Public Sector Borrowing Requirement

HC Deb 27 June 1985 vol 81 c1070

14. Mr. Pike

asked the Chancellor of the Exchequer if he will make a statement about the funding of the public sector borrowing requirement.

Mr. Peter Rees

The Government's practice is to finance their borrowing requirement in a non-inflationary way.

Mr. Pike

Will the Government, in pursuance of their monetarist policies and their desire to contain the PSBR, make further cuts in public expenditure, or will they sell more public assets?

Mr. Rees

The Government's policy has always been to maintain firm control over the level of public spending and to maintain it at a broadly constant level in real terms.

Sir William Clark

Does my right hon. and learned Friend agree that under the last Labour Government the public sector borrowing requirement as a percentage of GDP increased to 9.2 per cent., while today it is 2 per cent.? Even at 2 per cent. of GDP it is costing the taxpayer £18 billion to service the national debt. Is that not high enough? Would it not be folly to increase the PSBR?

Mr. Rees

I entirely agree with my hon. Friend's conclusions. As a consequence of the profligate policies of the last Labour Government, the IMF had to intervene to restore us to solvency.

Mr. Wainwright

Does the right hon. and learned Gentleman not understand that the Government's policy of persistently overfunding and borrowing substantially more than public borrowing requires makes nonsense of their claim to the Opposition parties that more borrowing would lead to even higher interest rates?

Mr. Rees

I think that the hon. Gentleman misunderstands our position. Overfunding is not expansionary. Like previous Governments, we use a mixture of interest rates and funding policy to maintain monetary control.