4. What assessment he has made of the effects of the increase in the standard rate of VAT on levels of economic growth in the first quarter of 2011. (54724)

At this stage, it is not possible to make a full assessment of the effect of the increase in the standard rate of VAT on levels of economic growth in the first quarter of 2011. The Office for Budget Responsibility forecast released on 23 March projected growth of 1.7% over the course of 2011. That forecast takes full account of the Government’s fiscal policy measures.

The Bank of England expects inflation rates to accelerate over the next few months. The markets, however, seem to have taken the view that interest rates will not increase as speedily as was anticipated just a few weeks ago. How does the Exchequer Secretary reconcile the Chancellor’s notion that the economy has grown with the judgment of the markets?

The economy is growing: that is clear from the Office for National Statistics numbers and from the projections of every respected economic forecaster. Despite the predictions coming from the Opposition last year, there has been no double dip.

May I return to the topic of VAT on fuel? I have just come from a business session in my constituency of Devizes, where I know that despite the decrease, high fuel prices continue to be a real drag on growth for small businesses across the economy. I have a letter from the EU commissioner saying that the recent motion we debated—that a derogation should be made specifically for motoring fuel—is almost certainly illegal and definitely unworkable under EU legislation. May I ask Ministers what proposals we can suggest to help motorists in the real world now that the Labour party’s suggestion has been revealed as yet another—

We are grateful to the hon. Lady.

It is striking that the first line of Labour’s blank sheet of paper on the economy is a proposal that we now know does not work, is illegal, would not help and would leave tax on fuel just as high as it was—whereas we are cutting fuel duty.