Pre-Budget Report 2006

My Lords, I am delighted to follow the noble Lord, Lord MacGregor. We have often spoken in finance debates. This pre-Budget debate is based on European Union Commission recommendations with which we have to comply. I want to comment on European Union matters and the issue of joining the euro-zone, on which there was a recent Question in your Lordships’ House. I am not suggesting for a moment that now would be an appropriate time for us to join the euro-zone. It would not, as most people would agree. My noble friend repeated what the Chancellor said in 1997 about having a referendum on the issue. I find the idea of having a referendum on the five economic tests difficult, to put it mildly. I image that readers of the Sun, and even the Times, might find it difficult to decide how to vote. I am not altogether sure that Members of both Houses could make a clear decision on something as complex—to describe it safely—as the five economic tests. I find it more than complex; it is rather silly, but that is another matter. In addition to talking about a referendum, the Chancellor said that, "““in principle, a successful single currency within a single European market would be of benefit to Europe and Britain””.—[Official Report, Commons, 27/10/97; col. 583.]" I certainly agree with that, but I should like confirmation from my noble friend that that is still the policy of Her Majesty’s Government, because at times it does not appear to be. My impression on hearing the Statement on the Pre-Budget Report, and on reading it later, was that the Chancellor had taken the opportunity of writing his successor’s Pre-Budget and Budget Reports for many years ahead. I hope that his successor will appreciate what the Chancellor has left him. One thing is clear: this is not what is sometimes described as—incorrectly, in my view—a green Budget in any sense of the word. There is a clear misunderstanding by what is meant by a green Budget. I put a question at Question Time to my noble friend a few weeks ago on this precise issue. I said that if the tax was not high enough, it would raise some revenue but do nothing whatever about climate change. If you want to do something about climate change, you must raise no revenue by placing it at such a high level that you will not get any tax. People will stop emitting, if that is the right word, and that will help to address climate change. But most people see a green Budget, green matters and green taxes as determined only by how much tax you are raising. I do not accuse the Official Opposition of that because they would call it ““stealth taxes”” or something that the Chancellor has dreamt up, you might say, as a means of cutting his Budget deficit—although they would not say it as politely as I would. Can my noble friend confirm that the Chancellor’s policy that I asked about at Question Time remains basically not a green tax but a means of raising revenue, which is what it certainly appears to be? The Financial Times recently told us—and I did not see the report anywhere else, but that is one paper I very much respect—that the Chancellor was pressing electricity and gas companies to offer more discounts for older customers. I declare an interest. Of course I am not specifically looking for a discount for myself, but I hope that the Chancellor was seeking to achieve that. Has he had any success with gas and electricity companies, and what were their replies to that pressure from him? The Pre-Budget Report refers to efficiency saving and, inevitably, the Gershon report; it does not refer to the equally famous report of the noble Lord, Lord James. The Chancellor told us in the Pre-Budget Statement that that means a 3 per cent cut in costs plus a 5 per cent cut in administrative cost—not one-off but every year until 2011. I assume that that means that not only every department but also every local authority and non-governmental body will achieve this 3 per cent plus 5 per cent administrative saving. What happens if those departments do not carry out their remit between now and 2011? How do the Government intend to enforce these savings? Am I right in assuming that the assumed savings from the Gershon committee have already been included in the Pre-Budget Report figures, whether or not they will be achieved? We have been told that 45,000 jobs have gone and that the total target was 84,000—not every year, of course. Where will the Gershon savings come from given, I assume, that they have already been taken into account in the Pre-Budget Report figures? How does the Chancellor hope to meet that target all the way through to 2011? I wish to say a few words on the crucial area of economic growth. I am glad to see in his place the chairman of the Select Committee on Economic Affairs, whose latest report came out today. Although I have not yet had a chance to read it in full, I have read press briefings—some of which I do not recognise from my brief look at the noble Lord’s report—which seem to say that the Economic Affairs Committee believes that the Treasury’s reports on economic growth and forecasts have been taken into account by the Monetary Policy Committee, which is one reason for our high interest rates. If the Monetary Policy Committee relied on Treasury forecasts for its decisions on interest rates, I will be even more worried about that committee than I already was. Yet I cannot believe that the Bank of England and the committee really depend solely on those forecasts. It would be incredible—