Local Government Financing

Part of Opposition Day — [2nd Allotted Day] – in the House of Commons at 5:52 pm on 29th June 2010.

Alert me about debates like this

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley 5:52 pm, 29th June 2010

First, there needs to be an understanding of terms, because I heard the phrase, "Paying back the deficit." However, the deficit is the forecast difference between income and expenditure in the financial year, the debt is the amount of money that the country as a whole has borrowed and there is often a lot of confusion between the two figures. This year, if we borrow another £150 billion, that will be added to the debt, and next year, if we borrow some more, that too will be added to the debt. Although we are talking about reducing the debt during this Parliament as a proportion of gross domestic product, our financial strategy does not talk about paying back the debt in cash terms. In fact, at the end of this Parliament we will end up with a higher level of debt, so in comparison with Sweden we cannot pay it back. We would like to do so, but we cannot do things that quickly.

We have to make people confident that the country is solvent. The country could be liquid at this stage without any great difficulty, but we have to make people confident that it is solvent and capable of paying back the debt so that the interest is paid. We are not paying back the deficit, however. The deficit is the amount borrowed each year. [ Interruption. ] I have another four minutes and am quite happy to explain to the Labour party the basics of finance, because there is a lot of confusion about debt and deficit. "Deficit" is the amount of money borrowed each year on a net basis- [ Interruption. ] I shall get through to Opposition Members at some stage.

Embed this video

Copy and paste this code on your website