Pre-Budget Report

Part of the debate – in the House of Commons at 1:20 pm on 7 January 2010.

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Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury 1:20, 7 January 2010

No, I shall definitely make some progress.

I have talked about the markets, and it is important to say-this answers the point made by my hon. Friend Sir Nicholas Winterton earlier-that although market confidence matters for Governments, it also matters for our public services. We must not lose sight of that point. Next year, we will spend £44 billion on interest payments on the national debt. By 2013, that figure will have risen to £63.7 billion if interest rates stay as they are. But interest rates on British Government debt have already started to rise. By 2013, for every extra 1 per cent. of interest cost that we face, another £14 billion of public spending cuts will be needed to finance it. We are already spending more than the schools budget on debt interest, and by 2013 we will be spending double that budget on debt interest. Britain plc has a huge vested interest in maintaining low interest rates and in maintaining the credit rating to support them.

This all matters to ordinary people, too-to home owners, families and businesses. Many people who faced this recession fearing that they would lose their homes and their jobs have been bailed out by the Bank of England's prompt action in reducing short-term interest rates to the lowest possible level and pumping liquidity into the economy. It is low interest rates that have kept Britain going through this recession, not the Chancellor's much-vaunted fiscal stimulus.