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27 Nov 2002 : Column 334—continued

Mr. John McFall (Dumbarton): I associate myself with the Chancellor's congratulations to Sir Edward George, the Governor of the Bank of England, on his wise stewardship of the Bank and the Monetary Policy Committee over the years. I also welcome his worthy successor, Mervyn King.

We accept that this country cannot escape the consequences of a downturn in a global economy. My right hon. Friend should not listen to the Jeremiahs in the Conservative party. The shadow Chancellor not only knew Margaret Thatcher, but, like a lap dog, implemented her disastrous policies. May I suggest that the Chancellor stands fast on the macro-economic objectives that have provided high employment, low mortgage rates, a stable environment and, more than anything, have utilised the previously unused talents of young people?

Mr. Brown: I agree about using the talents of young people. I hope that my hon. Friend will welcome the work that we are doing, especially my right hon. Friend the Secretary of State for Education and Skills, on modern apprenticeships and training, not just college and university training, but industrial and workplace training for young people.

On the monetary and fiscal rules, I hope that hon. Members in all parts of the House will agree that the monetary and fiscal rules that were established after 1997—rules that apply over the cycle, but rules that are disciplined and which must be met—are the best rules for the British economy. I hope that the House will agree that by keeping to those rules, not only shall we establish credibility, but we shall be able to keep interest rates lower than they would otherwise be.

Mr. Kenneth Clarke (Rushcliffe): I add my congratulations to Sir Eddie George and welcome the appointment of Mervyn King.

Will the Chancellor stop pretending that his present situation is the result of some careful Keynesian counter-cyclical planning on his part, when in fact he has come to the House to talk his way through the collapse of those absurd forecasts that he gave us only six months ago, at the time of his Budget? When he looks back, as he keeps doing, will he realise that he runs the risk of adding his name to the list of Chancellors who, first of all, gave way to political pressure to increase public spending, then claimed that it would all be affordable by making ridiculous estimates of future

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growth of the economy, then pretended that there was no problem when unexpected borrowing suddenly surged, and claimed that that could all be accommodated, and then did nothing effective on fiscal policy until the problem turned into a crisis?

The mistakes of which the Chancellor speaks are the mistakes made by Chancellors in the 1960s, the 1970s and the 1980s, and not repeated by the Major Government, which is why he inherited a stable economy already achieving growth with low inflation. That economy is now being sustained by a housing boom, household debt and public spending at an unsustainable rate. Will he come back to the House, recognising the existence of the problems to which he pretends to be blind, and present some substantial measures that might tackle them and restore stability to the British economy?

Mr. Brown: I am always interested to hear the words of the former Chancellor, but they would carry more weight if he had not left debt at 44 per cent. of GDP and forced us to cut it, and if he had not left an inflationary problem that had to be dealt with by raising interest rates in the first days after we came into government. I must therefore look at his record in the context of high debt, his failure to make the Bank of England independent, and the high inflation that he left us. [Interruption.] That rising inflation had to be met by rising interest rates when we came into government.

On the right hon. and learned Gentleman's comments about forecasts, our forecast was 2 to 2.5 per cent. The eventual outcome that we are forecasting now is 1.6 per cent. That is a long way from Conservative Governments in the early 1990s saying that there was no recession, when there was a recession.

Mr. Martin O'Neill (Ochil): I congratulate my right hon. Friend on his statement. Many of us who have been in the House for a wee while remember the conditions in which other economic difficulties were confronted by Governments. Given the present state of our economy and the health of our public finances, we do not need to take any lectures from the Opposition. However, I point out to my right hon. Friend that manufacturing industry looks for more assistance than it has received this afternoon. I should like to think that by the time of the Budget we will have had a proper review of the climate change levy, and I look towards an indication of a more rational form of carbon taxation in relation to energy. Finally, will my right hon. Friend try and hurry up some of the officials in his Department so that they complete the long-awaited review of the taxation of foreign nationals in this country?

Mr. Brown: I am grateful to my hon. Friend. The review on foreign nationals is continuing and we shall publish the documentation later.

On my hon. Friend's main points about manufacturing—I understand his long-term interest in the matter as Chairman of the Select Committee on Trade and Industry, and his constituency interest as well—the measures that we have taken include a research and development tax credit to help future manufacturing, 100 per cent. capital allowances, and

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venture capital funds in the regions, which are of assistance to manufacturing and therefore to investment. The main contribution that we can make with regard to the costs of investment for industry is to keep interest rates and inflation low.

The issue for us is not that we stand by and do nothing when manufacturing is in difficulty; we have done what we can in terms of capital allowances and investment allowances, and of providing a stable macro-economic environment to help manufacturing industry. Of course, the changes in manufacturing industry are taking place right across the industrial world. So far as the climate change levy is concerned, we froze it this year.

Mr. Michael Fallon (Sevenoaks): The Chancellor announced the endorsement of his pre-Budget assumptions by the Comptroller and Auditor General. Will he confirm that this is the same Comptroller and Auditor General who threw out his claim that Network Rail was a private sector company? Is it not typically disingenuous of the right hon. Gentleman to take credit for the former but to take no account of the latter?

Mr. Brown: The Office for National Statistics—

Mr. Fallon: The Auditor General.

Mr. Brown: Yes, but the Office for National Statistics makes the recommendations about off and on-balance-sheet matters. We have operated in exactly the same way as the previous Conservative Government did. If the shadow Chancellor is accusing us of Enron-style activity, which is a suggestion of corruption rather than of getting things wrong—[Interruption.] He is saying that Enron is not an example in which corruption was involved. If he is accusing us of such activity, he must also accuse his own Government, because we are operating under exactly the same rules. With regard to Network Rail—the case in point regarding the National Audit Office—we rigorously pursued the recommendations of the Office for National Statistics. Those are the same as the recommendations of the EUROSTAT office, and we have acted in accordance with all those rules. The same rules applied under the last Government.

Mr. Tam Dalyell (Linlithgow): The Chancellor will hardly be astonished if I press him on what he said in his opening statement about the unfolding events in Iraq. What exactly are the assumptions about oil prices? Will he also clarify the reference that he made towards the end of his statement to £1 billion for terrorist contingencies? Is that supposed to cover a military operation against Iraq? Are there not two jokers in this pack? The lesser may be the cost of the war; the greater will be the consequence for oil prices of the middle east going up in flames. It would be sheer folly—in terms of all sorts of things, not least the economy—to set the middle east on fire.

Mr. Brown: The setting aside of £1 billion in the reserve is in line with previous practice, and it is to deal with eventualities if or when they arise. I know that my hon. Friend takes a detailed interest in what is happening in the middle east. As he will know, oil prices have risen partly as a result of the uncertainty. They rose

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quite high, then they came down a bit. A great deal of the activity surrounding oil prices is related to that uncertainty. Our assessments of what oil prices are likely to be are independently audited by the National Audit Office. The price that we assume for oil tax revenues, for example, as well as for economic activity, is the one that is audited by the NAO. I will send my hon. Friend details of that.

Sir Peter Tapsell (Louth and Horncastle): Does the Chancellor deny that, at the time of his Budget last April, many Conservative Members told him that his growth forecasts were over-optimistic and unreliable? Does he also deny that we have been proved right, and that he has been proved wrong? Why should we now believe his projections for future years? Is it not the case that he has now reverted to his political ancestry of spend, tax and borrow, that he is frantically trying to weaken the European stability pact, and that he has thrown away his capacity to dominate monetary policy? In these circumstances, would it be helpful if I sent him an e-mail giving him an up-to-date telephone number on which he can get in touch with the International Monetary Fund?

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