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Mr. Francis Maude (Horsham) (Con): Can my hon. Friend recall, during his parliamentary career, a Budget debate that has started, at any rate, without a single Labour Back Bencher being present in the Chamber? We welcome the hon. Member for Ochil (Mr. O'Neill), who has just arrived, but he is the first to do so.
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Mr. Martin O'Neill (Ochil) (Lab): I am not sure whether that was a point of order, Mr. Speaker. I received a green card from a constituent and went out, but I was here for the opening remarks of the hon. Member for Havant (Mr. Willetts). The right hon. Gentleman may not have been present then, but that is another matter.

Mr. Willetts: My right hon. Friend has made an important point. The Government Benches do seem strangely depleted. It does not look to me as though there is a passionate endorsement of the Budget there. They seem rather tepid in their willingness to come along and support the Government today.

Let me turn to the central Budget judgment, and begin by recognising a point that the Chancellor has made over and over again. The Chancellor's forecasts for economic growth have indeed turned out to be much more accurate than those of outside City forecasters. The Treasury's forecasts of economic growth in the economy have indeed been more accurate than many of the external forecasts. The Treasury says that, because of the performance of the British economy, it is operating close to capacity and growing at about its trend rate. Let us accept that. Let us accept that the Chancellor's forecasts for economic growth have proved more accurate than those of many outsiders.

The question that that raises is: if the Chancellor's economic growth forecasts have done so well, why do we have a budget deficit that, in the latest estimates, is put at £34 billion? The great paradox at the heart of the Budget is that, despite the Chancellor's accuracy in forecasting the growth rate of the economy, he has been hopeless at predicting the size of the deficit in the public finances. The budget deficit deteriorates year after year even as his growth forecasts come in on target.

It is illuminating to look at what has happened to the Chancellor's forecasts for Government borrowing in 2004–05, the financial year that is just coming to an end. In the 2001 Budget, he forecast that, this year, the budget deficit would be £11 billion. In the 2002 Budget, it was forecast to be £13 billion. By the 2003 Budget, the Chancellor's estimate of the financial deficit in 2004–05 rose to £24 billion. In the 2004 Budget, the deterioration carried on and the deficit was up to £33 billion. The latest figure in yesterday's Budget is that public sector borrowing in the year coming to an end is £34.4 billion.

That gets to the heart of our challenge to the Chancellor and his Treasury team about the way they have managed the public finances despite achieving—[Interruption.] I welcome the Chancellor to this debate. It is good to see him. He has decided to endorse his own Budget. He missed me congratulating the Treasury on the fact that its economic forecasts for growth had proved to be more accurate than those of the City, but reminding the House that, even while the growth forecasts were being proved correct, the budget deficit year after year was deteriorating. Therefore, this is a Chancellor who is losing control of the public finances. The fact that we are running such a large deficit when, as he always reminds us, we have enjoyed many successive quarters of growth, is the central problem facing the management of the economy and the public finances.
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It is not just the Conservative party that is saying that. It is what all outside experts are warning, too. The International Monetary Fund said earlier this month that

When the IMF talks about fiscal consolidation, we know what it means: there will have to be either public expenditure cuts or tax increases. The Institute for Fiscal Studies put out a press release today saying that

that is, the golden rule—

the Chancellor—

That is the central question: why is it that the Chancellor is endlessly caught out with his budget deficit forecasts despite predicting accurately the growth of the economy?

The Chancellor says that he does not need to raise taxes but, if we look at the Red Book, it is clear that the Chancellor and the Treasury team are expecting to raise taxes. All we have to do is turn to page 254 of the Red Book. When the Chancellor publishes the Red Book, a good guide is to start at the back—the interesting stuff is all at the back. The first 100 pages do not really say anything; between pages 100 and 200 he is warming up, but some of the tables at the back are quite informative.

Tables C9 and C10 on page 254 show that the Chancellor is expecting his receipts from tax and national insurance contributions to rise from 36.3 per cent. of GDP in the current year to 38.5 per cent. by 2008–09. The Chancellor is expecting his revenues to grow by more than 2 per cent. of the entire national income within five years. He is, of course, expecting an incredible rate of growth in his tax revenues but he thinks that he can achieve that without putting up tax rates. He thinks that that is achieved by some extraordinary process of levitation in which he just collects more and more revenues. It is not so much new Labour as the Natural Law party when it comes to managing the public finances. No one believes that the sort of increases in tax revenues that he shows in his Red Book can be achieved without his having to raise taxes.

What we would like to hear from the Chancellor, even if he will not accept that, is an answer to the following question. He likes talking about prudence, although we notice that there was a little less about it in the Budget yesterday. If he believes in prudence and contingency planning, just assume that he found that that miraculous 2 per cent. of GDP surge in tax receipts was not coming through. Many people outside are sceptical. What would he do then? What would be his response to the failure of tax revenues to match his forecasts? Would he raise tax rates? Would he cut public expenditure? If he believes in maintaining long-term confidence and stability, he has to show what he would do if those extraordinarily optimistic forecasts for tax revenues did not come to pass.
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We have very clear plans about what should happen to the path of public expenditure. At the moment, public expenditure in 2005–06 is forecast to be £520 billion. The Chancellor plans to increase that by £180 billion by 2011–12. We plan to increase it by £145 billion by 2011–12, so underneath all the hysterical allegations about all teachers and nurses being sacked, which is complete rubbish, what we are talking about is that, whereas for him public expenditure in cash terms grows by 5 per cent. of GDP, under us it grows by 4 per cent.

The Secretary of State for Transport (Mr. Alistair Darling): Will the hon. Gentleman confirm, since there seems to be some confusion on the part of some of his other colleagues who are not here, that the difference between the two spending plans by 2011 would be £35 billion?

Mr. Willetts: We are talking about growth that is £180 billion under the Chancellor and £145 billion under us, and the debate is entirely about how rapidly public expenditure should grow. That is indeed the difference between us.

Mr. Darling: I wonder why the hon. Gentleman cannot use the figure £35 billion, because I think that that is actually the difference. Will he confirm that the difference is £35 billion, as the shadow Chancellor has said?

Mr. Willetts: The growth that the Chancellor plans in public expenditure is £35 billion higher than the growth that we plan in public expenditure. There is a difference because he is planning to increase it by £180 billion and we are planning to increase it by £145 billion. The difference between those two sums is indeed £35 billion.

Mr. Darling: At long last. It is like pulling teeth. Does the hon. Gentleman also agree with the analysis provided by the shadow Chancellor on Sunday morning's "Breakfast with Frost"? As he described it, the difference was vast.

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