towards fiscal union, and that was one of the reasons that I opposed joining the single currency. However, it is now in our interests to allow that to happen more in the eurozone, because it is in our absolute national economic interest that the eurozone is more stable. It is clear that that means that they need to have more fiscal powers to reduce instability. That means, of course, that Britain must fight hard to ensure that its interests are represented and that we are not part of this fiscal integration. Important decisions, such as on financial services, must continue to be taken at the level of 27. He talks about treaty changes and so on, but the prospect of a major treaty change to bring about eurozone fiscal integration is not imminent, although I imagine that there will be a lively debate if and when it comes about.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 21st June 2011 Commons Chamber

[Mr Osborne]

rose—

[Mr Speaker]

Order. All with specific reference to the level of debt as a proportion of GDP.

[Mr Osborne]

I see that the shadow Chancellor is following his former master’s habit of straying from the direct area of his brief, but there we go. Let me deal directly with Libya. What I told the House at the time was that the cost estimated at the time by the Ministry of Defence was in the tens of millions of pounds, and the Ministry of Defence is planning to provide an update to the House on the full costs, I think within the next week.

--- Later in debate ---

[Mr Osborne]

rose—

[Mr Speaker]

Order. There is no requirement or need for the Chancellor to comment on Opposition policy. I would have thought that we had grasped that point by now.

[Kerry McCarthy (Bristol East) (Lab)]

In reaction to this year’s Budget, the Institute for Fiscal Studies said that, if the Chancellor is to meet his borrowing targets, he will be

“now even more dependent on a bounce back in the rate of economic growth from 2013”.

Borrowing has already been £1.5 billion higher in the first two months of this financial year than it was in the same period last year, as the Chancellor’s tax rises and spending cuts kick in. If growth outturns fail to meet the forecasts, will the Government change their plans on borrowing?

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 10th May 2011 Commons Chamber

[Ms Angela Eagle (Wallasey) (Lab)]

I would like to thank you, Mr Speaker, and the Chancellor for your tributes to David Cairns, our colleague, and to add our tributes from the Opposition side of the House. David was one of those very rare people who caused a change in the law in order for him to be able to take his seat in this place, and when he arrived his presence was not a disappointment to anyone. He was a great colleague and friend, and our hearts go out to his family and friends. We would like to add our deepest condolences at the shocking news of his untimely and very early death today.

Before the last election, both parties now in government pledged no rise in VAT, but with inflation running at double the Bank of England target, people are facing the biggest and longest squeeze in their living standards for 80 years. How does the Chancellor think that increasing VAT by 2.5% has helped them to cope with this issue?

[Mr Speaker]

Order. Whatever may be said about the question, I am sure that the Chancellor will focus on the monetary policy framework. That is what he can be relied upon to do.

[Mr Osborne]

Actually, monetary policy is the thing that I am not directly in charge of, but the point I would make is that the VAT rise is part of a credible fiscal policy. The person who was Chancellor of the Exchequer before me has made it pretty clear in interviews since the election that he, too, was considering a VAT rise, and he would probably have gone ahead with one if Labour had been re-elected.

--- Later in debate ---

[Mr Osborne]

The answer is that we have not had discussions about a second Greek bail-out and we have not been asked to make a contribution. The question for Greece is whether it lives up to the commitments that it has entered into. There is currently an International Monetary Fund, European Commission and European Central Bank team in Athens assessing Greece’s progress against the plan that it committed to, and we should await the results of that assessment.

[Mr Speaker]

Jonathan Reynolds is not here, so I call Stephen Timms.

Bank Bonuses

Debate between George Osborne and John Bercow

Tuesday 11th January 2011 Commons Chamber

[Pat Glass (North West Durham) (Lab)]

The Chancellor has said several times that nothing is off the table if the banks do not conform to the code of practice. Can you explain to me and to people here today what exactly is on the table, and what you will do if they do not conform?

[Mr Speaker]

Order. I will do nothing at all, but I think the Chancellor might.

[Mr Osborne]

As I have said, what is on the table at the moment is the discussion that we are having to increase lending in a material way—in other words, more than would otherwise have been the case—and to reduce bonuses more than would otherwise have been the case. I have made it very clear to the banks that nothing is off the table if we do not agree this settlement, and we will look at all the options available to us.

[Mr Speaker]

I thank the Chancellor and all colleagues for their succinctness, which has enabled every Member who wanted to ask a question to do so, and to secure an answer.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 21st December 2010 Commons Chamber

[Mr Osborne]

rose—

[Mr Speaker]

With relevance to Treasury matters, Chancellor—that is, if the right hon. Gentleman wishes to respond. He is not under an obligation.

[Mr Osborne]

I am not sure that there is anything that I can say to the hon. Gentleman, except that I wish him a happy Christmas and I hope that he approaches retirement soon.

Loans to Ireland Bill

Debate between George Osborne and John Bercow

Wednesday 15th December 2010 Commons Chamber

[Mr Speaker]

Order. We cannot have an intervention on an intervention. We will hear from the Chancellor.

[Mr Osborne]

Let me take the other intervention and I will answer both.

Autumn Forecast

Debate between George Osborne and John Bercow

Monday 29th November 2010 Commons Chamber

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

I would like to make a statement regarding the Office for Budget Responsibility’s first autumn forecast. I will also, with your permission, Mr Speaker, inform the House about further measures that the Government are taking to support economic growth, including the new growth review launched today and a far-reaching programme of reforms to our corporate tax system. Following yesterday’s announcement by European Finance Ministers, I would like to take the first opportunity to update the House about the Irish situation and the UK’s involvement.

Copies of the OBR’s autumn forecast were made available in the Vote Office earlier today. We should take a moment to recognise the significance of this occasion and the practical demonstration of this Government’s commitment to transparency and independent forecasting. Today is the first time that Members of this House will engage in debate about an autumn forecast produced by the independent Office for Budget Responsibility, rather than conjured up by the Chancellor of the Exchequer, and available to read two hours before the statement. This is also the first forecast by the new independent chair of the OBR, Robert Chote, with the other members of the budget responsibility committee, Stephen Nickell and Graham Parker, whose appointments were approved by all Treasury Committee members from both sides of the House. As a result, I am sure the country can have full confidence in the independence of these forecasts.

The OBR report published today includes some 150 pages of information—an unprecedented level of detail and transparency, much of it of the kind available to previous Governments but never before published. I should like to thank the budget responsibility committee and the staff of the OBR for their hard work in putting together this autumn forecast. I hope that we now entrench this major improvement in the making of fiscal policy by passing the legislation currently before Parliament.

Although today’s figures are of course independent, they are still just forecasts, and we must treat them with a degree of caution, as one should treat any economic forecast. Indeed, the OBR is explicit about that, illustrating the uncertainty surrounding any economic forecasts with the use of fan charts rather than claiming the infallible certainty that my predecessors asserted when they provided their forecasts. The only thing that was infallible and certain was that those political forecasts were usually wrong.

With that caution in mind, let me turn to the forecast. After the deepest recession since the war, the greatest budget deficit in our peacetime history and the biggest banking crisis of our lifetime, recovery was always going to be more challenging than after previous recessions, but the message from the Office for Budget Responsibility is that Britain’s economic recovery is on track. The economy is growing, more jobs are being created and the deficit is falling. Its central forecast is for sustainable growth of over 2% in each of the next five years, and employment rising in each and every year. Indeed, employment and gross domestic product are higher in every quarter and every year than in the June forecast.

At a time when markets are gripped by fears about Government finances across Europe, today we see that the Government were absolutely right to take decisive action to take Britain out of the financial danger zone. Britain is on course both to grow the economy and balance the books, something that some people repeatedly said could not happen.

Let me take the House through the detail of the forecast. The forecasts for the economy are broadly in line with those produced for the June Budget, despite the more challenging international conditions. I should also like to point out that they are very similar to the European Commission forecasts for the UK, which also happened to be published today. Indeed, the European Commission today forecast that Britain would grow faster over the next two years than Germany, France, Japan, the United States of America and the average for the eurozone and the European Union.

The OBR forecasts real GDP growth of 1.8% this year, 2.1% next year, 2.6% in 2012, 2.9% in 2013, 2.8% in 2014 and 2.7% in 2015. Growth this year is now expected to be considerably higher than was forecast in June. In the OBR’s judgment, some of that improvement is likely to be permanent and some of it a temporary impact of stock-building. As a result, it forecasts that the rate of growth next year will be 0.2 percentage points below its forecast in June. It also predicts above-trend growth for the four years after that, but the level of GDP, or indeed the overall size of our economy, is forecast to be about half a percent higher next year than was forecast in June, and indeed higher throughout the whole forecast period.

Some have made predictions of a so-called double-dip recession, and although the OBR points out that

“growth has been volatile, as this is a common characteristic of post recession recoveries”,

its central view is that there will be no double-dip recession. Its forecast is growth next year of more than 2%, and it expects that in the slowest quarter of growth, the first quarter of next year, it will be 0.3%, rising back to 0.7% by the last quarter of next year. It also forecasts that consumer prices index inflation will fall from 3.2% in 2010 to 1.9% in 2012, once the short-term effects of the VAT rise and other temporary factors fall away.

Crucially, the OBR forecasts a gradual rebalancing of the economy as we move away from an economy built on debt to one in which we invest and export—again, something that some people said would not happen. It expects more demand to come from business investment, which is set to grow by over 8% for each of the next four years, as well as exports, which are expected to grow on average by over 6% per year. That new model of sustainable economic growth will rebalance the economy towards investment and exports and away from an unhealthy dependence on private debt and public deficit. It will bring to an end the unsustainable situation that saw families save less and less each year, so that they ended up, in the words of today’s report,

“effectively borrowing money to purchase increasingly expensive houses.”

The OBR also published today a full forecast for the labour market—something that, I should like to point out, previous Chancellors chose not to do. Employment is forecast to grow in every year of this Parliament. Total employment is expected to rise from 29 million to 30.1 million—that is over 1 million additional new jobs. Thanks to faster-than-expected growth in the economy, the OBR now expects the unemployment rate to be slightly lower this year at 7.9%, instead of 8.1%. Its forecast for the unemployment rate for next year is unchanged from the June Budget at 8%. For future years, the OBR predicts a gradual decrease in unemployment, with the rate falling every year. By the end of the Parliament, the OBR forecasts that it will fall to just above 6%, which is about 500,000 fewer unemployed people than at the beginning of this Parliament.

The trend in the claimant count is similar to that for the internationally recognised labour force survey measure of unemployment. However, the level is expected to be higher. The OBR explained that the revision is mainly due to a change in the way that flows from employment and support allowance on to jobseeker’s allowance will take place as a result of the new work capability assessment. In other words, more people are assumed to be flowing off ESA and on to JSA. That is a key part of our reforms to create a welfare system that encourages people to seek work and reduce costs to the taxpayer. In short, we will stop hiding people who can work in the incapacity statistics. Crucially, in each year, fewer people are expected to be on both of those out-of-work benefits combined than in the June forecasts.

I can also tell the House that following the spending review the OBR has recalculated its estimate of the reduction in the headcount in the public sector. In June, the OBR forecast a reduction in headcount of 490,000 over the next four years; in its latest forecast, that estimate has come down to 330,000—a reduction of 160,000. The bulk of that revision results from the action that we have taken to cut welfare bills rather than public services. Our difficult choices on child benefit, housing benefit and other benefits, each of which the Labour party opposed, mean that fewer posts will be lost across the public sector. Those headcount reductions that still need to take place will happen over four years, not overnight, and the OBR forecast is that private sector job creation will far outweigh the reduction in public sector employment. Its forecast states:

“A period of rising total employment alongside falling general government employment is in line with employment trends during the 1990s”

when total employment increased by 1.3 million over six years while general government employment fell by about 500,000.

The most important point is this: the lesson of what is happening all around us in Europe is that unless we deal decisively with this record budget deficit, many thousands more jobs will be put at risk in both the private and the public sectors.

Let me summarise the forecast for the public finances, which shows that Britain is decisively dealing with its debts. Borrowing this year is expected to be £1 billion less than was forecast in June. The OBR forecasts that public sector net borrowing will fall from £148.5 billion this year to just £18 billion in 2015-16. Government debt as a share of GDP is projected to peak just below 70% in 2013-14 and then to fall to 67% by 2015-16, so the debt ratio is now expected to peak at a lower point compared with the June forecast—just below 70% instead of just above it.

On the OBR’s central forecast, we will meet our fiscal mandate to eliminate the structural current budget deficit one year early, in 2014-15. The same is true for our target to get debt falling as a percentage of GDP. Indeed, to use the OBR’s own words,

“the Government has a slightly wider margin for error in meeting the mandate than appeared likely in June.”

For the first time, the OBR has also tested the resilience of the fiscal mandate against two alternative scenarios for the economy that critics have put forward, and in both cases the mandate is met.

It is clear that our decisive actions have proved to the world that Britain can live within her means. The Government have taken Britain out of the financial danger zone and set our economy on the path to recovery. That is the judgment not only of the OBR, but of the International Monetary Fund, the OECD, the European Commission, the Bank of England and all the major business organisations in this country. Already, our efforts are paying off. Today’s forecasts show that the cost of servicing the Government’s debt has come down. Compared to the June forecast, the OBR predicts that we will save £19 billion in interest payments between now and the end of the forecast period. That is £19 billion that will no longer be paid by British taxpayers to private bondholders and foreign Governments. It is £19 billion that would have been wasted, but will instead be saved.

This is an uncertain world, but the British recovery is on track. Employment is growing, 1 million more jobs are being created and the deficit is set to fall: the plan is working, so we will stick to the course. That is the only way to help confidence to flourish and growth to return, and I urge those who seriously suggest, when they see what is happening to our neighbours across Europe, that we should abandon the decisive plan we are following, and instead borrow and spend more, to think again. What they propose would be disastrous for the British economy, would put us back in the international firing line we have worked so hard to escape from and would mean higher deficits and jobs lost, and we should reject that path.

Stability is a necessary precondition for growth, but it is not enough. Our economy’s competitiveness has been in decline for more than a decade, undermining its ability to create jobs and grow, which is why we have already announced four annual reductions in corporation tax, axed the jobs tax, cut the small companies rate, expanded loan guarantees, simplified health and safety laws, invested in science and apprenticeships and promoted exports through major trade missions.

Let me set out some of the other things that my right hon. Friend the Secretary of State for Business, Innovation and Skills and I are announcing today to support growth and a rebalancing of our economy. In the Budget, I set out a plan to reduce the main rate of corporation tax to 24%—its lowest ever rate—demonstrating our commitment to tax competitiveness. I can now tell the House that today we are publishing the most significant programme of corporate tax reforms for a generation, for consultation with the business community. We propose to make the UK an even more attractive location for international business and investment by reforming the outdated and complex rules for controlled foreign companies. We have seen a steady stream of companies leaving the UK in recent years, and this Government, unlike the last one, are not content to sit by and watch our competitiveness leach away and our corporate tax base be undermined.

Another tax issue of crucial importance to our corporate sector is the tax treatment of income from intellectual property. For a long time, we have argued that we should increase the incentives to innovate and develop new products in this country, so to encourage high-tech businesses to invest in the UK and to create high-value jobs here, we can confirm that we will introduce from April 2013 a lower 10% corporate tax rate on profits from newly commercialised patents. We have been consulting the business community, and I can tell the House that as a result of this measure, GlaxoSmithKline will today announce a new £500 million investment programme in the UK, including new manufacturing in Hertfordshire; a £50 million venture capital fund to invest in health care research; a new facility at the university of Nottingham to develop green chemistry technology; and the building of GlaxoSmithKline’s next biopharmaceutical plant in this country, with sites in the north of England and Scotland under consideration. In total, it estimates that 1,000 new jobs will be created in the UK over the lifetime of these projects.

Today, we are also launching a cross-government growth review. This will be a determined, forensic examination of how every part of Government can do more to remove barriers to growth and support growth opportunities. Too often, the natural inclination of Government is in the opposite direction, creating new regulations, putting up new barriers, and making life more difficult for entrepreneurs and innovators. We are starting to turn the super-tanker around. Together with the Department for Business, Innovation and Skills, the Treasury will lead an intensive programme of work, involving all parts of Government, using evidence provided by the business community and reporting by next year’s Budget. We will identify reform priorities that can benefit the whole economy. Specific priority will be given to improvements to the planning system and employment law, more support for exporters and inward investment, and reforms to the competition regime. At the same time, we will begin a new sector-by-sector focus on removing barriers to growth and opening up new opportunities. Some of the resulting changes will be substantive on their own; others will help particular industries in specific ways. Some changes may be controversial if they confront vested interest, but brick by brick we will remove the barriers that are holding Britain back.

Finally, I would like to update the House on the international assistance package for Ireland. I attended the various European meetings in Brussels yesterday. We agreed a three-year package for Ireland worth €85 billion, which is

“warranted to safeguard financial stability in the euro area and the EU as a whole.”

Of that, €35 billion will be used to support Ireland’s banking sector, with €10 billion going towards immediate bank recapitalisation and €50 billion being used for sovereign debt support. Ireland will contribute €17.5 billion towards the total package, and the remaining €67.5 billion will be split, with one third coming from the IMF, one third from the European financial stability mechanism, and one third from bilateral loans and the eurozone facility. The terms of the IMF loans will be determined over the coming weeks. In principle, our bilateral loan is for £3.25 billion, and we will expect the loan to be denominated in sterling. The rate of interest on the loan will be similar to the rates levied by the IMF and the eurozone. The loan to Ireland is in Britain’s national interest. It will help one of our closest economic partners manage its way through difficult conditions.

I should also tell the House that the eurozone Finance Ministers met without me to discuss a permanent financial stability facility. I made it clear in the subsequent ECOFIN meeting that the UK will not be part of that. The president of the euro group made it clear that the UK will not be part of the permanent bail-out mechanism, and that the European financial stability mechanism, which was agreed under the previous Government in May and of which we are part, will cease to exist when that permanent eurozone mechanism is put in place.

When we came into office, Britain was in the financial danger zone. Our economy was unstable, our public finances out of control, our country—[Interruption.]

[Mr Speaker]

Order. The Chancellor must be heard.

[Mr Osborne]

Our economy was unstable, our public finances were out of control and our country was on the international watch list to avoid. We took decisive action. Now, the independent Office for Budget Responsibility has confirmed that the British recovery is on track, our public finances are under control, 1 million jobs are set to be created and our economy is rebalancing. Today we are taking further measures to secure growth and create prosperity. We are doing so based on the foundation of stability that we have now secured. Britain is on the mend, and I commend this statement to the House.

--- Later in debate ---

[Mr Osborne]

Ah. Well, I am sure that Lord Drayson also had some interesting things to say. [Interruption.] I welcome, by the way—[Interruption.]

[Mr Speaker]

Order. Members really must calm down. Only this morning I was talking to sixth-formers, one of whom observed that the noise in the Chamber was totally off-putting. The public loathe it, and so do I. Let us put an end to it.

[Mr Osborne]

I welcome the support that the Opposition have given to our decision to offer a bilateral loan to Ireland. We will have to put legislation before the House, and I will of course keep the shadow Chancellor informed of the details when they are negotiated along with the IMF, eurozone and other bilateral contributions. I should have mentioned that Sweden and Denmark have also provided bilateral loans.

I come back, however, to the point that this forecast shows 1 million new jobs being created over the next four or five years. It also shows growth of over 2% in each year; it shows the economy rebalancing; it shows Britain getting to grips with its debts. Yet all the shadow Chancellor could come up with was this: he said he had read a Financial Times editorial in the last week—and I note from his interview this morning that that is how he does his homework; he says he photocopies articles from the FT. Well, I went one better and actually got a copy of the FT, and he said this in his FT interview this morning:

“I am a great believer in the philosophy that if you’ve not got anything to say, keep your mouth shut”.

Very good.

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 16th November 2010 Commons Chamber

[Mr Osborne]

The whole point is that we have given these forecasts to an independent body, rather than just relying on the forecasts given by the Chancellor of the Exchequer at this Dispatch Box, so that people can believe in their independence and credibility. The Office for Budget Responsibility will produce its autumn forecast on 29 November. But of course the OBR figure that all Labour Members seem to use is the one for the public sector head count, but they seem to forget that this same body made a forecast of an increase in net employment, which sadly they never use.

[Mr Speaker]

David Tredinnick, not here.

--- Later in debate ---

[Mr Osborne]

The commission that we have set up is looking principally at the structure of the banking sector, which is another very important issue. We have said that we want the banks to make a contribution, which is why we introduced the permanent banking levy; we did not agree with the previous Government that that should not happen. We followed the best practice set out by the International Monetary Fund, which outlined two taxes that could be pursued—one was a bank levy and the other was a financial activities tax, which we also said that we would consider in the Budget. On the broader point of the Robin Hood tax, or the financial transactions tax, which is sometimes discussed at ECOFIN, I think that everyone accepts that it would have to be introduced internationally or else it would be almost impossible to collect any revenue.

[Mr Speaker]

I think we have got the drift.

Comprehensive Spending Review

Debate between George Osborne and John Bercow

Wednesday 20th October 2010 Commons Chamber

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

Today is the day when Britain steps back from the brink and when we confront the bills from a decade of debt; a day of rebuilding, when we set out a four-year plan to put our public services and welfare state on a sustainable footing for the long term, so that they can do their job of providing for families, protecting the vulnerable and underpinning a competitive economy. It is a hard road, but it leads to a better future.

We are going to bring the years of ever-rising borrowing to an end. We are going to ensure, like every solvent household in the country, that what we buy we can afford, that the bills we incur we have the income to meet and that we do not saddle our children with the interest on the interest on the interest on the debts that we were not prepared ourselves to pay.

Tackling this budget deficit is unavoidable. The decisions about how we do it are not. There are choices, and today we make them. Investment in the future, rather than the bills of past failure: that is our choice. We have chosen to spend on the country’s most important priorities: the health care of our people; the education of our young; our nation’s security; and the infrastructure that supports our economic growth. We have chosen to cut the waste and reform the welfare system that our country can no longer afford.

This is the context of this spending review. We have, at £109 billion, the largest structural budget deficit in Europe—this at a time when the whole world is concerned about high deficits and our economic stability depends on allaying those concerns. We are paying at the rate of £120 million a day, £43 billion a year in debt interest—this at a time when we all know that the money would far better serve the needs of our own citizens than those of the foreign creditors we borrow from. We have inherited from the previous Government plans—if one can call them that—that envisaged our national debt ratio still rising in the year 2014. Not a single penny of savings had been identified. Indeed, they were plans that envisaged the Chancellor of the Exchequer standing here in 2014, presenting a spending review that still had years of cutting public spending ahead of it. That is why, last year, the International Monetary Fund warned this country that it had to accelerate the reduction in the deficit. That is why the OECD, the Governor of the Bank of England and the CBI all agreed with the IMF.

The action we have taken since May has taken Britain out of the financial danger zone. The immediate reductions to in-year spending have bought us a breathing space in the sovereign debt storm. The creation of an independent Office for Budget Responsibility has brought honesty back to official forecasts. I can confirm to the House that the OBR and its new chair, Robert Chote, have audited all the annually managed expenditure savings in today’s statement.

The emergency Budget in June was the moment when fiscal credibility was restored. Our market interest rates fell to near-record lows, our country’s credit rating was reaffirmed and the IMF went from issuing warnings to calling our Budget essential. Now we must implement some of the key decisions required by that Budget. To back down now and abandon our plans would be the road to economic ruin. We will stick to the course, we will secure our country’s stability and we will not take Britain back to the brink of bankruptcy.

In the Budget, I set out the tax increases we were prepared to make, including on capital gains at the higher rate, pensions relief on the largest contributions and, for the first time, a permanent levy on banks. We also had to increase value added tax, where, fortunately, we were able to benefit from the preparatory work in the Treasury of the previous Government. I made it clear that spending reductions rather than tax rises needed to make up the bulk of the consolidation. That is what the leading international evidence suggests works best. So I set out spending totals for the coming years and announced some £11 billion of welfare savings that would help to achieve them. I also set out a new fiscal mandate for the public finances to eliminate the structural deficit by balancing the cyclically adjusted current Budget over five years by 2015-16. We set a target of national debt falling as a proportion of national income by that same year. We explained how, for reasons of caution, we will achieve both these objectives a year earlier, in 2014-15.

I can confirm that the spending plans I set out today achieve a balanced structural current Budget and falling national debt on the same timetable. I can further confirm that the current spending totals I set out in the Budget for each of the next four years are the same as the current spending totals I set out today. They have not changed. Next year, current expenditure will be £651 billion, then £665 billion the year after and £679 billion the year after that, before reaching £693 billion in 2014-15. The House will note that current spending is rising, not falling, over that period. That is partly because, even with the measures we take today, debt interest payments continue to grow in these years. Debt interest payments will reach £63 billion in 2014-15—it takes time to turn around the debt supertanker—but I can now report to the House that against the plans we inherited, one of the departments which suffers the greatest cut today, and at the steepest rate, is the department for debt interest. Debt interest payments will be lowered by £1 billion in 2012, then by £1.8 billion in 2013 and by £3 billion in 2014—a total of £5 billion over the course of the spending review, which is equivalent to 16 new hospitals or the annual salaries of 100,000 teachers.

At the Budget, I also set out my plans for capital spending over the next four years. I can tell the House that capital spending will be at £51 billion next year, then £49 billion, then £46 billion and at £47 billion in 2014-15. This is about £2 billion a year higher than I set out in the Budget. Given the contractual obligations we inherited from the last Government, doing anything else would have meant cutting projects that would clearly enhance the economic infrastructure of this country. This has no direct impact on whether we meet the fiscal mandate or the year in which the debt ratio starts falling. So, total public expenditure—capital and current—over the coming years will be £702 billion next year, then £713 billion, then £724 billion and £740 billion in 2014-15. In real terms, public spending will be at the same level as in 2008. Our public services and our welfare system will be put on a sustainable long-term footing and we will make sure that the financial catastrophe that happened under the previous Government never, ever happens again.

Let me now turn to the spending decisions and the three principles that we propose to apply to the choices that we have made. First, on reform, in every area where we make savings, we must leave no stone unturned in our search for waste, and we must deliver the changes necessary to make our public services fit for the modern age.

Secondly, on fairness, we are all in this together and all must make a contribution. Fairness means creating a welfare system that helps the vulnerable, supports people into work and is affordable for the working families who pay for it from their taxes. Fairness also means that, across the entire deficit reduction plan, those with the broadest shoulders will bear the greatest burden; those with the most should pay the most, and that includes our banks.

Thirdly, on growth, when money is short, we should ruthlessly prioritise those areas of public spending that are the most likely to support economic growth, including investments in our transport and green energy infrastructure, our science base and the skills and education of our citizens.

Let me explain now how those principles have guided our specific decisions. First, on reform, I believe that the public sector needs to change to support the aspirations and expectations of today’s population, rather than the aspirations and expectations of the 1950s, so the spending review is underpinned by a far-reaching programme of public service reform. We saw over the last decade that more money without reform was a recipe for failure; less money without reform would be worse, and we are not prepared to accept that, so we have begun by squeezing every last penny that we can find out of waste and administration costs.

Our ambition in this review was to find £3 billion of savings from the administrative budgets of central Government Departments. With the help of the Green review and the work done by my right hon. Friend the Minister for the Cabinet Office and Paymaster General, I can tell the House that we have gone further than we thought possible in cutting back-office costs. Quangos will be abolished; services will be integrated; assets will be sold; and the administrative budget of every main Government Department will be cut by a third. The result is this: we promised £3 billion of Whitehall savings; we will deliver £6 billion.

Of course, there is a very understandable concern about the reduction in the total public sector head count that will result from the measures in the spending review. We believe that the best estimate remains the one set out by the independent Office for Budget Responsibility. It has forecast a reduction in the head count of 490,000 over the spending review period. Now let us be clear: that is over four years, not overnight, and much of it will be achieved through natural turnover, by leaving posts unfilled as they become vacant. Estimates suggest a turnover rate of over 8% in the public sector; but, yes, there will be some redundancies, and that is up to the decisions of individual employers in the public sector. That is unavoidable when the country has run out of money.

We feel responsible for every individual who works for the Government, and we will always do everything that we can to help them to find alternative work. In fact, in the last three months alone, this economy created 178,000 jobs. So we should remember that, unless we deal with this record budget deficit decisively, many more jobs will be in danger in both the private and the public sector.

The Cabinet Office and the Treasury will oversee the programme of Whitehall savings. Both Departments will lead by example. The core Cabinet Office budget will be reduced by £55 million by 2014-15. Additional allocations will be provided to fund electoral reform, support the big society projects, establish community organisers and launch the pilots for the national citizen service, which will give young people for the first time a right of passage to citizenship. In recognition of the challenges faced by the voluntary and community sector, I am establishing a one-year £100 million transition fund to help those facing real hardship. The Treasury will see its overall budget reduce by 33%, and we will share the Department’s enormously expensive private finance initiative building, which my predecessor but one signed up to, by moving part of the Cabinet Office into the same premises.

The Chancellor is also a royal trustee, and I want to say something briefly about the civil list. As I outlined in the Budget, the 10-year settlement expired this year, and no provision for a new settlement had been made when we entered office.

Her Majesty has graciously agreed to a one-year cash freeze in the civil list for next year. Going forward, she has also agreed that total royal household spending will fall by 14% in 2012-13, while grants to the household will be frozen in cash terms. In order to support the costs of the historic diamond jubilee, which the whole country is looking forward to celebrating, there will be a temporary additional facility of £1 million. After that, the royal household will receive a new sovereign support grant linked to a portion of the revenue of the Crown estate, so that my successors do not have to return to this issue as I often as I have had to.

Central to this review—[Interruption.]

[Mr Speaker]

Order. All this noise makes progress slower and saps time that would otherwise be available for Back Benchers to question the Chancellor. Apart from anything else, it is unfair and discourteous.

[Mr Osborne]

Central to this review is the reshaping of our public services. First, there needs to be a dramatic shift in the balance of power from the centre to the locality. A policy of rising burdens, regulations, targets, assessments and guidance has undermined local democracy and stifled innovation. We will completely reverse that. We will give GPs powers to buy local services, schools the freedom to reward good teachers, and communities the right to elect their police and crime commissioners.

Secondly, we should understand that all services paid for by the Government do not have to be delivered by the Government, so we will expand the use of personal budgets for special education needs, children with disabilities and long-term health conditions. We will use new payment mechanisms for prisons, probation and community health services, and we will encourage new providers in adult social care, early years and road management.

For local government, the deficit that we have inherited means an unavoidably challenging settlement. There will be overall savings of funding to councils of 7.1% a year for four years, but to help councils we propose a massive devolution of financial control. Today I confirm that the ring-fencing of all local government revenue grants will end from April next year. The only exception will be simplified schools grants and a public health grant. Outside of schools, police and the fire service, the number of separate core grants that go to local authorities will be reduced from over 90 to fewer than 10. Councils and their leaders will remain accountable, but they will no longer have to report on 4,700 local area agreement targets.

The local government settlement includes funding for next year’s council tax freeze to help families when their budgets are tight. We are also introducing tax increment finance powers, allowing councils to fund key projects by borrowing against future increases in locally collected business rates.

Some in local government have concerns about the financing of social care. I can announce that grant funding for social care will be increased by an additional £1 billion by the fourth year of the spending review, and a further £1 billion for social care will be provided through the NHS to support joint working with councils, so that elderly people do not continue to fall between the cracks of two different systems. That is a total of £2 billion of additional funding for social care to protect the most vulnerable.

We will also reform our social housing system, for it is currently failing to address the needs of the country. Over 10 years, more than 500,000 social rented properties were lost. Waiting lists have shot up, families have been unable to move, and, although a generation ago only one in 10 families in social housing had no one working, this had risen to one in three by 2008-09.

We will ensure that in future social housing is more flexible. The terms for existing social tenants and their rent levels will remain unchanged. New tenants will be offered intermediate rents at about 80% of the market rent. Alongside £4.4 billion of capital resources, this will enable us to build up to 150,000 new affordable homes over the next four years. We will continue to improve the existing housing stock through the decent homes programme, and we will reform the planning system so that we put local people in charge, reduce the burdens on house builders and encourage more homes to be built, with a new homes bonus.

Within an overall resource budget for the Department for Communities and Local Government which is being reduced to £1.1 billion over the period, priority will be given to protecting the disabled facilities grant. This will go alongside a £6 billion commitment over the four years to the supporting people programme, which provides help with housing costs for thousands of the most vulnerable people in our communities. In recognition of the important service provided by the fire and rescue service, we have decided to limit its budget reductions in return for substantial operational reform.

Let me turn now to reforms in our security and defence. Yesterday, my right hon. Friend the Prime Minister set out the conclusions of the strategic and defence review. He explained in detail how we will protect the British people, deliver on our international obligations and secure British influence around the world. This spending review provides the resources to do just that. The budget for the Ministry of Defence will reach £33.5 billion in 2014-15, a saving of 8% over the period. On top of this settlement, we will continue to provide out of the reserve the resources that our forces in Afghanistan require. As the Chancellor, I believe strongly that if we ask our brave servicemen and women to risk their lives on our behalf in active combat, then we will give them all the tools they need to finish the job.

Our international influence and commitment to the world are not determined only by our military capabilities; our diplomacy and development policy matter too. Savings of 24% in the Foreign and Commonwealth Office budget will be achieved over the review period by a sharp reduction in the number of Whitehall-based diplomats and back-office functions. There will be a focus on helping British companies win exports and secure jobs at home, and with the help of UKTI we will attract significant overseas investment to our shores.

I can also confirm that this coalition Government will be the first British Government in history, and we will be the first major country in the world, to honour the United Nations commitment on international aid. The Department for International Development’s budget will rise to £11.5 billion over the next four years. Overseas development will reach 0.7% of national income in 2013; this will halve the number of deaths caused by malaria and save the lives of 50,000 women in pregnancy and of 250,000 newborn babies.

Whether working behind the counter of a charity shop, volunteering abroad or contributing taxes to our aid budget, Britons can hold their heads up high and say, “Even in these difficult times, we will honour the promise that we made to some of the poorest people in our world.”

Our aid budget allows Britain to lead in the world. It may be protected from cuts, but it is not from scrutiny. I have agreed with my right hon. Friend the International Development Secretary a plan of reform that reduces administration costs to half the global donor average, ends the aid programmes that we inherited in China and Russia, focuses on conflict resolution and creates an independent commission to assess the impact of the money that we commit.

Let me now turn to security at home. Protecting the citizen is a primary duty of the Government. Our police put themselves in harm’s way to make the rest of us safe, and we owe them our gratitude. But no public service can be immune from reform. Her Majesty’s inspectorate of constabulary found in his recent report that significant savings could be made to police budgets without affecting the quality of front-line policing. Tom Winsor is leading a review of terms and conditions that will report on how the police service can manage its resources to serve the public even more cost-effectively.

Using independent forecasts for the precept, the settlement that I am proposing today will see police spending falling by 4% each year. By cutting costs and scrapping bureaucracy, we are saving hundreds of thousands of police man hours. Our aim is to avoid any reduction in the visibility and availability of police in our streets. Our new national security strategy judges terrorism to be one of the highest risks facing this country. Therefore I am prioritising counter-terrorism over the review period, both in the Home Office budget and the single intelligence account. We have been assured that this will maintain our operational capabilities against both al-Qaeda and its affiliates and against Northern Irish terrorist threats. This will enable us to meet the terrorist threat and to protect the Olympic games in 2012.

Overall, the Home Office budget will find savings of an average of 6% a year. The Ministry of Justice’s budget will reach £7 billion by the end of the four-year period, with an average saving of 6% a year. A Green Paper will set out proposals to reform sentencing, intervene earlier to give treatment to mentally ill offenders and use voluntary and private providers to reduce reoffending. Some £1.3 billion of capital will also be provided over the period to maintain the existing prison estate and fund essential new-build projects, but plans for a new 1,500-place prison will be deferred.

The Law Officers’ Department will reduce its budget by a total of 24% over the period, with the Crown Prosecution Service greatly reducing its inflated cost base. Reforms will also be required to streamline the criminal justice system, close underused courts and reduce the legal aid bill. We do need fair access to justice but provided at a fair cost for the taxpayer.

All the reform that I have spoken of—to Whitehall and the way services are provided, to local government and to our defence, security and justice system—will improve both value for money for taxpayers and the service provided to the public. Next month, each Government Department will publish a business plan setting out its reform plans for the next four years, so that their priorities are clear and the public can hold them to account.

Reform is one of the guiding principles of this spending review—and so, too, is fairness. Let us be clear: there is nothing fair about running huge budget deficits and burdening future generations with the debts that we ourselves are not prepared to pay. How ironic that it was the last Labour Prime Minister himself who once observed that

“Public finances must be sustainable over the long term. If they are not then it is the poor…that will suffer most.”—[Official Report, 2 July 1997; Vol. 297, c. 304.]—

not that he is here in the Chamber today. That is why we are restoring order to our public finances before that is allowed to happen.

A fair Government deal with the deficit decisively, and that is what we are going to do. A fair Government make sure that those with the broadest shoulders bear the greatest burden. The distributional analysis published today shows that those on the highest incomes will contribute more towards this entire fiscal consolidation, not just in cash terms but also as a proportion of their income and consumption of public services combined.

I completely understand the public’s anger that the banks, which were so appallingly regulated over the last decade, and whose near-collapse wrought such damage to our economy, should now be contemplating paying high bonuses. We are overhauling the system of regulation that we inherited, so that the Bank of England, with its clout and reputation, is put in charge. We have set up the Independent Commission on Banking to look at the structure of the industry, and next year we will receive its report.

Today we set out very clearly, for all to take note of, our objective in taxing the banking industry going forward. We neither want to let banks off making their fair contribution, nor do we want to drive them abroad. Many hundreds of thousands of jobs across the whole United Kingdom depend on Britain being a competitive place for financial services.

Our aim will be to extract the maximum sustainable tax revenues from financial services. We will assess what those maximum revenues could be—not just in one year, but over a period of years. We have already decided, in the face of opposition from the previous Government, to introduce a permanent levy on banks. The legislation will be published tomorrow. Once fully effective, the permanent levy will raise more net each year and every year for the Exchequer than the one-year bonus tax did last year. I note that the previous Chancellor now admits that that failed to curb behaviour and was not sustainable.

However, that is not enough. We want the banks to pay not just by the letter of the tax law, but by its spirit. A year ago, the previous Government announced in a fanfare that they would require banks to sign up to the code of practice on taxation. I have asked the Revenue how many of our leading 15 banks actually signed up. The answer is four—four out of 15. That is what happened when they were in office—all talk and no action.

I have instructed the Revenue to work with the banking sector to ensure that the remaining banks have implemented the code of practice by the end of next month. We will also address the situation under the last Government where the gap between the taxes owed and the taxes paid grew considerably. So in this spending review, while the HMRC budget will be expected to find resource savings of 15% through the better use of new technology, greater efficiency and better IT contracts, we will be spending £900 million more on targeting tax evasion and fraud. This additional £900 million is expected to help us collect a missing £7 billion in tax revenues. Nor will fraud in the welfare system be tolerated any more. We estimate that £5 billion a year is being lost in this way—£5 billion that others have to work long hours to pay in their taxes. This week we published our plans to step up the fight to catch benefit cheats and deploy uncompromising penalties when they are caught.

That brings me to the wider welfare budget. A civilised country provides for families, protects the most vulnerable, helps those who look for work, and supports those in retirement. That is why one of the first acts of this coalition Government was to re-link the basic state pension to earnings and guarantee a rise each year by earnings, inflation or 2.5%. Never again will those who worked hard all their lives be insulted with a state pension increase of just 75p. But this guarantee of a decent income in retirement has to be paid for at a time when people are living much longer than anyone predicted. We should celebrate that fact, but also confront it. Lord Turner’s report on pensions, commissioned by the last Government, acknowledged that a more generous state pension had to be funded by an increase in the pension age. Even since its publication, life expectancy has risen further than it predicted.

Before the summer, we launched a review on increasing the state pension age, and that review has now concluded. As a result, I can announce today that the state pension age for men and women will reach 66 by 2020. This will involve a gradual increase in the state pension age from 65 to 66, starting in 2018, and it will mean an acceleration of the increase in the female pension age already under way since this April. From 2016, the rate of increase will be three months in every four rather than the current plan of one month in every two. Raising the state pension age is what many, many countries are now doing, and will by the end of the next Parliament save over £5 billion a year—money that will be used to provide a more generous basic state pension as we manage demographic pressures.

Earlier this month, we also received the interim report from John Hutton’s public service pensions commission. I am sure that the whole House will want to thank John Hutton for his excellent and independent piece of work. I welcome his findings. I hope that it will form the basis of a new deal that balances the legitimate expectations of hard-working public servants for a decent income in retirement with the equally legitimate demands of hard-working taxpayers that they do not pay unfairly for it.

I think that the elements of this new pension deal are clear. We should accept that public service pensions continue to provide a form of defined benefit and that there is no race to the bottom of pension provision. We want public service pensions to be a gold standard. At the same time, we should accept that they must be affordable. When these public service pension schemes were established in the 1950s, taxpayers made half the contributions; today, they make up two thirds of the contributions, and the unfunded bill is set to rise to £33 billion by 2015-16.

We should accept, as John Hutton does, that there has to be an increase in employee contributions, although I also agree with him that this should be staggered and progressive. That means that the lower-paid—and those in the armed forces—are protected, and the highest-paid public servants, who get the largest benefits, pay the highest contributions. We will await the full commission report next spring before coming to any conclusions on the exact nature of the defined benefit and the progressive contribution rise. We will also launch a consultation on the fair deal policy, as he recommends, but we will now carry out, as the interim report suggests, a full public consultation on the appropriate discount rate used to set contributions to these pensions. From the perspective of filling the hole in the public finances, we will seek changes that deliver an additional £1.8 billion of savings per year in the cost of public service pensions by 2014-15, over and above the plans left to us by the last Government.

It is also clear that the current final salary pension terms for MPs are not sustainable, and we anticipate that the current scheme will have to end. We will make a further statement following the publication of Lord Hutton’s findings.

The welfare system is also there to help people of working age when they lose their job, have a disability, start a family and need help with low pay. But the truth, as everyone knows, is that the welfare system is failing many millions of our fellow citizens. People find themselves trapped in an incomprehensible out-of-work benefit system for their entire lifetime because it simply does not pay to work. This robs them of their aspirations and opportunities, and it costs the rest of the country a fortune. Welfare spending now accounts for one third of all public spending. Benefit bills soared by 45% under the previous Government. In some cases, the benefit bill of a single out-of-work family has amounted to the tax bills of 16 working families put together. This is totally unsustainable and unfair. The last Government promised reform and flunked it: we will deliver.

My right hon. Friend the Work and Pensions Secretary is setting out proposals, with my support, to replace all working-age benefits and tax credits with a single, simple universal credit. The guiding rule will be this: it will always pay to work. Those who get work will be better off than those who do not. This represents the greatest reform to our welfare state for a generation. It will be introduced over the next two Parliaments at a pace that ensures that we get this right. I have set aside over this spending review more than £2 billion of resources to make this happen, and it will go alongside our new Work programme, which we are also funding today. Drawing on the skills of the voluntary sector and private providers, the Work programme will provide intensive help for those looking for work and support for those who could look for work but currently lack the confidence or the skills to try.

The Department for Work and Pensions will make savings to help to deliver these schemes by increasing the use of digital applications and reducing overheads. But we will also be seeking substantial savings from the rest of the £200 billion benefit bill, on top of those already identified in the Budget. As I said in June, the more we could save on welfare costs, the more we could continue other, more productive areas of Government spending. And in the massive public consultation we conducted over the summer, the overwhelming message we received was that the British people think it is fair to reform and reduce welfare bills in order to protect important public services.

So today I announce these further welfare savings. We will time limit contributory employment and support allowance for those in the work-related activity group to one year. This is double the length of time that applies to contributory jobseeker’s allowance. We will increase the age threshold for the shared-room rate in housing benefit from 25 to 35, so that housing benefit rules reflect the housing expectations of people of a similar age not on benefits. We will give local authorities greater flexibility to manage council tax, together with direct control over council tax benefit, within an overall budget that will be reduced by 10% from April 2013.

We will align the rules for the mobility and care elements of disability living allowance paid to people in residential care, generating savings but enabling us to continue with this important benefit. We will freeze the maximum savings credit award in pension credit for four years, thereby limiting the spread of means-testing up the income distribution.

We will further control the cost of tax credits by freezing the basic and 30-hour elements for three years; we will change the working tax credit eligibility rules so that couples with children must work 24 hours per week between them; and we will return the child care element of the working tax credit to its previous 70% level. We will also introduce a new cap on benefits. No family that does not work will receive more in benefits than the average family that does go out to work. That is tough, but fair. Of course, those in receipt of disability living allowance, working tax credit or the war widow’s pension will be excluded.

Taken together, all these welfare measures I have outlined will save the country £7 billion a year. But we want to ensure that low-income families with children are protected from the adverse effects of these essential savings—because this Government are committed to ending child poverty. I can announce today that I am increasing the child element of the child tax credit by a further £30 in 2011-12 and £50 in 2012-13 above indexation. This will mean annual increases of £180 and then £110 above the level promised by the last Government, and it will provide support to 4 million lower-income families. And I can confirm that using the same model we inherited, the spending review will have no measurable impact on child poverty over the next two years, while we await the conclusions of the report by the right hon. Member for Birkenhead (Mr Field).

Let me now turn to the universal benefits. I have taken the difficult decision to remove child benefit from families with a higher rate taxpayer. I wish it were otherwise, but I simply cannot ask those watching this earning just £15,000 or £30,000 a year to go on paying the child benefit of those earning £50,000 or £100,000 a year. The debts of the last Labour Government, and the need to ensure that the better-off in society also make a fair contribution, make this choice unavoidable. It also means that no further changes to child benefit are required. Child benefit will continue to be paid in the normal way to the great majority of the population from birth until a child leaves full-time education at the age of 18 or even 19. We can afford to do that because, according to the latest independent estimates we have received from the Office for Budget Responsibility, removing child benefit from higher rate taxpayers will actually save Britain £2.5 billion a year.

We will also keep the universal benefits for pensioners, in recognition of the fact that many have worked hard and saved hard all their lives. Free eye tests, free prescription charges, free bus passes, free TV licences for the over-75s and winter fuel payments will remain exactly as budgeted for by the previous Government, as promised. I am also turning the temporary increase in the cold weather payments introduced by the last Government into a permanent increase. In my view, higher cold weather payments should be for life, not just for general elections.

So, too, are the promises that we make on the national health service. The NHS is an intrinsic part of the fabric of our country. It is the embodiment of a fair society. This coalition Government made a commitment to protect the NHS and increase health spending every year. Today we honour that commitment in full. Total health spending will rise each year over and above inflation. This year we are spending £104 billion on health care, capital and current combined. By the end of four years we will be spending £114 billion. We can afford that, in part because of the decisions on welfare that I have just announced, and also because we have made tough decisions in other parts of the Government budget. But to govern is to choose, and we have chosen the national health service.

That does not mean that we are letting the Department of Health off the need to drive real reform and savings from waste and inefficiency. Productivity in the health service fell steadily over the past 10 years, and that must not continue. By 2014 we are aiming to save up to £20 billion a year by demanding better value for money—but the money we save will be reinvested in our nation’s health care.

As the independent forecasts we published in the Budget show, we need to make those savings to deal with our ageing population and the rising costs of new medical treatments, but there are also new services we can offer. A new cancer drug fund will be provided, spending on health research will be protected, and we will prioritise work on the treatment of dementia. We will expand access to psychological therapies for the young, the elderly and those with mental illness. We will fund new hospital schemes, including the St Helier, the Royal Oldham and the West Cumberland.

For health spending, as for other spending announcements, there will be consequential allocations for Scotland, Wales and Northern Ireland. The Barnett formula will be applied in the usual way, which means that the increase in health spending and the relative protection of education spending will feed through to the devolved resource budget. It means that all three nations will actually see cash rises in their budget, although rises below the rate of inflation. For Scotland the resource budget will rise to £25.4 billion in 2014-15. For Wales it will rise to £13.5 billion, and for Northern Ireland to £9.5 billion. In Scotland we are proceeding with the implementation of the Calman reforms. In Wales we will consider with the Assembly Government the proposals in the final Holtham report, consistent with the Calman work being undertaken in Scotland.

In Northern Ireland, the collapse of the Presbyterian Mutual Society has caused great hardship, and people have been left without their money for far too long. I confirm today that we will provide the Northern Ireland Executive with £25 million in cash and a £175 million loan to help those who have lost their life savings.

We will also help those across the United Kingdom who have lost money as a result of the collapse of Equitable Life. For 10 years the Equitable Life policyholders have fought for justice. For 10 years the last Government dithered, delayed and denied them that justice. It is time to right the wrong done to many thousands of people who did the right thing, saved for their future and tried not to depend on the state, and then were the innocent victims of a terrible failure of regulation.

So let me make it clear: I accept the findings of the parliamentary ombudsman in full. I have read the advice of Sir John Chadwick and I thank him for it, but I do not agree with the level of compensation that his analysis suggested. I agree with the ombudsman that the relative loss suffered is the difference between what policyholders actually received from their policies and what they would have received elsewhere. The parliamentary ombudsman herself recognised that a balance had to be struck between being fair to policyholders and being fair to taxpayers, particularly when many budgets and benefits are being cut. But money that we pay out has to come from general public expenditure. I have decided that the fair amount to pay out in total is in the region of £1.5 billion, two thirds of which will be found in this spending review period. Those who had with-profits annuities were particularly hard hit, as they were retired and were unable to move their savings elsewhere. As a result, the Government will cover the cost of the total relative loss suffered by those deserving people. The scheme will start making payments next year.

Those measures, and our welfare reforms, mean that it will always pay to work; the benefits savings will help us protect key public services such as the national health service; and there is help for those who have saved and lost everything. These are fair decisions, consistent with the second principle of this spending review.

The third and final principle centres on growth and promoting a private sector recovery. By restoring macro-economic stability we have brought certainty to business, and by cutting business taxes we are giving businesses the freedom to compete. Today’s review builds on those steps, because even when money is short we should prioritise the areas of public spending that are most likely to support economic growth. That is what we are doing with the Department for Business, Innovation and Skills. Administration will be cut by £400 million, 24 quangos will go, lower-priority programmes such as Train to Gain will be abolished, and adult learners and employers will to have contribute more to further education. But that means that today I can announce the largest ever financial investment in adult apprenticeships—an increase of more than 50% on the previous Government’s provision, helping 75,000 new apprentices a year by the end of this spending review period.

We will maintain and invest in the post office network and protect community post offices. We will come forward with our detailed response to Lord Browne’s report on higher education funding and student finance, including our plans to provide financial support to encourage those from the poorest households to stay in education. Our universities are the jewels in our economic crown, and it is clear that if we want to keep our place near the top of the world league tables, we need to reform our system of funding and reject—as, to be fair, many Opposition Members do—the unworkable idea of a pure graduate tax. Clearly, better-off graduates will have to pay more, which will enable us to reduce considerably the contribution that general taxpayers have to make to the education of those who will probably end up earning much more than them.

Overall, annual savings of 7.1% will be found from the budget of the Department for Business, Innovation and Skills—the minimum it was asked to find. Within those savings, however, the Secretary of State and I have decided to protect the science budget. Britain is a world leader in scientific research, and that is vital to our future economic success. That is why I am proposing that we do not cut the cash going to the science budget. It will be protected at £4.6 billion a year. Building on the Wakeham review of science spending, we have found that within the science budget, significant savings of £324 million can be found through efficiency. If they are implemented, with this relatively protected settlement I am confident that our country’s scientific output can increase over the next four years.

We will also invest £220 million in the UK Centre for Medical Research and Innovation at St Pancras, and fund the molecular biology lab in Cambridge, the Institute for Animal Health in Pirbright and the diamond synchrotron in Oxford.

Research and technological innovation will help us with one of the greatest scientific challenges of our times—climate change—and support new jobs in low- carbon industries. So today, even in these straitened times, we commit public capital funding of up to £1 billion to one of the world’s first commercial-scale carbon capture and storage demonstration projects. We will also invest more than £200 million in developing offshore wind technology at port sites.

Yesterday protesters scaled the Treasury, urging us to proceed with their idea for a green investment bank. That is the first time anyone has protested in favour of a bank—but we will go ahead. I have set aside in the spending review £1 billion of funding for that bank, but I hope that much more will be raised from the private sector and the proceeds of future Government asset sales.

The aim of all those investments is for Britain to be a leader of the new green economy, creating jobs, saving energy costs and reducing carbon emissions. We will also introduce incentives to help families reduce their bills. We will introduce a funded renewable heat incentive, and our green deal will encourage home energy efficiency at no up-front cost to homeowners, allowing us to phase out the Warm Front programme.

Overall, the total resource settlement for the Department of Energy and Climate Change will fall by an average 5% a year, but there will be a large increase in capital spending, partly to meet the unavoidable commitments that we have been left on nuclear decommissioning.

The Department for Environment, Food and Rural Affairs will deliver resource savings of an average 8% a year, but we will fund a major improvement in our flood defences and coastal erosion management that will provide better protection for 145,000 homes.

Britain’s arts, heritage and sport all have enormous value in their own right, but our rich and varied cultural life is also one of our country’s greatest economic assets. The resource budget for the Department for Culture, Media and Sport will come down to £1.1 billion by 2014-15. Administrative costs are being reduced by 41% and 19 quangos will be abolished or reformed. All that is being done so that we can limit four-year reductions to 15% in core programmes such as our national museums, the front-line funding provided to our arts and Sport England’s whole sport plans. We will complete the new world-class building extensions for the Tate Gallery and the British Museum. The Secretary of State will provide details of further projects shortly. I can also announce today that, in order for our nation’s culture and heritage to remain available to all, we will continue to fund free entry to museums and galleries. There is also ongoing provision of the £9.3 billion of public funding for a safe and successful Olympic and Paralympic games in London in 2012.

We have approached the BBC to ensure that it, too, makes its contribution, as a publicly funded organisation, to savings during the spending review. I am pleased to confirm that this week we have struck a deal. The BBC will take from the Government the responsibility for funding the BBC World Service and BBC Monitor, as well as part-funding S4C. That amounts to some £340 million of savings a year for the Exchequer by 2014-15.

To ensure that the cost of those new obligations is not passed on to the licence fee payer, the BBC has agreed a funding deal for the full duration of its charter review. The licence fee will be frozen for the next six years. That deal helps almost every family, and is equivalent to a 16% saving in the BBC budget over the period, similar to the savings in other major cultural institutions.

The BBC has also agreed to reduce its online spend and make no further encroachments into local media markets in order to protect local newspapers and independent local radio and TV. It will contribute to the £530 million that we will spend over the next four years in bringing superfast broadband to rural parts of our country that the private sector will take longer to reach. Pilots will go ahead in the Highlands and Islands, North Yorkshire, Cumbria and Herefordshire. All that will help encourage the growth of our creative industries as a key part of the new economy that we are seeking to build.

After our defence requirements are met, the Department for Transport will receive the largest capital settlement. Over the next four years we will invest more than £30 billion in transport projects—more than was invested during the past four years. Of that, £14 billion will fund maintenance and investment in our railways. Direct bus subsidies will be reduced, but statutory concessionary fares will remain.

The cap on regulated rail fares will rise to RPI plus 3% for the three years from 2012, but that will help this country afford new rolling stock as well as improve passenger conditions. The Secretary of State will set out how more of the transport money will be allocated next week.

However, I want to tell the House today about some of the projects that will go ahead. For let us remember that, even after the tough spending settlements, the country will still be spending more than £700 billion a year. In Yorkshire and Humber, capacity on the M62 will be expanded, £90 million will be spent on improving rail platforms across various towns and cities, and we will also improve line speeds across the Pennines. In the north-east £500 million will be spent on refurbishing the Tyne and Wear metro and the Tees valley bus network. In the north-west we will invest in rail electrification between Manchester, Liverpool, Preston and Blackpool, and we will provide funding for a new suspension bridge over the Mersey at Runcorn.

Rail and roads in Scotland are devolved to the Scottish Executive, and roads in Wales are also devolved, but I can tell the House that major rail investments around Cardiff, Barry and Newport will go ahead.

In the east midlands the M1 and the A46 will be improved. In the west midlands we will extend the Midland metro and completely redevelop Birmingham New Street station. In the south-west we will fund improvements on the M5 and the M4, and the new transport scheme for Weymouth. In the east of England, colleagues will be delighted to know, the A11 to Norwich will be upgraded. Around London, we will widen the M25 between 10 different junctions and complete improvements to the A3 at Hindhead.

In London, on top of the Olympics, a major investment in our capital city’s transport infrastructure will take place. Crossrail will go ahead and key tube lines will be upgraded for the 21st century.

That is nothing like the complete list, because next week, we will set out more details. So, yes, we are saving money and putting the state on a more sustainable footing, but even then, we will spend tens of billions of pounds on Britain’s future infrastructure. Next week the Secretary of State will also set out our national infrastructure plan, so that private money is put to work in building for this country the economic infrastructure that our businesses need. Our regional growth fund will also help us do that. As promised, £1 billion has been found for the fund over the next two years—money designed to lever in private investment in areas of our country where it has been too absent over the past decade. I can announce today that I am providing close to half a billion pounds extra in the third year for the regional growth fund.

Long-term investment in the capacity of our transport, our science and our green energy will all help move Britain from its decade-long dependence on one sector of the economy in one part of the country, and the ruin to which that has led.

The most important ingredient of a 21st-century economy is well-educated children, who believe in themselves and aspire to a better life, whatever their background or disadvantages. In June, after the Budget, when the Chief Secretary to the Treasury and I turned our attention to how to allocate spending between Departments, we set ourselves a goal. We wanted to see if it was possible, even when spending was being cut, to find more resources for our schools and for the early years education of our children. I can tell the House that we have succeeded. It has meant other Departments taking bigger cuts, but I believe strongly that that is the right choice for our country’s future.

There will be a real increase in the money for schools, not just next year or the year after, as the previous Government once promised, but for each of the next four years. The schools budget will rise from £35 billion to £39 billion. Even as pupil numbers greatly increase, we will ensure that the cash funding per pupil does not fall. We will also sweep away all the different ways in which money is ring-fenced so that schools can decide how to spend their money as they think best.

We will also introduce a new £2.5 billion pupil premium, which supports the education of disadvantaged children and will provide a real incentive for good schools to take pupils from poorer backgrounds. That pupil premium is at the heart of the coalition agreement, and at the heart of our commitment to reform, fairness and economic growth.

Parents, teachers and community groups will be supported if they wish to establish free schools. We will fund an increase in places for 16 to 19-year-olds, and raise the participation age to 18 by the end of the Parliament. That enables us to replace education maintenance allowances with more targeted support.

We will also provide support for the early years of our children. The increased entitlement to 15 hours a week free education for all three and four-year-olds that was introduced under this Government will continue. Sure Start services will be protected in cash terms and the programme will be focused on its original purpose. We will help them further by introducing for the very first time 15 free hours of early education and care for all disadvantaged two-year-olds, so that those children have a chance in life and are ready like the rest of their classmates for school.

Overall, the Department for Education will be required to find resource savings of only 1% a year. Central administration will be cut by a third and five quangos will go. The capital budget will, as we know, have to bear its share of the reductions, but as the House knows, we have had to phase out the hopelessly inefficient and over-committed Building Schools for the Future programme. However, £15.8 billion will be spent to maintain the school estate and to rebuild and refurbish 600 schools. I repeat: the resource money for schools—the money that goes into the classroom—on the broadest definition, including all the main grants, will go up in real terms every year. That is a real investment in the future of our children and in the future growth of our economy too.

Let me conclude. The decisions we have taken today bring sanity to our public finances and stability to our economy. We have dealt decisively with the largest budget deficit this House of Commons has ever had to face outside of wartime. We have had to make choices—choices about the things we support—and today I have announced real increases in the NHS budget and the resources of schools, as well as new investment in the infrastructure of our economy. I have announced real reductions in waste and reforms to welfare and although that will reshape public services to meet the challenges of this time, I think it is the right choice.

I have one final observation. During the process of this spending review, I have received many submissions, including one from the Labour party. It said that the average cut for unprotected Departments should be set at 20% over the coming four years, rather than the 25% that I anticipated in my June Budget. I have examined that proposal carefully and consulted the published documents of my predecessor, the right hon. Member for Edinburgh South West (Mr Darling), and because of our tough but fair decisions to reform welfare and the savings that we have made on debt interest, I am pleased to tell the House that that has been possible. The average savings in departmental budgets will be lower than the previous Government implied in their March Budget. Instead of cuts of 20%, there will be cuts of 19% over the four years, so I thank the Opposition for their support and input and look forward to their votes.

This coalition Government faced the worst economic inheritance in modern history. The debts we were left with threatened every job and public service in the country, but we have put the national interest first. We have made the tough choices. We have protected health and schools and investment in growth, and we have reformed welfare and cut waste. We have made sure that we are all in this together, and we have taken our country back from the brink of bankruptcy. A stronger Britain starts here, and I commend this statement to the House. [Interruption.]

[Mr Speaker]

Order. I call Alan Johnson.

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[Ms Louise Bagshawe (Corby) (Con)]

Does my right hon. Friend share my joy at the shadow Chancellor’s admission that the deficit must be reduced, and my mystification that he is apparently so bereft of ideas that today he sent an e-mail asking for “Answers on a postcard, please”?

[Mr Speaker]

Order. I must ask for a very brief reply. I hope that the message will be received.

[Mr Osborne]

I agree with my hon. Friend.

--- Later in debate ---

[Mr Speaker]

Order. We are grateful, but I think we have the thrust of it.

[Mr Osborne]

First, to put it in context, close to 200,000 jobs have been created in the last three months. Secondly, the Labour party’s plans involved a head-count reduction of more than 400,000. It was accepted by Labour politicians during the election that there would be a head-count reduction and that there would be redundancies. This is what happens when a country loses control of its public finances. If we had been better managed over recent years—if the people doing my job before me had managed to avoid this record budget deficit, which is the largest in the G20—[Interruption.] Opposition Members keep saying that this is all to do with the international situation. They have not yet managed to explain to me why we were the worst affected in that international situation. We have to take some difficult decisions, but it will help if private sector recovery helps to create jobs. The number that the hon. Lady keeps using is a number from an independent body—the Office for Budget Responsibility—that she presumably regards as credible, since she is quoting it, but the OBR also forecast falling unemployment over the period. She cannot really use one forecast from the body and not the other.

Proposed Public Expenditure Cuts

Debate between George Osborne and John Bercow

Monday 13th September 2010 Commons Chamber

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

I am grateful for the opportunity to update the House on the progress of the spending review, and to remind people of the context in which we make these difficult decisions.

The previous Government left Britain with the largest budget deficit of any major economy and no credible plan to deal with it. That was a major cause of instability and uncertainty that threatened any prospect of economic recovery. It was reflected in the substantially higher market interest rates that British families and businesses were being charged compared with those for families and businesses in countries that were regarded as less exposed to sovereign credit risk. The new Government had to take urgent steps to restore stability and allay fears about our country’s ability to pay its way in the world. In the words of the previous Labour Prime Minister,

“if we fail to offer a convincing path out of debt, that...will itself plunge us into stagnation”.

Those views were echoed in the comments this weekend from the International Monetary Fund, which said that

“fiscal consolidation remains essential for strong, sustained growth over the medium run”.

That is why in the Budget I announced decisive steps to get the deficit under control. I believe that that Budget has restored stability to the British economy and provided a sound basis for a sustainable recovery. It has helped keep down the market interest rates that Britain pays on its debts, which are today more than half a percentage point lower than at the general election. In other countries, such as Spain, Portugal or Ireland, these same rates have stayed broadly flat or gone up since then.

Because of the measures that we are taking, independent forecasters are increasingly confident about the British economy. Last week the OECD predicted that the UK would see the strongest growth in the G7 this quarter and the second strongest growth next quarter. I can also tell the House that today the EU predicted that the UK will see the strongest recovery in the second half of this year of any major European economy. These, of course, are just forecasts and all this hard-won stability would be put at risk if we did not now implement the components of our Budget plan.

Let me remind the House of the measures that we took at the emergency Budget and the steps that we now have to take. We are set to tighten the public finances by a total of £113 billion by 2014-15. Of this, £29 billion will come from tax measures, including the increase in VAT, higher capital gains tax and a new permanent levy on banks. A further £11 billion will come from the welfare reforms announced at the Budget. Another £10 billion will come as a consequence of paying lower interest charges on the national debt as a result of our plan—£10 billion that those who opposed the Budget plan would have to find to pay the holders of Government debt.

That leaves £61 billion that will come from reductions to departmental expenditure plans. It is worth reminding the House that £44 billion of that £61 billion was assumed in the figures left to us by the previous Government. In other words, for all the synthetic noise and fury that we hear, £3 of every £4 that we are having to cut were cuts that the Opposition were planning to make. Unfortunately, not a single one of those pounds was allocated to a specific programme.

Our job now is to allocate those departmental budgets. That is the purpose of the spending review that is under way, and I will announce the full results to the House of Commons on 20 October. The review is informed by the largest public consultation exercise ever undertaken on public expenditure. More than 100,000 substantive ideas have been received from members of the public. Teams at the Treasury have been sifting through these ideas over the past six weeks and some are already being implemented.

We have also created a mechanism for collective discussion of spending issues across the Cabinet, which is something of an innovation, so the Prime Minister—[Interruption.] Well, there was a Cabinet Committee on life chances, on talent and on democratic renewal under the previous Government, but no permanent committee on public expenditure. The Public Expenditure Committee of the Cabinet has already met twice this month and will meet again this week.

Of course, some decisions that shape the spending review have already been taken. We will protect the budget of the NHS with real increases, we will honour the commitments on international aid that we have made to the poorest in the world, and we will protect capital investment in our economic future. We have not reduced capital spending in future years beyond the plans that we inherited, and as we take further decisions, we will strive to ensure that those support economic growth, promote reform and local control, and are fair—fair between different sections of society and between different generations.

Let me say something about welfare spending—[Interruption.]

[Mr Speaker]

Order. May I tell the Chancellor that he has well exceeded his time? Allowance will have to be made for the Opposition Front Bench. That will happen today, but in future the time limits must be adhered to in this place.

[Mr Osborne]

I will heed your injunction, Mr Speaker, but the question was a very general one about an update on the public expenditure review.

I shall say something about welfare, if the Speaker will allow me. The welfare bill has risen by 45% in the past 10 years and almost £1 in £3 that the Government spend goes towards welfare. The current system is not protecting those who genuinely cannot work, nor is it helping those desperately looking for work to find a new job quickly. Close to 5 million people are on out-of-work benefits, more than half of whom have spent at least half of the past 10 years in this situation. Rather than rewarding work and supporting the vulnerable, we are wasting the lives of millions of people. That is why my right hon. Friend the Secretary of State for Work and Pensions is working with me and other Cabinet colleagues to see what we can do fundamentally to reform the welfare system so that it rewards work and supports aspiration, as well as saving the taxpayer on what someone once called the bills for social failure. When we have decisions to announce, we will bring them to the House and, of course, we will want to keep the House informed in other ways.

I have already given the Treasury Committee an unprecedented power to veto my preferred candidate to chair the independent Office for Budget Responsibility, Mr. Robert Chote, and I can tell the House today that I have asked my hon. Friends the Members for Gainsborough (Mr Leigh) and for Southport (Dr Pugh) to draw on their considerable expertise on the Public Accounts Committee in the last Parliament to advise the Government on how to improve the financial management systems that we have inherited, and in turn improve accountability to the House.

We have many difficult choices to make, but one thing is clear: one party created this mess; two parties are working hard to clear it up.

[Mr Osborne]

The position on welfare is exactly as I set out in my Budget speech at this Dispatch Box when I said that if we could find further savings on welfare, we would be able to reduce the pressure on other Departments. That was what we were planning to do over the coming months as part of the spending review, and that is exactly what I said in the television interview to which my hon. Friend refers.

Secondly, it would be impossible to conduct a spending review without looking at the welfare bill. Whether one is looking for £61 billion of savings or £44 billion, welfare spending accounts for a third of the entire Government budget, so one has to look at the welfare budget. That is what we are doing, but we are looking to do it in a way that reforms welfare, to help those millions of people who have been trapped for a decade or more on out-of-work benefits into work, to help those with aspirations to improve their income, to make sure that work is rewarded by the benefit system, and to do that while we are protecting those who cannot work and protecting the most vulnerable in our society. I would argue that the failure on welfare reform over the last decade was one of the greatest failures of the previous Government.

Despite the lurid headlines in some newspapers, the relationship and the co-operation between the Treasury and the DWP is strong. There is a perfectly natural—[Interruption.]

[Mr Speaker]

Order. The Chancellor must be heard. This sedentary chuntering needs to come to an end. I want to hear the Chancellor.

[Mr Osborne]

It is an improvement on the situation under the previous Government, where there was absolutely no contact between the Secretary of State for Work and Pensions and the Chancellor. The two Departments are working very well. Obviously the Treasury is interested in financial management and control: that is a proper part of our function. My right hon. Friend has inspirational plans that he has worked on to reform welfare and get people working, and the two of us are working together with colleagues in the Cabinet to make that happen.

Let me finally say something about the tax gap and people who do not pay their taxes. Later this week, figures will be produced—independent figures, not produced by me—which will show the latest situation on the tax gap that we have inherited: in other words, the gap between what should be collected in tax and what is collected in tax at the moment. Judging by previous figures I have seen, I think that the House will be pretty staggered by this number. [Interruption.] Labour Members seem to forget that their people were in power for 13 years. We have inherited this situation, and we will be taking steps to reduce tax avoidance, including tax avoidance by the richest people in our society, so that everyone makes a contribution.

--- Later in debate ---

[Sajid Javid (Bromsgrove) (Con)]

Does my right hon. Friend have a view on why Labour Members continue to treat the entire British public like children? They spend, spend, spend, bringing our country to the verge of bankruptcy—

[Mr Speaker]

Order. There is much pressure on time. I remind the hon. Gentleman that he must ask a Minister about the policy of the Government, not the attitude of the Opposition. We will leave it there; the Chancellor can respond briefly if he wants, but he is under no obligation.

[Mr Osborne]

My hon. Friend said some very good things about how the Opposition treat the rest of the country like children.

--- Later in debate ---

[Liz Kendall (Leicester West) (Lab)]

The Chair of the Treasury Committee asked the Chancellor to publish new details of the distributional impact of the Budget, including the proposed cuts to housing benefit and disability living allowance. Is the Chancellor aware that the Institute for Fiscal Studies produced such an analysis last month? Is he aware that it says that

“the overall effect of the new reforms announced in the June 2010 Budget is regressive, whereas the tax and benefit reforms announced by the previous Government” —

for the same period—

“are progressive”?

In the light of that evidence, will he explain whether he still claims that his Budget and his Government are progressive?

[Mr Speaker]

Order. There were three questions there, but one answer will suffice.

[Mr Osborne]

I can do no better than repeat what the IFS said in the report to which the hon. Lady has referred. It said that in 2012,

“Considering all tax and benefit reforms… the richest tenth of households lose the most in both cash and percentage terms.”

Oral Answers to Questions

Debate between George Osborne and John Bercow

Tuesday 8th June 2010 Commons Chamber

[Mr Osborne]

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

[Mr Speaker]

Order.

[Mr James Clappison (Hertsmere) (Con)]

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

--- Later in debate ---

[Mr Osborne]

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

[Mr Speaker]

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

[Mr Osborne]

Mr Speaker, you are absolutely right.

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