House of Commons Hansard Debates for 23 Apr 1998 (pt 5)

Budget Effects

13. Mr. Tony Baldry (Banbury): What representations he has received on the impact on the number of families facing marginal deduction rates of 50 per cent. or more of the measures announced in his Budget. [38254]

The Chief Secretary to the Treasury (Mr. Alistair Darling): None.

Mr. Baldry: Does the Minister accept that written answers to parliamentary questions show that a staggering 320,000 families face marginal deduction rates of 50 per cent. or more? Is that not a demonstration of how the Budget will extend the poverty trap, and a rotten way of going about welfare reform?

Mr. Darling: We have received no representations along the lines the hon. Gentleman suggests, because the vast majority of people recognise that our proposals for working families tax credit will help substantially more

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people than were assisted under the family credit scheme. We have reduced by two thirds the number of people who pay marginal rates of more than 70 per cent. For the first time, no families will pay marginal rates of more than 100 per cent. Most people recognise that it is an extremely useful measure that will make work pay and help reduce barriers to work. That and the reduction in national insurance rates announced by my right hon. Friend are major reforms of the tax and benefit systems, which have been widely welcomed by most progressive-thinking people--but I accept that that does not include the hon. Gentleman.

Mr. Jim Cousins (Newcastle upon Tyne, Central): Does the Chief Secretary accept that he is right to say that the Budget marks an historic shift away from welfare being a prison in which millions of people are forced to double their incomes simply to earn £5 more a week and in which half a million people are better off by working not at all or less, such was the stupidity of the welfare system that, we inherited from the Tories? Does he accept also that, because of the high rent increases for which the Conservative party was responsible in both the public and the private sector during the 1980s and early 1990s, we must look forward to the review of housing benefit and to a clear policy of restraining rent increases to deliver millions more people from the welfare traps that we inherited from 20 years of Tory rule?

Mr. Darling: My hon. Friend highlights the fact that the Government are looking across the full range of the benefit and tax systems to ensure that people are not penalised as he describes. We will ensure that people can get into work and, when they do, that it pays. That is the whole point of the Green Paper on the future of the welfare state, which we published recently. My right hon. Friend was quite right to draw attention to the fact that the Government are committed to modernising the welfare state so that it is fit for the labour market and the social and economic conditions that we have today, rather than those that might have been appropriate 50 years ago.

"Financial Statement and Budget Report"

14. Mr. David Ruffley (Bury St. Edmunds): If he will list the number of corrections made to the most recent "Financial Statement and Budget Report" since 17 March. [38255]

The Chief Secretary to the Treasury (Mr. Alistair Darling): A corrigendum was issued on Budget day and a further written answer was given in reply to a parliamentary question on 27 March making the necessary alterations.

Mr. Ruffley: Does the Chief Secretary accept that, while the revisions have the direct effect of artificially massaging down the national tax burden, the burden on ordinary families is increasing? Does he accept House of Commons Library figures that show that a family on average earnings is £1,000 a year worse off under this Government as a result of mortgage rate increases and tax increases--yes or no?

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Mr. Darling: I think that the hon. Gentleman was a special adviser to the former Chancellor of the Exchequer. He might wish to bear in mind two things when considering whether people are worse off. Under the previous Government--despite their promises at the previous general election--people were substantially worse off because of the tax increases introduced by that Government.

The hon. Gentleman is quite right: we did issue a corrigendum, but at least we were not in the situation he was in when he advised the former Chancellor. The former Chancellor did not have just to correct the figures three years ago: he had to correct his whole Budget when he was defeated on value added tax on fuel.

Economic and Monetary Union

15. Mr. Bernard Jenkin (North Essex): If it is the Government's policy to support the inclusion of all 11 applicant member states who wish to be included in the third stage of EMU on 1 January 1999. [38256]

The Economic Secretary to the Treasury (Mrs. Helen Liddell): The Government are considering the Commission recommendation in consultation with other member states. We note the considerable progress made towards convergence in the 11 countries. For the economic benefits of economic and monetary union to be realised, it will be important that this progress is maintained in future, with further action taken to reduce deficits and to reform markets.

Mr. Jenkin: May I congratulate the Government on the influence in Europe that they now believe they have? May I ask the Minister how the Government will exercise that influence? Will they support the participation of Italy and Belgium in the monetary union, or are the Government still awaiting instructions from European institutions, France and Germany?

Mrs. Liddell: This Government do not take instructions from other member states. The Scrutiny Committee has already been in touch with the Government about the opportunity to discuss these significant issues. I expect that an announcement will be made in due course. During the next week we shall consult other member states, which is the mature and sensible way in which to proceed.

Interest Rates

16. Mr. Michael Fabricant (Lichfield): If he will make a statement on the role of the Bank of England in setting interest rates. [38258]

The Chief Secretary to the Treasury (Mr. Alistair Darling): The Bank of England's Monetary Policy Committee sets interest rates to meet the Government's inflation target of 2.5 per cent.

Mr. Fabricant: Interest rates drive the value of the pound. Is the Minister happy with the value of the pound?

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Mr. Darling: There are many, many factors that influence the value of the pound. I repeat to the hon. Gentleman, in case he was not listening earlier, that the Government are determined to take whatever action is appropriate in the long-term interests of the economy. We are not prepared to see a recurrence of the boom-and-bust economy, which has been so damaging in the past. We--[Interruption.] Conservative Members do not like being reminded of the fact that, during the 18 years when they were in power, they were responsible for two severe recessions. The second was one of the deepest this century.

The Government are determined to avoid that happening again. That is why we took the necessary steps to reform the Bank of England. We now have one of the most open and transparent central banks in the world. The important point is that we now have the lowest long-term interest rates for 33 years.

Mr. Dennis Skinner (Bolsover): Is my right hon. Friend aware that, throughout this Question Time, and in particular in questions to my right hon. Friend the Chancellor of the Exchequer, the Tories have been talking

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about a competitive pound? They have been talking also about the value of the pound, but they have never said that they are in favour of a weak pound.

The truth is that no one--representing any party--would get elected to this place if he said to the electorate, "Vote for me and I will introduce a weak pound." That is the truth of the matter, and people must face it. On 16 September 1992 the Tories chose to go for a weak pound. The net result was that they were defeated on 1 May 1997. The same thing happened to previous Governments.

I suggest to my right hon. Friend that he should not listen to the moaning Minnies on the Conservative Benches talking about a weak pound or a competitive pound; remember that devaluation does not win elections.

Mr. Darling: Indeed it does not. My hon. Friend is right. We have heard this afternoon that the Conservative party has no idea what its policy is on a host of issues, whether the pound, taxation or the future of the Bank of England. The only thing that unites an increasing number of Conservatives is their bitter hostility to anything to do with Europe.

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