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Mr. Jacques Arnold (Gravesham): In view of his concerns over public finance, how would the hon. Gentleman finance the £8 billion cost of his 10 per cent. starting rate for income tax?

Mr. Brown: There is no £8 billion cost of a 10p starting rate for income tax. I will tell the hon. Gentleman what the choices will be at the next general election. [Hon. Members: "Answer the question."] I am answering the question. The hon. Member for Gravesham (Mr. Arnold) has a few questions to answer to his constituents about the promises that he made about tax cuts that have never been delivered.

I will tell the hon. Gentleman what the choice at the next election will be: it will be between what the Chancellor said yesterday--the Conservative plan to abolish capital gains tax and inheritance tax, at a cost of more than £4 billion to benefit only a few--and our proposals to use the same resources to get the starting rate of income tax down to 15 per cent., or preferably 10 per cent. I know what choice, on fairness grounds and on employment grounds, the electorate will make.

This is not just the 7p up and 1p down Budget. It is not just the Budget that gives--as I will show in a minute-- with one hand but takes with another. The Government cannot present the Budget as inspiring, as a turning point

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or as the 17th relaunch--for it would have been the 17th failed relaunch--so they now to try to salvage it and present it as cautious, sensible and prudent.

Prudence would have meant that the Chancellor tackled our deep-seated economic weaknesses, that he had a long-term strategy while being cautious in the here and now, but there is no sign at all from his Budget that he has any sense of direction or strategy for the British economy. He cannot be considered prudent if he neither acknowledges nor addresses the fundamental investment and skills gap with our competitors and has no clear direction for this country. He is not a prudent Chancellor with real scope and options that he can consider and reject, for what he calls his prudence is forced on him. He is a man without real choices, a prisoner of his Government's failure, paralysed into inaction as a result of everything that has happened to the economy under Conservative management for the past 16 years.

Mr. Nick Hawkins (Blackpool, South): The hon. Gentleman has talked about the need for investment. How will his party's policies to sign up to the social chapter and have a statutory minimum wage help investment? They will ruin investment, especially in manufacturing, and destroy jobs.

Mr. Brown: It is interesting that the same question that was asked of me last week has been asked this week by a different hon. Member who was not here last week. I will repeat what I said. Britain has slipped from 13th to 18th in the world prosperity league. Of the 17 countries ahead of us, 16 have a minimum wage. The hon. Gentleman must face up to the fact that there is a minimum level of social justice that contributes to economic efficiency in modern economies. The idea that we should return to a 19th century situation, where there is no protection at all for people in the workplace, is unacceptable to this country.

The result of everything that has happened is that after 21 tax rises--the biggest tax rises in history--with, even this year, as was admitted in a recent report, living standards for the majority still falling, with consumer confidence still weak because of widespread job insecurity and despite all the promises of the Conservatives being the low-tax party, all the Chancellor can offer to undo the damage of a 7p in the pound tax rise from 1992 is to make it a 6p tax rise from 1996.

People will ask, "What has all the suffering been for?" It has been for one solitary tax cut that cannot mitigate a record of 21 tax rises. Big tax rises followed by a small tax cut still equal a big tax rise since 1992. A tax cut one year in five cannot undo the damage of tax rises in the other years. Three billion pounds given away cannot compensate for more than £16 billion that has been taken away.

Mr. Tim Smith (Beaconsfield): The hon. Gentleman says that the 1 per cent. reduction in the standard rate is the only progress that is being made on tax reductions, but that it is not true. There are two other respects in which we shall be moving towards a 20p rate. The tax on savings is to be reduced to 20p, at a cost of £800 million. Will he support that?

Mr. Brown: The hon. Gentleman raises what the Deputy Prime Minister said immediately after the Budget. The Deputy Prime Minister was sent into the television

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studios to tell people that they were £9 a week better off as a result of the Budget, but when the Treasury press release was examined immediately afterwards, it turned out that £6.50 of the £9 was an assumption that people were getting a 4 per cent. pay rise and that the tax changes added up to a fraction of the £9 that was mentioned. Taken overall, all the tax changes made by the Chancellor are worth little more than £2 a week to the ordinary family. Many people's savings have been destroyed by the Government; the hon. Gentleman should face up to that fact.

Mr. Jacques Arnold: Will the hon. Gentleman give way?

Mr. Anthony Coombs (Wyre Forest) rose--

Mr. Brown: No, I will not give way to the hon. Member for Gravesham again. I will give way to the hon. Member for Wyre Forest (Mr. Coombs), and then I shall continue my speech.

Mr. Coombs: The hon. Gentleman talked about savings, but what destroys savings are the inflation rates--about 26 per cent.--that we had under the last Labour Government. Will he tell the house what his target inflation rate would be?

Mr. Brown: I thought that the hon. Gentleman would ask about the 40 per cent. increase in unemployment in his constituency in the past five years. I will tell him about inflation. We have said very clearly that we will set an inflation target. We shall consult the Governor of the Bank of England and set that rate in government.

The Chancellor must now explain his inflation target. Is it 2.5 per cent.? If it is, he has gone beyond it and he has failed to meet it this year. There is no guarantee that he will meet it in future years. I thought that the Chancellor might tell us that his inflation target is 1 to 4 per cent., but now he is telling us that it is 2.5 per cent. That is very similar to the memo that he sent to Back Benchers, in which he said that he might meet the 1 to 4 per cent. target on some, but not all, occasions.

The Chancellor of the Exchequer (Mr. Kenneth Clarke): I did not intend to intervene, but I shall answer the question. The target is 2.5 per cent. by the end of the Parliament and we are on course to achieve it. As I said yesterday, the target will be 2.5 per cent. for the rest of the Parliament. The Chancellor, and not the Governor of the Bank of England, is supposed to set that target. Why cannot the hon. Gentleman answer any of the perfectly legitimate questions that my hon. Friends have put to him? What will he do in the vote on the tax on savings, what inflation target will he set and what is the cost of his proposal for a 10p basic rate?

Mr. Brown: I have answered all those questions. I thought that, after last night, hon. Members would be more anxious to question the Chancellor about what he has done and what he has failed to do.

I have made it absolutely clear that we shall consult the Governor of the Bank of England on the inflation target when in government. That is the sensible thing to do. The Chancellor must explain why inflation this year is at 3 per cent. when his inflation target is 2.5 per cent. The Governor of the Bank of England says that he has no confidence that the Chancellor will meet the target by the end of the Parliament.

I will remind hon. Members about taxation. Despite all the promises of tax cuts, year on year, the tax cuts in the Budget leave value added tax at 17.5 per cent. and VAT on fuel at 8 per cent. Employees' national insurance contributions have risen since the last election and they have not been reduced. Mortgage assistance has been halved and it remains unchanged. The airport tax and home contents insurance tax have not been reduced. Anything that the Chancellor has given this year must be set against what he has taken away. After VAT rises, national insurance rises, cuts in mortgage help, cuts in the married man's allowance and new airport and car taxes, people are almost £700 worse off under the Conservative Government. Having taken the pounds, they are returning only the pennies. people have suffered enough as a result of the government's actions.

Mr. John MacGregor (South Norfolk) rose--

Mr. Brown: I will give way to the right hon. Gentleman. He is a distinguished former Treasury Minister and I doubt whether he agrees with many of the things that have happened since he left the Treasury.

Mr. MacGregor: I shall make my speech in my own way, thank you very much. We know that the hon. Gentleman has already committed himself to substantial public expenditure increases. Would he reverse tha tax measures that he has just mentioned? Would they become tax reductions if he were in power?


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