National Debt (Hansard, 31 October 1996)

§ 3. Mr. Spellar
To ask the Chancellor of the Exchequer what is his latest estimate of the net national debt. [310]

§ The Chief Secretary to the Treasury (Mr. William Waldegrave)
The provisional estimate of net public sector debt at end-March 1996 is £323 billion—some 45 per cent. of gross domestic product.

§ Mr. Spellar
Can the Minister explain how, in spite of having receipts from North sea oil and privatisation, in the five years since the Prime Minister came to office—when the national debt was £155 billion—the Government have managed to double it?

§ Mr. Waldegrave
There is something rather preposterous about the Labour party complaining about the national debt. The average public sector borrowing requirement under the Conservative Government has been 2.; per cent. of GDP. Under the previous Labour Government, it was 6; per cent—even with the help of the International Monetary Fund. It is reasonable to say 771 that, had Labour stayed in power, the Government would have continued to borrow at the same level. That would have produced a national debt of about £650 billion, or 90 per cent. of GDP. That is not an unlikely figure, as a number of countries in Europe that have had the disbenefit of social democratic governments have such debts.

§ Mr. Redwood
Will the Chief Secretary confirm that Britain is one of only three countries beneath the reference level for the stock of debt necessary to enter the single currency? Will he further confirm that the 12 countries that have already borrowed too much and are outside the terms of the treaty will not be eligible to join, and that Britain will try to prevent them?

§ Mr. Waldegrave
My right hon. Friend is perfectly right, and Britain is in a strong position on the stock of debt. In addition, all the other major European countries have had large increases in total debt, and most of them have been run for at least part of the time by socialist governments. We have not, and that is a major achievement. The final decision on who is eligible for EMU among those countries that want to join will be for the Heads of Government in due course, but some countries will have some explaining to do.

§ Mr. Malcolm Bruce
Does the Minister acknowledge that, in some areas, it is the Government who have some explaining to do—in particular, on the current PSBR forecast and our inflation targets, both of which put us outside the qualification criteria? Will the Government ensure that they maintain their commitment to bringing down the PSBR forecast to meet the criteria? Will both he and his right hon. and learned Friend the Chancellor resist the rumours that the Government will announce at the start of the general election campaign that they will not proceed to enter monetary union, and consequently will not be disciplined by the need to meet the Maastricht criteria?

§ Mr. Waldegrave
My right hon. and learned Friend and I—and all our colleagues—are reducing the public debt for the good of the British economy, and we will continue to do that.

§ Sir Peter Tapsell
When those member states of the EU that wish to join a single currency come to submit their statistics to show whether they have satisfied the economic criteria of the Maastricht treaty, will those countries with unfunded public sector pension obligations have to attribute that unfunded commitment as part of their national debt? If not, how will it be treated?

§ Mr. Waldegrave
That is not one of the criteria set out in the Maastricht treaty. Britain has a strong position in the short, medium and long term compared to some other countries that do not have properly funded pensions. Those countries will find that they must either cut pension entitlements—as some are currently trying to do, causing trouble in the streets—or increase taxes. I am happy to say that there is no question of our paying any part of that cost.

§ Mr. Darling
On the question of putting up taxes, the Chief Secretary will be aware that the Chancellor's former adviser has suggested that value added tax ought to be 772 increased to reduce national debt and borrowing. Is it still the Chancellor's view that in principle the scope of VAT ought to be extended?

§ Mr. Waldegrave
I know that this is the Labour soundbite for this week. The hon. Gentleman read it out in a rather dreary way. We had it yesterday and my right hon. and learned Friend the Chancellor answered it. I advise the hon. Gentleman to read Hansard.