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Lord Marlesford: My Lords, since the noble Lord mentions inflation, perhaps he should remind us that under the previous Labour government inflation reached 25 per cent in a year. One of the major achievements of the Conservative government was to set us on a course of low inflation, with which, I am glad to say, this Government have continued.
On public finances, based on the most cautious assumption, we are on track to meet the fiscal rules that we have set ourselves over the cycle. Public sector net debt is expected to stabilise at 34 per cent of GDP. We have increased investment in industry and business. Inward investment in this country is 639 billion dollars, the second highest after the United States.
Baroness O'Cathain: My Lords, I think that the noble Lord will, actually. I thank him for giving way; however, he is being a little unfair. I ended my speech by saying that we had one of the strongest economies, and one of the better industrial bases, in the world. We acknowledge all that. There has been huge acknowledgement by the noble Lord, Lord Newby, of the achievements. In this debate, all I want is to ensure that it continues.
I shall recite the facts, as it is necessary to do so. Between 1979 and 1996, business investment in this country grew by 3.3 per cent; by contrast, between 1997 and 2002, it has grown by nearly 6 per cent. In 2002, business investment in this country was 27 per cent higher than in 1997.
Lord McIntosh of Haringey: My Lords, that debate ought to have taken place. I shall respond to the cursory criticisms expressed. The noble Lord, Lord Newby, mentioned our forecasting record. References were made to the OECD report published today. The report states:
As regards the quality of our forecasting, since 1997 Treasury growth forecasts have, on average, equalled or outperformed independent consensus forecasts for both current and year-ahead forecasts. Our forecasts have also outperformed those from prestigious organisations such as the OECD, the IMF, the European Commission and the National Institute of Economic and Social Research.
Noble Lords on all sides of the House asked about the problem of government borrowing. I wish to respond to the noble Lord, Lord Tomlinson, in particular, who claimed that particularly high government borrowing would affect interest rates. Due to our participation in global capital markets, the relationship between government borrowing and short-term interest rates, at any rate, which used to be very close, is much weaker than it was. The proper comparison is to be made with long-term interest rates. The Japanese economy supports that argument.
Lord McIntosh of Haringey: My Lords, if I were to express any view on future government economic policy before the Pre-Budget Report, which will take place in the next two weeks, I would not be standing at this Dispatch Box for very long.
Lord Tomlinson: My Lords, I hesitate to interrupt my noble friend, but, as he specifically referred to what I said, and quoted the good parts of the OECD report, will he not acknowledge that the report expressed concern about the level of UK borrowing?
Lord McIntosh of Haringey: Yes, my Lords, it did; however, I quoted the summing-up of the OECD report on the UK economy. Nobody would claim that every sentence and paragraph of the OECD report was favourable.
Several noble Lords expressed the genuine and widespread concern, which is legitimate, about household borrowing. However, to some extent, the concern is based on a misunderstanding. The important point about the sustainability of household debt is not the amount of the debt itself but its relationship to net wealth and the cost of servicing that debt. On both counts, when net household wealth has gone up by 40 per cent since 1997 and the servicing of household debt is substantially less important than for many years, I would argue against some noble Lords who have taken part in the debate today. Although the level of household debt can be a tragedy for individual families and we must do everything that we can to avoid that tragedy, in macroeconomic terms it is not the problem that some suggest it to be.
Of course, there is concern about productivity levels and the noble Lord, Lord Tomlinson, and others expressed that. It is indeed the case, as my noble friend Lord Sainsbury said clearly and fairly in his opening speech, that our productivity levels need to be raised.
The noble Lord, Lord Sheldon, was concerned about the balance of payments. He said that he had been putting the argument for a competitive pound for many years. Of course, deficits do rise, but so does world trade. The true measure of the deficit is not in so many million pounds per year, but the percentage of gross domestic product. In 1989, the trade deficit as a percentage of gross domestic product was 4.8 per cent. In 2002, it was 4.4 per centgoing in the other direction. The current account deficit was 5 per cent in 1989. It is now 1.8 per cent. I hope that that gives some comfort to the noble Lord, Lord Sheldon, on that issue.
It is my duty to say something about the Bills that were not covered in my noble friend's opening speech. First, the Child Trust Funds Bill, which he did not introduce, has been the subject of debate to which I intend to respond. The Bill establishes child trust fund accounts for all children born since 1st September 2002. Our aim is to strengthen the real saving habit in future generations and ensure that all children have a stake in the wealth of the nation. It will give all 18 year-olds a financial asset and extend the opportunities available to them. The Government will give every child £250, with £500 for the poorest third of children. There will be an additional payment at age seven, again with more for the poorest children.
The comments on the Bill were interesting, but, understandably, were made in the absence of a full explanation of the Bill, which I have certainly not given now. The noble Lord, Lord Higgins, thought that there would be a burden on parents because of the way in which the trust fund was administered, but it will be processed automatically when parents claim child benefit. There will be no claim to make or any paperwork required. The £250 extra will be available when a family's child tax credit claim is finalised, with no additional means test.
Lord Higgins: My Lords, I apologise for intervening a second time, but that was not at all the point that I made. My point was that charges will obviously be levied by those looking after the trust fund. Will such charges be limited to 1 per cent, as in the failed stakeholder case, or some higher figure? If the proposal is to progress sensibly, the industry needs to know the figure involved.
Lord McIntosh of Haringey: My Lords, I was coming to that point. I did not say that the first point was the only one made by the noble Lord. However, he did make it and it needed to be answered. He also asked whether the child trust fund would be available
The second Bill to which I wish to refer is the National Insurance Contributions and Statutory Payments Bill, which makes some useful improvements to the administration of national insurance contributions. It does not change the structure or rates of NICs or disturb the contributory principle. Since there was no comment on that point, I will not burden your Lordships with a full explanation.
The third Bill that falls under the DCMS category is the Olympic lottery and horseracing betting Bill. Again, it is not in the Queen's Speech and I did not expect anybody to comment on it because the statement is being made today. However, it will enable the Government to deliver on a 2001 manifesto commitment.
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