Public Sector Borrowing Requirement (Hansard, 10 July 1995)

§ The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)
My Lords, the Government's fiscal objective is to bring the public sector borrowing requirement back towards balance over the medium term.

§ Lord Barnett
My Lords, that is a little different from what was in the Financial Statement and Budget report, which, as the Minister will know, said that it will be brought to zero by 1998–99. In his Answer, I hope that the Minister is not suggesting that there might be some relaxation of that aim in order to make tax cuts. Can the Minister confirm that there is no relaxation intended?

§ Lord Mackay of Ardbrecknish
My Lords, the words I used were those of my right honourable friend the Chancellor of the Exchequer in his Mansion House speech. I thought that was a good enough source from which to answer the noble Lord. As regards tax cuts, we believe in prudent management of the economy. We shall cut taxes when it is prudent and sensible to do so.

§ Lord Boyd-Carpenter
My Lords, is it not a necessary condition of this objective that expenditure should be reduced? Perhaps I may suggest to my noble friend that expenditure on legal aid be cut drastically.

§ Lord Mackay of Ardbrecknish
My noble friend makes a perfectly valid general point that the key to sensible management of the economy is the control of public spending. That is what we are doing and what we are usually attacked for doing from the other side. I hear what my noble friend says about legal aid. I believe that all government departments have to look very carefully at their spending and see what savings they can make.

§ Lord Eatwell
My Lords, given what the Minister said about controlling public expenditure, will he confirm that the summer forecast published last week shows an estimate for the PSBR which is 5 per cent. higher than the estimate published in the Budget last November—that is to say, roughly three pence off income tax? In those circumstances will the Minister tell the House what is the Government's view on borrowing to pay for tax cuts?

§ Lord Mackay of Ardbrecknish
My Lords, I thought that I answered the Question about borrowing perfectly clearly when I said that our intention is to reduce the PSBR towards balance in the medium term. 1370 That remains our objective. Of course, if the situation allows us to reduce taxes that is what we shall do because we are by nature a tax-cutting party; unlike the party opposite, which in the other place has opposed every single tax-cutting measure we have made since 1979.

§ Lord Eatwell
My Lords, will the Minister confirm the first part of my question, that the summer forecast shows a significant increase in the PSBR over that forecast at the last Budget?

§ Lord Mackay of Ardbrecknish
My Lords, the 1994 Budget forecast for this year was £21.5 billion. The summer economic forecast has put that at £23.5 billion. There is a slight increase, but that is part of the problem of forecasting. It is not an entirely accurate business and sometimes forecasts do not come out exactly as predicted.

§ Lord Peyton of Yeovil
My Lords, does my noble friend agree that one of my right honourable friend's most admirable characteristics is the way in which he makes his meaning absolutely clear? Is it possible that on this occasion he contracted some sort of opaqueness from some of his colleagues and did not make himself absolutely clear beyond all doubt?

§ Lord Mackay of Ardbrecknish
No, my Lords, I do not believe that my right honourable friend the Chancellor of the Exchequer suffers from the problem of opaqueness. I believe that he makes himself perfectly clear when he speaks. Our aim, as I said, is to move the PSBR towards balance in the medium term. I need not remind my noble friend that during the premiership of my noble friend Lady Thatcher we managed to get into the positive side.

§ Lord Molloy
My Lords, does the Minister agree that there are two elements into which there must be thorough investigation before there are any cuts whatever? The first is the defence of our country and the second is the defence of the greatest piece of legislation in mankind's history—

§ Lord Hailsham of Saint Marylebone
My Lords, I thought that was the Ten Commandments!

§ Lord Molloy
—namely, our British National Health Service?

§ Lord Mackay of Ardbrecknish
My Lords, both aspects mentioned by the noble Lord are very important. As he will know, we have made considerable changes to the defence budget in the light of the changes in the world in general and the fall of the Russian empire. These changes are in place. As regards the National Health Service, throughout the period since 1979 we have consistently protected the National Health Service and increased spending on it, in contrast to the last Labour Government which actually reduced spending on the health service.

§ Lord Hailsham of Saint Marylebone
My Lords, this is merely a request for information. Can my noble friend tell me the date when the public sector borrowing requirement was last nil?

§ Lord Mackay of Ardbrecknish
My Lords, I cannot tell my noble and learned friend the exact year but, as I mentioned earlier, it was during the tenure of office of our noble friend Lady Thatcher.

§ Lord Stoddart of Swindon
My Lords, how on earth can the Minister talk about tax "cuts" when the percentage of tax taken is the highest ever as a percentage of GDP? How can the Minister talk about tax "cuts" when personal allowances have been reduced in real terms, when the married man's allowance has been reduced, when mortgage interest relief has been reduced and when a tax of 8 per cent. has been imposed on domestic fuel? In my book and, I should think, that of most noble Lords, those are tax "increases". Can the Minister explain how tax "increases" can become tax "cuts"?

§ Lord Mackay of Ardbrecknish
My Lords, two or three years ago we had to take some serious steps to control public spending and to balance the position so that the PSBR did not go even higher. If the noble Lord is urging me to do the opposite and to make even deeper cuts, perhaps he, his noble friends and his right honourable and honourable friends in the other place might modify their language when they talk about more money being spent. I have fully admitted that we have had to increase taxes. We were reluctant to do that, but it was the sensible and prudent thing to do. Over time, we shall reduce taxes again. As I said, on every occasion on which we have reduced taxes since 1979 the party opposite has voted against us, including when we brought income tax down from its high level of 98 per cent., which was the top rate under the party opposite.

§ Lord Barnett
My Lords; we understand that the Minister was asked to say as little as possible in answer to this Question and he has managed to achieve that. Nevertheless, does he accept that saying as little as possible could be equally as damaging as if he had said that the Government have it in mind to relax the public sector borrowing requirement? Will he make it crystal clear that there is no question of relaxing the borrowing requirement?

§ Lord Mackay of Ardbrecknish
My Lords, I have made it crystal clear. As I said in my initial Answer, our objective is to bring the public sector borrowing requirement back towards balance over the medium term. To do that, we shall have to control public spending very severely—and that we intend to do.