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The key to this year's Budget is the remarkable stability that we have seen in the British economy since 1997. In the 18 years from 1979 to 1997, the UK had the least stable economy in the G7, with the single exception of Canada. Since 1997, the UK has had the most stable economy in the G7, bar none. That has been a remarkable transformation, benefiting every aspect of Britain's economy and of our society.
National debt is down. Since 1997, no G7 country has had lower debts and deficits than we have had. Inflation since 1997 has been half on average what it was before. Interest rates and mortgage rates have been halved. Disposable income has grown faster than it did under the previous Government. Unemployment is the lowest that it has been for a generation and there are 2 million more people in work. Every week, another 125,000 men and women find new jobs, and an additional 50,000 new vacancies are advertised.
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Mr. Timms: There was a period of growth under the previous Government. What is remarkable, however, and what was never achieved under any Conservative Government, was the securing of 50 consecutive quarters of growth. It is the transformation from the short booms and then the busts that characterised the previous Government to this long period of stability and steady growth that has been so remarkable and so important and valuable to our economy and society.
The economy grew by over 3 per cent. last year for the second year running, hitting, incidentally, precisely the forecast that my right hon. Friend the Chancellor had made and for which he was attacked by Opposition Members for being far too optimistic. We have had some discussion today about forecasts and projections. My right hon. Friend was entirely vindicated over that issue and will be over the other matters that we have discussed as well.
Mr. Dorrell: The hon. Gentleman draws attention to the Chancellor's record in forecasting growth in the economy, and he is right to say that the Chancellor's record in forecasting the growth of GDP is not bad. Would he like to address his attention to the Chancellor's record in forecasting the public sector deficit, which is under his direct control, and would he remind the House that in every year of the last five, the Chancellor has projected that that will turn down, and none of those five forecasts has been correct?
Mr. Timms: I am grateful to the right hon. Gentleman for rightly paying tribute to my right hon. Friend for the accuracy of his forecasts on growth. We have not heard much about that today from Opposition Members and one understands why, but it is important and right to put that on the record.
As to the other issues that the right hon. Gentleman raises, as he knows, my right hon. Friend the Chancellor set out in 1997 the fiscal rules, including the golden rule and the sustainable investment rule, and we have kept to them. We have set out the figures in the Red Book showing that we will keep to those rules on the basis of cautious assumptions. That is the basis on which the economy has been managed and on which this new stability has so successfully been built. It is the basis on which we need to continue to go forward and maintain this new, transformed record of stability and growth in the economy.
Mr. Dorrell: The Financial Secretary has shifted the terms of the argument. He was inviting the House to applaud the Chancellor's forecasting record. When one looks at the Chancellor's record in forecasting the public sector deficit, one sees that he has got it catastrophically wrong, with the result that we are landed with more debt and more interest costs going forward than he planned or promised in his last Budget before the previous general election.
The national debt is down and we have the lowest debt in the whole G7. There has been an
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extraordinary record of success under this Government and Chancellor. It is essential for the future that we lock in that record of stability that has been so important and valuable. The new confidence that has come from that stability has been of immense importance. We have 300,000 more business in the UK than in 1997, and every week there are 4,000 more. There has been a 50 per cent. increase in net household wealth and 1.5 million more people own their homes. Those are just some of the gains from the transformation that has occurred in the British economy since 1997. We and the country know that our first priority must be to hold on to that prize of stability, and not to put it at risk by policy lurches or by £35 billion-worth of reductions in public spending commitments. Stability has been a massive prize for Britain, and the Bill helps to ensure that it will be maintained and locked in for the future.
Mr. Jack: Let me take the Financial Secretary back to the point made by my right hon. Friend the Member for Charnwood (Mr. Dorrell). The Financial Secretary has not answered the central question as to what factors in the forecasting performance of the Chancellor have led to the fact that, since the 200102 financial year, the deficit has grown by about two and a half times in real terms compared with the original forecast figures. At a time when the economy has been growing at such a rate, we should be accumulating balances, not increasing deficits. He talks about the structural soundness of the economy, so will he explain why the economy is not doing what it should do?
Mr. Timms: The right hon. Gentleman is focusing on the difference between two very large numbers. The fact is that we have the lowest debt in the whole G7 and a remarkably successful record. The IMF has been referred to, and it has repeated that point recently. We must now ensure that we maintain that record of stability, which has been so valuable to us.
The Bill builds on Britain's new-found economic stability. It helps to prepare us for the challenges of the future, supports innovation and investment in new technologies and helps to ensure that the tax system is fair and that everybody pays their share. It safeguards the environment, recognising our responsibility for long-term stewardship of the earth's resources. I am pleased that that topic was raised.
Mr. Timms: The key to the success that we have seen in managing the economy over the eight years since 1997 is stability and the fact that we have published and kept to the fiscal rules, the golden rule and sustainable investment rule. We have published the figures in the Red Book showing how we will do that in the future, in this cycle and the next, on the basis of cautious assumptions. Our record is enviableit is 1 million times better than that of the previous Government, and the hon. Gentleman should pay tribute to it.
The Bill provides much-needed help to children, pensioners and home buyers. The increase in the child element of the child tax credit means that the effective income tax rate for a family with two children earning £25,000 a year will be just 6 per cent. At £30,000 it will be 10 per cent., so it is a family tax cut that targets the hardworking low and middle-income families who will benefit from it most.
The Bill includes important changes to remove the tax impediments to Sharia-compliant Islamic finance products. Last year's Bill fixed a problem with the way in which stamp duty affected Sharia-compliant mortgages. This year, the Bill extends the benefits of that change and alters the rules for income tax, corporation tax and capital gains tax to remove impediments to Sharia-compliant saving and loan products. It is important that everyone in our society has access to financial services that meet their needs, so that everyone can be included and benefit fully from the strength of our economy.
The measures in the Bill to simplify pensions taxation will provide more flexibility and choice as people plan for retirement. They will help employers and pension providers, and they have received very wide support from pensions providers, employers, and individual pension savers. The assurance that people will receive a meaningful proportion of their pension saving in the event of their employer becoming insolvent provides an important boost to confidence in pension saving.
I want to respond to a number of points raised in the debate. The hon. Member for Tatton (Mr. Osborne) helpfully explained to the House why the Opposition accepted the clauses in the Bill. He also mentioned representations on behalf of companies in the film industry. He spent a good deal of his time objecting to things that are not in the Bill, however, and I look forward to debating those matters with him after the election.
The hon. Member for Twickenham (Dr. Cable) made several points with which I agree, but I did not agree with a number of his other points. He discussed his party's plans for local income tax. Under Liberal Democrat plans, a couple on average earnings with a combined income of £41,000 would see their income tax increase by £1,170, which, on average, would make them more than £260 worse off compared with council tax. Once people realise that if two people are working in a household, that household will have pay its local income tax twice, the apparent attractions of that proposal rapidly disappear.
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