Budget Responsibility Bill

Baroness Kramer Excerpts

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

[Baroness Kramer (LD)]

My Lords, I am pleased to welcome the Bill. My colleagues in 2010 were very closely involved in the creation of the OBR in order to provide an independent analysis of the UK economy free from party politics. The noble Lord, Lord Macpherson, talked about the importance of the absence of political bias, and I think the noble Lord, Lord Murphy of Torfaen, echoed that same set of thoughts. We on these Benches believe that the OBR serves Parliament and the nation well.

A report from the OBR is not an examination judgment such as a “Good”, “Outstanding” or “Failing” from Ofsted. It is an analysis with which one can agree or disagree, but it enables policy and decisions to be made with deeper insight and challenged with greater insight. Obviously, forecasts must be part of that or the analysis is near meaningless.

Many noble Lords speaking today have suggested that there need to be further reforms, whether it is of fiscal rules, accounting rules or methodologies, and all that is worth looking at. We heard from the noble Lords, Lord Eatwell, Lord Altrincham, Lord Sikka and Lord Liddle, and the noble Baronesses, Lady Noakes, Lady Wheatcroft and Lady Lawlor. I have to say that I have a particular sympathy with the noble Lord, Lord Liddle, but it was also suggested by someone else—the name has escaped me—who challenged the current arrangement whereby the Treasury lays down the future spending plans that will be part of the OBR’s forecast. I would see much more scope for challenge there.

None of this is perfect, but to me it seems important that the OBR’s view does not dictate what policy or decisions will be. I say to the noble Viscount, Lord Trenchard, and the noble Lords, Lord Moylan and Lord Sikka, and the noble Baroness, Lady Bennett, who came at this issue from many different angles, that any politician or Chancellor with some backbone can accept or reject the conclusions that will come from the OBR, but presumably they will then have to explain in some detail why, and that process of challenge is crucially important.

A modern economy and a modern Government are so complex that, frankly, except for a small handful of institutions that have very extensive resources, it is extremely difficult to try to understand the primary elements of economic performance. It is really like trying to unravel a bowl of spaghetti if you come at it with the kind of tools, for example, that I would or many of my colleagues would have. But it is not just those outside of government that can use the OBR analysis; it is also data either to agree with or to challenge. I know from my very brief period inside government that the OBR view at least does something to check some of the groupthink that almost inevitably grows up inside government and which is a constant risk. Here is one of the opportunities to challenge that groupthink.

Frankly, I was stunned in 2022 when the then Prime Minister Liz Truss and her Chancellor Kwasi Kwarteng suddenly announced a mini-Budget with the biggest tax cuts in 50 years and soaring borrowing with no OBR analysis or economic forecast attached. The Bank of England, which also had no advance warning, had to step in to prevent financial meltdown as the markets went into shock, both from the content of the mini-Budget but also from the manner of its doing. I will not dwell on the consequences, because, as I think the noble Lord, Lord Liddle, said, the country gave its verdict at the last election, except to say that to this day ordinary people are still hurting, and hurting badly, from the consequences of that Budget and the manner of its introduction.

Why did the Truss Government turn their back on the OBR? They could easily have requested a draft forecast, and indeed one was offered by the OBR. I think it was because we had a series of Tory Governments which found economic truth at best “inconvenient”, and especially the consequences of Brexit—I heard that in some of the speeches today—and the permanent scarring of the economy that followed. Ministers would talk about the 2008 financial crash, Covid and the energy crisis arising from the Russian invasion of Ukraine. However, from on high or through self-denying ordinance, the B-word was banned, despite being far more damaging and a far more permanent blow. We heard speech after speech, month after month and year after year, in which there was omertà on that particular set of issues. As far as I can see, the OBR has never hesitated to name both the problem and the causes of a problem and to lay out its rationale. It can be challenged, but it has not flinched.

I very much hope that this new Government would never behave in the same way as Liz Truss—or any other Government, quite frankly; I hope that lessons have been learned. But the problem is that the horse has bolted. Financial markets will always suspect that a British Government are capable of the arrogance, self-interest and ideology to produce sweeping fiscal policy without any kind of unbiased or objective analysis—I think the noble Viscount, Lord Chandos, made that point. That indeed is the value of this piece of legislation.

This is a money Bill, so I cannot propose amendments. Were it not so, it would indeed be nice to be able to go through a process of probing amendments at the very least to try to understand more about some of the terminology, to understand what a “fiscally significant” event is and more about the issues of “temporary” and “emergency”. The noble Lord, Lord Davies of Brixton, raised similar points on trying to get greater clarity on this issue. I join others—I think the noble Lord, Lord Liddle, was the last to mention this—on wanting to understand how change can happen through the Charter for Budget Responsibility. We are going to be notified 28 days in advance, but I would love to have seen, at least from a Minister, some commitment to bring such issues to the Floor of the House for debate, which is where they belong—and remember that the Charter for Budget Responsibility was set up under the umbrella of primary legislation that started in this House. However, we are where we are, and when it comes indeed to the heart of the issue, do we support the Bill or do we not? We do.