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My hon. Friend is right. After this years Budget, we held discussions with the utility companies, and as a result of working with them they have agreed to treble the amount of investment they are putting into assistance for the most vulnerable householdsthose
on the lowest incomes, and those at greatest risk in terms of fuel povertyin order to help them with their fuel bills this year. That is hugely important, and it needs to be seen alongside work to reduce the demand for electricity and higher heating levels by improving insulation through the Warm Front programme and also the requirement on the energy companies to put more money into insulating peoples homes.
The fundamental problem is that the world is not producing enough food or energy to meet rising demand, particularly with the growing demand from developing countries as well. We need to act at international level to help increase production in the short term. That means working with international partners to remove some of the barriers preventing increased supply. On food prices, the UK will work with other countries to put forward proposals for increasing agricultural production at next months G8 summit. We have already committed to doubling investment in agricultural research to help improve efficiency and production over the next five years. We are continuing to press for reform of the common agricultural policy, because it is unacceptable that the EU continues to apply high tariffs to many agricultural imports, particularly at a time of such high prices.
On oil, we are pressing for the removal of barriers that are preventing an increase in supply. This weekend, the Prime Minister was in Saudi Arabia making the case for greater transparency in the provision of data on oil supply and demand.
We are continuing to press for further energy market liberalisation in the EU, so that consumers and businesses do not lose out as a result of inefficient and expensive gas and electricity markets. Of course, in the medium term we need to do more to reduce our dependency on oil and gas both in Britain and across the world, for the sake not simply of the world economy but of the planet. That is why we will be setting out further proposals on renewable energy later this week.
Mr. Peter Atkinson (Hexham) (Con): On the rising price of oil, a claim is being made in the US that some of this increase is due to speculation in the oil futures market, and the Fed lays considerable blame for this on the London oil futures market, which it claims is under-regulated and wants greater regulation of. Will the right hon. Lady comply with that?
Yvette Cooper: The Financial Services Authority has been looking at this issue, and there are different views on speculation. There is also an underlying view that there are long-term problems here, regardless of the impact of short-term speculation, which mean that we are overly dependent on oil and gas not simply as a nation, but across the world. We need to do more to address that and to improve energy efficiency, while also recognising some of the pressures in the market that prevent increasing responsiveness to price signals in the energy market but also in food production.
Rob Marris: I am grateful to my right hon. Friend. She has read out a long list of what the Government are trying to do to assist in this difficult situation. Does she agree with me that the official Opposition are not fit for government, given that they cannot put forward any policies? They decry jam tomorrow when in fact, all that they are talking about is proceeds of growth, which is a jam tomorrow policy if ever I heard one. They are the ones who caused the roof to be leaking in the first place, which we fixed literally and metaphorically around the country. They say that we need to tighten fiscal policy, but they do not even say whether they will put taxes up or cut spending. With a rhetorical flourish, the hon. Member for Runnymede and Weybridge (Mr. Hammond) sets out his policy to address the huge problems associated with the cost of livingsmart metering. That is their policy.
Yvette Cooper: My hon. Friend is rightthere was a distinct absence of alternatives and proposals from the Conservative party that would actually help either the UK economy or the global economic situation.
We will continue to support the Bank of England through the monetary policy framework, and we are urging a responsible and disciplined approach to pay on both the private and public sectors. From the boardroom down, people do need to recognise the importance of this, of avoiding a return to the destructive wage spirals that we saw in previous decades, and of the Bank of Englands being able to respond within the monetary framework. That is why we have welcomed the three-year pay deals in a series of areas in the public sector.
The hon. Member for Runnymede and Weybridge (Mr. Hammond) was keen to protest the Oppositions strong support for wage restraint, probably in some determination to correct the hon. Member for Tatton (Mr. Osborne), who told the BBC,
Im not against opening negotiated pay deals,
sending a much looser signal about their commitment to support for wage restraint at a difficult time. We are increasing borrowing to support the economy, and that is the right thing to do at this stage in the economic cycle. We have delayed the increase in fuel duty, and we have increased tax credits and allowances for pensioners and cut the basic rate of tax. In addition, the Chancellor has increased the tax allowance for this year not just for those affected by the 10p rate, but for all basic rate taxpayers, putting £120 into the pockets of some 22 million people. The overall tax burden, which is less than it was during most of the 1980s, is set to fall this year.
The impact of all this is that families with children will see their tax bills fall, in many cases by several hundred pounds a year, giving them more support at a time when there are difficulties in terms of pressures on the cost of living.
Mr. Philip Hammond: I am listening carefully to what the right hon. Lady is saying. Will she answer the question that I put to her? Will she confirm that, in asking people to settle for wage increases lower than the rate of inflation, the Chancellor is asking them to take a cut in living standards?
Yvette Cooper: I should point out to the hon. Gentleman that his own partys research document has recognised that in real terms, since 2001-02even in advance of some of the most recent changes that we have set outfamilies with children are better off than they were in 1997, or in 2001-02. They are seeing real improvements in their income and their support. For example, lone parents are £12 a week better off and couples with children where one parent works full time can be more than £700 a year better off. That is why we are also providing people with additional support through tax credits. I should point out to the hon. Gentleman that this extra support being provided through tax credits, and by increasing child benefit in the next year and the winter fuel payment this year, is funded by the increase in alcohol duty that Conservative Members have opposed. They are opposing our measures to provide additional support to families at a time when people are under pressure, particularly from their winter fuel bills.
It is worth reflecting, as my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) suggested, on what the Conservatives remedy might be. They have said that they would not put up alcohol duty and would have lower borrowingnot that they can point to any kind of historical record to support their position. We must remember that this is a party that has never proposed lower borrowing. Instead, it has repeatedly proposed spending increases and tax cuts at the same timethat would push borrowing up. Over the past 12 months alone, the Conservatives have called for £10 billion of extra spending on unfunded tax cuts. At the previous election, just at the time they now say they would have cut borrowing, they were actually calling for billions of pounds in extra borrowingthe independent Institute for Fiscal Studies costed their tax and benefit plans alone at an extra £5 billion. In 2005, they were also planning billions of pounds of extra spending on top of that, on things such as the pupil passport and the patients passport for private care, not to mention defence, the right to buy, tuition fees and offshore processing centres for asylum seekers.
At the 2001 election it was the same story: a £3 billion unfunded tax cut on savings, which would help those on the highest incomes, but billions of pounds more spending on asylum seekers reception centres, defence and other areas. The Conservatives would not have cut borrowing; instead, they promised again and again to dig themselves a massive black hole for the public finances. So much for telling us to fix the roof; they promised to dig up the foundations.
This Government did invest in fixing the roof. Not only did we mend the hospital roofs, the school roofs and the council house roofs that the Conservative party neglected and abandoned, but we invested in the infrastructure and skills that the British economy needs. We have been operating within our fiscal rules to bring down debt substantially and to cut the bills of the economic failure and high unemployment that we inherited from the Conservatives. That is why we have the flexibility to support the economy right now.
Britain, like other countries, is facing a difficult time as a result of world economic problems. Families across Britain are facing the pinch. They are facing higher prices as a result of increasing world food and fuel prices, but these world economic problems need a serious responsewith substance, not just showmanship, and
with serious policies not just spinto help households and businesses through the more difficult times. That is why the House should reject the posturing of the Conservative party and back the Government amendment.
Dr. Vincent Cable (Twickenham) (LD): The hon. Member for Runnymede and Weybridge (Mr. Hammond) gave a clear and forceful critique of Government economic policy, much of which I agreed with and so do not need to repeat. I am thinking in particular of the sense of hubris that derived from the claims about there being no more boom and bust and about the best economic performance since the Hanoverians, and the contrast with todays reality.
There is one commodity that is not in scarce supply at the moment, and that is criticism of the Government, so I do not need to add to a glut in the market. I shall concentrate instead on scrutinising more closely what the Conservatives are offering as an alternative economic strategy and the terms of their motion. I think that there is a genuine interest, both positive and negative, in what an alternative Government might have to offer. Perhaps I could start by dealing with the phrasing of the motion, by which I am genuinely a bit confused. The first five lines seem eminently sensible and fair, but the motion then goes on to talk about excessively loose fiscal policy with approval. The correct policy response to excessively loose fiscal policythis is presumably what the Conservatives think the Government should have done, and is what the Conservatives would have done and would now dois to use a combination of higher taxes and reduced spending. That is the opposite to loose fiscal policy. But the motion does not say that. It says that what the Government should have donewhat the Conservatives would presumably have doneis to provide assistance and support to hard-pressed families, which involves cutting taxes and increasing spending. Within the same sentence, we have two diametrically opposed macro-economic policies
Mr. Redwood: Was the hon. Gentleman asleep when the Conservatives produced endless proposals for getting better value for money and having fewer administrators, fewer targets, fewer quangos, fewer ID cards and all the other claptrap that has wasted billions?
Dr. Cable: I was not asleep: I was assiduously reading The Cost of Living Under Labour and I shall address the seven-point plan that the Conservatives propose to deal with the situation. It is possible plausibly, and perhaps wisely, to argue for fiscal austerity and for crowd-pleasing tax cuts and spending measures, but to advance them at the same time completely lacks credibility. I will proceed through the seven points, and I hope that my argument will begin to stack up.
Mr. Philip Hammond: I have great respect for the hon. Gentleman on these issues, but does he accept that excessively loose was not our description of the Governments fiscal policyit was the OECDs description? Does he agree that if the Government had adopted a less excessively loose fiscal policy during what the Governor of the Bank of England called the NICE years, they would be in a stronger position now to provide support and assistance to hard-pressed families and businesses and thus to draw the sting from the pressure for inflationary wage increases that they now face?
Dr. Cable: That does not follow at all. The hon. Gentleman said in his speech that the main emphasis of policy has to be on monetary policy and if interest rates have to fallwhich I think is what he wants to happen to deal with the slow-down in the economyfiscal policy would have to be tightened. There is a problem with fiscal policy, as the OECD identified, although it is less extreme than the hon. Gentleman claims. Were we to go into a period of slump, or of prolonged stagnation as they had in Japan, it would be very difficult for the Government to embark on strikingly Keynesian policies, because of the erosion in the fiscal rules that has already taken place. But that is not what the motion says. It gives the impression that we can simultaneously have fiscal austerity and crowd-pleasing measures of assistance and that is a fundamental contradiction.
I shall go through the seven proposals. The first is to give 1.8 million couples an extra £2,000 a year, addressing the couple penalty in the tax credit system. That is a good policy, and I applaud it, but the concluding sentence makes it clear that the change
will be implemented as savings are generated through our radical programme of welfare reform.
our commitment to increase the proportion of taxation raised through green taxes by rebalancing taxation away from taxing good things, like jobs and investment, towards taxing bad things, like pollution and carbon emissions.
When I read that, I felt like a member of the General Medical Council reading an essay by Dr Raj Persaud. I felt that I had read that somewhere before and, in fact, I wrote it. The Conservatives have lifted our green tax switch policy of several years ago.
As a candid friend, I can tell the Conservatives in strict confidence that adopting Liberal Democrat policy in that respect would not be without problems. There are two ways in which that Conservative policyI take it as a compliment that they have borrowed it from uscould be delivered. The first is to have a carbon tax, which in reality is a tax on household fuel, and even I am not brave enough to argue for that. The second is to increase taxation on transport fuels. A bit can be raised from aviation taxes, but the green tax switch, which is the third element in the Conservative proposals, in fact involves increasing taxation on the motorist.
I do not know whether the editor of the Daily Mail has been told yet that the Conservatives are campaigning to increase taxes on the motorist. I am not even sure that the shadow Chancellor has been told, because he told The Daily Telegraph last week that he was committing himself to not increasing the 2p rate on duty on petrol in the autumn, which struck me as an extraordinarily silly and impetuous thing to do. It might be that the Government will not increase it, and that might perhaps be the right thing to do, depending on conditions at the time. We do not know what the Governments fiscal position will be in the autumn. We do not know what the oil price will be. Any sensible person would wait before making such a commitment.
Mr. Stewart Jackson: Being lectured by the Liberal Democrats on tax policy is rather like being lectured by a eunuch about an orgy. The only two discernable fiscal policies that the Liberal Democrats have had are the 50p top rate of tax, which was unpopular, and the local income tax, which is completely unworkable. Apart from that, the Liberals are doing well. Has the hon. Gentleman any other ideas on fiscal policy that he will be putting in his next manifesto?
Dr. Cable: I was actually talking about one of our policies, which the Conservatives are talking about introducing, and I was explaining how they could do it. I am not sure what the hon. Gentlemans problem is.
As I say, the shadow Chancellor has committed himself to the 2p tax reductionat least, he has made that commitment to the readers of The Daily Telegraph blog, although it might not have gone any further yet. The implication, of course, is that the family fund that the Conservatives propose to establish to help cut taxes for families starts with a deficit of £1 billion a year. That is a problem.
The third element of the programme involves cutting stamp duty for first-time buyers, but to do so at this stage of the housing cycle is not just economically foolish but positively unethical as that is trying to draw people into the housing market at a time when house prices are falling. Be that as it may, I agree that stamp duty needs to be reformed. In particular, it needs to be reformed not for people at the bottom end but for those who are paying more than £250,000 for a property, who pay the 3 per cent. slab. There is an argument for reforming stamp duty to shift the burden on to much higher value houses from those in that price range.
The interesting thing about the proposalperhaps the Conservative spokesman can clarify itis that that policy depends on the assumption that the tax change will be paid for in full by the fixed levy on foreign non-doms. My understanding is that that levy is going through the Budget, but once the Budget has been completed, will that policy lapse or will there be a second levy on foreign non-doms? That is a legitimate question and I hope that at some point we might get an answer.
There is another set of Conservative proposals to do with personal debt. I am very interested in the subject and have spoken a lot about it, and the Conservative suggestions are quite sensible if extremely modest. The one specific suggestion concerns illustrative scenarios for credit card users, and the only problem with the policy is that it is already happening. I believe that the Office of Fair Trading ruled three years ago that such illustrative scenarios for credit cards should be introduced. They have been introduced and they do not work because they are not comparable. The policy seems to have limited value, although it is perfectly sensible
Dr. Cable: The hon. Gentleman mentions our policies, but it is not our Opposition day. We had an Opposition day three months ago in which we set out some detailed proposals on the housing market and repossessions. I am happy to repeat what I said then, but this is not our Opposition day. The Conservatives have set themselves up and I hope that they would accept that it is reasonable to scrutinise what they have to say.
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