Broad Economic Guidelines

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Dr. Palmer: As sometimes happens when I listen to the hon. Gentleman, I am confused. He asks the Government to refuse to follow certain European Commission recommendations and he points to other recommendations as a hook on which to attach criticisms of the Government. Does he feel that the Government should strive to fulfil all the recommendations?

Mr. Bercow: I hardly regard it as an absolute criterion on which to measure the effectiveness of Government economic policy that they adhere to the letter of the guidelines emanating from the European Commission. I am hurt, surprised and taken aback that the hon. Member for Broxtowe (Dr. Palmer) thinks that I have been unclear. I have been attacked for many reasons over the years and I make no complaint about most of those attacks. As a Member of Parliament, one receives the occasional bouquet, but is accustomed to the receipt of brickbats. However, the brickbat lobbed at me by the hon. Gentleman—that I am guilty of ambiguity and haziness—is as wounding as it is unfair. The answer

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to the hon. Gentleman is no, I do not regard that as a particularly significant yardstick in the conduct of British economic policy. I hope that I have made myself clear. If not, I confidently anticipate that the hon. Gentleman will spring to his feet.

I was talking about the burden of regulation and was about to move on to my sixth question, from which I am sure that the hon. Member for Broxtowe would not wish to divert me. The guidelines state that relatively low productivity in the United Kingdom remains a key challenge. As the Chancellor said as long ago as November 1998, productivity is a ''fundamental yardstick'' of economic performance. On that, I certainly agree with the Government. The difficulty is that their words are different from their deeds. There is a chasm between the Government's rhetoric on the one hand and their performance on the other. The hon. Lady need not depend on me for that point. It is clear from the ONS figures that productivity has grown less quickly under Labour than under the Conservatives, and less quickly than it needs to. Will she say in more specific and concrete terms how the Government intend to translate the ambition of improved productivity into fact?

My seventh question relates to the impact of ageing, a phenomenon with which we should all be concerned, with the possible exception of you, Mr. Hurst. The hon. Lady will be aware that the Barcelona European Council called for an increase of about five years in the effective average retirement age in the European Union by 2010. It was requested that member states should restrict access to early retirement programmes. That is a matter of legitimate public interest and it certainly has an economic and public expenditure implication, so I should be grateful if she would advise me of the Government's stance on the subject. The Minister looks quizzical; perhaps she did not catch what I said. I was talking about the Barcelona European Council's call for an increase in the retirement age and its exhortation for access to early retirement programmes to be restricted.

My eighth question relates to the promotion of dialogue with social partners and more flexible work organisation, and specifically the call to review employment contract regulations and related costs, with the aim of promoting more jobs and achieving a balance between flexibility and security. I would welcome the Government's thoughts on that subject in terms of policy detail.

I should also be grateful if, in the context of invigorating the labour markets, the Minister would say something about the plans to remove existing barriers to female labour market activity and to address the underlying factors that lead to a gender pay gap. The hon. Lady does not need to be reminded, but I am happy to remind her that there is still a significant pay gap between men and women. It is a fairly shocking state of affairs. More than 30 years after the enactment of the Equal Pay Act 1963—in fairness, I think that that took place under a Labour Government—I would appreciate it if she would address that subject.

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Moving speedily on, I come to question 9, on the promotion of the efficiency and integration of the EU financial services market. The Minister will be aware that the Council, the European Parliament, the European Commission and member states wish to step up efforts to ensure the full implementation of the financial services action plan by 2005 and the implementation of relevant securities legislation by 2003. Can we have an update on that? What progress has been made and will it be speeded up? What will the impact be and what is the Minister's prognosis?

I come now to question 10. The Minister will know that the documents refer to translating into action the commitments made under the European charter for small enterprises, and to encouraging risk taking through improving access to finance, especially for small and medium enterprises in their infancy. What do the Government have to say about that point? I did not expect the Minister to cover it in her relatively brief opening address, but it is of great importance to the small business community.

Question 11—the Minister will be delighted to know that I am moving towards a conclusion—relates to the enhancement of environmental sustainability. Reference has been made to a reduction in sectoral subsidies and other measures that have a negative environmental impact. What do the Government intend to do on that front? What do they regard as measures that have such an impact? Do they accept that sectoral subsidies need to be reduced or tempered in some way, and can we have particulars? In effect, the issue is grouped with the agreement to be reached by December this year on an appropriate framework for energy taxation at the European level. I will keep my powder dry on the merits or demerits of a European energy taxation policy. The Minister will not need to be Sherlock Holmes to discern that I might have some anxiety or scepticism on that front. On this occasion, I am less interested in conveying my thoughts to her than in her conveying her thoughts and those of the Government to me and members of the Committee.

I turn to the level of borrowing, which is extremely important in the context of the sustainability of economic growth, the balance of the public finances, and—I will say it before the Minister does—the priority that the Government attach to the avoidance of boom and bust. I am sure that she will have taken note of the observations of the Bank of England last week. She will be especially aware of the remarks made by Mr. Clementi and reported in The Times last Friday. According to figures produced by Bank of England staff, the jump in mortgage borrowing has pushed household debt to a record 120 per cent. of income. Low borrowing costs mean that that debt burden is currently affordable, but will not be so indefinitely. Will the Minister give us her interpretation of the current figures and their implications for economic stability? It is of concern to her, Committee members, businesses and householders. It is also of concern to the European Commission.

The Minister will also know of the observations of the Monetary Policy Committee earlier this year. The

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minutes of the meetings held on 9 and 10 January emphasised the concern of some of its members that the worsening imbalances in the economy posed a particular threat. It pointed out that real domestic demand growth had exceeded real output growth by 5.7 per cent. over the past five years. It said that that was unsustainable, and talked about the state of indebtedness and the need for retrenchment. It continued that

    ''a further stimulus to domestic demand . . . through another cut in interest rates would worsen the imbalances and could make it more difficult to keep inflation close to target in the medium term''.

I fear that the Minister will not want to comment, but it would be useful to know if she goes along with that proposition.

Mr. Hopkins: I am interested in what the hon. Gentleman is saying about indebtedness. Does he agree that a possible way through that, especially as far as pensions are concerned, is for there to be some degree of compulsory saving, however that might be achieved?

Mr. Bercow: The hon. Gentleman is trying to tempt me. Considerable thought is being given to the formulation of a detailed, credible, costed and attractive Conservative pension policy to juxtapose with the miserable and embarrassing failure of the Labour Government's policy on the provision of pensions over the past five years. As hon. Members will have noticed, I have been measured, temperate, and almost consensual. The hon. Gentleman is threatening to cause an imbalance in the Committee. I could easily be tempted to dilate on that matter at some length, but it would only prevent other Members from speaking, which I have no desire to do. In any case, it is properly for ''two brains''—my hon. Friend the Member for Havant (Mr. Willetts), the shadow Secretary of State for Work and Pensions—to introduce our credible proposals in due course. It is not for me, a mere humble underling, to seek to anticipate what he might choose to say.

Finally, is the Minister concerned that Britain has plummeted from ninth to 16th in the world competitiveness league since the Government took office? What does she propose to do about it?

11.9 am

Matthew Taylor: I shall not follow that long list of questions from the hon. Member for Buckingham, but I should like to raise a few points with the Minister. There are some points in the documents that are worth welcoming. The first is the progress that most countries are making towards solving the pension liability issue. Concern about the position in some other European countries has been raised in the House over many years. It is relatively easy for Governments to solve the problem by simply cutting back the entitlements that they intend to give to people, but that does not solve it from the point of view of current and future pensioners. There is a serious problem in the UK. The Conservatives solved it by breaking the link between pensions and earnings. They reduced future Government liabilities at a stroke, but at the same time created a situation where pension entitlements are clearly too low for many to have a reasonable quality

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of life in the future and savings are well below the required levels.

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