PARLIAMENTARY DEBATE
Balancing the Public Finances - 11 July 2017 (Commons/Westminster Hall)

If Members wish to remove their jackets, they should feel free to do so, and of course their ties—I have removed mine, as you can see.

I beg to move,

That this House has considered the matter of balancing the public finances.

It is a great pleasure to serve under your chairmanship in this new Parliament, Ms Ryan. This is the first time I have secured a Westminster Hall debate since the general election. If you will forgive the indulgence, it is also a great pleasure to see the Financial Secretary to the Treasury, my right hon. Friend the Member for Central Devon (Mel Stride), in his place. He served with tremendous distinction in the Whips Office, which I had the pleasure of leading after the 2015 general election, and I am pleased to see him in his current role. I look forward to him responding to the debate.

I am conscious that a large number of Members wish to speak, so I will speak for a little less time than I had originally intended. The first thing worth drawing to the attention of the Chamber, however, is how few Opposition Members are present, which I find astounding. To draw some conclusions from the attendance, we can see that the Conservative party and our allies in the Democratic Unionist party believe in balancing the public finances and making the difficult decisions necessary to ensure that we can grow the economy and create jobs. Judging by the turnout on the Opposition Benches, or rather the lack of turnout, the Labour party is clearly not interested in balancing the public finances or making sensible decisions; all that it is interested in is spending other people’s money until it runs out. Whereas, so many Conservatives are here that they are having to move right around the Chamber and take over the other side.

I will probably have to draw my remarks to a close sooner than I had expected, in order to allow other Members to speak, so let me do a quick précis of my argument. We have come a long way since 2010: we have cut the deficit by three quarters; we have had faster economic growth than almost any country in the G7 largest countries; and we have cut unemployment to levels not seen since I was at primary school in 1975. That is incredibly important, because those are not just statistics; they represent real people getting the opportunities to succeed and thrive.

There are things that we should be proud of, and we could and should have talked about them more during the election campaign. I was very pleased to hear the Chancellor’s outstanding speech in the debate on the Queen’s Speech, in which he set out our economic record and our plans for the future. My central message at the conclusion of my speech today will be that although we face difficult decisions and many pressing needs for spending public money, we need to raise that money while keeping taxes low and economic growth moving along. Those are difficult decisions. The Chancellor is the man who must make those decisions, and he must make them in a balanced way, taking into account all the factors, including economic growth. He needs to make those decisions at the Budget in the autumn, and Conservative colleagues should give him our support in doing so.

I congratulate my right hon. Friend on his excellent speech. Is it not the case that Britain has become addicted to public sector debt? The truth is that since 2002 Governments of both colours have been spending more each year than we have been collecting in taxes. If are to stop doing that in future, it will be a bit like a drug addict coming off drugs.

My hon. Friend sets out clearly what has happened in the past, and I want to spend a little time on the challenges facing us in the future, but it is worth looking at the economic record. We did not make the decisions and get the success we have had easily; they were contested, and our political opponents challenged us every step of the way. But we have been successful, which gives us the credibility to talk about facing the challenges of the future.

When we came to power in 2010, the budget deficit was the equivalent of just under 10% of the size of the economy, at £150 billion a year. According to the most recent set of actual figures, we have reduced the cash deficit to £46 billion—down by 70%—and the deficit as a proportion of the size of the economy is down by 75% to 2.5%. That is a significant achievement, and it means that in this Parliament the size of our stock of national debt as a proportion of the size of the economy will start to fall. That is incredibly important for the future.

I congratulate my right hon. Friend on securing this incredibly important debate. The impact is not simply one of taxes and of borrowing and spending, but of Government spending on personal finances, which has a massive impact because of interest rates and personal interest rates. If we let borrowing get out of control, interest rates in the real economy would rise. That is when we have repossessions, and that then is when we have a depression.

My hon. Friend is absolutely right. If we let the public finances get out of control, interest rates would rise and hard-pressed families who are having to make difficult decisions would see the cost of their mortgages and other debts go up, which would not make their lives any easier at all.

Let us consider the impact of controlling the public finances on the real economy. If we look at growth, at how fast the economy has grown over the past seven years, we see that our economic performance among the G7 largest countries in the world has been second only to that of the United States. Interestingly, we have grown our economy at almost double the rate of our nearest neighbour, France. In 2014 and 2016 we were the fastest growing G7 country, and the joint fastest in 2015. That is an impressive record. I mention that because our political opponents often pretend that balancing the public finances has not worked, but in generating economic growth it absolutely has worked.

I, too, congratulate my right hon. Friend on securing this debate. Will he join me in welcoming the fact that the reduction in corporation tax to 19% has brought in the highest yields ever, bringing another £11 billion into the economy? Does he have any thoughts on what increasing the rate to, say, 26% would have on jobs and, importantly, our ability to reduce the deficit?

My hon. Friend, who makes a good point, tempts me to leap forward to the end of my remarks, but I will say only this about taxes: there is a big difference between rates of tax and how much money is raised. As Conservatives, we believe that the purpose of taxes is to raise money to pay for our public services. The Chancellor made it clear in the debate on the Queen’s Speech that by reducing the tax rate, thereby encouraging businesses to locate here and be more successful, we raised more money to pay for those public finances—I think the Chancellor said £18 billion more.

Looking at that performance, it seems to me likely that if we were to raise corporation tax two things would happen: first, we probably would not raise the money, so although we might pat ourselves on the back and pretend that we were raising taxes, we would not raise the money to pay for public services; and secondly, it is fairly obvious to everyone, or to everyone on the Government side of the House, that those taxes do not fall on businesses at all. When we raise taxes on business, there is no mystical “business” to pay them; those taxes fall either on workers, who will receive smaller pay rises, or on customers, who will see higher prices. Taxes all feed through, so everyone in the economy would pay the price of any corporation tax rises, which probably would not raise any more money to pay for our public services, so we would be shooting ourselves in the foot. My hon. Friend the Member for North Warwickshire (Craig Tracey) makes exactly the right point.

I also want to mention our record on jobs, which is what I am proudest of: 3 million more people are now in work than were when we first came into office. Let me give the specific example—I think this will be heartening—of the impact on young people. In 2010 the unemployment rate among young people in this country was about 20%, which is comparable with that of our neighbours in the European Union and in the eurozone. Since we came into office, to this point, in those countries the unemployment rate among young people has been broadly flat, up a little but still around 20%. In our country it is down six percentage points, to 13%. That is not just a statistic; it means that hundreds of thousands of young people have had the opportunity to get a job when they leave school, college or university.

I thank my right hon. Friend for securing the debate. We reduced corporation tax from 28% to 20% but actually increased the tax take. As we exit the European Union, we will need to encourage more businesses to come to this country and create more employment, so it is essential that we reduce taxes further, rather than putting them up. That is the difference between the Government and the Opposition.

My hon. Friend makes a good point. As we are going to leave the European Union, we want to be more global and outward-looking and we want more companies to locate in Britain, so it seems to me that this is exactly the wrong time—if there ever is a good time—to increase corporate tax rates.

The right hon. Gentleman talks about the importance of what this Government have done for young people, but can he tell us how many people in the figure he mentioned are on exploitative zero-hours contracts? If the Government are so passionate about young people, why will they not pay them a real living wage? Why are they discriminating against the under-25s?

I am glad that the hon. Gentleman raises zero-hours contracts. It simply is not true that everyone on a zero-hours contract is being exploited. There is some good evidence from the Chartered Institute of Personnel and Development. I am not sure whether these data have been updated, but it did a survey in 2014 that showed that around 63% of people on a zero-hours contract—higher than the proportion of people on a permanent full-time contract—were satisfied with their terms and conditions. Most people on zero-hours contracts actually find that they fit their requirements, because they are either students or people with caring responsibilities.

There are of course people who would prefer not to be on a zero-hours contract. That is why I welcome Matthew Taylor’s review, which was published today. He thinks that employees should have the right to ask their company to put them on a permanent contract. Indeed, McDonalds recently offered that to its employees. It is true that some of its staff on flexible contracts said that they would prefer to move to a fixed-term contract, but about 80% preferred to stay on a flexible contract because it suited them. I just do not agree with the contention that a zero-hours contract is by definition exploitative. In many cases, it suits the worker and it suits the business—it is a win-win. But it is completely true that if such contracts do not suit people, it is better that they should have the opportunity to move to a full-time or permanent contract to guarantee them hours. I am pleased with Matthew Taylor’s report.

My final point about youth unemployment concerns what happens to young people’s opportunities in countries that do not deal with their public finances. The most obvious example is Greece, which clearly has not dealt with its public finances, where 47%—nearly half—of young people are without work. Countries that do not deal with their public finances damage young people’s opportunities, probably for their lifetime. I do not want us to go down that road and be that sort of country; I want us to keep focused on balancing the public finances.

There is an interesting factor relevant to my constituency. I looked at a debate in the House in 1983, in which my predecessor but two, Paul Marland, spoke. He pointed out that at that time unemployment in his constituency was 15.3%, which was 2% above the national average. I am pleased that, seven years into a Conservative Government, unemployment in my constituency is 1.6%, which is below the average for the south-west—1.7%—and below the United Kingdom average. Our economic record has not just delivered for the United Kingdom and for the south-west; it has absolutely delivered for my constituents, who now have the opportunity to be in work, which is important for their families.

My right hon. Friend is giving a characteristically powerful speech, which is why this debate is so well attended. In my constituency, youth unemployment has fallen by a staggering 61%, making a real difference to people’s lives. That is partly due to the expansion of apprenticeships, which more than 10,000 students have started. Last week I was proud to attend once again the graduation ceremony at Swindon College, where we are equipping young people with the real skills they need.

I am grateful to my hon. Friend for raising that point. He knows—not everyone in the Chamber will—that Swindon is my home town. I actually did my A-levels at Swindon College, so I am particularly pleased to hear that that institution is still delivering opportunities. The opportunities that I got at a comprehensive school in Swindon and at Swindon College meant that I was the first person in my family to go to university, and definitely the first person in my family to make it to the House of Commons. I am pleased to have had those opportunities, and I want every young person in our country to have them too. That is why this matters.

All that I will say about the Opposition—[Hon. Members: “Where are they?”] My hon. Friends make the point that there are hardly any of them here. [Interruption.] An hon. Friend says that they are out spending. They opposed all the reductions in public expenditure over the past seven years. It seems to me, having done a back-of-the-envelope calculation, that the debt would already have been more than £300 billion higher based on the Opposition’s public spending plans, and that if they had carried on spending at the rate they were when they left office, an extra £1 trillion would have been added to the public debt by the end of this Parliament. At the last general election, the Labour party manifesto was just, “Spend, spend, spend other people’s money,” with no credible plan to pay for it. That is not the route that our country should follow. The fact that so few Opposition Members are here to defend their plans tells us everything we need to know.

Having gone through our record and why I think we have been successful, let me say a few words about the challenges we face. Public sector pay is an important topic—in fact, it is what prompted me to call this debate. We all know hard-working public sector workers in our constituencies. It is good to pay them fairly for the jobs they do, but it is also fair that we look at all our constituents—those who work in the public sector and those who work in the private sector. It is worth reminding ourselves that after the financial crash a lot of people in the private sector experienced reductions in their pay, which did not happen in the public sector. According to the Institute for Fiscal Studies, which is a respected organisation, public sector workers are still paid slightly better than private sector workers, even after adjusting for qualification levels. Even after some public sector pay restraint, the levels of pay in the private and public sectors are about the same, and people in the public sector obviously have the benefit of a more generous final salary pension scheme.

We have not talked much about the fact that the 1% pay cap is of course a cap not on individuals’ pay but on the pay scales. Most people will not be aware that, even with that pay cap, many public sector workers have actually seen significant rises in their pay because they have moved up pay bands. I think that half of national health service staff have had a pay rise of more than 3%. Teachers have had an average pay rise of 3%, because many, unless they have a performance issue, move up the pay bands during their career. That is on top of the 1% pay rise. We need to look at all those facts and conduct the debate in the proper spirit.

There are many pressures on public spending. There is public sector pay and funding for our national health service and for social care, and colleagues want more money put into schools. Part of the challenge of being in government is that we cannot say yes to everyone; we have to make choices and set priorities. The right way to do that is to look at the economic growth forecast, at how much tax revenue we think we will have, and at recruitment needs in public services. We have to look at all those things together.

I congratulate the right hon. Gentleman on securing the debate. On the overall issue of rebalancing the public finances, does he agree that there is an example of effective and pragmatic expenditure in the recent announcement by the Prime Minister and the leader of my party? Is not it a good idea to have investment in an area of the United Kingdom such as Northern Ireland, where there has been high dependency on the public sector, in an effort to reduce the debt that is due to Northern Ireland, by the creation of private sector finance and private investment and thus better investment opportunities and more jobs? Is that a good project for the rest of the United Kingdom to follow?

I welcome that intervention, because one of the things that we set out in our manifesto, and that the Chancellor set out in the House of Commons, is our plan to invest across the United Kingdom in infrastructure such as broadband, to help the economy and businesses to be more productive. That is how to raise tax revenue, grow the economy and create the jobs that enable us to spend money on our public services.

I congratulate my right hon. Friend on securing the debate. He is right to highlight the importance of jobs, growth and apprenticeships, which should be at the forefront of any general election debate in a normal time. Does he agree that the public services are under pressure at the moment? We must recognise that. I work in those public services and I see it in my working life. According to the latest forecast, the target—a structural deficit of less than 2% of national income in 2020-21—will be comfortably met by sticking to the current tax and spending plans, so there is about £25 billion of leeway to invest a little more in those important public services, while paying down the deficit in a responsible manner.

I do not disagree with my hon. Friend about investing in public services. He will know that part of the reason why the Chancellor loosened the target a little in his first Budget last year was to build in some flexibility to deal with the headwinds that we may face in leaving the European Union, and some of the challenges, and I think that was right.

I was going to say—my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) has given me an excellent lead-in—that we can pay for our public services only by raising the money through economic growth, as he suggests, or by borrowing more, which I do not think would be sensible. It would damage the public finances, raise interest rates, as my hon. Friend the Member for Solihull (Julian Knight) said, and put pressure on our hard-pressed constituents. Alternatively, we would have to raise taxes, which I do not think would be the right thing to do either.

When the Chancellor looks at the public finance position in his Budget, he needs to consider the growth forecast from the independent Office for Budget Responsibility—what tax revenues he is likely to have. He then needs to consider the pressures on public servants and public services. He needs to look at all the pressures across the piece and come to a balanced Budget judgment, weighing up all those things. Then we need to back him in those decisions. What we cannot do is have a particular story that goes around each week, or decide that something happens to be the flavour of the month, and discover at the time of the Budget that we have run out of money. That is not the way to run a sensible Government, and that is the message for the Chancellor.

I want finally to consider how we pay for things. I remind my right hon. and hon. Friends that in our manifesto we said that we wanted to keep taxes as low as possible, because taxes are levied on businesses that employ people and on individuals who work hard and face decisions about how to spend their money. We will always be the party that keeps taxes as low as possible, and we want to reduce taxes on businesses and on Britain’s working families. We made it clear that we would deliver an increase in the personal allowance, that we would not increase value added tax, and that we would stick to our plan of reducing corporation tax, because that will bring investment and jobs to Britain. As I have already said in response to an intervention, that approach will raise more money for the public finances, not less. We need to stick with that plan and give the Chancellor the opportunity to act in that way.

Any Government worth their salt need to stick with sound public finances. That is how to get the growth, jobs and investment in the public services that we depend on. There are always more pressures on public spending than can be paid for. It is a difficult job for the Chancellor to balance those things. What we need to do, as his Conservative colleagues, is give him space to listen to the input—we can make our bids to him privately. He then needs to balance those things, taking everything into account, and come up with a balanced Budget judgment in the autumn. We need to back the Chancellor, which will mean we are backing our country and its growth prospects, and backing the prospects for jobs, growth and prosperity for all our constituents.

Order. I intend to call the Front-Bench speakers at about 10.30. Given the number of hon. Members who want to speak, I suggest that they limit themselves to a maximum of four minutes, if not a little less. I will not apply a time limit at the moment. We shall see how we go.

I pay tribute to the right hon. Member for Forest of Dean (Mr Harper), who made an interesting and succinct speech, as he always does. He has come to be known in this place as a deep thinker about all matters economic, and I hope that one day he will return to the Front Bench, from which he is sorely missed.

I feel somewhat like Custer at the battle of the Little Bighorn, as the Comanches come running towards me. I apologise to those Tories present, because I will pour cold water on some of the more political points raised by the right hon. Member for Forest of Dean. Over the past seven years the Government have been good at one thing—patting themselves on the back and congratulating themselves on what a great job they are doing with the economy. Even though so many families are more pessimistic than ever about the future, the Government still trade on the myth that they are overseeing a strong and robust economy. When they were elected in 2010, they were given a mandate alongside the Liberal Democrats to bring about change. They allowed people—intentionally, I believe—to believe that the deficit and the national debt were one and the same thing, and told the British people in 2010 that they would pay off the debt and bring the budget into surplus by 2015. It is now 2017, and they have failed.

Despite its being enshrined in legislation in October 2015, the Government have now abandoned their plan to achieve a budget surplus by 2019-20. The Chancellor of the Exchequer has said that the previous commitment will be replaced by a vague pledge to deliver a budget surplus as early as possible in the next Parliament. Since we have had a general election since that statement was made in November 2016, I imagine that that could happen in the next five years. According to the Institute for Fiscal Studies, even reaching that is likely to be difficult. The deficit this year is forecast by the Office for Budget Responsibility to be £68.2 billion, or 3.5% of national income. That is high by historical standards. Over 60 years, from 1948 until the eve of the financial crash and associated recession, average UK Government borrowing was 1.9% of national income.

If the hon. Gentleman is so concerned about closing the deficit, why has the Labour party, at every opportunity, thwarted every attempt to keep it under control?

I admire the hon. Gentleman, as he knows; I know his constituency well. I believe that we said there was a rush to pay off the deficit; the former Prime Minister and the previous Chancellor started an unnecessary rush to pay off the debt. We said it needed to be slower. We were concerned about high unemployment and a double-dip recession. But for monetary policy, that might have happened.

After six years of austerity, the deficit this year will be higher than it was for 80% of the time in the 60 years before the financial crash, while debt is now at its highest level as a proportion of national income since 1965-66. Is it any wonder that when the Tories tell the electorate “Trust us to pay off the deficit”, voters respond by taking their majority away? The Conservative party just do not get it. The electorate told them time and again that they wanted change, but they were given business as usual. Nearly 10 years after the financial crash of 2008, its legacy still weighs heavy on confidence and growth. By its very nature, it rocked financial institutions in this country. Suddenly, phrases such as “safe as houses” or “money in the bank” became laughable clichés. As the Labour Government rushed to bail out the banks and bring about a stimulus that was one of the largest in peace time, the Tories nodded their approval. It was not until much later that, for political purposes, they brought words such as “deficit denial” or “the age of austerity” into the political lexicon.

Sustained austerity has in the main been bad for the British economy. As the deficit fell from 10% to 3.5%, around a percentage point has been reduced from demand each year. The labour market has been unable to return productivity growth to anything resembling pre-crash levels. In June, the British Chambers of Commerce released its second quarterly economic forecast for this year, and the predictions do not make good reading. It forecast that, for the next few years, economic growth would underperform its historical average, falling to 1.3% next year and rising to only 1.5% in 2019. It also predicted that inflation would rise to a five-year high of 3.4% towards the end of the year. Interest rates are also expected to rise by 0.5% in the first quartile of 2018—much earlier than initially predicted. At the same time, there is a tax gap of £36 billion between expected and actual receipts in 2016. We can talk about tinkering with tax levels, but it means very little if we do not collect taxes effectively in the first place.

The Government have still not given any clarity on their plans for the post-Brexit world. The Government’s main tool to address inherent weakness in our economy has been monetary policy. Constraints on how low interest rates could go meant that the Bank of England had to buy gilts—so-called quantitative easing. That move, together with the cut in interest rates to their lowest possible level, has probably kept the lid on high unemployment, but it is only papering over the cracks. Listening to some of the speeches about how sunny the economic outlook is over the years during my time in the House, it has to be asked why people are not cracking open the champagne and singing, “Happy days are here again”? The reason is simple; people feel more anxious than ever, they view innovative technology with suspicion and they fear that jobs will be automated or lost. GDP can be a measure of the health of the Government’s spending, but it can never be a measure of people’s happiness, concerns, or worries.

Productivity has not recovered, and as a consequence, real wages are below what they were a decade ago—something no one alive has ever experienced before. The facts are stark. There is a 16% shortfall in the UK’s productive capacity. Monetary policy can only stabilise demand around the economy’s potential, it cannot increase it. Boosting long-term prosperity is firmly the job of the Government’s structural or supply-side policies—something that has been sorely lacking from the Tories over the past seven years.

Government policies influence investment in education and skills, capacity for research and development, the regulatory environment in which business operates, the flexibility of the labour market and—above all, in the light of Brexit—its openness to trade and investment. In the Queen’s Speech, the Prime Minister said that her Government would work to attract investment in infrastructure, so as to support economic growth. She also spoke of plans to spread prosperity and opportunity across the country.

Will the hon. Gentleman take this opportunity to welcome record employment in our country?

I admire the hon. Gentleman for the mischief he is trying to cause me. Of course, I will always welcome people being in jobs, but I am concerned about the inherent weakness in the economy, which is the lack of investment and the lack of an industrial strategy over the past seven years.

I hear the hon. Gentleman saying that the economy is not growing, but my memory of the statistics is that we are the second-fastest-growing economy in the developed world, after Germany. On what metric does the hon. Gentleman say that we are not a fast-growing or strong economy?

The hon. Lady should have listened to my speech earlier— I do not know if she was on her iPhone or something—because I never said anything about growth. I spoke about productivity, which is 16% down. It has not returned to pre-crash levels, and the facts from the IFS bear that out. If the hon. Lady wants to challenge me on that, I am willing to take another intervention.

I understand that the hon. Gentleman was discussing productivity, but he also challenged the strength of the economy. The economic strength of this country is such that we are the second fastest-growing economy anywhere in the developed world, after Germany.

I accept that we are not growing at the same rate as we have historically. That is the point I was making. I believe there is an inherent weakness in the economy; it has been over-reliant on monetary policy—quantitative easing, low interest rates. But I do not believe that there has been investment in the real economy. That is the point I am making and that is why productivity is down.

The Prime Minister has mentioned the industrial strategy, but it is still empty words. There is no insight or strategy for how the Government will attract investment.

The hon. Gentleman says that the industrial strategy is empty words. However, the industrial strategy has involved, for example, the biggest increase in research and development and science spending since 1979. How can he possibly say that those are just empty words? Those are real actions that will increase the trend rate of the growth of the economy.

When productivity is down, those things are too little, too late. They should have been thought of after the financial crash, when the Government told us from the very beginning that they were going to rebalance the economy and invest in manufacturing. I remember the former Prime Minister even saying at one point that we were going to invest to become an economy that makes things rather than sells them. That has not happened, so it is a bit late in the day to be talking about this.

In the light of the report by the British Chambers of Commerce, it is so important, now more than ever, that the Government implement a strategy to attract investment and generate the economic growth that we all want to see. That is easier said than done in a globalised world. Too many people have been left behind by globalisation. However, globalisation is here, and that will not change. The financial crash was probably the first crisis of globalisation. The only way to address growth, higher inequality and rising insecurity is to build a globalisation that works for all.

Society has to redistribute some of the gains from new technology. Technology constantly evolves and can lead to rapid changes in production, and therefore reskilling must be a constant. In a job market subject to frequent radical changes, people’s prospects rely solely on lifelong learning, which should be factored in by each and every employer. In the age in which we live, anyone can produce anything, anywhere. Someone sitting in their bedroom right now can broadcast across the world in minutes. They can sell to anyone at any time. We need to harness that entrepreneurial spirit. It should be the Government’s intention to bring that about in a way that equips people with skills for the future.

We live in exciting and changing times. With the right level of investment in our people, the age of austerity can come to an end.

The Labour party manifesto had some rather alarming plans for renationalisation, which would have cost more than £100 billion. Can the hon. Gentleman tell us how that would be paid for?

I thank the hon. Gentleman for interrupting me just as I entered my finishing flourish; I was trying to come to my rhetorical peak. There are inherent weaknesses in the former nationalised industries. As I was talking about before, people feel that they are being ripped off and have no control. They see energy companies squeezing them all the time, and something has to be done about that. Most people, and basic economics, ask why we would privatise an industry that has no competition. That has been the problem, but that is a debate for another day.

I will finish, because I have spoken for far too long. I have no doubt that, with the right level of investment, the UK economy can seize the opportunities ahead of it.

Order. I remind hon. Members that we are very short on time and that there are a lot of Members who want to speak. I suggest that hon. Members keep their remarks to no more than three minutes, otherwise I will have to introduce a time limit after the next speaker.

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.

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.

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

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.

It is a pleasure to serve under your chairmanship, Ms Ryan. I congratulate the right hon. Member for Forest of Dean (Mr Harper) on securing this debate. It was somewhat mischievous of him to comment on one side of the Chamber being empty—interestingly, the Government side was empty last week when we were debating WASPI women.

For far too long, balancing the public finances has generally been done on the backs of the poorest and most vulnerable in our society.

Will the hon. Gentleman give way?

I will not, because Members have taken quite a long time. Despite several years of austerity, Her Majesty’s Government continue to miss their targets on debt, deficit and borrowing. Quite simply, austerity has failed to rebalance our public finances, and we need to reassess and re-evaluate our approach.

The biggest contributor to a sluggish UK economy and the biggest threat to our public finances is the reckless hard Brexit currently being pursued by Her Majesty’s Government. That has not been helped by Labour Members voting to give the Prime Minister a blank cheque by voting against single market membership only two weeks ago.

Scottish National party Members will continue to stand up not only for access to but membership of the single market and customs union. When we look at our public finances, we see a major trade deficit, which in the three months to April was £8.6 billion, up from £6.9 billion in the previous quarter. By turning our back on the single market and pursuing a hard Brexit, we risk delivering further shocks to our already precarious economy.

The UK economy grew by just 0.2% in quarter 1 of this year. In comparison, in the same quarter Scotland’s economy grew four times faster. That was somewhat of a surprise, not least because colleagues in the Scottish Conservative party were briefing last week that Scotland was about to move into recession, which certainly did not happen.

We face difficult financial decisions in Scotland, not least because Scotland’s budget faces a real-terms cut of £2.9 billion due to UK austerity. That figure of £2.9 billion is significant, because had Barnett consequentials been followed during the Government’s grubby deal with the Democratic Unionist party, Scotland would have stood to receive £2.9 billion.

I want to move on and to some of my concerns about the deeply worrying consequences posed for Scotland by a hard Brexit. The stark reality is that Brexit threatens to cost the economy around £11 billion by 2030 and result in 80,000 fewer jobs compared with remaining within the EU. We understand and accept that, despite 62% of Scots voting to remain in the EU, we are leaving. However, the Scottish Government have sought to be reasonable and amicable, and have come forward with a compromise that would allow Scotland to remain within the single market. Unfortunately, those pleas have fallen on deaf ears.

We know that Her Majesty’s Government are pursuing a reckless approach to the economy, with a hard Brexit coupled to an ideologically driven obsession with austerity. SNP Members believe it does not have to be like that. Cuts are a choice, not a necessity. During the recent general election campaign, we put forward a responsible and credible fiscal plan that would return a balanced budget by the end of the Parliament. However, in doing so, we would generate an additional £118 billion cumulatively over the next Parliament, with around £10 billion flowing to Scotland. Our fiscal plan would stabilise net borrowing at the level it was before the financial crash and see debt begin to fall as a share of GDP from 2019-20.

Ministers and Conservative Members regularly tell us how employment is high under this Conservative Government. What they do not say is that much of that is due to part-time work or, worse still, exploitative zero-hours contracts. Unstable and low pay is a worry for my constituents in the east end of Glasgow, with the Resolution Foundation estimating that the period 2011-2020 will be the worst decade for wage growth in 210 years. That is before we take into account the Government’s con trick of the living wage, which will actively discriminate against under-25s.

Will the hon. Gentleman give way?

I will not, because of time pressures.

Austerity strangles the lifeblood out of an economy by exacerbating inequality. The Government’s tax and welfare reforms disproportionately affect the least well-off. Charities have warned that current planned welfare cuts are set to drive a potential fall in incomes of 10% for the poorest third of working-age households and a rise in inequality not seen since the 1980s.

Will the hon. Gentleman give way?

In conclusion, let us have a debate about balancing public finances but let us be serious and not balance the public finances on the backs of the poorest and most vulnerable.

Order. I am going to apply a three-minute limit. That still might mean that not everybody gets in. It is for Members to police it and to go below three minutes—you will not be able to go above the three minutes.

It is a pleasure to serve under your chairmanship, Ms Ryan. I commend my right hon. Friend the Member for Forest of Dean (Mr Harper) for securing this much-needed debate and for his excellent points.

I want to focus my comments on one issue only: income inequality, which the hon. Member for Glasgow East (David Linden) referred to. Almost a year ago today, the Prime Minister gave a statement on the steps of Downing Street in which she focused on her aim to make Britain a country that works for everyone by tackling deep-rooted injustices such as income inequality. That is one of the most pernicious issues facing our country, and it lies at the heart of our Prime Minister’s vision for our country. In this Parliament, we are setting out the meaningful ways in which we will effect change.

One thing that came up time and again in my election hustings, and I am sure those of other hon. Members, was the idea of taxing the rich more to pay for all the things on which Opposition Members propose to spend money. In fact, the Leader of the Opposition has proposed that as a highly desirable option, which he thinks would lead to lower inequality in our country. However, far from having the desired effect, would that not have precisely the opposite effect?

Is it not a fact that, under the Conservative Government, the people who pay the highest taxes in actual and relative terms are the rich? In 2016-17, the richest 1% in our country are set to pay 27% of all income tax revenue, a higher proportion than under the Labour Government. The richest 5% will pay 38% of total tax. I welcome that. Never let it be said that the Conservatives shy away from taxing the rich. We do tax them, but we do it in a way that delivers real income to the Exchequer. Labour Members—if they were here—would do it in a way that damages the economy, hurts businesses and jobs, and results in tax hikes for ordinary hard-working people, including my constituents in Redditch. Is it not a fact that, under the Conservatives, people on lower incomes are paying less tax than they did in all the years of the Labour Government?

I will be very brief, but I cannot let what the hon. Member for Glasgow East (David Linden) said go unchallenged, which is why he did not give way to me. Over the years that the Conservatives have been in power, income inequality has reduced. The country has become more equal, not less. That does not support Opposition Members’ arguments, which is why they do not want to hear it, but it is a fact of which Government Members should be very proud.

I thank my right hon. Friend—he has managed to make my speech a bit shorter.

I will focus on the lower paid, hard-working earners. For 2017 to 2018, the personal allowance is being raised to £11,500, which means that the amount of tax-free income someone can earn will be more than 75% higher than in 2010. That means more money in people’s pockets to cope with the cost of living, because taking people out of tax has the same effect as giving them a pay rise. We have discussed the importance of giving pay rises to everybody, which I welcome. People are keeping more of what they earn.

I reiterate my right hon. Friend’s comment that income inequality is in fact at a 30-year low. It continues to fall, and we want to see it go further. It is the Conservatives who are on the side of the lowest paid—we have taken them out of tax. We are on the side of those earning the minimum wage, and we are boosting their incomes with the national living wage. We are on the side of hard-working people, and we are stabilising the economy so that it creates jobs for people, and they can go to work and earn a decent living. It is the Conservatives who believe in fairness, because we have delivered the lowest levels of income inequality for 30 years, giving people a sense that our country works for everyone.

I congratulate my right hon. Friend the Member for Forest of Dean (Mr Harper) on securing this debate. I just wish it was much longer, as do we all.

As my right hon. Friend knows, every morning we are admonished about having a desire to please, but it is a salutary warning. It is too easy to spend other people’s money, particularly when it is future generations’ money we are getting through. I have to take issue with the hon. Member for Islwyn (Chris Evans). He referred to the financial crisis and the stewardship of the economy under Lord Darling. It was a privilege to serve in the Treasury in that period. I have to tell the hon. Gentleman that no one was under any illusions that, no matter how tough the decisions to be made in 2008 and 2009, the real tough decisions and the real grinding work would happen in the 10 years that followed as we sorted out the fundamental problems left to us by the Labour Government.

A lot of good things have been said today, and I intend to speak briefly so that other good things can be said. My hon. Friend the Member for Witney (Robert Courts) referred to the level of debt interest payments and the cost of servicing that debt. We have done an extraordinary job as a Government of reducing the share of our deficit from 10% to 3% of GDP. That has still left us with a monumental debt pile, which we all recognise. My hon. Friend the Member for Witney referred to the cost of servicing that debt pile in terms of transport, but I think of it in terms of policing and schools—just to service that debt is equivalent to the amount of money we are spending on both.

We have to consider what would happen if in some ghastly, dreadful other world this country chose to elect a Government that had less of a reputation for fiscal competence and in international markets. Where would our blended interest rate go from then? If it was to the rates currently endured by Spain, Italy or Australia, we would be looking at an increase in our debt service level of 40%, 80% or 120%.

It does not end there. It does not end on the immediate fiscal impact, with the money having to be raised in tax or added to our debt pile. It would also come in the dynamic effects that would flow—it would come in lower levels of confidence and investment and fewer jobs, meaning lower tax receipts, more borrowing, higher inflation and lower confidence. The cycle goes on.

The Labour manifesto was stuffed full of examples of desiring to please, and the impact on our economy would have been disastrous. Every pound that we borrow now and every pound added to the debt pile is a pound for future generations to pay off with interest. Every pound added to our already high levels of national debt reduces our ability to take sensible measures and make sensible fiscal interventions when the next cyclical downturn happens, as assuredly one day it will. Were we to fail in our generation to rebalance our books, it is the next generation that we would be failing.

Order. The time limit will now reduce to two minutes.

We can change many things in this House. We can pass and change many laws, but the laws we cannot change are those of arithmetic. No matter how big the abacus, no responsible person can ignore the size of our country’s debt and the deficit we inherited. Our debt as a percentage of GDP was roughly 30% to 40% for decades, yet now, courtesy of the last Labour Government, compounded by a global recession, that debt is above 80% of GDP. Those figures alone should make it clear that borrowing more at this stage would be completely irresponsible.

How much does that debt cost us in interest payments? Currently we spend £48 billion servicing our debt. That is dead money. What else could we spend it on? There are many areas where we could use that extra cash. It is nearly half the NHS budget; that is a lot of doctors and nurses. It is more than our whole education budget; that is a hefty pay rise for teachers and more school facilities, with plenty of spare change.

I understand that many years of trying to live within our means is hard. However, the short-term happiness of spending will have dreadful consequences for our country’s finances and make things even harder. It would be the height of irresponsibility to mortgage our future, and there is no moral case for bingeing on the nation’s credit card, least of all when we are forcing others to pay the bill—namely, our children and grandchildren. As anybody who has ever got themselves into credit card debt will understand, it is impossible to pay back the original debt when all your cash is taken paying off the interest payments alone.

That would set us back just at the point when all our leading indicators are heading in the right direction: we have seen a significant reduction in the deficit, which is down by two thirds; unemployment is the lowest it has been for 40 years; the minimum wage is up by 26%; pensions are protected; 1 million new businesses have been created since 2010; and we continue to invest more in our NHS and schools. Those are signs not of a country living under austerity but a nation starting to prosper, despite the dreadful debt burden handed to us by the last Government.

It is a pleasure to serve under your chairmanship, Ms Ryan. I congratulate my right hon. Friend the Member for Forest of Dean (Mr Harper) on securing this really important debate.

Everyone who argues for a splurge on public spending needs to explain where that money will come from. It comes either from increasing taxes or from more borrowing. If we increase taxes, that dampens the economy and takes away people’s hard-won earnings. If we borrow, it drives up interest rates. At the moment, we are very fortunate, in that we have hard-won respectability in the financial markets, which has kept interest rates incredibly low. At a time when the Bank of England is warning banks to increase their capital and about the level of household debt, the risks of increased interest rates to households and mortgage holders are great indeed. We must be mindful of any idea of increasing public spending, given the constraints.

When it comes to tax, we need to look at reforming the system and particularly at how taxation of multinationals works. Amazon pays very little tax in this country and hardly any business rates, yet it is killing our high streets. That is not fair. We need to rebalance the tax system to make a level competitive playing field, not just on our high streets but across the piece in business, so that we have more fairness and all businesses can succeed and compete equally.

Finally, we have a productivity challenge. We must get more investment into the real economy, which is why there should be a much greater focus on both sides of the House. We owe it to all our citizens to do all we can to get the nation a pay rise.

Economies that lose control of their finances lose control of their destiny and that is why it is absolutely right to focus on living within our means. Conservative Members believe that the best way to do that is to power up an enterprise economy. We all hate austerity; we believe in prosperity. We believe in creating businesses and helping them to grow and expand to create the wealth to fund public services so that we can see them grow and develop.

We must be conscious that as a country we need not only to live within our means but to help our lower paid workers to have the means to live. I am proud of what the Government have done with the national living wage because we want well-paid jobs and decent public services. Productivity is the absolute key to higher wages, often for lower paid workers—a good movement, “Be the Business”, has been launched by Charlie Mayfield today. Technical education is at the heart of that, so the Government are putting it to the front. Dealing with extortionate housing costs in London and the wider south-east is also key to the productivity issue, because high housing costs are a drag on the economy. Our national productivity infrastructure fund, focusing on transport, digital, research, investment and housing, is absolutely the right way forward. We should have common purpose across the House; we must all focus on driving up the country’s productivity.

I am proud that, as a result of the hard things that the Government have had to do, the richest 1% are paying more in tax than happened under Labour and that income inequality is at its lowest since 1986—according to the Office for National Statistics, not the Conservative research department. Finally, the Government have taken 75 measures to raise an extra £140 billion in tax.

I will now call the Front-Bench spokesmen. If they take eight or nine minutes each, Mr Harper will have one minute at the end.

It is a pleasure to be in Westminster Hall with you in the Chair, Ms Ryan. I thank the right hon. Member for Forest of Dean (Mr Harper) for bringing this debate to the House. It is an important debate to have. It highlights the fact that a huge number of Conservative Members live on a different planet from the rest of us. In particular, the speech of the hon. Member for Redditch (Rachel Maclean) did not seem to have any link with reality as I and my constituents know it.

Conservative Members are putting out economic soundbites that could easily have been lifted from the Conservative party’s manifesto, but that is not the lived experience of real people. That is not what is happening or what the just-about-managings are facing. They do not feel like their wages have gone up; they do not feel like the reduction in tax credits is at all helpful. I get that the personal allowance has been raised; that is brilliant and I am pleased that it has happened. I also get that the minimum wage has been raised, but it is not to a level that people can live on. That is the problem. It is still a minimum wage and it is not applicable to younger people in the job market. They may have families and housing costs—the same costs that those of us who are over 25 have—yet they are not worth the same wage as others. I am frustrated by the debate because I cannot believe that Members can spill this nonsense.

When the Chancellor gave the spring Budget statement, he reckoned that inflation would be 2.4% in 2017. Actually, in the 12 months to May, it was sitting at 2.9%. The forecast by the Office for Budget Responsibility for earnings growth in 2017 was 2.6%. If inflation continues to grow at 2.9% and wages continue to grow at 2.6%, there will soon be a serious problem, particularly for households that are struggling with increasing levels of household debt. The Bank of England is concerned about the increase in household debt, which is at its highest since 2008. This is a real problem for families, especially when they will see their real wages eroded.

Is the hon. Lady proposing higher Government spending, higher inflation and higher interest rates?

I was literally about to come to that. There are three ways for the Government to increase spending on public services: higher taxes, higher borrowing or higher growth. Those are not my words but those of the Chancellor, yet whenever an Opposition hon. Member suggests increasing public spending or simply not reducing it, Conservative Members say, “Oh, you will have to put up taxes.” As the Chancellor said, there are three ways to increase public spending.

Some of the things that Conservative Members said are a concern. My hon. Friend the Member for Glasgow East (David Linden) said that, according to the Resolution Foundation, 2011-21 will be the worst decade for pay growth for 210 years. That is quite some statistic.

It is interesting that the Government talk about how wonderfully they are doing for young people. The Institute for Fiscal Studies said that those born in the 1980s have by their early 30s accumulated half as much wealth as those who were born in the 1970s. The right hon. Member for Forest of Dean mentioned the IFS as a respected think-tank, and it won an award last night. If we are talking about mortgaging our future and concerns for the future, the lack of wealth accumulation compared with previous generations is a real problem, including for millennials. The way the Government are dealing with it is not working.

Will the hon. Lady give way?

Not just now; I am conscious of time.

The Government are increasing spending on infrastructure. A recent report from the Institute for Government said that

“weak processes are leading to the wrong projects and contested decisions, wasting both government time and taxpayer money.”

We agree that infrastructure spending is a good thing, but we believe that the processes in place and the Government’s choices are poor and could be much better directed to infrastructure projects that will increase economic growth and create, as the Chancellor said, better spending on public services by growing the economy rather than simply cutting things or increasing taxes.

It is a pleasure to serve under your stewardship today, Ms Ryan. I welcome the Financial Secretary to the Treasury to his position. I have no doubt we will have many of these debates in future. I thank the right hon. Member for Forest of Dean (Mr Harper) for tabling this debate on this important issue and on the need for Governments to balance the books. I also thank hon. Members for inviting me to the 1922 Committee. It is a pleasure. That was a joke—give it a bit of thought and try to keep up.

It is worth looking at the Conservative Government, in which the right hon. Member for Forest of Dean was a Minister for six years when all those decisions were made. Since coming to office, the Conservative Government have consistently failed to balance the books and to abolish the deficit, despite continually pledging to do so.

Will the hon. Gentleman give way?

May I get further into my speech? I will then be happy to give way.

First, it was promised that the deficit would be abolished by 2015. Then it was pushed back to 2020. We have now been told by the Chancellor that it is likely that it will not be abolished until 2025. The phrase used in the Conservative manifesto—hon. Members will appreciate that I read it avidly—was

“by the middle of the next decade”.

A full 10 years after the former Chancellor originally pledged to do it, and a full 15 years since the Conservatives started making the promise, the books still will not be balanced.

Does the hon. Gentleman think that our task of reducing the deficit would have been easier or more difficult if we had acceded to the Labour party’s continual requests for more spending and its opposition to every single reduction in spending that we put through?

The hon. Gentleman will appreciate that I am not going to get into hypotheticals or “what ifs” in this debate. We are looking to the future. That was promised. [Interruption.] I am sorry; I did not hear what was said. That was promised, but the Conservatives failed to deliver. I do not think that there is a case in modern political history of a British Government so regularly failing to meet their own economic targets.

Will the hon. Gentleman give way?

In a moment, if I may.

A Government can balance the books in many ways, and very many difficult decisions have had to be taken during the past seven years. No one doubts that. However, this Government chose the path of austerity over the long-term prosperity of everyone in the country. Some hon. Members have said that that was not a choice, but it was. The Government chose to cap public sector wages and to cut local council budgets by 40% and in certain cases by as much as 60%, with more on the way.

The reality is that that pay cap has now been institutionalised. It has been there for virtually a decade and it will continue. The Government have also chosen to underfund the NHS and cut £4.6 billion from social care, and they now threaten huge cuts for schools. However, despite those huge and deeply unfair budget cuts to public services, the Government have been able to find £70 billion of tax cuts for those who need them least of all.

Throughout the election campaign, which I might add is a happy memory, we were told that there was no magic money tree that could be used to solve the nation’s financial problems. If anything was magic about it, it was that it turned into a cherry tree, and the Prime Minister proceeded to pick the cherries and hand at least £1 billion-worth to the Democratic Unionist party to keep her in No. 10.

Under the previous Labour Government, low-paid workers were required to pay tax on earnings above about £6,500. The position now is that they do not pay it on earnings up to about £11,500. Is it not a positive thing to take low-paid people out of tax? Does the hon. Gentleman not welcome that?

Yes, I welcome anything that helps the low-paid, but that is not the only element in someone’s life chances or in people’s prosperity. The reality is that there was a mendacity in the deal with the DUP that will take a long time to be wiped clean.

Similarly, the Chancellor, in the spring Budget, was able to find a temporary £2 billion to backfill the cuts to social care and then further money to do a U-turn on raising national insurance contributions for the self-employed. There was a bit of cherry-picking there as well. It is clear that the Tories can find money when it is needed to oil the palms of certain people in order to assist the Prime Minister in retaining the tenancy of No. 10, and it is all dressed up as being in the national interest. That is not real and it is not acceptable.

When it comes to the long-term health of our economy and a wage rise for dedicated nurses and teachers, there is no money. They will have to continue with the pay they have, year in, year out. The truth is that austerity is not a necessity, but has been used by the Government to fulfil the ideological aim of shrinking the state beyond comprehension and privatising public services. That is a choice that the Government made. They should simply acknowledge that.

There are countless examples of countries taking a different approach. One hon. Member referred to Greece, and another referred to Portugal. The Government of Portugal, our oldest ally, have reduced the country’s deficit faster than us, but simultaneously they have restored state pensions, wages and working hours to pre-bail-out levels, and they managed that without crippling austerity. When we use examples, let us have a spread of international examples.

The well-off have done much better in austerity Britain. Meanwhile, those in the public sector have not seen their wages increase. The richest 100 families in the UK have seen their wealth increase by £55.5 billion. The Public Accounts Committee has reported that, while income tax for all taxpayers has risen by 9% under this Government, income tax receipts from high-net-worth individuals have fallen by 20% since 2009-10. That is typical of this Government’s approach: those who had nothing to do with the global financial crisis—the bulk of low and middle-income households—are made to pay the price of austerity through slashed services, increased taxes and falling wages, while the richest in society and big corporations get greater tax benefits. The old chestnut that we are all in this together is still trotted out.

I made this point in my speech, to which I refer the hon. Gentleman. Does he not agree that the richest 1% in our country are set to provide 27% of all income tax revenue in 2016-17, and that that is a higher proportion than it was under the Labour Government?

The hon. Lady made that point before, and I will repeat the point that I have just made. The claim is that we are all in this together, but Newcastle University has showed that, while my constituents saw a £195 per head reduction in spending by my local authority between 2010 and 2015, the constituency of the right hon. Member for Forest of Dean had cuts of only half that amount. If we are all in it together, is that fair or reasonable? It is not reasonable. Of course we need to balance the books, but doing it fairly rather than by cherry-picking is crucial. The Institute for Fiscal Studies has reported that for the Government to reach their target, they will have to find an additional £15 billion-worth of spending cuts or tax rises.

There is another question that we must ask ourselves. If this issue is so important, why are we waiting for the Finance Bill? We have waited and waited for the Finance Bill. I hope we get it this side of Christmas—we might get it next Pancake Thursday. I hope we get it on the Floor of the House so that we can debate it.

We can either carry on with the redundant approach of industrial-size spending cuts for most people and tax cuts for the rich and corporations, leading to an economy in the doldrums and falling household incomes, or we can start investing in our country, ensure that everyone pays their fair share, and use a growing economy to help to balance the public finances. We need a real long-term economic plan, without magic cherry trees, without bungs and smoke and mirrors, and without a Prime Minister who barely has the support of her Cabinet, let alone her party, and certainly not the country. We need a long-term economic plan for the many, not the few, and given the state of the Tory party under the Prime Minister, I do not think that that is far away.

It is a pleasure to speak under your chairmanship, Ms Ryan. I thank my right hon. Friend the Member for Forest of Dean (Mr Harper) for securing this extremely important debate and for the impassioned and meticulous way—we have grown used to that in his case—in which he dealt with some of the most important issues that our nation faces.

Many hon. Members have this morning gone back to 2010, as is right and proper, and set the debate in that context. Let us remind ourselves that in 2010 the deficit was 9.9% of GDP. To put that in context, the last time the Labour party put us into very deep and troublesome economic waters was in 1976, when the figure was somewhat lower but still led to the then Chancellor, Denis Healey, having to go cap in hand to the International Monetary Fund because this country was bust. That is the perilous background.

Over the past seven years we have made extremely good progress. We have reduced the deficit by three quarters and, according to OBR forecasts, are probably about two years ahead in terms of the interim targets that we have set and that have been discussed in this debate. One of the most spiriting aspects of the debate on the Government side of the Chamber has been the focus that was rightly placed on our huge economic achievements. Let us not forget that employment is at a record high, there are more women in employment now than at any other time in our history, unemployment is at its lowest level since the mid-1970s and, as many Members have rightly pointed out, we have sustained levels of economic growth that other members of the G7 would be proud of and wish to achieve.

However, as many Members have said, we cannot duck the fact that our level of indebtedness, which will peak at the end of this financial year at 89% of GDP, is too high. It is unsustainable. It is not just a burden on future generations, as has been pointed out, but means that we are vulnerable to external economic shocks. We need to get that level down.

Does my right hon. Friend agree that it is a sobering fact that in 2007 Greece had a debt to GDP ratio of 100%? The fact that ours is close to 90% means that we have to take this matter very seriously for our national security and that of future generations.

My hon. Friend is absolutely right. If we do not start to see the figure coming down, it can only bode ill for the future. That is why we are so determined to get it down.

Turning to the contributions that have been made, my right hon. Friend the Member for Forest of Dean made important points about our record on growth and jobs, about the threat of interest rate hikes if we fail to get on top of our debt and about keeping taxes low, particularly for our businesses. Many Members have made the point that as we have reduced corporation taxes the actual tax yield has increased, which rather suggests that the Opposition’s policy of raising them would be counterproductive in every sense. He made very important points about public sector pay. Let us not forget that this is not just about controlling public sector pay and spending, but about preserving jobs. The OBR reckons that by sticking to our plans we are protecting about 200,000 jobs in the public sector. When we talk about the 10,000-plus more nurses and 10,000-plus more doctors in the NHS, one of the reasons we have them is that we have given ourselves the room to afford them.

If I may, I will turn now to the hon. Member for Islwyn (Chris Evans), who made an impassioned attempt to take on the powerful arguments from the Government side. He is somewhat outnumbered. He suggested that he was like Lieutenant Custer. Of course, at Custer’s last stand, which was in 1876 at the battle of the Little Bighorn, unfortunately Custer was annihilated: he lost five companies, two of his brothers, a nephew and a brother-in-law to boot. It is remarkable that the hon. Gentleman is still standing after the onslaught from the hordes on our side of the Chamber today.

The hon. Gentleman made one point about the tax gap. He bemoaned the fact that, at £36 billion, it is higher than we would like it to be. That is absolutely true, but what he did not mention is that it represents 6.5% of the tax that we raise and is at the lowest level for very many years. As another hon. Member pointed out, since 2010 we have had about 55 new tax avoidance measures that in total have raised no less than £140 billion, which is three times the size of the deficit we face.

My hon. Friend the Member for Witney (Robert Courts) delivered the essential truth that borrowing must be repaid and the intergenerational unfairness of failing to do so. He made important points about the cost of servicing our debt and that if we lose the confidence of financial markets, those costs will rocket, to our detriment. The hon. Member for Glasgow East (David Linden) referred to Brexit as an ideological obsession, but I say no, actually: it is respecting the democratic will of the people. Although I, probably like him, was on the other side of that argument.

My hon. Friend the Member for Redditch (Rachel Maclean) made some very important points. The Opposition always say that we are looking after the wealthiest in society, but the truth is a long way from that. Some 27% of tax is paid by the wealthiest 1% in this country. A statistic that could also have been used is that the wealthiest 3,000 people in our country pay as much tax as the poorest 9 million. We are doing a huge amount on the issue of income equality.

My hon. Friend the Member for Horsham (Jeremy Quin) made an impassioned speech in which he referred to the importance of keeping interest rates low by keeping on top of the debt. My hon. Friend the Member for South Suffolk (James Cartlidge) finished his contribution on the Queen’s Speech debate today, and I am glad that he did because he made some important points, particularly on productivity, and quite rightly referred to our £23 billion productivity investment fund.

My hon. Friend the Member for Chichester (Gillian Keegan) gave a powerful speech and referred, I think, to the shadow Secretary of State for Education’s performance on “The Andrew Marr Show” on Sunday, when the hon. Member for Ashton-under-Lyne (Angela Rayner) referred to Labour having a large abacus. I have to say that my jaw hit the Stride sofa when I heard her say that it would cost about £100 billion to wipe out student debt and that this was something they were looking at.

The other point that the shadow Education Secretary made was putting her leader straight when she admitted that more working-class children were able to go to university with tuition fees and that it is simply not correct to keep asserting what he says, which is that fewer had done so. The fact that she put her leader right was spot on.

As ever, my right hon. Friend is entirely correct.

My hon. Friend the Member for Dover (Charlie Elphicke) made important points about retaining the confidence of financial markets, and my hon. Friend the Member for South West Bedfordshire (Andrew Selous) talked about the importance of productivity, technical education, infrastructure, housing and all those elements, which matter.

The hon. Member for Aberdeen North (Kirsty Blackman) did at least welcome the personal allowance increases that we have implemented. They are now at £11,500 compared with about £6,500 in 2010, and will increase to £12,500 over the coming period. She made various comments about pressures on pay and wage growth, but one fact that I will share with her is that those in full-time work on the minimum wage have actually seen pay boosted by £1,400 a year going back to 2010. That is an achievement that this Government should be rightly proud of.

I very much welcome the hon. Member for Bootle (Peter Dowd) to his place and look forward to a constructive engagement over the weeks, months and years of this Government. He said that he has read the Conservative party manifesto. I urge him to read it again and again and to learn from it. I am afraid that even though he has read it, he has failed to explain how to square more spending and spending, taxing and taxing and borrowing and borrowing with future sustainable economic success.

May I finish with one overall observation? The Opposition are very keen at every turn to say that our commitment to what they call “austerity” and what I call “living within our means” is some form of harsh, uncaring cruelty. Surely the cruellest cut of all is when a politician struts the stage telling the audience that which they most dearly wish to hear, but knowing in his heart that he has no way of delivering it—knowing in his heart that what he suggests will lead to financial and economic ruin. When we look at that situation, what question do we have to ask? We have to ask: who will be most hurt if we go back to the days of 1976? The answer is the most vulnerable—the poorest—because they are the least nimble and the least well-resourced to get out of the way of the damage. They are the people who lose their jobs and cannot cope. They are the people who see interest rates on their mortgages go through the roof, and struggle to pay as a consequence. As many Members have also said, the others who suffer are the young and the as yet not born—those who end up being saddled with the debt of the profligacy of our generation and have to pay it down themselves.

I thank my right hon. Friend the Member for Forest of Dean for securing this debate. We must stay the course. We must make the hard choices. We must make it the first priority of this Government to have a responsible stewardship of our public finances.

I am particularly grateful to the Financial Secretary to the Treasury for closing his speech so excellently, because it leaves us with this one thought: balancing the public finances and having sound public finances is not an academic exercise; it is about enabling growth and jobs and allowing us to protect the most vulnerable in society, allowing the investment in public services, as my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) set out, and making sure that we can deliver on those important promises. Those who do not want to live within their means—the hon. Member for Bootle (Peter Dowd) spent a lot of money in his speech but did not set out how he could save it—would disappoint people, let them down and fail them. That is not a mistake that we are going to make.

Motion lapsed (Standing Order No. 10(6)).