Budget Deficit Reduction

Oral Answers to Questions — Treasury – in the House of Commons at 2:30 pm on 12th October 2010.

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Photo of Marcus Jones Marcus Jones Conservative, Nuneaton 2:30 pm, 12th October 2010

What recent representations he has received on steps to reduce the budget deficit.

Photo of Glyn Davies Glyn Davies Conservative, Montgomeryshire

What recent representations he has received on steps to reduce the budget deficit.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

The Government's plan to tackle the record budget deficit they inherited has been supported by the CBI, the OECD and, now, the International Monetary Fund. We have received more than 60,000 representations from the public as to how to go about deficit reduction and many of their suggestions are being put into effect. To date, we have received no proposals and no suggestions from the official Opposition, who created the deficit in the first place.

Photo of Marcus Jones Marcus Jones Conservative, Nuneaton

I thank my right hon. Friend for his response. With the country set to pay £43 billion in interest in 2010-11, I am reassured that the general public have been willing to contribute to the tough decisions required of this Government to turn our economy around. Has he received any helpful advice from the Labour party, past or present, other than that from Tony Blair?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

My hon. Friend is absolutely right about debt interest; this country is now paying £120 million a day in debt interest. Debt interest under the previous Government was forecast to rise to £60 billion a year, making it one of the largest items of Government expenditure. He talks about suggestions from Members of Parliament. The new leader of the Labour party said:

"I think whoever is the Labour leader will, by the time of the spending review, have to show that they have an alternative plan".

So the clock is ticking.

Photo of Glyn Davies Glyn Davies Conservative, Montgomeryshire

The Chancellor attended the IMF conference at the weekend. Can he share with us what our international partners are saying about the coalition Government's efforts to deal with the deficit?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

As I am sure my hon. Friend is aware, the IMF's article IV study of the United Kingdom said:

"The government's strong and credible multi-year fiscal deficit reduction plan is essential to ensure debt sustainability."

That is in marked contrast to last year's IMF report on the UK. At the IMF annual meetings, which I attended last weekend, it was made clear that concerns about sovereign debt issues in Europe were one of the greatest threats to the world recovery. Of course, the decisions that we have taken in this House have moved Britain out of the financial danger zone and helped to deal with that potential threat.

Photo of Derek Twigg Derek Twigg Shadow Minister (Health)

On reducing the budget deficit and the issue of fairness, how does the Chancellor square the fact that his local authority has had a cut of only £600,000 to its education budget with the fact that Halton, the 30th most deprived authority, has had a cut of more than £1.2 million? How is that fair?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Decisions on local government allocations are properly a matter for the Secretary of State for Communities and Local Government, but I make the observation that we face a series of tough decisions because of the economic mess that the Labour party left us. To date, it is living in complete denial: there is not one single suggestion from one single Labour Member on how to reduce the budget deficit, or even achieve the £44 billion of cuts on which Labour fought the last election.

Photo of Andrew Love Andrew Love Labour, Edmonton

Can the Chancellor confirm or deny reports in the weekend press that he has given the Governor of the Bank of England the green light to increase quantitative easing, to deal with the policy that the Chancellor is pursuing on the deficit?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

What I said at the weekend was that I would follow the exact same procedure that my predecessor, Mr Darling, pursued when he was Chancellor of the Exchequer. The fact that that is regarded as something of a surprise by the Labour party shows how far it has departed from the centre ground of British politics.

Photo of David Ruffley David Ruffley Conservative, Bury St Edmunds

Our net contribution to the EU is, amazingly, projected to double in this Parliament from £4.7 billion to £9.5 billion a year. Does my right hon. Friend agree with me and many of my Bury St Edmunds constituents that if we are to cut the deficit, we need to cut our spending on the EU?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

It is good to see my hon. Friend. I make the observation that the situation is, unfortunately, yet another legacy of the previous Government. [Interruption.] Well, Labour Members obviously do not know the history: Tony Blair gave away our Budget rebate in return for the French reforming the common agricultural policy. So far as I have noticed, that deal has not held, and our contributions are rapidly rising. We have made strong arguments at the European level for similar budget restraints in the EU to those that member states are having to impose domestically. Of course, that will be our negotiating stance as we go into the new budget review period.

Photo of Alan Johnson Alan Johnson Shadow Chancellor of the Exchequer

Will the timing of the spending cuts that are to be announced next week be exactly as laid out in June's emergency Budget, and will the Chancellor confirm that the aim continues to be that the deficit will be eliminated by 2015?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

First, I should welcome the right hon. Gentleman to his new role on behalf of all Government Members. I did the job for five years, and I hope that he does it for even longer than I did. The answer to his question is yes.

Photo of Alan Johnson Alan Johnson Shadow Chancellor of the Exchequer

Well, the reason I ask is that there was some speculation at the weekend, when the Energy Secretary suggested, in a rather unfortunate yachting analogy, that he would not be "lashed to the mast" with a particular set of spending numbers. That is important, because from my vast experience in this job I am absolutely clear about this: the Chancellor says that the deficit was wrong and that his emergency Budget measures were unavoidable, but I believe that it is the other way round. The deficit was unavoidable if we were to avoid financial meltdown, and his Budget proposals were entirely wrong-wrong because they would, according to the Institute for Fiscal Studies, have two and a half times the adverse effect on the poorest as on the richest in our society, and wrong because he is seeking to cut public spending before there is any momentum for private sector spending in our economy.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Quite frankly, being in opposition involves choices, just as being in government does. The right hon. Gentleman talks about the Budget; there is a simple choice before the House today, which is whether we proceed with a graduate tax. Lord Browne's report says that such a tax would add £3 billion to the deficit and would not produce savings until 2041. That is a real choice on the deficit before us today. The right hon. Gentleman is the shadow Chancellor and opposes a graduate tax; is he going to assert his authority over Opposition tax policy?