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Public Sector Borrowing Requirement

Volume 13: debated on Thursday 19 November 1981

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asked the Chancellor of the Exchequer if it is still his intention to aim at a substantial reduction of the public sector borrowing requirement by 1983.

It remains our policy to secure a reduction in the PSBR as a proportion of money GDP over a period of years.

I thank my right hon. and learned Friend for that clear and precise answer. Does he agree that the cause of many of the problems that he is facing is that the Labour Government borrowed excessively to finance current expenditure? Does he further agree that the best way to bring down interest rates is to reduce, not increase, the amount that the Government borrow?

Since the TUC, the CBI and others seek a reflation of the economy, why do the Chief Secretary and his colleagues persist in ridiculing and misrepresenting the work done on the Treasury module by the right hon. Member for Chesham and Amersham (Sir I. Gilmour)? Does the right hon. and learned Gentleman realise that what his right hon. Friend said is supported by the majority of hon. Members?

I am not in the habit of ridiculing anything said by any hon. Member, least of all by my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour). However, there is a difference between ridiculing and subjecting what is said to serious scrutiny. It is a compliment to any hon. Member that we seek to deal with points raised in detail and in a responsible way.

Has my right hon. and learned Friend seen the analysis of the PSBR offered by the Clare group at Cambridge? Does he agree that, when the effect of inflation is taken into account, we are running a public sector surplus rather than a public sector deficit?

I have seen that analysis, but I do not find it persuasive. My hon. Friend will take into account that the PSBR, originally projected in the medium-term financial strategy, was adjusted substantially upwards to the tune of £3 billion to reflect changing conditions. In no sense do I present the position as being one of rigidity. It was precisely that situation that led to a measure of lack of specificity in my original answer.

Is the Chief Secretary aware that he has made probably the most important announcement in the House since we resumed? Are we right to infer from what he said that the medium-term financial strategy, certainly as far as it embraces the public sector borrowing requirement, has been abandoned and that events for the third year running are forcing the Government to accept a larger public sector borrowing requirement than they previously envisaged? Of course, we welcome their conversion.

Does it occur to the Chief Secretary and the Chancellor of the Exchequer that it would be better for the country if they did not adjust the PSBR in the wake of an increase in unemployment, with the public sector cost that that imposes? Would it not be better to adjust it first to create employment by using public sector expenditure in a creative way?

I welcome the opportunity to make it clear that I do not accept what the right hon. Gentleman said. I have made no such statement. I said that the public sector borrowing requirement foreshadowed by my right hon. and learned Friend the Chancellor of the Exchequer in the Budget Statement was higher than that posited in the previous medium-term financial strategy statement to the tune of £3 billion. That was made clear in the Budget Statement. As regards progress this year, I welcome the opportunity to clarify and to stress that the PSBR for 1981–82 is on target.