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Ask The Boss: Alistair Darling, Chancellor Of The Exchequer, Answers Your Questions

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http://business.timesonline.co.uk/tol/busi...icle6838870.ece

Q: How would the Chancellor describe the economy he inherited?

James Patterson, Borders

James,

When I became Chancellor in 2007, our country had seen a decade of stable growth. This strong economic foundation meant we were positioned much better to deal with the difficulties we have faced in the global downturn.

We have been in a better position because, since 1997, we were able to pay down our national debt to one of the lowest levels in the G7, while at the same time repairing the legacy of underinvestment we inherited. Schools and hospitals needed more investment, and we provided it.

As a result, we have been able to borrow to support the economy now and reduce the impact of the global recession, by helping people and businesses. It has allowed us to invest now to ensure we are well placed to take advantage of growth when it returns at the turn of the year.

Q: As a British taxpayer, can you please explain exactly where my money has gone in the last two years? It appears to me to be going, in a roundabout way, into the pockets of highly paid brokers, dealers, bankers and consultants. I would much rather the money had remained in my pocket. Please justify your actions in simple terms, thank you.

Robin Peacock, Bangkok

Robin,

The money raised in taxes has been used to continue vital investment in the public services, which are available to everyone in this country: building roads and schools, paying teachers, police and doctors, as well as providing a health service free at the point of use. It is right to continue to invest in our public services and support the economy through the downturn whilst ensuring we live within our means in the longer term.

On the issue of banks, and the support they have received, if we had not taken the decisive action to stabilise the banking sector, the impact for our economy would have been devastating. The financial system would have collapsed, people wouldn’t have been able to access their bank accounts, get paid or use their debit cards. As a result of supporting the banks we have maintained financial stability and ensured no depositor lost their savings.

The support we have provided is not a handout. The banks will pay the taxpayer a fee for the support they received and when we sell our shares in the banks we will get our money back. In return, the banks have agreed to lend more to families and businesses.

Q: When and how are you going to tackle directly the public spending deficit? A direct answer would be appreciated.

John Docherty, Bristol

John,

Over the past decade we reduced the UK’s debt level, as a share of national income, to the lowest in the G7. We paid down debt whilst also investing in our public services including doubling spending in the NHS and investing in our schools.

Once growth returns we must ensure that we put the public finances on a sustainable path. That is why in the Budget I set out a clear plan to halve the deficit over four years.

We are doing this fairly, through a combination of higher taxes for those who can afford them and slower spending growth in the future. It is right that those who have benefited most during the growth years bear their share of responsibility during the difficult times. I have announced a number of measures that will halve the deficit over four years. These include a new 50% tax rate for the top 1 per cent of the UK population earning over £150,000, restrictions on pension relief for those higher earners, as well as increases in alcohol, petrol and tobacco duties.

Q: How can this Government justify a third fuel duty increase in nine months?

Steve Lewis, Maidenhead

Steve,

It is essential that we invest to support people and businesses now - which we are doing through things like the VAT cut, tax cuts for basic-rate taxpayers and by giving businesses more time to pay their tax bills. But, we must also ensure we live within our means, just like all families across the country are doing, and strengthen our public finances. Increasing fuel duty this month is an important part of reaching that goal.

Q: Why have you raised corporation tax for small business twice in the last three years, while cutting it for big business - and therefore falsely claiming you had delivered a “budget for enterprise� Surely small business is the engine room of the economy and employs more people, so why penalise it?

Richard Ashton, Brighton

Richard,

Small businesses are very important to the UK. The fact their numbers have increased by over 1 million since 1997 is evidence we have strongly encouraged enterprise over the past 12 years.

In recent years we have further improved investment and growth incentives for small businesses, including increasing research and development tax credits.

Under the old rules some people were setting up small companies simply to pay less tax than the self-employed and employees. That's unfair to millions of taxpayers. Raising the rate has helped to reduce the incentive to do this and this means there is a more level playing field for everyone.

To help small businesses affected by the recession, I announced in last year’s Pre-Budget Report that the small companies’ rate of corporation tax would remain at 21 per cent for 2009-10. This will help around 800,000 small companies in the UK and will ensure we are internationally competitive with a tax rate significantly lower than the rate for larger companies and low compared to our international partners.

I also announced the business payment support service, which has allowed small businesses to defer £3.5bn in tax and therefore keep their staff in work and continue trading during these difficult times.

Q: When will the Government address the time bomb of unfunded public-sector pensions? It is grossly unfair to the over-taxed private sector. The public sector has greater job security, longer holidays and generally better working conditions than us in the private sector.

Simon Napier, Nottingham

Simon,

We believe that pensions are a key part of the remuneration package for public servants, aimed at maintaining a high quality public sector workforce. The typical public service pension payment at present is about £5,000 per year. Proposals to take away pensions from groups such as doctors, nurses, and police officers would not help the private sector or the functioning of key public services on which we all depend.

Reforms introduced by this Government - including changes to the age at which pensions are paid and cost capping will ensure public pension costs are sustainable now and in the future.

Q. The Tories wish to abolish the FSA. Why is that a bad idea?

John Leamons, Texas

John,

Simply moving the FSA into the Bank of England would distract regulators from doing their job. What matters is that the Bank of England and the FSA identify the right issues, work well together, and make sure they take action to prevent a build-up of risk.

We set-up the FSA ten years ago, bringing together seven different agencies. We were right to do that and replace the patch-work approach that existed before. The FSA plays an important role, responsible for the day-to-day regulation of individual financial institutions.

The Bank of England is responsible for controlling inflation through monetary policy. The Treasury needs to be at the table too, because sometime taxpayers’ money needs to be used to support the banking system.

In a global financial system, however, we need to consider whether further steps are needed to help the authorities address the potential build up of systemic risks, and work closely with the EU and other countries to achieve consensus on what these steps may be, and how they should be used.

Q. How can the solution to the financial crisis be a return to lending and spending when the initial problem arises from people borrowing more than they could afford to repay?

Richard Wagstaff, Ruislip

Richard,

It is certainly true that many individuals, banks and businesses borrowed more than they could afford to pay back. We have made it very clear that banks cannot return to the ways of the past that precipitated the financial crisis.

One of the consequences of the crisis is that as international banks withdrew from the UK, and our banks sought to rebuild their balance sheets, lending in the economy became severely constrained - making it much harder for businesses and families to get the loans, credit and finance they need. To deal with this we have required banks to sign up to commitments to increase their lending, and the Bank of England has taken unprecedented action to increase the supply of money in the economy.

We have also made it clear that governments, here and everywhere, have to live within their means. It is also right that families and businesses ensure they do the same with their finances.

Q: As potentially the last Labour chancellor for a generation … how would you like to be remembered?

Steven Elliott, Telford

Steven,

The Labour Party can win the next General Election. Why? Because we have a clear vision for the future of our country: of a Government working in partnership with individuals, families and businesses to help us all meet the challenges of the years ahead - such as tackling climate change, strengthening our skills base and high-tech manufacturing industry, and providing high-quality long-term care for the elderly.

I firmly believe that this Government’s track record of taking the right decisions, however tough, shows that we can meet the test of character, which this country faces.

All answers written directly from the propaganda office.

Banal in the extreme.

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Deserves a bump for sure!

Look at this:

"In return, the banks have agreed to lend more to families and businesses."

Say what????

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