Consolidated Statement (EU Funds in the UK)

Justine Greening Excerpts

Wednesday 19th January 2011 Written Statements

[The Economic Secretary to the Treasury (Justine Greening)]

Since November 2006, HM Treasury has prepared a Consolidated Statement on the use of funds from the EU budget in the United Kingdom.

The coalition Government have set new standards for transparency in the UK. This is at the heart of our shared commitment to enable the public to hold politicians and public bodies to account, to reduce the deficit and deliver better value for money in public spending. The Government are fully committed to transparency in the use of EU funds in the UK and to strong accountability for receipts of EU funding to the UK Parliament, to strengthen the audit and parliamentary scrutiny of the UK’s use of EU funds.

The coalition Government are also determined to ensure sound financial management of all EU funds. We need to ensure that simplified rules can go hand in hand with effective financial management of EU funds at all levels, taking a proportionate and risk-based approach to audit and financial control.

I therefore today lay before Parliament the third of these statements for the year ending 31 March 2009, along with the Comptroller and Auditor General’s (CAG) audit opinion and report.

The CAG has qualified his opinion on the statement, for the year ending 31 March 2009, on the issue of truth and fairness, and also the issue of regularity; and has set out weaknesses in accounting practice during the period covered by the statement. The coalition Government are introducing new measures to improve financial discipline of EU funds spent in the UK.

The coalition Government also hope this statement and the CAG’s audit opinion will be helpful to the European Court of Auditors and the Commission when they are performing their own audits and controls; and that the statement and the CAG’s audit opinion will encourage similar initiatives from other EU member states, whose contributions to improving financial reporting and management across the EU are also important.

Funding Formula

Justine Greening Excerpts

Tuesday 18th January 2011 Westminster Hall

[The Economic Secretary to the Treasury (Justine Greening)]

It is a pleasure to serve under your chairmanship, Mr Dobbin, particularly given your constituency’s links to the debate today, which became apparent during the discussion. I congratulate my hon. Friend the Member for South West Bedfordshire (Andrew Selous) on initiating an excellent debate. All hon. Members have made some articulate, well-argued points and I will do my best to try to respond to them during the next nine minutes. Given the fact that so many points have been made, if I do not cover all the issues, I will write to my hon. Friend afterwards to amplify them.

I shall start by being frank. As my hon. Friend is aware, the Government’s priority is to tackle the fiscal deficit. Although we do not have any current plans to review the Barnett formula, it is also fair to say that we accept it is not written in stone. Therefore, we look with interest at debates such as this one. The current statement of funding policy that we issued in October 2010 after the spending review was made in consultation with the devolved Administrations. Before I get on to some of my more detailed comments, I shall state a problem and then an observation about the issue. The problem is that, as the former Chief Secretary to the Treasury in the previous Government said, there is no money left. My observation on the debate is that I do not think anyone is arguing for a change in the Barnett formula on the assumption that their local community will come out of it with less money.

Those are the two challenges that we face. Hon. Members are absolutely right to make the case for the funding that their local communities need. The challenge is to ensure that we get the most out of the constrained pot that we have and to ensure in the future that the formula works effectively, whether that is at the Barnett level or at the England local government level, not just in terms of the absolute cash that goes in—there has been much discussion about cash per head and various Government policy areas—but critically in terms of what comes out. Despite today’s debate, we should never lose sight of the importance of discussing the quality of policy alongside the quantity of money that is going in. The cautionary tale is that the Barnett formula, which Lord Barnett said was only ever intended to be a short-term measure, has actually had a longevity that no one anticipated. It is worth while Ministers of today and tomorrow pondering the fact that, even if we think the decisions we take today are short-term, they might ultimately prove to be far more long term than we realise.

[Hywel Williams]

Is the Minister saying that underfunding in Wales will be addressed only when the economy grows and when we can afford to do so in a way that we currently cannot? Does she accept that that is irrelevant to the fact there is unfairness now?

[Justine Greening]

I shall make two points about the hon. Gentleman’s intervention. First, Wales is well funded. Secondly, let us consider how the Government have approached the spending review. It turns out that, because of how the formula works, the decisions we took to protect the NHS budget and the education budget in cash terms and in terms of schools has meant that the Welsh Assembly Government have probably received a more generous settlement out of Barnett than they would have if the previous Administration had stayed in office.

On the points raised today, clearly there have been a number of inquiries and reports on the Barnett formula and the devolution settlement. One such review is the Calman report on Scotland. As we have heard, the Scotland Bill is passing through Parliament and my hon. Friend the Member for Warrington South (David Mowat) is right to say that the legislation will devolve some of the financial management of income tax to the Scottish Government. However, I can assure him that it will not fix the Barnett formula in stone for the future. A further aspect to the Barnett formula is the Holtham commission, the findings of which illustrate the point I made at the start of my speech. The Holtham commission considered how a needs-based formula would work for Wales and said that such a formula would mean Wales got more, which would put more funding pressures on settlements for other areas. That shows that there are no easy answers to the debate.

[David Mowat]

On the point I raised about the Scotland Bill, it does not explicitly say that the Barnett formula can never be changed in future. The point I was making is that, once we link a baseline Barnett assessment to the level of Scottish income tax, it becomes extremely difficult to change. The £4 billion additional money that Scotland gets through Barnett is equivalent to 12p to 15p of income tax. In theory, the Scottish Government could reduce their income tax levels by 12p and go down to a needs-based analysis and it would be hard for us subsequently to change that.

[Justine Greening]

I understand my hon. Friend’s point. However, in many respects, the point of devolution is to allow more local decision making to take place across the different devolved Administrations.

Just to finish off the answer to the question asked by the hon. Member for Arfon (Hywel Williams), clearly there will be a referendum in Wales on whether primary legislative powers should be held by the Welsh Assembly Government. We will wait to see the outcome of that referendum before deciding how to take forward some of the points of the Holtham report.

On some of the specific issues raised by my hon. Friend the Member for South West Bedfordshire about transparency, the chapter and verse of the funding formula is in the current statement of funding policy. I admit that it is not the most riveting read in the world, but it does explain clearly how the various settlements are reached. The funding approach is agreed in consultation with the devolved Administrations of the rest of the United Kingdom.

On my hon. Friend’s suggestion about the needs-based formula, I can absolutely understand why people and hon. Members think that such an approach would be better. A needs-based formula allocates local government spending across English local authorities, but many hon. Members and different communities consider it to have flaws. That illustrates how there are no easy ways in which we can reform local government funding, whether in relation to local government across English local authorities or in relation to devolved Administrations. The common ground we have in the points made is that any changes should absolutely be approached with real caution over a period of time.

Of course, the Treasury has clear control over the process, as it deals with public spending issues. However, there are avenues through which disputes can be remitted to the Joint Ministerial Committee. Therefore, the Treasury is not always judge and jury. There is absolutely a process through which disputes can be resolved if the Treasury cannot do so. On the involvement of the Office for Budget Responsibility, that organisation is a forecasting rather than a policy-making body. My hon. Friend is right to point out that other countries, such as Australia, have a different approach, but they come with pros and cons. Yes, that authority may be independent, but there is no Minister such as me to stand in Parliament, listen to the issues and respond to them democratically and with some sense of accountability; Australia does not have that in the same way. There are still problems with how that authority operates and questions about whether it allocates funding fairly. Such an approach is not without its challenges.

In conclusion, although we do not plan to change the Barnett formula, we will continue to consider all aspects of public spending, how they operate and how effective they are. As I said, the points made today were highly relevant and interesting, and I have no doubt that the debate will continue over the coming years.

Carbon Price Support Consultation

Justine Greening Excerpts

Thursday 16th December 2010 Written Statements

[The Economic Secretary to the Treasury (Justine Greening)]

The Government have today published a consultation to encourage investment in low-carbon electricity generation.

“Carbon price floor: support and certainty for low-carbon investment” is an innovative approach to achieving the UK’s energy and climate policy objectives. Giving greater support and certainty to the price of carbon in the power sector will encourage further investment in low-carbon electricity generation. This can be achieved through reform of the climate change levy (CCL) and fuel duty to enable fossil fuels used by power generators to be taxed on the basis of their carbon content.

The proposal is part of a wider package of reforms to the electricity market, covering a number of commitments set out in the coalition agreement. These wider reforms are set out in a consultation on electricity market reform, also published today by the Secretary of State for Energy and Climate Change.

The consultation invites interested parties to submit their views on a range of implementation issues by 11 February. The Government will then publish their response, by Budget 2011. The Government intend to introduce legislation for the proposals in the 2011 Finance Bill (and subsequent secondary legislation) and to bring the proposals into effect from 1 April 2013.

Copies of the document have been deposited in the Libraries of both Houses and are available in the Vote Office and on the Treasury website at

www.hm-treasury.gov.uk.

Alcohol Taxation Review

Justine Greening Excerpts

Tuesday 30th November 2010 Written Statements

[The Economic Secretary to the Treasury (Justine Greening)]

I am today publishing further information about potential tax measures following the review of alcohol taxation, I am making this update available on the HM Treasury website and a copy has been placed in the Libraries of both Houses.

These measures are part of the wider Government action to tackle problem drinking due to be announced this week by the Secretary of State for Health and the Secretary of State for the Home Department.

The Government recognise that in some areas taxation can have a role in helping to address the harms associated with problem drinking. For example, a change to the definition of cider has already been made resulting in increased duty on cheap, strong ciders strongly associated with public health concerns.

To complement this change, the Government intend to introduce a new additional duty on beers over 7.5% abv (alcohol by volume) in strength. This will help to address the consumption of cheap, “super strength” lagers that are also associated with high, and dangerous, levels of alcohol consumption.

Changes will also be made to introduce a reduced rate of duty on beers produced at an alcoholic strength of 2.8% abv or below. This measure will help encourage the production and consumption of lower-strength beers and give responsible drinkers additional choice.

These measures will continue to be developed with a final announcement made at Budget 2011. Draft Finance Bill clauses will be published alongside other Finance Bill measures on 9 December 2011 as announced recently by the Exchequer Secretary to the Treasury, Official Report, 9 November, column 10WS.

There are no further changes to the structure of the duty on alcohol as a result of this review. Decisions about duty rates remain a matter for the Chancellor at the Budget. The Treasury will continue to engage with industry and other interested groups ahead of the Budget.

Departmental Expenditure Limits (Resource)

Justine Greening Excerpts

Tuesday 23rd November 2010 Written Statements

[The Economic Secretary to the Treasury (Justine Greening)]

Subject to Parliamentary approval of the winter supplementary estimate, HM Treasury’s Resource DEL will be decreased by £20,657,000 from £206,740,000 to £186,083,000. The Administration Budget will be decreased by £21,957,000 from £159,551,000 to £137,594,000. The impact on resources, including the administration budget, is set out in the following table:

National Insurance Contributions Bill

Justine Greening Excerpts

Tuesday 23rd November 2010 Commons Chamber

[Madam Deputy Speaker]

Order. We cannot have comments shouted across the Floor from a sedentary position. It makes it very difficult for Hansard to record our proceedings, particularly when the comments are then referred to without having been recorded. Will the hon. Lady make her point from the Dispatch Box, so that the right hon. Gentleman can answer it?

[The Economic Secretary to the Treasury (Justine Greening)]

My point was that the Labour party would have increased NICs for absolutely everybody.

[Mr Hanson]

The hon. Lady knows that that was a clear and honest policy that we put to the electorate. The Government have now introduced proposals for a national insurance holiday for new businesses in certain regions. I will explore shortly why we think that that choice is unfair in the context of the resources the Government are trying to save.

[Justine Greening]

Can the right hon. Gentleman tell us whether it is still his party’s policy to go ahead with those NIC rises?

[Mr Hanson]

I have said what I have said. We were open and honest during the election campaign, and we will support the rise proposed in the Bill, because we expected to do that. During the election campaign, the Economic Secretary and the Exchequer Secretary attacked the NIC rise without proposing the alternative that they have seen through in practice.

Let us put that aside, because the key issue before the House is the payment holiday. We do not believe that it is being proposed fairly, honestly or openly, and we do not believe that it will help the poorest and most deprived areas of the UK, which in great part are excluded from the scheme. Of the top 12 most deprived local authorities on the economic deprivation index, no fewer than seven will be excluded from the payment holiday. The seven boroughs of Hackney, Newham, Tower Hamlets, Islington, Barking and Dagenham, Haringey and Lambeth are excluded from the scheme.

In his written statement on 6 September, the Exchequer Secretary said:

“The Government are determined that all parts of the UK benefit from sustainable economic growth”.—[Official Report, 6 September 2010; Vol. 515, c. 1WS.]

If we are having a holiday from national insurance contributions, I do not understand how excluding those areas from the payment holiday will do that.

I want to challenge the Government’s logic. They claim that the reasoning behind the policy is that areas outside London, the south-east and the east are more reliant on public sector employment. Will the Exchequer Secretary confirm that that is his logic?

--- Later in debate ---

[Barry Gardiner]

The hon. Gentleman suggests that what the Government are seeking to do is compensate in some way for the decimation that they believe they will cause to employment in those areas. We share a belief that the Government’s cuts will have that decimating effect on employment in those areas. Where we differ is that the hon. Gentleman believes that the measures will in some way compensate for that, whereas I am pointing out that in other parts of the country, precisely in those areas where they are not to apply, they would have a greater effect in boosting the economy.

The hon. Gentleman may say that the measures will have a marginal effect in mitigating the increases in unemployment which he knows will come from his Government’s policies. I do not believe, and I am confident that he does not believe, that they will totally compensate for those. But the most important thing is to get our economy moving again; after all, that is why we are making those public sector cuts in the first place. If we are focused on economic regeneration, we must seek to make that investment where we know it will achieve the maximum return.

[Justine Greening]

Can I get this clear? Is the hon. Gentleman saying that Government should not try to help regions that need infrastructure improvement and are currently less productive? Should we simply not invest in them?

[Barry Gardiner]

I try to keep debate in this Chamber at a rational and reasonable level. I try not to play silly party politics or create a straw man simply so that I can knock it down. If the hon. Lady wishes to play those games, let her intervene on somebody else. It is really puerile to start talking in those terms; she knows that that is absolutely not my purpose at all.

The hon. Lady should consider her policies—not only these, but those that relate to VAT—and the effects that the Chartered Institute of Personnel and Development has said they will have. John Philpott, the chief economic adviser to the CIPD, said just a few days ago that:

“we are looking at something like 900,000 job cuts in the private sector as a result of both spending cuts and the VAT hike.”

That will be the effect of the hon. Lady’s policies. Of course I want that effect to be mitigated as far as possible, and for her to intervene on me in that ridiculous way, asking whether I am suggesting we should not try to mitigate the effect of her own policies—the loss of 900,000 jobs —is ludicrous.

In contrast to the hon. Lady, the hon. Member for York Outer (Julian Sturdy) was extremely reasoned in responding to my intervention on him. He accepted that there was unfairness in the Bill and that that unfairness was “regrettable”. My point is that although it is regrettable, it is not inevitable. We do not have to cut the cake or make the investments in this way.

In a rather partisan speech, the hon. Member for Sevenoaks (Michael Fallon) derided my right hon. Friend the Member for Delyn (Mr Hanson). He said that my right hon. Friend was suggesting that the Government were not going far enough. It is not a matter of not going far enough with the holiday; it is a matter of the Government’s being fair, equitable and effective. The Government cannot and should not take these decisions in an arbitrary fashion; they should take them on the basis of equity and effectiveness. The Bill does not enable that.

--- Later in debate ---

[The Economic Secretary to the Treasury (Justine Greening)]

We have had an interesting debate and I am grateful for hon. Members’ contributions, especially that of the hon. Member for Ealing North (Stephen Pound), who provided the most entertaining canter through an explanatory memorandum I have listened to in years.

At the beginning of the debate, my hon. Friend the Exchequer Secretary explained that the Bill contains two important measures: an increase in national insurance contributions and a regional employer national insurance contributions holiday for new businesses. Both are part of the Government’s plan to reduce the burden of labour taxation, reducing obstacles for those who want to recruit and retain staff. It is worth stressing that the clauses are part of a much wider package of reforms to help businesses and ensure that Britain is again open for business. The reforms are designed to reverse the most damaging aspects of Labour’s ill-conceived jobs tax. I listened with care to the contributions from Labour Members, but members of the public listening will have found it easy to forget that the Labour party left office with unemployment higher than when it entered.

Nevertheless, I am pleased that the debate has led to so many Opposition Members—and, indeed, Government Members—recognising that the best way to kick-start new business, as the hon. Member for Lewisham East (Heidi Alexander) put it, is to ensure that businesses are not over-taxed. In fact, the hon. Member for Ilford South (Mike Gapes) was extolling the virtues of low tax on businesses. That is why the Bill is so important. Were the coalition Government not in power, rather than corporation tax on businesses going down, it would have gone up, and rather than the national insurance burden, particularly on small businesses, being held down, it would have risen remorselessly.

The hon. Member for Nottingham East (Chris Leslie) talked about a split personality, but it is probably fairer to level that charge at the right hon. Member for Delyn (Mr Hanson), who, on the one hand, wanted to raise national insurance for all employers, but, on the other hand, complained that the tax break we wanted to introduce to reduce national insurance was not fair because it did not apply to all regions. He cannot have it both ways.

[Mike Gapes]

I am glad that the hon. Lady was listening so carefully to what I said. She refers to unemployment, but will she confirm that 3 million more people were in work when the last Government left office than when they entered?

[Justine Greening]

A lot of people would debate who those jobs were taken by. In reality, unemployment was higher—every Labour Government leaves office with unemployment higher than when they entered.

I want to talk about some of the most important aspects of the Bill. Employers will be £150 better off each year for each employee earning above the threshold. There will be an increase of 650,000 in the number of employees in respect of whom employers pay no national insurance contributions. Compared to this year, employers will pay less national insurance contribution in respect of those employees earning under £20,000. In fact, low-earning employees will also be better off, because the point at which they start to pay national insurance contributions is also going up—by about £23 per week. By reversing the planned employer national insurance increases, this package will help to maintain the UK’s attraction as a place to do business. In doing so, it will support the Government’s aim of creating a fairer and more competitive tax system. The national insurance holiday will help with the transition to a more sustainable model of economic growth, encourage private sector enterprise and investment where it is most needed, create jobs in some of our poorest regions, and encourage people to become business people, entrepreneurs and wealth creators—the very people who will lead the recovery.

Those points were made eloquently by my hon. Friend Member for Sevenoaks (Michael Fallon) and later by my hon. Friend the Member for York Outer (Julian Sturdy), who also talked about the burden of red tape, which is another matter that the Government are keen to reduce for businesses. My hon. Friend the Member for Central Devon (Mel Stride) talked about the need to support business, and to create new jobs and the positive culture that we need to engender throughout the country. That is absolutely what the Government want to do.

The Bill should be seen in the context of wider measures. The Government have taken several steps to support business. In the emergency budget we announced measures to reduce corporation tax, not raise it on large companies year on year. We announced measures to reduce the small companies rate of corporation tax. The hon. Member for Strangford (Jim Shannon) talked about what we can do to help small companies and new companies. He was right, and that is precisely why, instead of increasing corporation tax on those companies, we preferred to try to ensure that they can enjoy a rate decrease.

We have gone further. The regional growth fund will benefit all communities in our country. The capital infrastructure plan was announced as part of the spending review, and more capital will go into supporting our country’s infrastructure than would have happened under the previous Government. We have published the local growth White Paper.

[Chris Leslie]

In the hon. Lady’s list of Budget changes, what will be the impact of the VAT increase on employment?

[Justine Greening]

Clearly, that must be seen in the context of our desperate need to tackle the fiscal deficit that the Labour party left us. It is one reason why our overall plan is not just to support business—that is clearly how we will grow our economy back to the healthy state that it needs to get to—but, as the hon. Gentleman pointed out, to make our numbers add up across the board. We must get rid of the structural deficit that his party handed over to us.

We believe that the package of measures is right, the OECD has said that it is moving in the right direction, and it has been welcomed throughout Europe. If the hon. Gentleman is saying that we should not increase VAT, that prompts a question. His right hon. Friend the Member for Edinburgh South West (Mr Darling) was interviewed recently and said that the Labour party would have increased VAT, so we cannot accept the hon. Gentleman’s comments that his party would not have increased it. There is a blank piece of paper, and at the top are the words, “Labour economic strategy”. It is time for the Labour party to start to become credible by trying at least to pull together and to plan for our economy. Most people will put the contributions about jobs and the complaints about reductions in national insurance not going far enough in the context of a party that has absolutely no alternative plan for managing our economy. They will realise that its arguments are not credible.

The regional aspect of national insurance policy must be seen in the context of the broader package to support business. The level of VAT registrations in different parts of our country and the number of jobs created in different parts of our country show that we need to ensure that we can stimulate growth, particularly in the communities that can benefit most from it. The policy should be looked at not in isolation, but in the context of the broader tax reductions on business and the rise in the personal allowance for employees. Nearly 900,000 of the lowest-income workers in our country will be taken out of income tax altogether. The vast majority of people will benefit from our proposals, and under the Bill many of them will be small businesses with a handful of employees.

[Barry Gardiner]

I do not think I heard a single speech from either side of the Chamber that suggested in any way that those benefits should not flow to certain businesses. The question that was repeatedly asked and that the Economic Secretary and her colleagues failed to answer is why those businesses are favoured, not only when they are specifically not the ones in the areas that will produce the economic growth that she indicates is required from the policy, but because of the manifest unfairness that will result from their distribution.

[Justine Greening]

I realise that the hon. Gentleman takes a different view about how to target the policy. I happen to believe that he is wrong. We recognise that there needs to be some targeting, but the way in which he would have done that would have been unwieldy and unaffordable. In the context of our broader measures to reduce corporation tax instead of allowing rises, which would have happened under the Labour party, and the measures to take the lowest-income employees in our country—nearly 900,000—out of income tax altogether, we are trying to strike a balance, and I believe that we have struck the right balance.

I have no doubt that we will continue the debate in Committee, but we must be pragmatic. I draw attention to the hon. Gentleman’s attempts to target policies when the Opposition were in government. They faced difficulties with their changes during their final years in office. Under the deprived area fund, and the neighbourhood renewal fund, which became the working neighbourhood fund, some communities that had previously received funding were cut off. We want an overall package that supports business across the board, while retaining an element of support targeted at the regions that we think need to benefit most from the next economic upturn. That is what the Bill is doing.

The package of reforms of which the measures in the Bill are part will benefit individuals and employers throughout the country, and help us to achieve the twin objectives of creating a fair and competitive UK tax system. The burden of labour taxation will be reduced by more than £6 billion a year in a way that will help the lowest earners in Britain and protect lower-paid jobs.

The national insurance holiday provides targeted support to new enterprises, and encourages people to set up their own businesses and to employ new staff. It is an important part of our economic strategy to help the parts of the country that are most reliant on the public sector, and to ensure that we make the transition to a more sustainable model of growth and employment as smooth as possible. The Bill will ensure that as the recovery takes hold, all parts of the country will benefit. It will enable a reduction in taxation on labour nationally, and provide extra support in targeted areas. It will be good for growth, and for jobs. I commend this Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

National Insurance Contributions Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7),

That the following provisions shall apply to the National Insurance Contributions Bill:

Committal

1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 9 December 2010.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on consideration and Third Reading.

Other proceedings

7. Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Norman Lamb.)

Question agreed to.

Economic and Financial Affairs Council (11 and 15 November 2010)

Justine Greening Excerpts

Wednesday 17th November 2010 Written Statements

[The Economic Secretary to the Treasury (Justine Greening)]

I represented the UK at Budget ECOFIN on 11 November, resuming on 15 November. The Council meeting took place alongside a meeting of the Council-European Parliament conciliation committee on the 2011 EU budget.

At a time of unprecedented economic and financial difficulty throughout the EU, the Government had made clear that a 6% increase in the 2011 EU budget above 2010 levels, called for by the Commission and the European Parliament, was unacceptable. In July the UK voted against Council’s position calling for a 2.91% increase in the budget, with six other member states. This position was nevertheless adopted by a qualified majority. At the European Council on 29 October, my right hon. Friend the Prime Minister led 12 other EU leaders in stating clearly that we could not accept any budget increase beyond the level agreed by the majority in Council.

The Government’s aim at these Budget ECOFIN and conciliation committee meetings was to agree a budget for the EU in 2011 at the level of a 2.91% increase. The European Parliament said it was prepared in principle to accept this figure. The Government believe that agreement could have been reached on the 2011 budget in these terms, fulfilling the conciliation committee’s mandate.

However, the European Parliament also demanded an outcome on a number of broader, strategic budgetary issues. These included text on an increased role for the European Parliament in discussions of the next financial framework and the EU’s own resources, as well as a provision for flexibility to increase spending in the EU budget in future years.

The Government were not prepared to accept these conditions for agreement to the 2011 budget. At a time of widespread austerity measures, the Government believed that the over-riding priority for these meetings was to agree on next year’s EU budget, and that it was inappropriate to condition agreement to progress on these longer-term political issues. A number of member states expressed similar concerns.

The European Parliament was not prepared to agree the 2011 budget in these circumstances, ending the negotiating session on 11 November and declaring the conciliation committee’s deadline reached on 15 November. The committee therefore ended without agreeing a budget for next year. The Commission must now present a new draft budget for 2011 as a basis for further negotiations.

The Government strongly believe that there was a prospect for agreement on the 2011 budget at these meetings. Both Council and the European Parliament said they could have accepted a budget increase of 2.91% in 2011 compared to 2010 levels. However, the Government were simply not prepared to enter an agreement on the much wider demands from the European Parliament, on issues not immediately related to the 2011 budget. In these circumstances, the Government believe it was better for UK taxpayers not to reach agreement yesterday at all, rather than making a bad agreement which was counter to the interests of UK taxpayers.

The Government will continue to engage constructively in further negotiations aimed at securing agreement to a 2011 EU budget.

Oral Answers to Questions

Justine Greening Excerpts

Tuesday 16th November 2010 Commons Chamber

[Bill Esterson (Sefton Central) (Lab)]

3. How many child trust funds have been set up in respect of looked-after children since such funds were introduced.

[The Economic Secretary to the Treasury (Justine Greening)]

Local authorities report to Her Majesty’s Revenue and Customs all children coming into their care, and if a child does not already have a child trust fund, one is opened for them. Between April 2005 and April 2009, HMRC opened child trust fund accounts for 16,676 children.

[Bill Esterson]

Does the Minister agree that improving the life chances of all looked-after children should be an absolute priority for the Government, and will she consider supporting the amendments tabled to the Savings Accounts and Health in Pregnancy Grant Bill that address the issue of child trust funds for looked-after children?

[Justine Greening]

As the hon. Gentleman is aware, we are taking legislation through the House to get rid of the child trust funds. We think it is vital to support looked-after children, but the question is how best to do that while also tackling our fiscal deficit. We have come to the conclusion that what looked-after children need is support today, and that is what we will provide. Over the spending review period, £7 billion will go to supporting the most disadvantaged children in our country, including looked-after children. He will be aware that in the Department for Education, Eileen Munro is leading an inquiry into how social care can work better, including the support of looked-after children, and finally he will be aware that my hon. Friend the Financial Secretary will be considering proposals to bring forward a junior individual savings account, from which we will specifically ensure that looked-after children can benefit.

[George Freeman (Mid Norfolk) (Con)]

Does the Minister agree that it is appallingly disingenuous of Labour Members to posture as the friends of child savings, having left every man, woman and child in this country with debts of more than £22,000 each?

[Mr Speaker]

Order. The Minister, who is a dexterous Minister, will relate her answer to the policy of the Government, not that of the Opposition.

[Justine Greening]

I think it is a shame. The best thing we can do for all our children, including looked-after children, is to build a stronger country in which they can grow up and enter the workplace. I am afraid that it simply is not good enough to duck the serious questions of the day, which include sorting out not only our economy, but our broken welfare system, which does those looked-after children no service either.

[Mr David Hanson (Delyn) (Lab)]

Will the Minister take time to remind the House of the Government’s manifesto commitment in the May general election to retain the child trust fund for the poorest third of children in society? Does she accept that looked-after children predominantly will fall into that poorest third? Will she therefore consider the amendments to the Savings Accounts and Health in Pregnancy Grant Bill so that she can meet her manifesto commitments, or will it be a case, again, of hitting the poorest hardest?

[Justine Greening]

I do not accept that we did not follow our manifesto commitment. The House had another difficult debate on Second Reading of the Bill, and yet again the Labour party seemed to want simply to ignore the challenges that our country faces. In doing so, it does the public a disservice.

[Mr David Ward (Bradford East) (LD)]

5. What the evidential basis is for his Department’s estimate of the additional tax revenue to accrue by 2014-15 from expenditure on measures to address tax evasion and avoidance, and fraud and debt.

--- Later in debate ---

[Julian Smith (Skipton and Ripon) (Con)]

12. What assessment he has made of the effect on the economy of recent trends in growth in the private sector.

[The Economic Secretary to the Treasury (Justine Greening)]

This Government have been determined to show that Britain is back open for business, and gross domestic product growth has been strong over the past two quarters. That growth has been driven largely by the private sector. The Office for Budget Responsibility, which this Government established, is responsible for producing independent economic and fiscal forecasts, and the Chancellor has asked the OBR to publish a new forecast on 29 November. That forecast will incorporate the OBR’s assessment of the effect on the economy of recent trends of growth in the private sector.

[Julian Smith]

Does my hon. Friend agree that the hundreds and thousands of new jobs that have been created by the private sector in recent months make the outlook pretty positive? What encouragement would she give to budding young entrepreneurs in Yorkshire in existing businesses who are thinking of taking on a new employee?

[Justine Greening]

My hon. Friend is right. In quarter two alone, private sector employment grew by 308,000. I believe that many people in the country want not just to take jobs, but to create them. I would encourage them to get on with it, and to pursue their dreams and aspirations. They will have a Government behind them who are giving them a national insurance holiday for the jobs that they will create, and who are determined to support them by keeping corporation tax rates low when they are successful.

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

Given that Government plans to cut half a million public sector jobs are expected to lead to the cutting of a further 1 million private sector jobs, does the Minister accept that it would be more effective to reduce the deficit in three ways—through progressive taxation, through economic growth and through savings—than simply to throw millions of people on to the dole and whole communities into poverty?

[Justine Greening]

The hon. Gentleman seems to have managed to get from a reduction of half a million in the public sector head count to millions on the dole. The number that he cited is in the independent report from the Office for Budget Responsibility, which was published after our emergency Budget. Although the report showed that there would be a reduction in the public sector head count of about 490,000, it also showed—and I assume that the hon. Gentleman accepts all of it—that there would be an increase in employment of 1.6 million, and that, year on year, there would be reductions in unemployment and increases in employment. If he accepts the figure of half a million, does he also accept those figures?

[Margot James (Stourbridge) (Con)]

I congratulate the Government on extending the enterprise finance guarantee scheme, but I note that it is closed to companies that export because of our over-zealous application of European Union state aid rules. Can my hon. Friend update the House on any plans that the Government have to overcome that obstacle to the achievement of our exporters’ growth potential?

[Justine Greening]

We are examining ways in which we can help our UK companies to export more easily. The Prime Minister and the Chancellor have already led delegations to two key markets, China and India, where we hope that we can export more. That is critical if we are to put our economy back on its feet and it stands alongside the measures that we are taking to support companies creating jobs here, and the measures that we are taking to encourage investment in our country.

[Katy Clark (North Ayrshire and Arran) (Lab)]

13. What assessment has been made of the likely effects on Her Majesty’s Revenue and Customs’ tax inquiry services for the public of the outcome of the comprehensive spending review.

--- Later in debate ---

[Mr Peter Bone (Wellingborough) (Con)]

14. What assessment he has made of the effects on his Department’s ability to reduce the deficit of the reduction in the UK’s EU budgetary rebate; and if he will make a statement.

[The Economic Secretary to the Treasury (Justine Greening)]

The latest forecast of the UK contribution to the EU budget shows that the UK abatement will decline from £5.6 billion in financial year 2008-09 to £2.8 billion in financial year 2010-11. The Office for Budget Responsibility will publish new projections of the UK contribution to the EU budget, including the abatement, in its autumn forecast.

[Mr Bone]

Under the previous Labour Government our total net contribution to the EU was £19.8 billion; under the coalition Government it will be £41 billion. Will the British people not think it bizarre, bewildering and a betrayal that over half the money saved by cuts will go not to reduce the deficit, but to subsidise other western European countries?

[Justine Greening]

My hon. Friend is right that alongside the domestic economic mess we inherited, we also inherited an EU budget deal that was completely out of touch with the situation faced by many European countries. The fall in our abatement is largely due to the give-away agreed by the previous Government in 2005, which will be fully phased in from 2011. It is expected to cost the UK about £2 billion per annum. That is £2 billion that was needlessly given away for absolutely nothing in return—yet another failing of the British people by the Labour party.

[Nic Dakin (Scunthorpe) (Lab)]

15. What mechanism he plans to use to ensure that households which include one or more higher rate taxpayer cease to receive child benefit payments.

--- Later in debate ---

[Glyn Davies (Montgomeryshire) (Con)]

17. What recent discussions he has had with his international counterparts on the co-ordination of efforts to reduce Government deficits.

[The Economic Secretary to the Treasury (Justine Greening)]

The UK has been actively engaged in G20 discussions. The Prime Minister and the Chancellor attended the G20 summit on 11 and 12 November, which delivered the Seoul action plan and pledged to continue co-ordinated efforts to generate strong, sustainable and balanced growth. In this action plan, the advanced economies committed to

“formulate and implement clear, credible, ambitious and growth-friendly medium-term fiscal consolidation plans in line with the Toronto commitment, differentiated according”—

of course—

“to national circumstances.”

[Glyn Davies]

Bearing in mind reports of continuing threats to some of our EU partners, does the Minister agree that the International Monetary Fund’s recent growth forecasts underline the need for an ambitious and credible strategy for dealing with the budget deficit?

[Justine Greening]

My hon. Friend is right about that. The IMF clearly supported the efforts that the coalition Government have been making both in the emergency Budget and the spending review to get to grips with the terrible fiscal deficit handed over by the previous Government. The OECD also welcomed the balance that we struck in the spending review between not only protecting growth, but tackling debt.

[David Simpson (Upper Bann) (DUP)]

Can the Minister confirm that the international counterparts discussed the subject of the Republic of Ireland, its deficit and the possible EU bail-out for it? Will that cost the United Kingdom money?

[Justine Greening]

At this stage, we cannot speculate about other countries’ finances. Obviously, the Irish are taking very difficult decisions and actions to try to get the situation under control. I do not think that we should pre-empt actions that Ireland or any other country takes and the impact that such actions may ultimately have on the UK taxpayer.

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

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

Economic and Financial Affairs Council (11 November 2010)

Justine Greening Excerpts

Wednesday 10th November 2010 Written Statements

[The Economic Secretary to the Treasury (Justine Greening)]

I plan to represent the Government at the Budget ECOFIN to be held on 11 November in Brussels.

Budget ECOFIN will prepare a conciliation meeting with the European Parliament on the EU budget for 2011, and handle the outcome of that conciliation meeting.

The Government remain committed to opposing the increases of around 6% in the 2011 EU budget, above 2010 levels, proposed by the Commission and the European Parliament. These are simply unacceptable at a time when Governments across the European Union are taking difficult decisions to reduce national deficits and ensure the sustainability of their public finances.

The Government have called for a freeze in the 2011 EU budget at 2010 levels. We voted for this when the Council adopted its position on the budget earlier this year, which proposed a 2.9% increase over 2010 levels. Six other member states also voted against Council’s position. It was nevertheless adopted by a qualified majority.

Along with 12 other member states’ Governments, the Government have made it clear that they cannot accept any increase beyond 2.9% in the 2011 EU budget compared to the 2010 budget. Those are the terms of agreement that this Government will pursue at Budget ECOFIN on 11 November.

Vulnerable People (CSR)

Justine Greening Excerpts

Tuesday 9th November 2010 Westminster Hall

[Chris Leslie]

I am sorry if I have hurt the hon. Gentleman’s feelings; that would be a dreadful thing to do. However, it is far worse to hit the poorest and most vulnerable people in society through the measures that he will support by walking through the Lobby. The warm words that he espouses are all very well, although so far he has not said much about vulnerability and the impact of the reforms. He is doing his job and wants to progress through his party—I wish him luck with that—but the measures that he will be supporting will be harmful, and I am sorry if he feels that that is insulting.

Let us look at some of the changes to housing benefit. As I said, housing benefit needs to be reformed, but not necessarily at the pace and with the harshness espoused by the Minister. Some of the combined, compounding changes will come in quickly, with some starting on 1 October next year. According to the Government’s own figures, the reduction from the median 50th percentile to the 30th percentile for housing benefit will affect 642,000 people. Many hon. Members, including the Minister, will be getting letters from their constituents about that. Those reforms will leave some people £39 worse off per calendar month. Some landlords might be happy to say, “That’s all right; we will bear the loss”, but others will say, “Sorry, that is unacceptable. Out you go.” What will be the consequences for homelessness? What will the pressures be on the indebtedness of individuals who are already stretched with credit card debts and so on? Will we see even greater pain at that level?

The National Housing Federation said in the newspapers today that the reforms were “brutal cutbacks.” Those are not my words, so if the hon. Member for Skipton and Ripon (Julian Smith) feels that such words are insulting, he should speak to the National Housing Federation. It said that the reforms risk the prospect of people

“falling into debt or hardship or being forced to move out of their home and away from their local community.”

That sudden drop in income and the rushed nature of reform are what the Labour party fundamentally disagrees with. Of course we accept that the deficit needs to be tackled, but we take a different view of how to do that.

[The Economic Secretary to the Treasury (Justine Greening)]

You do not know how to do it.

[Chris Leslie]

We have a set of strategies, but we do not have the phalanx of Treasury officials lined up behind the Minister.

[Justine Greening]

Perhaps the hon. Gentleman will outline three or four specific measures that his party would propose to tackle the deficit.

[Chris Leslie]

Given that we are talking about vulnerability, let us look at the impact of the spending review. The hon. Member for St Ives mentioned the banking levy but, as we debated last night, that is a puny and pathetic attempt by Ministers to let the banks off the hook while they are hitting families and children hardest of all—[Interruption.] I am sorry that Minister does not like my example, but she has made a choice and we would do things differently. It is important that the record shows that the Government have decided to let the banks off the hook lightly.

The Minister may well bleat and moan, but she should realise, for example, that cutting mortgage interest support for the most vulnerable will, as the Archbishop of Canterbury said, help to create a cycle of despair for many people. I do not think that the archbishop is a particularly partisan individual, and it would be a great pity if the remarks of those in civil society were dismissed.

I am interested in the Government’s approach to the universal credit, which they are looking to put in place as part of welfare reform. In many respects, it is a reasonable concept. However, I cannot understand why their approach is then to cut council tax benefit by 10% and to localise it, as has been announced. How is that consistent with the universal credit policy? Will the Minister elaborate on how the universal credit arrangement will come into place for the most vulnerable people when the council tax benefit is not part of it? I would like to understand the consistency, because that change will hit the poorest in society, as will many of the disability welfare changes.

We accept that disability welfare reforms are needed but, again, we must at least ask questions about the pace and harshness of some of those changes—as the hon. Member for St Ives has done. Taking out £2 billion by limiting the contributory employment and support allowance to the very disabled raises questions about how those who no longer have such support will cope. It is incumbent on those who are proposing the cut to explain where the support for those individuals will come from. Even pensioners will feel the impact of many of the changes, and they will lose out because of the four-year freeze in the savings credit element of the pension credit.

Public service reductions will have an indirect effect. This debate is not just about welfare, because the public service reductions announced in the spending review will also have a disproportionate impact on the very poorest in society. As the Institute for Fiscal Studies has said,

“modellable cuts to public services are regressive”.

There will also be a cut in health service spending. If we take away the social services element—it is being redefined as NHS spending, which it was not previously—and look at core NHS spending, it will fall by 0.5%. The IFS described that as the “worst settlement since 1951”. Again, those people using the health service are the most vulnerable and they will bear the brunt.

There will be local government reductions, in particular for support to the voluntary sector. For example, several welfare advice centres in my constituency will no longer be able to offer help and support to the very poorest in society because of the implementation of legal aid cuts. People will be left to fend for themselves, with far less advice—[Interruption.] The Minister is chuntering away, but she will get her opportunity to speak in a moment. I hope that she can give those people an explanation of the deficit reduction choices that she is making that deliberately addresses the speed of her measures. I understand that everyone in the House wants to ensure that deficit reduction is carried out sensitively, but I cannot quite understand the voracious speed at which the Minister thinks she has to do that. Her approach seems punitive and potentially risky.

There are education changes, too, and we have also talked about policing and crime. Those who tend to need the support of the policing services are those who are the victims of crime, and most of all the poorest and most vulnerable in society. The list goes on: reductions in the working neighbourhoods fund; no more future jobs fund; and, again, some of the welfare advice changes. Those things give rise to more worries and concerns.

The IFS was right to point out the regressive nature of the Budget. All the spin and warm words that the Minister will no doubt parrot again have been unravelled by the objective and independent analysis carried out by the institute, which the Conservatives were more than happy to cite in times past, but now seem keen to rubbish. The IFS says that the cuts are the

“deepest since the second world war”.

The Government have decided to hit families with children hardest, with the health in pregnancy grant going, the taxing and freezing of child benefit, the cuts to child care help through the working tax credit, and the scrapping of the education maintenance allowance. It is not necessarily those individual changes, but the compounding effect of them all happening simultaneously, with the speed of implementation chosen by the Minister, that makes them hit the most vulnerable very hard.

It was right that the hon. Member for St Ives raised the question of whether those with the broadest shoulders are bearing the greatest burden. The Chancellor keeps saying, “We’re all in this together,” but that is completely unbelievable and palpably not the case.

The puny nature of the banking levy is such that even the International Monetary Fund has said that it is a third of the size that it suggested. The banks will enjoy the corporation tax cuts, as well as their deferred tax benefits. There is also, of course, complete inaction by the Government on banker bonuses, which will be revealed when the bonus season starts in January or February.

All in all, the set of changes is exceptionally regressive and will hit the most vulnerable in society most of all. Perhaps the saddest fact is that many of those who will be affected do not yet realise it. The changes have not necessarily been reported in detail. People might well be completely oblivious to the changes that are coming but, for example, when the housing benefit change comes in on 1 October next year, they will be faced with great difficulties.

I have urged my local authority in Nottingham to find a way of communicating with recipients of housing benefit so that they can prepare themselves for the changes that are coming. Will the Minister at the very least—even if we disagree about the speed and nature of the policies—tell hon. Members how the Government intend to communicate with people and give them a bit of a heads-up so that they can prepare themselves for some of the changes? With a little preparation, the poorest in society might be able to try their best to brace themselves for what is around the corner.

I have set out my genuine concerns. There are political differences between us, but the story is a sad one that will unravel further in the years to come.

[The Economic Secretary to the Treasury (Justine Greening)]

It is a pleasure, Mr Crausby, to serve under your chairmanship of this important Westminster Hall debate. I congratulate the hon. Member for St Ives (Andrew George) and pay tribute to him for securing the debate. I remember that during the spending review debate and the emergency Budget debate held earlier this year, his presence in the Chamber was constant, which shows his commitment to and concern about the issues—he is right to point out that we should all be deeply concerned about them. I shall start by setting out the background to some of the measures, and then talk in more detail about the housing benefit measures the hon. Gentleman mentioned in particular.

I listened to the response from the hon. Member for Nottingham East (Chris Leslie). He clearly holds a different view, but I found his speech deeply irresponsible in many ways. As an incoming coalition Government, we have picked up a fiscal deficit without precedent not just in our own country, but across the developed economies of the world. His party handed over that deficit, which we and the Liberal Democrats are working to address.

Certainly, the situation we took over was grave. The hon. Member for Nottingham East talked about the speed with which we are tackling the deficit, but that very much underscores just what a serious position our country was in when we came into government earlier this year. In fact, had we not taken the steps we are taking over the coming years, our debt would be £100 billion higher and we would be spending some £5 billion more as a nation on debt interest—money we want to put into supporting our public services. Had we not taken those steps, there would have been the real risk of being unable to have as a good a chance as we now do of keeping interest rates low, which is critical for companies investing and creating jobs and for households across the country with a mortgage.

Clearly, therefore, we needed to take action. One of the key pledges that we made as part of the spending review was that fairness would be at the heart of our decision making. The hon. Member for St Ives was right to say that despite the challenging backdrop against which the emergency Budget and the spending review took place, they included important measures such as increasing the personal allowance, which saw 880,000 people taken out of income tax altogether. Interestingly, he also mentioned that the Government’s aspiration was to go further on that, which is important. The distributional analysis and the IFS modelling do not take those aspirations into account, because we have not yet announced how we will carry them forward. Nor do they take into account the benefits of the universal credit or the stimulus and support that it will provide to people who are getting back into work. It is important to bear that in mind.

As I said, one of our key pledges in the spending review related to fairness. By fairness, I mean that, across the entire deficit-reduction plan, those with the broadest shoulders should bear the greatest burden. There has been a lot of debate about the IFS, and it is interesting that we have published more distributional analysis alongside our comprehensive spending review than any Government have ever done before. There is, of course, a debate about how to do that analysis in a more refined way, and the TUC, for example, took a view in its own analysis about how to spread defence spending across income deciles. Clearly, therefore, there are methodological questions that it is worth while looking at to see how we can improve things. Hon. Members will be aware that Robert Chote, who was the head of the IFS, now heads the Office for Budget Responsibility. He is precisely the kind of person who can help us to have a more transparent, independent assessment of our policy. That will help not only the Government, but people who look at our policy to understand what it means for our country and our communities.

Fairness has underpinned our approach. Critically, we have to move to a welfare system that helps and supports the vulnerable, but does not trap them in the way the system we have taken over too often did. We need a system that supports people back into work, and that is affordable. That is important because my great concern is that we need a system that people across our country buy into. That means that the system must be fair not only to the people in it, who need the support, but to those outside it, who perhaps work and pay their taxes. Those people might be happy to pay into a system to support the most vulnerable, but they might feel that it needs to be fair to them as well as to those who get the benefit payments. They need to feel that the system improves the lives of those who receive benefit payments and gives them the chance to be independent that, for various reasons, they do not have at the moment. I will say a little more shortly about how we can do that.

We have had a test on fairness, and there is no doubt that we have had to make some difficult decisions about how to spend the small amount of money we have following the Labour party’s profligacy in government. Today, in its debate on welfare on the Floor of the House, the Labour party will have another chance to set out how it would approach welfare reform. We have heard an awful lot about the fact that there is a better way of doing things, although we have occasionally heard from Labour Members that they do not oppose all our reforms. However, if we are to have a thoughtful and constructive debate about this important issue, it is time for the Opposition to engage more meaningfully, rather than simply setting out what they are against. They owe that to Parliament, which needs a proper debate from elected representatives, and to our country. They should set out exactly how an alternative, if there is one, would look.

I want now to look at the welfare state in a little more detail. Under the previous Government, benefit bills soared by 45%. In some cases, the benefit bill for a single out-of-work family amounted to the tax bills of 16 working families put together. To return to my earlier comments, everybody would say that that was not just unfair, but unsustainable. Given the financial position that we inherited, protecting the welfare budget was not an option. If we had done that, it would have forced more drastic front-line cuts on services elsewhere, which so many of us, including those on benefits, rely on so much. We therefore tried to focus our support on the people who need it most—the long-term unemployed, the very young, the very old, the disadvantaged and those who, through no fault of their own, are unable to work or find it hard to enter the labour market.

The spending review announced reforms to tackle welfare dependency by delivering a simplified system in which it always pays to work. The hon. Member for St Ives rightly mentioned impoverishment, and at its heart is the fact that people do not have a job. We need a welfare system that supports people back into work, and that applies particularly to people who have been on incapacity benefit and employment and support allowance. In one of my first roles as a new MP in Parliament, I sat on the Work and Pensions Committee, and I clearly remember that one of our first reports looked at incapacity benefit. It was a real scandal that although jobs had been created over the previous decade, the overwhelming majority of those on incapacity benefit were left wanting to work. On Thursday evening, I met visually impaired people in my constituency who were desperate to find work and to be financially independent. Those are the people we are keen to support back into work, but they were languishing on benefits in way that was bad for not just them, but our country and communities. It was also unaffordable.

[Andrew George]

The Minister is making an extremely important point; in fact, it was one of the many that I made. We need to establish a bridge between dependency and securing work. That applies to the housing benefit system, and I mentioned tapers, or the rate of withdrawal of housing benefit. The previous Government did nothing about the problem, which has been going on for decades. The point also applies to incapacity benefit. There is a cliff-face between benefit dependency and being able to get work. Perhaps the Government need to look a little more at ways of establishing a bridge to help people into work, rather than impoverishing them, putting them at risk or worrying them about making the transition into work.

[Justine Greening]

The hon. Gentleman raises one of the key flaws that has existed in the welfare system, which is that it has trapped people. Going back to my time on the Work and Pensions Committee, I remember an inquiry that we did into Jobcentre Plus. The then Government had to introduce a better-off test to prove to people that they were better off going into work, because it was so complicated to work out what benefits people were receiving and what they would lose. It was not clear to people that moving into work would be the best thing for them financially.

The hon. Gentleman will be interested to read the White Paper that the Department for Work and Pensions will release in the next few days on the universal credit, which is intended absolutely to make sure that people who are currently on benefits know that they will be better off if they move back into work. We can move away from the situation faced by some of the worst-off people in our country, who have moved into work only to be penalised with some of the highest marginal rates of tax, which are simply eye-watering. We would not dream of putting even the highest earners on such rates, but the marginal rates of tax faced by some of the lowest-income people have been huge, and the universal credit is aimed at starting to tackle that situation.

[Chris Leslie]

For the benefit of hon. Members, will the Minister tell us what the marginal rate of tax will be for families that lose child benefit when they earn more than a certain amount? What will the percentage be? As I understand it, earning £1 could result in £2,000 of lost child benefit.

[Justine Greening]

I am sure the hon. Gentleman will want to consider those calculations in detail, but that brings us back to my concern about the Opposition’s engagement with the subject, which was typified by his intervention. Unfortunately, it was not at all constructive but deeply negative. At the heart of my concern about the Opposition’s lack of thoughtful strategy is the fact that he argues for a policy that would maintain child benefit for higher rate taxpayers.

[Chris Leslie]

Will the Minister give way?

[Justine Greening]

No; I want to make some progress.

The hon. Member for Nottingham East could have set out some better alternatives, but he failed to do so. That is a shame for our democracy. I assure him that we are tackling problems in the welfare system that the previous Government failed to tackle; I had hoped that he would welcome that. I know that the Opposition agree with some of our welfare reforms; it would help if we knew which ones, as we could then have a genuine political debate about areas of disagreement.

The universal credit will be a big step forward, and a good one. It will ensure that people are no longer trapped in welfare, as they have been. The hon. Member for St Ives said that one of our achievements as a coalition Government was to re-establish the earnings link. He is right; against the backdrop of a difficult fiscal deficit, we have maintained pensioner benefits on things such as free eye tests, free prescriptions, the free bus pass and free TV licences for the over-75s. We have also increased the cold weather payment award permanently to £25.

The hon. Gentleman also mentioned social care. Again, it is symptomatic of what we have in mind that we must protect the most vulnerable. That is why we have added £2 billion to the social care bill, with £1 billion from the NHS and £1 billion from the budget of the Department for Communities and Local Government. That is precisely to ensure that local authorities do not need to restrict access to social care. The fact that the money comes from the NHS and the Department shows that we need them to work more closely together. The reality is that health and social care are inextricably linked. Indeed, good social care can protect the vulnerable and help them maintain a healthy and independent life. As MPs, we have all seen people in our surgeries who are very keen to do that, and we have all worked to help people maintain the independence that so many want. We have therefore been particularly careful to ensure that funding for social care is supported.

I turn to the hon. Gentleman’s important comments on housing benefit. In the changes that we made to housing benefit, we tried to ensure that we tackle the underpinning of affordable housing and the lack of new affordable housing. One reason why housing has become so expensive is the gap between demand and supply, and the fact that housing starts over the last 10 years have generally been lower than in the past. That was so particularly for social housing, and especially for affordable homes in places such as London.

That is the backdrop and the key reason why rents have risen and housing has generally become more expensive. The previous model of affordable housing did not work. If Government money had been thrown at it during an economic boom, we would have seen the sorts of affordable housing that were needed, but it did not happen. We therefore had to think of different ways to do it. We are working far more effectively with housing associations and other investors that want to create housing, to ensure that we get back to creating the levels of social housing and affordable housing that are needed. That means investment—£4.5 billion for new affordable homes and £2 billion for the decent homes programme. We also need a more flexible system of affordable housing to help those who need to move for work and to protect the most vulnerable, and one that is also fair to the taxpayer.

[Andrew George]

I acknowledged earlier that £4.5 billion will be retained over the next three years for social housing. However, the Government intend funding the shortfall by allowing social landlords to increase their rents by up to 80% of the market value. That will result in more housing benefit. Within the Treasury’s modelling, to what extent does the Economic Secretary anticipate the increase in public-sector contribution resulting from the increase in the housing benefit to be paid to residential social landlords as a result of rent increases?

[Justine Greening]

It is important to say that the change relates to new tenants rather than existing ones. Existing tenancies will not be affected by such measures. On the question of market rates and affordability, we will want to see landlords, the Homes and Communities Agency, and the regulator, in conjunction with local authorities, talking about ensuring affordability. The hon. Gentleman is right to point out that housing benefit will still be available to support people.

The challenge is to move to a more sustainable footing for housing, and particularly for social housing. That is most important for housing associations, and the need for them to keep reinvesting. We have tried to strike a balance that is broadly fair to those on existing tenancies and to ensure that the new stock that we seek to create—the £4.5 billion will create about 150,000 affordable homes—is used more effectively to support people. At the same time, we want to work with people to ensure that rents are affordable. Nevertheless, housing benefit will still be there.

The hon. Gentleman also spoke about the cap on the housing allowance and setting the local allowance at the 30th percentile rate. The reality is that people who are working must ensure that they can afford where they live. It will be difficult to ask them to pay into a system in which people on out-of-work benefits are living in areas that they simply cannot afford. The 30th percentile change is about trying to strike the right balance between what is affordable and what is fair and reasonable.

[Annette Brooke]

I thank the Economic Secretary for her earlier comments, which were helpful in setting the scene for reform. However, I share the concern of my hon. Friend the Member for St Ives (Andrew George) about the fact that housing benefit will impact differently in different areas. For instance, in my area I obviously have winter lets, and people seem to be concerned about the smaller one-bedroom or two-bedroom properties. I know that the transitional fund has been allocated, but will the Economic Secretary explain how the problems of each individual area, as they relate to vulnerable people, will be dealt with sensitively?

[Justine Greening]

The hon. Lady is right: different parts of the country clearly have different housing needs and challenges. The Department for Work and Pensions will be working with local authorities through the transition period, and as she pointed out, we need funding in place for that as well. There will be £140 million of discretionary funding to support local authorities, £10 million of which is for London. It is worth pointing out that that is not the only support available for those affected.

For example, we still have many things such as the social fund, which includes budgeting loans, crisis loans and community care grants that are being maintained. We are considering how the social fund can be more localised, so we are working with the Department for Communities and Local Government and local authorities to see how we can best use the money we have to support people, in a way that works for them and at the local level. Interestingly, no London MPs are here, apart from me. Depending on where one represents in the country, there is a different group of constituents, facing a different series of challenges. Therefore, ensuring that the local aspect is fully part of how we work through the transition is vital. That is why the role of the Department for Work and Pensions, working with local authorities and the DCLG, is so critical. That is also why, as Liberal Democrats will recognise, localism is a theme that needs to run more broadly through our policy across Government. That is one reason why in this area it is important.

[Andrew George]

That is central to the point that I was making, and it has been repeated by my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke). I entirely understand that in a London setting, and perhaps in other parts of the country, this is a debate about the understandable sense of injustice among hard-working people, who feel that those who are not working have preferential, and indeed better, living circumstances than they themselves can afford. In my part of the country that does not apply. The key issue is that the rental properties coming on to the market are not getting close to even the median or below, which is the setting for housing benefit in my area. Understanding how the market works in our area, we know that the policy of ratcheting it down to 30% will not lever private rents downward. It will leave a large group of people—working and non-working—significantly impoverished.

[Justine Greening]

The hon. Gentleman has set out his concerns for his area. I go back to my earlier comment about the 30th percentile change. That is the right thing to do to ensure that people feel the system is fair. As for rents, interestingly, if one looks at the changes around local housing allowance, about 32% of people affected by the changes will lose money, but will still get enough to cover their rent. Because of the way that local housing allowance worked in the past—it meant that people got more than they needed to pay their rent—a third of people will not be left with a shortfall.

We talked about the discretionary fund and working with local authorities. The concerns that the hon. Gentleman has raised are precisely why we want to ensure that as much of that support as possible can be localised. The reason is twofold. Local authorities might feel that the best way they can support people is to keep them in the homes they are already in—that is the decision they take. In other cases, they might feel that the best long-term sustainable situation is to help people to move to something that is more affordable to them.

The hon. Gentleman is absolutely right to raise those issues, which are precisely why we have set aside £140 million to ensure that the support is there to tackle some of those on-the-ground changes through the transition period, as we move to a housing benefit system that feels fairer and more affordable, and that does not trap people in poverty and out of work, as we have seen in the past.

I thank the hon. Member for St Ives for securing today’s debate, which has raised some very important points, and I am grateful to hon. Members for their contributions. There is no doubt that the spending review will have an impact across our society—not just for the next four years, but for many to come. The decisions we have made will help to shape Britain’s future. That is something of which I am very conscious. That is why we have put such an emphasis on fairness, protecting the vulnerable and supporting the most needy.

That fairness is rooted in not only supporting people today, but giving them the opportunity of a better quality of life tomorrow. We know that cuts to public expenditure have to be made—even the Opposition would agree with that—but that should not come at a cost of a more divided society, where the poorest and the most disadvantaged suffer as a result of mistakes that were never theirs. Our actions in the spending review reflect that: we have delivered a fair settlement, demonstrated that we are a progressive Government and supported the most vulnerable in our society. That was our promise when we came to power, and it is one that we fully intend to keep.