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Public Sector Borrowing

Volume 550: debated on Tuesday 11 September 2012

5. What assessment he has made of the implications for his policies of the public sector net borrowing figures in the current fiscal year. (120138)

Public sector borrowing figures have been higher than expected, primarily because of short-term factors, including lower corporation tax receipts caused by the Elgin shutdown and the lower than expected oil price. With eight months of the year remaining, it is too early to draw conclusions about the year as a whole, but the Government remain committed to returning the public finances to a sustainable path, while allowing the automatic stabilisers to operate in response to the weakness in the global economy.

The Chancellor boasted in his 2010 Budget speech that the borrowing requirement this year would be £89 billion. The Office for Budget Responsibility is suggesting that the figure will be £120 billion—a 33% overshoot. Can we have an explanation of why the Chancellor got it so wrong?

The hon. Gentleman, as he knows, is referring to the OBR’s forecasts. Of course, a number of problems in the global economy, not least those in the eurozone, have become more serious since those forecasts were made. I would have thought that he would applaud the fact that our plan is sufficiently flexible to allow the automatic stabilisers to support our economy when there is weakness in the global economy.

No one in the House underestimates the size of the economic challenge before us or the importance of supporting manufacturing and exports, which make up a fifth of the gross domestic product in my constituency, but at a time when the employment figures are encouraging, our manufacturing indices are outstanding and our global competitiveness has risen by two places, does my right hon. Friend agree that two impediments to business confidence are the threat of strikes by unions and the chorus of despair from the Opposition?

My hon. Friend is right to highlight some of the positives in the UK economy, especially the employment figures. My experience of dealing with trade unions is that one should not pay much attention to the rhetoric at their conferences. When one gets down to business with the trade unions, as I did on public service pensions, the majority of them are willing to behave responsibly. That said, and as the shadow Chancellor has said, the British public and trade union members do not want to see strike action in this country.

Borrowing is rising because of the scale and speed of the cuts, as we warned it would. Is it not the case that the economic policy brought in by the right hon. Gentleman and his friend the Chancellor has backfired?

Before asking that question the hon. Gentleman should have reflected on the fact that the policy of his party’s Front Benchers is to increase borrowing yet further. They recently announced a new approach, known as pre-distribution. We now know what that means: spend money before it has arrived, in the hope that it might arrive in future. That is the policy that failed this country for 13 years and we will not go back to it.

Does my right hon. Friend agree that the 900,000 extra private sector jobs that have been created since the last election will go a considerable way towards easing the fiscal position, as well as cast some doubt over the output figures of the Office for National Statistics?

I certainly would not wish to question the integrity of the ONS’s figures. However, I join my hon. Friend in highlighting the excellent record of many private sector businesses in creating jobs in all parts of the country over the past two years.