Pre-Budget Report

I should like to make some progress, if I may. The second issue that I want to address is the Government's optimism that the fiscal stimulus, as they call it—increasing expenditure while reducing taxation—will be expansionary. I devoutly hope that it will prove to be expansionary. I hope it will work. However, most people, as well as the Government, believe that its impact is likely to be quite small. The right hon. Member for Bolton, West (Ruth Kelly) said that it would reduce the impact of the recession by about 0.5 per cent. of GDP. If the Government are convinced that that expansion will work, and that we face a severe contraction, why have they not done more? If there is a limit on affordability, why did they not double the cut in VAT for half the time? A 5 per cent. cut for six months would probably have had a more stimulatory effect—for the reasons spelled out by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke)—and we would have known sooner whether that was going to work or whether we would need to switch to other measures.