Public finances submission to the European Union.

Brooks Newmark questions the Government's public finances submission to the European Union.

Mr. Newmark: I am delighted to see the Government Members out in full force for this important debate. I know that the Government Whip is particularly keen to hear what I have to say. I congratulate the Economic Secretary on her commitment to ensuring that the Treasury is run as a paperless office. Indeed, a copy of the UK convergence programme was, of course, made available on the Treasury website, but as my hon. Friend the Member for South-West Hertfordshire said, paper copies did not reach the Vote Office. I was a little amused to hear that, when my office requested a paper copy from the parliamentary unit at the Treasury, the response was that a copy would be sent over immediately, but that unfortunately it was the only copy available. Perhaps the other copies had already been forwarded to Brussels in anticipation of the Committee's approval-or perhaps it is the pre-Christmas post.

Mr. Gauke: They might have been lost in the post.

Mr. Newmark: Perhaps, indeed.

The Government notes at paragraph 1.7 of the report that the

"disruption in global financial markets has meant economic prospects have become more uncertain",

before emphasising that they believe the economy to be resilient enough for the impact to be minimal, and that

"growth could slow by less than expected."

Is that judgment in accord with the Governor of the Bank of England's statement to the Treasury Committee that conditions are not only highly uncertain, but rather uncomfortable? Is a revision of emphasis in the programme required in light of those comments?

Paragraph 2.4 states:

"Stability allows business, individuals and the Government to plan more effectively for the long term",

but how is stability being reinforced by the Chancellor's shilly-shallying, for example, on capital gains tax rates since the pre-Budget report?

Paragraph 2.7 makes another equally confident claim, and states that the

"most recent assessment, published in the 2006 Long-term public finance report, shows that the UK fiscal position is sustainable over the long term. The UK is in a strong position relative to other developed countries"-

the point made by the Economic Secretary-

"to face the challenges of an ageing society."

How does that statement square with the fact that the Chief Secretary said last week at Treasury questions that public sector pension liabilities

"should not be grossly simplified and misrepresented."-[Official Report, 29 November 2007; Vol. 468, c. 424.]

I agree with the principle, but at the same time he admitted that the ONS has already released new figures, back in October, and that a revision of the long-term public finance report was now both forthcoming and overdue. Should this expected revision not be reflected in the convergence programme?

My favourite claim is in paragraph 3.4, which says:

"Central banks have offered more liquidity at slightly longer maturities, including in the three-month money market, and, in some cases, against a broader range of collateral than usual."

There is no hint there of the mismanagement that caused the first run on a bank in 150 years, while the European Central Bank and banks in Europe avoided difficulty. There is no mention that one particular central bank that accepted a

"broader range of collateral than usual"

was Northern Rock, together with its depositors, in return for a rapidly escalating commitment of taxpayers' money. There is no admission from the Government that the "slightly longer maturity" of the liquidity may well be indefinite. That is just a flavour of the quite remarkable optimism with which the Government intend to regale Brussels and that at least proves that Ministers are capable of keeping a stiff upper lip abroad, whatever disasters befall them at home.

I move to some specific questions about the treaty deficit and the way that it is calculated. It seems that the Treasury prefers to use the cyclically adjusted treaty deficit because that measure has, in the past, helped to push the Prime Minister in the right direction. We begin to see from table 4.1 of the convergence programme that, next year, it will push him even closer to another breach.

The figures themselves appear to move about quite a bit. Table Bl of the pre-Budget report and table 4.1 of the convergence programme note this year's treaty deficit as 2.6 per cent. of GDP and the cyclically adjusted treaty deficit as 2.4 per cent. of GDP.

However, in its release of 28 September, the ONS preferred to split the difference by claiming the treaty deficit for this year as 2.5 per cent. of GDP. Will the Economic Secretary comment on the difference between the figures from the ONS and those that appear in the document before us?

Furthermore, it seems to be the practice of the ONS to publish the treaty deficit figure in a different format, depending on the year in question. I have the biannual releases going back a few years. Sometimes, as in the latest release, they are based on the financial year, but on other occasions they revert to the fiscal year. Moreover, it does not seem to matter when in the year the figures are published. I have no doubt that the ONS was already fully independent of the Treasury-I think that this is the point that the Economic Secretary was making-even before the advent of the new Statistics Board, but will she explain the methodology to me?

Misplaced optimism, the massaging of figures and a refusal to acknowledge criticism have all been hallmarks of this Government in the past. When, for example, the European Commission issued in January last year its indictment of the UK's failure to adhere to the 3 per cent. target for the second time in as many years, a Treasury spokesman said in response:

"As set out in the Budget last week, the UK treaty deficit is forecast to fall to 3 per cent. in the coming fiscal year, and will reach 1.6 per cent. by 2010-11. The UK continues to have the lowest average debts and deficits of any major European economy with the public finances sustainable and increases in public investment fully affordable."

Again, that point was made by the Economic Secretary earlier.

From table 4.1 of the convergence programme, we see that the treaty deficit position for 2010-11 is predicted to be not 1.6 per cent., but 2.1 per cent. on both the adjusted and the non-adjusted measure. That is an upwards revision in forecasting of 0.5 percentage points, which is significant for two reasons. First, in January last year, the Council made a recommendation that the UK should correct its deficit by 0.5 percentage points in a "credible and sustainable manner" between 2005-6 and 2006-7. It looks very much as if the Council's recommended margin for improvement is exactly the same as the Government's own margin for error in forecasting. Secondly, given that the estimated deficit for 2007-08 is 2.9 per cent., or 3 per cent. when cyclically adjusted, how confident is the Economic Secretary that the latest estimate will not miss by a similar margin and result in the UK breaking the Maastricht criteria yet again? Before concluding, I would like to turn briefly to the sixth report of the European Scrutiny Committee from the last Session, which addressed the stability and growth pact and, in particular, both the Council's opinion on the UK's convergence programme and the Commission communication that arose from it subsequently. The European Scrutiny Committee had already noted the substance of the Council's dissatisfaction with the Government's data on the UK convergence programme in an earlier report. Nevertheless, the Government failed to address many of the points raised by the Committee, which subsequently had to reiterate its request for an explanation of the concerns that the Council had expressed.Persevering, in its sixth report the European Scrutiny Committee again drew attention to both "omissions of data" and to the criticism that some data was being"aggregated differently from the harmonised measure".

The Committee eventually received an explanation from the former Economic Secretary to the Treasury, but it seems to have been the result of a process which reads as if it was a bit like pulling teeth. I quote from paragraph 9.6 of the Committee's report:

"The Economic Secretary to the Treasury writes belatedly in response to our repeated request on points related to the UK's Convergence Programme."

Later, paragraph 9.15 says:

"We note the further comments the Minister makes now (and which we would have liked to have seen much more promptly) in relation to the apparent dissatisfaction with the Government's data."

What was the reason for the delay in answering the European Scrutiny Committee's queries? Clearly, the Government could have done more and acted quicker to address concerns about the quality and the presentation of the data in the UK convergence programme.

There are, however, several questions that come to my mind out of all this. First, is the new version of the convergence programme up to scratch and does the new Economic Secretary feel that she can give it her full confidence? Secondly, can she confirm for the record how much importance the Government attach to the adherence to the Maastricht convergence criteria? As with so many other policy areas, the Prime Minister has in the past attached great significance to compliance with the Maastricht criteria when the going was good but, surprisingly, he became a little less interested when the rules were repeatedly breached and the Council started issuing critical missives. So, will the Economic Secretary signal whether the current Chancellor still believes in the importance of the Maastricht criteria and that convergence remains, to borrow the Prime Minister's favourite phrase, "in the national interest", or are we, once again, just going through the motions here today?