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27 Nov 2002 : Column 327—continued

Mr. Michael Howard (Folkestone and Hythe): I begin by drawing attention to my declaration in the register and express my gratitude to the Chancellor for advance sight of part of his statement, blank pages and all—a total of eight minutes of it.

I start on a note of consensus. I welcome what the Chancellor said in his closing remarks about the relief of global poverty. He said that he welcomed the support that that would receive from all quarters of the House, and he was absolutely right. We support those measures.

I must congratulate the Chancellor on something else. Up to now, he has been overshadowed by the Prime Minister, but at last he has come into his own. He is being paid the supreme accolade of having a song dedicated entirely to him. It is written by Kenny Jones and Robert Hart. [Interruption.] The song is released later this week, and I can give the House a preview. [Interruption.] It is called XMr. Brown, You're Robbing Me" and its lyrics include the lines:

But the Chancellor has not been able to run for cover today. This is a moment of humiliation for him. [Interruption.]

Mr. Speaker: Order. The Chancellor was heard and the right hon. and learned Gentleman has to be heard.

Mr. Howard: I quite understand, Mr. Speaker, if Labour Members do not want to listen to this.

The Chancellor was forced to admit that his forecasts on growth were wrong; his forecasts on revenue were wrong; his forecasts on borrowing were wrong; and his forecasts on his deficit were wrong. These are the downgraded forecasts of a downgraded Chancellor. For weeks on end, he and his spin doctors have been trawling around looking for alibis. In the words of the Financial Times, he has been Xrehearsing his excuses".

Everyone is to blame for the fact that the Chancellor got his forecasts wrong except the Chancellor himself. In Thursday's Financial Times he blamed it on the fall in world trade between 2000 and 2001, but in his Red Book, at the time of his Budget forecasts, he said that world trade was estimated to have contracted in 2001 and grown only slowly in 2002. At the CBI and in the House last week he said that we are seeing the sharpest contraction in world economic growth since 1974, and he is wrong about that too. We had world growth of 2.2 per cent. in 2001, and the rate is expected to be 2.8 per cent. in 2002, but in the early 1990s we had three years when world growth averaged just 1 per cent. a year.

The Red Book made it clear that independent forecasters took a much more realistic view of prospects than did the Chancellor. His central forecast for 2002

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was for growth of 2¼ per cent., but independent forecasters said that it would be 1.9 per cent., and so did the OECD just eight days after the Budget. What were those independent forecasters telling the Chancellor at the time?

noted The Independent. Growth projections in the next year or two were Xvery ambitious", said Deutsche Bank. XIt is not prudent," said HSBC economists. Everyone knew about this—except, apparently, the Chancellor. Indeed, far from heeding any of that independent advice, the Chancellor increased his forecast for growth in 2003 and for longer term trend growth. He thought that everyone else was wrong and he was right.

Today the Chancellor announced a borrowing figure of £20 billion for next year. Does not that demonstrate how dramatic is the deterioration in the public finances? His forecasts for borrowing over five years have risen from £30 billion in last year's Budget, to £66 billion in last year's pre-Budget report, to £72 billion in this year's Budget and to over £100 billion for the next five years.

The Prime Minister looks surprised; the figures obviously take him unawares. We know that the Red Book is not his favourite reading but he ought to take a little more interest. There they sit—what a shambles, what a shower. XBrown and Blair, the posturing pair." They are very good at taxing the people of this country; they are very good at spending the people's money; they are very good at wasting the people's money and they are very bad at delivering the improvements that the people want.

The Chancellor said that none of that matters as long as borrowing balances over the cycle, but will he comment on the view of the Ernst and Young item club that half the expected revenue shortfall for this year could be structural rather than cyclical? Will he comment on the view of the Financial Times that he took Xthe most unusual years" as the basis of his calculations, something that the newspaper says Xseems daft"? What is more, he cannot even say when his much vaunted cycle starts and ends. When I ask him about that he refers me to the Red Book, but the Red Book says that these things are very difficult to judge. It says that the start date for the cycle is provisional and that it is an assumption. Why on earth has the Chancellor spent the past five years claiming that his fiscal rules are rock solid when he cannot even tell us the start date of the cycle on which they depend?

Is not the end of the cycle even harder to predict, and is not that rather convenient for the Chancellor? Does he agree with the National Institute of Economic and Social Research that the current cycle will end early next year or early in 2004 and that he will not then be able to balance future deficits against past surpluses? That seemed to be the Treasury's view in the spring.

Is the Chancellor planning to do what has been suggested and try to make the cycle last longer? Why did the Treasury brief the press, first, that the cycle was about to end and then that it would end as late as March 2005? He told the House last week that the Government's fiscal policy

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Is not the truth that he is trying to adjust the economic cycle to suit his fiscal policy? What does he say to the national institute, which said of his golden rule:

What of the Chancellor's sustainable investment rule? If he had not, Enron-style, put £100 billion of his liabilities off the balance sheet, public sector debt would already have reached the 40 per cent. limit in his own rule. Will he confirm that the extra borrowing he has announced today takes us over that limit? Is not a black hole now emerging in the public accounts—a hole entirely of the making of this Chancellor of the Exchequer?

As we have constantly pointed out, the growth of public spending under the present Government is far faster than the growth in the economy. Is not the heart of the problem that the Chancellor is following his present course because without reform, his spending is not leading to the improvements to the public services that we all want? His only answer now is to spend more. How far he has come from his view in 1997, when Labour's manifesto stated:

By spending more without reform, he has locked himself on an unsustainable course, and if spending keeps rising faster than the growth rate of the economy, he will have to put up taxes again.

There were, as usual, plenty of promises on the public services in the Chancellor's statement, but every year he makes those promises and every year he breaks them. The Government are already taking almost £40 a week more in tax for every man, woman and child in the country. Yet while spending is indeed up on the NHS, patients are waiting longer in accident and emergency departments, and now, for the first time, there are more bureaucrats than beds. Although spending on law and order is up, crime and the fear of crime are on the increase—street crime has gone up by 31 per cent. in the past year. Although spending is indeed up on education, we were told yesterday that reading standards in our primary schools have actually declined in the past two years, and one in every four children leaves primary school unable to read, to write or to count properly. In fact, the Government have failed or are failing 40 per cent. of the targets that the Chancellor set in 1998, and 75 per cent. of those he set two years later. Every year he makes those promises and every year he breaks them.

We shall study with care what the Chancellor said about pensions, but it is a great pity that he did not answer the questions which my right hon. Friend the Leader of the Opposition put to the Prime Minister, but which the Prime Minister was so palpably unable to answer. Why does the Chancellor not start by getting the basics right—by encouraging people to save for their pensions, rather than discouraging them? How has his £5 billion a year pensions tax helped those who want to save for their retirement?

Mr. Ronnie Campbell (Blyth Valley): Pay for the rich and the gap will get bigger.

Mr. Howard: Will the Chancellor say also whether any provision has been made for—[Interruption.]

Mr. Speaker: Order. Mr. Campbell, please be quiet.

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Mr. Howard: Will the Chancellor say what provision he has made for public sector pay rises? Is it not the case that the Government have been in a complete mess and muddle on that issue, with the Chancellor, the Deputy Prime Minister and other Ministers all contradicting each other by the hour? This week, the Prime Minister entered the fray. On Monday, he was indulging his thespian fantasies, trying to play Margaret Thatcher. Well, I know Margaret Thatcher, and this Prime Minister is no Margaret Thatcher. [Hon. Members: XHear, hear!"]

In the statement, where was the announcement of action to reduce the burdens on business that the Government have imposed? Are not those burdens stifling the wealth creation on which we all depend? Does not yesterday's news that business investment has suffered the sharpest fall for 35 years—a fall significantly greater than that in Germany or the United States—represent a devastating vote of no confidence in the Chancellor and his policies?

What does the Chancellor have to say about the causes for concern in the UK economy, such as savings? We are now saving less than we have practically ever saved before. Borrowing is at record levels, and house prices are rising at an unsustainable rate. The newly appointed Governor of the Bank of England is now warning of the risk of a large negative demand shock at some point in the future. There are concerns about the world scoreboard of competitiveness, where we have been relegated from the top 10; about productivity growth, which has halved; about business investment, which has now fallen for seven quarters in a row; about the trade deficit, which we have run nearly every single month for five years; about manufacturing, where 15,000 jobs were lost in September alone and half a million since Labour came to office; and about the stock market, which has fallen disproportionately in comparison with the United States, hitting people with savings, pensions and mortgages. Does the Chancellor agree with The Independent, which said last week that he should face up to the severe imbalances in the economy? We have seen no sign of that today.

This is a Chancellor who clung like King Canute to his economic forecasts in the face of all the evidence. Today's statement shows him to have been wrong on all counts. His fiscal rules are not as rigorous as he claimed, and he has missed the very targets that he described as cautious and prudent. How mortifying that he, of all Chancellors, should have got it so badly wrong. On top of all that, we have still not seen the improvements in public services that he promised. Has not the time come for an end to the policy of taxing and spending and failing? Does the Chancellor not think that the people of this country deserve better?

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