UK Parliament / Open data

Pre-Budget Report 2009

Proceeding contribution from Lord Myners (Labour) in the House of Lords on Wednesday, 16 December 2009. It occurred during Debate on Pre-Budget Report 2009.
My Lords, I welcome this opportunity to debate the measures set out in this year’s Pre-Budget Report. The 2009 PBR has been delivered at a time when the economy is starting to see signs of recovery, after a tumultuous time for the world economy. Co-ordinated action by Governments around the world has helped to revive confidence in markets. The challenge that we face now is to take action to secure the recovery and to promote long-term growth. The Chancellor announced in the PBR a plan for reducing the deficit by half within four years, but given the uncertainties that remain and given that growth is still fragile, the PBR announced that we will maintain support until the recovery is secured. Cutting support now could derail the work done so far and risk the recovery. That is why further support is being offered to business to ease problems with cash flow and access to bank lending by deferring tax rises and extended tax allowances. This includes the extension of the time-to-pay scheme, which has helped over 160,000 businesses to spread their tax payments over a timetable they can afford, and freezing the small companies tax rate next year to help 850,000 businesses. The PBR announced that support for the mortgage interest scheme, which provides cover for mortgage interest payments for those who have lost their jobs, has been extended for a further six months. To date, the scheme has helped over 220,000 people. It is important that families receive the help they need through the tax and benefits systems. Through the downturn, the tax credits system has provided this extra help to 400,000 families whose income has fallen. Members of your Lordships' House will be aware that the retail prices index has been negative and many benefits and tax credits are linked to the September RPI. This should have meant no increase in these benefits. Instead, the Chancellor concluded that the basic state pension will rise by 2.5 per cent in April, providing welcome support to the pensioner community. Other benefits, such as child benefit and some disability benefits, will rise by 1.5 per cent. These will give real-terms increases to those who need it most. The Chancellor has put in place support to secure the recovery, but there is another challenge to face: the direction and long-term growth of the economy. The recession has had a marked impact on the labour market, but unemployment has risen by far less than expected by independent forecasters and by less than equivalent rises in the recessions of the 1980s and early 1990s. None the less, certain groups, such as young people, will be particularly hard hit. The PBR announced that every 18 to 24 year-old will be given work or training after six months out of the labour market, rather than 12 months. Investing in the skills of young people will not only prevent a lost generation of youth unemployment but also promote our long-term growth. The recession has been deeper than expected but, as set out at the time of the Budget and the PBR, growth is forecast to return in the fourth quarter this year. Next year growth is forecast to be between 1 and 1.5 per cent. This will be followed by growth of 3.5 per cent in 2011 and 2012 as world trade picks up and the spare capacity opened up by this recession comes back into productive use. Our growth will be achieved by the help of exports. This is why the Chancellor has announced investment in key industries of the future: in digital, bio and low-carbon technology. The PBR announced measures to support innovation and enterprise, introducing a patent box—a reduced rate of corporation tax applying to income derived from patents from April 2013 to strengthen the incentives to invest in innovative industries and to ensure that the UK remains an attractive location for innovation. Further, an additional £200 million of funding for the strategic investment fund will support advanced, innovative industrial projects of strategic importance. Also vital to our growth in future is investment in our infrastructure. The PBR announced further plans for rail electrification between Liverpool, Manchester and Preston. We will ensure that our workforce is equipped with the right skills for the future by giving financial support for up to 10,000 undergraduates from low-income backgrounds to take up short internships in industry, business and the professions. We have increased borrowing now to support the economy when it needs such support. With falling tax revenues, we must also reduce the debt and ensure sound public finances. The Chancellor set out a clear plan for consolidation. As a result of the combined effect of lower revenues, our commitment to maintain spending and extra support to the economy, borrowing will rise to £178 billion this year, or 12.6 per cent of GDP. As the economy recovers and the deficit reduction plan starts to take effect, this will fall to £176 billion next year, to £140 billion the year after, £117 billion in 2012-13, £96 billion in 2013-14 and then to £82 billion in 2014-15. Excluding public sector investment, or capital spending, and taking into account the economic cycle, the budget deficit is expected to fall to 1.9 per cent of GDP by 2014-15. To maintain our fiscal sustainability, the PBR announces tax rises for those with the greatest ability to pay, while ensuring that those on the lowest incomes will be protected. To this end, the PBR announces a special one-off levy on banks of 50 per cent on individual discretionary bonuses above £25,000. The restriction of pensions tax relief announced in the Budget will apply only to those with gross incomes of £150,000 or over, where gross income includes all pension contributions. There will be an additional 0.5 per cent increase in employee, employer and self-employed national insurance contributions for those earning more than £20,000. We also recognise that slower spending growth will be essential if we are to reduce borrowing. We will work to eliminate waste, cut some budgets, and stop some programmes altogether. The PBR announces £12 billion from greater efficiency, £5 billion from scaling back or cutting lower priorities, and £4.5 billion from reducing the cost of public sector pay and pensions. While we ensure investment for our future, the Chancellor also announces that we want to protect the most important front-line services that people depend on—schools, healthcare and police. Cutting public spending in the past has led to long-term damage that we do not want repeated. These services are essential for the continued well-being of people across the country. These have been testing times, and people all around the world have been affected. The actions taken by the Government have helped our economy to start to emerge from the crisis. There will be more to be done—not just now, but over the next few years. The PBR sets out actions to secure the recovery, to build our future, and to ensure that we have the means to do so while ensuring controlled public finances. This is the programme set out in the 2009 Pre-Budget Report, and that, with the approval of the House, is the basis on which we will send updated information to the European Commission. I look forward to your Lordships’ contributions to this debate.
Type
Proceeding contribution
Reference
715 c1533-5 
Session
2009-10
Chamber / Committee
House of Lords chamber
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