HC Deb 12 December 1974 vol 883 cc757-9
26. Mr. Gow

asked the Chancellor of the Exchequer from which sources, and at what rates of interest, he is proposing to borrow the sum of £6,300 million, being the amount of the public sector borrowing requirement to which he referred in his Budget Statement.

Mr. Dell

A large part of the requirement for the current financial year has already materialised and has been financed by borrowing from the general public and from overseas residents. My right hon. Friend sees no reason why the requirement should not continue to be financed to a large extent from those sources. The borrowing has been, and will be, at a range of interest rates reflecting the great variety of market instruments.

Mr. Gow

Will the Paymaster-General accept that the judgment which the Chancellor gave in his March Budget about the borrowing requirement, which was wise then, from the point of view of the Government, is not right today? Does he not agree that the borrowing requirement announced in the Chancellor's Statement last month is an indication that the Government are still arranging for the British people to live far beyond their means?

Mr. Dell

The Government are not arranging for the British people to live far beyond their means. It is part of the object of the social contract policy to make sure that standards of living do not rise over the next year. In any case, as the hon. Gentleman will be aware, when we are running a balance of payments deficit of the order that it is currently, either there is a very large public sector borrowing requirement or the company sector is in even greater deficit than is now the case. That would have a serious effect on employment and investment.

Mr. Sedgemore

Will my right hon. Friend give an assurance that the Treasury will co-operate to the full in the inquiry which the Public Expenditure Committee intends to make into the financing of this borrowing?

Mr. Dell

I have yet to hear about this inquiry. Perhaps I should study what it is before I commit myself.

Mr. Biffen

Does not the shaky state of sterling suggest that many people believe that overseas residents will not be such willing lenders as, perhaps, the Government have foreseen? In these circumstances, rather than that we should be bundled into yet another crisis by a flight from sterling should not the Government be announcing a stabilisation programme of increased domestic taxation?

Mr. Dell

I have already made a statement in answer to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) about recent events in the exchange market. I have nothing further to add to that.

Mr. Tomlinson

Does my right hon. Friend agree that when we are increasing public expenditure it is preferable to increase taxation to finance such expenditure rather than to increase the public borrowing requirement, as happened in the Budget this year?

Mr. Dell

I note my hon. Friend's view. He will appreciate that so to do has other effects, often undesirable. One such effect could be on the rate of inflation.

Mr. Aitken

How does the right hon. Gentleman reconcile the answer he has just given to my hon. Friend the Member for Eastbourne (Mr. Gow) with his statement a few moments ago that it was Government policy to reduce overseas borrowing?

Mr. Dell

I do not think there is any difficulty. I said that while we had a balance of payments deficit of this order we could not reduce overseas borrowing. We wish to reduce that balance of payments deficit as rapidly as we can and in that way reduce the amount of our overseas borrowing.