PARLIAMENTARY DEBATE
Servicing Government Debt - 21 January 2025 (Commons/Commons Chamber)
Debate Detail
Contributions from Mark Garnier, are highlighted with a yellow border.
Mr Richard Holden
Basildon and Billericay
Dr Luke Evans
Hinckley and Bosworth
Sir Desmond Swayne
New Forest West
Sir Ashley Fox
Bridgwater
11:36:38
Rachel Reeves
The Chancellor of the Exchequer
When we entered office, debt was at highs not seen since the 1960s. My commitment to the fiscal rules is non-negotiable, and we will drive debt down to a sustainable level. There have been movements in global financial markets, and the UK is not immune. The Office for Budget Responsibility will produce a forecast in the usual way, and I will respond with a statement to Parliament on 26 March. I will not be giving a running commentary on that forecast.
11:36:55
Mr Holden
Labour came to office promising to kick-start growth. Instead, it has kicked growth into the gutter. Over the last few months we have seen some of the slowest growth in the G7—in the actual figures rather than the projections. Where will the money for the public sector and public services come from with zero economic growth?
11:37:23
Rachel Reeves
Yesterday’s PwC report shows that the UK is the second most attractive place in the world to invest for global CEOs—it is the first time in 28 years that we have been in that position in the league table. And the International Monetary Fund forecast on Friday that the UK will be the fastest-growing major economy in Europe next year.
11:38:04
Dr Evans
Last time I raised the markets’ concerns about debt with the Chancellor, she told me to “get real.” What is real is that the cost of debt interest is over £10 billion. What is real are the three choices she has: to increase taxes on people and businesses in Earl Shilton, Burbage and across the country; to cut services for people in Hinckley, Donisthorpe and across the country; or to borrow on the country’s credit card. Will she now be real with the public and tell them which of the three it is going to be?
11:38:28
Rachel Reeves
We inherited a high amount of debt from the previous Government, and we have to pay interest costs on that debt. The forecast I set out in the Budget in October showed that debt falling to a sustainable level. As I said, the OBR forecast will be published on 26 March, and I will make a statement at that time.
11:38:46
Sir Desmond Swayne
The Chancellor’s increased demand for Government borrowing drives up its price and crowds out investment by productive private enterprises, doesn’t it? [Hon. Members: “No.”]
Rachel Reeves
Let me have a go. There have undoubtedly been moves in global financial markets this year, and the UK is not immune to those movements. The OBR has not yet started its forecast. It will update that in due course, and I will make a statement on 26 March.
11:39:39
Sir Ashley Fox
Since coming to office, the Chancellor has increased taxes by £40 billion and borrowing by £30 billion and her Employment Rights Bill has increased the costs of employers by a further £5 billion. Does she accept that her decisions have led to a loss of confidence in the British economy and an increase in our borrowing costs?
11:39:45
Rachel Reeves
I do not think the borrowing costs in every major country in the world can be explained by the decisions made by this Government. As I said to the hon. Member for Hinckley and Bosworth (Dr Evans) last week, the hon. Gentleman has to get real. There have been global movements in financial markets that have affected the United Kingdom, but if he looks at the PWC report from yesterday, the most recent report on market confidence, global CEOs see the UK as the second best place in the world to invest, after the US.
11:40:42
Peter Swallow
Bracknell
The International Monetary Fund forecasts that the UK is set to be the fastest-growing major economy in Europe, which one would have thought Conservative Members would welcome. I know my right hon. Friend the Chancellor will not be satisfied until residents in Bracknell, and across the country, feel the benefits of economic improvement in their pay packets and their day-to-day lives, so will she set out what more she can do to ensure we tackle the cost of living and fix the economic mess we have inherited from the Conservatives?
Rachel Reeves
After 14 years of stagnant growth and the decline in living standards during the last Parliament, my hon. Friend is absolutely right that we must turn around that performance. That is what this Government are determined to do. The planning and infrastructure Bill will come to Parliament shortly, followed by the pensions Bill, which will unlock long-term pension capital and make it easier for businesses to get things done in this country.
11:41:07
Mr Speaker
I call the shadow Minister.
11:41:45
Mark Garnier
Wyre Forest
The Chancellor makes reference to the PWC report, but half of the survey in that report was done before the Budget. The Chancellor and I spent a very happy three years sitting next to each other at the Treasury Committee, and she was incredibly good at demanding straight answers from the witnesses that came in front of the Committee. She has already been asked questions about the fact that the fiscal headroom is only £10 billion and the increase in the cost of borrowing is now going to go through the roof so, at some point, she will have to raise taxes, cut investment or increase debt. Which will it be?
Rachel Reeves
The headroom in our Budget was larger than the headroom that we inherited from the previous Government, so we have put aside more money for changes in economic prospects. The OBR has not yet done its forecast, which will take a whole variety of factors into account, and we will make decisions based on that. I have been really clear that our fiscal rules are non-negotiable because, unlike the Conservatives, we are determined to meet the fiscal rules, not break them time and again.
11:42:23
Mr Speaker
I call the spokesperson for the Liberal Democrat party.
11:42:45
Daisy Cooper
St Albans
The rising cost of borrowing will bring more misery to mortgage holders, with reports suggesting that some mortgage holders could pay an extra £500 a year. Given that potential global trade tensions could further affect the UK’s financial stability, what assurances will the Government provide that UK lenders remain in a strong position to support households and small businesses?
Rachel Reeves
Labour and Liberal Democrat Members are mindful of the last Government’s impact on mortgage borrowing costs for many of our constituents, and we are determined to tackle the cost of living crisis. As the hon. Member knows, I have written to financial regulators, including the Financial Conduct Authority, about regulating for growth, not just for risk, so that we can help more people get on the housing ladder and help grow our economy.
Contains Parliamentary information licensed under the Open Parliament Licence v3.0.