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Mr. Darling: I was about to say, Mr. Speaker, that I normally like to give way to Members as generously as possible, as the House will know, but you have indicated that you want the Front Benchers to keep their remarks to about 20 minutes or so. I will give way, but the House will understand that I will not be able to give way to everyone.
I should like to start by making two points about VAT. First, the order to implement the VAT reduction was laid on Monday. It is, of course, open to Members to pray against it, as the Liberal Democrats have done. If they want to vote against the reduction, that is a decision for them, and it is open for others to do so as well. As they will be aware, it is perfectly possible for the House to debate the matters.
Mr. Graham Stuart (Beverley and Holderness) (Con): On a point of order, Mr. Speaker. The Chancellor has just suggested that we have an opportunity to vote on this issue. Could the Speaker confirm that that is the case, and tell us when that will happen?
Mr. Darling: I will give way to hon. Members on both sides of the House, but first I should like to address the important matter of VAT. The shadow Chancellor asked me to address a particular question about the impact assessment that referred to a higher rate of VAT, which was lodged on the website of Her Majestys Revenue and Customs, and which has been the subject of a lot of newspaper reports. I want to deal with that, head on.
First, as the Prime Minister said earlier at Prime Ministers questions, in the run-up to the pre-Budget report, I consideredas any Chancellor woulda large number of options about just about every aspect of tax and spending, as the House would expect. As I had to raise money in order to ensure that our borrowing is reduced in the medium term, I concluded that the best and fairest way to do it would be to increase national insurance contributions by 0.5 per cent., as I announced on Monday. I also said that while VAT would come down to 15 per cent., it would return to its 17.5 per cent. rate at the end of 2009. That is the Governments position, and that remains the Governments position.
When I saw press reports this morning that an impact assessment containing a reference to 18.5 per cent. of VAT had been put on a website and been signed by my right hon. Friend the Financial Secretary, I asked the
permanent secretary at the Treasury to find out what had happened, as the House would expect. What I found was this: the Financial Secretary had not, in fact, signed that document. It transpires that someone within either the Treasury or Her Majestys Revenue and Customs had typed the Financial Secretarys name alongside an impact assessment that he did not know about, he had not seen and he had never authorised. [ Interruption. ] The shadow Chancellor asked me for an explanation, and the House is entitled to it. That is it. In other words, the Governments policy is and remains that VAT will fall to 15 per cent. at the beginning of next week. It will then rise to 17.5 per cent. In other words, our policy is exactly as I set out in the pre-Budget report on Monday.
Mr. George Osborne: The Chancellor has explained how the document ended up on the website. What we want to know is how it was prepared in the first place. We want to know how many Budget options there was a draft order and regulatory impact assessment for. Would he also confirm that the Treasury was considering a 20 per cent. rate in 2012?
Mr. Darling: The shadow Chancellor asked me for an explanation as to why the Financial Secretary signed it, and I have given that. As I said to the hon. Gentleman, like any Chancellor, I considered a wide range of options, and I decided that the fair way to raise money would be through the national insurance system, with a rise of 0.5 per cent.
The debate today gives us an opportunity to set out, as the shadow Chancellor said on Monday, a clear choice. I believe that, faced with todays extraordinary economic circumstances, there is a choice between supporting people, business and the economy, as countries across the world are now doing, and walking away, saying that we will do absolutely nothing and letting the recession run its course. We have been there before, in the 1980s and 1990s, and we will never return to those days again. The Government and I are determined to do everything that we can to support people and businesses during these extraordinary times, which are affecting this country and every country in the world.
Sir Robert Smith: But surely creating a bureaucratic nightmare for many small businesses through the VAT reduction does not target help on the poorest in the country. At the same time, the Government are threatening to pay for that by putting a tax on jobs in the future, when we want to keep employment, in order to recover from the downturn that the Government have forced upon us. That is surely not the way to tackle the poorest in our society.
Mr. Darling: I believe that cutting VAT, from which everyone can potentially benefit quickly, and the measures that I have implemented to reduce the amount of income tax that the lower paid pay, to increase child benefit and increase the amount of money going to pensioners will all benefit people in this country, as well as the economy as a whole. To stand back and do nothingthat is what we saw in the 1980s and the 1990s, when I think that the hon. Gentleman would have taken a different viewand thereby allow a recession to be deeper and longer would be more painful for the whole of the country, including the people whom he represents. I am not prepared to follow that course.
The Conservative party is now virtually isolated in its belief that Government should do absolutely nothing to help. All over the worldin the United States, France, Germany, Italy, Japan, China, Spain, Mexico and South KoreaGovernments are coming to the view that they ought to be helping their economies at a time when they are all being affected by the fallout that started, as the Americans themselves say, in the American sub-prime market last year.
Mr. Darling: Before I give way, let me plant something in the shadow Chancellors mind, as he referred to the Institute for Fiscal Studies so often in his speech. When Robert Chote, the director of the IFS, briefed people yesterday, he concluded his remarks by saying:
on balance the risk of acting may be less than the risk of refusing to.
Bob Spink (Castle Point) (Ind): I am grateful to the Chancellor for giving way. My constituents will be pleased to hear what he has said about not increasing VAT above 17.5 per cent. after we start to out of this recession. Would he acknowledge, however, that Britain subsidises a number of EU countries and that our membership costs us many hundreds of thousands of jobs, and probably up to about £50 billion? Is it not time to start clawing that back?
Mr. Darling: I just do not agree with the hon. Gentleman. Frankly, to cut ourselves off from the European Union at this time, or indeed any time would be absolute madness. He may have left the Conservative party, but a lot of his former colleagues share his view and I totally oppose it.
Mr. Devine: I am grateful to my right hon. Friend for giving way. Is not the difference between our party and the Conservatives that they believe that high unemployment is a price worth paying and we do not?
Mr. Darling: My hon. Friend represents an area that was devastated in the 1980s and 1990s, when the mining and steel industries came to an end. It took yearsmany of them under a Labour Governmentto ensure that we recovered.
Mr. John Redwood (Wokingham) (Con): I am grateful to the Chancellor. Given that the banking package has so far unfortunately not succeeded in loosening the credit that is so needed for anything to work in our economy, will he look again at that £487 billion package and renegotiate it, so that it is better value for the taxpayer and starts to work for the banks?
Mr. Darling: I will return to that point shortly, but may I just say that I believe that the steps that we took to recapitalise the banks were absolutely essential, because if we had not taken them, we might have been faced with the collapse of the banking system, as the Governor of the Bank of England has said. Secondly, we will have legally binding agreements with the Royal Bank of Scotland Group and with Lloyds TSB and Halifax Bank of Scotland, if that merger goes ahead, which will require them to maintain a level of lending. The right hon. Gentleman will no doubt welcome the statement by the RBS Group and NatWest at the weekend, in which they made it quite clear that they are ready and able to treat their business customers in a way that people will accept.
Chris Ruane: At last! Which dictum does the Chancellor feel is most relevant to the current slowdown: the old dictum that unemployment is a price worth paying or the new dictum that the recession should run its course?
Mr. Darling: We on the Labour Benches are quite clear: people elect their Governments to ensure that they help themto help people, businesses and the whole economyduring times of difficulty. For my part, I am not preparednor, I suspect, are my hon. Friendsto repeat the mistakes that we saw in this country 10, 20 or 30 years ago.
On Monday afternoon, the shadow Chancellor said that we were heading in the same direction as Japan. I pointed out to him that I had had the benefit of a conversation with the Finance Minister of Japan just recently, who said that one of the reasons the Japanese economy had problems for so long was that the Japanese hesitated and delayed before doing something to help support it. We are not prepared to repeat those mistakes, whether they were made in this country or in Japan in the 1990s. The hon. Gentlemans advice is completely wrong once again. When we look at what is happening in other parts of the world and at what actions other countries are taking, we can see that all over the world, all countries recognise that they have a duty to support their economies at this time. It is only the Conservative party that seems to be taking a completely opposite stance.
I will give way in a moment, but I am going to mention Europe, which I know distresses a lot of Opposition Members. [ Interruption. ] They are all sitting down now, Mr. Speaker. Despite what the shadow Chancellor said, right across Europe, including on our doorstep, namely France and Germany, Governments have taken action to stimulate their economies. That is important to consider because it is our biggest trading partner. The European Commission has today called for fiscal stimulus. It has called for a reduction in VAT,
for capital expenditure and support for small business, as well as for the European Investment Bank to take actionall the things that we are doing in this country. So yet again, that example reveals the isolation of the Conservative party.
Mr. William Cash (Stone) (Con): The Chancellor of the Exchequer says on page 191 of his pre-Budget report that the contingent liabilities will be disclosed. Does he accept that his figure on page 198, which has already been referred to, is actually £1,258 billion, if one includes the Maastricht arrangements, and that if we add the contingent liabilities, we arrive, at a conservative estimate, at a figure of £2,400 billion? That would mean 120 per cent. of national income, not the figure of 57 per cent. to which he has referred.
What I find puzzling is why, against the background that I have set out and the determination of countries across the world to take action, the Conservative party should take the position that was set out today by the shadow Chancellor. On 15 July, the Leader of the Opposition said:
what the government ought to be doing is actually cutting taxes...giving a fiscal stimulus to the economy,
this fiscal stimulus is going to cost the Government less than doing nothing because of the impact on unemployment.
It would be wrong to argue that the Conservatives did nothing about unemployment in the 1980s and 1990s. They did: they changed the way that it was calculated 31 times. We put up with unemployment that had risen to 3 million. At the same time, the number of people on incapacity benefit rose. I remind the House that there are many people [ Interruption. ] Yes, I do remember it. I remember what happened in the 1980s and 1990s, when, if I remember rightly, the shadow Chancellor was spending his time rather differently from the many people who were on the dole. Yes, there were two different pictures of Britain in the 1990s and people will remember that. I am not prepared to see the high economic and social costs of abandoning people to their fate, which is what the Conservative party argued then and what it is arguing now.
Sir Patrick Cormack (South Staffordshire) (Con): As one who remembers both of those recessions and was a Member at the time, may I say to the Chancellor that in the interests of the country I wish him well and hope his prescription succeedsI genuinely mean thatbut if we are not moving out of recession when he said he felt we would be and if his measures have not worked, will he resign?
Mr. Darling: I was going to say that I know that the hon. Gentleman was here in the 1980s and 90s and that he represents what I might call the decent wing of the Conservative party, but I would not join him in respect of his last remark.
Gordon Banks: Does my right hon. Friend agree that on the basis of the contributions we have heard from Conservative Members today, they have added nothing of any positive value to this debate at all? They are talking the UK down, just as certain Members talked the pound down. Will my right hon. Friend guarantee to the House that he will not be thrown off course by the do-nothing and dont-care party sitting on the Conservative Benches?
Rob Marris: I am grateful to my right hon. Friend. From todays revealing debates, it appears that the Conservative party position now is that in order to get out of the recession, we need credit insurance. Is my right hon. Friend aware of any other current Conservative party policy to address the recession that the world is in?
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