Government Borrowing

Chancellor of the Exchequer – in the House of Commons at 10:30 am on 26 May 2005.

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Photo of James Gray James Gray Conservative, North Wiltshire 10:30, 26 May 2005

If he will make a statement on the level of Government net borrowing.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

Deficits are falling each year. From last year to this year, and for each year for which figures are published until 2009–10, the UK deficit is lower than every deficit in the G7 except Canada, and is lower than the deficits of the USA, France, Germany and Japan.

With leave, Mr. Speaker, may I ask the whole House to pay tribute to my predecessor? As Chief Secretary to the Treasury, Paul Boateng oversaw two spending reviews with dedication and panache, and was known for his fairness, integrity and commitment to his job. As the right hon. Member for Brent, South, he served his constituents tirelessly for 18 years, increasing his share of the vote in every election since he was elected to the House in 1987. I am sure that the House would want to join me in wishing him well in the challenges that he faces in South Africa.

Photo of James Gray James Gray Conservative, North Wiltshire

I am not certain that I will join the Minister in that eloquent paean of praise, but I wish the people of South Africa well when his predecessor arrives.

In welcoming the Minister to his new role, may I inquire whether he is as confident as his next-door neighbour, the Chancellor of the Exchequer, that the economy will grow by 3 per cent. this year? If that is the case, why did he fail to answer my direct and straightforward question—namely, how much borrowing do we expect for this year? We know that it is £32 billion. If the economy is growing at 3 per cent., why does he have to borrow £32 billion?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

I thank the hon. Gentleman for his welcome. I had hoped to be able to welcome him to the Front Bench, but, unfortunately, I was not quick enough, so I shall welcome him to the Back Benches instead.

It is well known that moderate borrowing is necessary to bridge the years of under-investment in public services, which cannot be put right quickly. It will take years of sustained investment to address that historic under-investment. The hon. Gentleman's own party is entirely responsible for the circumstances that require that borrowing.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

May I, too, welcome my right hon. Friend to his new post? I agree entirely that the levels of borrowing are perfectly sensible and reasonable and are low, both historically and internationally. Does he not agree that it is much more important to keep the economy going by borrowing if necessary to sustain consumer demand so that we tackle unemployment and continue the great legacy of the past eight years?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

I thank my hon. Friend for his welcome. He is perfectly correct that we have had an unprecedented period of stability in the economy, which has allowed us the opportunity to make the investment in public services, and that is reflected in borrowing.

Photo of Richard Ottaway Richard Ottaway Conservative, Croydon South

Does the right hon. Gentleman share the Treasury's forecasts for the growth in the economy?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

The forecasts on all aspects of the United Kingdom economy are made regularly, and are quite transparent. Since the introduction of the new framework in 1997, forecasts have on average been cautious and inexorably have turned out to be correct. In recent years, Her Majesty's Treasury's forecasts have tended to be more accurate and cautious than many who have commented on them.

Photo of Madeleine Moon Madeleine Moon Labour, Bridgend

Does my right hon. Friend agree that it is only right to borrow to invest? Borrowing is now lower than at any time under the previous Administration, who borrowed to fund unemployment in constituencies such as mine in Bridgend.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

Of course, the bills for unemployment amounted to about £5 billion, which is more than was being spent on the schools budget when we came to power. My hon. Friend is perfectly correct about the stability and transparency that we have introduced into the economy, and the fact that our regular forecasts have consistently proved to be correct. That investment is delivering increased and improved public services in all our constituencies, including her own.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

I congratulate the Chief Secretary on his appointment and look forward to having a constructive debate with him over the coming months. Because of the level of net borrowing, the Organisation for Economic Co-operation and Development said this week that in the absence of a spontaneous rise in tax receipts, a slowdown in spending will be required. If that spontaneous rise does not happen, do the Government have a plan B? Is it to cut spending or to raise taxes?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

I thank the hon. Gentleman for his welcome and congratulations, and I, too, congratulate him. I look forward to a constructive relationship with him. He will know, of course, that the deficit is falling and that we are on course to meet our fiscal rules. In relation to tax, this Government have kept and will continue to keep our promises. As the hon. Gentleman is aware, decisions on tax rates are made as part of the tax—[Interruption.] The shadow Chancellor is speaking up in relation to tax, and in the general election campaign he was asked similar questions to those that I am being asked. In relation to plan B in respect of tax, he said on the Radio 4 "Today" programme, on 24 September 2004, before the election:

"To give a blanket pledge that whatever the economic circumstances, whether or not the country could afford it, we could reduce the tax burden would be wrong".

In the context of being asked about tax increases, he said:

"We have not ruled out increasing taxes or national insurance".

He therefore wishes to do exactly what the Government do and to keep the issues under review.