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Last Updated:  Thursday, 10 April, 2003, 10:28 GMT 11:28 UK
Budget 2003: Ask Treasury Committee
Chairman of the Treasury Committee, John McFall answered your questions.



Chancellor Gordon Brown has again cut his predictions for UK economic growth, as he unveiled his seventh Budget.

The chancellor also announced an increase in government borrowing and outlined measures which see greater taxes for smokers and drinkers, a new "baby bond" and benefits for pensioners.

Despite cutting his growth forecast, Mr Brown said Britain was in a much stronger position than other countries amid the global slowdown.

How will the budget affect you? What does an increase in government borrowing mean for your pocket? How has war affected the government's economic plans?


Transcript:

Newshost:
Hello and welcome to this BBC News interactive forum, I'm Andrew Simmons. The Chancellor, Gordon Brown, has defended his budget against accusations that he's been too optimistic in his forecast for economic growth. Mr Brown said he could be positive because the British economy had sound fundamentals in place. But beyond the Chancellor's growth forecasts how will his measures affect individuals - from the size of your pay packet to the cost of a pint?

Well here to answer your questions is the Chairman of the House of Commons Treasury Committee, Labour MP John McFall.

John, thank you very much for joining us. Let's get straight to the questions. The first one comes from Richard in Abingdon in Oxfordshire. He asks: "I don't have kids and I'm not married thus I get no tax breaks. What is there to help those of us who don't earn mega bucks but would like a decent standard of living?"

John McFall:
Yes well actually there is a working tax credit now and it applies to those with or without families and the Chancellor announced that in the pre-budget report last November. He did realise, I think, that there was an innovation to take place here, an anomaly that existed, so he has introduced that. And for Richard that's a positive measure, given that he has no family and no children.

Newshost:
This one from Alan, he's from the UK. "All families are guaranteed at least 16.05 a week through child benefit. What is the point in collecting tax just to pay it back again?"

John McFall:
Well we need to have tax in order to ensure that the UK plc works efficiently and properly. And we need to have a fair tax system. And I think one of the things that the Chancellor has done is to weld the welfare to work issue so that those at the bottom end of the scale are treated fairly and there is enough encouragement for people to go into work and to get off welfare. And he's introduced these tax credits. Now a number of people would say that they are unnecessarily complex but if you have a family or if you have a income which is comparatively low and it's supplemented by a tax credit then you will be very glad that that is the situation. So we have to have a tax system, we have to have a fair system in terms of redistribution but we also have to recognise people's circumstances and I think that's done through the tax credit system.

Newshost:
Now Brian Grant from Windsor wants to know: "I've heard that the increase in employers' national insurance will not apply if the individual does not receive a salary increase in the next tax year - is that true?"

John McFall:
Well that's a detailed point there. I was at a budget breakfast meeting this morning when the issue of national insurance rises came up but I couldn't say that that particular issue was raised, so I don't know where

Newshost:
Not sure of that one, okay. Well Brian we'll try and work on that one and come back to you on it hopefully. Jock from Oxford: "Our monetary system is reliant on unsustainable growth and the wage slavery that goes with it. It would only take an act of political will to change it once and for all, why can't chancellors make such radical decisions?"

John McFall:
Well what does Jock want to change? We have

Newshost:
The wage slavery possibly - low wages.

John McFall:
Well one of the things that this government did was introduce the minimum wage because it was possible for people to work in this country in a low wage environment getting as little as 1 or 1.50 an hour. Now that there is a basic wage - minimum wage in of 4.60 an hour then that's a very good platform, a very good start. And I'd be the first to say that it's still comparatively low wages but there is a platform there from which we have to build. And when we're dealing with an economy that is as diverse and as complex an economy as the United Kingdom then we have to have certain rules and regulations and the macroeconomic framework we have with independence for the Bank of England and the monetary policy committee setting interest rates, that's a model which has been admired throughout the world, since it was introduced in 1997. So I think we've got the big issues right - the macroeconomic framework - but on the individual issues like wages I think that the minimum wage is a good start.

Newshost:
Well you mentioned the Bank of England, the confidence the City had in the Chancellor, how popular was in those years, is the honeymoon over though because a lot of questions are being raised aren't there in the City about the issue of whether or not Gordon Brown is being too optimistic and I'm picking up here a question from Jeremy Lowe from London who gets right to the heart of the issue. He says: "The Chancellor's forecast is always optimistic in times of trouble. Would there be a different effect in the money markets if he gave a more realistic forecast?"

John McFall:
Well consistently this Chancellor has underestimated growth and he said surpluses and he was criticised for that and it's just in the past year that some people have criticised him on this issue. Indeed my own committee we looked at the budget proposals and the pre-budget proposals in November and we gave a mild rebuke to the Chancellor saying that we hoped that his forecast would not be consistently over optimistic. And again from the contacts that I've had with the City since his budget has taken place they're all agreed that the growth forecast for next year - for this year - are realistic but the one for next year, over three per cent, could be a little tad optimistic. But it depends on the global economy. And I think we have to realise that this budget has been set against a background of a global downturn, where growth in the Eurozone is one per cent, whilst it was two per cent in the UK and growth in Japan and America have been very disappointing. And there's a lot of what the economists refer to as downside risk as a result of it. But it's a very unstable economic global environment in which we're operating now.

Newshost:
This question is anonymous, it asks: "Gordon Brown said the Government was making 240 million available for humanitarian work in Iraq but an extra 330 million for counter-terrorism measures in the UK. Now how are we spending more on counter-terrorism than aid to the country we have just destroyed?"

John McFall:
Yeah well the 240 million was a one-off that was announced by Gordon Brown, that isn't the whole budget. And we are part of a number of countries who are contributing to the humanitarian task in Iraq. And I don't think it would be valid to compare the 240 million with the 330 million. I believe that that 240 million figure will increase as time goes past and indeed in the budget yesterday I took the opportunity in my own speech to focus on the humanitarian aspects and to ask Gordon Brown, along with Clare Short, the International Development Secretary, to keep the humanitarian issues up front.

Newshost:
This question has just come in and I'll read it from the computer. Becky from Southampton: "What is the idea behind the new housing benefit rules for people taking up jobs? Social housing should be solely for those in need and people in them should be means tested every five years to ensure that those whose circumstances have changed are encouraged to move into private housing. This would release the housing for those in need on the waiting list."

John McFall:
Well the issue of housing Andrew, in terms of housing benefit, that is an area where there is an awful lot of money, in many ways, gone missing with housing benefits, there's a lot of fraud taking place in the housing benefit and the Government are cracking down on that. And it's very important that we crack down on the fraud because if we do not do so then other people are paying unfairly for this fraud. So the housing benefit rules have been tightened up to ensure that those in need get decent housing and get housing benefit and those who are not, do not participate in this fraud. On the social housing aspect that Becky mentioned, that is a very important point and I think social housing should be for people in need and I agree with her on that area.

Newshost:
Rob Olson from London, some basic stuff here: "Have the income tax thresholds been raised in line with inflation?"

John McFall:
Yes as far as I know that detail in the Budget yesterday but I could come back to that, I haven't looked at anything in detail there yet but from what I can remember from what the Chancellor stated yesterday and the Budget meeting we had this morning I think it's the case that - it's an open question.

Newshost:
Well we'll hopefully do some background work on that one here to check on it and catch you out with detail. This just goes to prove that we don't forewarn you of the questions you receive. Brian from Lincoln: "The Chancellor is making the unemployed sign on every week instead of every fortnight. What is that supposed to achieve?"

John McFall:
Well I mentioned earlier Andrew on the welfare to work programme, since the Government have come in, in June 1997, an extra 1.5 million jobs have been created and one of the tasks that the Chancellor has set himself is to have a full employment strategy for each region of the country. And we have to break the welfare to work cycle which has existed and what the Chancellor is doing in this is ensuring that those who can work are given the opportunities to work because that's the way to a better society, a more stable society and for people to feel that they're contributing and that they have a worthwhile existence, that's very, very important. So for their own confidence and for the benefit of the country that's important. And I'm certainly supportive of ensuring that we bring full employment to every region of the area and I speak coming from an area where there's been historically high unemployment.

Newshost:
You touched earlier on the issue of housing, a question has been raised by Kevin Garner, just in, he asks: "How will the Budget help first time buyers?"

John McFall:
Well the Chancellor didn't touch the stamp duty and that's a good issue. And the interest rates in this country are historically low, they've never been as low for 40 years and that is a big help to first time buyers when they're going on the housing market. John Prescott is looking at housing development in brown field sites and looking at areas in the South East here where there is a demand for housing and that housing cannot be fulfilled and he's focusing particularly on those, say, who work in the public sector - nurses, the police and others and auxiliaries working in hospitals - who have a comparatively low wage and the social housing element is in his plans. So that's the way that the Government are responding to that and that's against a background of historically low interest rates, so that must be good for everyone.

Newshost:
Right, I'm going to have make this one the last question and it's just come in from David Martin and he's from London. He says: "The Labour Party have ridden the good times created by hard years under the Conservatives, they left the economy in a rock solid state. The slope is now very acutely downhill isn't it, with Brown having no control." So what do you say.

John McFall:
Well I think I would agree with David in that they were hard years with the Conservatives and that's why they lost after 18 disastrous years in government and the Labour government took over. But when Gordon Brown announced his macroeconomic changes, as I mentioned earlier on in our discussion, and giving independence to the Bank of England he said he wanted to establish a framework which would take the politicians out of that arena, so now an independent monetary policy committee decides on interest rates and not the politicians. And he also said that he wants a framework established for the long term so that we do have that stability, that macroeconomic stability, which is extremely important and it's there for the good times and the bad times. And we have difficult times at the moment, as I mentioned, because of the synchronised global slowdown that we are experiencing. And that's the test of Gordon Brown and others, is his framework one that will be robust, that can stand up to both the good times and the bad times?

Newshost:
John McFall thank you very much indeed for joining us. And thank you for your questions. From me Andrew Simmons that's all for now goodbye.



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