Charter for Budget Responsibility

Daisy Cooper Excerpts

Wednesday 29th January 2025 Commons Chamber

[Richard Fuller]

The Chief Secretary to the Treasury, like so many on the Labour Benches, loves to talk—almost fondly—about the former Prime Minister Liz Truss. Well, at least she knew her time was up after 50 days; we are stuck with the Chancellor for five years.

When it was noted a few months back that the entire Labour Cabinet could barely scrape together a year’s worth of business experience between them, it was thought to be just a curiosity. Little did we know it was an early warning sign of their lack of suitability for the task of managing the British economy: business confidence down, job losses up, consumer confidence in the gutter and Government debt spiralling further upwards—and they are just getting started.

There are, of course, potential benefits from the investments that are being announced today. We share a desire for a more competitive, less regulated economy based on a passion for free enterprise, but while Labour celebrates the exodus of millionaires from our country, we recognise that it represents a loss of skills, lower job creation, and the evaporation of potential future taxation to support public services. While Labour sees the attack on family farms and family businesses as a vital part of its warped class-war ideology, we recognise that putting family at the heart of enterprise is a critical piece of our nation’s proud heritage of freedom.

[Daisy Cooper (St Albans) (LD)]

The shadow Minister talks fondly about the importance of family farms. Where were his comments on that topic when his party was negotiating trade deals with Australia and New Zealand that have sorely impacted farms around the country?

[Richard Fuller]

My friend, the Liberal Democrat spokesman on economics, makes a fair point about the impact of trade agreements on family finances. However, as she knows, that is very different from the pain that farmers are feeling right now about Labour’s attack on the ability of families to pass on their farm to their children—it is different in scale and in type. It is a damaging policy by the Labour party that we know, or at least hope, that Labour will change in due course.

I am sure that today, the Chief Secretary to the Treasury is also engaged in a series of phone conversations with his departmental colleagues as, ahead of the March update on the OBR’s financial forecast, they review what it will mean for their departmental expenditures. As he has those difficult phone conversations, I say to the Chief Secretary that we stand ready to support effective steps on prudent financial responsibility.

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[Daisy Cooper (St Albans) (LD)]

The charter for budget responsibility is at the heart of the OBR’s function, setting the Government’s fiscal rules, as well as the OBR’s broader remit and how it is to perform its duties. It is important to stress just how vital the OBR is for the sound management of our public finances and for the UK’s economic stability.

I am very proud that the OBR was set up during my party’s time in office, and the Liberal Democrats have backed it at every turn since. In our most recent general election manifesto we said that every fiscal event should be accompanied by an OBR report, and we are pleased that this Government are taking the same approach. We also called on the Government at the time to establish the OBR to assess general election manifestos independently.

Unfortunately, commitment to the OBR as an institution cannot be taken for granted, as we have seen over the past few years. We saw Liz Truss’s Conservative Government sideline the independent watchdog at the mini-Budget and cast doubt on its forecasts at every turn. Equally unfortunately, we all witnessed the consequences: soaring interest rates, sky-high mortgage bills and a spike in the cost of servicing our national debt. We Liberal Democrats are crystal clear that we can never have a repeat of that debacle.

[Matt Rodda]

The hon. Lady is making an excellent speech. Will she also reflect on the disastrous impacts on pensions savings, and particularly on people who were drawing their defined contribution pensions at that point in time? Some of my constituents had awful experiences, which they relayed to me.

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[Daisy Cooper]

The hon. Gentleman is right to point to the fact that many people were impacted by the mini-Budget in different ways. [Interruption.] I hear chuntering from a sedentary position from the shadow Minister, the hon. Member for North Bedfordshire (Richard Fuller). Those on the Conservative Benches may want to forget the impact of the mini-Budget, but many of our constituents across the country continue to live with the consequences.

In the run-up to the Labour Government’s Budget, we Liberal Democrats welcomed one of the Government’s new fiscal rules—namely, the switch to public sector net financial liabilities as the targeted measure of debt. We are pleased that the Chancellor made a change that will create more room for productive public investment, while also making a commitment that debt as a share of GDP should keep falling. We Liberal Democrats have long recognised the need to boost public investment in a responsible way, and we are glad that the Government have moved in that direction.

However, as we debate the new charter, it is also worth reflecting on how fiscal rules are treated in our politics more broadly. Although they are absolutely necessary for economic stability, there is too often a sense that fiscal targets can be arbitrary and that they are chosen based on what is convenient for each Government; previous Conservative Chancellors changed the fiscal rules five times in seven years between 2015 and 2022. What often seems to be lacking throughout the process is a sober, pragmatic dialogue about what the best fiscal rules are for our economy, for everything from growth and investment to jobs and net zero—a discussion perhaps ideally not affected by politics, but focused on what is right for our economy.

Notwithstanding that, and although I hope we will all agree to these changes in the borrowing rules, the costs of borrowing clearly rely on good economic management, which, in turn, as the Chief Secretary said, relies on stability. Borrowing costs have gone up in part due to events abroad, but they have also risen because of the Government’s jobs tax, the uncertainty over their business rates reform and the impact that that will have on small businesses. It is therefore clearly important that we recognise that any changes to productive borrowing must go hand in hand with the responsible management of day-to-day spending and tax changes.

A second point, which I made in an earlier debate around the time of the Budget, is that although the Liberal Democrats welcome productive borrowing for investment, we recognise that the Government’s headroom is quite slim. Will the Minister be able to offer a word or two about which measures the Government are taking to ensure that we have a resilient economy that can withstand any external shocks? We live in a very uncertain world. There are rumours of trade wars and tariffs, and God forbid we have another pandemic. It is only by having a resilient economy that we can withstand unpredictable external shocks.

There are several elements in the charter that we support, and we do not want to stand in its way, but I express the hope that, from here on in, we may be able to adopt an approach to fiscal rules that is more pragmatic, open and grounded in what is best for our British economy.

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[Darren Jones]

That is a very strong accusation, which I refute in the strongest terms. The Chancellor was very clear that debt would be falling as a share of the economy. That is the fiscal rule. As predicted by the OBR, we will deliver on that promise. It is right that the Chancellor chose at the Budget to define debt as public sector net financial liabilities. The big question is why. As the Liberal Democrat spokesperson, the hon. Member for St Albans (Daisy Cooper) said, it is because having a Government with stability and competence at their core means that we are borrowing not to pay for out of control day-to-day spending, which I think everyone in the House would agree is an unsustainable path to higher debt burdens, but instead borrowing responsibly within guard rails for investments, predominantly alongside the private sector, to enable, for example, infrastructure delivery across the country or investment in businesses, for example, through the national wealth fund.

The reason that the public sector net financial liabilities debt rule is important in that context is because it reflects the fact that, where Government have an equity stake or have provided debt for non-commercial terms, there is a rate of return. The taxpayer receives some of the benefit of that investment and growth in the economy, which I am sure we would all welcome. There is the important difference about the type of debt. Under the last Administration, debt was spiralling out of control because the last Government could not pay their day-to-day bills. Everybody knows, whether they are running their household finances or the country’s finances, that that is not a sustainable thing to do.

That has changed under this Government. Debt will be for productive investment only and day-to-day costs will be met by revenues. Yes, that means that public services have to live within their means, and often that means difficult discussions in the spending review that I have to conduct with Secretaries of State, to which the hon. Gentleman alluded. However, all of us around the Cabinet table recognise not only the non-negotiable nature of the fiscal rules, which are the foundation of economic stability, but the prize of the modernisation and reform of our public services. He will have heard the Prime Minister and other Secretaries of State talk about just that fact. There is a huge amount of opportunity to achieve better outcomes for people at lower cost, not just through basic technology but by improving the way we deliver public services. That means delivering services designed around the person and how they wish to interact with the Government. It means that people can receive support from different Departments and different functions, and they can receive the information they need at the time they need it.

Let me give one example. In the constituency of my hon. Friend the Member for Filton and Bradley Stoke (Claire Hazelgrove)—just north of my Bristol North West constituency—I visited a community diagnostic centre. The CDC programme began under the last Administration, but we have committed ourselves to it. The provider works in partnership with the NHS trust, charging exactly the same rate as the hospital for a diagnostic scan. The company involved does not make profits in comparison with the hospital costs; it is the same NHS tariff rate. People can have MRI and CT scans, gastroscopies, and other tests. The centre is attached to a branch of Asda and there is plenty of free parking.

I asked the owners, “Why are you able to charge the same rates as the hospital in my constituency while running this service more effectively?” They said, “We are open for 14 hours a day from Monday to Saturday and for 12 hours on Sunday, we sweat the assets more than a hospital can, and we have new bits of kit with AI that are more productive to use”—which is why the Health Secretary wants to roll those out across the NHS. They also said that the customer service was the key driver for productivity, because customers could book their appointments and move them if necessary, they could visit the centre after work, and they could go there between shopping trips. Essentially, the service has been designed around the patient. Patients turn up pretty much all the time, and they are never not able to do so. That is just one example of the way we are modernising public services.

[Daisy Cooper]

The Chief Secretary has given a fantastic example of how improving capital infrastructure in the NHS can improve productivity, but one of the big frustrations in the NHS is the fact that staff cannot be productive because the buildings around them are falling apart. I have seen that in Watford General hospital, where A&E staff cannot be as productive as they might be because they are in a crumbling, cramped hospital. Has the Treasury considered conducting any assessment of the productivity gains that could be produced by the new hospital programme, and by potentially speeding up the delivery of those hospitals?