Panel of Independent Forecasters (Hansard, 3 February 1994)

§ 8. Sir Thomas Arnold
To ask the Chancellor of the Exchequer what assessment he has made of the work of the panel of independent forecasters.

§ Mr. Kenneth Clarke
I have read the panel's reports with interest, and I look forward to receiving the next one later this month.

§ Sir Thomas Arnold
Will my right hon. and learned Friend confirm, yet again, that he has absolutely no intention of disbanding the panel?

§ Mr. Clarke
Yes.

§ Mr. Radice
Has the Chancellor noted that the majority of the independent panel advised against tax increases in his Budget? Does he agree that the total of the two Budgets' tax increases, which amounts, as he told the Treasury Select Committee, to 7p on the standard rate of tax, is in danger of choking off the recovery?

§ Mr. Clarke
Different forecasters have had different views at different times. On this occasion, the members of the panel of forecasters are rather nearer to agreeing with each other than usual. Most of them are very supportive of the Budget. They are all revising their forecasts in the light of the fact that our determined action to ensure that we got control of public borrowing has restored business confidence to an all-time high. They now share our forecast that we can expect gross domestic product to grow by about 2½ per cent. in the coming year. It is realistic to look for about 3 per cent. growth to be sustained thereafter. That growth can be combined with low levels of inflation. Inflation is now at its lowest level for about 20 years.
I am also glad to see that forecasts for business investment are up. Business investment is forecast to rise by 3¼ per cent. in 1994. Total fixed investment is forecast to grow by 3 per cent. That means that sustained growth, with low inflation, based on investment and exports as well as consumption, lies ahead of us if we continue with the prudent economic policies that we are pursuing at the moment.

§ Mr. Garnier
When my right hon. and learned Friend next discusses matters, especially investment, with the panel of independent forecasters, will he seek to persuade its members that it would be a good idea to lower capital gains tax rates and that, eventually, capital gains tax should be abolished altogether?

§ Mr. Clarke
If someone could persuade them of that, no doubt they would add their voices to the advice of that kind that comes to me occasionally from various quarters, not least from my hon. Friend.

§ Mr. Nicholas Brown
I understand the Chancellor's difficulties in answering questions about tax burden forecasts, so in an effort to be helpful, may I ask him about public expenditure forecasts instead? Will he share his well-known mastery of the details with the House and say what is the size of the civil service and what he intends the size of it to be in three years' time?

§ Mr. Clarke
The share of gross domestic product taken by the state is forecast to fall from 45 per cent., its peak during the present recession, to 41 per cent. on the plans that I have announced—that compares with 46 per cent. under Labour. The Budget demonstrated a strong control over spending. Total Government spending is forecast to rise by 1 per cent. in real terms next year—far below the level of growth of the economy. The new control total, thanks to the efforts of my right hon. Friend the Chief Secretary, will rise by an average of only about ¼ per cent. in real terms over the next three years. That is why we are forecasting that spending will be on a downward trend and that the total tax burden on the public and on the economy will also be on a downward trend.