Pre-Budget Report

My Lords, I look at the gilt market daily. The premium of UK borrowing over German government borrowing rates is actually below trend. I was asked about future taxation by the noble Baroness and the noble Lord, Lord Howard. Again, I am sure that they will realise that I shall not anticipate forward changes in taxation, whether reductions or increases. However, we have said that it is our intention that public finances in the medium term should be sustainable. I am not going to comment on what the noble Lord, Lord Healey, says about those who work honourably, dutifully, effectively and loyally in the public sector. I know that it is very easy for people to mock public servants, but this party will not do so and I certainly will not be party to that. I found it shocking, in the description of those who will pay 45 per cent tax—the top 1 per cent of earners—the term that they ““have the most to contribute””. What an inverted view of society it is, when the Conservative Party believes that those who have the most to contribute are at the top, and those with medium and the lowest remuneration have little to contribute—although it might explain why their concerns are rarely a feature of the Conservative Party’s political proposals. I noticed that the noble Lord, Lord Newby, addressed a question about the IMF to the Conservative Benches. I also noticed that it was not answered. I appreciate the noble Lord’s support and that of the noble Lord, Lord Oakeshott of Seagrove Bay, for the fiscal stimulus, and I agree with their blending of the need and appropriateness of fiscal stimulus in this global crisis, aligned with a need to be fair and to ensure that those who are most vulnerable in society are protected. This is certainly not the right moment to copy the Tory tax cuts of 1981—to bleed the economy, as the noble Lord, Lord Vinson, said. This is the time when those with the broadest shoulders, the public sector, should be the risk managers who ensure that demand is there to support the economy. The noble Lord, Lord Newby, asked about the Government’s response to the Treasury Select Committee. I am sure that my right honourable friend the Chancellor of the Exchequer will respond, particularly to the committee’s observation that the single most critical problem for the economy in the near term is bank lending. That is precisely why we are focused on bank lending and precisely why we will be developing over the next few weeks lending agreements with banks which choose to participate in the asset-protection arrangements set out by the Chancellor of the Exchequer in the other place at the beginning of last week. I also recognise the value to our economy of social housing and the importance that that sector should continue to enjoy adequate supply of competitively priced funding. My noble friend Lord Barnett—whom I look upon to guide me on parliamentary procedure, although not to the point where he suggests that perhaps I should become a banker and cease to be an active member of Government and this House—asked a question about shorting. I thought I had answered this when questions were asked by the right reverend Primate the Archbishop of York. Specifically, I believe I said that shorting aids price discovery and provides liquidity. My noble friend invited me to put a letter in the Library explaining this. It may be even more helpful if I ensure that my noble friend and the Library have a copy of the FSA’s consultation document on shorting, which is likely to be published in the next few weeks. My noble friend suggested that Treasury economic forecasts were ““guessing””. That term is loaded with pejorative meaning. I shall simply say that the Treasury’s methods for economic forecasting are not dissimilar from those used by other reputable economic forecasters. If we accused those in the private sector responsible for producing economic forecasts based on guessing, their market value and rate for the service they provide would be likely to fall. We will not therefore use that term. My noble friends Lord Barnett and Lord Sheldon correctly summarised why we believe that VAT is the appropriate mechanism for fiscal stimulus. I would only add that the fact that it is also of benefit to non-taxpayers was another reason why Mr Kenneth Clarke and the Chancellor of the Exchequer both—