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Budget Deficit

Volume 543: debated on Tuesday 24 April 2012

Every significant business organisation and international body has welcomed this Government’s decisive action to deal with the record budget deficit that we inherited from our predecessors. Not only has that action brought low interest rates for families and firms, but it has made Britain a safer haven in what, as everyone can see today, remains a very volatile European debt storm.

The Office for Budget Responsibility’s Budget report stated that the interest paid on our national debt will be about £43 billion this year, rising to about £60 billion by the end of this Parliament. That rise in interest payments is a direct consequence of the previous Government’s action, but what action is the Chancellor taking to ensure that this interest rate bill does not rise any further?

My hon. Friend is right to remind us all that the Government have to pay interest on the enormous debts that the Labour party racked up and the budget deficit it bequeathed us. The action we have taken means that we are paying £36 billion less in interest payments over this Parliament, which completely dwarfs any initiative ever put forward by the shadow Chancellor.

Why are the Government now forecasting that they will borrow £150 billion more than they envisaged a year ago? Has not cutting back too far, too fast completely backfired?

As a former teacher, the hon. Gentleman read that very well. He should also study the Institute for Fiscal Studies’ statement that if we had stuck to the plan left to us by the Labour party we would be borrowing £200 billion more than we are borrowing at the moment and, as I just said, paying £36 billion more in interest payments to creditors of the British Government.

24. In May 2010, the level of yield on UK Government 10-year gilts was the same as those of Italy and Spain. Now we are at record lows and they are at 7%, so what does that say about the credibility of the UK Government’s plan? (104813)

Again, my hon. Friend is absolutely right. We have very low interest rates in an environment in which many other European countries have much higher interest rates. That is a reflection of market confidence in the UK’s deficit reduction plan, and of course if we had pursued the path advocated by the Opposition—the same path that led us into this economic mess—we would be paying a higher interest rate, and there would be higher interest rates and families would have higher mortgage bills.

May I very gently and in the friendliest way possible suggest that the Chancellor should not be quite so arrogant about his record on public borrowing? In Washington this weekend, he said that

“we have sorted out our problems.”

That is what the Chancellor told us. We have high unemployment and slow to non-existent growth. When will he realise that public borrowing is £150 billion higher than he predicted in his spending review?

As today’s public finance numbers show, we have hit the deficit reduction target we set out in the autumn statement and in the Budget. I am glad that the hon. Gentleman brings up Washington and the IMF summit. Perhaps we will hear later from the shadow Chancellor, as we did not have a chance to yesterday, what he thinks about the fact that the previous Chancellor of the Exchequer completely disagrees with the position that he has taken on behalf of the Labour party.