Charter for Budget Responsibility

Lord Jackson of Peterborough Excerpts

Wednesday 20th July 2016 Commons Chamber

[John McDonnell]

Can I just press on a bit further before I give way again? I am sure there will be plenty of time, Madam Deputy Speaker.

As I was saying, the former Chancellor missed every target in his first charter, so he brought in a second. He was on course to miss the targets in that second one, so he then brought in a third. In September last year, he presented his 2015 update. The current charter for budget responsibility sets targets for an overall balance on Government spending inside five years, with debt falling in each year of the Parliament. However, the Government knew last summer that the vast majority of economists who were asked had criticised the approach, as had the Treasury Committee. Almost without exception, the Labour party agreed with the macroeconomic profession that the approach was likely to prove misguided. We were defeated in the Lobbies that day, but our warnings have been proved prescient.

[Mr Stewart Jackson (Peterborough) (Con)]

The shadow Chancellor will know that any critique of the Government should be accompanied by a coherent alternative strategy. On that basis, is he embarrassed that the Leader of the Opposition’s economic adviser Richard Murphy described the Labour party’s approach as having

“no policy direction, no messaging, no direction, no co-ordination, no nothing”?

[John McDonnell]

He is not the economic adviser and never has been, because we doubted his judgment, unfortunately. He is a tax accountant, not an adviser. He is actually excellent on tax evasion and tax avoidance, but he leaves a lot to be desired on macroeconomic policy.

Turning to the Government’s performance, their charter for budget responsibility lacked credibility from the moment it passed into law and has now lost what shreds it retained this year. Since last September’s debate, every target in the charter that could have been missed has been missed. By the time of the March Budget, the OBR announced that the Government were on track to miss their target for the welfare cap for every year of this Parliament. The charter also insisted that the debt to GDP ratio would fall in each year of this Parliament, but the OBR said in March:

“We now expect the debt-to-GDP ratio to rise between 2014-15 and 2015-16”.

The Government managed to stay on target for its 2020 surplus only through some accountancy that might best be described as imaginative. The writing was already on the wall and then in June the then Chancellor used the backdrop of his fiscal charter as the pretext for threatening British people with a further austerity Budget should they vote to leave the EU.