The core purpose of the Treasury is to ensure that the economy is stable, to lay foundations for growth and employment, to reform banking, and to manage the public finances so that Britain starts to live within her means.
I thank the Chancellor for his reply to my supplementary question earlier. May I put it to him that his announcement last week that £1 billion was to be taken from international aid over the next three years suggests that, in the Prime Minister’s words, he is balancing the books on the back of the world’s poorest?
I do not agree with the right hon. Gentleman. I think that people should reflect on the fact that we are making some very difficult decisions in the current Parliament about welfare benefits and departmental spending, and that much of that is controversial. During this period, spending on aid is set to increase from £8.5 billion to £12 billion, which is a big increase. I think that if we start to attack that commitment—if we say that it is not enough, and the like—the coalition of support for the increase in aid spending that I believe exists throughout the House will start to fall apart, and I do not think that we want to go down that route. We have made our commitment to the poorest in the world. We will be one of the first countries in the world to hit the target of spending 0.7% of our gross national income on aid, and I think that we should all support and welcome that.
Sixty per cent. of the lowest-paid workers whom we have taken out of tax are women, as are 80% of those who benefit from our policy of exempting the lowest-paid in our public sector from the pay freeze.
“if activity were to undershoot current expectations and risk a period of stagnation or contraction, countries that face historically low yields (for example, Germany and the United Kingdom) should also consider delaying some of their planned consolidation.”
I do not have the IMF forecast to hand, but as I remember it was absolutely in line with other forecasts at the time. It was very much as we expected, but when the IMF produced that forecast it asked the question again of whether Britain should change its deficit plan policy, and it said no. In doing so, it joins a host of other organisations, ranging from the OECD to the CBI and the Governor of the Bank of England here in Britain, which make it very clear that Britain must stick to its deficit reduction plan.
In October, the IMF said that if growth
“were to undershoot current expectations” the Government should change course. The Chancellor did not know the answer to my question, so let me give him the answer. The IMF was forecasting UK growth of 1.1% in 2011 and 1.6% in 2012. The latest Office for Budget Responsibility forecast is that the UK is now expected to grow by just 0.9% this year and to grow next year not by 1.6% but by 0.7%.
Let me share another international judgment with the Chancellor:
“Wiser policies, mixing short-term stimulus with longer-term deficit reduction, should have been embraced last year…Instead, the Cameron government persists on a failed, irresponsible course that is unlikely to lead to recovery anytime soon.”
With growth undershooting IMF expectations in October, with borrowing now set to be £158 billion higher than he planned, and with even the IMF calling for a change of course, why is the Chancellor ploughing on? If even across the Atlantic The New York Times can see that it is not working, why can the Chancellor not see it?
The managing director of the IMF has clearly said that the “policy stance” in the United Kingdom “remains appropriate.” The right hon. Gentleman talks about international support, and not one single credible mainstream party in Europe is advocating the position that he advocates in the UK. We have done some research, and we have found that the Workers Struggle party in France supports what he is doing, as do the Communist parties of Spain, Switzerland, Finland, Romania and Moldova. Those are his new fellow travellers. If he had his own Communist manifesto, it would be “Workers of the Labour party unite! We have nothing to lose except our shadow Chancellor.”
My hon. Friend is absolutely right. The measure will provide support in the form of a reduction in business rates for more than 500,000 small businesses and 29% of all shops for the whole of the next financial year.
Will the Chancellor tell the House and the country whether it is fair for the brave men and women of our armed forces to face a pay freeze?
The decision to freeze public sector pay was, of course, a difficult one. I am not sure whether it was opposed by the Labour party; I do not think it was, but I stand to be corrected. Although it was a difficult decision, in respect of our armed forces we sought to double the operational allowance to give tax-free help to those who are risking their lives at this moment fighting for us in Afghanistan. We have also sought to double the council tax relief for our brave armed services when they go abroad. We have not changed the incremental pay increases that people—for example, those in the Army—get through their contracts, and we are enshrining the military covenant in law. So we are absolutely aware of the struggle and sacrifice the armed forces undertake on our behalf and we honour their sacrifice.
I hope it is not giving away too many House secrets to say that it is rumoured that the shadow Chancellor will be reprising his role as Father Christmas at the Westminster Christmas party tomorrow. If that is true, I am sure many children will tell him about their presents, and a recent survey suggests that the average cost of Christmas for a child is £112.50. Is the Chancellor aware that that is almost exactly the same amount that this Government are giving families through the council tax freeze and the reductions in fuel duty we have proposed?
Does the Chancellor agree with the chief executive of the Engineering Employers Federation, Terry Scouler, that
“the biggest threat to reducing” the
“deficit comes from weak growth”?
In view of the fact that growth is dependent on demand, that this country is confronted over the next two years with the biggest squeeze on its living standards in a very long time, and that demand in our main export market, Europe, is also falling, can he tell us where that growth is coming from?
May I point out to the hon. Gentleman that Terry Scouler is supportive of the steps we are taking to get the deficit under control, and made that very clear last week. He was also supportive of some of the measures we announced last week, such as the reforms relating to R and D tax credits, which will help manufacturing.
On Friday, I met businesses in my constituency at an event organised by our local enterprise partnership. They tell me that access to finance is one of the most important issues they face. Will the Chancellor confirm that the measures introduced in the autumn statement will provide more and cheaper finance to businesses in Rugby?
That is absolutely the intention of the national loan guarantee scheme. It is designed to help small businesses, in particular, with turnovers of less than £50 million to get access to cheaper credit—in other words, to pass on the low interest rates that we can borrow at, because of the difficult decisions we have taken, to those businesses in Rugby and elsewhere.
Will the Chancellor give a commitment to the English regions that they will receive all the European regional development fund money they are entitled to—or will that money end up with the Treasury?
If there are good projects that need European support and we can put together a joint bid and the resources to do that, of course we will do that. But let me make a broader point: disparity between the regions of this country grew over the past decade and ultimately, what we have got to do is to help the private sector across the regions to grow, as well.
Unlike the previous Government, this coalition Government agreed £1 billion in compensation to qualifying Equitable Life policyholders. Yet, judging by the Minister’s written answers, as recently as six weeks ago less than £500,000 had been paid out. What action will he be taking to ensure that the payment scheme finally gets compensation to policyholders without further delay?
We are on track to pay out £500 million in compensation to policyholders this year. We have completed a pilot testing phase to make sure that the system works, and I can advise my hon. Friend that we have made 3,000 payments to policyholders just today.
In one of his earlier answers, the Chief Secretary to the Treasury referred to the infrastructure fund announced last week. Given his comments of last week, can he confirm to the House precisely how much of the £1 billion allocated to carbon capture and storage will now be available for CCS projects before 2015?
As the hon. Gentleman will know, the consequence of last week’s infrastructure announcement for Scotland is an additional £430 million to be spent in Scotland. We have said throughout this process that £1 billion is available for the carbon capture and storage project. The likelihood is that that project will be delayed because of the failure to agree the Longannet project, and we will make funds available as soon as the competition is completed.
Sadly, I am not a quack doctor who can perform miracles and take a bank bonus tax and spend it 10 times over. What we have done is to introduce a permanent annual levy on the banks that raises in each and every year more than was ever raised in any year of the previous Labour Government, net, and we are using that to pay for things like new nursery care for disadvantaged two-year-olds, and of course to deal with our deficit.
Earlier, the Chief Secretary to the Treasury indicated that the reason for the slow growth in the past year was the depth of the recession. He quoted the OBR report, but it goes on to say that the recovery in 2009 was stronger than previously reported, and that decline started only in the latter part of 2010. Why did he not tell the House and the country that?
The hon. Lady should recognise that the OBR cited three reasons. It said that the bust was bigger and the boom was greater under the previous Government. I would have thought that she would stand up and apologise for that, as well as recognising that the high costs of commodities over the past year has slowed growth now and that the risks posed to the eurozone are what is causing a slowdown in demand at the moment. That is what the OBR said and she should accept it.
We publish, on an annual basis, a breakdown of our foreign exchange reserves, and this Government, like previous Governments, do not give a running commentary on the composition of those reserves.
Is Her Majesty’s Revenue and Customs trying to maximise its income by not warning businesses immediately that they have incurred a penalty for late payment of PAYE? Businesses in my constituency have been facing huge bills because HMRC has taken six months before letting companies know about the fines they are incurring.
I think, of course, that we have got the fiscal judgment right in this country, which is one of the reasons for the support we have had from international investors and others. Each country must make its own decisions. Ireland has to had to make some very difficult decisions, although because of the interconnectedness of the British and Irish economies it is to be welcomed by everyone in this House that better economic news has come out of Ireland more recently.
Given successive quarters of downward revision of the growth forecasts by the Office for Budget Responsibility and given that eurozone countries are now outstripping the UK in terms of upward growth figures, is the Chancellor proud to have abolished boom and bust and to have replaced it with bust and bust?
I do not know how long it took the hon. Gentleman to dream up that question, but he would have spent his time better reading the economic forecasts that he purported to give the House of Commons. They show the OBR downgrading its eurozone growth forecasts, and of course the OECD has forecast quite deep recessions in some eurozone countries. The Labour party really has taken the most extraordinary position; in this week when we have the European Council meeting coming up, those in the Labour party are literally the only people in Europe who think that the eurozone crisis is not having an impact on the British economy or the other European economies. It is absolutely bizarre and it shows why, in a week when some of the numbers have been going up, the one number that continues to fall is on the economic credibility of the Labour party.
What plans does the Chancellor have in place for peer reviews of the Crown dependencies and the overseas territories, and what sanctions will be in place for individuals, banks and businesses that are found not to be complying with international tax standards and are guilty of money laundering and tax avoidance?
Of course we monitor these matters very closely and are in discussions with Crown dependencies and overseas territories, many of which are taking substantial steps to improve their compliance with international tax standards. We welcome that and will further encourage it.
By what means will infrastructure projects in Wales, Scotland and Northern Ireland access finance from the pension funds element of the capital investment programme announced in the autumn statement? Is it a matter for the devolved Governments to put forward projects or not?
The agreement we have reached with pension funds will, in due course, set up a vehicle that enables pension fund investment to be made in infrastructure projects right across the UK. Of course there are many infrastructure projects in the private sector in Wales, in Scotland and in Northern Ireland where that money can help to deliver those projects more quickly. The Welsh Assembly Government will be free to bring forward projects for which they think private sector money is suitable. I also say to the hon. Gentleman that we are in discussion with the Welsh Assembly Government about their proposals for expanding the M4, which is a significant infrastructure project in its own right for Wales, for which Government money will need to be deployed.
Order. I am sorry to disappoint colleagues, but Treasury questions remains a popular sport, in which demand rather heavily exceeds supply.