Public Sector Deficit (Hansard, 29 January 2004)

§ 8. Brian Cotter (Weston-super-Mare) (LD)
Whether he expects to meet his public sector deficit forecast this fiscal year; and if he will make a statement. [151549]

§ The Chief Secretary to the Treasury (Mr. Paul Boateng)
An updated assessment of public finance projections will be available as usual in the forthcoming Budget on 17 March.

§ Brian Cotter
Does the right hon. Gentleman agree with yesterday's statement by the Institute for Fiscal Studies that, because of current deficits, the Government must increase taxation or reduce growth by 2006–07?

§ Mr. Boateng
No, I do not agree, and I do not believe that the hon. Gentleman has studied fully the IFS green budget. Had he done so, he would have seen that it confirms the sustainability of UK public finances when underpinned by low levels of debt. We would never be able to enjoy those low debt levels if we had adopted the tax-and-spend policies espoused by the Liberal Democrats.

§ Hugh Bayley (City of York) (Lab)
What assessment have Treasury officials made of Liberal Democrat proposals for tax commitments on the one hand and spending commitments on the other? What effect would they have on the deficit? If the deficit increased, what reduction in public expenditure on health and education would be necessary, given the amount of public expenditure that would go on debt repayment?

§ Mr. Speaker
Order. The hon. Gentleman should not ask the Minister questions about Liberal Democrat policy—[Interruption.] Well, perhaps it would be better for him to write to the Liberal Democrats to find out.

§ Mr. Oliver Letwin (West Dorset) (Con)
I certainly would not want to ask any hon. Member to wait that long.
I begin by thanking the Chancellor for his courtesy in letting us know the date of the Budget. Does the Chief Secretary acknowledge that the hon. Member for Weston-super-Mare (Brian Cotter) asked a sensible question? The IFS has produced a series of calculations that suggest that, in the next cycle, the Government will need to raise taxes to meet their own rules. Is that not true?

§ Mr. Boateng
The right hon. Gentleman really ought to reflect on his own party's record in government. Under the stewardship of a Tory Chancellor of the Exchequer, net debt was about 44 per cent. of GDP. The reality is that the Government remain on track to meet their fiscal rules over the economic cycle on the basis of our cautious assumptions, which were clearly stated in the pre-Budget report. IFS projections confirm that the golden rule will be met in the current economic cycle.

§ Mr. Letwin
That was a wonderful assembly of unanswers to my question. Let me put it to the Chief Secretary another way. He will have noticed, as we have, that it is not just the IFS that is on to this. The 379 International Monetary Fund and the Organisation for Economic Co-operation and Development, which are not employees of the Conservative party, the Liberal Democrats or anyone else in the House, have also come to the conclusion that the Chancellor's present level of borrowing and his present path of spending will mean—not in this cycle, to which the Chief Secretary referred, but in the next cycle—that he will need to raise taxes if the Government are re-elected. Is the Chief Secretary arguing that that is not the case?

§ Mr. Boateng
I am glad that the right hon. Gentleman now admits that we will meet the golden rule in this cycle. That is a new departure for him—he has urged us to introduce policies that would involve a cut in our current spending plans and that would move us towards 35 per cent. of GDP, which would be disastrous for the economy and the country at a time when we are investing in the very public services that were grossly run down when his party had stewardship of the economy.

§ Mr. Letwin
I do not know whether I will be able to persuade the Chief Secretary to engage in a genuine discussion of an important matter; he is so attached to policy-based evidence making that he is reluctant to engage in evidence-based policy making. Would it not be simpler for the Government to admit that the IMF, the OECD and the IFS have all concluded that in the next cycle—that is, after the election—the Government, if they are re-elected, will have to raise taxes? That is a serious problem that needs to be debated. Does he accept that it would be better if he admitted it, so that the public out there, who want us to have a serious and rational debate, could see us having a debate about whether it is in the interests of this country to raise taxes?

§ Mr. Boateng
I shall resist the right hon. Gentleman's blandishments, but I urge him to have a serious and rational debate posited on the fact that we will meet our fiscal rules—fiscal rules to which he was never prepared to submit his party when it was in government. If he had done so, his party would never have met them, but if it had tried, at least we would not have had the net debt of about 44 per cent. of GDP that we inherited. We were paying back the debt that the Conservative Government had accumulated. They were paying more on interest than on health, education and transport, and we have had to deal with all that they abysmally failed to do.

§ Mr. Russell Brown (Dumfries) (Lab)
Will my right hon. Friend confirm that the largest number of public sector jobs involve nursery staff, doctors, teachers and teaching assistants, and that the real route to dealing with the matter is by cutting the share of administration costs?

§ Mr. Boateng
My hon. Friend makes a good point. He will welcome the steps taken by my right hon. Friend the Secretary of State for Health to cut administration costs and headquarters costs. My hon. Friend will also welcome the steps that we are taking as a Government, using the good offices of Sir Peter Gershon, to make sure we build that into the up-coming efficiency review.