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Borrowings Forecast
5. Michael Fabricant (Lichfield) (Con): If he will make a statement on the Treasury's forecast on borrowings over the next five years. [995]
10. Mr. Geoffrey Clifton-Brown (Cotswold) (Con): If he will make a statement on the level of Government net borrowing. [1001]
The Chancellor of the Exchequer (Mr. Gordon Brown):
Forecasts of net borrowing are set out in the pre-Budget report and the Budget. The latest estimate in the Budget is £32 billion for 2005–06 and £29 billion, £27 billion, £24 billion and £22 billion for the following years.
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I take this opportunity to announce that I am appointing Mr. David Walton to the Monetary Policy Committee in place of Marian Bell.
Michael Fabricant: I thank the Chancellor for that interesting response and for his mini-statement. He will know that the current deficit is now £5 billion more than forecast, and that the International Monetary Fund said in March:
The Chancellor will probably brush that off by saying, "Hey, whatever." But what steps will he take to improve Treasury forecasting?
Mr. Brown: I think that the hon. Gentleman knows that our deficit is lower than almost all our comparable competitor countries, as is our debt level. As for forecasts, the last Conservative Government were not £2 billion or £3 billion out in their forecasts in the early 1990s. In 1992–93, their forecast was £49 billion wrong and in 1993–94 it was £51 billion wrong, but they did better in 1994–95 because they were only £43 billion out.
As for the issue of borrowing and spending, perhaps the hon. Gentleman would care to contemplate what he said to his electors in the recent election—
Michael Fabricant: My majority increased.
Mr. Brown: Far from the hon. Gentleman telling people that his party would spend less, he was getting votes by telling people that he wanted to spend even more on public spending. He said:
"Staffordshire schools are 145th out of 150 for . . . funding . . . despite Labour's promise, our authorities are worse off . . . I will continue to fight for [more] funding for Staffordshire schools."
The hon. Gentleman can lecture us about spending when he shows the same discipline himself.
Michael Fabricant: On a point of order, Mr. Speaker. That was a misquote—
Mr. Clifton-Brown: I welcome the Chancellor back to his post. In addition to the huge figures that he has just read out for our fiscal deficit, the Office for National Statistics and others have made good technical arguments that the debt figures for the private finance initiative, the Strategic Rail Authority and even the burgeoning public sector pensions should be added to our total debt figure. That amounts to a massive figure, and one of the highest in our history. The Chancellor used to talk about prudence for a purpose. A prudent Chancellor would address this huge problem. Will he increase taxation or cut spending to deal with it?
Mr. Brown:
We follow exactly the same rules on the private finance initiative and on the way in which we calculate debt and borrowing as the Conservative Government did. If anything, we are ready to tighten up the rules and make them more transparent in a way in which they were not prepared to do. The idea that we have more debt as a percentage of national income under the Labour Government is completely wrong. We
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have cut debt from 44 per cent. to just over 33 per cent. of national income. Over the years we have reduced debt substantially, against the advice of Opposition Members. The hon. Gentleman may think twice about lecturing us on overspending and over-borrowing, because in a press release just before the general election he demanded more spending on agriculture.
Paul Farrelly (Newcastle-under-Lyme) (Lab): Does my right hon. Friend remember how prudently he treated the £22 billion proceeds from the 3G mobile phones auction, by paying off a large slice of Government borrowing? Will he contrast that with the sheer fiscal irresponsibility of treating one-off privatisation proceeds as negative Government spending, which happened under the Conservative Government? Does he agree that not even a grocer's shop in Grantham, let alone the hon. Member for Lichfield (Michael Fabricant), would play so fast and loose with finances as the Tories did with the country's finances when they were in power?
Mr. Brown: I remember that during the spectrum auction when we raised £22 billion—people said that that would not be possible, but we managed to do it—Conservative Members said, not that we should use the money to reduce the national debt, but that we should use it for public spending. The idea that we have a disciplined and fiscally responsible Opposition party is knocked on its head, not just by that instance, but by every Opposition Member during the election campaign making irresponsible promises for more spending so as to gain votes. We shall expose that week after week throughout this Parliament.
Hugh Bayley (City of York) (Lab): Why did the national debt double under the previous Conservative Government, and what were the consequences of their short-term irresponsible borrowing decisions on public expenditure on health and education? [Interruption.]
Mr. Speaker: Order. I hear what the hon. Member for New Forest, East (Dr. Lewis) is saying, but the Chancellor can speak of the history of his Department, even under a previous Government.
Mr. Brown: It is sometimes difficult to explain the logic behind Conservative decisions. Debt and borrowing will rise if we do not cut unemployment bills. That is what happened under the Conservative Government and we are determined not to allow it to happen in this Parliament or in future. I invite the Conservative party to reconsider its opposition to the new deal. Two million people have been helped by it and there are 2.2 million more people in work. A reason why debt is lower and borrowing is less than it would otherwise have been is that we have saved £5 billion by halving the unemployment benefits bill. We want to continue to do so and both the Liberal Democrat and Conservative parties should support us in doing so.
Dr. Julian Lewis (New Forest, East)
(Con): The Chancellor will be aware that the Institute for Fiscal Studies has predicted a less than 60 per cent. chance that the Chancellor will meet the golden rule on borrowing, yet on Sunday he said on television that we have been
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meeting the golden rule and will continue to do so. Does that mean that he is predicting a near 100 per cent. chance that he will meet the golden rule in future?
Mr. Brown: The hon. Gentleman does not need to take it from me; he just needs to take it from the shadow Chancellor, who on the radio last Friday said that he believed that we would meet our golden rule. Perhaps the hon. Gentleman should have some conversations with his shadow Chancellor.
Mr. Dennis Skinner (Bolsover) (Lab): Does my right hon. Friend agree that in the last eight years we have been hearing from the Tory party in particular and to a lesser degree from the Liberal Democrats of the possibility of a black hole in Government funding? The black holes were in 1997 when we secured a victory and they fell down a black hole, in 2001 when we secured a victory and they fell down another black hole, and at our last election victory when not only did they fall in yet another black hole, but the right hon. Member for West Dorset (Mr. Letwin), then shadow Chancellor, got lost in a black hole in the middle of the Dorset woods.
Mr. Brown: We should not enter the private grief of the Conservative party. I think all of us were disappointed that we were not present at last night's meeting of the Conservative party, to hear the speeches from so many different candidates for the leadership. I do say to the Conservative party, though, and to every Member of the House: you cannot wish for increases in health and education without being prepared to make the commitment to the public investment. And even at the last general election the shadow Chancellor, who as shadow Chief Secretary was responsible for discipline in public expenditure, was making special promises to himself, for his own constituency, on roads and other issues—spending promises that were way beyond what this Government could afford and way beyond what the Conservative party was saying nationally it could afford. Every month we will remind Conservative Members of the manifesto promises they made.
Mr. Mark Field (Cities of London and Westminster) (Con): As my hon. Friend the Member for Cotswold (Mr. Clifton-Brown) rightly points out, this week even the Office for National Statistics confesses the need to make material changes to the way it classifies private finance initiative projects in calculating aggregate Government borrowing. Will the Chancellor now accept that the public's lack of trust that the presentation of official statistics is free from political manipulation necessitates Treasury forecasts being subject to the framework for statistical accountability proposed by the Conservative party?
Mr. Brown: It is the Labour Government who have given greater independence to the statistical services in this country. I may say that the hon. Gentleman misrepresents the announcement by the statistical office over the last few days. What the press release from the statistical office says—I have it here—is:
"The Office for National Statistics has taken no decision to change the treatment of PFI schemes in the public finances."
So I welcome the hon. Gentleman to his new post, but perhaps he might withdraw the allegation that he made.
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As for the Conservative party's proposal, which it never put into practice when in government, that all public finances be submitted to an independent committee, rather like the Monetary Policy Committee of the Bank of England, I do say—this is the argument that the Conservatives use in relation to the European Union—that the final decisions on public finances, and therefore on taxation, in this country have always historically been made by this House of Commons; and the Government answer to this House of Commons, so I do not believe that an independent committee doing that is the way forward for this country. If the Tories do not believe in it for Europe, they should not believe in it for Britain either.
David Taylor (North-West Leicestershire) (Lab/Co-op): Early in the last Parliament, in a debate in Westminster Hall on PFI, I, as a public sector accountant, put very vigorously to the then Member for Brent, South, Mr. Boateng, the fact that a great deal of PFI debt should be on balance sheet. In the press release from which the Chancellor just quoted, issued by the ONS a few days ago, the ONS acknowledged that it had known about the uncertainty of treatment of PFI debt since 2001. Can my right hon. Friend inquire of the ONS, and then relay to the House at a later date, why it has taken more than four years for it to realise that the treatment of PFI debt did not comply with international standards?
Mr. Brown: Forty billion pounds of PFI capital are on balance sheet. The most controversial proposal of PFI, the London Underground, is on balance sheet. My hon. Friend is talking about the technical issue of whether, in addition to the capital that is owed, the borrowing commitments of the single-purpose companies that have been set up should also be on the balance sheet. We are happy to listen to the views of the Office for National Statistics and take its advice on the matter, but the fact is that, contrary to what was being said a few minutes ago, the ONS statement says that it has made
and I suppose that until that is done, every Member of the House would want us to abide by the existing rules, which is what we will do.
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