Economic Policy

Ed Balls Excerpts

Monday 25th February 2013 Commons Chamber

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on the UK Government’s economic policy following the loss of Britain’s triple A credit rating.

[The Chancellor of the Exchequer (Mr George Osborne)]

This rating decision is a stark reminder of the debt problems built up in Britain over the last decade, and a warning to anyone who thinks we can run away from dealing with those problems. We on the Government side of the House will not do that.

I can report that we have not seen excessive volatility in the markets today. Ten-year Government gilts are broadly flat—trading at 2.1%—within the trading range of the last week, and near the very lowest rates of borrowing in our history. The FTSE 100 is currently up.

The credit rating is an important benchmark for any country, but this Government’s economic policy is tested day in, day out in the markets, and it has not been found wanting today. Families and businesses see the benefit of that in these very low interest rates.

If we accept the outcome of the rating agency’s decision, we must accept the reasons given for that decision. Moody’s points to the combined impact of what it describes as

“slow growth of the global economy”

and the necessary

“domestic public- and private-sector deleveraging process”—

in other words, the process of winding down the huge debts that built up in our society over the last decade. That is the environment that we are operating in. We are dealing with the very high deficit and debt trajectory that this country had, coming out of the financial crisis, and that was made more difficult by the economic environment abroad.

On the same day as the rating decision, the latest European forecasts showed the eurozone deep in recession, and weaker growth than ours in key economies such as France and Germany. Crucially, Moody’s says that the UK’s creditworthiness remains extremely high because of our

“highly competitive, well-diversified economy”

and a

“strong track record of fiscal consolidation”—

what it calls the “political will” to “reverse the…debt trajectory.” Its message to this Government and this Parliament is explicit: the UK’s rating could be downgraded further if there is a

“reduced political commitment to fiscal consolidation.”

Hon. Members will not get that reduced commitment from this Government. We will go on delivering on the economic plan that has brought the deficit down by a quarter, that has helped to secure 1 million private sector jobs, and that continues to secure very low interest rates, not just for the Government, but for families and businesses in this country.

Ultimately, that is the choice for Britain. We can either abandon our efforts to deal with our debt problems, and make a difficult situation very much worse, or we can redouble our efforts to overcome our debts, make sure that this country can earn its way in the world, and provide for our children a very much brighter economic situation than the one we inherited from our predecessors. That is what I will do, and what this Government will do.

[Ed Balls]

The downgrading of Britain’s credit rating is, in the Chancellor’s own words, a “humiliation” for this Government. Let me remind the House what he promised at the general election. He said:

“the British people will have eight clear and transparent benchmarks against which they can judge the economic success or failure of the next government”.

Point 1 says:

“We will safeguard Britain’s credit rating”.

The first economic test he set himself has been failed by this downgraded Chancellor. Yet as we have seen today, he remains in complete denial, offering more of the same failing medicine, even though Moody’s now agrees that “sluggish” growth is the main problem. Does he not now regret using the rating agencies as cover for his accelerated tax rises and spending cuts—an economic course he was warned was bound to fail?

The plan has failed. Businesses, families and pensioners are struggling. Our economy has flatlined, and as a result, Government borrowing is set to be £212 billion higher than the Chancellor planned, but despite all that, he spent the last year saying, “I must stick to my plan to keep the triple A rating.” Now that it is clear that his warnings of disaster—of rising mortgage rates and market mayhem—if we downgraded have not come true, what other excuse does he have for sticking to the plan? Over a weekend, he went from saying that he must stick to his plan to avoid a downgrade to saying that the downgrade is the reason why he must stick to the plan. He used to say that a downgrade would be a disaster; today he says it does not matter, but he still warns that a downgrade in future might be a problem—until it comes along; then he will have the same excuses. It is utterly baffling and completely illogical. He is just making it up as he goes along.

No wonder the Chancellor is now besieged by calls from right, left and centre to kick-start the recovery with infrastructure investment and tax cuts. Even the economic adviser to his great political rival, the Mayor of London, has today called for

“more spending by the Government on infrastructure and construction.”

In conclusion, the Chancellor needs to get out of his denial and get a new plan on growth, jobs and the deficit that will work, or else the Prime Minister will need to get a new Chancellor. Does the Chancellor not see that it is his first duty not to put his own political pride first, but to put the national economic interest and families and businesses in this country first?

[Mr Osborne]

The shadow Chancellor finds himself in the contradictory position of seeking an urgent question on a rating decision which he says we should ignore, about a debt burden that he admits he would add to, in order to attack a Government who are sorting out the mess that he created. What exactly is his policy? Six times on the radio he was asked this weekend whether the answer to too much borrowing is to borrow even more, and he would not answer the question. It is an economic policy that dare not speak its name, from a shadow Chancellor who refuses to be straight with the British people. Finally, he was confronted on the radio by the simple statement:

“I, Ed Balls…would borrow more”

and he admitted,

“Yes, that is what I would do.”

Does not that admission completely undermine his entire argument today? A deliberate decision to borrow more—[Interruption.]