Budget Responsibility Bill

Lord Moylan Excerpts

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

[Lord Moylan (Con)]

My Lords, I always think that legislation, of which this is not the only example, which arises in reaction to a single event is almost certain to be foolish, pointless and dangerous and to lead us astray. That is particularly so when reflection has shown that the initial understanding of that event—in this case, I am talking about the mini-Budget—was flawed, and that in fact it was not the mini-Budget and its fiscal measures that caused the market volatility.

It is now accepted—even by the Bank of England, I believe, in a recent paper—that about two-thirds of the volatility was caused by the Bank of England’s own misregulation of some dodgy LDI schemes in pension funds, which I do not claim to understand. Possibly the noble Lord, Lord Davies of Brixton, would understand them, given his background. They were happening in something like the equivalent of the darknet of the pensions industry, and they were what caused most of the problem. Perhaps we would be better off having a Bill that penalised the Bank of England for misregulating pension funds and other financial institutions within its purview, which might actually keep it on its toes.

My second point has already been made to some extent by my noble friends Lord Frost and Lady Lawlor. This Bill is a further step in the de-democratisation of our governmental decision-making. It is the transfer, in effect, of power from elected Ministers, who are accountable to the electorate, to unaccountable institutions on the basis of the claim that they are somehow independent. They simply have a view as to how certain changes in taxation and expenditure are going to affect the economy. It is perfectly possible for somebody else to have a different view—in fact, it is perfectly possible for a Chancellor of the Exchequer to have a different view. The noble Viscount, Lord Chandos, tried to persuade us that that was not in fact so, but of course the whole point of the Bill is to trammel and put handcuffs on the Chancellor of the Exchequer—and, of course, the first people who will be penalised by this and come to regret this legislation will no doubt be the current Chancellor of the Exchequer and her successors, if she has any, over the next few years. But that is the whole purpose of the Bill beyond its performative measure.

My third and final point was simply to say that I wanted to follow up on the remarks of the noble Baroness, Lady Wheatcroft. She said something to the effect that we were looking at our public accounts the wrong way. I agree with her to some extent but I want to make a different point. We have this enormous focus on the fiscal rules, which are essentially about the level of debt that the Government can carry—but that is a secondary matter.

The really crucial matter is what level of national income the Government should dispose of. To some extent, that is a political question, because inevitably the Labour Party will take the view that the Government should dispose of a larger sum and the Conservatives would probably take the view—I hope—that they should dispose of a smaller sum. It is not quite clear where the Liberal Democrats would stand on that crucial question. But that is the essential point that should drive all our politics. However, it is not simply a political matter; it can also be considered with regard to the effectiveness of that spending and whether that spending, as it increases, achieves a proportional improvement in the outcome of public services or whether it runs into what might be described as diminishing returns. I would say that the evidence is clear that at a certain point increased public expenditure starts to run into the problem of diminished returns when you measure the outputs that the Government actually achieve. Spending more money on the health service might produce more hospitals but does it produce better health outcomes? Are death rates from certain illnesses improving, and so forth? When you measure those things, it is clear from the evidence that simply spending more money does not produce proportionate outcomes.

The Government really need to focus on questions of that character, because the question of how you fund that expenditure, whether through debt or taxation, is an important one but essentially secondary.