HL Deb 09 February 2005 vol 669 cc789-91

2.44 p.m.

Lord Roberts of Conwy

asked Her Majesty's Government:

Whether they accept the conclusion of the Institute for Fiscal Studies' Green Budget 2005 report on the nation's finances.

The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)

My Lords, the Government do not accept the Institute of Fiscal Studies' conclusion. The Government's latest fiscal projections were set out in the Pre-Budget Report in December 2004. They showed that the Government are meeting their tough fiscal rules with an average surplus on the current budget as a percentage of GDP over the current economic cycle and net debt projected to remain well below the 40 per cent ceiling of the sustainable investment rule. Updated projections will be published in the Budget.

Lord Roberts of Conwy

My Lords, I am grateful to the noble Lord for that ample reply. But perhaps I may draw his attention to the report's conclusion, which says that, there is no strong evidence that economic stability and Government policies have raised the sustainable long-term growth rate of the economy". In the light of that, how can the Government justify their increased spending plans over the next five years and assume, with any certainty, that their tax take will increase by some —26 billion a year, as projected in the Pre-Budget Report?

Lord McIntosh of Haringey

My Lords, I assume that the noble Lord, Lord Roberts, quoted from the IFS Green Budget. I have to remind him that five days before the IFS published its Green Budget, it described the public finances data as, good news for the Government". with, current receipts now on track to meet the Treasury's Pre-Budget Report forecast and … spending moving closer in line with the Pre-Budget Report". In view of the divergence of view within the Institute of Fiscal Studies, it is not clear that we should revise our own judgments.

Lord Sheldon

My Lords, since the golden rule is the yardstick by which taxation and spending are brought broadly into line over a certain period, does my noble friend accept the view of the Institute of Fiscal Studies, part of which he quoted, that the outcome could be even better than the Treasury expected? That is a rather surprising change of attitude by the Institute of Fiscal Studies. Will he confirm that he holds that view as well?

Lord McIntosh of Haringey

My Lords, the Institute of Fiscal Studies is simply recognising that the Treasury works on very cautious assumptions. For example, its estimate of growth for these purposes has consistently been 0.25 per cent below its own central view. That caution has been expressed for many years now since the current framework came into place.

Baroness Noakes

My Lords, we are not surprised by the Minister's first response, which was to deny the view of the Institute of Fiscal Studies that there is a black hole in the Government's finances. In that case, the Minister will not find my question very difficult. Will he deny that the Government have no plans to raise national insurance contributions after the election?

Lord McIntosh of Haringey

My Lords, I deny that there is a black hole and I refuse to make any forecasts other than those that the Chancellor of the Exchequer will make in his Budget, which will be before any date of an election.

Lord Tomlinson

My Lords, as my noble friend does not want to get engaged in hypotheses about the future, would he perhaps care to look at the record over recent years and say whether the performance of the Government is a substantial improvement on what happened under the previous administration, particularly in relation to Black Wednesday, the details of which are now coming out and will be subject to full public view?

Lord McIntosh of Haringey

My Lords, I could give 20 or 2,000 answers to that question. There are so many ways in which the economic performance of this Government is better than that of the previous government that I have an embarrassment of riches. If I were to take only one of the Opposition's favourite measures—what they call the tax burden—I could point out that the tax burden in 1979 to 1997 was 40.6 per cent of GDP. We have got nowhere near that.

Lord Newby

My Lords, does the Minister accept that the Treasury, within the past 24 hours, has shown a reluctance to release forecasts made at the time of Black Wednesday on the basis that it could set a precedent for information about current forecasts? Would it not be sensible for the Treasury to accept as a matter of policy that whenever forecasts are made available to Ministers, bearing in mind that these are forecasts not policy recommendations, they should be made public at the same time?

Lord McIntosh of Haringey

My Lords, my understanding is that the Treasury's actions have been fully in accordance with the Freedom of Information Act.

Lord Northbrook

My Lords, how can we trust the Government's borrowing figures when the prediction for the public sector current balance has been out by on average —10 billion per year over the past four years?

Lord McIntosh of Haringey

My Lords, I am not asking the noble Lord to trust any figures. I am simply pointing out that Treasury forecasts have been consistently better than the average of independent forecasters. Let us go on evidence, not on trust.

Lord McKenzie of Luton

My Lords, can my noble friend tell me what the IFS Green Budget report has to say about the rise in national income after tax under this Government compared with the previous government? How does the percentage of national income taken in tax under this Government compare with the average taken under the previous government?

Lord McIntosh of Haringey

My Lords, I do not have all the answers to those questions, but I do know that since 1997 national income after tax under this Government has risen by 2.6 per cent in real terms. I understand that that is a faster rise than that achieved by the Conservative government. However, I shall have to write to my noble friend with the precise figure.