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What Japan got wrong was snuffing out a recovery at a very early stage and never really getting over it. As the hon. Gentleman knows, the Japanese have had complete stagnation for a long period now. The debt is just going up and up, and understandably they are very concerned about it. The new Prime Minister was the finance Minister until a few weeks ago, and understandably, he has huge problems on his hands.
The tests we need to apply to the Budget relate to growth and jobs, which I remain very concerned about; there is a substantial risk there, and I would like to have heard more said about policies to promote growth so that we do not end up with years of very sluggish growth at best or, even worse, bumping along the bottom for some years.
I have said that one of the tests that needs to be applied to this Budget is its fairness and another relates to the promises made about it before the election. Where better to start, then, than with VAT? During the election there was a lot of discussion about that. The Conservatives, like ourselves, said that they had no plans to raise VAT. I remember having a discussion with the Chancellor when he announced his plans not to go ahead with at least some of the national insurance increases, and he said that he would fund that from efficiency savings. I remember saying that I thought that was highly doubtful, and that they would have to raise money from another big tax. Sure enough, VAT is going up.
Interestingly, for some reason, not much was said about efficiencies yesterday, although they loomed very large during the election. We now know that "no plans" on the Tory side meant exactly what Geoffrey Howe said in 1979 when he said he had "no intention" of doubling VAT. Of course he was factually right, as it only went up from 8% to 15%. It was the same with John Major when he was Prime Minister in 1992, and said he had "no plans" to raise "extra resources from VAT": of course, VAT went up. Even last year, the Prime Minister said in opposition that putting up VAT was regressive. He said:
"You could try, as you say, put it on VAT, sales tax, but again if you look at the effect of sales tax, it's very regressive, it hits the poorest the hardest. It does, I absolutely promise you."
I assume he was not absolutely promising to do that, but was trying to point out to the questioner that he thought that VAT was regressive. Yet here we have it-VAT going up to 20%, as I always suspected would happen.
What I find even more curious is how on earth the Business Secretary can back this proposal. He cannot have been unaware of the Liberal campaign which spent two days dealing with the "Tory VAT bombshell". We saw the posters all over the country. They said a Tory Government would come up with "a secret VAT bombshell", but the only secret appears to be that the Liberals intended to vote for it when it was introduced. Simon Hughes, who is no longer in his place, said last week that he thought VAT was
"the most regressive form of tax" in that it "penalises the poor". When the Business Secretary said during the election that he would
"hardwire fairness back into national life", did he have this in mind?
I see that there are, wisely, only four Liberal Democrats in the House at the moment; the others are no doubt explaining to their constituents why it is that when they said, "Vote for us and keep the Tories out," they completely misunderstood the position. It seems to me that this is not just a broken promise, as there are real issues at stake. I was criticised for what I did with national insurance, but I wanted to ensure that pensioners would not have to pay the increased tax and I wanted to protect people earning less than £20,000-of course, that has not happened.
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