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11 Apr 2003 : Column 582—continued

2.15 pm

The Economic Secretary to the Treasury (John Healey): We have had an excellent and wide-ranging debate, and I have counted 21 contributions before mine. The tone was set by my right hon. Friend the Secretary of State for Education and Skills, who set out the significant philosophy underpinning the Government's and his Department's approach to education and skills. He stressed the crucial importance of skills at every stage of life, starting with schools and stretching through life to encourage lifelong learning. He rightly said that skills were central to the long-term economic performance and prosperity of this country.

The hon. Member for Ashford (Mr. Green) underlined the scale of the challenge that we face on skills. He got his figures a little confused, but reminded us that 7 million adults in this country are without basic literacy and numeracy skills; half of those are in the work force. My right hon. Friend the Chancellor said on Wednesday that 8 million people in the work force were without level 2 qualifications. That challenge is a direct result of the education system, over decades and under both parties, letting too many students down; people who have had to go through life with a legacy of poor skills.

I was glad to hear the judgment of the hon. Member for Ashford that Britain had a more flexible economy than others in Europe. I point out to the hon. Member for Leominster (Mr. Wiggin) that that is what business leaders say as well. The director general of the CBI said,

We need to combine fairness with flexibility in our economy.

The hon. Member for Harrogate and Knaresborough (Mr. Willis) recognised the efforts that my right hon. Friend the Secretary of State for Education and Skills is making to bring coherence to education and skills. The hon. Gentleman stressed the importance of that, but he will have to wait in particular for the skills strategy in June, as the Budget is not the means by which to try to do the comprehensive job that is needed. However, I and colleagues at the DFES are strong supporters of further education. Indeed, my right hon. Friend the Secretary of State had dinner with the executive council of the Association of Colleges, precisely to discuss the part that further education can play in the future skills strategy.

Hon. Members—including the hon. Members for Sevenoaks (Mr. Fallon) and for New Forest, West (Mr. Swayne) and my hon. Friend the Member for Croydon, Central (Geraint Davies)—have commented on the Chancellor's forecasts as set out in the Red Book and the Budget speech. I have three answers to those who accuse the Chancellor of over-optimism. First, Treasury predictions for growth this year are in line with those of the European Commission and the majority of independent experts. Secondly, we have the economic stability and the recent track record that can give us some confidence. Unlike the United States, Germany and Japan, the British economy has been growing uninterrupted, free of recession, in every single quarter for six years.Thirdly, it is true and inevitable that risks remain, but with low inflation and low interest rates,

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with independent forecasters confirming the credibility of our new macro-economic framework and with a world economy—especially that of the United States—poised to make what we believe will be a steady recovery, we expect British growth overall to rise as the economy returns to trend.

Mr. Fallon: Will he explain why, when the Chancellor is predicting growth of between 3 and 3.5 per cent. next year, the Bank of England's central projection is only 2.3 per cent.? Why is the Bank wrong?

John Healey: The hon. Gentleman is experienced enough to know that there will always be a range of forecasts. I remind him that, in 1999, the independent forecasters about whom he spoke so warmly vastly overestimated the impact of the Asian crisis; the outturn was that the Treasury forecasts were much closer to what really happened.

My hon. Friend the Member for Luton, North (Mr. Hopkins) set out views on the PFI, the euro and pensions to which he has held steadfast for many years, but I hope that he will accept that the Government will not focus all our efforts to support pensioners on the basic state pension; we can do much more for the poorest pensioners in other ways.

My hon. Friend the Member for Caerphilly (Mr. David) focused his speech on employment opportunity and stressed why our welfare-to-work programme is so important, as well as why individual action, flexible to meet the needs of local economic circumstances, is also so important. That theme was picked up by my hon. Friend the Member for Ynys Môn (Albert Owen), who also endorsed the economic sense of considering relocating civil service jobs to the regions.

The hon. Member for West Worcestershire (Sir Michael Spicer) treated the House to his own assessment of the five economic tests, but I am afraid that he will have to wait a little longer for the Government's own assessment to be published.

The hon. Member for Orkney and Shetland (Mr. Carmichael) curiously started by declaring how little relevance his comments would have to the Budget debate. He then went to welcome, on my count, five specific measures, including the freeze in spirits duty, which is the longest sustained freeze for 50 years, declaring both a constituency and a strong personal interest in that policy.

My hon. Friend the Member for Dagenham (Jon Cruddas) interestingly and vividly drew attention to the gap between the national description of public services, as often expressed in the media and certainly by the Opposition, and the local knowledge of the improvements in public services that hon. Members on both sides of the House know in their heart of hearts are taking place in our constituencies. My hon. Friend saw, as do all Labour Members, the Budget as a further staging post in the process of improving public services.

My hon. Friend the Member for Morley and Rothwell (Mr. Challen) did much the same—he detailed the impact that the increases in education funding are having on his constituency, and he noted in passing that that impact has not been lost even on the Liberals.

My hon. Friend the Member for Falkirk, West (Mr. Joyce) gave a passionate outline, from his experience, of the importance of higher education to the knowledge, talent and economic base of this country.

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The right hon. Member for South-West Surrey (Virginia Bottomley) spoke passionately about her local schools, university and those who lead them, but she went on to ridicule our approach to productivity. I was recently talking to one of the regional development agency chairmen—a successful business man in his own right—and he said of the Government's productivity policies, "You are giving us meat and two veg." [Interruption.] He was a northerner, as the hon. Member for Brentwood and Ongar (Mr. Pickles) would recognise.

I recognise the fact that improving British productivity is a long-haul challenge for this country, and we still have further to go, as the hon. Member for Sevenoaks rightly pointed out in referring to the United States.

Mr. Challen: Will my hon. Friend give way?

John Healey: If my hon. Friend will forgive me, I will not give way; I need to make progress to recognise all the contributions that hon. Members have made.

The most recent productivity figures show that, since 1995, Britain has eliminated the productivity gap with Japan and is closing the gap with France and Germany.

I was sorry to hear the hon. Member for East Devon (Mr. Swire) give such a grudging reaction to the pension credit and the extension to one year of the period before any deduction is made to the pensions of those in hospital. Many Labour Members and many members of the public will take a different view.

In contrast, my hon. Friend the Member for Gravesham (Mr. Pond) welcomed the extra £100 winter fuel payment for those aged over 80 and the fact that the Budget confirms the Government's commitment to continue to invest record levels in public services, and I will draw the attention of my right hon. Friend the Secretary of State for Education and Skills to the points that he made about the school in his constituency.

The comments on council tax and spending made by the hon. Member for Leominster sounded more like a speech from the hustings in a local council election, as did many of the points made by the hon. Member for Brentwood and Ongar. We are not underfunding councils from central Government. Funding has gone up 25 per cent. in real terms since 1997—in contrast to four years of cuts in the run-up to that election. The 5.9 per cent. increase in the general grant this year represents what the Government think the national taxpayer can contribute to local government, and every council is receiving an above-inflation increase for the first time.

The hon. Member for Sevenoaks asked an important and serious question about the Budget timetable. He is concerned about the scrutiny that can be given to the measures contained in the Budget. The hon. Gentleman will know that it was provisionally announced yesterday that Second Reading of the Finance Bill will take place on 6 May. I can assure the hon. Gentleman that Treasury Ministers will be working closely with business managers to ensure that the Bill receives proper scrutiny during its passage through the House.

I congratulate the hon. Member for Orpington (Mr. Horam) on his contribution to increasing policing resources in Bromley. My hon. Friend the Member for

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Croydon, Central presented a persuasive analysis of recruitment and retention problems in London and the south-east. He made the case for more local flexibility in delivering balanced economic growth throughout all regions. I see no reason why we cannot include local pay focus and delegation within a national framework.

My hon. Friend the Member for Telford (David Wright) welcomed the child trust fund, which he rightly recognised as a concept with plenty of scope to develop further.

As my right hon. Friend the Chancellor outlined in the Budget speech, this is no ordinary time. There is military conflict in Iraq; we have seen a sharp global downturn in the last couple of years, and there is continuing uncertainty and instability in the world economy. However, Britain entered this period of uncertainty from a position of relative strength. Since 1997, our monetary policy and the independent Bank of England, supported by fiscal policy and our two golden rules, have established consistently low inflation and, crucially, low inflation expectations. We have established long-term interest rates that are lower now than those in Germany, the euro area and America. Together with the new deal, employment is at a record high. A quarter of a million jobs have been created since the previous Budget and unemployment is now lower in the UK than in the euro area, Japan and America together, for the first time in 50 years.

Whereas in previous downturns the UK entered first, exited last and suffered more, in this downturn we expect growth this year to be between 2 and 2.5 per cent. That is double the growth in the euro area and Japan and about the same level as in America.

The Budget is a restatement of the Government's capacity and commitment to meet our international obligations, to maintain our increasing investment in

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developing public services and to move still further in support for business and the drive for full employment. The Budget sets out policies that combine enterprise with fairness, together with the economic dynamism that we have come to associate with the United States and the social cohesion that is more characteristic of continental Europe. There is not one at the expense of the other. Britain is advancing on both fronts at the same time. Hence the theme of the Budget speech of my right hon. Friend the Chancellor and the title of this year's Red Book, "Building a Britain of economic strength and social justice".

Our policies on enterprise, innovation and investment, and on the liberalisation of capital, product and labour markets are not brought at the price of fairness. They are underwritten by policies for achieving full employment and tackling child poverty through tax credits. We have introduced the child trust fund; we are developing the national minimum wage; and we are investing substantially in the national health service. Given the tough decisions that we took during our first term to freeze public spending, to set monetary policy on an independent footing and to cut the public debt, our policies are affordable, even on the cautious case, across the cycle and within our fiscal rules. In France, debt is 41 per cent. of GDP. In Germany it is 49 per cent. and in Japan it is 75 per cent. In Britain, debt this year and in future years will be between 32 and 34 per cent. of GDP. That is comfortably meeting our sustainable investment rule over the cycle in each and every year.

This is my right hon. Friend's seventh Budget. It is a Budget that was built on the basis of hard-won economic stability. The Budget builds further on the policies that are already in place from earlier Budgets for tackling inequality, encouraging enterprise, investing in our public services and boosting employment.

Debate adjourned.—[Jim Fitzpatrick.]

Debate to be resumed on Monday 14 April.

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