Fiscal and Monetary Stability (Hansard, 10 December 1998)

§ 11. Jacqui Smith (Redditch)
What plans he has to ensure fiscal and monetary stability. [61755]

§ The Chief Secretary to the Treasury (Mr. Stephen Byers)
We have put in place a new framework for monetary and fiscal policy and have taken tough action to deliver low inflation and sound public finances, both of which are essential for economic stability and sustainable growth.

§ Jacqui Smith
Can my right hon. Friend assure me that those policies will be sustained despite both lower world economic growth and the weasel words of the Opposition? In particular, can he confirm that the extra £40 billion of spending on schools and hospitals will be delivered despite moderated growth forecasts? Despite the fact that the Opposition want to reintroduce politics into the setting of interest rates, can my right hon. Friend reassure me that we shall maintain the independence of the Bank of England, which has brought such welcome news on interest rates today?

§ Mr. Byers
As I have already said, the Government welcome today's Bank of England decision to cut interest rates by 0.5 per cent. As the Bank said, the reason for the cut was a weakening in global economic activity. The tough decisions that the Government took to reduce the deficit by £20 billion, to give independence to the Bank 474 of England and to ensure that we hit the inflation target of 2.5 per cent. have enabled us to steer a course of economic stability. That is why we can guarantee £40 billion for our schools and hospitals over the next three years. It is a matter of regret that the official Opposition call that a spending spree; most people regard it as an investment in the future of our schools and hospitals.

§ Dr. Vincent Cable (Twickenham)
Is the Minister aware of warnings given in the Palace of Westminster yesterday by Mr. George Soros about the potential for British economic instability resulting from shocks of sterling instability? Can he confirm that the inter-party committee that he is currently establishing will specifically consider British preparations for entry to economic and monetary union, should entry prove to be in our national interest?

§ Mr. Byers
The committee announced a few weeks ago by my right hon. Friend the Chancellor is still subject to discussion among hon. Members, and we must await the outcome of those discussions before we know the details of its terms of reference. As for the evidence given yesterday by George Soros, on his own admission he has made some fundamental mistakes recently—he may have made one in his evidence to the Treasury Committee.

§ Yvette Cooper (Pontefract and Castleford)
Given that the framework for stability that the Government have put in place has led to interest rates falling from a peak of just over 7 per cent., compared to a previous peak of 15 per cent., will my right hon. Friend promise that he will not follow the advice of the deputy Leader of the Opposition to give away the Bank of England's independence and have the Chancellor, rather than the Governor of the Bank of England, taking decisions on interest rates?

§ Mr. Byers
The time has come for the Conservative Opposition to reveal their position on independence for the Bank of England. It is because we have given the Bank of England independence that long-term interest rates are now at their lowest level for some 35 years and that we have today received the welcome news from the Bank that interest rates are to be cut by a 0.5 per cent. It is because we will not play party politics with interest rates that we gave independence to the Bank of England. It is a matter of regret that the Conservatives apparently still want to have that control, which will operate only for narrow party advantage, not in the national interest.

§ Mr. Nick Gibb (Bognor Regis and Littlehampton)
Will the Chief Secretary explain why the National Audit Office was not asked to audit the economic assumptions used in the pre-Budget report? Will he also explain the discrepancy between the written answer that the Economic Secretary gave me, to the effect that there were no changes to the economic assumptions used, and the written answer that the Secretary of State for Social Security gave to my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), to the effect that the forecasts for social security spending had been changed because of changes to the economic assumptions used? Which answer is the truth, and why was there no audit?

§ Mr. Byers
The truth is the answer that I gave yesterday evening in the debate on this issue: that the conventions have not been changed. The pre-Budget report used unemployment figures for September, which was the latest month for which they were available. Because there was no change, as the code for fiscal stability clearly states, there was no need for the NAO to be involved.

§ Mr. Dennis Skinner (Bolsover)
My right hon. Friend will be aware that, whenever there is a recession, as sure as night follows day the worst-affected areas are those where unemployment is already very bad. Does he agree that that problem demands some intervention, as evidenced by the Deputy Prime Minister's idea for a coalfield task force, and that such intervention will need to be repeated in many ways if there is a downturn in the economy, so that in those areas where unemployment rears its ugly head we manage to get rid of at least most of it?
Is my right hon. Friend also aware that there is one sector of the economy where employment is not affected? I refer to the Tories' moonlighting jobs—more than 200 of them. Under the new Labour Government, the Tories have been gathering in jobs left, right and centre. The shadow Chancellor already has four, and the next Register of Members' Interests will show an increase. If all the firms involved start paying in euros, you can bet your bottom dollar the Tories will not resign their non-executive directorships.

§ Mr. Byers
As always, I am grateful to my hon. Friend. I forgot to point out in my earlier contribution that, since the general election, not only has unemployment in the shadow Chancellor's seat fallen by 29 per cent., but he has gained four jobs himself. On the more serious point, my hon. Friend is right to highlight the important work of groups such as the coalfield task force, as well as the new deal for communities launched by the Deputy Prime Minister. We were elected as a Government who would work for all of our people, not the few. We intend to do just that, thus ensuring that we give new hope to the communities represented by my hon. Friend and me.