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AMENDMENT OF THE LAW

The hon. Gentleman is a very good member of the Treasury Committee, so he knows that we have been studying the matter in depth for six months and made reports to the House. I can only quote a wise old central banker from the City who said to me, ““John, there have been no casualties in this. Nobody has lost any money, and the system has been stabilised.”” The public’s response shows that they share that sentiment. I am not surprised that the Chancellor did not mention Northern Rock, because it has been the focus for six months, and arrangements have been put in place. I wish to cover a number of matters. The first is economic prospects and forecasts. The second is fiscal policy and fiscal sustainability, and the third is child poverty. I was one of the 72 Members who wrote a letter to a national newspaper last week urging the Chancellor to ensure that the child poverty targets were re-established. The fourth is environmental taxation, the fifth is the savings gateway and the last is rogue trading and insider dealing. When considering the economic prospects and forecasts, I am mindful of the globalised, turbulent background. At the time of last year’s pre-Budget report, the Treasury’s forecast was for economic growth of between 2 per cent. and 2.5 per cent. in 2008, and between 2.5 per cent. and 3 per cent. in 2009. That forecast was prepared when the wider economic situation was far from clear. When the Committee reported on the pre-Budget report last November, we cautioned that there remained a risk that the credit crunch would have a greater economic effect than expected. That has been confirmed today by the downgrading of those economic forecasts. We also observed that the Treasury’s optimism that the economy would revert to trend in 2009 was not adequately explained. When the Chancellor and others come before the Committee, we will wish to test whether the new forecasts are realistic. I expect the Committee to focus particularly on three areas of risk. First, the Government have been looking for a growth in exports as part of the rebalancing of the economy. The International Monetary Fund is now forecasting US and eurozone growth of well below 2 per cent. for 2008, with world economic growth as a whole at its slowest rate since 2003. If exports are to grow significantly against that backdrop, exports to growing markets, including China, India and the oil-rich countries, will need to increase. In some of those markets, the UK has not performed as impressively as some of our European competitors. On a visit to India 18 months ago, the Committee was made aware that the links between the UK and India could be developed. We were convinced that the UK’s exports to India could complement what is happening there rather than challenge it. Developments could take place in high technology, and particularly clean coal technology. I would also like to see further developments between the UK and China in that area. Secondly, the Committee will consider the fact that the UK’s growth in recent years has been fuelled by the prosperity of the financial sector. On an international basis, that sector is the main cause of the current slow-down in the world economy. It is bearing some of the costs of its past exuberance. I believe that the British financial sector remains competitive and innovative, but it is still to be seen whether its relative contribution to the economy will diminish during the current period of consolidation. Thirdly, we will consider the dependence of the British economy on wealth and confidence linked to rising house prices, which is well known. In recent years, Treasury forecasters have prided themselves on defying the doom-mongers who have repeatedly forecast a sharp downward adjustment in house prices. There is a risk that house prices will prove less resilient than the Government expect in the face of the credit crunch. I expect that the Committee will explore that matter, and particularly the Chancellor’s initiatives in the mortgage market, with our witnesses next week.