Economic Policy

Part of Oral Answers to Questions — Defence – in the House of Commons at 3:33 pm on 25th February 2013.

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Photo of George Osborne George Osborne The Chancellor of the Exchequer 3:33 pm, 25th February 2013

This rating decision is a stark reminder of the debt problems built up in Britain over the last decade, and a warning to anyone who thinks we can run away from dealing with those problems. We on the Government side of the House will not do that.

I can report that we have not seen excessive volatility in the markets today. Ten-year Government gilts are broadly flat—trading at 2.1%—within the trading range of the last week, and near the very lowest rates of borrowing in our history. The FTSE 100 is currently up.

The credit rating is an important benchmark for any country, but this Government’s economic policy is tested day in, day out in the markets, and it has not been found wanting today. Families and businesses see the benefit of that in these very low interest rates.

If we accept the outcome of the rating agency’s decision, we must accept the reasons given for that decision. Moody’s points to the combined impact of what it describes as

“slow growth of the global economy” and the necessary

“domestic public- and private-sector deleveraging process”— in other words, the process of winding down the huge debts that built up in our society over the last decade. That is the environment that we are operating in. We are dealing with the very high deficit and debt trajectory that this country had, coming out of the financial crisis, and that was made more difficult by the economic environment abroad.

On the same day as the rating decision, the latest European forecasts showed the eurozone deep in recession, and weaker growth than ours in key economies such as France and Germany. Crucially, Moody’s says that the UK’s creditworthiness remains extremely high because of our

“highly competitive, well-diversified economy” and a

“strong track record of fiscal consolidation”— what it calls the “political will” to “reverse the…debt trajectory.” Its message to this Government and this Parliament is explicit: the UK’s rating could be downgraded further if there is a

“reduced political commitment to fiscal consolidation.”

Hon. Members will not get that reduced commitment from this Government. We will go on delivering on the economic plan that has brought the deficit down by a quarter, that has helped to secure 1 million private sector jobs, and that continues to secure very low interest rates, not just for the Government, but for families and businesses in this country.

Ultimately, that is the choice for Britain. We can either abandon our efforts to deal with our debt problems, and make a difficult situation very much worse, or we can redouble our efforts to overcome our debts, make sure that this country can earn its way in the world, and provide for our children a very much brighter economic situation than the one we inherited from our predecessors. That is what I will do, and what this Government will do.