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Pre-Budget Report debate: Cable slams unfair taxes and banks that won’t lend

November 27, 2008 5:05 PM
Originally published by UK Liberal Democrats

The controversial Pre-Budget Report (PBR) became the subject of an emergency debate in the House of Commons, as Liberal Democrat MPs called for a right to vote on the Chancellor's proposals.

Shadow Chancellor Vince Cable gave a comprehensive response to the PBR, criticising in particular the Government's optimistic growth figures and drastic cuts in future public spending. He said the 16% cut in public spending to be introduced over the next 3 years made "complete nonsense of the Government's claim to be borrowing to invest... How on earth is this supposed to stimulate the economy?" Housing, he said, should be an area where the Government increase expenditure to take advantage of the current fall in market prices.

By objecting to the fiscal stimulus, Vince said the Tories were ignoring a fundamental duty "in times of war and slump to sustain the economy".

"Governments have a responsibility. That is most obviously the case in war. Nobody expected that Mr. Churchill would stand up and say, "Sorry, we can't keep on fighting on the beaches because there is growing worry in the gilts market about the rising cost of ammunition." In emergency situations, Governments have to act, and although this is not war, it is an economic emergency and it requires drastic action."

He pointed out the incoming Obama Administration are considering a fiscal stimulus 20 to 25 times bigger than the British Government.

Vince moved on to taxation measures in the PBR, reiterating Liberal Democrat policy that it is time for a "permanent tax cut for low-paid workers". He described the Government's new 45p top rate tax as "pure tokenism" and of "no economic significance", as high earners will now divert funds to their pension to avoid the top rate.

Finally, the Liberal Democrat Shadow Chancellor reminded MPs of the need to get banks lending again:

"The banks are conserving capital, they are hanging on and keeping the Government out of their affairs...From their own self-interested point of view, their approach is entirely rational, but collectively it is suicidal."

Ahead of the debate Simon Hughes MP had raised a point of order, pressing for a vote on the floor of the House on the Government's tax proposals. The Lib Dems had earlier proposed a 'prayer' that the VAT changes be rejected. Denied this, the Lib Dems forced a vote at the end of the general PBR debate, on the technical question of whether 'the question be now put' - that is, whether the debate move to a vote on the Government's proposals. Labour and Conservative MPs voted together to reject this.

Read the full debate here

Read Vince Cable's full speech here