PARLIAMENTARY DEBATES - United Kingdom Parliament

659 Debate on the Address
15 MAY 2013
Debate on the Address
660
[Ed Balls]
though the deficit was not coming down and even
though living standards were under pressure, because
otherwise they would lose the triple A credit rating.
Now, they have lost the triple A rating, but they still
maintain that they have to stick to the plan. That is
completely illogical. The credit rating agency said in
terms that it had downgraded us because there was no
growth in the economy, and that that was choking off
deficit reduction. Sticking with a failing plan that is not
working and that has resulted in the deficit reduction
being stalled is not the way to keep our credit rating—if
that is the Government’s objective. The way to keep it is
to get the economy moving, get people investing and get
people back into long-term sustainable jobs. Until we
do that, the Chancellor is going to continue to fail.
Andrea Leadsom rose—
Ed Balls: If the hon. Lady would like to have another
go, I am happy to give way to her.
Andrea Leadsom: I am grateful to the right hon.
Gentleman for letting me have another go. I put it to
him that he really does not understand the point about
the credit rating agency in this context. The whole point
about confidence in the British economy is that people
need confidence in Britain’s ability to get out of the
economic mess that his Government left us in. This is
not about the absolute level; it is about market confidence.
He must surely understand that keeping a very good
credit rating is essential in order to have an affordable
cost of borrowing.
Ed Balls: I do not want to prolong this argument, but
I must explain to the hon. Lady the term structure of
interest rates. The 10-year bond yields are the accumulation
of market expectations of three-month interest rates
added up every three months over 10 years. Why are our
long-term interest rates so low? It is because people
think that short-term rates are going to stay low because
the economy is flat on its back. People would have to be
economically illiterate to think that our long-term interest
rates were driven by market confidence at a time when
we are being downgraded by the agencies. Our long-term
interest rates are low because our economy is not growing.
Jacob Rees-Mogg (North East Somerset) (Con) rose—
Ed Balls: I was hoping to debate the Europe issue
with the hon. Gentleman in a moment, but I am happy
to give way to him on this one as well.
Jacob Rees-Mogg: I look forward to debating many
issues with the right hon. Gentleman. The markets
show confidence in this Government’s policy by keeping
interest rates low. This is not purely to do with an
expectation of where short-term rates will be; it is about
confidence in the creditworthiness of the British
Government under this Chancellor.
Ed Balls: I have to say that that is a deluded view of
the way in which credit ratings work. Let us not forget
that in 2007 these same credit rating agencies were
saying, “Stick with Lehman Brothers”and giving America
a triple A rating despite all the sub-prime lending. That
is the reality. The fact is that the credit rating agencies
are downgrading Britain because our economy is not
growing. That is the fundamental problem.
I will give the hon. Gentleman a bit of ground,
however. It is true that the Labour Government left a
longer-term interest rate structure than other economies.
We had far less foreign currency borrowing and more
index-linked borrowing than other countries. That helped,
but the fundamental thing was that we did not join the
single currency. In Spain, Italy and elsewhere, we see a
currency risk premium, which relates to the central
bank’s ability and willingness to stand behind sovereign
debt. That is not an issue here. Our interest rates are
low, and they have fallen because our economy is not
growing. The market is therefore reflecting expectations
of continuing stagnation. I am afraid that that is the
reality—aside from the political rhetoric of the Chancellor.
Jacob Rees-Mogg: In my previous intervention, I was
careful to talk about the markets, not the credit rating
agencies. It is the markets that count, because they
reflect people investing their money. I agree with the
right hon. Gentleman that the credit rating agencies got
the whole of the pre-crash period wrong, but it is the
markets we need to bank on.
Ed Balls: Unlike the Chancellor, the markets do not
pay a huge amount of respect to the credit rating
agencies. The hon. Gentleman agrees with me on that.
That is why, two or three years ago, it was so ridiculous
for the Chancellor to say, “Trust me. I’ll keep us as a
safe haven because I’ll keep the triple A credit rating.”
We told him, in 2011 and 2012, that the plan was not
working, that the economy was not growing and that
the deficit was not coming down, but when we told him
to change course, he said, “I can’t do that because the
credit rating agencies will downgrade us.” Well, they
downgraded us anyway, because the economy was not
growing.
Andrew Selous (South West Bedfordshire) (Con): The
shadow Chancellor believes in plain speaking, so I want
to give him a third—and perhaps final—opportunity to
tell us the amount of extra borrowing that his policies
would require. Just a number—plain and simple.
Ed Balls: I am not going to write our Budget for 2015
two years ahead. That would be the wrong thing to do.
Right now, if the Chancellor had done what I recommended
a year ago, borrowing would be coming down. At the
moment, however, it is absolutely flat.
What have we learnt in the last seven days? What have
we learnt from today’s Tory amendment about the
priority of the Conservative party? What are Conservative
Members demanding in their amendment? What are
they rebelling on? Accelerated bank reform? Energy
market reform? Housing investment? Infrastructure
investment? Tough welfare reform through a compulsory
jobs guarantee? If they want all that, they can vote for
our amendment today. But no, according to the Tory
amendment, the No. 1 priority that is so vital that
Conservative Members are planning to vote against
their own Government’s Queen’s Speech involves enabling
legislation to allow Eurosceptic Conservative MPs to
try to take Britain out of the European Union.