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Session 2001- 02
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Delegated Legislation Committee Debates

Government's Economic and Financial Assessment

Fourth Standing Committee on Delegated Legislation

Monday 8 July 2002

[Mr. Peter Pike in the Chair]

Government's Economic and Financial Assessment

4.30 pm

The Financial Secretary to the Treasury (Ruth Kelly): I beg to move,

    That the Committee has considered the Government's Assessment, as set out in the Financial Statement and Budget Report 2002–03 and the Economic and Fiscal Strategy Report 2002–03, for the purposes of approval under Section 5 of the European Communities (Amendment) Act 1993.

I am delighted that you are presiding over our sitting this afternoon, Mr. Pike. I welcome the chance to open the section 5 debate. Each year, the Government report information to the European Commission on our main economic policy measures. The procedure is set out under articles 99 and 104 of the Economic Community treaty and relates to broad economic policy guidelines, convergence and stability programmes and the excessive deficits procedure. Its objective is to ensure that the economic policies of member states are consistent with the goals of the treaty, which are non-inflationary economic growth; respect for the environment; a high level of employment and social protection, and raising the standard of living and quality of life for citizens throughout the United Kingdom and the entire European Union.

Alan Howarth (Newport, East): On a point of order, Mr. Pike. I am having great difficulty hearing my hon. Friend the Minister.

Ruth Kelly: I shall speak up, Mr. Pike.

The goals are consistent with the Government's approach to economic policy. Section 5 of the European Communities (Amendment) Act 1993, usually known as the Maastricht Act, requires Parliament to approve the Government's information sent to the Commission for that purpose.

The Government's strategy for economic policy is set out in the ''Economic and Fiscal Strategy Report'' and the ''Financial Statement and Budget Report'', brought together in ''Budget 2002''. That material will form the basis of the information that we send to the European Commission. Sharing the information in the Budget document with our European partners allows us to influence the development of the European Union, to bring enhanced employment and growth to Britain and other member states.

Mr. John Horam (Orpington): I am interested to know whether we send the Commission what is known as the Red Book in the trade, or something that is based on the Red Book.

Ruth Kelly: We are asked to send our projections for public finances to the EU. Those projections are embedded in the Budget document. I understand that the Commission has access to whole text.

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Mr. Horam: The Minister has not answered my question. Do we send the Red Book to the Commission or a note that is based on the Red Book?

Ruth Kelly: We send our convergence programme, which is based on the documents before us. It includes our fiscal projections, which is why we are debating our Budget strategy and convergence programme now.

Mr. Horam: Has a note based on the Red Book been sent to the European Commission, which we have not seen? Have we seen what we are about to debate?

Ruth Kelly: We send our deficit returns twice a yearthe end of March and on 1 September. The returns that we send, as part of our convergence programme, are based on information that is in the document before us. That is why we have this debate twice a year, so that we debate not only the figures but the context of the information that is contained in the pre-Budget report.

Mr. John Redwood (Wokingham): Is the Minister aware that the EU does not accept a number of the definitions adopted by the Government for deficit purposes, and thinks that our deficit is much larger or that our surplus is much smaller than the Government's figures? Is that why we have not seen the real document that the Government file with the Commission?

Ruth Kelly: Members of the Committee have access to all the figures that we share with our European partners. Clearly, different accounting procedures are used in different member states. The information that we send to the Commission is based on agreed European standards and we share it publicly and with the Commission. We have every opportunity to debate such figures this afternoon. Generally, such matters are a formality. We lay down our projections in the pre-Budget report and update that information in the Red Book—''Budget 2002''. We have regular debates in Committee, during which hon. Members can voice all of their concerns about our figures and forecasts, and the information that we send to the EU.

Mr. Edward Davey (Kingston and Surbiton): In a reply to the hon. Member for Orpington (Mr. Horam), the Minister mentioned the Government's convergence programme. I have never heard of that. Can the Minister refer me to a document that describes that programme?

Ruth Kelly: We are sending the EU the figures that it is asking for as part of the convergence programme. These figures are explicitly set out in our Budget papers. If the hon. Gentleman turns to Table C2, he will see the deficit returns and the treaty definitions of debt and deficit that we are required to provide as part of our participation in this process. Today, we are debating the figures that are contained in the Red Book, and we are asking Parliament to agree that we should send those figures to the EU on 1 September.

Mr. John Bercow (Buckingham): The plot is thickening. Can the Minister establish beyond doubt whether the Government are just sending figures or, as some of us had supposed, they intend to send to the Commission both the figures and their assessment of them? Will the Government take account of the

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contents of the Red Book only, or will they also take account of this debate? If the latter is the case, might we have sight of what the Minister intends to send to the Commission following this debate, before it is sent?

Ruth Kelly: The Commission requires us to send figures as part of our commitment to sharing information under the convergence programme. This afternoon, right hon. and hon. Members have the opportunity to debate these figures in the context of our overall Budget statement, predictions and programme, as they are set out in the Red Book.

Mr. Peter Luff (Mid-Worcestershire): In answer to an intervention from the hon. Member for Kingston and Surbiton (Mr. Davey), the Minister helpfully referred to Table C2. I do not wish to be pedantic, but I can only find Chart C2. [Interruption.] I hear that Table C2 is on page 207.

Ruth Kelly: I confirm to Committee members that the hon. Gentleman is correct; I am referring to Chart C2.

Mr. Redwood: No. The Minister is referring to Table C2.

Ruth Kelly: I apologise; I am referring to Table C2. In due course, I will supply a page reference to the hon. Member for Mid-Worcestershire (Mr. Luff) so that he can look it up as we debate these matters.

Mr. Bercow: I am extremely grateful to the Minister for giving way. Whether we are referring to a chart or a table need not be one of the great preoccupations of our time, although it is not a trifling matter, and some hon. Members might think that it is on a par with the Schleswig-Holstein question.

The Minister referred to the Government's influence on the EU. I wonder whether she can give the Committee just three examples, from after the last of these debates on 16 July 2001, of the Government's influence on the economic thinking of the Commission?

Ruth Kelly: The hon. Gentleman is well aware that we are in the process of engaging in fundamental debates at European level—for instance, on the interpretation of the stability and growth pact, which will define to a large extent the future economic programme of the EU, and how it interprets the public finances of each member state. The hon. Gentleman is also aware of all of the other economic and political debates that take place on a daily, weekly and monthly basis between member states. Therefore, it is clear that sharing this information is part of that valuable process of peer review and discussion, which enables us to participate constructively—to comment on other member states' economic programmes, to learn from their best practice and to share information with them in the course of doing that.

Five years ago, the Government's first Budget set out long-term objectives and far-reaching reforms to achieve economic stability and high levels of employment. In the past year, Britain has experienced the lowest inflation and interest rates since the 1960s. For the first time for half a century, unemployment in Britain is lower than that in America, Japan and Europe. In this Budget—the

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first of the new Parliament—our task is to address, through modernisation and reform, three long-term challenges: the challenge of enterprise, with new incentives to raise investment and reward entrepreneurship; the challenge of family prosperity for all, with extra support for hard-working families; and the challenge of renewing our public services with a secure long-term financial foundation for a reformed national health service.

Last autumn, in the wake of 11 September, the world experienced declining markets, a fall in business confidence and volatile oil prices. These were major and simultaneous challenges to the stability and continued growth of the British economy. In the past, when the world has faced a downturn, it was usually Britain that entered weaker and suffered longer. Successive Governments, constrained by high inflation and borrowing, have been unable to sustain economic growth. This time, from a platform of low inflation and fiscal discipline—both delivered through the new monetary and fiscal framework—we have been able to steer a steady course.

The Bank of England has been able to adjust policy at the right time and in the right way, and cut interest rates seven times last year. Monetary policy has been supported by fiscal policy and, despite the difficulties, we have safeguarded both stability and growth. In 2001, Germany grew by only 0.6 per cent., America grew by 1.2 per cent., and Japan contracted by 0.5 per cent. Britain, however, grew by 1.9 per cent. The British economy has been stable, but it can and must be stronger, and its growth must be not only sustained but more balanced.


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Prepared 8 July 2002