Public Sector: Debt

Lord Newby Excerpts

Thursday 23rd January 2014 Lords Chamber

[Lord Wigley]

To ask Her Majesty’s Government what is their latest estimate of the United Kingdom’s public sector debt, and what was the comparable figure in May 2010.

[Lord Newby (LD)]

My Lords, the latest public sector finances statistical release set out that public sector net debt was £1,254.3 billion or 75.7% of GDP in December 2013, compared to £846.4 billion or 57.2% of GDP in May 2010.

[Lord Wigley (PC)]

My Lords, does the Minister accept that that is a serious deterioration in the level of debt, and that UK debt now stands higher as a proportion of GDP than does that of Spain? Do the Government accept that, at some point soon, they will have to start reducing that debt? In so doing, will he give an assurance that they will not continually place the burden on the weakest members of our community, who depend on public services and social benefits, but will, at the appropriate time in the economic cycle, raise taxes, so that those with the broadest shoulders start bearing some fair share of this gigantic problem?

--- Later in debate ---

[Lord Newby]

My Lords, the Government are determined to bear down on the level of public debt. Under current plans the debt will peak at 80% of GDP in 2015-16 and will then begin to fall. Whether the fiscal consolidation is dealt with entirely by cuts in expenditure or whether there will be a balance between further constraint on expenditure and additional tax increases, is, I suspect, one of the battle lines that will be drawn in campaigning for the general election.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, reducing the annual deficit is one thing; eliminating net public sector debt by 2018 is quite another. Can my noble friend give the House an assurance that in future, deficit reduction policies, including the capping of annually managed expenditure, will be pursued by the coalition Government only if protection is made available for low-income households?

[Lord Newby]

My Lords, sadly, we are not going to abolish the debt by 2018, although I hope that we shall abolish the annual deficit by then. The Government have set out expenditure plans for 2015-16; how expenditure falls beyond that will, as I said, be the task of the next Government. The parties will set out their plans, and my party has already explained that it would expect further fiscal consolidation to take place, but that a proportion of that fiscal consolidation will need to be borne by the shoulders that are broadest.

[Lord McFall of Alcluith (Lab)]

Is there a case for the Government to establish an education programme to distinguish between the deficit and the debt? Is it not misleading for them to focus only on the deficit, particularly when their actions are making the national debt increase by more than 60% compared with any other European country?

[Lord Newby]

My Lords, the Government are trying to get under control a disastrous fiscal situation that we inherited from the previous Government. I am not quite sure whether the noble Lord is saying that we should cut expenditure more, but if he is, I would be grateful to hear his specific proposals.

[Lord Higgins (Con)]

Does my noble friend agree that, although the deficit has been reduced by one third or so, extra borrowing is still increasing at an alarming rate? The Chancellor is therefore absolutely right to make it clear that his intention is to eliminate the deficit completely, if we are not to burden future generations with the terrible task of dealing with the borrowing and also incurring higher interest rate costs. Does my noble friend further agree that it is high time the Opposition recognised the fact that reducing the deficit is the only possible way forward?

[Lord Newby]

I do agree with my noble friend. I am not sure that it is widely understood that cutting the deficit, which we are doing, will still mean that this Government will have borrowed an extra half a trillion pounds during the course of this Parliament. The party opposite has so far come forward simply with plans to increase that additional borrowing further. That would simply not be credible.

[Lord Davies of Oldham (Lab)]

My Lords, “the party opposite” is critical of the Government for the obvious reason that, if you run an economy with such abysmal rates of growth as this Government have done over the past three years, you find yourself unable to hit the target for the deficit that the Chancellor himself identified in 2010.

[Lord Newby]

My Lords, I am sure that the noble Lord is an assiduous reader of publications by the IMF and will have seen that, within recent days, the IMF has upgraded its forecasts for growth to 2.4% next year and 2.2% the next year, which is higher than for France and Germany.

[Lord Grocott (Lab)]

My Lords, does the Minister recall that during the time when the economy was clearly not growing at all but flatlining, the Government repeatedly said that it was due to the eurozone or the weather but nothing to do with the Government? Can the Minister please confirm that it is his view from the Front Bench that, if there is any upturn in the economy at all at the moment, it will be nothing to do with the Government?

[Lord Newby]

It is not a question of whether there is any upturn in the economy; there is a very significant upturn. Government policy ensured that, when we were facing very strenuous headwinds, the economy did better than it would otherwise have done, and it will do better in the upturn now as a result of a whole raft of policies that this Government are pursuing.