Charter for Budget Responsibility
Debate between Ed Balls and Guy Opperman(9 years, 11 months ago)
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Ed Balls
I agree with the right hon. and learned Gentleman. I am not going to pick over past debates, but when he led his party through the Lobby opposing Bank of England independence, well, that was then; and when he advocated Britain joining the single currency in 2003, well, that was then. We probably agree on other things these days.
Let me take the right hon. and learned Gentleman to the most recent OBR forecasts. He makes an important point about trend, and in 2010 the OBR forecast that the underlying growth in our economy—trend growth—would in this Parliament, in 2014, be 2.1%, but in its most recent document it has revised down the underlying trend in 2014 from 2.1% to 1.7%, so, despite the reforms he talks about, we have been going backwards in terms of trend growth and productivity.
On the other hand, if we can raise through reform—I will come to this in a moment—the underlying trend growth of the economy, we can turn this around. These are not my numbers; they are the OBR numbers. The numbers show that if we were able to increase the underlying trend growth of the economy by just 1%, so it was 1% higher by 2019, which is the equivalent of about 0.2%—
Ed Balls
In a second; not in the middle of a sentence. That 0.2% a year improvement in the underlying growth of the economy would, by the end of the period, bring in £15 billion a year more in tax revenues. So the trend of growth has gone in the wrong direction under this Chancellor and the key for the next Parliament, as well as spending cuts and tax rises, is to improve the underlying growth of the economy. If we can do that, we can bring in the revenues. If, on the other hand, we fall short in the next Parliament under the same Chancellor in the same way as we have in this Parliament, that would lead to over £110 billion in extra borrowing. If we are going in the wrong direction on growth and wages, the revenues do not come in and the deficit does not come down. We have got to improve the underlying growth potential of the economy. The right hon. and learned Member for Rushcliffe and I agree on that, but I do not think that this Chancellor understands the point.
Ed Balls
The problem is that the Chancellor said he would make people better off, and they are actually worse off at the end of this Parliament; he said he would balance the books, but he has not got the deficit down, and the reason is that trend growth and productivity have been weaker than he expected in 2010, which means the tax revenues have not come in. So in fact the opposite is true. It shows that we need a proper plan for jobs and growth to turn around the underlying growth of the economy. On that, he has totally failed to deliver.
Ed Balls
In a second. First, let me turn to the fiscal mandate, because this is where the Chancellor’s position becomes, to be honest, farcical. The current fiscal charter says:
“The Treasury’s mandate for fiscal policy lapses at the dissolution of this Parliament.”
Rather than lapses, I would say that it has totally collapsed in this Parliament. It is totally discredited. Even the TaxPayers Alliance can now see how discredited the Chancellor’s forecasts are for this Parliament, but the Chancellor has a bail-out clause, because in the old charter it says that he has a
“duty to set out a fiscal mandate”
which
“will require the Treasury to set out a revised mandate for fiscal policy as soon as possible in the life of the new Parliament.”
This Chancellor, always alive to trying to find a new gimmick, decided—and has told every Tory commentator going—that this is a new trap for Labour. That is what we are going to get. It is not a stunt; it is not a gimmick; it is a trap for Labour. The problem is that, as we have seen today, this has been an opportunity for us, him and the TaxPayers Alliance to highlight to the country how much he has totally failed in this Parliament on fiscal policy. It is not only a chance to show how extreme his plans are for the next Parliament—and I will come to that—but he has not even managed to deliver the trap he promised.
Guy Opperman
I did not want to disrupt the shadow Chancellor’s flow, because I know he is easily distracted. Is it not because of the Chancellor’s support for the north-east by way of city deals, manufacturing and business support that the north-east now has the fastest rate of growth in private sector business in the autumn quarter, and the highest rate of growth in exports? Surely that is evidence that this economy has been turned around by a Chancellor who cares about business and manufacturing?
Ed Balls
Maybe we could form a consensus on the way forward on devolution for the regions—I am in favour of that and so is the hon. Gentleman—and that is not the only thing we could form a consensus on, because this is what he told ConservativeHome just recently:
“A bit of extra tax on properties over £2 million seems perfectly fair to me.”
I am with him all the way. Maybe we should get together on that one as well—you shouldn’t have let that one through, George!
Let me come back to the vote and what the Chancellor said at the time of the Budget. He said:
“Britain needs to run an absolute surplus in good years…To lock in our country’s commitment to this path of deficit reduction, we will seek the support of Parliament in a vote, and I will bring forward a new charter for budget responsibility this autumn.”—[Official Report, 19 March 2014; Vol. 577, c. 784.]
The vote was supposed to be on an absolute surplus. That is what the Chancellor was talking about. The Prime Minister on 15 December—the day the new charter was published—attacked Labour for our proposal for two or three years to get the current Budget into surplus. What was surprising about that speech was that the Prime Minister made it, did the Q and A, and got off the stage before the Treasury published the new charter. That was an odd thing to do when he was talking up the charter. Why would they not put it out in advance? It turned out to be because the Prime Minister had just finished a speech attacking Labour and our plan to get the current Budget into surplus, and then the Treasury published a new fiscal charter committing the Government to get the current Budget into surplus. No wonder he got off the stage so quickly.
The Chancellor promised in the last Budget a vote to balance the overall budget. Now the Government have done a U-turn and are proposing a vote on the current Budget excluding capital investment, which is the same measure we have been committed to for three years. Can he confirm that in the last Budget he promised a vote on an absolute Budget surplus and this charter before us is a vote on the current Budget? Is that right?
Also, when we study the fine print of this fiscal mandate, we find that it turns out to be even more different from the old one than I expected. The old fiscal mandate talked about having a target to balance the current Budget in 2015-16 and a target to have the national debt falling. We can see why this Chancellor has got a little worried about setting targets because they have not gone very well. It turns out that in this new document it has been downgraded from a target to an aim. Why have the words changed? Would the Chancellor like to explain?
Economic Growth
Debate between Ed Balls and Guy Opperman(11 years, 7 months ago)
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Guy Opperman (Hexham) (Con)
I am glad to see that the shadow Chancellor is beginning to agree with our plans for regional banking reform with local banks. However, he would improve his banking credibility if he were to repay the £3 million owed by the Labour party to the Co-operative bank. Does he agree with that?