Public Expenditure: Reserve

Lord Eatwell Excerpts

Monday 9th May 2011 Lords Chamber

[Lord Sassoon]

Yes, indeed. As ever, my noble friend Lord Newby gets it absolutely right. Fiscal discipline is absolutely the watchword of this Government. I should say that the Armed Forces will get all the expenditure that they need in relation to net additional costs of military operations in Libya and elsewhere, but that is the exception to the rule.

[Lord Eatwell]

My Lords, before answering my question, perhaps the noble Lord could tell the noble Lord, Lord Newby, what impact the threatened downgrading by Standard & Poor has had on the funding of US debt. I am sure that I could help the noble Lord by telling him that its impact was nil. Will the noble Lord tell us what criteria the Treasury uses to judge whether events merit using the reserve and, given those criteria, would an increase in unemployment of 100,000 or 250,000 fall within the rules?

[Lord Sassoon]

My Lords, first, in relation to this discussion about borrowing costs, I am pleased to say that as of last week the UK’s 10-year borrowing costs, the benchmark for our gilts, hit practically the lowest that they have ever done, while the margin we pay in relation to the German bund has hit its best position since the general election. We absolutely must do these things to make sure that our interest rates remain low. As to how the reserve operates, I am happy to copy to the noble Lord the published rules that the Treasury uses. However, they are for consideration only in exceptional circumstances and would not be linked to the sorts of factors that he sets out.