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Public Debt Management Bill

Volume 552: debated on Friday 9 November 2012

Second Reading

I beg to move, That the Bill be now read a Second time.

The coalition Government are bringing order to the finances of the state. It is a great and historic enterprise that is as politically bold as it is innovative. The deficit the coalition inherited was the largest in our nation’s peacetime history, and despite the extraordinary events in the eurozone that have continued since the coalition Government came to power, my hon. Friend the Exchequer Secretary and his colleagues at the Treasury are making steady progress towards meeting their targets in bringing that deficit to balance.

In defeating the deficit, we have only started on the first leg of a long journey. At the end, we will be met with a national debt approaching £1.4 trillion, on which the interest paid will amount to some £53 billion a year—larger than the defence budget, the budget for secondary education, the budget for transport or the budget for foreign aid. That extraordinary figure is more than just a toxic bequest to future generations. It will inhibit growth and our ability to try to get our country back on its feet again. For what? Not to defeat a foreign foe in battle or win a war of survival, but because of a structural deficit that we now understand was £73 billion on the eve of the financial crisis—a structural deficit hidden in the fog of credit, which was so terribly whipped away by the cold financial winds of the global economic meltdown.

My Bill is intended to ensure that we will never face that situation again by building on the Government’s commendable fiscal targets for the period after the next comprehensive spending review and putting in place a structure to deal with ongoing Government debt and the deficits it creates. There is no need to start from a fresh position, as there is a very good example in which measures taken by a Government have succeeded already. One need only look at Sweden, which had a national debt of 78% of GDP in 2000 but will next year see that debt reduced to 26% of GDP. That is a figure that we have not achieved in this country at any point since the second world war.

I have merely taken what the Swedes have done and transposed it to an appropriate form for a British Parliament, a British Government and the debt that we have inherited in Britain, which is approaching a figure very similar to the 78% that the Swedes had in 2000. The Bill is very simple and asks the Chancellor of the Exchequer to set an annual expenditure limit, which will be advised on and decided to be appropriate by the Office for Budget Responsibility. Once that limit is set, the Government will maintain a surplus of 1% within that expenditure limit over the course of the business cycle, which will be decided by the OBR. Parliament will vote on that expenditure limit. In so doing it will not only force the Government to keep to their spending plans and to maintain a surplus so that we can bear down on debt, but give back to Parliament our primary responsibility of ensuring that we keep the finances of the nation in check on behalf of our constituents and the subjects of the Crown.

The Bill contains a clause to ensure that in times of national emergency or war, the OBR can advise the Government on how that expenditure limit can be relaxed and on how it can be reeled back to ensure that within the business cycle the surplus can be maintained.

This is all intended merely to start a conversation about what happens after we have defeated the deficit—this great mission of the coalition Government—at the beginning of the next stage of the journey, when we will have to bear down on the national debt that has been the accumulated result of the faults of the previous Government and when we will try to bequeath to future generations a better inheritance than the one we had.

In the 40 seconds or so that remain, let me thank the hon. Member for Ipswich (Ben Gummer) for introducing this Bill. The Opposition think that it is very badly worded and merely a rehash of our fiscal golden rules and of the Chancellor’s. We will hear the autumn/winter statement on 5 December, in which I doubt the Chancellor will be able to meet his own golden rules, and I know the Minister will not be able to respond—

The debate stood adjourned (Standing Order No. 11(2)).

Ordered, That the debate be resumed on Friday 30 November.