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Debt Level (GDP)

Volume 530: debated on Tuesday 21 June 2011

1. What assessment he has made of potential trends in the level of debt as a proportion of gross domestic product to 2014-15. (60772)

6. What assessment he has made of potential trends in the level of debt as a proportion of gross domestic product to 2014-15. (60777)

This Government inherited plans that had Government debt rising as a share of GDP in 2014-15. Thanks to the credible plan that we have put in place, debt is now forecast to be falling in that year.

Would the Chancellor of the Exchequer like to take this opportunity to explain why the Office for Budget Responsibility now says that the Government will need to borrow £46 billion more than was estimated a few months ago? Would he also like to take this opportunity to accept that, by cutting too far and too fast, we will fall into a vicious circle that will make it more difficult to pay off the deficit in the long term?

The public finance figures are out today, and they show that the British economy and the British Government are on track to reduce the budget deficit, as we forecast in the Budget. On a day like this, in a week like this, for the Opposition to suggest that we should abandon our credible deficit reduction plan shows how out of touch they are with what is going on in the world today.

Will the Chancellor confirm that national debt as a proportion of GDP was 36.5% in 2007-08, before the global crisis, which was significantly lower than the 42.5% that we inherited from the previous Government, and lower than in America, France, Germany and Japan?

There is this myth on the Opposition Benches that we inherited a golden economic legacy. It is not a myth believed in by the International Monetary Fund, the OECD or the CBI, nor is it a view shared by Tony Blair or the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), both of whom have identified—since the general election, of course—the fact that Labour was running into spending problems in 2007 and that the structural deficit was starting to build before the global economic crisis that the hon. Lady mentioned.

How much greater would our public sector debt be if we adopted the completely unfunded and opportunistic proposal for a £13 billion VAT cut from the very people who racked up all the debt in the first place?

My hon. Friend draws attention to the completely ludicrous policy put forward by the shadow Chancellor last week—it was mentioned just on that Thursday, and has not been repeated by any Labour politician since—for a £13 billion unfunded tax change, or £51 billion over the Parliament. The policy is totally incredible, and was rejected by every serious economic commentator on the day. It just shows how far those on the shadow Front Bench have to go to make good for the mistakes that they made in office.

Given the large amount of state bank debt still on the balance sheet, will my right hon. Friend consider a scheme to make an early transfer of shares in the state-owned banks to taxpayers for free, on condition that, as and when people sell, they send money back to the Treasury to represent the Treasury cost of those shares?

I am always happy to discuss the ideas of my right hon. Friend or other Members on how we dispose of those bank shares. The House will know that we announced last week that we are putting Northern Rock up for sale—the good bank in Northern Rock, of course; the state will hold on to the bad bank for many years to come. We want to exit from our shareholdings in RBS and Lloyds in due course, but we do not judge now to be the right time.

I am very much looking forward to our debate on the economy tomorrow, on the anniversary of the Government’s first Budget. I do hope that the Chancellor is looking forward to the debate too, but today let me ask him about another matter of great importance to our economy, our national debt and our wider national interest. Three months ago the Chancellor told the House that the cost of the intervention in Libya, which the Opposition support, would be

“in the order of tens of millions of pounds, not hundreds of millions.”—[Official Report, 22 March 2011; Vol. 525, c. 850.]

That was followed the next day by headlines—which would have been read by the Gaddafi regime—saying that the Chancellor and the Government thought that the campaign would be over in a month. Does the Chancellor now accept that that was a mistake? Will he tell the House how much has been spent so far? Will he also give the House his latest estimate of what the full cost of the campaign is likely to be and what its impact on the national debt will be?

I see that the shadow Chancellor is following his former master’s habit of straying from the direct area of his brief, but there we go. Let me deal directly with Libya. What I told the House at the time was that the cost estimated at the time by the Ministry of Defence was in the tens of millions of pounds, and the Ministry of Defence is planning to provide an update to the House on the full costs, I think within the next week.

This is a Treasury matter. It is about Treasury spending from the reserve, and it has a direct bearing on the national debt as well as on our national interests. It seems rather odd that, at the outset of the campaign, the Chancellor was happy to give a detailed answer, yet he now says that he cannot do so. Does he not know, or is he not prepared to do so? Just a few weeks ago, the White House provided the US Congress with a 34-page document giving details of the costs up to 3 June and the likely costs up to September. Will the Chancellor now agree to provide this House with similar information on the cost of Britain’s involvement in Libya, and to make a full Treasury statement to the House?

If the right hon. Gentleman had been listening, he would have heard me say that the Ministry of Defence was going to provide an update on the costs within the next week. I know that, when he was in the Treasury, everything was a Treasury matter, but in this Government we let the Ministry of Defence talk about defence operations, just as we let the Department for Education talk about schools and the Department of Health talk about the NHS. The Ministry of Defence will provide an update on the costs within the next week. The costs come from the special reserve, as the right hon. Gentleman well knows, and I can tell him that they are very much lower than those of the ongoing operations in Afghanistan.