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I believe that the third key area in which we need to take action now is transport, which accounts for nearly a third of our carbon emissions. We recognise the contribution of aviation to the UK economy, which is why we support expansion at Stansted and Heathrow, but I have always been clear that aviation must meet its environmental costs, and that is why we want it to be in the European Union emissions trading scheme. Because emissions from aircraft are forecast to continue to grow, I am also announcing that revenue from the duty will be increased by 10 per cent. in the second year of operation. But Britain’s 30 million cars, vans and lorries together account for 22 per cent. of total carbon emissions. Over the last 20 years new cars have become 50 per cent. more efficient, and new technology will bring further improvement.
Today I am publishing Professor Julia King’s review of low-carbon cars, in which she examined new technologies which could help to cut carbon emissions further. Professor King found that simply by switching to the cleanest cars on offer, motorists could save 25 per cent. of their fuel costs. She also found that manufacturers needed to be encouraged to bring new technology to the market. I am asking the European Commission today to set a tighter target which reduces the cap on emissions from 130 g per km to 100 g per km by 2020.
But I believe that the road tax system should do more to support the use of more carbon-efficiency, and therefore less costly cars. It will continue to reduce the average carbon dioxide levels in new cars. First, I propose a major reform of vehicle excise duty from 2009 to encourage manufacturers to produce cleaner cars with the introduction of new bands. There will be an incentive to encourage drivers to choose the least polluting car.
As a second stage for new cars, from 2010 there will be a new first-year rate based on carbon dioxide emissions from the car. Cars that emit less than the proposed 130 g European standard will pay no car tax at all in the first year, but a higher first-year rate will be introduced for the most polluting cars. Cutting taxes for those who cut carbon emissions; but it is right that if people choose to buy a more polluting car, they should pay more in the first year to reflect the environmental cost. These changes will provide a real incentive for both manufacturers and motorists.
We must encourage sustainable biofuels, and therefore the biofuel duty differential will be replaced by the renewable transport fuel obligation. I am also reforming capital allowances for business cars to increase the incentive to move to lower-emitting cars.
Today is No Smoking day, and from 6 pm the duty on tobacco will rise, adding 11p to the price of a packet of 20 cigarettes and 4p to the price of five cigars. To help people stop smoking, we are continuing the 5 per cent. reduced rate of VAT on smoking cessation products beyond 30 June this year.
Mr. Deputy Speaker, as incomes have risen, alcohol has become more affordable. In 1997 the average bottle of wine bought in a supermarket cost £4.45 in today’s prices; if you into a supermarket today, the average
bottle of wine will cost about £4. So from midnight on Sunday, alcohol duty will increase by 6 per cent. above the rate of inflation. Beer will rise by 4p a pint, cider by 3p a litre, wine by 14p a bottle and spirits by 55p a bottle, and those duties will increase by 2 per cent. above the rate of inflation in each of the next four years.
It is only because I have taken these decisions on alcohol and on closing tax loopholes that I am able to provide additional support for families and lift more children out of poverty. It is also why I am able to make two further announcements, while still meeting our fiscal rules. As the House will know, the basic rate of income tax will fall by 2p in April. Because charities have a vital role to play, we will therefore implement a transitional rate of 22 per cent. to allow them to continue to claim gift aid at the current rate, delivering £300 million-worth of relief. It will provide charities with certainty for the next three years.
I also said that one of the key features of this Budget is fairness and I want to do more to help older people, especially this year. We are spending £11 billion more in real terms per year on pensions, with over half this extra money going to pensioners on the lowest incomes. From April, as a result of the changes we made last year, a further 600,000 pensioners will be taken out of paying income tax. The pension credit now guarantees a minimum income of £124 a week from April.
Before 1997, there was no winter fuel allowance. For this year, I have decided to help pensioners who are facing pressures such as high energy bills, so I intend to raise the winter fuel payment for the over-60s from £200 to £250 and for the over-80s from £300 to £400. Nine million pensioner households will be better off.
This is a responsible Budget to secure Britain’s stability in the face of global uncertainty. I have made my choice: responsible decisions, not irresponsible, unfunded promises; fairness and opportunity for everyone in Britain to secure a strong and sustainable future. I commend this Budget to the House.
PROVISIONAL COLLECTION OF TAXES
That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:—
(a) Rates of duty on alcoholic liquor (motion No. 8);
(b) Rates of tobacco products duty (motion No. 9);
(c) Rates of vehicle excise duty (motion No. 13);
(d) Amusement machine licence duty (motion No. 18); and
(e) Alternative property finance (motion No. 55). — [Mr. Darling.]
put forthwith, pursuant to Standing Order No. 51 (Ways and means motions), and agreed to.
Mr. Deputy Speaker: I now call on the Chancellor of the Exchequer to move the motion entitled “Amendment of the law”. It is on that motion that the debate will take place today and on the succeeding days. The remaining motions will be taken at the end of the budget debate, next week.
Budget Resolutions
AMENDMENT OF THE LAW
Motion made, and Question proposed,
(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
(a) for zero-rating or exempting a supply, acquisition or importation,
(b) for refunding an amount of tax,
(c) for any relief, other than a relief that—
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.— [Mr. Darling.]
1.23 pm
Mr. David Cameron (Witney) (Con): It is not difficult to see what is wrong with the Budget. It is not just that it was, on the whole, a dire list of reviews and re-announcements delivered with all the excitement of someone reading out a telephone directory, although that did not help. But people watching this Budget for the last hour will conclude that the Chancellor and the Prime Minister live in an entirely different world from everybody else. Every time people refinance their mortgage, it is costing them more. Every time they fill up their car, they are paying more. Every time they shop, food bills are higher. Yet every time they get a tax bill, they are paying more. There was no recognition of that in the Budget. The cost of living is going up and Labour is making it worse. Everybody has now learned the cost of living under Labour.
Everybody listening to the Budget will have noticed something else. This Government and the Prime Minister took all of the credit when the global economy was growing, but now there are difficulties, they will not take any of the blame. Here are some of the things that they would not tell us in the Budget. The Chancellor boasted about trade, but he did not tell us that the current account deficit is set to rise to a record £72 billion. That was on page 165 of the Red Book. He told us about investment, but he did not tell us that the rate of growth of business investment is slumping by two thirds. That is on page 163 of the Red Book. He talked about debt as a share of GDP and boasted about his rules, but if we include Northern Rock, debt as a share of GDP is 43.8 per cent., busting his fiscal rule.
The Chancellor made one central claim at the heart of his Budget: he told us that Britain is well prepared for economic slowdown. I have to tell him that he is absolutely wrong. As this country enters troubled times, it could hardly be worse prepared. We have the highest tax burden in our history.
The Secretary of State for Children, Schools and Families (Ed Balls): So weak!
Mr. Cameron: “So what?” says the Secretary of State for Children, Schools and Families. I know he wants to be Chancellor so badly it hurts. I have to tell him that another Budget like the one we have just heard and he will not have to wait very long.
We have the highest Budget deficit in western Europe. Today, the Chancellor told us that borrowing would be up by £20 billion over the next four years. Those are truly dreadful figures; there is a £7 billion increase in the next year alone. We have the highest interest rates in the G7, which means that on top of high taxes, home owners and businesses have a higher interest rate burden, too. Today, for the second time in his very short period as Chancellor, he downgraded his growth forecast once again—not that he could bring himself to use that word.
High debt, high interest rates, high taxes and now lower growth—those are the facts that this Budget cannot hide. They tell the story of just how badly prepared we are for the downturn. We all know why; because in the years of plenty, Labour Governments put nothing aside. They did not fix the roof when the sun was shining. What better metaphor could there be today, when it has started to blow off at No. 11 Downing street?
What we needed in the Budget was real leadership and a serious plan to get this country out of the mess that they have made. We need a Government who help people when times are tough; instead, we have a Government who kick them when they are down. The key test of competence for any Government is not how they perform when things are going well, but how well prepared they are to cope when things get tough. The key question at these times is how much room for manoeuvre one has given oneself. The answer with the Government is, “No room for manoeuvre at all.”
In America, they are cutting taxes by 1 per cent of national income. In Sweden, there is a 2 per cent budget surplus to help them out. [ Interruption. ] I am not surprised that hon. Members do not want to hear the consequences of the waste and incompetence of the last decade with their Prime Minister. In other countries, they are debating what to do with their surpluses. In this country, there is no debate because there is no surplus. In Britain, we have nothing—no room for manoeuvre on the deficit, no room for manoeuvre on interest rates and no room for manoeuvre on taxes. I want to take each of those in turn.
On debt, the Government said that they would borrow £47 billion over the last five years. In fact, they have borrowed £165 billion—over £100 billion more debt than planned. Today, it is worse again. They have told us that the current Budget deficit is up another £23 billion over four years. That is the extent of the Government’s economic incompetence.
This Chancellor, just like the last one, likes to read out the league tables. Let me read a list of major countries with deficits higher than Britain: Hungary, Pakistan and Egypt. That is the league of debt to which we have been relegated today. For years the Prime Minister and the Chancellor liked to tell us about their fiscal rules and how they would stop us getting into this kind of mess. The Chancellor tried today, and I do not know how he did it with a straight face. The truth is that they have forgotten the most important rule of all:
in good years you put money aside for bad years, because you cannot spend money that you have not got.
We are ill-prepared on fiscal policy; let us look at monetary policy. Again there is virtually no room for manoeuvre. The Chancellor boasted about low inflation, but let us listen to what the Governor of the Bank of England expects. He predicts
“inflation rising sharply alongside a marked slowing in growth”,
and it says on page 139 of the Red Book that inflation—on whichever measure we take—is higher now than in May 1997. That is why the Bank of England has the highest interest rates in the G7. But the situation is in fact worse than that. Let us look at the real figures for inflation. Food inflation: 7 per cent. Housing costs: up 8 per cent. Petrol and oil: up 19 per cent. That is the real inflation paid by families in Britain.
If anybody still needs proof of how little room for manoeuvre the Chancellor has, they should just take a look at what is happening to taxes. While our competitors are cutting taxes on enterprise, the Chancellor confirmed today that he is putting such taxes up. Capital gains tax: up by £700 million when we are heading for a downturn. Taxes on family businesses: up by £200 million—that is the new income-shifting rules for family businesses that he did not even mention in his speech. Corporation tax on small businesses: up £800 million as we head for a downturn. This is a crazy way to respond to a slowdown—hitting the very people who create the wealth, the jobs and the investment that this country so badly needs.
However, the true extent of the Chancellor’s dreadful predicament is the fact that the Budget— [Interruption.] I am going to mention something that last year was the centrepiece of the tax-con Budget, but which this year does not get even a single mention. He is abolishing the 10p starting rate of tax. That is the tax con that Labour Members all cheered so loudly last year, and soon they will find out what it means. Low-paid NHS workers will have to pay more tax. Part-time teaching assistants will have to pay more tax. [Interruption.] Is the Prime Minister shaking his head? Well, that is the Budget that he introduced. Our soldiers fighting in the heat and dust of Afghanistan will pay more tax. That is the consequence of the tax con. [Interruption.] Labour Members say, “Shame”; well, they should be ashamed for taxing our soldiers more. The fact is that 5.3 million of the lowest paid will be worse off, and what have the Government got to say to them? They say, “If you fill in a form, some of you can get some of the money back.” Taking away people’s money, reducing self-reliance and increasing people’s dependence on the state: that tells us everything we need to know about this Prime Minister and this Chancellor.
Let me explain what we would do differently. We would ensure that higher green taxes were paid into a family fund and were used to cut taxes on all Britain’s hard-pressed families. We would help business by sweeping away the allowances and reliefs and cutting the headline rate of corporation tax. We would target tax on binge drinkers, not on every responsible drinker in this country who wants a glass of wine or a pint of beer at the end of a hard day’s work.
What was the most important thing the Chancellor should have done in this Budget? He should have set a long-term strategy for economic policy that learns the
lessons of the waste and extravagance of the last decade. He should have set out how to share the proceeds of growth so we could get borrowing and tax rates down. That would help not only Britain’s families, but Britain’s businesses, too.
Business knows just how bad this situation is. The CBI says it is now like a “banana republic”. [Interruption.] Those are its words; that is the effect of the prawn cocktail offensive of all those years ago. The British Chambers of Commerce says the Government have “lost the plot”. Nine in 10 small businesses have lost confidence in the Government. Business has fallen out of love with Labour. The very least businesses expected was competent leadership in uncertain times, but all they have got is dithering.
Five months ago, the Chancellor stood at the Dispatch Box and proposed changes to capital gains tax; all the Labour Members cheered, and the policy fell apart. Five months ago, he announced his plans on non-doms; they all cheered, and the policy fell apart. Month after month, the Government said they did not want to nationalise Northern Rock, and they did. They cancelled the general election, which, unbelievably, they had planned to fight on the issue of competence, and they promptly lost half the country’s personal data in the post.
Who is to blame for this? It is tempting to blame the Chancellor; after all, he has had the most disastrous start of any Chancellor in modern history. But I do not think that would be fair. Let us be in no doubt as to the real source of this Government’s problems. Ask any question about this Budget, and the answer comes back to one man: the Prime Minister. Why is the Chancellor hitting the low-paid with higher tax? Because his predecessor put it in his Budget last year. Why is the Chancellor left with the biggest Budget deficit in western Europe? Because the Prime Minister spent all the money in the last 11 Budgets. Why is the Chancellor imposing £1 billion in extra taxes on capital gains and family businesses? Because the Prime Minister got himself in a panic trying to copy our proposals on inheritance tax. This country should not be in any doubt about the source of the difficulties that Britain is now in: the Chancellor was put in a hole by the Prime Minister and they both kept digging.
What is the situation now? We have the highest taxes in history, the highest deficit in western Europe, the highest interest rates in the G7— [Interruption.] I thank the Secretary of State for Children, Schools and Families for his comment; I know he is Minister for children, but he does not have to behave like one. We have all of that, and the Government are asking us to trust them to get the country out of this mess. They just do not get it. The City may be having a credit crunch, but this Government have a credibility crunch. The Treasury has run out of money, and they have left Britain running on empty.
All over this country, people are asking questions: “I am paying more tax, so why is my post office closing?” and “I am paying more tax, so why is my maternity unit closing?” and “I am paying more tax, so why do I see so much waste and incompetence?” The answer is sitting opposite me. Never has so much money been raised in taxes spent and wasted. Never again should we be so unprepared for a world downturn. Never again should there be so little room for manoeuvre
when things get tough. This Budget shows the whole country the cost of living under Labour, and everyone will conclude that the Prime Minister, who got us into this mess, cannot possibly be the person to get us out of it.
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