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There is continued turbulence in the global financial markets. Banks are not lending to each other in the normal way and we have seen the consequences for one of the largest banks in the US. Every major country of the world expects repercussions as a result. As we predicted last week, the increase in world fuel prices is having an impact on domestic fuel bills and household inflation.
Alan Duncan: Can the Minister list any other countries whose response to the credit squeeze to which she has just referred has been to increase taxation?
Yvette Cooper: If the hon. Gentleman had read the Red Book properly he would understand that in fact we are putting money into the economy over the next 12 months, which is the right thing to do. Borrowing will increase over the next 12 months. We are delaying the introduction of fuel duty. We are putting more money into pensioners pockets through the winter fuel payment, and in addition we are introducing the lowest rate of basic tax for 75 years.
I appreciate the fact that Opposition Members do not want to hear the truth, but we are putting more money into the economy, which is the right thing to do. We have to make sure that over the long term we bring the level of borrowing down in line with the fiscal rules we have set. We shall continue to take responsible decisions to support economic stability.
Faced with the challenges, the Chancellor set out a responsible Budget. We start in a stronger position than many other countries. Inflation is lower than in the euro area, lower than in the US and far lower than it was in the 80s or 90s. Employment is at a record high. Government debt has fallen since 1997, and borrowing is substantially lower than it was in the early 90s when it hit 7.8 per cent. of gross domestic product.
The Bank of England continues to support stability through its cuts in interest rates and through support for liquidity in the financial markets. We are working with the Bank, the Financial Services Authority, our international partners and the financial sector on ways to get the securitisation markets moving again and to help banks regain confidence in each other so that they begin lending again and get credit markets moving again.
Mr. Crispin Blunt (Reigate) (Con): Will the Chief Secretary to the Treasury explain to the House why, between 2005 and 2008after eight years of the Prime Ministers chancellorshipthe United Kingdoms contribution to the wider European Union position has been to make it considerably weaker, not stronger?
Yvette Cooper:
What we have seen is the Labour partys strong commitment to working with our European partners. There have also been improvements in the long-term economic performance of the country. The right hon. and learned Member for Rushcliffe wanted to argue that Britain was somehow the worst placed country in the entire world to deal with the global economic challenges that face us, and as I have said, if he is drawing on his experience in government, one can understand why he came to that conclusion.
Certainly, it is true that in the early 1980s and the early 90s Britain was first into recession and slow-down and last out, and had a far deeper recession than other countries across the world.
Mr. Kenneth Clarke: The right hon. Lady should follow the Chancellor and refer to the economy that the Government inherited, not the economy of the late 80s and early 90s. We had come out of the recession and were well poised for growth with low inflation when her party took over. I suggest to her that the opportunity should have been taken to put forward some credible, new fiscal rules for the future, to give realistic estimates for future borrowing and, because of the threat of the economy, to decide that this was not the time to raise corporation tax for small businesses. The whole Budget lacks imagination and any strategy at all for facing the present crisis, and makes misleading statements about the past.
Yvette Cooper: I noticed the right hon. and learned Gentleman trying very hard, in a slippery way, to sidestep and disown the events of the early 80s and early 90s, and trying to cling on to the events of the middle 90s, when he stoked up inflationary pressures, when corporation tax was substantially higher than it is today, and when the tax burden on businesses was higher as a result.
In the early 80s the world economy slowed, but Britain did not just slowit shrank. That was the case in the early 90s, too. In the early 80s, inflation hit nearly 22 per cent., unemployment topped 11 per cent., and borrowing hit nearly 5 per cent. In the early 90s, inflation hit nearly 11 per cent., unemployment topped 10 per cent., and borrowing hit nearly 8 per cent. For the 10 years before 1997, we had the lowest gross domestic product per head in the G7. Eleven years on, we have seen continuous growth and the largest growth in income per head of any G7 country. We are no longer bottom of the league; instead, we had the second highest level of national income per head of any major economy last year.
Mr. MacNeil: The Prime Ministerthe former Chancellor of the Exchequerused to boast that he had put an end to boom and bust. Does the right hon. Lady agree that those words are hollow today, or does she actually believe that the Prime Minister put an end to boom and bust? Which is it?
Yvette Cooper: The fact is that as a result of decisions that we have taken we have had much greater stability over the past decade than we had previously. For example, when the dotcom bubble burst, and after the 9/11 attacks, world stock markets halved, but while the economies in the rest of the G7 shrank, the British economy continued to grow by over 2 per cent. We face serious global challenges and serious pressures in the financial markets. They will inevitably have an impact on the UK, just as they will on countries across the world, but we start off in a stronger condition than many of our European competitors and many countries across the world, in part because of decisions that were made on issues such as Bank of England independence, which the right hon. and learned Member for Rushcliffe always opposed, and on investing in Britains future.
Adam Afriyie (Windsor) (Con) rose
Yvette Cooper: I will make progress.
The Budget sets out clear plans to help pensioners and families with children. Even at a time of global challenges, we are able to help the oldest and the youngest. The Budget raises revenue from alcohol duty; that is what makes it possible to help pensioners with their fuel bills this winter, and to help families with child benefit and the child tax credit the year after that. So this is the right time to use that revenue to help pensioners. The average price of a bottle of wine has fallen from the equivalent of nearly £4.50 in 1997 to nearer £4 today. Even after the duty increase, it will still be significantly cheaper than in 1997. So yes, we are giving pensioners an extra payment of £50 for all pensioners and £100 for the over-80s. In 2009 we will use the money to help child tax credit and those on low and middle incomes.
The question for the Opposition tonight is whether they will back that. Will they back the increase in alcohol duty to fund the payment to pensioners this winter? Will they back the increase in alcohol duty to fund the child benefit increase and the child tax credit the year after? Or will they once again turn their backs on pensioners and on families with children, as they did for so many years when they saw child poverty double and a big increase in the number of pensioners in poverty? Will they once again turn their backs on those who are youngest and those who are oldest across society? It is indicative that the one thing that the Opposition have proposed to cut to fund their plans is Sure Startone of the programmes that makes the greatest difference to those in greatest need. That is what the Conservatives want to cut.
What, then, are the alternatives offered in tonights debate? The hon. Member for Taunton set out what he thought was the Conservatives policy. He said that the hon. Member for Runnymede and Weybridge was proposing tax cuts in seven years. He pointed out that we had fought and won a war in less time. The hon. Member for Taunton is doing better than the rest of us if he manages to keep track of the Conservatives policies. They have said that they think borrowing is too high. They have also called for £10 billion of unfunded tax cuts that would push borrowing even higher.
This weekend the hon. Member for Runnymede and Weybridge said that the Opposition would not cut taxes for an entire parliamentary term, yet just three days before, on Budget day, they called for massive tax cuts to come in next month. It is still there on the Conservative partys website. The shadow Chancellor calls on the Chancellor to bring in a massive series of unfunded tax cuts, including inheritance tax for millionaires in this years Budget.
Mr. Mark Harper (Forest of Dean) (Con) rose
Yvette Cooper: I will give way to the hon. Gentleman if he can tell me what on earth his partys tax proposals are.
Mr. Harper:
I want to ask the right hon. Lady a question about hers. Will she confirm that 5.3 million
households8,000 per constituencywill be worse off as a result of the increase in the basic rate of tax from 10 to 20 per cent.?
Yvette Cooper: I notice that the hon. Gentleman could not answer the question about his partys tax proposals. We have set out a series of changes from which people will be considerably better off than they were in 1997 as a result of this Government. Three days after calling for massive tax cuts next month, his party and its No. 2 were telling The Sunday Telegraph that they could not introduce tax cuts for another five, six or seven years. Then, just a day later,
a source close to Mr Osborne
cuts could come at any time
Mr. Speaker: Order. We refer to hon. Members by their constituencies, not by their names.
Yvette Cooper: I apologise, Mr. Speaker. I was quoting from the Daily Mail, which did not use our parliamentary conventions.
Perhaps the Oppositions party leader could get a grip and set out the partys policies. In his speech on Saturday he said:
we need to get used to saying no more often than yes. That is the discipline that government demands and that is the discipline that this Party has always understood.
But what else did he say at the same conference? He promised dedicated maternity nurses, scrapping the couple penalty, rewarding management and, because it was in the north-east, a new north-south rail link and the A1 western bypass. He does not know how to say no; he just keeps saying yes. Another day, another Tory policy; another interview, another economic promise. How can the Opposition support stability in the economy if they cannot even deliver stability in their own policies? Back the Budget and back stability in the economy.
(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. Speaker then, pursuant to paragraph (3) of Standing Order No. 51 (Ways and means motions), put forthwith the Questions necessary to dispose of the further motions.
2. Income tax (charge and main rates for 2008-09)
That
(1) Income tax is charged for the tax year 2008-09.
(2) For that tax year
(a) the basic rate is 20%, and
(b) the higher rate is 40%.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
3. Income tax (personal allowances for those aged 65 or over)
That
(1) For the tax year 2008-09
(a) the amount specified in section 36(1) of the Income Tax Act 2007 and section 257(2) of the Income and Corporation Taxes Act 1988 (personal allowance for those aged 65 to 74) is replaced with £9,030, and
(b) the amount specified in section 37(1) of the Income Tax Act 2007 and section 257(3) of the Income and Corporation Taxes Act 1988 (personal allowance for those aged 75 and over) is replaced with £9,180.
(2) Accordingly
(a) section 57 of the Income Tax Act 2007 (indexation), so far as relating to the amounts specified in sections 36(1) and 37(1) of that Act, and
(b) section 257C of the Income and Corporation Taxes Act 1988, so far as relating to the amounts specified in section 257(2) and (3) of that Act,
(indexation) do not apply for the tax year 2008-09.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
4. Income tax (abolition of starting rate)
Motion made, and Question put ,
That
(1) In section 6 of the Income Tax Act 2007 (rates at which income tax is charged)
(a) in subsection (1), omit paragraph (a), and
(b) in subsection (2), omit starting rate,,
and accordingly, in the title, omit starting rate,.
(2) In section 10 of that Act (income charged at main rates: individuals)
(a) omit subsection (1),
(b) for subsection (2) substitute
(2) Income tax on an individuals income up to the basic rate limit is charged at the basic rate (except to the extent that, in accordance with section 12, it is charged at the starting rate for savings).,
(c) in subsection (4), omit the entry relating to section 12, and
(d) for subsection (5) substitute
(5) The basic rate limit is £36,000.
(6) The basic rate limit is increased in some circumstances: see
(a) section 414(2) (gift aid relief), and
(b) section 192(4) of FA 2004 (relief for pension contributions).,
and accordingly, in the title, omit starting,.
(3) Omit section 20 (starting rate limit and basic rate limit).
(4) The amendments made by this Resolution have effect for the tax year 2008-09 and subsequent tax years.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
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