Labour to force Commons vote as shadow chancellor claims government should crack down on tax avoidance instead
Labour will force a Commons vote next week to call for a planned 3p hike in fuel duty to be postponed for a second time.
The shadow chancellor, Ed Balls, said “it cannot be right” to hit struggling families and businesses with another tax rise, and urged MPs from all sides to back demands for the government to cancel the increase due in January.
He claims the move could be funded by cracking down on tax avoidance schemes.
In a blog for PoliticsHome, Balls wrote: “At a time when the cost of living is rising, our recovery is fragile and this out-of-touch government is giving 8,000 millionaires a tax cut, it cannot be right to hit middle and low income families and small businesses with another tax increase.
“That is why Labour is calling on the chancellor to cancel January’s planned 3p rise in fuel duty – at least until next April. We will put this to a vote in parliament on Monday and I hope MPs from all parties will stand up for their constituents and back our call.
“Where should the government get the money to pay for this tax cut? I suggest they pay for this move by clamping down on tax avoidance. Customs has forecast that these schemes cost the exchequer £650m a year. Recent estimates have now put it as high as £1bn a year. But ministers have failed to take tough action to stop it happening.”
Chancellor George Osborne scrapped a planned 3p rise in fuel duty due in August at a cost of £550m.
Campaigners from FairFuelUK claim allowing the rise to go ahead in January could lead to 35,000 job losses and hit economic growth.
Labour is using one of its allotted opposition day debates in the Commons to force the vote, which is non-binding.
Manufacturing output dropped 1.1% in August, Office for National Statistics said, casting doubt on hopes of growth in the third quarter
British factory output dropped in August and the country’s trade deficit widened sharply, data showed on Tuesday, dampening prospects for a sustained recovery in the second half of 2012.
Manufacturing output dropped 1.1% in August after a downwardly revised bounce of 3.1% in July, the Office for National Statistics said. Economists had forecast a dip of 0.6% on the month.
Britain’s goods trade deficit widened more than expected to £9.8bn, as exports fell and oil imports rose, and its total trade deficit – which includes buoyant services exports – rose to its second highest on record.
“Certainly it looks like the manufacturing sector is struggling and being affected by the very weak euro area economy and weak global backdrop,” said Investec economist Victoria Clarke.
Sterling fell to a fresh one-month low against the dollar on Tuesday while UK share prices also declined.
Britain’s economy has probably emerged from recession in the third quarter, but a vigorous return to health still looks elusive, keeping the pressure on the government and the central bank to boost growth.
The International Monetary Fund (IMF) slashed its forecasts for Britain’s economy, predicting a contraction of 0.4% for this year and meagre growth for 2013.
The country has not recovered the output lost during the 2008-2009 slump, and fell back into recession late last year.
Most economists think Britain achieved some growth in the third quarter as production bounced back from the effect of an extra public holiday in June, and ticket sales for the London Olympics and Paralympics added to gross domestic product.
Industrial output, which includes energy production and mining, fell 0.5% on the month in August, in line with expectations, after a 2.8% rise in July.
In more positive sign for the wider economy, retailers posted a solid rise in sales last month as Britons splashed out on sturdy shoes and warm clothes, and another survey showed that house prices fell at a slower rate.
But recent business surveys have shown a renewed weakening in sentiment, increasing concerns of an economic relapse as government spending cuts continue to hurt growth, and the eurozone crisis is hitting exports and business morale.
A sharp worsening in Britain’s net exports had been one of the main drags on the economy in the second quarter, when output shrank by 0.4%.
With the government’s hands tied by its pledge to erase the country’s budget deficit over the coming five years, the onus is on the Bank of England to stimulate the economy.
Chancellor George Osborne vowed on Monday not to waver from his austerity plans, although the IMF said on Tuesday that he may need to defer some spending cuts planned for next year if the economy is much weaker than forecast. The IMF also said the BoE may need to loosen policy further.
Most economists expect the central bank to extend its quantitative easing purchases of government bonds once the current £50bn round is completed in November.
Chancellor says eurozone leaders facing a ‘moment of truth’ which could determine the future of the entire continent
Britain’s prospects for economic recovery are being “killed off” by the crisis in the eurozone, Chancellor George Osborne has warned.
In a stark message to the leaders of the 17-nation single currency bloc, Osborne said they were facing a “moment of truth” which could determine the future of the entire continent for years to come.
In some of his strongest comments to date, the Chancellor voiced his exasperation at the repeated failure of the eurozone nations to find a permanent solution to end the financial turmoil.
Writing in The Sunday Telegraph he said: “The lesson of the last two years is that treating the latest symptom does not cure the underlying conditions.”
While there were signs a solution to the latest bout of uncertainty in the Spanish banking system was on the cards, Osborne said it would not be enough to end the threat to the UK economy.
“Our recovery – already facing powerful headwinds from high oil prices and the debt burden left behind by the boom years – is being killed off by the crisis on our doorstep,” he said.
“I know from talking to British businesses that our country is bursting with entrepreneurial spirit and exciting investment plans that are being held back because of uncertainty about the future.
“That’s why a resolution of the eurozone crisis would do more than anything else to give our economy a boost.”
He added: “The British Government is clear that it is strongly in Britain’s interests for our biggest export market to succeed; the risks for us of a disorderly outcome are huge.”
With the prospect of further turmoil in the wake of the of the forthcoming re-run of the Greek elections, the Chancellor called on the eurozone countries to take decisive action to end the instability.
“We are approaching a moment of truth for the eurozone,” he said.
“After more than two years of uncertainty, instability and slow growth, decisions taken over the next few months could determine the economic future of the whole European continent for the next decade and beyond.”
He again underlined the need for greater fiscal integration – with more pooling of financial resources and the creation of a banking union – across the currency bloc.
“The solution in the eurozone doesn’t have to be a full-blown United States of the Eurozone, but if it is to be successful it is likely to include most of the mechanisms that make other currencies work,” he said.
“If countries in the eurozone cannot meet their liabilities, for example to protect bank depositors, then it is natural for the other eurozone countries to stand behind them.
“In return, it is understandable that those countries would want a say in how banks across the eurozone are supervised and dealt with in a crisis. That is why a banking union is a natural extension of a single currency.”
Osborne stressed that Britain would not be involved in any such arrangement and that any transfer of power from Westminster to Brussels would require a referendum.
“One of our first and most important acts was to pass into law a referendum lock so that any politician proposing to give up more power over our own affairs in any new treaty will have to put that choice to the people,” he said.
“Whatever may lie ahead I find that extremely reassuring.”
Shadow chancellor Ed Balls said Osborne could not blame the problems in the eurozone for his mistakes in handling the economy.
“It’s deeply complacent and out of touch for George Osborne to blame Europe for a double-dip recession made in Downing Street. He will fool nobody with these increasingly desperate excuses,” he said.
“Despite the eurozone crisis, Germany, France and the euro area as a whole have so far avoided recession while Britain’s recovery was choked off in the autumn of 2010.
“We urgently need a change of course and a plan for jobs and growth, here in Britain and in the eurozone, if we’re to get people back to work and get deficits down. If we fail to act now, we will pay a very heavy long term price.”