As we set out in the pre-Budget report, total net borrowing will fall from £37 billion this year to £31 billion, and then to £27 billion, £26 billion, £24 billion and £22 billion, or from 2.3 per cent. of national income next year to 1.3 per cent. by 2011-12. Along with Canada, the UK is the only G7 country with net debt below 40 per cent.
Given that those are increases in the Treasury’s borrowing forecast, what analysis have the Chief Secretary and the Chancellor made of the effects of that on inflationary pressures and the ever-increasing value of the pound?
The key point is that we stick closely to the rules that we have set out. The sustainable investment rule is that net debt will be kept at a sustainable level—below 40 per cent.—and it will be. It is below that at the moment and it will stay below. It will stabilise at about 38.5 per cent. I remind the hon. Gentleman that total net borrowing reached 7.8 per cent. of GDP under the last Government and will be 2.3 per cent. next year. However one looks at it, this Government’s record has been far better.
Does my right hon. Friend agree that the UK’s borrowing requirement is affected by the strength of the UK car manufacturing industry, and does he further agree that the tax regime underpinning the manufacture and sale of 4x4 cars has a big impact on that sector? Would he or my right hon. Friend the Chancellor care to visit the very successful Land Rover plant on Merseyside, which produces both the Freelander 2 and the Jaguar X-type vehicles on the same production line at the same time—
I congratulate the company and the plant on those achievements. We will, of course, ensure through our commitment to stability in the economy that that success can continue.
If borrowing has been under such wonderful control, how does the Chief Secretary account for the fact that over the last decade sterling interest rates have been so much higher than dollar rates, yen rates and euro rates, including areas that are growing much faster than Britain?
Let me remind the right hon. Gentleman that the International Monetary Fund said that “macroeconomic stability remains remarkable”. I suggest that he look at what interest rates were when he was a member of the Government. They were sky high, repossessions took place on an enormous scale and unemployment was also high. The claimant count has fallen for three months in a row and growth is at a higher level than we and others were expecting. We are determined to ensure that that impressive record continues.
My right hon. Friend will realise that borrowing is driven by expenditure. Before the Government borrow any more money, will they look at their public expenditure and the waste of money spent on raising economic understanding of the issues under discussion today? I am thinking particularly of the Short money.
I sympathise with my hon. Friend’s concern—he makes a very fair point. My right hon. Friend the Chancellor announced at the time of the pre-Budget report that during the years of the comprehensive spending review, every Department would achieve value-for-money savings of 3 per cent. year on year, with 5 per cent. savings in spending on administration. That shows that we are continuing to improve value for money in Government spending across the board, if not in the particular area to which he referred.