Examination of Witnesses (Questions 20-40)
20 APRIL 2004
RT HON
GORDON BROWN
MP, JON CUNLIFFE
AND GEOFFREY
LLOYD
Q20 Mr Angus Robertson: Chancellor, you
have mentioned your view that you think the state aid rules need
to be changed, and in your introduction you mentioned also, in
passing, the need to reform structural or regional funding, but
we have not been able to go into that subject in any depth within
the context of the Lisbon Agenda. Can you tell the Committee why
you think it is important to reform structural funding, regional
funding, as part of the way of achieving the Lisbon targets?
Mr Brown: Because we should not
be prevented from doing things that are necessary to have greater
balanced economic growth in our country, to the benefit of Scotland,
Wales and the regions of England. Therefore, state aid rules,
as I mentioned in the context of innovation, but state aid rules
in relation to regional policy, which would prevent us, for example,
abolishing stamp duty in areas of high unemployment or providing
fiscal incentives for people to invest there, prevent us having
actually the most successful regional policy possible. What has
happened is that there have been three generations of regional
policy in our country. The first was First Aid, and that came
from the 1930s onwards. I read that Ramsay MacDonald, the Prime
Minister in 1935, came to the House of Commons and he was asked
why Yorkshire had been excluded from the list of depressed areas
to get First Aid under regional policy. He answered that there
is no logic in the conduct of human affairs, and, to some extent,
the first generation of regional policy was just First Aid, haphazard,
ad hoc. The second generation was to attract big, inwardly-mobile
projects, big companies coming with big capital incentives and
tax reliefs to invest in our country and in our regions in particular.
The third generation of regional policy, which I think we are
embarked upon now, to deal with the real problems that most of
the regions we represent face, is to encourage the indigenous
industries, innovation and science, to get the skills base improved,
to get the infrastructure improved. While you want to attract
the mobile investment, you want also to build your indigenous
base. What we need therefore are regional policy rules which enable
us to make these investments, in skills, in science, in innovation
and in infrastructure, and so state aid rules which prevent us
doing that are damaging to balanced economic growth as well as
to the individual needs of these regions. That is why the future
of regional policy for this country or for other countries will
not be necessarily just the European Union providing sums of money
under Structural Funds, it will be making it possible for development
agencies and for governments and administrations in Scotland,
Wales and Northern Ireland to invest in their own areas. That
is why it is important that we do not just emphasise, when we
talk about Structural Funds and regional policy, the amounts of
money coming from the European Commission, which are relatively
small in relation to the overall picture, we should emphasise
the ability to invest in your skills base, in your innovation,
in your universities, in your infrastructure. That is the importance
that we attach to the form of regional policy as a means by which
we meet the Lisbon Agenda.
Q21 Mr Angus Robertson: Chancellor, you
were just saying it was important to acknowledge the role of devolved
administrations and parliaments in this area, and you seemed to
be stressing the importance of having joined-up reforms in this
important area. That being the case, why have neither the Treasury
nor the DTI acceded to requests from the Scottish Parliament to
give evidence in their inquiry into regional funding?
Mr Brown: I think that is a different
issue, about the responsibility of ministers, to whom. As ministers,
we are responsible to the Committees of the House of Commons,
but there is an issue about whether in a devolved administration
the people who are responsible to that legislature or to that
administration are the ministers of that administration or the
ministers of another administration. I think that is what the
issue is. We have always been prepared to provide information
and to meet with the Scottish, Welsh and Northern Irish administrations,
but I think the issue that you are raising is not, as you say
it is, a refusal to discuss regional policy, I think the issue
is to whom ministers are responsible. Clearly, in the case of
the Scottish administration, the ministers in the Scottish administration
are the ministers who are responsible to the Scottish Parliament.
Q22 Chairman: Chancellor, in the Communication
on the next Financial Perspective, the Commission said: "To
saddle the Union with a set of goals and then deny it the resources
required would be to condemn it to justified criticism of citizens
denied their legitimate expectations." What is your view
of this in relation to the Lisbon Strategy?
Mr Brown: On the budget, we support
the Lisbon Agenda but it is more about Structural reform than
it is about spending money. I think we have got to recognise,
when we have called for a 1% ceiling, what we are comparing that
with—with a 1% ceiling the budget of the European Union
is going up. With a 1.24% ceiling, which is what some people have
recommended, I think I am right in saying, we will have a 30%
increase in funds available to the European Commission. You can
debate how that money should be spent, but at a time when, as
Finance Ministers in the European Union, none of us can commit
ourselves to 30% overall increases on our budget, the idea that
the European Commission should be able to do so and yet it is
we who are answerable to the electorate for raising the money,
I think people have got to be pretty sceptical about that sort
of demand that is being placed upon us for the budget. That is
why we are part of a group of countries, which includes France
and Germany but I believe an increasing number of countries, which
says there has got to be a proper and realistic ceiling for the
budget. Within that budget of course it is an issue, I hope it
is an issue for all of us, that 40% of that budget is going to
agriculture, that is an issue. It is also an issue for us and
it is unacceptable that continues in the long term, and I think
most people here would agree with that. Equally, on the regional
Structural Funds, why we have put proposals for changing it is
that under the initial Commission proposals, despite the fact
that, of the European 25 and then the European 27, the greatest
needs for regional policy are clearly in the poorest areas, that
is the new ten or twelve, the Commission's proposals envisaged
that the majority of the money, over 50% of the money in regional
policy, goes to the existing 15. I think that is something which
ought to be debated as well. I would say to the regions of England
and Scotland and Wales and Northern Ireland, we are in a position
to offer more through the UK Government providing these resources
than the European Commission providing these resources in future
years. The main point I would make is that you have got to have
a debate about the budget priorities from a realistic starting-point,
and a realistic starting-point is not a huge real-terms increase
in the Union's budget, and certainly not a huge increase in the
percentage that the Commission can take from Member States.
Q23 Mr Dobbin: Chancellor, with reference
to the proposed review of the Strategy in 2005 under Wim Kok,
do you think that the target date of 2010 is a realistic and achievable
objective?
Mr Brown: I think you have seen
in some countries that when actually you start making progress
then you can create a lot of jobs. The figures came out last week
for the United Kingdom, and I do not want to dwell on this but
since 1997 1.9 million extra jobs have been created in the economy.
Therefore we have got more people in work than ever before in
our history. When things are going well it is possible to envisage
that even with a target which looks difficult to meet, the 70%
overall employment rate, you can move from 63% to 70% in a period
of eight years, if you have sufficient economic growth and are
making the reforms that are necessary. The problem I see for the
European Union countries where there is high unemployment at the
moment, and on average it is about 8%, is that in many of these
countries 30, 50 or in some cases 60% of the unemployed have been
out of work for more than a year. The longer you are out of work
the more difficult it is to get back into work, so there ought
to be special measures which help people get back to work more
quickly. That is exactly what the New Deal that we introduced
was about, it is exactly what our tax credit system was designed
to achieve, to make it worth people's while even accepting a job
that was lower-paid than the one they had left, because the tax
credit system would give them more money. It is interesting that
France and I believe other countries have been looking at our
tax credit system because they too want to get people back to
work more quickly. I agree that to make progress from 61 to 62
and nearly 63% over three years is not that successful, but some
countries have increased their employment quite fast, in addition
to us. I will give you just one other example that has been pointed
out to me just this minute. In the last five years Spain has managed
to increase its employment from 55% of the workforce to 61%, so
it shows it can be done.
Q24 Mr David: Chancellor, it is my understanding
that the European Council commissioned an independent 2005 mid-term
review from the Wim Kok-led group into the progress being made
on the Lisbon Strategy. I was wondering if you are in a position
to give any explanation of why this was. Does it imply any sort
of criticism of the Commission and perhaps they are not moving
as quickly as perhaps they could do in this area?
Mr Brown: It is a new Commission
that is going to be in to receive the report, is it not? If the
last Commission has agreed there will be a report it is a new
Commission that is going to have to implement it. I think the
Employment Taskforce generally was welcomed and it is pointed
out to me that the Presidency Conclusions, and that is from the
Brussels European Council only a few weeks ago, said that the
progress made towards agreed sectoral targets should be examined.
The measurement of European performance in its global context,
and I think there is a new recognition of what I said at the beginning
of a global challenge. It should look at "governance and
other measures and instruments available both to Member States
and the EU to attain the Lisbon goal, including both the internal
and external drivers of growth, competitiveness and employment".
I take that as meaning a chance to look at these state aid rules
that I have been emphasising today, which I think are a problem
for the European Union when they are dealing, unsuccessfully at
the moment in some cases, with market failure, so possible ways
of improving the methods. You can see that it does make sense
to look at how you may introduce and learn from new initiatives
since the Kok Report to deal with some of these problems.
Mr Cunliffe: I think the decision
to ask Wim Kok to look at progress underlines the point that while
the Lisbon targets can be met it is going to require quite a stretch
in effort to do that. A lot of the action is for Member States
under the open method of co-ordination, and inviting Wim Kok to
look at that I think underlines that the Council sees this as
a priority. It sees the targets as achievable, but a considerable
effort is going to have to be made and made by Member States,
and Kok's appointment reflects that.
Q25 Chairman: Chancellor, what progress
do you foresee on the Transparency and Investment Services Directives?
Is the Government content with overall progress on the Financial
Services Action Plan, particularly on implementation of the new
legislation throughout the Community?
Mr Brown: Investment Services,
there was a disappointment at the ECOFIN in October 2003 when
actually we were defeated. Since then, by working through the
European Parliament, we have seen the Directive agreed, in October,
now amended. I think this has been welcomed by those people who
will be affected by it, the impact of what is called the pre-trade
transparency rule for share dealing by investment firms. We think
it will reduce by about two-thirds the value of transactions covered
by the rule that has been introduced. The purpose of the Directive
is to make it easier for investment firms and stock exchanges
to do cross-border business, and therefore it is designed to help
exploit the advantages of the single market. I think we are getting
nearer to the conclusion that we were working for before October
and before that meeting when we were not successful. Now we have
been successful and the Directive is being amended. I think you
raised the Transparency Directive as well. It introduces rules
on financial reporting for companies with shares and bonds on
EU markets. We have been very successful in arguing for the alternative
to what was proposed originally, which was quarterly reporting,
which would have cost, I am told, if that had been introduced
in its previous form, up to £250 million a year, so we have
made changes in that. We have worked with the European Parliament
to secure amendments that minimise the impact on bond markets,
easier for shareholders therefore to report their shareholdings,
and ensure electronic provision of financial information to the
market. While we have had to fight very hard for these things,
as we did over the Savings Directive, I think you can say that
we have made quite significant changes over the last few months
in the Investment Services Directive and the points we made on
the Transparency Directive have now been accepted. Mr Cunliffe
has been doing most of the negotiating so he is able to bring
you up to date.
Mr Cunliffe: On the legislation
so far, I think I would say we have come now pretty much to the
end of the legislative phase of the Financial Services Action
Plan, and within that there is a lot of legislation that should
offer opportunity to integrate European capital markets and provide
opportunities for UK financial services. Going forward though
I see it very much as moving now into an implementation phase,
which is about the transposition of Directives we have talked
about but also about looking to see where the obstacles are for
further integration of UK capital markets and then taking targeted
action to deal with that. That action may not be EU legislation.
It is the same as the general regulation point, the focus which
is away from legislation and regulation and more towards using
competition policy, towards using codes, towards using the open
method of co-ordination. We see the Financial Services Action
Plan having achieved the first phase, with some useful legislation,
and it goes now into an implementation phase and we have to look
at a much broader range of policy tools to try to make the integrated
European financial services market work.
Mr Brown: I may just add on that,
the reason why this is important to us is that we have a very
successful UK financial services industry, and if we can have
a proper single market functioning across Europe then both jobs
and business that can come to the UK can make a huge additional
benefit to our economy. I would add for the Committee's benefit
that some people said, when we did not join the euro in its first
round and then did not join after our review, that we would not
be in a position to attract much of that financial services business.
So far, that has proved unfounded. The Committee may be interested
to know that the Banking Committee of the European Union, which
is set up by European member countries, is to be based in London,
which I think is a significant agreement that we reached only
a few months ago. It has already started work from London as a
Banking Committee, and I think that is a recognition of the importance
of London but also a recognition that people appreciate that we
are at the centre of Europe on these issues.
Q26 Mr Steen: Chancellor, you have given
us quite a bullish approach and presentation to the European Union
and I wonder if you would be able to say something about the Government's
intention to emphasise the economic benefits of the Commission's
proposals on promoting "active ageing"? I represent
a constituency which is the eighth oldest constituency in terms
of age in the country. There is concern about the fact that in
Europe now I think there are about 300,000, or 250,000, additional
unemployed in 2003 and there is concern about how you are going
to deal with unemployment if you increase the active employment
age of most people from 65 to 70, or even older. How that will
fit with the unemployment situation in the rest of Europe as well?
Mr Brown: I agree with you, this
is a big issue. In fact, in Britain, it is a big issue that we
discovered when we introduced the New Deal. The European objective
is that older workers reach an employment rate of 50%, which is
relatively low at 50% but is the objective that has been set down.
Our rate is about 54% at the moment. Sweden is the best performer,
as things stand. The progress that has been made, however, is
36% in 1999, which is roughly just over a third of European over-50s
in employment, and it has risen to 38.7, so it is nearly at 40%
in 2002, but to get to 50% there would have to be substantial
progress between now and 2010. What we devised was a New Deal
for the over-50s; it will be particularly the issue for MPs after
the next election. The New Deal for over-50s gives a special incentive
for people who are moving from relatively high-paid jobs to relatively
lower-paid jobs, and so someone who moves, for example, from a
traditional industry into security work or into call centre work,
or something like that, the New Deal for the over-50s gives a
tax credit but also special help to get the jobs. I am told that
more than half the new jobs that have been created in Britain
since 1997 have gone to people over 50, so there has been some
success, not necessarily just because of the New Deal but because
the employment practices of companies are changing. People are
more aware of the benefits of employing older workers, some of
the big retail companies have actually made a virtue of employing
older people, so things are changing. That is the challenge, to
move from the existing 39 to 40% to 50% by 2010, and I believe
that some of the measures that the Kok Report mentioned and that
we have been involved in ourselves are of particular use to us.
Also, on the ageing issue, you have got to have a proper policy
on pensions. I think it is very important to recognise that whereas
the cost of pensions in the United Kingdom, the state contribution
to pensions, at the moment is 5 to 6% and will remain at that
figure from now until around 2050, in other words there will be
no significant rise, in countries like Germany and France, and
to some extent other countries in the euro area, the cost of pensions
met by the state is 10% of GDP at the moment and is rising to
15 or 16% by 2050. That is a huge increase which has got to be
met from somewhere, or they are going to have to reform their
pensions laws. It is not simply encouraging more people to make
the most of their talents by being given opportunities to move
jobs over 50, it is also, at the same time, the chance to have
pension laws which are affordable over future years which give
proper protection to people but does not end up with a huge bill
that cannot be met. So that is a problem that the European Union
is going to have to deal with, the European Union states are going
to have to deal with, because it is the European states themselves
not their Union that must deal with it. There is a table, by the
way, in our document, "Chart 2.2: Change in age-related spending
in selected EU countries" which brings out exactly the point
that I was making about the relative cost not just of pensions
but of healthcare, long-term care and learning.
Q27 Mr Steen: Just to come back to you
on the pension issue, there is concern, certainly in my constituency,
that further European integration will result in our attractive
pension position being shared with other European countries and
our position will get worse as a result of further European integration?
Mr Brown: There is no mechanism
in the European Union for doing that. When I said this is a matter
for European Member States, it is the sharing of information.
Alan Greenspan, the Chairman of the Federal Reserve, made a speech
only a few weeks ago about this very issue, about the costs of
social security and pensions and how every advanced industrial
economy was facing these challenges. The demographics are such
that there is a higher proportion of older people in the workforce,
it is true particularly in Germany and France in future years,
but it is a problem in America, it is a problem in Britain, it
is a challenge that we have got to meet elsewhere. There is no
requirement nor is there a constitutional power that has been
given to the European Union to impose these arrangements or any
arrangements they thought they wanted to impose on Britain, and
we have got no obligation to share the cost of pension provision
that is made in other countries. In fact, it is not that people
will want our pension arrangements, because we are spending 6%
of GDP, it is the other countries that are spending far more.
Q28 Mr John Robertson: Chancellor, I
am somebody who also has a lot of elderly people. I have got something
like 13,500 pensioner households, as I have told you on many occasions.
Mr Brown: I hope they all feel
happy about the Winter Allowance and that the over-75s have a
free television licence, which I can advertise again.
Q29 Mr John Robertson: Do you not agree
with me, to develop the Lisbon Strategy, should we not be looking
forward and actually have an EU strategy on pensions? It is probably
singularly the most important subject for everybody in this country
and for all the other countries in the EU. While I accept that
it is an EU states' prerogative how much they may put into it,
should we not have a strategy, because we have a strategy for
everything else? We have got one for employment, for research
and development, you name it, even poverty, but we do not have
one for pensions?
Mr Brown: Let us be clear about
this. There is an Occupational Pensions Directive and that is
to deal with the issue of cross-border pension arrangements, but
the responsibility for pension arrangements is with the Member
States. Therefore, it is learning from each other rather than
one group imposing their arrangements on another that is the issue.
I think we can learn from what is happening around the world,
and it is important that we look at how pensioners are being treated
in all countries of the world and what innovations we can draw
on and learn from. I think it is important to emphasise to this
Committee that pensions remains a matter for Member States and
there is no obligation on us nor would we accept any obligation
to cover the pension costs of other countries. The Stability and
Growth Pact, of course, has got to take into account the debts
that countries run up, but these debts are a matter for the individual
countries.
Q30 Mr Heathcoat-Amory: I am delighted
to hear what you have just said, Chancellor. I could not have
said it better myself. To continue the spirit of harmony, I was
also very pleased to hear what you said about the importance of
world trade and breaking down barriers, particularly with the
United States, that was one of your top three priorities. If one
looks at the Report to the Spring Council on the Lisbon reform
process, trade matters gets only a glancing reference, in fact
only one sentence, on page 19. I think that shows Europe's priority
on trade. By contrast, there is a whole section on modernising
healthcare and it is proposed that the Commission look into integrating
public health into the Lisbon Strategy by 2005, and that is developed
at some length here. Do you approve of that initiative? Do you
think that a common health system would be any more efficient
than a Common Agricultural Policy? Indeed, would the European
Union be any better at running a health co-ordinated programme
than it is at running any of its other budgetary programmes, particularly
as it could have very large budgetary implications? Could I get
your view about the section in this report about European public
health, and if you do not agree with it why is the Government
not apparently shooting it down in its infancy?
Mr Brown: The National Health
Service is the British National Health Service. It will continue
to be run as the British National Health Service and every Member
State has health arrangements that they prize for their own country.
While we can learn from each other, there is no proposal that
we are putting forward or we would accept that would diminish
the British National Health Service. It is a decision made by
our Government about how we fund it and it is a decision about
how we run it that is made by the British people, so I think I
can dispose of that issue as far as the attitude of the British
Government is concerned. You started by saying that you welcomed
the harmony, which of course is a very good European word. I hope
we can continue in the spirit of looking at actually what is happening
rather than, on occasion, some people try to propose, because
basically health policy is a matter for Member States.
Q31 Mr Heathcoat-Amory: Chancellor, again
I am pleased by what you said on autonomy in our health policy,
but can I ask you therefore about Article 13 of the draft Constitution,
which makes important aspects of public health matters of shared
competence with the European Union. I do not need to remind you
that the definition of "shared competence" is that when
the European Union legislates we will not be able to legislate.
In the light of your assurances you have just given us, why did
the Government representative on the Convention not seek to block
the insertion of public health as a matter of shared competence?
It is not a red-line issue in the Foreign Office White Paper.
Will the Treasury insist, in the light of your remarks, that it
is made a red-line issue at the forthcoming IGC in June?
Mr Brown: Just to be absolutely
accurate, what is referred to in Article 13 is not health services
or healthcare, it is common safety concerns in public health matters.
The decision of the Council makes it absolutely clear that there
is no intention of having a European healthcare system that replaces
national healthcare systems. This is the point I am making about
how we can learn from each other without ever having to be dictated
to in these matters. It says: "Modernising social protection
systems, particularly the pension and healthcare systems, and
mainstreaming the social inclusion agenda through implementing
national action plans . . ." It has nothing to do with Commission
action plans. It is paragraph 29 of the Presidency Conclusions.
Q32 Mr Heathcoat-Amory: I read through
the document itself, on page 26, it says here: "Examine the
possibilities for integrating public health into the Lisbon strategy
by 2005", that can hardly be clearer?
Mr Brown: You are referring to
what the Commission wanted to say to the Presidency and then the
Presidency concluded at the very meeting, on 25 and 26 March,
which disposed of the issue, and it referred to national action
plans, not Commission action plans, not European Union action
plans, but national action plans. I am saying, in fact your own
party said, we had a lot to learn from the healthcare system in
France, and then they said they had a lot to learn from the healthcare
in Germany, and then they said they had a lot to learn from the
healthcare in Sweden. That is all that is being said here, that
when you are looking at your national systems you should be prepared
to learn from each other, but nobody is imposing on the British
healthcare system some European diktat at all, and we would not
accept that, as you know.
Q33 Mr Heathcoat-Amory: Chancellor, that
is why I am asking you about Article 13. In the light of what
you have just said, why is it that, safety concerns in public
health, which obviously includes matters such as epidemics and
matters of European-wide importance affecting public health, which
is a very important part of the National Health Service at present,
you are happy to allow that to be a shared competence, because
the Government representative did not object to that in the Convention?
If that goes ahead it becomes a shared competence, and therefore
when the Union legislates we will not be able to, so that contradicts
what you have just said about the importance of retaining our
autonomy in health matters?
Mr Brown: I have just read out
the Convention text and it was about safety, it was not about
National Health Services or healthcare systems. Then I just read
to you the Conclusions of the Presidency, in relation to the proposal
of the Commission, and it talks about national action plans, not
about Commission plans or European Union plans. All that we are
talking about actually, even the European Commission, the Commission
paper you are referring to, even though I do not support it, because
the Presidency overruled it, it was only about extending the open
method of co-ordination, it was not about imposing a European-wide
system, in a sense, it was learning from each other. Let us go
back to what the real text is, and the real text is not imposing
a European-wide approach to healthcare on Member States, or taking
over from the national healthcare system or the National Health
Service in Britain. It is an encouragement for people to learn
from each other, which I thought was exactly the policy of your
own party, which said that we should be learning from what was
happening in France and Germany and Sweden and all the other countries
in Europe. In fact, you published a pamphlet, as a party, saying
how we should learn from all these different systems.
Q34 Mr Heathcoat-Amory: Could you answer
now my point about Article 13?
Mr Brown: Article 13, I have read
out the Article 13 to you, which said safety.
Q35 Mr Heathcoat-Amory: Common safety
concerns obviously is about public health, it is about health
scares, it is about AIDS, it is about matters affecting populations
in the Member States of Europe. That will become, under Article
13, a shared competence, therefore an important part of the NHS
will become subject to EU legislation, which will therefore replace
national ability to legislate in this important area. I think
that contradicts what you have just said about the importance
of national autonomy?
Mr Brown: Mr Heathcoat-Amory,
first of all, this is a debate about the Lisbon economic reform
agenda, and I think you are stretching it quite wide for us to
be talking about not economics but social policy and not in relation
to Lisbon but in relation to Maastricht or Rome or Brussels, or
some other treaty that was about to be looked at. I repeat the
point that the National Health Service is run in Britain and it
is run by the British Government on behalf of the British people,
funded by the British taxpayer, and there is no proposal to change
that. There is, of course, learning from each other, which I thought
was the policy of your party, until this morning.
Q36 Mr Angus Robertson: Moving back to
the Lisbon Agenda, in the final strait, looking in particular
at the Spring Report, which is the assessment on the achievements
and the shortcomings of particular Member States, and I think
members of the Committee want to ask different questions about
particular elements of that report. The Spring Report listed a
number of shortcomings with regard to the UK, in relation to the
Lisbon Agenda: disappointing productivity; widening budget deficit;
delay in liberalising the postal market; disappointing R&D
expenditure, especially by business. To what extent does the Government
accept these comments? Are these a fair assessment?
Mr Brown: I am just getting the
reference and I think we must put it in its proper context. What
I accept about the British economy is that we have been the fastest-growing
economy in Europe. Our investment levels to deal with the historic
backlog in investment which was the result of chronic underinvestment
over previous years has been one of the fastest in living memory
and greater than other countries in the rest of the European Union.
Whatever problems we have had to deal with, we are dealing with
them by record levels of investment in transport, in health, in
education and in law and order, so I think you would have to agree
with us that our levels of investment are better than could have
been achieved by any other party.
Q37 Mr Angus Robertson: Chancellor, I
fully expected you to concentrate on the strong hand that you
believe that you have, but I am asking you about these particular
points, are they fair in their criticism?
Mr Brown: You want to go through
each of them individually. I have just got the report here, which
says that our achievements are—
Q38 Mr Angus Robertson: I did not ask
about those. I asked about the shortcomings, which are disappointing?
Mr Brown: Is it not better always
to have a balance to counter than simply to concentrate on . .
. I read what they say: widening government deficit. Let us be
honest about this. Our deficit is roughly half that of America,
it is certainly more than half that of Japan, it is less than
Germany, it is less than France, it is less than the average now
for most of the major countries in the euro area, and so what
they call shortcomings is a disagreement about the Stability and
Growth Pact. Do you think that a widening government deficit is
the right thing at this time, given that we are going through
a world downturn, or would you want us to cut public spending?
I do not accept that as a shortcoming.
Q39 Mr Angus Robertson: Chancellor, with
the greatest respect, I asked you about disappointing productivity,
a widening budget deficit, delay in liberalising the postal market,
disappointing R&D expenditure, especially by business. This
is what the Commission has identified. Is that a fair criticism
or not?
Mr Brown: No, because I have just
gone through the first one, widening government deficit, I disagree
with that. It is the right thing to do at this stage in the economic
cycle. It is wrong for them, as the Commission, to say that with
a low level of debt we should not be investing, and I hope that
you, too, would agree with that, that it is the right thing to
do at this stage in the economic cycle. Even then, with a widening
government deficit this year, it falls next year, and at the same
time it is half that of Japan and almost half that of America.
"Disappointing labour productivity levels", it says,
"despite a recent increase . . ." and I think the level
of productivity increase in the last economic cycle, that is the
one since 1997, actually has been higher than in the previous
cycle. We have always said we want to do better, but there has
been acknowledged by the Commission, in this statement which is
listing our shortcomings, a recent increase. "Delay in the
opening of the postal markets to competition"; our policy
has been set out by the Secretary of State for Trade and Industry
and we are liberalising postal services ahead of the Lisbon timetable.
Then investment in R&D, we are addressing that with research
and development tax credits and with record investment in science,
which I announced in the Budget. If you take these four shortcomings,
I do not agree with the Commission on the deficit, they acknowledge
an increase in productivity, we are meeting the Lisbon timetable
on postal competition, despite what they say, and we are addressing
what has been a historic low level of R&D investment by the
measures we are taking. What do they say about our achievements?
Low long-term unemployment rate, with an increase in the level
of youth educational attainment; increased quality of public spending,
including education and transport, including a reform initiative
to boost training in basic skills. Another achievement they recognise,
good performance on Kyoto and burden-sharing indicators on environment.
Then another one, below the 1.5% transposition deficit target
of internal market Directives, and then the extension of the R&D
tax credit for large companies and identification of priority
areas for increasing productivity. I would have thought that,
on balance, the report on the United Kingdom was favourable, and
I would have thought that you yourself would have agreed with
my objection to the Commission criticising us on our deficit.
Q40 Chairman: Chancellor, I would like
to draw this very interesting evidence session to a close now
by thanking you and your colleagues very much for coming along
today. It is a huge event for us to have the Chancellor here for
the first time, and in thanking you for what has been an illuminating,
informative and enjoyable evidence session I would like to make
a little plea to you at the same time. We are very keen that European
matters are treated a lot more seriously than they have been in
the past, and we are keen to co-operate with anybody who wants
to co-operate with us to push Europe up the political agenda,
in here and outside of here. If you would consider it, and I do
not expect you to give us a reply now, it might be a good thing
if, at least once in a parliamentary session, the Chancellor of
the Exchequer could come along to debate with our Committee, which
we would find very useful to assist us in what we do?
Mr Brown: Thank you for, if I
might put it, the harmonious way in which you have dealt with
these issues today. I am very happy to look at your kind invitation
for the future, and I hope you will find that the co-operation
between your Committee and the Treasury is enhanced in future
years. Thank you all very much.
Chairman: Thank you very much.
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