If the Opposition make promises that they cannot afford, there will be instability, increased borrowing and taxation rises elsewhere, or cuts in health,
education and other areas. It is precisely such instability that got the Conservatives into so much trouble when they were last in government. The choice is between an affordable tax cut and irresponsible, unaffordable promises being made by the Conservative party.
The second striking thing relates to my announcement in my speech that we were able to spend £2 billion on health and education. I noticed that at no point did the hon. Gentleman say whether he would match that commitment. Now, next week and during the next few months, we shall continue to ask the Conservatives whether they are prepared to meet our commitment on health and education. The truth is that they cannot afford to; they are already committed to reductions in tax and increases in expenditure that they cannot afford because they have not identified how they would carry them out.
The hon. Gentleman criticised us by saying that health spending was not rising as fast as it should. I came into possession of certain information just a few hours ago, and I can tell the House that we are spending more on health than the Conservatives thought. Helpfully, one of their Membersperhaps someone waiting to cross over to us in the next few monthsleft the Tory crib sheet in the photocopier in the House of Commons. There is a suggested question on this and, by the way, I have all the suggested questions. [Hon. Members: Answer!] I intend to answer the question that they have for me in the document. It asks whether the Chancellor can confirm that growth is only 3.5 per cent. a year. The health increase is at 4 per cent. a yearmore than the Conservatives thought.
It is obvious that if the hon. Gentleman had his way, we would have a series of unaffordable promises on tax and spending that his party could not meet. In contrast, we will continue to take no risks with stability and we will continue to build the stability our economy needs because that is the best way of protecting the interests and aspirations of people in this country.
Dr. Vincent Cable (Twickenham) (LD): I thank the Chancellor for an advance copy of his statement, but 12 of the 18 pages were blank. Is that a new signal of open government and transparency? I congratulate him on adopting our long-standing policy on aviation taxation. There have also been welcome announcements on overseas aid, carers and social housing [ Interruption. ]
Dr. Cable: May I also sympathise with the Chancellor for having obviously spent the past 72 hours rewriting a speech that was originally intended to be a chapter in the election manifesto, and for having only just recovered from the ignominy of being the first Chancellor of the Exchequer since 1866 to preside over a run on a bank? Not since Black Wednesday has there been such a collapse of confidence in the authority of Government.
Let me begin with the key point in the Chancellors statement: the slowdown in the economy. We are in a rapidly changing and deteriorating environment. In
the United States, to which we are closely linked,Alan Greenspan estimated that the risk of a recession approaches 50 per cent. What is the Chancellors assessment of the risk of a recession in Britain50 per cent., 30 per cent., 20 per cent., 10 per cent.? It is an important question because factors that could precipitate a recession in the United Statespersonal debt and a bursting bubble in the housing marketare even more extreme in the United Kingdom.
is not the brutal truth that...the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level?[ Official Report, 13 November 2003; Vol. 413, c. 397.]
In the subsequent four years, every one of those indicators has deteriorated. Cannot the Chancellor bring himself to accept that millions of families are being squeezed by a combination of reducing disposable income and higher interest rates as a result of moving from fixed-rate mortgages in the next few months? Does not he accept that there is a major vulnerability in the UK economy?
The slowdown has major implications for the spending review, which makes grim reading for many Departments. The Chancellor has promised the largest increase in health spending. As I understand it, he said today that health spending will grow by 4 per cent. Will he confirm that the Wanless report argued that 4.4 per cent. growth was the absolute minimum required to sustain improvements in patient care? That assumed that the maximum amount of health service reform was achieved, which has clearly not happened. Will he confirm that, when we consider all the spending commitments, the growth that he suggestsI believe that it is 1.9 per cent. a yearis only fractionally higher than that achieved in the 18 years of Conservative government?
Will not local government now take the biggest hit? Something that did not appear in the statement but is buried in the report is the fact that council tax is due to rise by 5 per cent. a year throughout the UK. That tax bears disproportionately on low-income families and pensioners. At a time when the Chancellor is scrambling to catch up with the Conservatives on inheritance tax, why has he paid no attention to a report and an analysis conducted over four years on the need for reform of that hated and regressive form of taxation?
On poverty more generally, has the Chancellor made time today to glance at the parliamentary ombudsmans report on tax credits, which has the wonderful, evocative title, Tax Credits: Getting It Wrong?? Is he willing to be a little more open-minded than his predecessor and consider the parliamentary ombudsmans recommendations for simplifying and making a great deal fairer that hopelessly overcomplicated system?
On taxation, I am glad that, a few months after I introduced a debate in the House on the super-rich, there appears to be an all-party consensus that we should do something about it. However, the Government
have got only themselves to blame for their current position with regard to non-domiciled investors. Five years ago, they commissioned a report, which was suppressed under the Freedom of Information Act 2000. The data were released only a few days ago. However, I agree that there is little merit in the idea of a poll tax on non-domiciled investors. It would be unfair to many immigrant workers of modest means and a fleabite to the super-rich. For the Abramovichs of this world, a £25,000 charge is roughly the equivalent of what they would spend on a day out at Stamford Bridge. For the noble Lord Ashcroft, £25,000 is roughly the equivalent of one marginal seat.
In conclusion, perhaps I could say something a little more positive and sympathetic to the Chancellor. We know from the press releases that he advised the Prime Minister against a dash to the polls and to stay the course. In the light of the gloomy outlook for the British economy, whatever else one says about the Chancellor, he is a very brave man.
Mr. Darling: First, may I apologise if we sent a series of blank sheets of paper to the Liberals[Hon. Members: You always apologise.] Well, I will apologise, but it did enable the hon. Gentleman to jot down todays Liberal party policy. Rather like the Conservatives, he overlooks the fact that over the past few years we have established a strong and stable economy, which will enable us to deal with the uncertainty that we face today. As I have said to the House and as I said last week, the reason we have adjusted our growth figures is that it is sensible in the light of what people are sayingthat the uncertainty will have an effect not just here but across the worldto do that.
If I understood the hon. Gentleman correctly, I agree with him that there ought to be more fixed-rate mortgages. Indeed, I said that during my statement and I said it just a few weeks ago. I would like people to be able to fix their mortgage rates for a lot longer, not just because that would be good for them, but because it would be good for the country as a whole.
I am not sure that I follow the hon. Gentlemans point in relation to the Department of Health. We have been able to increase the amount of money being spent on health over the past few years. There is a further 4 per cent. real-terms increase, which will enable us not only to build more hospitals and provide new GP practices, but to provide health check-ups for individuals, which is important. It has never been clear to me whether the Liberals want to spend more on health or lessit really depends on what day we are listening to them. What I do know, having looked at the Liberals proposals on tax, which cost around £18 billion a year, is that it is not clear where they are going to get the money from even to finance a small part of what we believe is necessary in public services.
The hon. Gentleman talks about poverty. I strongly believe that we need to do more to reduce pensioner poverty and child poverty. Today I announced proposals to take another 100,000 children out of poverty. However, the Liberals proposals on income tax would actually disproportionately benefit people with higher incomes, so I do not think that he is in a particularly strong position to lecture us on that.
As I said at the last Treasury Question Time, there are problems in the administration of tax credits. However, the hon. Gentleman should not lose sight of the fact that more than 6 million families have benefited from tax credits. I believe that the policy of helping people on low incomes is absolutely right, which is why I intend to stick with it.
John McFall (West Dunbartonshire) (Lab/Co-op): I welcome the measures that the Chancellor has announced on simplifying the tax system, particularly on corporation tax and capital gains tax, and on fairness in private equity. As he knows, the Treasury Committee looked at the issue. We had practitioners from the industry lining up to say that it was terribly unfair for millionaires to pay less tax than their cleaners, so the steps that the Chancellor has announced today are welcome.
However, does my right hon. Friend agree that if we are to continue to enjoy prosperity in this country, we need economic stability? In that context, the Governor of the Bank of England mentioned that the UKs economic fundamentals were there when he appeared before our Committee, while the Organisation for Economic Co-operation and Development has praised the UKs monetary and fiscal framework. Will the Chancellor give a guarantee that any tax initiatives that he has announced today have been costed and can be funded in the long term? Otherwise, the chickens will come home to roost sooner than people expect.
Mr. Darling: I agree with my right hon. Friend. As the Chairman of the Treasury Committee, he knows a great deal about the subject. In particular, he knows that it is essential that the Government stick to the position that they have followed over the past few years. It was our strength and stability that meant that we dealt with the problems that arose after the collapse of the Asian stock market in the 1990s and of the American stock market in the early part of this decade. We have been able to do that precisely because we have not made promises on tax and spending that cannot be financed. As I said earlier, it is striking that the shadow Chancellor made little attempt to defend his position or to explain how he would fill that black hole.
In relation to spending, as my right hon. Friend the Member for West Dunbartonshire (John McFall) has said, it is important that we maintain expenditure where it will benefit the country in the long term. I understand that a Conservative Front Bench spokesman has already been on the radio failing to say that he would match us in spending that additional £2 billion on health and education.
Mr. Kenneth Clarke (Rushcliffe) (Con):
The Chancellor has acknowledged that we are going to have a very sharp slowdown of the economy at the end of a period in which a sea of household and Government debt has sustained growth so far. Does he not therefore accept that people will be looking to todays statement to see whether he can restore confidence in the Governments fiscal policy through what might be a very difficult phase for our economy? Does he not think that he should have introduced some new fiscal rules to replace the two discredited fiscal rules of his predecessor? Does he not also think that it was a
mistake to start playing around with the dates of the cycle as he did, so as to pretend that either of those rules was remotely credible? Does he not think that, when he announces that he is obliged to halve the rate of growth in public spending, compared with the rate that we have experienced for the past six or seven years, such an announcement should be combined with measures to indicate how reform can be accelerated, productivity improved and choice and competition actually delivered, in order to get a better quality of service for the money? With respect, his statement was devoid of any such measures. So far as he was concerned, this was the end of the party conference season. Does he not acknowledge that he will have to do some serious work over the winter if he is to retain even the modest levels of economic growth that he announced?
Mr. Darling: I seem to remember that the levels of debt that we have today are rather better than those that existed when the right hon. and learned Gentleman was Chancellor of the Exchequer. In relation to spending, I think that he was complaining that we were not spending enough, yet I had always understood that his partys position was that we were spending too much. The amounts of money that we are spending on public services such as health and education are considerably more than was the case 10 years ago when he was Chancellor of the Exchequer, as he well knows.
In relation to the revision to the growth figures that I have given, I believe that it is sensible to do that because of what is happening internationally. The problems that started in the American housing market have clearly spread across the world. I made the point earlier that we need to take account of that, although, given the strength of the British economy, there is every reason to believe that we can get back on track with growth in the years after thatthat view is shared not only by me but by independent commentatorsbecause our economy is fundamentally strong, and it can deal with these difficulties. That is a rather different position from that of the Conservative party in the early 1990s.
Rob Marris (Wolverhampton, South-West) (Lab): I welcome the continued stability and growth outlined in the pre-Budget report. I want to ask my right hon. Friend about Northern Rock and the financial assistance scheme. When Northern Rock was in difficulty, the Chancellor rightly stepped in and made the state the insurer of last resort. The Government have consistently said that they will not do that in relation to the 125,000 pensioners who will benefit from the financial assistance schemeset up, uniquely, by this Governmentbut not at a rate of 100 per cent. I did not notice anything in the statement today to suggest that the Government had changed their position on this and made themselves the insurer of last resort for those pensionersin whose case there was an adverse ombudsmans findingas they did in the case of Northern Rock, in which there was no such finding.
I am sure that we will have an opportunity to discuss Northern Rock later in the week. The reason why I agreed that the Bank of
England could provide lender of last resort facilities to Northern Rock was that I was concerned that damage might be done to the banking system as a whole. That is the only ground for interventiona fear of systemic failure. It is not the policy of the Government or the Bank of England to intervene unless there is a risk that something that is happening in one bank will spread to other banks. That is why we intervened, and to that extent the case is quite different from that of any company in another sector.
In relation to the financial assistance scheme, my hon. Friend will recall that we gave an undertaking in July to bring the support up to 90 per cent., if we can do that, and I hope that we will be in a position to say something about that in the not too distant future.
Mr. Michael Fallon (Sevenoaks) (Con): Given that the Chancellors predecessor consistently overestimated corporation tax receipts and ended up having to borrow £100 billion more over the last five years than was originally forecast, what assurance can the right hon. Gentleman give that his revenue and borrowing figures are any more robust than his predecessors?
Mr. Darling: Just a few moments ago, the hon. Member for Tatton (Mr. Osborne), who is continuing his huddle on the Front Bench, was criticising me for taking the necessary steps to ensure that I had made the necessary provision. I say two things in response. First, I want to ensure that we maintain a strong economy, which will help the financial health of companies and enable them to contribute through the tax system. I want to ensure that this is a good place to do business so that we can continue to attract more companies here, which we have been remarkably successful in doing. Secondly, as I said at the start of my statement, I have taken a prudent approach to the economy in order to ensure that we can support the economy as a whole. What we do fiscally must be the right thing to do in the light of present circumstances.
Mr. George Howarth (Knowsley, North and Sefton, East) (Lab): I warmly welcome my right hon. Friends announcement on the increase in supply of housing for sale, which will be greatly welcomed, particularly by young families just starting out in life. Will he confirm whether there will also be an increase in the supply of social rented housing?
Mr. Darling: I know that my right hon. Friend has long been concerned that that should happen. I hope that, with the additional money that we can make available, we will be able to improve the stock when it comes to new build or renovation of affordable housing. It is important that the supply of housing and the housing market should reflect the differing needs of people in this country. Most of us are concerned about the difficulties faced by people on lower incomes. There are two sides to dealing with the problem. We look to see what we can do to help generally, but the key is to get more affordable housing into the market. That means money, and we are prepared to provide it, but it also means reform of the planning system, for which I hope we will gain all-party support.
Sir George Young (North-West Hampshire) (Con): Does the Chancellor accept that the NHS, for which the Government have responsibility, has consistently done better than social services, for which local government has responsibility? Will he confirm that he has done the same today? Does he recognise that local authorities are now spending billions more than their formula spending assessments on social services and are increasingly having to ration care and introduce charges? Would it not have been preferable, if we want to take some of the pressure off council tax, if we believe in joined-up government, and if we want to spend effectively on individuals, to have a better balance between health and social services?
Mr. Darling: I agree with the right hon. Gentleman. It is important to ensure that social services are properly funded. In my statement I announced a number of measures to help elderly people in particular, and also those with disabilities. We have increased the amount of money going to local government. It is obviously for individual councils to decide how they allocate that money. I believe that we have provided resources, through the health service and local government, to enable councils and others to make improvements to provide the care that we all want to see.
Ms Sally Keeble (Northampton, North) (Lab): May I ask my right hon. Friend a bit more about his welcome announcement of increased spending on law and order, especially on local police budgets and local police teams? What would that mean in terms of the number of officers? Many people, including those in my own area, want to see more armed officers [Interruption]sorry, I mean uniformed officers, out on the streets.
Mr. Darling: I agree that we all want more uniformed officers on the streets, and I know that my hon. Friend has been vigilant in ensuring that the Government live up to their promises in that respect. We have made additional money available to the Home Office, but it is obviously for chief constables to decide how best to employ that money. I hope that by making this additional money available, we can ensure that police officers are placed where and when they are needed. I hope that the chief constable in my hon. Friends area recognises the additional funds invested and uses them to place the right number of officers where they are needed to police the streets.
Mr. Phil Willis (Harrogate and Knaresborough) (LD): I warmly welcome the £1.7 billion for the full implementation of the Cooksey reforms, but can the Chancellor confirm that the increase in resources by 2011 will not be at the expense of the Medical Research Council and basic research, and that resources for NHS clinical research will grow at the same rate?