HC Deb 18 April 1996 vol 275 cc828-30
3. Mr. MacShane

To ask the Chancellor of the Exchequer what is his estimate for the PSBR for the rest of 1996; and if he will make a statement. [24307]

6. Mr. Austin Mitchell

To ask the Chancellor of the Exchequer if he will make a statement on the change in the level of Government borrowing over the last financial year. [24313]

The Chief Secretary to the Treasury (Mr. William Waldegrave)

The provisional outturn for the 1995–96 PSBR is £32 billion. Excluding privatisation proceeds, that is £8 billion lower than the previous year.

An updated forecast of the 1996–97 PSBR will be published in the summer economic forecast in a couple of months' time.

Mr. MacShane

Is not that answer proof positive not just of the ideological disarray on the Treasury Benches but of technical incompetence? In the Red Book for 1995–96 we were promised a PSBR for this year of £21 billion, yet in the press release issued today that has increased to £32 billion. The Treasury was not able to account for £10 billion, which now has to be found. If any company were responsible for that, its finance directors would be sacked. I suggest to the Chief Secretary that perhaps Sir Richard Scott should be asked to set up an inquiry into where that money has gone.

Mr. Waldegrave

The expenditure controls have come in exactly on target yet again. For every year in which we set a new control total, we have hit it exactly. I do not think that there was any year under the previous Labour Government, except when the International Monetary Fund was running things, of which that could be said.

The Labour party has voted against every one of the expenditure control measures that we have taken. It has voted against them, lobbied against them and gone into the outside world and argued against them. Under Labour party policies, and under what it would have done if Labour had been in power, borrowing would have been much higher, as it would be if ever Labour got to power.

Mr. Mitchell

Is the Minister aware that, as a proportion of gross domestic product, the national debt is now more than 50 per cent., which is about the same as it was in 1979–80, despite the fact that he has had more than £100 billion of revenue from North sea oil, plus all the revenue from privatisation? This year's PSBR will cost about £3 billion, and every year into the future, just to pay the interest on it. That is accumulating deadweight debt. Is that responsible finance?

Mr. Waldegrave

It is extremely helpful to have support for Conservative economic policies from anywhere in the House and it is wonderful to hear Opposition Members arguing in favour of lower spending, lower debt and lower taxes. The trouble, however, is that we all know that that is wonderland. If the Labour party came into power, it would be just like it was when Labour was in power before: higher borrowing, higher taxes, higher spending—and I am advised that the hon. Gentleman has his tie on upside down.

Sir Peter Hordern

Does my right hon. Friend agree that it is important to keep the PSBR as low as possible to keep interest rates low, otherwise it would be impossible to have tax cuts, but is it not pretty rich for the Opposition to talk about the PSBR when, as a proportion of GDP, the PSBR was so high under Labour that the Labour party collapsed into the arms of the IMF on two occasions?

Mr. Waldegrave

I agree with my right hon. Friend. He is clearly right. Many people are asking—many supporters of the Labour party are asking—what on earth is the point of a party of, allegedly, the left that argues the same case as the Conservatives? Where has the dialectic of politics gone? The truth is that it has not gone at all. If the Labour party ever got back into power, we would have higher spending, higher borrowing, higher taxes, as we always do under a Labour Government, and higher unemployment, too. There has never been a Labour Government who did not leave unemployment higher than they found it.

Mr. Legg

Will my right hon. Friend accept my congratulations on the progress that he has made in reducing the PSBR over recent years? Is he aware, however, that if Britain were part of a single currency, the current deficit would be unacceptable, the United Kingdom would be subject to fines, and the timing of tax increases and public expenditure reductions would no longer be a matter for the Chancellor and the approval of the House? Does he accept that such a reduction in the powers of Her Majesty's Ministers and the authority of the House would be unacceptable?

Mr. Waldegrave

We are doing what we believe to be right for this country, and we would be doing it in any circumstances and shall continue to do it. It is noticeable that the debt to GDP ratio in the United Kingdom has fallen since 1979, whereas it has up to doubled in the other big countries of the EU. The sensible policies followed by the Conservative Government over the past years, which will be continued whatever happens, seem to me to stand on their own merits.

Sir James Molyneaux

Will the Chief Secretary consider recommending raising the retirement age and thus make a big contribution to reducing the public debt?

Mr. Waldegrave

The right hon. Gentleman makes an interesting point—which, incidentally, is referred to in the IMF world report which was published today. That report reveals the long-term strength of the United Kingdom's position, thanks to our funded pensions. We have almost no "contribution gap"—if I may use the jargon—whereas a number of other countries, especially those that follow the Opposition's policies of implementing the social charter and high social spending, among others, now face severe difficulties.

Mr. Gallie

Will my right hon. Friend tell us how important the recent successes of the car industry have been in dealing with the continuing pressures on the public sector borrowing requirement? Following the words of the hon. Member for Birmingham, Ladywood (Ms Short), will he also tell us what effect such ideas, if implemented, would have on car ownership?

Mr. Waldegrave

We seem to have witnessed the shortest ever half-life of a Labour policy. Yesterday, a policy relating to punitive taxation of company cars was leaked; it has already been withdrawn today, in the Evening Standard.

My hon. Friend makes a good point. We are now a major car manufacturing and exporting country again: we are exporting and producing as many cars as we were in the early 1970s. The proposals advanced by Labour's transport spokesman would damage that position.

Mr. Charles Kennedy

In an interview with Sir David Frost in September 1994, the Chancellor of the Exchequer said that a public sector borrowing requirement of £30 billion was no basis for cutting taxes. Where does that leave the Government's tax-cutting strategy today, given that we now have a PSBR of £32.2 billion? Has the Chancellor abandoned his previous position, or has the Government's strategy collapsed?

Mr. Waldegrave

The hon. Gentleman is labouring under a misapprehension. The figure that has just been reported relates to the last year; the taxes that we have introduced will affect next year.

Mr. Jacques Arnold

Would not the PSBR forecast for this year have been much lower without the costs of the bovine spongiform encephalopathy scare, stoked up so disgracefully by the hon. Member for Peckham (Ms Harman)?

Mr. Waldegrave

I suspect that my hon. Friend is right. [Interruption.] Opposition Members laugh; they are laughing at the damaging of livelihoods by the scares caused largely by Labour's health spokesman, which I do not consider a laughing matter.