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Amendment of the Law

Part of the debate – in the House of Commons at 3:51 pm on 24th March 2011.

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Photo of Stephen Hammond Stephen Hammond Conservative, Wimbledon 3:51 pm, 24th March 2011

My hon. Friend makes a correct point, and those are true facts. The causes of those facts may be in dispute. There is a clamour from the Labour party about the financial crisis. No one is suggesting that it did not happen, but equally the Labour party cannot escape the fact that this country had a structural deficit before the financial crisis or that Labour contributed at least partly to that crisis, because the regulatory regime that the previous Government put in place made no estimation of systemic risk.

There are risks to the Budget strategy—although I should say from the outset that I support it wholeheartedly. Those risks concern the lack of growth in places such as Brazil, India and China—which are slowing dramatically compared with previous levels—global inflation and the eurozone crisis, which the Prime Minister is talking about today. There are risks to the Budget strategy; it is just that the risks that the Opposition are talking about are not the risks that are real. Their strategy relies on their comment about the cuts being “too fast, too deep”. This is not just about the fact that no international economic body agrees with them, or about their plan to halve the deficit over the lifetime of this Parliament—which the shadow Chancellor reiterated again this afternoon, albeit without giving any detail. That deficit might or might not halve, but the total stock of debt would still rise, as would the cost of servicing it, even at this level.

The shadow Chancellor was wrong blindly to dismiss what is happening in the gilt markets. I read the yield curve this morning, just as he did, and it is clear that 10-year gilts yields are low at the moment. If the market believed that the Government’s debt reduction plan was going to change, those yields would undoubtedly rise and the cost of borrowing would rise substantially from £120 million a day, ruling out any prospect of more of the things that we really want to spend public money on. Labour Members shouted out, “Too fast, too deep,” yesterday, but they should remember that there are risks involved, and that theirs is an equally dogmatic strategy.

It has been interesting to observe the movement in the past year from the Opposition Benches to the Government Benches. Year after year, as we sat on the Opposition Benches, we listened to Chancellors changing their forecasts and changing the length of economic cycles. I would gently say to the Opposition that we have growth in the economy, and that there is growth for the next four years. Its overall level might be tinkered with slightly, but the forecasts often change—