David Gauke outlines the Government’s commitment to fiscal restraint.
What the British people want is a stable and successful economy—one that means jobs, opportunity and a high quality of life. That is what this Government are delivering, and what we will continue to deliver, because, unlike the Opposition parties, we are not ignoring economic realities, but facing up to them. We are not paying lip service to our responsibilities, but shouldering them, and we are not pretending that every problem can be solved by spending more, borrowing more or taxing more. We are restoring our public finances to health and investing sensibly and in a well-targeted way in the future success of this country.
That is how we have turned our economy around. Not only are we forecast to achieve faster growth than any other G7 economy last year, with near record employment and unemployment at its lowest rate in more than a decade, but, at the same time, we have made great progress on getting to grips with the public purse, cutting our deficit from its post-war high of 10.1% in 2010 to 4% last year, and borrowing £1 in every £10 we have spent, not the £1 in every £4 that we saw under the last Labour Government. As my right hon. Friend the Chancellor has pointed out, the recent fiscal sustainability report from the OBR reminds us of the action that we must continue to take to address our deficit.
The fiscal rules that we are looking at today strike the right balance for the challenges and opportunities that we face. They include a credible plan to return our public finances to balance; enough headroom to guard against economic shocks; and scope to invest in improving productivity. The structural deficit must be below 2% of GDP by the end of this Parliament, which sets the right course to ensure that the deficit is eliminated altogether next Parliament, and that debt will be falling by the end of this Parliament. The new medium-term welfare cap is an important component of the plan. A medium-term cap rather than an annual one allows us to ensure that we can control welfare spending without needing to make short-term changes to react to fluctuations in the forecast for spending.
To reiterate: the Government will deliver the overall total of welfare savings already identified, but we have no plans to introduce further welfare savings in this Parliament beyond those already announced. With welfare accounting for around a quarter of all our spending, the right course of action is not to refuse to consider any kind of control, but to ensure that our expenditure is stable and sustainable. We have already announced all the measures that we will take in this Parliament for savings in this area.
This then is a credible fiscal plan for three reasons: first, because it means tackling the deficit and bringing our public finances into balance, the importance of which continues to be completely overlooked by the Opposition party; secondly, because it sets feasible targets—in fact the OBR forecasts that we will meet our aims for this Parliament two years early—and thirdly, because it also gives us the space to react to any short-term fluctuations in our economy in this period of adjustment. It also gives us the scope to address the long-term structural changes and invest in our future success. I refer specifically to the additional £23 billion that we will be investing in our national productivity—borrowing to fund improvements for businesses and families alike in our infrastructure, research and development and housing.
The charter enshrines our commitment to fiscal restraint. It reflects our refusal to allow public spending to sky rocket as it did under Labour; our determination not to put ourselves again in such a vulnerable position as Labour did in running up the largest structural deficit of any G7 country ahead of the great recession; our rejection of the reckless economics that the Labour party continues to favour, which is one of blank cheques, unfunded spending commitments and magic money trees. Is it not time that Labour finally starts learning from its mistakes and caring about the economic security that the people of this country deserve? It clearly does not have a credible fiscal plan of its own. It clearly does not have much interest in the matter, because not a single Labour Back Bencher even attended this debate until the 67th minute of it. Let me invite them to join us in voting for a plan that is not only in the interests of working people today, but in the interests of their children and grandchildren who follow. I commend this charter to the House.