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Mutual Societies

3. Mr. Peter L. Pike (Burnley): What recent discussions he has had with the Building Societies Association regarding mutuality. [101767]

The Economic Secretary to the Treasury (Miss Melanie Johnson): I had the pleasure of addressing the Building Societies Association annual lunch on 11 November. I have been engaged in regular correspondence with building societies, setting out the Government's position on a range of issues.

Mr. Pike: Although the measures that the Government have recently taken to protect building societies and the increasing number of people who sign motions are welcome, do my hon. Friend and the Government endorse the decision of members of the Leek United, who have clearly said no to predators and carpetbaggers? Does she agree that that shows that the Government and building societies believe that long-term advantages outweigh short-term cash in hand, and that there is a future for mutuality and building societies in the 21st century?

Miss Johnson: I thank my hon. Friend for his welcome for our moves to amend secondary legislation, and I emphasise that I share his view of the role that building societies play. We acknowledge the variety and choice that building societies bring to the savings and loans market. They enhance competition to the consumer's benefit. Smaller societies in particular can provide a regional focus and high-quality finance jobs in our regions. They often have a close understanding of their local markets, and we value their contribution to the UK economy.

Debt Relief

5. Mr. Andrew Reed (Loughborough): What discussions he has had since the Cologne summit with the IMF on debt relief for the world's poorest countries. [101769]

The Economic Secretary to the Treasury (Miss Melanie Johnson): My right hon. Friends the Chancellor and the Secretary of State for International Development wrote to the managing director of the International Monetary Fund and the president of the World Bank on 1 December to press for countries to be brought forward quickly under the new debt relief initiative agreed at this year's annual meetings. In addition, my right hon. Friend the Chancellor met the managing director of the IMF and the president of the World Bank on 7 December.

Mr. Reed: I thank my hon. Friend for that reply. While it is appreciated that there is a need to speed up the process, and especially the heavily indebted poor

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countries initiative, will she also ensure that, in future discussions, the measures are more closely linked to poverty reduction in the countries that receive the benefit? We can thus ensure that all moneys are well spent and attack the real problems of world poverty.

Miss Johnson: I thank my hon. Friend for his continued pressure on us to take more account of poverty. The Government are pursuing that at every opportunity. With the World Bank and the IMF, we have made sure that they have formed new joint working partnerships to flesh out the new poverty reduction strategies and to ensure that their focus is alleviating poverty in the affected countries.

Sir Sydney Chapman (Chipping Barnet): The Minister will recall the Chancellor proudly proclaiming at the Labour party conference that he would cancel third-world debt. Can she confirm whether that means 100 per cent. guaranteed cancellation or cancellation of only the debt accrued before the Paris Club decided to reschedule the debt of a particular country? If it means the latter, as many of us suspect, will she also confirm that, in some cases, only 40 per cent. of debt--and, for Uganda, only debt accrued up to 1981--would be cancelled?

Miss Johnson: The Chancellor said on 30 September that the UK is prepared, on a case-by-case basis, to go further than 90 per cent.--and possibly up to 100 per cent., if necessary--when debt relief would finance poverty relief--[Interruption.] For each individual country. The point of the figures that the hon. Gentleman mentioned is that we are writing off two thirds of the debt of the poorest countries under the definitions of the HIPC initiative. The Government are committed to that and a great deal of progress is being made in achieving those goals.

Mr. Roy Beggs (East Antrim): Since the Cologne summit, what conditions have been imposed and what monitoring has been done to ensure that those countries that benefit from debt relief are applying more resources to education and health care?

Miss Johnson: We have, as I said, made sure that there is a focus on poverty and that we address health issues. We expect a number of countries to be able to benefit shortly from the enhanced HIPC 2 programme and hope that Uganda, Mozambique, Bolivia and Mauritania will all be ready to do so soon. On 8 December, Honduras met the IMF board to open discussions on the process. There is much greater focus throughout on the programmes that the hon. Gentleman and I both want in place.

Mr. Nigel Beard (Bexleyheath and Crayford): Does my hon. Friend consider the powers and policy of the IMF adequate to help countries in financial crisis? Will she comment in particular on the recent statement by Mr. Larry Summers, the United States Treasury Secretary, that the IMF should confine itself to short-term loans and leave long-term loans to the private sector?

Miss Johnson: We have continued to press for greater transparency in matters with which the IMF deals. We support in particular Larry Summers's comments in relation to considering the establishment of a fundamentally new framework for the international

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community's efforts to combat poverty that will give the World Bank the lead and the IMF a more tightly focused role. We also believe, as he does, that, although macro- economic stability is necessary, it may be far from sufficient to create lasting and inclusive growth. There is a commitment to transparency, and we believe that there is no reason why the IMF's operational budget, for example, should not be published regularly. He and the UK Government share views on those moves and are looking to what would be the right future for the IMF.


6. Mr. James Clappison (Hertsmere): What was the proportion of gross domestic product represented by net taxes and social security contributions on (a) 1 May 1997 and (b) the latest date for which information is available. [101770]

10. Mr. Philip Hammond (Runnymede and Weybridge): In which quarters since May 1997 the percentage of GDP taken by the Government in tax over the previous 12 months has risen. [101774]

12. Mr. Graham Brady (Altrincham and Sale, West): In which quarters the percentage of gross domestic product taken by the Government in tax over the preceding 12 months has fallen since May 1997. [101776]

The Chief Secretary to the Treasury (Mr. Andrew Smith): Decisions on the public finances are taken on a financial year basis. Financial year figures for the tax-GDP ratio can be found in the pre-Budget report. They show that the tax-GDP ratio is lower this year than last. It will be lower in the two following years than last year. Under the previous Government's plans, those rates would have been higher than the latest projections, in this year and for the next two years.

Mr. Clappison: As the Minister is unable to provide the figures that were specifically requested in my question, may I put this to him? Will he simply say whether the tax burden is greater or lesser than when the Government came to office?

Mr. Smith: The pre-Budget report shows--[Hon. Members: "Answer."] The hon. Gentleman asked for figures. The pre-Budget report shows that the share of GDP going on tax this year is 37 per cent. Last year, it was 37.4 per cent; for next year the projection is 36.8 per cent. That shows a tax burden that is falling, not going up.

Mr. Hammond: As the right hon. Gentleman seems to be having some difficulty, let us deal with the matter in multiple-choice terms. Does he agree with the Chancellor, who said on Tuesday that the tax burden was increasing, or with the Prime Minister, who said on 24 November--this can be found in column 609 of Hansard--that it was decreasing?

Mr. Smith: My right hon. Friend the Chancellor did not say that the tax burden was increasing, because it is not increasing. I shall give the hon. Gentleman the figures again. They are 37.4 per cent. for last year, 37 per cent. for this year and 36.8 per cent. for next year. That is a tax burden that is decreasing, not increasing. Moreover, it is

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smaller this year, and will be smaller next year and the year after, than it would have been under the Conservatives.

Mr. Brady: The Chief Secretary really ought to come clean. The Chancellor made it clear on Tuesday that, since the Government had taken office, the tax burden had become larger than it was in 1997. Does the Chief Secretary agree with that? Will he now make it clear that it is the case?

Mr. Smith: I will take no lectures on coming clean from Opposition Members who broke the promises that they had made about tax when they were in government. We are keeping each and every promise that we made about tax at the election.

Mr. Dale Campbell-Savours (Workington): I had a very interesting meeting with some business men last week. They told me--[Interruption.] The Tories would do well to listen. They told me that they wanted the tax burden to increase. [Laughter.] Yes, and they are telling the Tories the same. They say that that would reduce demand, and would take the pressure off interest rates. Is that not an interesting case which business men are now making?

Mr. Smith: I am sorry to disappoint my hon. Friend, but I cannot assure him--or, through him, the business people to whom he has been talking--that the tax burden is increasing. I have already given the House the figures, which show that the tax burden is decreasing.

I should have expected those business people to welcome particularly the cuts that we have made in corporation tax, which mean that our rate is the lowest in the industrialised world.

Ms Rosie Winterton (Doncaster, Central): Is my right hon. Friend aware that organisations such as the Royal Automobile Club and the Automobile Association were extremely critical of the tax burden placed on motorists by the Tory Government, who introduced the fuel duty escalator? Is he aware that those organisations have welcomed the hypothecation of future real-terms revenue increases in fuel duty? Will he ensure that there is a continuing dialogue with organisations such as the RAC, which is very supportive of the Government's choice of priorities for the purpose of spending the extra revenue?

Mr. Smith: Yes, indeed. My hon. Friend is right: the AA, the RAC and other organisations--and motorists in general--were very concerned about the continuation of the fuel duty escalator introduced by the last Government, and have welcomed my right hon. Friend the Chancellor's decision.

Mr. Owen Paterson (North Shropshire): Why is it going up?

Mr. Smith: I am telling the House about my right hon. Friend's decision to end the escalator introduced by the hon. Gentleman's party. As my hon. Friend the Member for Doncaster, Central (Ms Winterton) said, that decision will be greatly appreciated by motoring organisations, by motorists and, indeed, by the general public, who will--

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as she says--benefit from the hypothecation of revenues over and above inflation for public transport and improvements in our road network.

Yes, there will be continuing dialogue on these matters.

Mr. Geraint Davies (Croydon, Central): Does my right hon. Friend agree that the long-term tax reductions that the Government are introducing are based not just on cutting headline income tax and corporation tax, which they are doing, but on the fundamentals of lower interest rates, lower inflation rates and job security? Indeed, an extra 750,000 people are in jobs. A return to the boom and bust of the Jurassic park party opposite would simply inflict an extra 22 Tory taxes on the British people.

Mr. Smith: Yes indeed. The sensible and sound policies that we are following on fiscal matters complement our decisions to put a sound monetary framework in place and our measures to raise productivity, to equip our country with skills and to ensure that we are more competitive in future. My hon. Friend is right. The contrast could not be clearer than that between the Conservative party, which imposed 22 tax rises and broke its promises to the British people, and the Labour party, which has kept and is keeping each and every tax promise that it made on tax, as on everything else.

Mr. Francis Maude (Horsham): It is scarcely credible that, even after the Chancellor admitted on Tuesday that the tax burden has risen since Labour came into office, the Chief Secretary is still arguing the toss. I remind him that the Government's own figures show that the tax burden was at 35.6 per cent. when they took office. It has gone up in every single quarter since then and is 37.7 per cent. now. Where does that leave the Prime Minister's pre-election promise that Labour had

Does he agree with the Prime Minister's official spokesman, who is quoted in today's press as saying that getting at the truth on the tax burden is just a "game"?

Mr. Smith: I am sorry, but the right hon. Gentleman has missed again. My right hon. Friend the Chancellor did not say that the tax burden was rising; he said that it was falling. He said that because it is.

The right hon. Gentleman refers to promises made before the general election. I will tell him and the House what we promised. We promised not to raise the basic or top rates of income tax throughout the next Parliament and we have not. We said that our objective was a lower starting rate of income tax of 10p in the pound, a promise kept; we have delivered it.

We said that we would cut VAT on fuel to 5 per cent. when Conservative Members wanted to make it higher. We kept that promise and cut VAT on fuel. We said that we would not extend VAT to fuel, children's clothes, books, newspapers and public transport. We have not and we will not. We said that the welfare to work programme would be funded by a windfall levy on the excess profits of the privatised utilities. It was much derided and opposed by Conservative Members, but that is the policy that has delivered the new deal and cut youth unemployment by more than 60 per cent. and long-term

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unemployment by 50 per cent. The contrast could not be clearer between the party that keeps its promises on tax and the party that broke its promises.

Mr. Maude: The Chief Secretary still does not get it. The Prime Minister said before the election:

Was that a promise? What does the Chief Secretary understand that to have meant? The fact is that Labour got elected by promising not to increase taxes at all. Once elected, almost the first thing it did was to raise taxes massively by stealth. In every quarter since the election, the tax burden has increased. Ministers do not just deny it; they claim the opposite--that taxes are falling. Now that the Chancellor has finally admitted that the tax burden is remorselessly rising, what does he say? He says that Labour did not make that promise in the first place. When will we eventually see the end to the great Labour lie on tax?

Mr. Smith: I can only repeat: the Chancellor did not say that the tax burden is increasing because it is not. It is going down. I can give the figures again: 37.4 per cent. last year, 37 per cent. this year, 36.8 per cent. next year. More importantly for families and the taxes that they are paying, as a consequence of our tax changes, the average household is £380 a year better off and families with children are £740 a year better off--benefits which the Conservative party would clearly take away from them.

Mr. Roger Casale (Wimbledon): Does my right hon. Friend agree that Labour Members have no lessons to learn from Conservative Members when it comes to setting tax levels? We keep our promises--on introducing the working families tax credit, lowering the starting tax rate by 1p, and introducing the 10p tax rate--whereas, in office, Conservative Members broke their promises, raising tax not once, not twice, but 22 times.

Mr. Smith: Yes. The electorate will no more forget those 22 Tory tax rises than they will the boom and bust that went with them and that inflicted such incalculable damage on our economy.

Mr. Matthew Taylor (Truro and St. Austell): The Prime Minister yesterday admitted that, to overcome the Conservative deficit that the Government had inherited, tax had been increased in the their first two years in office, and promised that taxes would start to decrease. Does the Minister feel entirely comfortable with cutting 1p off income tax next year, even though the Secretary of State for Health has had to abandon waiting list targets, and out-patient waiting lists have not only doubled but, on current spending plans, are set to increase further?

Mr. Smith: Very comfortable--because it is absolutely in line with the promises that we made at the general election and not least because we are investing £21 billion extra in health.

Mr. David Chaytor (Bury, North): Does not the obsession with the overall tax take conceal the very

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important matter of tax distribution? Is it not indisputable that, since 1997, hundreds of thousands of low-income families have been taken out of the tax bracket entirely?

Mr. Smith: Yes, indeed. Furthermore, 1.4 million households are benefiting, by an average £24 a week, from the working families tax credit--which is a real advantage and a tax cut that Conservative Members would remove from them.

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