Fortifying the Fiscal Framework (Economic Affairs Committee Report)

Debate between Lord Liddle and Lord Sikka

Tuesday 3rd November 2026 Grand Committee

[Lord Liddle (Lab)]

My Lords, I thank the Minister for an excellent response to the committee’s report. I also thank the Members who have contributed, who have all had something very interesting to say; that is not what you often get in the House of Lords, but every contribution has been of great interest. I will not talk for long, because the noble Lord, Lord Wilson of Sedgefield, will be glaring at me about how we have to terminate this debate. However, I want to say just one thing about fiscal rules.

In the 1990s, when Labour was trying to make itself credible under Gordon Brown and Tony Blair, I remember having long discussions with Brown and Ed Balls about the fiscal rules. There was this wonderful, simple idea that we came up with: we will borrow only to invest. I think that that is a good rule and principle; obviously, you need to take account of Keynesian fluctuations in the economy et cetera, and perhaps some social investment is justified, but you have to be careful that that does not become just a means of extra borrowing.

I disagree strongly with my noble friend Lord Sikka, who seems to think that you can get away with 300% borrowing to GDP or something of that kind—I do not know what he said. I would say to him that my kind of social democracy, and the reason I supported toughness in borrowing only to invest, comes from what I learnt from Sweden, the most successful social democratic country in Europe, which had always pursued a fiscally responsible policy—except for a period in the 1990s when it got it very badly wrong, and it knew it had got it badly wrong. The truth is that, if you get into a fiscal mess and you have a crisis, it is precisely the working people who you claim to defend who suffer most. That is the myth of the left, which is wrong, and we must have a sensible approach to these questions.

[Lord Sikka (Lab)]

My Lords, do I have a moment of reply, since I have been accused? Indulge me, please, because I have been incorrectly represented.

[Lord Liddle (Lab)]

No, not at all. He has not.