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Oral Question (Prime Minister): Structural Deficit

2 February 2011

Q9. [37427] Tony Baldry (Banbury) (Con): Would my right hon. Friend describe the biggest structural deficit in the G7 as a golden economic inheritance?

The Prime Minister: I certainly would not, and my hon. Friend makes an extremely good point, which is that at the weekend the shadow Chancellor stated boldly that there was no structural deficit when Labour left office, even though-

Ed Balls (Morley and Outwood) (Lab/Co-op) indicated assent .

The Prime Minister: He nods now, even though the Institute for Fiscal Studies could not be clearer that we had one of the biggest structural deficits of anywhere in the advanced world. I have to say, if you start in opposition from a position of complete deficit denial, you will never be taken seriously again.

Speaking afterwards, Tony Baldry said “It was Ed Balls who described Labour as having given the country a golden economic inheritance.

On the 30th January on the Marr interview, Ed Balls was asked:

Q: It is true to say, is it not, that in the run up to the financial crisis, Britain was running the worst structural deficit – that is the extra beyond the cycle – of any the G7 countries?

Balls: “I don’t think we had a structural deficit at all in that period”

Balls: “Was there a structural deficit? I don’t think so”.

Balls: “Do you think that we were spending too much . . ? . . . Absolutely not”

Balls: “I don’t think we were overspending.”

According to the IFS,

By the eve of the financial crisis, the UK had “one of the largest structural budget deficits in the developed world”. (IFS: The Public Finances: 1997-2010, 19th April 2010, page 2).

Labour’s Treasury Minister, Lord Myners, said “The mistake we made as a government was that we ran large deficits in the middle part of the last decade when the economy was clearly running at full capacity”. (Lord Myners, quoted in the Guardian, 16th August 2010).

Even Tony Blair observed, “We should also accept that from 2005 onwards, Labour was insufficiently vigorous in limiting or eliminating the potential structural deficit”. (“A Journey”, pages 681-2).

I think the simple fact is that the Labour Party are “deficit deniers”. They simply refusing to face up to the reality of what they did whilst in Government and I think we should seek to make the soubriquet “deficit deniers” stick.