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Comprehensive Spending Review

The shadow Secretary of State began his little oration by asking about bond yields on UK gilts. It is worth reminding him of a headline that was in The Sunday Times business supplement just before the election, which said that Britain was not to lose its triple A rating yet. The article went on to explain that the reason why yields remained low was because all the rating agencies assumed that no matter who won the election, the new Government would take drastic steps to cut the budget deficit. That was the assumption, and the agencies openly said that they did not expect any political party to spell out exactly what it was going to do before the election. That is why confidence was maintained. There was also the fact that it was quite clear that in the rest of western Europe, and across much of the western world, no Government were willing to take similar steps. Of course, much of western Europe was already locked into the euro. It is now obvious to all of us the problems that that caused—the idea of trying to lock so many different types of economies into one single interest rate when clearly, economies such as Ireland’s needed much higher rates. However, the rates were kept artificially low by the Germans. Of course, Opposition Members were huge enthusiasts. I believe that the shadow Secretary of State is a huge enthusiast for the euro. Had we made the calamitous mistake of joining the euro, we would be facing exactly the same situation as Ireland, possibly Portugal and even Spain may face shortly. That is the answer to the question that the former Secretary of State for Wales asked. That is the reason why bond yields continue to remain low, and will continue to do so because Britain will maintain its triple A-rated status. It is important that we do so, because across the rest of the world, many sovereign investment and pension funds will only—and indeed can only—invest in countries and organisations with a triple A-rated status. If we lose that status, even if we are downgraded in a small way, there will immediately be pressure on all sorts of organisations to sell UK bonds. The result would be higher interest rates, which would immediately feed into the national economy, meaning higher interest rates for everyone.