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House of Commons

Tuesday 8 June 2010

The House met at half-past Two o'clock


[Mr Speaker in the Chair]

Oral Answers to Questions


The Chancellor of the Exchequer was asked-

Economic Growth

1. Tony Lloyd (Manchester Central) (Lab): What assessment he has made of the effect on economic growth of the programme of expenditure reductions announced on 24 May 2010. [918]

The Chancellor of the Exchequer (Mr George Osborne): The Treasury's assessment is that the effect will be positive. The in-year reductions in spending are part of the Government's efforts to bring down the budget deficit, the level of which threatens the recovery. This weekend the G20 stated:

including Britain-

Tony Lloyd: I welcome the Chancellor to his place, but will he have the candour to admit that his strategy is very risky, because it risks putting this country back into a double-dip recession? In any case there will be losers, so will he say who they will be?

Mr Osborne: Let us be clear about who the losers would be if we did not deal with this record budget deficit. The whole country would lose out, because there would be higher interest rates, more businesses would go bust and international investor confidence would be lost. The hon. Gentleman needs to examine what is happening in the rest of the world, and realise that because Britain has the largest budget deficit of any advanced economy, we have to get on and deal with it.

Michael Fallon (Sevenoaks) (Con): I welcome the Chancellor to his position. Will he give an absolute assurance that the coming Budget, and future Budgets, will always be presented first to Parliament, and that they will not have to be pre-notified to, or approved by, Brussels?

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Mr Osborne: My hon. Friend has my absolute assurance that I would not sign up to that. Indeed, I have made that position clear to ECOFIN, and my hon. Friend the Financial Secretary to the Treasury, who is taking my place at today's ECOFIN meeting, has also done so. It is absolutely certain that future Budgets will be presented first to the House of Commons.

Mr Liam Byrne (Birmingham, Hodge Hill) (Lab): I, too, welcome the Chancellor to his first Treasury questions. I know that he prefers the safety of the Treasury courtyard, but I am sure that the House will be on its best behaviour with him this afternoon. Since the 1970s, almost no country has cut its deficit significantly without increasing inequality. Will he make it a central goal of his deficit reduction plan to ensure that inequality does not rise?

Mr Osborne: I thank the right hon. Gentleman for his welcome. He is Labour's "man of letters", and it is good to see him still on the Front Bench. The point that I make to him is that Labour had 13 years in government, and inequality increased during its time in office. What we will do is deal with the very large budget deficit bequeathed to us by him and his colleagues in a way that is fair and reasonable, and protects people across the country.

Mr Andrew Tyrie (Chichester) (Con): It is clear that in the past few days a new system of public expenditure control has been put in place. What will the Chancellor do to ensure that Parliament is fully informed about the new system? Will he publish a full explanation of exactly how it works?

Mr Osborne: I think that we have the two candidates for the chairmanship of the Treasury Committee here today. [Interruption.] I do have a vote, but I am not going to exercise it on that matter. The point that I should make to my hon. Friend-I shall speak about this a bit more in our debate on the Queen's Speech later-is that we are publishing today details of the framework that we will adopt in conducting the spending review. I will say more about that at the time of the Budget-and I will, of course, answer questions about it in detail before the Treasury Committee, whoever is in the chair. Parliament will also have a number of opportunities to discuss it, and when the spending review is finally produced in the autumn it will, of course, be presented to this House. I want all Members of this House, from all parts of it, to engage in the big national challenge of resolving how we get this country to live within its means.

Tax (Pensioners)

2. John Robertson (Glasgow North West) (Lab): If he will assess the merits of increasing the level of financial assistance to pensioners through the tax system. [919]

The Economic Secretary to the Treasury (Justine Greening): This Government are committed to supporting pensioners to ensure that they can live with the respect and dignity they deserve. We have already said that we will restore the earnings link, protect key pensioner benefits and ensure that the retirement age can rise if pensioners want to continue working in order to support themselves. We think that, despite the fiscal deficit left to us by the former Government, that is the fairest way to proceed.

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John Robertson: I thank the hon. Lady, and welcome her to her position-but I am somewhat disappointed in her answer, because she has not identified exactly how she will support our elderly people at a time when cuts will be made all over the country and will affect everyone, including pensioners. What priority will she give to pensioners? What kind of increased payments will be made to cover some of the cuts, which will hit pensioners harder than anyone else?

Justine Greening: The hon. Gentleman seems to have missed the fact that this Government are having to tidy up a huge financial mess left to us by the previous one. We have made it clear that, despite that mess, we want, first, to protect key pensioner benefits-the benefits that Labour Members claimed we would take away-such as free bus passes, free prescriptions, free eye tests and the winter fuel allowance. That is a range of benefits that the Labour party said we would remove, but we are going to keep them. I can assure him on that, so he can go back to the pensioners in his constituency and explain why he was telling them mistruths during the last election.

Budget Deficit

3. Neil Carmichael (Stroud) (Con): What steps his Department is taking to reduce the level of the budget deficit. [920]

6. Nadhim Zahawi (Stratford-on-Avon) (Con): What recent representations he has received on the level of the budget deficit. [923]

12. Karen Lumley (Redditch) (Con): What steps his Department is taking to reduce the level of the budget deficit. [929]

13. Mr Kwasi Kwarteng (Spelthorne) (Con): What steps his Department is taking to reduce the level of the budget deficit. [930]

14. Chris Skidmore (Kingswood) (Con): What steps his Department is taking to reduce the level of the budget deficit. [931]

The Chancellor of the Exchequer (Mr George Osborne): In the past month, we have created an independent Office for Budget Responsibility to bring credibility to the Government's forecasts, undertaken and completed in-year budget reductions of £6.2 billion and, today, laid before the House the process for the spending review that will take place this summer. In two weeks' time, the Budget will set out a credible plan to accelerate the reduction of the budget deficit so that investors are reassured, interest rates can be kept lower for longer, and the recovery can be put on a stable footing.

Neil Carmichael: I note those excellent plans. Will the Chancellor of the Exchequer tell the House how many conversations he has had with colleague Ministers of Finance, and how much support and encouragement he has had from them to deal with our deficit?

Mr Osborne: I attended the G20 in South Korea this weekend. The G20 communiqué calls on countries with significant fiscal challenges-we have the highest budget deficit in the G20, so that includes us-to accelerate the reduction in the structural deficit. It has also been part of the European Union discussions that I have taken
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part in, that countries with significant budget deficits need to get on and reduce them. I am afraid that the Labour party, as it continues to oppose what we are doing, finds itself outside the international mainstream.

Nadhim Zahawi: Has my right hon. Friend the Chancellor read yesterday's International Monetary Fund report, which warns that the current crisis management was no alternative to fundamental economic restructuring? Does he agree that the previous Government either naively or deliberately chose to mislead the nation?

Mr Osborne: My hon. Friend is absolutely right. I have, of course, seen the IMF report, and the lesson we learned is that you have to fix the roof when the sun is shining. That is what the previous Government completely failed to do. They had 13 years to fix the national finances, and now it is up to us to clear up the mess that they left behind.

Karen Lumley: Has the Chancellor received any apologies from the previous Government for the mismanagement of the economy over the past 13 years?

Mr Osborne: No, but we did receive a letter from the former Chief Secretary to the Treasury, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), apologising for the fact that there was no money left. We will discuss this issue in the debate on the Queen's Speech. I note that the Labour party has tabled a motion, which it is asking us all to vote for, noting

I look forward to hearing that clear plan in the shadow Chancellor's speech.

Mr Kwarteng: Has the Chancellor received any more correspondence from the former Chief Secretary?

Mr Osborne: No, sadly I have not, but I discovered that he had a large bust of Oliver Cromwell sitting behind his desk, and that when the Irish peace negotiations were being conducted they had to be held in another room.

Chris Skidmore: In my constituency, the number of people claiming jobseeker's allowance has increased by 147% in the past five years. Does the Chancellor agree that unemployed people in Kingswood would be best served by decisive action to tackle Labour's legacy of debt now?

Mr Osborne: I agree absolutely with my hon. Friend. Of course, we inherited rising unemployment from the previous Labour Government and it is a fact that all Labour Governments have left office with unemployment rising-[Hon. Members: "It's falling."] Opposition Members say that, but they are not looking at the unemployment figures, which show that unemployment is rising, that we have the highest youth unemployment in Europe, and that a record number of children are growing up in workless households. That is what we have inherited from the Government who had 13 years to sort out these problems. We will sort this out, and give people real life chances.

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Natascha Engel (North East Derbyshire) (Lab): I welcome the right hon. Gentleman to his new position. Has he calculated what his announcement of a £125 million reduction in the police grant means, in terms of fewer police officers and fewer special constables in Derbyshire?

Mr Osborne: All public services have to find efficiencies, and that is true of the police service, as it is of every other service. I have to say to the hon. Lady, and all Opposition Members, that if they are going to play a serious part in the discussion about how to reduce Britain's record budget deficit, they need to come up with their own proposals instead of attacking every proposal put forward by the Government.

Mr David Anderson (Blaydon) (Lab): When the most recent Chief Secretary to the Treasury, the right hon. Member for Yeovil (Mr Laws), made his debut two weeks ago-which became, of course, his swansong-my hon. Friend the Member for Manchester Central (Tony Lloyd) asked him whether he could give any idea how many jobs would be lost as a result of the deficit reduction package. His answer was that it is not right to pluck figures out of the air. Can we have some more concrete evidence from the Chancellor?

Mr Osborne: Our plan is to increase employment in this country by putting the public finances on a sound footing. It is about time the Labour party understood that it left behind the largest budget deficit in the EU and the G20. All over the world, people are looking at sovereign credit risks. This Government are determined to do something about the problem before people start looking at Britain.

Mark Durkan (Foyle) (SDLP): The Chancellor could take the opportunity today to spell out to us how he and his coalition colleagues hope to popularise their cuts agenda. We seem to be being told that the public will be consulted on which spending should continue and which cuts might be made. How will that "axe factor" approach to government play out?

Mr Osborne: I congratulate the hon. Gentleman on the pun-but this is a very serious national challenge, which whoever won the election was going to have to face. The 11% budget deficit will not disappear. A very large part of it is structural, and so will not automatically reduce as growth returns to the economy. We want to make sure that all political parties, including his, and the brightest and best brains across Whitehall and the public sector, as well as voluntary groups, think-tanks, trade unions and members of the public, are all engaged in the debate and discussion about how, collectively, we deal with the problem. After all, it is our collective national debt.

Mr Alistair Darling (Edinburgh South West) (Lab): First, may I welcome the Chancellor and his team to the Front Bench? I hope that he will join me in sending our good wishes to my right hon. Friend the Member for East Ham (Mr Timms), who remains a member of the Opposition Treasury team and who I am glad to say was in very good heart when I saw him a couple of weeks ago. He is looking forward to returning to the House at an early opportunity.

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Unemployment is high today, but it is half what it was in the 1980s. Repossessions in the past couple of years are half what they were in the 1990s. Our economy is growing and our borrowing is coming down. Does the Chancellor accept that all of that is because we, in common with other countries-yes, as part of an international consensus-were prepared to take action to save our economy as we went into recession? Every one of those measures was opposed by him when he was shadow Chancellor.

Mr Osborne: It sounds as if we are rerunning the general election campaign. First, may I pay tribute to the work that the right hon. Gentleman did over three years, I think it was, as Chancellor of the Exchequer? He did the job in very difficult times, with the best of motives. Although we did not always agree with each other, as he has just made clear, he was always very courteous to me. I also thank him for the fact that I inherit from him a far more functional and less chaotic Treasury than the one that he inherited from his predecessor.

I make the point to the shadow Chancellor that the situation that we inherited from his Government-I do not say that he is solely to blame for this-is an extremely critical one. We have a very large budget deficit at a time when, as I have said, countries around the world are having to look at sovereign credit risks. We are having to deal with that, and with rising unemployment and growing inequality in our country. Regional disparities are growing as well, and we have to deal with those problems.

The right hon. Gentleman talks about the international consensus. He surely must have noted how, in the month since the general election, the EU, G20, the IMF, the OECD, and of course our own Governor of the Bank of England, have all warned us about the consequences of not dealing early with our budget deficit, and not accelerating the reduction in the budget deficit that he proposed in his March Budget.

Mr Darling: I agree that there are many issues that need to be resolved, in this country and others. No doubt we will return to them when the debate on the Gracious Speech resumes.

I want to ask a specific question about the Office for Budget Responsibility that the Chancellor is about to set up. When that body makes its recommendations, will he undertake that it will publish all the underlying assumptions that lead to them? Will he ensure that its deliberations, rather like those of the Monetary Policy Committee, are open and available for all to see?

Mr Osborne: I should have joined the right hon. Gentleman in wishing the right hon. Member for East Ham (Mr Timms) a speedy recovery. I understand that he has now sworn in, which is fantastic for everyone here concerned. The fact that he was assaulted in his constituency surgery doing his job as a constituency MP makes the incident all the more chilling, and we all wish him very well.

Let me deal specifically with the right hon. Gentleman's question. We have set up the Office for Budget Responsibility on a non-statutory basis because we need to pass legislation to make it statutory. The model that we have followed is the approach taken by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) when he set up the Monetary Policy Committee. Sir Alan Budd will be available to answer questions from the
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Treasury Committee on exactly the kind of points that the right hon. Gentleman raises-such as the underlying assumptions. It is ultimately up to him how he publishes his information, and I do not want to prejudge that, but the purpose of the exercise is for people to have confidence in official figures and growth forecasts, and confidence means transparency. I am sure that the spirit of what the right hon. Gentleman says will be taken on board by Sir Alan.

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