Vince on the pre-budget report

by Stephen Tall on October 9, 2007

The BBC’s fairly self-explanatory report – Darling ‘using Lib Dem air tax’ – can be read here.

For those who’d like to enjoy Vince’s wise words in full here they are, brought to you thanks to the wonder that is the online Hansard:

Dr. Vincent Cable (Twickenham) (LD): I thank the Chancellor for an advance copy of his statement, but 12 of the 18 pages were blank. Is that a new signal of open government and transparency? I congratulate him on adopting our long-standing policy on aviation taxation. … May I also sympathise with the Chancellor for having obviously spent the past 72 hours rewriting a speech that was originally intended to be a chapter in the election manifesto, and for having only just recovered from the ignominy of being the first Chancellor of the Exchequer since 1866 to preside over a run on a bank? Not since Black Wednesday has there been such a collapse of confidence in the authority of Government.

Let me begin with the key point in the Chancellor’s statement: the slowdown in the economy. We are in a rapidly changing and deteriorating environment. In the United States, to which we are closely linked, Alan Greenspan estimated that the risk of a recession approaches 50 per cent. What is the Chancellor’s assessment of the risk of a recession in Britain—50 per cent., 30 per cent., 20 per cent., 10 per cent.? It is an important question because factors that could precipitate a recession in the United States—personal debt and a bursting bubble in the housing market—are even more extreme in the United Kingdom.

Let me put to the Chancellor a question that I posed to his predecessor four years ago. I asked, “is not the brutal truth that… the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level?”—[Official Report, 13 November 2003; Vol. 413, c. 397.]

In the subsequent four years, every one of those indicators has deteriorated. Cannot the Chancellor bring himself to accept that millions of families are being squeezed by a combination of reducing disposable income and higher interest rates as a result of moving from fixed-rate mortgages in the next few months? Does not he accept that there is a major vulnerability in the UK economy?

The slowdown has major implications for the spending review, which makes grim reading for many Departments. The Chancellor has promised the largest increase in health spending. As I understand it, he said today that health spending will grow by 4 per cent. Will he confirm that the Wanless report argued that 4.4 per cent. growth was the absolute minimum required to sustain improvements in patient care? That assumed that the maximum amount of health service reform was achieved, which has clearly not happened. Will he confirm that, when we consider all the spending commitments, the growth that he suggests—I believe that it is 1.9 per cent a year—is only fractionally higher than that achieved in the 18 years of Conservative government?

Will not local government now take the biggest hit? Something that did not appear in the statement but is buried in the report is the fact that council tax is due to rise by 5 per cent a year throughout the UK. That tax bears disproportionately on low- income families and pensioners. At a time when the Chancellor is scrambling to catch up with the Conservatives on inheritance tax, why has he paid no attention to a report and an analysis conducted over four years on the need for reform of that hated and regressive form of taxation?

On poverty more generally, has the Chancellor made time today to glance at the parliamentary ombudsman’s report on tax credits, which has the wonderful, evocative title, “Tax Credits: Getting It Wrong?”? Is he willing to be a little more open-minded than his predecessor and consider the parliamentary ombudsman’s recommendations for simplifying and making a great deal fairer that hopelessly overcomplicated system?

On taxation, I am glad that, a few months after I introduced a debate in the House on the super-rich, there appears to be an all-party consensus that we should do something about it. However, the Government have got only themselves to blame for their current position with regard to non-domiciled investors. Five years ago, they commissioned a report, which was suppressed under the Freedom of Information Act 2000. The data were released only a few days ago. However, I agree that there is little merit in the idea of a poll tax on non-domiciled investors. It would be unfair to many immigrant workers of modest means and a fleabite to the super-rich. For the Abramovichs of this world, a £25,000 charge is roughly the equivalent of what they would spend on a day out at Stamford Bridge. For the noble Lord Ashcroft, £25,000 is roughly the equivalent of one marginal seat.

In conclusion, perhaps I could say something a little more positive and sympathetic to the Chancellor. We know from the press releases that he advised the Prime Minister against a dash to the polls and to stay the course. In the light of the gloomy outlook for the British economy, whatever else one says about the Chancellor, he is a very brave man.