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Wednesday, 27 November, 2002, 18:31 GMT
Howard's pre-Budget response
Here is an edited version of Shadow Chancellor Michael Howard's response to the 2002 pre-Budget report.
Today I congratulate the Chancellor. Up to now he's always been overshadowed by the Prime Minister.
But now, at last, he's come into his own.
He has been paid the supreme accolade of having a song dedicated entirely to him.
It's by Kenny Jones and Robert Hart and it's released later this week.
It's called "Mr Brown, you're Robbing Me".
Its lyrics include the lines: "Giving with one hand, taking with the other. Shatter your dreams. Then you run for cover'".
The Chancellor has not been able to run for cover today.
This is a moment of humiliation for the Chancellor.
He has been forced to admit that his forecasts on growth were wrong.
His forecasts on revenue were wrong.
His forecasts on borrowing were wrong.
His forecasts on his deficit were wrong.
He was wrong on his forecasts.
And he is wrong on his failed approach to the public services.
These are the downgraded forecasts of a downgraded Chancellor.
For weeks on end he and his spin doctors have been trawling around looking for alibis.
In the words of the Financial Times (21 November) he has been "rehearsing his excuses".
Everyone is to blame for the fact that he got his forecasts wrong - except the Chancellor himself.
In Thursday's Financial Times he blamed it on the fall in world trade between 2000 and 2001.
But in his own Red Book, at the very time of his Budget forecasts, he said world trade was estimated to have contracted in 2001 and grown only slowly in 2002.
At the CBI and in this House last week he said we're seeing the sharpest contraction in world economic growth since 1974.
He is wrong about that too.
We've had world growth of 2.2% in 2001 and its expected to be 2.8% in 2002.
In the early 1990s we had three years when world growth was an average of 1% a year.
And the Chancellor's own Budget Red Book made it clear that independent forecasters took a much more realistic view of prospects than the Chancellor did himself.
The Chancellor's central forecast for 2002 was for growth of 2.25%.
But independent forecasters said 1.9%.
So did the OECD - just eight days after the Budget.
And what were these independent forecasters telling the Chancellor?
"Economists were surprised by the strength of the forecasts" noted the Independent (18 April 2002).
Growth projections in the next year or two were "very ambitious", said Deutsche Bank (Evidence to Treasury Select Committee, 22 April 2002).
"It is not prudent", said HSBC economists (Financial Times, 18 April 2002).
So everyone knew about this - except, apparently, the Chancellor.
Indeed, far from heeding any of this independent advice, the Chancellor actually increased his forecast for growth in 2003 - and for longer-term trend growth.
Today he has announced borrowing figures of £20bn for 2002-3.
Does that not demonstrate how dramatic the deterioration in the public finances has been?
His forecasts for borrowing over five years have risen from £30bn in last year's Budget [2001-2 to 2005-6] to £66bn in the PBR [2002-3 to 2006-7], £72bn in this year's Budget [2002-3 to 2006-7] and over £100bn now [2003-4 to 2007-8].
There they sit [Prime Minister and Chancellor]. What a shambles! What a shower!
Brown and Blair - the posturing pair.
They're very good at taxing the people of this country.
They're very good at spending the money of the people of this country.
They're very good at wasting the money of the people of this country.
They're very bad at delivering the improvements the people of this country want to see.
The Chancellor said that all this doesn't matter as long as borrowing balances over the cycle.
But will he comment on the view of the Ernst and Young Item Club that in fact half of the expected revenue shortfall for this year could be structural rather than cyclical?
Or on the view of the Financial Times that he took `the most unusual years' as the basis of his calculations - something they say `seems daft' (21 November)?
What's more he can't even say when the cycle starts and ends.
When I ask him about this he refers me to the Red Book.
But the Red Book says these things are difficult to judge. It says the start date for the cycle is provisional. And an assumption.
And isn't the end of the cycle even harder to predict?
Isn't that rather convenient for the Chancellor?
Does he agree with the National Institute for Economic and Social Research that the current cycle will come to an end next year or in early 2004, and that he won't then be able to balance future deficits against past surpluses?
That seemed to be the Treasury's view in the Spring.
Or is he planning to do what they suggested he might, and try to make the cycle last longer?
Why did the Treasury brief the press first that the cycle was about to end soon and then that it would end as late as March 2005?
He told the House last week that the Government's fiscal policy `can adjust to the economic cycle' (18 November Col 388).
Is he not in fact trying to adjust the economic cycle to suit his fiscal policy?
What does he say to the National Institute, who said of his golden rule: "You can already smell the fudge being cooked up in Great George Street" (The Business, 3-4 November 2002)?
And what of his sustainable investment rule?
Will he confirm whether the extra borrowing he's announced today takes us over that limit?
Isn't there now a black hole emerging in the public accounts?
A hole entirely of the Chancellor's making?
Will he now accept independent scrutiny of his fiscal policies?
In opposition he called for the "borrowing forecast" to be "subject to an independent audit by people outside the Treasury" (18 Ap 1996 Col 833).
Does he stand by that position now?
Mr Speaker, as we have consistently pointed out, the growth of public spending under this government is far faster than the growth in the economy. Is not the heart of the problem this?
The Chancellor is following this course because, without reform, his spending is not leading to the improvements in services which we all want to see.
His only answer is to spend more.
How far we've come from his view in 1997, when Labour's Manifesto said: "The level of public spending is no longer the best measure of the effectiveness of government"?
By spending more without reform, he has locked himself on an unsustainable course.
And if spending keeps rising faster than the growth rate of the economy he will have to put taxes up again.
There were, as usual, plenty of promises on the public services in the Chancellor's statement.
But every year he makes these promises, and every year he breaks them.
The government is already taking almost £40 a week more in tax for every man, woman and child in the UK.
Yet while spending is up in the NHS, patients are waiting longer in Accident and Emergency departments - and for the first time, there are now more bureaucrats than beds.
While spending is up on law and order, crime, and the fear of crime, is on the increase.
Street crime has increased by 31% in the last year.
In fact the government has failed or is failing 40% of the targets the Chancellor set in 1998 and 75% of those set two years later.
Every year he makes these promises, and every year he breaks them.
On pensions, shouldn't he start by getting the basics right - by encouraging rather than discouraging people to save?
How has his £5bn a year Pensions Tax helped?
Will the Chancellor also comment on other items of rising expenditure?
What resources are available in the contingency reserve for any conflict in Iraq?
And will he say also whether any provision has been made for public sector pay rises?
Is it not the case that the Government has been in a complete mess on this issue, with the Chancellor, the Deputy Prime Minister and other ministers all contradicting each other?
This week the Prime Minister entered the fray.
On Monday he was indulging in his thespian fantasies.
He was trying to play Margaret Thatcher.
Well, Mr Speaker, I know Margaret Thatcher. This Prime Minister is no Margaret Thatcher.
Where was the action in this statement to reduce the burdens on business which the Government has imposed?
Are these burdens not stifling the wealth creation on which we all depend?
Does not yesterday's news that business investment has suffered the sharpest fall for 35 years represent a devastating vote of no confidence in this Chancellor and his policies?
What does the Chancellor have to say about the causes for concern which exist in the UK economy?
Concerns on savings, where we are now saving practically less than we've ever saved before, with borrowing at record levels and house prices rising at an unsustainable rate.
Concerns on the World Scoreboard of Competitiveness, where we have been relegated from the top ten.
On productivity growth which has halved.
On business investment which has now fallen for seven quarters in a row.
On the trade deficit which we have run every single month for nearly five years.
On manufacturing where 15,000 jobs were lost in September alone - half a million since Labour came to office.
On the stock market which has fallen disproportionately when compared with the US - hitting those with savings, pensions, and mortgages.
Does he agree with the Independent which said last week that he should face up to these severe imbalances in the economy?
We've seen no signs of that today.
This is a Chancellor who clung like King Canute to his economic forecasts in the face of all the evidence.
His fiscal rules are not as rigorous as he has claimed.
He has missed the very targets he described as cautious and prudent.
How mortifying that this, of all Chancellors, has got it so badly wrong.
And on top of all this we are still not seeing the improvements in public services which he promised.
Has not the time come Mr Speaker for an end to this policy of taxing; and spending; and failing?
Doesn't he think that the people of this country deserve better?
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