§ We have made good progress in reducing public sector borrowing, but it has not been as fast as I expected. The Budget therefore targets public sector borrowing again. The general public may ask why I concentrate on public sector borrowing in the way that I do. [Interruption.] It is suggested that I do so because I am a Tory. That is a good reason for concentrating on public sector borrowing as I do.
One reason why I continue to concentrate so heavily on public borrowing in setting policy is that money spent paying the interest on our debt is, in my opinion, money that I would prefer to spend on public services and the reduction of taxation.
We are making good progress on bringing down borrowing, but lower than expected tax revenues mean that it has not fallen as fast as I expected in the last Budget. This is not bad news for everyone. People are no doubt quite glad not to be paying as much tax as I expected. But as I am the Chancellor, I strongly prefer to keep any tax cuts under my own control.
The causes of these shortfalls in our forecasts of tax revenue—primarily on VAT, but also on direct taxes—cannot wholly be explained by any experts inside or 157 outside the Revenue Departments. But there does seem to be an increasing tendency to exploit loopholes and use special reliefs in an artificial way to reduce tax bills. Those sort of tax cuts are unacceptable. On that, I seem to have agreement. If they are not tackled every year in the Budget, they mean that a few people pay less tax, but the rest must pay more.
In this Budget I will propose a number of measures to stem tax leakage, to protect the ordinary tax payer and to make sure we get the right tax from the right people. When I reduce tax, I want to do so in a way that is fair for all businesses and fair for all hard-working British men and women.
Government borrowing has been steadily coming down for three years. This Budget will ensure that Government borrowing keeps coming down. I expect the public sector borrowing requirement to be £26½ billion this year. That will mean it has halved as a share of GDP over the past three years. I expect it to come down to £19 billion next year and to be broadly in balance by 1999–2000.
That pattern of declining borrowing is very much better than the one I had to put in my summer economic forecast last July. Since I produced the summer forecast, which was debated in the House last summer, I have reduced my expectations for next year by £4 billion.
A large part of that improvement is the result of the measures that I am taking in this Budget. This Budget tightens fiscal policy. The reason why I am tightening fiscal policy now is to reduce the risk of having to tighten monetary policy excessively as I set policy to hit my inflation target.
My decisions are always taken solely in British interests to benefit the British economy. But my decisions in this Budget also mean that, by happy coincidence, we will meet the Maastricht debt and deficit criteria in 1997, and we will do even better than that in the medium term. [Interruption.] I do not need any assistance from nationalists. It is a happy coincidence for everyone because those criteria make sound economic sense, as we all agree, with or without a single currency.
Our option whether to join or stay out of a single currency, based on British national interest, remains a genuine choice. We will qualify, but we will choose in the next Parliament when the time comes.
This Government is the champion of sound public finances, of limited government and of low taxation. Our combination of low taxation, low public spending and low debt is the best in Europe. We intend to stay in that enviable position. We can do that only if we continue to bear down on public spending.