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Economic Growth Forecasts

6. Mr. David Ruffley (Bury St. Edmunds): What his assumptions are in arriving at his revised GDP forecasts announced in the November pre-Budget report. [85253]

The Chief Secretary to the Treasury (Mr. Paul Boateng): The Government expect a gathering in the pace of global recovery, with G7 GDP growth forecast to rise from 1½ per cent. in 2002, to 2¼ per cent. next year and 3 per cent. in 2004. As a result, UK GDP growth is expected to accelerate from the second half of next year.

Mr. Ruffley : Will the Chief Secretary confirm that as a direct result of the Chancellor's over-optimism and imprudence those juggled forecasts now rest on three assumptions—an upturn in world trade, a wing, and a prayer?

Mr. Boateng: The hon. Gentleman, I know, takes a keen interest in these matters. I heard him only this morning talking on the XToday" programme about toxic cocktails—now he is over-egging the pudding. He needs to reflect and recognise that the assumptions outlined by my right hon. Friend are based on a rigorous assessment of the factors underlying trend growth, which were published in the pre-Budget report. He knows the assumptions in tables A and B very well, and knows that they are prudent, rigorous and in line with the broad breadth of independent forecasters. He should at least give some recognition to that fact.

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Mr. James Plaskitt (Warwick and Leamington): The pre-Budget report shows that my right hon. Friend anticipates a greater contribution to future growth from business investment. What measures is he introducing to encourage that?

Mr. Boateng: Business investment is key to our continued performance, hence the importance of the 2000 enterprise zones, not least in the most disadvantaged areas; the measures that we are introducing to increase R and D, not only in small and medium-sized enterprises but in large enterprises; and the measures on skills announced by my right hon. Friend the Secretary of State for Education and Skills. All of that will improve and enhance productivity, and promote business investment.

Dr. Vincent Cable (Twickenham): How would the GDP estimates be affected by a war in Iraq? The Minister will be aware of the work of the Congressional Budget Office in the US, which suggests that even a short and successful war and reconstruction could cost $150 billion—1.5 per cent. of GDP. Are such estimates relevant to the UK, or will the Treasury publish its own independent estimate?

Mr. Boateng: The hon. Gentleman will have seen the assumptions made in the PBR—for instance, in relation to oil prices at $25.10 and constant thereafter. He is aware of the prudent provision that we have made through the #1 billion that has been set aside for contingencies. He is also aware—these risks are again reflected in the PBR—of the risks attendant on the geopolitical situation, including Iraq. All those assumptions are contained in the PBR, which takes full account of the factors that he raised.

Ross Cranston (Dudley, North): May I ask my right hon. Friend about the assumptions concerning employment growth? Since 1997 there has been a massive number of new jobs. Unemployment in Dudley has gone down since 1993 by 70 per cent., but the Joseph Rowntree Trust has just reported that there are still significant numbers of unemployed people—mainly sick, disabled and lone parents—wanting jobs.

Mr. Boateng: The Joseph Rowntree Trust made it clear in its report that although there are always risks in this area, we are broadly on track to meet our targets in relation to child poverty. The assumptions made in relation to employment are based on independent forecasts and analysis. We are confident that the measures that we are taking, not least to make work pay—work is the surest route out of poverty—will allow continuing improvements in the number of children taken out of poverty; 200,000 were taken out of poverty last year, and there is every expectation that we will meet our undoubtedly challenging targets in that regard.

Mr. Michael Howard (Folkestone and Hythe): I welcome the proposal made by the Chancellor in answer to the hon. Member for North Durham (Mr. Jones). He does indeed have support for those proposals from the Conservative Opposition. Will the Chief Secretary tell us why the Chancellor blamed his failure to meet his Budget forecasts on falls in world growth and world

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trade, when the forecast for world trade this year, on page 152 of the pre-Budget report, was only ¼ per cent. lower than the Budget forecast, and the forecast for G7 growth has not changed at all? Is not the truth that it is not the forecast for the rest of the world that was downgraded, just the forecasts for this country?

Mr. Boateng: I welcome the right hon. and learned Gentleman's earlier remarks in response to my right hon. Friend the Chancellor's earlier answer. I draw the right hon. and learned Gentleman's attention to the fact that last year saw the sharpest slowdown in world growth for almost 30 years. The world's largest three economies, Japan, Germany and the US, were in recession. There were massive falls in the equity market. Despite all that, our growth was the fastest of all the G7 economies last year. The right hon. and learned Gentleman ought to recognise that and give credit for it, rather than continuing to cast himself in the role of Cassandra and Jeremiah.

Poverty

7. Mr. Terry Rooney (Bradford, North): What measures the G7 is taking to improve literacy in developing countries as part of tackling global poverty. [85254]

The Chancellor of the Exchequer (Mr. Gordon Brown): The new G7 education initiative has been decided because 113 million children do not enjoy primary schooling and 88 countries are missing the target that everybody should have primary schooling by 2015. Britain will be investing #1.3 billion in education in the poorest countries in the coming five years, and further funds for education are a critical element in our proposed international development finance facility.

Mr. Rooney : I thank my right hon. Friend for his answer and for his undoubted interest in the subject. What was the outcome of the XEducation for All" donor consortium meeting in Brussels on 27 November?

Mr. Brown: I am grateful to my hon. Friend. He, too, has taken an interest, both in his constituency and nationwide, in these matters. There are two initiatives that are moving forward on education. The first is for seven small countries, including Nicaragua, Niger and Mauritania, where the World Bank is running a fast-track initiative so that countries that are making progress will be in a position to meet the 2015 targets. The second set of initiatives is for the larger countries. My right hon. Friend the Secretary of State for International Development is particularly concerned about India, Pakistan, Bangladesh, the Democratic Republic of the Congo and Nigeria, where huge amounts of money will be needed if we are to meet the 2015 targets. That is why she is allocating #1.3 billion from her budget over the next five years. Almost half that money will go to Africa and a great deal of it will go to India, Pakistan and Bangladesh. Two initiatives are therefore moving forward: the G7 initiative for the smaller countries and her initiative, which is operating

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with other countries through the G7, for very large countries that are simply not meeting the necessary targets.

Gregory Barker (Bexhill and Battle): Last month I had the opportunity to visit a combined primary and secondary school in Uganda that had been built with proceeds from my constituency. Indeed, the school is named Bexhill high school. I was extremely impressed by that voluntary initiative in Uganda, but incredibly concerned about the systemic corruption that I saw not only in Uganda, but in Kenya. Can the Chancellor reassure the House that the huge amount that is destined for the poorest people in Africa will reach them and not be diverted, as so much other aid money has been, to line the pockets of the ruling elite?

Mr. Brown: I am grateful to the hon. Gentleman's constituents who have been part of the initiative in Uganda. While he is right that there is a major corruption problem that must be dealt with as part of the international finance initiative—that is very much one of the requirements for further development aid—he cannot say that progress is not being made in Uganda. Progress is being made on education, partly because of the proceeds of debt relief received by Uganda in the past few years. Uganda is now moving from a pupil-teacher ratio of 100:1 to one of 50:1 and to a situation in which it can genuinely say that every pupil who goes to school will have a roof above their head. That is a major initiative in Uganda that is designed to achieve 100 per cent. primary education enrolment in a short period. Progress is being made, although we must guard against corruption in every sense.

Roger Casale (Wimbledon): May I thank my right hon. Friend for the work that his Department is doing to eliminate poverty around the world and to raise educational standards? If an international consensus is to emerge on the measures and resources necessary to eliminate poverty, it is vital that he continue to articulate the same values and vision and to show the same leadership as he has shown previously and that led to the establishment of the millennium development goals in the first place. Will he and my right hon. Friend the Secretary of State for International Development redouble their efforts to strengthen international commitment to his proposal for a new Marshall plan for Africa?

Mr. Brown: My hon. Friend and his constituency take an enormous interest in such issues; I believe that churches and NGOs in Wimbledon have played a very important role in the campaigns that have taken place. He is absolutely right that there is now a unique world situation in which all international organisations—the International Monetary Fund, the World Bank, the United Nations, the World Trade Organisation and the OECD, as well as individual Governments—have signed up to the millennium development goals. We must meet those goals by 2015, so it is incumbent on all of us to raise the necessary resources. That is why we are working with other finance Ministries to see whether that international development finance facility, which is the means by which we could double development aid, will be possible over the next few years.

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One other measure that my hon. Friend would understand is reform of the European Union's aid budget. It is intolerable that only 38 per cent. of EU aid goes to the poorest countries. As a minimum, we expect that level to be raised to 70 per cent. by the measures that we are introducing.


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