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Mr. Greg Hands (Hammersmith and Fulham) (Con): Yesterday, Hammersmith and Fulham council announced a 3 per cent. reduction in council tax, for the third year running. The council has also reduced its debt by almost £20 million, producing annual savings on interest rate costs of £1.7 million per annum. Over the same period, the council’s services have been upgraded from three stars to four stars by the Audit Commission. Will the Minister come to Hammersmith and Fulham to see how public finances should be run? Will he bring the Chancellor and the Prime Minister with him when he does so?
John Healey: I cannot speak for the Prime Minister or the Chancellor on this occasion, but I will come to Hammersmith and Fulham and visit where the hon. Gentleman wants me to go with his council. However, I will also visit the areas where others tell me about savage cuts to many services and grants that support some of the neediest people in the borough. I look forward to my visit.
Paul Rowen (Rochdale) (LD): Local authority services, such as homelessness services, are being affected by the recession. In the PBR on Monday, the Chancellor announced additional resources for the relevant Departments, such as the Department for Work and Pensions. Why has no extra provision been made for local authority services, which are also under severe pressure?
John Healey: I am not sure whether the hon. Gentleman was in the Chamber when I made my statement. I think that he was here to hear me say that I recognise the pressures on local authorities, but that those pressures are just as strong on national Government. The central feature that is helping local councils to manage long-term decisions, address the pressures on their finances at present and prepare for the other side of the downturn is stability in the core grant. The three-year settlement does not include the strings that have been attached in the past, which is what I am reconfirming for the House this afternoon.
John Howell (Henley) (Con): Will the Minister confirm how many specific grants will be wrapped up in the rate support grant or even changed into permitted borrowing? Is that what he euphemistically means by “mainstreaming”? If it is, it will have no positive effect on floor authorities such as those in my constituency and the rest of the south-east.
John Healey: What I mean by “mainstreaming” is precisely what I said earlier. Forty-three specific grants are now paid each month to authorities without any strings attached under the new area-based grant. This afternoon, I have also announced the indicative figures for next year and the year beyond, which councils can use to plan. In total, there are 70 different funding streams from nine different Departments, which, along with my announcements on the formula grant, add to councils’ certainty.
Points of Order
1.24 pm
Mr. Richard Benyon (Newbury) (Con): On a point of order, Mr. Speaker. On 9 October, I tabled a written question for answer on 13 October to the Home Office asking about the absence of Home Office presenting officers defending Home Office decisions at immigration tribunals. I did not receive a reply, so on 19 November I asked a further question seeking a reply to the original question, but I have not received a reply to that. If I were a cynic, I might suggest that the Department was trying to push the matter through to prorogation, so that the question would fall; it may, of course, be just incompetence in the Home Office. I seek your advice on how one can get answers on such important issues, if questions are not answered on the named day or even a month later.
Mr. Speaker: The appropriate Ministers have heard the hon. Gentleman’s remarks. My advice is that perseverance is very important, and it is possible to table the same question after state opening.
Simon Hughes (North Southwark and Bermondsey) (LD): On a point of order, Mr. Speaker. You have granted a debate on the pre-Budget report, which is welcome. Normally at the end of a Budget statement, there is a debate and then we vote on resolutions on tax changes. Obviously, we will not have that opportunity before the House is prorogued. Can I ask for your assistance in making sure that the prayer tabled by my right hon. and hon. Friends, which would allow debate and a vote on VAT changes, comes before the House, so the House can decide whether to implement those changes, which would normally take place after a Budget?
Mr. Speaker: That matter is for business questions, but we are having a debate today. The motion is
“That this House has considered the matter of the Pre-Budget Report”,
Emergency Debate
Pre-Budget Report
1.26 pm
Mr. George Osborne (Tatton) (Con): I beg to move,
That this House has considered the matter of the Pre-Budget Report.
On behalf of many hon. Members on both sides of the House, I begin by thanking you, Mr. Speaker, for taking the exceptional step of granting this emergency debate. You have protected the interests of Members on both sides of the Chamber who want to hold the Government to account.
The public would have found it extraordinary if the House of Commons had not properly considered the huge tax measures put forward by the Chancellor on Monday, or indeed the tax measures concealed by the Chancellor on Monday. Those measures are being debated by families across the country who fear their impact, and it is astonishing that the Government did not want them debated in the House of Commons.
The only explanation is that the Prime Minister is running away from the argument, because he knows that he is losing the argument. This Budget started to unravel from the moment it was delivered. The doubling of the national debt shocked the entire country. [Interruption.] Labour MPs may not be shocked, but the country is shocked to realise that the Government have taken it to the edge of bankruptcy. Within minutes of the report being published, it became clear that the national insurance rises would, contrary to the Chancellor’s claims, hit people on modest incomes. The small print of the Budget book shows that the Chancellor had been less than candid about the stealthy duty rises on alcohol and petrol. Then we discovered the £100 billion black hole in the tax revenues with no explanation of how it will be filled.
Albert Owen (Ynys Môn) (Lab): Will the hon. Gentleman give way?
Mr. Osborne: I will give way in a second, but it is not as though Labour Members wanted the debate in the first place. Let me explain what happened to the Budget, and then I will take the hon. Gentleman’s intervention.
The next morning, the OECD undermined the borrowing projections, when it issued growth forecasts for the UK that were different from the Chancellor’s and said that Britain would have the worst recession and highest percentage rise in unemployment in the G7. Yesterday lunchtime, the Institute for Fiscal Studies pointed out that the new top rate would raise, in its words, “virtually nothing”. The Governor of the Bank of England told the Treasury Select Committee yesterday that the Government should be focusing on fixing the banking system. Meanwhile, retailers are up in arms about the huge costs and logistical nightmare imposed by the temporary VAT cut. Last night, the Chancellor U-turned on the proposed hike in whisky duty, which he had announced only 24 hours earlier. Finally, it has been revealed in an official Treasury document signed off by a Treasury Minister that there is a secret tax bombshell to increase VAT to 18.5 per cent.
Albert Owen: The shadow Chancellor has mentioned value added tax and fuel duty on a number of occasions. Is it still his party’s policy to have the so-called fair fuel stabiliser, and what would that mean at today’s prices for every motorist in this country?
Mr. Osborne: The hon. Gentleman should have paid attention on Monday, because the Chancellor—[Hon. Members: “Answer!”] I am going to answer. The Chancellor introduced a version of the fuel duty stabiliser on Monday.
Angus Robertson (Moray) (SNP): Only two days ago, the UK Labour Government made a proposal that would have amounted to the biggest annual rise in taxation on the Scotch whisky industry in almost four decades. We are about to hear—perhaps—a clunking U-turn, recognising that that is a reckless and dangerous road to go down. If the Chancellor had the interests of the Scottish economy at heart, why would he have even made that proposal in the first place?
Mr. Osborne: I think that that question was mainly directed at the Chancellor, but let us just say that the U-turn on whisky duty within 24 hours proves that the Scottish interest is well represented in this Government.
Mr. Osborne: I give to my hon. Friend the Member for Broxbourne (Mr. Walker).
Mr. Charles Walker (Broxbourne) (Con): Does my hon. Friend not agree that Labour’s plans to increase VAT to 18.5 per cent.—or perhaps even 19.5 per cent.—after the next election will hit hard-working families hardest? Should the Government not be ashamed of themselves?
Mr. Osborne: My hon. Friend is absolutely right. The details are here in the Treasury document that this Government published, and let me assure my hon. Friend that the Government are going to hear about it every single day between now and the next general election.
Mr. Osborne: If hon. Members will allow me, I shall make some progress and take some interventions later. I am aware that many Members want to speak in the debate, and that Front-Bench speeches have a time limit. Therefore, I shall proceed. [Interruption.] Well, I shall take some interventions later if the hon. Member for Weaver Vale (Mr. Hall) can think of some better ones.
Now, let us be clear. We know about the secret plan for VAT; it is totally— [Interruption.]
Mr. Speaker: Order. The hon. Gentleman is not going to give way.
Mr. Mike Hall (Weaver Vale) (Lab): He referred to me.
Mr. Osborne: It has totally destroyed the public’s trust in the Government’s motives, confirming what everyone suspects—that Labour’s temporary giveaways now will be dwarfed by permanent tax rises later. Normally, it takes a week or so for the Prime Minister’s Budgets to come unstuck; this one has completely fallen apart in just 48 hours.
Let us start with the debt figures, because I think that the reaction of the country was a sharp—
Mr. Osborne: I shall give way later.
Mr. John Baron (Billericay) (Con): Will my hon. Friend give way?
Mr. Speaker: Order. It is the hon. Gentleman’s privilege to give way to who he wants to give way to. [Interruption.] Order.
Mr. Baron: I thank my hon. Friend for giving way, but does he agree that one of the most alarming aspects of the pre-Budget report is that the tax increases that have been mentioned so far will raise only a small fraction for the black hole that has been created in our public finances, and that many more tax increases are coming down the line?
Mr. Osborne: My hon. Friend is absolutely right. A £100 billion black hole has been created by fiddling the growth figures between the Budget earlier this year and the pre-Budget report now. We know that at least part of the Government’s plan is to fill that hole with the 18.5 per cent. VAT rate.
Chris Ruane (Vale of Clwyd) (Lab) rose—
Hugh Bayley (City of York) (Lab) rose—
Mr. Osborne: I shall give way to the hon. Member for City of York (Hugh Bayley) and then proceed.
Hugh Bayley: The hon. Gentleman seems to have forgotten that the national debt doubled when John Major was in power, and that the Labour party brought it down. In the early 1990s, net borrowing was at 7.4 per cent., 7.7 per cent. and 6.2 per cent. Last year, under Labour, it was at 2.6 per cent., and the Library brief shows that net borrowing will not rise to anywhere near as high as it was under the Conservatives in the early ’90s, so what is he complaining about?
Mr. Osborne:
I am glad that I took that intervention, because it enables me to say that the budget deficit next year will be the highest on record—higher than when Denis Healey went to the International Monetary Fund—and the national debt, at 58 per cent., is the highest on record. Let me remind the hon. Gentleman that this Government inherited a golden economic legacy from
the previous Conservative Government; but this Government are bequeathing to their successors a complete basket case of an economy.
The debt figures are truly shocking, as the hon. Gentleman has just reminded us: the national debt is set to double to £1 trillion, and there is that record 8 per cent. deficit. We used to think of Britain as a low-tax, low-debt economy that was one of the most successful in the world, but now we must get used to seeing Britain as the rest of the world does: as a high-tax, high-debt country that cannot get a grip on its public finances.
Let us turn to table B10 on page 198. [Interruption.] It is probably not in the Whips’ handout, but if Government Members were to read the report, they would see that for the first time in living memory the Treasury forecast does not even try to pretend that the current budget will come back into surplus in the medium term. The Chancellor’s assertion on Monday that it was all okay, because, by
“2015-16, we will again be borrowing only to invest,”—[ Official Report, 24 November 2008; Vol. 483, c. 493.]
was greeted with total derision in the Chamber. He was 100 per cent. wrong about the borrowing forecasts that he made just eight months ago, and now he wants us to take him seriously when he gives us borrowing forecasts for seven years’ time. That is not in the next Parliament but in the Parliament after next. They are ridiculous, fantasy figures from a Government who have completely lost the ability to manage taxpayers’ money and control public expenditure.
Mr. Nicholas Soames (Mid-Sussex) (Con): Does my hon. Friend agree that when the Prime Minister was still walking out with Prudence, he was right when he said that you cannot spend your way out of recession?
Mr. Osborne: For once, the Prime Minister was right. He told the Labour party conference that in his first speech as Chancellor, and, indeed, he told the Labour party in 2000 that
“tax cuts before the election lead to...rises just after.”
That is exactly what he is planning: temporary tax giveaways and lifetime rises in tax afterwards.
Mr. Osborne: I shall make some progress and then give way to the hon. Member for Wolverhampton, South-West (Rob Marris).
Chris Ruane: What about me? Just ’cos I’m not rich!
Mr. Osborne: The hon. Gentleman more than makes up for it by being too voluble at Prime Minister’s Question Time.
The growth forecasts that the Chancellor has produced are more optimistic than the Bank of England’s, more optimistic than the IMF’s and more optimistic than the OECD forecasts that were published yesterday. The OECD said:
“The downturn is expected to be severe in economies most vulnerable to the financial crisis or to sharp house price falls. These include Hungary, Iceland, Ireland, Luxembourg...Turkey and the UK.”
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