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12 Feb 2003 : Column 882—continued

Mr. David Cameron (Witney) rose—

Mr. Brown: How can the shadow Chancellor square his demand for extra public spending in Folkestone with the shadow Chief Secretary's demand that it be cut by 20 per cent.?

Mr. Cameron rose—

Mr. John Bercow (Buckingham) rose—

Mr. Brown: I shall give way to the former shadow Chief Secretary, and then I hope to make some progress.

Mr. Bercow: I thank the right hon. Gentleman for giving way. Given that activity rates in the national health service are now rising at only one fourteenth of the level of the increase in NHS expenditure, given that last year alone 6,000 nurses left the United Kingdom to go overseas, and given that the right hon. Gentleman failed to meet and then scrapped his own target, set in 1998, for a reduction in truancy, is it any wonder that the British people and his own Cabinet colleagues are selling shares in this Chancellor?

Mr. Brown: This debate must be the first time Conservative Members have regretted the hon.

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Gentleman's resignation from the post of shadow Chief Secretary, because they have now been landed with the hon. Member for Arundel and South Downs. As far as the health service is concerned—

Mr. Cameron rose—

Mr. Brown: If I remember rightly, the shadow Chancellor gave way only four times. I have already given way to shadow Front Benchers at least six times, and I now have the alternative Front Bench lining up to make their case for office under the Leader of the Opposition—or should I say the current Leader of the Opposition?

There were 4.5 million elective admissions in hospitals when we came to power; there are 5.3 million now. There were 11.3 million outpatient attendances when we came to power; there are 12.7 million now. There were 1.8 million emergency admissions; there are 2.25 million now. Do not let people say that the health service is not having, and dealing with, more admissions, more outpatients and more emergency admissions. It is about time Conservative Members started to praise the national health service, instead of calling it a Stalinist creation.

Several hon. Members rose—

Mr. Brown: I have to make progress, and I want to make two announcements that I believe will be of interest to the House. In the pre-Budget report, I set aside £1 billion to be drawn on by the Ministry of Defence for security and military matters, if and when it becomes necessary. Nothing should prevent us from equipping and supporting our armed forces, who perform a great service for Britain, as do our security services. Money is being drawn down by the MOD to meet the costs that it is entailing. I shall report to the House again in full in the Budget, but I can tell it today that in this financial year I have increased this sum from £1 billion to £1.75 billion, to be set aside for possible commitments, and to be drawn on only if and when necessary. This is, of course, a time of great risk economically and geopolitically, and I believe that most Members of the House will support what I am doing.

Mr. Patrick McLoughlin (West Derbyshire): Will the Chancellor give way?

Mr. Brown: If it is on that point.

Mr. McLoughlin: I am grateful to the Chancellor, who has just been very helpful to the House. Listening to last night's news, we were told that a number of new police officers had also been deployed to Heathrow airport as a result of yesterday's increased security measures. Does he intend to increase the budget to the Metropolitan police to cover that?

Mr. Brown: I am grateful to the hon. Gentleman for that intervention. What he says is true, but he would not expect me to comment on operational matters relating to the police. However, the amounts of money made available in the spending round for policing in general and for the Metropolitan police in particular have increased substantially. I believe that, overall, there will

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be 5,000 more policemen as a result. So far as security is concerned, in these difficult days we will do whatever is necessary to protect and to make secure the British public.

Just as we are making provision for any necessary preparations for action, we are also providing to meet our responsibilities in terms of peace and tackling world poverty. I want the House to be the first to know of the new document on the technical details of the international finance facility, which I hope we can publish tomorrow with the support of all parties. It will show how aid can rise to $100 billion a year for the poorest countries, and I am grateful to Conservative Members in this House and in the House of Lords, and to members of all parties—Liberals and nationalists—for their support for this initiative.

I have a second announcement for the House. In addition to the work on the euro that is already under way, we will publish an additional four studies, which report on issues that the House will agree are important. The first study concerns the exchange rate and macro-economic adjustment; the second concerns the transition to the euro; the third explains the overall framework for the assessment of the five tests; and the fourth brings together specially commissioned papers by international academics on aspects of British membership of the euro. I look forward to giving evidence to the Treasury Select Committee on 27 February. Next Monday, before I meet the Committee, we will publish our progress report on European economic reform.

Mr. David Laws (Yeovil): Will the Chancellor give way?

Mr. Brown: Yes, if it is on that specific point.

Mr. Laws: I am grateful to the Chancellor for giving way. If the assessment of the five economic tests, which must take place before June of this year, shows that Britain has not met them, will that rule out a referendum on the euro for the rest of this Parliament?

Mr. Brown: We have been over this ground before and I am not going to pre-judge the assessment. It will set out the facts clearly, and the hon. Gentleman can make his own judgment afterwards.

I shall give full details of the updated figures on economic growth when we come to the Budget, but I can tell the House that last year, by contrast with growth in Germany of 0.2 per cent., in Italy of 0.4 per cent., in France of 1 per cent., and in Japan of minus 0.3 per cent., the economies of north America and Britain were the fastest growing of the G7 countries, as was stated earlier. So despite the events that have brought the first synchronised world slowdown, the Opposition are quite wrong to claim that we are not well placed to cope with it. Only a few days ago, the shadow Chief Secretary said in an intervention that we were facing likely recession and events analogous to the late 20s and early 30s, but I should tell him—[Interruption.] I ask him this: is he really saying that we face events analogous to the 20s and 30s? [Interruption.]

Mr. Speaker: Order. The Chancellor must continue.

Mr. Brown: I wonder whether the shadow Chancellor might allow the shadow Chief Secretary to have a higher

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role in the next debate. It is always illuminating to listen to his words. When Conservative central office had to explain his earlier intervention, it defended him not as a politician, but as a City expert giving his views.

In 2001, the UK was the fastest growing member of the G7. In 2002, with the north American countries, we were also the fastest growing. The Bank of England inflation report issued today states that, even before the effect of the recent interest rate cut, it expects growth to be 2.5 per cent. this year. Two underlying fundamentals matter if economic growth is to be sustained—that is why the shadow Chancellor's analysis is wrong—inflation and stability. Past Governments have been unable to act during a world downturn because inflation was too high and interest rates could not be reduced. Inflation was 6 per cent. on average, although it rose to 10 per cent. when the shadow Chancellor was Secretary of State for Employment. Under the Labour Government, even in the 1990s, inflation has averaged 2.3 per cent. Every year, we meet our inflation target. We shall continue to do so and we shall continue to exercise discipline in the settlement of wage claims.

As a result, we have achieved lower mortgage rates than those under the previous Government. They averaged 11 per cent. under the Conservatives, but only 6.5 per cent. under Labour. After all the shadow Chancellor's allegations, it is interesting to note that, over the last five years, 693,000 more people in England alone have become owner-occupiers.

Living standards have risen substantially. Despite the fall in equity markets across the world, total net household wealth is still up. Despite oil and other problems, we have achieved not only low inflation and low interest rates, but low unemployment. The figures that I read out today are not the only important ones in that regard; there are 600,000 vacancies and they are in every region—unlike the situation in the late 80s. Because of the new deal, which the shadow Chancellor would scrap and abolish, we have achieved the lowest long-term youth unemployment since records began. I urge the Conservatives, in their review of Government spending, not to abolish a new deal that has given hope to hundreds of thousands of young people throughout the country.

It is because we understand the slowdown in world trade and its impact on the stock exchange that, far from being complacent, we have seen interest rates come down, and small business corporation tax has been cut to 19 per cent; this spring, we are abolishing stamp duty for property purchases in disadvantaged areas; and tomorrow, because I believe that a consensus can be reached on measures that will help Britain to make the most of opportunities when the upturn in world trade takes place, we shall meet the CBI to follow up my meeting with Digby Jones and the joint note that we prepared.

Building on the cuts in corporation tax that we have already achieved, on the cuts in capital gains tax, from 40p to 10p for two years, and on the permanent capital allowances that we introduced, we shall examine investment incentives, especially in the venture capital sector. Building on the small business tax, which is down to 19 per cent., we shall examine how much more we can do to encourage enterprise in every area of the country.

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Building on the successful research and development tax credit, we shall examine measures for innovation. Building on the employer pilots for greater training and skills for the modern work force of tomorrow, we shall publish a skills strategy later this year. Building on the flat-rate VAT system that we are introducing in April, we shall attempt to do more to encourage flexibility in the economy, including labour market flexibility where there is indeed a case for more conditionality and compulsion in the new deal for the unemployed. I believe that we shall have support throughout the country for the measures that we are taking.

How different from the days of the early 1990s under the Conservatives! Then, when the shadow Chancellor was one of the architects of Conservative economic policy, unemployment went up by 1.4 million. Inflation was 10 per cent. Interest rates went up to 15 per cent. The record is undeniable. When there were difficult world conditions in the early 1990s, Britain did badly under the Conservatives, yet in the present difficult world conditions, Britain is doing well under Labour.

When I hear the shadow Chancellor's pronouncements—with no hint of embarrassment at his past record—on pensions, tax, jobs and public services, are we not entitled to remind people that, on pensions, the right hon. and learned Gentleman was the City Minister at the time of pensions mis-selling; that, on tax, he was the poll tax Minister and described the poll tax as "clear, simple and fair"; and that, on jobs, he was the Employment Secretary when we lost so many jobs in two years? On public services, of course, he was Home Secretary when crime doubled. As Home Secretary, the right hon. and learned Gentleman famously coined the phrase "prison works"—I suppose it did, for a number of his former colleagues.

We have taken the necessary action not only on monetary policy but on fiscal policy. In that area, too, the shadow Chancellor has misunderstood what it is right to do for a modern economy. In 1997 and 1998, in a period of growth, we actually froze spending. When others, including some of his colleagues, urged us to spend the proceeds—£22 billion—of the spectrum auction, we paid off debt. We deliberately ran up large surpluses in periods of higher growth and, in one year, we cut more debt—£37 billion—than in all the years from 1945 to 2000.

Let us make some comparisons. Debt is 31 per cent. of gross domestic product, but it is 45 per cent. in the United States of America; it is 47 per cent. in Germany, 55 per cent. in the euro area and 70 per cent. in Japan. As a result of cutting debt we have lower debt interest payments as a share of national income than at any time since 1915 and we can afford to take the action necessary in a period of low growth for the world economy. It is because our fiscal rules are set for the long term and because we paid off debt during times of high growth that our fiscal policies can adjust to the economic cycle.

The shadow Chancellor says that the position—

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