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The Budget

The hon. Gentleman says they were not regulated. Actually, the Conservative Opposition wanted lighter regulation of banks and the financial system at the time. The banks ratcheted up the risk of financial disaster behind a cloak of complexity. When the bubble burst, Governments had to take action to prevent a seizure in the world’s financial system from creating an economic catastrophe. That is the truth about the real source of today’s sorry state of affairs. It was not the Labour Government’s level of public investment but reckless risk-taking by the banks that provoked the crisis, and it was radical action by Labour and other Governments around the world that prevented complete collapse. What is the truth about Britain being on the brink of bankruptcy? If there were any substance in the ministerial myth that Labour maxed out on the country’s credit card—we have heard it from the Chief Secretary and indirectly from the Secretary of State this morning—the warning signs would have been flashing red all over the City. In fact, they have been signalling ““steady as she goes”” all through the last four years. Ever since the financial crisis erupted, as I have said, yields on British Government bonds have remained low. Throughout, City investors were keen to lend to the Labour Government at low rates, because they had confidence in the UK’s public finances—and with good reason. If Britain had really been a bankrupt borrower, no investor would have bought Government bonds on such low terms, but they did. That is the backdrop to the current Budget. What is the truth about debt? Investors had confidence because Britain’s national debt was low relative to national income, and it had been falling. Before the crisis, UK debt was lower than that of France, Germany, America or Japan. Labour had been paying down debt during our period in government—so much so, that UK debt was 6% of national income lower than when we took office in 1997, which is worth some £90 billion today. Lower Government debt meant that we saved the taxpayer some £3 billion in annual interest payments, so we did fix the roof when the sun was shining. That is the real story about debt and that is why this Budget is so badly wrong.