§ 6. Mr. David Ruffley (Bury St. Edmunds)What his assumptions are in arriving at his revised GDP forecasts announced in the November pre-Budget report. [85253]
§ The Chief Secretary to the Treasury (Mr.Paul Boateng)The Government expect a gathering in the pace of global recovery, with G7 GDP growth forecast to rise from 1½ per cent. in 2002, to 2¼ per cent. next year and 3 per cent. in 2004. As a result, UK GDP growth is expected to accelerate from the second half of next year.
§ Mr. RuffleyWill the Chief Secretary confirm that as a direct result of the Chancellor's over-optimism and imprudence those juggled forecasts now rest on three assumptions—an upturn in world trade, a wing, and a prayer?
§ Mr. BoatengThe hon. Gentleman, I know, takes a keen interest in these matters. I heard him only this morning talking on the "Today" programme about toxic cocktails—now he is over-egging the pudding. He needs to reflect and recognise that the assumptions outlined by my right hon. Friend are based on a rigorous assessment of the factors underlying trend growth, which were published in the pre-Budget report. He knows the assumptions in tables A and B very well, and knows that they are prudent, rigorous and in line with the broad breadth of independent forecasters. He should at least give some recognition to that fact.
§ Mr. James Plaskitt (Warwick and Leamington)The pre-Budget report shows that my right hon. Friend anticipates a greater contribution to future growth from business investment. What measures is he introducing to encourage that?
§ Mr. BoatengBusiness investment is key to our continued performance, hence the importance of the 2000 enterprise zones, not least in the most disadvantaged areas; the measures that we are introducing to increase R and D, not only in small and medium-sized enterprises but in large enterprises; and the measures on skills announced by my right hon. Friend the Secretary of State for Education and Skills. All of that will improve and enhance productivity, and promote business investment.
§ Dr. Vincent Cable (Twickenham)How would the GDP estimates be affected by a war in Iraq? The Minister will be aware of the work of the Congressional Budget Office in the US, which suggests that even a short and successful war and reconstruction could cost $150 billion—1.5 per cent. of GDP. Are such estimates relevant to the UK, or will the Treasury publish its own independent estimate?
§ Mr. BoatengThe hon. Gentleman will have seen the assumptions made in the PBR—for instance, in relation to oil prices at $25.10 and constant thereafter. He is aware of the prudent provision that we have made through the £1 billion that has been set aside for contingencies. He is also aware—these risks are again reflected in the PBR—of the risks attendant on the geopolitical situation, including Iraq. All those assumptions are contained in the PBR, which takes full account of the factors that he raised.
§ Ross Cranston (Dudley, North)May I ask my right hon. Friend about the assumptions concerning employment growth? Since 1997 there has been a massive number of new jobs. Unemployment in Dudley has gone down since 1993 by 70 per cent., but the Joseph Rowntree Trust has just reported that there are still significant numbers of unemployed people—mainly sick, disabled and lone parents—wanting jobs.
§ Mr. BoatengThe Joseph Rowntree Trust made it clear in its report that although there are always risks in this area, we are broadly on track to meet our targets in relation to child poverty. The assumptions made in relation to employment are based on independent forecasts and analysis. We are confident that the measures that we are taking, not least to make work pay—work is the surest route out of poverty—will allow continuing improvements in the number of children taken out of poverty; 200,000 were taken out of poverty last year, and there is every expectation that we will meet our undoubtedly challenging targets in that regard.
§ Mr. Michael Howard (Folkestone and Hythe)I welcome the proposal made by the Chancellor in answer to the hon. Member for North Durham (Mr. Jones). He does indeed have support for those proposals from the Conservative Opposition. Will the Chief Secretary tell us why the Chancellor blamed his failure to meet his Budget forecasts on falls in world growth and world 386 trade, when the forecast for world trade this year, on page 152 of the pre-Budget report, was only ¼ per cent. lower than the Budget forecast, and the forecast for G7 growth has not changed at all? Is not the truth that it is not the forecast for the rest of the world that was downgraded, just the forecasts for this country?
§ Mr. BoatengI welcome the right hon. and learned Gentleman's earlier remarks in response to my right hon. Friend the Chancellor's earlier answer. I draw the right hon. and learned Gentleman's attention to the fact that last year saw the sharpest slowdown in world growth for almost 30 years. The world's largest three economies, Japan, Germany and the US, were in recession. There were massive falls in the equity market. Despite all that, our growth was the fastest of all the G7 economies last year. The right hon. and learned Gentleman ought o recognise that and give credit for it, rather than continuing to cast himself in the role of Cassandra and Jeremiah.