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Government Debt
4. Mr. Nick Gibb (Bognor Regis and Littlehampton) (Con): What measures he is undertaking to reduce Government debt levels. [158470]
The Chancellor of the Exchequer (Mr. Gordon Brown): Because of the decisions we have made, including our fiscal rules, the sale of spectrum and the reduction of unemployment, public sector net debt, which was 44 per cent. of gross domestic product in 1997, is forecast to be just 32.8 per cent. in 2003–04, and below 40 per cent. for the whole forecast period. Last year, UK net debt, as a percentage of GDP, was the lowest among the G7 countries.
Mr. Gibb : That is all very well, but the Chancellor's net borrowing projections in the Green Book show no abatement to that borrowing over the long term. In 1996, he made the clear and public commitment that he had no plans to raise taxes at all. Can he now give a similar commitment—that despite current and projected debt levels he will not raise taxes to fund them, either in the remainder of this Parliament or, if the unthinkable were to happen and his party were to win the next general election, in the next Parliament?
Mr. Brown: We have kept all our manifesto promises on tax, and we will continue to keep all our manifesto promises on taxes. I will take no lectures on economic stability from the hon. Gentleman, who opposed the independence of the Bank of England.
Mr. Dennis Skinner (Bolsover) (Lab): Will the Chancellor of the Exchequer confirm that the debts of Britain are lower than those of France and Germany
and that they are a hell of a sight lower than in America—Bush's kingdom? They will never be as bad as black Wednesday in September 1992, when the Tories lost £10 billion in a single afternoon—and they never even went near a betting shop.
Mr. Brown: Debt rose under the Conservatives from 28 per cent. of national income to 44 per cent. of national income in 1997. I shall give the House the figures for other countries: debt in Britain at the moment is in the order of £350 billion; in the United States of America, it is £3,000 billion; and in Japan, it is £2,000 billion. We have the lowest debt of all G7 countries.
Dr. Vincent Cable (Twickenham) (LD): First, I apologise to the Chancellor and to the shadow Chancellor because I must leave early in order to present the Liberal Democrat alternative Budget, which is based on sound finance, tough choices in spending and fairer taxes. I am sure the Chancellor will endorse those principles and even draw inspiration from them.
On Government debt, the Government have apparently identified large savings as a result of the Gershon review. Will those savings be banked, as I hope, in order to cut Government debt and the growing deficit, or will the Chancellor use them to fund additional spending commitments?
Mr. Brown: If, as the hon. Gentleman says, the Liberals are announcing hard choices today, it will be the first time in all my years in the House of Commons. When he examines his spending commitments, which he says he has reduced, he might examine his own website, www.vincentcable.com, where he states:
- "Benefits from bees' natural pollination activities are enormous, worth billions of pounds . . . I have pressed the Ministry of Agriculture for a bigger research commitment."
Mr. Barry Sheerman (Huddersfield) (Lab/Co-op): May I remind my right hon. Friend that a lot of men and women on his Back Benches believe in Government debt if it services public expenditure, which guarantees the future health and education of our country? Will he carefully examine this morning's remarks by Sir Howard Newby, who points out that unless we urgently get extra investment into higher education, we will not be able to provide quality higher education for all the people in our country who need it?
Mr. Brown: Conservative Members do not seem to understand that we have managed to have low inflation, economic growth, low unemployment and low debt while maintaining all our commitments to public investment in education, health, transport and policing. It is sad that the Conservative party now says that it will cut budgets for science, defence, infrastructure, skills and even international development.
Sir Peter Tapsell (Louth and Horncastle) (Con): Before the Chancellor courted and then jilted prudence, had he ever found in his private life that the best way to reduce debt is to reduce spending and increase saving? Might that have a public implication?
Mr. Brown: As the hon. Gentleman knows, savings ratios are rising. Saving in this country is currently twice as good as in the United States. He tries to lecture us on the economy, but I remind him that he and Conservative Members opposed the major decision that we made in 1997 to make the Bank of England independent and create stability.
Llew Smith (Blaenau Gwent) (Lab): Will the Chancellor give the House estimates of total expenditure on the continuing war in Iraq and on Trident? What would our national debt be without that expenditure?
Mr. Brown: As regards expenditure on Iraq, Afghanistan and terrorism, I gave the House the figure in the pre-Budget report, and I shall report again in the Budget. Over the past few years, we have had to set aside an extra £3.5 billion for those commitments. That has been possible because we have had economic growth and have managed the public finances in such a way that whenever we have had to make exceptional commitments, we have been able to do so. The country will find it extraordinary that the Conservative party plans to cut the defence budget.
Mr. Oliver Letwin (West Dorset) (Con): As the Chancellor appeared not to want to answer the perfectly reasonable question asked by the hon. Member for Twickenham (Dr. Cable), let me try again. It is a simple question: does the Chancellor agree with his own efficiency adviser, Sir Peter Gershon, that there are £15 billion a year of efficiency savings that could be used to reduce borrowing and public debt without affecting front-line services? Yes or no?
Mr. Brown: I will announce in the Budget the initial conclusions of the Gershon review, and then we will announce further conclusions in the spending review. We will manage to cut substantially the costs of central administration as a percentage of public expenditure and of the national income from what it was in the Conservative years. However, it is necessary to combine policies for economic stability and growth with the need for continuing public investment, and it is unfortunate that the Conservatives now want to cut public investment.
Mr. Letwin: It is a pity that the Chancellor seems to be afraid of admitting that he agrees with his own efficiency adviser. What about the independent commentators, including the International Monetary Fund, the Organisation for Economic Co-operation and Development, the ITEM Club and the Institute for Fiscal Studies? Will he at least agree with them that if he does not use something like £15 billion of efficiency savings to reduce Government borrowing, a third-term Labour Government would need to raise taxes by about £15 billion to meet his own fiscal rules?
Mr. Brown: The right hon. Gentleman tries to anticipate the conclusions in my Budget statement. I can tell him that I will not make the mistakes that the Conservative party made, in wasting money on the exchange rate mechanism and the poll tax, and the other waste that we inherited and had to deal with in 1997.
Mr. Letwin: I really hope that underneath all the bluster, bravado and Punch and Judy politics, there is a quiet, still voice somewhere inside the Chancellor—I suspect there probably is—urging him to engage in rational debate. Can he truly not see that when his own efficiency adviser says that he has £15 billion a year of savings, we can either use the money to reduce Government borrowing to acceptable levels or we can go on another spending spree and raise taxes again?
Mr. Brown: The right hon. Gentleman will have to wait until we announce the conclusions of the Gershon review in the Budget and the spending review. He asks me today to anticipate what I will say to the House in the Budget and then in the spending review. What I can say to him is that we will not cut defence, we will not cut transport, we will not cut the science budget and we will not cut the international development budget: those are the policies of the Conservatives before they even know the public finance figures.
Charities
5. Sir Nicholas Winterton (Macclesfield) (Con): What changes he proposes for the taxation of charities. [158471]
The Chief Secretary to the Treasury (Mr. Paul Boateng): The Government keep all aspects of taxation policy under review. Any possible changes to charity tax will be considered by the Chancellor in his assessment of what is required in the Budget.
Sir Nicholas Winterton : I am grateful to the Minister for that reply. Will he accept that admission charities such as the Macclesfield silk museums are in a different position to beneficial charities such as Oxfam when it comes to the recovery of gift aid benefit? Charities such as the silk museums are often able to function and survive only by imposing admission charges. Will he accept that the entry fees should be regarded as a donation to the charity, rather than a proportion being seen as a donation and the balance as a commercial benefit? Will he please review the situation, for the sake of the survival of many small museums?
Mr. Boateng: The hon. Gentleman knows that I cannot comment on specific individuals or institutions, but I share his enthusiasm for and commitment to the charitable sector and to the particular sector that he mentions. He will also understand that the proper focus of the gift aid scheme has to be on a continuing relationship between the donor and the charitable organisation. The changes announced by my right hon. Friend the Chancellor in the pre-Budget report, which are currently the subject of discussion with the sector, are designed to achieve that. Day admissions, as the
hon. Gentleman will know, are not really about ongoing relationships and, therefore, I cannot accept the thrust that underpins his question.
Mr. Stephen McCabe (Birmingham, Hall Green) (Lab): If there is to be a review of charities and tax, could we once and for all define what legitimate charities are, and stop the abuse by which organisations such as public schools may posture as charities to gain tax relief?
Mr. Boateng: The matters to which my hon. Friend refers are properly matters for the Charity Commission, not the Government. I know that he will join in the support on both sides of the House for the valuable role that the charitable sector plays.
Mr. Mark Prisk (Hertford and Stortford) (Con): Given the clear concern of hon. Members on both sides of the House and the unique role of charities, will the Chief Secretary explain why under this Government—despite all the many schemes and promises—the total tax paid by charities has not simply increased, but effectively doubled?
Mr. Boateng: What the hon. Gentleman describes as "all the promises" have delivered £2.3 billion-worth of tax reliefs and special provisions to charities each year, £506 million of which has been a result of gift aid. He will not find anyone in the charitable sector who accepts his analysis that the Government have not done more for that sector than any of their predecessors—they have certainly done more than the Government formed by the party of which he is a member. We have continued, and we will continue, to support the charitable sector. I hope that we enjoy from his party the support that our measures deserve, because we have not always had it in the past.
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