My Lords, figures from the November 2008 public sector finance release, issued this morning, show that public sector net borrowing was £56 billion in the first eight months of 2008-09. The latest population estimates from the Office for National Statistics indicate that the UK population reached 61.4 million by the end of 2007-08.
My Lords, I thank the Minister for that Answer, but perhaps we could turn the Question slightly for his benefit. The total number of taxpayers in the country—a more relevant assessment—is 31 million, each paying an average tax of £4,830 per year. The 60 million alone represents a burden on each taxpayer of £3,722. By how much has borrowing gone up in the past year as a future burden to be repaid from revenue? How do the Government intend that to be carried as a burden on taxpayers into future years?
My Lords, the House will recognise that the burden increased significantly as the Government set about introducing the fiscal stimulus to the economy. The noble Lord, having slightly changed the basis of the Question, still shifts from the basis on which this debate normally occurs among economists and in politics, which is as a percentage of GDP. In those terms, we approached the recession with the second lowest debt in the Group of Eight countries. It is clear that our debt is about to increase significantly. That is also the case for other countries.
My Lords, if government borrowing is to rise to these very high levels, can the Minister help me by explaining how that will not result in the crowding out of the private sector? The high levels of public borrowing will make it harder for businesses to get the funds that they need, which is what the Government say they want to achieve.
My Lords, that question is more relevant to the past decade than to the situation in which we find ourselves. As I am sure the noble Lord will readily appreciate, small and medium-sized businesses, and business as a whole, cannot get investment funds at present because of the credit crunch and the position that our banks are in. That is why the Government have set about the recapitalisation of the banks in order to guarantee that the very problem that the noble Lord has identified is tackled.
My Lords, does my noble friend accept that the borrowing will, indeed, be very high—it would very likely be even higher without a fiscal stimulus, as the recession would probably last longer—and that it will have to be repaid once the recession is over? Has he read the article in the Times this week by Anatole Kaletsky, the only decent writer on that paper, particularly on economics, who agrees with the fiscal stimulus but suggests that one method of repaying it in due course might be through the fuel escalator, which we have suspended for the moment, set at 5 per cent above inflation every year? That would, indeed, be a reasonably sensible thing to do given that oil prices are now coming down substantially.
My Lords, oil prices are, of course, an important determinant. However, my noble friend will recognise that oil producers are addressing themselves to oil production, so the drop in price may not continue. On the more general point that he makes, of course the Treasury will examine every proposition with regard to the most effective way of repaying the very significant debt that will accrue so that we keep the depth of the recession as shallow as we possibly can.
My Lords, the amount of debt is quite extraordinary; it will exceed £1 trillion, the highest level for 40 years, and borrowing will be at the highest level for more than 60 years. Does the Minister think that the Government have made any mistakes at all over the past 10 years?
My Lords, if the noble Baroness were in any other Parliament, she could say exactly the same of any other Government. Of course mistakes have been made but I think that, given the international nature of this crisis, it scarcely behoves us to point the finger of criticism at any one Government and certainly not at our own. We are faced with a global collapse of the financial system on an unprecedented scale. That is why, as she rightly says, we have introduced a fiscal stimulus, which produces debt way above the levels that we have had since the Second World War. Of course, that has to be repaid. The alternative, however—and this is what we largely hear from the party opposite—appears to be to follow the strategy adopted in the 1930s and we all know what that led to.
My Lords, we on these Benches accept the need for a fiscal stimulus but are rather bemused about why the VAT route has been chosen, given that, by the Government's own estimate, half of that will go into savings rather than into boosting expenditure. Will the Minister explain why VAT was chosen as a way of introducing a fiscal stimulus rather than a more effective way of increasing spending on the high street?
My Lords, the stimulus from a VAT measure is immediate and benefits those with the highest propensity to consume, and we want to increase spending. The noble Lord appears to be saying that there are real doubts about whether the fiscal stimulus is working. In economic terms, these are ridiculously early days to judge how the economy will shift as a result of the Government's measures. To make the most obvious point, the recapitalisation measures meant that the banks did not receive any resources until
My Lords, we are in the 24th minute. We should move on.