§ 3. Michael Fabricant (Lichfield)What he estimates will be the levels of (a) national debt and (b) borrowing in each of the next five years; and if he will make a statement. [85249]
§ The Chancellor of the Exchequer (Mr. Gordon Brown)Figures for public sector net borrowing for future years are 24, 19, 19, 19 and 20 billion pounds. That is 2.2, 1.6, 1.6, 1.5 and 1.5 per cent. of gross domestic product. Public sector net debt in future years will be 32.1, then 32.4, 32.6, 32.7 and 33 per cent. of GDP. We consistently meet all our fiscal rules.
§ Michael FabricantThe Chancellor has given a detailed answer, but can we believe any of it any more? If we consider the five-year forecast that he made for borrowing, he said that there would be £30 billion-worth of borrowing in last year's Budget, which went up to £66 billion-worth of borrowing in the pre-Budget report. It then went up to £72 billion in this year's Budget, and to more than £100 billion in this year's pre-Budget Treasury forecast. Does not the Chancellor now admit that all his bombast and all his predictions have come to nothing, and that his credibility gap is about as—
§ Mr. SpeakerOrder.
§ Mr. BrownWe have the lowest inflation for 30 years, the lowest long-term interest rates for 40 years, the lowest unemployment for 25 years, and debt as a share 379 of national income is at its lowest for 100 years. The accurate figures are those that I just read out to the hon. Gentleman. He must recognise that if we want to continue to run a successful economy and spend money on public services, the policy to be pursued is that being pursued by this Government. I remind him that, at the general election, he promised in his manifesto that he wanted to spend more money on police and hospital services. Those things must be paid for.
§ Mr. John McFall (Dumbarton)Does my right hon. Friend agree that the hon. Member for Lichfield (Michael Fabricant) has flair, but not in the area of the economy? He should stick to other subjects. If he reads the pre-Budget report, he will see the figures set out. Will my right hon. Friend agree that the UK has among the lowest levels of public debt in Europe, and that he is on track with regard to his economic cycle?
§ Mr. BrownMy hon. Friend, who takes an interest in these matters as Chairman of the Treasury Committee, is absolutely right. Debt in the United Kingdom is about a third of GDP, whereas, in France and Germany, it is between 40 per cent. and 45 per cent. of GDP. In America, it is more than 40 per cent. of GDP. In the euro area, it is more than 50 per cent. of GDP as a whole. In Japan, it is nearly 70 per cent. of GDP. We have reduced debt, and the reason why we are able, as an economy, to have monetary and fiscal stability in a period of difficulty, is that we have taken the difficult decisions since 1997, from which we are reaping benefits.
§ Matthew Taylor (Truro and St. Austell)Given that the Chancellor's plans for a return to sustainability, on his Budget plans, depend on a return to sustainability in personal budgets at a time when house prices have been booming and personal debt has risen to a peak of 111 per cent. of annual personal income—as compared with the late-1980s, when it was just 85 per cent.—what are his plans for achieving a sustainable end to the housing boom without a bust? Does he agree with Chris Allsopp of the Monetary Policy Committee, who said that he should now consider micro-economic policy or financial regulation to ensure that that happens?
§ Mr. BrownIf we had taken the advice of the shadow Chancellor who lives in Truro rather than the shadow Chancellor who lives in Folkestone, we would have had a no-speed economy. The hon. Gentleman's advice was that we should have raised public spending at a time when we were cutting debt. It is because we cut debt that we are in a position, during a difficult period for the world economy, to continue to grow.
On housing, the hon. Gentleman knows that house prices relative to income are relatively high for new buyers. He also knows, however, that mortgage costs relative to average income are very low. Whereas, at the beginning of the 1990s, they were about 36 per cent. of average income, they are now between 13 per cent. and 15 per cent. of average income. That is because we have low inflation and low interest rates. It is about time that the hon. Gentleman recognised that, under this Government, in a very difficult world economic situation, we continue to have an economy that has grown every quarter since we have been in power.
§ Mr. Lindsay Hoyle (Chorley)Allowing for the borrowings that the Chancellor will have to use, will he ensure that growth within business continues to be encouraged, and that future research and development takes place in this country, through his excellent method of tax credits?
§ Mr. BrownWe have the second best tax system for research and development of any of the major industrialised countries. That is because we now have a research and development credit for large firms as well as small firms. We are prepared to listen to business on the subject of improvements that, even now, can be made in that tax credit system, because, for 20 years, Britain fell behind by failing to invest in research and development. We are determined to make those investments, and the research and development credit is one part of that.
§ Mr. Howard Flight (Arundel and South Downs)The House will have noticed that the Chancellor has dropped his boom-and-bust mantra about how his economic management has ended the economic cycle. Could that have something to do with the recent criticisms of his economic management by the IMF and the Bank of England and with the alarming news that Standard and Poor's has just listed the UK, for the first time ever, as an economy facing major potential stress on its banking system because of the possible bursting of the house price bubble and ballooning consumer debt problems? What assumptions has he made in his borrowing forecasts about house prices, consumer debt and the implications for the economy of the warnings not just from the IMF, the Bank of England and Standard and Poor's but from the permanent secretary that house price—
§ Mr. SpeakerOrder. I have counted several questions.
§ Mr. BrownThe Standard and Poor's assessment was made about both Britain and America and it was answered by the Bank of England, which the hon. Gentleman also cited in his argument. The IMF praised the macro-economic management of our economy and also said that the banking system was in a very good position to withstand difficulties. The IMF has therefore also answered Standard and Poor's. The fact of the matter, which the hon. Gentleman cannot understand, is that whereas inflation was at 10 per cent. at the beginning of the 1990s, in the last world downturn, and interest rates were 15 per cent. under the previous Chancellor, inflation is just over 2 per cent. and interest rates are at 4 per cent. We have the macro-economic stability that the Conservative party never gave us.