Charter for Budget Responsibility
Lord Tyrie Excerpts(9 years, 5 months ago)
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Mr Osborne
There has been a constructive alliance between Labour civic leaders in the north of England and Conservatives to bring an elected mayor to Greater Manchester and deliver High Speed 2. We have done so in the face of the opposition of the Labour shadow Chancellor, who has tried to frustrate all these things all along. Thankfully, Labour civic leaders are not listening to those on their own Front Bench anymore.
Although the deficit has been halved, at 5% of our national income, it is too high. Our national debt, at 80% of our national income, is too high.
Mr Andrew Tyrie (Chichester) (Con)
There have probably been about half a dozen attempts to try to buttress fiscal policy with rules in the past 30 years. Most of them have collapsed at some point during the business cycle. To get something that works, does the Chancellor not agree that we need something credible, not just for dealing with the deficit but for reducing the stock of debt, and that that must mean over the cycle running a surplus?
Mr Osborne
My hon. Friend is absolutely right. It is not enough to eliminate the deficit. We then have to get our national debt down. It is too high and leaves us exposed to the next economic shock. We do not want to go into the next economic shock with a debt-to-GDP ratio of 80%. That is precisely why, in good economic times, we need to be running an overall budget surplus. That is the only credible and sustained way to get national debt down. That is the way to fix the roof when the sun is shining.
Autumn Statement
Lord Tyrie Excerpts(9 years, 7 months ago)
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Mr Osborne
Let me also pay tribute to the former Chancellor for his work on the Scottish referendum campaign. To be fair to him, what we did not know in the debate before the previous general election, but which has subsequently been revealed in the various memoires that have been written about the Government he was at the heart of, is that he was arguing internally for the Government to set out the spending cuts that they would make. Indeed, he argued that the Labour Government should commit to a VAT increase, which of course the Labour party, somewhat hypocritically, opposed several months later when we had to take that step. What we know about his role in the previous Government does him great credit.
On the right hon. Gentleman’s point, as I explained in my statement, although borrowing falls in each year, the OBR has revised up the borrowing for the first two years but then revised it down, compared with the Budget, in the years after that. The structural deficit continues to fall at the same pace as in the Budget. This is not the big deterioration in the public finances that everyone has been predicting—it was on the front pages of many newspapers, and indeed the shadow Chancellor went about repeating it. That has not happened. With regard to lower tax receipts, I gave the tax receipts forecast but pointed out that one of the reasons why there has not been that deterioration in the public finances is the big reduction in debt interest payments.
Mr Andrew Tyrie (Chichester) (Con)
The OBR forecasts that over the course of this Parliament the eurozone will grow at a little over 2% and the UK will grow at nearly 9%, which of course is a tribute to the capacity of UK businesses, particularly small businesses, to adapt to the huge economic shock of the euro crisis. However, just doing a bit better than the eurozone is not enough; our prosperity will depend on whether we can absorb the annual shock of increased global competition. Is not it therefore crucial, as we have seen with the pressure on Northern Ireland’s corporation tax rate, that we do much more to sustain a globally competitive tax system?
Mr Osborne
My hon. Friend is absolutely right. It is not enough just to do better than our neighbours, because of course they have their own problems and are stagnating. If one looks at all the various indexes of global tax competitiveness and global innovation, one sees that the UK is climbing up the ranks. We in the Treasury certainly seek to mark ourselves against the most competitive economies in the world, not just those on the continent of Europe. The steps I have outlined today, which probably will not make it on to the front pages of the newspapers, such as the increase in the small business research and development tax credit, the large company tax credit and changes to entrepreneurs’ relief and its relationship with the enterprise investment scheme, are all designed to support research and development and entrepreneurial business in this country.
EU Budget (Surcharge)
Lord Tyrie Excerpts(9 years, 7 months ago)
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Mr Andrew Tyrie (Chichester) (Con)
This is almost like Budget day. Was it not crass insensitivity on the part of the Commission to make such a demand on several countries in this way? The Government have negotiated an interest-free deferment and a reduction in the sum outstanding, and exactly what those are worth is something that the Treasury Committee will want to examine with the Chancellor in public session in due course. In the meantime, will he give us further details to assure us that such demands will not be made on us or any other country again?
Mr Osborne
I welcome my hon. Friend’s support for what has been announced. There was agreement around the table that we should permanently change the EU budget rules. We shall have to consult the European Parliament on that, but it does not have a veto. We should change those rules so that if there is an exceptionally large payment or adjustment in future, as there was this time, member states cannot be bounced with a bill like this. There was strong support around the table for that change.
Oral Answers to Questions
Lord Tyrie Excerpts(9 years, 8 months ago)
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Mr Osborne
We do not need to raise VAT, because our plans are paid for by the Government living within their means. Does the hon. Lady speak for the Labour party, because she seems to be opposing the increase in the personal income tax threshold? That is a policy that has lifted many low-paid women out of income tax altogether, and I find it surprising that once again the Labour party is against the interests of hard-working people.
Mr Andrew Tyrie (Chichester) (Con)
By raising the personal allowance, the Chancellor has pulled 3.2 million people out of tax altogether. At the same time, however, he has dragged 1.6 million people into paying the higher rate of 40p. It is the marginal rates that matter, and that is a massive disincentive to wealth creation in this country. Does he acknowledge that, as soon as the fiscal room to do so is available, it will be essential to act to take as many people as possible out of higher-rate taxation altogether?
Mr Osborne
As my hon. Friend knows, people earning up to £100,000 who are paying the higher rate have seen the benefit of the increase in the personal allowance. They have seen their income tax bills fall. He is right to say that more people have been pulled into the 40p rate, however, and that is why we are proposing to increase the threshold to £50,000. That will be in our election manifesto, and it is something that we can deliver in the next Parliament so that people on middle incomes, as well as those on lower incomes, can benefit from a tax-cutting Conservative Government.
Oral Answers to Questions
Lord Tyrie Excerpts(9 years, 10 months ago)
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Mr Osborne
The first thing I would say to the hon. Gentleman is that of course we need to tackle long-standing regional disparities in our country, and we are putting investment into Wales, including transport and infrastructure investment, to try to lift the economic performance of Wales. The broader point I make is that we need to bring the economic geography of our country closer together. That is an argument I have made about the north of England. The gap between the regions grew under the last Labour Government. By making the long-term investment under our long-term plan we hope to reduce the disparities under this Government.
Mr Andrew Tyrie (Chichester) (Con)
The crucial task now is to develop a long-term supply side reform agenda. Does the Chancellor agree that at the heart of that must be policies to release the energies of millions of small businesses and sole traders up and down the country? With that in mind, will he examine the policies of both the Institute for Fiscal Studies and the Mirrlees review, which in different ways have proposed to reduce the burden of national insurance contributions when that is affordable? Is that not an essential part of Britain’s long-term recovery?
Mr Osborne
I agree with the sentiment that my hon. Friend expresses that we want to make it easier to employ people. I would argue that the reductions that we have already made in national insurance on coming into office and the provision of an employment allowance, which has been enormously popular among smaller businesses, and next year’s move to remove under 21-year-olds from the jobs tax are all steps we are taking to support the creation of jobs in the economy. Of course, the Labour party would like to put up the jobs tax, but that would be deeply counter-productive and put people out of work.
Office for Budget Responsibility (Manifesto Audits)
Lord Tyrie Excerpts(10 years ago)
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Mr Robinson
No, I am not giving way. I have made that clear already, although not out of any fear of what the hon. Gentleman might say. The Government are afraid, though. They are afraid that, if our proposals before the election were properly and independently costed, as they will be—we will probably try to get it done independently in some other way if we have to—it would give them the credibility that the Government seek to deny them by being misleading and by obfuscating, at which they are experts—the Chancellor in particular, who is not here.
When we look at what individuals have said about the proposal, it is clear that it is possible—no one has tried harder to secure this than my right hon. Friend the Member for Morley and Outwood (Ed Balls), the shadow Chancellor—to achieve consensus across the House if right hon. and hon. Members on the Government Benches want it. The hon. Member for Chichester (Mr Tyrie), who chairs the Treasury Committee, said on 15 October 2013, around the time that my right hon. Friend was writing to the Chancellor on these points:
“I made clear in the Commons that this should include examining, at their request, the fiscal policies of opposition parties at election time.”
The whole point is that election time and the run-up to the election is the appropriate time to do this. That is why my right hon. Friend started this in October—nine months ago. It is a complicated, difficult process, but why have we had nothing from the Chancellor since? Why has he refused to engage in that?
Mr Robinson
I did mention the hon. Gentleman. For that reason, I will take this one intervention.
Mr Tyrie
Curiously for an Opposition day debate, a bit of consensus seems to be emerging that at least in principle this work should be done, but does the hon. Gentleman agree that, although of course the work needs to be done at election time, the preparatory discussions to discover what the ground rules should be need to take place in a quiet political climate, not in the run-up to a general election? Therefore, given that for three years both parties have objected to this, the time to get that done would be immediately after a general election.
Mr Robinson
The most useful thing I can do for the hon. Gentleman and the House is to read out in full, to get it on the record, what the head of the OBR has said. In March, just a couple of months ago, he said:
“I think the key thing that you would need to do would be to ensure that by, say, the early summer”—
exactly where we are now—
“you were in a position”—
he is speaking to Members who are involved in the decision—
“where even if you did not have the full legislative framework for this sort of thing in place”—
I think we have that, largely—
“you would need to have, first, agreement in principle across the parties”,
which we are striving for, and it is only because the Government perceive it to be against their electoral interests that they are resisting it. It is the most blatant, obvious Government ploy that I have seen since—well, I will not say since when. He said
“that it was a good idea to do it and, secondly, fairly detailed agreement on what you might think of as the rules of the game: which parties should be involved”—
my right hon. Friend dealt with that—
“what scope of policies should you look at; what is the timetable; what would be the involvement of civil servants, and so on.”
The quotation continues:
“I think you would need to get that sort of thing in place in the early summer in order for us, for example, to be able to set out and recruit the necessary people over the course of the summer and have all that in place ready to be welcoming customers, so to speak, maybe after the party conferences in the autumn.”
There is the timetable, therefore, but Government Back Benchers are trying to deny it, and they are not playing their role at all. Why are they doing it? There is only one reason, and I shall come back to it in a moment.
Oral Answers to Questions
Lord Tyrie Excerpts(10 years ago)
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Mr Osborne
I would say that through our long-term economic plan we are creating jobs in the hon. Gentleman’s constituency, with the economic security that that brings. We are legislating to deal with the abuse of zero-hours contracts, which for 13 years the Labour party did nothing about, and we have discovered in the last couple of weeks that the shadow Chancellor, who from the Opposition Dispatch Box has criticised zero-hours contracts again and again, uses them in his own office.
Mr Andrew Tyrie (Chichester) (Con)
If economic growth turns out to be higher than currently estimated, as has been the case in several quarters over the past 18 months, does the Chancellor agree that that might provide part of the answer to the so-called productivity puzzle? Has the Treasury done any work on that question, and does he agree with the Governor of the Bank of England that we need to do a lot more to improve Office for National Statistics data?
Mr Osborne
I agree with my hon. Friend that one of the big challenges now is to improve productivity, which was clearly impaired by the financial crisis. Obviously, in doing that we need to make sure that the data we receive from our ONS is of the highest quality. People at the ONS work incredibly hard on that, but of course there is always room for improvement, as the Governor of the Bank of England pointed out today, and we will work with the Bank and the ONS to ensure that any improvements that can be made will be made.
Oral Answers to Questions
Lord Tyrie Excerpts(10 years, 2 months ago)
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Mr Osborne
Absolutely, Mr Speaker: having heard all the bad economic news in the previous Parliament, I thought Parliament would want to hear some good economic news. The reduction in fuel duty is one of the number of steps we have taken to support the British economy and families. As my hon. Friend says, we have just published a study that shows that the reduction and freeze in fuel duty has the potential to increase GDP by 0.5%. As Conservatives, we understand that lower taxes mean higher economic growth.
Mr Andrew Tyrie (Chichester) (Con)
The whole House will welcome the fact that we now have a policy to drive down costs on hard-pressed motorists, who have found it very tough in recent years. Can we take it from the Government that that reflects a wider shift in policy and that they are seeking to bear down on other energy input costs, including those of fossil fuels, in order to help hard-pressed consumers and encourage British competitiveness?
Mr Osborne
We need to have competitive energy prices while at the same time building a sustainable energy mix. The major £7 billion package in the Budget to help with the cost of energy for manufacturers has been welcomed not just by the big energy-intensive industries, but by many small business and, of course, families.
Budget Resolutions and Economic Situation
Lord Tyrie Excerpts(10 years, 3 months ago)
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Mr Andrew Tyrie (Chichester) (Con)
It is my job to take away the political punchbowl, just as the party was just getting going. What we have just heard is the most difficult speech that anybody has to make in the House of Commons, and I am sure we will all read it with interest.
First, I should like to say a few words in a personal capacity about what has been announced on savings. They look extremely interesting and long-term reforms. For a start, the ISA reform is resonant of PEPs; that goes right back to the beginning, as those introduced the savings allowance. It was a tremendous idea. I am really pleased that the cash and equity ISAs have been merged and that we have raised the cap. The Treasury Committee will have to look at the provisions. I hope I will not have to come to the House and say that it has a different view.
Getting rid of the defined contribution rules that force people into annuities is a tremendous achievement—a very far-sighted announcement. The last Labour Government were also looking at that for a while, but they could not find a way to do it. This Chancellor has found a way to do it, and we should commend him for that.
Before I say a few words about some of the other measures in the light of past Treasury Committee recommendations, I should like to say a few personal words about the deficit. When the Chancellor set out his initial Budget judgment on behalf of the new coalition, many thought that the coalition would collapse—that the political strains of implementing spending cuts would be too great and shake the coalition Government apart. Well, the opposite has been the case. The coalition has stuck with it and the deficit reduction plan has become the cement of the coalition.
Both sides deserve credit for the fact that the coalition is still going and dealing with the deficit. Particular credit goes to the Liberal Democrats. If I may say so—I hope they do not mind—I never thought they had it in ’em. But they have, and they have stuck with it.
Mr Tyrie
May I make a bit of progress?
The deficit is down from the stratospherically high figure of 11% of gross domestic product to just below 7%, and next year it is forecast to fall to 5%, as we have just heard announced by the Office for Budget Responsibility. The consolidation is already significant. It has been achieved despite a massive external shock which was not built into the forecast four years ago and which I do not think the Chancellor mentioned—the eurozone crisis and the economic stagnation in our largest export markets. It was primarily that crisis that forced the deficit reduction plan to fall behind schedule. The key question for the Government a couple of years ago was whether to relax fiscal policy sharply in response to the almost 4% loss of forecast GDP, most of which was a consequence of the eurozone crisis.
Rightly, in my view, the Government showed considerable flexibility within the overall framework, in two important ways. First, they authorised the Bank of England broadly to double the quantitative easing programme; and secondly, equally importantly, the so-called economic stabilisers—the falls in tax receipts and rises in public expenditure that come with lower growth—were allowed to kick in.
To give an idea of the importance of the stabilisers and QE on policy, it is worth reminding ourselves of the numbers. Since the election, an additional £175 billion has been put into the economy through QE and £140 billion has been put in through the automatic stabilisers. The latter figure is based on Institute for Fiscal Studies estimates; no one knows exactly, but it is of that order of magnitude. These are very large numbers. That showed flexibility by the Government.
Mr Redwood
Does my hon. Friend agree that the Government’s flexibility included putting public spending up every year in cash terms over the period and relying on higher tax receipts to get the deficit down, which is how they maintained political agreement to the policy?
Mr Tyrie
I do not know about the political agreement point, but of course the effects of the stabilisers operate on both the tax and the spending sides. I think the Government were right to do what they did.
The Government have also been right to see off calls fundamentally to alter fiscal policy by sharply relaxing deficit reduction and increasing public spending. One of the main reasons it was important that they did not listen to those calls is that credibility in fiscal policy is hard won. It is built up over time—over many years—and it can easily be squandered. The Government resisted that temptation.
I will say a few words about the historical context. Looking to the 1930s, when stagnation set in and the agony was prolonged, partly because automatic stabilisers were suppressed and partly because far from engaging in QE, the then coalition Government did exactly the opposite: they lengthened the maturity of the debt and sucked money out of the economy. That is why the 1930s were so painful.
Now that we have a recovery, some are complaining that it is not the one we ordered. They complain that the recovery is consumer-led or uneven across sectors, regions and income groups. Well, of course it is. All recoveries of any value trigger a reallocation of resources, and therefore all recoveries change the shape of the economy. A recovery rarely takes root where the jobs were lost or the firms failed; it was ever thus and it will be the same this time. As the Chancellor stressed in his speech, jobs are being created at a record rate, but we cannot expect those jobs to be in exactly the same places as the jobs lost in the downswing. I am confident that, as in all previous recoveries, if we can sustain this recovery—and even if it is uneven, as it will be—it will, in time, deepen and spread through the whole economy. The figures for previous upswings support that.
The crucial question now, though, will be whether we can sustain the deficit reduction plan. A threat to deficit reduction will come from siren voices who say, “With the recovery under way, we can go back to spending money we haven’t got.” We are already hearing that. We need to remind ourselves that we are still spending about £7 for every £6 we collect in tax. It is true that we are in better shape, but with a deficit of about 6.6% of GDP, as the Chancellor announced today, we will remain vulnerable to economic shocks unless we do more to tackle it.
Another risk to deficit reduction is one of simple arithmetic caused by ring-fencing—something that the Treasury Committee has flagged up on several occasions. It will become increasingly difficult to find cuts to an ever-shrinking share of non-ring-fenced departmental spending. In other words, with ring-fencing of nearly half departmental expenditure, finding these savings will get tougher year by year. The Chancellor has argued, rightly, that polling evidence shows that that ring-fencing reflects public preferences. I think that is true for health and education, but it is not supported in the area of overseas aid. Spending on aid has risen by over a third in real terms and will rise even more because it is linked to GDP. Politics always points to ever-more ring-fencing; economics to less. Eventually, ring-fencing will have to be revisited, however difficult it is for all political parties.
Perhaps I should say a little about the risks—
Oral Answers to Questions
Lord Tyrie Excerpts(10 years, 5 months ago)
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Mr Osborne
The revelations by Tomlinson shocked everyone, and the business practices of RBS, including Ulster bank, are now under the microscope. Of course, these revelations would not have come to light if we had not asked Tomlinson to do his work and had not published the Tomlinson report.
We are particularly aware of the challenge in Northern Ireland, with the weakness of the Northern Ireland banking system—affected by what has happened in the Republic and the fact that RBS is such an important player through Ulster bank—and we are in constant discussion with the Northern Ireland authorities. I know that my hon. Friend the Financial Secretary is talking to the Northern Ireland Executive about precisely what we can do to help to protect the Northern Ireland economy, as RBS implements its bad bank plan.
Mr Andrew Tyrie (Chichester) (Con)
The Prime Minister said yesterday:
“I am a tax-cutting Tory”.
So am I. Does the Chancellor agree that, when resources allow, cuts in tax are the best possible tonic that the Government can provide to small businesses? Does he further agree that the best spur to incentives for small businesses is to cut the marginal rates of corporation and personal tax as soon as he can?
Mr Osborne
I am a low-tax Conservative as well, and I hope that I am in good company on the Government side of the House. We have made reductions in tax. The small companies tax rate was due to go up to 22% under the Budget plans voted on by the Labour party, but we have reversed that and reduced it to 20%. We are now of course bringing the main headline rate of corporation tax down to 20% as well, and getting rid of the complicated taper. That is all further evidence to support the ambition of reducing marginal tax rates for businesses.