Debt

Lord Bilimoria Excerpts

Tuesday 29th May 2012 Lords Chamber

[Lord Sassoon]

My noble friend is right to point out quickly the confusion that many of us occasionally suffer on the difference between debt and deficit. Of course, the two things are different.

[Lord Bilimoria]

My Lords, does the Minister agree that one of the main reasons for the financial crisis and the great recession was the record level of low interest rates—we were talking of 5%? Now, for three years, interest rates have been 10 times lower than that. Do the Government want to help money to flow through? Lending needs to increase to small businesses and it is not happening at the moment. Secondly, could the Minister summarise the Government’s strategy and prognosis for the interaction between debt, deficit, interest rates and inflation?

[Lord Sassoon]

My Lords, I think we shall need a little longer on the latter part of the question. The noble Lord, Lord Bilimoria, raises an important point in that the first thing we have to do is to ensure that interest rates are kept low. I need hardly remind the House that 10-year interest rates, as of last night, were at almost record lows at 1.75%. We want to see the benefit of those low interest rates flow through to businesses, which is why, among other things, we have the national loan guarantee scheme. In the time of the noble Lord, Lord Barnett, there was not 3% inflation but it peaked at 26.9% and interest rates were more than 10%. That is why I know he is sympathetic to the challenge we have and why my right honourable friend the Chancellor is doing such a fantastic job in these difficult headwinds.