Budget Responsibility Bill

Baroness Lawlor Excerpts

2nd reading & Committee negatived & 3rd reading
Monday 9th September 2024 Lords Chamber

[Baroness Lawlor (Con)]

My Lords, I am grateful to the Minister for his exposition of the Bill. I declare a special interest, having worked on and published a number of independent analyses of the fiscal, monetary and regulatory problems of the UK economy as director of Politeia, the think tank at which I am now research director.

No one with the public finances at heart can fail to support a measure that strengthens transparency and a rules-based approach to the UK’s public finances. I am a devotee of fiscal stability and the need for rules, written or, as in previous times, understood. As the German economist Ludger Schuknecht has explained, many serious problems arise not because of bad rules, but because of the failure to implement the rules by using tools such as medium-term budgetary frameworks, spending reviews, financial risk analysis and independent fiscal councils to help achieve these aims.

But are the Bill and the structures—including the OBR, which it relies on—the way to ensure sustainable public finances and tighter fiscal discipline? I am unsure, and I have the following questions. First, is the Bill requiring an OBR assessment for financially significant measures or empowering the OBR to offer such an analysis, should it deem a measure such, enough to control unsustainable public spending and public debt? Is there any obligation on the Government to change their spending or debt policy if an OBR analysis predicts potentially dire consequences for the economy? If not, there is no fiscal lock, contrary to the Government’s suggestion, but simply fiscal advice. If so, that raises constitutional questions about unelected bodies and the power they exercise.

Secondly, the Government want to allow a higher ceiling for debt as a proportion of GDP by the fifth year of the cycle, from 1% to 1.2% of GDP, made public in advance of the Budget. Should we expect a further relaxation of the three previous rules for fiscal discipline and, if so, which will be relaxed, which will be changed and which will become less transparent? Will further changes be assessed by those who, like me, are sceptical of lax fiscal discipline?

Thirdly, no single forecasting institution can, or should be expected to, take the burden of advising a Government on tax and spending alone. We have heard today of some of the problems with the OBR which it has the modesty to recognise. Will the Government be open and invite other forecasters and assessments, equally independent of the Treasury and the OBR, to be sure to have other views?

Fourthly, what public spending will count as fiscally significant? I know the 1% of GDP measure has been provided, but here are two sorts of public spending that may be open-ended and not fall within the threshold, although they will eventually. The first is public sector pay rises. Rises of 5% or 6% for the 3.5 million public sector workers have been announced, adding to the potential for pay inflation, with other rises reported to be in the offing, including 22% mooted for doctors. Will the Minister agree that such pay rises should prompt an OBR report, particularly if they will likely continue to increase and reach the high threshold?

The second is the costs of immigration. According to Home Office figures, quite apart from legal migration—which is nearer to 1 million this year, net migration being lower—illegal migration via channel crossings amounted to 9,000 illegal immigrants crossing to the UK in July, August and the first week of September. Since no scheme in place is likely to deter these crossings, will the Minister confirm whether the additional management, administrative and legal costs—these have been itemised by previous Governments—for processing individual cases and providing public services, including housing and subsistence, will be averaged in an annual figure and considered as significant in order for an assessment by the OBR?