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Topical Questions

Volume 474: debated on Thursday 24 April 2008

The core purpose of the Treasury remains to ensure the stability of the economy, to promote growth and to manage the public finances. Last week, the new figures showed that employment in the United Kingdom had reached a new record of 29.5 million people, which demonstrates the underlying strength and resilience of our economy.

In an earlier response, the hon. Member for North Ayrshire and Arran (Ms Clark) responded to a question about the rescue package for the 10p rate of tax by saying that she could not reveal, or did not know, all the details in that package. Given the sensitivities on both sides of the House, and given the fact that another member of the Chancellor’s Front-Bench team was reluctant to reveal other details last night in the press, will the Chancellor answer two very straightforward questions about the contents of the package? First, which elements of it will and will not be—

Order. A supplementary, especially at topical questions, should be brief, and certainly two supplementaries is just not on.

I bow to your point, Mr. Speaker. Which elements of the 10p tax rescue package will and will not be backdated?

I think that I am right in saying that my hon. Friend the Member for North Ayrshire and Arran (Ms Clark) asked a question rather than sought to answer it.

On the proposals, I set out in a letter to the Chairman of the Treasury Committee how I propose to proceed, both in relation to a specific group—people between the ages of 60 and 64, whose incomes do not change that much and for whom there is a readily available mechanism for additional payments through the winter fuel payment—and in relation to everybody else who was affected. I said that there were certain areas that I wanted to look at in relation to tax credits and the national minimum wage, and that I would be setting out proposals and would return to the matter in the pre-Budget report. That is what I said at the weekend and in the letter to the Treasury Committee, which set out quite clearly how I intend to proceed.

T7. Will my right hon. Friend confirm that there will be an attempt to ensure that all groups on low income that are adversely affected by the abolition of the 10p tax band are fully compensated, and that there will be backdating for all those groups? (200857)

As I said in my letter yesterday, the first area in which we can take action is in relation to 60 to 64-year-olds. On the others, if my hon. Friend looks at the letter, she will see that I said that our focus is on allowing that the average losses from the abolition of the 10p band can be offset. I want to do that for this year. Because the groups concerned are diverse, and because the effect of any change to the tax system can be quite complex, it will take time—this is why it will not be until the pre-Budget report that I can come back to it—to work out in which way we can help groups. I suspect that there may be different ways.

I have made my intention very clear. It is all very well for the Conservatives to raise these matters, but they would have more credibility if they had a single proposal that might help.

T2. The House will have noticed that, since his Budget, the Chancellor has been barred from pubs around the country for raising the duty on beer when the pub trade is facing such difficult times. The move will not raise the predicted amount of revenue, but it will be the final nail in the coffin for many pubs. Is the right hon. Gentleman prepared to consider another Budget U-turn, or is he determined to go down in history as the man who killed the British pub? (200851)

I understand that I have been barred from more pubs than anyone else in the country, including pubs that I have never been in and many that I have never even heard of. It is the first time that I have ever come across that.

We raised the duty on alcohol primarily to finance what we are doing to increase the amount paid to people over 60 through the winter fuel payment, and to help families with children. I took account of the fact that the average price of a bottle of wine, for example, has fallen over the past 10 years. I know that pubs around the country face certain difficulties, although I think that the hon. Gentleman will acknowledge that there has been a change in people’s habits generally. However, constraints in the EU rules mean that it is not possible to have differential rates for beer that is bought as on-sales or off-sales. Of course, I have a great deal of sympathy for anyone running a business and trying to attract new customers, but I think that what I did in relation to alcohol was right, especially when one considers where a lot of that alcohol has been going. Finally, I can tell the hon. Gentleman that we are not proposing to change the Budget at all.

The most important reason why the Chancellor was able to come to his decision yesterday on the 10p tax band is that the economy is strong enough to pay out the money that people are going to get. The economy never allowed previous Governments to find the money to reverse a Budget proposal. On Black Wednesday, for example, the Conservatives did not have two ha’pennies to rub together.

As ever, my hon. Friend is quite right— the British economy is very strong and stable. As I said in response to the first topical question, unemployment is at its lowest since the early 1970s and employment is at record levels. Those facts make a huge difference. The situation is quite different from the one that we faced when the housing market in particular got into trouble in the early 1990s, because at that time there were more than 3 million people out of work. My hon. Friend is right that people will remember what happened when the previous Conservative Government got into economic difficulties that resulted in immense hardship for millions.

We are not prepared to allow that to happen, but we cannot be complacent. As I have said on many occasions, economies around the world are slowing and Governments will have to face up to the consequences. Even so, our economy is in a much better position and is more resilient than it ever was in any of the years when the Conservatives were in government.

What is becoming clear this morning is that this incompetent Government cannot organise even a humiliating U-turn without messing it up. Last night, the Chief Secretary to the Treasury was with me in the “Newsnight” TV studio and said that she could not confirm that the rescue package would be backdated. This morning, the right hon. Member for Birkenhead (Mr. Field) said:

“I think Yvette was badly briefed. The agreement—and this is an agreement that the Prime Minister actually put his stamp on—was that…the whole package would be backdated to April the first.”

Who speaks for the Government—the right hon. Member for Birkenhead and his conversations with the Prime Minister, or the Chief Secretary to the Treasury?

First, the hon. Gentleman’s position on this—[Hon. Members: “Answer.”] Well, he is the man who supported the abolition of the 10p rate 12 months ago. When my right hon. Friend the Member for Birkenhead (Mr. Field) tabled his amendment 12 months ago, far from supporting it, the hon. Gentleman abstained. About two weeks ago, the Conservative party’s policy was to reinstate the 10p band, and when confronted with the fact that that would cost him about £7 billion, he said that it was a holding position. Now, he has no position at all.

As I told the House just a few moments ago, I set out how I intend to proceed in the letter that I sent to the Chairman of the Treasury Committee, and I made it clear that, in relation to the first group—pensioners between the ages of 60 and 64—because their incomes do not tend to change that much, I am confident that we will be able to make a payment to them, probably by the same mechanism as the winter fuel payment is made, to cover their position for this year. I also said in relation to all the other people who are affected that this is something that I want to look at, and I will come back to the House in the pre-Budget report, as I said at the weekend and as I said yesterday. However, as my letter says, our focus is to ensure that we allow the average losses from the abolition of the 10p band to be offset for this year. That is something that I fully intend to proceed with, and I will come back to the House when I have specific proposals to make.

First, the Chancellor is in no position to lecture anyone about consistency, when he said on Sunday that he would not reopen his Budget and then did so three days later. Secondly, no one is interested in the letter that he sent to the Treasury Committee; what we are interested in is the conversation between the right hon. Member for Birkenhead and the Prime Minister. The right hon. Member for Birkenhead says clearly, and he said it again on the radio this morning:

“there is no mistake about this—the agreement will be backdated to April first.”

So will the Chancellor get up, stop all this waffle about the pre-Budget report and what the Chief Secretary did or did not say and make it clear that the agreement between the right hon. Member for Birkenhead and the Prime Minister, which the Chancellor was obviously not part of, is that the package will be backdated—yes, or no?

The hon. Gentleman should be interested in the letter that I sent to the Chairman of the Treasury Committee because it sets out the Government’s position. Like many others, no doubt, I heard my right hon. Friend the Member for Birkenhead on the radio this morning, and as he rightly said, because the people affected by the removal of the 10p band are disparate and are affected in different ways, it will be necessary for the Government to consider a range of measures to help them. However, as I say in my letter, my focus is to allow us to offset the average losses from the abolition of that band for this year. That is what I intend to do, and I fully intend to come back to the House in the pre-Budget report to set out precisely how I will do it. I have a commitment to do something about the problem. It is abundantly clear that the Opposition have absolutely no interest in it whatever and regard this as a political game.

T8. As my right hon. Friend knows, next month will mark the 10th anniversary of the G8 meeting in Birmingham, at which the Jubilee 2000 campaign on cancelling international debts really took hold. Will he update the House on what progress has been made in the past year and on what plans he has for next year to progress the cancellation of debt for the poorest 41 countries in the world to mark that 10th anniversary? (200858)

My hon. Friend is right. Right from the start, we have been committed, principally through the work undertaken by my right hon. Friend the Prime Minister when he was the Chancellor, not just to take action here at home to ensure that we meet our international obligations, but crucially and additionally, to work with other countries to write off the debt that poor countries faced. Liberia is perhaps an excellent example of where the international community has, albeit after a bit of a struggle, come together to try to remove the debts from that country, to give it a chance to get back on its feet and to improve the living standards of its people. I believe that the action that we have taken in relation to development and writing off debt right across the world has been a model of what all Governments ought to be doing. I should like to see us do more, but my hon. Friend is absolutely right: that is something that any humane Government ought to be doing, and they should be doing it because it is the right thing to do, not just morally but economically.

T4. According to the International Monetary Fund, the burden of tax under this Government has risen more rapidly than in any other major country, while the rate of growth of output per head has slowed down. Ireland, which has one of the lowest rates of tax, has had one of the highest rates of growth. Does the Chancellor still maintain that the burden of tax has no impact on the rate of growth, and if so, is he really asking the House to believe that Ireland would not have outstripped us by so much if it had suffered the same tax burden as this country does? (200854)

Well, looking at the international figures, we see that in the 10 years up to 1997 the UK was the bottom of the G7, in terms of income per head. It is now the second highest, behind the US, as a result of the decisions that we have taken. The tax burden today remains lower than the average over the 1980s, when the right hon. Gentleman and members of his party were in charge.

T5. I wonder whether the Chancellor has seen the report on page 2 of The Times today, which records that the average price at the pumps for unleaded petrol is now 108.9p a litre. The report predicts that the price will rise to 112p a litre next month. However, many of my constituents would love to pay even 112p a litre; in one of the biggest filling stations in Kirkwall, the price this morning is 123p for unleaded, and 131p for diesel. Will he meet a delegation from the National Farmers Union Scotland and local businesses to hear from them about the crippling impact that high prices are having on local businesses, and to see what the Government can do, as one of the largest contributors to that price, to help local people? (200855)

I appreciate the point that the hon. Gentleman makes and, if I may show my usual lack of partisanship, I know that the hon. Member for Na h-Eileanan an Iar (Mr. MacNeil) would have raised the issue had we got to his question. Having filled my car up with diesel in Lewis just a couple of weeks ago, I am acutely aware of how high the petrol prices are. There are two things that I can say. First, I cannot promise to do so myself, but I am sure that one of my ministerial colleagues will be happy to meet the hon. Member for Orkney and Shetland (Mr. Carmichael).

Secondly, I am struck by the variation in petrol prices across the highlands and islands; they vary substantially. I noticed an excellent article in the Stornoway Gazette a couple of weeks ago—I like to keep informed—that drew attention to the fact that the price of diesel seems to vary quite a bit depending on which side of the Minch one is on. The hon. Member for Na h-Eileanan an Iar has, I think, raised the matter with the Office of Fair Trading, but the fact that there is such variation, when it is not abundantly clear why that is, is something that perhaps all of us ought to have a look at.

T6. I listened carefully to the exchanges between the shadow Chancellor and the Chancellor. Is it not obvious that the Prime Minister has done a deal to buy off Labour MPs next Monday, and that the Chancellor of the Exchequer is in the process of reneging on it? Labour Members will find that they have been conned. (200856)

Absolute nonsense. The Conservative party ought to continue to reflect on the fact that on this issue, as on so many others, its positions are completely contradictory. The Conservative party has absolutely no coherent strategies for helping people on low incomes, for getting children out of poverty, or for helping older people and people on low incomes who do not have children. We do. We are determined to improve people’s living standards, and that is precisely what we will do.