Downing Street Says » Economy-Miscellaneous

Asked to confirm that there were no plans to change the overall spending totals that we had in place up until 2010, the PMS said that Yvette Cooper had been on the radio this morning, making the Government s position clear; we wanted to look at ways of re-profiling spending over the next few years.

Asked if there was any scope for the Government to put extra money into some of the Olympic projects that appeared to be having difficulties with raising money in the private sector, the PMS said that this was a matter for the Treasury and that they had set our their general position. As the Chancellor and the Chief Secretary had been saying in the past days, one area where we had already taken action was in relation to housing, where some expenditure had been brought forward and the Treasury had made clear that this was an approach they would consider looking at in relation to other areas in public sector spending. In terms of specifics, it was best to speak to the Treasury.

Asked how worried the Prime Minister was about the rocketing rise in borrowing, the PMS said that at a time when every country was being affected by the global financial crisis, Britain could not be immune and obviously that would have an impact on the British public finances. However, it was worth bearing in mind that we started from a position where our public finances were in much better shape than most other developed countries. The latest figures from the International Monetary Fund (IMF) published a few weeks ago, showed that in 2008 public sector net debt in the UK was 37.6%, compared with 55.5% in France, 56.1% in Germany, 46.3% in the US, 56.4% in the Euro area, and 94.3% in Japan. Different countries would of course borrow different amounts in different years, depending on their particular circumstances, but the best overall indicator of the state of the public finances was net debt as a proportion of national income. On that measure we were much better placed than most other developed countries in order to allow borrowing to rise and to support the economy, which was the right thing to do at this time.

Put that the previous percentage for the UK had been 29%, the PMS said that he didn t think that that was correct.

Put that the UK s net public deficit was the highest it had ever been, the PMS said that rather than looking solely at borrowing, which was the annual amount that told you what was happening in one particular year, we should be looking at net debt, which was a much better indicator of the sustainability of public finances and a much better indicator of how well prepared we were in order to deal with the circumstances like those we faced at the moment. The IMF figures showed quite clearly that the UK, with the exception of Canada, was the lowest in the G7 in terms of net debt as a proportion of national income.

Asked if the Prime Minister would be happy to go above 40% of net debt, the PMS said that any statements that changed the Government s position on fiscal policy were a matter for the Treasury, the Pre Budget Report and the Budget.

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» Monday, October 20, 2008

Economy-Miscellaneous

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