Balancing the Public Finances

Robert Courts Excerpts

Tuesday 11th July 2017 Westminster Hall

[Robert Courts (Witney) (Con)]

It is a pleasure to serve under your chairmanship, Ms Ryan—it is the first time I have had the opportunity to do so. I will keep my remarks very brief because I know a lot of hon. Members want to speak, and I will try not to repeat things that others have said already. I congratulate my right hon. Friend the Member for Forest of Dean (Mr Harper) on securing the debate, which is of enormous significance as we consider the Government’s progress since 2010 and where we go as we look forward to a strong economy for the future.

When the Government came to power in 2010, they immediately set about putting right and reducing the massive deficit they inherited from the Labour Government. The deficit has been brought down by three quarters after starting as the highest since records began. At that stage, one pound in every four spent by the Government was borrowed. That deficit has been brought down from 10% of GDP to 3%.

That matters a great deal, for two reasons, the first of which is that anything borrowed has to be paid back. It is a fallacy simply to think that there is a pot of money that can be borrowed and spent, but that there is never a day of reckoning. If the deficit is not dealt with by this Government or this generation, it will have to be dealt with by the generations that follow. It is not responsible—it is not something I wish to be a part of—to hand down to my children and to the children who follow us a debt that we were unwilling to consider repaying.

Secondly, there comes a point when the borrowing rate increases and becomes unsustainable. Owing to the cuts to the deficit that the Government have made, they now pay 1% on their 10-year gilts. That compares favourably with Italy, which pays 2%, or Portugal, which pays 2.9%. That has avoided tens of billions of pounds of extra debt payment.

Borrowing is not free. In the year 2014-15, about £34 billion was spent on servicing debt interest, which is about 4.6% of all Government spending. Depending on how it is managed, that is bigger than the transport budget and approximately equivalent to the defence budget. No one should be under any illusion that, in borrowing such amounts, our spending on debt interest is equivalent to that of a major Government Department of State.

[Neil O'Brien]

You are absolutely right—my hon. Friend is right—to point out that we are paying that much in debt interest payments. You will know that more than a quarter of our debt is held overseas, so by my calculations we are spending something like £10 billion a year to other countries for them to spend on their schools and hospitals. My constituents in Harborough will be shocked that we are spending that much to support public services overseas.

[Joan Ryan (in the Chair)]

Order. I remind the hon. Member for Harborough (Neil O'Brien) that he is supposed to address the Chair.

[Robert Courts]

I am grateful to my hon. Friend for making that powerful point. He is right that when we are paying debt interest overseas, we are paying money elsewhere when it could be spent in this country building up the economy and spent on our priorities.

The central point is that a strong economy is needed to fund strong services. It is all very well to have a long list of priorities on which we would like to spend. Let us be under no doubt that everybody Government Member wants strong public services. We want to increase spending, but that must be done in a responsible way. That money, in order to be spent, has to be raised. If public spending is not balanced, it leads to a weaker economy. That means less money to be spent on our public services, and it means that we are in a weaker positon to withstand the next economic shock when it comes. In due course, there always will be a downturn in the economy and we need to be in a strong position to meet it when it comes. That is the overriding mistake made by the Labour Government.

Living within our means is not an ideological fixation. It is not simply a desire. It is a necessity to ensure that we can protect our public services and spend sensibly for this generation and for generations to come.