---

Pre-Budget Report

My Lords, I welcome this opportunity to debate the information provided to the European Commission under Section 5 of the European Communities (Amendment) Act 1993. Each year the Government report information to the Commission on the economic and budgetary position and our main economic policy measures. By formally sharing information from the Pre-Budget Report with our European partners, we can help to ensure a proper, accurate and effective EU system and meet our commitments, contributing to enhanced employment and growth. This information was set out in the Pre-Budget Report in November and this material forms the basis of what we are now sending to the Commission. The 2008 Pre-Budget Report was made against a background of economic uncertainty not seen for generations. These are extraordinary, challenging times for the global economy and they are having an impact on businesses and families right across the world. Our central objective is to respond to the consequences of this global recession in our country. When faced with a global shock on the scale we have experienced, international co-operation is of primary importance and the European Union, its institutions and its member states are among our most important allies in this regard. In this spirit, the European Council has agreed a European economic recovery plan which rightly calls for a fiscal stimulus from member states equivalent to around 1.5 per cent of GDP. The Council has also stressed the importance of flexibility in these exceptional times. It encouraged member states to allow borrowing to rise to support the economy, acknowledging that this would lead to a deepening of deficits in the short term and that the stability and growth pact should be applied in a manner which reflects the current exceptional circumstances. Therefore, in line with international consensus, the Chancellor announced in the PBR a fiscal stimulus of £20 billion, in addition to allowing the automatic stabilisers to operate in full, providing meaningful help to families and businesses when it is most needed. Turning to the broader global economic environment, there is a serious problem with the global credit crunch, which is continuing to grip countries across the world and is inevitably affecting us here in Britain. This is a global problem, the start of which can be linked to problems in the sub-prime mortgage market in America and then spread with the contagion that infected banks right across the world. That is why the only way to resolve this will be through global action. The US and Japan are in recession and so is the euro area, while growth in India and China has slowed quite markedly. As the IMF has said, According to the most recent IMF forecast, the world’s advanced economies are set for their first annual contraction in the post-war period and the UK is no exception. As the PBR set out, short and medium-term growth prospects in the UK remain subject to exceptional uncertainty. The Financial Services Secretary to the Treasury (Lord Myners): My Lords, I welcome this opportunity to debate the information provided to the European Commission under Section 5 of the European Communities (Amendment) Act 1993. Each year the Government report information to the Commission on the economic and budgetary position and our main economic policy measures. By formally sharing information from the Pre-Budget Report with our European partners, we can help to ensure a proper, accurate and effective EU system and meet our commitments, contributing to enhanced employment and growth. This information was set out in the Pre-Budget Report in November and this material forms the basis of what we are now sending to the Commission. The 2008 Pre-Budget Report was made against a background of economic uncertainty not seen for generations. These are extraordinary, challenging times for the global economy and they are having an impact on businesses and families right across the world. Our central objective is to respond to the consequences of this global recession in our country. When faced with a global shock on the scale we have experienced, international co-operation is of primary importance and the European Union, its institutions and its member states are among our most important allies in this regard. In this spirit, the European Council has agreed a European economic recovery plan which rightly calls for a fiscal stimulus from member states equivalent to around 1.5 per cent of GDP. The Council has also stressed the importance of flexibility in these exceptional times. It encouraged member states to allow borrowing to rise to support the economy, acknowledging that this would lead to a deepening of deficits in the short term and that the stability and growth pact should be applied in a manner which reflects the current exceptional circumstances. Therefore, in line with international consensus, the Chancellor announced in the PBR a fiscal stimulus of £20 billion, in addition to allowing the automatic stabilisers to operate in full, providing meaningful help to families and businesses when it is most needed. Turning to the broader global economic environment, there is a serious problem with the global credit crunch, which is continuing to grip countries across the world and is inevitably affecting us here in Britain. This is a global problem, the start of which can be linked to problems in the sub-prime mortgage market in America and then spread with the contagion that infected banks right across the world. That is why the only way to resolve this will be through global action. The US and Japan are in recession and so is the euro area, while growth in India and China has slowed quite markedly. As the IMF has said, "““the world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s””." According to the most recent IMF forecast, the world’s advanced economies are set for their first annual contraction in the post-war period and the UK is no exception. As the PBR set out, short and medium-term growth prospects in the UK remain subject to exceptional uncertainty.