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Government Capital Expenditure

Part of Opposition Day — [3rd Allotted Day] – in the House of Commons at 4:55 pm on 2nd February 2009.

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Photo of Stephen Timms Stephen Timms Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills) 4:55 pm, 2nd February 2009

As my hon. Friend knows, we will set out new forecasts at the time of the Budget, and of course we will reflect on the lessons from them. However, the IMF forecast is for growth for the UK for the next calendar year. Interestingly, it also forecasts a shorter period of negative growth for this country than for several other G7 countries.

As I was saying, our increase in public investment compared with the Tory years will be sustained not just through the current downturn but through to the other side of it as well. Of course, paying for the fiscal stimulus, and for the steps that we are taking to support British businesses and households, will require Government borrowing to increase. We are starting from a strong position. According to the OECD, the UK had the lowest net debt of any country in the G7 apart from Canada—the point that Joseph Stiglitz rightly underlined on "Newsnight". That is the point that the Conservatives have failed to recognise. It would be helpful if Mr. Gauke confirmed, when he speaks later on behalf of the Conservative party, whether it is his party's view that President Obama should abandon his central economic policy proposal because of what they think is an emerging consensus, although it does not even appear to be a consensus in the shadow Cabinet, given some of the remarks that have been made by its members.

Of course debt in the UK will rise in the period ahead, as it will rise in the other major economies. Every advanced country in the world is increasing Government borrowing in response to the downturn. The latest OECD forecast shows not only that UK net debt was the second lowest in the G7 when the shocks began, however, but that our net debt will remain below that of most other G7 countries right the way through this downturn.

Some hon. Members would have us believe that we cannot afford to take measures to counter the effects of the global downturn in Britain. Their view is that we should do nothing, let the recession run its course and turn our backs, as the Tories did with such disastrous results in the recession of the early 1990s. We strongly disagree. Because of our responsible handling of public finances over the past decade, we can act now to preserve British jobs and boost our economy. These steps will ensure that Britain comes through the global downturn sooner and stronger than would otherwise be the case.

As the Institute for Fiscal Studies said last week, the cost of doing nothing would be greater than the cost of acting. Others in the House have today urged us to spend more—in effect, to throw sustainability in the public finances to the winds. We are not going to do that either. We will always live within our means. In that way, we will navigate a path that gets Britain through in the best possible shape. We will do that in a way that is fair to everyone, and make sure that we are in a position to grow again when the new opportunities of the upturn emerge in due course.

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