HC Deb 18 July 2002 vol 389 cc403-5
2. Mr. Desmond Swayne (New Forest, West)

What his most recent estimate is of the rate of growth in gross domestic product. [68398]

The Chancellor of the Exchequer (Mr. Gordon Brown)

Despite there being no growth at all in world trade last year, the UK grew by just under 2 per cent., the fastest growth rate of the G7. The growth forecast for 2002 of 2 to 2½ per cent. was set out in the Budget. I shall report again to the House in the autumn when the pre-Budget report is delivered.

Mr. Swayne

Ministers may discount warnings about the deteriorating fiscal position and the need for tax increases from Schroder Salomon Smith Barney and PricewaterhouseCoopers on the grounds that they are, after all, accountants. But when Vicky Price, the new adviser to the Department of Trade and Industry, adds exactly the same warning, is it not time that the estimates were reviewed?

Mr. Brown

The fiscal rules that we set down in 1997 give a stability to the British economy. We have met those fiscal rules every year, despite the Opposition saying every year that they would never be met. We will continue to meet our fiscal rules and disciplines; we will do that so we can finance higher levels of public expenditure while having the fiscal discipline that is necessary.

Denzil Davies (Llanelli)

Does my right hon. Friend agree that one factor that would have an adverse effect on growth in GDP would be if the very low levels of inflation—which, of course, are welcome—were to slide into deflation? Given that over a range of manufacturing goods prices seem to be falling, will the Treasury start thinking about how to avoid deflation, since at times of deflation central banks are usually superfluous?

Mr. Brown

We made the Bank of England independent and set it an inflation target of 2½ per cent. It is the duty of the Bank to meet that target and it has done so for the past three to four years. It is a symmetrical inflation target; because of that, problems that may arise from deflation are as important as problems that arise from inflation.

Mr. John Bercow (Buckingham)

Was it a lack of confidence in his growth forecast or an uncharacteristic coyness that caused the Chancellor to duck no fewer than six requests from James Naughtie on the "Today" programme on Tuesday to say whether he envisaged further tax rises in this Parliament?

Mr. Brown

I said to Mr. Naughtie—I repeat it to the shadow Chief Secretary—that our spending plans until 2006 are financed by the measures that we announced in the Budget. Indeed, our spending plans for the national health service until 2008 were financed by the measures that we put forward in the Budget. It is now up to the Conservatives to tell us whether they support spending on education and health, which is in the national interest.

Mr. John McFall (Dumbarton)

My right hon. Friend will be interested to know that the experts who appeared before my Committee yesterday said that the spending plans were eminently prudent and that the figures were in the books. That is welcome news in terms of spending for the whole country. However, does my right hon. Friend agree that the question of targets needs to be addressed? There is a proliferation of targets and we must ensure that they do not get in the way of delivery on the ground.

Mr. Brown

First, targets are important because they set objectives for Departments and services. It is by setting targets and objectives that we are making progress in reducing health service waiting lists; getting up literacy and numeracy standards in our schools; getting more young people to stay on in school; and meeting all our objectives, as we will do during this Parliament and beyond, for health and education. As far as the fiscal position is concerned, my hon. Friend knows from the expert advice that he has been given that not only have we met our fiscal rules but those rules are drawn on a cautious basis with a margin. As far as the current balances are concerned, they will be £3 billion, £9 billion, £7 billion, £9 billion and £7 billion; those are several billions, which is the margin for prudence that I set out in the Budget statement. Again, the issue, which has been being raised all this week, is that we want to spend money on health and education, while the Opposition oppose such spending.