Our first rule is the Golden Rule that over the cycle we balance the current budget. Having accumulated surpluses at the start of the economic cycle of 2.1 per cent of GDP in 1999-2000, 2.1 per cent of GDP in 2000-2001 and 0.9 per cent in 2001-02, we not only meet our first fiscal rule, the Golden Rule, that we balance the budget, but even on cautious assumptions we have an average annual surplus over the whole cycle of around 0.2 per cent of GDP - meeting our first rule in this cycle by a margin of £14 billion. And even on the cautious case moving back to balance by the end of the forecast period.
Our second rule – the Sustainable Investment Rule – is that net debt will be below 40 per cent of national income.
I can tell the House that debt this year is actually rising to 42 per cent of national income in France, 50 per cent in Germany, just under 50 per cent in the USA and 80 per cent in Japan. But in Britain debt this year and in future years will be well below 40 per cent – at 32.8, 33.8, 34.6, 35.1, 35.4, and 35.5 per cent – meeting our second rule by a margin of 60 billion pounds and doing so over the cycle and in every year.
So with both rules met it is right and prudent that – as in America, Japan, France and Germany – we borrow at this, the right time in the economic cycle.
Net borrowing adjusted for the economic cycle which is forecast this year at 3.5 per cent of national income in Germany, 3.9 per cent in France, 4.5 per cent in America and 6.9 per cent in Japan, is in Britain 2.4 per cent this year and in future years 2 per cent, 2.2 per cent, 2.0 per cent, 1.9 per cent and 1.7 per cent of national income.
Adjusted for the cycle our deficit, as I state in our Annual Convergence Report submitted today to the European Union, is and remains – unlike the deficits of these G7 colleagues – below 3 per cent of GDP and below 3 per cent in every single year.
And in each year, before adjusting for the cycle, Britain’s borrowing is also substantially below the G7 average and falling to just half the level of the USA.
Let me give the House, in detail, the comparative figures.
This year while net borrowing is for France 4.2 per cent of national income, Germany 4.2 per cent, the USA 4.9 and Japan 7.4. It is for Britain 3.4 per cent.
Next year net borrowing in France is 3.8 per cent of national income, in Germany 3.9 per cent, in America 5.1, and in Japan 6.8. In Britain it is 2.6 per cent.
And in 2005 while for France borrowing is 3.6 per cent of national income and in Germany it is 3.4 per cent, in America 4.9, and in Japan 6.9 per cent, in Britain it is just 2.4 per cent.
So compared with a British deficit of eight per cent ten years ago, and an average of six per cent over the early nineties, net borrowing this year and future years to 2008-9 is – as a percentage of GDP – 3.4, 2.6, 2.4, 2.1, 1.9 and 1.7 per cent, with, for this and future years, the cash figures 37 billions, 31 billions, 30 billions, 27 billions, 27 billions and 24 billions – able to meet all our commitments:
and at home;
Maintain the lowest level of debt in the G7;
Still announce a deficit that is in each and every year substantially below America, Japan, Germany and France;
Meet all our fiscal rules;
And able to move forward with the spending plans we have set out:
by 2006 £15 billion pounds more a year for education than last year;
£59 billion more a year for public services;
and by 2008 for health alone £41 billon more.
Allowing us to employ, in total, 25,000 more doctors, 20,000 more teachers, 80,000 more nurses and 90,000 classroom assistants as we invest in and reform our public services.
Mr Speaker, it is sustained economic growth, built on the foundation of long term stability and low debt, that has underpinned our investment plans and makes them affordable for now and the future
And so I can now make two further announcements.
The first on children’s benefits.
Nothing is more important to the future of our whole country than that, with the best schooling, services and financial support, every child has the chance to develop their potential to the full.
For mothers and fathers struggling to balance work and family responsibilities, help with childcare costs – once available to only 47,000 parents in 1997 – is now available to almost 300,000. But today it is time to begin to face up to a long standing grievance: that financial help for approved child care be offered not just to some families but available right up the income scale to working families facing child care costs.
So in advance of other decisions in the Spending Review, I can announce as a first step that for every employee whatever their income level, employers will be able – as long as the offer is made to every employee – to provide – free of both employee national insurance and income tax and free of employer national insurance – £50 pounds a week for approved child care.
I can also announce that we will respond to two other long standing concerns: help with child care costs will now be available when approved child care is provided in the child’s own home and after consultation we will widen the definition and therefore the numbers of approved child carers for whom the £50 pounds a week or tax credits can be offered.
We now expect child care places to double from 750,000 in 1997 to 1.5 million by 2006 – helping over 2.2 million children.
In April, for the first time our country will pass a milestone in opportunity for our children: a nursery place guaranteed for every three and four year old – six months ahead of our planned schedule.
But we know also that the most important formative years are from the cradle to the nursery school. So for 500 communities the Minister for Children will fund school-parent links so that long before schooling begins infants are introduced to early learning and books, and support is on offer to parents. Building from and including Sure Start, Neighbourhood Nurseries and Early Excellence Centres, I can confirm that over the next five years there will be one thousand Children’s Centres: Children’s Centres that can become – for parents as well as children – as much a focus of community life as the local school, the local place of worship and the local park.
Our goal: a Children’s Centre for every community; this generation meeting its obligations to the next.
Mr Speaker, we will be judged not just by what we do for services but on what we do for child benefits. So building upon the new child tax credit – and at a cost of £1 billion pounds a year – we will increase, from April, the child element not just by inflation or earnings but by 13 per cent – an extra payment to be paid to 7 million children of £180 a year – an extra £3.50 a week.
Because every child should be born into a world of opportunity not condemned to poverty, maximum help for the first child worth just £27 a week in 1997 will rise in April to £58. And for two children from just £44 a week to £100 a week.
Before housing costs a two child family on half average earnings now better off than in 1997 by £75 a week – £1 billion more a year to meet, on this basis, our goal for 2004 to reduce child poverty by one quarter – as step by step, we halve child poverty by 2010 and eradicate it in a generation.
I have one final announcement.
I stated earlier that starting in April 2005 local authorities promoting enterprise can receive from central government £150 million a year extra, rising to £450 million a year.
From April 2004 also I am now able to do more for local council tax payers: to allocate across the United Kingdom – free of ring-fencing – for local authorities as they set their budgets, an additional £406 million; in England £340 million extra.
Making the total available to English local authorities, £3.6 billion more next year than this year.
Cash to meet the needs and concerns of council tax payers.
The strength to make the best long-term decisions for Britain
And I commend this Pre Budget Report to the House.