06 June 2008
Chancellor Alistair Darling has dismissed accusations that his decision to borrow £2.7bn to fund a tax cut has put the fiscal rules at risk.
Further doubt was cast on the government's ability to meet the self-imposed rules when the Organisation for Economic Co-operation and Development's Economic outlook report said UK growth had slowed to 1.5% in the first quarter of 2008.
'The slowing economy is also likely to limit tax revenues, and the government deficit now seems likely to move significantly above 3% of GDP, putting the fiscal rules at risk,' the OECD's June 4 report states.
But confronted with the OECD's conclusion by the Treasury select committee, Darling said: 'I don't accept that we're putting the rules at risk. They provide a good discipline on us. What I've done [borrowing £2.7bn] we can afford and was consistent with the rules.'
Giving evidence to the committee in the second and final hearing of its inquiry into the effect of the Budget on low-income households, Darling gave no indication of how he planned to compensate individuals who have lost out.
'There are still people who we want to do more to help. We will do that in the Pre-Budget Report,' he said.
The decision to raise the personal allowance to help the Budget losers will benefit all basic-rate taxpayers, not just those who were affected by the abolition of the 10p rate. Darling was quizzed by MPs on whether the compensatory measures to be set out in this autumn's PRB would focus on just those 5.3 million individuals affected by the loss of the 10p rate or a larger group of people.
'Our starting point was how do we help people who have lost out? What I've done helps a wider range of people, but I'm not going to box myself in. I will do whatever I can to help lower-income people,' he said.
Darling also accepted that there were still approximately 1 million people who will not be fully compensated by the raising of the personal allowance threshold this year, and said the government wanted to do more for them.
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