My Lords, I thank my noble friend for that reply. In the Budget Statement, the Chancellor of Exchequer said that he was meeting the first fiscal rule—the golden rule—which is that the current Budget will be in surplus over the economic cycle. Can my noble friend give the date of the beginning of this cycle and the length of the economic cycle?
My Lords, the Government watch trends in the development of the economy but do not give an end date for the economic cycle. Forecasting that is the pursuit of fool’s gold. Since 1997, the Government have set out to follow the two golden rules. We have been successful in that. The growth of the British economy, the control of debt and the substantial investment over the past decade are proof of the Government’s strategy and our observance of the golden rule.
My Lords, on the subject of fool’s gold, can the Minister tell us how much less the deficit would be had the then Chancellor not sold our gold reserves at the bottom of the market? Can he also explain how this country, uniquely, has allowed borrowing to increase during the good times while our competitor nations have used the good times to reduce borrowing and are therefore better placed to deal with the current economic turbulence?
My Lords, on those two points, I notice that the Conservative Party’s ability to forecast consists of reflecting accurately what happened in 1997. It is easy to be wise after the event on gold prices. At the time, other countries were pursuing a similar strategy to ours with the rate of gold as it was; we all recognise the changes that have been effected more recently. On the more general issue, the strength of the British economy is such that we are best placed to face what we all appreciate is a very difficult international climate. All economies are being forced to rein in their projections for growth. The Budget indicated that we had scaled back our projections for growth, but I emphasise that they are projections for growth.
My Lords, could we be in danger of refighting the last war rather than the one that may lie ahead of us? While the consequences of high inflation are undoubtedly extremely damaging, would not the consequences of recession or even depression be at least as damaging? Would it therefore be wise dogmatically to seek to balance the budget over the cycle, especially as no one knows what the cycle is, while allowing demand to collapse in the economy?
My Lords, the Government would of course be concerned if demand collapsed in the economy and we were not able to fulfil our projection of growth, albeit more limited than we would have anticipated had not the international crisis occurred. Nevertheless, growth will occur. My noble friend is absolutely right: it is important that we avoid recession. The British economy is well placed to avoid it and the Government intend to pursue all measures that will help in that respect.
My Lords, is the Minister aware that the Government are officially still, it surprises some people to learn, in favour of joining the euro? It is now over 10 years since that assertion was made with the famous five conditions written on the back of an envelope by Ed Balls. Are the Government aware that they cannot avoid this issue any longer? The euro has become the most successful currency in the world. If we had the euro, we would have half the interest rates for British borrowers and half the mortgage rates for mortgage holders in Britain. When will the Government be bold—particularly under this Minister, who is used to being bold and has a reputation for it—and give us an undertaking of an early entry into the euro?
My Lords, I cannot satisfy the noble Lord in that respect. He will appreciate that over the past decade the comparison between the growth of economies in the eurozone and the growth of the British economy reflects favourably on the decision that we took not to enter the eurozone when that opportunity presented itself. He will also recognise the folly of reading too much into potentially short-term perspectives when we all recognise that there is a difficult year ahead of us and that economies may respond to it in different ways.
My Lords, regardless of the Prime Minister’s notions of moveable economic cycle start and finish dates, is it not the case that this country has enjoyed 15 years of economic growth? However, the inheritance of the incoming Labour Government was coloured by binge borrowing on a massive scale and encouragement to the private sector to do the same, so that we now have an economy disfigured by debt, burdened by the highest tax burden ever and facing a turn in the economic cycle. How can the Minister square those facts with the Chancellor’s claim of economic stability?
My Lords, the country is not burdened by debt. It is the case, of course, that debt for households has increased, but the assets of households have increased by 70 per cent in the past 10 years and therefore people are borrowing against clear and advanced assets over the period when we first came to power. On the more general issue of government finances, as we have indicated all along, the Government will borrow only to invest. The country enjoys the fruits of that investment over the past 10 years. The Conservative Opposition purport to be involved in no investment on the scale of this Government’s. Where would our health service and schools be had they been in power over that period?