George Osborne
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Charter for Budget Responsibility
George Osborne Excerpts(9 years, 11 months ago)
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The Chancellor of the Exchequer (Mr George Osborne)
I beg to move,
That the Charter for Budget Responsibility: Autumn Statement 2014 update, which was laid before this House on 15 December 2014, be approved.
The charter sets out the next steps we take to turn Britain around and ensure that the mistakes of the past are not repeated. People will remember the fiscal crisis facing this country five years ago: a deficit that stood at more than 10% of our national income; a Government borrowing £1 in every £4 they spent; a Treasury whose departing Chief Secretary left a note saying simply that there was no money left; a country described by international bond investors as sitting on the financial equivalent of a bed of nitro-glycerine; and a British economy whose ability to pay its way was questioned in the world. That was the appalling inheritance left to us by the last Labour Government.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The Chancellor mentions a British economy with an ability to pay its way. When did the UK last pay its way? When was it last not in deficit?
Mr Osborne
The last time it was not in deficit was when people followed Tory spending plans: there was a surplus at the end of the 1990s and 2000. That is what we advocate again.
At the moment of maximum danger five years ago, as much of the rest of Europe became engulfed in a sovereign debt crisis, Britain faced a choice: did we have the resolve to cut our spending, cut our deficit and set a course for economic stability, or did our country go on borrowing and spending our way to economic ruin?
Sir Edward Leigh (Gainsborough) (Con)
But surely we cannot relax for a moment. When we say we have cut the deficit by half that is good, but it gives the impression that the problem is solved and we are still borrowing £90 billion a year. The debt is still at about £1.7 trillion. Therefore, we cannot relax for a moment and we cannot allow there to be any sort of Government who let the anchor off. We therefore have to say no to a Labour Government.
Mr Osborne
My hon. Friend is absolutely right. Having brought the deficit down, we have to complete the job. We have to run a surplus and get our national debt down—that is what this debate is about. We remember Opposition Members in this House five years ago urging on us a ruinous course of more borrowing and more spending, the very same people who had presided over the borrowing and spending that had put Britain into such a perilous position.
Mr Osborne
I will give way in a moment, but I want people to remember that the country knew better than to listen to Labour again. The country supported this Government as we took the difficult decisions required to cut our spending, reduce our borrowing and get our country living within its means. Then, when the problems in the eurozone became acute and the currency union on our doorstep was threatened with collapse, we heard again, as we hear now, the siren voices luring us on to the economic rocks. “Stop the cuts,” they said, “Spend more, borrow more, adopt a plan B”. But Britain stayed the course. We did not spend more. We did not spend less. We worked through our plan. The result, in the verdict of the International Monetary Fund, is that no other major economy has achieved such a substantial and consistent reduction in its structural deficit over recent years.
Ed Balls (Morley and Outwood) (Lab/Co-op)
The Chancellor told this House that if Britain was to lose its triple A credit rating it would be a disaster for Britain. Can he remind the House when Britain lost its triple A credit rating? Was he the Chancellor at the time? When are we going to get it back?
Mr Osborne
We retain our triple A credit rating with some credit rating agencies. I can tell the right hon. Gentleman one thing for sure: the only way we will get back our triple A credit rating is by dealing with our debts, cutting our spending and making sure this country can live within its means. If anyone thinks the answer to Britain’s debt problems is to borrow £170 billion more, which is what the Labour party is proposing, they will be leading Britain back into economic ruin.
We remember what the shadow Chancellor said was going to happen if we pursued this plan. He said we would choke off growth and that there would be a double-dip recession. Britain has grown faster than any other major European economy in the past four years. We have grown faster than any major economy in 2014 and the one recession we had was the one big recession, the great recession, on Labour’s watch.
Alok Sharma (Reading West) (Con)
It was of course a Labour Government, led by James Callaghan, who went cap in hand to the IMF, and the Blair-Brown Government left us with a record deficit. Does the Chancellor share my view that it does not matter what that lot say today? History repeats itself and, when it comes to Labour, we cannot trust them with the public finances.
Mr Osborne
You cannot trust the Labour party with people’s money. Every Labour Government leads this country into bankruptcy. Every Labour Government left office with unemployment higher than when it came to office. That is what Labour does when it gets into office. People remember that and they will not trust them with the public finances again. We remember what Labour said was going to happen to jobs: they said that 1 million jobs would be lost. Instead, we have 1.7 million more people in work. Unemployment is falling. Youth unemployment is down by more than half. Full employment is in sight. They said that public services would be decimated and crime would rise. Crime has fallen and satisfaction with local government services is up. They said that the north of England would suffer the most, just as it had suffered the most in their great recession. Now, the fastest growing part of our economy is the north of England and we are building that northern powerhouse.
Alec Shelbrooke (Elmet and Rothwell) (Con)
I wonder if my right hon. Friend, during his busy schedule, was able to notice the comment of the Labour leader of Leeds city council, who said that he has to hand it to George Osborne because he is doing more in the north of England than a Labour Government ever did.
Mr Osborne
There has been a constructive alliance between Labour civic leaders in the north of England and Conservatives to bring an elected mayor to Greater Manchester and deliver High Speed 2. We have done so in the face of the opposition of the Labour shadow Chancellor, who has tried to frustrate all these things all along. Thankfully, Labour civic leaders are not listening to those on their own Front Bench anymore.
Although the deficit has been halved, at 5% of our national income, it is too high. Our national debt, at 80% of our national income, is too high.
Mr Andrew Tyrie (Chichester) (Con)
There have probably been about half a dozen attempts to try to buttress fiscal policy with rules in the past 30 years. Most of them have collapsed at some point during the business cycle. To get something that works, does the Chancellor not agree that we need something credible, not just for dealing with the deficit but for reducing the stock of debt, and that that must mean over the cycle running a surplus?
Mr Osborne
My hon. Friend is absolutely right. It is not enough to eliminate the deficit. We then have to get our national debt down. It is too high and leaves us exposed to the next economic shock. We do not want to go into the next economic shock with a debt-to-GDP ratio of 80%. That is precisely why, in good economic times, we need to be running an overall budget surplus. That is the only credible and sustained way to get national debt down. That is the way to fix the roof when the sun is shining.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
Was it not the case that the right hon. Gentleman’s boss, the Prime Minister, said that he would balance the books by 2015?
Mr Osborne
What we have done is cut the deficit by a half. We have neither gone faster than we said we were going to go, nor gone slower than we said we were going to go. We have stuck to our spending plans when people were urging us to take either course. To get lectures in managing the public finances from the Labour party is extraordinary.
Mr Osborne
I will give way in a moment. Labour are in the bizarre situation of complaining that we are borrowing too much, yet they want to borrow even more. Perhaps the shadow Chancellor can help to illuminate this debate and simply confirm that a Labour Government would borrow more than a Conservative Government.
Ed Balls
The Chancellor just said to the House that he has not gone slower on the deficit than he intended to in 2010, but the Office for Budget Responsibility says he has borrowed more than £200 billion more than he planned. Can he explain that remark? I have to say that I think everybody in the country will be totally baffled by the Chancellor’s remark.
Mr Osborne
We have delivered exactly the spending plans we set out in 2010—we have not gone faster, we have not gone slower. Indeed, spending this year is a little bit lower than I predicted in 2010.
Mr Osborne
I will give way in a moment.
There is going to be a test in this debate: will Labour confirm it will borrow more? It cannot complain about our spending cuts if it does not confirm that it would borrow more.
Mr Osborne
We have delivered exactly the spending plans that I set out and which the shadow Chancellor opposed. If he is complaining about those spending plans, and if he would like to spend more, he should be honest with the British people and say that a Labour Government would like to borrow more. Why does he not have the courage to tell the truth? The truth is that he does not tell the British people the truth because he knows that when they discover he wants to borrow £170 billion more, they will not let him near Downing street again.
Andrew Bridgen (North West Leicestershire) (Con)
Does the Chancellor recall, when the Government outlined their deficit reduction plan, that Opposition Members, including the shadow Chancellor, said we were going “too far, too fast”? Now the right hon. Gentleman criticises us for not cutting the deficit enough. Will he make his mind up?
Mr Osborne
It is a totally chaotic and farcical position from the Labour party. It has spent the first two weeks of this year complaining that the Conservative party is cutting too much and promising that it would not cut as much, but now Labour Members are going to troop through the Division Lobby with us in support of a charter that requires £30 billion of fiscal consolidation over the next couple of years. To be fair to the Scottish National party, I think its Members are going to vote against us, as too is the Green party, but Labour Members are sitting there in total silence. They are going to go through the Division Lobby with us to support £30 billion of spending cuts. [Interruption.] Cheer up, it is what the Labour Front-Bench team has asked you to do. It is going to lead the party through the Division Lobby because it does not want to admit to the British people that its plans involve spending more money.
Mr Osborne
Will the hon. Gentleman, who has experience at the Treasury, confirm that Labour’s economic policy is to borrow more?
Mr Robinson
The Chancellor is asking us to be honest and state our position. Will he tell us what he said today? A few moments ago, he clearly said—we can all check Hansard tomorrow—that he had not gone any slower on reducing the deficit. He said that word for word. We are simply inviting him to clarify his remark—to tell us it is not correct, that we must have misheard, or that he will correct Hansard. Whatever he does, will he clarify his position? He is clearly totally out of order.
Mr Osborne
The hon. Gentleman can check Hansard now if he likes. I was clear that we stuck to our spending plans—we did not go faster, we did not go slower—and reduced the deficit by a half, and we are going to carry on with the job.
Mr Osborne
I will give way to the shadow Chancellor in a moment, but I want him to understand what he is asking the Labour party to vote for. To their credit, the SNP and the Green party understand that they do not want to agree with our spending cuts.
The charter sets out that the OBR will continue to monitor our fiscal rules. This is a major innovation. We take it for granted now, but only five years ago we had a Labour Chancellor and the team behind him fiddling the figures and making sure they were marked against their own rules. We then commit in the charter to achieving falling national debt by 2016-17 and a surplus on our cyclically adjusted current budget by 2017-18. That requires £30 billion of consolidation. So for the third time, I ask the shadow Chancellor: will he accept that his plans involve borrowing more? What is wrong with the “borrowing” word? He used to give whole lectures about why the country should have a fiscal stimulus and borrow more. Why does he not get up and say, “Yes, Labour would borrow more”?
Ed Balls
We can accept that the Chancellor may have misspoken—we can check Hansard—but will he confirm that he has reduced the deficit much more slowly than he intended and borrowed £200 billion more than he planned? We do not need to debate what he said. Will he just confirm whether he has reduced the deficit much slower than he planned and borrowed a lot more?
Mr Osborne
We have halved a record budget deficit to 5% of national income. The shadow Chancellor says we should have borrowed more, and his plans involve £170 billion of more borrowing, yet he finds himself in the extraordinary position of asking the Labour party to vote for a charter that requires £30 billion of more consolidation. Where should that £30 billion of consolidation come from? To be fair to the Liberal Democrats, they say we should increase taxes to help achieve that consolidation. The Conservatives say it can be achieved by bearing down on spending, the welfare budget and tax avoidance—£13 billion of savings from the Departments, £12 billion from welfare and £5 billion from tax avoidance. That is our clear plan. Labour cannot pretend to support the charter while claiming that the £30 billion does not exist. It is a totally chaotic position.
Mr Osborne
Will the hon. Lady, who will be voting for the charter, tell us where she would find the £30 billion of cuts?
Julie Hilling
I have been trying to get in for a while, so I am grateful to the Chancellor for giving way now. I cannot move on from what he said about cutting the deficit at the level he said he would. Unless my memory is false, he said in 2010 that he would get rid of the deficit over the Parliament. Furthermore, did he intend there to be three years of flat-lining growth?
Mr Osborne
The British economy has grown faster than any major European economy over the last four years. It has created 1.7 million new jobs and 750,000 new businesses, and today the Governor of the Bank of England described it as being in a “sweet spot”, but Labour opposed every difficult decision we took to do that. It opposed every spending cut and welfare change. It goes around the country pretending it would reverse these things. It has made £20 billion of unfunded spending commitments. Every day in this Chamber, Labour Members ask for more public money to be spent on more things and complain about the difficult decisions we have taken. It is a totally incredible position from the Labour party and it is being exposed today.
Charlie Elphicke (Dover) (Con)
Is it not obvious that the Labour party is stuck in the past, talking about things done years ago and frightened to talk about the future? Did the Chancellor hear Paul Johnson from the Institute for Fiscal Studies say on the “Today” programme that borrowing would be higher under a Labour Government and that debt would be higher in the long run? The IFS says it; the Labour party ought to admit it.
Mr Osborne
My hon. Friend is absolutely right. The IFS today confirmed that Labour would borrow £170 billion more. This is its published plan. It is extraordinary that Labour Members are totally silent about it. They are not prepared to talk to the British people about what I assume they believe to be the right economic policy for the country.
I want to make sense of this strange journey that the Labour party has taken on fiscal policy over this Parliament. After all the twists and turns, I think it has managed to end up in exactly the same place as it started. In 2010, as part of his pitch for the Labour leadership—we thought at the time he was a worse choice than the current leader, but given all that has happened, perhaps we were wrong—the shadow Chancellor said we should not be cutting spending. He said that more spending would grow the economy and that the economic growth would eliminate the deficit. That was the position he set out in his Bloomberg speech—his so-called plan B. The problem was it was rejected by the British public and eventually by the Labour party. So two years ago, Labour changed its approach and committed to the original phrase of “iron discipline”. The only problem was there was no iron discipline and instead it made all those spending commitments. Last autumn, it moved on to another approach—the Basil Fawlty approach—which was not to mention the deficit at all. I think the House can agree that the Labour leader executed that strategy brilliantly at the Labour party conference.
In December, at the end of last year, Labour tried something else. The shadow Chancellor announced that he would seek to balance the current budget and get debt falling, but he would not say when, saying just as soon as possible. When pressed on specific dates, he dismissed them; he said he would not sign up to some arbitrary timetable. When challenged specifically to match our plans, he said a month ago, on 11 December, that he was not going to set a timetable to balance the current budget by 2017. Here he is, one month later, saying that he is going to vote in favour of a timetable to balance the current budget by 2017-18.
I thought that was the end of Labour’s journey. They had ended up supporting a charter that they had previously rejected, a timetable to which they had previously refused to sign up and £30 billion of cuts they had previously denounced. Then, this weekend, we were treated to the spectacle on “The Andrew Marr Show” of the Labour leader dismissing the charter altogether, rejecting the £30 billion figure and returning full circle to where the Labour party started four years ago. This is what the Labour leader said on Sunday:
“if we just try and cut our way to getting rid of this deficit, it won’t work.”
That is the latest version of the Labour party’s policy. It is exactly where they were four years ago. The Labour leader has gone full circle and gone back to saying that the answer to our debts is simply to grow the economy. That is economically illiterate when we have a structural deficit, and it is based on the fiddle of trying to upgrade the country’s trend growth rates—exactly the mistake made by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) when he was Chancellor and got us into this mess. Labour has gone from plan B to plan A to no plan at all.
Ed Balls
The Chancellor is shouting a lot and sounded a bit rattled. Will he clarify where in the charter for budget responsibility it says that we are going to balance the current budget in 2017-18? It actually says that it will be done
“by the end of the third year of the rolling, five-year forecast period.”
A moment ago, the Chancellor said it would be 2017-18, but where is that in the document? I cannot find it.
Mr Osborne
It does not augur well for someone who wants to be the Chancellor that he thinks three years from now is 2017-18. [Interruption.] He will have his chance. I have been wondering what he has been up to all this time while Labour has got itself into such a mess. Let me make this observation, and then I will give way to him. This gives us a clue to what he has been up to. He said to The Independent a couple of weeks ago:
“If I am sitting”
at the piano
“and I start thinking about the deficit, it all goes wrong. On the piano, you have to be totally focused”—
and with that set of priorities, I think the British people would agree that he should go on playing the entertainer and I will go on being the Chancellor of the Exchequer.
Ed Balls
The document does not say 2017-18, and nor does it say in three years’ time. It says
“by the end of the third year of the rolling, five-year forecast period”.
When does the rolling, five-year forecast period end—in 2017-18, in 2020-21 or in 2029-30? It is totally baffling.
Mr Osborne
The third year in the period is three years; that is 2017-18. Perhaps the right hon. Gentleman should use his piano fingers and count one, two, three.
Ben Gummer (Ipswich) (Con)
Does my right hon. Friend draw the conclusion from the Chancellor’s recent interventions—[Interruption.] I mean the shadow Chancellor’s interventions—he will wait a long time to become Chancellor. Does my right hon. Friend draw the conclusion from the shadow Chancellor’s interventions that he either does not understand the paper in front of him or is about to go through the Division Lobby to support something he describes as “baffling”?
Mr Osborne
I think the shadow Chancellor is trying to perpetrate a grand deceit on the British public. I think he has no intention of delivering the £30 billion of cuts. He does not want to do that: he wants to spend and borrow more, but he does not want to tell the British people the truth about that. We had independent confirmation from the IFS today that Labour would borrow £170 billion more. It confirms what we already know—that the Labour leader and the shadow Chancellor would do it all over again: tax, borrow and spend their way into an economic crisis, letting the British people pay the price in lost jobs, lost incomes and lost futures.
The shadow Chancellor faces a choice. He can either confirm by voting for this charter that he accepts the £30 billion of deficit reduction required to fulfil the objectives, in which case, since he does not approve of our spending plans, he admits that there will be major tax rises under a Labour Government; or he can reject the deficit reduction required, in which case he is confirming that voting for this charter today is nothing other than a grand deceit—pretending to the British people that Labour does not want to borrow more when that is exactly what it plans to do. With the Labour party, it is either a tax bombshell or a borrowing bombshell. The only question is which will it be. Either way, it leads to economic chaos for this country.
Mr Osborne
I give way to the Green party Member. We want her and her colleagues in the TV debates. At least the Green party is being straight about the fact that it wants to borrow and spend more money. Why does the Labour party not tell the truth about that?
Caroline Lucas
Does the Chancellor agree with me that with the feeble and inconsistent opposition coming from the Labour Front Bench, there is a very good reason for seeing the SNP, the Greens and Plaid as the real opposition on this issue because we are clear and consistent about the fact that austerity is not working?
Mr Osborne
That shows why we want the hon. Lady’s party in the TV debates.
What is clear today is that there is only one credible plan to deal with our debts, and that is our long-term economic plan. It binds us into eliminating the deficit, getting debt falling and running a surplus. It delivers economic security. This charter is part of that plan, and I commend it to the House.
Ed Balls (Morley and Outwood) (Lab/Co-op)
We have pledged to balance the books in the next Parliament. I said a year ago that the next Labour Government would get the current budget into surplus and our national debt falling as soon as possible in the next Parliament. This charter is fully consistent with our position, so on that basis we will support the motion today. We are not going to change our view about what is in Britain’s best interests, because of another one of the Chancellor’s silly failing games.
If you do not want to take this from me, Madam Deputy Speaker, an interesting press release was issued this morning by the TaxPayers Alliance—not an organisation I normally quote in the House. This is what its chief executive said just an hour ago about this debate:
“This is a meaningless political gimmick of the most transparent kind, and one that serves only to remind taxpayers”—[Interruption.]
The hon. Member for Dover (Charlie Elphicke) should listen to this. The chief executive said that this gimmick
“serves only to remind taxpayers how dramatically this Chancellor has missed his own original targets.”
We are happy to vote to remind people how much the Chancellor has missed his targets.
Mr George Osborne
I have a very simple question. If the right hon. Gentleman thinks it is a gimmick, why is he getting the Labour party to support it? What is his answer to that?
Ed Balls
I will explain that in my speech. What we have before us—this so-called trap—is not a trap at all, as I will explain. I will discuss the new fiscal charter in detail in a moment, but let us first be clear about the background to today’s motion and the new charter before us. This is not the first fiscal charter before us in this Parliament, but the second. The first was presented at the beginning of the current Parliament when the Chancellor lay before the House a charter committing the coalition to balance the books in this Parliament, to get the cyclically-adjusted current budget back into balance and the national debt falling by the coming financial year 2015-16.
As I reminded the House on the day of the autumn statement, the Prime Minister actually went further in 2010. He said that he would balance the Budget in 2015. However, just a few weeks ago, in the autumn statement, independent forecasts from the Office for Budget Responsibility confirmed that this Chancellor was not going to balance the books in 2015, or in 2015-16. In fact, public sector net borrowing in 2015-16 is now forecast to be £76 billion, £7.7 billion higher than was forecast even as recently as the Budget.
The figures on page 15 of the OBR’s “Economic and fiscal outlook” show that this Chancellor, in this Parliament, is borrowing—staggeringly—over £200 billion more than he proposed to spend in the 2010 plans. As a consequence, the national debt, compared to the 2010 forecasts, will be much higher in 2015-16 than he suggested. Back in 2010, he said that in 2015-16 the national debt would be 67.2% of GDP. According to the latest figures, it is now forecast to be not 67.2% but 81.1% of GDP, 14 percentage points higher than the Chancellor’s 2010 figure. Worse than that, according to the 2010 fiscal mandate the national debt would be falling, but the OBR figures show that in 2015-16 it will be rising again, from 80.4% to 81.1%. On the deficit, on the current deficit and on the national debt, the Chancellor made promises in 2010, in a clear fiscal charter, and he has broken every one of them.
Mr Clarke
No two crises are the same. The causes of the problems in the 1920s were quite different. The steps taken to stimulate demand then were too late. We have been running a deficit throughout these difficult times. We are not going into surplus until the next Parliament. As I have said, the circumstances in which the United Kingdom found itself trading are much more difficult than anybody predicted in 2010, but the idea that what we have done so far resembles anything that was done by the less successful Government in the 1930s is absolute nonsense. The idea that we are going back to the 1930s is also nonsense. The Labour Front Bench has just accepted that what has been proposed by the Chancellor is an essential pre-condition to any lasting success for the benefit of our children.
There are all kinds of other things, but I have no time to go into them. The structural changes that we, like many other Europeans with damaged economies, have got to go in for, and that we are going in for, include: bank regulation; skills training; education reform; and stimulating modern technological industry and businesses in this country. All of those are absolutely essential and include sensible infrastructure spending, which we are sustaining. Unless we get the deficit under control, we have no prospect of getting back to the kind of levels of growth to which we used to aspire. In fact, the debts we are running are rather easier to sustain with interest rates down to a 300 year-low. Once we go back to ordinary levels of interest, all those countries that have failed to tackle their underlying problems of fiscal discipline will find themselves in terrible, terrible trouble. This is a challenge for every western democracy, and it is a difficult message to get across in a democracy. The Greeks may be the latest population in danger of being seduced into not doing difficult things and living on other people’s money. That is very dangerous indeed. The next time that we have another crisis will be difficult because, with the present level of debt, we will have so little in reserve to draw upon to help us through.
The last Labour Government completely failed to foresee what happened, and I think that even now they do not quite understand where they went wrong. They ran a massive surplus during the dotcom bubble, because they stuck to my fiscal figures, and found their tax revenues were inflated for a time. Then, when the next South Sea bubble came around and we had the credit bubble and the credit crunch, they were still—at the top of crazy levels of growth—running a fiscal deficit. They borrowed, but claimed they did not have a deficit. Well, they did not have much of one in 2006, but once the crazy tax revenues from the City collapsed, they were left high and dry, with the full extent of their irresponsibility exposed. They had failed to regulate the mad borrowing and lending in the City of London just as the Americans had failed in Wall Street. It was free money, which their last Chancellor indulged in, and when the bubble burst they were caught.
Mr George Osborne
The former Chancellor is making a strong speech. He might remember that the Labour Government increased the trend growth rate—a decision that at the time was in the hands of the Treasury, rather than an independent OBR. That led them to spend more money and run a structural deficit—the highest, according to the IMF—during that period. Now, we have come full circle and the shadow Chancellor, who was an economic adviser at the time, is proposing exactly the same assumption to underlie his economic policy, so that he can spend and borrow more.
Mr Clarke
I entirely agree. The shadow Chancellor has done just the same today. In his way of looking at things, the future trend rate of growth will be what he says the future trend rate of growth has to be to justify his plans. I used to envy the Ministers in China, who did not have to worry about a national statistical office: what the Minister said the growth rate was now was what the statisticians told him his growth rate was.