The Government will continue to pursue our objective of a stability and growth pact that takes into account the economic cycle, debt sustainability and the role of public investment. I intend to publish later today the UK's 2004 convergence programme. The Government are also publishing today their autumn report on euro preparations.
Continental Europe seems to be stuck with rates of unemployment far higher than ours. Is it possible to argue that the growth and stability pact has delivered stability, but of the sort one tends to notice in a corpse? Under my right hon. Friend's stewardship, by contrast, the United Kingdom has announced outstanding records on both growth and job creation. What advice on the future of the pact will he give his European colleagues over the next few months?
It is true that the euro area has higher inflation and higher unemployment with lower growth than we do. The issue arising is whether the stability and growth pact gives a degree of co-ordination that is necessary with the monetary authority of the European Central Bank to enable Europe to continue to grow at a rate that would bring down unemployment. We have three specific proposals. First, just like our fiscal rules, Europe should take into account the economic cycle. Secondly, those countries with low levels of debt should be allowed to borrow. That would be positive for growth. Thirdly, they should recognise the important role of public investment, as we do in setting our fiscal rules, to enable countries with low debt to be able to borrow to make the necessary public investment to build up their infrastructure and to secure economic growth for the future. I believe that the main economies of Europe are moving towards the views that we have expressed for seven years on the stability and growth pact. I hope that during the Luxemburg presidency many of the rules that underlie the implementation of the stability and growth pact will be rewritten.
It is not usual to refer to Members in another place. I must correct the hon. Gentleman—the deficit this year is 2.9 per cent., not 3 per cent. That compares with other countries, including America and Japan, where the deficit is over 4 per cent., in both cases around 5 per cent. In Japan's case it is nearer 6 per cent. now. So our record is a good one and he should congratulate us on our management of public finances. Unfortunately, the only contribution that the Conservatives could make to public finances would be to cut £35 billion of public spending. Even if they sacked every civil servant in the country, they could raise only £15 billion, so they would have to find a further £20 billion from massive cuts in our public services. It is about time that they explained how many nurses, teachers and carers would lose their jobs.
What are the likely consequences of the European Union continuing effectively without any fiscal rules if the stability and growth pact is not reformed?
It is clear that the pact will be reformed and that all countries now recognise that the existing implementation rules cannot be sustained. Because France and Germany are not going to be disciplined as a result of the breach of the rules, it is clear that the rules will have to be changed; otherwise, the pact cannot survive. I believe that in the next few months we shall see proposals that will make the pact more understanding of the needs of the economic cycle and of public investment and more sympathetic to countries with low debt.