Balancing the Public Finances

Julian Knight Excerpts

Tuesday 11th July 2017 Westminster Hall

[Mr Harper]

My hon. Friend sets out clearly what has happened in the past, and I want to spend a little time on the challenges facing us in the future, but it is worth looking at the economic record. We did not make the decisions and get the success we have had easily; they were contested, and our political opponents challenged us every step of the way. But we have been successful, which gives us the credibility to talk about facing the challenges of the future.

When we came to power in 2010, the budget deficit was the equivalent of just under 10% of the size of the economy, at £150 billion a year. According to the most recent set of actual figures, we have reduced the cash deficit to £46 billion—down by 70%—and the deficit as a proportion of the size of the economy is down by 75% to 2.5%. That is a significant achievement, and it means that in this Parliament the size of our stock of national debt as a proportion of the size of the economy will start to fall. That is incredibly important for the future.

[Julian Knight (Solihull) (Con)]

I congratulate my right hon. Friend on securing this incredibly important debate. The impact is not simply one of taxes and of borrowing and spending, but of Government spending on personal finances, which has a massive impact because of interest rates and personal interest rates. If we let borrowing get out of control, interest rates in the real economy would rise. That is when we have repossessions, and that then is when we have a depression.

[Mr Harper]

My hon. Friend is absolutely right. If we let the public finances get out of control, interest rates would rise and hard-pressed families who are having to make difficult decisions would see the cost of their mortgages and other debts go up, which would not make their lives any easier at all.

Let us consider the impact of controlling the public finances on the real economy. If we look at growth, at how fast the economy has grown over the past seven years, we see that our economic performance among the G7 largest countries in the world has been second only to that of the United States. Interestingly, we have grown our economy at almost double the rate of our nearest neighbour, France. In 2014 and 2016 we were the fastest growing G7 country, and the joint fastest in 2015. That is an impressive record. I mention that because our political opponents often pretend that balancing the public finances has not worked, but in generating economic growth it absolutely has worked.