Budget Resolutions and Economic Situation
Debate between Rachel Reeves and Chris Huhne(14 years, 5 months ago)
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Chris Huhne
If VAT is raised right across without the exemptions that we have for food, children’s clothes and books, for example, and without the lower rate on fuel, then it is a regressive tax. It is a standard feature of basic micro-economics that indirect taxes are more regressive than direct taxes, but I ask that Members please look at the IFS analysis, because it seems to me to undermine directly the case that the Opposition are attempting to make.
Rachel Reeves (Leeds West) (Lab)
The right hon. Gentleman talks about the IFS numbers on the distributional impact. Does he agree with the following numbers from the IFS? The impact of the measures announced on Tuesday on the incomes of the poorest—the bottom—decile will be minus 2.6%, whereas it will be minus 1.5% for the next two deciles, then minus 1.4%, minus 1.3%, minus 1.1%, minus 0.9%, minus 0.6%, minus 0.6% and minus 0.7%. So the bottom decile will see a reduction in their income of minus 2.6% and the top decile will see a reduction in their income of minus 0.7%. Is that regressive or progressive?
Chris Huhne
The hon. Lady clearly did not listen to my earlier answer. When looking at the distributional impact, it is very important, particularly with indirect tax measures, to look at the expenditure effects, not the income effects. The IFS report shows very clearly the enormous distinction between the conventional answer on the distributional impact on income and the answer when we look at the expenditure effects.
The choice for this Government has been clear: either we manage the transition to lower borrowing to sustain the recovery, or we will have those choices yanked from our hands by the markets and we will face force majeure. It is far better to design a fair package, as we have done, than to have an unfair package imposed on us that no one has had the time or thought or energy to design.
No fiscal package responding to a market emergency that I have ever seen has been fair, whatever Opposition Members may say. I spent five years of my pre-political life analysing sovereign risk and sovereign crisis. I was in Seoul before Christmas 1997, in Djakarta at the time of the food riots, and in Bangkok when the authorities struggled with the collapse of the Thai baht, and I never want to see a British Government have to go cap in hand to the International Monetary Fund as those countries did, as Greece is now doing and as the friends of the right hon. Member for Doncaster North had to do in 1976.
Had we run the risk of contagion—of a sharp spike in Government and probably short-term policy interest rates too—the impact on growth would have been severe. The truth is that the course of action that the right hon. Gentleman and his friends recommend—the Micawberish course of hoping that something will turn up—would have put the British economy and British jobs in the international firing line, and no responsible Government would have done that. Frankly, I have enough respect for the intelligence and judgment of the right hon. Gentleman to believe that he would not have adopted that stance if he and his friends had been re-elected.
Energy and Environment, Food and Rural Affairs
Debate between Rachel Reeves and Chris Huhne(14 years, 6 months ago)
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Chris Huhne
If I may make a little progress first, I will happily give way again.
It is because of the urgent need to deal with climate change that we are committed to making this Government the greenest ever by taking that urgently needed action at home and abroad. This is not merely an aspiration; it is essential. The actions of this Government in this Parliament will define our ability to combat climate change in the decades to come. That is why, in the first week of the new Government, the Prime Minister announced that Departments would reduce their carbon emissions by 10% in the next 12 months—an early indication of our intention to take real action rather than merely setting meaningless targets.
Rachel Reeves (Leeds West) (Lab)
One thing that was mentioned in the Queen’s Speech was high-speed rail. Will the right hon. Gentleman please give us a commitment on the date on which high-speed rail investment will begin? Will it begin in 2012, and will high-speed rail come to Leeds? The Labour Government made both those commitments in the last Parliament.
Chris Huhne
Parties on both sides of the House were committed to high-speed rail and it is crucial that we make progress on this agenda, but the hon. Lady would not expect me to announce quite the detail that she is awaiting at this stage of the Government’s work. There is no doubt that we will be making serious progress on that agenda.
Internationally, we will work towards an ambitious global climate deal that will limit emissions. We will explore the creation of new international sources of funding to support countries both in limiting emissions and in adapting to the unavoidable consequences of climate change. Often the very poorest and most vulnerable countries are at greatest risk from the impacts of climate change, yet they have the least resources to participate in discussions that directly affect their future, so we will explore ways of helping those countries to take part in the international climate change negotiations—for example, in providing technical support.
Chris Huhne
Much as I admire the chutzpah with which the shadow Secretary of State approaches this leadership speech, I see no recognition in his remarks of the appalling legacy that he has bequeathed us.