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Exchange Rate

7. Mr. John Burnett (Torridge and West Devon): If he will make a statement on the impact of recent exchange rate fluctuations on British business. [68404]

The Paymaster General (Dawn Primarolo): The Government publish two assessments of economic developments and prospects each year, one at Budget time and the other in the pre-Budget report. The forecast published in the April Budget was based on all the relevant information available at that time. We will update our assessment of the economy as usual in the autumn pre-Budget report, taking account of all the relevant factors.

Mr. Burnett: In the unlikely event that the Chancellor can declare his five tests for euro entry to have been met, what will concern British business and the rest of the country is the proposed sterling-euro exchange rate at entry. At what stage will the Chancellor declare that rate? Will the Paymaster General confirm that it will be before any referendum, and also that there will be just one assessment during the present Parliament?

Dawn Primarolo: The hon. Gentleman will have to be patient, and wait for the assessment of the five economic tests in the Government's announcement.

Roger Casale (Wimbledon): May I draw my right hon. Friend's attention to an article by Roger Clews of the Bank of England's monetary instruments and markets division? On page 182 of the current "Quarterly Bulletin", he reminds us that the United Kingdom is part of the wider world economy, and furthermore that

Is it not the case that the platform of economic stability that the Chancellor has established is the best protection in the long term from shocks emanating from the world economy—to the extent that the greatest risk of a shock to the UK's financial markets in the future would be a return of the Conservative Government and their discredited policies of boom and bust?

Dawn Primarolo: As my right hon. Friend the Chancellor has repeatedly told the House, what is essential is that the economic fundamentals are sound—which means low inflation, low interest rates, sound public finances and stable growth.

Mr. John Redwood (Wokingham): In recent years, the pound has moved much more dramatically against the

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euro than against the dollar. Does that not show that we are if anything converging with America and not with euroland? Does the Minister agree that there is no point in assessing other convergence criteria while the exchange rate is gyrating so wildly in terms of the euro? Does that not show that we are nowhere near having converged?

Dawn Primarolo: The right hon. Gentleman is putting his old proposition. What the Government will do is assess the five economic tests, ensuring that the Government's best economic interests—[Interruption.]—the country's best economic interests are met and the best decisions are made for the country, both by Parliament and by the people.

Global Poverty

8. Mr. Win Griffiths (Bridgend): What plans he has to meet his G8 and EU counterparts to discuss further practical steps on tackling global poverty. [68405]

The Chancellor of the Exchequer (Mr. Gordon Brown): The Secretary of State for International Development and I will meet churches and non- governmental organisations next week. We will prepare for the International Monetary Fund and World Bank meetings in September, where we will want the announcement that this country is raising development aid from £2 billion in 1997 to £4.9 billion by 2006 to be an encouraging signal for a new international £50 billion financing facility involving all rich countries, the aim being to meet the millennium goals for 2015 of halving poverty, cutting child mortality by two thirds and delivering primary education for every child in the world.

Mr. Griffiths: I am sure that my right hon. Friend will be aware that he and the Secretary of State for International Development are seen as the shining stars in the firmament of the developing world for the leadership that they have given in increasing the amount of money that we set aside for overseas aid and other programmes to tackle poverty and ill health in the developing world. Given the fact that the tide of Conservative cuts in development aid has been reversed significantly by this Government, would he like to speculate that we might reach the UN target of a contribution of 0.7 per cent. of GNP by the time of the next election?

Mr. Brown: My hon. Friend is drawing me to speculate both about the date of the next election, of which I have no knowledge, and about the next spending round, which is two years from now. What I can say is that as a result of the representations made by many of his constituents, as well as by him and many others in the House, 26 countries have debt relief or are in the debt relief process. For the first time in 20 years, the decrease in development aid budgets has been reversed: they will rise over the next few years as a result of what Britain and the European Community have done and what America has announced in the past few months.

The key question now is to ensure that that extra money can be used to build better education systems and primary health care systems and to cut poverty in the poorest countries. When we meet the churches and the NGOs next

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week, we will discuss how we can join them and other international bodies to persuade other countries that it is worth being part of an international effort to tackle poverty.

Mr. Michael Weir (Angus): I note what the Chancellor has said, but does he not agree that there was at least a feeling from the recent G8 summit in Canada that the developed world had moved more towards putting money into security by giving more to Russia than to eradicating poverty in Africa? What action does he propose to take to ensure that the G8 countries do not lose sight of poverty in Africa?

Mr. Brown: I do not agree with the hon. Gentleman. At the G8 summit, the Prime Minister led with the African initiative that has been his particular contribution to the G8 process during the past year. He pledged that Britain's aid budget to Africa, which was £300 million in 1997, would rise to £1 billion. At the same time, America pledged $5 billion after 2006 and $5 billion in total until 2006. Then the European Union pledged that it would raise its development aid to 0.39 per cent. of its budget, which is an additional $7 billion. By the time of the G8 summit, an additional $12 billion had been pledged. That is why development aid as a proportion of GDP, which had been falling, is rising for the first time in 20 years. When the hon. Gentleman looks at the overall sums and at what we have to do to build on that, he will recognise that the G8 summit, where the Prime Minister led the delegation from Britain, was a great success in pushing things forward, but we need even greater successes in the months and years to come.

Mr. Tom Clarke (Coatbridge and Chryston): Is my right hon. Friend aware that, in contrast with the perspective offered by the hon. Member for Angus (Mr. Weir), some of us heard at a meeting this morning that this Government had given more bilateral aid to Rwanda than the whole of the EU and any other country? The Government have an excellent record on that and on debt relief. Does my right hon. Friend agree that the recent lobby on trade indicated that there is indeed a need for a new modern Marshall plan? Does he see that as part of the Government's approach?

Mr. Brown: I am grateful to my right hon. Friend, who takes a big interest in such matters. Over many years he has put the case for aid to Africa and for a constructive and progressive approach to solving international development problems. The issue that we faced was that despite all the good will, net disbursements of aid to Africa had fallen significantly over the 1990s. Only now is that process being reversed. That is why Rwanda, and many other countries, are receiving more money. That is why, for example, Uganda has doubled the number of children in education, and other countries such as Tanzania can do likewise. It is by our collective efforts, and by persuading other countries, that we will build both a development aid budget that is capable of dealing with the problem, and the will to ensure that the money goes, in an untied way, to education, health and anti-poverty programmes.

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Public Sector Pensions

9. Sir Nicholas Winterton (Macclesfield): What assessment he has made of the effect of his policies on public sector pension provision. [68406]

The Financial Secretary to the Treasury (Ruth Kelly): Prudent financial and economic management has ensured that the finances of the public services are on a sustainable basis. Through the spending reviews and other initiatives we ensure that public sector pension schemes are managed efficiently and provide cost-effective recruitment and retention of staff.

Sir Nicholas Winterton: The welfare and income of all pensioners must be central in any civilised and caring society, so will the Minister acknowledge the depth of concern felt by millions of public sector pension contributors about the crisis in funded pensions? Will the Government finally admit the connection between that crisis and their £5 billion a year tax on pensions, which has cost each pension contributor £400 a year? The Government must accept some responsibility for the crisis in our pensions today.

Ruth Kelly: I should point out to the hon. Gentleman that the tax changes that affected pension funds do not affect public sector pension funds; those are primarily unfunded schemes.

Sir Nicholas Winterton: I said all pensioners.

Ruth Kelly: Of course we take the issue of saving for the long term, especially for pension provision, extremely seriously. That is why the Government commissioned the Sandler report to examine private sector pension provision, and also why we are seriously considering the proposals made by Alan Pickering in his review of the occupational pension scheme. We shall respond to those reports in the autumn, and put forward our proposals.

Mr. Jim Cousins (Newcastle upon Tyne, Central): Most public sector pension schemes are, of course, unfunded, and they are an important part of the rewards package for low-paid workers in local government, health, the fire service and the police. Is it Government policy to continue those public sector schemes on a final salary basis, including survivor benefits and indexation of the pension once it is in payment?

Ruth Kelly: I take it that my hon. Friend is referring to the Pickering review, which proposed some changes in what it is compulsory for employers to offer in their pension schemes. We are, of course, taking those proposals extremely seriously—but at first sight some of them, especially those on compulsory indexation and survivors benefits, do not seem attractive. Against that, however, must be weighed the overall impact on occupational pension schemes. We are taking the issues extremely seriously, and we will make proposals in due course.

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