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25 Jan 2007 : Column 1539

Mr. Brown: By the hon. Gentleman’s party acquiring a sensible economic policy that is line with ours, so that we can support sensible levels of investment in infrastructure and the economy. When we came to power in 1997, public sector net investment was 0.7 per cent. of GDP. It is now nearly 21/4 per cent. of GDP, it has risen every year, and it will continue to rise in the next few years. Investment in infrastructure and transport is running at £18 billion, investment in schools is running at £6 billion, and investment in the health service is running at more than that. It is possible to produce such figures only by achieving the right balance between tax, spending and borrowing, and by having a sensible economic policy. I urge the hon. Gentleman to go back to the drawing board with his.

Mr. Sadiq Khan (Tooting) (Lab): My right hon. Friend will be aware that the very same people who opposed the policies that have led to this economic growth now believe that the economic growth in India is a threat. Leaving aside an unhealthy interest in “Big Brother”, what opportunities does the economic growth in India give the United Kingdom?

Mr. Brown: I said in India that we wished to double our exports to the country in the next few years and quadruple them by 2020, and I believe that that is possible. We signed a number of agreements in India, including public-private partnership agreements. As my hon. Friend suggests, by investing in infrastructure India will benefit from the expertise that we have built up in the United Kingdom. Greater collaboration between India and Britain on science and technology and universities, and, I believe, the strength of the relationship that we are building with India again, will serve both economies well—but both countries realise that economic strength can only be built on a basis of stability. And my hon. Friend is absolutely right: the Conservative party opposed the independence of the Bank of England.

Stewart Hosie (Dundee, East) (SNP): As the Chancellor is no doubt aware, while the Treasury is right to measure aggregate growth rates, growth is not uniform throughout the United Kingdom. It is highly likely that growth in the Dundee economy will be seriously dented by the recent announcement of more than 1,100 job losses. Is the Chancellor prepared to undertake an assessment of the impact on growth of job losses in the Dundee economy, and in other economies that are blighted in a similar way, to establish what targeted measures might be introduced in such circumstances?

Mr. Brown: If any redundancies happen, as they have at NCR, it is to be regretted, but I think the hon. Gentleman is giving us only one side of the picture. Unemployment in Dundee has more than halved under this Government, and in recent years there has been a phenomenal expansion in jobs created around the university, in life sciences and in new technology. Dundee is benefiting from winning money from United Kingdom research councils and United Kingdom research budgets. The policy that would be most damaging for Dundee is the hon. Gentleman’s policy of separating Scotland from the rest of the United
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Kingdom, which the leader of his party now believes could happen without the need for a Scottish pound. That is completely unrealistic. I think the that hon. Gentleman, like the Liberal Democrats, should go back to the drawing board and think again.

Gold Reserves

4. Mr. David Heathcoat-Amory (Wells) (Con): How much was realised from the sale of 395 tonnes of gold from the reserves between 1999 and 2002; and what the market value would be of that gold at 2006-07 prices. [111023]

Mr. Brown: Three hundred and ninety-five tonnes of gold were sold from the reserves between July 1999 and March 2002. The proceeds were in three tranches of $1.1 billion, $1.3 billion and $1.1—$3.5 billion in total. The purpose was a restructuring of the foreign currency and gold reserves aimed at achieving a better balanced portfolio—something that other countries are also achieving. The sterling value of the gold sold has risen to $4.2 billion, but a one-off reduction in risk of approximately 30 per cent. was achieved, as measured by value at risk, and the independent National Audit Office concluded that the sale had achieved value for money.

Mr. Heathcoat-Amory: As the Chancellor obviously has great difficulty in admitting the scale of this fiasco, will he confirm the Treasury’s own figure that the average price obtained during those gold sales was $275 an ounce, whereas the price today is $642 an ounce? That amounts to a total loss to the Treasury of more than $4.5 billion. As the Chancellor was warned at the time about the recklessness of those sales, does he agree that the depths of incompetence reached in that fiasco rule him out of being considered for further office?

Mr. Brown: What the right hon. Gentleman fails to tell us is that we restructured the portfolio, and what causes him most grief is the fact that one of the items that we bought was euros, which have increased in value since the purchase, at greater benefit to the Treasury. I am not going to take any lectures from the right hon. Gentleman, who was a member—in fact, for a time he was Parliamentary Private Secretary to Lord Lamont—of the Government who were in office when £28 billion of our reserves were sold on Black Wednesday, a total of £40 billion of reserves were sold after that, and £3.3 billion was lost to the United Kingdom. That was the biggest fiasco in history, and the right hon. Gentleman should be ashamed of himself.

Anne Snelgrove (South Swindon) (Lab): Will my right hon. Friend confirm that achieving the shrewd and successful management of the economy over the past 10 years has required more than looking at three years of gold reserve prices? Will he further confirm that he has absolutely no intention of introducing a third fiscal rule that will wipe £22 billion from this country’s public spending?

Mr. Brown: The most damaging thing we could do in terms of the stability of the economy would be to adopt a fiscal rule that would require us to cut public
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expenditure by £18 billion tomorrow. Conservative Members would have to explain to their constituents about the schools and hospitals that they were closing and the nurses and teachers whom they were laying off. We will continue with our prudent management of the economy, and that includes restructuring the reserves of the economy in such a way that we are not dependent on one volatile item.

Sir Peter Tapsell (Louth and Horncastle) (Con): In his last months as Chancellor, will the right hon. Gentleman have the frankness to apologise to the British people for selling, despite my warnings at the time, almost half of our gold reserves at the lowest gold price for 25 years, and just before there was a sustained rise? I warn him that I intend to do my best to haunt him throughout his premiership by repeatedly reminding him of that folly.

Mr. Brown: I look forward to continuing interventions from the hon. Gentleman while I hold the position of Chancellor. Almost every other country has done exactly what we have been doing to restructure and rebalance our reserves. It is the right thing to do; it is right not to be dependent on one volatile currency. The results were tested by the National Audit Office and it said that it was the right decision, and represented value for money. If I had taken the hon. Gentleman’s advice, which he gave me very forcefully—indeed, even more forcefully in 1997—I would not have made the Bank of England independent; he said that that would lead to deflation, unemployment and ruin for the British economy. The opposite has happened.

Public Expenditure

5. Mr. Ian Austin (Dudley, North) (Lab): What assessment he has made of the effect of levels of public expenditure on the economy; and if he will make a statement. [111024]

The Chief Secretary to the Treasury (Mr. Stephen Timms): By borrowing only to invest and maintaining net debt at a prudent level, the Government have succeeded in delivering unprecedented economic stability and the longest period of economic expansion on record, while at the same time correcting the legacy of under-investment that we inherited 10 years ago.

Mr. Austin: The comprehensive spending review will be the next opportunity to demonstrate how increased investment and public service reform can strengthen our public services and the economy. Will the Minister meet a delegation from the black country to examine proposals for spending review investment that will boost skills, improve the transport network, reclaim brownfield sites and provide more housing, all of which support the Government’s economic priorities? Can I also ask him to confirm that—

Mr. Speaker: Order.

Mr. Timms: I should be delighted to meet the delegation. We will certainly not adopt the Conservative party’s proposals, which would so badly undermine investment in exactly the priorities that my hon. Friend has highlighted—skills, transport and
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regeneration. We will maintain investment in those areas, which are crucial to the economy’s future, in the CSR announcements later this year.

Mr. Bernard Jenkin (North Essex) (Con): It is undoubtedly true that the very dramatic increases in public expenditure have increased the inflationary pressures in the economy as well. Since the Chancellor has twice today reminded the House that we had reservations about the independence of the Bank of England, may I remind him that we had reservations about the proposals that he tabled in the Bank of England Bill because the Bank would not be independent enough? [Interruption.] Oh yes, it is true. We proposed longer-term limits for the Monetary Policy Committee. Is it not now time to strengthen its independence, so that it can no longer be interfered with by the Chancellor?

Mr. Timms: The hon. Gentleman has given us a very interesting rewriting of history. It sounds as though what he wants is a European central bank. We have an extremely good record on inflation, which is 3 per cent. and coming down. Of course, in 1997 our economy was the most unstable of all the developed countries regarding inflation; today, it is the most stable. That is a result of the success of this Government’s policies over the last 10 years.

Barbara Keeley (Worsley) (Lab): Increased resources to schools in Salford in the last 10 years have resulted in an improvement in GCSE results. The number of pupils achieving good results has increased from 30 per cent. 10 years ago to 50 per cent. now. Among those schools is St. George’s, which achieved a 10 per cent. increase despite serving a disadvantaged area that is in the top 3 per cent. of the most disadvantaged areas in the country. Will my right hon. Friend underline his and the Treasury’s commitment to continuing to provide that level of resources, so that our pupils and teachers can continue to make such improvements?

Mr. Timms: I very much welcome the success in my hon. Friend’s constituency, and, indeed, across the country. Of course, that is a consequence of the fact that, whereas our education spending was among the lowest in the developed world 10 years ago, today it is among the highest. That is very good news for the future of our economy, and yes, I can confirm that we will maintain that priority in the years ahead. We will not be adopting a third fiscal rule, which would reduce spending this year by £28 billion and put all that progress at risk.

Mr. James Clappison (Hertsmere) (Con): Might not different levels of public spending in different parts of the economy lead to a sense of grievance? Is the Chief Secretary aware that in the same edition of The Daily Telegraph in which the Chancellor argued the case for the Union, there also appeared an article setting out that the frail and elderly in England paid three times as much for their residential care as the frail and elderly in Scotland, on top of having to pay for the personal care that comes free in Scotland? Is this right?

Mr. Timms: I am not sure whether the hon. Gentleman is calling for more spending in that area. He may well be, and if he is, he is joining his Front-Bench colleagues in that regard, who, since I have been Chief
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Secretary, have called for more spending for more social workers, more nurses and twice as many school nurses—at the same time as calling for a third fiscal rule that would dramatically cut spending on all those services. I hope that the hon. Gentleman will support the framework that we have put in place and the economic success that that has achieved, which has allowed us to continue to invest across the board, including in social care.

Judy Mallaber (Amber Valley) (Lab): In the next spending review, will my right hon. Friend ensure that the departmental public service agreements include a full analysis of how they will meet the new gender equality duty? At the moment, we are missing out on the skills, experience and potential contribution of a substantial part of the population, as identified in the Women and Work Commission report.

Mr. Timms: My hon. Friend is absolutely right. We do need to do better in that area, and on a number of other equality issues across the economy in the future. We shall indeed address all those issues in the delivery plans that will go with the public service agreement targets.

Mr. Mark Hoban (Fareham) (Con): Yesterday the Home Secretary wrote to judges asking them to jail fewer people because of prison overcrowding. Does the Chief Secretary think that the Chancellor now regrets deciding last year to freeze the Home Office’s budget in real terms over the next spending round, before he settled other Departments’ budgets? Does the Chief Secretary agree with the Home Secretary that the Home Office is not fit for purpose?

Mr. Timms: My right hon. Friend the Home Secretary simply reminded judges and magistrates of the existing position. The reality is that spending on and investment in prisons has been rising, and will rise further. More places will be provided. If the hon. Gentleman is now calling for even more spending on prisons, he needs to explain to the House how that is compatible with also calling for a third fiscal rule that would dramatically reduce spending. There is a fundamental incoherence in the policy of Opposition Front Benchers that needs to be explained.

Helen Goodman (Bishop Auckland) (Lab): In my constituency, Thorn Lighting is developing a new technology—which will mean more jobs—through a partnership with Durham university. Does my right hon. Friend agree that it is record spending on science under this Government that will secure the long-term future of the economy?

Mr. Timms: I very much agree with my hon. Friend. The investment that we have made in science is fundamental to our future economic success. Durham has a great record in that area, and I pay tribute to the work that she has done and the interest that she has shown in that. We need to continue that investment in order to secure our long-term economic success and to maintain the record of stability that has been so important across the economy over the past decade.

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Borrowing Requirement

6. Michael Fabricant (Lichfield) (Con): What projections he has made of UK borrowing requirements in each of the next five years; and if he will make a statement. [111025]

The Chief Secretary to the Treasury (Mr. Stephen Timms): As we set out in the pre-Budget report, total net borrowing will fall from £37 billion this year to £31 billion, and then to £27 billion, £26 billion, £24 billion and £22 billion, or from 2.3 per cent. of national income next year to 1.3 per cent. by 2011-12. Along with Canada, the UK is the only G7 country with net debt below 40 per cent.

Michael Fabricant: Given that those are increases in the Treasury’s borrowing forecast, what analysis have the Chief Secretary and the Chancellor made of the effects of that on inflationary pressures and the ever-increasing value of the pound?

Mr. Timms: The key point is that we stick closely to the rules that we have set out. The sustainable investment rule is that net debt will be kept at a sustainable level—below 40 per cent.—and it will be. It is below that at the moment and it will stay below. It will stabilise at about 38.5 per cent. I remind the hon. Gentleman that total net borrowing reached 7.8 per cent. of GDP under the last Government and will be 2.3 per cent. next year. However one looks at it, this Government’s record has been far better.

Jane Kennedy (Liverpool, Wavertree) (Lab): Does my right hon. Friend agree that the UK’s borrowing requirement is affected by the strength of the UK car manufacturing industry, and does he further agree that the tax regime underpinning the manufacture and sale of 4x4 cars has a big impact on that sector? Would he or my right hon. Friend the Chancellor care to visit the very successful Land Rover plant on Merseyside, which produces both the Freelander 2 and the Jaguar X-type vehicles on the same production line at the same time—

Mr. Speaker: Order.

Mr. Timms: I congratulate the company and the plant on those achievements. We will, of course, ensure through our commitment to stability in the economy that that success can continue.

Mr. John Redwood (Wokingham) (Con): If borrowing has been under such wonderful control, how does the Chief Secretary account for the fact that over the last decade sterling interest rates have been so much higher than dollar rates, yen rates and euro rates, including areas that are growing much faster than Britain?

Mr. Timms: Let me remind the right hon. Gentleman that the International Monetary Fund said that “macroeconomic stability remains remarkable”. I suggest that he look at what interest rates were when he was a member of the Government. They were sky high, repossessions took place on an enormous scale and unemployment was also high. The claimant count has fallen for three months in a row and growth is at a
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higher level than we and others were expecting. We are determined to ensure that that impressive record continues.

Mr. Brian Jenkins (Tamworth) (Lab): My right hon. Friend will realise that borrowing is driven by expenditure. Before the Government borrow any more money, will they look at their public expenditure and the waste of money spent on raising economic understanding of the issues under discussion today? I am thinking particularly of the Short money .

Mr. Timms: I sympathise with my hon. Friend’s concern—he makes a very fair point. My right hon. Friend the Chancellor announced at the time of the pre-Budget report that during the years of the comprehensive spending review, every Department would achieve value-for-money savings of 3 per cent. year on year, with 5 per cent. savings in spending on administration. That shows that we are continuing to improve value for money in Government spending across the board, if not in the particular area to which he referred.

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