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Pre-Budget Report 2007

My Lords, I hope that my noble friend will forgive me. I had completely forgotten his elevation at this juncture in the debate so that he is actually presiding over our affairs. In that case, I shall be even more solicitous in praising him for his contribution earlier this evening. He is absolutely right. He identified the strength of the Government's position with regard to the business economy. It is far too easy for others to paint a gloomy picture when a great deal about the real economy is working very constructively indeed. I know that he is well versed and has spoken most recently in debates about the enormously significant role that we are playing in improving the skills agenda, particularly in increasing the role of science in our society and by the work of my noble friend Lord Sainsbury in contributing to the strengthening of our economy against fluctuations that confront us, as undoubtedly they will. My noble friend was the only contributor this evening—I stand correction if I am wrong—to introduce that other dimension to which we must all have great regard: climate change. There is no doubt that it presents a significant challenge, but the Government are leading from the front on that issue. The whole House will recognise how much progress we have made with regard to the Kyoto targets, how fertile we are in ideas that promote a low-carbon economy and our intention to lead Europe in those terms. That does not alter the fact that this is a challenging agenda. I accept the point made by my noble friend that there is an element of acceleration in the air because of recent scientific insights beyond the Stern report. We must have due regard to that. It is certainly a challenge to which we need to respond. On the question of the public aspect of debt to which the noble Lords, Lord Marlesford and Lord Northbrook, referred, it can sometimes be construed that everything to do with PFI means that you gross up the sums and then dump them on the Exchequer, which then has to respond to the challenge of meeting those costs in any one year. These are long-term projects—in terms of the rewards that they bring to the economy and in terms of the actual costs. Therefore, it is not entirely right that the noble Lord, Lord Marlesford, managed by some rather subtle arithmetic to get our debt burden above and beyond the Italian perspective. I would not accuse the noble Lord of the concept of creative accountancy, but he will nevertheless recognise that the Government beg to differ on those calculations and how we arrive at our overall position on debt. The noble Lord, Lord Northbrook, gave a somewhat pessimistic perspective on the economy, although he would no doubt portray it as a realistic one. He is of course right that we have challenging times ahead. None of us can look at aspects of the American economy without recognising that we will have to adjust against that perspective. He first said that he did not like our index on inflation, but it is the international index—a comparator that we have with other countries, which therefore makes comparison with us internationally valid. He will also recognise the difficulty with the other measure of inflation; every time the Bank of England puts up interest rates in order to manage the economy, it automatically pushes up inflation because the other measure of that is the mortgage rate built into its actual index. Now, that is a real weakness of that other index, but while one must have due regard for the burdens that households have to bear when people pay mortgages on their housing, I assure him that when the Government use their index of inflation it is for the best reasons of international comparison. I hope that the noble Lord will accept that dimension.