Budget Responsibility Bill

Baroness Noakes Excerpts

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

[Baroness Noakes (Con)]

My Lords, I have a number of regrets about the Bill. My first regret is that it is a money Bill. It is customary that this House does not challenge the decision of the Speaker in the other place, and I will not do so. It is not, however, a Bill that has any direct fiscal impact, but it makes changes to a body that has become an integral part of the country’s economic management. I believe the Bill would have benefited from a normal Committee, where we could have scrutinised it in detail. For example, noble Lords might recall that when income tax was first introduced in 1799, it was labelled a temporary tax, which raises interesting questions about this Bill’s exclusion of temporary measures from the OBR’s new powers.

Secondly, I regret that the Government have not taken the opportunity to ensure that the OBR’s forecasting is fit for purpose. My noble friend Lord Altrincham raised several of the issues here. On its own internal assessment, the OBR is not particularly good at forecasting. It claims, with no sense of irony, that its performance is in line with that of the Bank of England. The noble Lord, Lord Eatwell, from whom we have just heard, pointed out in his speech on the gracious Speech in July that the OBR was set up to reinforce austerity and is ill-suited to underpin the Government’s growth ambitions. In the same debate, I argued a similar point: the OBR does not use dynamic modelling, so growth measures will struggle for a full evaluation in the OBR’s calculations. These areas would have been a better target for the Government’s reforming zeal.

Thirdly, I regret that the Bill does not ensure that the OBR operates to high standards of governance. I cannot think of another public sector body which has an executive chairman and does not have a majority of non-executive directors. Like most independent quangos, its external accountability arrangements are weak. It is quite simply dangerous to allow a public body, which can exert great influence on the Government’s fiscal policies, to exist with weak internal governance alongside weak external accountability.

Lastly, I regret that the Government have used this Bill to peddle untruths for political purposes. At Second Reading in the other place, the Chief Secretary said:

“The country cannot afford a repeat of the calamitous mini-Budget of September 2022, when Liz Truss and Kwasi Kwarteng’s reckless plans unleashed economic turmoil that has loaded hundreds of pounds on to people’s mortgages and rents”.—[Official Report, Commons, 30/7/24; col. 1211.]


The Minister repeated the substance of that in his opening remarks. The fact is that interest rates were already on the way up in the fight against inflation, and they remain high for the same reason. They did spike immediately after the mini-Budget, but the Bank of England’s own internal analysis shows that two-thirds of the 103 basis points spike in the 16 days after the mini-Budget was due to the Bank’s own mismanagement of the risks inherent in LDI strategies. Furthermore, the Bank had already unsettled financial markets by failing to raise interest rates in line with the US and with market expectations. It does not reflect well on either of the Chancellors who succeeded Kwasi Kwarteng that they have turned a blind eye to these truths.

It was political opportunism that led to the creation of the OBR, and it is the same motivation driving this Bill. This is a poor foundation for legislation.