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I can confirm that, with 300,000 more lone parents in employment compared with 10 years ago, we can help even more lone parents by extending the top-up that they receive for the first 12 months that they spend back in work. In addition, I can also announce today further measures to take more children out of poverty. First, I am doubling the amount of child maintenance that a family can receive without affecting their family benefits to £20 a week next year and then £40 a week in 2010. Secondly, I am increasing the child tax credit by a total of £175 a year from next April, with a further
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increase in 2010, so that, for families on low incomes, children’s benefits and tax credits will be worth at least £3,500 a year for the first child. Taken together, those measures will lift a further 100,000 children out of poverty.

Next year’s rise in the basic state pension and other benefits will be announced later this month, but the pension credit for older people with just a small pension of their own will rise from next April by £5 a week and £260 a year for a single person and by £7.65 a week and £397 a year for a couple. That guarantees every person over the age of 60 at least £6,450 a year. We will bring forward the start date for flat-rating the state second pension to 2009.

I can announce that direct funding for social care will increase to £1.4 billion by 2010. That will help to provide new homes for older people and help people with disabilities to live independently in the community, as well as offering more services for carers. I can also announce an extra £200 million next year to deliver on our commitment to every pensioner and disabled person in England—guaranteed free off-peak national bus travel.

Today, home ownership is at 70 per cent.—that is nearly 2 million more than 10 years ago—but we need to do more; we need to ensure that there are homes for people to buy. Last year the number of homes increased by 185,000. That is the largest increase for nearly 20 years. Planning reforms that are coming before the House will help the building of more homes in an economically and environmentally sustainable way, as we provide additional investment to increase the level of house building to 240,000 a year by 2016. In total, that is an extra 3 million new homes between now and 2020.

I can announce that we will also spend over £4 billion over the next three years to help people living in poor quality housing to make renovations to their homes, so that by 2010, some 1.9 million of the poorest children and 1.7 million pensioners will have benefited. As we build more homes, we need to ensure that properties are not left unrented, unsold or unavailable for people to live in. I am introducing measures today that will help to bring empty residential properties back on to the market.

Buying a home is probably the biggest investment that people make in their lives. Fixed-rate mortgages can offer more certainty. I want to see more fixed-rate mortgages not for just two years but for 10 years or even longer. I will bring forward proposals at the Budget on reforms to help lenders to ensure that more people can fix their mortgages as a matter of routine, if it is right for them. As we prepare plans for more home building, for eco towns and for shared equity, we will also consider how else we can increase the supply of housing to help first-time buyers to enter the market.

Grants to local authorities for local services in England will increase to £26 billion by 2010. We have provided sufficient resources to ensure that local authorities can keep council tax rises substantially below 5 per cent. The budget for the Department for Culture, Media and Sport will increase to £2.2 billion in three years’ time. That guarantees an inflation
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increase for the arts, free access to museums and galleries, and extra sport, so that every child and young person can take part in sport for five hours a week. It will also deliver the cultural Olympiad in the run-up to London 2012.

I can also set out the total settlements for the devolved Administrations in Scotland, Wales and Northern Ireland, giving them their full entitlement. In Scotland the figure will rise to £30 billion in 2010; in Wales it will rise to £16 billion; and in Northern Ireland it will rise to £10 billion. That, of course, is in addition to spending in Scotland, Wales and Northern Ireland on matters that are not devolved, such as spending on defence, tax credits and pensions, which benefit all parts of the United Kingdom.

I now come to my final decisions. In respect of capital gains tax, there is currently transferability between spouses, to recognise the fact that capital assets are built up jointly over a lifetime. In inheritance tax, there is currently 100 per cent. spouse relief over a lifetime, but there is no transferability of allowances. I want to ensure that husbands and wives can benefit from each other’s unused inheritance tax exemptions, so I will raise the total amount of inheritance for married couples on which no tax is paid, and this will apply to civil partnerships, too. I can announce that, from today, the combined tax-free allowance for their estates will not be the current £300,000, but up to £600,000. By 2010, the combined tax-free allowance for couples will rise to £700,000. And I can do more: to ensure that people who have already lost their husband or wife will also benefit, I will backdate that indefinitely for every widow or widower.

Those changes mean certainty for up to 12 million married couples, with an allowance of up to £600,000, rising to £700,000, and the same entitlement for 3 million widows and widowers. That allowance is worth more than the value of 97 per cent. of homes in this country. In future years, we will take both house prices and inflation into account when setting inheritance tax thresholds.

I now have a further choice to make. As a result of our economic management, I can meet both our fiscal rules and invest more—£2 billion in 2010, in addition to the sum proposed at the Budget. If I was to raise the inheritance tax threshold to £1 million, it would cost a further £2 billion. I found that, under that proposal, £1 billion would go to estates worth more than £950,000—the top 1 per cent.—only. Instead, I decided to go ahead with raising the inheritance tax exemption to £700,000 for married couples and civil partnerships, and invest the additional £2 billion in health and education.

Let us now have a debate about what is affordable and what is fair in the future of inheritance tax. I welcome that debate. In this statement, I have managed to raise the arts and culture budget; to give the go-ahead for Crossrail; to meet our international obligations on overseas aid; and to double the budget for social housing and expand owner-occupation.

I can now announce that the final figures for education will be higher than originally proposed. I hope that all parties will support and match these new plans when I explain where the additional money is going. The Budget proposed that investment in
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education and skills will rise to £74 billion in 2010, increasing education spending as a share of national income rising from 4.5 per cent. 10 years ago to 5.6 per cent. now. Today, I can announce, in addition, further investment, providing a £250 million fund to ensure that all children at school are ready to learn and benefit from personalised support.

I can also do more for the national health service. Over the next three years, the money we spend will rise again by more than its historic rate: on average, by 4 per cent. above inflation. This new investment will allow us to ensure a maximum wait of 18 weeks from referral to hospital, increased access to GP services and cleaner hospitals.

With the additional £2 billion I have available, I can now announce that investment in health in England will rise from £90 billion this year to a total of £110 billion in 2010. I could have spent that £2 billion on an inheritance tax reduction for the few wealthiest estates. Instead, I am able to raise the inheritance tax allowance and invest more in schools and hospitals for the British people. That means, in education, helping to build a new primary school in every local area by 2010. In health, when added to its budget, this will deliver 20 new hospitals, 140 new walk-in centres open seven days a week, and 100 new GP practices. We aim to ensure a regular check-up for every adult in the NHS, saving lives and improving the quality of patient care across the country.

We propose not unaffordable tax cuts that deprive public services of the money they need, but an affordable tax cut and improved investment in health and education, founded on economic stability. I commend this statement to the House.

Mr. George Osborne (Tatton) (Con): I do not know why the Prime Minister even bothered to turn up. He should have called that election, and let us give the Budget. Instead, we had a pre-election Budget without the election. We all know that the report was brought forward, so that it could be the starting gun for the campaign, before the Prime Minister took the pistol and fired it into his foot.

Let us deal straight away with the announcements on aviation, and on non-domiciles and inheritance tax. For 10 years, the Prime Minister has been sucking millions of families into the inheritance tax net. For 10 years, he has been pulling first-time buyers into stamp duty. For 10 years, he could have reformed air passenger duty. For 10 years, he did nothing on non-doms.

Now, a week after we introduced our plans, the Prime Minister and the Chancellor scrabble around in a panic trying to think of something to say. The Prime Minister talks about setting out his vision of the country, but he has to wait for us to tell him what it is. That is not leadership of this country—it is followership, Prime Minister. It is not strong, Prime Minister, it is weak. He has learned nothing from recent events. The public will see today’s measures as a desperate, cynical stunt from a desperate and weak Prime Minister, and the public can tell the difference between a Labour party that sees this all as a cynical, calculating game, and a Conservative party that believes in lower taxes and in aspirations.

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The Chancellor attacked my non-domicile policy, but then announced that he would consult on it. Will he confirm that? From this day on, let there be no doubt about who is winning the battle of ideas in Britain. If the Prime Minister wants to debate our policies, and if he wants to challenge the independent experts who support our costings, he should have the courage to call a general election, but he will not. This Prime Minister’s name may appear on the cover of books about courage, but it is never likely to appear in the index.

These cynical stunts should not distract us from the fact that today was the day when the economic chickens came home to roost. Britain needs a Government who prepare us for the new economic revolution by freeing our economy, reforming public services and putting us on the path to lower taxes. Instead, we got a speech that boils down to this: growth is down, borrowing is up, the spending rate is down, and overall taxes are likely to go up. What a mess after 10 years in office.

The real charge against the Prime Minister is not just that he got his growth forecasts for the next year wrong, although he did. The real charge against the Prime Minister is, first, that he should have prepared the public finances for a slowdown in the economy, and he did not; and secondly, he should have prepared the public services for a slowdown in spending, but he did not do that, either. The pre-Budget report is the opposite of what a sensible, prudent Government should do.

Let us look at the public finances. After 15 years of global growth, we should be running a surplus in this country. Instead, we are entering what the Chancellor himself admits are difficult times, with Government borrowing out of control. The Prime Minister told us in last year’s Budget that 2007 was the year when the finances would move into the black. Then, in this year’s Budget he told us that he was wrong, but that at least borrowing would fall.

Today the Chancellor admitted that borrowing is going up again. Total borrowing this year is now expected to be £4 billion higher than forecast. We all waited for the moment when, as the former Chancellor used to do, he would rattle off the borrowing figures for the years afterwards, but he entirely missed them out—talk about burying bad news! Indeed, the annual deficit, which he did mention, will be £4 billion higher in the current year. The real tragedy is that the Government should not have borrowed in a boom; they should have saved. Now there is nothing left to prepare Britain for the rainy days that may lie ahead.

Why did not the Chancellor tell us that the savings ratio has fallen? Page 146 of the report shows that the savings ratio this year has fallen from 51/2 per cent. to 31/2 per cent. That is the lowest savings ratio on record. He did not tell us that the estimates for the growth of disposable income for millions of families have also fallen sharply from 21/2 per cent. to 11/2 per cent. this year. Why did he hide those figures? He should be blaming his predecessor, not copying him.

The Chancellor has not prepared us for the economic slowdown or the spending slowdown. The growth rate of spending has been cut in half. The Chancellor has been forced to share the proceeds of
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growth. This is another example of us setting the agenda. Why cannot the Chancellor be honest with people about what that means, instead of trying to spin the figures?

Let us take the education budget. When the more gullible Labour Members cheered, perhaps they did not realise that the Chancellor is cutting the spending growth rate of education in half. The real tragedy is that the Government failed to use the boom years to reform education and prepare it for this slowdown. The building schools for the future programme, which the former Chancellor used to boast about, is now in such a mess that just 14 of the 100 schools that were supposed to open this year will do so. The £1 billion spent on tackling truancy has led to a 45 per cent. rise in it. The question people are asking is simple: where has all the money gone? [Interruption.]

Mr. Speaker: Order. Members should allow the hon. Gentleman to be heard. Clapping is not in order in this House.

Mr. Osborne: I might try that again: where has all the money gone in health? Why does not the Chancellor be honest with the public about what this health settlement means? The growth of health spending is set almost to halve in the next three years, so a health service that is already seeing maternity wards closing, accident and emergency wings shutting and staggered pay awards for nurses will now have to make do with a much slower rate of spending growth. It would have been able to cope better if the recent spending boom had been matched by reform.

I know that the Prime Minister has found himself a new health guru, Lord Darzi. Remember him? He is the one whose report sunk without trace last week. The Prime Minister should listen to the previous health guru, Derek Wanless, who says that the hoped-for productivity gains have not been achieved and that a lot of money has been wasted. When Wanless compared our health care with other similar countries, he found that Britain was still lagging on crucial outcomes such as life expectancy, infant mortality, cancer survival and health inequality. The Health Secretary puts it in a more technical way:

Even with today’s spending slowdown, this report confirms that the tax burden is now set to reach a record high—at a time when all our global competitors are trying to reduce their taxes. By the way, why did the Chancellor not tell us that this is a tax-raising pre-Budget report? We heard all the talk about inheritance tax and so on, but I see that in 2010-11 there will be a £1.4 billion rise in taxes as a result of the measures that he announced from the Dispatch Box just a few minutes ago.

This pre-Budget report should have prepared our country for the new economic revolution, but instead we got over-spun claims, desperate stunts and fake figures from a Government who have given us fake photos, fake troop withdrawals and fake hospital openings, all led by a Prime Minister who is increasingly seen as a fake.

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The Chancellor should spare us the Brownite nonsense and save it for the election campaign. Instead, he should give us straight answers to these straight questions. First, will he confirm that the Prime Minister got the growth and borrowing forecasts wrong? Secondly, will he confirm that the growth rate of health and education spending will be cut by almost half? Thirdly, will he confirm what he did not say when he gave his original report: that this report raises taxes overall? Out of curiosity, will he also confirm that he had no plans to reform inheritance tax in this PBR until we made our announcement and he looked at his polls? We know that the Prime Minister cannot give straight answers to straight questions, so let us see whether the Chancellor can do any better—let us see whether he can begin to restore trust in this weak and cynical Government.

Mr. Darling: I thank the shadow Chancellor for his response. It strikes me that he might have benefited —[Interruption.]

Mr. Speaker: Order. Members should let the Chancellor speak.

Mr. Darling: The shadow Chancellor might have benefited from rehearsing his lines a bit longer before he delivered them. Listening to him and to some of his colleagues, it is striking that they find it difficult to acknowledge in this Chamber that we have one of the strongest and most stable economies in the world. They have no difficulty in doing so outside this Chamber when talking to business audiences, when they have to concede that thanks to the stewardship of my right hon. Friend the Prime Minister over the past 10 years we have a very strong and stable economy. It is precisely that stability that will enable us to deal with the international uncertainty that we now face.

Another striking thing about what the hon. Gentleman said—as he desperately confers with his colleagues on the Front Bench—is how on earth he thinks he can maintain stability when he has made promises during the past week on inheritance tax, stamp duty and tax credits and has no means of delivering on those spending commitments. He has a black hole—£6 billion that he cannot find.

When he was talking about inheritance tax, the hon. Gentleman said that he set great store by independent experts, so I thought I would check to see which independent expert advised the Conservatives on their inheritance tax policy. I listened to the Leader of the Opposition as he went round the television studios last week, and he kept referring to Accountancy Age as the authority for the fact that there were so many people not paying tax. I read Accountancy Age and found out the source of this independent expert, and it turned out to be an article in a Sunday newspaper. And when I read the Sunday newspaper to find out where its figure came from, I learned that it was an “unnamed tax expert”. How on earth can we have any confidence in a man who wants to be Chancellor when he bases his estimates on what is in a Sunday newspaper, not on firm evidence?

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