Finance Bill

Lord Wharton of Yarm Excerpts

Tuesday 20th July 2010 Commons Chamber

[Matthew Hancock]

Unfortunately, those from whom the previous Government had borrowed so much did not see a credible plan from the Labour party. That is why we have had to introduce the emergency Budget, so that we could put that credible plan in place. Since the election, there have been downgrades in the debt of many of our competitors, so it is critical that we have managed to put that triple A rating on to a sustainable basis.

I want to go through three reasons why a fiscal consolidation can lead to growth. The first, of course, concerns interest rates. The long-term interest rates at which many companies around the country borrow—they include those in my constituency, and no doubt those of all other Members—have fallen. In fact, since the election the 10-year rate has fallen from 3.88 to 3.44%, which represents more than a 10% fall in the funding costs of companies up and down the country. Of course, that was not taken into account in the two productions of the Office for Budget Responsibility analysis, which is why a direct comparison of the two is, as stated by Sir Alan Budd, misleading.

[James Wharton (Stockton South) (Con)]

I would like to echo my hon. Friend’s comments about interest rates, but also add that low interest rates have a beneficial impact not only on our economy and businesses, but on the very individuals and families whom the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) talked so much about. The most disadvantaged in our society will benefit most from the positive outcomes of the fiscal and economic policy approach that we have taken.

[Matthew Hancock]

My hon. Friend is getting a reputation for making extremely good interventions, and that was one of them. Fiscal consolidation also means that interest rates can be held lower for longer by the independent Bank of England, which is a second important channel through which economic growth can be supported, and not opposed, by fiscal consolidation.