Charter for Budget Responsibility

Alan Mak Excerpts

Wednesday 20th July 2016 Commons Chamber

[John McDonnell]

This is the slowest recovery in our history. The last time a date was put on it was 1066. The way in which we are recovering is on the basis of increased household debt, low incomes and insecure jobs. I do not think that any Government should be proud of that record.

[Mr Alan Mak (Havant) (Con)]

Will the hon. Gentleman give way?

[John McDonnell]

Let me just finish another paragraph before I give way again.

A new set of rules for fiscal policy is needed. I know that some Members have questioned the need for fiscal rules at all. During the discussions on the Fiscal Responsibility Bill in early 2010, I recall the right hon. Member for Tatton (Mr Osborne), who was then shadow Chancellor, saying that the Bill was a “completely feeble stunt” and the

“biggest load of nonsense that this Government have had the audacity to bring to Parliament in this Session”.—[Official Report, 5 January 2010; Vol. 503, c. 72.]

That was the then shadow Chancellor condemning Gordon Brown for having a fiscal rule. A short while later, when he became Chancellor of the Exchequer, he produced his own fiscal rule: the fiscal responsibility charter. He missed every target in his first charter, so he brought in a second one. He was on course to miss the targets in his second one, so he brought in a third.

--- Later in debate ---

[John McDonnell]

As always, my hon. Friend is spot on. We are on the same page as almost every organisation that has an interest in the economy in this country: the CBI; the Federation of Small Businesses; the British Chambers of Commerce; and the TUC. All of them are saying exactly as he has said.

[Mr Mak]

Controlling welfare spending has been a key element of this Government’s economic plan and has helped to make the fiscal charter a reality. How would the hon. Gentleman plug the black hole? Would he raise taxes, raid pensions or print more money?

[John McDonnell]

The problem with the hon. Gentleman’s contention is that we were told the way to control welfare spending was to introduce a welfare cap, and this was part of the charter. The Government have now breached that charter consistently and are forecast to breach it in every year throughout their Administration. The point I am making is that the fiscal charter is almost redundant now, because it is so ineffective. Housing benefit did rocket, but the way to control welfare is by building council homes again, so we are not pouring money into the pockets of private rented landlords.

--- Later in debate ---

[Mr Gauke]

There are those who will argue, in the light of Brexit, that we should not worry about borrowing and debt. They are usually—not always, and I certainly exclude the hon. Gentleman from this—the same people who have argued consistently for the past 10 years that we should not worry about borrowing and debt; it is the reasons that have tended to change. First, they argued that we need not worry about borrowing because the business cycle had been abolished and there would be no downturn, so that was all right. Then their argument was that we should borrow because we needed a fiscal stimulus, and then because gilt rates were so low. But with debt last year at almost 84% of our GDP, maintaining fiscal credibility must absolutely remain our priority. If we had not taken the measures we have on public finance over the past few years, we would be in a far worse position still. Analysis shows that from 2010 to 2020, if the structural deficit had remained the same we would have borrowed an additional £930 billion. That is a huge sum to add to our current debt total.

We have already set out our plans for finding departmental savings and in my new role I will be working closely with my fellow Ministers to make sure we stick to those plans. We have a strong record on delivering such commitments—we have done so every single year we have been in government, and we are not going to let up in our efforts now.

I am also determined to look at what further scope there is for delivering the value for money that the taxpayer deserves. I have spent the past six years working hard to make sure we get the tax revenues in, so am not about to see those revenues spent without delivering as much for our money as possible. I will therefore also take forward our work on finding further efficiencies across the public sector. That work was announced at the last Budget and I will be taking it forward straightaway, to explore all avenues for making innovations, finding reforms and saving time and money across the public sector.

This is without doubt a time of considerable uncertainty. That has its own implications for the current stability of our economy. We anticipated short-term turbulence in the event of a decision to leave the European Union, and that has been reflected in the economic developments that have unfolded. It is clear that we must pursue policies that help us grow in the future. That means pursuing pro-business tax policies, improving our skills and our infrastructure, and looking out to the world, enabling us to trade and benefit from globalisation, as there are real signs of opportunities ahead from such an outward-facing approach.

[Mr Mak]

I congratulate the Chief Secretary to the Treasury and the Financial Secretary on their promotions. Does my right hon. Friend join me in welcoming the Prime Minister’s proposals for infrastructure bonds, which will boost economic growth and give the country vital infrastructure?

[Mr Gauke]

My hon. Friend raises an important point about how the Government are doing all they can to support infrastructure in this country. As I said, we have a proud record on that, and an infrastructure pipeline worth, I think, £480 billion. We have taken steps to reform our planning system to help infrastructure, and established the National Infrastructure Commission. My hon. Friend is right to highlight the proposals set out by the Prime Minister in that area.

We can take measures to help improve infrastructure in this country, but all measures to help growth—whether our outward-looking approach to trade, our pro-business tax policies, or improving infrastructure or skills—can and must go hand in hand with the need to take our public finances seriously, and the Government will pursue that balanced approach.

What we hear from the Labour party continues to be unbalanced, and there is a failure to take into account the need for credibility with the public finances. Labour may have changed a lot of its personnel, but I fear that there is a degree of continuity in the failure to face up to challenges in the public finances, and the motion reflects that. I therefore urge the House to oppose the case for fiscal indiscipline that we have heard today, and to oppose the motion before us.