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Public Finance Forecasts

8. James Duddridge (Rochford and Southend, East) (Con): What measures he is taking to improve the reliability of public finance forecasts. [45620]

The Chief Secretary to the Treasury (Mr. Des Browne): Since 1997, the Government have introduced a number of changes that have improved forecasting performance. They include the introduction of reasonable and cautious assumptions, independently audited by the National Audit Office. The Treasury regularly reviews its fiscal forecasting performance and publishes the results in end-of-year fiscal reports. They demonstrate that the Treasury's forecasts since 1997 compare well with those of major international organisations and of other EU member states.

James Duddridge: Does the Chief Secretary agree with the Treasury Committee, which said:

"It is important that official forecasts for tax receipts avoid any systemic bias either to exaggerate or underestimate revenue receipts, particularly towards the end of the economic cycle when forecasts are likely to come under particular scrutiny"?

Mr. Browne: I do agree with that. I have yet to have the advantage of reading all the Treasury Committee's report on the pre-Budget report. However, it was precisely in order to achieve that objective that we went to the trouble of introducing rules and a level of independence concerning the assumptions that underlie such forecasts.

Mr. Andrew Love (Edmonton) (Lab/Co-op): Can my right hon. Friend explain to the House the impact on public finance forecasts of the possible introduction of a flat tax?

Mr. Browne: As everybody knows, a flat tax would be significantly expensive in terms of the damage that it would do to this country. Some estimates suggest that if a flat tax were operating now, much-needed investment in public services would be reduced by as much as £7 billion for this year alone. I understand that the
 
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Conservatives, some of whom advocate a flat tax, are keeping their powder dry on this issue—or trying to—but it is hardly likely that it will remain dry for very much longer, given that they have put Michael Forsyth in charge of consideration of taxation. Of course, and as Scotland knows, he is the ultimate flat-tax—

Mr. Speaker: Order. We are going beyond the question.

Chris Huhne (Eastleigh) (LD): May I ask the Chief Secretary—[Interruption.]

Mr. Speaker: Order. I called the hon. Gentleman because he is a Back Bencher, and for no other reason. Please listen to him.

Chris Huhne: Thank you, Mr. Speaker, for that promotion. May I ask the Chief Secretary carefully to consider the course of action promoted by my hon. Friend the Member for Twickenham (Dr. Cable), who points out that the issuance of long-dated Government debt would of course improve the reliability of public finance forecasts? Does the Chief Secretary recognise that not increasing such issuance would constitute a substantial threat to the sustainability of pension funds?

Mr. Browne: First, Mr. Speaker, without wishing to encourage your wrath, may I recognise that the hon. Gentleman is, I think, his party's shadow Chief Secretary to the Treasury and is in fact speaking from the Front Bench?

Mr. Speaker: Order. I am going to make something plain. I called the hon. Member for Eastleigh (Chris Huhne) as a Back Bencher, not as a spokesman. There is only one allocation to the Liberals.

Mr. Browne: I apologise, Mr. Speaker—I should have known better than to try to be that clever. I am glad to hear from the hon. Member for Eastleigh (Chris Huhne) today. He is perhaps the only candidate for the leadership of his party whom we have not heard from this week, so I am pleased that he has had an opportunity to say something. In answer to the question, I assure the hon. Gentleman that the Government appreciate his point. That is exactly why my right hon. Friend the Chancellor has introduced appropriate mechanisms.

Andrew Miller (Ellesmere Port and Neston) (Lab): But will my right hon. Friend explain the difference between the mechanisms in place now and those that applied on Black Wednesday? Could it be that my right hon. Friend the Chancellor has better special advisers?

Mr. Browne: It is substantially because this Government have learned from the mistakes of the previous Administration. When we came to power in 1997, we set out principles for fiscal management and a code for fiscal stability. We have implemented significant changes that have helped to deliver improved forecasting performance. They include, for example, the publication of full fiscal projections at each PBR and Budget that are based on all Government decisions and circumstances that may have a material impact on the
 
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fiscal outlook, the audit of key assumptions—in particular the cautious assumptions for trend growth—and the publication of a full backward-looking analysis of forecasts in the end-of-year fiscal report.

Mr. Mark Hoban (Fareham) (Con): In 1995, the then shadow Chancellor called for an independent audit of the sustainability of public expenditure and the golden rule. What progress has the sixth Chief Secretary to the Treasury since this Government came to power made in that regard?

Mr. Browne: I have already set out the rules that we have introduced. What the hon. Gentleman is arguing for requires consideration of where the proper political accountability for such decisions lies. My right hon. Friend the Chancellor has made it clear that the Government are accountable for the decisions that they announce to this House.

Manufacturing Industry

10. Michael Fabricant (Lichfield) (Con): What recent assessment he has made of the competitiveness of UK manufacturing industry; and if he will make a statement. [45622]

The Chief Secretary to the Treasury (Mr. Des Browne): The pre-Budget report provided an assessment of all areas of the UK economy, and action taken by the   Government to provide the right environment for    business competing in a global environment. Manufacturing productivity in the UK rose by 30.9 per cent. between 1997 and 2004. The Government want a successful and dynamic manufacturing sector with more companies moving to high-value production to meet the challenge of globalisation, for which the best foundation is, of course, macroeconomic stability.

Mr. Speaker: I call Mark Hoban. [Interruption.] My apologies; I meant Mr. Fabricant.

Michael Fabricant: We look so alike, Mr. Speaker, that getting us mixed up is easily done.

I know that the Chief Secretary will join me in offering sympathy to the 175 workers at GKN Lichfield who have just lost their jobs because the company is moving its manufacturing plant from the UK to Europe. However, that is not so surprising, given that the Engineering Employers Federation has said that extra taxes placed on manufacturing directly amount to £2.2 billion since 1997, and that the total for extra taxes in that period comes to £5.5 billion. That compares with what has happened in Europe and the US, where the overall tax burden has fallen since 1997. What can the Chief Secretary do to reverse that trend?

Mr. Browne: First, may I take the opportunity to express my condolences and support to the workers at the GKN Lichfield plant, which is now to be closed? My understanding of the situation is not exactly the same as the hon. Gentleman's. We are dealing with his constituency and I accept that I may be wrong, but I understand that GKN announced at the same time that it would relocate all the jobs to its 10 other UK plants.
 
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That is not entirely consistent with what the hon. Gentleman said, but I recognise that he will have more accurate information.

The loss of manufacturing jobs in the west midlands and the rest of the UK has been going on for some time, but I point out that the service sector in the west midlands has expanded significantly, with more than 300,000 jobs created since we have been in government. Job opportunities exist, and I assure the hon. Gentleman that the Government will support the people who have lost their jobs today.

In relation to the meat of the hon. Gentleman's question, I suggest that his analysis of why this is happening is slightly skewed. I understand why, for political reasons, he wants to skew it, but corporation tax has gone down in this country from 33 per cent. to
 
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30 per cent. We support manufacturing industry through research and development credits, 80 per cent. of which go to manufacturing industry.

The global challenge that we all face in relation to manufacturing will have to be met by a number of activities, and most of those my right hon. Friend the Chancellor announced in the pre-Budget report.

Mr. Michael Foster (Worcester) (Lab): Cadbury's is a highly competitive manufacturer of chocolate based in the west midlands. Does my right hon. Friend understand the dismay felt by workers in our region that Opposition Members have signed an early-day motion urging people to boycott the products—

Mr. Speaker: Order. I was doing the hon. Gentleman a favour by calling him late in the day, but he is out of order.

 
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