Pre-Budget Report

We have had two debates on the economy this week. I judged, wrongly, that this would be the centre of attention, but the Chancellor and the shadow Chancellor clearly took a different view. Nevertheless, I persist in my belief that this is an important debate, for several reasons. First, it centres on the pre-Budget report, which was a very important event, however we judge it. As the Chairman of the Treasury Committee pointed out, the debate represents an advance, albeit a small one, in parliamentary accountability, because it represents an acceptance that the PBR should be subject to debate. Moreover, we now have access to the Treasury Committee's review of the PBR, which we did not have on Tuesday. There is therefore a lot to discuss today that we were unable to discuss properly then. I want to say something about the deficit and the controversies surrounding it; something about the issue that dominated the PBR but has now largely been forgotten—the banking tax, and what has happened to it; and something about the long term, because we are very preoccupied with the short-term fiscal position. There was an interesting half one-liner in the PBR about the creation of an infrastructure bank and a vision of how the economy could develop in the very long term, and we need to refocus some of our attention on long-term structural issues. I start with the deficit. This debate has been a good deal less emotional than bits of the one that I heard on Tuesday, in which the right hon. Member for Birkenhead (Mr. Field) among others proclaimed that the fiscal crisis was comparable to the crisis in 1940. Other speeches were at a similar level of emotion. Today everybody has been a little bit calmer, but we clearly have a serious problem and it is helpful to start by stating what the deficit problem is. There are two linked problems: a deficit or borrowing problem and a debt problem—a cash flow problem and a balance sheet problem. The problem of debt and the balance sheet is clearly serious, because the situation is deteriorating rapidly. However, as is often pointed out from various parts of the House, as things stand the level of British public debt in relation to the economy is actually one of the lowest in the developed world and much lower than at various periods historically.