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Taxation

5. Mr. Jonathan Djanogly (Huntingdon) (Con): What assessment he has made of the influence of levels of taxation on the state of the economy. [197388]

The Financial Secretary to the Treasury (Mr. Stephen Timms): The level of taxation is one of a number of factors influencing the economy. The Government's approach balances finance to improve public services with fairness and sustainable growth, and our tax policies have been successful in delivering stability with strong growth and low inflation.

Mr. Djanogly: After 66 tax rises, equivalent to a 16.5p increase in the basic rate of income tax, together with a huge increase in public borrowing, when will the Government come clean and advise the British people by how much they will have to increase tax to bridge the growing black hole between their income and their spending plans?

Mr. Timms: The hon. Gentleman's figures are quite wrong. On the basis that he uses, there have been 200 tax cuts since 1997, as well. The fact is that there has been a remarkable transformation in the British economy since 1997. Between 1979 and 1997, the UK was the least stable of all the G7 countries except for Canada. Since 1997, we have been the most stable of all—bar none. That is a remarkable transformation and the best foundation for national prosperity and improving public services, and our tax policy has helped to deliver that remarkable improvement.

Mr. Stephen McCabe (Birmingham, Hall Green) (Lab): What kind of special alchemy does my hon. Friend think might be needed to maintain the economy if one were to deliver tax allowance increases for specific groups at a cost of about £7 billion, as I saw in one recent tax option paper, and simultaneously deflate the public economy by imposing £20 billion-worth of cuts?

Mr. Timms: My hon. Friend makes a telling point. The fact is, of course, that the Conservative party's sums simply do not add up. What is important for everybody in the UK is that we maintain the remarkable record of stability and growth that we have achieved since 1997.

Gregory Barker (Bexhill and Battle) (Con): The Governor of the Bank of England and his committee are now forecasting significantly lower growth next year than the Chancellor. What assessment has the Treasury made of those revised-downwards growth forecasts and what impact will that have on tax take? Will we have to raise taxes or are the Government proposing to cut spending?

Mr. Timms: I quote to the hon. Gentleman exactly what the Governor said. He said that over the past year:


 
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On the latest figures, business investment is up by 5.9 per cent. in the second quarter of this year, the fifth consecutive quarter of expanding investment. The record is very, very good.

Dr. Brian Iddon (Bolton, South-East) (Lab): Is not taxation partly about investing in Britain's future, and nowhere more so than in the discovery of new products via investment in science, engineering and technology? Is that not what the Government are doing, and is that not good for the economy?

Mr. Timms: It is extremely good for the economy. We have a 10-year framework for science and innovation, and there have been improvements through the research and development tax credit, for which there has been a very large take-up already. But the key thing is that the stability that has been achieved since 1997 provides a sound basis for investments in innovation, in technology and right across the economy, and that is what puts us in such a good position.

Mr. Oliver Letwin (West Dorset) (Con): My hon. Friend the Member for Huntingdon (Mr. Djanogly) asked the Financial Secretary a question, which was, by how much will taxes have to rise if Labour is re-elected? Could he now answer that question?

Mr. Timms: Tax as a proportion of GDP today, of course, is significantly less than it was throughout the 1980s. Perhaps I can remind the right hon. Gentleman what he said in his speech to the Conservative party conference:

That is a mistake that we are not going to make.

Mr. Letwin: The Financial Secretary has given us a marvellous exposition of how to say nothing in a number of words. He must face the fact that all the respected international and national independent economic commentators—the International Monetary Fund, the Organisation for Economic Co-operation and Development, the Institute for Fiscal Studies, the Item Club, the National Institute of Economic and Social Research and the Centre for Economic and Business Research—are all saying that, given the black hole in the Chancellor's public finances and his spending plans, if Labour is re-elected, taxes will have to rise. Can the Financial Secretary tell us by how much?

Mr. Timms: I can tell the right hon. Gentleman that we remain on track to meet our strict fiscal rules. That is the basis on which the economy is being managed, and our forecasts will be updated at the time of the pre-Budget report, on the date that my right hon. Friend the Chancellor announced earlier.

International Finance Facility

6. James Purnell (Stalybridge and Hyde) (Lab): What recent discussions he has had with his G8 colleagues on using the international finance facility to meet the millennium development goals. [197389]
 
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The Chancellor of the Exchequer (Mr. Gordon Brown): In recent days I have talked to Finance Ministers in Europe and America about our proposed international finance facility. I shall raise the matter at European and G20 meetings next week. Our aim is to secure progress on both debt relief and finance for development during our presidency of the G7 in 2005.

James Purnell: The non-governmental organisations are generally complimentary about the Government's record on aid, debt and trade, but there is an emerging worry about the European Union's attitude to the economic partnership agreements that it is negotiating. The NGOs worry that some of the issues that we have taken out of the Doha round, such as the Singapore issues, are being reintroduced by the back door. Does my right hon. Friend share that worry, and does he believe that we should address it in our presidency of the EU next year?

Mr. Brown: I think it is important, as our presidency of the EU will focus, as will Britain's G7 presidency, on getting an agreement with the World Trade Organisation, and we hope that will happen during the course of next year. That agreement would open up huge trading opportunities for many parts of the world, including Africa. We are also concerned—I think this is the gist of my hon. Friend's question as well—that African countries should have the capacity to benefit from an opening up of trade, and we will deal with the problems of the most vulnerable if trade is more open in the future. It is these two issues that our proposed international finance facility is able to address; in other words, if we are to make an impact on these problems, we will need substantially more resources.

Mr. Andy Reed (Loughborough) (Lab/Co-op): I know that my right hon. Friend the Chancellor has made great progress on the international finance facility, when one thinks that only 18 months ago no other country had signed up to the principle. On the basis of the 40 countries that have already said that they will support it, how much does he feel that he now has in the bag of the £100 billion that he expects? Will he set a timetable for reaching a final decision so that the international finance facility can be up and running and we will start to see some benefit from it?

Mr. Brown: I applaud my hon. Friend for the work that he has done in promoting these issues throughout the country. It is important to recognise not only that support is growing for the international finance facility as a proposal but that five countries in the past year have committed themselves to reaching 0.7 per cent. for development aid over the next few years. Substantial progress is now being made in discussions about multilateral debt relief as a result of pressure from people in this country such as the Churches, the non-governmental organisations and others. I believe that 2005 can be an important year when we will make a breakthrough. Many countries support the proposal. We also propose a pilot of the international finance facility with the vaccination and immunisation fund so that it can front-load its effort to save lives by making vaccination possible. I believe that progress is being made, but next year when so many people will be active—there will be a United Nations summit as well as G7 meetings—will be an important year for all of us.
 
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