Part of the debate – in the House of Lords at 3:15 pm on 3rd November 2008.

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Photo of Lord Myners Lord Myners Parliamentary Secretary, HM Treasury 3:15 pm, 3rd November 2008

My Lords, I was not boasting; I was sharing the facts with the House. The price of oil has fallen substantially in terms of any currency, including sterling.

It is important to consider also the role of fiscal policy. Rules provide discipline for the Government; they are the means to an end. Our core objective right now is to get the economy through these difficult times. As the Chancellor set out in his Mais lecture last week, the average current budget between 1997 and 2006 was in balance—the only time that has been achieved over a cycle since the early 1970s. As the Chancellor has also made clear, that is how the Government managed something that many thought would be impossible: to triple public investment while cutting government debt. In other words, we fixed the many roofs that needed fixing—the roofs of schools, hospitals and homes throughout the country. No one at that time was arguing for less spending on education, health or transport.

We also had enough flexibility to accommodate negative shocks, such as the bursting of the technology bubble in 2000, as well as positive shocks, such as the receipts from the spectrum auctions, which were used in full to repay debt. What matters is that the public finances start from a position of strength, with public debt low as a share of national income and low compared to other countries. People should be in no doubt that the Government will take the decisions necessary to ensure sustainability of the management of public finances in the future.

Our fiscal framework leaves room for the rules to adapt to today's global challenges by providing support for the economy, maintaining investment now and reducing borrowing and debt later. In the short term the twin shocks have meant, among other things, lower than expected growth, higher than expected inflation, falling house and equity prices and fewer jobs and reduced earnings growth in the financial sector. It is clear that those economic disappointments will impact negatively on the public finances.

Discipline imposed on public finances through the fiscal framework has meant that net debt is now low by both international and historical standards. We are in a good position to manage this downturn.