Pre-Budget Report 2009

My Lords, I have shifted significantly to the right because I am told that the microphone to my left is not working. The purpose of my speech is statistical. In the 40 pages of supplementary material to the PBR, the only table that goes beyond 2011-12 is table 2.9: "Current receipts". One would have expected there to be an equivalent table called "Current expenditure", which should also cover the period until 2014-15. There is an issue about the provision of information. The noble Lord, Lord Barnett, challenged us to say what we thought would be the right way to proceed. The challenge was absolutely correct, but the problem is that unless you have detailed information upon which you can rely, it is very difficult to be specific. I take one example from table 2.9. It predicts a doubling of air passenger duty over the period from today to 2014-15. Once one has seen that in a figure, I suppose there is a basis for doing some research and investigation into whether it is possible to agree with the consistent increases described in the table. The table also describes consistent increases in council tax and business rates. Is this reasonable? In the formulation of policy, unless you have accurate information, it is difficult to be confident that what you are saying makes sense. My wider question is: how confident is the Minister and the Government that the report presents the most likely outcome for the public finances? The Treasury will have done its sensitivity analysis. The report states in many places—one can only agree—that forecasting is particularly difficult in current circumstances. I should have thought that it was more difficult as regards receipts than expenditure. How wide is the difference between the best and the worst cases, and where within that analysis does the most likely case, the one in front of us, lie? I ask that not least because of the way in which these figures have rapidly changed since the end of January this year, when we had the equivalent debate to this—although then, of course, we were in possession of Maastricht treaty figures. The noble Lord, Lord Myners, said in his opening speech then that the six-year run of borrowing would be £78 billion, £118 billion, £105 billion, £87 billion, £70 billion and £54 billion. Now, less than a year later, the six-year run is £90 billion, £175 billion, £173 billion, £140 billion, £118 billion and £97 billion. A total of £514 billion was forecast, but now, with one actual figure within the six-year run, it is forecast to be £793 billion, an increase of over 50 per cent. It may well have been that these figures, or close to these figures, had emerged and were presented by the time we came to the Budget; nevertheless, 11 months ago we had the figures that we had then and now we have the figures that we have within the report. The Minister went on to say that net debt would be 41 per cent, 48 per cent and 53 per cent, ""before peaking at 57 per cent in 2013-14".—[Official Report, 27/1/09; col. 201.]—" all as a percentage of GNP. That was a four-year run. We now have a seven-year run, which on page 18 of the report reads 44 per cent, 55 per cent, 65 per cent, 71 per cent, 75 per cent, 77 per cent and, again, 77 per cent for 2014-15, which represents a substantial and rapid increase with no peak. The concept of a peak that we were given 11 months ago has disappeared. As I said, by the time of the Budget the figures had significantly deteriorated, prompting the Government to say that the deficit was still in line to be halved from 12 per cent of GDP to 5.5 per cent in 2013-14. However, as has been said by several speakers in this debate, crucially this outcome depends on the forecast that the economy will grow by 3.5 per cent in 2011 and 2012, and above past trends thereafter. Outside commentators may always be wrong, as the noble Lord, Lord Barnett, said, but of course they can be wrong in both directions and at the moment they are unanimous in regarding this predicted rate of growth as optimistic. I do not believe that any of them will be including it in their most likely outcome, which we shall see over the next weeks or months. My own view is that it is only common prudence to go forward on the assumption that recovery will continue to disappoint. When we look at the previous trend rate of less than 3 per cent and look at its components, it seems doubly unlikely that, given the lower pound, the effects of a post-recession bounce and export-led growth will deliver 3.5 per cent as early as 2011. Indeed, I doubt the figure of 3.5 per cent altogether. One component relating to household consumption, for example, is predicted to rise by 3 per cent and, at the same time, there will be a falling savings ratio. The savings ratio has dramatically increased and is predicted to go on increasing. In these uncertain times, I think that people will continue to do their best to increase their savings, and it is very unlikely that they will swap savings for consumption as early as 2011. I trust that no undue pressure was put on the statisticians. I am taking into account the assumption on page 164 that trend growth will be one-quarter percentage point lower than the Government’s neutral view. I fervently hope that my doubts are misplaced. Any further deterioration in forecasts will confirm the widely held public view that no forecast can be trusted. It is because, as my noble friend Lord Renton of Mount Harry pointed out, we need a nationally supported effort to get us through this economic disaster that trust is so vital. It is therefore completely wrong to play divisive party politics as a substitute for accurate analysis and action—matters are far too serious. We have very little room to manoeuvre and will therefore need one and all to be on side as we battle our way towards better times.