Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): Having rejoined the debate and expertly managed to avoid the no doubt helpful contribution by the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), I congratulate the Secretary of State on his much-anticipated and well-briefed promotion to his new portfolio and on his first engagement in Parliament in that role. When he was confirmed in his position, he made much of his determination to continue with the policies of his predecessor, so we have a new man in charge but the same policy in place. At least he has not continued with one feature of his predecessor’s appearances in this House—the speeches of inordinate length. We should be grateful for small mercies. It is a shame,

5 Mar 2012 : Column 628

though, that much of the content turned out to be very similar, with the same mixture of obstinacy, complacency and diversionary abuse.

The change of Secretary of State has given the Government an opportunity to reassess their policy prescription in the light of the evidence of falling investment in the green economy, taking the UK from third to 13th place, and to make good much of the rhetoric of the past two years on the opportunities for growth and investment to help to rebalance the economy and to build vital skills that could create and keep jobs in every part of the country. Those opportunities should not be missed. However, there is genuine concern that a combination of the effects of Government policies elsewhere, the Chancellor’s comments on a range of related issues at party conferences, and the hapless approach of the Minister of State, the hon. Member for Bexhill and Battle (Gregory Barker), on feed-in tariffs are combining to reduce the attractiveness of those opportunities, not least in renewable energy.

The Secretary of State spent some time in Scotland this weekend, and he will have appreciated that Inverness is a little less crowded and a little windier than Surbiton, and that is not just because he was at the Scottish Liberal Democrats’ conference. I welcome his recognition of the benefits to Scotland and the rest of the country of the single energy market and the mechanisms within it to improve infrastructure and promote new developments that work in the interests of the whole of the UK. As well as appreciating the potential for renewable energy in Scotland he will also, according to press reports, have witnessed some of those who are less convinced at the staged wake at the conference. For the avoidance of doubt, it was an unofficial wake outside rather than something on the agenda inside.

As well as the opportunities, significant costs are associated with the investment needed to update our energy infrastructure. The right hon. Member for Hitchin and Harpenden (Mr Lilley) and my hon. Friend the Member for Sedgefield (Phil Wilson) expressed concern about that. However, we should be realistic. There are no no-cost options, but there are opportunities to be realised. An over-reliance on fossil fuels will cost more in the long term and lead to bigger increases in consumers’ bills, and our generation plant is largely coming to the end of its useful life. The need to reduce carbon emissions, which is accepted by the Government but not necessarily by all Government Members, means that there is a pressing need to renew that infrastructure, and to do so in the right way.

We should also be maximising the opportunities for jobs in our economy to build growth and provide employment in the parts of the UK that are suffering the most economically, not least because of the impact of other aspects of Government policy. That was pointed out in an intervention by my hon. Friend the Member for Kingston upon Hull North (Diana Johnson) and in the speeches by my hon. Friends the Members for Sedgefield and for Scunthorpe (Nic Dakin). Many places around the UK are well placed to be the hubs for renewable energy because they combine the port infrastructure, the manufacturing expertise and the chance to develop new export opportunities. We have heard about the need for joined-up thinking within Government to attract that investment. Much of that depends on confidence, as the Secretary of State observed, and the Government must be aware that the shambolic handling

5 Mar 2012 : Column 629

of the feed-in tariff debacle has dented confidence more widely across the energy industry. I hope that Ministers learn some lessons from that sorry exercise, because it not only has direct consequences for jobs and businesses, as my hon. Friend the Member for Kingston upon Hull North said, but sends a wider message to the industry.

The hon. Member for Skipton and Ripon (Julian Smith) highlighted the importance of CCS, quoting Professor Jeff Chapman, and reflected on the decision on Longannet, which many Members are sorry has been unable to be demonstrated on a commercial basis. We should not forget, however, that the work at Longannet, including the FEED—front-end engineering design—study, will bring some benefits to potential future CCS projects, and it is important that we learn from that. I hope that as the Government outline their new competition, they do not use criteria that restrict the ability of many potential CCS projects to go ahead.

My hon. Friend the Member for Vale of Clwyd (Chris Ruane) highlighted the importance of innovation and development to provide high-quality, high-skilled and exportable jobs, and the important link between academic institutions and industry in developing those jobs around the UK.

The right hon. Member for Bermondsey and Old Southwark, with his own unique style of collegiate behaviour, helpfully highlighted the differences among the Liberal Democrats on nuclear. We must all be clear that we need baseload generation as well as renewable generation, and that nuclear, despite many other aspects about which people express concern, is, like renewables, a low-carbon energy.

My hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz), the hon. Member for Romsey and Southampton North (Caroline Nokes) and my hon. Friend the Member for Swansea West (Geraint Davies) put in, or repeated, their bids for the location of the green investment bank. I think that everyone did that apart from the right hon. Member for Hitchin and Harpenden, who said that he did not want it in his constituency, so that might bring the number of bids down from 32 to 31. However, the most important issue in relation to the green investment bank is not its location but whether it is up and running. The Secretary of State suggested that its operation as a bank has probably been delayed until 2017. My hon. Friend the Member for Southampton, Test (Dr Whitehead) reminded him that that is a direct result of Government policies elsewhere.

In the extensive press coverage on the Secretary of State’s appointment, various anonymous Members among his coalition partners said that they were very pleased that he had got the job because he is a much more collegiate figure than his predecessor—although that would not be difficult. Labour Members must hope that he learns to stand up to the Treasury as well, because Treasury dominance has too often overridden important aspects of the green economy from which we need to benefit in the period ahead.

The hon. Members for Great Yarmouth (Brandon Lewis), for Waveney (Peter Aldous) and, briefly, for Suffolk Coastal (Dr Coffey) highlighted the potential of offshore industrial opportunities in their constituencies and the need to ensure procurement benefits, as far as possible, for indigenous companies—a point also made by my hon. Friend the Member for Scunthorpe.

5 Mar 2012 : Column 630

The hon. Member for Sittingbourne and Sheppey (Gordon Henderson), in an interesting and courageous speech, made clear the problems that the mixed messages coming from the Government and from Government Members are creating as regards some of the investment decisions that may or may not be made. He made the important point that while there may be costs associated with renewable energy, there are also costs associated with an over-reliance on declining and volatile resources. We need to bear that in mind.

My hon. Friend the Member for Scunthorpe made some important points on behalf of energy-intensive industries. He represents a steelmaking constituency, as do I. It is important that those industries get clarity from the Government about the package that was put in place in the autumn statement and do not miss out on opportunities in the green economy.

My hon. Friend the Member for Islwyn (Chris Evans) highlighted the importance of energy efficiency in stimulating the construction industry, although I suspect that the right hon. Member for Hitchin and Harpenden would disagree with him.

The motion highlights the need for the transition to a low-carbon economy. It outlines the opportunities and presses the Government to get the right strategy in place. If the Secretary of State wants to make his mark and to deliver change, rather than just to use the rhetoric of change, he should ensure that the Government bring forward an active industrial strategy, because that is what is needed to transform the opportunities into reality. I commend the motion to the House.

7 pm

The Minister of State, Department of Energy and Climate Change (Gregory Barker): This has been a great debate, with terrific contributions and thoughtful speeches by Back Benchers from all parts of the House. The level of expertise and knowledge on the green agenda across the Chamber never ceases to surprise and encourage me. I shall shortly address many of the points raised.

However, once again, the Labour Front Benchers were out of step with the mood of the House because of their desperate rush to score party political points at the expense of measured and informed argument. The fact is that the green economy, like the rest of the economy, faces a challenging time. There are real barriers and obstacles to growth to be navigated. The coalition is determined to tackle them with vigour, ambition and optimism. However, the green economy does not exist in a vacuum, and these are tough times.

There are no easy solutions for dealing with Labour’s legacy of debt and borrowing. In the real world, the green economy is confronted with the same financial challenges as every other industrial sector. Contrary to the gloomy, downbeat predictions from the Opposition, the green economy is rising to the challenge. It is bearing down on costs, introducing greater financial rigour and delivering better value for money for consumers and investors alike. Although there are no easy answers or quick fixes for Labour’s debt crisis, the green economy now has a Government who are genuinely on its side for the long term. Perhaps that is why Ernst and Young’s latest report upgraded the UK from the sixth to the fifth most attractive place in the world to invest in renewables, and why 80% of the 150 global investors in Credit Suisse’s recent survey voted for the UK as having

5 Mar 2012 : Column 631

the best regulatory environment for the next five years. After years of Labour’s stop-go policies, transparency, longevity and certainty are at the heart of our policy making.

Let me reassure the right hon. Member for Don Valley (Caroline Flint) that the coalition’s ambition to be the greenest Government ever has not withered; far from it. In 2012, our green agenda will move up a gear. This is the year in which the coalition will move from ambitious green rhetoric to bold deployment. On a range of iconic programmes, we are taking huge strides forwards. We are delivering the same level of ambition, but at a lower cost to the consumer. More green for less cost—that is the challenge for the low-carbon economy in 2012; that is “Green economics 2.0.” Many Government Members echoed that. We are happy to be judged on our record.

The plans to establish Europe’s first green investment bank are well under way. In the meantime, UK Green Investments will invest £775 million in the green economy. The green deal, our transformational new market for energy efficiency and the most ambitious home improvement programme since world war two will be launched in the fourth quarter of this year and will build momentum in 2013 and 2014. Europe’s first renewable heat incentive is already investing £860 million in British innovation.

The reforms to feed-in tariffs were challenging and difficult for many companies, but they were absolutely necessary. However, as a result of some difficult decisions that Labour shirked, we can afford to increase massively our ambition for solar and a range of other decentralised technologies. Thanks to the firm action to reduce the cost of FITs, we have a bigger scheme offering better value.

The year 2012 will be the one in which we finally shrug off the humiliation left by Labour of being the third worst country in Europe for renewable deployment. This year, we expect to install at least 4 GW of green energy—double the amount that we inherited from the Labour Government. We are also building for the long term, not only with our forthcoming electricity market reforms and their game-changing measures for energy efficiency and demand production, but with our ambitious plans for marine energy, which will harness wave and tidal power; a world-leading programme for carbon capture and storage; and the ambitious roll-out of a new nuclear fleet. That all means that we can face the 2020s with growing confidence.

The hon. Member for Sedgefield (Phil Wilson) spoke encouragingly of a range of renewable energy projects and initiatives in his constituency. I am happy to invite him to meet my officials to see how we can help to develop those programmes.

My hon. Friend the Member for Skipton and Ripon (Julian Smith) spoke with authority about CCS. He spoke up for the positive engagement that there now is between the industry and my Department.

Ian Lavery: Will the Minister give way?

Gregory Barker: I will give way if there is time a little later, but I want to respond to some more contributions.

5 Mar 2012 : Column 632

The hon. Member for Vale of Clwyd (Chris Ruane) was right to flag up the extraordinary industrial innovation in the green sector, which is creating jobs in his constituency.

My right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) spoke with genuine passion. I understand his long-held views on nuclear power. Although he takes a different view from mine, I welcome his canter through the range of other coalition policies that he wholeheartedly endorses. I thank him for paying tribute to the right hon. Member for Eastleigh (Chris Huhne) for his contribution to the international climate negotiations at Cancun and especially at Durban, where he played an important role.

The hon. Member for Edinburgh North and Leith (Mark Lazarowicz) spoke strongly in favour of the green investment bank. I assure him that we are pressing ahead at full speed with that flagship coalition policy, which was announced in opposition and is being seen through in government by our reforming Chancellor.

My hon. Friend the Member for Great Yarmouth (Brandon Lewis) is a great champion for a range of renewables, especially offshore wind. His active support for a huge number of new green jobs in this area is very valuable. I assure him that we are determined to maximise the value to British business of the deployment of these new technologies, unlike Labour. In the last offshore wind farm to be constructed under Labour, 80% of the components were manufactured overseas and imported. That is a shameful record that the coalition is determined to turn around.

My hon. Friend the Member for Waveney (Peter Aldous) was right to point to the important role that East Anglia can play in the new green economy. I listened carefully to his thoughtful comments and suggestions. I was only sorry that my hon. Friend the Member for Suffolk Coastal (Dr Coffey) was cut off in her prime, rather like Adele at the Brits, when extolling the virtue of the East Anglian energy coast.

The hon. Member for Kingston upon Hull North (Diana Johnson) was right to celebrate the investment in her area by Siemens and to praise the many local individuals who worked hard to secure it. However, she is wrong to think that there was not a strong and concerted push from Downing street and my Department to bring that investment to her area.

My hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) was right to focus on the excitement on the Back Benches about a range of innovative new technologies that are coming forth and fuelling a green recovery, particularly the anaerobic digestion initiatives in her constituency.

My hon. Friend the Member for Sittingbourne and Sheppey (Gordon Henderson) made a great speech. He was right to point to the falling costs of wind energy and its future as a reliable source. He was also right to remind us that home-produced renewables not only help us to meet our carbon targets, but add to the UK’s energy security by reducing our exposure to fluctuating international fossil fuel prices.

The hon. Member for Scunthorpe (Nic Dakin) was right to point to the need for more skills. I think he will be pleased about further announcements that my Department will make shortly on that issue and on apprenticeships.

5 Mar 2012 : Column 633

My right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) injected a degree of rigour back into the debate. I am afraid we do not always see eye to eye on these issues, and I have to say that the green investment bank will play a very powerful role, not least in leveraging in many times more money in private capital than from its own capitalisation. It will be a real lever for growth. I am now in a position to make a new announcement to the House about the location of the green investment bank: I can formally confirm that it will not be in Hitchin.

The hon. Member for Islwyn (Chris Evans) spoke about our use of natural resources and the need to install energy efficiency measures in homes, and I agreed with many of his points.

Despite the partisan note injected by Opposition Front Benchers, I believe that there is still much that unites Members throughout the House in their commitment to green investment and climate change. The real difference, however, is that Government Members believe in enterprise, the private sector, innovation and the genius of British business. The Labour party, I am afraid, is retreating to its left-wing comfort blanket of heavy-handed regulation, punitive taxation, fat Government subsidies for the chosen few and the dead hand of state planning. That is not our vision. We believe that the green economy can be an engine for growth, not a burden on taxpayers.

Globally, the clean energy sector continues to show dramatic growth, and we are determined for the UK to seize an increasing share of that valuable world market. Here at home, the Labour party had 13 years to deliver on the ground, but for all the big talk, its achievements were very modest. Come 2015, this historic coalition will be very happy indeed to be judged on its record of delivery.

Question put.

The House divided:

Ayes 218, Noes 275.

Division No. 482]

[7.10 pm


Abbott, Ms Diane

Abrahams, Debbie

Ainsworth, rh Mr Bob

Alexander, Heidi

Ali, Rushanara

Allen, Mr Graham

Anderson, Mr David

Austin, Ian

Bain, Mr William

Balls, rh Ed

Barron, rh Mr Kevin

Bayley, Hugh

Beckett, rh Margaret

Bell, Sir Stuart

Benn, rh Hilary

Berger, Luciana

Betts, Mr Clive

Blackman-Woods, Roberta

Blears, rh Hazel

Blenkinsop, Tom

Blunkett, rh Mr David

Bradshaw, rh Mr Ben

Brown, Lyn

Brown, rh Mr Nicholas

Brown, Mr Russell

Buck, Ms Karen

Burden, Richard

Burnham, rh Andy

Byrne, rh Mr Liam

Campbell, Mr Alan

Campbell, Mr Ronnie

Caton, Martin

Chapman, Mrs Jenny

Clark, Katy

Clarke, rh Mr Tom

Clwyd, rh Ann

Coaker, Vernon

Coffey, Ann

Cooper, Rosie

Cooper, rh Yvette

Corbyn, Jeremy

Crausby, Mr David

Creagh, Mary

Creasy, Stella

Cruddas, Jon

Cryer, John

Cunningham, Alex

Cunningham, Mr Jim

Cunningham, Tony

Curran, Margaret

Dakin, Nic

Danczuk, Simon

David, Mr Wayne

Davies, Geraint

De Piero, Gloria

Denham, rh Mr John

Dobbin, Jim

Dobson, rh Frank

Doran, Mr Frank

Dowd, Jim

Doyle, Gemma

Dromey, Jack

Dugher, Michael

Durkan, Mark

Eagle, Ms Angela

Eagle, Maria

Edwards, Jonathan

Efford, Clive

Ellman, Mrs Louise

Engel, Natascha

Esterson, Bill

Evans, Chris

Farrelly, Paul

Field, rh Mr Frank

Fitzpatrick, Jim

Flello, Robert

Flint, rh Caroline

Flynn, Paul

Fovargue, Yvonne

Francis, Dr Hywel

Gapes, Mike

Gilmore, Sheila

Glindon, Mrs Mary

Godsiff, Mr Roger

Goggins, rh Paul

Goodman, Helen

Greatrex, Tom

Green, Kate

Greenwood, Lilian

Griffith, Nia

Gwynne, Andrew

Hain, rh Mr Peter

Hamilton, Fabian

Hanson, rh Mr David

Harman, rh Ms Harriet

Harris, Mr Tom

Healey, rh John

Hendrick, Mark

Hepburn, Mr Stephen

Heyes, David

Hillier, Meg

Hilling, Julie

Hodge, rh Margaret

Hoey, Kate

Hood, Mr Jim

Hopkins, Kelvin

Hosie, Stewart

Howarth, rh Mr George

Hunt, Tristram

Irranca-Davies, Huw

Jackson, Glenda

Jamieson, Cathy

Johnson, rh Alan

Johnson, Diana

Jones, Graham

Jones, Helen

Jones, Mr Kevan

Jones, Susan Elan

Kaufman, rh Sir Gerald

Keeley, Barbara

Kendall, Liz

Khan, rh Sadiq

Lavery, Ian

Lazarowicz, Mark

Leslie, Chris

Lewis, Mr Ivan

Lloyd, Tony

Love, Mr Andrew

Lucas, Ian

MacShane, rh Mr Denis

Mactaggart, Fiona

Mahmood, Shabana

Malhotra, Seema

Marsden, Mr Gordon

McCann, Mr Michael

McCarthy, Kerry

McClymont, Gregg

McDonagh, Siobhain

McDonnell, John

McFadden, rh Mr Pat

McGovern, Jim

McGuire, rh Mrs Anne

McKenzie, Mr Iain

Meacher, rh Mr Michael

Meale, Sir Alan

Miliband, rh David

Miliband, rh Edward

Mitchell, Austin

Morden, Jessica

Morrice, Graeme


Morris, Grahame M.


Mudie, Mr George

Munn, Meg

Murphy, rh Mr Jim

Murphy, rh Paul

Murray, Ian

Nandy, Lisa

O'Donnell, Fiona

Onwurah, Chi

Owen, Albert

Pearce, Teresa

Perkins, Toby

Pound, Stephen

Qureshi, Yasmin

Raynsford, rh Mr Nick

Reed, Mr Jamie

Reeves, Rachel

Reynolds, Emma

Reynolds, Jonathan

Riordan, Mrs Linda

Robertson, Angus

Robinson, Mr Geoffrey

Rotheram, Steve

Roy, Mr Frank

Roy, Lindsay

Ruane, Chris

Ruddock, rh Dame Joan

Sarwar, Anas

Seabeck, Alison

Sharma, Mr Virendra

Sheerman, Mr Barry

Sheridan, Jim

Shuker, Gavin

Skinner, Mr Dennis

Slaughter, Mr Andy

Smith, rh Mr Andrew

Smith, Nick

Smith, Owen

Spellar, rh Mr John

Straw, rh Mr Jack

Stuart, Ms Gisela

Sutcliffe, Mr Gerry

Tami, Mark

Thomas, Mr Gareth

Thornberry, Emily

Timms, rh Stephen

Trickett, Jon

Turner, Karl

Twigg, Derek

Twigg, Stephen

Umunna, Mr Chuka

Vaz, Valerie

Walley, Joan

Watson, Mr Tom

Watts, Mr Dave

Weir, Mr Mike

Whiteford, Dr Eilidh

Whitehead, Dr Alan

Wicks, rh Malcolm

Williamson, Chris

Wilson, Phil

Winnick, Mr David

Winterton, rh Ms Rosie

Wishart, Pete

Woodcock, John

Woodward, rh Mr Shaun

Wright, David

Wright, Mr Iain

Tellers for the Ayes:

Mr David Hamilton and

Jonathan Ashworth


Adams, Nigel

Afriyie, Adam

Aldous, Peter

Amess, Mr David

Bacon, Mr Richard

Baker, Norman

Baker, Steve

Baldry, Tony

Barker, Gregory

Baron, Mr John

Barwell, Gavin

Bebb, Guto

Beith, rh Sir Alan

Benyon, Richard

Beresford, Sir Paul

Bingham, Andrew

Blackman, Bob

Boles, Nick

Bone, Mr Peter

Bottomley, Sir Peter

Bradley, Karen

Brake, rh Tom

Bray, Angie

Brazier, Mr Julian

Bridgen, Andrew

Brine, Steve

Brokenshire, James

Brooke, Annette

Browne, Mr Jeremy

Bruce, Fiona

Bruce, rh Malcolm

Buckland, Mr Robert

Burley, Mr Aidan

Burns, Conor

Burns, rh Mr Simon

Burrowes, Mr David

Burstow, Paul

Burt, Lorely

Byles, Dan

Cairns, Alun

Campbell, rh Sir Menzies

Carmichael, rh Mr Alistair

Carmichael, Neil

Carswell, Mr Douglas

Cash, Mr William

Chishti, Rehman

Clappison, Mr James

Clark, rh Greg

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Collins, Damian

Colvile, Oliver

Cox, Mr Geoffrey

Crabb, Stephen

Crockart, Mike

Crouch, Tracey

Davey, Mr Edward

Davies, Glyn

Davies, Philip

de Bois, Nick

Dinenage, Caroline

Djanogly, Mr Jonathan

Dorrell, rh Mr Stephen

Drax, Richard

Duddridge, James

Duncan, rh Mr Alan

Duncan Smith, rh Mr Iain

Ellis, Michael

Elphicke, Charlie

Eustice, George

Evans, Graham

Evans, Jonathan

Evennett, Mr David

Fabricant, Michael

Fallon, Michael

Farron, Tim

Featherstone, Lynne

Field, Mark

Foster, rh Mr Don

Fox, rh Dr Liam

Francois, rh Mr Mark

Freeman, George

Fuller, Richard

Garnier, Mark

Gauke, Mr David

Gibb, Mr Nick

Gilbert, Stephen

Gillan, rh Mrs Cheryl

Goldsmith, Zac

Goodwill, Mr Robert

Graham, Richard

Grant, Mrs Helen

Gray, Mr James

Grayling, rh Chris

Green, Damian

Griffiths, Andrew

Gummer, Ben

Gyimah, Mr Sam

Hague, rh Mr William

Halfon, Robert

Hames, Duncan

Hammond, rh Mr Philip

Hammond, Stephen

Hancock, Mr Mike

Hands, Greg

Harper, Mr Mark

Harrington, Richard

Harris, Rebecca

Hart, Simon

Harvey, Nick

Haselhurst, rh Sir Alan

Heald, Oliver

Heath, Mr David

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Hendry, Charles

Herbert, rh Nick

Hoban, Mr Mark

Hollingbery, George

Hollobone, Mr Philip

Holloway, Mr Adam

Hopkins, Kris

Horwood, Martin

Howarth, Mr Gerald

Howell, John

Hughes, rh Simon

Huhne, rh Chris

Hunt, rh Mr Jeremy

Jackson, Mr Stewart

James, Margot

Javid, Sajid

Jenkin, Mr Bernard

Johnson, Gareth

Johnson, Joseph

Jones, Andrew

Jones, Mr David

Jones, Mr Marcus

Kawczynski, Daniel

Kelly, Chris

Kirby, Simon

Knight, rh Mr Greg

Kwarteng, Kwasi

Laing, Mrs Eleanor

Lamb, Norman

Lancaster, Mark

Lansley, rh Mr Andrew

Latham, Pauline

Laws, rh Mr David

Leadsom, Andrea

Lee, Dr Phillip

Leech, Mr John

Lefroy, Jeremy

Letwin, rh Mr Oliver

Lewis, Brandon

Lewis, Dr Julian

Lidington, rh Mr David

Lilley, rh Mr Peter

Lopresti, Jack

Lord, Jonathan

Loughton, Tim

Lumley, Karen

Main, Mrs Anne

Maynard, Paul

McCartney, Jason

McIntosh, Miss Anne

McLoughlin, rh Mr Patrick

McPartland, Stephen

McVey, Esther

Mensch, Louise

Menzies, Mark

Mercer, Patrick

Metcalfe, Stephen

Miller, Maria

Mills, Nigel

Mitchell, rh Mr Andrew

Moore, rh Michael

Morgan, Nicky

Morris, James

Mowat, David

Mulholland, Greg

Mundell, rh David

Munt, Tessa

Neill, Robert

Nokes, Caroline

Nuttall, Mr David

O'Brien, Mr Stephen

Offord, Mr Matthew

Opperman, Guy

Osborne, rh Mr George

Ottaway, Richard

Paice, rh Mr James

Parish, Neil

Patel, Priti

Pawsey, Mark

Penning, Mike

Perry, Claire

Phillips, Stephen

Pickles, rh Mr Eric

Pincher, Christopher

Poulter, Dr Daniel

Prisk, Mr Mark

Pritchard, Mark

Pugh, John

Raab, Mr Dominic

Randall, rh Mr John

Redwood, rh Mr John

Rees-Mogg, Jacob

Rifkind, rh Sir Malcolm

Robathan, rh Mr Andrew

Robertson, Mr Laurence

Rogerson, Dan

Rosindell, Andrew

Rudd, Amber

Ruffley, Mr David

Russell, Sir Bob

Rutley, David

Sanders, Mr Adrian

Sandys, Laura

Scott, Mr Lee

Shapps, rh Grant

Sharma, Alok

Shelbrooke, Alec

Shepherd, Mr Richard

Simmonds, Mark

Simpson, Mr Keith

Smith, Miss Chloe

Smith, Julian

Smith, Sir Robert

Soames, rh Nicholas

Soubry, Anna

Spencer, Mr Mark

Stephenson, Andrew

Stevenson, John

Stewart, Rory

Streeter, Mr Gary

Stride, Mel

Stunell, Andrew

Sturdy, Julian

Swales, Ian

Swayne, rh Mr Desmond

Swinson, Jo

Swire, rh Mr Hugo

Syms, Mr Robert

Tapsell, rh Sir Peter

Thurso, John

Timpson, Mr Edward

Tomlinson, Justin

Truss, Elizabeth

Turner, Mr Andrew

Tyrie, Mr Andrew

Uppal, Paul

Vara, Mr Shailesh

Vickers, Martin

Villiers, rh Mrs Theresa

Walker, Mr Charles

Walker, Mr Robin

Wallace, Mr Ben

Weatherley, Mike

Webb, Steve

Wheeler, Heather

Whittingdale, Mr John

Wiggin, Bill

Willetts, rh Mr David

Williams, Stephen

Williamson, Gavin

Willott, Jenny

Wilson, Mr Rob

Wilson, Sammy

Wollaston, Dr Sarah

Wright, Jeremy

Wright, Simon

Yeo, Mr Tim

Young, rh Sir George

Zahawi, Nadhim

Tellers for the Noes:

Mark Hunter and

Mr Philip Dunne

Question accordingly negatived.

5 Mar 2012 : Column 634

5 Mar 2012 : Column 635

5 Mar 2012 : Column 636

5 Mar 2012 : Column 637

5 Mar 2012 : Column 638

Living Standards

7.25 pm

Rachel Reeves (Leeds West) (Lab): I beg to move,

That this House believes that next month’s Budget should include a real plan for jobs and growth in order to boost the stalled economy, help hard-pressed families, pensioners and small businesses, bring down unemployment, and so ensure that the deficit is brought down and done so in a fair way; notes that while the banks are receiving a tax cut this year, the Institute for Fiscal Studies analysis shows that families with children will lose an average of £580 per year from tax and benefit changes coming into effect in 2012-13; further notes that up to 200,000 couples with children who work part-time face losing all their working tax credit of up to £3,870 per year from April 2012 if they cannot increase their working hours to 24 hours per week, further squeezing family living standards; further recognises that, in addition to ending the principle of universal child benefit, the Government’s unfair and ill-thought-through changes to child benefit will mean that a family with two earners each earning £40,000 would keep all its child benefit, but a single-earner family on £43,000 would lose it all, at a cost of £2,450 per year for a family with three children; and calls on the Chancellor to use extra revenue from tackling tax avoidance to cancel his changes to eligibility rules for working tax credits and announce in the Budget an immediate and urgent review of his changes to child benefit, to report before they come into effect in January 2013.

The Opposition have called this debate to draw attention to the injustice of ill-considered changes to benefits and tax credits, which are about to hit hard-pressed hard-working families across the country. We urge the Government to take this chance to review and rectify the pressure they are piling on families who are already under huge strain.

The debate takes place against the backdrop of the biggest squeeze in living standards in a generation, which is made all the more painful because of the Government’s failure to generate jobs and growth, and to deal with the deficit fairly. This year, they have chosen to take more from women and families with children than they are taking from the banks—they are refusing to repeat the tax on bank bonuses that the previous Labour Government introduced, with banks benefiting instead from a cut in corporation tax. At the same time, the average family with children faces a £580 cut in their annual income next month, according to the Institute for Fiscal Studies. Those families will get a Budget bombshell from the Chancellor this year.

Today the Opposition are calling attention to two ways in which the Government are clobbering families with children. The Government’s lack of competence or care when it comes to fairness for families includes a crude cut to child benefit planned for 2013, meaning that while two-earner families with incomes up to £84,000 will keep all their child benefit, a single-earner family with an income of more than £43,000 will lose all theirs. Families will be asking: “Is that fair?” We are also about to see a punitive withdrawal of working tax credits for couples with children, meaning that unless a family on £17,000 can increase their working hours from 16 to 24 by 1 April, they will see their income fall by almost £4,000. Families will be asking the Government: “Is that fair?” I look forward to the Minister’s answers.

Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op): Does my hon. Friend agree that it is appalling that in Liverpool, Riverside alone, more than 520 children from families who are working, but in low-paid jobs, will suffer as a direct result of that measure?

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Rachel Reeves: I entirely agree with my hon. Friend, who makes the point about her constituents. All hon. Members will have heard at our surgeries from people who are beginning to realise that in just a few weeks’ time, they will lose all their working tax credit, despite the fact that they are working and doing the right thing.

Mr Frank Field (Birkenhead) (Lab): Will my hon. Friend put it to those on the Treasury Bench that when child benefit came in, it replaced family allowances and child tax allowances, and therefore played a crucial part, because whatever level of income people with children were on, we in some way maintained equity with tax-free income? The Government are abolishing that for the sake of higher rate taxpayers. How can they maintain that the tax burden is being shared between single and childless people, and those with children, if they abolish child benefit?

Rachel Reeves: My right hon. Friend is entirely right. This country will be one of the few that does not support families with children across the income distribution. Having children is expensive, and it is right that when people bring up a family, and when they retire, the state is there to provide that bit of extra support when they need it. The Government’s changes go entirely in the wrong direction.

That is a shocking illustration of the Government’s failure to come to grips with the crisis that our country faces—the crisis that is putting families under strain is the crisis in jobs, incomes and living standards. The cost-of-living crisis does not hit the headlines like a banking crisis or a currency crisis perhaps because it is a crisis from which those with the loudest voices can too easily insulate themselves. For the vast majority of people, however, trying to keep going and keep their heads above water is one of the toughest challenges that they have ever faced. Every day is a battle in a long war of attrition.

Helen Goodman (Bishop Auckland) (Lab): Does my hon. Friend agree that those at the top of the income scale do not mention the crisis because they are not facing a crisis? The RBS bonus pool was £785 million.

Rachel Reeves: My hon. Friend is right to say that those on the lowest incomes and modest and middle incomes are being hardest hit by the changes to taxes and benefits that the Government have instituted.

George Freeman (Mid Norfolk) (Con): Does the hon. Lady acknowledge that the Government’s proposals to take more than 1.1 million people out of tax, through the personal allowances, represents a tax cut for more than 25 million people? On the motion, will she confirm that the Budget is this month, not next?

Rachel Reeves: The changes come into effect next month, but the Budget is in 16 days. [Interruption.] The hon. Member for Taunton Deane (Mr Browne), who is a Liberal Democrat, says that he was going to vote for the motion. Perhaps he was thinking of before the election, when he agreed with progressive policies.

Every day, families are struggling, while the Government demand more from them, and there is no end in sight, no light at the end of the tunnel, just the fear that one

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day, sooner or later, they will not be able to pay the mortgage, rent or gas bill. We have called this debate because the Government seem unaware of what is happening, unable to understand what people are going through, unwilling to do what it takes to get our economy growing and unemployment falling, and uninterested in taking the trouble to find out what impact their decisions are having.

The choices that the Government are making are hurting but not working. [Interruption.] The hon. Member for Taunton Deane says that we are wrong. It is the Government who are wrong because they are hitting hard-working families harder than anyone else, and giving the banks a tax cut while penalising families and young children trying to do the right thing and stay afloat. The choices that the Government are making are hurting but not working. They are penalising those trying to do the right thing. In response to the crisis in living standards hitting families, the Government are piling on the pressure with badly designed and badly targeted cuts to benefits and tax credits.

Kate Green (Stretford and Urmston) (Lab): Although, of course, it is desirable to lift more people on low wages out of tax, is it not the case that this is not a particularly well-targeted measure in difficult times because it applies exactly the same tax advantage to higher paid people?

Rachel Reeves: My hon. Friend speaks with great knowledge, having formerly worked for the Child Poverty Action Group, and what she says should hold great sway with the House.

Mr David Anderson (Blaydon) (Lab): In response to the question from the hon. Member for Mid Norfolk (George Freeman) about people being taken out of tax, will my hon. Friend agree that more people are being taken out of tax—and put on the dole? What is that costing us? Some 700,000 public sector workers have gone on the dole in this country. Not only will they not be paying tax but they will not be paying national insurance, which will make things even worse for this country.

Rachel Reeves: My hon. Friend is absolutely right. As we all know, unemployment is at a 17-year high and youth unemployment at an all-time high. That is taking more people out of tax and costing taxpayers more and more every day, as the bills of this failed economic policy add up.

Sheila Gilmore (Edinburgh East) (Lab): Will my hon. Friend consider the point that the people affected by the change to working tax credit who work 16 hours a week—probably on the minimum wage—already fall well below the tax threshold, so however desirable it is to raise the tax threshold, it will not help those people at all?

Rachel Reeves: My hon. Friend is absolutely right. The most by which someone affected by the changes to working tax credits could benefit from next month’s increase is £125. That pales into insignificance compared with the £3,800, which is the amount by which these families will be worse off because of these changes.

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Mr John Redwood (Wokingham) (Con): Having highlighted the anomaly with one and two-earner families regarding child benefit withdrawal, does the Labour party have a suggested solution to sort it out?

Rachel Reeves: I am looking to the Government Front-Bench team for their solution, given the words that we have heard from Ministers over the past couple of days. The Labour party supports child benefit as a universal benefit. At the very least, the Government must iron out the anomaly that means that families earning £84,000 a year can still get child benefit, while a one-earner family on £43,000 cannot.

One month tomorrow, on Good Friday, 212,000 families stand to lose up to £4,000 because of changes to the working tax credit. The Government will say that people need only to increase the number of hours they work from 16 to 24. If they were in touch with working families and businesses, they would know that this is simply not an option for many people because the jobs are not there, and employers are laying people off and cutting hours, not increasing them.

Mr Sam Gyimah (East Surrey) (Con): The hon. Lady is demonstrating to the House that she is a very good Opposition politician. What exactly would she do to address the problem that she is highlighting?

Rachel Reeves: I thank the hon. Gentleman for saying that I am a good Opposition politician; I hope, in due course, to be a good Government politician, so that we can put into practice measures to help families, pensioners and businesses facing the squeeze. But it is this Government’s mistakes and wrong-headed policies, which are callous, incompetent and unfair, that are penalising families trying to do the right thing. As I said to the right hon. Member for Wokingham (Mr Redwood), I would like child benefit kept as a universal benefit to help all families with the cost of bringing up a family. At the very least, however, the Govt must address the anomaly.

Nia Griffith (Llanelli) (Lab): Does my hon. Friend agree that this devastating cut in tax credits, which will take £800 million away from families in Wales alone, is not only a tragedy for each family but economic madness, because these are the very families who have to put the money immediately back into the local economy? That money will be sucked out of the local economy, resulting in fewer opportunities for growth and economic recovery.

Rachel Reeves: My hon. Friend is right. Government Members would do well to listen to her point. We also know that because of the changes to working tax credits, many families will be in the crazy situation whereby they would be better off on benefits than in work, as the Government’s own figures show.

Richard Fuller (Bedford) (Con): The hon. Lady is moving on to some of the complexities of the benefits system. Does she support the coalition Government’s policies for a universal benefit as a way of simplifying this process? Did she vote for that?

Rachel Reeves: This has nothing to do with universal credit. Those changes take effect in about one and a half years. In the meantime, families will be £74 worse off a week because of what the Government are doing, and

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would be better off on benefits. That is totally inconsistent with what universal credit is supposed to do, which is to ensure that everyone is better off in work. This policy goes in totally the opposite direction.

Fiona Mactaggart (Slough) (Lab): The hon. Member for Bedford (Richard Fuller) mentioned universal credit. That is designed to ensure that work pays in 18 months, but what would my hon. Friend say to my constituents, the parents of 1,700 children in Slough, who currently work between 16 and 24 hours and who will lose £3,800? That is in no way compensated for by the measly £200 resulting from raising the tax threshold.

Rachel Reeves: I will come to that very point. Hours are being cut at the moment, so many people working part time who will be hit by these changes to working tax credits are working part time because they cannot find full-time work. Numbers from the Office for National Statistics show that the number of people working part time because they cannot find full-time work is at a record high of 1.35 million—a 13% increase on a year ago. It is therefore not the case that families can simply increase their hours to keep their tax credits. They are being penalised, first because of the lack of economic recovery, and secondly because of this Government’s decision to cut working tax credits.

Hugh Bayley (York Central) (Lab): Government Members keep asking what a Labour Government would do. I was a Social Security Minister when the Labour Government put together effective welfare-to-work policies. What is needed to make them effective is a macro-economic policy that creates jobs and allows people in part-time work to increase their hours. Under the Labour Government, the number of jobs in York increased from 40,000 to 57,000, many of them in retailing. It is precisely those people—1,600 in York—who look set to lose family income as a result of this Government’s policy.

Rachel Reeves: Like my hon. Friend, many of us will have spoken to constituents in jobs whose hours vary—for instance, those working in retail or call centres, or those working as cleaners. However, at the moment, their hours are varying in one direction: downwards, because employers are cutting hours and cutting staff.

In addition to the changes to working tax credits, next January more than 1.5 million families will lose every single penny of their child benefit. The Government are saying, “Well, we’re only cutting child benefit for rich families.” However, if they talked to working families, they would realise that many families are heavily reliant on a single earner, because there is only one parent or because one parent is staying at home to bring up the kids. Those families are being hard hit by the changes.

Glyn Davies (Montgomeryshire) (Con): I am listening to the hon. Lady’s speech carefully, and she has made several references to the crises in various parts of our society. The greatest crisis facing the Government, I hope she would agree, is the debt crisis, a huge contribution to which was made by the previous Government. We would all appreciate it if the hon. Lady told us whether the response to the issue being raised today is simply to add to that debt crisis or to find some other way of dealing with it.

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Rachel Reeves: I would like to know how the hon. Gentleman would explain to the 348 kids in his constituency who will be affected by the changes to working tax credits how it makes sense for their families to be better off on benefits than it is for their parents to be in work. That will surely add to the debt, not reduce it. It is this Government who are borrowing an extra £158 billion, because of the costs of their failed economic policies; it is they who are adding to the debt.

A Government who believe in fairness—a Government who say, “We’re all in this together”—are straining at the leash to cut tax for individuals with incomes over £150,000, while one-earner families on £43,000 stand to lose £2,500 of child benefit and families struggling on just £17,000 stand to lose around £4,000 because of changes to tax credits. Instead of worrying about the top 1%, this Government should start thinking about the other 99%.

Anna Soubry (Broxtowe) (Con): The hon. Lady says that she cares about our children. Those of us on the Government Benches also care about our children and our grandchildren. Does she think it right to saddle them, generation on generation, with debt, racked up by the previous Administration?

Rachel Reeves: As for caring for children, the Government’s own figures show that child poverty will increase under this Administration. As I said in answer to an earlier question, there is nothing helpful about throwing more people out of work and on to benefits, either for those families or for taxpayers, who have to pick up the bill of extra benefits and lower tax revenue.

Anna Soubry rose

Rachel Reeves: The hon. Lady has had her chance; I will carry on.

When it comes to child benefits, a Government who say that they believe in rewarding work are creating a perverse and damaging incentive for people near the higher-rate tax threshold to limit their hours or pay, because of the crude cliff-edge effect that their policies will create. At the same time, changes to the rules for working tax credits will mean that some families could end up £728 better off on benefits than in work, according to a written answer from the Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling).

Helen Jones (Warrington North) (Lab): The Chancellor said when he took office that he did not intend to balance the books on the backs of the poor. Is that not now exactly what he is intending—and failing—to do? That is the real answer to the hon. Member for Broxtowe (Anna Soubry).

Rachel Reeves: It is even worse than that, because the Chancellor is not even balancing the books.

Joan Walley (Stoke-on-Trent North) (Lab): Does my hon. Friend agree that the 1,200 people in Stoke-on-Trent earning just under £17,000 a year who will be worse off under these changes desperately need the Government to listen to this debate and do something in the Budget

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about the comprehensive spending review, so that they do not have to pay the price for these unacceptable changes?

Rachel Reeves: My hon. Friend is right when she sticks up for the people of Stoke, who, like many of our constituents, will be hard hit by the changes, which do nothing to encourage people to go back to work, and instead encourage people to stay on the dole, because they will be better off on benefits than in work.

Toby Perkins (Chesterfield) (Lab): I hope I can add some weight to what my hon. Friend is saying. I was contacted by a local small business owner in my constituency—Keith Bannister, who runs Harley’s pub, which people in Staveley will all be aware of. He told me that three women on his payroll are threatened with the loss of their tax credits. They have told him that they will have to give up work if that happens, but he knows that if he increases the hours of two of them, he will have to lay off the third. It just does not make sense, does it?

Rachel Reeves: It would be better if he was advising the Treasury, rather than the people who are currently doing it, because that is absolutely right, and it gets to the heart of the problem.

Indeed, that seems symptomatic of a wider problem with this Government: rushing out announcements to generate headlines before the costs have been counted; dreaming up the next big idea, when they should be focusing on the impact of their policies in the real world. We heard over the weekend that the Prime Minister had lost his blue-skies thinker. However, it might not be such a bad thing, because in tough times such as these, our constituents need a Government with their feet on the ground, not with their head in the clouds. I hope that this debate gives the Government a much needed reality check, because it is not too late to change course and protect hard-pressed families from further hardship and strain, inflicted on them by this Government.

It is the job of this House to ensure that our constituents’ voices are heard and their struggles taken into account, and that the impact of Government policies on their lives is fully understood. Labour Members hear every day from our constituents, and from the people we talk to around the country, about how hard it is to make enough money to pay the bills, find work or keep businesses afloat. It is not too late for the Chancellor to correct the mistakes that he is making with child benefit and working tax credits. I urge the Government to commit now to an urgent review of the child benefit changes and to use the money from a crackdown on stamp duty avoidance to cancel the damaging cut to working tax credits.

There is still time to listen to the families who will be hit by the restrictions on working tax credits, 78% of whom said in a survey for USDAW—the Union of Shop, Distributive and Allied Workers—that they would be unable to find the additional hours needed to keep their tax credits. There is still time to listen to the many families hit by the change who cannot work extra hours because they have disabled children or other caring responsibilities. The Government have refused to exempt those families where one parent is a full-time carer. There is still time to listen to the Child Poverty Action Group, which warns that the change will

“cause a surge in child poverty of hundreds of thousands”.

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There is still time to listen to the children’s charities and organisations speaking up for hard-pressed families—including Barnardo’s, Carers UK, Citizens Advice, the National Children’s Bureau and Working Families—which today wrote to the Prime Minister urging him to think again. There is still time to listen to one woman—Mary, from Belfast—who said:

“I can’t get my employer to give me the extra hours I need to qualify. There are people in my work who have had to take redundancy or cut their hours from 36…to 12 hours a week…Where does he think we are going to pluck the extra hours from? It’s a joke.”

Frankly, Mary is right.

On child benefit, there is still time to listen to the Institute for Fiscal Studies, which says that the Government’s proposals will

“create a bizarre and economically damaging set of incentives”.

There is still time to listen to the hon. Member for Christchurch (Mr Chope), who said that the Government’s plans would lead to

“a lot of unfairness and injustice”.

He is right. There is also still time to listen to the hon. Member for Peterborough (Mr Jackson), who said that the Government’s policy was “barmy, tokenistic and unfair”. He, too, is right. I look forward to both of them, and others on the Government Benches, joining us in the Lobby this evening to tell the Government what they think of their policies.

All day, we have been getting smoke signals and spin from the Government. The Deputy Prime Minister says that they are thinking again, yet the Secretary of State for Justice says that they are not. Who is right? I look forward to getting an answer on what the Government’s policy on tax credits and child benefit actually is. It is a shame that no member of the Cabinet is in the Chamber tonight to give that answer and to talk about Government policy.

With 16 days to go until the Budget, the families that are about to be hit by the changes need certainty and commitments. The motion gives Members on both sides of the House an opportunity to dispel any doubts about the seriousness of our commitment to families and to fairness, and to show that we have listened to our constituents and our consciences. We have an opportunity this evening to stand up for fairness in tough times and to vote to protect family incomes by supporting the motion.

7.50 pm

The Exchequer Secretary to the Treasury (Mr David Gauke): After all the sound and fury that we have just heard, perhaps I may provide a little context for the benefit of the Opposition. When this Government came to power, we had the highest borrowing in our peacetime history. We were borrowing one in every four pounds that we were spending. It was clear then, and it has since become clearer, that countries that lack fiscal credibility pay the price in higher market interest rates, at a cost to mortgage holders and businesses throughout the country.

In order to reduce a structural deficit—that is, one that will not go away with growth—it is necessary to cut spending or raise taxes, or a combination of the two. Cutting spending and raising taxes will, unfortunately, have an impact on people’s living standards. We do not want that to happen—we did not go into politics to do

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that—but the impact on living standards is the inevitable consequence of the dire state of the public finances left by Labour and the recognition by the coalition parties that we could no longer continue to borrow in the same reckless way.

Sheila Gilmore (Edinburgh East) (Lab): Does the Minister acknowledge that if some of the families that we are talking about give up their employment and claim other benefits—including, in some cases, help with their mortgages, to which they would then become entitled—the savings that he is trying to achieve would simply not be made?

Mr Gauke: I shall speak in greater detail about the reforms to the working tax credit in a moment, but there is a question that we all have to answer. As the hon. Lady knows, there is a threshold for claiming the credit. For lone parents, it is 16 hours a week. We think it entirely reasonable that the joint target for couples should be not 16 hours a week but 24; we believe that that incentive will be helpful. The principle of a threshold has been in the tax credit system since it was put in place.

Helen Jones rose

Joan Walley rose

Mr Gauke: Let me just make a little more progress.

We heard the hon. Member for Leeds West (Rachel Reeves) set out the challenges and pressures on living standards, but it takes some cheek for Labour Members to complain about the consequences of their own irresponsibility in power. Their position today in this motion relating to living standards is the equivalent of that of a man who sets his house on fire, then complains, after the fire brigade has extinguished the fire, that it has damaged his carpets. We accept that difficult decisions have to be taken, and we have taken them, but the British public know that we have had take them now because Labour failed to take them when it was in power.

Ian Lucas (Wrexham) (Lab): The Minister is peddling the persistent Tory untruth that this economic situation existed only in Britain. Will he now accept that there was a worldwide banking crisis in 2008, and that the action that was taken to reflate the economy had contributed to the size of the deficit by 2010?

Mr Gauke: I will happily re-fight the 2010 general election with the hon. Gentleman any time. He will remember how well his party did on that occasion. The fact is that the UK had the worst deficit of any major economy.

Priti Patel (Witham) (Con): This debate is about living standards, and central to good living standards in our country are job creation and economic growth. Does my hon. Friend agree that the role of the private sector is central to creating jobs, to make up for Labour’s failure to rebalance the economy and provide job creation?

Mr Gauke: My hon. Friend is absolutely right. The recovery that this country requires will be driven by the private sector. It cannot be driven by more borrowing and more debt, which is the policy of the Opposition.

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Helen Jones: Given that the Chartered Institute of Personnel and Development says that one in five firms are cutting hours, rather than increasing them or creating new jobs, how are people who work 16 hours a week going to find the extra hours to qualify for working tax credit? Where are those hours going to come from?

Mr Gauke: The figures for the last quarter for which figures are available show that there were more than 1.1 million jobs—[ Interruption. ] That is not a net number; it is the gross number of people moving into employment. We are not going to do anything for employment in this country if we undermine credibility, or if we see our interest rates driven up because we lack credibility because our policies do not hang together. That is what Labour is advocating, but it would be bad news for private and public sector employees.

Hugh Bayley: Does the Minister not recall that, at the time the coalition came to power, interest rates were extremely low and had been for a long time? Our policy at the time of the banking crisis did not therefore create high interest rates. Will he also remind us what the national debt was at the time of the election? I think that it was between £700 billion and £800 billion, whereas it is now more than £1 trillion for the first time in our history, and that is because of this Government’s poor economic growth.

Mr Gauke: There is so much wrong with that that I do not know where to start. Perhaps I will begin by pointing out that, at the last general election, our interest rates were at more or less the same level as those of Italy and Spain, yet there is now an enormous difference between us. I am afraid that the hon. Gentleman is wrong.

Ian Austin (Dudley North) (Lab) rose

Mr Gauke: I am going to make a little progress.

We know, given the constraints that we face in the public finances, alongside high commodity prices and international uncertainty, that these are tough times for many families. That is why we have taken substantial steps to protect living standards, and to ensure that we support our poorest and most vulnerable families. Even as we cut the deficit, fairness has been at the very core of our spending plans. We will not let our poorest and most vulnerable families bear the consequences of the previous Government’s failures. That is why we have secured the largest ever cash rise in the basic state pension, and why we have uprated working-age benefits by 5.2% to protect the real incomes of the poorest.

Anas Sarwar (Glasgow Central) (Lab) rose

Glenda Jackson (Hampstead and Kilburn) (Lab) rose

Toby Perkins rose

Mr Gauke: I want to make a bit more progress.

That is also why we increased the child tax credit by £135, in line with inflation, which means that, by this April, it will have increased by £390 since May 2010. It is telling that the Opposition motion makes no mention of this Government’s plans to increase the personal

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allowance, no doubt because their last contribution to the debate on income tax for the low paid was the 10p debacle.

Glenda Jackson: Will the Minister tell us how his Government are helping the poorest in our society? Hundreds of families in my constituency are going to lose working family tax credit and will not be able to increase their hours. They are facing the possibility of losing their homes because of the cap on housing benefit, and of losing services because of the cuts to local authorities. The people who are most dependent on such services are inevitably the poorest in our society, yet his Government seem quite deliberately to be attacking them, perhaps because they believe that there are no votes in that part of the country.

Mr Gauke: We believe there are a lot of votes in the hon. Lady’s constituency.

I was going through the things we have done to help the poor, but let me continue. What we have done with the personal allowance is a big step—helping working people, ensuring that work pays and lifting living standards for those on low incomes. That is why this Government have made increasing the personal allowance one of our key priorities in supporting low and middle-income families across the UK. In April 2012, we will make a £630 increase in the personal allowance, taking it £8,105, which, taken with the £1,000 increase in April 2011, will benefit 25 million taxpayers, taking 1.1 million low-income individuals out of income tax altogether. We note that the shadow Chief Secretary to the Treasury expressed her opposition to that policy just a few minutes ago.

Anas Sarwar: Will the Minister explain how living standards are increasing for families in Glasgow when 2,000 couples and 4,000 children will lose up to £4,000 in working tax credits at the same time as VAT is going up, inflation is high and the cost of living is going up? How is that improving living standards for poor families in Glasgow?

Mr Gauke: I come back to the initial point: we face a huge deficit. People recognise we have to reduce it, but at the same time we are trying to do everything we can to protect the poorest. That is why we are running through the issues here.

Elizabeth Truss (South West Norfolk) (Con): When the previous Government introduced so much regulation into the child care market, did not the number of child minders fall from 100,000 to 50,000 placements while the cost of child care doubled? Was that not a shameful increase in the cost of living for some of the poorest families in our country?

Mr Gauke: My hon. Friend makes a good point. If we are to find practical ways of improving living standards, the work that she is undertaking is exactly what we need to be doing. We need to ensure that we have an effective environment in which parents can work and child care costs are manageable.

Ian Austin: Will the Minister point me to the bit of the Conservative manifesto that promised hard-working families that they would lose their tax credits and be better off out of work, and to the bit that promised

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other families that if they had a pay rise that took them into the 40p band they would lose their child benefit and be much worse off, too? Will not people who voted Conservative at the election feel utterly betrayed by the introduction of these anti-work and anti-aspiration policies?

Mr Gauke: The people who voted Conservative at the election, and indeed others, recognise that this Government are prepared to take difficult decisions to get the public finances on track to provide the long-term credibility that our public finances need and to ensure that our economy can grow strongly once again. By sticking its head in the sand and opposing every step taken to get the deficit under control, the Labour party does itself no favours.

Chris Williamson (Derby North) (Lab) The Minister talks about putting the public finances in a sound state, yet are not the Government’s policies singularly failing because the Government are having to borrow an additional £158 billion? Surely that should tell the Minister that he is getting it wrong, that he needs to think again and put people back in employment to give them the opportunity to pay tax and contribute to society rather than wasting taxpayers’ money on keeping people idle on unemployment benefit.

Mr Gauke: For the hon. Gentleman’s information, borrowing is falling year on year, and we are not going to get borrowing down by borrowing more—however often the shadow Chancellor claims that that is the case.

Heather Wheeler (South Derbyshire) (Con): Does my hon. Friend agree that if the Opposition really believed in looking after low-paid people, they would have voted for the welfare cap and not voted against it? My constituents do not understand why they did that.

Mr Gauke: My hon. Friend is right to raise that point, which reveals a lot about Labour’s priorities. It is for Labour Members to answer why they pursued that policy. I want to address the point about welfare reform.

Several hon. Members rose

Mr Gauke: Let me make a little more progress.

We want to target support where it is needed most. Tackling the deficit fairly requires us to ensure that tax credits are targeted at our poorest and most vulnerable families. We simply could not continue on the path that the previous Government took. From 2003-04 to 2010-11, spending on tax credits increased from £18 billion to an estimated £30 billion, with nine out of 10 families with children eligible for tax credits. In total, the previous Government had spent more than £150 billion on tax credits since 2003—a staggering sum, poorly targeted and an unsustainable level of spending. It is absolutely right and fair to reform the system to support those who need it most.

Huw Irranca-Davies (Ogmore) (Lab): At Work and Pensions questions earlier, the Secretary of State made it clear that because of the support of Jobcentre Plus and other agencies, he did not expect anybody to opt out of work as a result of the changes. Does the Minister stand by that? If so, let me give him this challenge. If any family comes into my constituency office to tell me

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that it is no longer worth them going to work because of these changes, will he personally respond to their financial queries, which I will put in front of him? I suspect that other Members will be doing exactly the same to explain to their constituents why this Government have now made it no longer worth going to work. This seems to be a complete aberration and against his own policy—

Madam Deputy Speaker (Dawn Primarolo): Order. Interventions need to be brief.

Mr Gauke: Given that we ask lone parents to work 16 hours a week before they are entitled to working tax credits, I would say that it is not right to have the same threshold for a couple. Asking and incentivising them to work 24 hours a week is perfectly reasonable. Under the universal credit that we are going to introduce shortly, every hour extra worked will be worth while, as there will not be the same threshold. Essentially, we are working within the system that we inherited from the previous Government.

Yasmin Qureshi (Bolton South East) (Lab): The hon. Gentleman talks about the extra hours, but with more than 2 million people unemployed, where are those extra hours going to come from?

Several hon. Members rose

Mr Gauke: As I said earlier, over the last quarter for which figures are available, a further 1.1 million jobs were created, while today we have had announcements of 20,000 jobs created by Tesco. We are going to take steps to make it easier to create jobs in this country.

Several hon. Members rose

Madam Deputy Speaker: Order. Members know that they should not stand and point at the Minister; they should ask him to give way. If he declines to give way, it means that they have to sit down and try again later.

Mr Gauke: Thank you, Madam Deputy Speaker.

Increasing the working hour requirements for a couple is entirely fair. It is absolutely right that a couple with children should put in more hours than a lone parent before receiving working tax credits. This also creates a clear work incentive signal to potential second earners who could benefit from working tax credits if they moved into work or increased their hours.

Toby Perkins: The Minister referred to universal credit. Is not one of the most foolish parts of this policy the fact that it will be out of date within 18 months or so in any case? This will potentially mean a lot of people deciding to get out of work, but it will be superseded by the policy on universal credit. Why not just wait until universal credit comes in?

Mr Gauke: I come back to the point I made previously. With the difficult financial situation we inherited, we needed to take steps, and one of them was to increase the threshold for a couple from 16 to 24 hours. That seems perfectly reasonable and fair in the context of a 16-hour requirement for lone parents.

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Several hon. Members rose

Mr Gauke: I want to make a bit of progress, because I know that many other Members wish to speak.

We are also right to reform child benefit to target the families who need it most. I fully understand that child benefit provides a vital boost in parental income for millions of families throughout the country, but it represents a substantial cost to the Exchequer. It makes up about 7% of total social security and tax credit spending each year, including child benefit payments of over £2 billion per year to higher-rate taxpayers. When we face such tight constraints on the public purse, it is right for us to refocus resources where we need them most.

Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): The Minister mentioned the administrative cost of child benefit to the Exchequer. Can he tell us what is the estimated cost of all the extra form-filling that the change will require?

Mr Gauke: I was actually talking about the overall cost. We will give details of the cost of administering child benefit when we announce the details of the policy, which, as the hon. Lady will know, we will do shortly. However, as the Chancellor has said:

“We simply cannot ask those earning just £15,000 or £30,000 to go on paying the child benefit of those earning £50,000 or £100,000.”

It is simply not fair for working parents on low incomes to subsidise millionaires. If members of the Labour party believe in that, they can add it to their election literature along with their opposition to the benefit cap. By making these changes, we can continue to direct child benefit to where it is needed most, supporting millions of families and millions of children from birth until they leave full-time education at the age of 18 or even 19.

Ed Balls (Morley and Outwood) (Lab/Co-op) rose—

Mr Gauke: I will certainly give way to the shadow Chancellor.

Ed Balls: Can the Minister explain to Members on both sides of the House why he thinks it fair for a family with a joint income of £84,000 to keep all their child benefit, while a one-earner family will lose all their child benefit if the husband or wife stays at home and their income is just £43,000?

Mr Gauke: Let me explain the challenge that we face. Basing child benefit on household income means a full means-testing regime with all the complexities that that involves: all the form-filling, and all the administration problems. I do not know whether that is what the shadow Chancellor wants, or whether he supports the position taken by the shadow Chief Secretary, who would not touch child benefit at all; but if we do not pursue the policy that we have announced, we will incur an additional £2.5 billion of borrowing every year. That is what the Labour party is committing itself to.

Ed Balls: The Minister is right: the policy is very complicated. It is a pity that the Government did not work that out before they announced it 18 months ago.

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The Secretary of State for Justice wants to keep it, the Deputy Prime Minister wants to drop it, the Prime Minister also wants to drop it, and the Chancellor is confused. My advice to the Minister is this: sit down, finish the speech and let us see what happens in the Budget, because this is doing his career no good at all.

Mr Gauke: Treasury Ministers have taken advice from the right hon. Gentleman in the past, and it did not end well. In that context, I will continue my speech.

At the same time as refocusing child benefit, we are investing £7.2 billion in the fairness premium, including £2.5 billion in the pupil premium, to support the poorest in their early years and at every stage of their education. There are substantial reforms and tough decisions to make, but we have not shirked our responsibility to do so. We will not burden future generations with unsustainable debts that would mean higher taxes and diminished public services. We cannot keep building debt to fund spending on today’s generation at the expense of tomorrow’s.

Several hon. Members rose

Mr Gauke: I am going to make a little more progress.

We cannot ask our poorest and our most vulnerable to carry the burden; it is right and fair for those with the broadest shoulders to carry the heaviest burdens. Those who say that we are not asking the wealthy to pay their fair share are the very same people who are jumping up to oppose reform of child benefit, which will do exactly that.

Under the previous system, about nine out of 10 families with children were eligible to receive tax credits. Under our reforms, the proportion will fall to six out of 10. As is shown by our distributional analysis of the impact of the autumn statement and previous fiscal events, the top 20% of households will make the greatest contribution to reducing the deficit as a percentage of their incomes and benefits in kind from public services.

Helen Goodman: Strictly speaking, what the Minister has said is accurate, but he knows as well as we do that the only reason for the positive distributional effect is the measures taken by my right hon. Friend the Member for Edinburgh South West (Mr Darling) before the last general election. Surely the Minister can acknowledge that the measures taken by the coalition Government are massively regressive.

Mr Gauke: I am grateful to the hon. Lady for accepting and confirming that all the measures that will be put in place in 2012-13—which we could implement or not implement—are progressive.

Rachel Reeves: Can the Minister tell us whether the measures introduced by his party are progressive or regressive?

Mr Gauke: All the measures that will be put in place in 2012-13 are being implemented by this Government. That is the point. It is impossible to disaggregate those measures. They are all going to be put in place, and we are responsible for all of them. If we had wanted to reverse some of them, we could have done so, but we did not.

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Of course, none of what we are doing ignores the fact that this will be a tough year for households across the board. We know that that is the case, and it is our reason for going even further to support families and businesses throughout the country.

Chris Williamson: Will the Minister give way?

Mr Gauke: I want to make some progress.

We are limiting the increase to Transport for London and regulated rail fares, funding South West Water to enable it to cut bills by £50 per year for households that currently face the highest water bills in the country, setting aside an extra £675 million for local authorities in England to freeze or reduce council tax in 2012-13, and providing real help for households that are feeling the squeeze. We are deferring the fuel duty increase that was due to take effect on 1 January to August this year, while also cancelling the further increase in August. As a result, tax on petrol will be a full 10p lower than it would have been, and families will have saved £144 on the cost of filling up the average family car by the end of next year.

Ian Austin: Will the hon. Gentleman give way?

Mr Gauke: No, I am going to make a bit more progress. I have already given way to the hon. Gentleman once, and I think that that was enough for all of us.

It is because of our decisions that we have secured record gilt yields, feeding through to record low and stable interest rates that make a real difference to families paying their mortgages and businesses refinancing loans throughout the country. If we are going to discuss a squeeze on living standards, let us discuss what an increase in market interest rates would mean for families throughout the United Kingdom. It would force taxpayers to find an extra £21 billion in debt interest payments, increase the cost of business loans by £7 billion, and add £10 billion to mortgage bills every year, an extra £1,000 for the average family—and that is just a 1% rise. Let me remind the House that when the Government came to office, our rates were tracking those of the likes of Spain and Italy, and that they are now close to those of Germany. It is because of the tough decisions that we have made to cut the deficit that the UK has broken ranks. In the last year alone, its rates have fallen by about 1.5%, whereas those of Italy and Spain have risen by almost 3%.

I know the shadow Chancellor considers that low interest rates are a sign of trouble, and that he would prefer higher interest rates, a bigger squeeze on families, and an even bigger fall in living standards, but the simple truth is that the Opposition have no credible response to the economic challenges that the country faces.

Sheila Gilmore rose—

Mr Gauke: I look to the hon. Lady to rectify that.

Sheila Gilmore: I am wondering whether the Minister has been out of the country for the past few days, and therefore has not noticed that several banks are increasing their mortgage rates.

Mr Gauke: If we had pursued the policy advocated by the Opposition, our market rates and gilt yields would be going up and we would be facing a very significant problem. We have record low interest rates at

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present. That does not necessarily mean mortgage rates will remain at their current levels for ever across the board, but the fact is that the tough steps we have taken have ensured that interest rates are much lower than they would otherwise be, which is to the advantage of both mortgage holders and businesses looking for finance.

Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab): We have debated this question before, and it was clear that quantitative easing is what has led to the reduction in interest rates. The recent £50 billion of quantitative easing has, in effect, been an attack on pension funds; it has wiped out almost a quarter of private pension funds compared with the situation before the last general election. Will the Minister confirm that further credit easing will also affect private pension funds?

Mr Gauke: Credit easing will benefit businesses. I should also point out that the current low interest-rate trend was in place before the additional quantitative easing undertaken by the Bank of England.

The simple truth is that the Opposition have no credible response to the economic challenges we face. It took the coalition Government five days to come together in the national interest to forge a joint commitment and approach to tackle the deficit, yet 18 months later the Opposition remain confused and conflicted. Every now and again a member of the shadow Cabinet—even the shadow Chief Secretary—crops up to say they will be fiscally credible but, in practice, they oppose welfare reform, for instance, and say it affects the poorest, even when a household receives more than £26,000 a year. They also oppose reforming universal benefits, even though that protects the richest, and they oppose anything that affects the squeezed middle. Clearly, their economic plan involves more spending, more borrowing and more debt.

However many Opposition days they have, and however many economic policy relaunches they make, it is clear that Labour was irresponsible in government and is irrelevant in opposition. We are fixing the failures of the past and are repairing our economy. This Government are committed to supporting families across the country through difficult economic times.

It is, of course, a tough challenge to secure our economic stability and lay the foundations for sustainable growth, but we are determined to restore the UK’s prosperity, and we will put fairness at the heart of our recovery by protecting living standards for our poorest and most vulnerable families, by lifting millions out of tax, by taking steps to reduce the cost of living and by refocusing welfare on those who need it most. Yes, that means that those on the highest incomes will bear the heaviest burden as we pull together to tackle the deficit, but it is absolutely right that those who can contribute the most do so.

A fair and sustainable recovery demands leadership, and that is exactly what this Government are providing. It is this coalition Government alone who are determined to face up to today’s economic challenges, and to build tomorrow’s fair, prosperous and sustainable economy.

Several hon. Members rose

Madam Deputy Speaker (Dawn Primarolo): Order. There will be a seven-minute time limit on all Back-Bench contributions.

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8.23 pm

Ian Lavery (Wansbeck) (Lab): I was amazed to hear the Minister claiming to be putting fairness at the heart of policy, when this Government are viciously attacking the most vulnerable and the lowest paid in the country.

As has continually been said, the forthcoming Budget must include measures for jobs and growth. Without jobs and growth, everything else in the economy fails and the cuts will continue indefinitely. The country is suffering greatly as a result of the coalition Government’s policies. I call on them to reconsider their intended changes to tax credits and child benefit, which will cost ordinary hard-working families up to £4,000 a year.

These proposals will impact heavily in my constituency. For the benefit of the Government Front-Bench team, I should point out that Wansbeck is in the north-east—not near Aberdeen, but in the north-east of England. We are being hit very hard already. Before the general election, the Prime Minister said he would hit the north-east the hardest, and, by goodness, that is one promise he has kept. Some 240 households in Wansbeck will be hit by the measures that are to be introduced, and 465 children in Wansbeck will suffer as a consequence. The situation is dire.

Yasmin Qureshi: I sympathise with my hon. Friend’s constituents. In my constituency, 880 households, which include 2,095 children, will be affected. Does my hon. Friend agree that these measures are disgraceful?

Ian Lavery: I entirely agree.

The dire situation in my constituency is compounded by the following fact. The Office for National Statistics stated last week that 55.4 people are applying for each vacancy advertised at the jobcentre—and there are only 48 unfilled jobs in Wansbeck—although two weeks ago the House of Commons Library said this figure was a little lower, with some 36.5 applicants per vacancy. The notion that there are plenty of job opportunities, and opportunities to take on extra hours at work and part-time employment, is a myth propagated by the Government.

I am very concerned. Today, I have written to the Prime Minister, the Business Secretary and the Employment Minister, the right hon. Member for Epsom and Ewell (Chris Grayling), calling for urgent discussions on the future of my area. The attacks on the disabled and the less well-off seem to have abated since the new welfare reforms passed through Parliament, but now the Government are beginning in earnest their attack on hard-working families with children.

The tax and benefit changes will hit women, children and single parents hardest. We must ask why that is the case. Why are the bankers not being attacked? Why do they get a tax cut? Why is there now talk about the rich people getting their 50p tax rate reduced, while at the same time the Government are continuing to attack those who are unable to support themselves? That is obscene, to say the least.

The average family with a child will lose up to £580 per annum. As many as 200,000 couples with children will face losing up to £4,000 in their income. Some 212,000 households and 470,000 children will be affected if people cannot secure extra hours in their workplace. We have got to ask ourselves: where will people get these hours from in their workplace? There is not enough

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employment in any case—if the Minister wishes to intervene, that would be great. He can tell people in Wansbeck, where there are 50-odd people after each job, how they will get extra hours in part-time employment. The fact of the matter is that they have absolutely no chance, so they are going to lose their money. In a recent Union of Shop, Distributive and Allied Workers survey, 78% of people said that there was absolutely no chance that they would get an extra hour in their workplace, and so they will be losing their tax credits.

Yasmin Qureshi: My hon. Friend rightly says that there are no jobs out there, with more than 2 million unemployed. So people will become unemployed and the state will then have to spend hundreds of pounds on keeping these families on benefits, as opposed to allowing them to work and contribute to the economy.

Ian Lavery: Again, I thank my hon. Friend for her intervention, as I could not have put it better myself.

We are talking about the same hard-working families who were used two or three weeks ago by the Government as shining examples of why people on benefits should lose them. We are talking about the people who are getting out of bed and going to work, even if it is for 14, 15 or perhaps 16 hours a week—these are the shining examples and look what has happened to them. A lot of people believed in what the Government had to say but, unfortunately, that has now gone out the window. These are not necessarily the squeezed middle, but the working poor, and they are very hard-working people. I must point out that £4,000 is a mortgage to lots of people involved in this issue, and people—hard-working families—will lose their homes as a result of these policies being introduced by the Government. Their figures suggest that some people will actually be better off not going to work. Only a few weeks ago, we heard a million and one times, “It doesn’t pay to be on benefits and nor should it.” So they attack the “scroungers” first and look what is happening now. The situation is an absolute disgrace, because under these new proposals someone can be better off on benefits than in work, possibly by as much as £728 per annum, as some have it. How is it that people can be better off on benefits?

The proposal on child benefit is the most bizarre and ridiculous, and it has to change, as I am sure everyone in this Chamber understands—it is that stupid and it involves a huge anomaly. How can it be fair that someone in a family earning £84,000 can keep their benefits, whereas someone in a family earning £43,000 can lose theirs? It is absolutely outrageous. I am sure that that will change—if it does not, God help us all. I hope that this glaring anomaly will be cleared up.

The Government cannot continue their unfair attack on those less well-off in society—it is mainly an attack on women, children and hard-working people. The hard-working people cannot continue to pay the highest price for this too fast, too far Government approach. Hard-working people cannot continue to pay the lion’s share in a failing economy, purely on the basis of ideology. Given an increase in fuel prices, the introduction of unfair welfare reforms, high unemployment—the highest in 17 years—huge energy prices, pay freezes and pension cuts, the burden must be shared. It must not be shared just by women, children and those hardest up who are willing to go to work—the hard-working people, as we

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have heard a million times. It is time that the coalition Government changed direction. Instead of flying into the abyss, they should look after the hard-working people in this country, and revisit their proposals on child benefit and tax credits.

8.33 pm

Stephen Williams (Bristol West) (LD): We have debated many Opposition motions on the economy and public finances in the past 20 months, and this one is little different from the many others that I have discussed—I have spoken in all these debates. We are asked to focus on the needs of hard-pressed families—we are hardly likely to disagree with that—and on pensioners, but the whole tenor of this motion, like all the others that have gone before it, is that the coalition Government should do more for some people and should reverse the planned changes that they have set in train. So despite the U-turns that the shadow Chancellor and the Leader of the Opposition have made in recent weeks on the need to cut the deficit, we are exactly where we have been before on all other Opposition days. We are back with uncosted proposals somehow to make us all believe that tackling the deficit can be a painless and, indeed, invisible process of fiscal rebalancing. It is as if public finances can be restored to health by magic, with no tax rises and no expenditure cuts—it simply is not credible.

Toby Perkins: The hon. Gentleman mentions the importance of tackling the deficit, but he will recognise that by 2013 this policy will be out of date because of the incoming universal credit. What is the point of putting 200,000 people through tremendous pain for the sake of 18 months? When the Government review their books in 2015 that figure will have entirely disappeared, so why not wait until the universal credit has come in and sort the system out at that point?

Stephen Williams: I thank the hon. Gentleman for his intervention and I think he made the same point to the Minister. The coalition Government have a five-year programme of reform, which includes cutting the deficit as well as long-lasting reform of our entire welfare state, which has evolved over a long period of time. Many of the reforms, whether they are on the universal credit, pensions or other parts of the welfare state, are designed to last for a generation whereas the deficit reduction measures are, of course, short-term measures, painful as they might sometimes be. I acknowledge that for many households and some families what this Government are having to do—not because we choose to do it, but because we have to do it—causes discomfort.

What matters most to all households is putting our public finances and our economy back on track. That gives our country fiscal credibility and allows our Government, businesses and households to borrow and invest at affordable rates.

Helen Goodman: The hon. Gentleman clearly has not read the motion, which makes it absolutely clear that our proposals on working tax credits will be matched by an increase in tax take on stamp duty from those people who have houses worth more than £1 million and who are offshoring. That would match the revenue needed for the working tax credit.

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Stephen Williams: All I can say is that the hon. Lady must have been reading an earlier draft, because that is not what the motion says. I shall discuss tax avoidance later in my speech, as I am sure she will be pleased to hear.

Even in the tough fiscal environment that the Government face, it is right that we should do what we can to help low-income households. That is why the Government are absolutely determined that the budget will not be balanced on the backs of the poorest and those in work who have low earnings. The Government will not repeat the fiasco that happened in good times under the previous Government. The Chancellor who became Prime Minister, in his last Budget as Chancellor, abolished the 10p rate of income tax, raising income tax for the lowest paid in society and all his hon. Friends, who, at the time, sat on the Government Benches and waved their Order Papers with glee that a tax on the poorest in society was funding a tax cut for the rich.

Meg Hillier rose

Stephen Williams: I have given way twice and I am on a time limit, unlike some previous speakers. The hon. Lady will have her turn later.

That is why reducing the tax burden for the lowest paid is the No. 1 priority, as far as the Liberal Democrats are concerned, of this coalition Government. I and all my colleagues stood at the last election on a promise that the income tax threshold would be raised to £10,000 and the coalition Government’s first budget raised the threshold by £1,000 to £7,475 a year, taking 800,000 people out of income tax altogether and giving a £200 tax cut to every basic rate taxpayer. From next month, the threshold will be raised again to £8,105, cumulatively taking 1.1 million low-paid people out of income tax altogether with a cumulative income tax cut for every basic rate taxpayer of £330. That is £330 extra take-home pay, particularly for part-time workers, who are disproportionately women and young people, that they can spend immediately in their communities.

Two weeks ahead of the Budget—16 days, as the shadow Chief Secretary kept saying—the Liberal Democrats want the Chancellor to go further and faster in announcing a timetable to reach that £10,000 threshold in this Parliament. We want to know that when all our constituents go out to work, they will be able to take home £10,000 a year and not face the burden of income tax. That will send out a message that we are determined to make work pay and to reduce the tax burden for everyone on the basic rate of tax.

Sheila Gilmore rose

Helen Jones rose

Stephen Williams: I have already given way twice and I am on a time limit.

The same arguments apply as when the Government had to take tough decisions on whether to raise out-of-work benefits in the comprehensive spending review and the last autumn statement, and those benefits were raised by the high consumer prices index of 5.2%. Child tax credits have also been raised by 5.2%; that is £135 extra this year. As the Minister said earlier, there has been £390 extra cumulatively so far since the general election.

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Difficult decisions are being taken on the reform of tax credits. The Liberal Democrat manifesto explicitly said that we thought there was scope for the reform of poorly focused tax credits. In 2010, nine out of 10 families with children received tax credits and, even after the difficult reforms we are introducing in these tough fiscal times, six out of 10 families will still receive tax credits.

Child benefit is another area in which the Government have to make a tough choice. If the Labour party’s message is that it opposes even that tough choice of withdrawing child benefit from the richest families in the country, where on earth is it going to find the cuts? I look forward to hearing, in all the Labour speeches between now and 10 o’clock, what alternative cuts would be made to replace that cut in child benefit. The cliff edge of the higher rate tax threshold is difficult. We all acknowledge the anomaly that was expressed in the extreme by the hon. Member for Wansbeck (Ian Lavery) regarding the earnings of two people in a household. The Deputy Prime Minister confirmed this morning that we are looking for ways to smooth that withdrawal of benefit from those who are marginally over the threshold; we will have to wait until the Budget to see the outcome of those discussions.

The Government are introducing other measures to support families with children. This morning, I visited a secondary school in my constituency, St Mary Redcliffe, and on Friday I visited the City academy in my constituency as well. Both those schools and all the other schools in all our constituencies are benefiting from the introduction of the pupil premium. Parents who are working need support with child care, and the Government are introducing 130,000 extra places for two-year-olds.

At least this motion mentions pensioners. The last time we had an Opposition motion on living standards, it neglected to mention pensioners at all. That was hardly surprising because the Government had just announced the largest cash increase in the state pension since it was introduced by Lloyd George and Asquith in 1908. The Government have a triple lock in place to ensure that pensioners always receive an increase. We will not have the embarrassment of 75p pension rises in future.

The Government are taking action on tax avoidance. I note that the motion says that everything Labour wishes for, whether on child benefit, child tax credit or working tax credits, is somehow going to be paid for through tax avoidance measures that are unspecified in the motion. That would have more credibility if Labour had voted in favour of the tax avoidance measures introduced by the Government in the last Finance Act, rather than voting against them. I want to see more action on tax avoidance in the Budget, such as a general anti-avoidance rule, and I look forward to hearing what the Chancellor has to say—

Madam Deputy Speaker (Dawn Primarolo): Order.

8.43 pm

Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): We have heard a lot of twaddle from Government Members today. I was shocked that the Minister seemed to agree with the hon. Member for South West Norfolk (Elizabeth Truss) about the need for unregulated child care, as though high-quality, regulated child care is a

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cost too high for working parents to pay. As a working parent who uses child care, and as someone who represents many young people in my constituency who face having to seek child care, I must say that having lower-quality child care is not the answer. Cost is an issue but lowering the quality is not the answer. I hope the Minister will pick up on that point in responding.

I represent half of a borough that has the unenviable record of being one of the country’s poorest. About 45% of children in my constituency live in out-of-work households or in in-work households that have an income below 60% of the national average. That compares with 22% in the UK as a whole according to 2009 figures.

One in five of my constituents is under 16, so the two changes that the Government are introducing have a very big impact on a very large number of people in my constituency—the youngest, the children who need the support, and their parents as well. Anything that hits children affects Hackney particularly hard. When we are talking about the impact on young people, their life chances and their opportunities, we should not forget the impact that that has on the wider population. It is my constituents who will be paying the pensions of the older population of the rest of the country in time to come. It is my constituents who will be creating the jobs that will pay for this country in time to come. We need to make sure that we give them a little more respect than the Government currently do.

The Government have form in this respect. About a third of my constituency is aged under 24. This group has already been hit massively by the loss of the education maintenance allowance, which had a high take-up in my constituency. For example, one young woman said to me, “By Thursday, when the electricity key was running out, I would pay that,” so she could do her homework and the house would be warm. It paid for basics like that in my constituency. I will not revisit the pain of tuition fees, on which the Liberal Democrats have shown their true colours.

I turn to working tax credits. In my constituency 12,000 families receive tax credits overall. Of those, 4,500 families, which include 8,600 children, are in work and receive both child tax credits and working tax credits. Of the total 12,000 families, 1,100 families receive working tax credit only. Those figures are from December last year, and they hide real people, such as the woman who came to see me on Friday and wept as she said to me, “I’m working 16 hours a week. I want to work more but I cannot find the hours.” She will lose more than £300 a month as a result of the Government’s changes. She has one month to find eight hours of extra work. Where is she going to find that at her level of income?

A related issue, which I am digging into, is school support staff. I have had a number of reports from primary schools in my constituency where low grade staff working 10 or 11 hours a week have been told by the jobcentre that they need to increase their hours to 16, because that gets them off some statistic that the Department is gathering about part-time work. When they went back to the school to ask for extra hours, one head teacher had the wit to go to Jobcentre Plus and say, “Give me this in writing. Tell me who is directing this.” No information was forthcoming.

Those people were being encouraged to give up a good job of 10 or 11 hours a week to find some job somewhere that might be 16 hours a week, but as many of the jobs in low level retail are on zero hours contracts,

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it is difficult to be guaranteed the 16 hours, let alone the 24 hours. They may get 16 hours now in a good week but not in a bad week, but going up to 24 hours will be increasingly challenging. I talk about my constituency, but as we have heard, up to 200,000 working parents will lose almost £4,000 a year in working tax credit as a result of the changes, which are about three weeks away.

I move on to child benefit. We know that in London child care costs are very high and many of my constituents on good incomes find it unaffordable to work. Their child care would cost more than quite generous full-time earnings, so many have made the understandable decision to opt for one of the couple to stay at home and look after the child. The Minister’s answer was, “Unregulate the child care and make it cheaper”, but that is a retrograde step.

The Government talk about being family-friendly and wanting to support the family unit of two parents with children. The reward for those families for doing what the Government profess to want is a cut in child benefit. What does that mean? If one of the couple is earning £43,000 but the other is not earning and they have three children, they lose £188 a month in child benefit.

Ian Lavery: I shall be brief. The hon. Member for Bristol West (Stephen Williams) commented that that is an extreme example. Does my hon. Friend agree that it is not extreme; it is absolutely accurate?

Meg Hillier: I completely agree with my hon. Friend. It is rich for the Liberal Democrats to speak sanctimoniously today, when we know what they were saying on the campaign trail just over two years ago.

A family with two incomes totalling £84,000 a year and three children loses nothing in child benefit. The policy is bonkers. It was not even written on the back of an envelope. It must have been written late at night in the bar, because it does not make sense in any way, and the Minister was unable to answer my question about how much it would cost administratively for individuals to collect the paperwork to find people who are on those incomes, in order to take their child benefit away.

We will have the Budget in a fortnight’s time, but my constituents are already being hit. Working tax credit is being taken away from the lowest-paid. There are the cuts to child benefits. We hear from The Daily Telegraph that there might be some changes, but we have heard nothing today from the Minister at the Dispatch Box. VAT has been increased to 20%, affecting the cost of day-to-day purchases for all my constituents. We read of the threat of mortgage interest rates going up. Rents for new social housing will now have to be 80% of private rents, which in my constituency will make it unaffordable for most people—and we can add to that the housing benefit cap, which would affect two thirds of my constituents renting in the private sector, the fact that private rents are increasing exponentially all the time, that energy bills and food prices are going up, that unemployment is increasing, and the loss of the education maintenance allowance.

Many of my constituents may be poor, but there is no poverty of aspiration in my constituency. These policies, layered on month after month and year after year under this wretched Government, are a real kick in the teeth for my constituents, many of whom have come from other countries to do well and to put time and effort

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into education and training in order to improve their lot. As they are struggling up the ladder of ambition and trying to improve their lot and support their families, the Government are pulling the rug out from under their feet and taking away the lower rungs of the ladder. It is shameful.

8.51 pm

Mr John Redwood (Wokingham) (Con): I am grateful to the Labour party for choosing this important subject for this evening’s debate, because it is right that we should debate living standards. It is quite brave of the Labour party to choose this topic, because there was a sharp decline in living standards in the last years of the Labour Administration, but it is also true that there has been a further decline in the first 18 months of the coalition Government. It takes time to turn these things around. The main reason why living standards have continued to fall in the past 18 months is that inflation has been too high. If time permits, I wish to suggest some things Ministers could do in the drive against rising prices so that we can relieve some of the pressure on our constituents.

I agree with Labour and colleagues on the Government Benches that we are here above all to ensure the better prosperity of the people we represent. None of us wishes to see their constituents’ livings standards fall, and it is right that today we should consider, on an Opposition motion, how we might strengthen and improve living standards. I also agree with Labour that we need to debate jobs and growth and am delighted that the motion starts off with that. I am sure that Ministers on the Treasury Bench are well aware that, although they have introduced some measures, they have not yet done enough to ensure a rapid, strong and continuing recovery. We all look forward to my right hon. Friend the Chancellor adding to the range of policies and instruments that he can adopt to improve the chances of more rapid and sustained growth.

Again, it is a matter of common agreement across the Chamber that growth is a good thing, that it will mean more jobs, rising living standards and higher incomes and that it will bring with it more tax revenue. More tax revenue is much needed, because the Chancellor and his Front-Bench colleagues have decided to increase public spending in cash terms every year of the five-year period, which will not be easy to finance, given the very large running deficit and accumulated debt they inherited. Contrary to what some people in the media have said, the debt is still rising day by day because we are still running a large deficit.

I was hoping to say something good about the parts of the motion where Labour highlighted one of the problems people have with one of the Chancellor’s proposals. As many Labour Members and others have pointed out, with the wish to make richer people pay a little more by withdrawing child benefit there is the problem that those who are better off might in some cases get a better deal than those who are worse off. None of us likes that, and I think that there is common ground on that across the House. It is not a new discovery that Labour has highlighted today. I was hoping that it might have a contribution or a solution, because we know that the Treasury is thinking about whether the problem can be dealt with, but when I asked, thinking that I might find something I could support, answer came there none.

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Ian Austin: What advice would the right hon. Gentleman give to a constituent of his, earning perhaps £42,000 or £42,500, who has three children, is working hard, getting on in life and wants to do better, but who is offered a pay rise that would take them into the 40p tax band? They would then face the difficult choice between taking a promotion that they have worked hard to get and losing thousands of pounds in child benefit. What would he advise them to do?

Mr Redwood: That is a very good example of the problem one can get into, and that is why I wish my right hon. Friends on the Treasury Bench every success in dealing with what we can all see is a problem, but I am not recommending to them that they give up and say that somebody on £200,000 a year should still be able to get full child benefit. That is not the right answer, and I should hope that Labour might sympathise with that proposition and agree, but I am grateful that some Opposition Members are now coming round to my view that high marginal rates of tax and of benefit withdrawal, at all levels of income, are a disincentive.

Just as Government Front Benchers are rightly trying to tackle the very serious problem at the lower end, perhaps with some support from Labour, they should have some sympathy for people in the middle of the income scale, where the situation can be equally unpleasant and difficult for families struggling to meet their bills. Sometimes Opposition Members forget that, although people in my constituency tend to have a higher average income than many of the average incomes in their constituencies, my constituents’ housing costs, their travel costs and other factors in their cost of living mean that they need higher incomes in order to have the same living standard as those whose houses are half the price or less, because housing is a very big component.

The Labour party has rightly said that it would be wonderful if we could tax the banks more, and I again find myself in agreement with that. It is an immediately attractive proposition. We all know that banks are pretty unpopular, and we like to think of them as very rich, so it would be good if we could tax them more. Unfortunately, Labour is wrong to suggest that the Government have just offered another tax break to some banks by cutting the marginal rate of corporation tax. The reason we are getting so little tax out of them is nothing to do with a small drop in the corporation tax rate; it is that two of the biggest banks, Royal Bank of Scotland and Lloyds HBOS, are loss-making, so it does not matter what corporation tax rate we set, because they are not going to pay a penny of it. That is a disgrace, but it is where we have got to because of the disasters and problems in bank management over recent years.

Worse still, we are in the position whereby, if those banks do start to make money—it is true that the losses have been much reduced in the past year and they might start to make money—they will not be about to pay any tax, because they have such huge inherited losses from the period under Labour when they plunged into massive deficit and got into a disastrous position.

Richard Fuller: My right hon. Friend is making very good points about the importance of companies being profitable so that they can pay tax, but when it comes to bankers and high earners paying taxes does he think

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that it is more important that the tax take is as high as it can be, or that we have a headline-grabbing marginal tax rate? Which is more important: the take or the rate?

Mr Redwood: I am very much of the view that we want a higher tax take, and I favour taking the tax from the people with the money, the rich, and from the companies with the money, rather than from the people who do not have it. That is what I believe, and I would hope that that again was common ground. The way we do so is by charging a rate that people are prepared to stay and pay, because the danger is that if we set the rates too high, people do not stay or they do not pay; they find clever accountants and lawyers, do less, invest less, risk less or go. It is the same with banks: if we get the rate wrong for banks, instead of getting more money out of them, we get less.

In 1979 when Labour had had a strongly socialist Government, they left office with a marginal income tax rate—in which some current Opposition Members would take pride—of 83p in the pound. In those days the top 1% of income tax payers contributed just 11% of the total income tax take, because the rich had either gone or had clever arrangements to avoid paying tax. When the Conservatives brought the rate down to 40%, not only did the amount of money paid by the rich go up, and the real amount that they paid go up significantly, but the proportion of total income tax that they paid more than doubled. Surely that is a desirable outcome, and it is the same with banks: we need to find a way of taxing them.

My first recommendation to the Chancellor for his Budget is to sort out the banks. We need to create some working banks out of the RBS framework, get them out there in the market, sell them off, get them into a profitable state without all the back history of tax losses, and create new entities that can trade properly and lend money for the recovery, and then we can get some tax revenue out of them. I hope that Labour Members might agree with that proposition. We then need to tackle the problem of inflation, which has been rising too rapidly.

I am glad that those on the Front Bench have done something about council tax bills—I hope that Labour councils will join Conservative councils in keeping those bills down, because they are very difficult for many people to afford—and have started to do some work on fuel prices, although they are still extremely high. We could do more to get water and energy bills down. I recommend that we allow more competition in those industries, particularly water. In the energy industries, we need more private sector-led investment, with an emphasis on cheaper power, which is needed to tackle fuel poverty and inflation and to secure an industrial recovery. The Government need to recognise that energy is now usually the biggest cost in many industries and, instead of favouring dear power, follow competition and private investment policies that will promote cheaper energy.

9.1 pm

Sheila Gilmore (Edinburgh East) (Lab): If I showed some hesitancy in rising, Madam Deputy Speaker, it is because I tend to find that I am called at the very end of debates, so I am extremely grateful to you for calling me at this stage.

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Sometimes Government get things wrong and must have the grace to say so. The change in working tax credit proposed for this April is one of those occasions. Interestingly, it was announced in October 2010, before the Government’s proposals on welfare reform were fully announced and explained. There is an obvious dichotomy between what the Treasury is saying and what the Department for Work and Pensions is saying. It is unfortunate that DWP Ministers have not been present in the debate to give their point of view. Those of us who served on the Welfare Reform Bill Committee had hours of Ministers and Government Back Benchers telling us that any job and any hours of work were better than none, and how important it was that we should be encouraging the mini-jobs that we were hearing so much about. The DWP is very clear that it is important that people should be supported in working, even for relatively short hours, whereas the Treasury Minister who opened the debate told us that it is very important that a couple should work more hours, and that if they do not the Government are going to take their working tax credit from them. Those two positions are irreconcilable. It is not good enough to say that it will all come right next year when the universal credit comes into being, because people will soon be suffering from this change, which is the complete and direct opposite of what the Secretary of State for Work and Pensions has been telling us he is going to do.

Is it really the Government’s position that they want people to stop work, as some people will in this situation because it is more attractive to do so? If the family who cannot find the extra eight hours’ work give up work altogether, then without the working tax credit they will get benefits paid at a higher rate than they would otherwise have received. In addition, if they are home buyers they will qualify for other things such as help with the mortgage, which they do not get if they are working. At that point, they may well conclude that it is not worth their while to continue with their jobs. They may continue to think like that in the future. We hear a lot from the Government, particularly from the Department for Work and Pensions, about how benefits policy should drive behavioural change. This policy will drive behavioural change, but in precisely the wrong direction.

Meg Hillier: Does my hon. Friend agree that one of the best things parents can do for their children is to embed the work ethic early on? By working, parents not only bring in an income for their children, but set an example for them and bring future benefit.

Sheila Gilmore: There is a long-term benefit in people learning from their parents what it is to work.

We used to hear so much about the couples penalty from the Conservative party. It used to say that there should no longer be a couples penalty and to talk about how unfair it was. However, this provision creates just such a couples penalty. A couple who lose their working tax credit might look at their neighbour, who is a single parent, and think, “She’s not losing her working tax credit. That doesn’t seem fair.” Why, when we have heard so much about that, are the Government creating a new penalty for the sake of just 18 months or two years?

That all comes on top of the decision not to increase working tax credit in line with inflation. We have heard a lot, particularly from the hon. Member for Bristol

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West (Stephen Williams), about how wonderful it is that benefits will rise by 5.2% in the coming year, as if it is some unique act of generosity. In fact, people are simply being given the rate of inflation.

Stephen Williams: There were, of course, other choices that the Government could have made. There were voices —I will not say who they were—telling the Government not to raise benefits by that historically high rate of inflation. The previous Government used the lowest possible rate when they raised pensions by 75p. This Government took a different view.

Sheila Gilmore: I think that the hon. Gentleman would accept that the 75p increase followed the rate of inflation. I might not have made that decision if I had been the Chancellor of the Exchequer, but that is the decision that was made.

I am pleased that the hon. Member for Bristol West and his colleagues, who are remarkably absent from this debate, managed to persuade the Government that out-of-work benefits should increase by the full amount. I support that. What I find strange is that a Government who wish to support work did not take the same view about working tax credit. I am not talking about levelling down the increase for out-of-work benefits. I am talking about a decision that increases the degree to which work does not pay, when the Conservative party says that it wants work to pay. If all these things are taken together, one begins to wonder where the Government are going.

People are sceptical about universal credit and anxious about what will happen. Let us consider something else that will happen under universal credit. Somebody who is working and who qualifies for universal credit will have their universal credit reduced if they have savings of more than £6,000 and eliminated if they have savings of more than £16,000. People who have managed to save, perhaps towards buying a house or towards their retirement, will be told, “You don’t need support, so we’re going to take it away from you.” Despite all the Government’s warm words about how much they want to support hard-working people and people who save, this is another example of how their policies will not do that in practice.

I say one last time to the Minister: change now. You —the Government, not you, Madam Deputy Speaker—know it makes sense.

Several hon. Members rose

Madam Deputy Speaker (Dawn Primarolo): Order. We are running out of time in this debate. I am taking the time limit down to four minutes, so we might get most Members in, but we will not get all of them in.

9.9 pm

Priti Patel (Witham) (Con): I welcome the opportunity to speak in this debate, because from what I have heard thus far it seems to be a chance to draw a contrast between the policies that this Government are pursuing to support jobs, growth and living standards and the record of economic failure that hangs like a millstone around the necks of Labour Members. Few things would be more damaging to the living standards of all our constituents than the introduction of the Labour party’s discredited policies.

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I should like to focus on three areas in which the Government are making a real, positive difference to living standards despite the challenging economic circumstances and the appalling state of the public finances inherited from the previous Government. The first is business and growth.

Supporting jobs and growth is essential to maintaining good living standards, and the Government are putting Britain on the right track. The commitment to a lower main rate of corporation tax of 23% will boost Britain’s competitiveness, and I emphasise that that will mean more jobs being created and better living standards for all our constituents. Importantly, that pledge rules out a financial transaction tax and gives great stability to the City of London and the financial markets, which are key to the triple A rating that provides the financial stability underpinning our economy.

The Government have also cut the small profits rate to 20%, which is a welcome step forward to support growth. That, of course, helps to stimulate economic activity, particularly among small businesses. In my constituency, 83% of jobs depend on small businesses, compared with the national average of 68%. Few things would have been more damaging to business men, entrepreneurs and wealth creators looking to invest more and create jobs than the previous Government’s plan to increase the small profits rate to 22%. Jobs and growth are fundamental to our living standards, and it is a shame that the previous Prime Minister, who did so much to damage our economy and undermine our triple A credit rating, is not in the Chamber today to listen to the debate and account for the previous Government’s failures.

I should also like to touch on support for pensioners, which is central to living standards. The Government deserve great praise for the action that is being taken to support our pensioners. Council tax freezes in particular are a welcome way to keep more money in the pockets of all our constituents, including pensioners, whereas the Labour party doubled council tax when it was in government. That hit pensioners the hardest. We have also protected the winter fuel allowance and made cold weather payments permanent. The triple lock on pensions, which has been mentioned, has led to a record increase of £5.30 in the state pension, which will benefit about 13 million people and of course have an impact on living standards.

In the time that I have left I wish to refer to the reform of public services. Only last week, we learned that 17 million adults—about half the working-age population—have the numeracy skills of primary school pupils. Having a work force unable to do the basics in maths and arithmetic is naturally detrimental to our living standards. The Labour Government have much to account for on that front, as well.

The Government are investing a great deal in education and reforming public services. Frankly, after the previous Government left the country with an unprecedented scale of economic and social problems—

Madam Deputy Speaker (Dawn Primarolo): Order.

9.13 pm