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Sir Nicholas Winterton : The right hon. Gentleman is the Chairman of a very important Select Committee and he has just referred to international business takeovers. Does he think that the people and Governments of countries must take a view on globalisation and decide whether every takeover will be beneficial? Does he agree that they should consider not only the long-term survival of the company in question, but the impact on employment in the communities where the companies are being taken over and the benefits or disbenefits that the takeover might bring to those localities and countries? That is not just nationalism, it is good sense.
Mr. McFall: I agree with the hon. Gentleman. At the end of the day, globalisation has been a good thing. For example, consumers have found that electrical goods and clothing have been cheaper as a result. US consumers have been able to spend because China and other Asian countries are holding the dollar as their foreign exchange reserves. There are good aspects to globalisation, but there are drawbacks as well. Increasingly over the years, some of our communities will be affected by them.
Do we have a policy response to the trends that will take place in the future? It is important to have such a debate now. The Treasury Committee is looking at the
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issue now and we share our information with the House. There is no doubt that a number of us will experience the local effect of the downsides of globalisation, but I am sure that we can debate that as time goes on and consider those issues with a common view, so that we find both an understanding of what is happening in the world and an appropriate policy response for our country, which will help both its competitiveness and prosperity in the future.
Mr. John Redwood (Wokingham) (Con): I have declared my interests in the Register of Members' Interests, and I should like to remind the House that I am a director of companies in both services and manufacturing and I am a director of a pension trustee company of one of those companies.
It is a great pity that the Chancellor of the Exchequer presents his case in such a selective way. I certainly welcome in his remarks today the proposition that we should have a independent eye cast over how the figures are compiled, and I hope that that independent eye will also be able to give advice to the Chancellor, which we can know about, on how the figures should be presented on big occasions such as this. It makes for a much better debate if we have an honest and full account of what is going on in the economy. For our part, we can accept that not everything is bad, but we would like the Chancellor to agree that not everything is good.
It is extremely good that we are debating the economy yet again against the background of continuous months, quarters and years of output growth, since we righted the economy after the bad mistake of the exchange rate mechanisma policy recommended by Labour to the then Conservative Government, but a policy that Labour seems to have forgotten that it was part father and mother to. Since we came out of that most unfortunate experiment and since the Conservative Government put in place the foundations of fiscal discipline and greater productivity growth, the economy has grown extremely well. The continuous growth under Governments of both parties is extremely welcome.
If we look at the Chancellor's views on growth, we must acceptI trust that Labour Members will acceptthat we are reviewing a disappointing year. In 2005, the Chancellor tells us that output growth was down to only 1.75 per cent., compared with, as he helpfully tells us, real GDP growth that averages 2.5 per cent. in the major seven countries and 4.5 per cent. in the world overall. So that shows Britain growing not only at under half the world average rate, but at considerably below the growth rate of large, advanced countries.
If we turn to the Chancellor's forecasts, we see that he thinks that the economy will grow by between 2 and 2.5 per cent. this year. If we are charitable and say that he thinks that it will grow at 2.25 per cent.I fear that he thinks that it will grow at 2 per cent.that compares again with what he thinks will be a rather better performance by the major seven countries, with growth at an average of 2.5 per cent., and an overall world performance of 4.5 per cent. yet again.
The first question that we need to ask in reviewing the Budget measures is whether the Chancellor is now planning to put in place measures that are sufficient to get Britain at least up to the average growth rate of the
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major countries in the world, or even better, to get us above the average of the major countries of the world, because we have clearly slipped some way below them in recent months and recent quarters.
The Chancellor also gives us the latest projections on his borrowing. The Leader of the Opposition, my right hon. Friend the Member for Witney (Mr. Cameron) gave a superb response to the Budget, and its brevity was matched by its brilliance. There is no need for the Leader of the Opposition to give a very long speech if he has gone to the trouble of preparing an excellent short speech that makes all the crucial points. One of the crucial points on which my right hon. Friend immediately homed in, although he did not have very long to read the documents, was the way in which the Chancellor intends to borrow so much money over the review period set out in the Budget forecast that we have just received.
My right hon. Friend said that the Chancellor plans to borrow £175 billion, on the published figures, through the public sector accounts over that period. Like my right hon. Friend, I think that that is very dangerous. If we are going to live through a period of reasonable growth, surely that is exactly the point in the cycle where we should cut public borrowing rather more sharply than the Chancellor forecasts, preferably by the growth in revenues from faster economic growth, but also from pursuing the initiatives that the Chancellor always promises that he is taking to gain greater efficiency in the public services and public sector and to cut the public overheads.
The Chancellor suggests instead very slow progress indeed: £37 billion of borrowing in the year just finishing; £36 billion of borrowing in the year about to start; and another £30 billion of borrowing in 200708. If only that were the end of it, I suppose that it would meet the wishes of the Labour party, but of course that is not the end of it because we know that there will be an awful lot of off-balance-sheet borrowing, too. There is no reference in the stock of debt figures to the £20-odd billion of borrowings and guaranteed moneys that have already been pushed the way of the effectively renationalised railway company. Strange accounting procedures are followed for all the private finance initiative and public-private partnership projects in which the Government have indulged on a grand scale.
Justine Greening (Putney) (Con): Does my right hon. Friend agree that many British taxpayers will get a nasty shock over the coming years when they find that they suddenly have to start paying for hospitals that they thought that their new and extra taxes had already paid for?
From rough mental arithmetic, the published figure of £175 billion represents about £3,000 for every man, woman and child in the country. The Chancellor is thus asking every one of us to sign up to an additional £3,000 mortgage. On top of that, there will be additional mortgages for PFI, PPP and off-balance-sheet items, including the railways, which will probably be another
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£1,000 or £2,000. There will thus be a substantial increase in the national mortgage per head on top of the billions that the Chancellor has already borrowed and accounted for and those for which he has not accounted. Given that there is already quite a lot of debt in the private sector, the Chancellor should be more careful when building up public debt. After all, public debt is tax deferred; we or our children have to repay all that money with interest.
Mr. Newmark: I would be interested to hear my right hon. Friend's comments about the fact that up to £800 billion might be held off balance sheet. Should not the Chancellor be far more transparent in his accounts? Is that not the issue with which we should be dealing?
Mr. Redwood: My hon. Friend is right to extend my argument even further. He is pointing out that we should account properly for not only borrowings that are guaranteed but not in the documents, such as the railway borrowings, and the contingent liabilities of all the PPP and PFI projects, but the massive contingent liabilities in the pensions area throughout the public sector.
I will accelerate my argument because of my hon. Friend's question, although I was going to refer to this matter later. The Government have just said to all private businesses that they must not only have recent calculations of the deficits in their pension funds, but write those deficits on to their company's balance sheets. I understand the logic of that, and FRS 17 is the standard under the Government's requirements. My plea is not that the rule is changed for companies, but that the same rule is applied to the Government. It is obvious that the Government have a massive deficit on the pension account because theyGovernments of all parties have done this over the yearshave built up huge liabilities, but not provided any assets on the other side of the account to pay for them. We need honest public accounts that match the clarity and honesty of private sector company accounts to show us the contingent liabilities of all the pension funds.
The Government may well counter my point by saying that one can deduce, by reading carefully the Red Book and other sources, the annual payments under the PFI and PPP contracts. However, that is not sufficient because it is a flowan income statementfor each year. We need to know the contingent liability, which is how many times the income must be paid to get rid of the contract, or how much would have to be paid to rescue the contract if the company went bust or the contract went wrong. It is how much would need to be paid to reinstate the service if there was a breakdown. We need an accurate figure for that kind of contingency.
We know that sadly such contracts go wrong from time to time. We can expect new Governments to be elected who would like to change the arrangements, but there would be a substantial price for doing so. For example, it might prove penal to get out of the London tube contract because it is very bad. We need on the face of Government accounts a clear statement of what the contingent liability costs of all the private arrangements would be, in addition to the guaranteed borrowings and the pension liabilities.
My concluding point on debt is simple and echoes the comments of my right hon. Friend. We are borrowing too much as a nation both through the public accounts
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and outside the public accounts under Government initiative and with Government encouragement. As a period of moderate to reasonable growth of the economy is forecast, we ought to rein back that debt more quickly.
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