In 2010, we inherited the largest deficit since the second world war, standing at nearly 10% of GDP. We have successfully reduced it by three quarters, meaning that it stood at 2.3% at the end of last year, but our debt is still too high. High levels of debt leave us vulnerable to economic shocks and incur significant debt interest, which is why the Government have clear and detailed fiscal plans to reduce borrowing further and to ensure that debt falls.
Yes, I absolutely agree with my hon. Friend that a policy of increasing borrowing simply means passing the cost of today’s consumption to future generations and wasting more taxpayers’ money on debt interest. Even Labour’s shadow Education spokesperson has acknowledged that this is a ultra high-risk strategy that would be a gamble with our economic future.
Does my right hon. Friend agree that uncontrolled debt is bad for the economy and bad for the young people who have to pay the debt off, and that we should avoid following the model preferred by the Opposition, which has all the qualities of the parliamentary sewage system?
Yes, I can agree with my hon. Friend on that. Any party that aspires to government and is serious about properly managing the public finances should be able to explain how it would fund the expenditure it is committing to—and to do so without consulting an iPad.
The Chancellor says that he does not want to incur more debt, but yesterday the Treasury approved a minute providing for a contingent liability on Carillion, for which we have had no estimate. Will he please explain to the House what sort of expenditure will be covered—I see that he has given an indemnity to the receiver—and how he will report to the House on how much money the Government will be liable for?
Yes, the Government have given an indemnity to the official receiver so that it can take on the role of special manager of Carillion’s assets to ensure the continuity of public services in the many schools, hospitals and local authorities that have contracts with Carillion. The Treasury has provided the official receiver with a line of credit that enables the official receiver’s office to operate the company’s public sector contracts, after which it will, in due course, recover the costs from the Department that would have paid fees for those services anyway. The official receiver can only step in and do this with the Treasury’s underwriting, and we deemed it appropriate to give that underwriting.
The Government have made good progress in cutting the deficit, but national debt as a percentage of GDP remains at a dangerously high level and will only start to reduce next year—10 years after the crash. Will the Chancellor share with the House how our level of national debt to GDP compares with that of other major western economies?
My hon. Friend is right. Our level of debt is too high, and there is a reason why that matters. In response to the financial crisis in 2009, the then Government were able to allow debt to rise. If we had a similar crisis now—God forbid—we would be struggling to be able to do that, because debt is already very close to 90% of GDP. It is urgently necessary that we get our debt level down to create the headroom that will enable us to deal with any crisis that comes along in the future, whether internal or external.
It is amazing that the Government should want to plant questions about high levels of borrowing, given that they have missed every single one of their deficit reduction targets, and let us not forget that this Conservative Government have borrowed more than any Labour Government in history. Under Labour’s fiscal rules, we would close the deficit on day-to-day spending over five years, but exclude investment spending from that figure. Given the huge challenges that the country faces in relation to productivity, infrastructure and skills—challenges that he has already mentioned—does the Chancellor not recognise that that is a prudent and sensible way forward?
No, and neither do the Opposition. That is why they have already recognised that their plans would deliver the run on the pound for which they are wargaming. I will take no lectures from a party that oversaw a 165% increase in debt, and is proposing to add a further £500 billion to our debt level just when the Government are delivering a reduction in debt.