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Business Fluctuations
7. Dr. Iddon: What steps he is taking to end major fluctuations in the business cycle. [12654]
Mr. Darling: The Government have taken decisive action to strengthen economic stability. As my hon. Friend the Economic Secretary said, the damaging boom and bust legacy that we inherited has been extremely damaging to British industry. We attach great importance to stability, openness and transparency of policy--because from them flows the credibility that world markets now demand.
Dr. Iddon: Does my right hon. Friend agree that the Government have established a framework for monetary policy that is transparent, accountable and the best in the world? Does he agree also that the monetary policy reforms signal the Government's intention to get away from the boom and bust policies and short-termism of the past, allowing the United Kingdom to take decisions with the long-term interests of the economy rather than political expediency in mind? Does he think that the Conservatives will support the Bank of England Bill?
Mr. Darling: If Conservative Members cannot tell us their policy on the European single currency, perhaps they can tell us their policy on supporting the Bank of England Bill, which was introduced earlier this week; we shall see. My hon. Friend is quite right that we must have stability if we are to put the economy on a long-term footing and create an environment that encourages investment and increases prosperity. Our reforms--which the Bank of England Bill will soon introduce--are a part of that process. Those reforms must be considered alongside the actions taken this year by my right hon. Friend the Chancellor in his Budget, which were geared to achieving
long-term stability, reducing the high debt level that had been encouraged and creating a climate in which British business can flourish.
Mr. Flight: Does the Minister accept the view of the International Monetary Fund that exchange rate flexibility is necessary to cushion business cycles, as has been witnessed recently in south-east Asia? The view has also been relevant to Europe and America over the past few years, and is supported by most central bankers.
Mr. Darling: The hon. Gentleman seems to forget that it was his party which took this country into the exchange rate mechanism, although it seems that the Conservatives are now collectively sorry for it. I am happy to accept that the IMF has been complimentary about the conduct of the economy in the hands of my right hon. Friend the Chancellor.
Domestic Fuel (VAT)
8. Mrs. Mahon: If he will make a statement on the reduction in VAT on domestic fuel. [12655]
9. Mr. Ruane:
What representations he has received on his reduction in VAT on domestic fuel from 8 per cent. to 5 per cent. [12657]
Mr. Gordon Brown:
The change to a 5 per cent. rate on VAT came into effect on 1 September, benefiting all households well in time for winter fuel bills. This honours our manifesto commitment to the people of Britain.
Mrs. Mahon:
I thank my right hon. Friend for that answer. Does he agree that the manifesto pledge that we kept will stop the obscenity of pensioners having to choose between eating and heating?
Mr. Brown:
Not only have we cut VAT on fuel but we have abolished the gas levy. At the same time, in our welfare-to-work programme we are introducing an insulation programme to enable elderly people to insulate their homes against the winter cold. These measures add up in only 18 weeks to far more than the previous Government did in 18 years.
Mr. Ruane:
I thank my right hon. Friend for his comments. My constituency, Vale of Clwyd, has the second highest number of pensioners in Wales, and his announcement will go down well there. Does my right hon. Friend have any further proposals to promote warmer homes, such as a reduction in VAT on insulation schemes?
Mr. Brown:
That is part of a review that we promised at the time of the Budget--and, indeed, before the election--which will report soon. As for the measures that we are taking to protect elderly people against the winter cold and to enable them to have better insulated homes, the environmental task force being set up under the welfare-to-work programme will have a significant role to play. I accept that for elderly people, whose fuel bills are a far higher proportion of their income and expenditure, Government action is necessary. However, I remind my hon. Friend that if the Conservative party had had its way,
Mr. Robathan:
How does the Chancellor balance the electorally popular measure of reducing VAT on fuel with the hard choices, about which the Prime Minister spoke, involved in reducing carbon emissions? Is not the policy of reducing VAT on fuel in direct contradiction to the hard choices involved in reducing carbon emissions and the incremental growth in taxation on petrol?
Mr. Brown:
If the hon. Gentleman is saying that the policy is in direct contradiction to the objective of energy efficiency, I assume that the Conservative party is pledging at the next election to raise VAT on fuel from 5 per cent. to 8 per cent. and perhaps to 17½ per cent. When the Opposition Front-Bench spokesman rises to speak, perhaps he will tell us what the Conservative policy is. Only a few minutes ago, when talking about the environment, my hon. Friend the Financial Secretary spelled out all the measures that have been taken to honour the Prime Minister's commitment on the environment. We are an environmentally friendly Government who are dealing with the problems of energy efficiency and insulation.
Mr. Boswell:
Before the Chancellor overdoses on self-congratulation, will he confirm, as the Economy Secretary has already done in the House, that had he not deftly chosen to manipulate the implementation date of the reduction in VAT on fuel--introducing it on 1 September, before the pensions uprating, rather than after it on 1 October--the state pension would have risen next April by an additional £6.23 per year for a pensioner couple and £3.90 per year for a single pensioner? Has not his manoeuvring taken that money directly out of the pockets of pensioners?
Mr. Brown:
Here we see the Conservative party in action. [Hon. Members: "Answer."] It is about time the Conservatives listened to what is happening. They are saying again that VAT on fuel should not have been reduced in September and that we should have waited longer, letting pensioners suffer during the winter. We were not prepared to do that.
10. Mr. Beith:
If he will make a statement about the impact of inflation on his public expenditure projections. [12658]
Mr. Darling:
Public expenditure figures are based on cash planning. A key principle of spending control for two decades has been that there should be no automatic adjustments for inflation, because that would just build inflation into the system. We are committed to controlling public expenditure and keeping a firm grip on inflation.
Mr. Beith:
Nevertheless, so that false expectations are not aroused, will the Chief Secretary confirm that, even with the very welcome extra £270 million, the national health service budget will be £150 million lower in real terms than was planned by the previous Government?
Mr. Darling:
As I said earlier, we are committed to maintaining tight control over public expenditure. That is
Mr. Paice:
Will the Chief Secretary tell the House the precise impact on inflation of his right hon. Friend's Budget this summer?
Mr. Darling:
As the hon. Gentleman will know, I have answered many parliamentary questions to his colleagues, and perhaps even to him, in which I have made that clear. We have given real-terms increases to health and education, which will benefit patients and people in schools. I am not prepared to take lectures from the Conservatives, who left public finances in a ruinous state and left record levels of debt, having doubled the national debt over six years. Their failure to take action to control inflation has meant that we have had to make tough choices and take the necessary action that they ducked on every occasion.
11. Mr. Rammell:
How he proposes to further the public debate on the implications of a single currency. [12659]
Mr. Gordon Brown:
In addition to publishing a guide to economic and monetary union, with a special edition as a guide for business, the Government are preparing for economic and monetary union by setting up a steering group, led by the president of the Confederation of British Industry, the Governor of the Bank of England, the chairman of the Association of British Chambers of Commerce, and Ministers. We are also planning sectoral and regional consultations on the single currency to start from January.
Mr. Rammell:
I thank my right hon. Friend for that response and congratulate him on his statement this week, which was the most positive statement on economic and monetary union that we have heard from a British Government. Does my right hon. Friend agree with the Tory Reform Group, which stated this morning that the Leader of the Opposition's tactics on EMU have united the Government and business against the Conservative party?
Mr. Brown:
I quite understand my hon. Friend's remarks. Because the Conservatives cannot tell us whether they support the principle of a single currency or whether they will put a national economic test above all others, they have lost the support of business. They are the anti-business party in Britain today. Confirmation of that, if it was needed, has come from the Tory Reform Group and the remarks of the right hon. Member for
Dr. Julian Lewis:
In the light of his repeated comments this week that all that matters are the economic tests, will the Chancellor explain what he would do if other countries went ahead with economic and monetary union and--against the expectations of people on both sides of the House, including me--it succeeded economically but the tests failed democratically? What would the Government's view be if a new regime emerged that destroyed the democratic freedoms of those countries?
Mr. Brown:
The hon. Gentleman does not seem to understand my statement on Monday. I said that we supported the principle, that we would apply economic tests, that national economic interests would be decisive in the Government's recommendation and that the people would have the final say. The hon. Gentleman should tell us whether his party supports the principle of a single currency or not. I understand that Conservative Members went to Eastbourne to sort the matter out in what they called sessions for bonding. I gather that they were split up into small groups--and that is literally the position in which they are now.
Mr. Winnick:
I am aware of all the fiscal constraints involved. Arising from what my right hon. Friend has just said, is there not a case for public money being used for another prolonged bonding session for the Conservative party so that it can try to sort out the issue? May I also suggest that it could be held at Henley and that a few more records of wartime songs could be thrown in at evening sessions?
Mr. Brown:
I offer the shadow Chancellor the chance--with your permission, Madam Speaker--to tell us whether he supports the principle of a single currency or not. Within the Conservative party, there is now a five-year group, a 10-year group, a 30-year group and a group that will never go into the single currency. If the Conservative party does not support a single currency for the foreseeable future, it will not be a single party for the foreseeable future.
Mr. Malcolm Bruce:
Does the Chancellor accept that many in this country believe that economic tests are the only basis on which a decision to join a single currency should be made? It is conceivable that those tests may arise within this Parliament. Will the Chancellor accept, therefore, that it is imperative to mobilise public opinion to ensure that we get support for a commitment to enter a single currency? Does he agree that the split within the Conservative party at least creates the opportunity for a cross-party campaign that can ensure a yes vote in a referendum whenever it comes?
Mr. Brown:
I respect the hon. Gentleman's long-standing commitment to a single currency. I think, however, that on reflection, he will agree that getting it right is more important than getting it quickly. If he believes, as I do, that the economic tests must be met and that we need a sustainable and durable period of convergence, he must accept that that will take time. What
Mr. Todd:
In the Chancellor's welcome statement on Monday, he addressed the lack of convergence between our economy and that of our European neighbours. Will he give some information on how we shall measure that convergence over the next few years, picking out particularly the element of interest rates, on which he laid so much emphasis?
Mr. Brown:
My hon. Friend makes a good point. We have laid down five economic tests. They include investment and what impact the single currency will have on it, whether there is sufficient flexibility to withstand shocks, whether the business cycles are convergent, and the impact on jobs. We can set these tests down because we have been prepared to say that we support the principle of a single currency. Until we clarify the Opposition's position--do they support a single currency or not--we cannot move further in understanding it. The leader of the Conservative party said at one stage:
Mr. Nicholls:
If, as is inevitable, there comes a point when the interests of this country are not the same as the interests of the rest of Europe, whose interests does the Chancellor think will prevail in this brave new world--the interests of this country or the interests of the rest of Europe?
Mr. Brown:
It is precisely because we have set national economic tests for Britain which have to be met that we can say that the decision will be made in the national economic interest. Even if the economic arguments for a single currency were compelling and it was in the national interest to go in, the Conservatives cannot say that they would recommend doing so. I suggest that they return to Eastbourne and have another bonding session to see whether they can sort things out.
"We should say very clearly that we have principled objections to a European single currency. If in some future decade, that is no longer the case . . . "
He is a Conservative leader who has principles for one decade, but who may drop them in the next. That is the sort of party we are dealing with.
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