Cable on the Budget Deficit

2.10.11pm GMT Sat 20th Mar 2010

• [Mar 16] Vincent Cable: IS the Minister not mildly embarrassed that the Government claimed to be leading the international debate on recovery from the financial crisis but have now been chastised by the European Commission for a lack of clarity in their plans for tackling the fiscal deficit? Although the Government have been clear about when to make cuts and how rapidly to do so, they have been massively unclear about what they propose to cut - when are we going to hear that?

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Liam Byrne (Chief Secretary, HM Treasury; Birmingham, Hodge Hill, Labour): I think that the European Commission made the wrong decision by saying to the United Kingdom that we should reduce the deficit to 3 per cent. of GDP by 2014 - 15. That would entail a cut of well above £20 billion in public spending or commensurate tax increases. In the pre - Budget report we set out deliberately how we would save £20 billion of current spending over the next four years: £4.8 billion of that would come through savings on pay and pensions; there would be £5 billion of cuts to departmental expenditure limits; and £11 billion of it would come through the reorganisation of Whitehall and doing things more efficiently in the future. We set that out clearly in chapter 6 of the pre - Budget report.

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Vincent Cable: Does this European report not also relate to a deeper argument within Europe about whether recovery should be led by countries such as Germany widening their deficit - that is the French argument - or by the weaker countries, such as Greece, Ireland, Italy, Spain and probably Britain, taking action on their deficits? Where do the Government stand on that debate?

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Liam Byrne (Chief Secretary, HM Treasury; Birmingham, Hodge Hill, Labour): We are very clear that what is in the interests of the United Kingdom economy - I believe that the hon. Gentleman has made this argument before - is rebalancing our economy in the years to come and having an investment and export - led recovery. No one country can secure that policy acting on its own, which is why international trade reform is part and parcel of our approach to the agenda for the G20 over the year to come. The truth is that if American savers carry on saving at today's rates we will not be able to rely on them to drive growth in the global economy in the way that they have done in the past.

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• Full Debate in Parliament