HL Deb 21 March 1994 vol 553 cc496-7

2.52 p.m.

Lord Stoddart of Swindon

My Lords, at his request, and with his consent, I beg leave to ask the Question on the Order Paper standing in the name of the noble Earl, Lord Selkirk.

The Question was as follows:

To ask Her Majesty's Government whether the deficit due to the Maastricht Treaty, reported by the Central Statistical Office, shows that this year the United Kingdom's budgetary deficit has increased by roughly 100 per cent. on the general government debt of the previous year and whether this increase is likely to continue in succeeding years.

Lord Henley

My Lords, the UK Government's budgetary deficit, on the measure adopted for the Maastricht Treaty excessive deficits procedure, rose from £19.8 billion in 1991–92 to £45.7 billion in 1992–93. The November Budget forecast showed a further rise in 1993–94 to £55 billion. However, economic growth combined with a tight control of public spending and the measures announced in the two Budgets last year will put the government deficit on a firm downward trend.

Lord Stoddart of Swindon

My Lords, that was a complicated Answer to a complicated Question. Is the Minister aware that we all wish him well? We hope that his hope will be realised. But is not the difficulty that under the Maastricht Treaty in future our budget deficits will have to be in accordance with a common policy agreed by the Commission? That will not take into account credits such as the sale of privatised assets. Will not that, in turn, put further pressure on Her Majesty's Government to reduce their budget deficit, thereby increasing deflationary pressures, leading to loss of businesses and jobs in the UK?

Lord Henley

My Lords, I hope that the noble Lord did not find my Answer too complicated. What he probably found somewhat confusing is the fact that the deficit as agreed under Maastricht is a different measurement from the PSBR, to which the noble Lord referred. I do not believe the mere fact that the measure is calculated differently will have the effect that the noble Lord seems to suggest.

Lord Eatwell

My Lords, does the Minister agree that the Maastricht requirements for the measurement of the government deficit are in accordance with correct accounting practice, unlike the usual UK method for the measurement of the PSBR which confuses current transactions with balance sheet transactions'? Be that as it may, will he tell us for how many years since 1979 the Government have not been in deficit on the basis of the Maastricht measurement?

Lord Henley

My Lords, the point to get over is that central government's financial deficit, to which the noble Lord refers as the Maastricht definition, and the PSBR are basically different measures. The main differences between the two are that the PSBR includes public corporations' borrowing, privatisation proceeds and other financial transactions. As regards the number of years when we have not been in deficit since 1979, from my figures I understand that there was just one year which was 1988–89.

Lord Bruce of Donington

My Lords, will the Minister cite that part of the Maastricht Treaty that defines precisely how the government deficit is determined? Is he aware that we appear to operate on a cash in and out basis, including items of negative expenditure and similar creative accounting methods? Will the Minister give us some assurance that a common definition will be arrived at and that a determination of the deficit will take into account capital receipts and capital expenditure so that we can have an above-the-line and below-the-line position, but, above all, something that can be agreed, preferably in writing, by the Commission.

Lord Henley

My Lords, I refer the noble Lord to Article 104(c) of the Maastricht Treaty. It is somewhat lengthy and I do not believe that the House would welcome it if I were to read it out in detail.

Lord Stoddart of Swindon

My Lords, does not the answer given to my noble friend Lord Eatwell confirm that under European Community rules the deficit could very well be higher than under the British rules? Under those circumstances, the 3 per cent. deficit which would activate action under the Maastricht Treaty would be reached sooner and on a different basis, and could therefore trigger deflationary policies. Is that not so?

Lord Henley

My Lords, further to the answer I gave to the noble Lord, Lord Eatwell, looking at the figures from 1979, there are relatively few years when we reached that 3 per cent. guideline under the Maastricht Treaty. I understand that we did in 1983–84, 1984–85, 1991–92 and subsequent years. I do not believe the mere fact that a different measure is used for calculating deficit, as opposed to the PSBR, need necessarily cause the noble Lord any worry. As regards the second part of the guidelines—that debt itself should be below 60 per cent.—we have been consistently below that figure since 1979. I understand that we were last above that figure many years ago.