Economic Update

Debate between Lord Agnew of Oulton and Lord Razzall

Tuesday 12th January 2021 Lords Chamber

[Lord Agnew of Oulton (Con) [V]]

I am not aware of a huge jump in inflation, as suggested by the noble Lord. Indeed, inflation remains extremely low. The pay freeze in the public sector was carefully targeted to ensure that those on the lowest earnings still received some protection.

[Lord Razzall (LD) [V]]

My Lords, what the Statement does not refer to—although the noble Lord, Lord Balfe, touched on it—is the amount of debt incurred to fund government spending since the start of the pandemic. Government debt is now in excess of £2 trillion, of which nearly 50% has been bought by the Bank of England. Do the Government take the view that the Bank of England can continue to fund significant purchase of government debt, thereby avoiding damaging tax increases so long as inflation and interest rates remain low, or does the Minister think the Government would prefer to return, when they can, to cuts in public spending?

[Lord Agnew of Oulton (Con) [V]]

My Lords, there is a balancing act here. We all absolutely accept the grave state of the government finances following this crisis, and we will be doing everything we can to bring the books back into balance; however, if that is done too quickly, it will cause greater suffering to those who are most vulnerable, and therefore we have to try to strike a balance. The optimum way out of this will be by economic growth, which is where we are putting a great deal of emphasis.