|Previous Section||Index||Home Page|
12 Dec 2002 : Column 378continued
The Chancellor of the Exchequer (Mr. Gordon Brown): Figures for public sector net borrowing for future years are 24, 19, 19, 19 and 20 billion pounds. That is 2.2, 1.6, 1.6, 1.5 and 1.5 per cent. of gross domestic product. Public sector net debt in future years will be 32.1, then 32.4, 32.6, 32.7 and 33 per cent. of GDP. We consistently meet all our fiscal rules.
Michael Fabricant: The Chancellor has given a detailed answer, but can we believe any of it any more? If we consider the five-year forecast that he made for borrowing, he said that there would be #30 billion-worth of borrowing in last year's Budget, which went up to #66 billion-worth of borrowing in the pre-Budget report. It then went up to #72 billion in this year's Budget, and to more than #100 billion in this year's pre-Budget Treasury forecast. Does not the Chancellor now admit that all his bombast and all his predictions have come to nothing, and that his credibility gap is about as
Mr. John McFall (Dumbarton): Does my right hon. Friend agree that the hon. Member for Lichfield (Michael Fabricant) has flair, but not in the area of the economy? He should stick to other subjects. If he reads the pre-Budget report, he will see the figures set out. Will my right hon. Friend agree that the UK has among the lowest levels of public debt in Europe, and that he is on track with regard to his economic cycle?
Mr. Brown: My hon. Friend, who takes an interest in these matters as Chairman of the Treasury Committee, is absolutely right. Debt in the United Kingdom is about a third of GDP, whereas, in France and Germany, it is between 40 per cent. and 45 per cent. of GDP. In America, it is more than 40 per cent. of GDP. In the euro area, it is more than 50 per cent. of GDP as a whole. In Japan, it is nearly 70 per cent. of GDP. We have reduced debt, and the reason why we are able, as an economy, to have monetary and fiscal stability in a period of difficulty, is that we have taken the difficult decisions since 1997, from which we are reaping benefits.
Matthew Taylor (Truro and St. Austell): Given that the Chancellor's plans for a return to sustainability, on his Budget plans, depend on a return to sustainability in personal budgets at a time when house prices have been booming and personal debt has risen to a peak of 111 per cent. of annual personal incomeas compared with the late-1980s, when it was just 85 per cent.what are his plans for achieving a sustainable end to the housing boom without a bust? Does he agree with Chris Allsopp of the Monetary Policy Committee, who said that he should now consider micro-economic policy or financial regulation to ensure that that happens?
Mr. Brown: If we had taken the advice of the shadow Chancellor who lives in Truro rather than the shadow Chancellor who lives in Folkestone, we would have had a no-speed economy. The hon. Gentleman's advice was that we should have raised public spending at a time when we were cutting debt. It is because we cut debt that we are in a position, during a difficult period for the world economy, to continue to grow.
On housing, the hon. Gentleman knows that house prices relative to income are relatively high for new buyers. He also knows, however, that mortgage costs relative to average income are very low. Whereas, at the beginning of the 1990s, they were about 36 per cent. of average income, they are now between 13 per cent. and 15 per cent. of average income. That is because we have low inflation and low interest rates. It is about time that the hon. Gentleman recognised that, under this Government, in a very difficult world economic situation, we continue to have an economy that has grown every quarter since we have been in power.
Mr. Lindsay Hoyle (Chorley): Allowing for the borrowings that the Chancellor will have to use, will he ensure that growth within business continues to be encouraged, and that future research and development takes place in this country, through his excellent method of tax credits?
Mr. Brown: We have the second best tax system for research and development of any of the major industrialised countries. That is because we now have a research and development credit for large firms as well as small firms. We are prepared to listen to business on the subject of improvements that, even now, can be made in that tax credit system, because, for 20 years, Britain fell behind by failing to invest in research and development. We are determined to make those investments, and the research and development credit is one part of that.
Mr. Howard Flight (Arundel and South Downs): The House will have noticed that the Chancellor has dropped his boom-and-bust mantra about how his economic management has ended the economic cycle. Could that have something to do with the recent criticisms of his economic management by the IMF and the Bank of England and with the alarming news that Standard and Poor's has just listed the UK, for the first time ever, as an economy facing major potential stress on its banking system because of the possible bursting of the house price bubble and ballooning consumer debt problems? What assumptions has he made in his borrowing forecasts about house prices, consumer debt and the implications for the economy of the warnings not just from the IMF, the Bank of England and Standard and Poor's but from the permanent secretary that house price
Mr. Brown: The Standard and Poor's assessment was made about both Britain and America and it was answered by the Bank of England, which the hon. Gentleman also cited in his argument. The IMF praised the macro-economic management of our economy and also said that the banking system was in a very good position to withstand difficulties. The IMF has therefore also answered Standard and Poor's. The fact of the matter, which the hon. Gentleman cannot understand, is that whereas inflation was at 10 per cent. at the beginning of the 1990s, in the last world downturn, and interest rates were 15 per cent. under the previous Chancellor, inflation is just over 2 per cent. and interest rates are at 4 per cent. We have the macro-economic stability that the Conservative party never gave us.
The Chancellor of the Exchequer (Mr. Gordon Brown): The World Bank estimates that full trade liberalisation globally could lift 300 million people out of poverty by 2015. We therefore seek significant reform from the
Mr. Tynan : I thank my right hon. Friend for that reply. Is he aware that the poorest farmersthe 25 million coffee-growing farmers worldwideare suffering enormous hardship because of the price of coffee? Will he examine the coffee rescue plan promoted by Oxfam as it would make a tremendous difference for those farmers? Will he seek international support for that plan?
Mr. Brown: I am grateful to my hon. Friend. He and people in his constituency have taken a long-term interest in development. On Oxfam's proposals for coffee, he may know that my right hon. Friend the Secretary of State for Trade and Industry held a meeting with non-governmental organisations, the World Bank, the European Commission and others last Monday to consider these very issues. There are many things that we can do, but we cannot take up Oxfam's proposal to destroy 5 million bags of coffee. That would not be in the best interests of everybody. However, we are trying to help growers to diversify and we are trying to expand trade opportunities.
Africa is an important issue for many people here. Although it has 12 per cent. of the world's population, it has only 2 per cent. of the world's trade and 1 per cent. of its investment. Our African initiative is trying to rectify many of those problems.
Mr. Andrew Mitchell (Sutton Coldfield): Is it not clear to even the most unreconstructed old socialist that free trade enriches nations while trade barriers impoverish them? Is it not the poorest countries that benefit most from free trade? Will the Chancellor and his colleagues therefore work a good deal harder to ensure that we eradicate tariffs and barriers in Europe and the United States?
Mr. Brown: I agree about the importance of trade, but the hon. Gentleman should agree that we have done more than previous Governments to try to remove barriers to trade. First, on the common agricultural policy, the waste of money is a feature of the mid-term review, and we are pushing for change on that. Secondly, on trade generally, the hon. Gentleman is absolutely right. Two thirds of the poorest people in the world live off the land, and agricultural protectionism costs $20 billion to the poorest countries. It is precisely for those reasons that, at Cancun in Mexico, we are determined to reach a settlement that is fair to the poorest countries.
Mr. Tom Clarke (Coatbridge and Chryston): I congratulate my right hon. Friend on his policies. When some of us visited Rwanda recently, we found that they were very welcome there. However, the strong feeling was expressed that, whereas the World Bank appeared to be aware of the problems, the IMF seemed to be somewhat less sensitive to them. Will he use his considerable influence to ask the IMF to focus on the real problems of countries such as Rwanda?
Bob Spink (Castle Point): Pursuant to the Chancellor's answer to my hon. Friend the Member for Sutton Coldfield (Mr. Mitchell), does he agree that the abandonment of the common agricultural policy would help to improve world trade and relieve poverty?
Mr. Brown: We want significant reforms in the common agricultural policy. We believe that that is of use to the developing countries, Europe and Britain in particular. We also believe that those countries joining the European Union should not be led to expect that an unreformed common agricultural policy will benefit the 4 million farmers who could be demonstrators in Brussels against further change. For all those reasons, we favour fundamental reform.
The Chancellor of the Exchequer (Mr. Gordon Brown): Meeting the 2015 targets requires not just debt relief and more aid, but new means of financing development. Today I am sending to the Chairmen of the Treasury and International Development Committees and placing in the Library further details of our proposed international development finance facility. I am grateful for all-party support, and the Secretary of State for International Development and I will publish a prospectus on that important new facility in the new year.
Mr. Jones : I thank my right hon. Friend for that answer. Does he recognise the important contribution that NGOs such as Oxfam and Church groupsfor example, those in my constituencyhave played in highlighting world poverty? Will he outline what role those organisations can continue to play in the ongoing Government campaign to eradicate world poverty?
Mr. Brown: I am grateful to my hon. Friend who takes an interest in such matters, as do many members of his constituency, especially the Churches. The role of NGOs in promoting debt relief was central to our efforts. I think every hon. Member would agree that the Churches made an enormous difference, not only in Britain but internationally. I want the NGOs and the Churches to help us to take forward the next initiative that we should all support, which is not just debt relief, but a proposal that could release up to $50 billion extra a year$10 billion for education, $10 billion for health, and $20 billion or more for anti-poverty programmes.
Sir Teddy Taylor (Rochford and Southend, East): Would not the Chancellor be able to do more for good causes such as reducing world poverty if he had not obliged the Bank of England to lose a massive amount of money by forcing it to sell its gold at an average of $270it is now worth more than $325and to invest the money instead in currencies like the euro, which have no great future at all?
Mr. Brown: The decision to sell gold was right. The only problem was that it should have been made 20 years ago under the previous Government. It is sad that the hon. Gentleman always turns a question on overseas aid, which is about the poorest countries of the world, into a question that reflects his obsessions with the European Union.
Ms Julia Drown (South Swindon): NGOs have said that AIDS is the biggest threat to delivering the 2015 goals and it has been recommended that we should increase our support for AIDS from #200 million to #750 million. Has the Chancellor assessed that recommendation?
Mr. Brown: We continue to consider all proposals. I think the most important report is the Zedillo report, which came out a few months ago. It contained information on what we need to spend on education, health and anti-poverty programmes. The effectiveness of aid must be improved, and I am sure all hon. Members would agree that major improvements are possible. Even now, we see the waste of resources in the famine of Africa, which could be avoided. At the same time, we need additional money. That can only come from either a Tobin tax or something similar, but there is no support for that, or our new international finance facility, which I hope, as I said, will enjoy all-party support.
Tony Baldry (Banbury): The note published by the Treasury today says that it is willing to give a long-term commitment to support an international financial facility, which is genuinely welcome. However, can the Chancellor give some indication of the size of the commitment that he and the Treasury envisage for such a facility to meet millennium development goals, as that may well encourage other countries to sign up? I think that we all accept that that has to be done together and cannot be done by the UK alone.
Mr. Brown: The hon. Gentleman is Chairman of the Select Committee on International Development, and he will know that I appreciate the all-party work that it does. We will have increased our aid budget from 0.27 per cent. when we came to power to 0.4 per cent. by 2006, thus releasing substantial extra money, and have persuaded the European Union that on average Europe's aid budget should be 0.39 per cent. America will have made a substantial commitment of $5 billion extra by 2006, and it is on the basis of those commitments that I believe the new international finance facility can be built. Of course, we are prepared
Mr. George Foulkes (Carrick, Cumnock and Doon Valley): While everyone appreciates what the Chancellor and the Secretary of State for International Development are doing, real progress world wide will only be achieved if the Americans stop trade protectionism and increase their development assistance. Will my right hon. Friend use his undoubted influence in the United States to get it to follow our lead?
Mr. Brown: I am grateful to my right hon. Friend. When he was at the Department for Overseas Development, he played a prominent role in many countries in pushing a social justice agenda as part of the global economy. I continue to talk to the American Administration and, since last week, have been talking to the new Secretary of the Treasury. I appreciate the work that the previous Secretary and his predecessors did to promote international development aid. America will have made a commitment of $5 billion by 2006 and, at the same time, as part of the world trade negotiations, has said that it is prepared to remove all tariffsthat is its latest initiative. I believe that there should be a response from the Europe Union, and there is a chance that in Mexico in September there will be progress on trade while, at the same time, we are making progress on the Monterrey proposals for an increased development budget. It is heartening that there is support from Members on both sides of the House for those moves.