Clegg replies to the Budget

11.31.31am UTC (GMT +0000) Thu 13th Mar 2008

[Mar 12] . . Nicholas Clegg: I am told that during the Government's previous 10 Budgets Prime Minster Blair did not know what the proposals would be until Chancellor Brown rose to his feet in the Chamber.

This time, the situation is exactly the other way round: the Chancellor is the Prime Minister's creature, struggling to clear up a mess left by his boss under instruction from No. 10. What we have seen today is an act of political ventriloquism. I would like to compliment the Prime Minister: I watched him very closely, and his lips barely moved all the while that the Chancellor was speaking.

This Budget has inevitably brought a lot of bad news. It has also massively over-egged and exaggerated any good news. Why, for instance, did the Chancellor not admit in his statement that the winter fuel allowance increases are a one-off? How can he bring himself to play with the hopes and expectations of some of the oldest and most vulnerable people in our society? Is this just another pre-election bribe? Are we now to expect an election in 2009?

There are tough times ahead, of course, and the world economy remains uncertain, so this was an opportunity to give whatever help possible to the millions of hard-pressed families who are feeling the pinch-whose money simply does not stretch as far as it once did-but the Chancellor has not delivered such a Budget. This is a meagre, tinkering Budget, which gives precious little help to the poor but maintains special treatment for the rich. It is a Budget designed to fill a black hole, masquerading as good for the environment. It is a Budget that will not make Britain fairer. It is a Budget that is a green cop-out.

The Chancellor bravely suggests that the problems afflicting our economy were all caused elsewhere. He has to do that; he cannot tell the truth. He cannot blame his boss; a monkey never blames the organ grinder. It is deeply disingenuous to claim, as he did, that a housing market crash in the United States is the main reason for our economic woes. The reality is that a swelling tide of personal, private debt secured against high house prices that are now declining is creating the conditions for a perfect economic storm. High oil and food prices make it difficult for the Bank of England to cut interest rates, and with Britain now up to £2 trillion in debt, the Chancellor has backed himself into a corner with no room for manoeuvre. The sustainable debt rule is in tatters, even without Northern Rock and private finance initiative projects being put on to the national accounts, and the "golden rule" has become the "gamblers rule". Deep in the red, the Government keep betting more and more of our money in the hope that someday, somehow, they will find themselves back in the black. As we have heard today, that prospect is moving ever further into the distance.

We heard much today about the Chancellor's wish to cut child poverty, but the meagre, piecemeal reforms that he is introducing to the chaotic tax credit system will not get the Government anywhere near meeting their 2010 child poverty target. By my reckoning, only about a third of what is needed is being provided; the ridiculously complex set of proposals that we have heard about today will be difficult for the most hard-pressed families to understand. Using the Government's own calculations, the Chancellor would have to find an additional £3.5 billion to stand even a faint chance of achieving their goal, and they are nowhere near doing that. The reality is that this Government's approach to child poverty has failed. If we are to abolish child poverty for good, we must increase not only income but opportunity. We must target more investment to help the poorest children in our schools and offer them genuine opportunity for life. Crucially, we must deal with the link between poor housing and persistent poverty.

This Budget was widely trailed by the Treasury as the greenest ever, but at the first sign of political difficulty the Government have run away, by postponing the petrol duty increase until October. The fact is that the real cost of motoring has fallen consistently over the past two decades while the real cost of public transport has risen by a third. We of course welcome the Government's increasing vehicle excise duty on the most polluting cars. Like many of the Treasury's best proposals-nationalising Northern Rock, reforming aviation tax and increasing stamp duty thresholds-that started life as a Liberal Democrat policy. We have got used to the fact that a while after we have a good idea, the Treasury, too, finally gets round to realising it is the best way forward.

Green taxes should be revenue-neutral. They should not be treated as a wheeze to squeeze ever more money out of the British people, but should instead be designed to encourage green behaviour and cut the taxes of the most needy. By my reckoning, the figures that we have heard today will mean that the Government will be taking approximately £1.7 billion in new green taxes, but less than £1 billion of that will be spent on the poor. Much of the revenue from those green taxes, plus other duties, will clearly go straight back into the black hole that the Prime Minister and the Chancellor have created in the UK's finances. By 2010, an additional £1.9 billion will go straight to filling that black hole. This is not a Budget for the environment; it is a Budget driven by fiscal incompetence and political desperation.

Is it not the case that the only people who will welcome this Budget are those at the top of the income scale, not those at the bottom? The Government's policy on non-doms is laughable. Their new poll tax, which the Conservatives unsurprisingly support, will be wildly punitive for ordinary foreign workers, but it will be no more than a flea-bite for foreign billionaires, who have come to regard the United Kingdom as nothing more than a tax haven.

The Government's approach to capital gains tax policy continues to be mired in chaos. It is frankly amazing that the Chancellor has contrived to create a tax change that has caused howls of anguish from businesses and cries of derision from commentators but still allows hedge fund managers to pay lower rates of tax than their cleaners. Surely it would make more sense to return to the capital gains tax system of Nigel Lawson-not a man with whom I readily agree-and tax capital like income? Until the two taxes are united, we will continue to see mass tax avoidance by the wealthy, presenting their income as capital for a 23 per cent. tax break. Surely this is also the time to take a much wider look at tax avoidance by big business. It is scandalous that companies such as Tesco avoid paying millions in stamp duty by placing British properties in foreign special purpose vehicles, which are based in offshore tax havens.

Finally, the Chancellor's announcement on fuel poverty is, once again, too little, too late. Why has he not had the guts to claw back the huge excess profits made by energy companies thanks to the emissions permits that the Government have given them for free? Some 4.5 million people still live in fuel poverty, but the Government's 2010 fuel poverty target appears to have been conveniently shelved by Ministers. Limiting his measures to prepaid meters and only a modest increase in money for social tariffs does not go nearly far enough. Surely this is the time to compel all energy companies to introduce real, fair, social tariffs for all vulnerable people, not just those on prepaid meters.

This Budget gives no real help to families struggling with higher food bills, higher energy bills and higher debt repayments. What will this Budget do to help junior nurses, teaching assistants and soldiers serving in Afghanistan? The answer is nothing. What we have got instead is a sequel to last year's Budget, when the Chancellor's predecessor scandalously raised taxes exclusively on people earning less than £18,500 per year who do not get tax credits. What will the Chancellor say to those most vulnerable people when their income goes down in three weeks' time?

After 11 years in government, Labour has today completed its fiscal fusion with the Tory Party. Both parties believe in the same kind of Budget: the kind of Budget that kowtows to vested interests, but fleeces the average family; the kind of Budget that keeps tax loopholes for the super rich, but closes in mercilessly on single mothers who have been overpaid tax credits; and the kind of Budget that uses green taxes as an excuse to take more money from the kitty of low earners. This is not a green Budget. This is not a people's Budget. This is a tinkering, con-trick Budget that protects the rich and abandons the poor.