My Lords, as a result of the Government’s balanced approach we have been able to reduce debt while supporting public services, investing in the economy and infrastructure, and keeping taxes low. Debt peaked in 2016-17 at 85.1% of GDP and, due to the actions of this Government to reduce borrowing and support to the economy, debt fell in 2017-18. It is forecast to fall further, all the way up to the end of the forecast period in 2023-24.
What action are Her Majesty’s Government taking to ensure a balanced approach to managing the public finances? Does my noble friend agree that it is vital that, while we prudently reduce both borrowing and debt, we invest in public services and keep taxes low for hard-working people?
I am very happy to do that, and of course my noble friend will be aware that 32 million people have just enjoyed a tax cut as the tax thresholds were raised. There is a balance; we have seen net borrowing come down from a peak of about 10% in 2010 to under 2%, and overall net debt is beginning to fall after having peaked. However, at the same time, as he rightly says, we have seen half a trillion pounds of investment in infrastructure, and the prioritisation of public services, principally the National Health Service, which has had one of the largest budget increases in its history.
My Lords, why does the Minister not confess that the noble Lord, Lord Hunt, got it absolutely right? The only thing is that it is completely contrary to what Conservative Governments over the last decade have pursued. Austerity has been pursued to the extent that people are poorer and our public services are on the point of breaking down in many areas. Even then the Government do not hit their target for reduction of debt, but are falling many years behind the famous promise made way back in 2010 that they would do it in about five years. Is not the Government both incompetent and wrongly focused?
If the noble Lord is arguing that we should have gone further and faster in reducing the debt, he is somewhat at odds with his leader down the other end of the Corridor, who has come up with a plan to spend another £1 trillion. We are taking a balanced approach, protecting essential public services and delivering tax cuts while investing in infrastructure, and that is how we will go forward.
Certainly, the Government see merit in repaying debt; we pay interest rates of about £50 billion a year on debt, so there is a good rationale for trying to do that. However, we need to balance our approach. Primarily, we seek to stop that debt level increasing by bringing it down as a percentage of GDP from around 85% to 73% at the end of the forecast period, but we need to go further on that.
My Lords, do the Government now understand that including borrowing for investment into infrastructure in the deficit number is not only intellectually flawed but has constrained growth in this country by limiting the number of projects in which we can invest, at a time when interest rates have been exceptionally low and a great deal more could have been done to catch up on the infrastructure backlog?
My Lords, can I bring the noble Lord back to the NHS? He mentioned the NHS five-year spending agreement that has already been announced, but he will know that that does not cover education and training. The key issue facing the NHS is a large workforce problem, and part of the answer will be more training places. Can he assure me that, in the next spending review, the Treasury will not take the view that the NHS has received everything it is going to receive, and that it will look to increase the amount of money going into education and training?
Obviously, there will be issues, which will be addressed in the spending review. Simon Stevens made that proposal about what is needed for the NHS, £20 billion—I think—was delivered to meet it, and there has been a significant increase with this further amount. However, we are aware of the pressures, which is why we have been clear that, when it comes to public services, the NHS is our priority.
This is an historic problem that we have debated many times in this House. Because we are a heavily services-oriented economy it is difficult to capture all the value. We set up the national infrastructure investment scheme with £37 billion to help us to tackle those issues.
My noble friend follows these matters very closely. We are currently under 85%, with a target to go down to 73%. France is at 98.7% and I think Italy is at 131.1%, but we still need to go further to ensure that we do not leave a legacy of debt for our children and grandchildren.