Finance Bill

Sajid Javid Excerpts

Tuesday 6th July 2010 Commons Chamber

[Mr Jones]

I am grateful to my hon. Friend for raising that point. A Bank of International Settlements report that I looked at this morning—it is worth looking at, and I suggest that anyone who has a spare half hour, or who suffers from insomnia later tonight, read it—contains an interesting graph showing exactly where debts are: 70% of Greek debt and 50% of US debt is held by non-residents, but for the UK the proportion is 30%. That makes my hon. Friend’s point well.

Ministers increasingly raise the spectre of Greece. For example, last week the Secretary of State for Energy and Climate Change said that the Chancellor had said that the Budget was necessary because otherwise Britain would be in danger of not being able to pay its way in the world. Public debt in Greece is the highest in the euro area at about 120% of GDP. It also has one of the highest fiscal deficits in the OECD, with 14% of GDP. I do not seek to minimise the UK’s debt—it needs to be dealt with, and we set out a clear plan to tackle it—but it rose 20% in the last couple of years for a very good reason. We faced a massive economic downturn, and investing the money was the correct thing to do to ensure that we did not go into not only a recession, but a long-term depression. I remind new Conservative Members that when those who are now in government were in opposition, they got it wrong on Northern Rock and wrong on how to deal with the banking crisis. Did they ever oppose anything that we did on that? No, they did not; they supported our measures. Their approach would have got us into a complete mess.

The UK debt is 68% of GDP, which is much lower than the euro area average of 79%. Our fiscal deficit is 11%. However much people try to portray our borrowings as on a par with those of Greece or some of the other basket cases—as the press call them—that is just not so. It is the same with the return on bonds. In the US it is 3.58% and in Germany 2.5%. In addition, we have to recognise what type of debt we have. Those who are following the war plan to frighten everyone might fall for the suggestion that somehow our debt has to be repaid tomorrow. We are even hearing some of the nonsense that we heard in the Thatcher era about the idea that the UK economy—or a business—should be run like a personal bank account. That is complete nonsense. If people look at the chart on page 68 of the Bank for International Settlements report, on the maturity of debt, they will see that for the UK it is 14 years. In the US and Germany it is under nine years, and Greece has some debt on short-term loans of two years, with an immediate requirement to repay. The idea that we are in such a mess that we have to repay debt now, and so need this emergency Budget—with all the damage that the VAT increase and everything else will do—is utter nonsense.

[Sajid Javid (Bromsgrove) (Con)]

While what the hon. Gentleman says about the duration of the Government’s debt is correct, what is of more importance now is the amount of borrowing that the Government have to do on a weekly basis because of the size of the deficit, which is—at 13% of GDP—the largest in Europe. We are borrowing roughly £3 billion a week, and that has nothing to do with the duration of the debt. Regardless of the duration, if the deficit is not addressed we will still be in the market trying to borrow £3 billion a week. That is one of the reasons why the auction that my hon. Friend the Member for North West Leicestershire (Andrew Bridgen) mentioned earlier failed in the markets.