Section 5 of the European Communities (Amendment) Act 1993

Claire Perry Excerpts

Wednesday 27th April 2011 Commons Chamber

[Mr Hoban]

Of course, sanctions are a matter for the eurozone countries. They do not apply to us, as we are outside the eurozone thanks to the opt-out secured under the Maastricht treaty and reiterated in the Lisbon treaty, so that point is not relevant to tonight’s debate. We have ensured, through our opt-outs and our commitment not to join the euro—this addresses the point raised by the hon. Member for Glasgow South West (Mr Davidson)—that Parliament remains sovereign.

The Commission has endorsed the UK’s domestic consolidation plan, which is laid out in the convergence programme. As a result of the measures the Government have taken, the path set for fiscal policy means that the UK is on course to meet the Commission’s recommendations and deadline for dealing with our excessive deficit. We are not doing this to get a gold star—to use the language of the hon. Member for Glasgow South West’s analogy—from Brussels; we are doing it for the UK’s economic health. The plan will tackle our record deficit, with expenditure falling as a share of income in every year of this Parliament and national debt falling as a proportion of gross domestic product by 2014-15.

For those in opposition who question this approach and who would condemn Britain to years of unaffordable and wasteful expenditure, let us look at the facts. In Britain we have a higher budget deficit than both Portugal and Greece. Last year, we also had a similar level of national debt to Ireland, but our market interest rates are a fraction of those countries’ rates. Greece’s currently stand at more than 14% and Portugal’s at more than 9%, while Ireland’s is approaching 10%. Britain’s market interest rates have fallen to 3.6%, our triple A credit rating has been secured and we have avoided the sovereign debt storm that has engulfed our continent. That is a direct result of the decisive action that we have taken.

[Claire Perry (Devizes) (Con)]

Does the Minister agree that it is not only the absolute value of interest rates that is important but the spread over countries such as Germany? Indeed, the spread over German bunds for UK sovereigns has dropped by almost two thirds since the election, confirming the validation of this fiscal convergence programme.

[Mr Hoban]

My hon. Friend makes an important point. Interest rates are low and the spread is narrowing. That is a huge benefit to the British economy. It ensures that mortgage rates for families are kept low and it helps to encourage the economy by reducing the costs faced by businesses that borrow. There is a significant benefit to this country as a consequence of the firm action that we have taken. These actions have shown the world that Britain’s future is now in safe hands, and that this is a Government who know how to manage their finances and who have a credible plan that is delivering stability, certainty and growth.

The independent Office for Budgetary Responsibility has forecast growth in each and every year of this Parliament, with growth of 1.7% forecast for 2011. This is in spite of the rise in world commodity prices and higher than expected inflation. The OBR points out that this effect

“creates scope for slightly stronger growth in later years”

than previously forecast. So although it expects real GDP growth of 2.5% next year, it forecasts that it will then rise to 2.9% in 2013, 2.9% again in 2014 and 2.8% in 2015.

The European Commission last month published its own economic forecasts. These show that the UK will grow more strongly in the coming year than Spain, Italy, France, the average for the eurozone, and the average for the EU.