Debt has climbed steadily since 2009 as a result of the high levels of deficit. Since 2010, we have reduced the deficit by three quarters, so national debt will now peak at just under 90% of GDP this year. As the OBR’s “Fiscal risks report” of last week makes clear, that level of debt—a legacy of Labour’s recession—leaves us vulnerable to future shocks, which is why the Government have committed to eliminating the deficit and reducing the level of debt as a share of GDP. As a result of the actions taken to bring the public finances back under control, the OBR now forecasts that debt will start falling next year and will be below 80% of GDP by 2021-22.
Those figures are welcome, but will my right hon. Friend confirm that were the Government to pursue a policy of wiping all outstanding student debt, that would cost in excess of £100 billion and cause the national debt to surge? Will he also confirm that the biggest beneficiaries by far would be the top-earning graduates in the country?
My hon. Friend is absolutely right. He might have added that were anyone to suggest that they were able to do that, they could be accused of practising a deception on the people to whom they were offering that proposal. The cruelty of that would become apparent when it would have to be admitted that the proposal could not possibly be delivered. We face a debt challenge in this country, and we cannot borrow our way out of debt. The Opposition would do well to acknowledge that. Stronger growth and sound public finances are the only sustainable way to deliver better public services, higher real wages and increased living standards.
My hon. Friend is right to express concern about the vulnerability created by the high level of debt. As the OBR made clear last week, that debt means that if the economy were to face an external shock, we would not be in a position to respond in the way that we would ideally like. That is why we have to get debt down, and the only way to get debt down is to get the deficit down. That means responsible fiscal policy, not the kind of rubbish we hear from Labour Front Benchers.
Was it not clear from the OBR report last week that it is a hard Brexit that presents the biggest threat to our national finances? Just a 0.1% decrease in productivity could lead, over 50 years, to a 50% increase in the ratio of debt to GDP. If the reports are true that the Chancellor is prepared to champion a longer transition from the single market for the UK, such welcome news might secure a lot of support on both sides of the House.
I welcome the hon. Gentleman’s contribution. On an issue as important to our nation’s future as our exit from the European Union, I welcome any opportunity to build consensus across the House and the nation. He is right to draw attention to what the OBR said. Even a very small decline in our productivity performance would add huge amounts to the debt and would reduce, by significant amounts, our projected growth in GDP. That is why it is so important that we now act responsibly in maintaining fiscal discipline and ensuring that we reduce our debt over time.
How is the Chancellor’s consensus building around the Cabinet table going? Will he update the House on his assessment of the trade deals that will be done after we leave the single market? He knows that Brexit is going to cause a fiscal shock. Is it true that he has challenged the Secretary of State for International Trade to disprove Treasury calculations that show there is no trade deal we can do after leaving the European Union that will make up for the huge loss of trade that Brexit will create?
The hon. Lady is assuming that we will lose trade with the European Union. It is clear to me that, all other things being equal, the ability to enter bilateral trade deals with third countries will be a positive for our economy. Of course, we also want to protect our trade with the European Union. My focus is on ensuring that we get a Brexit deal that protects our existing patterns of trade and commercial engagement with the European Union, as well as, over time, allowing us to explore new opportunities beyond the European Union.
The Chancellor will be aware that the current cost of Government borrowing is at a historical low, with gilt yields at 1%. Does he agree that, if markets lose confidence in our ability to live within our means, the cost of that borrowing would spiral, costing us billions of pounds? That would mean less to spend on our public services.
My hon. Friend is right to warn of the danger of a loss of market confidence in UK fiscal policy—I am looking very hard at John McDonnell. If markets lose confidence in UK fiscal policy, they will re-price lending to the United Kingdom. We already spend more every year on servicing our debt than on our armed forces and police services together. It would do a huge disservice to taxpayers in this country if we created conditions that would cause the cost of that debt to rise.
An enfeebled Chancellor has been forced to give a £1 billion bung to the Democratic Unionist party, to cough up £1.3 billion for a schools funding U-turn, to scurry around to find £2 billion to pay for his humiliating national insurance contributions debacle and to bail out his nightmare neighbour’s social care retreat with £2 billion. Why should this House believe a word, a promise, a claim or a target on reducing the debt?
I was glad to see the hon. Gentleman smiling by the end of that little rant. I do not know which planet he lives on, but I do not feel particularly enfeebled. I do not know what the Labour Treasury team does all day, but my right hon. Friend the Secretary of State for Education made it clear in her statement yesterday that she has put extra money into the frontline schools budget by reprioritising the wider education budget and finding efficiencies across her Department. That is the way to do a fiscally prudent protection of our public services.
Yes, the Government have taken it off some children and given it to others.
The national debt has risen by £707 billion since 2010 and is rising. It is barely a year since the Chancellor was given the keys to No. 11, and in that time public sector net debt has not reduced. According to the Office for National Statistics and the OBR, it has increased by £122 billion. Given that lamentable record, has he been given notice of eviction by the woman in the bunker next door? Perhaps they may leave Downing Street in the same removal van.
The hon. Gentleman will know—I say that, but perhaps he will not—that public sector net debt will continue to grow until the deficit is eliminated. That is a simple arithmetic fact. His Government pushed our deficit up to almost 10% of GDP, and we have spent the past seven years getting it down to 2.4% of GDP. We will carry on getting the deficit down so that this country’s public finances get back into balance. We are a responsible Government, planning for Britain’s future.