Economy: Deficit Reduction

Lord Peston Excerpts

Monday 15th October 2012 Lords Chamber

[Lord Sassoon]

My Lords, I certainly agree with my noble friend that the question of funding, particularly for SMEs, continues to be of considerable concern to the Government. That is why we have been able to use the strength of the national government balance sheet which derives from our deficit reduction plans to put in place the funding for lending scheme, to which my noble friend referred, and the UK guarantee scheme of up to £50 billion for infrastructure projects so that we can ensure that credit continues to flow.

[Lord Peston]

My Lords, I take it that the noble Lord’s answer implies that the Government intend to pursue continuously their ludicrous economic policy, the effect of which is that the Government engage in cuts, those cuts lower aggregate demand, the tax revenue goes down and some benefits go up so that the budget deficit increases, whereupon they engage in more cuts, and this process goes on until the economy implodes. That is the danger before us. What is required is a change in economic policy that leads to some expansion of the real economy.

[Lord Sassoon]

My Lords, I do not know whether the noble Lord, Lord Peston, and his noble friend Lord Barnett have been comparing notes, but the noble Lord, Lord Barnett, was quoting the IMF approvingly at me only a minute or two ago. On this point, only a week ago, on 9 October, a senior official of the IMF said that at this stage:

“The policy mix in the UK, which consists of adjusting fiscal policy, reducing deficits, at the same time supporting the economy with a very accommodative monetary policy is the right way to go”.