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Mrs. Lait: I assume that the Chief Secretary is aware that yesterday's PBR indicated that the tax burden has increased even this year, since the figures were announced in the Budget. I assume that he is also aware that stealth taxes have been increased by the higher rate in the national insurance threshold that was announced yesterday. On which page of the Labour party's election manifesto can we find the promise to increase taxes by £26 billion a year?
Mr. Smith: Our manifesto promise was about fair taxation and sound management of the economy. We promised that we would not put up the higher or basic rates of tax, and we did not do so--in fact, we cut the basic rate of tax. We said that when it was prudent to do so, we would introduce a 10p starting rate of tax, and we introduced that rate. We said that we wanted competitive and fair corporate taxation, and we have cut corporate taxes to the lowest level among our European competitors. When Conservative Members were in government, they imposed VAT on fuel as part of their 22 tax rises--their broken promises. We cut VAT on fuel to its lowest possible level. That shows how the Labour party keeps its promises and the Conservatives break theirs.
Mr. Bill Rammell (Harlow): Does my right hon. Friend recall that the only people paying less tax in 1997 than in 1979 were those earning more than £64,000 a year? Do not people want fair taxation? Is it not the case that the Labour party is delivering fair taxation and the Conservative party is opposing it?
Mr. Smith: My hon. Friend is absolutely right. That was indeed the £64,000 question under the Conservative Government, with their record of broken promises and economic instability. We will take no lectures from the Tories on taxation or management of the economy, given that they not only broke all their promises, but led us into boom and bust. Now we hear from the shadow Chancellor that he has no rules for stability in the economy and no
Mr. Howard Flight (Arundel and South Downs): After yesterday's acrobatics, will the Minister focus on the simple fact that, hidden away in yesterday's upward revisions of the tax take, is the fact that living standards are falling? Tax receipts--[Interruption.] Well may hon. Members on the Government Benches laugh. Tax receipts are rising by 6.4 per cent. per annum, versus a 2 per cent. increase in earnings. In simple terms, that means that the tax paid by the average family is increasing faster than the rise in average earnings.
Mr. Smith: In the shadow Chancellor's extraordinarily feeble response to my right hon. Friend the Chancellor's statement yesterday, he said that real disposable incomes had not been growing. He is wrong. Each and every year the Government have been in office, real disposable incomes have been increasing. Moreover, people have the benefit of £1,000 on average, thanks to the lower mortgage interest payments that they are making, because we have kept interest rates down, whereas the Conservatives had them high.
Mr. Roger Casale (Wimbledon): Is it not the case that as well as working to reduce the share of tax in national income, we are bringing down the share of debt in national income? Is it not right that, as well as reminding the British people of the 22 tax rises under the Tories, we should remind them of the massive and uncontrollable levels of public debt? Were not those levels of public debt a massive monument to Tory mismanagement of our economy? Were it not for Labour, levels of debt would remain high.
Mr. Smith: Indeed. Debt doubled under the Conservatives. They left a millstone of debt for the country and for the Government when we came in, with their unsustainable £28 billion-worth of borrowing. The level of debt was 44 per cent. of gross domestic product when we came in. We have reduced that to 33 per cent. and, as the pre-Budget report shows, we are on course to get it down to 30 per cent. and keep it there, consistent with firm and disciplined fiscal rules, which we are applying and which the shadow Chancellor does not have. Because we have reduced the debt, are responsible with the public finances and have strong and sound public finances, interest rates are lower, and individuals with mortgages, as well as businesses, see the consequent benefit.
Mr. Gill: Is the Chancellor prepared to allow a further depreciation of sterling against the United States dollar, to the point at which the supposed overvaluation of the pound against the euro is eliminated? In view of the brevity of the question, will he simply answer yes or no?
Mr. Brown: I do not have an exchange rate target, which is what the hon. Gentleman's question implies. I thought that the Conservative party had learned the lessons of the 1980s, when they took us into the exchange rate mechanism at the wrong exchange rate and caused enormous problems. We will make a decision on the single currency based on five economic tests, but we will not return to the situation to which the Conservatives brought us by running a dual inflation and exchange rate target. I should have thought that the hon. Gentleman would be sensible enough to realise that that is not the way forward.
Mr. Dale Campbell-Savours (Workington): While the rate of sterling is high, in some industries, such as the steel industry, it is also true that exports are growing by 8 per cent., as my right hon. Friend said yesterday. He did not labour that figure. Why are Britain's exports increasing on that scale at a time of high sterling?
Mr. Brown: Despite the difficulties with the exchange rate--I have always understood the resultant problems that many manufacturers face--manufacturing industry is responding and growing. It will grow next year. Exports have increased this year by 5 or 6 per cent., and they will grow by 6, 7 or 8 per cent. next year. Those are our projections based on the information that we hold. That is another example of how, despite the difficulties of the exchange rate, we are creating the stability in the economy that is necessary for investment and growth.
The contrast with the previous Government is all too clear to businesses. Under the Conservatives, with interest rates at an average of 11 per cent., interest rate costs would have been nearly £2 billion higher for business at this stage. Under Labour, average interest rates are 6 per cent.
Sir Peter Tapsell (Louth and Horncastle): Will the Chancellor confirm that, in anticipation of Britain joining the single European currency, the Treasury and the Bank of England have since 1 January 1999 bought large amounts of euros? It has been estimated that the operation losses so far amount to approximately £2,000 million, or treble the loss on the dome. Is the Chancellor in a position to tell us the official Government estimate of the losses on those euro operations?
Mr. Brown: I am sorry that the hon. Gentleman is so out of date because we publish the figures for the interventions in the exchange rate market and he can consult them. His figure is wrong. He should compare our sensible approach to such matters with the huge losses that the Conservative Government incurred when we had to leave the exchange rate mechanism and the shadow Chancellor was in the Treasury.
Mr. David Taylor (North-West Leicestershire): Despite the rampant and terminal europhobia that habitually grips the Conservative Benches, does not my right hon. Friend agree that the British economy diverges dramatically from the eurozone and that, without convergence, a common language, interstate transfers and mobility of labour, the prospect of joining the euro in the next decade is thankfully remote?
Mr. Brown: We have set out five economic tests, which will be assessed early in the next Parliament. However, the difference between me and the Conservative party is that I see the benefits in principle of joining the single currency, whereas Conservative Members are divided about whether they are against it in principle or simply against it in principle for one Parliament.
On 1 May 1999, the shadow Chancellor, the right hon. Member for Kensington and Chelsea (Mr. Portillo) said that a single currency would mean giving up the government of the UK. [Hon. Members: "Hear, hear."] No British Government can give up the government of the United Kingdom. That is impossible. The hon. Member for Buckingham (Mr. Bercow), who is a Front-Bench spokesman, agrees with the shadow Chancellor. When the right hon. Member for Kensington and Chelsea was asked the same question on "Breakfast with Frost" on 27 February, he said that he would not say that he was a never man. What sort of position does the Conservative Front Bench take?