Three hour debate tomorrow on Pre-Budget Report

Conservative demands for a parliamentary debate on yesterday’s Pre-Budget Report have been accepted by the Speaker.

Shadow chancellor George Osborne demanded the debate under a standing order.

“The news the government is set to borrow more than any government in history has shocked the entire country,” he told the Commons.

“If this had formally been called a Budget there would now be four whole days of debate on it.

“These are the issues the entire country is talking about and I believe we should be debating them in this chamber.”

The Speaker Michael Martin then allowed for a three hour debate tomorrow.

Meanwhile, chancellor Alistair Darling has been forced to defend yesterday’s Report following massive concern at the level of debt the country is getting itself into.

Mr Darling has dedicated the day to justifying yesterday’s Report, touring media outlets to put the government’s side of the argument across.

“It seems only the Conservatives who are saying, as they did in the 1980s and the 1990s, ‘just walk away from people, leave them high and dry, let them sink or swim’,” he told GMTV.

“I just do not think that is right thing to do. People expect the government to help them. We will be helping people and I fully intend to see that through.”

Mr Darling also defended aspects of the Report which specifically redistribute wealth.

“Of course, we have got to live within our means, so I have also had to take difficult decisions, though I think it is the fair way to do it, to ensure we get that borrowing back down again,” he said.

“People [who earn] over £100,000 will actually be paying more, I make no bones about that, in three years’ time, when the changes come through.

“But I believe that it is the right thing to do, to support our economy now, but at the same time make sure that as a country, we live within our means.”

But disputes over the Report grew increasingly acrimonious today, with the Conservatives accusing Labour of misleading the public.

The party raised serious concerns over the government’s commitment to the Warm Front scheme, which provides grants for insulation and heating measures to vulnerable households.

Yesterday the chancellor said £100 million in new money would be put into the scheme, but the Tories say the government actually plans to cut the Warm Front budget by £76 million over the next three years.

“They have been rumbled saying one thing and doing another,” said shadow energy secretary Greg Clark.

The Treasury select committee met today, with Bank of England governor Mervyn King telling MPs the government may have to force banks to change their behaviour.

The Liberal Democrats tabled a parliamentary motion to stop the proposed cut in VAT today, and instead called for radical cuts in the basic rate of income tax, paid for by closing tax loopholes and removing expensive reliefs.

Liberal Democrat economics spokesman Vince Cable also wrote to Mr Darling calling on him to re-think the Pre-Budget Report plans.

“Given the huge discounts already on offer in many British shops, this short-term VAT cut will make very little difference.

“Instead, the chancellor should be putting money directly back in people’s pockets with a big permanent cut in income tax, targeted at the low earners and paid for by removing tax loopholes and reliefs which only benefit the very wealthy.”

Yesterday’s report saw £20 billion directed towards revitalising the economy, but analysts are concerned at the ratio of risk to reward.

Assuming the Treasury’s projections are accurate (many observers consider them optimistic) the spending will help a little in a 2010 recovery. If they are inaccurate, the UK will be in its worst economic situation for a generation.

Policies in the Report included a cut in VAT, a boost for tax allowances, changes to income tax and national insurance and more cash for parents and pensioners.

The chancellor admitted borrowing £78 billion this year, and £118 billion the next with national debt hitting £1 trillion by 2012/13.

Shadow chancellor George Osborne argued cuts in interest rates were a more effective way to stimulate the economy.

“We have got to get lending going in this economy again, you have got to get credit to small businesses, that is where the action is needed, not, frankly, taking a huge risk with the public finances,” he told the Today programme.

“I think you could directly insure – for a premium to protect the taxpayers’ interest – lending from banks to businesses to get credit flowing, to keep people in work, to stop businesses folding,” he said.

“These measures would do far more than a 2.5 per cent cut in VAT – a temporary cut which would be paid for later with massive tax rises coming down the track.”

Yesterday’s Report is increasingly being referred to as the moment the battle-lines for next general election were set.