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Amendment of the Law

Part of the debate – in the House of Commons at 8:33 pm on 29th March 2010.

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Photo of Philip Dunne Philip Dunne Opposition Whip (Commons) 8:33 pm, 29th March 2010

Thank you, Madam Deputy Speaker. I was going to say that it is a pleasure to participate in a debate in which so many of the Members who are retiring from the House have spoken. I am sure that the hon. Member for Stroud will not be voluntarily retiring. If he did so involuntarily, the House would lose one of its more regular attenders, especially of these end-of-evening sittings, which would be a disappointment.

I would like to raise a couple of macro-economic points before focusing on specific ways in which the Budget creates particular challenges for companies operating through the recession. First, however, I shall focus on the state of the economy. The hon. Member for Stroud was quite right to refer to the economic mess in which the country finds itself, but he and other Labour Members have not acknowledged that the financial services community's role in the cause of the original economic crisis now bears little relation to the state of the public finances. The financial services crisis of two years ago that resulted in the Government having to bail out the banks is now part of this country's economic history, but the structural deficit with which we have to deal, which will be the Government's legacy, has little direct relationship to that crisis. Although there are clearly indirect consequences, the structural deficit has ballooned under this Government, irrespective of the bail-out that funded the resurrection of the banks nearly two years ago. Labour Members do not acknowledge that fact, but it needs to be acknowledged so that we can recognise the measures that are required to start to bring the deficit down.

Throughout their Budget projections, the Government rely on their measure of economic growth, but I would like the House to consider the plausibility of their projection. The Treasury has a track record of forecasting economic growth that any schoolboy economist would find somewhat embarrassing. It has rarely, if ever, got it right, and it has tended to veer on the side of optimism in each Budget presentation that I have heard while I have been a Member-last week's was no exception. The Chancellor admitted that economic growth was likely to come down, but only by 0.25 per cent. The reduction was from 3.5 per cent. to somewhere between 3 and 3.5 per cent., so if we are charitable and take the average, it looks like a reduction to 3.25 per cent. However, that projection remains above all external forecasts, or the average of them, and above the forecasts for all other major industrialised economies. It is also substantially above this country's trend growth during the Government's tenure in charge of the economy, and above trend growth for the 31-year period of this Government and their predecessor. It is surprising that the Government base the largest component of their recovery programme on an estimated increase in this country's activity for the next four years, and specifically for the coming year, that is significantly above their track record and what other forecasters think is likely.

I am not trying to talk down the strength of the economy and I would, of course, like the economy to grow and rebound rapidly. I merely question the validity of the Government's forecasting methodology, which has also been questioned by the National Audit Office in its review of the figures.

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