Section 5 of the European Communities (Amendment) Act 1993

The Financial Secretary to the Treasury (Mr David Gauke): I beg to move,
That this House approves, for the purposes of section 5 of the European Communities (Amendment) Act 1993, the Government’s assessment as set out in Budget 2015 and Autumn Statement 2014, combined with the Office for Budget Responsibility’s Economic and Fiscal Outlook (2015) and Fiscal Sustainability Report (2014), which forms the basis of the United Kingdom’s Convergence Programme.
As in previous years, the Government inform the Commission of the UK’s economic and budgetary position in line with our commitments under the EU’s stability and growth pact. The Government plan to submit their convergence programme, with the approval of both Houses. The convergence programme explains the Government’s medium-term fiscal policies, as set out in the 2014 autumn statement and Budget 2015, and also includes the Office for Budget Responsibility forecasts. As such, it is based entirely on previously published documents that have been presented to Parliament.
With the Budget on 18 March this year, and the debate much earlier than normal because of the electoral timetable, I appreciate that the time to prepare for this debate has been particularly tight. Against that backdrop the Treasury has made every effort to provide early copies of the convergence programme document in advance of the debate today. The document makes it clear that since 2010 the Government’s long-term economic plan has delivered the stability and security needed to build a resilient economy: the UK had the fastest growth among G7 economies in 2014; employment has reached its highest ever level; and inflation—the consumer prices index—is at a record low. Debt as a share of GDP is now forecast to start falling in 2015- 16, meeting the debt target set out in 2010.
There are differing views on the value of submitting that information to the Commission. To be clear, as a result of the UK’s opt out from the single currency, no sanctions can be imposed on the UK as part of this process. The UK’s record is a good one, and there is some value in sharing the UK experience across Europe and demonstrating that there is no conflict between central fiscal consolidation on the one hand and robust economic growth on the other.
Last week’s Budget set out the Government’s assessment of the UK’s medium-term economic and budgetary position. GDP grew 2.6% in 2014, which is the strongest annual growth since 2007 and the fastest in the G7. Debt is forecast to fall as a share of GDP in 2015-16, meeting the debt target set out by the Government in 2010. Borrowing is forecast to be lower in every year to 2018-19 than at autumn statement 2014, and the public finances are forecast to achieve a larger surplus in 2018-19. Falling debt and improving borrowing mean that consolidation can end a year earlier than planned, and that spending will grow in line with GDP in 2019-20. Budget 2015 builds on existing reforms to create a dynamic, regionally balanced and stronger economy. Latest data show that employment is at its highest ever level, with 1.9 million more people in work since the current Government came to power. Business investment has increased by 25.6% since the first quarter of 2010, and the UK will have the joint lowest rate of corporation tax in the G20 from April 2015.
Budget 2015 sets out a significant package of measures for a truly national recovery by investing in infrastructure, housing, and science and innovation across the whole of the UK, and building a northern powerhouse. Fuel duty will be frozen for another year. The Government will substantially reduce oil and gas taxes to improve competitiveness in the North sea. Further support for energy-intensive industries will begin in 2015-16. A comprehensive review of business rates has been launched, and there will be a radical simplification of the tax system by abolishing the annual tax return.
Restoring growth and competitiveness across the EU is critical. The euro area outlook is for slow, but positive growth, supported by lower oil prices and European Central Bank sovereign quantitative easing. The European Commission’s own forecasts from February this year predict growth in 2015 of just 1.7% in the EU as a whole, and 1.3% in the euro area. Some 45% of our exports are destined for the EU and seven of the UK’s top 10 trading partners are EU member states.
The UK recovery has been based on a number of policy responses: supportive monetary policy, clear and credible fiscal consolidation, and structural reform, all of which must mutually reinforce each other. Although the challenges across member states differ, countries across the EU need to consider a similar response, and these processes of European co-ordination, including the sharing of information through the shared reporting of fiscal and reform progress, can play a part in making that happen.
Much of the answer lies in national level reforms such as creating flexible labour markets. Clearly, the European Semester has a key role to play in encouraging member states to make ambitious reform commitments, and the UK has an interest in making those reforms happen. However, an ambitious EU-level reform agenda is also a key part of the equation and an essential counterpart to national level reforms.
In conclusion, the Government are committed to ensuring that, in line with section 5 of the European Communities (Amendment) Act 1993, this House approves the economic and budgetary assessment that forms the basis of the convergence programme. Following the House’s approval of that assessment, the Government will submit the convergence programme to the European Commission, which is expected to make its recommendations to all EU member states in late May. Those recommendations will then be considered by ECOFIN council and agreed by Heads of State or Governments at the European Council.
The convergence programme explains the Government’s medium-term fiscal policies as set out in the 2014 autumn statement and Budget 2015, and also includes the Office for Budget Responsibility forecasts. As such it is based entirely on previously published documents that have been presented to Parliament. Unlike other member states, the UK does not submit its Budget to the Commission for approval, and cannot be subject to any action or sanctions as a result of its commitments under the stability and growth pact. I look forward to the debate.
and at the end of the debate:
Mr Gauke: We seem to have entered day five of the Budget debate. Let me make one or two brief points in response to the hon. Lady. First, let us remember what the state of the economy was in 2010, and the state of the public finances. Our borrowing levels were over 10% of GDP, which is a peacetime record, and we were forecast to have the highest level of borrowing in the G20. Over half of that amount has now been dealt with, but we have further to go and further steps are needed to deal with borrowing. That is why this House overwhelmingly voted for the charter for fiscal responsibility, which means that the cyclical current budget will be balanced by 2017-18. That is a target that those in all parts of the House signed up to, including Labour Members, but we heard nothing from them during the Budget debates, or today, about how they would meet that ambition. Whereas my party has set out our plans for finding £12 billion from welfare cuts, £13 billion from departmental spending and £5 billion from tax evasion, tax avoidance and aggressive tax planning, we have had no such indications from Labour. There is a huge hole where there should be an Opposition party policy.
Kelvin Hopkins (Luton North) (Lab): The hon. Gentleman constantly talks about cuts—very unpleasant cuts that are going to affect a lot of poor people—but the real problem is an income problem, because we have a tax gap of £120 billion through evasion and avoidance that the Government refuse to recognise to its full extent. If we looked at the income side and made sure we collected the tax that should be paid, then we could address the problems with the deficit—if they are serious problems—and, at the same time, not inflict cuts on poor people.
Mr Gauke: The Government do not recognise the £120 billion figure, nor did the previous Government, and nor, as far as I am aware, does any statistician. One individual has put that methodology forward, but Her Majesty’s Revenue and Customs has set out in some detail the numerous flaws within it. As for tax, I agree that it is important that we get the money in. It is worth pointing out that the yield from HMRC’s activities has gone up from £17 billion a year to £26 billion a year under this Government. We have a proud record of collecting more in tax, and we will maintain it.
I do not intend to detain the House for long on this occasion. The fact is that this Government are getting the deficit down, while living standards are going up, employment is going up, and we are fixing the mess that we inherited. Is there more to do? Yes, of course there is, and we hope to have the opportunity to address that over the next five years.



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