Balanced Budget Rule

Debate between Stewart Hosie and Robert Jenrick

Wednesday 23rd January 2019 Westminster Hall

[Robert Jenrick]

As we have already heard today, a great deal of progress has been made in that respect. Of course there is more to do, but we have to recognise the considerable progress that we have made. In 2010, as my hon. Friend the Member for North East Derbyshire said, we inherited a very severe situation: debt had nearly doubled in two years and was snowballing, while the deficit soared to a near record level—the highest in 50 years. Of course the financial crisis had contributed to that, but so had poor management of the public finances in the years leading up to it. We have made progress, and we are nearing a turning point in the public finances. Debt has begun its first sustained fall in a generation and the deficit has been reduced by four fifths—from 9.9% of GDP to 2% at the end of 2017-18. That is an important step forward, but there is a great deal more to do.

[Stewart Hosie]

Does the Minister not accept that his party has any responsibility for slowing down the recovery? Does he not recognise that in 2010 the UK was one of only two countries—the other was Argentina—to completely end the fiscal stimulus, weakening the recovery and ensuring that the downturn lasted far longer than it ought to have?

[Robert Jenrick]

No, I do not accept that for one minute. It is exactly as a result of this Government’s fiscal responsibility in that period that the public finances have now improved, credibility has been restored in the market and business has continued to invest. For those reasons and others, we now have continued record levels of employment, record low levels of unemployment and an economy that remains remarkably resilient. Let us not forget that public spending is £200 billion higher today than it was in the last year of the last Labour Government.

We are not complacent about the debt or the deficit. The fiscal outlook may be brighter, but the need for fiscal discipline continues, as my hon. Friend the Member for North East Derbyshire made very clear. The debt is still more than 80% of GDP, which is equivalent to approximately £65,000 per household, and we want to reduce that figure, for a number of reasons. We are concerned to ensure that if there is a future economic shock, the economy is resilient, and we want to improve fiscal sustainability. In the most recent Budget, the Chancellor set aside £15 billion of headroom for economic shock, out of concern for any further uncertainty that might arise as a result of Brexit.

There is a broader point, however: servicing debt is costly. If our spending on debt interest were a Ministry, it would be the third largest, after health and education. Our spending merely on servicing our debt is equivalent to what we spend on the police and the armed forces. As my hon. Friend made clear, that has an opportunity cost, because that spending has no economic or social value and reduces our ability to spend on our priorities and keep personal and corporate taxes as competitive as possible. The debt burden of interest is merely being passed to future generations.

The foundations of the Government’s approach are our fiscal rules: first, to reduce the cyclically adjusted deficit to below 2% by 2020-21, and secondly to have debt fall as a percentage of GDP in the same year. Sticking to those rules will guide the UK towards a balanced budget by the middle of the next decade. The OBR’s economic and fiscal outlook, which was published in October and was quoted from earlier, shows that the Government are forecast to have met both our near-term fiscal targets in 2017-18, three years earlier than predicted. Sensibly, given uncertainties in the fiscal outlook, the Chancellor took the view that we should retain the £15 billion of headroom against the fiscal mandate in the target year and £73 billion against the target of getting debt to fall. The forecast also shows that borrowing will fall to 0.8% of GDP by 2023-24, its lowest level since 2001.

Trade, Exports, Innovation and Productivity

Debate between Stewart Hosie and Robert Jenrick

Wednesday 13th January 2016 Commons Chamber

[Stewart Hosie]

I agree with the hon. Gentleman’s assessment that we need more innovation, exports, technology and investment, all of which I will come on to. The Government and I can have a debate about precisely what they are doing, but his assertion that being part of the UK will allow such things in bigger quantities is tenuous at best and probably not confirmed by the reality.

To return to the Chancellor’s “march of the makers” speech, if those words appeared far-fetched when he first said them, they appear rather shallow and empty in the light of the reality of what is going on. In that regard, during the last Parliament—this is linked to the intervention about investment—another Tory-led Government, in a press release about business investment, a balanced and sustainable economy and all the matters we are discussing, boasted about investment in the UK Green Investment Bank. We supported that institution. We believed that it would deliver support for innovation and growth in a new industry, and indeed it has done so. Incredibly, however, it has been systematically undermined by this Government, while many of the changes they have announced since are undermining the commitment to the green economy generally.

[Robert Jenrick (Newark) (Con)]

One of the levers at the disposal of any Government to increase exports is to push aggressively for new free trade agreements. Does the hon. Gentleman agree that the SNP has been less than fulsome in its support for free trade agreements around the world, particularly the Transatlantic Trade and Investment Partnership, on which the SNP’s position is opaque at best?

[Stewart Hosie]

It is not opaque, so let me make the position really clear to the hon. Gentleman. We welcome trade agreements. We think that they are a good thing in general. However, we will not countenance a trade agreement that opens the door to the systematic undermining of our essential public services. That is not opaque; that is crystal clear.

We need rather more than words from the Government: we need action to reverse declines, particularly in manufacturing, and to ensure that the last quarter’s fall in manufacturing output—which I mentioned earlier—does not become a pattern. At least in part, that will require—again, this is a response to the intervention—more innovation.