Living Standards

Richard Fuller Excerpts

Wednesday 30th November 2011 Commons Chamber

[Mr Syms]

Yes, partly because of that. Traditionally in Britain it has been about 40%, so that gave the Government some room for manoeuvre. Any Government in office would have had a large increase in its deficit given what hit them in 2007 and 2008. There is no great argument about that and, as someone sitting on the other side of the Chamber, I think that many of the things that the right hon. Member for Edinburgh South West (Mr Darling) did were beneficial in trying to maintain a fragile economic situation.

Having said that, we cannot continue to increase debt year on year at the rate we were in 2009, 2010 and 2011 or we will overwhelm the British economy. The worst thing for our constituents is not paying tax; it is paying tax to pay interest on money being borrowed from someone else. The Government had to make a judgment, and their judgment was to set out an economic policy gradually to reduce our debt over five to seven years to a level that, once it tops off in 2016-17, can then start to be brought back to the level of more normal years, which is about 40% of GDP. In an environment in which the world was growing rapidly, that would be easier. In an environment in which the eurozone is blowing up, and there are high fuel and food prices, it becomes much more difficult. That is part of the problem for the Government in the short term. It is events—it is what is happening around the world.

There is nothing surprising about where the Government are. Sticking with the policy is perfectly sensible, but things do not go in a straight line in economics, and there will be OBR forecasts and Budgets where the figures for debt increase, and some where they decrease. It will depend to some extent on world events.

[Richard Fuller (Bedford) (Con)]

My hon. Friend is talking about debt levels. Was not one of the issues under the Labour Government the integrity of the public finances? Their estimates of public sector debt did not include the private finance initiative, which was a grossly exaggerated amount of public benefit, and they did not include the burgeoning increase in public sector pension claims on the economy. Does my hon. Friend agree that another aspect of debt in which the Labour Government’s policies were embedded was increasing the costs that people had to pay for their housing through the ever-increasing impression that housing wealth was real wealth? That has had a real impact on people’s well-being and living standards today.

[Mr Syms]

Clearly, and another problem in the British economy is that there is a lot of private sector borrowing. We have a high level of indebtedness, both of government and of the private sector. In Italy, they save rather more than we do, and as a country we should try to encourage more of our citizens to save and not live on the never-never in the long term.

I support what the Chancellor did in the autumn statement. We are clearly in choppy weather, but that is no reason to change course. We cannot adjust the budget down or raise taxation painlessly. The living standards of most of the population will be squeezed. As the IFS and other organisations have said, living standards have fallen by about 7% over the past two to three years. The good news is that next year the projection is for things to be fairly flat, with some modest recovery after that. It may well be that when we get to 2015—the general election year—we have lower living standards than in 2010 as a consequence of the fact that we have inherited a major deficit, very difficult problems and a pretty rotten international environment. That is no reason for going off course, but it is a reason for sticking to a very sensible policy. Labour Members may think that we cannot do things without breaking eggs, but that is not so. We have to raise the tax burden and reduce spending, and I am afraid that that has consequences.