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The Chief Secretary to the Treasury (Yvette Cooper): We have had four days of debate on Budget measures. We heard from my right hon. Friends the Members for Coatbridge, Chryston and Bellshill (Mr. Clarke) and for Neath (Mr. Hain) about the importance of not returning to the policies of the 1980s, which had such devastating consequences for Britain. We heard from the hon. Members for Gainsborough (Mr. Leigh) and for Belfast, North (Mr. Dodds), who talked about the importance of efficiency savings; many of the kinds of things they mentioned are under way as a result of the operational efficiency review. We heard from my hon. Friend the Member for City of Durham (Dr. Blackman-Woods), and from the hon. Members for Hornsey and Wood Green (Lynne Featherstone) and for Foyle (Mark Durkan), about the value of support for those who are losing their jobs. We heard, too, from the hon. Members for Wimbledon (Stephen Hammond), for Bournemouth, East (Mr. Ellwood) and for South Holland and The Deepings (Mr. Hayes), who argued for the importance of public spending cuts.
We hold this debate at a difficult time for the British economy and the world economy. For the first time since the second world war, the economy of the entire world is shrinking. Many of the biggest banks in the world have had to be rescued by their national Governments. World trade has dropped. By the end of last year, the German economy had shrunk by 3.1 per cent., the
Japanese economy by 4.6 per cent., and the UK economy by 2.3 per cent. The world stock market is down £30 trillion from its peak in 2007. So, as we agreed at the G20 summit, it is vital that every Government act to support their economy through a difficult time. That is why this Budget sets out further measures to help those who lose their jobs, to help those fearful of losing their homes, to help businesses struggling to invest, and to help savers affected by interest rate reductionsall measures to support the economy at a difficult time. My right hon. Friend the Secretary of State for Work and Pensions set out proposals for £5 billion of extra investment to help the unemployed: extra help and advice; extra training places; golden hellos for employers who take someone on; and now a jobs guarantee backed by 250,000 new jobs. I think that those are the most important measures in the Budget, because we should never go back to the travesty of long-term youth unemployment that we saw in the 1980s.
Before todays debate I had assumed from the statements of Conservative Front Benchers that they opposed the extra help for the unemployed, but the right hon. Member for Maidenhead (Mrs. May) said that she supported it. As we made clear, this is £5 billion of extra spending over this year and next, paid for primarily by additional short-term borrowing; it is part of the fiscal stimulus. Again, I give her an opportunity to tell the House whether she supports the extra investment for the unemployed and has done a U-turn on the fiscal stimulus, or opposes the additional £5 billion of investment over the next two years to support the unemployed. I give Conservative Front Benchers the opportunity to interveneBack Benchers may also want to do soto tell us whether they support the £5 billion of additional investment to help the unemployed. The right hon. Lady said that she did, yet the shadow Chancellor has said that he does not. Do they support extra investment to support the unemployed, or not? Do they support the fiscal stimulus, or not? [ Interruption. ] They are saying that it is not £5 billion. We have set out £5 billion of additional spending over this year and next as part of the pre-Budget report, and yet Conservative Members refuse to support it.
Let us turn to business, where the same question applies. The shadow [ Interruption. ]
Mr. Speaker: Order. The Chief Secretary should be allowed to address the House properly. [ Interruption. ] Order. Far too many right hon. and hon. Members are interfering.
Yvette Cooper: I have offered Opposition Members the opportunity to get to their feet and tell me what their policy is, but they repeatedly refuse.
I shall set out the issue for business. As part of the Budget, we have set out additional capital allowances for business. The right hon. and learned Member for Rushcliffe (Mr. Clarke), the shadow shadow Chancellor, said in yesterdays debate that he agreed with those measures, but they, too, are part of the fiscal stimulus, funded by more than £1 billion of extra borrowing this year. We will get extra revenue in future years as a result.
Do the Opposition support those tax allowances and the extra funding for business, or would they prefer the shadow Chancellors approach? He has argued that in fact we should cut such tax allowances and make it harder for businesses to invest in the future. No Opposition Member will tell us what they think about policies to help the unemployed and businesses. Those are the measures in our Budget that we are debating today, and the Opposition have refused to support them. They refuse to support the economy through a downturn and a recession, and they refuse to back the additional support that the economy needs.
The Budget also set out extra help for families, savers and pensioners, and of course we have the sustained cut in VAT. The hon. Member for Twickenham (Dr. Cable) has opposed that, yet independent economists are now saying that it is working to support the economy and retail sales. The total fiscal stimulus is likely to reduce the drop in national income by 0.75 per cent, yet Opposition Members have opposed that action to reduce the severity of the recession.
Alongside the action on interest rates and the action to safeguard peoples savings in the banking system and get banks lending again, those measures are supporting more than 500,000 jobs, but again, the Conservatives are opposing that. When we debated the last Budget 12 months ago, their soundbite of the month was that they wanted a Government who got off peoples backs. It turns out that they wanted a Government who turn their back, just as their party did in the 80s and 90s.
The right hon. and learned Member for Rushcliffe argued yesterday that we could not afford to support the economy in this way. The truth is that we cannot afford not to. If we do not take action now, this recession will run longer and deeper, push debt up higher and cost us all more in the long run. The Nobel prize-winning economist Paul Krugman has said:
The bottom line, then, is that people who think that fiscal expansion today is bad for future generations have got it exactly wrong. The best course of action, both for todays workers and for their children, is to do whatever it takes to get this economy on the road to recovery.
We can afford to support the economy right now, because our public sector debt when the credit crunch hit was one of the lowest in the G7. That is why the IMF said:
Some countries entered the crisis with greater fiscal space to expand, including more favorable levels of deficits, public debt contingent liabilities and interest rates (Canada, China, France, Germany, the UK and the US).
But yes, public finances are being affected here, as they are across the world. Tax revenues from the City have been particularly hit, but we have automatic strong support for families during an economic downturn built into our tax credit and welfare system.
The IMF forecast, on which Opposition Members are so keen, is still that UK public sector debt, when it is at its highest level in a few years, will be below that of Germany and the US, significantly below that of Japan and Italy and only slightly higher than that of France. Every one of those countries is backing increased Government action to support their economies right now, because they know, as we know, that we cannot cut our way out of recession. We have to invest and grow our way through a downturn such as this.
There is a clear choice. The Conservatives are offering a very different approach to recession. Not only are they opposing all the extra support to help our economy
recover, they want to go further and make cuts in the budgets with which public services are operating right now. The right hon. Member for Witney (Mr. Cameron) has said:
We have said that the government should have come off its spending plans in 2009 and 2010, that theyve got to make a start in reducing this deficit.
It is time that the Conservatives told us what their plans for this year and next would really mean. They previously told us that they wanted £5 billion of cuts in the budgets that people are already spending this year. On Wednesday, the hon. Member for Runnymede and Weybridge (Mr. Hammond) said that they would deliver £6 billion more in 2010. On Sunday, his party leader said:
Theyve just announced a spending increase... of £20 billion for next year.
and now were saying they should abandon their irresponsible plan to increase spending in 2010.
So which is it£5 billion, £6 billion, £20 billion? The shadow Chief Secretary should watch out; his figures look positively profligate compared with those of his boss.
However, Conservative Members have never said where any of the savings would come from. They say the NHS computer, yet they have admitted that there are no savings to be found. They say ContactPoint, yet that recommendation of the Laming review costs £40 million to run and saves more than £80 million across services. They say tax credits for households on over £50,000, but that includes couples, both on the average wage, who form 0.2 per cent. of the tax credit billless than £40 million. That is not £5 billion of cuts, but tinkering. Again, Conservative Members play hide and seek and do not tell people where their axe would fall.
The Conservatives were a bit more open in February when they described specific restrictions on departmental budgets. Housing would lose £810 million in the middle of a recession, and education and training would lose £910 million this yearequivalent to cutting 220,000 apprenticeships now. That is economic madness. It is economically dangerous, not just today, but for the future. Such cuts would not only delay recovery, but push up the bills of recession and leave the Conservatives making even more cuts in future.
There will be tough choices for the future. The Budget sets out plans to halve borrowing over four years, because we need it to decrease, and we need those on the highest incomes to pay more. That is a fair way in which to help reduce borrowing. Public spending budgets will be tighter, which means setting priorities, and we will do that as part of the spending review. However, we have been clear: we will continue to support front-line services and we believe that it is right to reduce borrowing step by step, steadily as the economy grows, precisely so that we can continue to safeguard public services for the future. It is not the shock and awe approach of the Conservative party, which appears to want immediate cuts in borrowing and public services.
In the four-day debate, some Conservative Back Benchers have been literally salivating at the prospect of spending cuts. So much for modern, compassionate Conservatism and backing investment in public services. The right hon. Member for Witney has let the dogs off the leash
and they are slavering for the flesh of the NHS. There are serious choices to make and the Conservatives are making different choices. We should listen to the glee with which the right hon. Gentleman calls for austerity. For whom does he want austerity? He wants austerity for public services and couples on the average wage who get tax credits, but not for the millionaires, whose tax increases he wants reviewed. He wants no austerity for millionaires estates, to which he would give more money. Three thousand of the richest estates in the country would get an average of £200,000 each. At the weekend, the right hon. Gentleman said, that will be done.
Conservatives say that the economic circumstances are so severe that they must ditch their plans to support our investment in public services. Yet the economic circumstances are clearly not sufficiently severe for them to drop their commitment to tax breaks for millionaires. That is shockinga shocking set of priorities from the Conservative party, which would rather defend tax breaks for millionaires estates than public services. They would rather cut investment in apprenticeships and housing in the middle of a recession than support action to help the unemployed and people who need our help now, so that we can get through the recession faster, come through it stronger and build for recovery.
We have set out our Budget for the future and plans not only to help the British economy through the world recession, but to build for the long term.
I commend the Budget to the House.
That,
(1) It is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide
(a) for zero-rating or exempting a supply, acquisition or importation,
(b) for refunding an amount of tax,
(c) for any relief, other than a relief that
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.
The Speaker put forthwith the Questions necessary to dispose of the motions made in the name of the Chancellor of the Exchequer (Standing Order No. 51(3)).
That
(1) Income tax is charged for the tax year 2009-10.
(a) the basic rate is 20%, and
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
That
(1) For the tax year 2009-10 the amount specified in section 10(5) of the Income Tax Act 2007 (basic rate limit) is replaced with £37,400.
(2) Accordingly, section 21 of that Act (indexation of limits), so far as relating to the basic rate limit, does not apply for that tax year.
(3) This Resolution does not require a change to be made in the amounts deductible or repayable under PA YE regulations before 18 May 2009.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
(1) For the tax year 2009-10 the amount specified in section 35 of the Income Tax Act 2007 (personal allowance for those aged under 65) is replaced with £6,475.
(2) Accordingly, section 57 of that Act (indexation of allowances), so far as relating to the amount specified in section 35 of that Act, does not apply for that tax year.
(3) This Resolution does not require a change to be made in the amounts deductible or repayable under PAYE regulations before 18 May 2009.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
(1) Corporation tax is charged for the financial year 2010.
(2) For that year the rate of corporation tax is
(a) 28% on profits of companies other than ring fence profits, and
(b) 30% on ring fence profits of companies.
The House proceeded to a Division.
Mr. Speaker: I ask the Serjeant at Arms to investigate the delay in the Aye Lobby.
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