[Un-allotted Half Day] — Cost of Living

Opposition Day – in the House of Commons at 1:37 pm on 9th July 2008.

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Photo of Sylvia Heal Sylvia Heal Deputy Speaker 1:37 pm, 9th July 2008

I advise the House that Mr. Speaker has selected the amendment in the name of the Prime Minister.

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Photo of Gregory Campbell Gregory Campbell Shadow Minister (Work and Pensions) 1:43 pm, 9th July 2008

I beg to move,

That this House
recognises the recent increases in food and fuel costs combined with the abolition of the 10 pence tax band, and the effect these are having on the most disadvantaged in society;
and calls for a review of all mechanisms, including the use of extra revenue raised through increased crude oil prices, winter fuel payments and family tax credits, to assist those on lower and medium incomes.

Across the United Kingdom there is evidence of an economic downturn, which has many aspects to it. In fact, today's national newspaper front page headlines give a stark indication of what we face in the coming months, which has all the hallmarks of the nation's worse downturn in 30 years. While all parts of the nation and all sectors of society are suffering, the region whose suffering is among the worst is Northern Ireland. The price of oil in all parts of the UK is hovering near $150 a barrel, which means that the prices of diesel in Northern Ireland filling stations—I am sure that this is the case elsewhere in the UK—has increased by 35 per cent. since this time last year, and that of unleaded petrol by 22 per cent. Regions such as Northern Ireland, parts of Scotland and the south-west of England suffer most, because food and goods have to be transported to the consumer.

We have seen electricity price rises of the order of 20 per cent. in 12 months; natural gas prices have risen by 28 per cent., and home heating oil in Northern Ireland has risen by 100 per cent. in a 12-month period. All that provides a clear indication that consumers and vulnerable groups, to whom I will turn in a moment, are suffering horrendously. Today, I read that home repossessions are set to rise throughout the United Kingdom by 60 per cent. by the end of the year—not in 12 months' time, but within the next six months. The credit crunch, coupled with the other issues that I have mentioned, means that people are suffering across the UK. Indeed, every constituency MP hears on a daily basis of the genuine hardships faced by people who find it difficult to meet mortgage costs. The increase in repossessions in the next six months indicate how difficult it is for people to meet those increasing mortgage costs.

Given that vulnerable groups are being hit the hardest, people are turning to the Government for solutions. Governments here and elsewhere may protest that the increases are, for the most part, outside their control—and of course many of them are—but helping the lower-paid and vulnerable senior citizens is certainly what the Government must do, and they must do so quickly.

I read with interest in the amendment tabled in the name of the Prime Minister the gestures that the Government intend to make. There will be increases in the winter fuel payment and in tax credits and allowances. The Government are moving in the correct direction, but those gestures are just that—gestures—and they are not sufficient, because elderly people have found that even a £50 or £100 increase in the winter fuel payment does not extend to their covering the purchase of one tankful of home heating oil to get them through half of the coldest part of the winter. Only four years ago, the winter fuel allowance allowed a senior citizen to acquire sufficient heating oil to get them through the entire winter, so the scale of the problem is increasing, and the measures that are intended to deal with the problem have fallen significantly short.

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Photo of Nigel Dodds Nigel Dodds Shadow Spokesperson (Business, Enterprise and Regulatory Reform), Without portfolio, Shadow Spokesperson (Justice), Shadow DUP Spokesperson (Without Portfolio)

My hon. Friend mentioned vulnerable groups, particularly the elderly. Does he agree that inflation for older people is running ahead of inflation rates for the community in general? The winter fuel allowance, which helps many elderly people, has been increased only once since 2000, and has not kept pace with inflation. The allowance would be a practical means of helping older people in particular, and the Government need to act on that, given the escalating price of fuel to which my hon. Friend referred.

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Photo of Gregory Campbell Gregory Campbell Shadow Minister (Work and Pensions)

I thank my hon. Friend for that useful intervention. What he says is indeed the case. I have read with interest the information disseminated by the financial services group Clerical Medical, which has said that senior citizens have seen the cost of the whole range of goods and services that they use rise by 36 per cent. in the past decade. Retail price inflation, however, has risen by only 32 per cent. over the same period. That is precisely the point. The situation for those vulnerable groups, particularly elderly citizens, is worsening. It was worsening by the year, as the figures from Clerical Medical indicate, but in the climate that we face in 2008, it is worsening by the week. That is the problem with which we have to grapple.

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Photo of Mark Oaten Mark Oaten Liberal Democrat, Winchester

Before the hon. Gentleman comes to what he would like the Government to do to address those circumstances, does he have any comments on what the energy companies could be doing to help with the problem?

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Photo of Gregory Campbell Gregory Campbell Shadow Minister (Work and Pensions)

I thank the hon. Gentleman for that. Many of the energy companies could be making a significant contribution, given the profitability of most of them in recent years. They should and could be looking at their tariffs, particularly at how they ensure that payments are made. There are a number of issues that they could and should consider; I hope that they will.

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Photo of Sammy Wilson Sammy Wilson Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Education)

Does my hon. Friend find it odd that the tariffs for some of the most needy and the poorest—those who use card meters, for example—are not the lowest? Addressing that issue would be one way in which energy companies could help reduce fuel poverty.

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Photo of Gregory Campbell Gregory Campbell Shadow Minister (Work and Pensions)

I thank my hon. Friend for that intervention. What he says is indeed the case. In fact, the evidence that I have read indicates that some of the highest tariffs are levied against the most vulnerable, who cannot avail themselves of the direct debit system. The companies need to consider that issue.

I return to the issue of the winter fuel payments. We need a radical overhaul for the next two winters. All the indications are that the oil price is not going to drop significantly in the next 12 to 15 months. That means that between now and the end of 2009, senior citizens and the vulnerable groups to which I have alluded will face two consecutive winters during which the winter fuel payment will not be sufficient to heat their homes.

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Photo of William McCrea William McCrea Shadow Spokesperson (Environment, Food and Rural Affairs)

I thank my hon. Friend, who has been considerate in giving way. I draw his attention not only to senior citizens, who are certainly traumatised and fearful about what the future—certainly the winter period—holds for them, but to the many disabled people who face a similar trauma. More consideration needs to be given to such people, who are caged in their homes and are unable to do anything themselves. They rely on us to raise a voice for them.

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Photo of Gregory Campbell Gregory Campbell Shadow Minister (Work and Pensions)

I thank my hon. Friend, who has alluded to yet another vulnerable group. One hopes that the Warm Front scheme, for example, will be extended to take particular account of the disabled and others who find that the winter fuel payment could go much further if more was on offer for their homes.

I turn to other measures that the Government could implement to assist in the current crisis. The Government will complain—they are complaining—that employees are making demands for wage increases to meet the spiralling costs and that, in doing so, they are adding to inflationary pressures. Employees are doing that because of the problem to which I have alluded. We need to try to ensure that people's net disposable incomes are sufficient to allow them to cope with the pressures.

In that respect, my party and I have been lobbying the Treasury for some time to increase personal allowances significantly. I notice that a temporary measure is being implemented to allow for the 10 per cent. debacle. That measure needs to become much more significant. A significant increase in the amount of take-home pay, particularly of the lower-paid, that is not subject to national insurance contributions or income tax will greatly assist them over the next 18 months or thereabouts, when the pressure will be greatest.

The Government must respond on a combination of issues. The last thing that people want is the Prime Minister returning from the G8 summit to be asked at the airport what he thinks about the crisis. Inevitably, there will be those who would wait for a response that I have no doubt would not be given; the Prime Minister would be warned against saying, "Crisis? What crisis?" We all know the political consequences that followed the last time a Prime Minister uttered those words.

People want more than veiled references and the Prime Minister's amendment, which alludes to the gestures that have been made. Those have been in the right direction, but are patently insufficient because the crisis, as is clear from the front pages of most newspapers today and as will continue to be clear, is deepening by the day. The Government must respond and do so in a way that people see as meaningful and that will assist people in dealing with the problems that they face—not only on a yearly basis, in their mortgage payments, but on a monthly and weekly basis. Only an emphatic Government response will allow people to see that the Government care for the low-paid, senior citizens and vulnerable groups and are taking action to alleviate the problems that those people face.

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury 1:57 pm, 9th July 2008

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

"notes that the Governor of the Bank of England's letter of 16th June 2008 to the Chancellor of the Exchequer said that 1.1 per cent. of the 1.2 per cent. increase in recent months in inflation was due to global energy and food prices;
further notes the Government's global leadership and supports the Government's action to tackle price rises with action on an international level, including pushing for a successful conclusion to the Doha round of negotiations in the World Trade Organisation and examining the impact of biofuels of food production;
acknowledges the significant increases in world prices, with the oil price rising by 80 per cent. and food prices up by 60 per cent. in the 12 months to May 2008;
recognises that these increases in global prices affect every country and put real pressure on family budgets throughout the UK;
further acknowledges that the measures that the Government has taken and will continue to take to support families, individuals and businesses throughout the UK include extra tax credits, increased tax allowances, further winter fuel payments and increases in child benefit;
considers that a strong and stable economy delivers the most important support for working families;
and supports the Government's actions that have delivered unemployment, inflation and interest rates all at historically low levels."

It is a pleasure to have the opportunity to debate an issue as important as the cost of living. I appreciate that the terms of the motion and Government's amendment are set widely. It is a pleasure to respond to a debate tabled by the Democratic Unionist party and I congratulate it on having selected this subject.

As the House will know, this debate comes at a time when families across the country face rising world food and fuel prices as well as the effects of the ongoing global credit squeeze. I would not employ the language used by Mr. Campbell, but I acknowledge the problems that families face. Those challenges face not only us here in Britain or in Northern Ireland, but economies across the world. Oil prices have hit record highs in recent weeks and are nearly twice as high as they were a year ago. That has pushed up the price of petrol, gas and electricity. I know that Northern Ireland Electricity increased its prices by 14 per cent. at the start of the month.

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Photo of Mark Oaten Mark Oaten Liberal Democrat, Winchester

I am grateful to the Minister for giving way so quickly. On the point that she has just made, is it not the case that although many of the pressures are global, some of the energy prices are still much higher in this country than on mainland Europe, which is still exposed to the same global pressures?

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

The hon. Gentleman is not correct in general. If he will allow me, I shall come to such issues in an orderly way in the course of the comments that I want to make. I do want to address that point, however.

Staple food prices have risen across the world by more than 40 per cent. in a year. Those increases, as the Governor of the Bank of England made clear in his letter to my right hon. Friend the Chancellor last month, have accounted in large part for the increase in inflation since the end of last year, and they mean that the UK's economy, like that of the rest of the world, is facing a challenging time and that life is more difficult for families across the country—including, of course, in Northern Ireland.

However, as I have said before—we have debated this on several previous occasions—our economy faces these challenges in a much stronger position to respond than in previous decades. Before I am accused of complacency, let me set this in an historical context. The UK's inflation has been the second lowest in the G7 since 1997—that is a fact that we should all be able to agree on. It is still lower than in the USA or the euro zone, and it is far lower than in the early 1990s, when for nearly two whole years it was more than twice as high as it is now. That did not happen by accident. The reform of fiscal policy established by this Government in 1997 laid the foundations for this steadiness in the economy. Interest rates are much lower than they were in the past. The strong and steady growth that we have seen over the past 10 years, from which all families have benefited, has taken us from having the lowest income per head in the G7 to the second highest, and real household income available to spend has risen by more than 30 per cent. in that time.

Crucially, employment is high, with more than 3 million more jobs than in 1997, and unemployment is low. In Northern Ireland, unemployment has been halved in the past decade, with long-term unemployment down by 90 per cent. Its unemployment rates are among the lowest in the UK, and there are 100,000 more people in work than there were 11 years ago: a fact that brings me particular pleasure given my short time—one year—as Minister with responsibility for employment in Northern Ireland.

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Photo of William McCrea William McCrea Shadow Spokesperson (Environment, Food and Rural Affairs)

I have happy memories of the Minister's time in Northern Ireland and the pleasant manner in which she received elected representatives. However, I remind her we have specific problems that are exacerbated by this crisis—lower disposable incomes, extra energy costs and higher fuel poverty than any other region of the United Kingdom.

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

I acknowledge that factors in Northern Ireland mean that families are affected in different ways by the challenges that we face. Broadly, on most issues, Northern Ireland faces the same challenges as the rest of the UK, but other factors overlay the situation, as the hon. Gentleman knows far better than I do as a representative of an English constituency.

The hon. Gentleman and his colleagues will know how important to Northern Ireland's economy is the ongoing political stability that we need to maintain. Clearly, the ability to bring about a devolved Government to Northern Ireland has had a major impact on the confidence of business. I will turn in a moment to the successful conference that the Assembly organised, which is a tribute to the work that is going on. The fact that companies from around the world are now investing with confidence in Northern Ireland is very much to do with the ongoing political stability that the hon. Gentleman and others have worked so hard to achieve. We all need to work hard to sustain, foster and encourage that for the sake of the ongoing stability of the economy and the extra jobs that will be generated by inward investment. I am setting the context, not seeking in any way to minimise the points that he and others will make about specific problems that he and his constituents are experiencing.

Northern Ireland has, like the rest of the UK, enjoyed sustained economic growth for a number of years. Exports have risen by 70 per cent. over the past decade, and its economy has a promising future as it benefits from a successful peace process. I congratulate Mr. Robinson and Mr. Dodds, both of whom are in their seats, on the recent US investment conference, which attracted twice as many potential investors as were originally expected. That shows the potential that there is in Northern Ireland, particularly when put alongside companies such as Fujitsu, Bloomberg and Bombardier announcing investments there.

I am confident that Northern Ireland and the rest of the UK will weather the storm that we are experiencing internationally. The Government are taking action to respond by supporting our economy, our families and our businesses. This year, we are using the flexibility that our fiscal rules give us to increase borrowing to support the economy at a time when it needs it. That allowed us to delay the increase in fuel duty that was due in April.

The hon. Member for East Londonderry spoke about other ways in which we might support families. His motion indicates that he believes that a windfall from higher oil prices could be used for that purpose, as do other political parties that have made great play of this. If he will allow me to say so respectfully, this shows how Opposition politics fail to appreciate Government responsibilities. Let me draw his attention to the article IV inspection by the International Monetary Fund that took place in May. In a document that is publicly available on the Treasury website, the IMF says:

"For over a decade, the United Kingdom has sustained low inflation and rapid economic growth—an exceptional achievement...the fruit of strong policies and policy frameworks, which provide a strong foundation to weather global challenges."

It goes on to say:

"The 2008 budget judgment was appropriate, as was its commitment to fiscal tightening over the next few years."

It continues:

"The inflation targeting regime should remain unaltered...Key elements of the fiscal framework".

That is a very important endorsement of the direction of Government policy that Opposition parties who call for quick fixes should bear in mind before propounding such policies.

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Photo of Peter Bone Peter Bone Conservative, Wellingborough

Given the Minister's comments, are we to assume that the inflation target will not be changed, that the fact that it is way over the permitted boundaries is not acceptable, and that the Bank of England is being called in to ask it what is happening?

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

The hon. Gentleman will know that the inflation target is a medium-term target. He will also appreciate the very strong endorsement that we are seeing from independent commentators from a number of sources about the underlying policies that this Government have introduced and remain strongly in support of, and which have brought about this sustained period of economic stability. I am confident that that ongoing stability will prove very important in helping the British economy to weather the storm that we are experiencing and face in the coming weeks. Maintaining that stability will be equally important to Northern Ireland. I remind the hon. Gentleman that the last time we debated this, Mr. Hammond boiled it down to the difference between his party and mine. He said

"there are no easy or quick solutions and no magic wands. The essence of our argument against the Government is that we have entered this downturn—and it is a downturn—"

I do not think that anybody is arguing with that—

"uniquely ill prepared to deal with it."—[ Hansard, 24 June 2008; Vol. 478, c. 162.]

My suggestion to his party and to those who would argue for a different course of action is that the IMF profoundly disagrees with that. I think that parties that purport to present themselves as ready for government ought to bear in mind how important the underlying strength of the economy is, and no action should be taken that would jeopardise that stability.

As higher fuel prices lead to less demand, we might even receive less revenue from fuel duty than we otherwise would have done, so the concept of a windfall is profoundly misjudged. VAT is a percentage of the price, so it rises with fuel prices, but as people spend more on fuel, there is likely to be an impact on VAT revenues from elsewhere in the economy, leaving the overall level of VAT roughly the same—particularly as businesses can reclaim the VAT that they spend on fuel. It is also compulsory under EU law to charge VAT on fuel, and the House should remember that the UK has one of the lowest rates of VAT on fuel in the EU.

As well as suggesting that we were going to get a windfall—and I do not think that we will—the motion also tells us how to spend it, and suggests a review of winter fuel payments and tax credits. I am, of course, always happy to listen to proposals from any Member, but hon. Members will know that tax credits support around 20 million men, women and children across the country, and those credits have made a major contribution to lifting hundreds of thousands of children above the poverty line. They mean that 3 million out of Britain's 7 million families with children now receive more in tax credits and child benefit than they pay in income tax. Let me say that again: of the 7 million families with children in the UK, almost half now pay less in income tax than they receive in benefits through tax credits and child benefit.

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Photo of Sammy Wilson Sammy Wilson Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Education)

I have listened to the Minister's argument, and it is a refinement of the argument put forward time and time again to excuse the Government for not reducing fuel duty at a time when money from VAT on fuel and North sea revenues would be expected to rise. The explanation that she has given is not borne out by the figures that the Government published in the Budget report for 2009, which do not show, over the next three years, either a fall in North sea revenue duties or VAT duties. How does she square what she says with the Government's published figures?

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

It is not clear that there would be a net gain to the Government as a result of the increase in oil prices. The analysis that I have given to the House of the impact of the changes is based on the best available information. Despite the case that Opposition parties are making for an opportunity to grab at this perceived or suggested windfall, the truth is very different. There is no opportunity to do what is suggested by the hon. Gentleman's party or the official Opposition.

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Photo of William McCrea William McCrea Shadow Spokesperson (Environment, Food and Rural Affairs)

Although the Minister said that the United Kingdom has one of the lowest VAT burdens, she did not say that it has one of the highest rates of tax burden on fuel in the EU. Let us have all the facts.

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

But the hon. Gentleman will know that VAT rates are very difficult to adjust in the face of the European Union rules under which we work. I say to him and Sammy Wilson that the Government responded to the increase in pressures on household costs by not raising fuel duty in the Budget in 2008, and the Chancellor will keep all those factors under review—as he always does—when considering the measures introduced in the pre-Budget report.

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Photo of Peter Bone Peter Bone Conservative, Wellingborough

I really do not think that the Minister should be allowed to move on while she is trying to give the impression that we are somehow better off than the European Union. The duty we pay in this country is over 50p per litre. The EU average is 25p per litre. To talk about VAT rates—I will not say it is misleading because I would not be allowed to—is moving away from reality. The fact is that the duty is twice as much.

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

The fuel duty we apply is based on the sound approach that we introduced. In fact, it was the hon. Gentleman's party that introduced the fuel duty escalator. We moved away from that on the grounds that it was unsustainable. Had we stuck with his party's fuel duty escalator, which was introduced, if I remember rightly, for environmental reasons, fuel duty would now be 35p a litre higher. We are sensitive to the costs that apply to motorists, but this debate should not go by without taking note of the Royal Automobile Club report on the costs of motoring, which shows that the total cost of motoring, including the cost of fuel, has fallen by 18 per cent. in real terms over the past 20 years. Hon. Members will have read accounts of that report today, so I will not labour the point, but it is worth noting.

Turning to winter fuel payments, they are an important part of the increased support that we have provided to pensioners over the past 11 years. In the Budget, we announced that households with people over 80 years old will receive an additional £100 alongside their winter fuel payments this year, while households with those over 60 will receive an additional £50. That will benefit 9 million households nationwide, including Northern Ireland. It is not true to say that we have not acknowledged the difficulties of dealing with rising fuel prices.

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Photo of Gregory Campbell Gregory Campbell Shadow Minister (Work and Pensions)

I thank the Minister for being kind enough to give way again. She alludes to the proposed increase in the winter fuel payment, and all hon. Members say that that is a step in the right direction. But can she not accept that that increase is significantly short of what the people who avail themselves of the benefit need to pay for oil? That is the point.

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

I acknowledge that the situation means that families throughout the UK are facing increasing costs. We have made a contribution towards helping them to do that. I accept that I cannot make promises to the hon. Gentleman that will mitigate the effect of all those costs. We have acknowledged the situation by taking action to help families with older people in their households, and we know that fuel costs cause them great anxiety because of the need to maintain a warm environment, particularly for older people in poorer health.

I do not accept that we have not been doing enough. We have been supporting families for the last 11 years, and we are continuing to do so today. In fact, we are providing even more support, recognising the tougher time that people are facing. At the same time as we are helping people to deal with the challenges, we are tackling their causes, including the ongoing credit squeeze. We are supporting the Bank of England's special liquidity scheme, which is helping to stabilise the financial markets and to promote confidence. We are also working to strengthen mortgage finance markets, which funded about a third of new mortgages last summer, but which have since frozen. During my visit to Northern Ireland on Monday, I was interested to note that house building appeared to have slowed, when it had grown very strongly there. I accept that Northern Ireland, like other parts of the UK, is experiencing the challenges that the British economy is facing.

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Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party

My right hon. Friend referred to the fact that the banks are benefiting from the Bank of England liquidity scheme. In circumstances where all of us, as taxpayers, are essentially underwriting liquidity for the banking sector, should it not be doing more to ensure greater liquidity in the construction and property sector? Businesses in that sector in Northern Ireland are going under. Many feel that they will be made to walk the plank soon by banks, partly because of the lack of liquidity in circumstances where house prices are falling. But people cannot buy houses because the cost of mortgages is too dear.

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

My hon. Friend asks an important question, but it is important for the House to understand that we are not underwriting the banks in the way in which he suggests. Questions were asked about that earlier in Prime Minister's Question Time, and hon. Members know that the Government are taking seriously the measures that need to be put in place to support and reform the banking system and encourage confidence. We are working closely with the financial industries and the banking sector to ensure that we get the legislation right before we introduce it in Parliament. However, I appreciate that the anxiety that my hon. Friend described is real.

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Photo of Mark Oaten Mark Oaten Liberal Democrat, Winchester

Given the attempts and efforts that the Financial Secretary describes, is she concerned that so many individual banks are not passing on changes in interest rates to their customers? Indeed, the rate that is advertised and offered to new borrowers on most new mortgage products has increased. That applies especially to those transferring from previous fixed rate deals.

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

We would like the banks to pass on the changes, but that is a matter for each bank and its relationship with its borrowers. I note the hon. Gentleman's point, and, while I am speaking to him directly, let me deal with his question about electricity prices being higher in the UK. I apologise for not having figures immediately to hand on relative electricity prices in the European Union, but I am conscious that the nature of the electricity market in the UK is different from structures in other member states. Northern Ireland Electricity advises that, following the 14 per cent. tariff increases in domestic electricity prices, Northern Ireland prices will be 2.1 per cent. above those in comparator regions in Great Britain, 9 per cent. lower than the western European average and 9 per cent. lower than those of the Electricity Supply Board in the Republic of Ireland. None of that will be of comfort where prices are increasing, but it is worth the House bearing in mind the context of the price rises.

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Photo of David Simpson David Simpson Shadow Spokesperson (Education), Shadow Spokesperson (International Development), Shadow Spokesperson (Transport)

The Financial Secretary mentioned an increase in the price of electricity, but does she know that Northern Ireland faces another 14 per cent. increase come audit time?

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

I dealt with that point in my reply to Mr. Oaten. I hear what David Simpson says.

Although we can support the economy, and support families here in Britain, the global credit crunch and rising food and fuel prices across the world are international problems, which need international solutions. As hon. Members know, my right hon. Friend the Prime Minister was in Japan earlier this week discussing world food prices, and we are continuing to press for reform of the common agricultural policy because it is unacceptable that the EU continues to apply high tariffs to many agricultural imports, especially at a time of such high prices.

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

I am grateful to the hon. Gentleman.

Agreeing a successful deal on the Doha development agenda will also help remove distorting subsidies and restrictions, and we will continue to push for a deal up to and at the World Trade Organisation ministerial meeting. We are also working with our international partners to achieve a world response to rising oil prices, including greater investment to help achieve enhanced supply capacity in the medium term, and moderating future demand growth by improving energy efficiency and exploring alternatives to oil. If the world is not producing enough fuel or food to meet rising demand, that challenge requires an international response.

Clearly, times are tough. People are paying more for their food, energy bills and petrol because of rising prices around the world at a time when we face a continuing credit crunch, which has meant increased mortgage costs for some. However, as I said, I believe that Britain is well placed to respond, and we are responding. The same is true in Northern Ireland. Inflation has been low for several years, there has been sustained growth, and unemployment rates are among the lowest in the UK.

Maintaining calm and developing appropriate and proportionate responses in the current global economic turbulence do not equate to complacency. I stress that we are not complacent. That is why the Government continue to work with our international partners to respond to the global challenges and support families across Britain, including in Northern Ireland. I urge hon. Members to oppose the motion, however well intentioned—I am grateful to the hon. Member for East Londonderry for introducing it—and I commend the Government amendment instead.

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Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party 2:25 pm, 9th July 2008

I congratulate Mr. Campbell on securing a debate on a subject that is vital for many people throughout the country. There is no doubt that the rising cost of living is one of the most pressing issues for millions of people in Britain today. That includes families, pensioners—indeed, pretty much everyone on low and fixed incomes, who struggle to cope with increased prices. Many are younger people who are starting out on their working lives and are therefore on much lower incomes than other people. They find that food is getting more expensive and fuel bills are increasing at an alarming rate, as we discussed earlier. Mortgages are harder to come by and the cost of transport—whether cars, buses or trains—continues to rise. A report by Asda stated that the cost of transport had increased by 6 per cent. between May 2007 and May this year.

We live in uncertain times. Today's economic pressures will not go away any time soon. Given that grim outlook, I am worried that the Government have fundamentally misunderstood the dire position that people face. Ministers tell us that our economy is in great shape, and much better than it was 20 years ago. However, people in today's Britain are already living frugally; many are already struggling to keep their heads above water financially. Disposable income has fallen by 6 per cent. That means that by May this year, families had 6 per cent. less to spend on leisure and entertainment than they had in May last year. A cost of living index, which Capital Economics researched for The Daily Telegraph, showed that a typical family that spent £100 a week on food a year ago now pays an extra £406 annually on groceries. Families clearly face difficult challenges.

Many people have all their disposable income committed; they simply have no more money to give the Government. The savings ratio is a tenth of what it was in 1997 and many people have nothing in reserve. For the many who live on the tipping point, life is not happy. It is stressful for families who are doing all they can to get by in such challenging times. It is unbelievably frustrating and stressful for people to be in a position where, although they are doing everything possible to keep the cost of living down, they face a constant daily challenge to make the household budget add up. They end up feeling that they have no control over their situation and little influence over events as they unfold. They need a Government who offer them the hope of a way out of their troubles.

Have the Government shown leadership on such issues? Have they recognised the urgent need to do everything they can to help struggling families in Britain? The answer is no. Instead, it is abundantly clear that the Government's attitude to the problem is, "Don't blame us, it's not our fault." We see that in the tone of their amendment. Inflation, food prices, fuel prices: these are global issues to the Government. They are telling us, "What can we do about them?" That is their attitude. There is nothing in the Government's amendment to give people facing challenges caused by the cost of living any hope whatever. It talks about "global leadership", but frankly, people up and down this country would settle for some national leadership.

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

It is kind of the hon. Lady to give way so early in her speech. I sought to set out why we were taking the course of action that we are, based on our confidence in the reforms that we made to fiscal policy arrangements early in government. I would be very interested to hear whether she believes that there are any alternative measures that we could take, perhaps at a macro-economic level. Would she intervene over interest rates, for example? I am interested to know what exactly she would do in this situation that she believes would bring about a better outcome for the British economy.

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Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

I will come to that shortly. On interest rates, my understanding is that it is the Prime Minister and the Chancellor, not our side, who are chuntering behind the scenes about what the Bank of England should do. The Government talk about leadership, but the reality is that there is a complete lack of leadership. Unfortunately, however, the Government's involvement in the cost of living goes beyond that.

Let us set aside the Government's claim about rising global costs. We can see that global trends are pushing up the cost of commodities such as corn and energy, but the Government have choices that they can make. The Financial Secretary has challenged me on what the Conservatives would do, and I will come to that. However, rather than trying to come up with solutions, the Government are, for many millions of people up and down the country, now part of the problem, because they are adding to the economic burden that people face. Despite all their warm words, and what they claim is their understanding of people's predicament as they try to keep up with rising fuel, energy and food costs, the Government have nevertheless decided to add to their economic misery.

Ministers must understand that their actions have serious and damaging consequences for people's cost of living. We talked earlier about dithering over the fuel duty rise. What families need from the Government is certainty. They need to be able to plan ahead. I will tell the Financial Secretary what she could do right now: she could tell us when the Government are going to make an announcement on their planned fuel duty rise. [ Interruption. ] She says that they may make an announcement at the Budget.

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Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

If the Financial Secretary wants to intervene, she can do so, but the reality is that, like the rest of the British people, we are left wondering, looking for nudges and winks—perhaps they will have a think about policies in this or that area. That is simply not good enough for families who need to plan financially, as they head into the second half of the year.

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Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

The hon. Gentleman points out that there is uncertainty, but why are the Government nevertheless ploughing ahead with the policies that they introduced in the Budget? They include, for example, taking away the 10p tax rate, which they would never have backed down on if they had not been caught with their fingers in the pockets of people on such low incomes. Indeed, they have not backed down yet.

On vehicle excise duty, the Government were again caught with their fingers in the pockets of people who can least afford it. Although over recent months Labour MPs have made a great play of their angst about what their Government are doing to their constituents who cannot afford to pay more tax, when it came to road tax, which will affect twice as many people—in some cases by up to twice as much—they passed up an opportunity last week to help keep the cost of living down, and were quite happy to put politics ahead of their constituents.

Even with the 10p tax rate fiasco, there are still well over 1 million people who will be worse off as a result of the Government's Budget, which they introduced when they knew that we were entering uncertain times. That is the reality of the Government's involvement in all this. Such policies will be the final straw for hundreds of thousands—probably millions—of households that are on the brink of going under financially. The Financial Secretary talked about the winter fuel allowance. Yes—a one-year winter fuel allowance paid for by permanent tax rises. Even this week, we have seen the complete and, dare I say, utter hypocrisy of the Prime Minister, in terms of the lack of assistance on offer.

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Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. Perhaps the hon. Lady would like to consider withdrawing that remark and rephrasing.

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Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

I will withdraw that remark. The Prime Minister was ill advised to make comments to British families about economising on wasting food on the same day that he sat down to an eight-course meal at the G8 summit that, as I understand from the menu, included white asparagus and truffle soup and what is called in French an amuse bouche—I understand that it is called corn-stuffed caviar in English—which was all washed down with champagne. People must wonder what planet the Prime Minister is living on when he can have that meal in the evening and then in the morning tell people that they are wasting their food.

As ever with this Government, it is one rule for them and another rule for the rest of us. The Prime Minister tells us that households can save £240 a year by not wasting food, but how about if they did not have to save it? How about if the Government were not bringing forward road tax rises that will cost some families £245 a year? The Government could be playing their role in helping people to cope with the rising cost of living, but they are not. The Prime Minister is in no position to lecture the British people about waste when he has presided over a Government who most people feel have wasted billions of pounds more than any Government in living memory—indeed, they have wasted £1.4 billion on tax credits alone.

The last thing that people who are just managing to stay afloat need right now is a Government who want to take more money out of their pockets, while at the same time telling them that they should try to economise. The reason why the Government are in this position—the reason why they cannot stop themselves from going ahead with their swingeing tax rises on low-income people—is that they have run out of money. As we have said, they could have fixed the economic roof when the sun was shining and the global economy was in a better shape. They chose not to, and now they are left with no alternative but to impose tax rises on the people who can least afford them, at a time when their financial situation is getting worse and worse.

I am sure that the Financial Secretary has told us that her hands are tied and that there is no room for Government to manoeuvre, but the situation is down to the Government's economic mismanagement, and there are things that can be done to help people. As we discussed earlier, only last week the House had a choice to avoid going ahead with swingeing, punitive increases in road tax, but Government MPs decided not to take that road. They decided to press ahead with increases on road tax—and for what? To tackle motor vehicle emissions, which, by their own admission, the policy will reduce by a fraction of 1 per cent. by 2020. That measure was all about raising money, and Government MPs were quite happy to go through the Lobby and vote for it.

Last weekend, we proposed a fair fuel stabiliser, which would mitigate the burden on families of rising fuel prices by lowering fuel duty and vice versa, precisely in order to remove the uncertainty that people face in their household budgets to the extent that we can.

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Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

I am glad that the hon. Lady has mentioned her proposals for a fuel duty stabiliser. My question is this: if the oil price rose so much that the public purse could not afford automatically to compensate families for the increase in the price of petrol, would a future Conservative Government do that?

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Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

What the Economic Secretary has fundamentally missed is the other beneficial aspect of our measure. It would provide not only stability for household finances—although that is the most important part of what we are doing—but stability, as she ought to know, for the public finances. Our proposal would ensure that at times of rising oil prices, the Government would receive an unexpected windfall. Ministers have questioned our proposal— [ Interruption ]—and indeed, they are shaking their heads right now. However, they should talk to the National Institute of Economic and Social Research, whose work clearly shows that there is a net benefit to the Exchequer of rising oil prices. The problem is—

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Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

Let me just finish explaining and answering the question. That might be helpful.

The other side of the argument is that when oil prices go down, the Government have an unexpected shortfall. Our proposals would therefore stabilise public finances as well. I do not need to take any lectures on our policy from a Government who cannot even tell us what they are going to do about fuel duty in the next six months. They do not have a policy, but they need to have one, for the sake of the British people. Instead, they are going to dither and do whatever is politically astute for them, instead of what is financially astute for the British people.

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Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

Does the hon. Lady not agree with the Institute for Fiscal Studies, which has considerable experience in this respect, when it says that there is no clear evidence of any net windfall for the Government as a result of a rise in oil prices?

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Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

The Minister and I can trade think-tanks, but the Conservatives are absolutely confident that the approach that we are taking will benefit the British people and provide them with some certainty, which is something that Ministers, living in their bubble in Whitehall, are rather dismissive of. People who are watching this debate, or who read about it in the papers tomorrow, will be dismayed to see the Government pooh-poohing an idea that could really help families throughout the country right now. If our proposal had been introduced in the Budget, families would now be paying 5p a litre less for their fuel, which would be very welcome.

I shall wrap up now, because I know that other hon. Members want to speak—

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Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

Labour Members, who have nothing to tell the British people about what they would do, apparently want to hear more from us. I am sure they do, because every time we announce a policy, they go through a process of rubbishing it, then rapidly adopt it in some less effective variant.

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Photo of Sammy Wilson Sammy Wilson Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Education)

The Minister argued earlier that VAT revenues from other areas fell when fuel duty went up. On that argument, if the fuel stabiliser that Justine Greening proposes were introduced, surely the compensatory element for public finance would be self-financing. If we give people more money in their pockets through lower fuel prices, they will spend more on goods and the Government will get more through VAT.

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Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

The hon. Gentleman makes an interesting point, although I doubt that the Minister would have anything interesting to say in response to it. I see that she does not wish to intervene at this point.

In these difficult economic times, the thing that people need most is for the Government to be on their side. We have had 10 years of this Government telling us that everything was fine, but it is now clear that for people in Britain that is not the case and that the Government have economically mismanaged this country's public finances. They did not fix the roof when the sun was shining. People will remember this Government for the hard times, not the good times, and the true test of the Government's leadership and competence comes when things are at their worst. People are looking to Ministers for a lifeline and for help to ease their financial burdens. Instead, they are seeing a worsening of those burdens.

A Conservative Government will help people, rather than hinder them. We want to assist people with their financial troubles and try to ease those troubles, rather than taking the route that this Government have taken in adding to them. We are going to tackle economic problems, rather than abrogate responsibility, as we have seen happening today. What are people getting at the moment? They are being met with nothing more than uncaring, indifferent leadership from Ministers who, far from offering solutions to any of their financial troubles, are more concerned with addressing political priorities than tackling the nation's economic priorities.

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Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party 2:44 pm, 9th July 2008

I congratulate Mr. Campbell and his colleagues on securing a debate on this important issue. The hon. Gentleman is my constituency neighbour and, indeed, my constituent—

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Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party

No; that is not news.

The hon. Member for East Londonderry, the Minister and others who have spoken have highlighted a number of ways in which the current situation is affecting people in their daily lives, and in their homes in regard to household bills and their daily consumption. The credit crunch that we have all been talking about is now a consumer crunch, and consumers are now experiencing a situation of crunch and grind as more and more bills are rising higher and higher.

Underlying energy costs are contributing to higher food costs and higher costs for all sorts of other services and amenities. They are also contributing to higher costs for the public purse, as fuel bills rise for hospitals, schools and other public service buildings. The situation is biting on all of us, either as individuals, in households, in businesses or as taxpayers funding public services.

The Minister talked about a global rise in oil prices and referred to the fact that the world was not producing enough oil. In the Northern Ireland Assembly, the Committee for Enterprise, Trade and Investment took evidence from people in the energy market who made the point that a barrel of oil is traded 11 times before it is consumed. Those trade transactions are driving up the cost to the end consumer. Similarly, it was pointed out that gas in the UK is traded six times before it is consumed, whereas the additional ratio of trade in the continental gas market is only 0.6. I know that there is a different structure in the gas market on the continent, including more state ownership, but the fact is that we need to take account of the market factors that are driving up the costs for consumers before they have to pay the end cost. It is clear that they are paying more than just the price of scarce production, and that they are having to take on price increases that are the result of up to 12 transactions for profiteering and speculating purposes.

When we search for evidence of who is doing this trading in oil, we see that banks and institutional investors are significant players in that regard. I accept that, in circumstances in which the property market has taken a hit, banks and other institutional investors are looking for commodities to deal and speculate in usefully and profitably, not least because they are trying to maintain the value of pensions on behalf of us all. However, we really need to see some action that says to institutional investors that the degree to which they trade in commodity indices and in futures is doing wider economic damage. We know from the warnings given to the US Senate Commerce Committee by George Soros, among others, that the degree of dealing that is going on in commodity indices is creating a dangerous bubble. That is creating the immediate price pressure that everyone is feeling, but it will also create a dangerous collapse at a later stage.

When we consider the key pressures affecting the cost of living, it is important to ask whether there are interventions that could be made or brakes that could be applied to ease the pressure from global oil price rises. I hope that the G8 and other international forums will consider such interventions and restraints, and examine whether we could incentivise responsibility among those who seem to be having a significant impact on the oil crisis.

What we are discussing today is the cost of living, but it is clear from the comments of hon. Members who have spoken that looming large within our consideration of the cost of living nowadays is the cost of warmth. I would like to see the Government move forward with a working cost-of-warmth index to show that they are tracking and measuring the cost of warmth for people in their homes, whatever the cost of domestic fuel. They need to gain a real sense of what people have to pay.

The Government should use a cost-of-warmth index to proof and improve their efforts to tackle fuel poverty. To their credit, they have made significant inroads into reducing fuel poverty over a number of years. Of course, the danger of the current crisis is the risk of all that good work being wiped out. Just as they are right not to throw away their drive towards creating a greener fiscal regime in the current economic climate, so they are right to keep their focus on trying to bear down on fuel poverty, curbing and restraining it as much as possible.

In the context of a cost-of-warmth index that tracks what different households have to pay and the changes in relative income bases, it is important for the Government to take into account the argument about windfall taxes to a more considered degree than they have so far. The Government tend to put forward the general surmise, "Well, it is swings and roundabouts; and what we appear to gain here, we may lose somewhere else." It would be helpful if the Government were able to say more precisely what they are or are not gaining in respect of VAT on domestic fuel bills, added revenues from various other fuel duties and any other revenue receipts, which would allow people to judge the argument.

The Government have used reflex arguments before in respect of fiscal issues, including spending a long time saying that it was a figment of everyone else's imaginations to suppose that there would be problems from the abolition of the 10p tax band, only eventually to recognise that there were serious problems requiring fairly dramatic responses and interventions to ameliorate the resulting situation. I would appreciate it if the Government, as well as cautioning the rest of us about the argument, promised to show exactly what is or is not happening.

I particularly hope that the Government will promise to identify what additional VAT income they receive from household energy bills. They should separate out petrol, diesel and other fuels and find out what exactly is happening in respect of added revenue yield coming from ever-increasing domestic energy bills. The hon. Member for East Londonderry referred earlier to the sort of price increases that consumers in Northern Ireland have faced, with one gas company's consumers having to pay 28 per cent. extra and electricity customers facing an interim increase of 14 per cent.

David Simpson then intervened to say that the same, if not worse, increases were going to happen in the autumn. In the circumstances, the Government should look further into those revenues with an eye to redirecting any windfall VAT benefits on domestic energy bills towards adopting measures aimed at improving energy efficiency or curbing fuel poverty for those domestic consumers. We need to target and keep our eye on that issue in circumstances where it is very easy to get distracted and preoccupied with a variety of other issues. We need to keep an eye on the Government's successful drive on fuel poverty. It would be consistent with the Government's approach if Ministers were to refocus their case on the general argument for windfall taxes in order to deal with that particular issue.

I intervened on the Minister earlier about the difficulties faced by the construction and property sector in the current crisis. In a constituency and region such as mine, that is not only a problem for businesses. Yes, construction and property is a very significant sector in Northern Ireland—indeed, it has been a very significant driver of the regional economy recently, just as it was a hugely significant driver in the economic success of the Irish Republic over the past decade—but it is now a sector in crisis. Given the land prices developers were prepared to pay and the house prices that they were prepared to charge, not everyone will have much sympathy for them, but the fact remains that it is not a crisis entirely of their own making. After all, the banks were throwing money at them to buy land at these significant prices, and they were putting up the money in very generous mortgage deals at 100 per cent. and 125 per cent., which fuelled the market, but we are now seeing a virtual collapse of that market with the banks putting the squeeze on some of those very same businesses. Houses are available at much lower prices than were sought last year, so it is paradoxical that they are now in market terms out of the reach of many people, who can no longer access the finance to buy them.

Given the commitments of the Government and the various Administrations around these islands to affordable and social housing, positive intervention is important. We need more effective intervention to ensure that houses that should be available at lower prices are available at lower prices. Influencing the banks is a key factor, because they have moved from over-lending to under-lending as far as that market is concerned. Action needs to be taken to strike a better balance.

I argued earlier that the credit crunch has become a consumer crunch, and I want to close by mentioning my visit to a credit union in my constituency. Those working there told me that they are now being asked for loans so that people can pay their fuel bills or cope with significant household bills, including groceries. That is a new situation for credit unions. Some of the older credit unions may have faced it many years ago and some may have started by helping people to cope in that way, but now that problem is biting again, it really is a call to us all to wake up and see what we can do.

I accept what the Government say about their good economic management over the past 10 years, and I also respect what they say about all their headline macro-policy initiatives, but policy management does not always help people to cope in circumstances where they have to turn to a credit union to cope with an oil bill. If this is happening as we come into the summer, what situation are people going to face as we move into winter? It was good to hear from the Financial Secretary that the Government appreciate the pressures that people are experiencing, as it is important that they feel the pain of those who are struggling on marginal incomes with ever-rising bills. However, it is even more important that the Government translate that into significant action and real intervention that helps real people to cope with very real pressures.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer 2:59 pm, 9th July 2008

Let me add my congratulations to Mr. Campbell. A couple of weeks ago we had an Opposition day debate on the same subject, but no Ulster Members had an opportunity to speak on that occasion. As I do not want to restrict the time available to David Simpson, who is obviously waiting to speak, I shall be fairly brief.

A couple of distinctive Northern Irish issues are relevant to the debate. The first is that as Northern Ireland has a large rural hinterland, it is probably proportionally more affected by transport costs and by a relatively poor train system. The impact on the farming community is particularly significant, and it involves factors that also affect Scotland, Ireland, Cornwall and other parts of England.

A second issue that was mentioned by neither Mark Durkan nor the hon. Member for East Londonderry is Northern Ireland's proximity to the Irish border. Nowadays there is a large amount of cross-border trade and movement across the Euroland frontier. Anyone importing goods from southern Ireland or crossing the border to buy them will know of the substantial impact of sterling devaluation against the euro, which is probably about 15 per cent. That currency change is an important element of the increased cost of living in Northern Ireland, which may be mentioned in the winding-up speeches.

I want to develop some of the points made by the Minister and Justine Greening about the oil sector. Although the motion contains nothing desperately controversial—it is worded very openly, and I am happy to support it—I worry, like the Minister, about the constant references to a windfall from oil. It is tempting to jump on to the bandwagon, as the Conservatives and the Scottish National party have, and I am tempted to imagine that there is a pot of gold that can be spent on good causes, but I want to dwell a little on where the money comes from.

The sums that I have seen suggest that if we are talking purely about the existing windfall tax from the North sea—the petroleum revenue tax and the extra rate of corporation tax—if oil prices were maintained at their present level throughout the financial year, there could be an extra £6 billion from that source and, on similar assumptions, £3 billion or £4 billion from value added tax. That apparently quite large sum would come simply from higher oil prices.

There are two points to be made. First, we are talking about not a separate silo, but a single stream of Government revenue. What is happening to oil revenue is no different from what is happening to stamp duty or income tax. Some taxes are going up, while others are going down. This is not free money waiting to be allocated, and if it were allocated to something else there would presumably be an opportunity cost. That is the obvious point.

Secondly, there is a slightly more subtle point, which I think the Financial Secretary was trying to make, although I do not know how subtle it proved to be because I had to leave the Chamber. It is an economic point: as the fact that oil prices are rising contributes to a slow-down in the economy and therefore has an impact on income tax, corporation tax and all the other taxes that are going down, it is questionable whether there is a net revenue gain.

I am on the Financial Secretary's side, and I am somewhat sceptical about the existence of a net gain. The think-tanks have clearly reflected on the matter, which they consider to be complex, and they have not come up with any definitive conclusions. I think it would help the Government to make their own case, not only with Opposition parties but in the drawing rooms and pubs of Britain, if they explained the model that they use to produce their figures. I do not know whether the outcome would be positive or negative, but I think it would increase their credibility if they explained their calculations rather than the Financial Secretary simply telling us that she has the information on good authority. After all, it may or may not be good authority.

The hon. Member for Putney spoke of the new approach to the duty regulator. She is to be commended for coming up with a new idea that deserves serious discussion, and although I think that she will acknowledge that it is based largely on an idea that the Scottish nationalists have been advancing for some years, it has joined the mainstream of the debate, so let us discuss it.

On the basis of what the hon. Lady said today and what I heard her say on the radio during the rain intervals at Wimbledon on Sunday, I think that I have pieced the argument together, and I do not think what she is saying is enormously different from what the Government are doing. When oil prices rise, a decision is made not to increase the escalator. The difference is that the Government do that on an ad hoc basis, while the hon. Lady suggests that it should be done according to a formula.

During our last debate on the cost of living, the Chief Secretary acknowledged that the price of petrol had been reduced by, I think, about 16p a litre as a result of the freezing of the escalator since 1999. The hon. Member for Putney argues that such action could be taken more effectively if it were taken systematically. Her explanation—it was more detailed on the radio than it was today—is that because there is a cycle in prices, we can be reasonably confident that when prices rise the duty can be withheld, and when they fall again it can be increased. It all balances out in tax-neutral way.

The problem is that the oil market does not actually work in cycles. In the 19th century, when Daniel Day-Lewis was drilling for oil, there was a cycle, and then for the best part of a century there was not, because the oil industry was controlled by companies that had access to cheap oil. They controlled the supply to keep the price flat. Since then, we have had three rather random shocks: one caused by a cartel, one caused by a war and one caused by specifically economic conditions—rapidly rising demand in Asia and restrictions in capacity.

I think that to create a model based on the idea that there is some regular cycle, as the Conservatives seem to be proposing, does not correspond to the way the system works. To make their proposal work, they would need a reference price—a trend price—against which they could make judgments on whether the price was above or below normal. The price would have to be established somehow, and I do not know how they would establish it.

The honest truth is that no one, whether they know a lot about the oil industry or not, has the faintest idea what will happen to world oil prices. They could continue to rise indefinitely, as some theorists argue. If that were to happen, under this proposal there would have to be a permanent freeze on increased revenue, leading to a black hole of some kind which would have to be explained. The price might come right back down again because of a recession or increased supply, in which case the Conservatives would be able to pick up revenue, but they have not explained whether that would be possible to the extent of cancelling out the original concession, and whether there would be indexing. It would all be very difficult, although I do not want to be too damning, because the idea may be in its preliminary stages.

The hon. Lady was absolutely right to say that what she proposes would stabilise the impact on households. That is obviously true, and it is an advantage of her approach. It is, however, untrue to say, as she did, that it would stabilise Government revenue, because it would do the opposite. That is a simple matter of logic—it must destabilise Government revenue. When the hon. Lady's proposal is analysed by the Institute for Fiscal Studies and others, they will make that point very strongly. Putting in the hands of a future Chancellor a policy that destabilises Government revenue would not be terribly helpful. Perhaps we should return to the issue later, but it has some relevance to the debate, because the motion refers to the potential source of oil revenue.

The Conservatives are pushing their constructive idea on oil prices, and I am pushing mine on the housing market. I want briefly to refer to, as the hon. Member for East Londonderry has mentioned, the impact of the slow-down in the housing market in the Province. I should, perhaps, be less kind now to the Financial Secretary, as we had a debate a few months ago on what was happening in the housing market, and I ask her to read some of the things she said then, when I was accused of scaremongering, exaggerating and finding doom in that otherwise happy corner of the economy. If she looks back, she will find that what I was saying was deeply conservative compared with what is now happening with the falls in sales and prices and the ripples felt in the building industry, which have had devastating consequences, and which none of us, including me, had anticipated.

I commend to the Financial Secretary an idea that I and others, including some Labour Members, have been putting forward. One way of helping to stabilise the situation, and also of doing an important social good, would be to take advantage of the fact that there are now substantial amounts of unsold property and unfinished developments—including, I suspect, in the fairly prosperous suburbs around Belfast and elsewhere—which social landlords such as the council and registered social landlords could acquire at a very substantial discount and make available for rent on the basis of need. There is a major opportunity for the Government not to intervene directly, but to empower social landlords to do that. It would be a very attractive economic proposition. I am aware that it would raise borrowing levels, but as an economic intervention, it would be a sensible and helpful thing to do, and I ask the Government to reflect on that.

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Photo of David Simpson David Simpson Shadow Spokesperson (Education), Shadow Spokesperson (International Development), Shadow Spokesperson (Transport) 3:11 pm, 9th July 2008

I am sure that those at home who might be watching this debate will be saying to themselves, "We're not interested in the technicalities of why there are difficulties; we're interested in how much money will be in our bank accounts and pockets to pay bills." Come September, households will have to face buying school uniforms and other things for their kids, and shortly after that we will be facing the Christmas period. Those of us who do a lot of work on the large housing estates in our constituencies will know exactly how those folk have to live. This is a very difficult time for them. The Financial Secretary mentioned the word downturn in relation to the economy. I am sure that Members will agree that this is more than just a downturn. The debate focuses on Northern Ireland, but I believe that the whole of the United Kingdom will face a very difficult time over the next three to four years.

I wish to rehearse certain points and facts mentioned in the debate that need to be reiterated. The price of oil has reached an all-time high, and that is causing a major difficulty. Petrol prices have surged in the last year, and motorists across the United Kingdom are paying in the region of £14.3 million more per day than they were 12 months ago. Dr. Cable mentioned transport. It is a vital and integral part of delivering goods and services not only in Northern Ireland, but across the UK.

The Financial Secretary is currently absent from the Chamber, but I wish to pay tribute to her. She visited Northern Ireland on Monday past in her Treasury role in order to investigate the issue of the illegal fuel that is coming into Northern Ireland via the Republic of Ireland. That is a major difficulty. As Members know, there was a large lobby here last week, and we met representatives from a number of transport companies from Northern Ireland who told us about the difficulties they were facing.

Reference has again been made to the south of Ireland and the economy, and I am very glad that my party did not move towards having an all-Ireland economy as recommended by the party of Mark Durkan. If we had done so, we would be facing even more difficulties, because the so-called Celtic tiger which, we were told, was on fire for so many years, is starting to wither like grapes on a vine. Sadly, it is going down the tubes, as we in Northern Ireland would say. We did not go down such an all-Ireland route, but the Government must pay attention to the issue of the fuel coming into Northern Ireland illegally.

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Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party

Surely the case for an all-Ireland economy is reinforced by the current situation? Part of the answer for consumers to the question of energy costs is to make sure that we have a more active competitive market, and the way forward on that is to have a strong island market and then a stronger market within these islands.

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Photo of David Simpson David Simpson Shadow Spokesperson (Education), Shadow Spokesperson (International Development), Shadow Spokesperson (Transport)

To a certain extent, I take on board the hon. Gentleman's point. However, he will know that in November last year we linked up our electricity through an interconnector, but we are told that Northern Ireland will not receive the benefit of that for some years, and the reason is that the power plants in the Republic of Ireland are so old that they need a lot of investment in repairs and so forth to come up to the level of what we would term efficiency.

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Photo of Sammy Wilson Sammy Wilson Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Education)

Does my hon. Friend accept that all the evidence so far is that the single electricity market, which in the Irish Republic is dominated by the Government-sponsored monopoly ESB—the Electricity Supply Board—has added to fuel costs in Northern Ireland, not reduced them?

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Photo of David Simpson David Simpson Shadow Spokesperson (Education), Shadow Spokesperson (International Development), Shadow Spokesperson (Transport)

My hon. Friend makes a valid point, and I entirely agree with him.

Farming and food production make a major contribution to the Northern Ireland economy, more so than in any other region in the United Kingdom. Agriculture contributes 0.5 per cent. towards the total gross value added across the United Kingdom, but the figure for Northern Ireland is 1.3 per cent. It therefore follows that pressures in agriculture are felt twice as much in Northern Ireland as they are across the United Kingdom as a whole. The farmers in Northern Ireland also experience twice the degree of hardship as a result of rises in the cost of feed and grain. Across the United Kingdom, 28 per cent. of gross output comes from the cattle, sheep, pig and poultry industries, while the proportion for Northern Ireland is 43 per cent. As a result, Northern Ireland farmers have to purchase more than twice the amount of feedstuff as their mainland counterparts and must therefore bear the cost of grain prices, which have exploded in recent months.

The Government may not control oil production by OPEC, but they do control the amount of taxation levied on fuel, and the UK has the greatest tax burden on fuel of any of the EU countries. The tax on a litre of petrol in Britain is some 57p, compared with 31p in Spain, 45p in Italy, 48p in France and 52p in Germany. The Exchequer has the power to reduce the cost of fuel.

Unfortunately, whenever there is a downturn in the overall economy, small businesses are especially affected. The Federation of Small Businesses has given us some figures on the difficulties that its members are experiencing. A poll carried out by the federation showed that 9,000 small business owners—more than 80 per cent. of those surveyed—said that fuel costs are likely to make it more difficult for them to expand their business and hire more staff in the next 12 months. Nearly 40 per cent. said that fuel costs would make it likely that they would have to reduce staff numbers in the next 12 months.

My constituency has the largest manufacturing work force in the Province—some 9,500 jobs—with the next largest being East Belfast. The businesses that provide those jobs have major concerns that if this trend continues—as economists tell us it will—they will have to pay off massive numbers of staff. That is a sad reflection on the state of manufacturing industry, which is dwindling in many parts of the UK. The Government could do more. Their amendment goes some way, but it does not go far enough. More could be done to help people, not only in Northern Ireland, but across the UK, to get out of the poverty that they are in.

Eleanor Gill, the chief executive of the Consumer Council, has said of gas prices in Northern Ireland:

"The sheer scale of this gas price increase will leave consumers here reeling at a time when the cost of living has shot up by £1,400 in just one year, and they now will have to find an extra £130. A staggering one in three households here is in fuel poverty which is nearly double the rest of the UK. On top of this our incomes are lower and we depend more on benefits."

I hope and trust that the Government will see a way to help those in trouble out of their difficulties, across the whole of the UK.

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Photo of Peter Bone Peter Bone Conservative, Wellingborough 3:24 pm, 9th July 2008

It is a pleasure to follow David Simpson, who is always worth listening to. His experience in Northern Ireland is most helpful to this debate, but so are his comments about the rest of the United Kingdom. I also wish to congratulate Mr. Campbell on his reasoned and thoughtful introduction to the debate.

I was amazed when the Minister said that the Government would oppose the motion. That is like opposing apple pie. How can they oppose a motion that proposes the consideration of ways to protect the poorest in our society?

When I was a new Member, I noticed early on how assiduous hon. Members from Northern Ireland—from all parties—are at attending debates in this House. They must be some of the hardest-working Members in the House, and they should be congratulated on their efforts on behalf of the United Kingdom.

Wherever people live in this country, the increasing cost of living is reducing their quality of life. This is not a "new Labour" Government: there is nothing new about them. They are like any old Labour Government: they tax and spend, tax and spend, and then destroy the economy. Then a Conservative Government come into power and have to spend many months fixing the mess that they have inherited.

I suppose that there is one difference. Former Prime Minister Blair tried to hide the tax increases so that people did not notice them, but now the stealth taxes are coming home to roost. The current Prime Minister does not bother. He does not even try to hide the tax increases. He scrapped the 10p rate of tax, harming millions of our most disadvantaged citizens, but at the same time the Government continue to waste millions and millions of pounds on useless projects. Before a Labour Member jumps up—oh, there is no one on the Labour Benches apart from the Minister and the Parliamentary Private Secretary

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Photo of Peter Bone Peter Bone Conservative, Wellingborough

I would not say that, because for important debates, such as regulatory reform tomorrow, the Labour Benches will be packed. My point was that Labour Members, if they were here, would probably challenge me on what we would scrap if we were in government. Why not scrap regional assemblies, saving £230 million a year? Why not scrap the Standards Board for England, saving £12 million a year? Why are we building new driving test centres across the country, costing £71 million? I know the answer to the last question: it is because the Government did not bother to get a derogation from the European Union like other countries did. Instead, the Government said, "Let's spend £71 million. It's only taxpayers' money so it doesn't matter."

All that expenditure pushes up taxes and increases the cost of living. As we heard earlier, from both sides of the House, it is extraordinary that when our lorry drivers fill up with diesel they pay 50.35p per litre, whereas our continental cousins pay just 25p. Those additional costs work through and increase the cost of living. It does not stop there. I know that the hon. Member for Upper Bann mentioned some figures for the rate of tax paid on every litre of petrol by private motorists, but I have obtained the latest figures from the Library which show that 70p in every litre goes to VAT and duty. Every time the price of petrol increases, another 17.5 per cent. is added in VAT.

What is the latest wheeze? What will the Government waste our money on next? Of course, they never say "taxpayers' money". It is always "Government spending" or "Government investment". They really mean that they are taking money from the taxpayers' pockets, and spending it on their pet projects. The next wheeze is that tomorrow, in this House, they will try to get through the final stages of the Regulatory Enforcement and Sanctions Bill—the "Yes Minister" Bill, for short. The House is being asked to set up a department of administrators and bureaucrats to control other administrators and regulators at a cost of £73 million. The idea could have come straight out of "Yes Minister". It is the department of administrative affairs in everything but name and Jim Hacker would have been proud of it.

At a time of economic crisis, with the Government in complete disarray, what is the Government's solution? It is to set up a department of administrators to administer other administrators. Only this Government could come up with that solution: "Let's create more administrators so that the Government can be more efficient." That is a most courageous decision by the Prime Minister, who is in deep crisis.

It might be said that saving £71 million here and £73 million there is nothing—it is chickenfeed in relation to the Government's overall spending. Of course, that is true, but if you look after the pennies the pounds look after themselves. In Government terms, if they look after the millions, the billions will look after themselves.

Let us look at the areas where the Government have really been wasteful at the cost of billions of pounds. Government spending on health care when Labour came into power was £42.7 billion, or under 14 per cent. of public expenditure. That rocketed last year to £107.2 billion, about 20 per cent. of public expenditure. That massive additional cost to the taxpayer has not brought an equivalent improvement in health care. Far from it.

Health care outcomes, as measured by finished consultant episodes, have risen from just under £12 million in 1998-99 to just under £15 million in 2006-07, an increase of 23.7 per cent. In the same period, Government health spending increased from £47.1 billion to £97.4 billion, an incredible increase of £50.3 billion and a cash increase of 107 per cent. When adjusted for inflation, that was an increase of 74 per cent. The taxpayer is paying, in real terms, 74 per cent. more and getting only a 23 per cent. increase in outcome. That is clearly a massively disproportionate increase. Vast sums of money have been poured into health care but the focus has not been on improving efficiency and outcomes. That money has been wasted at a time when we are in economic crisis.

Let us look at the cost of living in relation to health care. Unbelievably, that cost is £5,000 a year for each family and each household in the country. It will increase this year to at least £5,200 per household. The next Conservative Government would concentrate on outcomes, not artificial targets and would give power to the clinicians—the people who understand how to improve the quality of health care in this country. That would dramatically improve the outcomes for the public without increasing costs. The Conservatives want to move the operation of the health service out of the hands of politicians, into the hands of doctors and nurses.

Let me turn now to the real scandal, which is the complete and unjustified waste of taxpayers' money that is our contribution to the European Union. Last year, the net contribution paid to the EU out of taxpayers' pockets was an extraordinary £4.7 billion. It is beyond my comprehension how on earth there could be any justification for paying that sort of money so that we can be part of a free trade area. The truth is that we pay £10.3 billion to Europe and some bureaucrats in Europe decide to give us some back for their pet projects. Our net contribution is £4.7 billion. That would be bad enough, yet the Government have already forced through the House the budget until 2011 and in that year the net contribution that taxpayers will have to pay will be £6.8 billion. We pay £4.7 billion for very little in return, and we are due to increase that by 45 per cent. in 2011.

Figures from the Department for Environment, Food and Rural Affairs show that the common agricultural policy adds £10 per week to the average family's cost of living. What do we expect to get from the huge increase in payments to the EU? We have no guarantee that the cost of the CAP will be reduced. My suggestion, which would save an enormous amount of money for the Government without harming us in any way, is to freeze our contribution to the EU at the current £4.7 billion until there is real reform of the CAP, which in turn would reduce the cost of living. Better still, why do we not take a lesson from the previous Conservative Government? When we left power, the contribution to the EU was £1.6 billion.

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Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

The hon. Gentleman talks about when his party was last in power. Given the previous Conservative Government's "empty chair" policy, how could they possibly negotiate anything from our European partners?

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Photo of Peter Bone Peter Bone Conservative, Wellingborough

That intervention really takes the cake! The Minister jumps up and tries to claim that this wonderful Labour Government, who have been in power for 12 years, have had some influence over the EU. If that were true, why have they not done something about the CAP? Why are the world trade talks stalled? It is because the EU is so protectionist. The idea that this Government have been at the heart of Europe is a farce. If they have been at the heart of Europe, they have achieved nothing—and I notice that the Minister is not leaping to her feet to defend the Government's appalling record in the EU—

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Photo of Alan Haselhurst Alan Haselhurst Chairman of Ways and Means

Order. The hon. Gentleman provokes me to leap to my feet. I ought to tell him that, although his remarks are occasionally linked to the words "cost of living", they are well outside the terms of the motion. I therefore caution him that we do not want to do the European round too heavily this afternoon.

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Photo of Peter Bone Peter Bone Conservative, Wellingborough

I apologise, Mr. Deputy Speaker, but I think that I was unfairly provoked. I hang my head in shame.

The serious point about the relationship between the cost of living and our contributions to the EU is that spending such huge sums of money has a real and dramatic effect on the cost of living. However, we could control and cut that expenditure in a way that would not affect a single taxpayer in this country other than to improve the standard of living.

In conclusion, I believe that the cost of living in this country will continue to rise and the quality of life will continue to go down until we have the next Conservative Government. I am afraid that, until my right hon. Friend Mr. Cameron leads the Government, there will be no improvement to our standard of living. The next Conservative Government will control public expenditure, improve the quality of life, and lower taxes.

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Photo of Mark Oaten Mark Oaten Liberal Democrat, Winchester 3:38 pm, 9th July 2008

I am not sure that I can agree with the final comment made by Mr. Bone. In many ways, I do not believe that the cost of living should be such a party political issue because, as the Minister and others have said, there are many matters that are out of the control of Westminster politicians.

A lot has been said about the problems of poverty connected to the current change of economic pace, especially for the hardest-hit families. We have talked a lot about fuel poverty, but I want to say something about a group of people, the middle classes, who are often ignored these days. Quite rightly, they are not a political priority, and they are not usually affected by changes to the economy, but my judgment is that the current downturn—or beginning of recession, whatever one may wish to call it—is starting to impact on a new group of people. I am talking about those hard-working couples—they often have two children, and often both parents are working—who risk being ignored by politicians. Suddenly, and for the first time, they are finding that they are being hit very hard indeed by the cost of living. Of course, it is absolutely right that the Government, with their winter fuel allowance and various tax credit schemes, focus on the poorest in society, but let us not ignore those others—the many hard-working individuals—who fall outside the schemes and are suffering and finding things tough. I want to link that point to the groups in rural communities who, given their dependency on vehicles and on certain forms of energy, are finding things particularly tough.

To try to find out what was going on in my own constituency, I created a non-political survey that was advertised in the local newspaper and did not mention any political parties. I do not for a minute suggest that it is a scientific survey, and I hope that the questions were not leading. I can see that the Minister is cynical about the prospect of any politician being able to put in a newspaper anything without a political word in it, but the survey is totally non-political. I am genuinely interested in finding out some information, and to be perfectly honest, I am not standing at the next election, so there is no political gain from my doing so.

The responses so far have been quite alarming. They show that the groups being hit by the changing economic climate are not those who are usually hit. The figures suggest that 90 per cent. of people who filled in the survey believe that they are going to be worse off this time next year, and in line with the some of the more respected surveys from various think tanks and groups, there is certainly doom and pessimism about where the situation is heading.

In the survey, we looked at four indicators: people's attitudes towards food prices, fuel, energy and housing. On each, there was pessimism and concern about what might happen. Petrol is a particular concern for Members who represent large rural constituencies. Often, families are dependent not on one car but on two, and people said to me in the survey that it now costs them about £20 a week more to fill up their cars. I suspect that, anecdotally, we could all say the same. I can remember when it cost me £50 to fill my car up about a year and a half ago; it certainly costs me £70 now. It is the same for my wife, which means that it costs £40 a week extra to fill our car up, and although I was off the day we did maths at school, that to me is a lot of money each month—about £160 a month extra just to fill up the car for many couples living in rural communities.

That is an awful lot of extra income to find and to absorb, and when the Government and others say, "Yes, but there could be a hidden benefit, in that it might persuade people to use alternative transport," I must say that I would be laughed at in the 56 villages in my constituency if I told people to try to take a bus, a train or another form of transport. For couples with children, trying to do school runs or having to take complicated routes, there is just no rural transport network that can act as a realistic alternative. Some respondents to the survey said that where there had been the opportunity to walk to a post office or to a shop as an alternative, those rural post offices have now disappeared—even more requirement, therefore, to get into the car and absorb those increased petrol costs.

The second indicator was energy prices, and the survey shows that individuals' electricity, gas and fuel costs have been increased by about 20 per cent. However, owing to the focus on rural areas, I want to talk about those individuals who are not able to obtain gas but are dependent on oil to heat their homes and to provide their fuel. They have faced an enormous increase in costs. I declare an interest, because my monthly direct debit for oil is £225 and has gone up enormously over the past two or three years. If one gathers together any group of individuals in villages or communities that cannot obtain gas, they first talk about trying to find a different oil provider in their area. The figures are enormous, and they are hitting rural communities very hard, because there is just no alternative for them. They cannot switch suppliers as one might do with gas; they are dependent on oil.

The regulation of gas and electricity would help enormously; I hope that the Minister will pick up on that point in her response. Ofgem and Energywatch are legally required to act as the consumers' champion, to make sure that something at least is done on prices. However, oil for heating one's house and liquefied petroleum gas fall outside the regulatory system. The Minister may or may not be aware that changes to the regulation of energy are due to be made in October and November. It would be enormously helpful to the millions of people who are dependent on oil if that form of fuel were also regulated, and if Ofgem looked at the matter, just as it does in relation to gas and electricity. My fear is that because that form of fuel has not been regulated, companies were able to get away with prices that would not have been acceptable in the gas and electricity markets.

Democratic Unionist party Members touched on energy prices and on the fact that individuals who pay by pre-pay meters lose out enormously. I am lucky enough to be on the Business, Enterprise and Regulatory Reform Committee, which has just concluded a study of energy prices. When the big six suppliers came to give evidence, I asked them to justify the fact that customers who use pre-pay meters pay 17 per cent. more than those who pay by direct debit. They struggled to do so. They claimed that a meter scheme was more expensive to administer. Of course there will be more administration costs for people who have meters than for people who pay by direct debit, but the increased costs are not equal to the increase in prices. It would help enormously if the Government could speed things up and look at ways of changing the market. The Government could do something about introducing smart meters, as opposed to pre-pay meters; they could help in that respect. Finally on energy, I asked one of the big six to try to give me an indication of how people were coping with increased bills. One of the representatives said that their company's bad debt had doubled in the past 12 months. That graphic statistic shows how difficult individuals are finding it to pay those bills.

The Minister did not really answer the question that I put to her in an intervention about the comparison between our energy prices and those in mainland Europe. It is my understanding, from the evidence that the Select Committee received, that owing to the way in which our market is constructed, we as consumers pay more for gas and electricity than our colleagues in mainland Europe. They, of course, face the same global economic problems that we do. We need to look at how the market is constructed in this country, because it is adding to our problems.

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Photo of Peter Bone Peter Bone Conservative, Wellingborough

I entirely agree with what the hon. Gentleman says, but the reason for that situation is that we have a liberalised energy market, whereas our continental cousins have refused to implement the European Union rules on liberalisation.

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Photo of Mark Oaten Mark Oaten Liberal Democrat, Winchester

The Committee has looked into the issue, but I shall not bore hon. Members with that. Anyway, the report is coming out soon, so I probably should not talk about it. However, there are several, complex issues behind the difference between the markets. What disappointed me as a member of the Select Committee was not being able to find two or three simple solutions to the problem. It is incredibly complex, but it certainly needs looking into, because we have a very complicated market. We need to consider restructuring it, but I shall not bore the House with the ways in which that should be done now.

The third indicator that I wanted to touch on is housing. Let us be honest: in areas such as Winchester, most people's house price has rocketed in the past 10 to 15 years, and they felt very comfortable indeed about the way in which house prices had risen. It is interesting that 50 per cent. of those who filled in my survey said that there had been a fall in their house price. One would imagine Winchester to be one of the last areas in the country that would experience that kind of change. Interestingly, when one asks individuals whether the amount that they pay out each month for their mortgage has increased, the response is split. About half of respondents say that they have experienced an increase, and half say that they have not. I suspect that many of those individuals are still on fixed-term rates, which they have had for some time, and that those fixed-term rates are due to come to an end. In fact, the estimate is that a big change is due this summer, with about £30 billion-worth of mortgages due to come off fixed rates.

The figures suggest that when the individuals involved try to come off their fixed rates, their average monthly outgoings on their mortgages will increase by about £158 a month. Of course, that is if they can get a satisfactory new rate. It is not just individuals trying to get into the housing market who are struggling to get mortgages but those who are coming off fixed rates. For some, the hike in their rate can have an enormous impact on their monthly bills and the cost of living. It is of concern that in some cases, companies such as Bradford and Bingley, First Direct, the Co-op and the Royal Bank of Scotland—in fact, nearly all of them—have not set lower rates for fixed-rate deals. Many have increased them.

I wish to mention two consequences of individuals struggling to pay their increased mortgages, or to get a mortgage in the first place. The first is the power of credit agencies to give people a bad rating, and the impact that that has on them. Many of my constituents have discovered that they cannot get a mortgage because three or four years ago, they missed a small payment on a utility or mobile phone bill. It is enormously difficult for people to track down what is affecting their credit rating. Given the credit crunch and the mortgage companies' closer focus on whom they give money to, people need to be able to check more quickly and easily what is on their record that is causing them difficulties in getting credit.

The other consequence is that many people are now desperately taking out loans for inappropriate things. Mark Durkan said that people are doing so to meet fuel bills, and there is a growing pattern of people borrowing money for all the wrong reasons to get themselves out of current financial difficulties. That, of course, perpetuates the problem.

The fourth and final indicator on which we asked people to comment in our non-scientific survey was food and its cost. The figures suggest that there has been a 20 per cent. increase in weekly food costs. Anecdotal evidence suggests that people in my constituency are switching from Waitrose to Asda and desperately trying to find ways to get cheaper food. Perhaps one welcome consequence of what is happening in the economy will be the beginning of a price war between the big supermarkets, which I hope will cut into their profits and make them recognise that they must deliver a better deal for their customers.

One downside could be that people will change purchasing habits that have had a welcome impact on food welfare. I have strongly supported animal welfare causes such as changing how we purchase chickens. We know that free range eggs and animal welfare food cost a little more, and I think that sadly, individuals will reconsider whether they can afford them or whether they need to cut their costs in the current climate.

I do not believe that we can ask the Government to do a great deal about those food issues, although if there had been much more encouragement over the years for local food production, and much more work with agriculture in vast parts of the country, we would not have had a food trade deficit. We could have been getting our food from local suppliers, which might just have made a difference.

I do not offer solutions, but I wanted to reflect on the concerns in my constituency about housing, food, energy and petrol. I have made a couple of suggestions to the Minister, particularly on smart meters and on the regulation of oil, which is causing such difficulty in rural areas. Although I totally understand the focus on the fuel-poor and those on benefits and in poverty, this recession/downturn is starting to hit another set of individuals whom we should perhaps talk about. Ordinary, hard-working families in areas such as Winchester are starting to feel the pinch.

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Photo of William McCrea William McCrea Shadow Spokesperson (Environment, Food and Rural Affairs) 3:54 pm, 9th July 2008

I apologise for not having been here throughout the debate, Mr. Deputy Speaker. I was chairing a Committee and so was out of the Chamber for a time.

This is an important debate on a matter that has an impact on my constituents and people throughout the UK. It does not take a Bank of England economist to tell people that the cost of living is on the increase. That is the reality that everyone is experiencing at present. What the experts call inflation translates for householders and shoppers as higher prices. That is the reality that my constituents and the constituents of every right hon. and hon. Member are experiencing.

In Northern Ireland, because of the water between the mainland and ourselves, people in my constituency and in the Province have experienced increases that other parts of the United Kingdom may not have experienced. In the past year, Northern Ireland has seen price increases of 19 per cent. for electricity, 28 per cent. for natural gas and coal, and 75 per cent. for oil. Combined with other increases in household bills, that gives great urgency to the need to tackle fuel poverty and the problem of many families going into poverty. A recent debate on the subject showed that Members across the House acknowledged the fact that throughout the United Kingdom there are problems.

While it is true that the Government cannot be blamed for everything or for the problems that have arisen, they have a responsibility to steer the country through the economic difficulties. Whenever things go well, they are happy to claim that that is because of their policies, but if there is an economic downturn, they are happy to blame everybody else. We must therefore make it abundantly clear that there is nowhere for the Government to hide when it comes to their responsibility to govern the United Kingdom. If they do not desire to do so, they should step aside, hold an election and allow another Government to come to power. That is the way in which democracy works, and they have the option to do so.

While the Government have that responsibility, they must carry it out, and take the United Kingdom through these difficult economic times and the problems that we face. For example, people are finding things hard in Northern Ireland. The Consumer Council for Northern Ireland looked at the problem, and found that we paid 47 per cent. more for energy. Fuel poverty is double the average in Great Britain, and it is three times the percentage in England. Incomes are lower; and half of people who work are on gross earnings of £330 or less a week. Benefit dependency is higher: one in six do not have a current account, compared with one in 10 in the rest of the United Kingdom. Those statistics simply mirror a greater problem, because we are talking about families, individuals, elderly people, disabled people, and normal individuals in society who face a credit crunch, which has impacted on their lives.

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Photo of Christopher Fraser Christopher Fraser Conservative, South West Norfolk

I am pleased to attend this debate, albeit that I arrived rather late, because I was chairing a meeting. Does my hon. Friend agree that people in rural areas in Northern Ireland, as in Norfolk, suffer the double dilemma of heating their home or buying food, added to which they face the problem that using a car in rural areas is a necessity, not a luxury, as local services have been shut down because of Government initiatives?

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Photo of William McCrea William McCrea Shadow Spokesperson (Environment, Food and Rural Affairs)

I agree with my hon. Friend, and I am happy to acknowledge that point. I was coming on to speak about rural constituencies. Many people view a car, or even two cars for a family, as a luxury, but in reality, that is not so. For rural parts of Northern Ireland, Norfolk and any other rural region of the United Kingdom, the car is a necessity. Parents have to take their children to school—they cannot keep them at home. They have to travel to the shops, because the arrival of the supermarkets means that many local shops have closed. We must therefore face the reality: we are not talking about a luxury, and we are not even talking about alternative modes of transport. For example, for people in rural parts of my constituency and other rural areas of Northern Ireland, the only alternative transport would be a horse and cart. Do we want to go back to those days? There are no buses or trains in rural parts, but we are now going to say to the people there that they cannot even use their cars because of fuel costs.

Let us face the reality. We are talking about the realities for families, and that means fuel costs. The Government bear a responsibility for the situation. A few moments ago, my hon. Friend David Simpson and Mr. Bone were talking about percentages; when we add VAT to the fuel costs, we are certainly into the 70 per cent. That is a disgraceful situation, and the vast majority of people do not realise that they are being taken to the cleaners by the Government on fuel taxation. The Government are gaining the benefit.

On home fuel costs, let us bear this in mind. Gas is not available in many parts of Northern Ireland, so people have no alternative means of heating their homes. Many of our elderly and disabled people are really concerned. We and the Northern Ireland Assembly talk about renewables, but they are for the future, not the present. Unfortunately, we are behind the rest of Europe in taking renewable energy forward, but we are where we are and our people have to deal with the realities. The Northern Ireland fishing industry faces a bleak future; its fuel bills have soared at the very time when Europe demands that it should tie up its boats for most of the year. Fishing is allowed only a few days a year, so how will the fishermen keep their families and fuel their boats? Europe and the Government cannot have it both ways.

A few moments ago, Mr. Oaten mentioned an important point. We have to look again at where the poverty trap is. Remember that in Northern Ireland wages are in many ways minimum wages. However, hard-working people, who go out every day to work, can be just beyond the boundary of getting any other help or benefit; they have to pay everything from their wages. In my opinion, those people are in a poverty trap today, and they need help.

The Government must carry a responsibility, because government should be all about seeking to help such people. I mentioned the statistics given by the Consumer Council for Northern Ireland: an extra £60 a week is required for essentials for an average family of four, as at June 2008, because of fuel, food, heating and mortgage rates. To maintain the same standard of living as they had this time last year, the average family's income needs to have risen by 12.5 per cent. Furthermore, even as we speak in the House today, fuel costs are probably still going up.

We face a tremendous challenge. As my hon. Friend Mr. Campbell said, we acknowledge that the Government gift for the fuel payment was certainly a move in the right direction. However, as the elderly face this winter, the measure is far short of meeting the real need. I say that not only about Northern Ireland, but about the whole United Kingdom. That situation has to be seriously considered.

This is an important debate. Other hon. Members want to participate. I trust and pray that we have exercised the Government's mind about the fact that there is a demand across the United Kingdom for us to tackle many of the severe issues affecting our constituents.

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Photo of Sammy Wilson Sammy Wilson Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Education) 4:04 pm, 9th July 2008

Let me make it clear that as a party we do not take any pleasure in the current economic crisis that is affecting people not only in Northern Ireland but right across the United Kingdom. In the motion, we deliberately did not go out of our way to make a party political point against the Government. As my hon. Friend David Simpson pointed out, the vast majority of people who are watching this debate—if there are any—or who are interested in the issue do not want to know about the macro-economic explanations or the political excuses. They are concerned about how they pay for the uniform that their youngster needs for school in September, how they pay their fuel bill or how they keep their car running. The motion was not designed to be confrontational. Of course, there is no political point for the DUP to make anyhow, because the Government do not put up candidates in Northern Ireland.

One of the reasons why I am disappointed that the Government found it necessary to table an amendment is that we wanted this debate to explore the possible options for dealing with the issues that are affecting people across the United Kingdom. I sometimes joke with the Scottish National party Members who sit in front of me that since I came into this House, every time there has been a problem the Prime Minister has referred back to 1997, as if all the problems that the Government faced were due to the mismanagement of the Conservative party during its years in government. Nowadays, we never hear him or other Ministers mentioning 1997, because they have found a new way of deflecting the blame: the explanation is not historical but global; the problem is somebody else's fault, or down to influences beyond our control. As my hon. Friend Dr. McCrea said, while things may well happen on a global stage, Governments cannot run away from their responsibility for managing the economy and dealing with the issues that arise.

Although we have not made the motion specific to Northern Ireland, Members in all parts of the House have referred to how Northern Ireland specifically is damaged by the increases in the cost of living. Ninety-six per cent. of our energy sources are imported, and therefore volatile in terms of changes in the value of sterling, and oil and gas prices. Mr. Oaten talked about the problems that affect his rural constituency. The same problems have a great impact in Northern Ireland; our communities, who live largely in rural areas, are affected by the kinds of costs that are going up. A higher proportion of people are already on low incomes, and measures such as the 10p tax change have a disproportionate impact on them.

The situation does have some global reasons behind it, but it has been made worse by actions taken by the Government. I mentioned the 10p tax rate and the impact on the lower-paid. Even after the £2.7 billion compensation package, there will still be people on incomes of less than £7,500 who find themselves worse off at the end of this financial year. The increase in vehicle excise duty will catch 2.3 million households across the United Kingdom, many of whom can afford only second-hand cars. People do not understand why they should face an increased bill of £250 per year in running their car so as to reduce global CO2 emissions. They do not see the connection between the well-being that is supposed to come from such a tax and the immediate problem that it causes them in running their much-needed car.

The increased tax burden that people across the United Kingdom have faced gives them less disposable income. Since this Government took office in 1997, the tax burden has increased by 6.6 per cent. By the end of 2012, it will have increased by 8 per cent. That means people have less disposable income, which adds to their economic misery at a time of rising costs.

The Government have slavishly followed EU directives, and I shall just give one example—the idea that we need to get 20 per cent. of our fuel from biofuels by 2020 to cut CO2 emissions. It has already been stated that 75 per cent. of the increase in food costs since 2002 is directly attributable to the fact that we now use grain and land to produce fuels that have no apparent impact on global warming anyway. But we slavishly follow those directives. I just wanted to illustrate some of the ways in which I believe the Government have made the situation worse.

I shall deal with some of the issues raised, and hon. Members have raised a wide range of them. The impact of the Government's macro-economic policies on people's well-being and on the cost of living in the UK cannot be ignored. In the Minister's defence, I must explain that she referred to the International Monetary Fund. The IMF said—I love this phrase—that the fiscal tightening is appropriate. Let us get down to the bones of it: fiscal tightening means that people get more money taken out of their pockets. They have less disposable income. It is a lovely phrase, and the IMF has endorsed it.

The IMF has also endorsed the fiscal framework as correct. We start off from a position where Government borrowing has been rising. Since 2000, Government borrowing has risen by 20 per cent., and that borrowing started when we should have been putting money aside for the bad times. If we are talking about an economic situation that has been created by profligacy in the years when there should have been prudence, we may well reach the conclusion that the fiscal framework is correct. However, would that all have been necessary if proper economic policies had been pursued during the years when money should have been set aside?

Even taking into account the IMF's arguments that fiscal tightening is appropriate and that the fiscal framework is correct, I note that when it comes to a crisis that affects the Government, such fiscal tightening is suddenly no longer quite so important or such a priority. If there is a by-election, or a revolt on the Back Benches against the impact of tax policies on the poor and the less well-off, the fiscal purse strings can be loosened, and £2.7 billion can be produced. The tightening does not seem to matter then.

The motion says that there is a crisis—one which affects a wide range of people. Those people now find it impossible to pay their fuel bills. They are people on low incomes, or old people who stay at home. It is fine for many of us here; I come to an office that is heated during the day, and I do not have to worry about heating my home. But I think of constituents who are confined to their house all day, who are living on a pension and who have to keep their heat on. When I visit them, I find that some of them have a coat on and a rug around them because they cannot afford to pay their fuel bills. To me, that warrants a little fiscal loosening, especially when money is available from additional fuel duty.

Let me deal with the Financial Secretary's second point, which several hon. Members supported. Dr. Cable said that perhaps there was merit in her argument. Mark Durkan said that there should be greater transparency about it. Her argument is that increasing fuel prices do not mean that the Government have more revenue, because as fuel prices increase, people's disposable income decreases, so they spend less money on other things. I could take that if the Government's figures, which they produced in the Budget in March, showed that that was the case, but they do not.

I assume that the Budget and the figures were drawn up at the last possible moment, when we already knew that fuel prices were increasing. They did not just start to go up in the past month—they have been increasing steadily. The increase has been a bit more rapid in the past couple of months, but prices have been rising for well over a year—well before the figures were produced. Yet, when we consider the matter against that background, and ask whether the Government predicted that VAT receipts would decrease overall or would stay the same, the answer is no. They predicted that in 2006 VAT receipts would be £77.4 billion and that, even with rising fuel prices, they would increase to £83.8 billion in 2008-09. The Government's figures do not bear out the Financial Secretary's argument.

The same applies to fuel duty, which has increased from £23.6 billion to £25.7 billion. That provides additional money, which could be used—at least partly—to tackle fuel poverty. My hon. Friend Justine Greening made that point. On the Government's own admission, even at a time of rising fuel prices, money is available. If it can be found on other occasions, why cannot it be found now?

Of course, there are many ways in which spending can be diverted. Although Mr. Bone was cut off in his prime, I was interested in his point about Government waste. It was probably just as well for the Financial Secretary that he was cut off for wandering off the subject, but his points were relevant. It is possible, even in the current financial framework, to consider how money might be better spent.

The motion was designed to start discussion and tease out from the Government how the windfall from rising oil prices could be spent and how to alleviate the difficult position in which many people find themselves. It was not meant to be confrontational, but the Government tabled an amendment that gives excuses rather than dealing with the problems that we wanted tackled.

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Photo of Angus MacNeil Angus MacNeil Shadow SNP Spokesperson (Scotland), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

The hon. Gentleman mentioned rising oil prices. It was said earlier today in the Chamber that an extra dollar on the price of an oil barrel gives the Government an extra £200 million in revenue.

Photo of Sammy Wilson Sammy Wilson Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Education)

The Government predicted that the oil price increases anticipated at the time of the Budget—which were much lower than what subsequently transpired—meant that they would have £5.4 billion more in the next financial year.

Perhaps the Economic Secretary to the Treasury has an answer to the problem, but, as several hon. Members pointed out—even those who were supportive, such as the hon. Member for Twickenham—if there is an economic model that shows no overall financial gain, it should at least be transparent. I know from teaching economics in school that the one cardinal rule when examining the way in which one variable affects another is that unless all other things are equal—the old ceteris paribus; even a GCSE economics student will know that—it is not possible to identify the cause and effect of a specific economic event. If the Economic Secretary intends to argue against the points that have been made, there should be transparency and an explanation of how the conclusion that the Financial Secretary outlined was reached.

The Government have made a lot of the right noises today. The Financial Secretary started by expressing sympathy. The Government very often make the right noises on such issues and sometimes they even do the right things. She made the point, which I accept, that for many years the economy in Northern Ireland has been good. We have experienced the lowest rates of unemployment. I want to acknowledge that, because I do not want this debate to be seen as all negative. However, too often the Government have made the wrong decisions. Unfortunately, I believe—and I think that many of their own Back Benchers would accept this, too—that they appear to be out of touch. That will be fatal.

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury 4:20 pm, 9th July 2008

I am grateful to all hon. Members who have contributed to what has been an interesting and timely debate, even though we might have a slight sense of déjà vu, having debated a similar subject only a couple of weeks ago. Let me add my congratulations to those of other hon. Members to Mr. Campbell on securing this debate, and to his colleagues on making their points so clearly.

In Northern Ireland, as in the rest of the country, it is clear that the prices of food and fuel, and energy bills, are rising and that families are feeling the pinch as a result. That is no surprise, given the recent state of world oil and food prices, with oil up by 80 per cent. and food up by 40 per cent. in the year to May. However, Opposition Members may not like this, but it is a fact that our economy is well placed to respond to the disadvantageous global scenario, and that it is coping far better than it could have done in the past.

Oil prices have increased fivefold in the last five years, in what is widely being described as the third oil price shock in living memory, but this time headline inflation has risen by less than 2 percentage points, as compared with a rise of nearly 20 percentage points during the first oil price shock in the mid 1970s and a rise of more than 10 percentage points during the second shock in the early 1980s. That, if nothing else, is a demonstration of the increased resilience of our economy after 11 years of low inflation—the second lowest in the G7, in fact—and steady and strong growth.

Photo of Christopher Fraser Christopher Fraser Conservative, South West Norfolk

Can the Minister explain why, if we have the cheapest diesel in the Europe and the second lowest price for unleaded petrol, we pay the most tax?

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

That is not the case. In fact, we have fallen down the ranking in fuel duty taxation compared with other countries in Europe. Including tax and duty, the UK has the seventh lowest petrol price in the EU 15 and the 19th lowest in the EU 27. We have fallen from our habitual rank, when the Conservative party was in power, of second highest in the EU 15 to around the middle of the range, so I would politely suggest that the hon. Gentleman check his facts.

In the past 10 years, real household disposable income has risen substantially, by more than 30 per cent., and income per head has risen faster than in any other G7 country, taking us from the bottom of the pile to second place. We are now second in the G7 in terms of GDP per capita, whereas before 1997 we were bottom. We have experienced the fastest rise in income per head of any G7 country since 1997. Real disposable income increased by 25 per cent. between 1997 and 2006. Most importantly, growth for the bottom 40 per cent. of people in our country is greater than that for richer households. Employment has also risen by around 3 million, to record highs. Justine Greening tried to imply that things were worse under this Government than under previous Governments, but the facts do not bear her out.

In Northern Ireland, as my right hon. Friend the Financial Secretary to the Treasury said earlier, the economy is stronger, with unemployment halved—it is now the third lowest of any UK region—and 100,000 more people in work than was the case under the previous Conservative Government. We are seeing progress all the time, as the new era of stability in Northern Ireland brings new investment and jobs. This means that Northern Ireland, like the rest of the UK, can respond far more strongly to the challenges that we all face. We cannot be complacent, however. We need to work to tackle the causes of these challenges and to support people in the meantime.

Obviously, no national Government by themselves can stop world fuel and food prices rising or end a global credit squeeze, but we are working with our international partners at every level, because these challenges need international solutions. As I have said, we also need to support people in the meantime. We are doing that through the delay in the planned April fuel duty increase and, yes, the Chancellor is carefully considering the October increase. We are also supporting people through the increases in personal allowances this year and through the additional payments that will be made with the winter fuel payment this winter in the whole of the UK, including Northern Ireland. We will continue to support people in that way.

I want to turn now to the specific points that have been raised in today's very useful debate. We challenged the hon. Member for Putney about her own policy during her speech. She mentioned a fuel stabiliser policy, but, when challenged, she said that it was not a policy, simply a consultation. That is yet another example of the Conservatives using salesman-like tactics to get in through the front door of our nation's households, even though they would be unable to follow them through.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

When Ministers have gone through the absolute disaster of not consulting properly on issues such as non-doms and capital gains tax, the one lesson that they ought to take from us is on consultation. It is sensible to consult, to make sure that we get things right first time. That is something that we have learned from the Government's getting it wrong.

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

I confidently look forward to this so-called consultation being quietly dropped because the plan simply would not work. Dr. Cable gave one reason why it would not work, with which I absolutely agree. His understanding of the Conservatives' consultation/policy/not-quite-sure-what-we're-talking-about was that it would rely on a cyclical oil price, so that households and motorists could be subsidised when oil prices rose, and it would pay itself back when the oil price was in the other half of its cycle. He rightly pointed out, however, that that would not work because oil prices are not cyclical.

However, the main problem with the Conservatives' consultation/policy/not-quite-sure-what-we're-talking-about is that it would require an automatic correlation between the international price of oil and the effect on the public purse. They are effectively saying that if the international oil price rose because of decisions taken in different countries by OPEC, there would automatically be a channel of funding that would go from the public purse to the motorist. If I were a nurse, a doctor or a teacher in this country, I would be extremely worried by what the Conservatives might, or might not, be proposing.

Mr. Bone finished what might politely be called a wide-ranging speech by saying that his was the party that would control public expenditure. At the same time, however, those on his own Front Bench are saying that they would not control public expenditure, but would simply hand out taxpayers' money on the basis of what was happening to the international oil price.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

The doctors, nurses and policemen who would have their fuel prices reduced by the stabiliser would welcome that policy. This party is interested in looking after the consumer. The Government are trying to reduce their borrowing because of their inefficient running of the economy.

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

It is the overall state of the economy that we are interested in, and we will not play fast and loose with the public finances through cheap gimmicky policies like those being proposed by the Conservative salesperson in order to get in through the front door.

My hon. Friend Mark Durkan, who is no longer in his place, made a useful contribution to the debate and raised several issues to which I should like to respond. First, he expressed understandable concern that the price of oil is being driven by speculators, and asked whether we could intervene to prevent trading in oil futures. The issue is being looked into by the Financial Services Authority, although I have to say that there has been no indication of any inappropriate inactivity.

Secondly, my hon. Friend asked what we were doing to help people to cope. We understand, of course, as I said in my opening statement, the significant difficulties faced by families feeling the pinch. At such a time, it is right for the Government to use whatever resources are at their disposal to ensure that everybody—whether they be working class or middle class—has access to good impartial advice. [Interruption.] Mr. Oaten mentioned the middle classes, but I am not accusing everyone on the Liberal Democrat Benches of actually being middle class.

We want everybody to have good financial advice in what we all recognise as a difficult time. That is why in recent weeks we have expanded by £10 million our debt advice funding and why, together with my right hon. Friend the Chief Secretary, we made a substantial policy announcement earlier this week on the whole issue of financial capability. That includes not only a significant £12 million pilot in the north-east and north-west, taking forward the work of Otto Thoresen in order vastly to improve access to so-called generic or non-product-tied financial advice, but rolling out a programme through schools and the workplace for accessing good financial advice at this important time. That involves an expanded helpline available nationally, including to people in Northern Ireland, as a one-stop shop to signpost people to the advice most suited to their needs.

Photo of Christopher Fraser Christopher Fraser Conservative, South West Norfolk

If the Minister is saying that the Government are serious about people suffering from fuel poverty, why have they cut the Warm Front budget for the next three years?

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

My experience is that the services offered through Warm Front are expanding. We have the potential to do that, and I certainly see increasing numbers of people in my own constituency taking advantage of what Warm Front has to offer.

Let me address an issue raised by Members of all parties—whether the Government have a tax revenue windfall from the rise in oil prices. The simple answer is that there is absolutely no correlation between the international price of oil and what the Government actually receive. That is one reason why the hon. Member for Putney is wrong to imply that money is necessarily coming in; as I said in an earlier intervention, an analysis done by the Institute for Fiscal Studies shows that.

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

May I give way after I have finished explaining my point, as it may answer the hon. Lady's question?

The key point is that we cannot look at North sea revenues in isolation. Higher oil prices will, of course, boost revenues from petroleum revenue tax and North sea corporation tax, but a number of offsetting effects limit the overall impact on the public finances. We have already made this argument: fuel duty is set as a constant amount per litre of fuel sold, and it does not go up as a result of fuel price rises. When consumer spending on fuel goes up, there is likely to be a separate effect elsewhere in the economy, leaving the overall level of VAT revenues broadly unchanged. Of course businesses, including road hauliers, can reclaim the VAT that they spend on fuel as well.

Higher oil prices have temporarily pushed up inflation, and as most tax and social security benefits are linked to inflation, this will reduce income tax receipts and boost Government spending from April 2009. Higher inflation also increases the cost of servicing index-linked bonds, and higher oil costs could mean smaller profits for companies that have to spend more of their income on fuel, thus leading to reduced Government receipts from that source, and all this depends on the impact on the wider economy. I hope that that picks up a number of points raised by Members in the debate. We will, of course, update all our forecasts in the pre-Budget report.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

The Minister says that there is "absolutely no correlation" between oil prices and Government revenues. Is she really saying that the Government have some random way of assessing revenues, depending on oil price changes? Surely, there has to be a model showing some kind of correlation, albeit a complex one.

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

I do not think the hon. Lady understood what I just said. I said that there was no automatic correlation between an oil price rise and the overall effects on the public finances. Many other factors are involved, such as the way in which mechanisms operate throughout the economy. As I said, we will update all our forecasts for revenues and the wider economy at the time of the pre-Budget report.

I do not want to intervene in the debate between David Simpson and my hon. Friend the Member for Foyle, but I thank the hon. Member for Upper Bann for his mixed metaphor about the Celtic tiger which had been on fire withering on the vine. I shall bear it in mind when I consider the economy of the Republic of Ireland.

The United Kingdom is well placed to respond to the international economic challenges that we face. That also goes for Northern Ireland, where the economy is far stronger than in the past, partly because of the Government's economic policies but also, of course, because of the new era of stability. Politicians in Northern Ireland have had the chance to build on that stability and to secure more investment and more jobs by completing devolution, which includes signalling their willingness to achieve agreement on the transfer of policing and criminal justice powers.

Photo of Gregory Campbell Gregory Campbell Shadow Minister (Work and Pensions)

The Minister presumably accepts that she is a member of a Government who, for whatever reason, are deeply unpopular at the moment, as a sequence of by-elections appears to show. Today's debate raised a core issue affecting tens of millions of people throughout the United Kingdom, and gave the Government an opportunity to introduce steps to deal with the deepening problems that people are facing out there. Is not their lack of ideas in this regard an example of what makes them so deeply unpopular?

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

We present policies at the appropriate time. We make our economic forecasts at the time of the Budget and the pre-Budget report.

All politicians in Northern Ireland have a responsibility to build on the stability that has already been granted through the peace process, and we all have a responsibility to play our part to secure more investment and jobs by completing devolution. That is not to say, however, that families are not feeling the pinch, in Northern Ireland as much as elsewhere. Energy bills, petrol and food are all significantly more expensive than they were a year ago, and that is creating tougher times.

The motion calls on us to look at new ways of helping those on low and medium incomes. Of course we are always happy to hear new ideas, and we will always do our best for the people of this country—

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

I will not give way.

The Government have done a huge amount for people on lower incomes over the last 11 years through tax credits, the national minimum wage and measures for pensioners in particular, such as pension credit. Many of those measures were opposed by the Conservatives. Those policies have supported people in every part of the UK. We are continuing to support the people of this country during difficult times, and I commend the amendment to the House.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 200, Noes 292.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments) :—

The House divided: Ayes 293, Noes 195.

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Question accordingly agreed to.

Mr. Deputy Speaker forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House notes that the Governor of the Bank of England's letter of 16th June 2008 to the Chancellor of the Exchequer said that 1.1 per cent. of the 1.2 per cent. increase in recent months in inflation was due to global energy and food prices; further notes the Government's global leadership and supports the Government's action to tackle price rises with action on an international level, including pushing for a successful conclusion to the Doha round of negotiations in the World Trade Organisation and examining the impact of biofuels on food production; acknowledges the significant increases in world prices, with the oil price rising by 80 per cent. and food prices up by 60 per cent. in the 12 months to May 2008; recognises that these increases in global prices affect every country and put real pressure on family budgets throughout the UK; further acknowledges that the measures that the Government has taken and will continue to take to support families, individuals and businesses throughout the UK include extra tax credits, increased tax allowances, further winter fuel payments and increases in child benefit; considers that a strong and stable economy delivers the most important support for working families; and supports the Government's actions that have delivered unemployment, inflation and interest rates all at historically low levels.

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