asked Her Majesty's Government:

Whether they propose to make any changes in policy following publication of the May public sector borrowing figures.

My Lords, the Government's existing policies have delivered macro-economic stability and sustainable public finances, and those will continue. Budget 2005 projections show that the Government are meeting their fiscal rules.

My Lords, I am comforted by the Minister's assurances, but in practice the deficit between taxation revenue and public spending in 2005–06 will be approximately £57 billion, using the Treasury figures. There are only three ways to balance those payments: first, by increasing taxation more than has been predicted; secondly, by reducing public spending by a far greater amount than the Gershon review; and, thirdly, by increasing borrowing more than forecast. Which one of those three methods will the Government use to balance the books in 2005–06?

My Lords, I do not agree with the starting proposition. The Government set out their projections for the fiscal numbers for revenues which are to be raised for public expenditure through to the end of the current forecast period. Looking at the May figures, there is a great mistake in taking numbers for just a short period and extrapolating the potential impact pf those. However, if you take the May figures, you should also take into account the April figures, where current government expenditure was below the forecast levels.

I am surprised to be challenged by Conservative Benches on Government debt, where the projected figures in terms of percentage of GDP for the current year are at 35.5 per cent. The series which existed before this Government came into office was at 43.6 per cent, 42.7 per cent and 40.8 per cent. With great respect, I do not believe we have any lessons to learn from Members opposite.

My Lords, the March figures were particularly good, so there is a bit of a downturn in the June figures. However, we should we not take a more relaxed view of this? We do not need to look at them month by month because it is the long term that really counts. The confidence we have in the way that the economy of this country is being run should be the main test. That, I think, is good enough.

My Lords, I agree with that assessment. We should understand that we are dealing with the net figure of two aggregates when looking at deficits. Those can be somewhat volatile, and then to take just one month's figures and to extrapolate from them can be wholly misleading. Look at this Government's record on forecasting: it has been better that the OECD, better than the IMF, and, as the European Central Bank analysis shows, between 1999 and 2003, our forecasting was the best of all the governments in G7.

My Lords, when will the Government produce honest borrowing figures? The Minister chose to make a comparison with the previous Conservative government. When will we see the end of the Enron-style accounting, where huge sums of borrowing are presented off balance sheet? I am thinking, for example, of the PFI borrowings and of the borrowings which have been made to British Rail, as it was. These sums do no appear. Therefore, if the Minister wishes to make an honest comparison with the previous government, will he produce the figures which people want in order to know the extent to which they have put this generation in hock as a result of borrowings which are off balance sheet?

My Lords, the Government make an honest assessment. This Government have been more transparent in the way they have dealt with public finances than any previous government. That is a key part of anchoring the fiscal and monetary stability on which this Government's economic policies have been so successful. On the PFI—and I know there has been press comment on this—the ONS press release of 20 May states that,

"the ONS has taken no decision to change the treatment of PFI schemes in the public finances".

Some of those PFI schemes are on the balance sheet, quite properly. There is an assessment in each case on where the risk lies, and there has been no change in that approach.

My Lords, the economic cycle over which Golden Rule borrowing is measured is due to end this year. Will the Minister confirm that the Government have no plans either to change the definition of the economic cycle, or how it is measured?

My Lords, I confirm that the Government have no such plans. The Government's position on measurement of the economic cycle has been in place since 1997, and that process and the parameters have not changed.

My Lords, is it the Government's policy to fund their borrowing in full, and if not what do they expect the effect will be on money supply interest rates and inflation?

My Lords, the Government will fund their requirements in the normal way, taking account of the normal market conditions in full.

My Lords, was it an exercise in transparency when the noble Lord, Lord Warner, recently said that an increase of £30 billion to £90 billion in NHS expenditure was an increase of 300 per cent, or is new Labour arithmetic a variant form?

My Lords, I would not like to be drawn into that particular statistic. The arithmetic of new Labour has been exemplary, as has its management of this country's economy.

My Lords, is the Minister aware that the Bank of England has recently cut its growth forecast to 2.6 per cent? Does he think its forecasting record better than the Government's?

My Lords, I reiterate that the Government's projections on growth have been better than those of any other forecasters over the period. The next pre-Budget report will be in November or December, but I stand by the fact that the Government's record has been good and better than that of any independent forecaster.