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Mr. Redwood: Will the right hon. Gentleman give way?

Mr. Brown: I should be happy to give way to the right hon. Gentleman, who does speak on trade and industry matters, unlike the shadow Secretary of State for Economic Affairs. Perhaps he will explain what good it would do the national health service and other parts of our public services if we were to cut public expenditure to 35 per cent. of GDP.

Mr. Redwood: There is no intention to cut public spending. Will the right hon. Gentleman confirm what Labour Back Benchers have been saying, which is that under his regime, there is a small reduction in the proportion of GDP going towards public spending? Does that show that he has been cutting public spending, or that the economy has been growing?

Mr. Brown: We were right to spend on the national health service; we were right to spend on education; we were right to spend on, and invest in, the transport infrastructure; and we were right to spend on more policing. It is therefore right that public expenditure as a share of national income has risen since 1997, and it is right that we invest in these vital services.

Mr. Stephen Dorrell (Charnwood) (Con): Will the right hon. Gentleman give way?

Mr. Brown: I shall give way in a minute to the right hon. Member for Charnwood (Mr. Dorrell), who is someone who says that he wishes to invest in the national health service. The question, however, that Conservative Members must answer is whether they are going to enter the next election promising that they will cut public expenditure to 35 per cent. of GDP—an £80 billion cut in public expenditure. They would then have to explain in every constituency in this country how many hospitals and schools would be affected, and how many teachers and nurses would be made redundant. I now give way to the former Health Secretary, who will perhaps defend the national health service from the Conservative Benches.

Mr. Dorrell: I am grateful to the Chancellor for giving way. He lists a number of things that he thinks he was right to have done. When he first announced his planned borrowing for the current financial year in the 2001 Budget, he said that he planned to borrow £10 billion. The City now believes that he will actually need to borrow £40 billion. Is that change in his plans right, or did it happen by accident?

Mr. Brown: It is right for Governments to borrow at a time of a world downturn. The right hon. Gentleman

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will know that the American deficit is in the order of 6 per cent., and that the German and French deficits are in the order of 4 per cent. [Interruption.] The American deficit is approximately 5 to 6 per cent.—far higher than ours will be or could be.

So that the right hon. Gentleman is in no doubt, let me point out that spending on the war in Afghanistan and on the war on terror—both international and domestic—is approaching £2 billion so far. That was the right thing to do, even though that expenditure was incurred after the 2001 Budget. The House will also know that I set aside £3 billion to fund the cost of military operations in Iraq. I have made clear my resolve to ensure that our armed forces and security services are properly supported for whatever lies ahead. In addition, we have spent £250 million on reconstruction in Iraq, with a further £300 million having been committed. The total spent and committed so far for the war on terror and our operations in Iraq and Afghanistan is about £5.5 billion. I shall publish further updates on those figures, and further information, next week in the pre-Budget report—and I will be able to tell the House not only that we meet our fiscal rules, but that we will never get the economy into the situation that prevailed when the right hon. Gentleman was in the Cabinet, when public borrowing rose to £80 billion.

Sir Peter Tapsell (Louth and Horncastle) (Con): On the subject of public borrowing, does the Chancellor accept that if he had not sold our gold reserves at $260 an ounce before the price went up to $400, he would have rather less to borrow?

Mr. Brown: I do not accept that at all. The problem was that the reserves should have been rebalanced years before we were in government. It should have been done under the Conservative Government, because to have properly balanced reserves—particularly, if I may say so, given the rise of the euro in recent months—is to the advantage of the British Exchequer and the British economy.

Mr. Djanogly rose—

Kevin Brennan (Cardiff, West) (Lab) rose—

Mr. Deputy Speaker: Order. We can have only one hon. Member on his feet at a time—and when that is me, all other hon. Members must resume their seats.

Mr. Brown: There is never a debate when the Conservatives' enthusiasm for their European position does not shine through.

Richard Ottaway (Croydon, South) (Con) rose—

Mr. Brown: I shall give way to the hon. Gentleman, but then I will have to make some progress, because we need to talk about the economy, especially as the shadow Chancellor failed to do so.

Richard Ottaway: May I turn the Chancellor's mind to the subject of productivity? He will know that in the five years to 1997, productivity was running at more than 2.5 per cent., whereas in the five years since 1997, it has been running at 1.5 per cent., in stark contrast to

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productivity in the United States, which is 3 per cent. Is that a result of the growth of the public sector or the growth in bureaucracy and red tape for business?

Mr. Brown: Productivity is rising above 2 per cent., and manufacturing productivity is in the order of 5 per cent. The only years in which productivity fell were under the Conservative Government—1980 and 1989—and the only years in which manufacturing productivity fell were 1980, 1995 and 1996. Our record on productivity is far better than the record of a Conservative Government who, at the same time as failing to raise productivity dramatically, lost the British economy millions of jobs. We are creating jobs.

Mr. McFall: Will the Chancellor give way?

Mr. Brown: I shall give way to the Chairman of the Treasury Select Committee, because I believe we can have a debate about the economy.

Mr. McFall: May I remind my right hon. Friend that he was imprecise with regard to the comments made by the shadow Chancellor, who is on record as saying that he was one of the 20 people who created the poll tax? May I have a message from the Chancellor about what I can tell my pensioners when I meet them as I walk down Dumbarton high street on a Saturday, about what the future would be like for them if public spending were 35 per cent. of GDP?

Mr. Brown: I was coming to the debate on the public services, and I think that people will realise that with that policy, it would be impossible to have 80,000 more nurses and 25,000 more doctors, or 90,000 more classroom assistants and 25,000 more teachers, or to build 120 hospital developments, repair 20,000 schools and double the amount of national health service equipment with the most advanced technology. Hon. Members would have to explain to their constituents that instead of hospitals being opened, hospitals would have to be closed, and that instead of nurses being hired, nurses would have to be sacked.

Mr. Djanogly rose—

Mr. Brown: It is time to make progress in what I have to say about the Government's policies, and how they compare with Opposition policies.

Mr. David Laws (Yeovil) (LD): Will the right hon. Gentleman give way?

Mr. Brown: I shall not give way any more now.

There are 200,000 more jobs in the United Kingdom than there were a year ago. In the most recent quarter alone nearly 50,000 new jobs have been created. There are now almost 1.7 million more people in work since 1997, and since the beginning of 2001, 3 million jobs have been lost in America, 1.5 million in Japan and 1.5 million in Germany. It is to the credit of this Government's policies that half a million jobs have been created, not lost, in Britain during that period.

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The shadow Chancellor should take an interest in this matter, because in his constituency the unemployment rate is 0.8 per cent. as a result of a Labour Government.

Mr. Laws rose—

Mr. Brown: I am not giving way at the moment.

The new Conservative leader, and now the shadow Chancellor too, have said that the new deal is an expensive failure. They have said that they would abolish it immediately. They would abolish the new deal for the under-25s, for the long-term unemployed and for lone parents; the only new deal that they would retain is the new deal for the over-50s—perhaps because they may have to use it themselves after the next election.

Mr. Laws: Will the Chancellor give way?

Mr. Brown: I shall give way in a minute, but not now; I am making progress on the new deal.

The new deal has proved—[Interruption.] I know that there are Conservative Members who know that the new deal has worked in their constituencies, that it gives people a better chance of getting jobs, and that the new deal for single parents saves the Government money rather than costing money, because it helps more people get to work.

The Chairman of the Public Accounts Committee, who is a Conservative, has praised the new deal for young people—so why are the Conservatives so determined to abolish the new deal? Why are the ideology and dogma of the Conservative party now so extreme that their policy at the next election will be to abolish the new deal? May I suggest that they have learned nothing and forgotten nothing from the experience of the early 1990s, when at the very moment when unemployment was rising, the former shadow Chancellor, who is now the leader of the Conservative party, and was then the Employment Secretary, abolished the enterprise allowance scheme, the jobstart scheme, the jobshare programme and the employment rehabilitation service for disabled people? At every point when there is a choice to make, Conservatives are prepared to see people unemployed rather than help them get work. That is a major dividing line between our parties now, as we move towards an election.

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