The UK faces one of the largest fiscal challenges of any advanced economy. According to the International Monetary Fund, between 2007 and 2015 the UK is forecast to experience the most rapid increase in net debt of any G7 economy, with the exception of Japan. The Office for Budget Responsibility’s pre-Budget forecast shows that without further action to tackle the deficit, debt would still be rising in 2014-15. As result of the actions set out by the Government in the June Budget, the OBR projects that debt will have declined to 69.4% of gross domestic product in 2014-15— 5% of GDP lower than under the plans the Government inherited.
That was a lot of words, but the Chief Secretary did not answer the question. Why does the United States have a much higher debt than we have, and why do Canada, Italy, France, Germany and Japan all have, as a percentage of GDP, higher debt than we have? Is it true that the extent of the cuts is driven not by economics but by ideology?
No, that is not true. The plain fact is that, as I said earlier, we have the fastest growing debt and the largest deficit in the European Union apart from Ireland. In the Budget we have taken action to ensure that we prevent the key risk facing growth in this country, which is a failure to take action and a failure to restore confidence in the economy, potentially causing us the sort of problems that we have seen in other European countries. That is the problem that we need to avoid.
Of course that matters, but what matters more than anything is the risks that this economy would have faced if we had stuck with the plans of the previous Government, which would have risked higher interest rates, lower growth and fewer jobs, and there would have been very big risks in the future.
I am glad that the Chief Secretary at least accepts the proposition put by the hon. Member for Louth and Horncastle (Sir Peter Tapsell).
We all agree that to get debt down, growth is essential. However, has the Chief Secretary noticed this morning’s remarks by Geoffrey Dicks, a member of the Office for Budget Responsibility, who said that his office had cut its forecasts for growth by 0.5% as a result of the Budget announcements two weeks ago, and went on to say that logically, as he put it, that increased the chances of our economy slipping back into recession?
He also made it clear that he did not think that that risk was a likely one. In the Budget—this is the important central judgment that the House needs to understand—we have faced up to the fact that if we had carried on with the plans of the previous Government, the big risk facing the economy would have been higher interest rates, fewer jobs, and a reduction in growth, and we would have faced the big risk that we have seen in other countries, which we need to ensure does not happen in this country. Our Budget has ensured that that risk is avoided; the previous Government would not have done that.
Given that the IMF report said that we would have had the highest public borrowing in the G20 this year and the worst structural deficit in the OECD, has the Chief Secretary, the Chancellor or any Treasury Minister yet received a formal apology from the Labour party for the appalling state of the economy?
Sadly, there has been no formal apology. Labour Members are free to offer one during this questions session should they wish to. In fact, with the revised Office for National Statistics forecasts of the last couple of days, we have seen the predicted reduction in the size of the economy go from 6.2% to 6.4%. Even after they have left office, their recession is still getting worse.
Is the UK on the brink of a debt downgrade because the rating agencies have noted that the Government propose to cut capital allowances and therefore stifle investment, or because the agencies do not share the Government’s optimism about Europe’s capacity to buy UK goods in the future?
Does my right hon. Friend agree that given that we are currently spending more on interest on our accumulated debt than we are on schools, police officers and other important measures, we must take difficult decisions now to release more money to spend on vital public services later in this Parliament?
I could not agree more with my hon. Friend, who sets out the case strongly. From what I read, I believe that that position was understood by the previous Government. I read the former Chancellor’s interview in The Guardian, in which he said:
“There were bits of medicine we could have administered last year that would have made things easier. Had we gone further in saying to people round the cabinet table we are not going to do this”—