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UK Economy

8. Mr. Tim Boswell (Daventry) (Con): What assessment he has made of the principal factors affecting the estimated level of growth in the UK economy. [35538]

The Chief Secretary to the Treasury (Mr. Des Browne): The pre-Budget report 2005 set out a comprehensive account of recent economic developments and the Government's assessment of growth prospects for the UK economy. Over the past year, the effects of global and domestic inflationary pressures have tested the UK economy. However, sound macro-economic fundamentals continue to support growth and stability, helping our economy to remain far more resilient to challenges and shocks than it has in the past.

Mr. Boswell: In the new spirit of consensus, and because I suspect that the Chief Secretary would agree that economic growth is the bedrock not only of
 
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individual prosperity but of any social advance, does he share my concern about the very sharp decline in the rate of economic growth in recent months?

Mr. Browne: I do agree. However, the bedrock of economic growth is stability. Through the macro-economic framework, we have provided the stability to engender the growth that is necessary to create the wealth of which the hon. Gentleman speaks. We have a record of economic growth that would have been the envy of any previous Government. We have grown consistently.

Mr. Jim Cunningham (Coventry, South) (Lab): May I suggest to my right hon. Friend that one way to develop growth is by improving skills and research and development? What is he doing about that, particularly in relation to the west midlands, which traditionally has had a manufacturing base?

Mr. Browne: I thank my hon. Friend, who has been a consistent champion of those issues on behalf of his constituents and the west midlands. As my right hon. Friend the Chancellor said earlier, the whole developed world faces the challenge of retaining manufacturing jobs. We need to decide what is the Government's role and what their response should be to those who are challenged in such circumstances. We have set out to respond in a way that allows people to develop the skills that are necessary to face the challenges of the 21st century. Earlier this week, in his pre-Budget report, my right hon. Friend explained how we will further invest in innovation, research and development and the creative industries to develop those opportunities and skills.

Mr. Brooks Newmark (Braintree) (Con): In last year's autumn statement, the Chancellor said that in the previous Budget

"I forecast growth . . . of between 3 and 3½ per cent . . . Even after the doubling of oil prices".—[Official Report, 2 December 2004; Vol. 428, c. 784.]

We all know that oil prices have doubled and his forecast is halved. Does the Minister agree that the Chancellor's judgment in this matter is flawed, as it is in other matters?

Mr. Browne: The hon. Gentleman's basic facts are wrong. Oil prices were $40 at the beginning of the year and rose to $70. A combination of factors have generated a set of circumstances that have challenged this country's growth, but the resilience of our stable economy has allowed us to continue to grow. Because of that, and because of the stability that is in the economy, we can look forward to increasing growth as forecast in the pre-Budget report.

Ms Sally Keeble (Northampton, North) (Lab): Does my right hon. Friend agree that skills are especially important in areas such as Northamptonshire where growth has been high and the labour market is tight? What is he doing to encourage staying-on rates at school to provide support for families so that people do not leave school without skills and we can thus improve the skills base of our work force?
 
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Mr. Browne: My hon. Friend makes an important point. We introduced the education maintenance allowance to develop the skills that tight labour markets such as that in her constituency need. I do not have the exact figures for education maintenance allowance in her constituency, but I am sure that, as an assiduous Member of Parliament, she knows them already.

Mr. George Osborne (Tatton) (Con): When was the Chief Secretary first told that the Chancellor's hopelessly optimistic pre-election growth forecast was likely to be wrong?

Mr. Browne: The hon. Gentleman knows that those matters change over the course of the year. I cannot specifically remember when I was told and I am sure that that is not the point of his question. However, he knows that the Office for National Statistics, which tries to calculate growth and other matters that affect the economy, often has to revise its figures retrospectively. I am confident that, even for this year, it will have to revise its figures.

Mr. Osborne: The Government fought an election promising a strong economy this year. We simply want to know when the Chancellor and the Chief Secretary knew that they could not keep that promise.

Let us consider another promise that the Chancellor made. He is keen to point out how young he is feeling these days, but when he was young and doing my job, he said:

"Raising the trend growth rate of the economy will be an objective of the next Labour Government".

Will the Chief Secretary confirm that page 186 of the pre-Budget report contains an admission that the trend growth rate—the long-term growth rate—of the economy will be lower than it was in 1997?

Mr. Browne: The average growth rate—[Interruption.] The average trend growth rate for the economy is 2.7 per cent. and has risen from an average 2.2 per cent. when we came to power. We have achieved that. The hon. Gentleman had five opportunities in the first six questions to ask the Chancellor his questions. Why does he have to ask them through me? [Interruption.]

Mr. Dennis Skinner (Bolsover) (Lab): Is my right hon. Friend aware that in the 1970s and a lot of the 1980s, we would have thanked our lucky stars in the coalfield areas for growth of 1.75 per cent.? The only thing growing then were the lines of coke in front of boy George and the rest of them.

Mr. Speaker: Order. This seems to be a trend with the hon. Gentleman. He must withdraw that remark.

Mr. Skinner: It was in the News of the World.

Mr. Speaker: Order. The hon. Gentleman must withdraw the remark.

Mr. Skinner: No, I will not withdraw it. It is true.
 
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Mr. Speaker: Order. If the hon. Gentleman does not withdraw the remark, he must leave the Chamber—I order the hon. Gentleman to leave the Chamber. I am forced now to name the hon. Gentleman. I name Dennis Skinner. He is withdrawing—he has taken my advice.

Mike Penning (Hemel Hempstead) (Con): You named him.

Mr. Speaker: I know what I have done. The hon. Gentleman has moved and that is the main thing.

British Film Industry

9. Mr. John Whittingdale (Maldon and East Chelmsford) (Con): What representations he has received in response to his proposals for tax incentives to support the British film industry. [35539]

The Paymaster General (Dawn Primarolo): The Treasury consulted extensively with the industry on the proposed new film tax between July and October this year. The consultation informed the announcements on film tax in the pre-Budget report. They included allowing films costing up to £20 million a guaranteed minimum benefit worth 20 per cent. of qualifying production costs and a benefit worth 16 per cent. for films costing more than £20 million. The incentives will be even more valuable for profitable films. That can help achieve our goals for greater sustainability for the British film industry. The industry has warmly welcomed the announcements.

Mr. Whittingdale: When I tabled this question, I intended to be critical of the Chancellor, but, in keeping with our new spirit, I warmly welcome the measures that were announced in the pre-Budget report. However, the Minister will be aware that the uncertainty that has surrounded the fiscal arrangements for the industry has already led to some major film productions being made abroad. Will she confirm that the new measures will not be subject to change, so that the industry can now plan ahead with total certainty?

Dawn Primarolo: I welcome the hon. Gentleman's conversion to supporting the Government. In fairness to him, he has taken an interest in assisting the development of the British film industry for a considerable time. I can confirm that the measures will produce a stable regime for the industry, and that they will be effectively targeted to ensure that we support the producers. If the hon. Gentleman has time to look again at the pre-Budget report, he will also see the announcements regarding the transition from the present regime to the new one. Consultations with the industry are still going on, which is important, but there is general agreement that the measures will offer a stable regime to help the development of the industry.

Paul Farrelly (Newcastle-under-Lyme) (Lab): My right hon. Friend will be aware that a good reason to change the tax regime for the film industry was to clamp down on tax avoidance. Following the pre-Budget report, she will know how much we all enjoy blocking gaping tax loopholes, whether they relate to film, fine wines or property speculation. How confident is she that
 
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the new film industry regime will be generous enough to help UK film producers while being robust enough to prevent yet another spawning of the so-called tax avoidance industry?

Dawn Primarolo: I can inform my hon. Friend, who also follows these matters with interest, that the incentives will now be more effectively targeted, and therefore less vulnerable to manipulation and avoidance than the current reliefs. It is, however, almost impossible to anticipate the creativity of the avoidance industry. The film industry has welcomed the proposals, saying that they are the best news in five years. They will ensure the security of the regime. I would say to my hon. Friend, however, as I have said to the industry, that if there are any signs of avoidance, we will clamp down on them immediately.

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