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The Government have made their choice—short-term tax cuts before an election, followed by a massive tax hike after the election—just as they did in the previous
two elections. We have made our choice, too: fiscal prudence with a sustainable path for the growth of public spending and a focus on where the real problem lies, getting credit flowing again, and helping families and businesses in the meantime with properly targeted help.
The Prime Minister said that he had abolished boom and bust, so he did not notice that the boom was based on a bubble and financed by a mountain of unsustainable debt. He deluded himself and the country into mistaking the creation of credit for the creation of wealth. We had the illusion of boom and now we have the reality of a bust. Now that the bubble has burst, his only answer, like a junkie reaching for one last fix, is to borrow still more, but he cannot avoid the truth. This recession was caused by excessive debt and we cannot borrow our way out of debt.
The Prime Minister has planted a tax bombshell under the British people. The clock is ticking, but the British people are not fools. They know that Britain can no longer afford this Government. His fiscal rules are gone, his reputation is shattered, his economic policy is crumbling before our eyes and he no longer has the authority or the credibility to lead Britain through the economic challenges ahead. For years he has lived on borrowed money; now he is living on borrowed time.
4.17 pm
The Chief Secretary to the Treasury (Yvette Cooper): We have had a thoughtful debate, once we got past the early bombast from the hon. Member for Tatton (Mr. Osborne). The debate in all parts of the House has broadly been very thoughtful. Hon. Members have talked about the seriousness of the challenges that we face. We have toured the economic history, talking about Budgets from 1993, 1981 and 1967, and we even went back to Snowden. There is a broad consensus in all parts of the House that the events that we have seen in the world economy over the past 12 months have not been seen in any of our lifetimes. This week the biggest bank in the world had to be bailed out by the American Government. That is evidence of the sheer scale of the global problems facing every country in the world.
Extraordinary times require extraordinary measures. Evidence of the extraordinary times is the fact that the right hon. and learned Member for Rushcliffe (Mr. Clarke), having long been an opponent of Bank of England independence, brought himself to support the Bank’s role in the current events. As the right hon. Member for Fylde (Mr. Jack) said, there is great uncertainty. People are very worried about the economic events that they see around them. That is why the pre-Budget report is so important.
Two things are clear from this debate. First, there is a big difference. We on the Labour Benches believe that we should act now to support the economy; the Conservative party does not. Secondly, the Conservative party is not prepared to take the tough decisions in the future to bring the public finances back into line after the problems caused by the recession.
Mr. Walker: It is estimated that by the time we reach the end of this recession, this country’s national debt will be £1 trillion. Can the Chief Secretary tell us how many zeroes there are in a trillion?
Yvette Cooper: We have set out the forecasts. We are increasing debt and increasing borrowing, because that is the right thing to do, as part of the £20 billion fiscal boost announced by the Chancellor, which includes cutting VAT, extra cash for families and pensioners, income tax cuts and speeding up investment to support jobs, as well as extra help for small businesses in particular, which goes considerably further than the measures that the shadow Chancellor has announced.
Mr. Peter Bone (Wellingborough) (Con) rose—
Yvette Cooper: I want to respond to comments made in the debate.
We had a detailed discussion about the importance of the fiscal boost, which was clearly and well argued for by my right hon. Friend the Member for Bolton, West (Ruth Kelly), who pointed out the limitations of monetary policy at a time like this. Yes, we need monetary policy and action to support the banks and get them lending again, which is why the action of the Royal Bank of Scotland at the weekend has been welcomed as a step forward, and we do of course need to go further. The hon. Member for Tatton seemed to be calling for radical monetary policy; it sounded to me as if what he was actually calling for was an end to the independence of the Bank of England and for him to set interest rates instead.
Yvette Cooper: We believe that now is an important time to use fiscal policy, as do other countries. In Europe, where major countries’ debt levels are higher than ours, fiscal action is being supported. The President of the European Commission said just this morning that he is supporting a £160 billion economic recovery package across Europe. In America, for Republicans and Democrats alike, their debt is higher than ours and their borrowing is higher than ours. Yesterday, President-elect Obama announced a fiscal boost of more than 3 per cent. for the American economy, when he said:
“The consensus is this, that we have to do whatever it takes to get this economy moving again”.
Germany, Spain, the US, Australia, Japan, China and other countries across the world are all introducing fiscal boosts for their economies because they know that there is too much at stake for Governments to stand back and allow the recession to take its course. They all know that the nature of the shocks to the financial system, alongside falling inflation, means that monetary policy is not enough. Even the International Monetary Fund has said— [Interruption.]
Madam Deputy Speaker (Sylvia Heal): Order. It is entirely up to the Chief Secretary to decide whether she wants to give way.
“If there has ever been a time in modern economic history when fiscal policy and a fiscal stimulus should be used, it’s now.”
Mr. Kenneth Clarke:
My understanding of the background to the PBR on this point is that the Treasury wanted to put in credible figures for two or three years ahead to show how all this was going to be paid for before returning to stable policy, but Downing street did not. Is it not the case that more tax increases were
originally going to be put in than eventually appeared and that they have been replaced by wholly incredible growth forecasts, supposedly getting us back to 3 per cent. growth by 2012?
Yvette Cooper: The right hon. and learned Gentleman is talking nonsense. As the Chancellor said, we looked at a range of options and decided on the fairest options necessary to bring borrowing back down. That is the right thing to do to support a fiscal policy and a fiscal boost that are supported across the world. That is supported by the Bank of England, the CBI, the Federation of Small Businesses, the TUC, the national institute and the Institute for Fiscal Studies—everyone except the Conservative party.
Conservative Members also oppose the action we need to take in future to bring borrowing back down. The credit crunch is not hitting our economy only today; it is affecting our public finances into the future. This year alone, the revenue from the financial and housing sectors is likely to be £25 billion lower, and it will take the financial sector some time to recover. Because of the recession and the impact of the credit crunch, tax receipts will fall to 33.8 per cent. of GDP, and responsible Governments know that that has to be dealt with not now, while the economy is under pressure, but in future once the economy grows. We have set out how to do that in a fair way, but the Conservative Front Benchers oppose any action to bring borrowing down in future. They oppose any tax increases, although I notice that they are still supporting tax cuts on millionaires’ estates. Not only would they not bring borrowing down, but the effect of their programme would be to push borrowing up even higher.
When my right hon. Friend the Chancellor said earlier that the Government ought to be cutting taxes and giving a fiscal stimulus to the economy, quoting what the Conservative party leader said in July, I noticed that the hon. Member for Runnymede and Weybridge (Mr. Hammond) cried out no, saying it should be done permanently. I should point out to the hon. Gentleman that a permanent fiscal stimulus is a permanent increase in borrowing. That is what this party opposes and why we are calling for borrowing to come back down and why we are being responsible about it.
The cut in VAT, once it is passed through, will mean that the average household will find its normal spending costs more than £20 less each month. That is extra cash that people can spend to support the economy or to help them get through the more difficult times ahead. We want to give every pensioner in the country £60 extra in the new year—something opposed by the Conservatives at the very time that it is most difficult for pensioners to pay their fuel bills in the winter months.
We want £3 billion brought forward to repair schools, insulate homes and build roads—again, that is early investment opposed by the Conservatives. We want to put £20 billion into the economy, which the Conservatives also oppose. It will be funded by borrowing in the short term that we will bring down and which they have opposed time and time again. Yes, it means borrowing more in the short term; the truth is that it will cost us all far more later if we do not do that now. The Conservatives say that we cannot afford to do it, but we know that we cannot afford not to.
Mr. Paul Burstow (Sutton and Cheam) (LD): rose in his place and claimed to move, That the Question be now put.
Question put, That the Question be now put:—
The House divided: Ayes 67, Noes 422.
AYES
Alexander, Danny
Baker, Norman
Barrett, John
Breed, Mr. Colin
Brooke, Annette
Browne, Mr. Jeremy
Bruce, rh Malcolm
Burstow, Mr. Paul
Burt, Lorely
Cable, Dr. Vincent
Carmichael, Mr. Alistair
Clegg, rh Mr. Nick
Davey, Mr. Edward
Davies, Mr. Dai
Dodds, Mr. Nigel
Farron, Tim
Featherstone, Lynne
Foster, Mr. Don
Gidley, Sandra
Goldsworthy, Julia
Hancock, Mr. Mike
Harris, Dr. Evan
Harvey, Nick
Heald, Mr. Oliver
Heath, Mr. David
Hemming, John
Holmes, Paul
Horwood, Martin
Hosie, Stewart
Howarth, David
Hughes, Simon
Huhne, Chris
Hunter, Mark
Keetch, Mr. Paul
Kramer, Susan
Laws, Mr. David
Leech, Mr. John
Lilley, rh Mr. Peter
MacNeil, Mr. Angus
Mason, John
McCrea, Dr. William
Moore, Mr. Michael
Mulholland, Greg
Öpik, Lembit
Pelling, Mr. Andrew
Price, Adam
Reid, Mr. Alan
Rennie, Willie
Robertson, Angus
Rowen, Paul
Russell, Bob
Sanders, Mr. Adrian
Simpson, David
Stuart, Mr. Graham
Stunell, Andrew
Swinson, Jo
Taylor, Dr. Richard
Teather, Sarah
Thurso, John
Webb, Steve
Weir, Mr. Mike
Williams, Hywel
Williams, Mark
Williams, Stephen
Willis, Mr. Phil
Willott, Jenny
Wilson, Sammy
Tellers for the Ayes:
Sir Robert Smith and
Mr. Roger Williams
NOES
Afriyie, Adam
Ainger, Nick
Ainsworth, rh Mr. Bob
Ainsworth, Mr. Peter
Alexander, rh Mr. Douglas
Allen, Mr. Graham
Amess, Mr. David
Ancram, rh Mr. Michael
Anderson, Mr. David
Anderson, Janet
Arbuthnot, rh Mr. James
Atkins, Charlotte
Atkinson, Mr. Peter
Austin, Mr. Ian
Austin, John
Bacon, Mr. Richard
Bailey, Mr. Adrian
Baldry, Tony
Banks, Gordon
Barker, Gregory
Barlow, Ms Celia
Barron, rh Mr. Kevin
Battle, rh John
Bayley, Hugh
Beckett, rh Margaret
Begg, Miss Anne
Bell, Sir Stuart
Bellingham, Mr. Henry
Benn, rh Hilary
Benyon, Mr. Richard
Bercow, John
Beresford, Sir Paul
Betts, Mr. Clive
Binley, Mr. Brian
Blackman, Liz
Blackman-Woods, Dr. Roberta
Blizzard, Mr. Bob
Blunkett, rh Mr. David
Blunt, Mr. Crispin
Bone, Mr. Peter
Borrow, Mr. David S.
Boswell, Mr. Tim
Bottomley, Peter
Brady, Mr. Graham
Brazier, Mr. Julian
Brennan, Kevin
Brokenshire, James
Brown, rh Mr. Nicholas
Brown, Mr. Russell
Browne, rh Des
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burgon, Colin
Burnham, rh Andy
Burns, Mr. Simon
Burt, Alistair
Butler, Ms Dawn
Butterfill, Sir John
Byrne, rh Mr. Liam
Caborn, rh Mr. Richard
Cairns, David
Campbell, Mr. Ronnie
Carswell, Mr. Douglas
Caton, Mr. Martin
Challen, Colin
Chapman, Ben
Chaytor, Mr. David
Chope, Mr. Christopher
Clappison, Mr. James
Clark, Greg
Clark, Ms Katy
Clark, Paul
Clarke, rh Mr. Charles
Clarke, rh Mr. Kenneth
Clarke, rh Mr. Tom
Clelland, Mr. David
Clwyd, rh Ann
Coaker, Mr. Vernon
Coffey, Ann
Cohen, Harry
Connarty, Michael
Conway, Derek
Cooper, Rosie
Cooper, rh Yvette
Corbyn, Jeremy
Cousins, Jim
Crausby, Mr. David
Creagh, Mary
Cruddas, Jon
Cummings, John
Cunningham, Mr. Jim
Cunningham, Tony
Curry, rh Mr. David
Darling, rh Mr. Alistair
David, Mr. Wayne
Davidson, Mr. Ian
Davies, David T.C. (Monmouth)
Davies, Philip
Davies, Mr. Quentin
Davis, rh David
Dean, Mrs. Janet
Denham, rh Mr. John
Devine, Mr. Jim
Dhanda, Mr. Parmjit
Djanogly, Mr. Jonathan
Dobson, rh Frank
Donohoe, Mr. Brian H.
Doran, Mr. Frank
Dorries, Mrs. Nadine
Dowd, Jim
Duncan, Alan
Duncan Smith, rh Mr. Iain
Dunne, Mr. Philip
Durkan, Mark
Eagle, Angela
Eagle, Maria
Efford, Clive
Ellman, Mrs. Louise
Ellwood, Mr. Tobias
Ennis, Jeff
Evennett, Mr. David
Fabricant, Michael
Fallon, Mr. Michael
Farrelly, Paul
Field, Mr. Mark
Fitzpatrick, Jim
Flello, Mr. Robert
Flint, rh Caroline
Follett, Barbara
Foster, Michael Jabez (Hastings and Rye)
Francis, Dr. Hywel
Francois, Mr. Mark
Fraser, Christopher
Gale, Mr. Roger
Gapes, Mike
Gardiner, Barry
Garnier, Mr. Edward
Gauke, Mr. David
George, rh Mr. Bruce
Gerrard, Mr. Neil
Gibb, Mr. Nick
Gibson, Dr. Ian
Gillan, Mrs. Cheryl
Godsiff, Mr. Roger
Goggins, Paul
Goodman, Helen
Goodwill, Mr. Robert
Gove, Michael
Gray, Mr. James
Green, Damian
Greening, Justine
Griffith, Nia
Griffiths, Nigel
Grogan, Mr. John
Gwynne, Andrew
Hall, Mr. Mike
Hall, Patrick
Hamilton, Mr. David
Hamilton, Mr. Fabian
Hammond, Mr. Philip
Hammond, Stephen
Hands, Mr. Greg
Hanson, rh Mr. David
Harman, rh Ms Harriet
Harper, Mr. Mark
Harris, Mr. Tom
Havard, Mr. Dai
Hayes, Mr. John
Healey, rh John
Heathcoat-Amory, rh Mr. David
Hendrick, Mr. Mark
Hendry, Charles
Hepburn, Mr. Stephen
Heppell, Mr. John
Herbert, Nick
Hesford, Stephen
Hewitt, rh Ms Patricia
Heyes, David
Hill, rh Keith
Hillier, Meg
Hoban, Mr. Mark
Hodgson, Mrs. Sharon
Hoey, Kate
Holloway, Mr. Adam
Hoon, rh Mr. Geoffrey
Hope, Phil
Hopkins, Kelvin
Horam, Mr. John
Howard, rh Mr. Michael
Howell, John
Howells, Dr. Kim
Hoyle, Mr. Lindsay
Hughes, rh Beverley
Humble, Mrs. Joan
Hunt, Mr. Jeremy
Hutton, rh Mr. John
Iddon, Dr. Brian
Illsley, Mr. Eric
Ingram, rh Mr. Adam
Irranca-Davies, Huw
Jack, rh Mr. Michael
Jackson, Mr. Stewart
James, Mrs. Siân C.
Jenkins, Mr. Brian
Johnson, rh Alan
Johnson, Ms Diana R.
Jones, Mr. David
Jones, Helen
Jones, Mr. Kevan
Jones, Mr. Martyn
Jowell, rh Tessa
Joyce, Mr. Eric
Kawczynski, Daniel
Keeley, Barbara
Keen, Alan
Kelly, rh Ruth
Kemp, Mr. Fraser
Key, Robert
Khan, Mr. Sadiq
Kidney, Mr. David
Kilfoyle, Mr. Peter
Kirkbride, Miss Julie
Knight, rh Jim
Kumar, Dr. Ashok
Ladyman, Dr. Stephen
Laing, Mrs. Eleanor
Lait, Mrs. Jacqui
Laxton, Mr. Bob
Lazarowicz, Mark
Leigh, Mr. Edward
Lepper, David
Letwin, rh Mr. Oliver
Levitt, Tom
Lewis, Mr. Ivan
Lidington, Mr. David
Linton, Martin
Lloyd, Tony
Loughton, Tim
Love, Mr. Andrew
Lucas, Ian
Mackay, rh Mr. Andrew
MacShane, rh Mr. Denis
Main, Anne
Malik, Mr. Shahid
Malins, Mr. Humfrey
Mallaber, Judy
Mann, John
Maples, Mr. John
Marris, Rob
Marsden, Mr. Gordon
Mates, rh Mr. Michael
Maude, rh Mr. Francis
May, rh Mrs. Theresa
McAvoy, rh Mr. Thomas
McCabe, Steve
McCarthy, Kerry
McCarthy-Fry, Sarah
McCartney, rh Mr. Ian
McDonagh, Siobhain
McDonnell, John
McFadden, rh Mr. Pat
McFall, rh John
McGovern, Mr. Jim
McGuire, rh Mrs. Anne
McIntosh, Miss Anne
McIsaac, Shona
McKechin, Ann
McLoughlin, rh Mr. Patrick
McNulty, rh Mr. Tony
Mercer, Patrick
Merron, Gillian
Milburn, rh Mr. Alan
Miller, Andrew
Miller, Mrs. Maria
Milton, Anne
Mitchell, Mr. Andrew
Moffatt, Laura
Moon, Mrs. Madeleine
Moran, Margaret
Morgan, Julie
Morley, rh Mr. Elliot
Moss, Mr. Malcolm
Mudie, Mr. George
Mullin, Mr. Chris
Mundell, David
Murphy, rh Mr. Jim
Murphy, rh Mr. Paul
Murrison, Dr. Andrew
Naysmith, Dr. Doug
Neill, Robert
Newmark, Mr. Brooks
Norris, Dan
O'Brien, Mr. Mike
O'Brien, Mr. Stephen
O'Hara, Mr. Edward
Olner, Mr. Bill
Osborne, Mr. George
Osborne, Sandra
Palmer, Dr. Nick
Paterson, Mr. Owen
Pearson, Ian
Penrose, John
Plaskitt, Mr. James
Pope, Mr. Greg
Pound, Stephen
Prentice, Bridget
Prentice, Mr. Gordon
Primarolo, rh Dawn
Prisk, Mr. Mark
Pritchard, Mark
Prosser, Gwyn
Purchase, Mr. Ken
Purnell, rh James
Randall, Mr. John
Raynsford, rh Mr. Nick
Redwood, rh Mr. John
Reed, Mr. Andy
Reed, Mr. Jamie
Robathan, Mr. Andrew
Robertson, Hugh
Robertson, John
Robertson, Mr. Laurence
Robinson, Mr. Geoffrey
Rosindell, Andrew
Roy, Lindsay
Ruane, Chris
Ruffley, Mr. David
Russell, Christine
Ryan, rh Joan
Salter, Martin
Scott, Mr. Lee
Selous, Andrew
Shapps, Grant
Sharma, Mr. Virendra
Shaw, Jonathan
Sheerman, Mr. Barry
Sheridan, Jim
Simmonds, Mark
Simon, Mr. Siôn
Simpson, Alan
Simpson, Mr. Keith
Singh, Mr. Marsha
Skinner, Mr. Dennis
Smith, rh Mr. Andrew
Smith, Ms Angela C. (Sheffield, Hillsborough)
Smith, Angela E. (Basildon)
Snelgrove, Anne
Soames, Mr. Nicholas
Soulsby, Sir Peter
Southworth, Helen
Spellar, rh Mr. John
Spelman, Mrs. Caroline
Spicer, Sir Michael
Spink, Bob
Spring, Mr. Richard
Stanley, rh Sir John
Starkey, Dr. Phyllis
Steen, Mr. Anthony
Stoate, Dr. Howard
Strang, rh Dr. Gavin
Straw, rh Mr. Jack
Streeter, Mr. Gary
Stuart, Ms Gisela
Stuart, Mr. Graham
Swayne, Mr. Desmond
Swire, Mr. Hugo
Syms, Mr. Robert
Tami, Mark
Tapsell, Sir Peter
Taylor, Ms Dari
Taylor, David
Taylor, Mr. Ian
Thornberry, Emily
Timms, rh Mr. Stephen
Timpson, Mr. Edward
Todd, Mr. Mark
Touhig, rh Mr. Don
Tredinnick, David
Truswell, Mr. Paul
Turner, Mr. Andrew
Twigg, Derek
Tyrie, Mr. Andrew
Ussher, Kitty
Vaizey, Mr. Edward
Vaz, rh Keith
Viggers, Sir Peter
Villiers, Mrs. Theresa
Vis, Dr. Rudi
Walker, Mr. Charles
Wallace, Mr. Ben
Walley, Joan
Waltho, Lynda
Ward, Claire
Wareing, Mr. Robert N.
Watkinson, Angela
Watson, Mr. Tom
Watts, Mr. Dave
Whitehead, Dr. Alan
Whittingdale, Mr. John
Wicks, rh Malcolm
Wiggin, Bill
Willetts, Mr. David
Williams, rh Mr. Alan
Williams, Mrs. Betty
Wills, rh Mr. Michael
Wilshire, Mr. David
Wilson, Mr. Rob
Winnick, Mr. David
Winterton, Ann
Winterton, Sir Nicholas
Winterton, rh Ms Rosie
Wood, Mike
Woodward, rh Mr. Shaun
Woolas, Mr. Phil
Wright, Mr. Anthony
Wright, David
Wright, Mr. Iain
Wright, Jeremy
Wright, Dr. Tony
Wyatt, Derek
Young, rh Sir George
Tellers for the Noes:
Chris Mole and
Mr. Frank Roy
Question accordingly negatived.
It being more than three hours since the commencement of proceedings, the motion lapsed without Question put, pursuant to Standing Order No. 24.
Simon Hughes (North Southwark and Bermondsey) (LD): On a point of order, Madam Deputy Speaker. The whole House was grateful to Mr. Speaker for allowing the debate, but my colleagues and I have tried twice to get a vote on the substantive matters to do with the pre-Budget report, first by tabling a prayer against the proposals for the tax changes and secondly by seeking a vote on whether we have had enough time today to debate the pre-Budget report. Labour and the Conservatives voted together to prevent that vote. Will you advise the House— [Interruption.]
Madam Deputy Speaker (Sylvia Heal): Order. Will Members please come to order so that I can hear the hon. Gentleman’s point of order?
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