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Hon. Members: More!

Mr. Deputy Speaker (Sir Alan Haselhurst): Order.

1.38 pm

Mr. Charles Kennedy (Ross, Skye and Inverness, West) (LD): The words may be "Bring it on," but after examining the detail of Conservative policy, I will be amazed if the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) can pull it off, as far as the British public are concerned, over coming weeks.

I want to acknowledge that the Chancellor's Budget statement is taking place against a fortunate backdrop for our country. Ours is one of the largest and most successful economies in the world. We are generally doing well. Of course part of the reason for that, on which I know the Chancellor now agrees, is that when he first came to his high office, he implemented Liberal Democrat policy on giving operational independence to the Bank of England. The difference between the Chancellor and ourselves, of course, was that he did not say it and he did it, whereas we said it and would have done it had we been given the opportunity to do so.

The Chancellor rightly speaks about the need for social justice in our country and for our tax and expenditure policies to reflect that ambition. This is his ninth Budget. Given all the responsibility and, along with that, all the opportunity that his task involves—buttressed by a fairly stable economy and by a three-figure majority, which means a stable Government as well—how can it be right, in terms of social justice, that nine Budgets on, the poorest 20 per cent. in society are still paying a higher proportion of their income in tax than the richest 20 per cent? It cannot be right—and this from a Chancellor who, rightly, trumpets the cause of social justice.

I shall deal with the Chancellor's specific announcements shortly, but why are so many pensioners still receiving what are officially classed as poverty-level pensions? The Prime Minister—I mean the Chancellor, perhaps to become Prime Minister; who knows?—has referred to international experience of late. He has said that 4 million graduates are emerging
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from China and India each year, and that our country must be alert to that competitive challenge. How, then, can it make sense to burden would-be graduates and students in our countries with massive student debts, tuition fees and top-up fees? And then there is the council tax.

The council tax is patently unfair. It is worth asking ourselves about it, because there will be a real choice at the general election—between two parties that accept the status quo, and another that says "Scrap the council tax: it is regressive, unfair and discriminatory." What has the Chancellor been able to announce today? What, indeed, has the leader of the Conservative party been able to announce? There has been something of a Dutch auction between them on council tax. The Chancellor talks of a £200 refund for all pensioner households, for one year; the Conservatives talk of £500. Neither has addressed the ticking bomb that is coming down the track, in the form of council tax revaluation. If recent experience in Wales is anything to go by, 7 million households in England alone will bear a significantly heavier council tax burden.

Mr. Ken Purchase (Wolverhampton, North-East) (Lab/Co-op): Will the right hon. Gentleman give way?

Mr. Kennedy: I will not, if the hon. Gentleman does not mind.

We have that looming revaluation, we have the sticking plaster that the Chancellor is applying, and we have the slightly larger amount of sticking plaster of which the leader of the Conservative party speaks. Surely to goodness, the sensible course is to adopt a principle of local taxation based on ability to pay. That means a local income tax. It works well in other countries, it is fair—much fairer than what we currently have—and it would free us from the ridiculous Dutch auction that is taking place between the other parties.

Mr. Andrew Turner (Isle of Wight) (Con): Will the right hon. Gentleman give way?

Mr. Kennedy: No, I will not.

The Chancellor mentioned the Institute for Fiscal Studies. The IFS has examined our proposals for a local income tax. It says that half those affected would pay less, the contributions of a quarter would be unaffected, and, yes, the remaining quarter would contribute that bit more, but that bit more would be based on the domestic household income of those people. It is a good principle. It is a principle of fairness, and we shall be very proud indeed to present it at the forthcoming general election.

According to the IFS, a typical family would be £450 a year better off, 50 per cent. of pensioners would pay no local tax, and more than 3 million pensioners would be better off by more than £500 a year—every year, year on year. We are not talking about a one-year quick fix for the purposes of a general election, like the one of which we have heard this afternoon.

As for the position of pensioners generally, we are being very straightforward and up front. According to all the indications and studies, because of greater
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longevity the oldest pensioners tend to be the poorest. That is why we argue that the over-75s should be a priority, and that they should receive £100 more per month in basic state pension. That will inevitably benefit women in particular, as they live longer than men.

That brings me to another important issue, which returns us to the theme of social justice. It is an absolute scandal that, in this day and age, women are still so discriminated against by the operation of the basic state pension. Why are they discriminated against? Because they take time out to start a family or bring up children, or perhaps take time out from their careers and working patterns to care for elderly relatives. In those circumstances, they do not maintain their national insurance contributions. When they reach pensionable age, they find that because their contributions are not complete they are not eligible for the same level of direct return from the state as men. That is iniquitous, which is why we argue—again, in line with international experience—that instead of basing women's entitlement to a pension on national insurance contributions, we should base it on residency. The system works well elsewhere, and there is no reason why it should not work well in Britain. Where there is a will, there is a way. We believe that such a system would end, at a stroke, the fundamental inequity in the present arrangements for women, and it is another proposal that we will put at the forefront of the coming debate at the general election.

There will be a third and, I think, very telling debate at the election on the back of this Budget. The Conservatives have their views, to which they are thoroughly entitled, and the Chancellor has his policies, which he has recommended to us today. We have a different take on things. If we want to tackle injustice and inequality—if we want to define priorities, and make the tough choices that go with deciding those priorities—we must be straight with people. We must say what our proposals will cost, and where the money will come from.

I am not interested in a general election debate that is predicated on nonsense that people do not believe in the light of their daily experience: "Vote for us and your taxes can go down, the national debt can be reduced, spending can go up, and the sun will shine for 24 hours a day." People are not stupid about this sort of thing. What they do want to know is what our priorities are. I have mentioned one of them: getting rid of the council tax and replacing it with a local income tax. I have mentioned another: alleviating the burden of student debt that currently afflicts far too many of our young people. A third is, of course, the introduction of free long-term personal care for the elderly. But all that bears a price tag. Where will the money come from?

According to Government figures, if every pound paid by those earning more than £100,000 a year and paying the top rate of income tax—the 1 per cent. top earners in the country—was taxed at 50p rather than 40p above that £100,000 level, enough money would be generated to enable a Government to get rid of the council tax and introduce a fairer local tax, to end the imposition of student debt that results from top-up and tuition fees, and to legislate for the introduction of free
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long-term personal care for the elderly. We have done that successfully in Scotland, where, ironically, we have been working with the Labour party—

John Barrett (Edinburgh, West) (LD): Dragging the Labour party along.

Mr. Kennedy: I prefer to be more generous. I am in a generous spirit this afternoon.

That is who will pay, that is what it will cost and that is what people will get—and that is the direct, straightforward, honest approach that the Liberal Democrats will present at the general election. I believe that we will find, as we have indeed found in recent years, a very positive and supportive echo in favour of that argument.

We have identified those areas in which we would pursue a different agenda, on a different financial basis, from the Government of the day. But I should point out that the entire agenda that the Chancellor has just set out is influenced by the fact that, at the last general election, he was very careful to say that, if re-elected, a Labour Government would not raise income tax. They did not, but what did they do? They raised national insurance contributions, and for most individuals, families and households, that adds up to exactly the same thing. This Labour Government wonder why people get cynical about politicians, yet they give one impression before an election and do exactly the opposite afterwards. Well, we are not in that business.

In light of what the Chancellor has said today, and particularly given the imminence of the election, he should be prepared to open his books to the National Audit Office, so that it can examine the assumptions underpinning his forecasts. He made some allusion to that, but interestingly, no such thing is going to happen until the end of this calendar year. I wonder why. The Chancellor talks about the savings that can be achieved in central Government—we agree that such savings should be achieved—but how can we properly identify them if the NAO does not have such access, along with the right to publish the findings of its inquiry into the Government's behaviour as a whole?

I turn to my second point about the overall context of the Chancellor's speech. There was a very revealing sin of omission, save for one passing reference, in that it is now perfectly clear that the environment does not loom large in this Government's overall economic thinking. We will argue at the coming election that the environment should be factored into each and every one of the Government's public policy decisions. That process has to begin with the Treasury itself, but it is clear that that is not happening.

There will be clear choices and competing priorities before the country at the forthcoming general election. I want to, and we will, go into that election arguing for the principle of social justice, with which the Chancellor would agree, but based on a transparent tax system and fairness in terms of the priorities to which such proceeds should be devoted. That is a good story to tell, and I am looking forward with enthusiasm to telling it. As for the Chancellor and the leader of the Conservatives, they can carry on being two ships that pass in the night; the Liberal Democrats will address the agenda that matters most to people.
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1.53 pm

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