Covid-19 Pandemic: Fiscal Policies

Debate between Andrew Griffith and Mary Kelly Foy

Monday 17th July 2023 Commons Chamber

[The Economic Secretary to the Treasury (Andrew Griffith)]

I congratulate the hon. Member for City of Durham (Mary Kelly Foy) on securing this evening’s debate.

In debating the Government’s fiscal policies, as in so many things, it is all important to set out the context. When the Government were first elected, it was in the immediate wake of the global financial crisis. It was also after we inherited a situation that had led to the Labour Chief Secretary to the Treasury leaving a note—we all remember that note—that said, “There is, I am afraid, no money left.”

In the years preceding the covid-19 pandemic, the Government’s fiscal strategy—the only fiscal strategy—was to reduce the deficit and debt that Labour had left us. As a long-standing finance director myself before coming to this place, I know that Government need to live within their means and show responsibility when entrusted with people’s hard-earned money. That was the time to repair the nation’s finances—before a storm would strike. When the deficit reached 7.5% of GDP in 2008-09, Government decisions supported its reduction to 2.7% of GDP by 2019-20. That approach developed the financial buffers to help absorb the impact of future economic shocks, such as we saw in the pandemic. Yet despite that period, and rather belying what the hon. Lady said, we have still been able to provide departmental spending today that will be around £75 billion a year more, in real terms, by 2027 than in 2010.

It is no wonder, then, that at the time when we took that approach, it received the support of Parliament. It was in line with the recommendations then for best practice. For example, the 2017 fiscal risks report of the independent Office for Budget Responsibility said that

“the public finances need to be managed prudently during more favourable times to ensure that when these shocks do crystallise they do not put the public finances onto an unsustainable path.”

That was why, when the pandemic hit, we were well placed to borrow to provide quick, decisive and consistent support to households and businesses throughout the country, which at that time had significant support from Members on both sides of the House. Estimates from the International Monetary Fund showed that the UK’s discretionary fiscal expansion in response to covid-19—the support that we gave households—was one of the largest and most comprehensive financial support packages globally.

To fund that response, we had to borrow an additional £313 billion—a huge amount of money—across 2021 and 2022, but we could not have done that had we not made the difficult decisions. Had we not acted, the cost to the country would have been far higher. Members will remember the support that we provided, including the furlough scheme, which supported nearly 12 million jobs in total, holding our economy together in incredibly tough times. I note that some 420,000 of those jobs were in the north-east, and that since the pandemic has ended the north-east has had the third-highest increase in employee numbers relative to pre-pandemic levels. The economy in the north-east has been one of the fastest growing.

I also note that, as is sadly so often the case on such occasions, the hon. Member for City of Durham had no alternative plans to lay out. I do not know whether she agrees with the North of Tyne Mayor, Jamie Driscoll, who today said, in respect of the right hon. and learned Member for Holborn and St Pancras (Keir Starmer):

“You’ve U-turned on so many promises…in fact, a list of broken promises too long to repeat in this letter.”

I do not know whether she has seen the letter from Jamie Driscoll, or whether she agrees with the right hon. Member for Ashton-under-Lyne (Angela Rayner) or the right hon. and learned Member for Holborn and St Pancras on an issue like the two child policy. Our policy is clear. I do not think that it is appropriate for the Opposition to hold two policies simultaneously in respect of the two child policy.

When we look back on the pandemic, and on our fiscal approaches both during and in the run-up to it, the Government believe that we can be confident that we acted responsibly. We took difficult decisions on the back of the financial situation that we inherited, allowing us, when that terrible pandemic broke above our heads, to protect livelihoods up and down the country, and ensuring that we could afford to do so and could bounce back afterwards, as we have done subsequently. That was, and remains, sound, responsible fiscal policy.

I understand that not every Member of this House will agree with the decisions taken. I hope that the hon. Member for City of Durham will recognise that many people on both sides of this House did their best in those most difficult times.

[Mary Kelly Foy]

I am quite surprised and confused. I gave statistics about how many deaths there were, and specialists across the board, including the United Nations, have pointed out the damage done by the austerity programme. I have no idea why you mentioned the two child limit. It would have been really helpful if you had stuck to the point of my debate.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. The hon. Lady knows that she must not address the Minister directly.