National Debt Repayment (Hansard, 4 May 1989)

§ The Secretary of State for Trade and Industry (Lord Young of Graffham)
My Lords, the Government have made a net public sector debt repayment (PSDR) of £17.8 billion over the past two years. As my right honourable friend the Chancellor of the Exchequer announced in his Budget speech, this will save over £1½ billion a year in debt interest costs.

§ Lord Orr-Ewing
My Lords, does the Minister agree that that substantial saving has been a major factor in permitting the Government to spend an extra 40 per cent. in real terms on the health service and between 20 per cent. and 25 per cent. extra, again in real terms, for every pupil in our schools?

§ Lord Young of Graffham
Yes, my Lords. I hope that my noble friend will not think that I am being too self-centered when I say that the annual saving is rather more than the entire budget of my department.

§ Lord Jenkins of Hillhead
My Lords, as this day of all days we are being asked to think back over a 10-year span, can the Minister tell the House what has been the net debt reduction, if any, over the past 10 years and what has been the consequent saving in interest to the taxpayer taking those 10 years as a whole?

§ Lord Young of Graffham
My Lords, over the whole of the 10-year period there has not been a net reduction. However, it may be of interest to learn that the net public sector debt was just over half of GDP in 1979; namely, 50.s6 per cent. In 1989 the estimate is that it will be precisely 32 per cent.

§ Lord Barnett
My Lords, does the noble Lord agree that there would be an even greater benefit to the taxpayers and the community as a whole if, instead of reducing the national debt, the resources had been used to improve the quality of life for everyone by spending the money on the environment, general infrastructure, and so on? Is that not the policy of the Chancellor? Is it not part of his policy not to reduce the national debt; or is that not a policy with which the Minister agrees?

§ Lord Young of Graffham
My Lords, it is only by good housekeeping that we are in a position to be able to reduce the public sector debt. Perhaps I may remind the noble Lord, Lord Barnett, that each year the Government are spending more money on precisely the objectives that he outlined. Only by running the economy in the way that the Government have succeeded in doing for the past decade have we been able to see not only the reduction in the public debt but the amazing turnaround in our economy.

§ Lord Boyd-Carpenter
My Lords, can the Minister say how far one has to go back before last year to find a year in which there has been a net repayment rather than an increase in the national debt?

§ Lord Young of Graffham
My Lords, we have to go back a very considerable period, I suspect, since these figures were first kept to find a repayment in the order of last year's figure.

Lord Bruce of Donington
My Lords, I note that the Minister has refrained specifically from answering the precise Question put on the Order Paper by his noble friend. Is he aware that the cost of servicing the national debt in 1978–79 was £15.8 billion whereas in 1987–88 it was £17.7 billion and in 1988–89 it was £17.1 billion—all valued at 1987–88 prices? Does he not agree that it would be well worth while to answer his noble friend precisely and say that in point of fact the increase in the debt charge in the years to which the noble Lord, Lord Orr-Ewing, has referred was between £186 million and £574 million, depending on which document is relied upon—either the Financial Statement accompanying the 1989–90 Budget report or the Government's expenditure plans, both of which are issued by the Government?

§ Lord Young of Graffham
My Lords, I am not sure that I followed the question put by the noble Lord, Lord Bruce of Donington. I shall only say that in all these matters the relevant figure is the percentage of GDP. It is the proportion of the total resources of the nation that goes to pay off our debt. That is coming down and will continue to come down.

Lord Bruce of Donington
My Lords, in response to the Minister on that specific point, may I point out that in 1978——

Noble Lords
Order!

Lord Bruce of Donington
My Lords, is the Minister aware that in 1978–79 the debt charge as a percentage of GDP was 9.9 per cent. and in 1988–89 it is 10.28 per cent?

Lord Young of Graffam
My Lords, no doubt the noble Lord can seek and find individual figures taken from different tables issued by the Government, which I do not deny. However, the only relevant figure here is the proportion of national resources which have to go back to pay the debts of past generations. This Government are lifting from the future the burden of the debts of the past.

§ Lord Tordoff
My Lords, does the Minister agree that the answer to the question put by his noble friend Lord Boyd-Carpenter is 1968–69?

Lord Young of Graffam
My Lords, it may very well be, but not to the same proportion, which was my answer.

§ Lord Hailsham of Saint Marylebone
My Lords, before we prolong indefinitely this statistical game of ping-pong, may we reflect that the noble Lord, Lord Bruce, cannot have it both ways? The total borrowing may have increased, but by how much more would it have been increased if we had done a quarter of the things that the Opposition Front Bench has asked us to do?

Lord Young of Graffam
My Lords, since my noble and learned friend has asked that question, perhaps I may say in reply that if the PSBR as a share of GDP had remained at the 1978–79 level, cumulative borrowing today would be £90 billion higher than the outturn and increased debt service would cost us £9 billion each year. That is the measure of the difference.

§ Lord Stoddart of Swindon
My Lords, is it not a fact that while public debt has been reduced, private debt has increased very considerably indeed with detriment to the economy and in particular the balance of payments? Does the Minister agree that it would be preferable for the Government to ensure that their debt was kept under proper control; indeed, that they should not pay off the national debt so quickly but rather encourage private saving, which would help the general economic situation and the balance of payments situation in particular?

§ Lord Young of Graffham
My Lords, it is all a matter of perspective. I suspect that if one were sitting opposite it would appear to be to the detriment of the economy; if one were sitting outside your Lordships' House and looking at the real world, it would not.

§ Lord Peston
My Lords, the Minister said that what really mattered was the decline in the public debt. Is he saying that future generations will welcome the decline in public investment and the quality of the environment in which they will live because this Government have cut such expenditure in order to cut the national debt?

Lord Young of Graffam
My Lords, the noble Lord is too good an economist not to know that the Government have increased expenditure in all those areas in real terms. If he steps outside he will see that the quality of life is rising and not falling. Whether one considers water pollution or any other measures, it is clear that the environment is being improved.

Viscount St. Davids
My Lords, will my noble friend confirm that during their period in office the Labour Party added £40 billion to our debts which, according to my calculations, mean that we have to pay out £4 billion a year simply to service those 258 debts? I think that my noble friend will agree that that is considerably more than twice his total budget.

§ Lord Young of Graffham
My Lords, it is nearly four times my total budget.

§ Lord Thorneycroft
My Lords, whatever else has happened in the past 10 years, is it not a rather cheerful fact that it has resulted in the Labour Party embarking upon a policy of trying to reverse almost every policy that they pursued before that period?

§ Lord Young of Graffham
My Lords, I think that that factor has not escaped the notice of those of us on this side of the House at least.