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Mortgage Interest Rates

3. Angela Watkinson (Upminster) (Con): What recent discussions he has had with the Governor of the Bank of England regarding mortgage interest rates. [197386]

The Chancellor of the Exchequer (Mr. Gordon Brown): I met the Governor on 26 October. Mortgage interest rates have averaged 6 per cent. since 1997, in contrast to 11 per cent. in the period from 1979 to 1997.

I can also tell the House that I shall deliver the statement on the pre-Budget report on Thursday, 2 December.

Angela Watkinson: The Chancellor's 66 stealth taxes and his borrowing and spending programme have caused personal debt in this country to reach £1 trillion. The UK has nosedived from fourth to 15th place in the international competitiveness league. How will he stabilise mortgage interest rates, which have been increased five times this year?

Mr. Brown: The hon. Lady does not seem to understand that we have the lowest inflation for 40 years, the lowest average interest rates for 30 years and the lowest unemployment for 25 years. Moreover, we have more people in work than ever before. We have done what the Conservative party always failed to do, and we have low inflation, rising growth and employment, and more investment in the public services. She should be apologising for the Conservative record of the previous years.

Mr. Bill O'Brien (Normanton) (Lab): Does my right hon. Friend agree that it is important that we have low mortgage rates, as low interest rates are essential to ensuring that we continue the stability that we have enjoyed over the past seven years under his stewardship? Will he assure the House that he will keep up the pressure to maintain low mortgage and interest rates?

Mr. Brown: There are more than 1 million extra home owners since 1997 as a result of the low inflation and low interest rates that have been achieved in this country. I am grateful to my hon. Friend for pointing out that it is important that these policies for economic stability
 
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continue. That is why we will not return to the mistaken policies of the Government to whom the shadow Chancellor was an adviser.

Mr. George Osborne (Tatton) (Con): In order to help the Chancellor heed the advice of his good friend Peter Mandelson and avoid exaggerated gloating about the British economy, may I ask him to confirm that household disposable income is set to fall for the first time this year in six years, as a result of mortgage rate increases and his big tax increases? Does he think that that feel-bad factor is something that the Prime Minister's new council of economic advisers should look at?

Mr. Brown: What the hon. Gentleman is confirming is that real disposable income has risen every year under this Labour Government. It rose faster than under the previous Conservative Government, to whom he was an adviser. Disposable income has risen by 3 per cent. in real terms every year. That is the mark of a successful policy. If the hon. Gentleman is not prepared to acknowledge our success, I remind the House that the leader of the Conservative party has said that

That was the Leader of the Opposition's comment.

Ian Lucas (Wrexham) (Lab): Low and stable mortgage rates have contributed to a very healthy housing market in Wrexham and across Wales. However, my constituents tell me that they would prefer to have a fixed mortgage rate system. What progress has been made in discussions with the Bank of England on that?

Mr. Brown: There are more people on fixed and long-term mortgages than previously, and that was the subject of the Miles report at the time of the previous Budget. We continue to look at these matters to secure a more successful housing market in the UK. Although house prices are moderating and an adjustment is taking place, it should be noted that low interest rates and low mortgage rates have meant that the level of repossessions last year was at its lowest for 20 years. We continue to give people advice on personal debt problems and other issues, and we will continue to improve our services to deal with companies that unfairly charge extortionate interest rates. However, the secret for the long term is economic stability based on low inflation and low interest rates. I hope that all parties in this House now understand that that is the way forward for Britain.

Dr. Vincent Cable (Twickenham) (LD): Further to the answer that the Chancellor has just given, does he agree with the judgment of the Governor of the Bank of England that house prices are not "moderating", as he put it, but are falling and will continue to do so? What does the Treasury's analysis suggest will be the economic consequence for the UK of the expected sharp fall in house prices?

Mr. Brown: It is quite amazing. For months, Liberal Democrat Members have told us at Treasury Questions
 
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that house prices are rising too fast. Now the hon. Gentleman complains that they are moderating. I shall repeat to the House what he told the Confederation of British Industry. He said:

Why does the hon. Gentleman not say in this House what he tells the CBI?

Single Currency

4. Mr. Graham Allen (Nottingham, North) (Lab): If he will make a statement on progress made with meeting the criteria for joining the euro. [197387]

The Chancellor of the Exchequer (Mr. Gordon Brown): The assessment of the five economic tests was published on 9 June 2003. My statement to the House set out a reform agenda of concrete and practical steps to address the policy requirements identified by the assessment.

Mr. Allen: I congratulate my right hon. Friend the Chancellor on sticking to his guns on the five tests and continuing the policy that has served us so well. Is it legal in the United Kingdom for consenting adults—among whom I include businesses, companies and customers—to buy and sell goods and services in euros?

Mr. Brown: Some companies, including some major retailers, have installed euro systems already and are able to trade in euros. So the answer is yes, it is possible to do so.

Sir Peter Tapsell (Louth and Horncastle) (Con): Has the Chancellor noted that Mr. Derek Scott, former chief economic adviser to the Prime Minister, recently described the Chancellor's famous five economic tests for joining the euro as "absurd" and "economically illiterate"? So the Chancellor is to be congratulated for devising them, presumably to frustrate the Prime Minister's ardent wish that Britain join the single European currency.

Mr. Brown: This is the Member of Parliament who told us that if we made the Bank of England independent, it would be an absolute disaster. It has proved to be one of the greatest success stories, so I am not sure that I should listen to his analysis of the five tests. I gave a report to Parliament last year about the importance of flexibility, convergence, investment, the role of financial services and employment to a decision on the euro, and I have no reason to change my judgment that those are the important factors that have to be taken into account. I should have thought that the hon. Gentleman, who considers such matters very carefully, would see that employment, the role of financial services, what happens to investment, whether we have flexibility, and convergence—which are the five tests—are the important issues.

Mr. Dennis Skinner (Bolsover) (Lab): Will my right hon. Friend take no notice whatever of Mr. Derek Scott, who stood for the SDP in Swindon many years ago? He was wrong then and he is wrong now. Seven and a half
 
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years ago, we said that we would not join the euro, based on those tests, and now we are doing exceptionally well, with low inflation, low unemployment and more people in work. You can't beat it: keep taking the tablets.

Mr. Brown: I have to say to my hon. Friend that there are reasons why it is important to consider the euro: the first is a cut in transaction costs, which could be in the order of £1 billion; the second is the increased amount of trade that would take place within Europe and between Britain and other member states as a result; and the third is an increase in growth. But we have to get it right, which is why the five tests are important. In particular, we would need more flexible European and British economies and we would need sustainable convergence, which—with the large differential in interest rates—we clearly do not have at present.

Mr. John Wilkinson (Ruislip-Northwood) (Con): How can the Chancellor posit the idea of greater growth if the UK were to join the euro, given that growth in the eurozone is just over half the rate of growth in this country? Is it not a fact that the growth and stability pact has produced very little growth, and stability only in stagnation in the eurozone? How can that be the model to follow? We at least have a much better employment record, which is what counts to the British people.

Mr. Brown: I am glad that the hon. Gentleman acknowledges the great successes in employment under this Government. I hope that he will be able to tell his constituents about that when he fights a Labour candidate at the next general election—

Mr. John Bercow (Buckingham) (Con): He is retiring.

Mr. Brown: Ah, he is taking the wise option. In that case, he may be interested in our new deal. Some other hon. Members may also have to take advantage of it. The hon. Member for Ruislip-Northwood (Mr. Wilkinson) wants to leave the European Union: I ask him to look at the benefits we get from membership of the European Union. More than 50 per cent. of our trade is with Europe, and the single market opens up opportunities for British firms. If we were in the euro there would be a cut in transaction costs, and he must acknowledge that. If we could achieve the increased trade that I have mentioned, economic growth would increase, but the circumstances must be right for the UK. That is why the five tests that are disparaged by the Opposition are so important, and we must get them all right for Britain.

Keith Vaz (Leicester, East) (Lab): While I accept the importance of the five economic tests, does not the Chancellor believe it important that we should go out to the country campaigning on the benefits not only of the euro, which is Government policy, but also of the European Union? If we did that, we could dismiss many of the myths perpetrated by the Eurosceptics on the Opposition Benches.

Mr. Brown: I agree with my hon. Friend. The Conservative proposition is simply not to join the euro and not to accept the existing European constitution,
 
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but to renegotiate our membership of the European Union. As for the roadshows, there have been 150 events that the Treasury—[Interruption.] Well, I started it off with the first meeting, the Chief Secretary has done three, the Financial Secretary has done seven, the head of the European business unit—[Interruption.] We have a practice of devolution at the Treasury, so that people get on with the job. I should have thought that the Conservatives might now reconsider their position; theirs is the only party in the House of Commons that is not a member of the all-party committee looking at these issues. The Conservative party has chosen to isolate itself from that, just as it has isolated itself from the rest of Europe.

Mr. Mark Francois (Rayleigh) (Con): May I congratulate the Chancellor on his participation in the euro roadshow? I hope it has the same success as his participation in the north-east the other week.

In addition to meeting the five tests, if the UK were to join the euro we would, theoretically, have to comply with the marvellously named stability and growth pact, which as we have already heard from my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) neither ensures stability nor encourages growth. How could we do that when the Chancellor is running an excessive budget deficit, which last year, according to our own Office for National Statistics, reached as much as 3.2 per cent. of gross domestic product?

Mr. Brown: I welcome the hon. Gentleman to the Front Bench, but he really must make up his mind which position he is taking. He seems to be saying, on the one hand, that Britain is doing very well as an economy but on the other hand that we are not doing well. He really must make up his mind. As for the growth and stability pact, he knows that it is the UK that is making the recommendations for change in the pact and that this country's record on fiscal deficits and debt is better than that of America, better than Japan, better than Germany, better than France and better than the euro area. He should be congratulating us on the sustainable way in which we run our public finances.

David Taylor (North-West Leicestershire) (Lab/Co-op): Does the Chancellor think that the five economic tests are sufficiently flexible for the next leader of our party, and perhaps the next Prime Minister, to assess them at that point, to reject them as inappropriate for the conditions in which that succession might take place and then to consign them to the dustbin of political history in order to secure our economy and our political future?

Mr. Brown: My hon. Friend has a very specific view about the euro in principle. I have set out the advantages of being part of the euro and the difficulties that we found when we made the assessment. We shall come to the issue in the Budget next year when I report to the House. If we thought it right to pursue another assessment, we would make another assessment; if we think it is not right to do so, we will not. That is the position that has been agreed by the Government and I believe it commands wider support in the country than the position of the Conservatives, who would never join, and the position of the Liberals, who seem to want to join irrespective of what is happening.
 
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