To ask Her Majesty's Government what is their assessment of the impact of their economic policies during their 1,000 days in office.
My Lords, the Government's economic strategy is underpinned by fiscal consolidation, allowing monetary activism and supply-side reforms to support the economy. This strategy has provided the foundations for recovery. Market interest rates have fallen to near-record lows; the deficit has been reduced by a quarter; more than 1 million private sector jobs have been created; and goods exports to China, India and Brazil have increased by around a third.
My Lords, I thank the Minister for that reply. Today, this Government have been in office for 1,000 days: 1,000 days, and we are teetering on the brink of a triple-dip recession; 1,000 days, and the UK's credit rating is close to being downgraded; 1,000 days, and our national debt is rising; 1,000 days, and our productivity is falling; 1,000 days, and our trade gap is widening. After 1,000 days, does not the Minister think that this Government should stop blaming the previous Government and start taking responsibility for their own failed economic policies?
I thank the noble Lord for that question. I confirm that we are facing extraordinarily challenging economic conditions, but the economy is recovering from the most damaging financial crisis in generations after a decade of growth built on unsustainable levels of debt. This Government inherited the largest deficit since the Second World War and the largest in the G20, and we experienced one of the deepest recessions of any major economy. This Government's strategy is designed to protect the economy through this period of global uncertainty, to maintain market confidence and keep those interest rates low, and to lay the foundations for a stronger, more balanced economy.
Where is the evidence of growth? Without growth, you will not get out of this deficit. We had larger deficits than this several times in the 19th and 20th centuries, but we got out of them through growth. It is growth that is lacking.
I agree with the implicit statement of the noble Lord that the economy is taking a long time to recover. That is because of the depth of the problems that we confront and the global nature of the economic recession with which we are dealing. There is only one effective solution to that, which is to restore market credibility. The only way in which we can do that is to ensure that our finances are absolutely stable. The alternative strategy of borrowing more to increase demand has already been proven, given the state that we got into, not to work. You do not borrow your way out of a recession which is caused by a deficit created by borrowing too much.
Will my noble friend confirm that the reason the Government are facing such terrible economic difficulties is because at the height of the boom created by Gordon Brown, that Government continued to borrow? As a measure of their economic competence, they sold gold at the bottom of the market, which is affectionately known in the City as the "Brown bottom".
I thank my noble friend for that excellent contribution. I will not comment on the timing of selling the gold. Hitting a market high is tough to do. I will refer to what I would call the "scissors of doom", which is the graph I was first shown when I entered the Treasury, which shows that between 2008 and 2010 spending was heading north at a rapid rate while receipts were heading south at an equally rapid rate, a situation that we are now trying to recover through this period of fiscal consolidation.
There are many positive signs. I do not think that the patient does look so ill. I refer to the extraordinary employment levels-the biggest increase in employment for the past 20 years. On the question of the exchange rate, the noble Lord is absolutely correct that sterling has recently weakened against the euro. The exchange rate has two sides: the strength of the eurozone versus the UK economy. What that exchange rate reflects is that many of the risks that have been confronted by the eurozone over the past two or three years are perceived by the market to be diminishing.
I welcome my noble friend's encouragement to delve a little deeper into the figures. Certainly, with respect to employment, we are seeing a switch from an overinflated public sector to a much more dynamic private sector, which will stand us in very good stead in the longer term. If one looks at the specific factors relating to the output figures, there are some very interesting facts; for example, the majority of the decline in the fourth quarter relates to maintenance in the North Sea, and coping with the long-term decline of that source of revenue to the United Kingdom is a structural problem to which we must adjust.
My comments were not intended to imply that the economy was going so well. My comments were intended to imply that the economy is facing extraordinarily difficult circumstances that were a function of the historical debt we accumulated, and a very difficult global situation in terms of demand. With respect to the deficit, I confirm that it has been reduced by a quarter.
I thank my noble friend for reinforcing the fact that demonstrating to the world's financial markets that our spending is properly controlled, and consistent with our capacity to repay the debts that we develop in the international markets, is absolutely at the foundation of our recovery.