ECOFIN

George Osborne Excerpts

Tuesday 14th May 2013 Written Statements

[The Chancellor of the Exchequer (Mr George Osborne)]

A meeting of the Economic and Financial Affairs Council will be held in Brussels on 14 May 2013. The following items are on the agenda to be discussed.

Banking Recovery and Resolution

There will be a state of play discussion on the banking recovery and resolution directive.

Current legislative proposals

The presidency intends to give a state of play update on the revision of the anti-money laundering (AML) directive and the revised rules for markets in financial instruments directive/regulation (MiFID/MiFIR).

Draft Amending Budget No 2 to the General Budget 2013

ECOFIN will seek to reach a political agreement on this. The Government have been clear that they want to see real budgetary restraint in the EU. They will not support a request for additional payments from the EU budget for 2013. The Government are committed to continue to work hard to limit EU spending, reduce waste and inefficiency, and deliver the best possible deal for taxpayers.

Savings taxation and mandate for negotiations of amendments to the Savings Taxation agreements with third countries

ECOFIN will seek to reach a political agreement on a proposal for a Council directive amending the EU savings directive, and to adopt the mandate for negotiations of amendments to the savings taxation agreements with third countries. The Government support an agreement of the amending proposal to the EU savings directive and an adoption of the mandate as soon as possible.

Draft Council conclusions on tax evasion and fraud

ECOFIN will seek to adopt Council conclusions on tax evasion and fraud. The Government believe tackling tax evasion and fraud is as an important issue for protecting revenues and for ensuring public confidence in the fairness and effectiveness of our tax systems, which needs a combination of action at both domestic and international level.

Macro-economic Imbalances Procedure: In-depth reviews

Council will seek to endorse Council conclusions on the macro-economic imbalances procedure: In-depth reviews.

Towards a deep and genuine Economic and Monetary Union: Commission communications

The Commission will present the two communications on a deep and genuine economic and monetary union which were published on 20 March. These cover the introduction of a convergence and competitiveness instrument and ex ante co-ordination of plans for major economic policy reforms.

Follow-up to the G20 Finance Ministers and Governors (18-19 April) and IMF/World Bank (19-21 April) 2013 Spring meetings in Washington. USA

The presidency and Commission will debrief Ministers on the main outcomes of the G20 Finance Ministers and Governors and IMF/World Bank spring meetings.

Pilot Initiative on automatic exchange of information

There will be a presentation to Council by the G5 (France, Germany, Italy, Spain and the UK) on their pilot project on automatic exchange of information in the area of taxation. The UK is committed to tackling tax evasion through exchanging tax information between countries and, with France, Germany, Italy and Spain, the UK is aiming to embed multilateral automatic exchange of information based on Foreign Account Tax Compliance Act (FATCA) agreements with the US as the new single global standard.

Financial Statement

George Osborne Excerpts

Wednesday 20th March 2013 Commons Chamber

[The Chancellor of the Exchequer (Mr George Osborne)]

This is a Budget for people who aspire to work hard and get on. It is a Budget for people who realise there are no easy answers to problems built up over many years—just the painstaking work of putting right what went so badly wrong. And together with the British people, we are, slowly but surely, fixing our country’s economic problems. We have now cut the deficit not by a quarter, but by a third. We have helped business create not a million new jobs, but one and a quarter million new jobs. We have kept interest rates at record lows.

Despite the progress we have made, there is much more to do. Today, I am going to level with people about the difficult economic circumstances we still face and the hard decisions required to deal with them. It is taking longer than anyone hoped, but we must hold to the right track. By setting free the aspirations of this nation, we will get there.

Our economic plan combines monetary activism with fiscal responsibility and supply-side reform, and today we go further on all three components of that plan: monetary, fiscal and supply-side reform. We also understand something else more fundamental. Our nation is in a global race, competing alongside new centres of enterprise around the world for investment and jobs that can move anywhere. What was the response of those who came before us? It was to expand the state in a way that we could not afford; to drive businesses overseas with taxes that became more and more uncompetitive; to let schools fail; to deplete our skills base; to let a bloated welfare system pick up the human casualties and assume that an uncontrolled banking boom would pick up the bill. To win in the global race, we are doing the exact opposite. We are building a modern, reformed state that we can afford. We are bringing businesses to our shores with competitive taxes. We are fixing the banks. We are improving our schools, our skills—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Obviously the country is waiting to hear the Chancellor. I certainly want to hear the Chancellor, and I am sure that most people in the Chamber also want to hear the Chancellor. Please let us hear the Chancellor.

[Mr Osborne]

For years people have felt that the whole system is tilted against those who did the right thing: who worked, who saved, who aspired. Those are the very people whom we must support if Britain is to have a prosperous future. This is a Budget for those who aspire to own their own home, who aspire to get their first job or to start their own business. It is a Budget for those who want to save for their retirement and provide for their children. It is a Budget for our aspiration nation.

The forecast from the independent Office for Budget Responsibility today reminds us of the economic challenge at home and abroad, but it also—[Interruption.]

[Mr Deputy Speaker]

Order. Let us start as we mean to go on. The shadow Chancellor may not have been the Chancellor, but he should observe the courtesies, and should know better. [Interruption.] We want no advice from the Government, and they should know better than to display it. I do not wish to see it. That is not a good position to put us in. Let us continue, and let this not become the circus of the day.

[Mr Osborne]

Since the autumn statement, the OBR has again revised down its forecast for global economic growth, and has sharply revised down its forecast for world trade. Growth in the United States and Japan was flat in the last quarter, while the eurozone shrank by 0.6%. That was the largest fall since the height of the financial crisis. The problems in Cyprus this week are further evidence that the crisis is not over, and the situation remains very worrying. I can confirm that, as the Prime Minister said, people sent to Cyprus to serve our country, in our military or Government, will be protected in full from any tax on their deposits.

The OBR today sharply revised down its future growth forecast for the eurozone, and expects it to remain in recession throughout this year. In its words, “the underlying situation” in the eurozone “remains very fragile”. I will be straight with the country: another bout of economic storms in the eurozone would hit Britain’s economic fortunes hard. Forty per cent. of all we export, we export to the eurozone. There is a huge effort across the Government to grow Britain’s trade with the fast-growing parts of the world, and exports to Brazil, India and China are up by almost two thirds. United Kingdom firms now export more goods to non-European Union countries than to EU countries. This is the first time that that has happened in over two decades. However, we are still very exposed to what happens on the continent. Indeed, last year domestic demand was actually stronger than forecast, but it is the weakness of net trade that helps to account for much of the weakness in GDP. As the OBR makes clear,

“the unexpectedly poor performance of exports is more than sufficient on its own to explain the shortfall”.

GDP for last year has turned out to be a little higher than the OBR forecast in December, but this year its output forecast is reduced to 0.6% growth. Despite the recession in the eurozone, the OBR’s central forecast today is that we will avoid a second quarter of negative growth here in the UK. While it is less than we would like, our growth this year and next year is forecast by the International Monetary Fund to be higher than that of France and Germany. That is a reminder of the fact that all western nations live in very challenging economic times.

The OBR expects the recovery to pick up to 1.8% in 2014, 2.3% in 2015, 2.7% in 2016, and 2.8% in 2017. Crucially, jobs are being created. Indeed, in the words of the OBR, the picture on employment

“continues to surprise on the upside”

in this forecast.

When we started the unavoidable task of reducing the size of the public sector work force, some in the House expressed doubts that the private sector would be able to make up the difference. I am glad to report to the House that their lack of confidence in British businesses has been misplaced. It is a tribute to the energy and enterprise of British companies that for every one job lost in the public sector in the last year, six jobs have been created in the private sector; the employment rate has been growing faster than in the US and three times as fast as in Germany. So, despite the weaker GDP, at this Budget the OBR has now revised up further its forecasts for employment. Compared with this time last year, the OBR now expects 600,000 more jobs in 2013, and there will be 60,000 fewer people claiming unemployment benefit. We have seen more people in work than ever before, including a record number of women; there are a quarter of a million fewer workless households than two years ago; and the unemployment rate is lower than it was when we came to office.

The deficit continues to come down. Three years ago, the Government were borrowing £1 for every £4 they spent—that was completely reckless and unsustainable. We have taken many tough decisions to bring that deficit down, and we will continue to do so. The deficit has fallen from 11.2% of GDP in 2009-10 to a forecast of 7.4% this year—that is a fall of a third. It will then fall further to 6.8% next year, 5.9% in 2014-15, 5% in 2015-16 and 3.4% the following year, reaching 2.2% by 2017-18. Those numbers all exclude the transfer of the Royal Mail pension fund to the Government, which reduces the deficit still further for this year alone. It is sometimes asserted in this House that borrowing has gone up under this Government—[Interruption.] As we have just seen again. The facts show the opposite to be true. The previous Government borrowed—[Interruption.]

[Mr Deputy Speaker]

Order. We cannot have one side being told without the other. It is not a competition of who can shout the loudest. Let us hear the Chancellor. If you don’t want to hear your own Chancellor, I am sure your constituents would understand if you were to leave the Chamber. I suggest that nobody wants to leave the Chamber, so let us continue to hear the Chancellor of the Exchequer.

[Mr Osborne]

As I was saying, the facts show the opposite to be true. The previous Government borrowed £159 billion in their last year in office and this year this Government are forecast to borrow £114 billion. So that is not more borrowing—it is £45 billion a year less borrowing. Borrowing then falls from £108 billion next year, and falls again to £97 billion in 2014-15 and to £87 billion in the last year of this Parliament, before falling again to £61 billion and £42 billion in the following two years. To ensure complete transparency, the OBR publishes the numbers without the asset purchase facility cash transfers. They show that on that measure, too, borrowing is just forecast to fall.

We committed at the start of this Parliament to a fiscal mandate that said we would aim to balance the cyclically adjusted current budget over the following rolling five years. I can confirm that the OBR says we are on course to meet our fiscal mandate—and meet it one year early. However, the likelihood of meeting the supplementary debt target has deteriorated. Public sector net debt is forecast to be 75.9% of GDP this year, 79.2% next year, 82.6% the year after, 85.1% in 2015-16 and 85.6% in the year after, before falling to 84.8% in 2017-18.

In response, there are those who would want to cut much more than we are planning to and chase the debt target. I said in December that I thought that with the current weak economic conditions across Europe that would be a mistake. We have got a plan to cut our structural deficit. Our country’s credibility comes from delivering that plan, not altering it with every forecast—and that is why interest rates remain so low. Our judgment has since been supported by the International Monetary Fund, the OECD and the Governor of the Bank of England, and I do not propose to change that judgment three months later.

I have also had representations at this Budget for measures that would add £33 billion a year extra to borrowing on top of the figures I have announced. That is from people who seem to think that the way to borrow less is to borrow more. They would return us to the double-digit deficits of the last Government and give us far and away one of the highest deficits in the western world. That would pose a huge risk to the stability of the British economy, threaten a sharp rise in interest rates and leave the burden of debts to our children and our grandchildren. I will not take that gamble with the future of this country, especially when those representations came from the very same people whose previous gamble with our economy led to the mess that we are clearing up in the first place.

The spending reductions that we promised have been more than delivered. Welfare reforms have been legislated for and are taking place, and here is a clear sign of progress: the proportion of national income spent by the state has fallen from 47.4% three years ago to 43.6% today; and it is on course to reach 40.5% at the end of the period. We have set out the deficit plan, and we are delivering that plan. Taken together, the measures that I will announce today are fiscally neutral overall. Ask the British people and they will tell you: our problem as a country is not that we are taxed too little, but that the Government spend too much. I agree with them. So the tax cuts in this Budget are not borrowed; they are paid for. That is our way, and it is the only responsible way to lower taxes.

It is the central plank of our economic plan that a tough and credible fiscal policy creates the space for an active monetary policy. Recovering from the financial crisis has exposed the shortcomings of conventional monetary tools. We in Britain have had to innovate and develop new tools; so have other countries. I confirm today that the asset purchase facility will remain in place for the coming year. We are now actively considering with the Bank of England whether there are potential extensions to the successful funding for lending scheme that will boost lending still further. We are also setting out our plans for lending from our new business bank, but I want to make sure that an active monetary policy plays a full role in supporting the economy, so I am today setting out an updated remit for the Monetary Policy Committee. Alongside it, we are publishing a review of the monetary policy framework.

This Budget confirms the primacy of price stability and the inflation target in Britain’s monetary policy framework. The updated remit reaffirms the inflation target as 2% as measured by the 12-month increase in the consumer prices index. The target will apply at all times, but as we have seen over the last five years, low and stable inflation is a necessary but not sufficient condition for prosperity. The new remit explicitly tasks the MPC with setting out clearly the trade-offs that it has made in deciding how long it will be before inflation returns to target. To ensure a fuller communication between the Bank and the Treasury, I am changing the timing of the open letter system, so that when inflation is above target the Governor will write to me on the day the minutes of the next MPC meeting are published to allow for a more substantive exchange of views.

The new remit also recognises that the Monetary Policy Committee may need to use unconventional monetary instruments to support the economy while keeping inflation stable, and it makes it clear that the committee may wish to issue explicit forward guidance, including using intermediate thresholds in order to influence expectations on the future path of interest rates. For example, that is what the US Federal Reserve has now done, making a commitment to keep interest rates low while unemployment is high, provided that inflation is not expected to rise too much. This can help the economy because it gives families planning their futures, and businesses wondering whether to invest, more confidence that interest rates will stay lower for longer. So I am asking the Monetary Policy Committee to provide an assessment of how intermediate thresholds might work in Britain, and to give that assessment in its August 2013 inflation report. That report will be the first issued under the governorship of Mark Carney. Whether intermediate thresholds are used will be an operational matter for the independent MPC. I can confirm that Mervyn King and Mark Carney have both seen the new remit and they have both agreed to it.

Active monetary policy can only operate freely when securely anchored by credible fiscal policy. That is the next component of our economic plan. We have instituted new public spending controls in government. When money is short, we make no excuses for the rigorous financial management we have run across Whitehall. Let me be clear with the House: that is one of the reasons why we have got forecast borrowing falling in this year and next. The traditional splurge of cash by Departments at the end of the financial year, just to get the money spent, has to be curtailed. And thanks to the tough financial control of my right hon. Friend the Chief Secretary, Government Departments are forecast to underspend their budgets by more than £11 billion this year. If you want to bring borrowing down, you have to control spending, and that is what we have done.

Now we want to ensure Departments have budgets that are more closely aligned to what they actually spend. So both next year and the year after, we will reduce resource departmental expenditure limits by the equivalent to a 1% reduction for most Departments. The schools and health budgets will remain protected, because our promise to our NHS is a promise we will keep. Local government and police allocations for 2013-14 have already been set out and will not be affected. We will also deliver in this coming year on this nation’s long-standing commitment to the world’s poorest to spend 0.7% of our national income on international development. We should all take pride, as I do, in this historic achievement for our country. As previously, the Department for International Development budget will be adjusted to ensure we do not spend more than 0.7%.

Departmental budgets have yet to be set for the year 2015-16, which starts before the end of this Parliament. This will be done in the spending round that will be set out on 26 June. I said last autumn that we would require around £10 billion of savings from that spending round. I confirm today that we will instead be seeking £11.5 billion of current savings. We have got to go on making difficult decisions so that Britain can live within its means. And because we make those decisions, we can get our deficit down and focus on our nation’s economic priorities.

Total managed expenditure for 2015-16 will be set at £745 billion. How the savings will be achieved will be a matter for the spending round, but existing protections apply. We are also taking steps to help all Departments to achieve the savings required. Together, my right hon. Friends the Chief Secretary and the Minister for the Cabinet Office have indentified that a further £5 billion of savings in efficiency and cutting the cost of administration can be made. This will go a huge way towards delivering the spending round in a way that saves money but protects services.

So too will action on pay. The Government will extend the restraint on public sector pay for a further year by limiting increases to an average of up to 1% in 2015-16. This will apply to the civil service and work forces with pay review bodies. Local government and devolved Administration budgets will be adjusted accordingly in the spending round. We will also seek substantial savings from what is called progression pay. These are the annual increases in the pay of some parts of the public sector. I think they are difficult to justify when others in the public sector, and millions more in the private sector, have seen pay frozen or even cut. I know that is tough, but it is fair. In difficult times with the inevitable trade-off between paying people more and saving jobs, we should put jobs first.

Today is also the 10th anniversary of the start of the Iraq war. The awarding of a posthumous Victoria Cross to Lance Corporal James Ashworth this week reminds us of the courage and sacrifice that all who serve in our armed forces are still making to defend our country. We will exempt our military from changes to progression pay. We are also accepting in full from 1 May this year the armed forces pay review body's recommended increase in the so-called X factor payment made to military personnel to recognise the particular sacrifices they make. And I can also announce that further awards from the LIBOR banking fines have gone to good military causes, with money for Combat Stress to help veterans with mental health issues and funds for Christmas boxes for all our troops on operations this year and next. Those who have paid fines in our financial sector because they demonstrated the very worst of values are paying to support those in our armed forces who demonstrate the very best of British values.

Ultimately as a country we will not be able to spend more on the services we all value, from our NHS to our armed forces, or invest in our infrastructure, unless we go on tackling the growth of spending on welfare budgets. The public spending framework introduced by the previous Government divided Government spending into two halves: fixed departmental budgets and what is called annually managed expenditure—except in practice it was annually unmanaged expenditure—and it includes almost the entire welfare budget as well as items like debt interest and payments to the EU. I can tell the House that according to the OBR forecast today, the European budget deal secured by my right hon. Friend the Prime Minister has saved Britain a total of £3.5 billion. We will now introduce a new limit on a significant proportion of annually managed expenditure. It will be set out in a way that allows the automatic stabilisers to operate, but it will bring real control to areas of public spending that had been out of control. We will set out more detail on how this new spending limit will work at the spending round in June. All decisions, on welfare, pay and Departments are tough, and they affect many people. But if we did not take them, what is a difficult situation for them and for the whole country would be very much worse.

Active monetary policy and a responsible fiscal policy are two components of our economic plan. We also need supply-side reform, to throw the full weight of our efforts behind the entrepreneurial forces in our society. Our fundamental overhaul of the planning laws are now helping homes to be built and businesses to expand. Our reform of schools, universities and apprenticeships is probably the single most important long-term economic policy we are pursuing. Our support for European free trade agreements with India, Japan and the US is a priority of our foreign policy. And we are building the most competitive tax system in the world. But now we need to do more.

First, we can provide the economy with the infrastructure it needs. We are already supporting the largest programme of investment in our railways since Victorian times, and spending more on new roads than in a generation. We are giving Britain the fastest broadband and mobile telephony in Europe. And the Treasury is now writing guarantees to major projects from supporting the regeneration of the old Battersea power station site to building the new power stations of tomorrow. We have switched billions of pounds from current to capital spending since the spending review to mitigate the sharp decline set in train by the last Government. But on existing plans, capital spending is still due to fall back in 2015-16, and I do not think that is sensible. So by using our extra savings from Government Departments, we will boost our infrastructure plans by £3 billion a year from 2015-16. That is £15 billion of extra capital spending over the next decade, because by investing in the economic arteries of this country, we will get growth flowing to every part of it. And public investment will now be higher on average as a percentage of our national income under our plans than it was in the whole period of the last Government.

In June, we will set out long-term spending plans for that long-term capital budget. And we will use the expertise of Paul Deighton, the man who delivered the Olympics and who now serves in the Treasury, to improve the capacity of Whitehall to deliver big projects and make greater use of independent advice.

The second thing we can do to support enterprise is to give our great regional cities and other local areas much greater control over their economic destiny and to back sectors that are a global success. Businesses have created more jobs in areas such as the west midlands in the first three years of this Government than they did in the first 10 years of the Labour Government. Private sector employment has been growing more quickly in the north-east, the north-west and Yorkshire than across the whole country.

But we can do much more, so I accept Michael Heseltine’s excellent idea of a single competitive pot of funding for local enterprise. I also fully endorse the report of Doug Richard to make the most of our apprenticeships. We have the second largest aerospace industry in the world. For the first time in 40 years, we manufacture for export more cars than we import, and our agritech business is at the global cutting edge. We are backing international successes like those with £1.6 billion of long-term funding for the industrial strategy that my right hon. Friend the Business Secretary launched this week.

Today we build on our new tax reliefs coming in this year for the creative industries such as high-end television and animation with new support for our world-class visual effects sector. To help small firms, we will increase fivefold the value of Government procurement budgets spent through the small business research initiative. We will fund the proposal to make growth vouchers available to small firms seeking advice on how to expand. We are putting new controls on what regulators can charge and giving the Pensions Regulator a new requirement to have regard to the growth prospects of employers.

A vital sector for our economy, and a cost of doing business for everyone, is energy. Creating a low-carbon economy should be done in a way that creates jobs, rather than costing them. The granting of planning permission yesterday at Hinkley Point was a major step forward for new nuclear. Today, with the help of my hon. Friend the Energy Minister, we are also announcing our intention to take two major carbon capture and storage projects to the next stage of development. We will support the manufacture of ultra-low emissions vehicles in Britain with new tax incentives. The hon. Member for Stoke-on-Trent Central (Tristram Hunt) has argued passionately, and on this occasion in a non-partisan way, about the damage that energy costs are doing to his city’s famous ceramics industry. He has persuaded me, so from next year we will exempt the industrial processes for that industry and some others from the climate change levy.

In the spending round, we will provide support for energy-intensive industries beyond 2015. For the North sea, we will this year sign contracts for future decommissioning relief, the expectation of which is already increasing investment there. But I also want Britain to tap into new sources of low-cost energy such as shale gas, so I am introducing a generous new tax regime, including a shale gas field allowance, to promote early investment. By the summer, new planning guidance will be available alongside specific proposals to allow local communities to benefit. Shale gas is part of the future, and we will make it happen.

We can help companies grow and succeed by building infrastructure, backing local enterprise and supporting successful sectors, but nothing beats having the most competitive business tax system of any major economy in the world. That is what this Government set out to achieve. That is what we are delivering. The accountants KPMG does a survey of investors that ranks the most competitive tax regimes in the world. Three years ago we were near the bottom of that table; now we are at the top. But in this global race we cannot stand still, so today we step up the pace. Our seed enterprise investment scheme offers generous incentives to investors in start-ups. My hon. Friend the Member for Braintree (Mr Newmark) and David Young have done a great job helping to promote it across the country. They have asked me to extend the capital gains tax holiday, and I will.

Employee ownership helps create an enterprise culture, so we are making our new employee shareholder status more generous, with national insurance contributions and income tax relief, and we are introducing capital gains tax relief for sales of businesses to their employees. Companies that look after their employees and help them return to work after periods of sickness will also get new help through the tax system, and we will double to £10,000 the size of the loans that employers can offer tax free to pay for items such as season tickets for commuters. That is a great idea from my hon. Friend the Member for Witham (Priti Patel) and I am happy to put it into practice. My hon. Friend the Member for Enfield North (Nick de Bois) and others have put forward proposals to help investment in social enterprises, and I have listened. We will introduce a new tax relief to encourage private investment in these social enterprises.

Research and development is absolutely central to Britain’s economic future, so today I am increasing the rate of the above-the-line R and D credit to 10%. Along with our new 10% corporation tax rate on profits from patents coming in next month, that will help make us one of the most internationally attractive places to innovate.

I also want Britain to be the place where people raise money and invest. Financial services are about much more than banking. In places such as Edinburgh and London we have a world-beating asset management industry, but they are losing business to other places in Europe. We act now with a package of measures to reverse that decline, and we will abolish the schedule 19 tax, which is payable only by UK-domiciled funds.

Many medium-sized firms and start-ups use the alternative investment market to raise funds to help them grow. Many observers of the British tax system complain that it has long been biased towards debt financing over equity investment, so today I am abolishing altogether stamp duty on shares traded on growth markets such as AIM. In parts of Europe they are introducing a financial transaction tax; here in Britain we are getting rid of one. From April next year, that will directly benefit hundreds of medium-sized UK firms, lowering their cost of capital and supporting jobs and growth across the UK.

We also set out to compete with the world in our headline rate of corporation tax. In Germany, the corporate tax rate is 29%; in France it is 33%; in the United States it is 40%. Here in Britain we have cut corporation tax from the 28% we inherited to 21% next year. But I want to go further. Today I want us to send a message to anyone who wants to invest and create jobs here that Britain is open for business, so in April 2015 we will reduce the main rate of corporation tax by another 1%. Britain will have a 20% rate of corporation tax, the lowest business tax of any major economy in the world. That is a tax cut for jobs and growth. We will have achieved in one Parliament, and in these difficult times, the largest reduction in the burden of corporation tax in our nation’s history, and with it we will achieve major simplification of our business tax system. By merging the small company and main rates at 20p, we will abolish the complex marginal relief calculations between them and give Britain a single rate of corporation tax for the first time since 1973. As with previous reductions in the corporate tax rate, I do not intend to pass the benefit on to the banking sector, so I will offset the reduction by increasing the bank levy rate next year to 0.142%.

Britain is moving to low and competitive taxes, but we should insist that people and business pay those taxes, rather than aggressively avoiding or evading them. That is the right way to succeed in the global race. Under Labour, we had the worst of both worlds: uncompetitive tax rates that were not paid. When the 50p rate was introduced, tax revenues fell by billions of pounds as the wealthy paid less. That is the wrong way round. Under this Government, the tax rates are more competitive and the wealthy pay more tax. That is the right way round. Here is an inconvenient truth for the Opposition: in every year of this Parliament the rich will pay a greater proportion of income tax revenues than in any one of the 13 years of the previous Labour Government. During those 13 years, too many people were allowed to get away with aggressive tax avoidance and abuse. They boasted that they were paying less tax then their cleaners, and Labour Members lauded them for it. We have stopped that, and that is what I call fair.

Today I am unveiling one of the largest ever packages of tax avoidance and evasion measures presented at a Budget. The details are set out in the Red Book. They include agreements with the Isle of Man, Guernsey and Jersey to bring in over £1 billion in unpaid taxes and new rules to stop the abuse of partnership rules, corporate tax losses and offshore employment intermediaries. That is another £2 billion. This year we are giving Britain its first ever general anti-abuse rule, and we will name and shame the promoters of tax avoidance schemes. My message to those who make a living advising other people how to aggressively avoid their taxes is this: this Government will not let you get away with it. This year we are leading international action on tax avoidance through our presidency of the G8 and with the OECD and the G20. We want the global rules governing the taxation of multinational firms to be updated from the 1920s, when they were first written, and made relevant to the global internet economy of the 21st century. This is the right and fair thing to do.

A tax system where people and businesses pay what is expected of them is part of the glue that holds our society together. So too is the expectation that those who work hard, who play by the rules, who save for their future and try to be independent of the state are not undermined but supported. So to the working parents struggling with the costs of child care, and the mother wondering whether it makes financial sense to get a job, we offer this: tax-free child care. The plans were set out yesterday: new tax-free child care vouchers for working families, with 20% off the first £6,000 of your child care costs for each child, and increased child care support for those low-income working families on universal credit.

For those who aspire to put aside money for their retirement, we offer this: a simple, flat-rate pension accessible to everyone and worth £144 a week. Any one pound you save will be a pound you can keep. We are bringing forward the introduction of the new single-tier pension to 2016. It will help the low-paid, the self-employed, and millions of women most of all. Of course, if there is no longer the old state second pension, there is no longer anything to contract out of. For employers, that means paying the same employer national insurance as those without defined-benefit schemes. Private sector employers can adjust their pension benefits to accommodate the extra cost; public sector employers will have to absorb the burden, as is always the case with tax changes. Any spending review in the next Parliament will of course take the £3.3 billion cost into account.

As we have already made clear, public sector employees, and the relatively small number of private sector employees in defined benefit schemes, will from 2016 pay more national insurance then they do today. They will pay the same rate of national insurance as the rest of the working population, and in return they will get a larger state pension than before. For example, someone who is 40 years old when the single-tier pension is introduced, and who has always been contracted out, will pay an extra £6,000 in national insurance over the rest of their working life—and in return get an extra £24,000 in state pension over the course of their retirement. That is a fair deal, and it is a progressive pension reform. We have also made it clear before that the extra £1.6 billion raised in employee national insurance will not be kept by the Treasury.

There is another group of savers I want to talk about today. I am proud to have been part of a Government who have helped to compensate the policyholders of Equitable Life, who have suffered a great injustice. But we have not extended help to those who bought their with-profits annuity before 1992. Now we can. I would like to acknowledge the work of my hon. Friend the Member for Harrow East (Bob Blackman) on behalf of these people. We will make ex gratia payments of £5,000 to those elderly policyholders, and we will make an extra £5,000 available to those on the lowest incomes who are on pension credit. We are not doing this because we are legally obliged to; we are doing it because, quite simply, it is the right thing to do.

Helping with aspiration also means helping those who want to keep their home instead of having to sell it to pay for the costs of social care. That is what our new cap will deliver, as Andrew Dilnot recommended. It will also come in in 2016. It will be set to protect savings above £72,000, and we will raise the threshold for the means test on residential care from just over £23,000 to £118,000 that year too. For decades, politicians have talked of doing something for savers and those who have to sell their homes to pay for care, and yet nothing has been done—until this week.

I want to do much more, for unless we fire up the aspirations of the British people—light the fires of ambition within our nation—we are going to be out-smarted, out-competed and out-performed by others in the world who are prepared to work harder for success than we are. So this Budget makes a new offer to our aspiration nation—and what symbolises that more than the desire to own your own home? Today I can announce Help to Buy. The deposits demanded for a mortgage these days have put home ownership beyond the great majority who cannot turn to their parents for a contribution. That is not just a blow to the most human of aspirations: it is a setback for social mobility, and it has been hard on the construction industry too. This Budget proposes to put that right—and put it right in a dramatic way.

Help to Buy has two components. First, we are going to commit £3.5 billion of capital spending over the next three years to shared equity loans. From the beginning of next month, we will offer an equity loan worth up to 20% of the value of a new build home to anyone looking to move up the housing ladder. You put down a 5% deposit from your savings, and the Government will loan you a further 20%. The loan is interest free for the first five years. It is repaid when the home is sold. Previous help was available only to those who were first-time buyers and who had family incomes below £60,000. Now help is available to all buyers of newly built homes on all incomes: available to anyone looking to get on or move up the housing ladder. The only constraint will be that the home cannot be worth more than £600,000—but this covers well over 90% of all homes. It is a great deal for homebuyers; it is a great support to home builders; and because it is a financial transaction, with the taxpayer making an investment and getting a return, it will not hit our deficit.

The second part of Help to Buy is even bolder and has not been seen before in this country. We are going to help families who want a mortgage for any home they are buying, old or new, but who cannot begin to afford the kind of deposits being demanded today. We will offer a new mortgage guarantee. This will be available to lenders to help them to provide more mortgages to people who cannot afford a big deposit. These guaranteed mortgages will be available to all homeowners, subject to the usual checks on responsible lending. Using the Government’s balance sheet to back these higher loan-to-value mortgages will dramatically increase their availability. We have worked with some of the biggest mortgage lenders to get this right; and we are offering guarantees sufficient to support £130 billion of mortgages. It will be available from the start of 2014 and run for three years. A future Government would need the agreement of the Bank of England’s Financial Policy Committee if they wanted to extend it.

Help to Buy is a dramatic intervention to get our housing market moving. For newly built housing, Government will put up a fifth of the cost; and for anyone who can afford a mortgage but cannot afford a big deposit, our mortgage guarantee will help them to buy their own home. That is a good use of this Government’s fiscal credibility.

In the Budget Book we also set out more plans for housing—plans to build 15,000 more affordable homes; plans to increase fivefold the funds available for building for rent; and plans to extend the right to buy so that more tenants can buy their own home.

People also have the aspiration to keep more of what they earn. That is a difficult aspiration for any Chancellor to help with when economic times are tough and money is short, but we are doing the hard work to reduce current spending. We have set out a tough package to raise money from tax avoiders. That means that with this Budget we can stick to the path of deficit reduction, increase capital spending, and still find ways to help families.

Let me turn to duties. We inherited a fuel duty escalator from the previous Government that would have seen above-inflation increases in every year of this Parliament. We abolished the escalator and we have now frozen fuel duty for two years. This has not been easy. The Government have forgone £6 billion in revenues to date, but oil prices have risen again, family budgets are squeezed, and I hear those who want me to do more to help them get by. My hon. Friend the Member for Harlow (Robert Halfon) has again spoken up for his hard-working constituents. He has been joined by many other hon. Friends, like the hon. Member for Argyll and Bute (Mr Reid). We have all listened to the people we represent. Today I am cancelling this September’s fuel duty increase altogether. Petrol will now be 13p per litre cheaper than if we had not acted over these last two years to freeze fuel duty. For a Vauxhall Astra or a Ford Focus, that is £7 less every time you fill up.

There is another duty escalator that we also inherited from the previous Government—the annual 2% above inflation increase in alcohol. We are looking at plans to stop the biggest discounts of cheap alcohol at retailers, but responsible drinkers in our pubs should not pay the price for the problems caused by others. The sad fact is that we have lost 10,000 pubs in the UK over the past decade. Many hon. Members, such as my hon. Friend the Member for Bristol North West (Charlotte Leslie), have raised their concerns with me, and my hon. Friend the Member for Burton (Andrew Griffiths) in particular has been a committed champion of the famous brewing industry that employs many of his constituents.

I intend to maintain the planned rise for all alcohol duties, with the exception of beer. We will now scrap the beer duty escalator altogether, and instead of the 3p rise in beer duty tax planned for this year by the previous Government I am cancelling it altogether.

That is the freeze people have been campaigning for, but I am going to go one step further and cut beer duty by 1p. We are taking a penny off the pint. The cut will take effect this Sunday night and I expect it to be passed on in full to customers. All other duties will remain as previously announced.

Of course, freezing petrol duty and cutting beer duty will not transform the finances of any family, but it helps a little to have some bills that are not going up. [Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. May I say to Back Benchers and to a couple of Members in particular that the panto season is not for another nine months, and if there are auditions could they take place outside the Chamber?

[Mr Osborne]

It helps a lot to be able to keep more of the money you earn before you pay tax on it. The Government support people who work hard and want to get on.

When we came to office the personal income tax allowance stood at under £6,500. In two weeks’ time, the allowance will reach £9,440, with the largest cash increase in its history. Twenty-four million taxpayers will see their income tax bill cut by an extra £200. More than 2 million of the lowest paid will be taken out of tax altogether.

In this Budget, the Government reconfirm their commitment to raising the personal allowance to £10,000, In fact, we go one better. We said we would raise the personal allowance to £10,000 by the end of the Parliament. Today I can confirm that we will get there next year. From 2014, there will be no income tax at all on the first £10,000 of your salary—£10,000 of tax-free earning. That is £700 less in tax for working families than when this Government came to office. Almost 3 million of the lowest paid will pay no income tax at all. It is a historic achievement for this Government and for hard-working families across the country.

I am aware that the concept of a 10p tax rate has caused problems for Labour Members. First, they introduced it before deciding that introducing it was a mistake and that it ought to be abolished. Then they decided that abolishing it was a mistake and that they ought to introduce it again. To put them out of their misery, we are going to turn their 10p band into a 0p band, so they do not have to worry about it any more. Every person who is paying at the 10p rate that Labour doubled will now pay no income tax at all.

There is one final tax change that I want to tell the House about. It is about jobs. In the end, aspiration is about living in a country where people can get jobs and fulfil their dreams. The ending of contracting out that I talked about generates extra employee national insurance revenues for the Exchequer. I want to put those revenues to good use. I want to support jobs and the small businesses that create them, and I want to do it with a reforming tax cut. In fact, it is the largest tax cut in this Budget.

The cost of employing people is a burden on small firms. It is a real barrier to taking an extra person on. To help create jobs and back small businesses in this country, I am today creating the employment allowance. The employment allowance will work by taking the first £2,000 off the employer national insurance bill of every company. It is a tax off jobs. It is worth up to £2,000 to every business in the country. It will mean that 450,000 small businesses—one third of all employers in the country—will pay no jobs tax at all.

For the person who has set up their own business and is thinking about taking on their first employee, a huge barrier will be removed. They can hire someone on £22,000, or four people on the minimum wage, and pay no jobs tax. Ninety-eight per cent. of the benefit of this employment allowance will go to small and medium-sized enterprises. It will become available in April next year, once the legislation has passed. We will also make it available to charities and community sports clubs. The previous Government’s answer to Britain’s economic problems was to propose a tax on jobs. We stopped that and today this Government are taking tax off jobs.

A new employment allowance that helps small firms, a 20% rate of corporation tax and a £10,000 personal allowance are major achievements delivered by this Government in difficult times.

We understand that the way to restore our economic prosperity is to energise the aspirations of the British people. If you want to own your own home, if you want help with your child care bills, if you want to start your own business or give someone a job, if you want to save for your retirement and leave your home to your children, and if you want to work hard and get on, we are on your side. This is a Budget that does not duck our nation’s problems; it confronts them head on. It is a Budget for an aspiration nation. It is a Budget that wants to be prosperous, solvent and free, and I commend it to the House. [Interruption.]

[Mr Deputy Speaker]

Order. If Members want to debate the Budget, we had better make some progress.

ECOFIN

George Osborne Excerpts

Thursday 14th March 2013 Written Statements

[The Chancellor of the Exchequer (Mr George Osborne)]

A meeting of the Economic and Financial Affairs Council was held in Brussels on 5 March 2013. Ministers discussed the following items:

Revised capital requirements rules (CRD IV)

Ministers discussed a revised legislative package. I made clear that the UK would not support the proposals as they stand. The UK currently has one of the toughest remuneration regimes in the world and the current remuneration proposals in CRD IV would risk the perverse effect of driving up fixed pay, making banks less resilient. The proposals would also make it more difficult to claw back pay where appropriate, thus reducing accountability in the banking sector. The presidency noted that a majority of member states supported the revised package: however further work was required to negotiate outstanding technical issues before Council would formally approve the measures.

Current legislative proposals

The presidency updated Council on the state of play of the following legislative proposals currently under consideration: revised rules for markets in financial instruments, the single supervisory mechanism, the bank recovery and resolution directive, the mortgage credit directive and the market abuse directive and regulation.

VAT fraud: quick reaction mechanism (VAT QRM)

Ministers discussed political guidelines for an anti-fraud package including the QRM. The UK and others stressed the importance of decisions on tax matters being made by the Council and being subject to unanimity. The presidency will continue its work in this area.

Economic governance “two pack”

Council noted the agreement reached with the European Parliament.

European semester: discussion of certain thematic issues—report on quality of public expenditure

Ministers agreed Council conclusions on the report, which addresses fiscal adjustments and finds that fiscal consolidation and promoting growth are not alternatives and can go hand in hand.

Closer economic and monetary union: response to President of the European Council

Ministers held an exchange of views on closer economic and monetary union integration.

Follow-up to G20 meeting of Finance Ministers and governors in Moscow, 15-16 February 2013

The presidency and the Commission updated Ministers on the meeting.

Oral Answers to Questions

George Osborne Excerpts

Tuesday 12th March 2013 Commons Chamber

[Claire Perry (Devizes) (Con)]

1. What recent assessment he has made of the UK’s business competitiveness.

[The Chancellor of the Exchequer (Mr George Osborne)]

Under this Government, Britain has moved into the top 10 of the most competitive places in the world to do business, according to the World Economic Forum; our tax system is seen as one of the most pro-business in the world; market interest rates are at record lows; red tape has been cut by almost £850 million in the past two years; and exports to China, India and Brazil are up by almost two thirds since 2009.

[Claire Perry]

I thank the Chancellor for that reply. Is he aware that, according to accountants KPMG, Britain is now the best place in the world to do business, for the first time ever? That is very welcome news for businesses in my constituency, but what more do we need to do to maintain and consolidate that position?

[Mr Osborne]

My hon. Friend refers to the remarkable survey by KPMG that found that in the space of three years Britain has gone from having one of the least competitive business tax systems in the world to having the most competitive one; we are ahead of Ireland, the Netherlands and Luxembourg, as well as, of course, the United States, France and Germany. That is because of the hard work we have done on corporation tax and on the controlled foreign companies regime. Of course, we have to go on making this country the most competitive place to do business, so that we can succeed in the global race.

[Sheila Gilmore (Edinburgh East) (Lab)]

Is it not the truth that demand has been so sucked out of the economy by the Government’s policies that there just is not the growth? Telling us how competitive we are is living in cloud cuckoo land, given that even the Office for Budget Responsibility says that growth is going to be very slow, even in the coming year.

[Mr Osborne]

To get a lecture from the Labour party on demand! The economy shrank by 6% when the shadow Chancellor was in the Cabinet, and we are picking up the pieces of the mess he and his party left behind. One of those pieces was the deeply uncompetitive business tax system which meant that companies were moving their headquarters out of the United Kingdom. Companies are now moving into the UK because of the changes we have made.

[Mr Andrew Tyrie (Chichester) (Con)]

It is small businesses in our constituencies that will hold the key to Britain’s economic revival. Does the Chancellor agree that they are simply not getting the support they need from the banks at the moment and that although the funding for lending scheme is good, most of the money is currently going into mortgages rather than businesses? I realise that he will not want to say much now, just before the Budget, but can he at least reassure the House that the needs of small businesses are right at the top of his agenda for this Budget?

[Mr Osborne]

My hon. Friend has that assurance. The funding for lending scheme, joint with the Bank of England, is now supporting the small and medium-sized business sector as well as the mortgage market, and is repairing the damage to the financial system caused by the financial crisis. He is also right to say that small businesses are the bedrock of our economic revival, which is why we have cut the small companies tax rate, which before the general election the Labour party wanted to put up. We have also carried on the relief for small businesses from business rates, and in the autumn statement we increased tenfold the annual investment allowance, so that small businesses can invest for the future and create jobs. The Government understand that there needs to be a private sector recovery in order not to repeat the mistakes of the past.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

The Chancellor boasts that all is going well for British business, but terrible figures out this morning show that manufacturing is down by 3% compared with last year’s figure. Business has lost all confidence to invest, so when will he pull his head out of the sand and see that his plan is clearly failing?

[Mr Osborne]

The manufacturing sector halved as a share of the British economy when Labour was in office and we had the fastest decline in British manufacturing in British history. The steps that we have taken to support manufacturers, to help with investment allowances and to ensure that they have access to fast-growing parts of the world, such as China and India, are all part of rebalancing and rebuilding the British economy. I was in the west midlands a couple of weeks ago, and there are 67,000 new private sector jobs in that region alone; I mention the region because private sector employment fell during the boom years under the previous Labour Government. We must get behind the private sector and we must get behind business: that is exactly what this Government are doing.

[Nic Dakin (Scunthorpe) (Lab)]

2. What recent assessment he has made of the UK’s credit rating; and if he will make a statement.

[The Chancellor of the Exchequer (Mr George Osborne)]

As I said to the House last month, the recent Moody’s decision was a stark reminder of the debt problems facing Britain and the clearest possible warning to anyone who thinks we can run away from confronting them. We will not do that.

[Nic Dakin]

When he was shadow Chancellor in 2009 and Standard & Poor’s put the UK on negative watch, the right hon. Gentleman was unequivocal in calling for a general election. Now that the UK has lost its triple A status on his watch, will he be consistent and urge his right hon. Friend the Prime Minister to go to the palace?

[Mr Osborne]

The advice from the rating agency could not be clearer: a reduced political commitment to fiscal consolidation would put Britain’s creditworthiness at risk. That reduced political commitment would come from the Opposition, who oppose every single spending cut, who have no credible economic policy and who, despite having promised for two years to produce a deficit reduction plan, still do not have one. We hear that a draft Labour manifesto is coming this July; perhaps then we will see a proper plan to deal with the deficit Labour created.

[Mark Garnier (Wyre Forest) (Con)]

Does my right hon. Friend agree that the only true measure of creditworthiness is the price paid by the Government to borrow? Gilt yields are still 16 points lower today than before Moody’s downgrade. Does that not reconfirm the international markets’ confidence in this country’s ability to pay its debts and the Chancellor’s programme to tackle Labour’s deficit crisis?

[Mr Osborne]

My hon. Friend is right that our credibility as a nation is tested every day when we seek to borrow money to pay for the deficit that the Opposition racked up. We can borrow at historically low rates, which means low rates for people’s mortgages and low rates for people’s small business loans. Of course, if we lost that credibility by pursuing the Opposition’s policies, interest rates would rocket, people would be put out of their homes and businesses would go bust. That is exactly what we will avoid.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

I am sorry; we cannot let the Chancellor wriggle out that easily. Does he remember writing his pre-manifesto paper, “A New Economic Model: Eight Benchmarks for Britain”, just before the last general election? In it, he said that

“for the first time, the British people will have eight clear and transparent benchmarks—Benchmarks for Britain—against which they can judge the success or failure of their Chancellor and their government over the next Parliament. We will be accountable.”

Will he remind the House of his first benchmark test?

[Mr Osborne]

Our benchmark was to restore the fiscal credibility of this country and that credibility has earned us record low interest rates. The hon. Gentleman talks about wriggling out of things we did in the late period of the last decade, but he ran the leadership election campaign for the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown)—he was the campaign manager—and he should apologise for that disastrous premiership and the chancellorship that preceded it, which put this country in this mess in the first place.

[Chris Leslie]

We are all deeply moved by the Chancellor’s remorse and contrition, but let me remind him of his first benchmark test:

“We will safeguard Britain’s credit rating”.

He has failed on the other benchmark tests, too: he said that he would ensure greater availability of credit to small and medium-sized enterprises; he has failed on economic growth; he is failing on borrowing and the deficit; and he is failing on living standards. After three years of failure, when will it dawn on the Chancellor that his strategy is not working?

[Mr Osborne]

We have cut the deficit by a quarter, a million new jobs are being created in the private sector and there is record employment in our economy, as well as record female employment. We are rebalancing the British economy after all the problems of the past. The hon. Gentleman talks about remorse and contrition, but until we hear some remorse and contrition from those on the Labour Front Bench about the economic mistakes they made, no one will pay the slightest attention to what they, and in particular the shadow Chancellor, have to say.

[Stephen Williams (Bristol West) (LD)]

Given that the UK Government are able to borrow at historically low rates, may I urge my right hon. Friend to take advantage of that position in order to prioritise capital investment, particularly in the housing market, to give a strong fillip to growth?

[Mr Osborne]

We have increased capital investment from the period of the Labour Government. Capital spending as a percentage of our national income is more than under the Labour Government, and we have increased by £10 billion our spending on capital from the plans they left us. I agree that we should be using the Government’s credibility to do more, which is why the infrastructure guarantees and the housing guarantees are coming on stream. Guarantees are being written and that will help to build the infrastructure that this country needs.

[Jim McGovern (Dundee West) (Lab)]

3. What progress he has made on supporting victims of interest rate swap mis-selling.

--- Later in debate ---

[Mr Stephen Hepburn (Jarrow) (Lab)]

T1. If he will make a statement on his departmental responsibilities.

[The Chancellor of the Exchequer (Mr George Osborne)]

The core purpose of the Treasury is to ensure the stability and prosperity of the economy. I am pleased to announce that I have decided to reappoint Martin Weale as external member to the Monetary Policy Committee. He is a wise and valued member of the committee and I am delighted he has agreed to continue his service.

The spending review will be published on Wednesday 26 June and its spending envelope will be set in next week’s Budget.

[Mr Hepburn]

Bankers’ bonuses are up £15 billion, executive boardroom pay is up by 27%, and the richest 1,000 people in this country have increased their wealth by £155 billion, yet there is still a tax cut on the way for the richest 1%. When is the Chancellor going to do something for the other 99% who are paying the bill to subsidise the lifestyle of his privileged chums?

[Mr Osborne]

We are increasing the personal allowance for 24 million people. Bankers’ bonuses were £15 billion a year when the shadow Chancellor was City Minister, but they have come down to just over £1 billion—a dramatic reduction as we now have a more responsible financial sector.

[Mr David Amess (Southend West) (Con)]

T5. With the whole of the United Kingdom getting behind Southend’s bid to be city of culture in 2017, will my right hon. Friend tell the House what economic benefits such an award would bring?

[Mr Osborne]

My Parliamentary Private Secretary, my hon. Friend the Member for Hastings and Rye (Amber Rudd), has just said in my ear that her constituency is also bidding. I will not take sides, but I know that Southend will put in a very strong bid, as will Hastings. The decision will be announced shortly.

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

The Chancellor has had plenty of advice over the weekend on how to change his failing economic plan, and it has not all come from me. The former Defence Secretary says that he should cut capital gains tax, the Business Secretary wants a £15 billion housing boost, and even the Home Secretary is making speeches calling for a new growth plan. What is going on? Do Cabinet Ministers not realise that the Budget is in just eight days’ time, or have they lost confidence in the Chancellor of the Exchequer?

[Mr Osborne]

What people realise is that the right hon. Gentleman’s prescription of borrowing more as a solution to Britain’s borrowing problems is exactly the same prescription that got the country into this mess in the first place. He is like the snake oil salesman selling his miracle cures when people remember that his medicine almost killed the patient. We are not going to listen to him again.

[Ed Balls]

But it is the Chancellor’s plan that is failing. The Business Secretary said on Monday:

“Well we are already borrowing more”—

[Interruption.] Government Members may cheer behind the Chancellor in public, but they are not cheering in private. An e-mail from the right hon. Member for Wokingham (Mr Redwood) has fallen into my hands. It was sent around within half an hour of the Prime Minister’s speech last Thursday to set out alternative ideas for the Budget from Back Benchers, such as income tax cuts and capital gains tax cuts. He says that “one colleague” says that we should do

“more to help people with childcare costs.”

Just one colleague! It concludes that the Chancellor needs

“to stimulate greater confidence, more enterprise, and to relieve some of the squeeze on the private sector.”

Businesses and families are feeling the squeeze, so why will the Chancellor not act to stimulate the economy and why is it only millionaires who are getting a £3 billion tax cut from him? Is not the truth that his plan is failing? That is why all the Government Members are losing confidence.

[Mr Osborne]

I am tempted to say, “Look behind you.” With a week to go until the Budget, is that the best that the shadow Chancellor can do? He has produced an e-mail from Conservative Back Benchers who are perfectly entitled to ask for things in the Budget. In this party, we are perfectly prepared for people to express an opinion and to listen to the views of our colleagues, unlike him and the operation that he runs. He is the face of Labour’s economic failure. As long as he remains as shadow Chancellor, it is a great thing for my party.

[Mr Philip Hollobone (Kettering) (Con)]

Given that an improved export performance will be crucial to Britain’s economic success, may I share with the Chancellor the good news that in its fourth quarter economic review, the Northamptonshire chamber of commerce, which after all represents middle England at its best, reported that 41% of its manufacturing members reported increased exports and that 76% of service sector companies reported higher figures?

[Mr Osborne]

That is excellent news. I congratulate the businesses in my hon. Friend’s constituency and the people who work for them on the hard work that they are putting in. It is essential that Britain connects itself better to the fast-growing parts of our world. It is good news that exports to China, India, Brazil and the like are up by two thirds under this Government, but we still have much more to do in that space. That is why, in December’s autumn statement, we put more money into UK Trade & Investment, which will help the businesses in his constituency to get those export orders.

[Steve Reed (Croydon North) (Lab)]

T2. Is it not absurd that the Liberal Democrats, who claim that the mansion tax on homes worth more than £2 million is their policy, are poised to vote against a motion that argues for precisely that?

--- Later in debate ---

[Mr George Osborne]

We are raising more in bank taxes every year of this Parliament than the previous Government raised in any one year during their time in office. My hon. Friend is right; those revenues help to support public services and deal with the deficit. We also have a better-regulated banking system, and with the arrival in April of the Bank of England’s new role as prudential regulator, and the Financial Services (Banking Reform) Bill currently before Parliament, we are putting right all that went wrong in the banking system.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

T3. Did the Business Secretary let the cat out of the bag yesterday? When asked on the “Today” programme whether his call for investment in infrastructure to kick-start the recovery would mean more borrowing, he replied:“Well we are already borrowing more”.

[Mr Osborne]

We are increasing capital spending more than in the plans we inherited from the Labour Government. This Government are spending more on roads than the previous Government did and, of course, the deficit has come down by 25%.

[Jacob Rees-Mogg (North East Somerset) (Con)]

Although article 153(5) of the treaty on the functioning of the European Union may be esoteric to some, it is rather important because it prohibits the European Union from running an incomes policy. It seems to me that the bonus limit is an incomes policy; it is not a power of the European Union and therefore ought to be resisted by the Government by all possible means. Will the Chancellor take it to the European Court of Justice?

--- Later in debate ---

[James Morris (Halesowen and Rowley Regis) (Con)]

Does the Chancellor agree that increasing the personal allowance again will mean that a basic rate taxpayer in my constituency will pay £600 less in tax as a result of the measures taken by the Government?

[Mr George Osborne]

That is already planned and was announced last year. In April, people will be £600 a year —£50 a month—better off. We have also taken 2 million people out of tax altogether, which is a sign of our commitment to those on low incomes and a sign of our commitment to all those who work hard and want to get on.

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

T8. As the Chancellor puts the finishing touches to the Budget, may I, on behalf of the potteries of Stoke-on-Trent, make another plea for applying the mineralogical processing exemption in the taxation of energy products? That would be a helpful sign that the Government understand the needs of energy intensive sectors.

[Mr George Osborne]

I shall take that as a Budget representation. To be fair to the hon. Gentleman, he is always a powerful champion of the ceramics industry in his constituency.

[Harriett Baldwin (West Worcestershire) (Con)]

My constituents find it much easier to take out a payday loan than to open a savings account. What steps are the Government taking to make it much more difficult for my constituents to fall into that sort of temptation?

--- Later in debate ---

[Graham Evans (Weaver Vale) (Con)]

Does my right hon. Friend agree that infrastructure projects such as the Mersey Gateway bridge, the northern rail hub and High Speed 2 are good news for my constituents, good news for greater Cheshire, and good news for the north of England as a whole?

[Mr George Osborne]

I absolutely agree with my constituency neighbour. The Mersey Gateway bridge, which has been talked about for many years, has now got the go-ahead. The northern hub, which MPs from all parties and on both sides of the Pennines have been calling for, is now funded and will be of particular benefit in the Greater Manchester area. High Speed 2 is controversial, but nevertheless will connect the biggest cities of our country and help reduce the north-south divide in our economy. One piece of good news in our economy recently has been the growth of private sector jobs in the north of England.

[Ann McKechin (Glasgow North) (Lab)]

T10. Has the Chancellor of the Exchequer managed to overcome the militant tendency within the Cabinet to allow him fully to implement the recommendations of the Heseltine review on growth and localism?

[Mr George Osborne]

We will set out next week our response to the Heseltine review. Michael Heseltine has set out a compelling vision of how we can operate as a more decentralised country and empower our great cities. I was with him in Birmingham just the other day, with the Labour leader of Birmingham council, working on how Birmingham could set out a report and act as a test case for other cities.

[Mr Peter Bone (Wellingborough) (Con)]

In the past, Chancellors have had to resign if Budgets are leaked. Given what happened last year, will the Chief Secretary tell the House what measures he has put in place to ensure it does not happen again?

[Mr Osborne]

Of course I want to ensure that the House of Commons is the first to hear the Budget, just as it was the first to hear the appointment of the new Governor of the Bank of England.

[Several hon. Members]

rose—

ECOFIN

George Osborne Excerpts

Tuesday 5th March 2013 Written Statements

[The Chancellor of the Exchequer (Mr George Osborne)]

A meeting of the Economic and Financial Affairs Council will be held in Brussels on 5 March 2013. We expect the following items to be on the agenda and discussed:

Revised capital requirements rules (CRDIV)

The presidency will seek Ministers’ political endorsement of a revised CRDIV package.

VAT fraud: quick reaction mechanism (VAT QRM)

Ministers will discuss political guidelines. The UK will continue to stress the importance of decisions on tax matters being made by the Council and being subject to unanimity.

Economic governance “two pack”

The presidency will update Ministers on the agreement reached with the European Parliament.

Current legislative proposals

The presidency will update Council on revised rules for markets in financial instruments (MiFID), the proposed single supervisory mechanism (SSM), the bank recovery and resolution directive (RRD) and the mortgage credit directive.

European semester: discussion of certain thematic issues—report on quality of public expenditure

Ministers will hold an exchange of views and will seek to agree Council conclusions.

Closer EMU: response to President of the European Council

Ministers will hold an exchange of views in order to prepare a contribution to the European Council’s discussions on closer EMU integration, expected in June.

Follow-up to G20 meeting of Finance Ministers and governors in Moscow, 15-16 February 2013

The presidency and the Commission will update Ministers.

ECOFIN

George Osborne Excerpts

Monday 25th February 2013 Written Statements

[The Chancellor of the Exchequer (Mr George Osborne)]

A meeting of the Economic and Financial Affairs Council was held in Brussels on 12 February 2013. Ministers discussed the following items:

Current legislative proposals

The presidency updated Ministers on the single supervisory mechanism (SSM); capital requirements directive IV (CRD IV); bank recovery and resolution; market abuse directive (MAD)/market abuse regulation (MAR); and revised rules for markets in financial instruments directive (MiFID).

Discharge to be given to the Commission in respect of the implementation of the budget for 2011

Council adopted a recommendation to the European Parliament on the discharge to be given to the Commission for implementation of the EU’s general budget for 2011. This recommendation was based on an annual report by the European Court of Auditors (ECA). The UK, along with the Netherlands and Sweden, voted against the recommendation and submitted a joint statement expressing disappointment that for the 18th year in succession, the ECA has been unable to grant a positive statement of assurance on the EU budget as a whole, and furthermore that the overall error rate in recent years has increased.

Council guidelines for the budget for 2014

ECOFIN agreed a set of Council conclusions on guidelines for the 2014 budget of the EU, which will serve as its overall reference for the subsequent budgetary procedure.

Preparation of G20 Meeting of Finance Ministers and Governors (Moscow, Russia, 15-16 February 2013)

Council endorsed EU terms of reference in preparation for a meeting of G20 Finance Ministers and central bank governors to be held in Moscow on 15 and 16 February.

Annual Growth Survey 2013

ECOFIN agreed a set of Council conclusions on the Commission’s annual growth survey 2013. The conclusions, which highlight the importance of EU growth and structural reform, will feed into the March European Council.

Alert Mechanism Report 2013

Council agreed a set of Council conclusions on the Commission’s alert mechanism report 2013.

Fiscal Sustainability Report 2012

ECOFIN agreed a set of Council conclusions on the fiscal sustainability report 2012.

Economic Policy

George Osborne Excerpts

Monday 25th February 2013 Commons Chamber

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on the UK Government’s economic policy following the loss of Britain’s triple A credit rating.

[The Chancellor of the Exchequer (Mr George Osborne)]

This rating decision is a stark reminder of the debt problems built up in Britain over the last decade, and a warning to anyone who thinks we can run away from dealing with those problems. We on the Government side of the House will not do that.

I can report that we have not seen excessive volatility in the markets today. Ten-year Government gilts are broadly flat—trading at 2.1%—within the trading range of the last week, and near the very lowest rates of borrowing in our history. The FTSE 100 is currently up.

The credit rating is an important benchmark for any country, but this Government’s economic policy is tested day in, day out in the markets, and it has not been found wanting today. Families and businesses see the benefit of that in these very low interest rates.

If we accept the outcome of the rating agency’s decision, we must accept the reasons given for that decision. Moody’s points to the combined impact of what it describes as

“slow growth of the global economy”

and the necessary

“domestic public- and private-sector deleveraging process”—

in other words, the process of winding down the huge debts that built up in our society over the last decade. That is the environment that we are operating in. We are dealing with the very high deficit and debt trajectory that this country had, coming out of the financial crisis, and that was made more difficult by the economic environment abroad.

On the same day as the rating decision, the latest European forecasts showed the eurozone deep in recession, and weaker growth than ours in key economies such as France and Germany. Crucially, Moody’s says that the UK’s creditworthiness remains extremely high because of our

“highly competitive, well-diversified economy”

and a

“strong track record of fiscal consolidation”—

what it calls the “political will” to “reverse the…debt trajectory.” Its message to this Government and this Parliament is explicit: the UK’s rating could be downgraded further if there is a

“reduced political commitment to fiscal consolidation.”

Hon. Members will not get that reduced commitment from this Government. We will go on delivering on the economic plan that has brought the deficit down by a quarter, that has helped to secure 1 million private sector jobs, and that continues to secure very low interest rates, not just for the Government, but for families and businesses in this country.

Ultimately, that is the choice for Britain. We can either abandon our efforts to deal with our debt problems, and make a difficult situation very much worse, or we can redouble our efforts to overcome our debts, make sure that this country can earn its way in the world, and provide for our children a very much brighter economic situation than the one we inherited from our predecessors. That is what I will do, and what this Government will do.

[Ed Balls]

The downgrading of Britain’s credit rating is, in the Chancellor’s own words, a “humiliation” for this Government. Let me remind the House what he promised at the general election. He said:

“the British people will have eight clear and transparent benchmarks against which they can judge the economic success or failure of the next government”.

Point 1 says:

“We will safeguard Britain’s credit rating”.

The first economic test he set himself has been failed by this downgraded Chancellor. Yet as we have seen today, he remains in complete denial, offering more of the same failing medicine, even though Moody’s now agrees that “sluggish” growth is the main problem. Does he not now regret using the rating agencies as cover for his accelerated tax rises and spending cuts—an economic course he was warned was bound to fail?

The plan has failed. Businesses, families and pensioners are struggling. Our economy has flatlined, and as a result, Government borrowing is set to be £212 billion higher than the Chancellor planned, but despite all that, he spent the last year saying, “I must stick to my plan to keep the triple A rating.” Now that it is clear that his warnings of disaster—of rising mortgage rates and market mayhem—if we downgraded have not come true, what other excuse does he have for sticking to the plan? Over a weekend, he went from saying that he must stick to his plan to avoid a downgrade to saying that the downgrade is the reason why he must stick to the plan. He used to say that a downgrade would be a disaster; today he says it does not matter, but he still warns that a downgrade in future might be a problem—until it comes along; then he will have the same excuses. It is utterly baffling and completely illogical. He is just making it up as he goes along.

No wonder the Chancellor is now besieged by calls from right, left and centre to kick-start the recovery with infrastructure investment and tax cuts. Even the economic adviser to his great political rival, the Mayor of London, has today called for

“more spending by the Government on infrastructure and construction.”

In conclusion, the Chancellor needs to get out of his denial and get a new plan on growth, jobs and the deficit that will work, or else the Prime Minister will need to get a new Chancellor. Does the Chancellor not see that it is his first duty not to put his own political pride first, but to put the national economic interest and families and businesses in this country first?

[Mr Osborne]

The shadow Chancellor finds himself in the contradictory position of seeking an urgent question on a rating decision which he says we should ignore, about a debt burden that he admits he would add to, in order to attack a Government who are sorting out the mess that he created. What exactly is his policy? Six times on the radio he was asked this weekend whether the answer to too much borrowing is to borrow even more, and he would not answer the question. It is an economic policy that dare not speak its name, from a shadow Chancellor who refuses to be straight with the British people. Finally, he was confronted on the radio by the simple statement:

“I, Ed Balls…would borrow more”

and he admitted,

“Yes, that is what I would do.”

Does not that admission completely undermine his entire argument today? A deliberate decision to borrow more—[Interruption.]

[Mr Speaker]

Order. Government Back Benchers, whatever their intentions, are in danger of shouting down their own Chancellor. Mrs Perry, calm yourself. There is always another day.

[Mr Osborne]

Government Back Benchers are as baffled as I am by the shadow Chancellor’s economic policy, which he has just had a few minutes to explain and still there is no explanation. His answer to a debt crisis is to borrow more. His answer to too much borrowing is to add to it. That is the problem he has, ultimately—that he is responsible for the mistakes that got Britain into this economic mess. This is the verdict from the leading Citi economist, Michael Saunders, today:

“In our view, the underlying causes of the UK economy’s weakness—and hence the rating downgrade—stem from the surge in private credit and public spending during 2000-2007.”

Who was in charge of economic policy during that period? The right hon. Gentleman is the architect of the mistakes that gave Britain its debt problem. He ignores the solution to that debt problem. He is condemned to repeat those mistakes and, as a result, his party is condemned never to be trusted with the public finances again.

[Mr Andrew Tyrie (Chichester) (Con)]

The truth is that any Government would need a credible deficit reduction plan, and the plain fact is that the markets are telling us we have one. Does the Chancellor agree with the shadow Chancellor, though, as he pointed out only the day before yesterday, that what the rating agencies have to tell us, given their dismal forecasting record, is of very limited value?

[Mr Osborne]

I would say that the credit rating agencies are important, but they are one test—[Interruption.] It is the shadow Chancellor who wants to say that the rating agency’s decision is not important, but we should still have a debate on it in Parliament. It is a completely contradictory position. It is important, but it is just one test of the Government’s economic credibility in the markets, and that is tested by the gilt yields, by the value of sterling, by the rates of the stock market and all sorts of other things, and as I say, today we have not seen excessive volatility. I say to the shadow Chancellor and to my hon. Friend and the Treasury Committee that we have to convince the world that we can pay our way in the world, and that is what this Government are going to do.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

If the Chancellor did not want this to be the test, he should not have set it up to be the test. Does he agree with himself that for the UK to lose its triple A rating would be a humiliation?

--- Later in debate ---

[Mr Osborne]

What would be humiliating is if this country lost control of its economic destiny. The way we keep control of our economic destiny is deal with our debt, deal with the imbalances in our economy, and make sure that this country can pay its way in the world, and that is what this Government are doing.

[Gordon Birtwistle (Burnley) (LD)]

Does my right hon. Friend agree that the shadow Chancellor would himself get a triple A rating for his skill in running this country down? Does he also agree that the hard-working people of this country are getting—[Interruption.]

--- Later in debate ---

[Mr Speaker]

I am bound to tell the hon. Member for Burnley that I am always very grateful to him for his advice, but I think that on the whole I can probably get by without it, and only by a very generous interpretation—I am in a generous mood—could that be considered to be in order, but I will happily have the Chancellor briefly respond.

[Mr Osborne]

My hon. Friend is right that what is completely extraordinary is that we have constant criticism from the shadow Chancellor of our fiscal policy but not a clue from him about what he would do except add to borrowing. He has made it very clear that he would add to borrowing, although he has not said by how much, and he has not said which of the cuts he would stick with and which he would oppose, so until we have a credible alternative, we will not have a credible shadow Chancellor.

[Frank Dobson (Holborn and St Pancras) (Lab)]

The Chancellor, having abandoned the triple A rating as a benchmark, appears to have adopted the claim that he has created 1 million private sector jobs. Will he tell us how many of those jobs have in fact been transferred to the private sector, or franchised out to it, from the public sector?

[Mr Osborne]

Private sector employment is up by 1 million since the election, the unemployment rate is lower than when we came into office, female employment is at the highest level in our history and the inactivity rate is at its lowest since 1991, so even though there has been a necessary reduction in public sector jobs, which I think even the Opposition accept had to happen—at least, they used to—we have actually seen very healthy jobs growth in the economy.

[Mr John Redwood (Wokingham) (Con)]

Does the Chancellor agree that the state balance sheet would look an awful lot better, and that the economy would function better, if RBS was sorted out more quickly and sold back to the private sector in a way that promoted banking competition?

[Mr Osborne]

I agree with my right hon. Friend. RBS is now pursuing a policy of becoming a much more UK-focused bank than it was under the strategy we inherited. We are absolutely clear that it should not be in the universal banking business on the scale that it has been and that the investment bank should be supporting its corporate and retail business in the UK, and it has made important steps in that direction.

[Gavin Shuker (Luton South) (Lab/Co-op)]

Will the Chancellor confirm that in the five years of this Tory-led Government he will borrow more than the previous Labour Government borrowed in 13 years?

[Mr Osborne]

Let me explain something to the hon. Gentleman. We inherited a 12% budget deficit, and the deficit is defined as the amount added to the debt every year. We are getting the deficit down in order to deal with the debt problem. His plan is to increase the deficit deliberately, borrow even more, add to the debt burden and repeat all the mistakes made by his colleagues when they were in charge.

[Richard Fuller (Bedford) (Con)]

Between the mid 1990s and 2010, the nation’s total indebtedness grew from two to five times the national income. The shadow chancellor and the Leader of the Opposition, who came to Bedford two weeks ago to advise that the country should borrow £200 billion more, were architects and supporters of a policy of indebting our children and grandchildren. Will my right hon. Friend tell me what the implications for the country’s credit rating would be if the Opposition’s policies were pursued today?

[Mr Osborne]

We are debating the decision of Moody’s credit rating agency, which said in its market notice on Friday that reduced political commitment to fiscal consolidation could lead to further downgrades of the United Kingdom. That is the verdict of the ratings agency. The verdict of the Institute for Fiscal Studies, an independent body, is that Labour plans would add about £200 billion extra to borrowing. That is the view of independent bodies about the Labour party’s economic policy.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

Is the Chancellor aware that the whole country is getting progressively more sick of the mantra that there is no alternative, which he parades as a policy, and that for as long as he perseveres with these counter-productive policies there is no hope? In particular, until he can get his national programme for investment in infrastructure under way—even the director general of the CBI said that he had totally failed to deliver on that, and the whole country and the whole House agrees—he is failing as a Chancellor.

[Mr Osborne]

Infrastructure spending—actual money being spent on infrastructure—is higher in this Parliament than it was in the previous Parliament. That is, I am afraid, the simple fact produced and audited by the independent Office for Budget Responsibility. We have increased capital spending compared with the plans that we inherited, and under this Government in this Parliament it is higher as a percentage of GDP than under the previous Labour Government. That is what has happened.

[Mark Garnier (Wyre Forest) (Con)]

Does my right hon. Friend agree that it is going to take slightly longer than two and a half years to sort out a problem that was 13 years in the making?

[Mr Osborne]

My hon. Friend puts it very simply. It is a bit like the arsonist calling the fire brigade and then complaining that we have not put the fire out quickly enough.

[Mr Dennis Skinner (Bolsover) (Lab)]

Does not the Chancellor realise that it has been three years of continuous failure: first, a recession, then a double-dip recession, and now the relegation of the pound sterling? If he had been a football manager he would have been out on his neck already. The people think that he is not fit to deliver the next Budget—why does he not get out?

[Mr Osborne]

There seems to be amnesia about Labour’s 13 years in office. The hon. Gentleman talks about a double-dip recession. The first recession was a 6% contraction in our economic activity while he was supporting a Labour Government, with a 12% budget deficit, a higher rate of unemployment and more youth unemployment than we have today. We are sorting out these problems. Of course it takes time, but, frankly, the prescription of the hon. Gentleman and other Labour Members would put us right back in the mess that they left this Government with.

[Mr Brooks Newmark (Braintree) (Con)]

Does the Chancellor agree that the only two countries that have maintained their triple A credit rating across the board—Canada and Germany—are the two countries that fixed the roof while the sun was shining?

[Mr Osborne]

My hon. Friend is absolutely right. Germany and Canada went into the financial crisis with the two lowest structural deficits of the G7, and the United Kingdom went into the financial crisis with the highest structural deficit in the G7—5%. That was confirmed recently by the International Monetary Fund. I think that, quite extraordinarily, the only person in Britain who still denies that we had a structural deficit is the shadow Chancellor. The former Chancellor accepts it and the former Prime Minister, Tony Blair, accepts it; only the shadow Chancellor does not accept it. He cannot accept it because that would mean admitting he got it wrong, and if he admitted he got it wrong, people would not put him in charge again.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

It is suggested that to establish economic credibility we need more growth in the economy, yet—since the Chancellor seems to be quoting former Chancellors—a former Conservative Chancellor said that it will be years before we re-establish proper growth in the economy. How is the Chancellor going to re-establish his credibility?

--- Later in debate ---

[Mr Osborne]

As I said, the credibility of the Government’s economic policy is tested every day in the markets, and we are borrowing at record low interest rates. As I have said many times, the idea that the problems we inherited could be solved overnight was patently ludicrous. They are some of the worst economic problems that any incoming Government have ever faced in British political history. We are dealing with those problems. The deficit is down by a quarter, 1 million jobs have been created in the private sector, and interest rates remain very low. That is the test of the success of our policy.

[Claire Perry (Devizes) (Con)]

I shall be calm, Mr Speaker. Will the Chancellor confirm that two other major rating agencies still maintain Britain’s triple A credit rating and that the credit default swap rate—another measure of default risk—is at 51 basis points today, one of the lowest levels in the world?

[Mr Osborne]

My hon. Friend is right about the credit default swap rate. As I have said, the credibility of our policies is tested every week when we have to borrow all this money to pay for Labour’s deficit, and we are borrowing it at record low rates.

[John Mann (Bassetlaw) (Lab)]

Would not the honourable course be for the Chancellor to say at the next Cabinet meeting, “I’m going outside and I may be some time”?

[Mr Osborne]

The problem with the hon. Gentleman is that he is pretty free with his calls for people to go. The last person he called on to go was the shadow Chancellor.

[Sir Tony Baldry (Banbury) (Con)]

Is it not correct that even before the crisis struck we had pretty much the biggest structural deficit in the world as a consequence of the previous Government’s policies? It is no wonder that we have been losing ground to economies such as those of India and China. It is only if we stick to our guns that we will sort out our position to become increasingly internationally competitive with other economies.

[Mr Osborne]

My hon. Friend is right. The UK had the highest structural deficit of the G7 going into the financial crisis. That was confirmed by the IMF just before Christmas. He is also right about our trade patterns. When this Government came to office we were exporting more to Ireland than to the BRIC countries—Brazil, Russia, India and China—combined. We are seeking to expand our trade with those countries and it has been going up markedly. I think there has been an almost 100% increase in our trade with China and, of course, the Prime Minister led a high-powered business delegation to India only last week.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

Will the Chancellor remind the House and the country how many billions of pounds his Government have borrowed since he came to office?

[Mr Osborne]

We borrow money because we are running a deficit and we are trying to get it down from the 11.5% that we inherited. The deficit has actually come down by a quarter over the past couple of years.

[Mr John Baron (Basildon and Billericay) (Con)]

Evidence suggests that this downgrade will have little effect in the actual markets. May I also suggest to the Chancellor that small business corporation tax cuts will bring their own reward over the medium term? [Interruption.]

[Mr Osborne]

I think that someone on the Opposition Benches shouted from a sedentary position, “Tax cuts for the rich,” when my hon. Friend was suggesting tax cuts for small businesses. That tells us everything about the Labour party’s attitude to enterprise. We have reduced the small companies rate, which was due to go up to 22% under the plans we inherited. It is now 20% and, as from the beginning of this year, we have had a tenfold increase in the annual investment allowance to help small businesses.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

Who does the Chancellor think has been the most humiliated in the eyes of the public—the credit rating agencies that gave triple A ratings to junk investments and therefore helped cause the financial crisis, or the Chancellor, who staked everything on the same triple A rating and then lost it?

[Mr Osborne]

Unfortunately the hon. Lady’s list did not include the shadow Chancellor, so I cannot give her an answer.

[Mr Peter Bone (Wellingborough) (Con)]

I can guarantee that in the Dog and Duck in Wellingborough they will not be talking about Moody’s. They might be talking about the lowest council tax in the country or the thousands of homes to be built in Wellingborough East, but does the Chancellor agree that they are most likely to be discussing the 2,000 new jobs that will be created by the Skew Bridge development, which will bring leisure and retail facilities to my town?

[Mr Osborne]

I think they will be talking about the new jobs being created at Skew Bridge and those being created across our economy as the private sector grows. I was in the west midlands on Friday, where I think there has been a 67,000 increase in jobs in the private sector over the past year. That is worth remembering, because the number of jobs in the private sector in the west midlands during the boom years before the financial crisis actually shrank under the previous Labour Government.

[Helen Goodman (Bishop Auckland) (Lab)]

The Chancellor began by saying that the gilts market had been flat today, but in fact it is down across the board. Will he share with the House his changed forecast for inflation following the fall in the pound and for the cost of borrowing to the Government?

[Mr Osborne]

Unless something happened while the shadow Chancellor was on his feet, the gilts market was flat on the day.

[Penny Mordaunt (Portsmouth North) (Con)]

The shadow Chancellor has admitted that his plan is to borrow even more. Although the Chancellor has a tough shift sorting out the disaster of Labour’s economic legacy, is he not glad that it is our shift when he stares at the car crash of an alternative opposite him?

--- Later in debate ---

[Mr Osborne]

We have inherited a very tough economic situation from our predecessors, but we have confronted the problem and taken difficult decisions on spending. What is remarkable about the Labour party is that in all its questions at Treasury questions, Prime Minister’s questions and the like, it complains about every cut, but never tells us about a single cut that it supports. That is why it does not have a credible shadow Chancellor or a credible economic policy.

[Lucy Powell (Manchester Central) (Lab/Co-op)]

In 2011, the Conservative party issued a dossier that said that a credit rating downgrade

“could add £5,000 per year to a family’s mortgage interest bill”.

Does the Chancellor stand by that laughable remark?

[Mr Osborne]

We are very clear that if we lost control of the country’s credibility in the international markets, as Labour would, interest rates would go up and families would pay more. The truth is that because of the credibility of our economic policy, interest rates are low and have stayed low today.

[Jacob Rees-Mogg (North East Somerset) (Con)]

I wonder whether I may remind the Chancellor that Standard & Poor’s is facing proceedings from the United States Government for fraud and that Moody’s is likely to follow? Moody’s has just downgraded a country whose debt is all denominated in its own currency, which is a fiat currency. That is absolutely nonsensical. Will he therefore join me in citing Lord Chesterfield and telling them that they are foolish people who do not even know their own foolish business?

[Mr Osborne]

I think that it was Lord Chesterfield who provided advice to his son in that famous book, and I am sure that the advice included, “Don’t spend more than you’ve got.”

[Mr Tom Harris (Glasgow South) (Lab)]

The Chancellor seems determined to follow in the footsteps of his illustrious predecessor, Lord Lamont, who, following our ignominious expulsion from the exchange rate mechanism in 1992, famously had a bath and sang, “Je ne regrette rien”. Does the Chancellor have any plans to have a bath tonight and what song does he plan to sing? May I suggest, “Help!”?

[Mr Osborne]

We are dealing with the problems that we inherited. Given the situation that we inherited, I think we can say, “Things can only get better”.

[Jake Berry (Rossendale and Darwen) (Con)]

At the export for growth summit in east Lancashire, I spoke to world-class engineering businesses that are interested in borrowing to invest in their businesses so that they can grow and sell to the global market. Will the Chancellor confirm that he will stick to his plan and keep interest rates at a record low so that we can create more jobs in east Lancashire?

[Mr Osborne]

My hon. Friend is a powerful champion of businesses in his constituency and has spoken to me about what they need. He is absolutely right. Of course we want to get credit to businesses that want to expand and take people on. That is why we run the funding for lending scheme with the Bank of England. We have also provided additional annual investment allowances in the way that I have just set out. The reaction of business organisations to the news of the last couple of days has been striking: they have absolutely supported the Government’s determination to deal with our debts.

[Geraint Davies (Swansea West) (Lab/Co-op)]

May I congratulate Swansea City on its triple A rating after winning the league cup? At the same time, the Chancellor is fouling up the economy and has caused a penalty that has lost us the triple A rating. He should be focusing on a growth strategy and should not be cutting the poorest hardest, given that they spend the most.

[Mr Osborne]

Of course, I congratulate Swansea on its victory in the Capital One cup.

We have to take difficult decisions on things like welfare, but we are helping people to have incentives to be in work, helping people who are in work and supporting people by, for example, increasing the personal allowance and taking the lowest-paid out of tax altogether. I would hope that the hon. Gentleman supports that.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

The Chancellor has rightly drawn attention to the effect of deleveraging. May I remind him that the average leverage ratio for the banks in the 40 years between 1960 and 2000 was 20 times, and that between 2000 and 2007 it rose to 50 times? Will he remind us which party was in government at that time and who was the Minister for the City?

[Mr Osborne]

We are now looking, through the Basel agreement, at a leverage ratio as a back-stop to regulation in this country, and of course we have the Financial Services (Banking Reform) Bill coming through Parliament better to protect and regulate our financial services. My hon. Friend is quite right to remind us of who was the City Minister when the City blew up.

[Lilian Greenwood (Nottingham South) (Lab)]

In February 2010, the Chancellor asked:

“What investor is going to come to the UK when they fear a downgrade of our credit rating?”

What I and my constituents want to know is this: does he still think that a downgrade will drive investors away, and if not, what has changed?

[Mr Osborne]

I am very clear, and was clear then, that the test of the Government’s economic credibility is out there in the markets with the interest rates that we can charge and in the corporate tax environment and the general competitiveness of the economy that we offer. Since I made those statements, this country has actually become more competitive and climbed up the league tables of international competitiveness. There was a survey last week on business tax, which said that this country had gone from being one of the least competitive business tax regimes in the world to being one of the most competitive.

[Mr Julian Brazier (Canterbury) (Con)]

Will my right hon. Friend reassure the House that he has no plans to balkanise the responsibility for regulating banks, that he will not sell off half our gold at a knock-down price and that he is not going to let our deficit rip?

--- Later in debate ---

[Mr Osborne]

I can assure my hon. Friend that we are not going to repeat the mistakes of the last Labour Government. We are absolutely clear, when it comes to regulating the City and banking—I am about to give evidence to the Banking Commission—that we are taking the tough action. [Interruption.] The right hon. Member for Morley and Outwood (Ed Balls) says “Pathetic”, but he was the City Minister when the Royal Bank of Scotland bought ABN-AMRO and when Northern Rock was offering 125% mortgages. He was the City Minister when the City got completely out of control, and he should get up and apologise for it.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

In May last year, the Chancellor said that when Britain’s outlook was moved off negative, it demonstrated that the country now had economic stability. Now that it is being downgraded, would he like to give his assessment of our economic stability?

[Mr Osborne]

I know that Labour MPs keep reading out the Whips’ note, but perhaps the Whips will also circulate a note on what Labour’s economic policy is, and then we can have a more constructive debate.

[Philip Davies (Shipley) (Con)]

Does the Chancellor agree that the reason he inherited such a big deficit was that the last Government had overspent, rather than that we were under-taxed? Is growth not sluggish because the tax burden is higher now than the one that he inherited, and is the deficit not higher than it should be because spending is higher than the level that he inherited? Is it not about time that we had some proper spending cuts and some proper tax cuts to put money in people’s pockets and get some growth into the economy?

[Mr Osborne]

We have further difficult decisions on spending to take this year to set the spending round for 2015-16. I know that my hon. Friend has always been consistent in supporting all the difficult spending decisions, so I look forward to that consistent support in the years ahead.

[Pete Wishart (Perth and North Perthshire) (SNP)]

Over the weekend, the Labour and Tory Better Together no campaign was giving out leaflets to the effect that an independent Scotland would never, ever secure the triple A rating of the UK, just as the UK was losing that triple A rating. Does the Chancellor agree that his nonsensical economic scaremongering about an independent Scotland has totally failed, and that his credibility and that of the no campaign is nothing other than a treble Z?

[Mr Osborne]

If the SNP is to persuade the Scottish people to vote for independence, it must address fundamental economic questions that it has been unable to answer about the currency it would use and the fiscal agreement it would seek should it want to use the pound with the rest of the United Kingdom. There are also fundamental questions about the financial services industry based in Scotland. I remind the hon. Gentleman that the Royal Bank of Scotland is headquartered in Scotland. The SNP is simply unable to answer those questions at the moment, and as a result I think people doubt the case it is making for independence.

[Conor Burns (Bournemouth West) (Con)]

Does the Chancellor agree that rather than sneering at private sector job creation, we should welcome the fact that 1 million new jobs have been created since the general election? Will he assure me, the House and the markets that, in framing the coalition’s economic policy, he will continue to listen—and indeed listen significantly more—to those who run such businesses and who are taking on new employees, rather than to those on the Opposition Front Bench who landed us in this mess?

[Mr Osborne]

I agree with my hon. Friend and we should listen to the demands of the business community. It wants a more competitive business tax regime and additional help with investment, which we are providing. It wants essential economic infrastructure that was not provided over the past 15 years, and we are providing that. It wants a lighter regulatory regime, and we are providing that for small businesses. My hon. Friend is right: businesses large and small are the engine of growth in our economy, and it is welcome that there have been 1 million private sector jobs since the election.

[Mr Nick Raynsford (Greenwich and Woolwich) (Lab)]

The Chancellor has been noticeably more comfortable this afternoon looking backwards rather than forwards. Will he please tell the House his estimate for the likely impact of recent events on the sterling exchange rate, and what the implications will be for inflation?

[Mr Osborne]

I do not comment on the level of sterling. The G7, which the UK chairs at the moment, issued a clear statement that we are not targeting an exchange rate and that the exchange rate flows from the economic policies that we pursue at home to improve our domestic economies.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

Does my right hon. Friend agree that for the Labour party to have any fiscal credibility it should just say sorry—sorry for the debt, sorry for the deficit, and sorry for the pain it has caused my constituents?

[Mr Osborne]

My hon. Friend puts the point powerfully and until we hear that apology from the shadow Chancellor, frankly he will not have the credibility to offer an alternative.

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

The Chancellor’s message to my constituents seems to be that things are only getting worse. Will he lead by example and inform the House what personal sacrifices he will have to make as a result of this downgrade?

[Mr Osborne]

My message to all families is that in the markets interest rates remain low and have remained low today. That is the credibility test for the Government’s economic policy, and as I say, for families paying a mortgage or businesses with a business loan, that is crucial.

[Jason McCartney (Colne Valley) (Con)]

Those on the Opposition Front Bench should come out into the real world from their Primrose Hill mansion. Last week in my constituency I visited businesses that are winning new orders, expanding, and taking on workers and apprentices. Will the Chancellor pledge to continue investment in the regional growth fund, enterprise zones and infrastructure spending such as the electrification of the trans-Pennine route that is helping businesses in my constituency?

[Mr Osborne]

I read in the paper that the Primrose Hill mansion my hon. Friend refers to falls just below the threshold for the new mansion tax proposed by the Labour economic team. However, my hon. Friend makes a good point: we must invest in economic infrastructure across the country. People have been calling for years for the electrification of the trans-Pennine route, and indeed the northern hub. It did not happen under a Labour Government but it is happening under this Government.

[Mr Kevin Barron (Rother Valley) (Lab)]

Does the Chancellor accept that the state of the British economy and its flatlining in terms of growth is a good example of how party political scaremongering at the Dispatch Box for three years does not work?

[Mr Osborne]

I am not sure I really understand what the right hon. Gentleman is getting at. Yes, of course we have a difficult economic situation, because we inherited a 11.5% budget deficit and were coming out of a contraction of the economy of 6%—the right hon. Gentleman talks about flatlining but there was a 6% contraction of the economy when the shadow Chancellor was in the Cabinet. That is what we are dealing with. As I say, we have reduced the deficit, created 1 million jobs, and we have low interest rates.

[Mr David Nuttall (Bury North) (Con)]

Does the Chancellor agree that the only real way for the UK to maintain its economic credibility is to continue to cut spending in real terms and to start living within its means, so that we and our British companies can start to compete more effectively in the global marketplace?

[Mr Osborne]

We have to reduce spending and, as I have said, we will have a spending round later this year. We are reducing the share of national income taken by the state. When we came to office, almost 48% of national income was taken by the state, which was a completely unsustainable position. That position was never advocated by the Labour party when it sought office, but that is how it left the country. It now apparently wants to return to that position. As far as I understand the shadow Chancellor, who shakes his head, he does not support a single cut the Government have made.

[Paul Blomfield (Sheffield Central) (Lab)]

There is an issue of accountability. In the Chancellor’s February 2010 Mais lecture, which was still on the Conservative party website this afternoon, he said:

“in order to bring some accountability to economic policy, I have set out eight benchmarks…against which you will be able to judge whether a Conservative Government is delivering”.

The first benchmark is that the Conservatives

“will maintain Britain’s AAA credit rating.”

How will he be held accountable for his failure?

--- Later in debate ---

[Mr Osborne]

I said very clearly in my statement that that is a benchmark, but it is one of a number of benchmarks. The No. 1 benchmark was fiscal credibility and market credibility, which is precisely what the Government have delivered.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

Anyone running a household budget knows that they have to live within their means, and that to start paying off debts, they have to reduce spending if they are not getting as much income. Will my right hon. Friend confirm that households will be worried about higher mortgage rates if we pursue the Opposition’s plans?

[Mr Osborne]

My hon. Friend is absolutely right. If we lose that credibility in the markets and are unable to convince the world that we can pay our way—that would be the case if we had a reduced commitment to fiscal consolidation—interest rates would go up, which would affect families with mortgages and small businesses with those crucial loans that are helping them to expand and take people on.

[Mr Dave Watts (St Helens North) (Lab)]

Will the Chancellor change the economic medicine before he kills the patient?

[Mr Osborne]

We have revived the patient from the near-death experience it had under the Labour Government.

[Michael Ellis (Northampton North) (Con)]

Does my right hon. Friend agree that, as the Labour party has no economic policy of its own and no wish but to borrow more and more on the never-never, if the shadow Chancellor were in my right hon. Friend’s shoes, this country would be looking at default?

[Mr Osborne]

The great thing is that we, as a country, have experienced the shadow Chancellor’s economic policy, because he was the chief economic adviser to the Government. We had the biggest financial crisis in our history and the deepest recession for 100 years, and many people lost their jobs. We have had a dry run of what it would be like if he were ever allowed back.

[Paul Flynn (Newport West) (Lab)]

For the past three years, the Government have blamed all problems on the EU, the previous Government or the civil service. On what precise date will the Government take responsibility for the ineptocracy they have created?

[Mr Osborne]

Unless the hon. Gentleman can find anyone else to blame for the fact that there was an 11.5% budget deficit—[Interruption.] That was what we inherited from Labour, and we have cut it by a quarter. That just shows how economically illiterate Labour Back Benchers are.

[Mr James Clappison (Hertsmere) (Con)]

As matters stand today, the gilts market is flat, the stock market is going up, and the cost of Government borrowing stands at historically low levels. What does my right hon. Friend believe will be the impact on the cost of Government borrowing if they borrowed even more, if the deficit was going up rather than down, if the national debt was thereby being added to, and if we followed the kamikaze economics advocated by Opposition Front Benchers?

--- Later in debate ---

[Mr Osborne]

We would have the same outcome as happened to the kamikaze pilots.

[Julie Hilling (Bolton West) (Lab)]

The Chancellor says that he will not run away from dealing with the country’s debts. When will he accept that the debts have actually run away with him, and that he has got no answers? When will he resign?

[Mr Osborne]

We are confronting the problems that the hon. Lady’s party left this country. If she is seriously trying to blame us for the fact that there was an 11.5% budget deficit, or for a financial crisis that was brewing while the shadow Chancellor was regulating the City, she needs to read her history books.

[Charlie Elphicke (Dover) (Con)]

Is not the priority to preserve the record low interest rates that have helped hard-pressed families and businesses in an extremely difficult time? Would it not be madness to panic and borrow billions more? Would that not put those low interest rates at great risk?

[Mr Osborne]

My hon. Friend is absolutely right. As I have said before, the Institute for Fiscal Studies says that the Labour plans would add £200 billion extra to borrowing. In the end, the clue is in how one answers the questions, and the shadow Chancellor was asked six times on the radio—many will have heard it—whether borrowing would go up under a Labour Government. He did not want to give a clear answer. Why is that? It is because Labour does not want to admit that borrowing would go up. Finally, on the seventh question, he was forced to admit it, but it is the policy that dare not speak its name.

[Natascha Engel (North East Derbyshire) (Lab)]

As well as the lack of growth in the economy, Moody’s also cited in its downgrading decision its concern about the implementation risks surrounding the current austerity plans. What is the Chancellor doing to address those?

[Mr Osborne]

That is the first sensible question we have heard from the Labour party all afternoon. I agree with the hon. Lady that we have to make sure that the decisions we take on reducing the size of Government are implemented. Collectively as a Parliament we have to reduce Government spending and we have to get the deficit down. I look forward to her support in the Division Lobby as we take further difficult decisions this year.

[Andrew Selous (South West Bedfordshire) (Con)]

We learned this morning that the UK oil and gas industry is set to invest an extra £100 billion in the industry, with anticipated tax revenues of a further £25 billion to the UK Exchequer. Does that not give us some cause for confidence in and optimism for the public finances as we move forward?

[Mr Osborne]

My hon. Friend is right that it is very welcome news from the oil and gas industry, and it is partly because we have been able to provide certainty on decommissioning relief, which it has long sought. One of the challenges for the UK economy is the secular decline in the North sea oil field as it reaches its maturity. Although we will get oil out of it for many more years, we have to look to the post-North sea future, and that is one of the big challenges for the SNP.

[Chris Evans (Islwyn) (Lab/Co-op)]

As a political strategist, does the Chancellor understand that linking the fortunes of the UK economy to discredited credit rating agencies is at best naive and at worst plain stupid?

[Mr Osborne]

That question rather reveals Labour Members’ confusion today. They cannot decide whether this credit rating decision matters or not. What I am saying is that we have to have the credibility to show the world that we can pay our way, and that is precisely what we are doing.

[Andrew Stephenson (Pendle) (Con)]

Despite the bluster of the Labour party, in Pendle we have seen a 106% increase in apprenticeships, and unemployment fell again last month—it is now down to just 4.8%. I urge my right hon. Friend to stick to the course that he has set, because following the shadow Chancellor’s plans for £200 billion of extra borrowing would be an absolute disaster for manufacturers in the north of England.

[Mr Osborne]

My hon. Friend is absolutely right. In Nelson, Barnoldswick and places he represents, there are successful small and medium-sized businesses, as well as large firms such as Rolls-Royce, which are exporting more. We are supporting them with lower business taxes and helping them with vital economic infrastructure. We have to go on supporting those businesses, as he does, because they are the backbone of this country, and they will provide the secure and stable economy that we need in the future.

[Kerry McCarthy (Bristol East) (Lab)]

The Chancellor talked about reviving dead bodies, and he may recall the Hollywood film about medical students trying to create near-death experiences. It was called “Flatliners”. Can the Chancellor predict when the UK will regain its triple A credit rating from Moody’s and say what needs to be done in the interim to make sure that we do so?

[Mr Osborne]

I will not make a prediction about that. [Interruption.] Moody’s is clear that we can win the rating back provided that over time we show our commitment to dealing with our debts and rebalancing our economy, and we will of course provide that commitment. Its market notice is clear that a reduced political commitment to fiscal consolidation—the policy advocated by the shadow Chancellor—would risk further downgrades.

[Graham Evans (Weaver Vale) (Con)]

Will my right hon. Friend the Chancellor remind the House that he has cut the deficit by a quarter under this Government? Will he also remind the House that it is Labour Chancellors who ultimately run out of money and have to go to the IMF to be bailed out?

[Mr Osborne]

It is an eternal truth that all Labour Governments have left office with unemployment higher than when they came in. I think that they have all left the country with a fiscal crisis, so let us make sure that history does not repeat itself.

[Ian Lavery (Wansbeck) (Lab)]

The Chancellor of the Exchequer has quite simply lost all credibility as an individual and all credibility as a Chancellor. What will he do to regain the confidence of the general public? Hundreds of thousands of people have lost greatly as a result of the failure of his economic policies.

[Mr Osborne]

Actually, the unemployment rate is lower today than when we came into office, and there are 1 million more people with jobs in the private sector than there were two years ago. Families want to know that the Government are determined to tackle the nation’s problems, to keep rates low, and to ensure that we provide the right environment for business. They have our assurance that we will do that.

[Stephen Mosley (City of Chester) (Con)]

One of the problems highlighted by the Moody’s downgrade was the sluggish nature of international growth. Will the Chancellor use the forthcoming G7 Finance Ministers meeting in May to argue for the reduction of barriers to international trade, to encourage other countries to keep on the path of lowering their own debt, and to try to ensure that we generate the international growth that will benefit all countries?

[Mr Osborne]

I agree with all the sentiments expressed by my hon. Friend. Of course, all countries in the western world are confronting their debt problems. When it comes to trade, one of the big initiatives we need to pursue in the next couple of years, principally through G8 leaders rather than the G7 Finance Ministers, is the possibility of a free trade agreement with the United States. It was encouraging that the President mentioned that in his inauguration speech. That is one objective, alongside EU free trade agreements with India and Japan, that we should pursue in the coming months.

[Helen Jones (Warrington North) (Lab)]

Last year, just before he was booed at the Olympics, the Chancellor said that this country’s triple A credit rating showed that the world had confidence in his policies. What does he think the downgrading shows?

[Mr Osborne]

As I have been explaining for the past 57 minutes, the test is there each day and each week as we have to borrow money to fund the deficit we inherited—even if it has come down. That is the test, and at the moment the world is lending us money at some of the cheapest rates in our history.

[Gavin Barwell (Croydon Central) (Con)]

Will my right hon. Friend confirm that a significant part of the deficit is structural, which means that, as vital as growth is, it will not do anything to reduce the structural element? As long as Opposition Front Benchers refuse to acknowledge the key fact that we need to start living within our means again, they will not be fit to return to office.

[Mr Osborne]

My hon. Friend is absolutely right, and that is why one of our debt objectives relates to the structural deficit. The structural deficit is the part that does not go away when the economy grows. The shadow Chancellor’s argument that all these problems will disappear as the economy grows is simply nonsense. That was his argument before the financial crisis, that is why Britain went into the financial crisis with a 5% structural deficit, and that is why, when boom turned to bust, the country found itself without any money.

[Alex Cunningham (Stockton North) (Lab)]

Unemployment in my constituency is still higher than it was a year ago, and many of the people in the dole queue feel humiliated that they cannot find a job under this Chancellor’s policies. Does he not accept that he is the one who is now humiliated and that he should lose his job?

[Mr Osborne]

Of course we are working in the north-east, as elsewhere, to create the right conditions for businesses to grow. Unemployment has fallen—the unemployment rate is lower; a million jobs have been created; the number of youths unemployed has fallen as well; and there is a record number of jobs and a record number of women in work. Those things are welcome, but of course we have to do more to help businesses grow, and that is precisely what we are going to do.

[Bill Esterson (Sefton Central) (Lab)]

The Chancellor has spent the past hour denying what he said previously, but the reality is that he staked his entire reputation on maintaining this country’s credit rating. Why on earth is he still in a job?

[Mr Osborne]

I have made it very clear that although the credit rating is an important benchmark, it is one of a number of benchmarks. We are tested every day out there in the market, and what we have not heard from the shadow Chancellor is any alternative. It is all very well criticising the current Government’s economic policy, but what is the Opposition’s alternative? They have to have a policy to attack a policy.

[Sheila Gilmore (Edinburgh East) (Lab)]

This time two years ago the Chancellor was telling us that he had already created half a million new jobs, most of which were probably the result of the previous Government’s economic stimulus—[Laughter.] Unless, of course, people think this was an instant response in six months. Perhaps it was, but that still leaves us with a much slower rate of growth of new jobs since that date. He may not be aware that the Minister of State, Department for Work and Pensions, the hon. Member for Fareham (Mr Hoban) admitted at the last Department for Work and Pensions questions that free jobs—where people were working without wages—were included in his totals. Is it not time he re-examined the reality of these so-called “employment figures”?

[Mr Osborne]

Frankly, the numbers the hon. Lady quotes are nonsense. The employment creation rate last year—perhaps we should give her some credit for saying last year—was the highest since 1989.

[Nic Dakin (Scunthorpe) (Lab)]

Does the Chancellor think that the loss of the UK’s credit rating is what the Prime Minister was thinking of when he said

“the good news will keep coming”?—[Official Report, 24 October 2012; Vol. 551, c. 917.]

[Mr Osborne]

Last week we had the good news that unemployment had fallen again and employment had gone up, and we had the forecasts from the European Commission. Although we would of course want UK growth to be higher, they show that it is actually forecast to be higher than that of France, Germany and many of our European neighbours. We are in a tough neighbourhood—it is a tough economic situation—but we are confronting our country’s economic problems.

[Alison McGovern (Wirral South) (Lab)]

The Chancellor’s response to the questions today has proved that, as ever with him, it is politics first before economics. Now that he has failed the test he set himself, will he turn his attention to the test that Wirral people set him, specifically on under-employment? What is he going to do to help people who cannot get the hours they need in work to put food on the table?

[Mr Osborne]

Of course we want to help people who are not currently working the hours that they want to work; we want to help them by helping businesses to expand to take on more people. As well as jobs going up by 888,000 in total and private sector jobs going up by 1 million or more, the number of hours worked in our economy has also gone up. Labour argues that it is all to do with under-employment, but that is not the case. Of course we want to help people who are working part time but want to go full time and people who want to work more hours. The best way to do that is to create an environment in which businesses want to expand and take people on.

[Kate Green (Stretford and Urmston) (Lab)]

Does the Chancellor not accept that the reason why gilts have not really moved in the wake of the downgrading is not a tribute to the Government’s economic policy, but is symptomatic of a deep pessimism about the long-term growth prospects for our economy?

[Mr Osborne]

If that were the case, why would German rates be lower than ours?

[Mr William Bain (Glasgow North East) (Lab)]

On 2 February 2010, the Chancellor said

“we will protect Britain’s credit rating and international reputation.”

Having delivered the third-lowest growth in the G20 since 2010, with real wages having fallen every month that he has been in office, the cost of living staying higher for longer, according to the Bank of England, and our nation’s productivity slumping, it is his reputation that lies in ruins in the eyes of the British people today.

[Mr Osborne]

I cannot believe that the hon. Gentleman waited an hour and four minutes to read us the Whips’ handout again. As I have said, perhaps the Labour party will circulate its alternative economic policy, so that we can have a real debate about it in the House.

[Diana Johnson (Kingston upon Hull North) (Lab)]

Given the loss of 1,000 private sector jobs in the Hull area over the last couple of months, and the 15,000 people who are looking for work, does the Chancellor think that the downgrading will help or hinder the economic recovery of the Humber?

[Mr Osborne]

What will help the economic recovery of the Humber are, first of all, the low interest rates, which, as I said earlier, are tested every day out there in the bond market. In addition, however, we have opened new enterprise zones in east Yorkshire, we have cut the bridge tolls on the Humber bridge—which I would have hoped that the hon. Lady would welcome—and we have invested in new road projects in and around the area, which had been demanded for years.

[Andrew Gwynne (Denton and Reddish) (Lab)]

In 2010, the Chancellor pledged to secure the recovery. By 2011, that had changed to maintaining Britain’s triple A credit rating. Is not the Chancellor’s failure to deliver on the first promise the reason for our losing the second?

[Mr Osborne]

We inherited an incredibly difficult situation. The economy had contracted by 6%; we were experiencing the deepest recession in the country’s modern history, and arguably the worst financial crisis in its entire history. Since then we have made difficult decisions, but they have seen interest rates stay low, they have seen the deficit come down, and they have seen the creation of a million jobs. The hon. Gentleman should be welcoming that.

[Mr Speaker]

I call Mr Flello. Is Mr Flello still with us to give us his views?

[Robert Flello (Stoke-on-Trent South) (Lab)]

I am most grateful, Mr. Speaker. This is definitely worth waiting for. I have handwritten notes.

If one of the Chancellor’s pals in one of the banks had lost that bank’s triple A credit rating, he would have gone. Will the part-time Chancellor now either become full-time and change his plan, or go?

[Mr Osborne]

I am not sure that that was worth waiting for. Let me say to the hon. Gentleman that he either thinks it is important for us to confront our debt problem—in which case he should support me as we make the difficult decisions that will enable us to do that—or he thinks that that is not important, and that we can take a difficult situation and make it very much worse. No amount of handwritten notes will help him in those circumstances. The main handwritten note from the Labour party that I remember is the one that said there was no money left.

[Jack Dromey (Birmingham, Erdington) (Lab)]

In the name of protecting our triple A rating, the Chancellor cut £4 billion of affordable housing investment, causing house building to collapse, pushing housing benefit bills up, and creating the biggest housing crisis in a generation. Rather than continuing to borrow to pay the costs of failure, will he now endorse the shadow Chancellor’s call for investment in affordable house building to create jobs and apprenticeships and to get the economy moving, which he has so signally failed to do?

[Mr Osborne]

That is a call for yet more borrowing. At least the hon. Gentleman is happy to advocate that in the House of Commons, whereas the shadow Chancellor dare not talk about his economic policy.

The capital spending in the plans that we inherited from the last Labour Cabinet—which, presumably, were agreed to by all members of that Cabinet—was lower than the capital spending in the plans that we have now. Why? Because we have made difficult decisions on welfare bills and other areas of resource spending in order to invest in capital. As for housing, with schemes such as Firstbuy and NewBuy and the new housing guarantees, we are getting behind the housing industry. [Interruption.] The hon. Gentleman says “Going down”, but the rate of housing starts under the last Labour Government was the lowest since the 1920s. That is the situation with which they left us.

[Andy Sawford (Corby) (Lab/Co-op)]

Only a few months ago, people in my constituency gave a verdict on who they thought was responsible for the state of our economy. The number of jobseeker’s allowance claimants in my constituency has risen by 127 in the last two months. It is the toughest place in the country for young people to find work. Does the Chancellor realise just how out of touch he will sound to all those people who desperately want a Government who are on their side? How can he look foreign investors in the face and tell them to invest in my constituency and others, given that he has now failed the test that he set himself?

[Mr Osborne]

Foreign investors are investing in Britain, and the hon. Gentleman should welcome that. We are also investing in the east midlands—

[Andy Sawford]

Not in my constituency.

[Mr Osborne]

The hon. Gentleman says not in his constituency. He is the MP for Corby, and for 13 years people wanted the Corby link road, which is being constructed—

[Andy Sawford]

Where is it?

[Mr Osborne]

He asks where it is; it is being built at the moment. For 13 years people wanted that road and it was not produced, but it is now being produced under this Government.

[Mr Speaker]

I thank the Chancellor of the Exchequer and, for that matter, the 69 Back-Bench Members who contributed in 57 minutes of exclusively Back-Bench time for their notable succinctness.

ECOFIN

George Osborne Excerpts

Tuesday 12th February 2013 Written Statements

[The Chancellor of the Exchequer (Mr George Osborne)]

A meeting of the Economic and Financial Affairs Council will be held in Brussels on 12 February 2013. We expect the following items to be on the agenda and discussed:

Current legislative proposals

The presidency intends to give an update on: single supervisory mechanism (SSM); the fourth capital requirements directive (CRD IV); bank recovery and resolution; market abuse directive (MAD)/market abuse regulation (MAR); and revised rules for markets in financial instruments directive (MiFID).

Discharge to be given to the Commission in respect of the implementation of the budget for 2011

As part of the annual discharge process, Ministers will conclude recommendations to the European Parliament on whether to discharge the Commission from its responsibility for implementing the 2011 EU budget, based on an annual report from the European Court of Auditors (ECA).

Council guidelines for the budget for 2014

As part of the annual EU budget process, Council will agree a set of Council conclusions on guidelines for the 2014 budget of the EU, which will serve as its overall reference for the subsequent budgetary procedure.

Preparation of G20 meeting of Finance Ministers and governors (Moscow, Russia, 15 to 16 February 2013)

Council will be asked to endorse the EU terms of reference for the G20 Finance Ministers and governors meeting. This will be the first G20 Finance Ministers and governors meeting of the Russian presidency.

Annual growth survey 2013

Ministers will agree a set of Council conclusions on the Commission’s annual growth survey 2013.

Alert mechanism report 2013

Ministers will agree a set of Council conclusions on the Commission’s alert mechanism report 2013.

Fiscal sustainability report 2012

Ministers will agree a set of Council conclusions on the fiscal sustainability report 2012.

Oral Answers to Questions

George Osborne Excerpts

Tuesday 29th January 2013 Commons Chamber

[Mr Brooks Newmark (Braintree) (Con)]

6. What fiscal steps he is taking to encourage private sector job creation.

[The Chancellor of the Exchequer (Mr George Osborne)]

More than 1 million private sector jobs have been created since the first quarter of 2010 and employment is at a record high. We are supporting more job creation by further reducing the rate of corporation tax to 21%, and since 1 January we have been helping businesses large and small to invest, with a temporary tenfold increase in the annual investment allowance. We can afford these tax reductions in part because we are taking tough action on tax evasion. I can confirm to the House that last night Her Majesty’s Revenue and Customs received £340 million from the Swiss Government, a first instalment of the deal we have struck, and the first time in our history that money due in taxes has flowed from Switzerland to the UK, instead of the other way round.

[Jessica Lee]

I warmly welcome the announcement that my right hon. Friend has just made. I am sure the fact that a fairer share of tax is being paid will also be warmly welcomed by my constituents in Erewash. Does my right hon. Friend agree that another important aspect of private sector job creation is the role of apprenticeships? Companies such as Derwent Analytics and TecQuipment in my constituency have an important role and are enriching young people with opportunity and skills for the future.

[Mr Osborne]

My hon. Friend is right, and I am glad she welcomes the deal we have struck with Switzerland—a deal, by the way, rejected by the previous Government. Apprenticeships are vital in helping to create that skilled work force. More than 1 million people have started apprenticeships since 2010 and in her constituency alone there has been a 42% increase. I am delighted that successful businesses in her constituency are helping to train the work force of tomorrow.

[Mr Newmark]

Does my right hon. Friend agree that the Government’s generous tax incentives provided by the seed enterprise investment scheme not only stimulate investment by angel investors for start-ups, but help create jobs in the private sector?

[Mr Osborne]

I do agree. The seed enterprise investment scheme has succeeded in getting money into start-up businesses and we currently have the fastest rate of business creation in our history. I take this opportunity to thank my hon. Friend for all the work he has done, going around the country promoting the scheme.

[John Healey (Wentworth and Dearne) (Lab)]

If everything is going so well in the jobs market, why is the number of people on the dole long term the highest for 15 years? Why has the number of young people in Rotherham out of work for more than 12 months tripled over the past year? When is the Chancellor finally going to act to give people real help with jobs?

[Mr Osborne]

Of course, we are clearing up the mess that Labour left behind. As we do that, the private sector has created over a million new jobs, unemployment has been falling, employment is at a record high, and female employment is at a record high. I would have thought the right hon. Gentleman should celebrate that, rather than talking it down.

[Alison McGovern (Wirral South) (Lab)]

Private sector job creation is not working for young people. In January 2011 I asked the Government how many young people they would be paying out the dole to by the end of this Parliament. They said 279,000. In December 2012 they had to up that figure to 310,000, an extra 31,000 young people who they predict will be on the dole by the end of this Parliament. Who does the Chancellor blame for that planned increase in welfare spending—himself or the Secretary of State for Work and Pensions?

[Mr Osborne]

The claimant count has fallen on the most recent measure, which was published last week. As I said, 1 million jobs have been created in the private sector. We are also, as my hon. Friend the Member for Erewash (Jessica Lee) reminded us, creating the apprenticeships to give these young people the skills they need, which the previous Government were not providing, to compete in the modern economy. I would ask the hon. Lady to get behind the education and welfare reforms needed so that people have the right incentives to work and the right skills to get a good job in future.

[Mr Andrew Tyrie (Chichester) (Con)]

The recent cancellation of the rise in fuel duty in the autumn statement was very welcome news for all our constituents, and it will help with jobs. Our constituents now need greater certainty about future rises, so will the Chancellor accept the Treasury Committee’s recommendation, published today, that he should use the Budget to set out a clear medium-term strategy for fuel duty?

[Mr Osborne]

My hon. Friend is right to remind us that fuel duty is 10p per litre lower than it would have been if we had stuck with Labour’s Budget plans. We have also, as a medium-term measure, abolished the fuel duty escalator that the previous Government put in place. He mentions the Treasury Committee’s report. I hope that, as Chair of the Committee, he will welcome the fact that we have got the money in from Switzerland, because one of the issues that the report raised was whether that money would be forthcoming, and the fact that it came last night was very welcome.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

While the headline rate of unemployment is falling, is not rising long-term unemployment bad for society, as my hon. Friends have been saying, but bad for the Exchequer too, because it is one reason why so far this year the deficit has been going up, with £7 billion more borrowing than in the same period last year? Can the Chancellor at least bring himself to admit that?

[Mr Osborne]

Unemployment rocketed because of the disastrous economic policies of the Labour party, and the deficit rocketed too. The good news is that 1 million jobs have been created and that the deficit has come down by 25%. Perhaps one day we will get an economic policy from the Labour party and we can make comparisons with what it would do in office. Until then, the hon. Gentleman should get behind the measures to clear up the mess that he left behind.

[Ian Lavery (Wansbeck) (Lab)]

2. How many households no longer eligible for child benefit have opted not to receive it.

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[George Freeman (Mid Norfolk) (Con)]

12. What recent steps he has taken to increase the level of infrastructure investment.

[The Chancellor of the Exchequer (Mr George Osborne)]

By making the hard choices to save money in areas such as welfare, this Government have been able both to reduce the deficit and to increase capital spending on the infrastructure that is vital to our economic future. That is funding more roads and rail, and faster broadband, than in the years of the previous Government, when money was wasted. Indeed, public investment as a percentage of gross domestic product is higher on average in this Parliament than under the previous Government.

[George Freeman]

I thank my right hon. Friend for his commitment to upgrading our infrastructure, which was so woefully neglected in Labour’s 13 years of waste. In particular, I welcome the £5.5 billion in the autumn statement for science, roads and free schools. We will never build a 21st-century economy on 19th-century infrastructure. Given the pressure on public finances, does he agree that we may need to be bold in unlocking new models in private investment? I am thinking particularly of mutual and local investment such as the tax increment financing that has financed so many American cities.

[Mr Osborne]

I agree with my hon. Friend. In East Anglia, where his constituency is, we have invested more than £280 million in life sciences, and are providing infrastructure by, for example, upgrading the A11. He is completely right that we should look at new forms of financing. We have introduced tax increment financing, as he suggests. From April this year, all authorities will, within prudential limits, have unfettered access to standard tax increment financing.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

Is the Chancellor aware that Mr John Cridland of the CBI said yesterday that the Government have a national infrastructure plan but were just incompetent at delivering it? That incompetence, which characterises the Government, is leading to a situation in which the Government will have achieved, by the end of this Parliament, about half the level of national infrastructure investment of 2008, which will cripple the competitiveness of the British economy. What is the Chancellor going to do about it?

[Mr Osborne]

It is an inconvenient truth to the hon. Gentleman that public investment as a percentage of GDP is higher on average in this Parliament than under the entire last Labour Government. That is because this Government are making the difficult choices on welfare, which Labour Members oppose, to save money and reduce the deficit, and to spend more, for example, on roads than they did during their period in office. That is the right priority for the taxpayer.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

Can the Chancellor confirm that Labour’s last Budget planned to cut capital spending by 50%?

[Mr Osborne]

Yes I can. Again, it is an inconvenient truth that we are spending billions of pounds more on capital spending than was setout in the Budget that half of them opposite, who were in Parliament before the last election, voted for. We are making those choices: they oppose everything because they have nothing to offer in this place.

[Rachel Reeves (Leeds West) (Lab)]

That is an incredibly complacent answer from the Chancellor. Does he not agree with the Deputy Prime Minister that the coalition Government in fact cut capital spending in infrastructure projects too far and too fast, and that this has hampered growth and the economic recovery?

[Mr Osborne]

We are spending more on capital than the plan set out by my predecessor, the right hon. Member for Edinburgh South West (Mr Darling)—the plan that the shadow Chancellor voted for. We have increased capital spending in the 2010 spending review and increased it in autumn statements since. That is why we are spending more money on roads, and it is completely hypocritical for the Labour party to complain about capital spending cuts that would have been deeper if they had stayed in office.

[Rachel Reeves]

It is simply not correct to say that the Government have matched the plans of my right hon. Friend the Member for Edinburgh South West. The Office for Budget Responsibility says that in the first three years this Government are spending £12.8 billion less on infrastructure than the plans that they inherited. It is £6.7 billion lower in this year alone. But if the Chancellor and Deputy Prime Minister are now so concerned about the shrinking economy, why do they not listen to the advice the International Monetary Fund gave them last week and use the Budget in March to rethink their failed economic plan?

[Mr Osborne]

I do not think that the hon. Lady is being completely straight with the House about the numbers she is using—[Hon. Members: “Withdraw.”]

[Mr Speaker]

Order. Hon. Members may leave this to me. The Chancellor is very versatile in his use of language and he can rephrase that. No Member would be other than straight with the House. He should withdraw that term and use another, and I feel sure that he will do so.

[Mr Osborne]

Of course I withdraw it and would simply say that the hon. Lady has been very creative in the use of the numbers that she has put before the House. The number she is using is the amount of money that Labour was spending on capital before the general election, but it set out plans to cut capital after the general election. We have exceeded those plans, and it is completely hypocritical for the Labour party to claim that it would have spent more on capital when it clearly would not have.

[Mrs Mary Glindon (North Tyneside) (Lab)]

13. How many working households will be affected by the changes to the uprating of tax credits and other payments announced in the autumn statement.

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[Mr David Amess (Southend West) (Con)]

T1. If he will make a statement on his departmental responsibilities.

[The Chancellor of the Exchequer (Mr George Osborne)]

The core purpose of the Treasury is to ensure the stability and prosperity of the economy.

[Mr Amess]

My right hon. Friend will recognise the valuable work that public sector workers do, by and large on our behalf, but he will also acknowledge the fact that their earnings have increased by only 1%. Is it the Government’s policy that benefits will not increase by any more than the increase in public sector pay?

[Mr Osborne]

It is the Government’s policy that both should rise by 1%. It is a rather bizarre argument advanced by the Labour party—that public sector pay should go up by 1%, but benefits should go up by more than 1%. The Opposition are the people who will have to explain it to the hard-working public sector taxpayers who have to pay for the welfare system.

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

May I start by welcoming the Chancellor back from his winter mini-break in Davos? I do not know whether he got any skiing in, although he and his chums certainly went out on the piste.

Back to Britain: in August 2010, the Chancellor also made a speech at Bloomberg, in which he claimed that his economic plan would secure the recovery. A few weeks later, his spending review said that by now we would see growth of 5.2%. Let me ask him: since his spending review, how much growth have we actually had?

[Mr Osborne]

I am glad the right hon. Gentleman noticed that I went to Davos, where I met the last two Labour Prime Ministers as well—and I could not help but notice that both of them were talking about the global economic problems. Of course we have to sort out those problems abroad, but we also have to deal with our problems at home, and of all the people now in Parliament, the right hon. Gentleman bears primary responsibility for putting Britain into this mess. The reason his economic argument is not making more traction is because no one believes that the problems that got us into this mess are the things that will get us out of it.

[Ed Balls]

How complacent is that? The economy is flatlining and borrowing is rising on the right hon. Gentleman’s watch. Let me tell him the facts. Since the spending review, growth has been just 0.4%, which is 13 times lower than he forecast. Our growth is slower than that of America, France, Germany, Australia, Canada, Mexico, Turkey—the list goes on and on. Let me ask him this: now that the chief economist at the International Monetary Fund, the Deputy Prime Minister and even his dining chum the Mayor of London are losing faith in his plan, when will he listen, stop being so complacent and finally act to kick-start this flatlining economy?

[Mr Osborne]

There is no complacency about dealing with the mess that the right hon. Gentleman left behind. He talks about the economy over the last couple of years. Let me tell him what has happened in the Morley and Outwood constituency. In his area, the unemployment claimant count went up 190% under the last Government; it has fallen by 7% under this Government. The youth claimant count was 161% up under his Government; it has come down by 10% under this Government. We are fixing the problems that he created. The only job that he is interested in saving is his own. The truth is that while he remains in the post that he is in, he is a reminder to everyone of all the mistakes that Labour made when it managed the economy.

[Steve Brine (Winchester) (Con)]

T4. A number of my constituents—[Interruption.]

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[Mr Tom Harris (Glasgow South) (Lab)]

T2. May I take this opportunity to pay tribute to the Chancellor’s excellent judgment in supporting Labour’s spending plans up until November 2008? Will he therefore accept that the deficit he inherited was caused not by the spending plans supported by those on both sides of the House but by the worldwide recession?

[Mr Osborne]

The idea that Labour irresponsibility had nothing to do with the fact that Britain had a higher budget deficit than almost any country in the world is fanciful. The truth is that my predecessor as Chancellor has accepted that Labour was spending too much, as has Tony Blair, who was Prime Minister during that period. The only person who will not accept that is the person who was chief economic adviser at the Treasury at that time—the man who Labour have now been landed with as shadow Chancellor.

[Kris Hopkins (Keighley) (Con)]

T5. The last Labour Government presided over a decline in manufacturing industry in west Yorkshire, which fell from 23% of local economic output in 1997 to just 14% in 2010. What steps is the Chancellor taking to reverse that trend and to support constituencies such as mine, which have relied on manufacturing for jobs and growth?

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[Stephen Williams (Bristol West) (LD)]

We already know that in April the personal tax allowance is going to be raised to £9,400—the largest rise in history. By the time we next meet for Treasury questions, the Chancellor will have put the finishing touches to his Budget. I now urge him to take the final step and deliver £10,000 of tax-free pay in time for April 2014.

[Mr Osborne]

We have a very clear commitment to reach that £10,000. We have not put a time scale on it, but even under the plans we have already put forward, that level will be reached with inflation increases before the end of this Parliament. This is a good example of two parties coming together to help working people across this country.

[Graham Jones (Hyndburn) (Lab)]

T10. In the autumn statement of 2011, the Chancellor allocated £5 million to combat metal theft, which through Operation Tornado has been highly successful. With that funding coming to an end, was that a knee-jerk reaction or is the Chancellor going to continue it?

[Mr Osborne]

I am happy to look at the funding for the metal theft initiative, but I know that the Government have introduced regulation to clamp down on this crime, which can of course endanger people’s lives.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

In a debate in this Chamber, the right hon. Member for South Shields (David Miliband) accepted this Government’s spending envelope, but was quickly shot down by the shadow Chancellor. Is not the real problem here the fact that to be credible on the economy, the Labour party needs to come up with a policy that stands up?

[Mr Osborne]

My hon. Friend has described the comments of the right hon. Member for South Shields as a speech. I think we could describe them as an audition.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

The Chancellor of the Exchequer is being lobbied heavily by the Mayor of London, Boris Johnson, for a massive increase in infrastructure spending in London. Does he realise that if he really wants to get our economy going, he should be investing in the infrastructure of the towns, cities and regions of our country, particularly Yorkshire and the north-west?

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[Mr David Anderson (Blaydon) (Lab)]

The Chancellor is well known for trying to help us Back Benchers to do our job. Would he be so kind as to place in the Library the criteria that he uses to define whether or not the economy is in the danger zone, and will he tell us whether it is in the danger zone today?

[Mr Osborne]

There is a pretty simple definition. Every day and every week the British Government have to go and borrow money to fund the extremely large deficit that was left behind, but we can command record low interest rates because of the confidence that the rest of the world has in our economic plans.

[James Morris (Halesowen and Rowley Regis) (Con)]

Unemployment among 18 to 24-year-olds in my constituency is 15% lower than it was in December 2011, but does the Chancellor agree that we still need to do more to improve young people’s skills, especially in the context of the black country city deal, which is focusing on skills in advanced manufacturing? May I commend that proposal to the Treasury team?

[Andy Sawford (Corby) (Lab/Co-op)]

In opposition, the Chancellor was fond of quoting the Institute for Fiscal Studies in support of his policies. Does he accept the finding by the IFS that because of all the changes that he has made following his autumn statement, the average one-earner family with children will be £534 worse off by 2015?

[Mr Osborne]

I am fond of quoting the IFS in government as well, and it says that Labour’s plans would add £200 billion to borrowing.

[Mark Menzies (Fylde) (Con)]

What assurances can the Minister give me that if shale gas production is given the go-ahead in Fylde it will not be just the Treasury or the company that will benefit, and that substantial benefits will flow to the local community?

[Mr Osborne]

I know that my hon. Friend has a strong constituency interest in this issue. We want to see the shale gas revolution come to the United Kingdom—it has done wonders for the United States economy—but that must, of course, happen in a way that does not damage the environment and enables communities to benefit. I shall be happy to work with my hon. Friend, and other Members of Parliament throughout the House who may be affected, to ensure that communities share the benefits—which I hope can be shared by the whole economy—of this new form of energy extraction.

[Ian Austin (Dudley North) (Lab)]

On the many other occasions on which the economy has gone into reverse under this Chancellor, he has blamed the snow, and he has blamed the floods. When people took time off in the summer to go on holiday, he presumably blamed the sun. He has blamed the Americans, and he has blamed the Europeans. He blamed the Queen’s jubilee. He even blamed her grandson for getting married. Whose fault is it this time?

[Mr Osborne]

I think that I have been pretty consistent in blaming that lot opposite.

[Several hon. Members]

rose—

ECOFIN

George Osborne Excerpts

Wednesday 19th December 2012 Written Statements

[The Chancellor of the Exchequer (Mr George Osborne)]

A meeting of the Economic and Financial Affairs Council was held in Brussels on 12 December 2012. Ministers discussed the following item:

Banking Supervision Mechanism

Ministers agreed an approach on the Commission’s proposal for a single supervisory mechanism in the European Central Bank and an amending regulation for the regulation establishing the European Banking Authority (regulation 1093/2010).

The Government have been clear that the UK will not participate in the banking union, including the single supervisory mechanism. Other member states outside the eurozone have also signalled that they will not participate at this stage. Accordingly, it is vital that these proposals are underpinned by measures that protect the single market. To ensure this, the Government have secured a number of safeguards to protect those outside banking union.

There will be a duty on the ECB to have regard to the unity and integrity of the single market. Importantly, the ECB will be subject to an express obligation to ensure that no action, proposal or policy of the ECB shall directly or indirectly discriminate against any member state or group of member states as a venue for the provision of banking or financial services in any currency.

The scope of the ECB’s supervisory remit will be expressly limited to credit institutions in participating member states. The supervision of central counterparties will be explicitly excluded from the ECB’s mandate.

The Government have also secured symmetry of treatment between the ECB and national competent authorities in those member states who are not participating in banking union. Powers and decisions of the EBA, for example in cases of mediation between supervisors, will apply equally to the ECB and other supervisors. The Council has also agreed that the ECB’s supervisory powers should be aligned with those available under Union law to national competent authorities in non-participating member states.

There will be a statutory underpinning for a bilateral memorandum of understanding between the ECB and Bank of England to ensure proper co-ordination of supervision for cross-border banks.

The introduction of banking union will see the interests of the eurozone converge as participants move forwards with further integration. We have therefore secured changes to voting arrangements in the European Banking Authority to ensure that the eurozone cannot systematically dominate decision-making on matters that affect the whole single market. All key decisions taken by the EBA will require a double majority—that is either an overall qualified majority or simple majority in the Board of Supervisors of the EBA, plus a simple majority of representatives of participating member states and a simple majority of representatives of non-participating member states. This will ensure that all member states will continue to have a meaningful voice in EBA decision making. In addition there will be a review by the Commission of the decision-making rules when the number of non-participating member states reaches four or fewer and this review will report to the European Council.

Taken together, this is a good agreement for the eurozone and the wider European Union, including the UK.

The proposals will now be discussed between the Council and the European Parliament before the final texts can be agreed.