United Kingdom Economy (Hansard, 12 February 2004)

HL Deb 12 February 2004 vol 656 cc1203-5 1203

§ 11.12a.m.

§ Lord Roberts of Conwy asked Her Majesty's Government:

§ How they respond to the forecast for the United Kingdom economy in the latest Economic Review of the National Institute of Economic and Social Research (NIESR).

§ The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)
My Lords, in January the National Institute of Economic and Social Research revised its 2004 forecast of GDP growth to 2.7 per cent, up from its previous forecast of 2.6 per cent made in October, and 2.4 per cent a year ago. Moreover, this latest forecast was completed before publication of the stronger than expected 0.9 per cent GDP growth out-turn for the fourth quarter of 2003.

§ Lord Roberts of Conwy
My Lords, I am grateful to the Minister for that reply. Does he agree with the review's findings that, the budget deficit will continue to breach the Maastricht limit of 3 per cent of GDP over the next few years", and that, despite the robust recovery, the outlook for the public finances remains bleak"?

§ Lord McIntosh of Haringey
No, my Lords, we do not agree. We have already published forecasts at the last Pre-Budget Report indicating that the estimated borrowing will decline to around 2.4 per cent this current year and 1.8 per cent the year after.

§ Lord Sheldon
My Lords, is my noble friend aware that in the past seven years we have seen a degree of economic stability greater than anything in the whole of the 20th century? This is quite an astonishing achievement, and although we will obviously comment on how we can improve things further and reduce some of the problems we still have, this is a fact that should be noted.

§ Lord McIntosh of Haringey
My Lords, I entirely agree that it should be noted. I can go further back than the past seven years, however. We have had continuing growth for the past 44 consecutive quarters.

§ Lord Skelmersdale
My Lords, what is the Government's view of the comments of the Governor of the Bank of England yesterday, reinforcing the 1204 national institute's report, that it was time government spending was reined in, otherwise interest rates would have to go up and the golden rule be broken? In any event, if the economy is continuing to grow, why are the Government borrowing so much?

§ Lord McIntosh of Haringey
My Lords, the Governor of the Bank of England is entitled to his views; we do not comment on every statement he makes. However, the Chancellor has made it clear within the past week that growth in public spending over the period covered by the next spending review will slow, relative to growth in previous spending reviews.

§ Lord Newby
My Lords, the Minister will be aware that the Governor of the Bank of England said yesterday that in order for the Government to keep to their fiscal rules, the ratio of income tax receipts to gross domestic product would have to rise over the next two years. He said that it is up to the Government to make sure that it actually happens. Is it the Government's intention that it happens?

§ Lord McIntosh of Haringey
My Lords, as I said before, the Governor of the Bank of England is entitled to his views and they make a very useful contribution to macro-economic debate. But it is not the role of government to respond to each of the issues he chooses to raise.

§ Lord Hunt of Kings Heath
My Lords, will my noble friend comment further on the question raised by the noble Lord, Lord Skelmersdale, given the Conservative Party's problem in trying to work out how it will spend more money than is now spent on the health service and apparently reduce taxes as well?

§ Lord McIntosh of Haringey
My Lords, as I understand it, the statement which Mr Oliver Letwin will make next Monday has not yet been made; it has only been spun. If the spinning from the Conservative Party is correct, there is quite a remarkable contrast between the intention to spend more on the health service and the undertaking to cut public expenditure by 20 per cent.

§ Lord Howell of Guildford
My Lords, is the Minister as unhappy as the Governor of the Bank of England clearly is about government advisers making remarks on the future evolution of interest rates?

§ Lord McIntosh of Haringey
My Lords, everybody in this country is entitled to make observations about the future evolution of interest rates in this country. It is part of our democratic system that nobody is forbidden to do that. We treat all serious comments with the seriousness they deserve.

§ Lord Burnham
My Lords, does the Minister agree that the Governor of the Bank of England is 1205 considered to be in a rather privileged position, and that more attention should be paid to his remarks than should be paid to the noble Lord's or mine?

§ Lord McIntosh of Haringey
My Lords, in May 1997, the Government devolved the responsibility for setting short-term interest rates to the Monetary Policy Committee of the Bank of England. Therefore, yes, of course, the Bank of England and the Monetary Policy Committee have a special role in relation to interest rates. Not only do we take that seriously, we persist in the view, which I think even the Opposition have come round to, that this was the right step to take.