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Mr. Denis MacShane (Rotherham): Will my hon. Friend give way?

Dawn Primarolo: If my hon. Friend promises not to ask a question on Europe, I shall be happy to.

Mr. MacShane: My hon. Friend tempts me, but I wanted to illustrate her contrast between the Government's policy and that proposed by the hon. Member for Truro and St. Austell (Mr. Taylor). We did not need to hear the hon. Gentleman's speech, because we can see Liberal Democrat practice. In Sheffield, the Liberal Democrats won last year on a platform of cutting council tax, increasing public spending on council services and reducing debt. In fact, there has been a 6 per cent. increase in council tax--three times the rate of inflation--massive cuts in libraries, leisure services and other vital services, across the board privatisation and a

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£120 million increase in Sheffield's debt, which every Sheffield council tax payer will have to pay for. We heard the hon. Gentleman's waffle, but--

Mr. Deputy Speaker: Order.

Dawn Primarolo: I thank my hon. Friend for his intervention, and agree that the Liberal Democrats say one thing when they have no chance of power, but do something quite different when they have an opportunity to exercise it in local authorities.

We have the same openness and disclosure in fiscal policy as in monetary policy, with key fiscal assumptions independently audited and far more information published than ever before to ensure properly informed debate and scrutiny. On the basis of prudent and cautious assumptions audited by the National Audit Office, we are firmly on course to balance the current Budget over the cycle, and, therefore, firmly on track to meet the first of our fiscal rules--the golden rule.

We are also on target on our second fiscal rule--the sustainable investment rule. Under the previous Government, national debt doubled. In the past three years, under the Labour Government, debt as a share of national income has fallen from 44 per cent. to 42 per cent., and is estimated to be 38.2 per cent. by the end of this financial year, and 37 per cent. next year.

Over the economic cycle, we will keep debt below 40 per cent. of national income. As a result of falling debt and lower long-term interest payments, in this financial year we are projected to have almost £4 billion lower payments than in previous years. That is money available for investment in front-line public services.

Thanks to the steps that we have taken to achieve stability, sustained investment and low and stable inflation, more than 800,000 more people are in jobs than at the time of the general election. The hon. Member for Truro and St. Austell made no mention of employment: of developing jobs and ensuring that people can work for their living.

That platform of stability, with the new deal and our measures for investment and regeneration, will enable us steadily to increase employment. Our aim is for a higher percentage of people to be in work this decade than ever before.

Mr. Phil Woolas (Oldham, East and Saddleworth): Does my hon. Friend recall that the major package of delivering employment--the new deal--was opposed by the Liberal Democrats, who voted against it?

Dawn Primarolo: My hon. Friend is right. The then leader of the Liberal Democrats, the right hon. Member for Yeovil (Mr. Ashdown), with regard to the windfall tax--[Hon. Members: "Ah."] Liberal Members may make noises but they always want to spend money without telling us where it should be raised, and when we make proposals on how it can be raised, they object to and oppose them. Their then leader said:

[Hon. Members: "Ah!"] Liberal Members who are sitting there sounding like sheep should understand that to replace the windfall tax to fund projects such as the new

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deal they would need to put 3p on tax. They make no mention of that when they are telling us endlessly how they will spend their 1p. They have spent the magical 1p a breathtaking number of times.

Mr. Malcolm Bruce (Gordon) rose--

Dawn Primarolo: I am happy to welcome Mr. 1p to the Chamber.

Mr. Bruce: Will the Minister acknowledge that we opposed the windfall tax in principle as a wrong tax, and not the new deal, for which we had our own package? How do the Government propose to maintain the new deal programme after the windfall tax yield has been spent? Does she have another windfall tax in mind, or some other tax that we have not yet heard about?

Dawn Primarolo: I do not think that the hon. Gentleman has noticed how successful the new deal has been in getting people into real jobs. Perhaps he was not here when I explained how we have created 800,000 new jobs--real jobs--since the general election.

Having come this far, we will not relax our grip. We are doubly determined to avoid the mistakes of the Lawson era, when growth got out of control in the late 1980s, which led to stop/go, and the Major/Lamont mistake of the pre-election public spending spree of 1991-92, which was followed by tax increases in the mid-1990s. Those were attempts to make policies for political reasons that were not sustainable economically.

Mr. Howard Flight (Arundel and South Downs): Will the Minister give way?

Dawn Primarolo: I will when I have finished this point.

Our emphasis on stability and sustainable public finances has enabled us to introduce two momentous reforms that have made a significant difference to millions of families, children and low-paid workers throughout the country: first, the comprehensive reform of the British tax and benefit system that we are now developing; and secondly, our massive programme of reform in the public services.

I hope that, when I give way to the hon. Gentleman, he will finally tell the House whether his party is still opposed to the working families tax credit and the expenditure that we have committed to public services.

Mr. Flight: The Minister spoke of economic mistakes of the past and the Government's determination to avoid them. Does that include the equivalent of locking into the exchange rate mechanism and interest rates allied to those of continental Europe, which, going in the wrong direction, arguably had the biggest impact on our economy?

Dawn Primarolo: What always amazes me about Opposition Front Benchers is their ability not to be in tune with the public debate, or indeed debate in the Chamber. The hon. Gentleman would not clarify whether his party still opposes investment in the public sector--whether,

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for example, it believes in privatising the national health service--but seeks to take the debate in another direction. That may speak volumes to people outside the House.

Mr. Edward Davey (Kingston and Surbiton): The Minister talks about the hon. Gentleman clarifying his position on tax. Will she clarify her position on what the Liberal Democrats are proposing? Does she support extra investment in public services or the 1p off income tax that the Chancellor has announced for the coming Budget?

Dawn Primarolo: I thank the hon. Gentleman for his prompt, as I come to that part of my speech. I hope that I will be able to answer his question as I deal with tax and benefit reform.

Together, our reforms to integrate tax and benefits--the working families tax credit, which the Liberal Democrats opposed; the national minimum wage; the 10p tax rate; the cut in the basic rate of tax; the rises in child benefit, which the Liberal Democrats opposed; and the national insurance reforms--are for the first time tackling the causes of poverty and fulfilling our essential commitment to reform welfare to make work pay. Our commitment is that work will pay more than benefits for everyone.

The working families tax credit, introduced in October 1999, is already providing extra help for 1 million of Britain's hard-working families and increasing the minimum income guarantee for every family with children and with full-time earnings up to £200 a week--and 325,000 of those families were not in receipt of family credit at the time of the claim. The average gain to our poorest working families is £24 a week.

The Inland Revenue telephone lines, and the special working families tax credit telephone lines, have received nearly 2.75 million calls from people inquiring about the working families tax credit and the disabled persons tax credit; that is why most people will conclude that the credits are a worthwhile and necessary innovation. People will draw their own conclusion at the next general election when the Liberals and the Conservatives say that they will withdraw the working families tax credit.

As a result of our tax and benefit measures, families with children are an average £740 a year better off. Working households are an average £450 a year better off. No family earning less than £235 per week has paid any net income tax from October 1999. The national minimum wage has boosted the hourly wage of more than 1.5 million low-paid workers--two thirds of them women--by an average of 30 per cent. The introduction of a new 10p rate of tax has halved the tax bills of 2.3 million people, of whom 1.7 million are low-paid employees.

All those measures are opposed by the Liberal Democrats. They are opposed to the working families tax credit, to rises in child benefit, to a new low rate of tax, and therefore to lifting 1.25 million people out of poverty, of whom 800,000 are children. Our tax cut to 10p as the initial rate for savings will also benefit 1.5 million pensioners.

We now have a strategy, through the new deal, to give people new job opportunities and, through the working families tax credit, to make work pay. The child care credit makes it possible for people to work who might not otherwise have been able to; and the tax changes that we are making, including the cut in the basic rate of tax, make it possible for work to pay even more for those families.

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In the Budget, we shall introduce further measures that will make it possible for people in areas that have in the past been hardest hit by unemployment to find work. The debate in this country is between fairness--our tax and benefits reforms for families and the low-paid--and unfairness.

On public services, by contrast with the commitments contained in the Liberal Democrats' 1997 manifesto, our three-year spending plans set out in the comprehensive spending review give Departments and our public services the certainty and stability they need to plan beyond a one-year horizon. Based on a platform of stability in the public finances, we have been able to commit significant extra resources to key public services, at the same time as meeting our tough fiscal rules. We have committed £40 billion extra over three years to education and health. That is £40 billion over and above what those services would have got if spending had continued at its 1998-99 level. It is £40 billion pounds of extra investment which our valuable public services would not have got under the Conservative party, or, indeed, under the Liberal Democrats.

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