HISTORIC PRESS RELEASE : Steering a course of stability in Britain [October 1998]
The press release issued by HM Treasury on 22 October 1998.
Attached is an extract from the speech given by the Chancellor of the Exchequer, Gordon Brown today to the European Investment Bank Forum.
Just as we are working for stability internationally, so in this uncertain and unstable world where growth forecasts for the world and for national economics are being downgraded by national and international authorities alike, the government is steering a course of stability for Britain.
It because we created a new monetary framework, by making the Bank of England independent, and tackled the inflation problem – that is at the root of the boom bust cycle of the past – that we are better placed to withstand the uncertainties of the global economy.
Inflation has been brought down and is at its target of 2.5 per cent. And the bank of England has now been able to reduce interest rates while setting policy to meet that target.
And it is because we tackled the fiscal deficit -the 28 billion pounds deficit we inherited – that we are better placed. In our first year we took the difficult decision to work within the public spending plans we inherited and to tighten fiscal policy – with a reduction in borrowing of 20 billion pounds last year, amounting to 3.5 per cent of GDP from financial year 1996-97 to financial year 1999-2000.
And just as we have consistently taken a prudent and cautious approach to managing the public finances, we will continue to do so. I will of course be delivering the Pre-Budget report on 3 November, with the half yearly assessment of the economy and the public finances which every chancellor gives. But I can say – as I said last July – that our plans and projections have been based on cautious assumptions which have been audited by the independent national audit office, including a cautious and realistic assumption about trend growth – one quarter per cent a year lower than the conservative assumption.
It is one of the central features of our new spending regime that we built in margins to cover uncertainties, including the risk of slower growth and its effect on revenues. And we have laid out, as our new code for fiscal stability requires, clear fiscal rules which we will achieve over the economic cycle and which explicitly allow the automatic stabilisers to operate in periods of more moderate activity.
The Pre-Budget statement I will make to the house of commons in ten days time will show that in an uncertain and unstable global economy we in Britain are steering a stable course for both our national economy and our public finances. It would not be in the national economic interest for us to be diverted by opportunist calls for emergency cuts in public investment which are not justified on economic grounds.
For it is because of our prudent management of public finances – including last years 20 billion pounds cut in the deficit – that we remain on track to meet our strict fiscal rules over the economic cycle while maintaining our commitment to an additional 40 billion pounds for improvements in health and education.
