The Economy

Debate between David Rutley and Kwasi Kwarteng

Tuesday 11th December 2012 Commons Chamber

[Kwasi Kwarteng (Spelthorne) (Con)]

Thank you, Mr Deputy Speaker. You have not been in the Chair for the whole of the afternoon, but I am pleased to see you there now.

Clearly, we have stated our positions at the beginning of this debate. The Labour Opposition have spoken eloquently about the need for growth and Government Members have commented on the mess in our public finances that we inherited in 2010. The gravity of the situation in 2010 should not be underestimated: our deficit to GDP ratio in 2010 was higher than it had ever been in peacetime conditions. That was a function of probably the worst management of public finances that this country ever had the misfortunate to live under.

I am very pleased to follow the right hon. Member for Edinburgh South West (Mr Darling), who served at the tail end of that Administration as Chancellor of the Exchequer. To use a cricketing metaphor, he was very much like the night-watchman who is sent in when the team has collapsed to 70-8 and the light is pretty dim. He did well in trying to steady the ship, but we have to look at the damage that had been caused in the public finances before he took over his post and at what the Labour Administration did not only from 1997, but in particular from 2001 to 2007, during which time they ran a deficit in each consecutive year for seven or eight years before the crisis happened. No academic textbook and no economic school of thought thinks that it is a good idea to run a deficit when the economy is growing. In 2004, the economy was growing at 3%; it was going at full rate, jobs were being created and investment was taking place. What was the deficit then? It was 3%; even under the Maastricht criteria, the previous Government would have failed. No Keynesian in his right mind, and certainly not John Maynard Keynes himself, would have ever contemplated running a deficit of more than 3% when the economy was growing at 3%.

[David Rutley]

Will my hon. Friend confirm that even former Prime Minister Tony Blair felt, on reflection, that Labour was spending too much when it was in office?

[Kwasi Kwarteng]

Absolutely. The former Prime Minister has said that on a number of occasions. I have been on record as saying that the first Labour Administration between 1997 and 2001 was, I freely admit, a very conservative fiscal Government. As the right hon. Member for Edinburgh South West well knows, during those four years the budget was never in deficit. We ran two years of surpluses and the budget in the other years was balanced. It was only after 2001 that the disaster occurred, that the wheels spun off the car and we suffered under a profligate traditional Labour tax and spend regime. I use the phrase “tax and spend” very gingerly, because the taxation never covered the spending.

That was precisely the reason why the Government ran those deficits—to pay for their projects, to pay for greater spending. They were required to borrow money. I remember that in 2001 one of their favourite columnists, Polly Toynbee, said that Labour would have to tax more in order to spend the money. At least that was an honest position. She was suggesting that Labour should try and balance the budget at a higher level of spending. I and my colleagues might want to balance the budget at a lower rate of spending, but both Polly Toynbee and those on the Government Benches would accept is that it is a road to disaster to borrow yet more money in order to spend on grand projects or whatever utopia the Government want to build in this country. We now have the consequence of this recklessness—of Government Ministers at the time spending more and more money and running 3% deficits.