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Barry Gardiner (Brent, North) (Lab):
The Chancellor is right to address the lack of liquidity in the financial
markets. Will he now consider the effect that the lack of liquidity might have on the utilities sector, which bears a collective £28 billion burden of debt? Has he spoken to utility regulators to ask why they continue to rely on rating agencies to fulfil their statutory duty to assess financial stability, despite their track record?
Mr. Darling: The scheme that we are considering applies to the institutions that can normally get support from the Bank of England. That would not include a utility company. Credit rating agencies should be perceived as a means of reaching a decision, whether that is for a bank, a utility company or anybody else. Their findings are not something definitive, which demands no further questions. The responsibility for running companies and making decisions about debt must lie, first and foremost, with their boards of directors.
Mr. Lindsay Hoyle (Chorley) (Lab): Anything that stops us going back to the 15 per cent. interest rates of 1992 must be welcomed in the House. However, what will be the pecking order for the banks in borrowing the £50 billion? Will UK banks come first or can foreign banks also borrow the money?
Mr. Darling: As I said, the facility is open to the banks that are normally here—British banks and those from abroad with branches here. From the discussions that the Bank of England has held, I do not think that there will be a pecking order problem. The Bank of England is fairly confident that the banks that want to take advantage of the facility can do that.
Mr. Philip Dunne (Ludlow) (Con): Banks have been reluctant to take advantage of overnight borrowing facilities from the Bank of England because of the opprobrium that attaches to that public borrowing. What makes the Chancellor so certain that they will be more likely to borrow under the facility that he has just announced rather than under the overnight facility?
Mr. Darling: As is fairly widely known, a long discussion has taken place between the Bank of England and banks in this country about what the scheme might resemble and whether banks might take advantage of it. I believe that most said that they would. The hon. Gentleman mentioned opprobrium. A feature of the scheme is that the Bank of England will not report on individual banks as and when they may look for facilities. It will report on an aggregate but, for obvious reasons, there is no sense in identifying individuals. My guess is that the scheme will be taken up fairly widely.
Points of Order
4.17 pm
Mr. Gerald Howarth (Aldershot) (Con): On a point of order, Mr. Speaker. Following the recent Freedom of Information Act report released to The Times last week by the Ministry of Defence on the humiliating abduction of Royal Navy and Royal Marine personnel by the Iranian revolutionary guard, I seek your advice on how to secure more transparent, accurate and timely information from the Government on the issue, which is obviously of great importance.
According to an internal and unpublished Ministry of Defence report dated 13 April last year, the illegal abduction by the Iranian revolutionary guard navy took place in waters that are not internationally agreed to be Iraqi. However, the Secretary of State told the House on 19 June last year:
“There is no doubt that HMS Cornwall was operating in Iraqi waters and that the incident itself took place in Iraqi waters.”—[ Official Report, 19 June 2007; Vol. 461, c. 1266.]
I am sure that you agree that it is important that Parliament be presented with the facts. It appears—it may not be the case—from the reports that the House was given information, which the Ministry of Defence has contradicted. Although there are Defence questions next week, the matter is so important to our foreign policy that I wonder whether you could advise me on how best I might seek information from a Ministry of Defence Minister.
Mr. Speaker: The hon. Gentleman has given me the solution to his problem by saying that there are Defence questions next week. He should ask those questions. It is up to Members of Parliament to seek clarification on all matters that come before the House and to ask questions. The hon. Gentleman should continue to ask questions, either written or oral, when he gets the opportunity.
Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): Further to that point of order, Mr. Speaker.
Mr. Speaker: I was telling the hon. Gentleman that it was not a point of order.
John Bercow (Buckingham) (Con): On a point of order, Mr. Speaker, on a different matter about which I seek your guidance. Given the weekend reports of further arrests, torture and killings that were undertaken in Zimbabwe—to the distress, I am sure, of hon. Members of all parties—at the obvious behest of the mass murderer Mugabe, and in the light of the Prime Minister’s welcome public statements in the United States and elsewhere on the subject, have you had any indication that the Foreign Secretary intends to come to the House to make a statement about how, on a multilateral basis, we can achieve progress to bring that ghastly regime to book and ensure that the people of Zimbabwe have a better future?
Mr. Speaker: These matters should not be raised in points of order. It is up to Ministers whether they wish to come to the House. I think that we can leave it at that and not use points of order to raise such matters.
Orders of the Day
Finance Bill
[Relevant Document: The Ninth Report from the Treasury Committee, on the 2008 Budget, HC 430.]
Order for Second Reading read.
4.21 pm
The Chief Secretary to the Treasury (Yvette Cooper): I beg to move, That the Bill be now read a Second time.
The Finance Bill implements measures from the Budget 2007, the pre-Budget report last year and the Budget 2008. There are three central areas in the Bill that I want to highlight: support for the economy at a time of global economic turbulence; the changes to the personal tax system; and the long-term reforms for the future of our country, particularly those addressing climate change. I will take each of those three areas in turn.
The Bill supports the economy at a time of significant global pressures. As the Chancellor said in his statement a moment ago, a serious global credit squeeze is taking place, triggered by the problems in the US sub-prime mortgage market. At the same time, as families in Britain know well, world food and fuel prices are increasing, too. As a result, all economies across the world are likely to be affected this year.
The British economy is well placed to weather global storms. Inflation is lower here than in the US or the euro area. As the recent labour market figures show, claimant count unemployment is now at its lowest for more than 30 years. Product, capital and labour markets have become more flexible and responsive as a result of the skills and competition reforms that we have introduced. That is why the independent International Monetary Fund has forecast that the UK will be the joint fastest growing economy in the G7 this year.
However, resilience is not enough. We are doing more now to respond to the economic challenges that we face. So for a start, the Chancellor has today set out the steps that we are taking with partners across the world to help address the problems that have stopped banks from lending to each other. As well as the action to promote financial stability, supporting liquidity and monetary policy, the Budget sets fiscal policy to support the economy, too.
The overall approach set out in the Budget and implemented through the Finance Bill is deliberately to put more money into the economy this year. We are using the flexibility that our fiscal rules give us to support additional borrowing in a sensible and sustainable way when the economic pressures are greatest. That is the right thing to be doing now. The overall impact of the fiscal decisions is to put billions more into the economy this year, through the automatic stabilisers and the decisions on things such as delaying the increase in fuel duty until October, which is implemented in the Bill. That is the right thing to do within the fiscal framework at a time when the economy faces global challenges.
Thanks to our fiscal rules, we are able to protect investment at the same time. Previous Governments often slashed capital investment when economic pressures grew. We are protecting it, however, which means protecting
investment for the future in our vital transport infrastructure, in our schools and hospitals, and in the underpinnings of the economic growth that we have sustained for so long.
The Opposition have set out a rather different fiscal judgment—in fact, they have set out several, depending on their audience. First they say that borrowing is too high; then they set out ways to increase it further. In the past 12 months, they have set out £10 billion of unfunded tax promises. On Budget day alone, the shadow Chancellor set out proposals for borrowing an extra £5.4 billion, cutting inheritance tax except for millionaires, changing stamp duty and more. Six days later, after the Budget debates, the Opposition voted for an extra £10 billion in borrowing on top of that and against all the revenue-raising measures—on alcohol, on vehicle excise duty and so on—but for none of the tax cuts. Funny that. The Opposition have never told us where the money would come from or how they would make up their black hole—a black hole that just gets bigger and bigger.
The Budget and the Finance Bill also support the economy in other ways, confirming corporation tax at 28 per cent. for this year and next—the lowest rate in the G7 and the lowest rate since the tax was introduced. The Bill also makes changes to the small companies rate to create a more level playing field, and introduces a new annual investment allowance to support capital investment.
The Bill also increases research and development tax credits and makes the enterprise investment scheme—a tax scheme that supports small businesses—more generous. It restructures capital gains tax, creating a single rate of 18 per cent. with a new entrepreneurs relief. It implements more than 20 business tax simplification measures that were announced in the pre-Budget report and the Budget. So, the Bill supports the economy, simplifies the tax system to help businesses and provides overall support for the economy at a time of global pressures, while retaining a sustainable and responsible approach to the public finances.
I want to turn now to the personal tax measures in the Bill. It sets out a major package of reforms to run alongside the changes made by the National Insurance Contributions Bill last year and the changes made to the tax credit system. These include the cut in the basic rate by 2p to 20p, its lowest rate for 75 years. They also include the removal of the 10p starting rate. They include increases in the tax allowance for pensioners, increases in the working tax credit for those in low-paid work, increases in child tax credits and, next year, child benefit to help families with children, and changes to the national insurance upper earnings limit.
As the independent Institute for Fiscal Studies has set out, the poorest third of the population will benefit most from this package because of what we have done for pensioners, for families with children and for low-paid workers through allowances and tax credits. Indeed, the impact of the two Budgets and the pre-Budget report is to raise more than 500,000 children out of poverty. We should not underestimate the immense impact of this. When children grow up in poverty, it can disadvantage them for the whole of their lives. Lifting them out of poverty now could help them not only in the year to come but for decades into the
future. As a result of these measures, households with children in the poorest fifth of the population will be on average £340 a year better off, and that will make a very big difference to them.
Pensioners will benefit too—600,000 pensioners will be taken out of tax altogether—and the increases to the working tax credit will help low-paid workers without children. The working tax credit increases will mean that a single-earner household without children earning, say, £14,000 a year will be about £180 a year better off as a result of the Bill.
I want to say more about those who will not benefit from this year’s package. These are major reforms, and the majority of households will be better off or remain the same, although some will pay more as a result of the package. It is hard, in any one Budget, to help everyone, and those who lose in any one year might have benefited in previous years or might benefit in the next. If we look at the Budgets as a whole since 1997, we see that even those who are paying more in this year’s Budget have still benefited significantly overall since 1997. So, on average, those who will pay more this year are still about £500 a year better off than they would have been under the 1997 personal tax and benefits system that the Conservatives left us with.
Mr. Philip Hammond (Runnymede and Weybridge) (Con): As the right hon. Lady has already cited the Institute for Fiscal Studies, will she remind the House what the institute’s estimate is of the number of people who will be losers as a result of this package? Will she also remind the House of the Treasury’s own estimate, as reported to the Select Committee?
Yvette Cooper: We have set out the figures. Four out of five households will be better off or see no change. One in five will pay more as a result of this year’s personal tax package, but that does not take into account measures such as the extra given on the winter fuel package or the increases to the minimum wage. For example, the increases to the minimum wage over the past two years alone are worth about £13 a week to those on the lowest pay. We want to do more to help many of those who will not benefit from this year’s package and we have already been working to achieve that.
Mr. Frank Field (Birkenhead) (Lab): Does my right hon. Friend accept that Labour Members in general fully support the Budget and the direction in which it is going, but that there are 5.3 million workers—including some in my own constituency and that of the Exchequer Secretary to the Treasury, my hon. Friend the Member for Wallasey (Angela Eagle)—who are worse off? Before we reach clause 3, as I think we will do next week, I hope that the Government will be able to find their way not to unstitch the Budget—nobody is asking that—but to bring forward specific proposals to ensure that those in work who are on the lowest pay are not made worse off by a Labour Budget.
Yvette Cooper:
I welcome my right hon. Friend’s support for the overall Budget and the fact that he is not asking the Government to reopen the Budget. I hope that he will understand quite how impractical that would be when people already have their tax codes for this year and are already paying tax and benefiting
from tax credits as part of this year’s proposals. He will also recognise that tax changes are part of a major package and that it is not always possible to help everybody in any one package; even those who may end up paying more as a result of this package will still be significantly better off on average than under the Conservatives’ package of 1997.
I would also say to my right hon. Friend that the Chancellor has said that it is his intention to return to this issue in future Budgets and the pre-Budget report and that he wants to look further into what we can do for those on the lowest incomes, just as we have in previous Budgets. That is why we have already made proposals for additional money to help those over 60 this year with winter fuel payments and also why we have provided further help with child tax credit and child benefit. Those will be part of a major programme of work that we shall be taking forward.
Yvette Cooper: Will hon. Members allow me to complete one more paragraph of my speech, after which I will be happy to take as many interventions as they wish?
In the Budget report, we announced that we would begin a new programme of work on the next phase of tackling child poverty. We said that we would work with stakeholders, launching seminars and debates over the next few months, and begin pilot programmes on new approaches to help more children out of poverty. I can tell the House that we will now extend that work to include consideration of households on low incomes without children. Many without children have already benefited from things such as minimum wage increases and the working tax credit, but we want, as always, to do more for those on the lowest incomes, given the resources in the economy at the time. We will therefore consult stakeholders, MPs and different groups on the next phase of tackling poverty and unfair inequality in Britain. That work will initially feed into the pre-Budget report and then future Budgets as well.
Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): Nowhere more than Plymouth appreciates the importance of the economic stability that my right hon. Friend set out earlier in her speech, but she will know that I inherited from my Conservative predecessor the poorest ward in England. Although I can see from what she has set out that the net losers are considerably fewer than was put out by the press over the weekend, does she nevertheless understand that it is some of the youngest people in the constituency, who already feel undervalued, who are losing out? Will she look further into how they might be given a signal that they do matter?
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