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House of Commons

Thursday 15 July 2004

The House met at half-past Eleven o'clock

PRAYERS

[Mr. Speaker in the Chair]

Oral Answers to Questions

TREASURY

The Chancellor of the Exchequer was asked—

Income Tax

1. Mr. David Amess (Southend, West) (Con): What representations he has received regarding future levels of income tax. [184070]

The Paymaster General (Dawn Primarolo): The Government have received a number of representations on the level of income tax, and we have committed ourselves not to raise the basic or top rates of income tax within the lifetime of this Parliament.

May I draw the House's attention to an announcement in a written statement that I made earlier this morning? The Government will legislate to ensure that payments by the Thalidomide Trust to people affected by the drug thalidomide will in future be exempt from income tax. That change will be worth about £1 million a year—up to £3,000 for each beneficiary of the trust. I know that Members on both sides of the House will welcome the announcement.

Mr. Amess: It is wonderful news that the Minister has accepted the suggestion of my hon. Friend the Member for Arundel and South Downs (Mr. Flight) and is helping thalidomide victims rather than wasting taxpayers' money looking for weapons of mass destruction.

Does the Minister accept that since 1997 there have been 66 tax rises and that each householder is paying an extra £5,000 a year? As she is getting advice from the Chancellor, is he authorising her to tell the House that those tax rises by stealth will continue?

Dawn Primarolo: I am sorry that the hon. Gentleman spoiled the welcome given to the change for the beneficiaries of the Thalidomide Trust. For the past 30 years, as he well knows, Governments of all political persuasions have struggled to settle that matter and it should be welcome that a restructuring of the trust will ensure that income tax is not paid on benefits from it.

The hon. Gentleman is completely wrong. If he looks at the facts, he will see that the Government have cut income tax and introduced the 10p rate and that, on
 
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average, households are £850 a year better off in real terms, that families with children are, on average, £1,350 a year better off in real terms and that pensioners are better off in real terms. By October 2004 about 18.3 million households will have gained as a result of the personal tax and benefit reforms that the Government have undertaken.

Mr. Bill O'Brien (Normanton) (Lab): I thank my right hon. Friend for her statement. When considering further tax provisions, will she give an assurance that my right hon. Friend the Chancellor will not move from his programme for providing education, health, local government, transport, defence and all the other services on which people rely?

Dawn Primarolo: Of course I can give my hon. Friend that assurance. He will have noticed both from the 2004 Budget statement and from the spending review announcement made earlier this week that the Government's finances are sound and that the forecast is for spending more on public services over the next period—on police, child care, more nurses and teachers—and for investment in housing, transport and our security. Those are all things that the Government are committed to, but the Conservatives will cut them.

Mr. David Ruffley (Bury St. Edmunds) (Con): The right hon. Lady will know that in 1997 2.1 million people paid top-rate tax. As a result of the Chancellor's tax policies, last year 3.27 million people paid top-rate tax. Will she give us her estimate of the number of people who will pay top-rate tax in the current tax year?

Dawn Primarolo: As the hon. Gentleman knows from his constituency experience, unemployment is down—[Interruption.] Just a moment. Unemployment in his constituency is down by 83 per cent. During the period 1997–98 to 2002–03, average earnings went up by 25 per cent. while prices went up by only 12 per cent. Employment has increased by nearly 1.8 million since the spring of 1997. The number of people in work is at a record level, and that is clearly reflected in the tax system; more people are working and earning more money and therefore contributing to public services.

Mr. Oliver Letwin (West Dorset) (Con): It is clear that the Paymaster General has not yet heard of the word "threshold".

On behalf of the Opposition, I welcome the right hon. Lady's welcome announcement in response to the pleas of my hon. Friend the Member for Arundel and South Downs (Mr. Flight) about tax relief for thalidomide victims.

Derek Scott, a former adviser to the Prime Minister, has told us that he would not be surprised if there were tax rises under a third-term Labour Government. Will the Paymaster General give the House an assurance that if the Labour Government are re-elected and if the Chancellor is either the next Chancellor or Prime Minister, there will be no increase in either income tax or national insurance?

Dawn Primarolo: I am perfectly happy to share with all Members our pleasure that the proposals with regard to the Thalidomide Trust have now been sorted out, but
 
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the right hon. Gentleman really should not keep trying to claim as his original idea every good thing that the Government do. As he well knows, the Government's spending commitments are properly financed over the spending round and in the statements made in the Budget 2004. As I made clear in my opening remarks, the Government are committed in the lifetime of this Parliament not to raise either the basic or the higher rate of tax. Indeed, we have been reducing the tax burden, particularly on those who are the lowest paid.

HIPC Initiative

2. Julia Drown (South Swindon) (Lab): Whether it is his policy to support a write-off of the UK's share of the multilateral debts owed by heavily indebted poor countries. [184071]

4. Mr. Mark Lazarowicz (Edinburgh, North and Leith) (Lab/Co-op): What his policy is on writing off the UK's share of the multilateral debts owed by heavily indebted poor countries. [184073]

The Chancellor of the Exchequer (Mr. Gordon Brown): The UK believes that more must be done to ensure debt sustainability in the world's poorest countries. We are proposing that the international community review further debt relief for the poorest countries, including making better use of IMF gold using a revaluation or off-market transactions, so that, to match bilateral debt relief, which we provide at up to 100 per cent., we can begin to consider how we provide multilateral debt relief of up to 100 per cent. as well.

Ms Drown: I welcome the Chancellor's response and his commitment to help the poorest countries in the world, which is shown by his already having committed this country to almost doubling overseas aid and, on Monday, by being the first Chancellor to set a date by which he hopes that this country will spend the internationally agreed target of 0.7 per cent. of our income on international aid. Will he comment on what that might mean for the poorest people of the world and contrast that with what might happen if the Opposition, who plan to cut overseas aid by £800 million, were in charge?

Mr. Speaker: Order. The hon. Lady cannot ask that one.

Mr. Brown: My hon. Friend is absolutely right on all those points. First, the additional money that we are providing in overseas development aid, which I was able to announce on Monday, will increase the percentage of GDP that is spent on overseas aid from 0.26 per cent. in 1997—it had been reduced over the previous 20 years—to 0.47 per cent. in 2007–08, with our objective of moving towards 0.7 per cent. by 2013. We have made decisions in this spending round to provide the necessary money and debt relief, so that we can achieve that figure by 2007–08. I wish that there was an all-party consensus on providing that level of development aid.

Mr. Lazarowicz: Like my hon. Friend the Member for South Swindon (Ms Drown), I welcome the announcement made on Monday about the increase in overseas aid. I have already been contacted by a lot of my
 
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constituents and organisations in my area who have been calling for that increase, and I am sure that my colleagues have had a similar response. Does my right hon. Friend consider that it might now be appropriate for the many organisations that have been campaigning on this issue to direct more efforts, both nationally and perhaps internationally, to get the richest countries in the world to back the proposals for the international finance facility, which could have a very important role to play in the write-off of debt owed by the poorest countries?

Mr. Brown: I am grateful to my hon. Friend and my hon. Friend the Member for South Swindon (Ms Drown) for their interest and the work that they have done in their constituencies. It is important to recognise that, even if we are able to increase our bilateral aid very substantially, the whole world community will need to provide far more development aid in the next 10 years if we are to have a chance of meeting our millennium development goals. That is why, last Friday, I was very happy to be able to present our proposals in Rome to a group of the Churches, backed up by representatives of countries from all over the world. We are winning support for the international finance facility. It would be unfortunate, however, if the Conservative party, which supported the international finance facility, were to continue with the policy that it has now adopted to cut overseas development aid. I hope that the Conservatives will cease that policy and start to move towards a sensible policy, so that we can promote action together in the international community.

Sir Nicholas Winterton (Macclesfield) (Con): I am sure that the Chancellor would accept that it is important that we should seek to bring good governance and responsibility to the heavily indebted poor countries, but I am sure that he would also agree that it is absolutely crazy that the financial aid that should be given to those poor countries is spent only on repaying the debt that they already owe. Will he accept therefore that there is, in fact, widespread support in all parts of the House, including the Conservative and Unionist party, for debt to be taken away from those countries, so that the money that they are given can bring about improvements in education, health and other matters?

Mr. Brown: I am grateful to the hon. Gentleman for the enlightened view that is coming from at least part of the Conservative Back Benches on the matter. It is important to realise that we must move forward with debt relief if we are to give the countries in which he is interested the chance of development over the next few years. As we have a 100 per cent. write-off of bilateral aid, it is possible to cut the debt bill of those countries. However, while only 50 per cent. of multilateral aid is being written off, they have substantial debts to pay. The results can be seen in countries such as Uganda, which has moved to class sizes of 50 compared with 100. In other African countries, 1 million children got primary education in one day as a result of debt relief, which released resources for education. However, it was unfortunate that the Conservative party issued a document after Monday's spending statement saying:

"Are you going to cut aid to developing countries? This is another example of big Government."

It must think again.
 
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Mr. Andrew Turner (Isle of Wight) (Con): When a Government spokesman describes conditions in Kenya as a "gigantic looting spree", points out that corruption under the new Government may be worth $188 million and says that if Kenya's governance was less corrupt it could afford to pay its own development budget rather than going to donors cap in hand, does that form part of the Government's strategy to ensure that poor people in this country are not paying for rich people in developing countries?

Mr. Brown: We heard an enlightened view from the hon. Member for Macclesfield (Sir Nicholas Winterton) earlier and now we have heard a completely retrograde view. We have taken action with other countries to ensure that there is transparency and to tackle corruption. There is no stronger advocate of tackling corruption than the Prime Minister, and work is being done by the Commission for Africa.

It is absolutely ludicrous to give people the impression that Africa's problems can be solved by cutting international aid to the continent. When the Conservatives started in office, $33 per head was spent on aid to sub-Saharan Africa, but the figure was $20 per head by the time that they finished—the aid halved. Some 70 million children in Africa have no schools to go to. The AIDS epidemic is affecting 24 million people. Infant mortality rates are such that 30,000 children die each day. I hope that the hon. Gentleman will think again about the idea that those problems could be solved without international development aid.

Mr. Bill Tynan (Hamilton, South) (Lab): The whole House will congratulate the Chancellor on his commitment to eliminate global poverty. Twenty-seven HIPC countries currently qualify for assistance, which leaves 15 other countries, the people of which are suffering from abject poverty and a lack of education and clean water. Will the international community get together to consider what can be done? I understand the problems due to civil wars in some of the countries, and that some are ruled by military juntas, but their populations have no influence on that, so it is important to give them some hope. Will the international community do something together to alleviate their problems?

Mr. Brown: I am grateful to my hon. Friend, who takes a great interest in the matter. I announced on Monday that the International Development Secretary had agreed that £150 million of aid would be set aside for the needs of Sudan. There is abject poverty, and conditions in many places are worse than those in 1985, when Live Aid started. However, we also said that we could not provide the money until there was peace and the issues of conflict had been dealt with. Of course, there must be transparency and money must be able to flow to the poorest people, but the need for the money is obvious. On Sunday, the shadow International Development Secretary said that he also wanted to make a commitment to 0.7 per cent., but said:

"It is for Oliver Letwin, the shadow Chancellor, to make a judgment."

How can the Conservative party claim to support international development aid if it would cut it by hundreds of millions of pounds? How can it claim to support the third world when it would cut aid massively?
 
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