Darling accused of 'hiding' debt interest bill of £60bn
A senior member of the Treasury Select Committee today demanded to know why the Chancellor had refused to publish estimates of the cost of interest on Britain’s national debt.
Michael Fallon, the most senior Tory on the panel, asked Alistair Darling why he had not admitted that annual interest on the debt is forecast to hit £60 billion within four years.
The cost of servicing the country’s £178 billion budget deficit represents just under double the annual budget for the Ministry of Defence. The figure is roughly double the current interest charges.
Mr Darling appeared before the cross-party committee – one of the most influential in Parliament – this afternoon.
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Mr Fallon, the Tory MP for Sevenoaks, demanded to know why the forecast bill was not made public in last week’s Pre-Budget Report.
He said: "Why are you continuing to conceal these numbers?"
Mr Darling replied: "For the last ten years, we have been publishing debt numbers on a three-year programme. What we have not done is to publish estimates and forecasts beyond that.
“Even in the best of times, unlike now when there is a great deal of uncertainty. Nothing has changed from this year to last year. We only publish what has been decided."
Mr Fallon replied: "So you have the forecasts but you are not prepared to share them with Parliament."
The size of Britain’s debt pile and the cost of servicing it represents one of the biggest challenges for the next Government.
Standard & Poors, Moody’s, and Fitch – the world’s most influential credit rating agencies – have effectively indicated that they will delay taking any decision on whether to downgrade Britain’s own rating until after the general election, expected in May.
They want to know specific details on how the next Government will pay down the £178 billion budget deficit with costings on tax rises and spending cuts.
While Britain enjoys the top credit rating at the moment a downgrade would represent a devastating blow for the economy because the Treasury would have to pay more to raise new debt.
Questioning Nick MacPherson, the most senior civil servant in the Treasury, the 14-member committee extracted a promise that the figures would be submitted to the committee after they failed to appear in the Pre-Budget Report.
The Treasury Select committee typically holds three hearings after both the Pre-Budget Report and the Budget in which it questions experts, civil servants and finally, the Chancellor, on the measures.
On Monday, the chief economist at HSBC told the committee that the bank forecast that the interest bill would jump to around £60 billion in 2013-14. For the current year, the cost of servicing the deficit is around £30 billion.
The interest bill arises from the coupon – or interest payment – on Government bonds, known as gilts. The Treasury – through the Debt Management Office – sell the gilts to raise money.
Other countries and massive pension funds purchase Britain’s gilts – in return for the promise of a fixed interest payment twice a year - which is called the coupon.
Gilts have a finite life-span – once they expire, after, for example, ten years, the nominal value of the bond is returned to the investor.
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