Autumn Statement

John Bercow Excerpts

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 Speaker]

Order. I ask the right hon. Gentleman to resume his seat. I said very clearly that people should not shout and yell at the Chancellor. He should be heard in respectful quiet, as the public would hope. The same goes for the reaction to the shadow Chancellor. Let us try to operate at the level of events.

[Ed Balls]

Thank you, Mr Speaker.

Let me start by thanking the Chancellor of the Exchequer for advance notice of his statement, and the Office for Budget Responsibility for ensuring that the Chancellor is today setting out to the House the truth about the state of the British economy and the truly colossal failure of the Chancellor’s plan.

Let us be clear about what the OBR has told us today, which the Chancellor could not bring himself to say: growth is flatlining and will be down this year, next year and the year after; unemployment is rising; and there will be well over £100 billion more borrowing than he planned a year ago, and more than was set out in the plan he inherited at the general election. As a result, his economic and fiscal strategy is in tatters. After 18 months in office, the verdict is in: plan A has failed, and failed colossally. With prices rising and unemployment soaring, families, pensioners and businesses already know that it is hurting. With billions of pounds more in borrowing to pay for rising unemployment, today we find out the truth that it is just not working.

The Prime Minister likes to say, “You can’t borrow your way out of a crisis.” Will the Chancellor confirm that that is exactly what he has been forced to do? He has been forced into higher borrowing to pay for the crisis in growth and jobs in Britain, the higher unemployment and higher benefits bill that his failing plan has delivered.

The Chancellor’s out-of-touch and complacent hubris of a year ago now seems such a distant memory. The Prime Minister boasted that Britain was out of the danger zone and the Chancellor claimed that the UK was a safe haven, but we know the truth: cutting too far and too fast has backfired and all his claims of a year ago have completely unravelled. It is not as if they were not warned, including by their coalition colleagues. Before the election, we said that, like every country after the global financial crisis, we had to get our deficit down, which meant tough decisions on tax and spending cuts. The question is not whether that should be done, but how. That is why the Opposition warned that trying to cut spending and raise taxes too far and too fast risked choking off recovery and pushing up unemployment and borrowing. We said that the Chancellor’s plan was reckless, not cautious, and that he was ripping out the foundations of the house, leaving our economy not safe, but badly and deeply exposed to the growing global storm.

Let me remind the Chancellor what the managing director of the International Monetary Fund warned this summer. She said that

“slamming on the breaks too quickly will hurt the recovery and worsen job prospects.”

What has happened? Consumer and business confidence has slumped in the past year. Our recovery was choked off over a year ago. Since then, Britain has had slower economic growth than any G7 country other than Japan, and it had an earthquake. Unemployment is at a 17-year high and over 1 million young people are out of work. Today we hear that growth this year will be not the 2.3% he so confidently predicted in the June Budget this year, but just 0.9%. It will be even lower next year and lower than forecast the year after. It is the fourth time the OBR has downgraded his growth forecasts in just 18 months.

Today we learn that the Chancellor, even when judged by the one objective he set himself—getting the deficit down—is failing. With lower growth and rising unemployment pushing up the cost of failure, will he confirm that he will now have to borrow not £46 billion more than set out in his autumn statement last year, as he said in March, but a staggering £158 billion more? Will he also confirm that, despite the pain of the £40 billion of extra spending cuts and tax rises he boasted about a year ago, because the recovery has been choked off and unemployment is higher he will be borrowing more at the end of this Parliament than he would be under the balanced plan inherited from the Labour Government at the last election? That is a fact.

A year ago the Prime Minister told the CBI:

“In five years’ time, we will have balanced the books.”

That was not some kind of dodgy rolling target, but a clear commitment to eliminate the deficit by 2015. Can the Chancellor tell the House whether he will meet that fiscal mandate? Is not the truth that, with unemployment and borrowing up, going further and faster has been utterly counter-productive and self-defeating and has backfired? We have had all the pain, but none of the gain.

The OBR forecasts show that the Chancellor’s entire economic and fiscal strategy is now in complete disarray, yet all we get are excuses. He has blamed anyone and anything, including the Labour Government, the snow, the royal wedding, the Japanese earthquake, higher inflation, VAT, the eurozone and low-paid dinner ladies and teaching assistants—anybody but himself. [Interruption.] It is he who is to blame. It is his failing plan that has pushed up unemployment and borrowing. It is his reckless gamble that has made things worse here in Britain, not better.

If eurozone countries continue to fail to sort out their problems, of course that will have an impact here. [Hon. Members: “Ah.”] However, Britain’s economic recovery was choked off a year ago, before the euro crisis. The OBR has downgraded growth in Britain this year but upgraded growth in the euro area. Of the 27 countries in the EU, only Greece, Portugal and Cyprus have grown more slowly than Britain in the past year. Not only is it not too late for the Chancellor to change course, but the deepening euro crisis makes it even more important that he sees sense. Instead he is still clinging to the fantasy that any change of course would make things worse. He still clings to the illiterate fantasy that low long-term interest rates in Britain are a sign of enhanced credibility and not, as they were in Japan in the ’90s and in America today, a sign of stagnant growth in the economy. [Interruption.] This summer the head of the IMF warned the Chancellor—[Interruption.]

[Mr Speaker]

Order. The situation is very simple: however long it takes, the shadow Chancellor will be heard. That is all there is to it.

--- 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.

Northern Rock

John Bercow Excerpts

Monday 21st November 2011 Commons Chamber

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

With permission, Mr Speaker, I would like to make a statement about Northern Rock. As the House will be aware, on 15 June this year the Chancellor of the Exchequer announced that Northern Rock had been put up for sale. Last week, he announced that he had agreed the sale of Northern Rock plc to Virgin Money. I am grateful for the chance to update Parliament on those events.

As hon. Members will be aware, the collapse of Northern Rock four years ago foreshadowed a crisis that was to engulf the global financial system. The queues of people outside branches of Northern Rock—the first run on a British bank in more than a century—remain to this day a lasting image of the crisis. It was a sorry result of the inadequate regulation and irresponsible banking that the previous Government presided over, and it was a crisis that led to a range of Government interventions in the financial sector. The sale of Northern Rock to Virgin Money is an important step towards normalising the Government’s role in the financial sector and getting the Government out of the business of running the banks.

The deal with Virgin Money is expected to be completed on 1 January 2012, pending European Commission merger clearance and Financial Services Authority approval. Let me reassure the House that the sale route represents the best value for money for the taxpayer. United Kingdom Financial Investments and its independent advisers looked exhaustively at all potential exits, including stand-alone remutualisation, combination with an existing mutual and initial public offering, but ultimately advised that a sale would generate the best value for money for the taxpayer.

Furthermore, under the terms of the state aid agreement entered into by the previous Government, we have to transfer control of Northern Rock to a new owner by the end of 2013. That limits the window for getting Northern Rock plc back into the private sector. Combined with the fact that the bank is likely to be loss-making well into 2012, a sale to Virgin Money now is the best option measured against taxpayer value for money. We have also carefully assessed the impact of the sale on competition and financial stability.

Let me set out the details of the deal. The cash elements are as follows. Virgin will make a cash payment of £747 million to the Treasury on completion, which is expected to be on 1 January, conditional on regulatory approvals. We also expect about a further £50 million once we know the actual final net asset value of Northern Rock plc at the end of 2011. In addition to the cash payment, the Government will hold a capital instrument in Virgin Money, with a par value of £150 million and paying interest at 10.5%. Furthermore, we have ensured that the taxpayer will get a share of any upside. In the event of a profitable sale or initial public offering by Virgin Money, an additional cash consideration of between £50 million and £80 million will be paid to the Government.

By way of comparison, our shareholding in Northern Rock is valued at £1.2 billion on the Treasury’s balance sheet, because the previous Government injected £1.4 billion of capital into the loss-making bank at the start of 2010. By the end of this year, that value will have decreased further due to the losses that Northern Rock currently makes. Despite all that, we have sold Northern Rock plc at a price-to-book multiple of about 0.8. Given that other UK banking stocks are trading at multiples of around 0.5, that is a good outcome for the taxpayer. Of course, when we consider the final position we will need to look at both Northern Rock Asset Management and Northern Rock plc to see the final outcome for the taxpayer.

This is also a good deal for the economy of the north-east, with the potential to create new growth and new jobs in the area. Virgin Money has committed to there being no further compulsory redundancies beyond those already announced for at least three years. It will also make Newcastle the operational headquarters of the new, combined business. It will retain the total number of existing branches, with the highest concentration in the north-east, and with plans to expand as the business grows.

We are pleased that Virgin Money has also committed to extending the current financial agreement with the Northern Rock Foundation to the end of 2013. We all know that the Northern Rock Foundation plays a vital role in tackling disadvantage in the north-east and Cumbria. Virgin has also committed to exploring how Virgin Money Giving and the foundation could work together in the future.

This deal will create almost immediately a new, credible competitor in our retail banking sector, thus increasing choice for consumers. The Government are clear that more competition is needed in the banking sector. A competitive banking sector ensures that the economy benefits from banking products and services at efficient prices. Competition is also a spur to innovation and economic growth, but choice has diminished in recent years as a number of high street banks and building societies have disappeared or merged. As set out in this Government’s coalition agreement, we are committed to promoting competition in the banking sector and to the return to the private sector of the Government-held stakes in banks, of which this measure is a key part.

The Virgin brand has a strong reputation for growth and innovation and I am confident that its entry into retail banking will provide a real challenge and improve diversity in the banking sector. I want to be clear that for current Northern Rock customers, it is business as usual. They will not need to take any action as a result of the announcement. Virgin Money also plans to offer personal current accounts and small business banking products in due course.

I know some would have liked to see Northern Rock re-mutualised, but no final bids were made by mutuals and no workable plans for stand-alone mutualisation were put forward. None the less, the Government remain committed to promoting mutuals, which is why we are working with the mutuals sector to support its ambitions and ensure that it is not disadvantaged compared to bigger established banks—all to foster diversity and create a more competitive banking industry.

Of course, the sale of Northern Rock is only one step to a new banking sector—it is not simply a return to business as usual. The last crisis cost the taxpayer billions of pounds, and we cannot afford to repeat that. That is why this Government are pursuing ambitious reform of the financial sector at home and abroad, ensuring that we embed a competitive, successful but secure financial sector, and one that supports growth across the entire economy without jeopardising its stability; why we are fundamentally reforming the failed tripartite system, entrenching a much greater and much-needed focus on macro and system-level risks; why we are leading the international agenda for full implementation of the Basel III standards, to ensure that our banks are resilient to ongoing market turbulence; why we support in principle the recommendations of the Independent Commission on Banking to ring-fence better-capitalised high street banks, reduce taxpayer exposure through powers of bail-in, and increase competition in banking; and why we have secured commitments from the UK’s biggest banks to provide £190 billion of new credit to businesses across the country this year, lending £76 billion to small and medium-sized enterprises this year alone, which is £10 billion more than banks lent to them last year.

The sale of Northern Rock to Virgin Money is an important milestone in this Government’s efforts to return state-owned banks to the private sector. It represents good value for the taxpayer and provides an economic boost to the north-east region. For consumers across the board, it means greater diversity and choice in financial services.

I firmly believe that Virgin Money will have a hugely beneficial impact on the banking landscape in the years to come, providing better outcomes for customers and businesses. Of course, this is only one step towards a reformed banking landscape. The Government will continue to work hard to remedy the regulatory failures of the last decade, to promote a more competitive sector, and to ensure that we embed a stable and successful financial system that serves and not jeopardises the economy. I commend this statement to the House.

[Mr Speaker]

I apologise to the hon. Gentleman for inadvertently demoting him. I had been advised that this statement was to be made by the Exchequer Secretary to the Treasury, but I realise that the hon. Gentleman is a still more senior man, serving the Government as Financial Secretary.

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

The Chancellor might have chosen to make this announcement when Parliament was in recess, but he really ought to have been here today—[Interruption.]

[Mr Speaker]

Order. I just say this, once and for all, to the hon. Member for Reading West (Alok Sharma): sit there silently, please, doing your duty. If you feel unable to do so, you have a very simple alternative, which is to leave the Chamber.

[Chris Leslie]

Thank you very much, Mr Speaker. I was simply making the point that the Chancellor ought to have been here today because there are so many questions to answer about this deal. Obviously it is right that Northern Rock should be leaving public ownership, just as it was right to take it into public ownership in 2008 to avoid a catastrophe, but the decision to sell at this time and in this manner raises some very serious questions. Will the Minister confirm the net loss to the taxpayer from the sale, and that the proceeds will be used in their entirety to pay down the national debt?

On the sale’s timing, I read in the papers, and the Minister said again today, how the Government are blaming Europe and Labour—I am surprised that they have not blamed the civil service yet. These are weak excuses that just will not wash. He should start taking responsibility for some of his own decisions, and he should be doing what is right for the British taxpayer, not hiding behind EU rules. If he felt constrained by the EU requirement to sell by the end of 2013—let us remember that it is still only 2011—why did the Government not try to change that? If he is now suggesting that it was a bad deal for the taxpayer and that he would rather have waited, why did he not ask the European Commission for an extension? With the economy flat-lining, bank shares in decline and a deepening crisis in the eurozone, he could easily have made the case that circumstances had changed. Or does this fire sale suggest that they think that conditions will get even worse?

The Government have a duty to ensure that the deal is good for taxpayers, the economy, the new company and its customers and staff, so why is he scared to issue an initial public offering for Northern Rock? With about £700 million of excess equity on its balance sheets, why on earth is he selling it privately for 66p in the pound? Contrary to the headlines, this deal is funded not principally by Richard Branson, but rather with £250 million from US financier Wilbur Ross, a stake from an Abu Dhabi sovereign fund and—wait for it— £250 million of Northern Rock’s own money, using its existing capital assets in a complex financial swap deal. Is the Minister not a little troubled that the company’s assets are being stripped even before it changes ownership?

What is Northern Rock’s current core tier 1 capital position, and what does the Treasury anticipate it will be in three years? We know that the Financial Services Authority has voiced its anxieties about such a substantial removal of capital. What safeguards will it be given if these capital buffers are to be thinned out so dramatically? The Financial Times reports that Wilbur Ross has paid about 80% of the book value for Northern Rock, yet he is quoted as saying that he would have

“to sell out a few years down the road for 1.5 times book value.”

That is 150%. Is the Minister comfortable with the news that the Government have sold to an individual actively planning to dispose of the bank quickly and nearly double his money? Does that not indicate that the Treasury might be selling prematurely and at the wrong price?

I am amazed that the Minister has agreed to underwrite a further £150 million of the buyers’ payments? I have heard of vendor financing, but agreeing to accept £150 million of debt so deeply subordinated as to be basically unsellable takes the biscuit. Is it not possible that the subsidy will be regarded as further state aid, and is he presumably seeking EU Commission approval for that? Will he at least guarantee that the Treasury will receive a payment every year on that £150 million, and that we will get it all back by the end of this Parliament?

The coalition agreement promised to promote mutuals and financial services, yet no apparent consideration was given to the mutualisation of Northern Rock. Why did Ministers not try harder to develop that option? Will the Minister publish the analysis on the basis of which they dismissed a member buy-out? The concerns about the decision to run down £250 million of Northern Rock’s capital reserves are not just an issue for the taxpayer; they also reduce Northern Rock and Virgin Money’s ability to provide significant credit in a market crying out for mortgage finance. Despite the new owners’ reported assurances, there are no contractual guarantees that branches or jobs will be retained. Savers in Northern Rock will also need reassurance that their new bank’s depleted capital reserves will not bring repeated anxieties if another banking crisis occurs.

The Chancellor opposed the original decision to rescue Northern Rock, saying:

“I am not in favour of nationalisation, full stop.”—[Official Report, 19 February 2008; Vol. 472, c. 186.]

Is this not a golden opportunity for him to hold up his hands and admit that he made a mistake, and do not the growing question marks lingering over this giveaway deal also suggest that his judgment is as wrong now as it was then?

--- Later in debate ---

[Several hon. Members]

rose—

[Mr Speaker]

Order. There is extensive interest in this statement, which I am keen to accommodate, but I remind the House that there is another statement to follow. Therefore, brevity is of the essence.

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

Is the Financial Secretary not aware that this is an appalling deal, and at quite the wrong time for the British taxpayer? Is he not aware that the European Commission cannot sanction the imposition of that date? The worst time to sell a company is when it is loss-making and when—as in this case—it has prospects of profits to come. He should have waited. It is the timing that is being opposed, and which has nothing to do with the European Union, but everything to do with the collapse of this Government’s economic policy.

--- Later in debate ---

[Mr Hoban]

I think that there is a better guarantee of jobs under the current proposal than there would have been if Northern Rock had continued as it was. The problem with Northern Rock was that its cost base exceeded the business that it was writing, and that posed a long-term—[Interruption.]

[Mr Speaker]

Order. As I said to the hon. Member for Reading West (Alok Sharma), I understand that there are very strong feelings and effects on constituencies on these occasions, but the hon. Member for Blyth Valley (Mr Campbell) must not chant a chorus from a sedentary position—or even, for that matter, from a standing position. We are grateful to him for his views when he is called to speak.

[Matthew Hancock (West Suffolk) (Con)]

Is not the argument that we should hold on to Northern Rock for a few more years in the hope that the price will go up just a punt on the stock market, and is that not exactly the sort of attitude that got us into this mess in the first place?

--- Later in debate ---

[Mr Hoban]

rose—

[Mr Speaker]

Order. The relationship between that question and the matter under consideration is, at best, tangential, but I am sure it is not beyond the intellectual compass of the Financial Secretary to address it.

[Mr Hoban]

I was, indeed, intrigued about the role Northern Rock might play in bailing out the eurozone economies. It is essential that action is taken in the eurozone to tackle the fundamental problems it faces. The banking system must be recapitalised, the fiscal crisis in Greece and a number of other member states must be resolved, and a firewall must be put in place to ensure that the turbulence in the eurozone comes to an end. We are all working towards achieving that, and it is in our long-term interests to do so. The fact that we were able to dispose of Northern Rock against that backdrop is a good sign of what is happening here in the UK.

European Budgets 2014 to 2020

John Bercow Excerpts

Tuesday 8th November 2011 Commons Chamber

[Mr Hoban]

Let me finish a couple of sentences and then I will give way.

Tackling financial mismanagement in the EU can help meet spending commitments, so our message on spending is clear. There should be a real-terms freeze on spending, a focus on the amounts actually spent, not plans dreamt up over five years ago when the world was different. Let us tackle waste and financial mismanagement across the EU. I give way to my hon. Friend the Member for South Northamptonshire (Andrea Leadsom).

[Mr Speaker]

Order. Before the Minister gives way to the hon. Lady, I emphasise that, of course it is in the gift of the Minister to give way as he thinks fit, but the total time for the debate on this matter is only one and a half hours, and it would be a pity if Back Benchers were disappointed. I am sure that the Minister will tailor his remarks and his giving way accordingly.

[Andrea Leadsom]

Thank you, Mr Speaker. I shall bear in mind your comments. I am grateful to the Minister for giving way. Does he agree that one of the most ridiculous wastes of money in this day and age, with tight budgets, is the European Parliament continuing to move between countries during the week, at enormous expense to British taxpayers?

--- Later in debate ---

[Several hon. Members]

rose—

[Mr Speaker]

Order. A considerable number of Members are seeking to catch my eye. I remind the House that the debate is due to conclude at 19 minutes past 5 and that it would be seemly and courteous to allow the Financial Secretary five minutes to reply to it. Members can do the arithmetic for themselves. There is less than an hour for Back-Bench speeches and, as a consequence, I have imposed a five-minute limit on Back-Bench contributions with immediate effect, beginning with Mr John Baron.

Eurozone Crisis

John Bercow Excerpts

Thursday 3rd November 2011 Commons Chamber

[Several hon. Members]

rose—

[Mr Speaker]

Order. As the House knows, there is intense interest in this subject, which I am keen to accommodate. However, I must now insist on single short supplementary questions without preamble, and ask for the wonderfully succinct replies from the Minister to continue.

[Charlie Elphicke (Dover) (Con)]

Does the Financial Secretary agree that, while much progress has been made over the last 18 months—demonstrated most recently by this week’s excellent growth figures—we need measures to protect us from the implosion of the eurozone? What does he think are the best options to shield us from wider economic turbulence in that direction?

Public Service Pensions

John Bercow Excerpts

Wednesday 2nd November 2011 Commons Chamber

[Danny Alexander]

I am grateful to the hon. Lady for her response, although she left a few questions unanswered herself, which I shall come to.

On proper discussions, I reject what she said about the Government’s stance. Talks have been going on constructively for the last eight months. The Minister for the Cabinet Office and I have spent many, many hours in those discussions, and if the hon. Lady talked to the trade unions, she would discover that they, too, see them as constructive. She also referred to the previous Government’s cap and share arrangement. Let me tell her what Lord Hutton said about it in his report:

“Cap and share cannot take account of the increases in cost of pensions over recent decades because people have been living longer. Also, untested, complex cap and share arrangements cannot of themselves, address the underlying issue of structural reforms, nor significantly reduce current costs to taxpayers.”

In other words, the previous Government’s arrangements were simply not good enough at controlling the costs in the way we need to.

The hon. Lady asked me several questions; let me address them directly. As I said in my statement, transitional protections and tapering are outside the cost ceiling, so they will not be met at the expense of other arrangements, which may be negotiated on a scheme-by-scheme basis. On contributions, there was an assumption, audited by the Office for Budget Responsibility, about the impact that 1% of pay bill would have on opt-out rates, which I accept. We are engaged in a separate track of negotiations with the local government pension scheme—which the hon. Lady also mentioned—precisely in recognition of the fact that it is a funded scheme and that therefore different considerations apply.

On affordability—the first of the hon. Lady’s three tests—let me tell her that, yes, the changes are affordable. Her test is met. This test ensures—[Interruption.] Opposition Front Benchers are saying, “Part-time workers?” The contributions increase has been set out. We have ensured, on a scheme-by-scheme basis, that the contributions will be tiered according to income. Those earning less than £15,000 a year on a full-time equivalent basis will have zero—[Interruption.] The right hon. Member for Morley and Outwood (Ed Balls) likes to hector from a sedentary position. Instead of being the shadow chunterer, perhaps he will sit there and listen. We have made it clear that those earning up to £21,000 on a full-time equivalent basis will have a reduction. The full-time equivalent basis for pension reform is the basis—[Interruption.]

[Mr Speaker]

Order. There was quite a lot of chuntering earlier when the shadow Chief Secretary was speaking, and that should not happen. Those on the Opposition Front Bench have had their go, and I am afraid that they cannot pursue the debate again from a sedentary position. Let us hear the Chief Secretary. The House knows that I will allow plenty of time for questions, so we need not get aerated about it.

[Danny Alexander]

The full-time equivalent basis for pension reform is being approached in exactly the same way that the previous Government treated it. The hon. Lady’s tests for affordability, fairness and a workable settlement are all met. She did not say, in the end, whether she supported the deal on the table to date. It is incumbent on the Opposition to understand the deal and support it. It is also incumbent on them to make clear their position on strike action. I hope that she agrees with me that, in light of the new offer and the constructive approach taken to the negotiations, she should not support trade unions going ahead with strike action later this month.

--- Later in debate ---

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does the Minister agree that the statement consisted of sacrificing long-term pension rights to pay for a short-term failure to stimulate economic growth? What we are seeing, after 13 years of industrial peace, is the return of mass strike action due to Tory economic failure and a threatening, macho approach to negotiation. [Interruption.]

[Mr Speaker]

Order. It would be more seemly if the hon. Gentleman were not standing with his hand in his pocket, but I must say to the Education Secretary that he really should not keep on expostulating noisily from a sedentary position. If he were to do that in one of the nation’s classrooms, he would be in detention by now.

[Danny Alexander]

The Education Secretary’s noisy expostulations have been thoroughly in support of what the Government are doing; as such, I welcome them. I think that the tone struck by the hon. Member for Swansea West (Geraint Davies) is entirely out of keeping with the tone of the debate so far. For all the reasons I have given, reform of public sector pensions is necessary. It is important that we get it right and that we do so by agreement if we can. That is this Government’s objective.

--- Later in debate ---

[George Freeman (Mid Norfolk) (Con)]

I welcome the statement and congratulate the Front-Bench team on the work they have done to go as far as they can to help the low-paid. Is it not the truth that we are facing a crisis of spiralling costs from an irresponsible boom in the public sector under the last Government—with unfunded pension liabilities, bankrupt public finances and debt interest set to rise to £76 billion? Is it not the truth that it is always the poorest that pick up the bills for Labour and that a responsible—

[Mr Speaker]

Order. The trouble with Members crafting their questions word for word is that they tend to be rather long.

[Danny Alexander]

The hon. Gentleman is right that the poorest in society end up paying the price for the loss of financial control that we saw in this country under the previous Government. He referred to the liabilities in public service pensions. Those liabilities are, on the latest figures, more than £1.1 trillion. That is the entire education budget for more than 20 years.

--- Later in debate ---

[Mr Dominic Raab (Esher and Walton) (Con)]

My question has just been answered.

[Mr Speaker]

Well, that is a first—not the fact that the question has been answered, but the fact that a Member has been self-denying to the extent that he sits down when his question has already been dealt with. That is an interesting precedent.

[Mark Durkan (Foyle) (SDLP)]

Has the Chief Secretary taken into account the particular responsibilities of devolved Administrations and the rights of their public sector workers—many of them low paid, and all of them tax-paying—and do the terms of today’s offer differ from the previous terms about which he wrote to those Administrations?

--- Later in debate ---

[Danny Alexander]

I am grateful for the hon. Gentleman’s comments, and I hope that Mrs Bone shares his views. He is right to say that nobody who is within 10 years of retirement on 1 April next year will see any change either to their retirement age or to the benefits that they receive.

[Mr Speaker]

That answer will doubtless wing its way to Mrs Bone in a matter of minutes.

[Stephen Mosley (City of Chester) (Con)]

I congratulate the Chief Secretary on his statement. May I also ask him to continue to negotiate and engage positively with the trade unions in the weeks and months ahead?

--- Later in debate ---

[Danny Alexander]

The hon. Gentleman is right about that, and he makes an important point. Part of the reason for setting out some of the information about pension pots today is precisely to widen public understanding of the comparison. That is not to do down public sector workers—in fact, what we are setting out today is a properly positive and generous offer to them—but we are making it clear that there is a wide gulf and we need to raise standards in the private sector too.

[Mr Speaker]

I thank the Chief Secretary and colleagues, whose succinctness enabled 47 Back-Bench Members to question the Chief Secretary in 41 minutes of exclusively Back-Bench time. It shows what can be done when we try.

Oral Answers to Questions

John Bercow Excerpts

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.

--- Later in debate ---

[Fiona Mactaggart]

But with both women’s unemployment and the retail prices index at a higher level than at any time since the Chancellor left university—which was probably when the hon. Lady left primary school— [Interruption.] I do not—[Interruption.]

[Mr Speaker]

Order. All this noise slows down progress. Let’s get on.

[Fiona Mactaggart]

I was welcoming a young woman to the Front Bench, and I am glad to see young people representing people in this Parliament, but I do think it is shocking that we currently have the highest level of unemployment in more than 20 years—

[Mr Speaker]

Order. I just say to the hon. Lady that what I want is a question with a question mark.

[Fiona Mactaggart]

Is it not time that this Government delivered for women on employment, and may I suggest that support for women entrepreneurs and delivering promises that they made before the election for 3,000 more midwives and 4,000 extra—

[Mr Speaker]

Order. We have got the point.

[Miss Smith]

I have a number of things to say to the hon. Lady, none of which would include any personal questions, of course.

I can assure the hon. Lady that the Government are reducing the deficit fairly, and I would point out in particular that we are taking 1.1 million of the lowest-paid workers out of tax entirely, and the majority of them are women. She will welcome that as much as I do. Furthermore, she should know that unemployment rose to its level of 30% under her party’s Government.[Official Report, 3 November 2011, Vol. 534, c. 6MC.]

--- Later in debate ---

[Danny Alexander]

The hon. Gentleman is absolutely right about the enormous potential of this sector, and I congratulate him on his work and the close interest he has taken in this subject. The Exchequer Secretary to the Treasury would be very happy to meet both him and representatives of the Social Finance investment bank.

[Mr Speaker]

I call Kelvin Hopkins.

[Kelvin Hopkins (Luton North) (Lab)]

Next question.

--- Later in debate ---

[Jesse Norman]

I thank my hon. Friend for that response. This country continues to bear a huge burden of private finance initiative debt. The Government have made important progress in improving the cost and operation of PFI over the past 18 months. Does he share my view, and that of many of my colleagues, that more can be done to secure a fair deal on PFI, while securing investment in our infrastructure?

[Mr Speaker]

It would help if the Chair could actually hear the question being asked.

[Mr Gauke]

My hon. Friend has campaigned tirelessly on this matter. As he knows, the Government have improved the assurance and approval arrangements for PFI, and the transparency. We are seeking to obtain £1.5 billion of savings on existing stock of PFI contracts, and we will of course continue to work hard to improve the situation.

--- Later in debate ---

[Mr Hoban]

My hon. Friend asks a very good question. It is a sad indictment of the state of today’s Labour party that it voted against the increase in the IMF subscription negotiated by the—

[Mr Speaker]

Order. The Minister has said enough, and he has said it about another party’s policy. We need to move on.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Is it not accepted now by the international community that the announcement by the Chancellor a year ago that he would cut half a million public sector jobs led directly to a reduction in consumer demand, and that it has reduced private sector investment and growth and led to an increase in deficit predictions?

--- Later in debate ---

[Several hon. Members]

rose—

[Mr Speaker]

Order. As usual, this event is heavily oversubscribed. I am sorry to disappoint colleagues, but we must now move on.

Eurozone Crisis

John Bercow Excerpts

Thursday 27th October 2011 Commons Chamber

[Several hon. Members]

rose—

[Mr Speaker]

Order. I am keen to accommodate the remaining colleagues who are seeking to catch my eye, but I must remind the House that there is a business statement to follow, and a significant debate thereafter. I am therefore looking for brevity.

[Mr James Clappison (Hertsmere) (Con)]

I welcome my right hon. Friend the Chancellor’s approach, including his recognition that the division of responsibilities between the EU and member states has become unbalanced. Does he agree that the new proposals for fiscal integration and mutual control in the eurozone do nothing to reduce the case for a rebalancing of those responsibilities?

Eurozone

John Bercow Excerpts

Monday 10th October 2011 Commons Chamber

[Several hon. Members]

rose—

[Mr Speaker]

Order. A great number of Members are still seeking to catch my eye, and I am keen to accommodate them, but progress so far has been at best leisurely. What is required is brevity, a legendary example of which will now be provided by Mr David Tredinnick.

[David Tredinnick (Bosworth) (Con)]

Is not the fundamental problem with the Greeks that even if a package is agreed, there is no way the Government can implement it, because the tax authorities have themselves said that they are not going to do so? A depreciated or, indeed, a new currency for Greece would give my Hinckley constituents and others some chance of buying cheaper Greek holidays and stimulating the economy.

--- Later in debate ---

[Several hon. Members]

rose—

[Mr Speaker]

Order. At one point I thought that the hon. Member for Reading East (Mr Wilson) had toddled out of the Chamber, but I am delighted that he is back in his place and we want to hear him.

[Mr Rob Wilson (Reading East) (Con)]

My right hon. Friend was right to be concerned in his statement about money finding its way to small and start-up businesses. May I urge him to consider streamlining the current, overly complex enterprise investment scheme and add tax relief to those business angel investors who are making their savings available to small businesses in this country? Such an approach would give a much-needed boost to small business in this country.

Independent Banking Commission Report

John Bercow Excerpts

Monday 12th September 2011 Commons Chamber

[Several hon. Members]

rose—

[Mr Speaker]

Order. The Chancellor is helpfully offering the House very informative answers, but I would gently point out that thus far we have made what can best be described as leisurely progress, on which I hope we can now improve.

[Stephen Williams (Bristol West) (LD)]

Reform of the banks was one of the key foundation stones of the coalition Government, so I very much welcome today’s report. The public will certainly expect this Government to legislate as soon as possible to enact the various parts of the report, but they will need a reassurance today that there will be no excuse for the banks not returning to lending to small and medium-sized businesses, which are so necessary for our economies to return to sustainable growth.

--- Later in debate ---

[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

John Bercow Excerpts

Tuesday 6th September 2011 Commons Chamber

[Mr Speaker]

Order. I think the shadow Chancellor will want to refer to taxation levels on the banking industry.

[Ed Balls]

The argument that I am making is that the Chancellor is ignoring the case for repeating the bank bonus tax for a second year, even though youth unemployment has gone up by 18%—119,000 more. Let me ask him a second—

[Mr Speaker]

Order. I say to the shadow Chancellor that what we need now is a very brief question. We need to move on; there are a lot of questions to cover.

[Ed Balls]

The question that people will be asking is if the Chancellor will not change his mind on the bank bonus tax, on VAT and on the pace of deficit reduction, why is he now changing his mind on stalling bank reform? He said that we were all in it together. Why is there one rule for the banks and another rule for everyone else?

--- Later in debate ---

[Justine Greening]

The hon. Gentleman is right to raise the issue because it is important. The challenge that we all face is to make sure that energy bills are affordable not just this winter—the point that he makes—but in winters in 10 and 20 years’ time. The problem that we have as a country is our dependency on fossil fuels. In the long term, we need to get ourselves off that dependency so that we are not so blown about by the international winds that see commodity prices go up and down. In the short term, we are taking steps to support the most vulnerable through the Warm Homes discount. Next year, we will introduce the green deal to help energy efficiency. The hon. Gentleman asks whether we have meetings with energy companies, and of course we do every day. I am sure that he will also—

[Mr Speaker]

Order. Progress is very slow, and it needs to get faster.

[Mr Mark Spencer (Sherwood) (Con)]

The Minister will be aware of how rapidly fuel and energy prices have increased. Am I right in thinking, however, that if the Chancellor had not taken action in the Budget, fuel prices would be 6p a litre higher today?

--- Later in debate ---

[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.

--- Later in debate ---

[Justine Greening]

rose—

[Mr Speaker]

Order. The Minister will want to relate her answer to domestic energy prices. I feel sure that that is what she will do.

[Justine Greening]

I shall try. I am sure that many of those apprenticeships will be in green industry, which is part of how we hope to get this economy back on its feet.

[Mr Speaker]

We are grateful.

[Robert Halfon (Harlow) (Con)]

15. What fiscal measures he is taking to reduce the costs faced by businesses.

--- Later in debate ---

[Several hon. Members]

rose—

[Mr Speaker]

Order. Time is up. I would love to call more hon. Members, as I enjoy nothing more than hearing my colleagues ask and answer questions, but I am afraid that we must move on to the ten-minute rule motion.