Small change proves to be the big issue

POST BUDGET: COMMONS DEBATE

STEPHEN GOODWIN

Parliamentary Correspondent

The Liberal Democrats ploughed a lonely furrow in yesterday's Commons debate on the Budget, marking themselves out as the only party that will vote against the 1p in the pound income tax cut.

Labour and the Conservatives were indulging in fantasy, trying to persuade voters they could have higher spending, lower taxes and safe borrowing, said Malcolm Bruce, the party's economics spokesman.

Repeatedly challenged on Labour's intention to abstain when the House votes on the 1p cut, Gordon Brown, the shadow chancellor, said it would do so because people had suffered enough under the Tories.

Mr Bruce reiterated the Liberal Democrats' willingness to add a penny to income tax to spend on education. The party proposed to take 750,000 people out of tax altogether while introducing a new top rate of tax of 50p in the pound for people earning more than pounds 100,000.

Mr Bruce said the Government's "proud boast" of a 1p tax cut would be at expense of a dramatic rise in council tax. And although the Chancellor had increased spending on schools by almost pounds 880m, most of the money would be provided by local authorities.

William Waldegrave, Chief Secretary to the Treasury, denied the effect would be cuts in services and a rise in council tax. "It will be possible for all education authorities to spend the increase on schools, whatever their budget is."

Echoing the Chancellor, Mr Waldegrave said the Budget kept spending down, kept borrowing on a downward path and protected high priority programmes. "Lower borrowing will keep pressure off interest rates. That's good news for business, investment, homeowners and for jobs."

But Conservative backbenchers wanted more. John Townend, chairman of the Tory backbench finance committee, said the Budget had created "a window of opportunity to cut interest rates in weeks rather than months".

He made plain he would have liked bigger cuts in both taxation and public expenditure, though he said his only difference with the Chancellor was one of speed.

Gordon Brown, the shadow chancellor, accused the Government of taking pounds away in tax rises and giving back only pennies. Opening the second day's debate on the Budget, he claimed Kenneth Clarke had been "paralysed into inaction as a result of everything that has happened in the economy under Conservative management over the last 16 years".

Mr Brown said that despite the 1p cut in income tax, people in total were nearly pounds 700 a year worse off after the 21 tax rises of recent years. Embellishing on the Chancellor's public house analogy that the tax rises since 1992 amount to the price of three pints of beer a week, Mr Brown said Tuesday's tax cuts "amount to rather less than two or three packets of peanuts".

He said the Tories had hit work and training programmes when they should have introduced Labour's employment programme and paid for it by a windfall tax on the utilities.

"This is a Budget that marks not the beginning of the Conservative Party's fightback but the irrevocable public exposure of its terminal decline."