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The Conservatives have to understand that if we want to make inroads on the number of people on benefit, money has to be spent up front. There is a financial commitment; there is no way of getting away from that. Whether in Wisconsin or Australia, Governments have accepted that money needs to be spent. The Conservatives also need to accept that the process does not produce millions or billions of pounds immediately; a long-term commitment and process are involved. We are now seeing the incapacity benefit rolls falling because we stuck the course for 10 years. The Conservatives are making promises, which they say
they can pay for, on getting people off incapacity benefit when they know, and everyone tells them, that there is not a hope of getting that money in anything like the timescale that they would need to avoid a hefty increase in Government borrowing. That is why their policies simply do not stand up and do not bear scrutiny.
Chris Grayling: Can the Chancellor explain why, given all the billions of pounds spent on the new deal for young people, the number of 16 to 24-year-olds registered unemployed is higher now than it was 10 years ago?
Mr. Darling: We recognise that it has been difficult to get people from that group into work, although their population has increased as well. However, the big difference is that during the past 10 years unemployment levels have been a fraction of what they were in the 1980s and 1990s. The hon. Gentleman says that the new deal has not worked, but it hasit has seen hundreds of thousands of people back into work. The Conservatives cannot even tell us how long their proposals on getting people off incapacity benefit and back into work would take to implement. The shadow Chancellor, when interviewed by Mr. Naughtie on the Today programme, was asked how long it would take. The reply was, Im talking about, you know, two or three years. When the hon. Member for Epsom and Ewell (Chris Grayling) was asked about it on a different programme, he said that it would take four or five years. The truth is that they have no idea when they would get the money in, yet they are prepared to make promises on tax credits based on the back of money that they do not actually have.
That takes me back to the point that I made right at the startthe Conservatives sums do not add up. That is why they cannot stand up and give us commitments on eradicating child poverty. They have never yet said that they would sign up to the target and the commitment to which we have signed up. They cannot give us commitments on other major spending because they have a black hole in their spending plans, and they know it.
Mr. Stewart Jackson: The Labour partys campaigning mantra over the past 10 years about black holes is wearing extremely thin, and it does not wash with the public. If the Chancellor is so proud of his record, can he explain why in the last financial year under this Labour Government the weekly income of the poorest 10 per cent. of this countrys population has fallen?
Mr. Darling: I would have more sympathy with the hon. Gentlemans comments if he supported us in our policies on tax credits, increases in child benefit and other measures that are designed to help people on low incomes to increase them. We have been increasing their incomes; the Conservatives have absolutely nothing to say about it.
Mr. Siôn Simon (Birmingham, Erdington) (Lab): Does the Chancellor agree that perhaps an explanation for the metaphorical chaos of these black holes that will not wash because they are too thin lies in the methodological chaos about which he has been so eloquent, whereby the shadow Chancellor made up his non-doms policy on the basis of an article that somebody read in the back of a Sunday supplement?
This debate has demonstrated that the Conservatives are in no position to set out their vision for the future of this country or of this countrys economy because they are not in a position to make the necessary investment that we need in order to meet the challenges that we face.
The Conservatives have nothing to say about the future key issues that face us because, right at the heart of their plans, there is a gap between what they are promising to spend, whether in tax reductions or other spending commitments, and the amount of money that they could get in. They cannot make those promises because there is a flaw at the heart of their economic policy. The hon. Member for Peterborough (Mr. Jackson) might say that the public will not focus on that, but I can assure him that they do focus on such things because they are very weary of people who make promises that they know they cannot afford to keep.
Perhaps the Chancellor can clarify the situation as regards black holes. Is the black hole the £540 billion cumulative deficit forecast for the UK this year? Is it the £38 billion of borrowing forecast for this year, up £4 billion on the previous forecast? Is it the £179 billion of liability for only £53 billion of PFI capital expenditure, with liability interest having risen by £55 billion in the past three and half years, which is more than the capital sum of every signed deal? Where is the black hole in relation to the devastating debt created by this Government?
Mr. Darling: The black hole that the hon. Gentleman should be bothered about is his partys policy of hitching itself to revenues from North sea oil and gas that are likely to last 20 or 30 years, not 200 or 300 years. He might also like to address the question of why many of the promises that his party made in the May Scottish elections are now being dumped one after the other because it cannot deliver on them.
The Queens Speech introduces measures to enable this country to meet the challenges of the future. The Conservatives have absolutely nothing to say on the long-term future of this country, whereas we have the vision, the commitment and the means to deliverthat is why the Queens Speech should be supported tonight.
Julia Goldsworthy (Falmouth and Camborne) (LD): We have heard a lot of talk about vision today, as we did in the run-up to the Queens Speech. One would have thought that given that this subject is the new Prime Ministers former portfolio it would be the key area where we would see the heart of his vision. However, anyone who was eagerly anticipating todays debate should have learned their lesson from the Prime Ministers last Budget as Chancellor. In the run-up to that Budget, we were promised that he would flesh out the vision for his planned premiership. The reality was a let-down. His last Budget was long on superficial and eye-catching proposals but short on vision and fairness. There was nothing to tackle the unfair council tax and nothing to simplify the tax system. As a country, thanks to the Prime Minister, we are now the proud owners of the longest and most complicated tax code in the world. His proposed changes to income tax leave millions of people on low incomes paying a higher marginal rate of tax through the abolition of the starting rate which he himself introduced.
The Chancellor spoke today about child poverty and the importance of tackling it. Many millions of the people who will pay higher rates of tax because of the abolition of the starting rate have children who are part of exactly the group that the Chancellor says that he wants to get out of poverty. He may well say that child tax credits and other benefits will help to lift those people out of poverty, but the problem is that the take-up of many of those benefits is very low, and the system of overpayments is leaving many of my constituents with significant difficulties. There is no visionat best, a sleight of hand, which we will debate in next years Finance Bill, as announced in the Queens Speech.
The Chancellor is right that we have had 10 years of relative stability, thanks in no small part to the decision to make the Bank of England independent, which we supported at the time. However, in the months following the Prime Ministers last Budget as Chancellor, it has become increasingly evident that our economy is increasingly exposed to uncertainty. Repossessions are on the increase, oil prices are rising, there is a credit crunch in the US, over the summer we had the experience of Northern Rockthe first run on a bank for more than 140 yearsand only yesterday the Royal Institution of Chartered Surveyors spoke of house prices beginning to fall. Weaknesses in our economy are becoming exposed. Now, more than ever, we have a need for vision, but instead the Government are responding to events instead of anticipating them, and tinkering around the edges without tackling the fundamentals.
What makes matters worse is that the Conservatives seem happy to join the skirmishes rather than seek to provide their own vision. In the opening debate on the
Queens Speech, the Leader of the Opposition proudly said, when referring to the Prime Ministers plans to change flight taxes, inheritance and non-dom tax:
it was our vision, not his.
The difference between our policy and the Prime Ministers is that we thought of it and he stole it.[ Official Report, 6 November 2007; Vol. 467, c. 20-33.]
We have long called for a tax on aviation. We considered ways in which non-doms could pay their fair share. We had proposals that reconsidered inheritance tax; I seem to recall that it was the Liberal Democrats, not the Conservatives, who raised that issue in relation to this years Finance Bill. We have a consistent track record on this, not the sudden revelation that seems simultaneously to have struck the Conservative and Labour parties. However, such proposals in themselves do not constitute a visionthey have to be part of much more comprehensive proposals, which we have put forward, to make the tax system simpler, fairer and greener. I am sorry to point out to the Chancellor that proposals alone do not add up to vision, and I am sorry to point out to the hon. Member for Tatton (Mr. Osborne) that simply saying, We got there first, does not constitute a vision either. The hon. Member for Rhondda (Chris Bryant) mentioned intellectual property rights. If there were intellectual property rights on policy, we would be a very rich party.
Let me look at the proposals in more detail. On inheritance tax and non-doms, there is a poverty of wider vision. The Governments proposals offer nothing that was not already available to people who were able to access advice on tax planning. It is a welcome simplification in some respects because it means that people will not lose out because they did not understand the rules, but it comes at a significant costas the Blue Book showed following the pre-Budget report, £1.4 billion by 2010. The Conservative proposals to raise the inheritance threshold to £1 million are superficially similar but even more expensive. In both cases, a flat charge on non-doms will not be sufficient to meet the cost, and it will end up crippling essential workers while other non-doms, such as Lord Ashcroft, will hardly notice the differenceit is barely equivalent even to the amount of money that he might spend in one target seat. It is nothing short of irresponsible scaremongering for the Conservatives to claim that 37 per cent. of people will be affected by inheritance tax. It is based on dubious research, which was commissioned by Scottish Widows but subsequently removed from its website. The research showed that 37 per cent. of people owned homes worth more than £210,000. An assumption was then made that they would have assets worth more than £94,000 and that they would not need to sell their homes to make up for inadequate pension provision. Some people will be in that lucky position, but certainly not 37 per cent. of all people, let alone homeowners.
Most importantly, neither of the sets of inheritance tax proposals do anything to address the greatest inequality in the inheritance tax system: the fact that the richest of all manage to get out of paying it altogether. The number of estates worth more than £1 million that pay inheritance tax has actually fallen in the past few years. Ultimately, if a person is wealthy enough to employ the right tax adviser, they can ensure that they end up paying no inheritance tax at all. Neither the Governments nor the Conservatives proposals will ensure that those with the most valuable estates get the same treatment as everyone else. That is why our proposals on inheritance tax were set in the context not only of changes to non-dom tax treatment, but of looking again at the lifetime gift rule. A person with assets other than their house will find it easier to give them away tax free, provided that they do so seven years before their death. That is why we want to change the time limit and invest those proceeds in lifting the inheritance tax threshold. Our proposals would ensure that inheritance tax changes are not caught by fiscal drag and they would make the system fairer as well.
Julia Goldsworthy: We put forward those proposals during consideration of the Finance Bill. We were trying to make them more sustainable, so that there would be a better relationship between dealing with the matter and the lifting of the threshold than there would otherwise. The Chancellors proposals will tackle the issue partially, but as I said before, they do not deal with the fundamental fact that the number of estates worth more than £1 million is actually decreasing.
Mr. George Osborne: I am sorry to have to follow up a question from a Labour Back Bencher [ Interruption. ] Well, it is a bit of give and take. They follow my tax proposals, I follow their questions. What is the time limit? Would there be a situation under Liberal Democrat proposals, if they were ever to produce a Budget, where a car given to a grown-up child by a parent would count later on for inheritance tax purposes?
Julia Goldsworthy: No, I do not think that that would be the case at all. Given the context that life expectancy is rising, the matter should be looked at again. I will not have any of the problems the hon. Gentlemans Front-Bench colleagues will have in dealing with the issue during consideration of the Finance Bill.
The capital gains tax proposals are a wasted opportunity because there is a chance to have a much wider debate, rather than the narrow one we will have on the proposals brought forward by the Government. It seems that those proposals were part of the frantic preparation for a general election that never was, and perhaps that is why the Treasury thought that it would be able to get away with them despite the fact that they are so flaky. It is right in principle to simplify the system, but I wonder whether that was the primary motivation of the Government in introducing their proposals. Let us not forget that taper relief was the Prime Ministers creation in the first place.
Proper scrutiny will be needed of whether retirement relief will be made available. There was an indication that it might be in an interview with a newspaper, but as the hon. Gentleman made clear in his comments, small businesses need certainty because they may be making decisions in the next few months about how they treat their businesses. It is clear that the proposals will create some ridiculously perverse incentives. In my constituency, second home ownership is a significant issue in many communities, and second home owners will receive a tax cut as a result of the proposals. It worries me that more and more people will consider home ownership as a way of investing money and getting a tax break; we will not have a fair tax system.
There is a real need for debate, but the question is one of the distinction between capital and income. For a lot of people, that distinction is becoming increasingly blurred, and people make decisions based on how much tax they think they will pay. Our concern is that the proposals will make matters worse. What impact will the way in which the Government dealt with the issue have on share ownership schemes, for example? Before, there was an incentive for longer-term investment, but now that has been removed, and a lot of higher-rate taxpayers will have an incentive to shift more into capital rather than income.
There was an opportunity for a much more fundamental look at the tax system with regard to how capital and income are treated, and that opportunity has been wasted. The Government are pre-empting an argument, rather than opening up a debate. The irony of the position of the Conservative Front Benchers is that their party opposed the introduction of taper relief in the first place, and they are now opposing its abolition. We hope to use the opportunity of the debate on the Finance Bill to raise the issue more widely.
The banking system legislation proposed in the Queens Speech was not included in the pre-legislative teaser that the Prime Minister gave us before the summer recess. It is a reaction to the events concerning Northern Rock during the past few months. It will improve the current framework for dealing with banks in distress, and will include arrangements for deposit protection. It is necessary and right that the deposits of investors are guaranteed to protect against runs on financial institutions. However, what is the genuine motivation behind the proposals? Is it to support savers, or to protect the economy by backing up our banks? It certainly will not offer any comfort to those affected by the Equitable Life scandal or, for that matter, people who invested in Farepak last year and saw their savings disappear.
Mr. Maples: I may have misheard the hon. Lady but I think that she said that it is right for the Government to guarantee depositors. Is she saying that the Government should guarantee all the liabilities of the British banking system? That seems to be what she is saying.
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