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27 Mar 2003 : Column 435—continued
International Finance
3. Mr. Tony Clarke (Northampton, South): If he will make a statement on the international finance facility. [105152]
The Chancellor of the Exchequer (Mr. Gordon Brown): At the April meetings of the International Monetary Fund, the World Bank and the G7, a joint proposal for a new international finance facility will be made by Britain as chair of the IMF committee and South Africa as chair of the development committee.
There has been growing support for the British initiative: it is being discussed today at the meeting between President Bush and our Prime Minister, and it will be discussed at the G7 meeting in Evian later in the spring.
I am allocating an extra £120 million from the reserve to the Department for International Development for humanitarian relief and reconstruction in Iraq, and I am today allocating a further £1.25 billion to increase the special reserves to £3 billion, to be drawn by the Ministry of Defence as necessary for action in Iraq.
I think the whole House will want to make clear our gratitude to our armed forces and our determination to ensure that they are fully supported, and will want to send condolences to the families of the 22 British service men who have lost their lives.
Mr. Clarke : I share my right hon. Friend's sentiments about our sympathy for those who have lost family members in the Gulf.
My right hon. Friend should be congratulated on exporting the values of financial stability and security that he applies to the United Kingdom economy around the globe. When he meets the G7 and G8 countries, will he use his best endeavours to ensure that those participating do not allow their participation to rely too much on trade deals? Developing countries should be allowed free trade, and opportunities to trade and choose their own export markets involving the countries of their choice.
Mr. Brown: One of the achievements since 1997 has been the untying of aid from trade, which means not making the aid that we give principally for education, health and anti-poverty programmes conditional on either trade or commercial agreements. I think my hon. Friend will agree, however, that if we are to achieve the millennium targets by 2015, it will be necessary to combine debt relief with the opening up of, in particular, the African countries that we have mentioned to trade and private investment, as well as the additional resources that will be made available by the international finance facility.
The agreeing of a new financing facility would be a major departure for the international community. It would be on a scale similar to that of the establishment of the World Bank in 1945, when it put extra funds into securing international development. That is why it is so important that we win international support for this facility.
Miss Anne McIntosh (Vale of York): I welcome the additional moneys that the Chancellor has allocated to the Iraq effort. I especially welcome the announcement that the girlfriends and partners of deceased soldiers—common-law wives, as we would call them in Scotland—will now enjoy the same benefits as the widows of those active service men. Will the Chancellor confirm that the provision will extend to any children of what in Scotland, but not in England, is recognised as a common-law marriage?
Mr. Brown: I am grateful for the hon. Lady's support for my announcement about funding. The Ministry of Defence will make further announcements on the specific matter that she has raised.
Mr. John McFall (Dumbarton): The Chancellor is aware that in May I will accompany the Scottish Catholic International Aid Fund to Zambia to see the work that it is doing in the western part of the country, the Shangombo region, where 100,000 people are starving. That country is spending 20 per cent. of its GDP on debt and only 2 per cent. on health and education. What message of hope can I take to the Government and those on the ground that the international financing facility and other issues are dealing with the needs of their country?
Mr. Brown: I hope that the visit of my hon. Friend and the NGO concerned to Zambia will be a success. Zambia is one of those countries where one in every five children die before the age of five. Therefore, a huge amount of money has to be spent on health systems as well as education systems in that country. What he can say to the people whom he meets is that we are determined to move ahead with the debt relief that we promised and to build upon that money to enable the millennium development targets to be met. That means that every child in Zambia should be able to look forward to the possibility of schooling and that we should cut the infant mortality rate in Zambia, which is in one in five children, to a far lower level over the next 10 years, but it will require us as an international community to provide the funds.
GDP Growth
4. Mr. David Ruffley (Bury St. Edmunds): What assumptions he used when making changes to his forecasts for GDP growth since the 2002 Budget. [105153]
The Financial Secretary to the Treasury (Ruth Kelly): The Government will publish updated forecasts for the UK and world economies in the Budget on 9 April, which will take into account all factors affecting
economic prospects. All relevant forecast assumptions will be detailed at that time in the "Financial Statement and Budget report".These are clearly challenging times for the world economy. However, the UK's sound economic fundamentals based on the Government's strong macroeconomic framework, leaves us in a far better position than in the past to weather those testing conditions.
Mr. Ruffley : Last November, the Chancellor tried to explain away his dodgy forecasts by using smoke and mirrors. When next month he has to explain away that he has got his figures wrong for a second time, will he hide behind the fog of war?
Ruth Kelly: The hon. Gentleman should look at the facts of the situation rather than get carried away by his own rhetoric. In 2001, 22 countries were in recession, including the United States, Japan and Germany. The UK continued to grow; it saw the fastest growth in the G7. That growth continued to be one of the fastest last year. Perhaps he should also look at the recent IMF report on the UK economy, which said:
- "This remarkable economic performance owes much to the government's strong policy framework."
Ruth Kelly: I completely agree with my hon. Friend that this country has extremely sound long-term economic fundamentals, including the lowest sustained inflation for 40 years, the lowest unemployment in a generation, interest rates at their lowest level for 50 years and one of the lowest debt ratios in the EU. That is a consequence of the tough decisions that the Government took on coming to power.
Matthew Taylor (Truro and St. Austell): Once again, the Chancellor ducks answering any questions on the state of the domestic economy, and no wonder. Would the Minister care to comment on a series of records that the Chancellor has set in this morning's GDP data? Those are an unprecedented seventh decline in manufacturing out of eight quarters, a record business investment fall of 8 per cent. and a record annual deficit on trade in goods. The Organisation for Economic Co-operation and Development has made it clear that last year, irrespective of war and not part of the general world economic situation, the Chancellor managed to achieve the notable and distinguished success, I presume the Minister will tell us, of a decline in investment in business worse than that in France, Germany, Japan and the United States. That is what the OECD has to say about the Chancellor's record.
Ruth Kelly: The hon. Gentleman seems to have missed one crucial fact; that GDP growth was revised up this morning from 1.6 per cent. to 1.8 per cent., largely as a result of an increase in business investment. Of course I will comment on certain records that my right hon.
Friend the Chancellor has set—record low levels of unemployment, record low interest rates and a record for one of the lowest debt ratios in the EU.
Mr. James Plaskitt (Warwick and Leamington): Does my hon. Friend agree that the increasing public investment made by the Government is itself making a positive contribution to holding up our GDP? How would she react to a proposal that that public investment should now be reduced by, say, 20 per cent.?
Ruth Kelly: My hon. Friend makes an incredibly important point. The Government's policy of continuing to invest in our public services is supporting growth in incredibly difficult international times. It is important that we complement our policies for macro-economic stability with policies that will see growth in investment and support the manufacturing sector, rather than the policy advocated by the Conservative party of a 20 per cent. cut across the board.
Mr. Michael Howard (Folkestone and Hythe): First, I welcome the increased funding announced by the Chancellor a few moments ago for the war and for humanitarian help to the people of Iraq. I also associate myself with his remarks on the valour of our service men and women and with his expressions of sympathy to the families of those who have, sadly, made the ultimate sacrifice on behalf of our country.
Why does the Chancellor hide away again when the economic forecasts of this country are the subject of this question? His forecasts for GDP growth in last year's Budget were higher than the average from independent forecasts at the time, so it was hardly surprising that, in the pre-Budget report, he was forced to admit that his forecasts on growth, revenue, his deficit and borrowing were all wrong. Yet his new growth forecasts in the pre-Budget report in November were, again, higher than the average from independent forecasters at the time. Why does the Chancellor keep thinking that he was right and everyone else was wrong?
Ruth Kelly: I am afraid that the right hon. and learned Gentleman has got his facts entirely wrong. At the time of the pre-Budget report, two thirds of independent forecasts were either within or above the range predicted by this Government. If he insists on comparing this Government's forecasting record with that of his party when in power, he will see that this Government have been far better at predicting the economy. It continues to be the case that the economy in Britain grew faster than the G7 average last year and the year before.
Mr. Howard: The question is about forecasts. The forecasts to which I referred were the average forecasts set out in the Government's own documents at the time of the Budget and the pre-Budget report. Why does the Financial Secretary think that independent commentators at the time were describing the Chancellor's figures as overly optimistic and rose-tinted? Why does she think that, at the time, they questioned his figures on business investment and cast doubt on his productivity figures? Has he not been warned about his forecasts by the IMF and by the Institute for Fiscal Studies, as well as by his own colleagues on the Treasury Committee? Is it not time for
the Chancellor to come to the Dispatch Box himself to accept responsibility for his forecasts and the failure of his policies?
Ruth Kelly: The right hon. and learned Gentleman is trying to find an extraordinarily elaborate way of getting around the real economic success of the Government. The UK has continued to grow when every other major country in the G7 has fallen into recession, at a time when we have had the biggest world economic slowdown for 30 years. He dares to criticise this Government's forecasting record and challenges me on our forecast, but let us compare our downward revision of 0.4 per cent. with the downward revision of 2 per cent. during the previous recession in 1992. This Government have achieved remarkable economic success and we stand on our record.
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