Fiscal Responsibility Bill

Thank you, Mr. Deputy Speaker, for giving me an opportunity to contribute to this pressing and important debate. As we have just been hearing from the right hon. Member for Birkenhead (Mr. Field), we gather at a time of great economic risk for our country. The first signs of tentative economic growth may be appearing, but we are far from out of the woods. The economic backdrop to the Bill is dire, as the right hon. Gentleman has just said. In 2009, the British economy contracted by almost 5 per cent. That is worse than in either of the Conservative recessions of the early 1980s and 1990s, and worse even than 1978 and the winter of discontent. Remarkably, it is even worse than the year of the Wall street crash or any of the subsequent years during the great depression. Our economy contracted by more in 2009 than in any peacetime year since 1921, and the impact on our public finances has been truly devastating. One quarter of British public spending is now unfunded. We have a low-tax economy, not because ordinary people and households around the country pay less tax but because of a collapse in corporation tax. At the same time, however, we have a high-spending Government. The money coming into the Treasury's coffers is comparable to that in an American-style society, but the money going out of those coffers is more comparable to that in a Scandinavian-style society. The long-standing ready-reckoner suggesting that any country borrowing more than 10 per cent. of gross domestic product in a given year has entered basket-case territory has been breached. In this financial year, we in Britain will borrow more than 12 per cent. of our GDP, and the proportion will be well over 10 per cent. again next year. What will be the effect on public services—the local schools, the police, the hospitals—in our individual consistencies? One quarter of those services are unfunded, and we are plugging that gap this year with public borrowing. As a country, we are borrowing an extra £500 million every single day, which equates to more than £20 million extra every hour or £1 million extra every three minutes. We have borrowed about £25 million extra since this debate started. Our currency has been massively devalued, and we are now printing extra money. It is often said by the Government that other countries have experienced recession too, and that is of course true. When those countries were growing, however, we never heard from the Prime Minister that Britain's rising prosperity was due to international factors that had nothing to do with the policies of his Government. Instead, all his plans were predicated on the best-case scenarios, and that left Britain dangerously over-exposed. When this Prime Minister boasted that we had abolished boom and bust on his watch, he was half right—he just got the wrong half. I want, however, to turn to where the Prime Minister has a valid story to tell. It has been said—and the Chancellor said it again today—that our borrowing is at a level similar to that of other comparable countries, and that is broadly true. We were told by our iron Chancellor that we would not let our debt rise above 40 per cent. of GDP, but it is now doubling to 80 per cent. Even so, it remains lower than the debt level in Italy—although by some measurements Italy's economy is now bigger than ours, and our total debt is still rising faster than Italy's. It is also true—and in this the Chancellor, the Prime Minister and others have a point—that by historical standards Britain's debt looks manageable. It may be rising to 80 per cent. now, but we have just been hearing from the right hon. Member for Birkenhead about the consequences of 1945, when our total debt as a percentage of GDP stood at a terrifying 250 per cent. The second world war is always rightly portrayed in terms of the human casualties that were suffered, but until I saw that figure I had not fully appreciated the terrifying scale of indebtedness that we as a country faced at that time. We may be broke now, but we have been three times more broke in the past.