Independent Public Service Pensions Commission
Danny Alexander Excerpts(13 years, 6 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
Lord Hutton has today published a further “Call for Evidence”, which has been deposited in the Libraries of both Houses.
Periodic updates of the Commission’s work will be made available through the website, located at:
http://www.hm-treasury.gov.uk/indreview_Johnhutton_pensions.htm .
Comprehensive Spending Review
Danny Alexander Excerpts(13 years, 6 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
I beg to move,
That this House has considered the matter of the Comprehensive Spending Review.
It is eight days since my right hon. Friend the Chancellor set out the conclusions of the Government’s spending review—this coalition’s plan to bring the country back from the brink. We had to act to tackle the deficit: it was the only option to secure our country’s future. It is the only option to build a strong platform for future growth and prosperity, and we will see it through.
In charting the course for the next four years, we have made choices. We have chosen to invest in growth, jobs and the future of the economy. We have chosen to protect the most vulnerable and extend the ladder of opportunity. We have chosen to cut the costs of central Government to free up the front line. These are our priorities—growth, fairness, reform. They are the right priorities.
Danny Alexander
I am going to get to end of this section, and I will give way then.
These are some of the most difficult decisions that any modern Government have had to make, with every number on every page representing someone’s job or a service someone relies on. They are decisions that I know will affect everyone. So today I will set out why we had to act, the principles guiding our choices, and why fairness is at the heart of this spending review.
Danny Alexander
There is an important debate to be had. The Opposition have a chance to contribute to this discussion, but the price of being taken seriously is a credible and detailed plan. They need to recognise that we cannot go on in the way that they did; they need to say which cuts they support and which they oppose, and what they would do instead. Without that, it is opposition for opposition’s sake, and the country will not take them seriously.
Danny Alexander
So today’s debate also offers a challenge for Labour Members. I will be listening carefully to what they have to say, and I hope that the British public will receive a long-overdue apology for the mess that one party caused and which two parties have come together to clean up.
Fiona Mactaggart (Slough) (Lab)
I thank the right hon. Gentleman for giving way—at last. He says that in order to be taken seriously, we need a plan. In order for him to be taken seriously, he needs to be truthful with people. I do not understand how he can claim that fairness is a principle of this comprehensive spending review when women have been hit twice as hard as men.
Danny Alexander
I do not accept that analysis, and I will come to that point later. The hon. Lady should be aware that her party’s plans were for £44 billion-worth of cuts, which would have had an impact on people too. Many of the things that we have done, such as uprating the state pension in line with earnings and protecting the national health service, which her party would not have done, support women.
Toby Perkins (Chesterfield) (Lab)
The right hon. Gentleman is perpetuating the myth that there is no alternative, but he just said that the previous Government had a strategy in place for paying off the deficit, so there is an alternative. An alternative was also put forward in 1945. He can take whichever direction he likes, but he cannot keep claiming that the decisions he is making are the only alternative, because others have been put forward.
Danny Alexander
No alternatives have been put forward by the hon. Gentleman’s Front Benchers; perhaps he wants to talk to them about that.
Mr John Redwood (Wokingham) (Con)
The figures assume 8% inflation over the period, but if, in the first couple of years, we have a complete pay freeze in the public sector and we buy things more cheaply, as is the plan, does not that mean that cash rises can translate into real rises in the programmes that are going up in cash terms?
Danny Alexander
The right hon. Gentleman is certainly right to say that at the end of the spending review public spending will be higher in cash terms than it is at the moment. In real terms, it will go back to the level of about 2008-09, and in terms of a share of gross domestic product to about the level of 2006-07. People need to be realistic about the scale of what is being proposed. The big gainer from the huge deficit that Labour left us with was the department of debt interest, and unfortunately it is the cost of debt interest that we have to meet.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
Will the Chief Secretary give way?
Mr Bailey
The right hon. Gentleman has put great emphasis on the debt that he inherited and the need for the Opposition to be responsible. Given that the greater part of that debt was incurred in bailing out the banks and supporting manufacturing industry, could he be responsible and tell us what he would have cut in that position?
Danny Alexander
We have set out in detail what we would cut—that is the whole point of the spending review.
Danny Alexander
I am going to press on; I will give way again in a moment.
The House and the British people will never forget the financial position of this country when we came into office, with £1 borrowed for every £4 spent—the largest deficit in our peacetime history. Debt interest payments alone stood at £43 billion a year—that is £120 million a day.
Danny Alexander
I will press on, and give way in a moment.
Thanks to Labour’s profligacy, there really was no money left. The country knew it, our business leaders knew it, and, as we discovered, the Labour Chief Secretary knew it too. By May, the alarm bells were ringing—the danger was real. Whether one wants an expansive social policy, a smaller state, or more or less public spending, it must be underpinned by proper control of the public finances. If that control is lost, the policies that have been built, whatever they are, will inevitably crumble.
Stewart Hosie (Dundee East) (SNP)
The Chief Secretary said that to be taken seriously one needs to have a credible and detailed plan. He then went on to say that the Government have laid out their plans in detail, so perhaps he can give us some of that detail. Which Revenue offices will shut? Where will the Department for Work and Pensions closures be? Among the 35,000 Ministry of Defence civilians, where will the jobs be lost? Will he give us the detail in the same way as when the spending plans in the 2004 and 2007 CSRs were announced?
Danny Alexander
There is a great deal of detail in the spending review document, as the hon. Gentleman knows because he has had a chance to study it, and of course Departments will set out more detail in due course. He would have a bit more credibility on the subject of controlling the public finances if his colleagues in the European Parliament had not just voted for the 6% rise in the European Union budgets.
Ian Swales (Redcar) (LD)
Is the Chief Secretary aware that the 2007 CSR called for £35 billion in cuts, and that in July 2010 the National Audit Office could find only £6 billion that had been achieved? Does he agree that the failure of the last spending review makes this one much more difficult?
Danny Alexander
My hon. Friend makes a very important point. The NAO has indeed criticised the effectiveness of the previous Government’s so-called efficiency programme. Many of those criticisms are well founded, and we will proceed on a very different basis. To give an example, the single indicator that they set out for local authorities to report on their own efficiencies had 66 pages of guidance for them to follow, thereby creating a huge industry in local authorities just to meet the reporting requirements.
Ms Angela Eagle (Wallasey) (Lab)
The right hon. Gentleman has been talking about detail, and there is one detail that I am interested in. There was a leak from the Ministry of Justice demonstrating that it has set aside £230 million to pay for the redundancies that it has announced in its front-line staff. Can he tell the House, because he must have this figure, how much he has set aside to pay the redundancy bills for the job cuts that he has announced?
Danny Alexander
I welcome the hon. Lady to her place. I think that it is the first time we have had an exchange over the Dispatch Box, and I congratulate her on her appointment. Departments will set out their work force plans in due course. They are working on those things, and there are many things that they can do to avoid excessive redundancies. [Interruption.] I am not going to go into individual departmental figures.
Danny Alexander
I am not going to give way again. These figures will be for Departments to set out.
Danny Alexander
I am going to press on and make some progress. I will take further interventions later, but I answered the point that the shadow Chief Secretary made.
Rising interest rates choke the finances of those who borrow, and rising inflation bites on those on fixed incomes. It was the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) who once observed:
“Public finances must be sustainable over the long term. If they are not, the poor…will suffer most.”—[Official Report, 2 July 1997; Vol. 297, c. 303-304.]
For once, I agree with Gordon. Those who say that there is a choice between fiscal discipline and supporting growth could not be further from the truth. The choice is between a sound platform to support growth and a lack of control that would undermine it. In reality, it is no choice at all.
Danny Alexander
I am going to press on with this section of my speech, and then I will give way in a moment.
In June’s emergency Budget, we set out the road map to recovery and took the country out of the danger zone. The independent Office for Budget Responsibility examined our plans in June and forecast the economy growing and unemployment falling in every year. It also assessed that we were on course to eliminate the structural current deficit and see debt fall by the end of this Parliament, one year ahead of our mandate. The recovery will be choppy, but we are confident that our plan will see us through.
Caroline Lucas (Brighton, Pavilion) (Green)
Does the Chief Secretary accept that he is introducing a benefit system based on punishment? Does he agree that anyone out of work for more than a year will now lose 10% of their housing benefit? That is punishment. What advice would he give to my constituent in Brighton who has gone for 465 jobs over the past 10 months without success?
Danny Alexander
I do not accept that. We have to control the welfare bill, which has risen dramatically over the past few years. I will come to that later in my speech.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
It is inevitable, of course, that individual Departments will have to set out the costs of redundancies, and it is right that they should do so in due course. However, will my right hon. Friend set out how much extra interest the Government would have to pay, and therefore how much more public spending would have to be cut in future, if we did not start to make such economies now?
Danny Alexander
My hon. Friend asks a very good question. Over the course of the spending review period, our plans will save £5 billion in debt interest, which the Labour party was very happy to pay.
Ms Eagle
I thank the right hon. Gentleman. We know that he will know the answer to this question. He has set out a plan that will lead directly to 490,000 people losing their jobs in the public sector. We know that the Ministry of Justice has already made an allowance of £230 million to cover the cost of redundancies. He must have a figure for the rest of Whitehall put together, and he should now give it to us.
Danny Alexander
The hon. Lady is the shadow Chief Secretary, and we read in a memo directed to the Leader of the Opposition that the Opposition had a plan for £44 billion of cuts, but she has not set out a single piece of detail on that. As I said, Departments will set out their work force plans in due course.
The previous Government’s plan was not a serious plan to deal with the deficit and support growth. It was not a fair approach. It would have led to more, not fewer, cuts in the end, because of higher debt and higher interest payments—more interest on the debt, and more interest on the interest. Compared with the plans that we inherited, we will save £5 billion in debt interest payments over the course of this Parliament.
The emergency Budget set out our plan to balance the books, and now we have shown how we will find £81 billion of savings by 2014-15. Let me put that in some context. Even at the end of that period, public spending as a share of gross domestic product will be 41%.
Danny Alexander
I will give way at the end of this section of my speech.
That 41% figure is about the same level as in 2006-07, and the same level in real terms as in 2008. It is higher than in any year of Tony Blair’s Government. Perhaps that is why he supports our strategy. That is not to say that cuts will be easy—of course they will not—but it nails the myth that we are an ideological Government, hell-bent on shrinking the state out of recognition.
Angela Smith (Penistone and Stocksbridge) (Lab)
In 2007-08, the UK debt stood at 36.5% of GDP. In 1997, at the end of the last Tory Government, it was 42%. Does that fact not expose as meaningless spin the Government’s line on the record of the Labour Government?
Danny Alexander
I think that that is a classic statement of deficit denial. The hon. Lady has to recognise that we are spending £150 billion more than we raise in tax—the largest budget deficit in the European Union and the largest in our country’s history.
Danny Alexander
I will not.
We also have the largest budget deficit in the G20. Those are the facts that the hon. Lady should understand.
Danny Alexander
I will not give way again, I am going to press on.
The Chancellor’s statement set out the level of departmental spending for the next four years. I will not repeat every decision now, but of course I am happy to take interventions. [Hon. Members: “You’re not!”] I have taken a great deal of interventions, and I will take a few more later. Instead, I want to focus on our priorities: growth, fairness and reform.
Gordon Banks
I am very grateful to the Chief Secretary for finally seeing me up at the back here. One of the words that he mentioned was growth. How can we have growth when 1 million people are being put on the dole?
Danny Alexander
How could I miss the hon. Gentleman? I will explain the answer to his question as I make progress in my speech. He will just have to listen carefully.
Our priorities—growth, fairness and reform—guide every choice that we make. We are a pro-growth Government, focusing our capital resources on key infrastructure projects in transport and green energy.
Danny Alexander
I will not give way at the moment.
We are a Government with fairness at our core, and a reforming Government who leave no stone unturned in the search for waste, while devolving power and funding away from Whitehall. In answer to the hon. Member for Ochil and South Perthshire (Gordon Banks), I will address our priorities in turn, and the first is growth.
It is growth that will deliver additional jobs in the economy across England, Scotland, Wales and Northern Ireland. I have said that our plan as a whole will deliver macro-economic stability, which is crucial to restore growth and increase confidence to invest. We are not standing on the sidelines waiting for growth to happen. We have prioritised spending on the areas that can deliver the best return to growth. Over the spending review period, capital spending will be slightly higher than the previous Government planned, with significant investment in transport capital across the country and more cash being spent on transport over the next four years than in the past four. We will maintain in cash terms resource spending on science, and a new green investment bank will lead the way in the economy of the future. Today we published our local growth White Paper, which includes a regional growth fund of £1.4 billion over three years and announces new local enterprise partnerships. Those actions and many others are major parts of our strategy to secure and support sustainable economic growth.
John Woodcock (Barrow and Furness) (Lab/Co-op)
The right hon. Gentleman’s speech so far has shown that he is sticking to the outlandish predictions of growth levels that he has made, and of unemployment falling year on year as a result. Will he reassure the House and the country that if they prove wrong, he will change course, and quickly?
Danny Alexander
Outlandish predictions by politicians were the prerogative of the previous Government. We have established an independent Office for Budget Responsibility to make forecasts. We do not make the forecasts, and I am merely quoting what the OBR had to say.
Sajid Javid (Bromsgrove) (Con)
Does my right hon. Friend agree that the biggest risk to our economy is the record deficit of 10% of GDP, the highest in the G20? Had we not taken action, that would have posed a big risk and we would have lost more than 490,000 jobs. Opposition Members should think about the jobs that we would have lost had the Government not taken decisive action.
Danny Alexander
I agree wholeheartedly with my hon. Friend. If we had not tackled the deficit, the poor in this country would have suffered most.
Helen Goodman
I am grateful. The Chief Secretary has pointed to the forecasts made by the OBR. He will know that between 1994 and 2008, the private sector created 100,000 jobs a year. In that period, growth was 2.8%. The OBR projects growth of 2.4%. How, then, is it possible that 1 million jobs can be created in the forthcoming period?
Danny Alexander
In fact the OBR forecast more private sector jobs than the hon. Lady suggests. She will know that in the past two quarters several hundred thousand jobs have been created in the private sector. I will explain later in my speech the measures that we are taking to support the private sector.
Danny Alexander
Not for a moment. I am going to press on with my speech. I know that many hon. Members wish to contribute, and the Back-Bench time limit is already at six minutes, so I will make some progress, if I may.
Our second priority is fairness, and let me say what I think that means. Fairness means that across the entire deficit reduction plan, those with the broadest shoulders should bear the greatest share of the burden.
Danny Alexander
Fairness means that even in tough times, we focus our resources on extending the ladder of opportunity through early years provision and schools, and it means that we look carefully at whether we are doing right by those who receive welfare and the working families whose taxes pay for it. Those are our tests and we have met them in full. First, we have published distributional analyses that clearly demonstrate that those on the highest incomes will contribute more towards the consolidation. [Interruption.] That is not just in cash terms, but—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The right hon. Gentleman is giving way, but will hon. Members please take their seats when he does not?
Danny Alexander
Thank you, Mr Deputy Speaker.
As I was saying, we have published distributional analyses that clearly demonstrate that those on the highest incomes will contribute more towards the consolidation, not just in cash terms but as a proportion of their income and consumption of public services.
Mr Alistair Darling (Edinburgh South West) (Lab)
I am grateful to the Chief Secretary for giving way. So far, he seems bereft of answers to any of the questions put to him. Does he agree with the Institute for Fiscal Studies’ analysis that the June Budget and last week’s spending review can be fair only if the Government include all the measures that I introduced in my Budget prior to the election?
Danny Alexander
I think that the phrase “no answers” applies to Opposition Front Benchers on dealing with the deficit.
The measures included in our analyses include measures for which we will introduce legislation, such as the measures on national insurance. Those measures are part of our plan and it is perfectly appropriate that they should be included.
Danny Alexander
I am going to press on and answer this point. I shall give way in a moment.
The right hon. Gentleman talked about our analyses counting measures proposed but not yet introduced by the previous Government. I have to tell him that the measures are as much a part of our plan as any others we have introduced. We took the decision to proceed with them. However, I am glad to say that some of the measures proposed by the previous Government did not make it into our final analysis. We rejected the jobs tax—[Interruption.] They do not like it! We rejected cuts to the overall NHS budget and we rejected the idea of burdening future generations with debt. They were wrong and they were stopped.
Our progressive approach also places responsibility on the banks to make their fair contribution. We will continue to press banks to do more and to bring forward reforms to improve our financial system. That is why we introduced the bank levy. The previous Government stalled on that, saying that we would need international agreement first, but we went ahead with it. As the banks need to follow the spirit and not just the letter of the law, we have engaged in a concerted effort to get the leading banks to sign up to the code of practice on taxation by the end of November. We must ensure that everyone, no matter how rich, pays the taxes they owe. That is why we have agreed a new £900 million package for HMRC. That investment will fund a clampdown, bringing in £7 billion a year by the end of the Parliament.
Richard Burden (Birmingham, Northfield) (Lab)
On banks and fairness, will the Minister confirm that families with children are being asked to contribute twice as much to deficit reduction as the banks? How is that fair?
Danny Alexander
No, I will not confirm that. We have made many spending choices to invest additional resources in families with children—a pupil premium in the schools system and an entitlement to 15 hours of free nursery care for two-year-olds in addition to the 15-hour entitlement for three and four-year-olds that we introduced.
Our clampdown on tax avoidance will bring in £7 billion a year by the end of the Parliament, because there is no place for tax cheats in our society—neither is there a place for people who cheat the benefit system. My right hon. Friend the Secretary of State for Work and Pensions has introduced new plans to tackle benefit fraud.
Danny Alexander
I shall get to the end of this section on welfare before giving way, so hon. Members should stop troubling themselves.
On welfare—
Danny Alexander
I shall give way at the end of the section on welfare because I know it is of interest to many hon. Members, but let me explain our position.
The welfare budget accounts for nearly £1 in every £3 spent by the Government. The cost of the welfare system has increased by 45% in the past decade. In some cases, those increases were necessary—it is right that the Government should help those who need it most—but in many cases the previous Administration’s over-complicated bureaucracy trapped people in a system in which it does not pay to work. Worse still, many were simply dumped on benefits by previous Administrations and left there. That is not fair on them or the taxpayer. No one can deny that reform is essential, but the question is how the right balance should be struck.
Our approach is to move to a universal credit system over the course of two Parliaments to do away with the complexity of the current system so that it always pays to work. We will introduce a new work programme to provide personalised support to those who need the greatest help with getting back into employment, with private and third-sector providers being paid for the additional benefit savings they secure. We will fund significant above-indexation increases for the child tax credit to ensure that the spending review has no measurable impact on child poverty over the next two years. Through the welfare reforms in the spending review, we will find £7 billion of net savings on top of those identified in the Budget. Some £2.5 billion comes from removing child benefit from households with a higher-rate taxpayer. That is the largest welfare measure in the spending review and the most progressive, but it is the one that the Opposition have most vocally opposed.
Ms Angela Eagle
I thank the right hon. Gentleman for giving way on that point. There are press reports out on the wires that a source in Her Majesty’s Treasury is saying that the child benefit cut is “unenforceable” and will be dropped. The press report says that it is
“panic stations in the Treasury.”
Is that true?
Danny Alexander
I think it is panic stations on the Opposition Front Bench if they do not have a single answer to a single question about the action that they would take to reduce the deficit. The story that the measure is unenforceable is nonsense; it will be introduced as planned. The savings were signed off by the Office for Budget Responsibility, which considered the compliance risk involved as well. Higher-rate taxpayers are of course required to disclose all relevant information.
Ian Austin
The Minister’s whole plan is based on two things: achieving, first, the biggest rate of export since 1974 and, secondly, a rise in business investment that has been matched only once in our history. Achieving both those things in the same year would be unprecedented, but the Government want to achieve both every year for three years on the trot. I know that the Chancellor and the Prime Minister do not live in the same world as the rest of us, but where did they dream that up—fantasy island?
Danny Alexander
I had planned to give way a few more times, but that intervention took so long that there will not be time to take any more for a while. The spending review is based on one simple principle: cleaning up the mess left behind by the Government of whom the hon. Gentleman was part.
We are making other welfare reforms too. We will cap household welfare payments at the average earnings of working households and we will reform housing benefit so that support better reflects the housing choices that working families have to make. That must be right. The welfare system should provide an effective safety net, but it should not pay workless families far more than most working families earn. That is where benefit traps and dependency start. Our reforms mark an historic shift from dependency to independence. Our measures are tough but fair.
Kate Green (Stretford and Urmston) (Lab)
Does the Minister accept that housing benefit is also an in-work benefit? The Government have presented very little evidence that out-of-work families who receive housing benefit live in significantly better conditions than any working family.
Danny Alexander
The cap that we propose, which will be debated in due course, is nearly £21,000-worth a year of housing benefit. That is more than equivalent to what most working families have to spend on their housing costs.
Matthew Hancock (West Suffolk) (Con)
Does the Minister think it fair that his, my and other constituents should pay so that some people can live in houses costing £500, £600 or more a week?
Clive Efford (Eltham) (Lab)
I have one simple question: will the Minister confirm that the majority of people on housing benefit are in work?
Danny Alexander
Yes; many people on housing benefit are in work. The point of our reform is to say that the fairness should be between people on out-of-work housing benefit gaining the maximum amount, which we will cap at £400 a week, so that that amount is equivalent to what people in work could receive in housing benefit.
Danny Alexander
I want to press on, so I shall not give way.
Our third principle is reform, which manifests itself in three ways. The first is bearing down on back-office costs. Each main Government Department has found at least 33% in administrative savings: we will share services, cut down on waste and abolish quangos. The second is a massive devolution of power from the centre, reflecting our commitment to freedom and responsibility. Apart from schools and public health, we will end the ring-fencing of all Government grants to local authorities from April next year. We will reduce 90 separate core revenue grants to councils to fewer than 10. Under the previous Administration, the comparable number of grants increased by more than 500%. Our new tax increment financing borrowing powers will allow councils to fund key projects, and we have today announced that we will consider options to enable local authorities to retain locally raised business rates. We are putting the local and government back into local government.
Finally, reform means recognising that the old ways of doing things simply were not working, even in times of plenty.
Danny Alexander
I will give way to the hon. Member for Birmingham, Erdington (Jack Dromey), then I will press on.
Jack Dromey (Birmingham, Erdington) (Lab)
The House has waited in vain for a straight answer to a straight question. I know the right hon. Gentleman would like to take credit for the sun shining, and indeed for the imprint on the Turin shroud, but will he give a straight answer to the straight question asked by my right hon. Friend the Member for Edinburgh South (Mr Darling), the former Chancellor of the Exchequer? Is it true or untrue that the growth in the first three quarters of 2010 is a direct result of the measures taken by the previous Government to build Britain out of recession?
Danny Alexander
The last quarter of growth—Opposition Members were hoping that things would be worse than they are, which is a pretty poor foundation for any sort of economic policy—took place since the Budget. [Interruption.] Of course the previous Chancellor deserves credit for that much of his work in office—[Interruption.]
Mr Deputy Speaker
Order. A lot of Members want to speak in this debate, and this disorderliness is doing us no good.
Danny Alexander
Finally, reform means recognising that the old ways of doing things were not working.
Danny Alexander
No, I will not give way.
The old ways of doing things were not working even in times of plenty, so we will revamp the failing system of social housing. The number of socially rented properties fell under the previous Government in total, with an increasing proportion of workless households finding themselves trapped in dependency. The terms of existing tenants and their rent levels remain unchanged under our proposals. Some new tenants will be offered intermediate rents nearer to market rent.
Danny Alexander
I am not going to give way because many hon. Members wish to speak.
Together with capital investment, those measures will create a more flexible and responsive model, enabling the Government to deliver up to 150,000 new affordable homes over the next four years.
Danny Alexander
No, I am not going to give way.
There will be reform, too, in the justice system. A prison population that is rising out of control is not right, let alone affordable. The guilty must be punished, but rehabilitation must be the priority.
There are major reforms in other policy areas. Across all that we do, reform is the keystone to delivering better for less.
Mr Nigel Dodds (Belfast North) (DUP)
I thank the Government for their work in rescuing savers in the Presbyterian Mutual Society in Northern Ireland; they are very grateful. The Government have built on the work of the previous one, but they have brought a solution to fruition. However, may I remind the Minister of the agreement—the settlement—that was made at the time of devolution for Northern Ireland? Will he look at that again to ensure that the challenges unique to Northern Ireland are faced with confidence?
Danny Alexander
I am grateful for the right hon. Gentleman’s intervention—my hon. Friend the Financial Secretary, who did a great deal of work on that issue, will have heard his compliments. I believe that we will introduce a growth paper on Northern Ireland soon, and the right hon. Gentleman’s points on that are very important. I know that questions have been asked, for example, on capital spending between June 2005 and 2018. We believe that we are on track to meet those commitments, which were made some years ago.
Danny Alexander
I am not going to give way.
The spending review will have an impact on the public sector workforce. I should like to say that the ideas, effort and commitment shown by the public sector workforce are essential to helping people to get the best from the services they provide, and we should thank them. The reforms that we are making will make the public services a more rewarding place to work—more power, more trust, more independence—but there will be an impact on employment. The best estimate remains that of the Office for Budget Responsibility, to which hon. Members have referred, which forecast in June a reduction of 490,000 employees over the next four years.
Natural turnover will play a big part, but individual employers will make their own decisions on redundancies. Each such decision will be difficult, which we recognise, so we have introduced pay restraint to protect jobs. We will monitor plans closely to try to avoid localised hotspots, and deploy our regional growth fund to support such areas.
Danny Alexander
I will give way to the hon. Member for Warrington North (Helen Jones).
Helen Jones
The Chief Secretary is proposing to make many public sector workers redundant. Given that, why is it considered fair for others to have money in tax avoidance trusts based overseas? Considering the strategies he is introducing, will he give a commitment that no Minister in the Government has or will have money based in overseas trusts designed to avoid paying their fair share of British tax?
Danny Alexander
If the hon. Lady was listening to me earlier, she would know that we have announced significant additional investment for HMRC to tackle tax avoidance and tax evasion. Of course, every Minister should comply with tax law.
Danny Alexander
I will give way to the hon. Gentleman sitting next to the hon. Member for Warrington North.
Huw Irranca-Davies (Ogmore) (Lab)
Does the right hon. Gentleman accept that the localised hotspots he mentioned, where the cumulative impact of his measures will take the most drastic and tragic effect, include Wales, the north-east and other areas that either rely heavily on public sector workers as a proportion of the work force or where the benefits reforms will have a significant impact? Does he also accept that he will be judged in 12 or 36 months or five years of this Parliament on whether the north-east, Wales and elsewhere are disproportionately and tragically affected by the cumulative impact of the measures he is ramming through?
Danny Alexander
Of course I accept that people will judge the Government’s performance on the basis the hon. Gentleman suggests. I fully understand that, which is why I am spelling out the measures we are taking to ensure that those areas that are most affected are supported through the regional growth fund. His point is important and serious, but I observe only that the previous Government created the mess of the Budget deficit. We have to clean up the problems facing our economy. The worst thing possible for Wales or other parts of the country would be to leave the deficit untackled, which would lead to lower growth, higher interest rates and less employment.
Danny Alexander
I will not give way again to the hon. Gentleman; I shall press on.
Also in June, the OBR forecast total jobs in the economy over the next four years, which Opposition Members seem to have missed. It implies 1.6 million additional private sector jobs over the period. We will do all that we can to help those leaving the public sector to take advantage of those opportunities, and we must remember at all times that the gravest threat to jobs in our economy would be a failure to deal with the deficit. Deficit denial is the single biggest danger to employment in this country today.
Throughout the review, I have been clear on one thing: our decisions need to improve life chances. Fairness is not just the net sum of cash transfers. That is important, but there is more. Fairness is about opportunity and the chance for a better future, especially for the next generation. We know about the attainment gap between children from different backgrounds, which starts at an early age.
In these difficult times, perhaps no one would have noticed had we quietly turned a blind eye, but fairness demands more, so we have chosen to invest. That is why we have introduced a new pledge for 15 hours’ child care for disadvantaged two-year-olds, matching the 15-hour commitment for all three and four-year-olds that was previously introduced by this coalition Government. Cash spending on Sure Start services will be maintained, with a renewed focus on life chances. Although this has meant a greater challenge for other Departments, I am proud that the schools budget will not only match but outstrip inflation in each of the next four years. When we factor in reduced pressure from pay restraint and back-office savings, that amounts to a very significant boost to the classroom. A new £2.5 billion pupil premium will target additional resources on those with the most to gain.
We will be relentless in our focus on social mobility, and in extending the ladder of opportunity. Fairness runs through the heart of this spending review.
Keith Vaz (Leicester East) (Lab)
We all accept that those are very difficult decisions. However, the chairman of the Police Federation has suggested that 40,000 police service jobs will be lost because of cuts to the Home Office budget. Does the right hon. Gentleman accept that if that happens, crime will rise?
Danny Alexander
I do not accept that analysis. Of course, it will be for individual police forces in due course to make their own decisions—[Interruption]—but given the potential for police forces to become more efficient, we think that there is no reason why those savings should have any impact at all on the presence of police on the front line in communities.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
On the policy to give two-year-olds 15 hours of education based on free school meal eligibility, what mechanism will be used and how much will it cost to ensure that that happens, given that there is no information about two-year-olds receiving free school meals? I have asked Ministers that question twice, but I still have not had an answer.
Danny Alexander
That is a very good question. I imagine that the hon. Gentleman intended to preface his question by saying that he welcomed the commitment to additional nursery education for the poorest two-year-olds. There are many mechanisms available, for example within the Sure Start system, that can target those pupils, and the Secretary of State for Education will no doubt make announcements in due course.
Danny Alexander
I now intend to finish my speech with no further interruptions.
I am often asked about a plan B. Plan A is to deal with the deficit so that we can support growth and invest in fairness. But we all know that the recovery will be choppy, so plan B is to deal with the deficit so that we can support growth and invest in fairness. But we know that the road will be difficult, so plan C is to deal with the deficit so that we can support growth and invest in fairness. Nothing is more important to our future prosperity.
One party made this mess. Two parties are working together to clear it up. We will hold firm. Where we have faced tough choices we have asked, “What are the fair choices? What are the choices that support growth? How can we achieve more with less?” We have made the right choices for the right reasons. We have given our answers: now let us hear the Opposition’s.
Ms Eagle
No. I have given way to the hon. Gentleman before.
No priority is to be given to the services that we rely on, day to day. That is the choice that the Government have made. Let us have a serious debate about the differences between us, and let us have no more nonsense from the Government about the four myths on which their entire defence of the scale of their cuts is based. Let us hear no more nonsense about the deficit being the result of the decision of one party or the fault of spending on our public services, rather than the inevitable result of a global economic crisis and the greed and recklessness of the banks.
Danny Alexander
The right hon. Lady has said that she is opposed to the welfare cuts that we have proposed, opposed to the pupil premium, opposed to the savings in the Ministry of Justice and opposed to the savings in the Home Office. Can she name one single saving that she would propose to help to tackle the deficit?
Ms Eagle
I have not said that I am opposed to all the changes in the social security budget. My right hon. Friend the shadow Chancellor supported some of the changes in welfare spending. Indeed, it was we who developed them: the Government are putting our changes into effect. Let us hear no more of this nonsense about the scale of the Government’s cuts being unavoidable, rather than the result of a decision that they made on the balance between taxes and public spending cuts.
Danny Alexander
This really is quite a simple question. Can the hon. Lady name a single cut that she supports?
Ms Eagle
If the Chief Secretary had answered my questions, I might answer his. [Hon. Members: “Incredible!”] What I find incredible is the fact that the right hon. Gentleman has the figures for redundancies and the costs of redundancies across Whitehall in his books. We know what the Ministry of Justice figure is, but he knows what the overall figure is, and he refuses to give it to the House. That is a disgrace.
Let us hear no more nonsense about how the spending cuts that the Government have announced were, as a result of some magical accounting trick, less than those that we planned when we were in government. The truth is that this country faced the gravest of economic challenges. The truth is that our party, in government, rose to meet that challenge, and averted a catastrophe for our country by making tough decisions to protect jobs and homes in our economy. The truth is that whatever party was in government, it would now be making decisions to pay down the deficit. Any party, including ours, would be having to make tough decisions.
It is also true that there is a clear choice in relation to what to cut, and the balance between cuts and measures to bring in revenue. My right hon. Friend the shadow Chancellor has set out the different approach that we would be taking, which would protect not only front-line services but jobs, growth and the recovery. The Government, for ideological reasons alone, have used the deficit as a fig leaf for an assault on our public services of a kind that they had previously only dreamt of. They can talk of fairness as much as they like; they can spread myths as much as they like; but we are not fooled, and, more important, the British public will not be fooled either.
The spending review document sets out the Government’s choices. Those choices were freely made. What the Government have presented is their vision of a future for our country. What we have seen is not the big society but the blueprint for a smaller, meaner and nastier society, and we reject it.
National Infrastructure Plan 2010
Danny Alexander Excerpts(13 years, 7 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
The Government have today published a national infrastructure plan outlining its vision for the future of UK economic infrastructure.
This is the first ever infrastructure plan for the UK. It outlines the scale of the challenge facing UK infrastructure and the major investment that is needed to underpin sustainable growth in the UK. It focuses on the networks and systems—in energy, transport, digital communications, flood water, waste management and in science—that provide the infrastructure on which our economy depends. The plan gives clarity on the role of Government in specifying what infrastructure we need and how they can remove barriers to mobilise both private and public sector resources to maintain our world class infrastructure.
Copies of the document have been deposited in the Libraries of both Houses and are available on the Treasury website at: www.hm-treasury.gov.uk.
Oral Answers to Questions
Danny Alexander Excerpts(13 years, 7 months ago)
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Paul Blomfield (Sheffield Central) (Lab)
3. What representations he has received on variations between the English regions and constituent parts of the UK in respect of the effects of the measures in the June 2010 Budget.
The Chief Secretary to the Treasury (Danny Alexander)
We received representations from many interested parties from all parts of the UK and at the time of the Budget we published details of the impact of the Budget on each English region and each devolved Administration.
Kevin Brennan
Does not the Government’s proposed closure of the passport office in Newport show that, far from us all being in this together, these Budget cuts will fall disproportionately on the poorest parts of the UK? Is this closure inevitable?
Danny Alexander
I am grateful for the question, and I understand the sensitivity in the community about that decision. The spending review will, of course, result in some difficult decisions having to be made all over the country. I can however say to the hon. Gentleman that we are looking very closely at the regional and national impact of particular decisions. One of the reasons why the Deputy Prime Minister announced a regional growth fund for England is to deal with those issues, and I hope very much that the Welsh Assembly Government might follow suit.
Paul Blomfield
Will the Chief Secretary acknowledge the analysis undertaken by the Institute for Fiscal Studies, whose head at that time now leads the Office for Budget Responsibility, that found that the measures in the emergency Budget will hit those on lowest incomes hardest and will have a disproportionate impact on constituencies in the north?
Danny Alexander
If anything demonstrates the independence of the OBR it is the appointment of the head of the IFS to be the head of the OBR, and I hope that will put an end to any such criticisms from the hon. Gentleman’s side of the House. The analysis was interesting, but the analysis we published at the time of the Budget was robust and soundly based. I have carefully studied the IFS’s additional analysis, and I think it makes some assumptions that push the boundaries. As a result it is not an analysis the Treasury would stand by. I would stand by the view that the measures we announced in the Budget were progressive and fair and hit the people on the highest incomes hardest.
Charlie Elphicke (Dover) (Con)
Can the Chief Secretary tell the House the benefits that the regional growth fund will have for neglected regions, in particular coastal and seaside towns?
Danny Alexander
I fear that the hon. Gentleman will have to wait until a week tomorrow for the spending review announcement to hear details of that sort, but I can tell him that the purpose of the regional growth fund is precisely to ensure that areas hit hardest by public spending cuts or areas most dependent on the public sector have an opportunity to put forward proposals for measures that would support their economic growth. The regional growth fund has been established to meet those proposals.
James Morris (Halesowen and Rowley Regis) (Con)
This builds on what the Chief Secretary has just said. Does he agree that what we need with the regional growth fund is a much more focused regional policy, rather than the waste that came from the previous Government and their one-size-fits-all regional policy?
Danny Alexander
I would agree with that, although I am not going to go over the litany of spending by regional development agencies. Having a regional growth fund that is able to respond to bids from communities, along with a much more devolved set of arrangements, through local enterprise partnerships, which require local authorities and local businesses to work together on what is best for their areas, is a much more dynamic approach, and it is likely better to meet the needs of those areas.
Mr David Hanson (Delyn) (Lab)
What account will the Chief Secretary take of last week’s joint statement by the leaders of the devolved Administrations in Wales, Scotland and Northern Ireland? They said that the proposed cuts in the comprehensive spending review are
“too fast and too deep”,
that
“Front loading the cuts into the next two years is…the wrong approach”
and that a failure to promote growth will damage the private sector? Will he now listen to those voices, which do not just argue for the public sector, but argue that the cuts that he proposes will damage private sector growth and private sector industry?
Danny Alexander
First, may I welcome the right hon. Gentleman to his new role, congratulate him on his appointment and wish him luck with it? The question he asks is important: what is the impact on the devolved Administrations? As he knows, the budget for devolved Administrations is set by the Barnett formula, which reflects the decisions we make for Departments within the UK, and so it falls out as a consequence of the spending review decisions. Of course our decision to protect the national health service—something that the Labour party was not willing to do—will reflect well on the devolved Administrations’ settlement. If the right hon. Gentleman wishes to enter credibly into this debate, he and his colleagues should make some credible proposals of their own as to how they would tackle the deficit.
Andrew Bridgen (North West Leicestershire) (Con)
16. What recent estimate he has made of the proportion of the central Government tax take from residents of the east midlands which is spent on that region.
The Chief Secretary to the Treasury (Danny Alexander)
We cannot accurately disaggregate tax revenue by individual regions, but we publish regionally disaggregated public spending tables each year. Total identifiable expenditure in the east midlands was £35.4 billion in 2009-10.
Andrew Bridgen
I thank the Minister for that answer, but as he is well aware, Leicestershire is historically one of the lowest-funded parts of the UK for education, the police and the fire services. Can he assure me that that historically low funding settlement will be taken into account in the comprehensive spending review?
Danny Alexander
The hon. Gentleman will have to wait until the statement on 20 October to hear the details of our spending decisions, but as I have made clear in answer to earlier questions, of course we consider it important to understand and manage the regional impact of spending cuts. We have established a regional growth fund, the details of which will be in the spending review statement, which will enable areas such as his to win support for projects that help economic growth in difficult times.
Harriett Baldwin (West Worcestershire) (Con)
17. What assessment he has made of the effect on GDP of proposals to increase the level of economic growth in the June 2010 Budget.
Paul Blomfield (Sheffield Central) (Lab)
T9. Will the Chief Secretary to the Treasury welcome the backing given by Olympic champion Jessica Ennis to the U-mix centre, which is a sports and leisure facility in Sheffield designed by Urban Mixtures, an inspiring group of young people who represent the real big society at work? Funding has been allocated for the project under the myplace programme, but has been frozen pending the comprehensive spending review. Will he share my hope that that funding will be unfrozen and allocated shortly?
The Chief Secretary to the Treasury (Danny Alexander)
I am grateful to the hon. Gentleman for raising that point, and as usual he puts the case for his constituency very eloquently. Decisions on spending matters, including spending that was frozen under the project re-approvals process, will be announced on or after the date of the spending review.
Tom Brake (Carshalton and Wallington) (LD)
T10. When the Chancellor and the Chief Secretary consider how to address the huge budget deficit they inherited from Labour, will they not lose sight of the importance of investing in affordable housing, specifically to ensure that homes meet the decent homes standard?
Danny Alexander
My hon. Friend makes a very important point. We will make decisions on spending and announce them on 20 October in the spending review statement. The point he makes is important, and I very much take it to heart.
Dr William McCrea (South Antrim) (DUP)
During a visit by the Deputy Prime Minister to Northern Ireland last week, he stated, “I will go away with colleagues in the coalition Government to look at the possible impact of the deficit reduction plan on capital expenditure in Northern Ireland.” Can the Chancellor confirm that that has been done and what steps will be taken in response?
Albert Owen (Ynys Môn) (Lab)
What representations have Treasury Ministers had from advice organisations such as citizens advice bureaux which fear that their budgets from local government will be cut at a time when they will be advising the most vulnerable people on their finances and welfare benefits? Will the Treasury team join me in paying tribute to the citizens advice bureaux for the work that they do, and commit to giving them extra funding for that purpose?
Danny Alexander
I join the hon. Gentleman in paying tribute to the work of the citizens advice bureaux. In constituencies across the country they play an invaluable role in advising people and helping them through difficult times. We will make spending announcements on 20 October, but I have had conversations with the citizens advice bureaux about some of the issues affecting them. Those issues will also affect other organisations in the community and voluntary sector, and the Government take that very seriously.
Jesse Norman (Hereford and South Herefordshire) (Con)
Does the Chancellor share my view that an economic policy that does not engage with cutting the deficit at all, and which has £30 billion of additional spending requirements, is no economic policy?
Emma Reynolds (Wolverhampton North East) (Lab)
The Government failed to conduct an equality impact assessment on the June 2010 Budget. Can the Chief Secretary reassure me that they will not make the same mistake again, and will the Government ensure that they assess the—probably disproportionate—impact on women of the comprehensive spending review?
Danny Alexander
The answer is yes. Departments will be carrying out these assessments on their spending decisions, and I myself held a round-table meeting in the Treasury with a number of different organisations involved in the equalities area to ensure that we were considering all the relevant issues in the run-up to publishing the spending review.
Mr Speaker
Order. There is quite a lot of chuntering from sedentary positions, but I want to hear both the questions and the answers.
Public Expenditure Provisional Outturn White Paper
Danny Alexander Excerpts(13 years, 10 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
The Treasury will publish the 2009-10 Public Expenditure Provisional Outturn White Paper on Monday 26 July.
The White Paper is an annual report to Parliament on the provisional outturn for public expenditure. It focuses on spending within departmental expenditure limits (DEL) and annually managed expenditure (AME), and includes information on individual supply estimates, and administration costs and near-cash limits.
The outturn figures are described as provisional because, in some cases, they will be revised when Departments publish their final accounts.
A copy of the White Paper will be deposited in the Libraries of both Houses and will be accessible on the Treasury website.
Oral Answers to Questions
Danny Alexander Excerpts(13 years, 10 months ago)
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Andrew Stephenson (Pendle) (Con)
14. What steps he plans to take to support economic growth in the north-west.
The Chief Secretary to the Treasury (Danny Alexander)
I am delighted to have the opportunity to answer these questions on behalf of the Chancellor, who is at the ECOFIN meeting today.
In order to support private sector enterprise throughout the UK and ensure that all parts of the country, including the north-west, benefit from sustainable economic growth, the Government announced a number of measures in the Budget, such as using the national insurance system to encourage the creation of new businesses and establishing a £1 billion regional growth fund. Later in the summer we will publish a White Paper on a new approach to sub-national growth, including local enterprise partnerships, local incentives and more powers for major cities.
Eric Ollerenshaw
I thank my right hon. Friend for that detailed answer. My question relates to the abolition of the Northwest Regional Development Agency. Does he agree with the comments of Councillor Peter Gibson, leader of the excellent Wyre borough council in my constituency, who said last week that its abolition will give us the potential to relieve the bureaucracy on the backs of local authorities and businesses and the potential for a fairer distribution of resources throughout Lancashire?
Danny Alexander
I am very grateful for that question. It is precisely because of such concerns that we have chosen to establish local economic partnerships. The Secretaries of State for Communities and Local Government and for Business, Innovation and Skills jointly wrote to local authorities inviting submissions for the establishment of those new bodies, which will be partnerships between local authorities and local businesses. That is the right way to promote economic growth in localities.
Andrew Stephenson
I thank my right hon. Friend for that answer. Picking up on what my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw) said about the Northwest Regional Development Agency, is my right hon. Friend aware that the North of England Inward Investment Agency, which is sponsored by the Northwest RDA and One NorthEast, currently maintains five offices in north America? In light of the record budget deficit, can he assure the House that he will look carefully into overseas offices and whether they deliver value for money?
Danny Alexander
The hon. Gentleman makes a very good point, and there is an awful lot of waste in the regional development agency system more generally. Of course, it will be for the local economic partnerships to look at such issues and work out whether they wish to come together to promote their region in a wider way, but his point serves to reinforce the argument for the structural change that we are making.
Graham Stringer (Blackley and Broughton) (Lab)
There is no doubt in my mind that the Northwest Regional Development Agency has been a bureaucratic burden on the economy of the north-west since it was started. It has also followed capricious policies that have not directed investment where it would create most jobs. How will the right hon. Gentleman ensure that money is invested in those places where it will create most jobs?
Danny Alexander
I am very grateful to the hon. Gentleman for his comments in support, I think, of the policy that we are pursuing. The local enterprise partnerships will be able to choose for themselves and direct where they think investment is needed in their localities. One major tool that they will have at their disposal is the ability, as a public-private partnership, to apply to the regional growth fund for investment in their areas. Obviously, that will be allocated in ways to be announced, but I hope that it will provide a tool for those new bodies to do precisely the sorts of things that the hon. Gentleman set out.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
Businesses in the north-west will have seen the National Institute of Economic and Social Research arguing that growth will now be lower as a result of the Budget; they will have seen two reports of business confidence in their region and throughout the UK tumbling as a result of the Budget; and, just last week, they will have seen the International Monetary Fund’s devastating downgrading of its forecast for UK growth. Are not people in the north-west listening to the Chief Secretary trying to sell the Budget as a Budget for growth entitled to feel that, actually, they are being sold the emperor’s new clothes?
Danny Alexander
People in the north-west and elsewhere will have seen the Office for Budget Responsibility’s forecast, which predicts that during the course of our Budget over the next four years we will see rising economic growth, falling unemployment and rising employment. They will have seen also the OECD’s forecast and review of the UK, which was published today and includes the title, “A Strategy To Instill Confidence and Boost Growth”. That is precisely what our Budget is.
John Mann (Bassetlaw) (Lab)
3. What recent representations he has received on the level of the UK national debt relative to that of other countries; and if he will make a statement.
The Chief Secretary to the Treasury (Danny Alexander)
The UK faces one of the largest fiscal challenges of any advanced economy. According to the International Monetary Fund, between 2007 and 2015 the UK is forecast to experience the most rapid increase in net debt of any G7 economy, with the exception of Japan. The Office for Budget Responsibility’s pre-Budget forecast shows that without further action to tackle the deficit, debt would still be rising in 2014-15. As result of the actions set out by the Government in the June Budget, the OBR projects that debt will have declined to 69.4% of gross domestic product in 2014-15— 5% of GDP lower than under the plans the Government inherited.
John Mann
That was a lot of words, but the Chief Secretary did not answer the question. Why does the United States have a much higher debt than we have, and why do Canada, Italy, France, Germany and Japan all have, as a percentage of GDP, higher debt than we have? Is it true that the extent of the cuts is driven not by economics but by ideology?
Danny Alexander
No, that is not true. The plain fact is that, as I said earlier, we have the fastest growing debt and the largest deficit in the European Union apart from Ireland. In the Budget we have taken action to ensure that we prevent the key risk facing growth in this country, which is a failure to take action and a failure to restore confidence in the economy, potentially causing us the sort of problems that we have seen in other European countries. That is the problem that we need to avoid.
Sir Peter Tapsell (Louth and Horncastle) (Con)
Does the Chief Secretary agree that it is the refinancing capability of the national debt as redemption dates are reached that really matters?
Danny Alexander
Of course that matters, but what matters more than anything is the risks that this economy would have faced if we had stuck with the plans of the previous Government, which would have risked higher interest rates, lower growth and fewer jobs, and there would have been very big risks in the future.
Mr Alistair Darling (Edinburgh South West) (Lab)
I am glad that the Chief Secretary at least accepts the proposition put by the hon. Member for Louth and Horncastle (Sir Peter Tapsell).
We all agree that to get debt down, growth is essential. However, has the Chief Secretary noticed this morning’s remarks by Geoffrey Dicks, a member of the Office for Budget Responsibility, who said that his office had cut its forecasts for growth by 0.5% as a result of the Budget announcements two weeks ago, and went on to say that logically, as he put it, that increased the chances of our economy slipping back into recession?
Danny Alexander
He also made it clear that he did not think that that risk was a likely one. In the Budget—this is the important central judgment that the House needs to understand—we have faced up to the fact that if we had carried on with the plans of the previous Government, the big risk facing the economy would have been higher interest rates, fewer jobs, and a reduction in growth, and we would have faced the big risk that we have seen in other countries, which we need to ensure does not happen in this country. Our Budget has ensured that that risk is avoided; the previous Government would not have done that.
Michael Fallon (Sevenoaks) (Con)
Given that the IMF report said that we would have had the highest public borrowing in the G20 this year and the worst structural deficit in the OECD, has the Chief Secretary, the Chancellor or any Treasury Minister yet received a formal apology from the Labour party for the appalling state of the economy?
Danny Alexander
Sadly, there has been no formal apology. Labour Members are free to offer one during this questions session should they wish to. In fact, with the revised Office for National Statistics forecasts of the last couple of days, we have seen the predicted reduction in the size of the economy go from 6.2% to 6.4%. Even after they have left office, their recession is still getting worse.
Barry Gardiner (Brent North) (Lab)
Is the UK on the brink of a debt downgrade because the rating agencies have noted that the Government propose to cut capital allowances and therefore stifle investment, or because the agencies do not share the Government’s optimism about Europe’s capacity to buy UK goods in the future?
Danny Alexander
No, the hon. Gentleman will know that the rating agencies’ response to the Budget has been positive and ensured that we have a stronger position going forward.
Stephen Williams (Bristol West) (LD)
Does my right hon. Friend agree that given that we are currently spending more on interest on our accumulated debt than we are on schools, police officers and other important measures, we must take difficult decisions now to release more money to spend on vital public services later in this Parliament?
Danny Alexander
I could not agree more with my hon. Friend, who sets out the case strongly. From what I read, I believe that that position was understood by the previous Government. I read the former Chancellor’s interview in The Guardian, in which he said:
“There were bits of medicine we could have administered last year that would have made things easier. Had we gone further in saying to people round the cabinet table we are not going to do this”—
Annette Brooke (Mid Dorset and North Poole) (LD)
5. What recent representations he has received on the proposals in the June 2010 Budget intended to increase economic growth; and if he will make a statement.
The Chief Secretary to the Treasury (Danny Alexander)
The Government have received representations on a range of proposals to increase economic growth. Indeed, the Budget is about growth. It is about underpinning private sector confidence and creating the space for business to grow, redressing the balance between the public and private sector. Crucial to promoting growth is cleaning up the public finances and the mess that the previous Government left. That is why the OECD document published today described the Budget as “courageous” and “appropriate”.
Annette Brooke
Given the difficulties with time lags, for example between decision making and outcomes, how will the Chief Secretary monitor the overall impact of the stimulus given to growth in the private sector and the necessary cuts in Government expenditure, to ensure that we have a sustainable recovery and not a double-dip recession?
Danny Alexander
The measures in the Budget are set out precisely to ensure a sustainable recovery through a number of measures, particularly in the tax sphere and, following the earlier questions on regional growth, to stimulate business. Of course, it is now for the independent Office for Budget Responsibility to produce independent forecasts of growth, and it will do so at the time of future fiscal events.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The Budget VAT rise in January will affect economic growth on the islands of Scotland. Surely we need a rural fuel derogation in place before the rise. After all, the rural fuel derogation was in the coalition document, but the VAT rise was not.
Danny Alexander
The hon. Gentleman is right, of course, that the rural fuel derogation is in the coalition agreement. The Chancellor restated our commitment to investigating the matter in the Budget statement, and I can assure the hon. Gentleman that we will be coming forward with an announcement in due course.
Mrs Helen Grant (Maidstone and The Weald) (Con)
What action will the Chief Secretary take to boost new business in rural areas?
Danny Alexander
Businesses in rural areas will have the opportunity to benefit from the regional growth fund that we are establishing and which will help to support business growth in the regions of the country, particular those areas where dependence on public sector employment is greatest. Also, new businesses in rural areas will benefit from the cut we have announced in national insurance for new employees in new businesses.
Ms Angela Eagle (Wallasey) (Lab)
Is the Chief Secretary aware that, as part of the growth drive, the Treasury has set up a spending challenge website asking for ideas and assistance for the future, and that it is currently featuring issues such as sterilising the poor; reopening the workhouses; asking single parents who cannot finance their children to terminate the pregnancy; benefit claimants to work in sweatshops; and immigrants to be moved out of cities? Is he happy that such racist and offensive drivel is being hosted by one of his websites, and will he give the House an undertaking that the site will be moderated and that this stuff will be removed immediately?
Mr Speaker
Order. I know that the right hon. Gentleman, in answering the question, will focus his remarks on the June 2010 Budget.
Danny Alexander
I am grateful for that, Mr Speaker.
Of course, I would not wish to promote such ideas, but I am surprised that the hon. Lady pours scorn on the consultation process we are undertaking. She will know that we have also set up such a process for public sector workers. We have had more than 66,000 ideas from people who work in the public sector and who are suggesting savings that they believe can be made in their own services. That is a valuable part of the spending review process. However, we have not had a single idea from the Labour party on how we can make the savings, let alone the apology warranted for the terrible mess it left the economy in.
Esther McVey (Wirral West) (Con)
13. What recent discussions he has had with the Secretary of State for Health on funding for mental health services.
The Chief Secretary to the Treasury (Danny Alexander)
I am grateful to the hon. Lady for her question. I know that she takes a great interest in these issues. We want to offer long-term solutions to people with mental health problems and provide psychological therapies to do that. Our coalition programme set out our intention to ensure greater access to talking therapies. That is why, on 23 June, the Secretary of State for Health pledged £70 million to continue the roll-out of psychological therapies across the NHS this year.
Esther McVey
Given the dire financial situation the last Government have left us in, and the very real impact it will have on each and every one of our lives, will the Minister go further to explain the £70 million that he plans to spend on psychological therapies in the current financial year? That is particularly important when one in four of us will in the course of our lifetimes suffer from problems in our mental well-being—including finance-related stress, reminding us of our inheritance from the previous Government.
Danny Alexander
The hon. Lady is quite right to spell out the importance of tackling mental health problems, which, as she says, many people experience during the course of their lives, so it should be taken very seriously. That is why we have continued to roll out funding for the expansion of talking therapies, which in many cases are the most effective. I also note that, unlike the Labour party, we have pledged to increase health spending in real terms during every year of this Parliament to enable these sorts of problems to continue to be tackled—even in very tight financial circumstances.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
Investment in mental health through the NHS is very important. Equally, however, people with mental health problems are affected by many other issues, including the caps on housing benefit proposed in the Budget. Has the right hon. Gentleman had any discussions across Government about the impact of Treasury decisions—not just giving money away, but cutting funding—on people with mental health problems?
Danny Alexander
Supporting people with mental health problems through protecting the NHS budget is the best way to achieve the outcome that the hon. Lady suggests. There is also the Work programme, which is being developed by the Department for Work and Pensions to bring together and replace many of the employment initiatives of the previous Government, some of which were highly ineffective. Conditioned management of mental health problems will be part of that programme, which will help people with mental health problems back into work, which is, after all, the best route out of poverty.
Kevin Brennan (Cardiff West) (Lab)
15. In what sectors of the economy he expects the export growth forecast contained in the June 2010 Budget to be achieved.
Jessica Morden (Newport East) (Lab)
T1. If he will make a statement on his departmental responsibilities.
The Chief Secretary to the Treasury (Danny Alexander)
The core purpose of the Treasury is to ensure the stability of the economy, promote growth and employment, reform the banking system and manage the public finances so that Britain lives within her means.
Jessica Morden
Many small charities are extremely worried about the rise in VAT. Does the Minister think it is fair that charities be hit in this way?
Mr Alistair Darling (Edinburgh South West) (Lab)
Does the Chief Secretary, in the Chancellor’s absence, agree that the independence and credibility of the OBR are absolutely paramount? Sir Alan Budd said to the Treasury Committee this morning that the numbers he released two weeks ago
“were not an appropriate basis for attempting to estimate the effects of the June Budget on general government employment”,
and the Prime Minister was quite wrong to claim that they were. Would it not be better for the OBR to be more accountable to this House, with its appointments being subject to confirmation hearings by the Treasury Committee, and for its deliberations to be completely open and transparent? What we have at the moment is a good idea strangled at birth by the way in which this Government have been treating it.
Danny Alexander
The independence of the OBR is not in question. That was made clear by Alan Budd in his evidence to the Treasury Committee today. This is a good idea that was brought forward by this Government, and it will be established in legislation. I do not think it was even part of the former Chancellor’s secret plans before the election, alongside a rise in VAT, a cut in corporation tax and a cut in income tax. Those are measures he should be supporting in this Budget, because he came up with them in the first place.
Mr David Davis (Haltemprice and Howden) (Con)
T4. When the Exchequer Secretary answered the hon. Member for Edmonton (Mr Love) earlier on capital gains tax, he quite properly justified the increase in CGT on the basis of a dynamic model of both income tax and CGT. Will he publish that model and its supporting evidence?
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
T3. The Chief Secretary justifies massive cuts to the public sector through fears of a sovereign debt crisis as the credit rating agencies downgrade our debt, but those same agencies were giving triple A ratings to junk financial instruments right up to the crash. Can he explain whether credit rating agencies, discredited as they are, or Tory ideology is driving these cuts?
Danny Alexander
The measures we have taken in the Budget are necessary to tackle the mess that the previous Government left. The degree of denial that the Opposition are in about the mess they created, the huge debt they built up and the fact that this country has the largest deficit in the European Union outside Ireland never fail to surprise me, although they probably should not surprise me. The measures we are taking are necessary to clean up that mess and to establish jobs and growth in the future.
Chris Skidmore (Kingswood) (Con)
T5. I am sure that Ministers can understand the disappointment of my constituents when Cadbury’s new owners stated their intention to move mass production abroad from the Summerdale plant near my constituency. In the light of this and of the dramatic decline in manufacturing employment over the past 13 years—down from 4.7 million jobs in 1997 to 2.6 million jobs now—what steps are they taking to support manufacturers in this country?
Bill Esterson (Sefton Central) (Lab)
Many businesses in the north-west saw the value of regional development agencies and were very much opposed to their abolition. What consultation was carried out with business leaders on the proposal to abolish RDAs?
Danny Alexander
Of course we have invited groups involving local authorities and local businesses to submit proposals for the establishment of local enterprise partnerships in the hon. Gentleman’s area and across the country to replace the regional development agencies. Local businesses will be very involved in those and will help to lead them. To judge from the earlier exchange involving other Members from the north-west, it seems there has been a positive welcome for those steps.
Richard Harrington (Watford) (Con)
T6. In view of the importance of this issue to Opposition Members and their colleagues in the other place, can the Minister confirm that there are no plans for the Government to introduce VAT on the sale of hardback books?
Gloria De Piero (Ashfield) (Lab)
Mums in my constituency who work part time in the public sector and earn, say, £11,000 or £12,000 a year are telling me that their pay is to be frozen, so far from low-paid workers being protected, as was promised, it seems they are going to be hit the hardest, because that pay freeze is pro rata. Can the Chief Secretary confirm that and tell me how many low-paid part-time public servants will be affected?
Danny Alexander
We have announced a pay policy that involves a pay freeze for people earning above £21,000 a year. People earning below £21,000 a year will have a pay rise of at least £250.
Danny Alexander
That pay rise will be pro rata, but people will benefit from the changes to tax credits, for example, and the significant increase in the child tax credit for those with children. That will help to ensure that many of the people with children in the hon. Lady’s constituency whom she is describing will not be driven into poverty, as they were in many instances were under the previous Government.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
T7. I and I am sure many other Members have received many representations from Equitable Life policyholders who felt very shabbily treated by the last Government. Can the Minister give me some assurance that under the new coalition Government, they will treated a little more equitably?
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
The Economic Secretary, the Chief Secretary’s Front-Bench colleague, referred to the establishment of the Office for Budget Responsibility as a welcome step forward for transparency. In the interests of transparency, could the Chief Secretary tell me precisely when he saw the revised unemployment figures produced by the OBR?
Danny Alexander
The revised unemployment figures were published by the OBR on the Wednesday morning. The figures were circulated in the normal way, as happens with the Office for National Statistics, the day before in the Treasury. That is when I saw the documentation that was published. The requirements for confidentiality that apply to ONS figures also apply to OBR figures.
Mr John Leech (Manchester, Withington) (LD)
T8. The Chancellor took the difficult decision to increase VAT to deal with the dire economic legacy of the previous Labour Government. Will the Minister commit to reviewing the increase in VAT once this coalition Government have dealt with the deficit and got the economy back on its feet?
Mr Speaker
Order. I must limit the hon. Gentleman to two questions—one answer will suffice.
Danny Alexander
The Office for Budget Responsibility is wholly independent. Decisions of the sort that the hon. Gentleman has described are a matter for the OBR to take on its own initiative—that is what having an independent body means.
Nicky Morgan (Loughborough) (Con)
The issue of business start-ups and supporting small companies has been mentioned this afternoon, but many of them are finding it very difficult to access bank financing. I was wondering how the Budget proposals will assist them, because growing the private sector is essential to improving our economy.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
Does not the revised forecast from the International Monetary Fund demonstrate yet again that the coalition’s Budget will hit growth and therefore jobs?
Danny Alexander
The consensus among international bodies is that growth will grow over the coming years based on the Government’s plans and that unemployment will fall. The hon. Lady might not yet have seen the OECD’s report on our economy today, which describes our Budget measures as “courageous and appropriate” and as “an essential starting point” for restoring growth and jobs in this economy. That is a position that the whole House should welcome and not criticise.
Mr Stewart Jackson (Peterborough) (Con)
I am delighted that the shadow Chancellor believes in transparency in Government. Is my right hon. Friend minded to publish the position papers prepared by the Treasury in respect of the previous Government’s plans to increase VAT before the election?
Danny Alexander
It is striking that the one party that had a plan to increase VAT before the election—to 18% or even 19%, according to the account in one book serialised today—did not say so at the election. I am not sure that it would be appropriate for us to publish documents that were worked up for the previous Chancellor—I am not sure that that would be in line with the conventions—but the hon. Gentleman has made his point very effectively.
Mr Dennis Skinner (Bolsover) (Lab)
Has the Treasury done a calculation of the number of construction jobs that will be lost as a result of not building 700 schools? Does that not prove that public sector cuts equal private sector misery? Get that into your head.
Danny Alexander
The thing I have got into my head is that the plans laid down by the previous Government for this programme, particularly in the Department for Education, were among the most irresponsible financial planning carried out by that Government in their entirety. When that Government were planning to cut capital spending in half and increase the spending on this programme, taking no account of the pressures in primary schools, for example, that was pure irresponsibility. My friend the Secretary of State for Education has made the right decision on this matter. I know that it is painful in many constituencies, but this is one of many things that the Opposition should be apologising for, not criticising.
Independent Public Service Pensions Commission
Danny Alexander Excerpts(13 years, 10 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chief Secretary to the Treasury (Danny Alexander)
Lord Hutton’s terms of reference and “Call for Evidence” are available in the Vote Office and in the Printed Paper Office, and have been deposited in the Libraries of both Houses.
Periodic updates of the Commission’s work will be made available through the website, located at: www. hm-treasury.gov.uk/indreview_johnhutton_pensions. htm.
Finance Bill
Danny Alexander Excerpts(13 years, 10 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
I beg to move, That the Bill be now read a Second time.
The emergency Budget takes tough action at a critical time for the British economy. The Bill implements many of the necessary measures in the Budget. As my right hon. Friend the Chancellor of the Exchequer said in his statement:
“The coalition Government have inherited from their predecessors the largest budget deficit of any economy in Europe, with the single exception of Ireland. One pound in every four we spend is being borrowed.” —[Official Report, 22 June 2010; Vol. 512, c. 166.]
The gap stands at £149 billion for this financial year alone. Yet the previous Government left us with no credible plans to reduce their record deficit. Nothing at this time is more urgent for Britain than setting out a tough, realistic and fair plan that demonstrates how we will regain control of the public finances.
Kelvin Hopkins (Luton North) (Lab)
Would not a better plan be for the Government to try to collect some of the taxes that are not paid, rather than cutting the wages and jobs of people in the public sector?
Danny Alexander
I am grateful for that intervention. Of course the hon. Gentleman will know that the Bill includes some anti-avoidance measures, to which I will come in my speech. I trust, therefore, that he will welcome those measures.
Mr Kevan Jones (North Durham) (Lab)
The right hon. Gentleman just told the House that the previous Government’s plans for a reduction were not credible, but how can he say that when the Office for Budget Responsibility’s latest independent analysis found that the Labour reduction plan would have more than achieved the target to halve the deficit over four years from 11.1% in 2009-10 to 5% in 2013?
Danny Alexander
I am grateful for that intervention. As the OBR set out both in its pre-Budget forecast and in the forecast published with the Budget, the comparison that the hon. Gentleman is seeking to make is based on interest rate assumptions that took into account market expectations under this Government’s measures, not market expectations of the measures that the previous Government were taking. He should read the OBR report if he does not agree, because that is an accurate account of what it says. It is clear that, had the previous Government carried on with their plans, interest rates would have been different. The risks that we are seeking to avoid through the Budget are those of higher interest rates, lower growth and fewer jobs, which I believe would be the consequence.
Clive Efford (Eltham) (Lab)
In light of that answer, what are we to make of Sir Alan Budd’s resignation today? The right hon. Gentleman puts much store by the OBR’s reports, but did they not contribute to Sir Alan relinquishing his post? He said that this was the greatest challenge of his professional career. He must have an extremely exciting career that he can give up that post so quickly.
Danny Alexander
I am grateful to the hon. Gentleman for giving me the opportunity to place on the record my thanks and those of this Government to Sir Alan Budd for his superb work in establishing, in a short period, an independent Office for Budget Responsibility with a strong reputation. It was always known that he intended to move on after a short period—a few months—in his post, and that is what he is doing. In a short time, he has established greater independence of the forecasts that go with the Budget than the previous Government managed in 13 years.
Chris Leslie (Nottingham East) (Lab/Co-op)
Sir Alan Budd is leaving the Office for Budget Responsibility, so to ensure that that organisation is seen to be independent, will the right hon. Gentleman give the House of Commons the power to appoint the successor or is he going to keep that for himself as a Minister?
Danny Alexander
I am not sure that that power ever rested in the hands of the Chief Secretary but, as the hon. Gentleman knows from the Gracious Speech, the Government intend to implement legislation to put the OBR on a statutory footing. He will have the opportunity to make that point in considering that legislation, and I am sure that he intends to do so.
Danny Alexander
I would like to make progress.
We have considered the plans of the previous Government and it is clear that they left us open to the risk of ending up in an even more serious crisis than that which we currently face. Such a crisis could ask questions of the kind that some other European countries face today, with higher interest rates—I mentioned those to the hon. Member for North Durham (Mr Jones)—more businesses going bust and higher unemployment. That is not a risk that we are prepared to take. The Budget takes the tough action necessary, but it does so with fairness, protecting the most vulnerable, including children in poverty and pensioners. In his emergency Budget, my right hon. Friend the Chancellor has set out clearly how we will pay for the bills of the past and start to plan for the future. This has already had an impact on the credibility of and confidence in the British economy.
Helen Jones (Warrington North) (Lab)
On fairness, it is clear that the measures that the right hon. Gentleman is enacting mean that the poorest 10% of people lose in percentage terms twice as much of their incomes as the richest 10%. What definition of fairness is he using when he says that that is fair?
Danny Alexander
I am sorry, but I do not accept the figures that the hon. Lady set out. If she looks at the information presented in the Red Book, she will find that it shows that the richest 10% of the population pay the greatest contribution, both as a share of their income and in cash terms. That is what I mean by fairness, and that is what we have set out. It is worth pointing out to her that this is the first time that a Government have chosen to set out in detail in the Budget documentation the distributional impact of the Budget measures. That is not a measure that the previous Government took, for example, when the 10p tax rate was being abolished.
Danny Alexander
I will give way to the hon. Gentleman and then to the right hon. Lady.
Mr Jones
I know that the right hon. Gentleman is doing his apprenticeship, but does he not understand the difference between the proportion and the actual tax take? Surely for a family in my constituency who are earning the minimum wage, the VAT situation alone will mean that the effect on the proportion of their income will be larger. If he looked at the research paper that has been ably produced in the House of Commons, he would find that it points out that fact.
Danny Alexander
I ask the hon. Gentleman to look at the tables on page 67 of the Red Book. I draw his attention to chart A2, which is on the
“Impact of all measures as a per cent of net income by income distribution”.
He will find that it makes it clear that the impact on the top decile is the highest as a share of income. Other charts make it clear that it is the highest in cash terms and that the impact is broadly progressive across income distribution.
Danny Alexander
I give way to the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), who tried to intervene first.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
I am rushing to get to the ballot box—[Interruption.] The right hon. Gentleman is welcome to come to the ballot box too, if he so wishes. He will know that not only does chart A2 include the Labour measures from the March Budget, but it does not go beyond 2012-13 and does not include housing benefit. Is he also aware that the House of Commons analysis has shown that more than 70% of about £8 billion of direct tax and benefit measures introduced in his Budget are being paid by women? What figure does the Treasury put on the proportion of those direct tax and benefit measures being paid for by women?
Danny Alexander
There were a lot of questions there but not a single apology for the record of the previous Government. The single measure announced by the previous Government that is included in the charts in the Budget Book is the national insurance change. We have chosen to introduce that measure, so it is legitimate that we have included it in the charts. Other measures that affect people on higher incomes such as the increase in capital gains tax for higher rate taxpayers, which the previous Government never chose to introduce, cannot be included in the tables, so the impact on the wealthiest may even be greater than is illustrated in the charts.
Matthew Hancock (West Suffolk) (Con)
Does not the Minister, like me, find it a bit rich that Opposition Members look only at part of the Budget, not the whole, after 13 years in which they did not once introduce a distributional table?
Danny Alexander
I agree with the hon. Gentleman. It is a bit rich coming from the Opposition, given that we have set out for the first time in any Budget its distributional impact.
Danny Alexander
I wish to respond fully to the intervention. I will come to the right hon. Gentleman in a little while.
We have taken a number of measures in the Budget, such as the earnings link with pensions, with a triple lock of earnings, prices or 2.5%, which the previous Government never managed in 13 years. That is a record of which we can already be proud. I give way to the former Chief Secretary.
Danny Alexander
As I understand it, the House of Commons analysis does not include the impact of all the measures in the Budget. VAT is paid much more in cash terms––that has been accepted by the Institute for Fiscal Studies––so it is paid more by the wealthiest. The analysis that we should rely on is that which is presented in the Budget because it shows that the distributional impact of the Budget measures hits those on highest incomes hardest. That is the relevant measure and the one that I intend to draw attention to.
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
I commend my right hon. Friend on the fairness that he has ensured runs right through the Budget, especially in respect of pensioners, but may I draw his attention to one small potential unfairness that may have crept in? Pensioners who are on a modest works pension and the state pension will pay £100 more in tax this year than they did last year because of the difference in the thresholds. I am sure that this was inadvertent. Will he look again at that particular issue?
Danny Alexander
I am grateful for that intervention. I am sure that my hon. Friend will have the chance to raise that point either in Committee or on the Floor of the House when the Bill is considered.
Barry Gardiner (Brent North) (Lab)
Has the Chief Secretary analysed the impact of the Budget measures on women? If not, will he commit to doing so?
Danny Alexander
I can confirm that we have carried out an analysis of the Budget across the income distribution to evaluate its fairness. We have also conducted an analysis of the impact on child poverty, which is the most important aspect. We have ensured that, even in the toughest Budget since the second world war, there will be no impact on measured child poverty—something that could not always be said of the previous Government’s Budgets.
Ben Gummer (Ipswich) (Con)
Opposition Members like talking about apprenticeships. I am a relative newcomer to the House so can my right hon. Friend enlighten me? What happened to the gap between rich and poor under the previous Government? For my information, did it get wider or narrower?
Danny Alexander
The hon. Gentleman is clearly not as much of an apprentice in this House as he claims to be. The gap between rich and poor got wider during the previous Government’s term.
The measures in the Budget have already had an impact on the credibility of and confidence in the British economy. As the director general of the CBI, for example, has said:
“This budget is the UK's first important step on the long journey back to economic health.”
The Fitch rating agency said:
“The path of deficit reduction and public debt projections set out in”
the
“Budget statement are materially stronger than that set out in the March 2010 Budget.”
On fairness, the chief executive of Barnardo’s said:
“we recognise the Government has done what it can to protect the most vulnerable.”
Mr Andrew Love (Edmonton) (Lab/Co-op)
Will the right hon. Gentleman give way?
Danny Alexander
I will make some progress and give way to the hon. Gentleman later.
The Bill shows how the Government will carry out Britain’s unavoidable deficit reduction plan in a way that strengthens and unites the country. The Budget and the Bill stand for three things. The first is responsibility—taking action to eliminate the structural deficit. The second is freedom—helping the businesses on which we all rely to rebuild our broken economy. The third is fairness—protecting the most vulnerable, while ensuring the contribution of all. Those principles are at the centre of the Bill before the House today and I shall address each in some detail shortly.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The right hon. Gentleman mentioned fairness and businesses, and I would like to draw his attention to rural areas. He will understand that the increase in VAT will affect fuel prices in rural areas. Would it not be right to have a rural fuel derogation pilot in place before the VAT increase takes effect?
Danny Alexander
I am very grateful for that intervention. The hon. Gentleman knows that we are investigating a rural fuel derogation of some sort—that was repeated in the Budget statement. Although I cannot make a commitment on timing, as he knows, I am personally very enthusiastic about such a measure and I will continue to work with my colleagues on it.
Danny Alexander
No, I want to make some progress.
The Finance Bill before the House today seeks to ensure that the Government’s key tax priorities as set out in the emergency Budget are put on the statute book as swiftly as possible. This year, however, we face exceptional circumstances owing to the timing of the general election, which resulted in a curtailed Finance Bill following the previous Government’s March Budget and a relatively short timetable between our emergency Budget and the summer recess. There remain a number of minor and technical measures that we inherited from the previous Government and which must be legislated for before 2011. We shall therefore introduce those measures in a further Finance Bill in the autumn. Consistent with our aim of greater scrutiny of tax legislation, again set out in the Budget, we shall publish all those measures in draft for consultation before the end of July.
Chris Bryant
The right hon. Gentleman says that he is thinking about a derogation for rural areas in relation to VAT on fuel. May I point out that not a single house in the Rhondda is more than half a mile from a farm, so will he include the Rhondda in a derogation not only from VAT on fuel but from everything else as well?
Danny Alexander
The hon. Gentleman has misunderstood what is being discussed, which is no surprise, given the previous Government’s attitude to the idea, as the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) knows. We are not talking about a VAT derogation; the proposal relates to fuel duty.
Ms Angela Eagle (Wallasey) (Lab)
I was involved when the Treasury last looked at that idea. As the hon. Member for Na h-Eileanan an Iar knows, there are real hardships and we were very sympathetic. However, the Chief Secretary must admit that there are difficulties with developing such a policy, not least because of the potential for smuggling and fraud.
Danny Alexander
The hon. Lady says she was sympathetic—I attended a meeting where she expressed that sympathy—but no action by the previous Government resulted, despite the matter being pressed for a number of years. I am sure that my hon. Friend the Exchequer Secretary will look at all the issues as the question is investigated.
Danny Alexander
I hesitate to take further interventions, as we are somewhat outwith the scope of the Bill, but I will give way once more to the hon. Gentleman.
Mr MacNeil
I ask the Chief Secretary to consider this question. With rural fuel priced between £1.30 and £1.35 a litre, were a rural fuel derogation to apply in Na h-Eileanan an Iar, to where might we smuggle fuel? I would struggle to find anywhere where fuel is more expensive. That smuggling would be a problem is a ridiculous proposition. We had 13 years of nothing but sympathy from the last Government, with absolutely no action. I hope that this Chief Secretary does not make the same mistake.
Danny Alexander
I am grateful for the intervention, in both senses.
Returning to the Bill, I should say that our plan stands first and foremost for responsibility, because a failure to deal with the deficit is the greatest threat to our economy and to the well-being of our nation. A failure to act now would mean higher interest rates hitting businesses, hitting families and hitting the cost of repaying the Government’s debt. That would mean more business failures and sharper rises in unemployment, and it would risk a catastrophic loss of confidence in the economy. The Budget’s forward-looking fiscal mandate will eliminate the deficit in five years and put us on track to have the debt falling by 2015.
The Office for Budget Responsibility forecasts that the measures in our Budget will lead us to meet that challenge one year early and the bulk of the reduction will come from lower spending, rather than from higher taxes. My right hon. Friend the Chancellor announced that the spending review will conclude with an announcement on 20 October and address precisely how we will bring down spending.
Mr Michael Meacher (Oldham West and Royton) (Lab)
If the Budget is to meet the objectives that the right hon. Gentleman has in mind, where exactly does he expect growth to come from over the next five years?
Danny Alexander
I draw the right hon. Gentleman’s attention to the Budget measures forecast, which the OBR published. It demonstrated significant growth in the private sector, based at least in part on measures, which I shall come on to describe, in the Budget and in the Finance Bill.
Danny Alexander
I have given way already to the hon. Gentleman.
Let me turn to the first of the measures in the Bill.
Stewart Hosie
The Chief Secretary to the Treasury makes the point about growth, but he has not really answered the previous question. The OBR suggests that business investment will increase by 8% to 11% almost every year, but can he tell us of any period of two, three or four years when business investment grew by 8% to 11%—particularly given that we are coming out of the deepest recession that anyone in this Chamber has ever seen?
Danny Alexander
Those are not my figures; those are the figures that the independent Office for Budget Responsibility produced. By the way, the figures that the previous Government put forward contained hopelessly over-optimistic forecasts for economic growth. In this Budget, we are taking measures to reduce corporation tax, to reduce the small companies rate of corporation tax and to tackle the Labour jobs tax on national insurance, all of which will help to support business development. Those measures, which I shall come on to if I get the chance during my speech, will all help to stimulate economic growth in the private sector, and that is the best way to lead this country out of the economic mess that we are in.
Danny Alexander
I am not sure that the right hon. Gentleman can do anything to help me, given that he left the note saying that there was no money left, and that his decisions led the country to that position. I hope that in response to this debate he chooses to apologise for the mess in which his Government left the country.
Owen Smith
Precisely further to my right hon. Friend’s point, can the Chief Secretary point to any five-year period in the past 40 years when 2.5 million private sector jobs have been created—any one period?
Danny Alexander
My point is that that forecast was made by the independent Office for Budget Responsibility. In the previous Government’s March Budget, their growth forecasts, which were not independent in that sense, were over-optimistic, and I am prepared to accept the forecasts of the independent Office for Budget Responsibility.
Derek Twigg (Halton) (Lab)
Will the right hon. Gentleman give way on that point?
Danny Alexander
No, I am going to move on.
Let me turn to the first of the measures in the Bill. Given that the structural deficit is some £12 billion larger than the previous Government told us, we have to make difficult choices—whether to fill the black hole with yet more spending cuts or increase taxes. Further spending cuts would have made it impossible for the Government to protect the country’s most essential services in the spending review. The only other option would have been to raise taxes on companies or on personal income, reducing the rewards for work at a time when hard work and endeavour must lead the recovery.
The VAT rise is unavoidable. As I said in the Budget debate, it is Labour’s inheritance tax. Clause 3 increases the standard rate of VAT from 17.5% to 20% from 4 January 2011. Everyday essentials such as food and children’s clothing, as well as newspapers and printed books, will remain zero-rated throughout the Parliament, protecting those on lower and middle incomes. Domestic consumption of fuel and power will remain subject to VAT at 5%.
Danny Alexander
No party proposed an increase in VAT at the election, and no party ruled one out. The Liberal Democrat manifesto—[Interruption.] If Opposition Members will listen, I will explain the situation. In the Liberal Democrat manifesto, we made it clear that we would seek to reduce the deficit through spending measures alone, unless, on grounds of fairness, it was necessary to increase taxes. That was a clear statement in our election manifesto. The rationale that I have just set out is based on the decision that we made. We felt that, given the £12 billion of extra structural deficit left us by the previous Government, the right decision was a rise in VAT rather than increased spending cuts.
Kate Green (Stretford and Urmston) (Lab)
I am grateful to the Chief Secretary for explaining his approach to fairness. Can he explain why it is fairer to cut spending on public services, on which the poorest rely most, than to use a progressive system of taxation? Why does the balance have to be 20% in favour of taxation and a whopping 80% in favour of public spending cuts?
Danny Alexander
In a way, the hon. Lady makes my point for me. The point that I just made is that given the additional £12 billion of structural deficit, as revealed by the OBR forecast, that was left us by the previous Government, we had to decide whether to make £12 billion of further spending cuts or to establish a tax measure to fill the gap. We made the right decision. The tables in the Budget book show that the overall impact on fairness—particularly for children living in poverty, which is a long-standing concern of the hon. Lady’s and on which she has a strong track record—is minimised.
Danny Alexander
I am going to make progress for a few moments, or the former Chief Secretary will never get a chance to have his say.
Clause 4 takes further action to tackle the deficit by increasing the standard rate of insurance premium tax from 5% to 6%. The higher rate of insurance premium tax will increase from 17.5% to 20% from 4 January 2011, to bring it into line with the new VAT rate. The increases are both fair and sustainable.
Chris Leslie
Is it fair to increase the higher rate of insurance premium tax to 20% on travel insurance, which is vital for many ordinary working people as they take a break and go on holiday? They may be able to do so for only one or two weeks a year. If they do not have travel insurance, that could leave them in significant jeopardy. Will the increase not prevent or deter people from taking out travel insurance?
Danny Alexander
I am sure that the hon. Gentleman is right to exhort people to take out travel insurance. As he will know, when insurance premium tax was established, both its lower and higher rates were linked to VAT. It is therefore right that they go ahead together on the same basis.
We have inherited plans to limit tax relief on pension savings for the wealthiest. We have concerns about the complexity of the changes and their potential consequences for pension saving, UK competitiveness and the complexity of the tax system. However, given the state of the public finances, we cannot be blind to the £3.5 billion of revenue that the policy was set to raise. Therefore we have set out our commitment to protecting the public finances by pursuing an alternative approach that raises no less revenue than existing plans, potentially by reducing the annual allowance. We will therefore engage employers, pension schemes, experts and other interested parties to determine the design of an alternative scheme. To keep our options open, clause 5 provides the power to repeal the regime that was legislated for in the Finance Act 2010.
Secondly, our Budget stands for fairness. This is a Budget that protects the most vulnerable, especially children in poverty and pensioners, while ensuring that those with the broadest shoulders take the greatest share of the burden. As my right hon. Friend the Chancellor said in his Budget statement, it is a progressive Budget.
Derek Twigg
As regards fairness, is it fair to my constituents and to the construction industry that the Chief Secretary has already stopped £168 million of expenditure on Building Schools for the Future projects and postponed the Mersey Gateway project? Total expenditure on those projects would have been £500 million. How does that help the construction industry?
Danny Alexander
I think it was irresponsible to make commitments to those sorts of projects, which could not be funded on the basis of the previous Government’s plans for halving capital spending over the next few years while building into their plans ever further, unsustainable commitments.
Danny Alexander
I will press on, if I may.
As my right hon. Friend the Chancellor said, this is a progressive Budget.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Will the Minister give way?
Danny Alexander
I am going to make some progress, but I will give way to the hon. Gentleman in a moment.
The Budget includes progressive measures such as increasing the rate of capital gains tax by 10 percentage points for higher rate taxpayers while keeping it the same for basic rate taxpayers. Clause 2 increases the rate of capital gains tax to 28% for higher rate income tax payers, but basic rate taxpayers continue to pay an 18% rate. The entrepreneurs’ relief lifetime limit will be extended from the first £2 million to the first £5 million. That implements the commitment in the coalition agreement to provide generous exemptions for entrepreneurial businesses.
Danny Alexander
I am going to finish this section, and then I will give way to both hon. Gentlemen.
These changes—
Derek Twigg
On a point of order, Mr Deputy Speaker. The Chief Secretary hinted a few moments ago that the money was not available for Building Schools for the Future projects in my constituency, yet the shadow Education Secretary has had a letter from the permanent secretary at the Department for Education saying that the money was available. Also, I know for a fact that the money was there for the Mersey Gateway project, yet the Chief Secretary said it was not. Can we have some consistency in the accuracy of answers?
Mr Deputy Speaker (Mr Lindsay Hoyle)
That is not a point of order. If the hon. Gentleman wants to intervene, it is up to the Minister to give way if he wishes.
Danny Alexander
I have given way a great deal, and I now give way to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards).
Jonathan Edwards
On geographical fairness, does the right hon. Gentleman agree with the recommendations of the final Holtham report, published today, which calls for an immediate Barnett floor to protect Wales from further convergence, the implementation of transition mechanisms towards a needs-based formula, and a place at the table for the Welsh Government in discussions on fiscal autonomy for Scotland?
Danny Alexander
I am grateful for that intervention. I have not yet had a chance to read the second Holtham report, which is published today. However, in the course of a meeting with the Welsh Finance Minister, I undertook to meet Mr Holtham once he had published his second report, and I look forward to doing so and having a chance to discuss it directly with him. At this stage, I will not make any commitments of the sort the hon. Gentleman wants, except to note that on the path of public finances as they are at the moment, further convergence is not forecast over the next few years.
The changes to capital gains tax help to pay for further progressive measures such as our increase in the income tax personal allowance, which takes almost 1 million of the lowest-earning income tax payers out of income tax altogether. It also increases the incentive for people on low incomes to get a job. That is fairness.
Danny Alexander
Approximately half the people who paid capital gains tax in the past year were basic rate taxpayers—
Danny Alexander
I do not have the figure to hand, but I will happily let the hon. Gentleman know at a future date or write to him with the precise figures he is looking for.
The measures that we are taking, rightly, close the avoidance issue that arose under the system put in place by the previous Government, whereby someone who was taking a substantial bonus, for example, in capital gains could pay less tax than the person who cleaned their office. [Interruption.] I am being asked if that was fair. I certainly do not think it was fair—it was highly unfair. That is why we have chosen to try to reduce that avoidance risk. The hon. Member for Wrexham (Ian Lucas) will know that the yield from the measures that we have taken comes in large measure from income tax, which reflects the fact that that sort of avoidance was going on.
Yvette Cooper
I thank the Chief Secretary for his generosity in giving way. I will give him one more chance to answer this important question: has the Treasury done any analysis of the direct impact of the tax and benefit measures on women, separately from men? Does he know?
Danny Alexander
I am not sure that that analysis was carried out under the previous Government. We are the first Government to have published analysis of the impact across the income distribution, and we have conducted specific analysis of the impact on child poverty. It is notable that the House of Commons analysis assumes that women will be the only people affected by changes in benefits that are targeted on families. It does not make any allowance for the way incomes may be shared within the household, and as a result it may well exaggerate the impact of Budget measures on women’s incomes.
The Budget includes a number of measures to ensure fairness for pensioners. For example, it locks in an annual increase in the state pension in line with earnings, prices or a 2.5% increase, whichever is the highest—the so-called triple lock—to the benefit of 11 million pensioners. It also enables individuals to make more flexible use of their pension savings. The Government intend to end the existing rules that create an effective obligation to purchase an annuity by age 75 from April 2011. Clause 6 provides interim measures to raise the age at which a person is required to purchase an annuity, or otherwise secure a pension income, from 75 to 77. That is to protect those who might otherwise be forced to annuitise before the new rules that we are seeking to introduce come into place. We will consult interested parties on the detail of that change later this month.
Stewart Hosie
I welcome the age increase to 77 to allow flexibility, but a constituency query regarding that matter has emerged in the past 48 hours. If someone has already reached 75 and their annuity was going to be so miserable that they chose not to buy it yet, will they be covered by the new rules or will they fall in a hole in the middle in which, if there is anything left in their pension pot in the future, it will be subject to inheritance tax?
Danny Alexander
If the matter that the hon. Gentleman mentions is a constituency case, I suggest that he write to my hon. Friend the Financial Secretary, who will be able to address the matter in detail.
Danny Alexander
No, I do not accept that. In fact, the increase next year will be protected. According to the forecasts for average earnings, the increase in the following year, 2012-13, would have been 2.4%, so our floor of 2.5% will ensure that the increase in the second year is higher than that forecast by the previous Government.
Danny Alexander
No, I am going to make some progress. I have given way a great deal and an awful lot of questions have been asked, and no apology has been heard from any Opposition Member for the dreadful mess they left the economy in.
Fairness in the tax system is also about ensuring that everyone pays their fair share of taxes due. Too many individuals and firms in Britain today exploit the tax system through tax avoidance, a practice that ultimately means the rest of us have to pay more tax. The Bill puts in place measures to protect about £200 million of revenues per annum from tax avoidance. Clause 8 sets out an anti-avoidance measure to prevent matched income and expenses from being derecognised in a company’s accounts. That will ensure that income from financial instruments such as loans and derivatives can no longer be excluded from the accounts and go untaxed.
Clause 9 sets out a further anti-avoidance rule, building on section 47 of the Finance Act 2010 to prevent life insurance companies from avoiding tax on previously unrecognised profits. It will do so by ensuring that section 47 will be effective in cases in which life insurance business is transferred to another company. We will take further measures in future to tackle avoidance. In particular, a consultation on a general anti-avoidance rule was announced in the Budget.
Kate Green
How will the welcome measures to reduce tax avoidance be squared with job cuts in HM Revenue and Customs?
Danny Alexander
On the plans for HM Revenue and Customs, I am confident that the anti-avoidance measures are deliverable and can be expected to yield the amount that I described.
Danny Alexander
No, I have given way nearly 30 times already.
Thirdly, the emergency Budget stands for freedom because it frees businesses to go for growth. A genuine and long-lasting economic recovery must have its foundations in the private sector. That is where jobs will come from, and we will do everything we can to support their creation. That is why the Budget sets out a plan to open Britain for business once more.
We will open Britain for business by creating a more competitive system of corporation tax, reducing the rate from 28% today to just 24% over four years. It will give us the lowest rate of corporation tax of any major western economy, and one of the most competitive rates in the G20.
Stephen Timms (East Ham) (Lab)
Why does the Bill legislate for only one of those changes, not all four?
Danny Alexander
It is good to see the right hon. Gentleman in his place; I welcome him back to the House after the experience that he had, for which Members of all parties feel enormous sympathy.
As I understand it, the practice in Finance Bills is to legislate one at a time for the changes that are needed in the following years. The Chancellor’s commitment in the Budget speech was for year-on-year reductions, and we will fulfil it.
Stephen Timms
I thank the Chief Secretary for his kind remarks.
I think the precedent was set in 1984, when the now Lord Lawson reduced corporation tax over a series of years, and the Finance Act 1984 legislated for them all. Why is that not being done in this Bill?
Danny Alexander
I am grateful for the further intervention and it is interesting to hear the right hon. Gentleman cite Lord Lawson. I am not sure that the Labour party cited that example in its Budgets. There are various technical reasons, which have just been discussed, and which my hon. Friend the Exchequer Secretary will explain in his closing speech. The basic point is that our method is more business-friendly.
As a first step, clause 1 reduces the main rate of corporation tax from 28% to 27% from 1 April 2011. Consequently, the corporation tax of around 47,000 companies will fall. The Budget also supports Britain’s small businesses by cutting the small companies rate of corporation tax from April 2011, reversing the previous Government’s plans to increase the small companies rate. That will benefit some 850,000 companies. The Budget takes action to stop the previous Government’s job tax by increasing the threshold for employers’ national insurance contributions, thereby lifting 650,000 employees out of that tax. Of course, a separate Bill will deal with that.
Taken together, those measures offer a stable and consistent platform for a private sector recovery.
Danny Alexander
I will not give way.
Clause 7 amends the tax rules for the expenses incurred by Members of Parliament, following the creation of the Independent Parliamentary Standards Authority. I know that that is of interest to many Members. The clause will broadly have the effect of maintaining the tax system and treatment that applied to similar expenses paid under the previous regime.
Danny Alexander
I will not give way on that. The hon. Gentleman can make his points in the debate.
The emergency Budget takes decisive action to tackle the deficit that we inherited and to confront the greatest economic risk to our country. It is tough, but it is fair. We have set the course for a balanced budget and falling national debt by the end of the Parliament. We have to pay the bills of past irresponsibility, but in doing that, we have ensured that those with the broadest shoulders carry the greatest share of the burden.
The Budget and the Bill represent a break with past traditions. They demonstrate a genuine shift in approach from that of the previous Labour Government. Our decisions are in the best interests of the economic cycle; those of the previous Government were dominated by the news cycle. Our actions are based on hard facts and the real world; theirs were based on wishful thinking and, in some cases, complete denial of the economic reality. We have been guided by independent forecast, not political whim. We are acting responsibly; they remain in the mindset of profligacy, which led them to make spending promises that they knew could not be kept while they were in government.
The Opposition now say that they will oppose many of our measures, but without giving any indication whatever of what they would do instead—not a single suggestion. They are in denial; the Government are facing up to reality. The provisions in the Bill are fair. They will help to put our public finances on a solid footing and provide a strong platform for economic recovery. I commend the Bill to the House.
Mr Byrne
My hon. Friend is absolutely right. Very few people in the country believe the Budget’s forecasts for employment growth, which is not surprising given how hard the Budget is hitting growth.
I want to move on from the economics of the Bill, and the possibility that it may work, to a wider question that I know we will want to debate this afternoon.
Danny Alexander
The right hon. Gentleman began, quite rightly, by paying tribute to the Office for Budget Responsibility and the work that it has done. Does he accept that the OBR forecasts make it clear that over the period of the Budget, growth will rise and unemployment will fall? That confirms—if we are trading quotes—the view of the secretary-general of the OECD, who has said that the Budget
“provides the necessary degree of fiscal consolidation over the coming years to restore public finances to a sustainable path, while… supporting the recovery.”
That is what the Budget does, and the right hon. Gentleman should be welcoming it.
Mr Byrne
I ask the Chief Secretary to be patient for a moment. The last year in which exports grew as a percentage of our economy in anything like the way that the OBR projects for the next few years was 1974. The Chief Secretary is relying on a unique combination of the business investment that we saw in 2005 and the exports that we saw in 1974. He is assuming that they will come together in perfect harmony in each of the next three years. I must say to the Chief Secretary, very gently, that that is a bit of a gamble for him to take.
Danny Alexander
Does the right hon. Gentleman accept that it is the independent Office for Budget Responsibility—which I think he welcomes—that forecasts that growth will rise over the current Parliament and that unemployment will fall? Does he accept that, yes or no?
Mr Byrne
It is not a great triumph for unemployment to fall as an economy returns to growth. The point that I was making is that employment in this country is lower as a result of the Chief Secretary’s Budget, that growth is lower as a result of his Budget, and that the Budget hits the economy so hard that he must raise another £9 billion of taxes, although the Chancellor refused to admit it at the Dispatch Box.
I now wish to turn to a question to which I hope we will devote quite some time today: the wider question of why this Finance Bill is so unfair. We now have the judgment of the Institute for Fiscal Studies, which tells us that the Budget is so regressive that its only redeeming features are Labour policies. Age Concern tells us—clearly, starkly, urgently—that it will put older people’s lives at risk. The Child Poverty Action Group tells us that it will drive poorer parents into the arms of loan sharks. The House of Commons Library tells us that nearly three quarters of the £8 billion tax and benefits bill will be paid by our country’s women—and that is before we get to VAT.
Clause 3 is the clause that deals with VAT, and I think it fair to say that it is the clause without a mandate. I have come to learn that, after nearly 30 years in the House, the hon. Member for Bermondsey and Old Southwark did not get where he is today without knowing what makes his party tick. I believe that when he said, a week before the Budget,
“I hope we don’t have a VAT increase because it is the most regressive form of tax”,
he spoke for the majority of his party’s voters and his party’s members. Before too long, those words will come back to haunt the Chief Secretary and the rest of the occupants of the Treasury Bench.
Back on 7 April, the Deputy Prime Minister warned us about hikes in VAT. He said:
“let’s remember, it is a regressive tax”.
He was right: it is a regressive tax, and we now know that he is a regressive politician for supporting it.
I think that it is fair to say—I feel that I can say this among friends—that I know a thing or two about writing something and regretting it later, but the Liberal Democrats did not just write a silly note. They unveiled a whacking great poster on a lorry saying, “Tory VAT bombshell”. Little did we know that they would be the ones not only to prime it, but to set it off.
Public Spending Control
Danny Alexander Excerpts(13 years, 10 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chief Secretary to the Treasury (Danny Alexander)
The Government’s top priority is to take early action to tackle the unprecedented deficit and restore confidence in the economy.
Within 10 days of taking office, the Government took decisive action to find £6.2 billion of efficiency savings in 2010-11.
We have since conducted a review of all spending decisions approved by the previous Government in their final months of office, and I presented the conclusions of this review to the House on 17 June 2010.
I also informed the House on 17 June that, while conducting this review, we had discovered yet another legacy issue that needed to be addressed. The previous Government made billions of pounds of spending commitments for this financial year that relied upon underspending across Government via the end-year flexibility (EYF) system or on additional funding from the reserve.
However, it was highly unrealistic to expect that underspending would have been sufficient to cover these commitments. There is insufficient contingency in the reserve to cover the remainder. Without remedial action, the difference would result in higher borrowing this year. It is clear that commitments of this scale should never have been entered into.
In order to address this serious situation, the Treasury has worked with Departments to cancel £1.5 billion of commitments that relied upon access to the reserve and EYF to deal with the most serious pressures. These decisions are an unavoidable consequence of the unaffordable level of previous commitments. The details are given in the table below.
Department | Savings Announced (£m) |
|---|---|
Department for Education | 1000 |
Department for Business, Innovation and Skills | 265 |
Department for Communities and Local Government | 220 |
Home Office | 55 |
Total | 1540 |
As these commitments relied upon the drawdown of additional funding later this year rather than money already in budgets, the existing departmental expenditure limits (DELs) of these Departments will remain unchanged.
The EYF and reserve deals for other Departments remain under review, in the usual way, until later in the financial year when likely departmental underspending figures for 2010-11 will become clearer. Final allocations of EYF and reserve funding will be determined on a basis of need, realism and the wider fiscal position, and announced at the time of spring supplementary estimates later in the financial year.
Cancelling the commitments for additional funding set out above and working to manage down remaining claims over the course of the year, will help create contingency in the reserve to meet further pressures that might arise over the course of the year, without increasing borrowing.
The Government will meet the previous Government’s EYF and reserve commitments to the devolved Administrations, including those in the financial package agreed with the Northern Ireland Executive to support the devolution of policing and justice powers.
Oral Answers to Questions
Danny Alexander Excerpts(13 years, 11 months ago)
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Richard Harrington (Watford) (Con)
4. If he will estimate Government expenditure on external consultants in (a) 1997 and (b) the last year for which figures are available.
The Chief Secretary to the Treasury (Danny Alexander)
Information on 1997 central Government expenditure on external consultancy is not held centrally, but records for 2007-08—the first year for which figures are available—show that spending on external consultants was £773 million in central Departments. In 2008-09 that rose to £1.1 billion for central Departments, or £1.57 billion when the whole of central Government is taken into account. Future expenditure will fall significantly as a result of the freeze on consultancy spending recently announced by the Government.
Richard Harrington
I thank my right hon. Friend the Chief Secretary for that answer, and welcome him into the job. He should note that the figures show gross profligacy and a waste of taxpayers’ money that affects everybody in the House, all my constituents in Watford, and everybody in this country. I should very much like the Chief Secretary to assure us that that disgraceful waste of money will not happen again.
Danny Alexander
My hon. Friend is right about waste and inefficiency, and consultancy is not the only example. I can give him two or three more. The Department for Business, Innovation and Skills spent £12,000 on branded golf balls over three years. The Ministry of Defence spent £232,000 on eight paintings in a single year. The Department for Communities and Local Government has spent £6,000 on deluxe espresso coffee machines for nine new, but empty, regional fire control rooms. He can rest assured that the actions that we take will ensure that that kind of waste and inefficiency will never happen again.
Mr Speaker
Order. I know that the Chief Secretary will want to stick to the narrow subject of external consultants.
Mr Tom Watson (West Bromwich East) (Lab)
Is Andy Coulson a consultant? How much are you paying him?
Danny Alexander
He works at No. 10 Downing street—[Interruption]—and I will give the hon. Gentleman a full response if he wants one.
Peter Bottomley (Worthing West) (Con)
5. What steps his Department is taking to increase economic growth.
Charlie Elphicke (Dover) (Con)
10. What recent assessment he has made of the level of growth in the UK economy compared with those of other OECD countries.
The Chief Secretary to the Treasury (Danny Alexander)
The independent Office for Budget Responsibility will publish forecasts for growth in the UK ahead of the emergency Budget.
Charlie Elphicke
There is too much deprivation in Dover and Deal. We need more jobs and money locally. What action will the Government take to increase the trend growth rate of this nation, so that the people of Dover and Deal get more jobs and money, and Britain does better?
Danny Alexander
The best thing that we can do to increase growth and create jobs in this country is tackle the enormous budget deficit that we inherited from the previous Government. By taking firm action to reduce the deficit, we can restore confidence in the economy and help the private sector to create jobs. That is what we need to do.
Angela Smith (Penistone and Stocksbridge) (Lab)
The £80 million loan to Sheffield Forgemasters was an investment designed to encourage the growth of the advanced manufacturing sector of the economy, not just across south Yorkshire but across the UK as a whole. Will the Government bear in mind that investment, and the long-term context, when they make a decision on the future of that loan?
Danny Alexander
I am grateful to the hon. Lady for making that point, and I have certainly heard what she said. Obviously, we are reassessing carefully projects approved by the previous Government between 1 January and the election, and we will make an announcement in the near future.
Mr Mark Williams (Ceredigion) (LD)
11. What his policy is on the mechanism for the provision of funding from the Exchequer to the devolved Administrations; and if he will make a statement.
The Chief Secretary to the Treasury (Danny Alexander)
The Government recognise the concerns expressed by the Holtham commission about the system of devolution funding, but as we made clear in the coalition programme for government, the first priority has to be reducing the deficit.
Mr Williams
I thank my right hon. Friend for that answer, and for the acknowledgement in the coalition agreement of the work of the Holtham commission. Its message was that there was historical underfunding of Wales to the tune of £300 million a year; that was backed up by Lord Barnett himself and a Lords Committee. Does my right hon. Friend accept the report’s conclusion that Wales has, historically, been underfunded? We acknowledge that cuts will be borne right across the UK, and across all its regions and nations, but will he use this opportunity to confirm the Government’s commitment to fair funding across the country?
Danny Alexander
In the coalition agreement, we say that we recognise the concerns raised by the Holtham commission, but the priority must be to reduce the deficit. We also said that once the forthcoming referendum has taken place, there will be a Calman commission-like process. The Calman commission looked at greater financial accountability for the Scottish Parliament, and a similar process for Wales might help to address some of my hon. Friend’s concerns.
Anas Sarwar (Glasgow Central) (Lab)
Will the Chief Secretary please tell us why his party campaigned throughout the election against immediate spending cuts, but is now, in return for jobs in the Cabinet, willing to risk tens of thousands of jobs across the country?
Danny Alexander
The hon. Gentleman just needs to look around the world to see that the argument for rapid fiscal consolidation is becoming stronger by the day. He should look at the G20 and the independent assessments. Clearly, making the sort of decisions that we are making now—the £6 billion exercise and the decisions that will no doubt be announced in the Budget—is absolutely essential to create a responsible basis for the public finances and return the country to the right economic track.
Mr Adrian Sanders (Torbay) (LD)
16. What steps his Department is taking to reduce the level of tax avoidance.
Tom Brake (Carshalton and Wallington) (LD)
T2. While the Chancellor is reviewing the projects agreed by the previous Government since 1 January, may I commend to him the Better Healthcare Closer to Home programme and the plans that it has for St Helier hospital? May it draw it to his attention that the plans were very enthusiastically endorsed by the new Secretary of State for Health when he visited my constituency just a couple of days before the general election?
The Chief Secretary to the Treasury (Danny Alexander)
I am grateful to my hon. Friend for his question and pay tribute to his assiduous campaigning on the issue over many years. He will know that we are carefully reassessing the projects agreed by the previous Government between 1 January and the election, and we will make an announcement shortly. He will also know that it is right that we are making sure that each and every one of the many projects that were announced is affordable and represents value for money.
Kerry McCarthy (Bristol East) (Lab)
T5. I was disappointed to see no mention of the credit union movement in the coalition agreement. Although I admit that I have not yet got my head around what the big society is, I hope that there is a role in there for the credit union movement. When can we expect the Legislative Reform (Industrial And Provident Societies and Credit Unions) Order 2010 to be laid before the House?
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Growth throughout the UK economy has often been geographically uneven. Has the Chancellor considered what help a rural fuel derogation might bring to the highlands and, in particular, the islands of Scotland; and can I volunteer my own constituency, Na h-Eileanan an Iar, for any pilot project?
Danny Alexander
The Government are well aware of the benefits that a rural fuel derogation might bring to remote parts of the economy. We are examining that issue, which is contained in the coalition agreement, and we note the hon. Gentleman’s interests from his own constituency.
Robert Halfon (Harlow) (Con)
Under the previous Government, unemployment in Harlow was the highest in west Essex. Do the Government agree that a low-tax, low-debt economy is the best way to bring jobs back to Harlow?
Roger Williams (Brecon and Radnorshire) (LD)
A Select Committee in the other place found that reform of the Barnett formula could lead to a reduction in the budget deficit. In terms of the imperative of achieving that, will not the Treasury team look once again at that Select Committee report?
Danny Alexander
I am happy to look at the report, but as I said in answer to earlier questions, we made it clear in the coalition programme for government that, although we recognise those concerns, the priority must be to address the budget deficit, and that is what we are going to do.
Fiona Mactaggart (Slough) (Lab)
Will unemployment and inequality increase or decrease in the coming year?
Danny Alexander
A range of announcements will be made in the Budget across a whole range of issues, but as the Chancellor has said repeatedly, one of the key tests of measures is fairness, to ensure that we do not repeat the mistakes of the previous Government in allowing inequality to widen and in missing child poverty targets.
Gordon Birtwistle (Burnley) (LD)
Does my right hon. Friend intend to continue using the very expensive PFI funding for future capital investment in the NHS? The most expensive to date has been in Wythenshawe hospital, where the NHS will pay back 16 times the original capital value. More prudent borrowing in the past would have delivered the investment without adding to the deficit.