Oral Answers to Questions
Matt Hancock Excerpts(13 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gauke
As I said in my answer, we are introducing more apprenticeships, and young people will have priority in the Work programme. The hon. Lady highlights youth unemployment in Halifax. The last estimate showed that it increased by 0.6% from June 2010 to March 2011—but I also have to point out that from 2004 to 2010, youth unemployment increased by 8.5% in Halifax.
Matthew Hancock (West Suffolk) (Con)
Does the Minister share my concern that even during the boom years youth unemployment rose? Will he join me in commending the work placement scheme in Haverhill in my constituency? The work programme and the new flexibility at the jobcentre means that young people can be put into work placements, and more than half of those put in placements end up getting a permanent job.
Jobs and Growth
Matt Hancock Excerpts(13 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Ed Balls
I understand the hon. Gentleman’s point. If, rather than preparing his intervention, he had listened to my last point, he would have understood why borrowing is already set to be £46 billion higher than the Chancellor planned. The reason is that if unemployment goes up, if the economy flatlines, if fewer people are paying tax and if more people are on benefits, you borrow more. In the hon. Gentleman’s constituency, 50 more people are unemployed than a year ago. Perhaps he should be apologising for backing a Chancellor who got it so badly wrong.
This increasingly desperate Chancellor is now relying on plan B—or should I say plan BOE? But quantitative easing cannot work on its own, and any sensible economist can tell him why that is. The new shadow Chief Secretary to the Treasury, my hon. Friend the Member for Leeds West (Rachel Reeves), who is a former Bank of England economist, can certainly explain to the Chancellor why quantitative easing cannot do the job on its own. Whether the current Chief Secretary—the former national parks press officer—could explain to the Chancellor how quantitative easing works is another question. As the shadow Chief Secretary could very well explain—[Interruption.] Does the hon. Member for West Suffolk (Matthew Hancock) want to intervene? If so, I will happily take his intervention.
Matthew Hancock (West Suffolk) (Con)
As a former Bank of England economist, may I explain to the shadow Chancellor that quantitative easing works only when one has a credible fiscal policy?
Ed Balls
I am so pleased that the hon. Gentleman has made his intervention, because we have missed him for the past couple of debates, and now he is back. Last time he intervened on me, he put this on his website:
“Shadow Chancellor boosts Matthew’s work in West Suffolk”.
I want to do the same again. His campaigns to get more money for schools, to keep Thetford forest safe and to stop cuts to school crossing patrols are going well. The chief executive of his council has been sacked, and the Labour council in Ipswich has intervened and backed his campaign on school crossing controls and libraries. I have a quote from the shadow Chancellor for his press release: “Mr Hancock has been tireless in his campaign against unfair cuts to local services imposed by the Conservative-led Government—cuts which go too far and too fast.” He can leave the last bit out if he likes; I do not mind.
Ed Balls
I will give way, but before I do, let me return to quantitative easing. As these Bank of England economists know well, simply printing money cannot boost demand and keep interest rates low when they are already close to zero. Printing money cannot boost spending when companies are too scared to invest and consumers to spend. QE—the hon. Gentleman should know this—cannot revive a stalling economy by boosting demand in one direction when fiscal policy is working in a contractionary way in completely the opposite direction. As the Bank of England Governor said only last week, and in this respect I agree with him:
“We can do our part in it but we can’t solve all our problems alone.”
I now give way to the hon. Gentleman.
Matthew Hancock
The shadow Chancellor is famous for being a supporter of Norwich City football club, so will he join me in welcoming the decision to break ground on dualling the A11—an investment project that did not get the go-ahead under Labour and is happening under this Conservative Government?
Ed Balls
I think the hon. Gentleman got the name wrong. He does not mean Norwich City—he means premiership Norwich City, which is more than one can say for any football team in Suffolk. I will back his campaigns to stop the cuts and to spend more, and I fully support the dualling of the A11. At last some Conservatives have persuaded some Conservative councils to do the right thing about these proposals, which is very good.
Danny Alexander
I will not. I only have a few minutes left.
We will not return to growth on the back of debt-fuelled consumption.
Independent Banking Commission Report
Matt Hancock Excerpts(13 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
I do not think the hon. Gentleman is being entirely fair. A specific part of the report deals with the remit of the new Financial Conduct Authority, and it says that—although we have changed our proposal in the light of the interim report, as I announced at the Mansion House—we could go further and make the requirement to promote competition an overriding duty on the authority. We should look at that over the next couple of months. I would welcome the input of the Select Committee, and we could respond later this year.
Matthew Hancock (West Suffolk) (Con)
On the impact of these reforms on lending, does the Chancellor agree that bad banks are bad for growth too, and therefore strengthening our banks and financial services industry, as proposed in the report, is good for the UK economy?
Mr Osborne
Yes, in short: I agree with my hon. Friend. John Vickers and his commissioners explicitly address the costs and benefits of these changes, and although they accept that there will be some additional costs, they will be more than outweighed by the broader benefits that include the benefits of having an environment in which banks are seen as more stable and the benefit to the UK economy of retail banks using their retail deposits to support retail lending.
Oral Answers to Questions
Matt Hancock Excerpts(13 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
I think the hon. Gentleman is being rather harsh on Hugh Dalton, who I think also went to Eton.
Matthew Hancock (West Suffolk) (Con)
Do not recent revelations show that the previous Government were masters of nothing?
Mr Osborne
That is a brilliant plug for my hon. Friend’s new book. I am sure that the whole House will want to read it, because it will remind us of everything that went wrong under the previous Government.
Global Economy
Matt Hancock Excerpts(13 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Matthew Hancock (West Suffolk) (Con)
In terms of the stimulus to the British economy, what does the Chancellor think would be the effect of increased borrowing, which would then have an impact on increased mortgage rates for millions of people up and down the country? What would be the aggregate impact, say, of a VAT cut?
Mr Osborne
My hon. Friend is right that there is a significant monetary stimulus in place through the very low market interest rates and of course the official rate. Both of those would go up, almost certainly in the case of the markets and probably in the case of the Monetary Policy Committee, although it is independent, and that is why all this talk of more fiscal stimulus is a debate that is happening only in the Labour party of the United Kingdom, alone in the world. It is very difficult to find an opposition anywhere in Europe arguing for less deficit reduction coming off the published plans of a Government. As I say, if the shadow Chancellor turned up at one of these meetings and put forward his proposal, he would be laughed out of the meeting.
Sovereign Grant Bill
Matt Hancock Excerpts(13 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
I should make it clear that it is an established principle that the income from that property, which is held in trust, is for the private purposes of the royal family.
In response to the hon. Member for North Durham (Mr Jones), I point out that there are of course some areas of royal financing—I will come on to say something about royal protection—where it is very difficult to be public about some of the sums of money involved. The Bill—I hope that we will soon get into the meat of it—is a mechanism for helping to continue the current level of spending. As I say, it is perfectly within the rights of the National Audit Office and the Public Accounts Committee, if they want to, to look at payments from the Ministry of Defence, but that has to be a matter for them.
Matthew Hancock (West Suffolk) (Con)
As the most senior member of the Public Accounts Committee in the Chamber—because I am the only one here—I think that I speak for everybody on that Committee when I say that we welcome the additional transparency and very much look forward to bringing the royal household before it to answer the questions that have rightly been raised across the Chamber.
Mr Osborne
I thank my hon. Friend. When the Chair of the PAC, the right hon. Member for Barking (Margaret Hodge), spoke in the debate two weeks ago, she was very generous in her tribute and made it pretty clear that the PAC would be getting to work on its job. I served on the PAC, as its most junior member, with the hon. Member for Glasgow South West, and I remember us making an interesting visit to Kensington palace to investigate royal finances. For some years, therefore, the PAC has been establishing a reputation for examining the books in this area.
Finance Bill
Matt Hancock Excerpts(13 years, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Jonathan Edwards
Thank you very much, Mr Deputy Speaker.
Interestingly, when the House divided on that amendments the Labour party abstained. Since then, it seems that the official Opposition’s main critique of the UK Government’s economic policy has been based on the Treasury’s VAT policy. I hope that when we divide later the Labour Front-Bench team will set aside its usual partisan approach to votes in this place and will walk through the Lobby with us. As I see the shadow Minister, the right hon. Member for Delyn (Mr Hanson), grinning, I hope that that will be the case.
In the 2010 general election, Plaid Cymru campaigned against a VAT increase—unlike the Liberal Democrats, who had their tax bombshell poster, we meant it. That is why we tabled an amendment to prevent the increase last year and why we have done the same again this year. Last year, I said that there was both a social and economic reason why the increase in VAT was a bad idea, and I hope to concentrate on those reasons during my speech. We are against the ideological cuts and the rush to achieve a zero deficit within one parliamentary term with the net result of hundreds of thousands of lost jobs and unimaginable pain across our communities. We have consistently expressed our concern at the possibility of what the former Monetary Policy Committee member, David Blanchflower, called a “death spiral”, whereby cuts in expenditure become cuts in receipts.
A country’s economy is not like a family budget. Although it is good public relations, making misleading references of this sort is a very dangerous game for the UK Government to continue to play. In the case of the state there is a direct link between expenditure and income. Indeed, an overt reduction in expenditure can lead to a reduction in income and an increase in the deficit. Some would argue that we are in that situation already, even before the real cuts start to bite.
The state cannot cut its expenditure and assume that its income will remain constant. We are talking about intrinsic fine balances, which is why it always makes more sense for a state to change its expenditure levels modestly, rather than go cold turkey, as is favoured by the current Government. Four main elements drive economic growth: public sector expenditure; exports; private investment; and the key element as far as today’s debate on VAT is concerned, which is household spending.
VAT is, in essence, a tax on consumption. Economic growth in the Labour years was largely driven by consumer spending, resulting in a situation whereby personal debt levels in the UK have rocketed to an unsustainable 100% of gross value added, at £1.4 trillion.
Matthew Hancock (West Suffolk) (Con)
I am listening to the hon. Gentleman’s argument. Given that cutting VAT appears to be the only economic policy of the Labour party, is he not surprised that the party tabled its amendment so late that it was not selected and that the leader of the Labour party did not sign up to its amendment?
Jonathan Edwards
The hon. Gentleman makes an interesting point and I hope that the shadow Minister will be able to address it much better than I could.
Debt charities such as Citizens Advice report that the amount of debt problems dealt with by the service continues to increase, as the human cost of the recession feeds into the system. There is a long-term economic case for addressing this unsustainable situation by reducing the personal debt caused by consumption in the economy. My preference, however, would be to change the banking code and make it more difficult for lenders to seduce consumers into debts that they cannot service, rather than directly to reduce the purchasing powers of individuals via the use of VAT. I note that new clause 11 has been selected for debate and it covers associated matters.
The major issue faced by the economy is a lack of demand. Personal household debt, built up during the last decade, will be a severe economic headwind facing the UK economy for the foreseeable future. The increase in VAT exacerbates the situation, as we can see today from the revised growth figures for the first three months of 2011, which show that consumer spending is falling at its fastest rate since the second quarter of 2009, a decline of 0.6%. Real household disposable income is 2.7% lower than it was last year, the biggest annual fall since 1977.
Growth in consumer spending will be key if the UK Government are to meet the economic growth forecasts they have set in order to achieve their fiscal consolidation targets. The January VAT increase will stymie the consumer-led growth on which the Government depend.
In the past, my party has argued against VAT being used as an economic stimulus, which was the aim of the previous Labour Government when they cut VAT by 2.5% in 2008-09. In our view, there were more effective ways of stimulating the economy, not least investing in capital infrastructure and putting proper money in people’s pockets and in their pay packets rather than just hoping that they would spend the small change from VAT. With the increase in standard VAT from 17.5% to 20% and the stagnating economic recovery from the recession, the circumstances have changed. This is no longer about merely keeping the tills ringing, but about keeping families in their homes.
The Economy
Matt Hancock Excerpts(13 years, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Chris Evans
No, he did not. This debate would be far more honest if we said that it was the banks. This is like the sword of Damocles hanging over our heads. The banking sector is too large. We have too many large banks. I welcome some of what the Chancellor has said about this—he said that there needs to be ring-fencing between the banks’ retail and investment operations—but if we do not break those banks up and just one of the big six goes under, the economy will be back in trouble. However, we have sent the banks a message that we would send to no other business. We have said to them, “What you’re doing is okay. However you run your businesses, we will bail you out.”
Matthew Hancock
I am listening to the hon. Gentleman trying to blame everything on the banks. The question is, who designed the regulation of the banks?
Chris Evans
We have heard about the FSA, and we have admitted that that did not work, but before that, there was self-regulation. There was no attempt to tie them down, and there is still no such attempt. When the Minister responds to the debate, we need to hear from her what the future of the banks will be. We need to know that.
This is the problem that I have with the entire debate. People say, “It was the Labour Government overspending”, but faced with the same problem of the banks going under, what would the present Chancellor have done? He would have done one of two things. Since his road to Damascus experience, he wants to cut everything, and following that logic, he would have done nothing. The economy would have gone under, and everyone with a mortgage would have been written off. Alternatively, bearing in mind his mates in the City, I suspect that he would have bailed the banks out just like we did. He would have been faced with a deficit, just like we were. We never hear anything about the future of those banks from Members on the Government Benches.
Geraint Davies
The situation there is that the Germans are very focused on ensuring that their economy is focused on the growth of the developing economies of China and India. Obviously, there is a difference in the complexion of the German health service. The real focus is on generating export-driven growth, and that is what has happened.
Geraint Davies
No, I will not.
Let me give an example. Every business in Germany is tied into a chamber of commerce, and every chamber of commerce is required to provide tailor-made apprenticeships and training to focus on industrial growth. We do not have that. There is a lot to learn, and we should go out and learn it. We should focus on growth and stop making these ridiculous cuts.
Finance (No. 3) Bill
Matt Hancock Excerpts(13 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Alec Shelbrooke
But you cannot deny that your Government doubled income tax for the lowest paid in society and destroyed pensions—not you, Mr Deputy Speaker, but the previous Government. The previous Government destroyed pensions, leaving many people whom we would class as the most vulnerable in society to take their pensions with fear and trepidation. At least we have brought in the triple lock on pensions, meaning that people should never again get the 75p rise in their pension.
Matthew Hancock (West Suffolk) (Con)
In addition to the facts that my hon. Friend is bringing to bear in this debate, is it not shocking that the amount that the Government have borrowed only over the past year is equivalent to more than £2,000 for every family?
Alec Shelbrooke
Again, that illustrates my earlier point: when the figures are brought down to a smaller level, people can understand their full impact and the state of the nation’s finances. When I compare that to our personal finances, I say to people, “For every £1 we’ve spent, we’ve borrowed 25p. How long would your household finances survive with that sort of economics?” They simply would not. Indeed, the increase in private debt and in people’s credit card debts, with some even committing suicide because they used credit cards to pay off credit cards, is a lesson that Governments should learn.
Let us look at the growth and debt figures. Our debt is 10.4% of GDP, Spain’s is 9.2% and Portugal’s is 9.1%, but I do not see our interest rates on the gilt markets being as high as Portugal’s. My hon. Friend the Member for North East Somerset made an excellent point when he described the percentage rates being below RPI by 300 unit points, or 500 unit points below normal. That shows that a credible plan had to be put in place.
I find it distressing when we get into this argument with the Opposition, who say, “You don’t need to do all this.” I will give the House an analogy. For 13 years, the previous Government fed everybody chocolate and burgers, and every person in this country now weighs 35 stone. Along comes the doctor, in the form of this Government, who says, “I’m afraid if you don’t lose at least 20 stone you are going to die very young and it is going to be disastrous for you.”
Matthew Hancock (West Suffolk) (Con)
I am grateful for the chance to speak briefly at the end of this debate. This Finance Bill is but one part and but one significant change to the economic policy framework in the UK. The significance of some of the details in the Bill is matched only by the modesty of the amount of comment that they attract. We are debating many of the detailed changes, such as expanding gift aid, helping low earners, supporting motorists and improving the environment for enterprise. I support all those measures and will speak about them later, but I first want to address the context and background set for the Bill by changes to the economic policy framework.
One of the big changes has been referred to explicitly and implicitly throughout the debate. The hon. Member for Edinburgh South (Ian Murray) spoke about the Office for Budget Responsibility, and every Labour Member has referred to its figures. In that magnificent British way, we have managed to establish and accept a new tradition—the OBR—as if it were ever thus. I argue that that innovation in economic policy and others are significant and noteworthy for the long term. Over many years, evidence grew in the academic economic debate that economic policy is best set for the long term, and the short-term dash for growth became discredited. In the ’80s and ’90s a consensus grew that fiscal policy should be set for the long term, and that monetary policy should be set through an independent Bank of England and used to regulate demand in the shorter term—to keep inflation low and growth going. In fact, that became the cross-party consensus in the House. The shadow Chancellor even wrote a book on what a magnificent set-up that was.
The problem with that arrangement is that it stabilised only one part of the economy, and it was far too narrow. Where discretion was allowed, and within closely prescribed rules, policy worked reasonably well, and policy makers hit the inflation target with commendable accuracy. However, the success of that narrow area of economic policy making led its creators to believe—absurdly—that they had solved the problems of economic policy making. We know the phrases. They said that boom and bust had ended, but that hyperbole led them to ignore the growing signs that all was not well elsewhere, and to commit vast policy mistakes that led to the enormous crisis that we have gone through, and that Government Members are trying to help to clear up. The Labour Government admonished anybody who claimed that Britain’s economic policy framework was anything other than perfect, and that belittled debate.
The problem was that by aiming at one target only—inflation, and consumer price inflation specifically—everyone missed the huge and unsustainable growth in balance sheets throughout the economy. There was unsustainable public debt and unsustainable private debt—a classic debt bubble. The problem first became obvious in fiscal policy. The now discredited fiscal rules allowed the Labour Government to claim that all was rosy—indeed, the shadow Chancellor still claims that all was rosy. In fact, they were borrowing an unsustainable amount at the height of a boom. They then tried the classic trick of borrowing to fund their re-election. As the House knows, they fiddled the figures and moved the goalposts to keep on spending when the facts started to prove otherwise.
The new OBR will bring long-term independence to fiscal policy making, which will constrain not only the current Government, but—I hope—all Governments to come. Crucially, the OBR’s forecasts will define the discretion within which policy makers can operate, and will bring this constrained discretion, similar in structure to monetary policy, into fiscal policy. Different though the execution will be of course—because the policy levers will be different—the structure will be similar.
Although having an OBR in the past might have meant not entering the crisis with unsustainable public finances, what of those unsustainable private finances? No one can argue that the amount of debt in our economy—in our banks and households—was sustainable. Britain entered the crisis as the most indebted nation in the G7 ever, and also had the biggest banking bust in the world. Those are not unconnected, however, because household debt and the banking debt that supports it are a reflection of each other—one group lends to the other. That combination of unsustainable public and private debts means that Government Members have a huge mess to clear up.
The combination of targeting only narrow consumer prices inflation in one part of a tripartite system and the regulation of individual banks in another meant that the crucial piece of the jigsaw—looking at how bank balance sheets affected debt across the economy—was missed. It is a bit like a balloon: we pushed down on consumer prices and kept control of them, but all the extra liquidity shot out into prices of other assets, including, as we know from our personal lives and those of our constituents, the biggest asset of all—housing. We had a bonanza housing boom: equity withdrawal; get-rich, buy-to-let schemes; more than 100% mortgages. We all know about them. The bubble lasted all the longer, however, because it had a credible story behind it—of the extra savings being made in China and the rising Asian nations—and was harder still to argue against.
Nobody was there to pull the punch bowl away when the party got going. As we know to our cost, the power to do that was removed from the Bank of England in 1997. At the time, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) predicted it would cause problems. The link between looking at the sustainability of individual banks and looking at the macro-picture had been broken. Now that link is being restored. First, clause 72 and schedule 19 will introduce and increase the bank levy. It will be a levy on banks’ balance sheets, not bonuses, so will contribute to financial stability. Secondly, and crucially for the context in which we think about the Bill, the proposed financial policy committee, which will first operate in shadow form, will monitor that link. It will link the management of the country’s debt and balance sheets with the management of the macro-economy, linking fiscal policy and monetary policy through financial policy, and therefore allow for a holistic big picture of how we are managing our economy. Instead of allowing a bubble to build up by omission, the FPC’s job will be to look for it and act on it. Unlike under the former system, in which the Bank of England could complain and raise concerns but not act, the FPC will be empowered. Crucially, because the discretion is embedded in a respected institution, it will have the authority to exercise that discretion. For whereas discretion without rules gives us tyranny, rules without discretion give us futile bureaucracy.
The changes have been praised by the OECD and the IMF, and they represent a substantial and fundamental shift in how we run our economy. However, we should resist the hubris of saying that these reforms will ever be finished or that the ancient challenge of economic management, first recorded in Genesis, is complete. As we debate the details of the Bill today, we should consider how the context of those changes, in strengthening our economic framework, is about learning the lessons from the past and helping us to be stronger as we face the inevitable challenges ahead.
Stella Creasy (Walthamstow) (Lab/Co-op)
If a week is a long time in politics, then a year—and perhaps some aspects of tonight’s debate—is an eternity. Yet a year ago, when we were all candidates and none of us was allowed to stand in this place, things were very different. The economy was beginning to recover, as unemployment was falling and growth was returning. Crucially for today’s debate and the provisions in the Bill, that meant that the deficit came in at £21 billion lower than was forecast. Well, here we all are, a year later, and just as the faces in the Chamber have changed, as have the sides that we are sitting on—some would say not for the better—so too has the economic picture. Given where we were last year, one would have expected the economy next year not simply to have recovered, but to have begun motoring; and yet now, thanks to snow it seems, it appears that the reverse is true. By cutting too fast and too deep, this Government are delivering slow growth and higher unemployment, which is why they will now have to borrow £46 billion more than they planned.
However, the question that this Bill raises is about not just whether to cut the deficit, but how we do so and who ultimately pays. Our national Exchequer certainly will: slower growth plus higher unemployment will make it harder to get the deficit down. As we pay out in jobseeker’s allowance, we will also lose out as families fear spending money that they do not have. That is what I want to highlight this evening. We have a duty to consider how the proposals will help or hinder the finances of families across this country, because it is not just the Chancellor who will have to go cap in hand for extra funds. Contrary to what the hon. Member for Elmet and Rothwell (Alec Shelbrooke) seems to think—I am sorry that he is not here; perhaps he is in the gym preparing for his wedding—public debt and private debt are linked. Although public debt is down by £43 billion, private household debt is up by £245 billion—five times as much.
The hon. Member for West Suffolk (Matthew Hancock) is a man for whom I have tremendous respect—both him and his pullovers. He lauds the role of the Office for Budget Responsibility, but like Rosencrantz and Guildenstern, he is hoist by his own petard, because the OBR forecast last June that household debt would increase from an average of £58,000 in 2010 to £66,000 by 2015. The OBR now expects the figure to be £77,000. That is the downside of the Chancellor’s deficit reduction plan. As taxes increase and public spending squeezes households’ disposable income, they will be forced to take on more and more debt in an attempt to maintain their living standards. In fact, the OBR’s March forecast shows household debt rising from £1.6 trillion this year to £2.1 trillion in 2015—or, from 160% of disposable income to 175%. The OBR reports that households will have to borrow more money than forecast in order to maintain their living standards. With the planned cuts in public spending, the only way the Government will see an improvement in the OBR’s forecast for growth is for that ratio to increase.
I know that many Members will be sick of hearing me talk about credit and debt. Many may also argue that it does not matter, because we are a nation that is comfortable with debt—something the hon. Member for West Suffolk talked about. We have always had a different approach to personal debt from many other countries. We are a nation comfortable with borrowing in ways at which other cultures baulk. It is no surprise that we have the highest level of personal debt in the G7. That is not a problem if it can be managed. Much of the money that this country owes is housing related, which reflects a culture in which mortgages are routine. The truth is, however, that the debt that families are now getting into is not related to such investment in their future or about luxury living; it is about the money that they spend on everyday items. That is what is missing from their family finances.
In the current economic climate, UK adults face an average shortfall of £165 each month, with 26% unsure whether they can pay their bills on time. Recent research shows that more than 2 million people have used credit cards to pay their mortgage or their rent. That is an increase of almost 50% in a year. Since the recession, nearly a third of Britons are now spending more than they have coming in each month, and 22% of consumers will carry a credit card debt throughout 2011, with 7% of people saying that they will still be paying for Christmas 2010 after June 2011. It is estimated that 5 million people are now permanently overdrawn, and that 18 million have gone into the red at some point in the past 12 months. Nearly 8 million of us failed to pay at least one bill in the past year.
It is not just the poorest consumers in our society who are affected. According to Experian, the biggest rise in insolvencies in 2010 was among the people whom it calls “suburban mindsets”, a consumer group comprising married, middle-aged people. That situation has not come about by chance. It is a direct consequence of how this Government have chosen to address the deficit.
Matthew Hancock
I do not wish to extend the love-in much further, but the hon. Lady’s arguments, which are being passionately put, would carry much more weight and credence if she were to disappoint her Front-Bench team and accept Labour’s role in bringing about this situation.
Stella Creasy
I am sorry that the hon. Gentleman has not been listening closely. Let me make it very clear: the figures from the Office for Budget Responsibility that I cited refer to this past year. Forgive me, but as far as I am aware, his party has been in power during that time and it has presided over this increase in the private debt that households are now taking on.
Let us talk about some of the things that are causing that increase. VAT is costing a family with children an extra £450 this year, on average, due to the rocketing cost of buying basics such as telephones and clothes and of getting a boiler or a washing machine fixed. That is before they even consider getting out and about to spend money. Many Conservative Members have talked about fuel prices, but the increase in VAT is adding £1.35 to the cost of filling up a 50-litre tank with unleaded fuel. The cut in fuel duty gives back only 1p, but the VAT increase costs us almost 3p a litre.
Those who are in work are finding it even harder to make ends meet as a result of the Budget. Since 5 April, 750,000 more workers have been dragged into the higher rate of income tax, and benefit recipients have lost £2.7 billion-worth of payments. Cuts to child care support have taken £1,500 a year from families. The £48 that people will get through the personal allowance increase in the Budget is barely a tenth of the amount that families will have to pay back through increased VAT. In two years’ time, 1.5 million families—including many in places such as Walthamstow—will lose all their child benefit. Credit Action has pointed out that, of the 45 changes to the tax and benefit system made in the Budget, 26 will have a negative impact on households.
There will also be fewer chances of getting a better-paid job, or of getting back into work, because unemployment is set to be higher in every year of this Parliament as a result of this Government’s actions.
European Summit
Matt Hancock Excerpts(13 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Matthew Hancock (West Suffolk) (Con)
Will the Minister confirm that the contingent liability under the scheme was set up after Labour had lost the election by the then Labour Chancellor? Does what is happening in Portugal, where interest rates have today risen above 8%, not provide the most eloquent lesson on what would happen here if we did not get a grip?
Mr Hoban
My hon. Friend is absolutely right. The decision taken by the previous Chancellor meant that we became part of the ESFM, and that is why the liability exists today. My hon. Friend is absolutely spot on: we have taken difficult decisions in this country. This Government have decided to tackle the deficit that Labour left behind, and we have a clear plan to do it. The Opposition have no ideas. Under a Labour Government, this country would be running out of steam.