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Mr. Brown: I am grateful to the hon. Gentleman for sometimes saying things that his Front-Bench colleagues will not say. He claims that the fiscal deficit is £40 billion and suggests that the economy is running beyond capacity—[Hon. Members: "At capacity."] I am happy to correct myself—it is running at capacity. He must therefore be surprised that inflation is running at 1.2 per cent. Can he explain that?
Mr. Flight: I should have thought that the Chancellor understood that in a global economy, excess demand sucks in more imports rather than creates inflation. That has manifestly happened in the United States, whose deficit is relatively far larger than ours. The whole problem is that excess demand causes a massive external deficit.
Mr. Brown: The hon. Gentleman is basically claiming that the United States economy has precisely the same problems as the British economy. The Conservatives say that the European economy is doing badly; now the hon. Gentleman is trying to say that the British and American economies are doing badly. The fact is that we have had seven years of sustained growth, seven years of low inflation and seven years of rising employment. To put the former shadow Chief Secretary's mind at rest, let me quote his remark to "The World This Weekend", reported in the Financial Times of 4 February 2003, that
"When you get something analogous to what happened in the later 1920s and early 1930s which, alas, is what is happening today, then the economic and political impact is potentially huge."
If that is not the former shadow Chief Secretary giving a hostage to fortune, I do not know what is. When the Conservative party was asked about his remark—the hon. Gentleman was still a Front Bencher when he made it—an official replied,
Mr. Brown: I shall give way to a different former Front Bencher. It is good to give them a chance to speak.
Mr. Bercow: Millions of voters in this country who have not yet decided whether to vote, and if they do, for which party, are tired of the tedium of the most tribal politics. Therefore, let me say straight away that I concede that the Chancellor was right and we were wrong about independence for the Bank of England; that was one of the best decisions that he has made. Does he, in turn, accept the verdict of a countless number of my constituents and that of my right hon. and hon. Friends that one of the worst decisions and most pernicious judgments that he has made was to tax the British pensions industry in such an underhand way, and to preside over a more than halving of the savings ratio? In that respect, a readiness to apologise and a display of just a modicum of humility on his part would be greatly appreciated.
Mr. Brown: I do not know that the hon. Gentleman is the best person to lecture us about humility—
Mr. Bercow: I am on a learning curve.
Mr. Brown: Perhaps the curve will take him over the threshold. The savings ratio is 6.2 per cent. now; it fell to 4.5 per cent. in the late 1980s under a Conservative Government. The savings ratio is only 2 per cent. in the United States of America. The hon. Gentleman should check all his facts carefully before he intervenes, but as he has so few opportunities to speak for the Conservative party these days, I shall give way to him again.
Mr. Bercow: I thank the Chancellor for giving way with his characteristic grace and generosity. Would he care to tell the House what the savings ratio was on 30 April 1997?
Mr. Brown:
The savings ratio reflects the cycle; it reflects the point at which the economic cycle is. If the United States' savings ratio is 2 per cent. and ours is 6 per cent., what conclusions does the hon. Gentleman draw? [Hon. Members: "Give us the figure."] The figure now is 6.2 per cent. and rising, and it fell to 4.5 per cent. under a Conservative Government. I am sure that the hon. Member for Buckingham (Mr. Bercow) does not want me to repeat to the House what he said about the international development budget just before he resigned from the Conservative Front-Bench team. The Conservatives never want to talk about international development, but let me remind the House that he said that a cut in the overseas development budget was
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completely unacceptable. I suspect that that is one of the reasons why he is now on the Back Benches. Perhaps the shadow Chancellor should think again about the international development budget.
Angela Eagle (Wallasey) (Lab): Does my right hon. Friend recall, as I do, that in the heat of battle during the 2001 election campaign, the right hon. Member for West Dorset (Mr. Letwin) was shut away in mysterious circumstances after he revealed rather too much about Conservative plans to cut expenditure? Will he share with the House how those plans have developed, and what he thinks the implications of the immediate £20 billion cut would be?
Mr. Brown: I was going to discuss fiscal policy. As set out in the spending review, total managed expenditure is to rise from £486 billion this year to £576 billion in 2007–08. In each year we will be able to invest more than in the last, and meet all our fiscal disciplines. We shall continue to meet those commitments, and all emergencies, while meeting our fiscal rules.
I wish to express the gratitude of the whole House to the armed forces for their work, especially in the most recent period. The budget for the Ministry of Defence and for our armed forces, on whom the defence of our country depends, is to rise from £29.7 billion to £33.4 billion by 2007–08. I confirm that we have provided £4.4 billion to meet the extra costs of military conflicts in Afghanistan and Iraq and of meeting international obligations. I am setting aside in the special reserve a further £520 million for this year, raising the overall provision to almost £5 billion. At the same time we shall be vigilant, not only about what we do to help our armed forces, but about security at home.
Mr. Crispin Blunt (Reigate) (Con): Will the Chancellor give way?
Turning to the international development budget, during our G8 presidency the needs of Africa, development and delivering the Doha development round will be our focus. In the documents of the pre-Budget report issued tomorrow, the Secretary of State for International Development and I will set out our proposals for ensuring through our proposed new international finance facility that Africa and poor countries have the resources they need to fund education, health and anti-poverty programmes, and that the millennium development goals are met. We shall set out proposals for 100 per cent. multilateral debt relief from international institutions, which could complete the process of debt relief for the 37 poorest countries and could be extended to other poor countries as well. In next year's G8 discussions, we shall ask all countries to support our proposed international finance facility. So far 40 countries have done so, and this week Italy announced its support.
Funds for health are a priority of the new international finance facility to promote treatments and cures for HIV-AIDS, and it is appropriate that this is world AIDS day. To promote treatments, we have allocated in the spending review, in each of the next three years, £450 million, £500 million and £550 million.
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That is over the three years of the spending period. We will allocate £1.5 billion to tackle this scourge. My right hon. Friend the Secretary of State for International Development and I are today issuing new proposals on the basis of research showing that for every year we bring forward the discovery of an AIDS vaccine, we save 2 million lives that would otherwise be lost. We commit the British Government to push forward the decisions that have been made before to establish a new global AIDS vaccine enterprise and infrastructure for co-ordinating internationally an exchange of research into AIDS.
As with our offer for malaria vaccines last week, we will also be willing to join other countries to explore how to increase investment in AIDS research and how to develop a jointly agreed advance purchase scheme to make new HIV vaccines accessible to Africa and meet our millennium development targets on health. I hope that I can have all-party support in the House for these proposals that we will put to the G8.
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