Economy: Deficit Reduction

Lord Barnett Excerpts

Thursday 28th June 2012 Lords Chamber

Asked by

[Lord Barnett]

To ask Her Majesty’s Government whether they remain of the opinion that their deficit reduction plan has been the right policy for the United Kingdom; and, if so, why.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, tackling the large deficit that this Government inherited was, and is, necessary to restore public finances to a sustainable path. Reversing the historic rise in public debt will strengthen the UK’s medium-term growth prospects.

[Lord Barnett]

My Lords, has the Minister seen the OECD’s latest figures, which show that when the Government took office in 2010 our net debt in that year was 53.9% of GDP, while in Germany it was 52.2%? By 2013, next year, they say that UK debt will be 74%, although it is likely to be higher now in the light of the latest figures, while Germany’s will still be 50.5%. The budget deficit was serious, of course, but it cannot be blamed for those figures. Does the Minister not agree that those figures show that the real reason behind this is that Germany had growth, whereas the Chancellor’s deficit reduction plan deliberately had no growth? In those circumstances, can we now expect another U-turn, shortly I hope, to provide some capital for structural expenditure, which might just help to kick-start a bit of a revival?

[Lord Sassoon]

My Lords, the debt figures that the noble Lord, Lord Barnett, recited precisely illustrate the structural deficit challenge that we inherited from the previous Government. We have already reduced the current budget deficit from 11% to 8% of GDP in two years, but there is much more to do, and we will do it. We will be reducing borrowing by £155 billion a year by 2016-7, compared to what it otherwise might have been under another Government. We will keep on with that task.