Budget Responsibility and National Audit Bill [Lords]

Debate between Alison McGovern and Angela Eagle

Monday 14th February 2011 Commons Chamber

[Ms Eagle]

This is how we can get into difficulty with forecasts, which are static when they are made but apply to a dynamic situation. The hon. Gentleman knows, for example, that our debates in the House are, in part, about the effects on growth of a drastic fiscal consolidation. Our contention has always been that cutting too far too fast will suppress growth to such an extent that the deficit reductions that were hoped for will not come about. That is an essential part of the economic debate that, as far as I can see, we have been having since the Budget in June last year.

Forecasts can be affected by subsequent events and by Government policies. That demonstrates that what matters most is not forecasting for its own sake, but the judgment of the Chancellor of the Exchequer and the Government, and the extreme fiscal choices that they have made.

[Alison McGovern (Wirral South) (Lab)]

Does my hon. Friend agree that we have another independent forecaster, the Bank of England, which was made independent in 1997? What lessons from the interaction between the Treasury and that independent forecaster ought to be applied to the relationship between the Treasury and the OBR?

[Ms Eagle]

In order to fulfil its duties, the Bank of England produces its own forecasts, which do not always agree with what were previously Treasury forecasts and will now be OBR forecasts. There are also a number of independent forecasters out there with their own view of the situation. Forecasts range from optimistic to pessimistic, and those of us who watch these things learn to take account of that. Regarding OBR forecasts or forecasts of the Bank of England as statements of the unvarnished truth will quickly get us into difficulty.

Finance (No. 2) Bill

Debate between Alison McGovern and Angela Eagle

Monday 11th October 2010 Commons Chamber

[Ms Eagle]

The hon. Gentleman is arguing that we should do the opposite of what the Government decided to do in June. I hope that, in due course, we will see him in the Lobby with us.

[Alison McGovern (Wirral South) (Lab)]

I thank my hon. Friend for giving way and welcome her to her new role. I am pleased to see one of my Wirral constituency neighbours at the Dispatch Box. I was not a Member of the House at the time, but I recall the temporary VAT reduction to 15% as being just that—a temporary improvement for consumers to build confidence. Will she assist me? Was that the case and how does that measure compare to the VAT proposals made by the Chancellor in his Budget?

[Ms Eagle]

Clearly, that measure was temporary and well signalled in advance—a cut to boost the economy in the short term in the most effective way. The interesting thing about what has been announced since June is that the VAT increase appears to be permanent. We are also seeing a range of other announcements, such as the shift from the retail prices index for benefit increases to the consumer prices index—not temporary to deal with a situation in front of us, but seemingly permanent.