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Economic Growth (Global Competitiveness)
6. Andrew Selous (South-West Bedfordshire)
(Con): What recent assessment he has made of the UK economy's global competitiveness in respect of economic growth. [26727]
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The Chief Secretary to the Treasury (Mr. Des Browne): Since 1997 the Government have delivered 53 consecutive quarters of economic growth, the longest period of unbroken expansion on record. Our performance compares favourably with that of our international competitors. GDP growth in 2004 was higher in the UK than in Germany, Ireland, France, Italy, Japan, Canada and the euro area.—[Interruption.] The hon. Member for Tatton (Mr. Osborne), who made a sedentary interjection, is correct: my arithmetic in terms of the number of quarters is incorrect.
Andrew Selous: According to the OECD, the UK has the lowest growth rate of all the major English-speaking economies—America, Canada, Australia, New Zealand and Ireland. The World Economic Forum's competitiveness league shows the UK slipping a further two places to 13th. Does the Minister believe, as the WEF does, that excessive taxation, regulation and bureaucracy as well as inadequate infrastructure are to blame?
Mr. Browne: I do not want to turn the question into an exchange of quotes from the OECD, but since the hon. Gentleman refers to it, I shall quote from the OECD report, which says of the UK's economic position that
"this performance is a testament to the strength of the institutional arrangements for setting monetary and fiscal policy as well as to the flexibility of labour and product markets"
Part of that is that the UK's competitiveness has been standing up well to recent global economic challenges. In the period since 1997, UK gross domestic product growth has been more stable than that of any other G7 country, in contrast to the period between 1979 and 1996, when it was the most volatile in the G7, with the exception of Canada. The UK's overall macro-economic performance remains strong and it compares well with our major competitors.
Keith Vaz (Leicester, East) (Lab): Given our success, are we now able to look again at the tests for joining the euro, and can we reach any conclusions based on that assessment?
Mr. Browne: The Treasury keeps the tests under review. It is not the view of the Treasury at present that it would be an appropriate time to deploy the tests.
Michael Gove (Surrey Heath) (Con): The Minister will be aware how important clear and simple taxation is in generating economic growth. He will also be aware that his colleague, the Chancellor of the Exchequer, regularly blames oil prices for any turbulence in the economy. Can he guarantee that there will be no windfall tax on the oil sector in any forthcoming Budget?
Mr. Browne:
If my right hon. Friend the Chancellor were here, he would not rise to the bait of making up his Budget at the Dispatch Box, and as the Chief Secretary to the Treasury, I will not do so in his absence. I do not
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think the hon. Gentleman expects me to do that. Despite other people's observations, our public spending plans are fully costed and fully affordable on a basis of reasonable and cautious assumptions. They are independently audited by the National Audit Office. We in Government have always met our fiscal rules and we will continue to meet our fiscal rules. The hon. Gentleman joins the growing band of those on the Opposition Benches who look for simplification. We know what that means, of course. That would not be affordable because it would be flat tax, and would mean a £50 billion hole in our public spending plans and for the public services. That is the simplification that the hon. Gentleman and his friends want.
Ed Balls (Normanton) (Lab): The latest figures on the performance of the economy over the past 10 years show that between 1986 and 1997, the economy grew by 2.5 per cent. Between 1997 and 2001, it grew by more than 3 per cent. Productivity growth in the former period was 2.2 per cent. It went up to 2.7 per cent. and has carried on since.—[Interruption.] Does my right hon. Friend agree that the right way to carry on that record of improvement in growth and competitiveness is to carry on with policies for stability and investment in the economy, and not to see £50 billion diverted away from public services in our economy to an Estonian-style flat tax?
Mr. Browne: My hon. Friend is correct and the figures that he quotes are accurate, although Opposition Members do not seem to want to hear them. It is stability that has given us consistent growth over the period that we have been in office. As I said earlier, the UK's macroeconomic performance remains strong, compared with that of our major competitors. We have the highest employment in all the G7 countries. Unemployment is at 4.7 per cent., its lowest for a generation; on an annual basis, we have been the lowest in the G7 in the past three years. UK inflation since 1997 has been the least volatile of all the 179 countries tracked by the International Monetary Fund. That did not happen by accident; it happened because of stability.
Mr. Stephen Dorrell (Charnwood) (Con): The Chancellor of the Exchequer is a regular contributor on the international lecture circuit, including to the World Economic Forum, about the importance of competitiveness and productivity. The World Economic Forum, a body to which he regularly lectures, recently said that British competitiveness has fallen since 1997 from being fourth in the world to being 13th in the world. Do the Government accept that judgment, or will they demonstrate to the House and to the country why the World Economic Forum is wrong?
Mr. Browne: The right hon. Gentleman is correct in his description of what the World Economic Forum said. However, the UK is the only G7 economy to avoid any quarters of contraction in output since 2001. It has continually expanded despite slow growth in the G7. Our economy is performing appropriately and positively in the environment and shows greater stability than that of any of our major competitors.
Mr. Jim Devine (Livingston)
(Lab): Unemployment in my constituency is 2.9 per cent.—it was 20 per cent. when
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the Conservative party was in power. Does my right hon. Friend agree that the Conservative Government introduced a flat tax in the past—it was called the poll tax, under which nurses paid exactly the same as—
Mr. Speaker: Order. The first part of the supplementary was fine.
Mr. Browne: Part of our stability has been continued growth in labour markets. More people now work in all constituencies throughout the UK. In total, 2.3 million more people work in the UK now than when the Government came to power. We can contrast that with the Conservative Government's record. That is a measure whereby we can judge whether we should take lessons from Conservative Members about how to run the economy.
Mr. Philip Hammond (Runnymede and Weybridge) (Con): As my hon. Friend the Member for Surrey Heath (Michael Gove) said, the Chancellor blames the halving of Britain's growth on oil price rises. Will the Chief Secretary, in the Chancellor's absence, acknowledge the findings of the National Institute of Economic and Social Research, which claims that the impact of oil on this year's growth will be negligible? Is not the truth of the matter that the slowdown is home-grown? Does the Chief Secretary think it could have anything to do with the WEF findings that Government spending in Britain is now more wasteful than in Tanzania and that our tax system is less efficient than that of Ethiopia or Ghana?
Mr. Browne: If the problem is home-grown, as the hon. Gentleman suggests, why is the UK economy growing faster than that of Germany, France, Italy, the Netherlands, the euro area, Japan, Australia and New Zealand? That is happening because the problem is not home-grown, but caused by the environment. That is why I said earlier that the economy was behaving appropriately in the current macro-environment, which includes oil prices. They have been continuously high for a quarter of a century, not only recently—
Mr. George Osborne (Tatton) (Con): They are not the whole story.
Mr. Browne: Well, if we had had the sustained oil prices, moderation of the housing market and a euro area growth rate to provide the context for the rise—
Mr. Speaker: Order. I must try to get down the Order Paper—it is a difficulty that I have.
Andrew Selous: On a point of order, Mr. Speaker.
Mr. Speaker: No points of order are taken during Question Time.
Mrs. Louise Ellman (Liverpool, Riverside)
(Lab/Co-op): Does my right hon. Friend agree that the recent announcement of major funding to the Liverpool school of tropical medicine from the Gates Foundation, the north-west development agency and Europe will enable it to be a bigger player in combating world disease and that that will also have an impact on economic growth
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in Liverpool and the north-west? Will the Government continue to support investment in science, thus supporting regional growth in the north-west?
Mr. Browne: My hon. Friend is right that investment in science, especially support for research and development in science, is an important component of a modern economy. Of course, the Treasury and the Government will continue to support that. However, we can do that only because of the framework that the Government have created. The Lords Economic Affairs Committee stated:
"We think that the UK fiscal framework is close to being best practice, with the Government's golden rule a good rule of thumb."
Basic fiscal rules and stability have given us the opportunity to invest in science.
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