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House of Commons

Thursday 26 May 2005

The House met at half-past Ten o'clock


[Mr. Speaker in the Chair]

Oral Answers to Questions


The Secretary of State was asked—

Government Borrowing

1. Mr. James Gray (North Wiltshire) (Con): If he will make a statement on the level of Government net borrowing. [990]

The Chief Secretary to the Treasury (Mr. Des Browne): Deficits are falling each year. From last year to this year, and for each year for which figures are published until 2009–10, the UK deficit is lower than every deficit in the G7 except Canada, and is lower than the deficits of the USA, France, Germany and Japan.

With leave, Mr. Speaker, may I ask the whole House to pay tribute to my predecessor? As Chief Secretary to the Treasury, Paul Boateng oversaw two spending reviews with dedication and panache, and was known for his fairness, integrity and commitment to his job. As the right hon. Member for Brent, South, he served his constituents tirelessly for 18 years, increasing his share of the vote in every election since he was elected to the House in 1987. I am sure that the House would want to join me in wishing him well in the challenges that he faces in South Africa.

Mr. Gray: I am not certain that I will join the Minister in that eloquent paean of praise, but I wish the people of South Africa well when his predecessor arrives.

In welcoming the Minister to his new role, may I inquire whether he is as confident as his next-door neighbour, the Chancellor of the Exchequer, that the economy will grow by 3 per cent. this year? If that is the case, why did he fail to answer my direct and straightforward question—namely, how much borrowing do we expect for this year? We know that it is £32 billion. If the economy is growing at 3 per cent., why does he have to borrow £32 billion?

Mr. Browne: I thank the hon. Gentleman for his welcome. I had hoped to be able to welcome him to the Front Bench, but, unfortunately, I was not quick enough, so I shall welcome him to the Back Benches instead.
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It is well known that moderate borrowing is necessary to bridge the years of under-investment in public services, which cannot be put right quickly. It will take years of sustained investment to address that historic under-investment. The hon. Gentleman's own party is entirely responsible for the circumstances that require that borrowing.

Kelvin Hopkins (Luton, North) (Lab): May I, too, welcome my right hon. Friend to his new post? I agree entirely that the levels of borrowing are perfectly sensible and reasonable and are low, both historically and internationally. Does he not agree that it is much more important to keep the economy going by borrowing if necessary to sustain consumer demand so that we tackle unemployment and continue the great legacy of the past eight years?

Mr. Browne: I thank my hon. Friend for his welcome. He is perfectly correct that we have had an unprecedented period of stability in the economy, which has allowed us the opportunity to make the investment in public services, and that is reflected in borrowing.

Richard Ottaway (Croydon, South) (Con): Does the right hon. Gentleman share the Treasury's forecasts for the growth in the economy?

Mr. Browne: The forecasts on all aspects of the United Kingdom economy are made regularly, and are quite transparent. Since the introduction of the new framework in 1997, forecasts have on average been cautious and inexorably have turned out to be correct. In recent years, Her Majesty's Treasury's forecasts have tended to be more accurate and cautious than many who have commented on them.

Mrs. Madeleine Moon (Bridgend) (Lab): Does my right hon. Friend agree that it is only right to borrow to invest? Borrowing is now lower than at any time under the previous Administration, who borrowed to fund unemployment in constituencies such as mine in Bridgend.

Mr. Browne: Of course, the bills for unemployment amounted to about £5 billion, which is more than was being spent on the schools budget when we came to power. My hon. Friend is perfectly correct about the stability and transparency that we have introduced into the economy, and the fact that our regular forecasts have consistently proved to be correct. That investment is delivering increased and improved public services in all our constituencies, including her own.

Mr. Philip Hammond (Runnymede and Weybridge) (Con): I congratulate the Chief Secretary on his appointment and look forward to having a constructive debate with him over the coming months. Because of the level of net borrowing, the Organisation for Economic Co-operation and Development said this week that in the absence of a spontaneous rise in tax receipts, a slowdown in spending will be required. If that spontaneous rise does not happen, do the Government have a plan B? Is it to cut spending or to raise taxes?

Mr. Browne: I thank the hon. Gentleman for his welcome and congratulations, and I, too, congratulate
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him. I look forward to a constructive relationship with him. He will know, of course, that the deficit is falling and that we are on course to meet our fiscal rules. In relation to tax, this Government have kept and will continue to keep our promises. As the hon. Gentleman is aware, decisions on tax rates are made as part of the tax—[Interruption.] The shadow Chancellor is speaking up in relation to tax, and in the general election campaign he was asked similar questions to those that I am being asked. In relation to plan B in respect of tax, he said on the Radio 4 "Today" programme, on 24 September 2004, before the election:

In the context of being asked about tax increases, he said:

He therefore wishes to do exactly what the Government do and to keep the issues under review.

G7 Presidency

2. Mr. Sadiq Khan (Tooting) (Lab): What proposals for debt relief the UK plans to bring forward during its presidency of the G7; and if he will make a statement. [991]

The Chancellor of the Exchequer (Mr. Gordon Brown): Following the European Union agreement to double aid to 0.56 per cent. of GDP by 2010, Britain will seek European Union and G7 agreement on a debt relief package for 100 per cent. relief for debts owed by poor countries to the international financial institutions. We will also seek agreement on a finance facility for vaccination, which could save the lives of 5 million children by 2015, and for long-term finance to meet the millennium development goals. I hope that there will be all-party support for those initiatives.

Mr. Khan: My right hon. Friend the Chancellor recently had the pleasure of visiting Tooting and meeting local faith groups who did so much in the Jubilee 2000 campaign to help to cancel debt. What advice would he give to the churches, mosques, temples and other communities in Tooting who want to work with this Labour Government finally to make poverty history?

Mr. Brown: I thank all the churches and faith groups, not only in Britain but throughout the world for the work that they have done so far in putting the issue on the agenda. I was pleased to visit the constituency of my hon. Friend, and I welcome him to the House. I saw him playing his part in making the case for debt relief and increases in development aid. The next few weeks are vital for those of us who wish to see a reduction in global poverty. By the time of Gleneagles, I believe that we can achieve an historic agreement that will make possible greater aid and substantial debt relief. We have persuaded a large number of countries to join us, we need to persuade other countries over the next few weeks, and if we can do so, the agreement at Gleneagles will release billions of pounds to the poorest countries.
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John Bercow (Buckingham) (Con): Given that many in Burkina Faso, Mali and Chad depend on cotton for between 30 and 40 per cent. of their export earnings, does the Chancellor agree that the continued and extortionate subsidy by the United States of its inefficient cotton sector damages massively the western central African economies' chances of meeting the millennium development goals? Does he accept that he will command support from the Opposition if he can use his influence with the Americans to bring an end to those subsidies and to give the poorest people in the world the chance to compete and to grow?

Mr. Brown: Overseas development aid amounts to $50 billion a year, and trade subsidies by the richest countries, which discriminate against the poor, amount to $300 billion a year. Whether in agriculture, sugar, or cotton and textiles, as the hon. Gentleman suggests, those discriminatory subsidies do huge harm to the poorest countries. That is why we look forward not only to the Gleneagles agreement on debt relief and aid but to the Hong Kong talks of the world trade agreement. Not for the first time this week, I find myself in agreement with the hon. Gentleman.

Sir Nicholas Winterton (Macclesfield) (Con): May I warmly welcome the answer that the Chancellor gave to the original question on the Order Paper? Does he agree that bilateral aid between ourselves and a particular country can be much more effective than aid given through a third party? Will he seek to concentrate more of our aid through bilateral aid agreements with individual countries, such as those to which my hon. Friend the Member for Buckingham (John Bercow) referred, rather than seeking to channel more through third parties?

Mr. Brown: As the hon. Gentleman knows, we have trebled aid for Africa over the last few years. I am aware that, owing to his association with the Commonwealth Parliamentary Union, he has both welcomed that and seen some of the good effects that it has produced.

This is the first time that I have heard the hon. Gentleman describe the European Union as a third party—it may be due to the change that is taking place in the Conservative party—but if I were to talk about third parties, I would say that he should support the work of the World Bank and the International Monetary Fund. I think that on this occasion at least, the Conservative party should be generous enough to support the decision made by the European Union this week. It was an historic decision—that all 25 countries would play their part in doubling European aid between now and 2010. Even the poorest EU countries agreed to move their aid budgets to 0.17 per cent. That was a sign that even the poorer EU countries recognised their responsibilities to the rest of the world. I should have thought that at a time of reflection for the Conservatives, they would take the opportunity at least to welcome one thing that has come out of the European Union.

Angela Eagle (Wallasey) (Lab): I congratulate my right hon. Friend on the progress he is making in setting the agenda globally on this extremely important issue. I also welcome the EU agreement that was announced
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two days ago. Can my right hon. Friend give us his assessment of how likely it is that the United States will be brought on board by the time of the Gleneagles meeting?

Mr. Brown: I am grateful to my hon. Friend, who has also taken a huge interest in these issues.

The Americans support our initiative on debt relief, and I believe that we are closer to an agreement on multilateral debt relief than we have been at any time. In 1999, an agreement was reached on bilateral debt relief, and we and other countries removed the costs that countries in the poorer world had to pay for debt servicing. It is now possible that the other half of the debt owed by the poorest countries—the multilateral debt—could be written down, with all G7 countries supporting the move. I believe that the Americans, like the rest of Europe, are ready to reach an agreement on debt relief.

As my hon. Friend will know, the American Administration have proposed substantial increases in aid for HIV/AIDS and education through the millennium challenge account. One of the purposes of the Prime Minister's visit to America over the next few days is to see whether we can bring together Europe, Japan and America, so that at Gleneagles we can agree a plan for Africa, and at the United Nations special summit in September we can agree with the rest of the world that it will share the priority that we have accorded to Africa.

Mr. George Osborne (Tatton) (Con): Poverty, disease and poor education blight the lives of hundreds of millions of people, and we have a moral duty to help. Today the Chancellor has called for all-party support on those issues, and at this first Treasury Question Time of the new Parliament, I offer him our support.

Does the Chancellor agree that we now need to build a broader international consensus? What prospects does he see of our using the good will that this country and, indeed, the Prime Minister have built up in the United States to secure backing for the speedy establishment of an international finance facility?

Mr. Brown: I am grateful for that all-party support—I believe that the Liberal Democrats and the other parties in the House will also support this initiative. It is important for Britain to signal to the rest of the world that the whole United Kingdom Parliament is united in our efforts to tackle the problems of developing countries.

The hon. Gentleman has raised again the attitude of the American Administration to the initiative, and particularly to our proposed international finance facility. Progress has been made on the facility, which involves front-loading funds so that we can do very special things early in order to be in a position to meet the millennium development goals. A number of Governments around the world, and the Gates Foundation, have come together to propose an international finance facility for vaccination and immunisation. As I have told the House, that would release an extra $4 billion for the vaccination and immunisation of children who would otherwise not have such treatment. Between now and 2015, 5 million lives could be saved by that one measure, and I believe that it will be endorsed at Gleneagles.
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There is a good deal of discussion still to take place on the more general funding of the international finance facility and other measures that could raise additional finance, but I hope that the hon. Gentleman agrees that there has been progress over the last few months. That progress will be enhanced by the all-party agreement on these issues.

Mr. Osborne: I agree that there has been progress but, as the Chancellor points out, each day that progress towards the millennium development goals is delayed, 30,000 children lose their lives, 100 million children miss out on education and 1 billion people lack access to safe drinking water. [Interruption.] Labour Members are muttering, but we are trying to establish broad consensus on the point.

Fifteen months ago, the Chancellor said that he wanted to establish the international finance facility immediately. The Secretary of State for International Development rightly said:

I take the point that the Chancellor just made about the international finance facility and vaccinations, but does he expect the broader international finance facility to be up and running during Britain's G7 presidency this year?

Mr. Brown: I am glad that the hon. Gentleman supports the international finance facility both as an idea and for its practical development in vaccination and other areas. At the meeting of European Union Finance Ministers only a few days ago, all 25 countries of the European Union agreed that we could support an international finance facility. It was agreed that we had to find a way to fund it after 2015, and further work is being done on how to guarantee that funding. However, there was a time when there were sceptics in the European Union and people in other countries thought that the proposal was impractical, but it is now accepted that we should move forward. Whatever happens and however many countries join the international finance facility, it will be established, and I am grateful that we have the support of all parties—I believe that that includes the Liberal Democrats.

The broad agenda for development, trade and aid is debt relief to deal with the burdens of the past, raising development aid so that we can build up the capacity of the countries that we are talking about, particularly their health and education systems, opening up trade—a point already raised by Opposition Members—which is absolutely right and the only long-term source of development and growth for those countries, and prioritising funding by front-loading it through the international finance facility. That is a major package and if we can secure agreement on it at Gleneagles, it will not only be welcomed by the Churches in Britain but people around the world will think that the G8 presidency has achieved a great deal.

Mr. John McFall (West Dunbartonshire) (Lab/Co-op): I will be joining local schools and churches in the Edinburgh rally on 2 July in advance of Gleneagles. What message can the Chancellor give to encourage more of my constituents to attend that rally, particularly
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on the issues of achieving millennium development goals and the revaluation of the International Monetary Fund gold reserves to write off more debt?

Mr. Brown: When the issue of debt relief was raised in 1996–97, no one ever thought that 100 per cent. write-off of bilateral debt would be possible. However, thousands of people, churches and faith groups in all constituencies around the country sent out a message not only to Britain but to Germany, France, Japan and America to take action. There is absolutely no doubt that, when large numbers of people have got together to force the issue on to the agenda, it has made a difference.

On one occasion, the German Finance Minister accused me of organising for thousands of postcards to be sent from different addresses in Britain to the German Finance Ministry and thought that it was part of an orchestrated Treasury campaign. We would never have been able to approve such a use of public money. However, that action did make a difference, as has the work of churches and faith groups in all countries, which is why every member of public who can should register their support for this campaign.

Norman Lamb (North Norfolk) (LD): There is support across the House for the imperative of debt relief, for securing fairer trade rules and for the work of the Commission for Africa, and Gleneagles will be vital on all those fronts. What objective, measurable criteria should we use to measure the success of Gleneagles in achieving success on those fronts?

Mr. Brown: I had thought that there had been a change in the Liberal Democrat shadow chancellorship overnight until I was informed that the real shadow Chancellor for that party had not realised that the hours of the House had changed—yet another example of the Liberal Democrats getting their figures wrong. I congratulate the hon. Gentleman on his promotion and I welcome his question.

The test of Gleneagles will be whether we can achieve substantial progress on debt relief, whether we can raise substantially the amount of development aid, whether we can prepare for a breakthrough on trade—it would happen in Hong Kong in December—and whether we can build a new relationship between the richest and the poorest countries, which I believe all hon. Members would wish to see.

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