Budget Responsibility Bill

Viscount Trenchard Excerpts

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

[Viscount Trenchard (Con)]

My Lords, I congratulate the Minister on his appointment, if it is not too late to do so. I was delighted to learn from his interview with the Financial Times that he is working on breaking down

“very big obstacles to inward investment”.

This Bill is intended to contribute to financial stability; I imagine that the Government think that periods of relative financial instability have constrained foreign direct investment. That may or may not be true, but is it not also the case that foreign investors are more likely to invest in countries with relatively low rates of tax and relatively light and proportionate regulatory regimes?

The Government also make much of their democratic credentials but the effect of this Bill is to transfer power away from the democratically elected Government and the Chancellor of the Exchequer—accountable to the House of Commons—to an independent body that is, however well regarded it may be as a fount of prudential wisdom and the most formidable number cruncher bar none, still a quango. There are too many quangos and they have too much power, which has been relentlessly but steadily drawn away from Ministers. Most new substantive Acts of Parliament create a separate independent quango with its own offices, board of directors and substantial costs that are met by either taxpayers or consumers.

I was rather sceptical about the OBR when it was created by George Osborne. I did not believe that there was any chance that it would be a more accurate predictor of the consequences of any fiscal changes on the economy than the Treasury. Graham Stringer, speaking in another place last Wednesday, suggested that George Osborne created the OBR in order to trap an incoming Labour Government, restrict them and slow them down; he described it as

“an odd thing that we see this quango being gilded ”.—[Official Report, Commons, 4/9/24; col. 340.]

Is it not obvious that, as is reported in the media, the existence of the fiscal rules as adjudicated by the OBR severely limits the Government’s choices? Does the Minister agree that these limitations were behind the Chancellor’s decision to cancel infrastructure spending to meet public sector pay demands?

I am not sure that having the OBR really protects us at all from financial instability. I am pretty sure that the average voter does not have a clue what it is or what it does—but we have it, and we should make sure that it is as cost-effective as possible. I am sympathetic to the attempt made by my honourable friend in another place, Nigel Huddleston, who sought to amend the Bill to ensure that any changes in the fiscal rules would trigger a requirement for the OBR to issue a report. As the Government have committed to reduce the national debt, it is also critical that we understand the definition of debt in connection with the application of the fiscal rules. Without certainty in respect of these two points, it is hard to accept that the fiscal lock will be effective.

As was discussed in another place last week, it is also unclear what happens when a fiscal measure intended to be temporary—I understand that this means up to two years—runs on beyond that time limit. The example of income tax was given; it was introduced as a temporary measure in 1799 by Pitt the Younger. I ask the Minister whether there should be constraints on Ministers taking significant decisions on other measures that are not fiscal ones if it is considered that, severally or cumulatively, they may have an effect on GDP of over 1%.

Does the Minister not agree that it would be much better if the revisions to the Charter for Budget Responsibility had been published already? I agree with the noble Lord, Lord Eatwell, on this. Can the Minister tell your Lordships whether there will be an opportunity to debate the changes to be made to the charter in due course? The separation of the charter revisions from the Bill itself gives the impression of undue haste. I am tempted to agree with those who think that the Bill is not necessary and is as much concerned with political theatre as with making changes that will have any real positive effect on the operations of the OBR.