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Government Capital Expenditure

Of course, any responsible person has to worry about that risk, which, although probably not large, certainly exists. I am surprised that the hon. Gentleman is reinforcing the rather hysterical approach taken by the Conservatives, who think we are on the edge of a major currency collapse and all that will follow from it. Nevertheless, that risk has to be taken into account. To answer the hon. Gentleman's question and to put the British financial position into context, we started the recession with the Government in a position where public debt was about 40 per cent. of gross domestic product—we can argue about whether they were concealing one or two percentage points, but it was of that order of magnitude and it was less than the figure for the United States, Germany or France. I am always happy to concede that. The worry is that public debt is growing very rapidly and that within two to three years it may well have reached 60 per cent., by which time other developed countries will also have increased their public debt as a share of GDP. It is worth while putting that in the wider context and considering the extreme cases, such as those of Italy and Japan. As far as I am aware, Japan has not had a currency crisis, yet it has public debt of well over 100 per cent. of GDP. It finances that comfortably by patriotic saving on the part of the Japanese and their lending their money to the Government. Its high levels of debt are way beyond what we are currently contemplating and do not, by any means, necessarily create the kind of problems that some hon. Members are worrying about, but clearly we must be cautious. That is why any public investment programme has to be carried out in a disciplined way. The problem relating to public debt arises not from excessive public investment, but from the fact that over the next two to three years the expected deficit will be very large compared with other western countries—8 to 10 per cent. of GDP is the relevant figure and it is a major worry. This situation is partly to do with the cycle and partly to do with a structural deficit, and it has emerged partly because of the collapse in the housing market and the revenue associated with it, and partly because of the collapse in the City and the revenue associated with that. The Government, the Conservatives and the Lib Dems—all of us—will have to face the fact that over the long term there is a structural deficit problem that will have to be dealt with, come what may. It is fair to say that none of us have yet come up with a convincing explanation of how that structural deficit will have to be addressed, but that is the nature of the problem—it is not, by any means, about excessive public investment.