Oral Answers to Questions

David Gauke Excerpts

Tuesday 10th May 2011 Commons Chamber

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

4. What assessment he has made of the effects of the increase in the standard rate of VAT on levels of economic growth in the first quarter of 2011.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

At this stage, it is not possible to make a full assessment of the effect of the increase in the standard rate of VAT on levels of economic growth in the first quarter of 2011. The Office for Budget Responsibility forecast released on 23 March projected growth of 1.7% over the course of 2011. That forecast takes full account of the Government’s fiscal policy measures.

[Ms Stuart]

The Bank of England expects inflation rates to accelerate over the next few months. The markets, however, seem to have taken the view that interest rates will not increase as speedily as was anticipated just a few weeks ago. How does the Exchequer Secretary reconcile the Chancellor’s notion that the economy has grown with the judgment of the markets?

[Mr Gauke]

The economy is growing: that is clear from the Office for National Statistics numbers and from the projections of every respected economic forecaster. Despite the predictions coming from the Opposition last year, there has been no double dip.

[Claire Perry (Devizes) (Con)]

May I return to the topic of VAT on fuel? I have just come from a business session in my constituency of Devizes, where I know that despite the decrease, high fuel prices continue to be a real drag on growth for small businesses across the economy. I have a letter from the EU commissioner saying that the recent motion we debated—that a derogation should be made specifically for motoring fuel—is almost certainly illegal and definitely unworkable under EU legislation. May I ask Ministers what proposals we can suggest to help motorists in the real world now that the Labour party’s suggestion has been revealed as yet another—

[Mr Speaker]

We are grateful to the hon. Lady.

[Mr Gauke]

It is striking that the first line of Labour’s blank sheet of paper on the economy is a proposal that we now know does not work, is illegal, would not help and would leave tax on fuel just as high as it was—whereas we are cutting fuel duty.

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[Jeremy Lefroy (Stafford) (Con)]

14. What recent discussions he has had with his international counterparts on strategies to reduce budget deficits.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

At the G20 summit in Seoul in November, advanced countries committed to formulate and implement credible growth-friendly, medium-term fiscal consolidation plans. The Chancellor has been involved in discussions with our international and European counterparts since the Seoul summit, including in the International Monetary and Financial Committee and the International Monetary Fund spring meetings. As was the case with the previous Administration, it is not the Government’s practice to provide details of all such discussions.

[Jeremy Lefroy]

I thank the Minister for his reply. The OECD’s recent report says that the UK is striking

“the right balance between addressing fiscal sustainability…on the one hand, and preserving short-term growth on the other.”

In his contact with international colleagues, has my hon. Friend found other support for this view or, indeed, any support for the opposing view?

[Mr Gauke]

It is quite striking that on one side of the argument, saying that we must be serious about getting the deficit down, there is the OECD, the IMF, the European Commission, the CBI, the Governor of the Bank of England and the US Government, whereas on the other side we have the Labour party. We do not find the Labour party’s case terribly persuasive. On the evidence of last week, nor do the British people.

[Ian Austin (Dudley North) (Lab)]

Does not what happened in Greece show that measures that hamper growth make tackling the deficit all the harder? Is that not why, six months after the geniuses opposite took stewardship of an economy that was beginning to recover strongly, growth had ground to a halt? Is it now why, far from tackling the deficit, which is what all this is supposed to be about, the small print of the Budget shows that the Government will have to borrow £46 billion more?

[Mr Gauke]

I know that the hon. Gentleman is close to the former Prime Minister, but it really is disappointing that he is such a deficit denier. He even seems to suggest that the Greeks should not be doing anything about their deficit. If we do not have a credible plan, then the economy is at risk. We do have a credible plan.

[Stephen Williams (Bristol West) (LD)]

First, Mr Speaker, may I associate myself and my Liberal Democrat colleagues with your remarks about David Cairns at the start of Question Time?

On the deficit, the Government’s plans will reduce the fiscal deficit from last year’s figure of 9.6% to 7.9% this year, but that will still be roughly double the eurozone average and higher than the figures for Germany, France, Italy and Spain. Does the Minister agree that if we did not take this action to reduce the deficit, it would undermine international confidence in this country and our ability to borrow the funds that we still need to fund our programmes?

[Mr Gauke]

My hon. Friend is absolutely right. Even now, our deficit is higher than Portugal’s and it is perfectly clear that we on the Government side are united and determined to bring that deficit down.

[Chris Kelly (Dudley South) (Con)]

T1. If he will make a statement on his departmental responsibilities.