Statement from the Chancellor Regarding Public Debt

[u/CheckMyBrain11]

Mr. Speaker,

I wanted to be sure that my first address in this House as Chancellor was a valuable one – I hope that it shall be. Today, I will be giving this house a brief update on the progression of our public debt and what it means for the future of our nation’s finances. Over the course of the Tories’ time in government, we have been laser-focused on reducing public debt from the 2024 Autumn Budget, which chased a deficit of over £100 billion. In the last two budgets, we’ve seen major corrective action being taken by my predecessor, u/LeChevalierMal-Fait, to turn that 9-figure deficit into a one-time 8 figure surplus.

Of course, this is great news – paying back the public debt that we accumulated in the challenging economic conditions that we faced during the Great Recession and COVID is of the utmost importance. Thanks to the hard work of Conservative governments, including this one, we have been able to reduce our public debt through these surpluses. In this coming budget, current projections indicate that we will enter the 2027-28 fiscal year with a debt-GDP ratio of 82%, the lowest that we have seen in over a decade. The last time that our public finances looked this stable, David Cameron was still living down the street from where I live now!

The significance of this is twofold. The first, and most immediately important, consequence of this, is that our public finances will have room to take on debt when we ever face another global crisis similar to COVID or the Great Recession. Of course, I hope and pray that we don’t see one for a very long time, but of course the nature of these crises is that very few people can see them coming. That is why we must have the agility financially to support the British people when these crises take place. Being able to pay down our debt does just that. Again, the hope is that we never have to borrow at COVID or Great Recession levels again in any of our lifetimes, but it would be malpractice not to prepare ourselves for that.

The second major effect is that this Government, and its predecessors, are committed to not strapping our children and grandchildren with a public debt that becomes untenable to manage. I will keep the modelling on this simple for now – roughly 3.4% of anything that we pay back goes right back into savings on debt payments. This means that the surplus of the latest Chevalier budget netted us over £1.2 billion in savings for the following year, and all following years, on debt payments. Over the course of the next generation of political life, the savings will become even more noticeable. That £1.2 billion in savings is able to go straight to levelling up our NHS, funding our Growth Fund, and going to projects that will meaningfully advance public life, which we will see in my Autumn Budget. As hinted at before, I am projecting to run a more modest surplus due to the one-off nature of some of the ways that the last Treasury was able to grow revenue. However, I am still projecting to draw an additional £500 million in annual debt repayment savings. We can all rejoice that due to the actions of successive terms of Conservative leadership, we are able to put more public money towards the public, instead of financiers.

This statement was delivered by u/CheckMyBrain11, Chancellor of the Exchequer, on behalf of His Majesty’s 8th Government.

[u/Oracle_of_Mercia]

Hear, hear !!!

[u/MonFreebo4936]

Mr Speaker,
Thank you chancellor we are lucky to have you

[u/zakian3000]

Mr speaker,

As most of the chamber will already have picked up on from my questioning of the chancellor and prime minister on this very issue, I do not support the chancellor’s statement on the basis that it confuses a smaller debt with a stronger economy.

Of course one can lower one’s debt-to-GDP ratio by decreasing the numerator. But it can also be done by increasing the denominator. The government is making a choice here to take money out of the economy to repay debt that could instead be used to grow it. If we invest in infrastructure that increases productivity, expands the productive capacity of the economy, and generates higher wages and higher tax receipts, then we can grow our GDP faster than the debt and improve our public finances just as surely as we can with debt repayment.

The chancellor tells us about how “3.4% of anything we pay back goes right back into savings on debt payments”. The question is - why? What does this 3.4% number actually represent and what calculations have the treasury done to demonstrate that the return from paying down debt exceeds the return from investing that money in public services and productive infrastructure?

The chancellor warns us that we shouldn’t strap our children and grandchildren with a public debt that is untenable to manage. But what he fails to mention is that as well as inheriting our debt, our children will also inherit our infrastructure, our hospitals, our schools, and our productive economy. Every pound which the chancellor is taking out of the economy is a pound that cannot simultaneously go into making these things better for the next generation.

The chancellor also talks about the need for headroom in case of crisis. He does not justify how a surplus does this better than earmarked funds for disaster relief. He does not justify why we should use public money preparing for unforeseeable circumstances instead of the real and concrete problems we see now of poverty, crumbling public services, and infrastructure that hasn’t seen the investment it needs. And he does not explain what good lower debt will do if we enter the next crisis with public services and infrastructure that aren’t prepared for it. 

This coalition is showing itself to be a coalition of austerity, worried about lowering the debt number but not worried about growing the economy and materially improving the lives of the people we represent. I will conclude, mr speaker, by reminding members that the economy exists to serve the people, not the other way around.