The impact of the Chancellor's Pre Budget Statement was felt before it was delivered.
The Prime Minister put on one of his better performances in Prime Minister's Questions. Acutely conscious that his half hour would be followed by half an hour from the Chancellor and that people would inevitably make comparisons, he got his act together in a way that he had failed to do on the three previous occasions. True, he never answered Michael Howard's questions about the legitimacy of spending taxpayers money on a policy that Parliament has not approved. He simply answered all the questions put to him by asking questions back; but he ended with a score-draw instead of being well behind.
Turning to the Chancellor, we had some familiar themes - enterprise, fairness, elimination of child poverty. All worthy ambitions. What struck me was the optimistic growth forecasts for the next two years (3 to 3.5%) as opposed to 2.1% this year. I hope it happens, but it did strike me as a step change in a short space of time. In April 2002, the Chancellor said growth this year would be 3 to 3 ½ per cent. In November 2002, he said it would be 2 ½ to 3 per cent. In April 2003, he said it would be up to 2 ½ per cent. Today, he said it would be 2.1 per cent. Hmm . . .
But does he need these optimistic forecasts to make the sums add up in the future, so he can tell us he would stick with his golden rule (borrowing over the economic cycle only to sustain investment, not to fund revenue)?
Nor was it quite clear to me why, if things are going so well, the borrowing figures are so high. Were we in the depth of a recession, I could understand why we were having to borrow £37 billion this year (and that figure excludes some borrowing which should be included as it is underwritten by the Government). But the Chancellor told me how well we were doing, how buoyant employment was, and how we were bucking the downturn elsewhere. So why are we borrowing such enormous figures in the next three years? At the time of the last election, he said he would borrow £10 billion this year. He revised this figure up to £15 billion, to £24 billion, to £27 billion and, today, to £37.4 billion. In 2001, he said he would be borrowing around £35 billion over the years 2002-2006. Now, he says that figure will be around £120 billion. It makes you a bit suspicious of his forecasts.
The inflation target is being changed - I will want to look at the small print of this; but he was clear that he wanted public sector pay next year to be at around 2%. That may lead to some confrontation with the public sector trade unions. He obviously recognised that the Government had set an excessive number of targets and introduced too many regulations, because he announced that he was abandoning a number of them. Hoorah, but we need to carry this zeal a lot further if industry is to remain competitive, and those in the public sector are not to be throttled by Whitehall.
At the end of his speech, there was a welcome U turn on the Revenue Grant Settlement to local councils - which impacts on next year's Council Tax Bill. Only a few days ago, the Local Government Minister made an announcement about next year's statement, and told us how fair it was. Many of us objected and told him otherwise. Today, the Chancellor lobbed in an extra £400 million. Hoorah! Let's hope some of that filters down to Hampshire.
Oliver Letwin did well and asked a large number of pertinent questions. The Chancellor did not answer any of them; not surprising, as the Chancellor spent most of Oliver's speech talking to his neighbours on the front bench.
It is quite clear that, when the next election comes, the Government will accuse us of wanting to cut public expenditure by £80 billion to take public expenditure down to 35% of GDP. I am confident that we will do no such thing. I hope we will be able to peg public expenditure on health and education where it is, and get better value for money. And I hope we will look for worthwhile economies in the overheads of Whitehall.