Economy: GDP Forecast

Lord Peston Excerpts

Monday 29th July 2013 Lords Chamber

[Lord Newby]

My Lords, it is worth reminding the House that in the financial year 2011-12 the net debt was £1,106 billion. On current plans, by 2017-18, when the percentage of GDP starts to fall, it will be £1,637 billion, so the noble Lord makes a valid point.

[Lord Peston]

My Lords, is the noble Lord aware that research evidence shows categorically that if you want to get the debt to GDP ratio down, the vital ingredient is to increase the rate of growth of GDP? That is the way to do it. Measures such as raising taxes or cutting the deficit by cutting large chunks of public expenditure simply do not work. Overall, the lesson we have to learn is that an austerity package is not required; a package concentrating on raising GDP is the correct policy.

[Lord Newby]

I am sure that the noble Lord will therefore have been very pleased to have seen the growth figures last week. I point out to the House that a key factor in growth is the level of interest that people have to pay and that, as a result of the Government’s decisive action in 2010, interest rates have fallen compared with the forecast, as a result of which we will, by 2015-16, have paid £31 billion less in interest payments than was expected in 2010-11.