Autumn Statement

Debate between George Osborne and Lord Darling of Roulanish

Wednesday 3rd December 2014 Commons Chamber

[Mr Osborne]

My right hon. and learned Friend makes a good observation about the shadow Chancellor’s career. I should pay tribute—probably for the first time—to the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who this week announced his retirement: first, for his commitment to advancing international development and to British aid, which I fully support; and secondly, because when he was shadow Chancellor, as we all remember, he built up a really compelling case for fiscal discipline. That, in part, is why the Labour party won the 1997 general election. That stands in such marked contrast to the shambles we see from the pair sitting opposite me now, who subsequently advised him.

On my right hon. and learned Friend the former Chancellor’s good point about devolution, of course both local government and the different nations of the United Kingdom—the devolution arrangements apply to both—will have in place robust arrangements that protect taxpayers across the United Kingdom. That is certainly an important part of the Smith commission report and how we must take it forward. It is also at the heart of the devolution settlements that we have discussed with English local authorities.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I am sure that the House will want to return to that last point on the UK Government’s ability to control their finances. Did I hear the Chancellor correctly when he was claiming credit for having halved the deficit over the course of this Parliament, because his view used to be that that would not be a terribly good thing? We are still borrowing £90 billion this year, and the reduced growth forecasts for the next five years, which we see in the OBR report, show that it will slow down, so can he tell us what impact that will have on the likely tax revenues, which of course have a bearing on our ability to pay down the deficit?

Autumn Statement

Debate between George Osborne and Lord Darling of Roulanish

Thursday 5th December 2013 Commons Chamber

[Mr Osborne]

I thank my hon. Friend for his support and his observation about what is happening in the economy. I complete agree with him. One of the things I said in the speech was that of course risks remain, the job is not done, productivity remains too low and we want it to grow. That requires economic reform and reducing taxes on business, which is what we have done again today.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I notice that the Chancellor’s growth forecasts follow a very familiar pattern of being fairly flat and then rising to, I think, 3.7% in four years’ time. That, of course, drives his assumptions in relation to borrowing and debt. Does he agree that risks remain not just in the eurozone, but here at home? In connection with that, could he tell me what the Office for Budget Responsibility is forecasting in relation to North sea oil revenues over the next few years, because there are some people who believe that that is a limitless source of funding for whatever they happen to be promising in the coming referendum? Finally, could he also tell me the source of the funding for the very welcome centre at Edinburgh university?

[Mr Osborne]

The right hon. Gentleman and I are both looking forward to the Higgs centre at Edinburgh university, which is a reminder of the scientific collaboration that can happen across the entire United Kingdom. We are, of course, incredibly proud of Professor Higgs.

The right hon. Gentleman makes a very good point about oil and gas receipts in the forecast from the entirely independent Office for Budget Responsibility. Its forecast today for the whole of the UK is that oil and gas receipts will be £3.5 billion in 2016. That compares with the £6.8 billion on which the SNP Scottish Government have based their premises and their claims for independence. It is twice as much as the OBR has independently assessed, and that is another example of how they are not being straight with people about the facts in relation to independence. It would of course mean that there was a black hole in an independent Scotland’s public finances that would cost the Scottish people £1,000 each. It is yet another example of how they are not being straight; the independent facts refute their case.

Spending Review

Debate between George Osborne and Lord Darling of Roulanish

Wednesday 26th June 2013 Commons Chamber

[Mr Osborne]

I thank my hon. Friend for his support for the difficult steps we needed to take. Our trying to set out these spending plans further in advance, so that Departments have time to make the necessary adjustments, is a good innovation in fiscal policy. The certainty we now have for 2015 will, I think, mean better public policy.

We have set out some of the details of the welfare cap in my speech today, but in the document we publish, we have set its parameters, how it will be set in cash terms, the period over which it will be set and when it will be set—at the Budget. However, it is absolutely my intention to listen to the Treasury Committee, which I hope will take an interest in this issue, and to examine best practice and make sure we get the final details absolutely right. If we want to change the Office for Budget Responsibility charter, we will have to legislate, but that is something we need to examine. We absolutely should work on the details, but the principles and the principal components of the cap have been established.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I was interested in the Chancellor’s claim to have rescued the economy. I think I am right in saying that in 2010, the economy was actually growing, whereas unfortunately, in 2011 it stopped growing. That is why he is borrowing more than he intended and why his target to reduce national debt has been moved well into the next Parliament.

On the new growth items the Chancellor announced today, particularly those relating to transport, how much of that is public money and how much is expected to be raised from the private sector? Can he also give us some idea of how much additional growth he expects to see in the economy as a result of the measures he has announced, most of which, I think I am right in saying, will not take effect until the next Parliament? Given the delay in delivery of these projects—a problem that has dogged successive Governments—it may be some considerable time before we actually see their economic benefit.

[Mr Osborne]

The right hon. Gentleman and I have, I hope, a cordial relationship, but I will just disagree on one point. The idea that he handed me a golden economic legacy and an easy set of books, and that somehow it was all fantastically booming after a 6% contraction in the economy, is something that will turn out, if I check his memoirs, not to have been the case.

To answer the right hon. Gentleman’s specific points, the transport money we set out is public investment; of course, there are opportunities to lever in additional private investment. He was gracious enough to acknowledge that all Governments have had the challenge of how to deliver infrastructure projects, given the planning system we have and so forth. We are reforming planning and will set out this week changes to infrastructure delivery in Whitehall to try to accelerate the delivery of projects—something that has bedevilled the British Government for decades, and we shall do our best to put it right.

Autumn Statement

Debate between George Osborne and Lord Darling of Roulanish

Wednesday 5th December 2012 Commons Chamber

[Mr Osborne]

I very much respect my right hon. Friend’s observations on the problems in our banking system. There is an aggressive plan to reduce the bad bank elements of RBS, and that plan is on track, but, as I said earlier, I want more to be done. RBS is reducing the size of its investment bank quite considerably. It also recently received advice from the Financial Policy Committee, and I hope it takes that advice into account.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

If I understood the Chancellor correctly, the profile of rising growth that he announced today looks remarkably similar to the profile that he announced in 2010, but which singularly failed to materialise. That, of course, is one reason why he has missed his debt target. Will he tell us why we should have any more confidence in the next set of figures, which show recovery, albeit postponed for several years? Of all the capital projects that he announced today—which I think many of us would support—how many will start this year?

[Mr Osborne]

The first thing I would say to the right hon. Gentleman is that the forecasts we produce are independent—they are produced by the Office for Budget Responsibility. This is the OBR’s best estimate of what will happen to GDP over the next few years. As the OBR says, its forecast two years ago was wrong because of three things, which it talks about. One is that the impact of the financial crisis was greater than it had assessed. Secondly, there was an oil price shock in 2011, which hit all oil-consuming economies. Thirdly, there was the impact of the eurozone, which the right hon. Gentleman has spoken about at length. All those things have had an impact, not just on the GDP of this country but on every western democracy in the world. Indeed, they have also had an impact on some of the emerging economies.

The right hon. Gentleman makes a good point about capital investment. He speaks with experience: it is often difficult to get these projects out the door. We are speeding up the delivery of these projects—the road schemes are under way. The capital we have allocated is for the next two years. The road schemes and the like that I announced are due to start—because they have got planning permission—in the next two years.

LIBOR (FSA Investigation)

Debate between George Osborne and Lord Darling of Roulanish

Monday 2nd July 2012 Commons Chamber

[Mr Osborne]

My right hon. Friend reminds us that he was absolutely right about the problems that would emerge with the creation of the tripartite regime, and, sadly, his predictions have been borne out by events. He also makes a specific proposal about legal changes and the introduction of the directing mind. We are aware of that idea, and we will look into it. The House can look at it, too, in the inquiry over the next few months.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

The Chancellor referred to my quote in a newspaper yesterday. I should just tell him that I was asked specifically about the investigation of individuals, and I made the point that there are authorities, such as the Serious Fraud Office and the Financial Services Authority, who are supposed to be doing that.

On the Chancellor’s broader point, let me say that this inquiry will work only if it is a genuine examination of what went wrong. As I have said before, it went wrong under successive Governments over quite a long period, as well as in the City itself. If the inquiry looks like a partisan exercise in settling scores between the political parties, it will not work. The public may not like bankers, but they do not care much for politicians either. I therefore hope the Chancellor can give us an assurance that this inquiry will not be that sort of exercise, and that it will instead be a genuine inquiry into what went wrong and what needs to be put right.

[Mr Osborne]

First, the inquiry should be genuinely cross-party and it will, of course, be up to the Labour party to choose whom it would wish to be on the Committee, both in the Commons and in the Lords. So there will be a choice for the Labour leadership in that respect. Of course, I hope that they would consult my hon. Friend the Chair of the Treasury Committee, but it is ultimately their choice.

Secondly, the Treasury Committee, under its previous Chair, Lord McFall, did some very good work on investigating what went wrong. So the idea that the Select Committee or a Joint Committee is unable to do this work is nonsense. “The run on the Rock” was a very good report, as I think the right hon. Gentleman would concede, and it provided the basis for some of the changes in the Financial Services Bill. I think we can draw also on the expertise in the House of Lords in this area and have a Joint Committee. As I say, I hope that once tempers have cooled today, we will be able to reflect on that and have a joint-party consensus on it.

LIBOR (FSA Investigation)

Debate between George Osborne and Lord Darling of Roulanish

Thursday 28th June 2012 Commons Chamber

[Mr Osborne]

I completely agree with the sentiments that my hon. Friend has expressed. I congratulate him and his Committee on acting swiftly to ask Mr Diamond to come and account for himself. As I said in my statement, we are looking at strengthening the criminal sanctions regime in general for market abuse and market manipulation, not just of LIBOR but in other parts of the market; and next week, as planned, the consultation on potential sanctions for directors of failed banks will be published. Sadly, the Government have been in this situation before with the FSA’s report into the failure of Royal Bank of Scotland, when the authority reported to us that it did not have the powers it would have liked to hold to account those responsible for the failure.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I am sure that, in his quieter moments, the Chancellor will reflect on the fact that we are kidding ourselves if we think that the UK was the only country where this sort of thing was going on. The American authorities are just as concerned as our authorities. The situation is symptomatic of a culture that prevailed for much of the last decade, when, frankly, anything was allowed to go.

Does the Chancellor accept two things? First, LIBOR now has to have some degree of independent supervision. It cannot be a work of fiction. It is so important, especially at times of financial crisis—in 2008, we were concerned about the financial health of Barclays and other banks—to know exactly what it is costing them to borrow. Secondly, although the FSA may not have criminal powers, I am pretty sure it does have powers to take out of banks and put off the road the people who are responsible for doing this, the people who tolerated it, and those gained from it and condoned it. If that is not done, we have no chance whatsoever to move on in what remains a very important industry for this country.

[Mr Osborne]

The former Chancellor is of course right: there was poor financial regulation in American markets too, and part of the investigation has been conducted jointly with the American authorities—but LIBOR was set in London, which is why it is called LIBOR.

The right hon. Gentleman raised two points. The regulation and supervision of LIBOR is precisely what we are investigating, although we have to make sure that we are not regulating the LIBOR market as it existed three years ago. That market today is somewhat different and changing quite a lot, so we have to get the regulation right for 2012, not for 2006-07. His second point was on the individuals concerned and the FSA’s powers. I have spoken to Adair Turner and I am absolutely clear that the FSA is pursuing cases against individuals, but it is a prosecuting authority and it would not be appropriate for me to comment about those individuals and ongoing cases.

Jobs and Growth

Debate between George Osborne and Lord Darling of Roulanish

Thursday 17th May 2012 Commons Chamber

[Mr Osborne]

I have spent the last 35 minutes explaining how I am digging the country out of the hole that the right hon. Gentleman put us into.

Let me say something about the eurozone crisis. When eurozone central bank governors and Finance Ministers openly speculate on the possibility of Greek exit, the genie is out of the bottle. That and the Greek elections make this a perilous time. We are clear about the three steps the eurozone needs to take if its currency is to function properly.

First, countries in the periphery with high deficits and uncompetitive economies need to confront their problems head-on, as Governments in Ireland, Spain and Italy are. We are doing it in Britain too, but the adjustment our country must go through is made easier by loose monetary policy and a flexible exchange rate. The countries of the eurozone do not have that to help them, so the core of the eurozone, and the European Central Bank, need to do more to support demand and share the burden of adjustment.

Of course, ideas such as the project bonds put forward by the new French Government are worthy of serious consideration, but, fundamentally, the German Finance Minister is right when he says that rising wages in his country and increased domestic demand there can play a substantial role.

Secondly, the eurozone needs to follow what I described a year ago as “the remorseless logic” of monetary union that leads to greater fiscal union. As I said in the same interview, forms of collective support and responsibility must be developed. I echoed the view in many eurozone countries when I spoke of the possibility of eurobonds.

Thirdly, all of us in Europe, including the United Kingdom, need to address our continent’s lack of competitiveness. That involves structural reform to welfare, pensions and labour laws, and completing single markets in services and digital. It means all Europeans, including Britons, rediscovering the ambition and the ethic that made our continent the dynamo of the world economy for so many centuries. It is not that dynamo today. As the Prime Minister says in his speech today:

“The eurozone is at a cross-roads. It either has to make up or it is looking at potential break up.”

No one should underestimate the huge risks of the latter, but Britain will be prepared for whatever comes. We are making the necessary contingency plans. We will take the steps needed to secure our economic stability and protect our financial system. Above all, we will go on with the progress we have made in the last two years on reducing the structural deficit, keeping our credibility in the bond markets and keeping our interest rates low.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

The Chancellor seems to be setting out quite a significant shift in the Government’s policy on what should be happening in Europe, in particular urging the German Government to do things in relation to promoting growth that many of us have argued for several months. Interestingly, they are not to apply to this country. Will he confirm that this is a significant shift, and will he add to his list that it is now desperately important that the eurozone looks at the health of some of the banks in Europe? The Spanish started last week. I do not know whether they have the strength to do what is necessary, but unless the banking system is significantly shored up, if the problems spreading from Greece continue—contagion and so on—we could have another major banking crisis on our hands. That would be an utter disaster.

[Mr Osborne]

I very much agree with the sentiment that the former Chancellor expresses. In the autumn of last year, and indeed before that, the Prime Minister, myself and others in the Government did consistently say, in public as well as in private, that surplus countries in the core of the eurozone needed to do more; that the European Central Bank needed to do more—I said it in the House and we said it in the ECOFINs and European Councils that we attended.

What has changed this week is that, first, the Greek elections have brought back the fear of contagion that had never really quite abated, despite the action of the European Central Bank over Christmas. Secondly, over the weekend and at the beginning of this week, central bank governors and Finance Ministers in the eurozone itself were openly speculating on Greek exit, and that has, as I said, let the genie out of the bottle. Some of the things that we were happy to say in private we are now also willing to say in public, because the issue is out there—on the agenda. We have not put the issue out there in the public domain, but now it is out there, put there by other people. We have very clear ideas of what the eurozone needs to do to make their currency work.

[Mr Darling]

The Chancellor is actually confirming what I thought. It is good that they are saying these things in public, but it does suggest that perhaps there is an opportunity to change direction in Europe. I know we will not agree about what is necessary in this country, but does the Chancellor agree with me that we need to be explicit now that austerity on its own will not work—we need policies of growth to go with it?

[Mr Osborne]

I completely agree that austerity alone is not enough, and that is why I have just been explaining how we have cut business taxes, set up enterprise zones, set up the national loan guarantee scheme and reformed the labour market. We have done all these things so that car companies expand their production and investment in Britain and choose Britain as a place to do business. Of course those countries in Europe need to undertake structural reforms to go alongside their efforts to get their public finances under control, but we have to ask ourselves this question: if you are running a high budget deficit in a single currency zone, and you do not have the support of loose monetary policy, you do need support from the core of the eurozone but to abandon a commitment to austerity will expose you to even greater pressure on the international money markets than those countries are already exposed to.

IMF

Debate between George Osborne and Lord Darling of Roulanish

Monday 23rd April 2012 Commons Chamber

[Mr Osborne]

Germany made a $55 billion dollar contribution to the IMF this weekend, which is a much greater contribution than the $15 billion that we are putting in, and it is the principal contributor to the various eurozone bail-out funds of which we are no longer part. However, I agree with the spirit of what my right hon. Friend is saying, which is that Germany needs to stand behind its currency. That is indeed a very important part of solving this problem.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I think it right for us to support the IMF, but is not something very wrong when it is having to pass the hat around because it is becoming increasingly concerned that the policies being pursued by the eurozone—and, within it, some of the most developed and well-off countries in the world—are making it more likely that those countries will have to draw on international help to sort themselves out? Would it not be far better if the eurozone countries accepted that until they clean up their banking system once and for all, and until they recognise that the austerity policies that they are imposing on the peripheral countries simply will not work—and there are very few people around now who think that they will work—there remains a greater risk that these funds will have to be called upon? It seems to me that, while it is all very well to have a rescue fund, it would be far better to deal with the root causes of the problem.

[Mr Osborne]

I welcome the right hon. Gentleman’s support for the decision to provide extra resources for the IMF. He was Chancellor of the Exchequer in 2009, when we last made a contribution to it, and, as I said a moment ago, I think that that was one of the highlights—if not the highlight—of the last Labour Government.

The eurozone countries on the periphery are being asked to walk an incredibly difficult path. That is the consequence of being in a monetary union in which it is impossible to devalue. However, it is clear that Ireland, which has had to make some incredibly difficult decisions and take some very tough fiscal measures, is becoming dramatically more competitive—its current account is back in surplus, and its exports are increasing—so it is possible to walk that path.

I certainly agree with the right hon. Gentleman that further action is required on the banking systems in Europe. A European directive which is currently being debated transponds the Basel agreement into European law, and we are keen for it not to be watered down so that it is not used to disguise problems in the European banking system.

Banking Commission Report

Debate between George Osborne and Lord Darling of Roulanish

Monday 19th December 2011 Commons Chamber

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I welcome the Vickers report and I am glad to hear that it is being implemented, but will the Chancellor be careful about overselling this? This would not have stopped the failure of Northern Rock or HBOS, and the idea that a future Government might decline to step in and rescue an investment bank if it failed is simply not credible. Look what happened to Lehmans when the Americans tried that. So these problems have not gone away. Will he accept that if his reforms of the Bank of England are to work, he has to look at the governance of the Bank, as the Treasury Committee recommended recently? The Bank made some bad mistakes in the past and we have to face up to that, just as we have faced up to the mistakes of the Financial Services Authority. Will he urgently accept the need for European Governments to shore up their banks, because there is very real risk, if we have a sovereign default in the next few weeks, that their banks will be affected because they are not adequately capitalised? If he is still on speaking terms with his opposite numbers, that is something that he should attend to very quickly.

[Mr Osborne]

I can assure the former Chancellor that we are still on speaking terms. Indeed, I had an hour and a half conference call just before I came into the Chamber, so I can promise him that a lot of speaking is still going on. The question he rightly asks is: where is the action? The eurozone has taken a number of important steps, but we still need to see a more credible firewall, which will enable it to stand behind its banks even more effectively.

On the right hon. Gentleman’s specific point about the Bank of England and whether this could have prevented what happened when he was Chancellor, of course institutions can get things wrong, and the Bank of England got things wrong in the run-up to the crisis, but it is sensible to try to have one body that is looking at both the prudential risks in individual firms and the overall systemic risks in the economy. The tripartite system clearly failed to do that. I do not think that before he became Chancellor it met in person at a principal level, or perhaps only once. The system did not work and many Committees of this House have pointed that out. For the Bank of England to have clear responsibility for monitoring risks is sensible. As to whether all this could have prevented what happened, I draw attention to two points. First, there are higher capital requirements in Vickers that would have better protected banks such as HBOS, and, secondly—the biggest challenge of all that he had to face—it is precisely the collapse of a large universal bank such as the Royal Bank of Scotland that Vickers is seeking to address. No one pretends that it is easy, but we believe, Vickers believes and many others believe, that the idea of ring-fencing the retail operations focused on the UK will give the Chancellor of the day greater opportunity to protect what really matters to the UK economy without having to resort to bailing out the entire institution.

Eurozone Crisis

Debate between George Osborne and Lord Darling of Roulanish

Thursday 27th October 2011 Commons Chamber

[Mr Osborne]

There is increasing evidence that people are focused on the structural issues facing the European economy. Indeed, when my hon. Friend looks at the agreement issued by the eurozone last night, he will see that when it refers to Spain and Italy, it stresses the importance not just of getting their budget deficits down, but of plans to increase the pension age and make labour legislation more flexible and competitive—all the sorts of things that this Government are pursuing here in Britain, although every one of those measures has been opposed by the Labour party.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

Does the Chancellor agree that one reason why the bank recapitalisation worked three years ago was that we were able to provide precisely the sort of detail required to reassure markets that we were taking the necessary action? When can we expect to hear, for example, exactly how much Greek debt is to be written down, and which banks in continental Europe will require additional funds from Governments or other sources? When can we expect to hear more detail about the rescue fund? In relation to that, can he let us know whether there is a commitment on the part of the eurozone to provide real cash—or are we looking at a sophisticated financial instrument of the sort that might have contributed to the problems in the first place?

[Mr Osborne]

I fear that we are looking at a sophisticated financial instrument here. However, it is clear that Germany and the Bundestag were not prepared to provide further resources. The European Central Bank was not prepared to provide those resources either, for all sorts of reasons to do with its history and those of other central banks in Europe. They have therefore turned to those options to try to leverage up the money they have already committed. That is the sensible choice for them, given those other constraints. They are trying to get other private investors from around the world, potentially including the involvement of sovereign wealth funds, to leverage up the fund.

Of course, I completely agree with the right hon. Gentleman that the sooner we get the agreement in detail, the better. That applies equally to what he said about private sector involvement in the Greek write-down. A mistake made earlier this year, on 21 July, was that eurozone members put together a deal and then took months to implement it and get the detail. He is completely right to say that yes, we made some good progress overnight, but the job is not finished yet. The eurozone now has to get the detail and reassure the markets that it has got a grip of the situation. That is where we will continue to exert British pressure.

Eurozone

Debate between George Osborne and Lord Darling of Roulanish

Monday 10th October 2011 Commons Chamber

[Mr Osborne]

As my right hon. Friend will know, in its most recent quarterly bulletin, the Bank of England did an assessment of the impact that the previous round of quantitative easing had had; it thought that that had increased GDP by 1.5% to 2%, but that it had also increased inflation. However, the Bank was very clear that in recommending or requesting further quantitative easing, it was still aiming to hit its inflation target in the required two-year period.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I am glad that the Chancellor now realises that the policy of quantitative easing was, in fact, a good one and did help get our economy growing. Can he tell us how he plans to ensure that the additional £75 billion gets out of the bank vaults and on to the high street? He has mentioned the credit support scheme, on which we have not yet got some details, but I am sure that he would agree that it is important that the money finds its way out into the economy.

On the question of Greece, is there now an acceptance that the present austerity policies being visited on that country are not going to work? Were the reports coming out of the IMF a couple of weeks ago—that there would have to be some sort of write-down of Greek debts—accurate?

[Mr Osborne]

Let me deal first with the right hon. Gentleman’s question about quantitative easing. I think there is general recognition that what worked was the increase in asset prices and also pushing investors up the risk chain. I defer to the right hon. Gentleman’s view on this, but what did not work so well was an increase in bank lending; that did not happen as a result of QE, although the Government at the time hoped that it would. As he knows better than anyone, the Government also created the asset purchase facility with the idea that the Bank of England might purchase some corporate paper; it ended up purchasing only around £1 billion-worth.

I thought that it was sensible, therefore, that alongside the Bank’s action on QE we separately, as a Government accountable to the House, looked at credit easing options, which directly try to address the bank lending issue and enable the Government—again, directly accountable to elected people—to look at a range of assets that one can buy, such as small business loans.

On the question of Greece, I have to be a little careful; I alluded to that in my statement when I said that the advice that we are giving on Greece is private. But our public intent is very clear: the Greek situation has to be resolved. It is very debilitating for the world that at the moment each week goes past and there is another event risk around Greece—the troika turns up, there is a parliamentary vote in Greece. Of course, a lot of the frustration of eurozone members is not so much at the impact of austerity, but at the feeling that they have that the Greeks have not done what they promised to do. But as I say, if the right hon. Gentleman will forgive me, I will continue to give my specific advice on Greece to my eurozone neighbours in private.

Independent Banking Commission Report

Debate between George Osborne and Lord Darling of Roulanish

Monday 12th September 2011 Commons Chamber

[Mr Osborne]

Well, I think my right hon. Friend was certainly alive when Messrs Glass and Steagall were, which most Members of the House could not say.

I respect my right hon. Friend’s experience. He has long argued for some form of separation between retail and investment banking and has been consistent in making that argument. Events have borne out his advice to successive Governments.

We asked John Vickers carefully to consider the timetable, and he gave a lot of thought to it. He recommends that all the changes should be completed by 2019, but that other changes should take place at earlier dates—he specifies those dates in his work. The 2019 back-stop is appropriate, because that is the date when the international rules also need to be in place. We should not underestimate the huge amount of work to be done in this House to get the report turned into legislation that works and that people do not find ways around.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I am grateful to the Chancellor for plugging my book, but when he gets a chance to read it, I think that he will see that political parties on both sides of the House went along with the culture that led to some of the problems we had to deal with and that some of the shrillest voices calling for light-touch regulation were those of Members now sitting on the Treasury Bench. Will he tell us a bit more about what discussions he proposes having with other Governments, in view of the interconnected nature of the banking system, which is only as strong as its weakest part? Will he also deal with the erroneous assumption that there will never be a case in the future when a Government might have to bail out an investment bank? We should remember what happened to Lehman Brothers. It cannot ever be said that we will never have to do that again, even with a bank that is not thought now to be systemically important. I welcome the report, but it has to be seen as part of a wider range of reforms necessary to make our banking system stronger and more secure.

[Mr Osborne]

I respect the right hon. Gentleman’s experience of having been through all that he went through as Chancellor. He had to deal with these problems in real time over long weekends, and I have paid tribute previously to the work that he did on behalf of our country in those difficult months. As for his book, I have only just started reading it, but as far as I can see, I get off relatively lightly compared to the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown).

The right hon. Gentleman made a good point about the interconnectedness of the banking system. The Basel rules are significant, and I believe that that process was initiated when he was Chancellor and representing the United Kingdom. New arrangements have been agreed in record time. It took 10 years to come up with Basel II, but about 18 months to come up with Basel III. The international rules are important because they help us to deal with investment banks in foreign jurisdictions, such as Lehman Brothers, and to protect all globally systemically important banks and give them bigger cushions. As he well knows, new proposals are coming down the track for additional capital requirements on the most globally systemically important banks. That is significant. Also, we are putting in place the recovery-and-resolution ideas that, again, he initiated when he was Chancellor in order to ensure that we can deal with the failure of the UK end of an American investment bank. That will ensure that these banks do not just live internationally and die nationally, but that we can resolve any problems.

I would make a broader point, however. Yes, we have to do that at an international level, but we also have to consider regimes that have large concentrations of banking, such as Switzerland—let us, for a moment, leave aside Ireland and Iceland, which were obviously virtually bankrupted by what happened. It is interesting that Switzerland, which, as the right hon. Gentleman knows, is as keen as anyone to remain internationally competitive, has introduced its own domestic regime for its banks. It is wholly appropriate for us to consider doing that in this country while, of course, recommending to other countries changes that we think are sensible for all jurisdictions.

Financial Assistance (Ireland)

Debate between George Osborne and Lord Darling of Roulanish

Monday 22nd November 2010 Commons Chamber

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I agree with the Chancellor that it is in our country’s interests to do everything we can to help Ireland through its present difficulties. Although he and I agree that I was right to keep us out of the eurozone support fund, some money coming from Europe is partly subscribed by us and also the IMF—but does that not demonstrate that it is in our interests? The fact that he is also willing to make bilateral loans available to Ireland demonstrates that it is our interests to sort out the problems in Ireland. Although he does not have the details, can he tell us how much of that money from us and from other sources will be used to restructure and recapitalise the Irish banks, which is absolutely necessary in Ireland and also, I suspect, in a number of other countries in Europe?

[Mr Osborne]

I very much welcome what the right hon. Gentleman has said, and of course I agree that it is in our national interests, and indeed the interests of other European Union member states, that we bring some stability to Ireland. He is right, as his question implies, to focus on the banking system. The situation in Ireland is different from the situation that Greece found itself in earlier this year, with which he had to deal when he was Chancellor.

On the question of the breakdown between the amount of money going to the banking system and the amount going to fund the sovereign, I am afraid that I cannot give the right hon. Gentleman the exact figures, because they are still being negotiated, but I would say that most of the money will be used to take the sovereign out of the market for a period, and a substantial minority of the amount will be required for a fund to help the Irish banking system.

Capital Gains Tax (Rates)

Debate between George Osborne and Lord Darling of Roulanish

Wednesday 23rd June 2010 Commons Chamber

[Mr Darling]

My hon. Friend makes a fair point. It is interesting that the Liberal Democrats promised us that if they went into coalition they would get something in return on capital gains tax. They wanted a 40% CGT, yet they appear to have settled for 28%.

[The Chancellor of the Exchequer (Mr George Osborne)]

That is 10% higher than under Labour.

[Mr Darling]

The Chancellor says it is 10% higher, but when I raised capital gains tax to 18%, I remember the angry campaign waged against it by Conservative Members. They said that 18% would discourage enterprise and was a terrible thing, but they seem to have changed their minds on that absolutely and completely. By the way, we are not going to oppose the increase in capital gains tax; especially when there is a higher 50p rate of tax, sooner or later action would have to be taken to stop the real risk of leakage. As I think the Chancellor said yesterday, the real gain from raising capital gains tax comes from income tax receipts. The position of the Liberal Democrats, however, was quite different.

There are other areas, too, where questions of fairness will be raised. Where in the manifestos of either of the political parties that form the Government was it said that they were going to index benefits to the lower inflation index of the CPI—the consumer prices index—which takes about £6 billion away from people whose income, generally speaking, is not that great? Where was it said in their manifestos that they were going to cut more than £100 in relation to child benefit, or to freeze that benefit for three years? Other changes also deserve very close examination. Everybody knows that housing benefit is in need of reform, as is the disability living allowance, but as we all know, these are complicated, difficult and sometimes controversial issues. It will be interesting to see whether the coalition Government can deliver all the things they promised yesterday.

Financial Services Regulation

Debate between George Osborne and Lord Darling of Roulanish

Wednesday 16th June 2010 Commons Chamber

[Mr Alistair Darling (Edinburgh South West) (Lab)]

(Urgent Question): To ask the Chancellor of the Exchequer to set out his proposals for the future of financial services regulation and for the role of the Bank of England.

[The Chancellor of the Exchequer (Mr George Osborne)]

In 1997, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), as Chancellor, established, without any consultation and without telling Parliament, the tripartite system to regulate the financial system. In doing so, he removed from the Bank of England its historical role in monitoring overall levels of debt in the economy. It is well known that the late Eddie George was deeply unhappy with that decision. It is also well known that the tripartite system that the right hon. Gentleman created, and that his successor as Chancellor sustained, failed spectacularly in its mission to ensure stability in the financial markets, and the failure of certain banks cost the taxpayer a vast amount of money. Indeed, British taxpayers funded the largest bank bail-out in the world, and it was only in Britain that depositors queued in the high street to get their money back.

The British people rightly ask how this new coalition Government will learn from the mistakes of their predecessor. The coalition agreement commits us to reforming the regulatory system for financial services in order to avoid a repeat of the financial crisis, and that is precisely what we will do. First, on the structure of regulation, our plan is to hand over to the Bank of England the responsibility for macro-prudential supervision, which should never have been taken away from it. The tools for macro-prudential supervision are the subject of ongoing international discussions. We are playing a full part in that process at European and G20 level, along with the Governor of the Bank and the chairman of the Financial Services Authority. It is already clear that the tools will include capital requirements that work against the cycle, rather than with it.

The coalition Government are also committed to handing to the Bank of England responsibility for the oversight of micro-prudential regulation. It is clear that the central bank needs to have a deeper understanding of what is going on in individual firms. My hon. Friend the Financial Secretary to the Treasury will give further details of the institutional arrangements in a parliamentary statement tomorrow. It is important that the institutions involved correctly follow their own internal procedures before those arrangements are made public, and the Governor of the Bank will be talking to the court of the Bank this afternoon.

The coalition Government will also deliver on their promise to establish an independent commission on banking. The previous Government would brook no debate about the future structure of the banks, the relationship between retail and investment banking, and the questions of how best to protect taxpayers and how to ensure greater competition in an industry that they actively sought to consolidate. The previous Prime Minister did not want anyone to challenge his opinions, but we cannot ignore this debate about the future of banking—indeed, I want Britain to lead it. We will therefore establish the commission on banking to investigate those issues. It will be chaired by Sir John Vickers, who is a former chief economist at the Bank of England, was one of the first members of the Monetary Policy Committee and is a former chairman of the Office of Fair Trading. He is a man of unquestioned experience, integrity and independence who approaches this issue with an open mind. I am today placing in the Libraries of both Houses the terms of reference and we await the conclusions of the commission.

Unlike the last Government, this Government are prepared to confront the difficult challenges of the regulation and structure of the banks. We are prepared to learn the lessons of what went wrong, even if they were not.

[Mr Darling]

I am grateful to the Chancellor for that answer, and I wonder whether I might press him on a number of points. First, he says that the Bank of England will have responsibility for macro-prudential supervision, but he also says that the debate as to what macro-prudential supervision consists of is still up for grabs as it is still being debated internationally. When does he expect those discussions to be concluded?

The Chancellor also says that the Bank of England will have some responsibility for micro-supervision. It has been suggested in some quarters, for example, that the Bank of England, rather than the FSA, might have dealt with whether the Royal Bank of Scotland could take over ABN AMRO. Does he not realise that far from clarifying the situation, this is adding another complication? The risk is that we will have a dog’s breakfast of a regulatory system in which no one knows who is making decisions and no one knows who is in charge. Does he not accept that at a time when there is still a great deal of uncertainty in the banking world and a great deal of turbulence, the last thing that we want is a situation in which it is not clear which organisation is responsible for precisely which activity? If both the Bank and the FSA are responsible for regulating institutions, that is bound to lead to confusion and inevitably runs the risk that mistakes will be made.

Will the Chancellor also tell us whether, in relation to the Bank of England’s responsibility, he is planning any reform to the financial stability committee or any internal reforms so that a committee will advise the Governor? If that is the case, will the Governor be making those decisions or will a committee do so, perhaps on a wider basis? Will he also tell us whether or not Lord Turner, the chairman of the FSA, agrees with his proposals and whether he is now prepared to serve, in effect, as a deputy under the Governor of the Bank of England?

In relation to the proposal to break up banks, will the Chancellor explain how Northern Rock, which was a very simple retail bank on the face of it, would have been saved from collapse simply by virtue of the fact that it was a retail bank and not an investment bank? Will he also explain how his proposal would have made any difference to Lehman Brothers, which did not take a single retail deposit but was a complex investment bank that collapsed with calamitous consequences? Will he tell us, too, whether the commission that he proposes to set up will consider the break-up of British banks such as Barclays or HSBC? Will he tell us how the uncertainty that will inevitably be caused by the work of the commission will help to rebuild the financial stability that we want? At a time when there is that instability, does he not think that it would be far better to keep the FSA working on what it is supposed to be doing—that is, the day-to-day supervision and regulation—bearing in mind that some small minor decisions are sometimes very important, especially if they are the wrong ones?

Is it not the case that the proposal was made in the first place because the right hon. Gentleman was looking before the election for a dividing line between him and the then Government? What we have today is something that has been cobbled together, that is ill thought out, that will add to uncertainty and that runs a grave risk that further mistakes will be made with catastrophic consequences in the future.

[Mr Osborne]

The dividing line is between a Government who want to learn the lessons of what went wrong and an Opposition who have no intention of learning from all the mistakes that they made in office. I find that striking.

The right hon. Gentleman talks about a dog’s breakfast. What about the dog’s breakfast of the tripartite system that allowed the Royal Bank of Scotland to fail and that allowed Northern Rock to fail? He was the Chancellor at the time and he completely failed to see the growing levels of debt in the economy. He and the institutions that were created by his predecessor completely failed to see what had gone wrong in individual institutions. The thing I find extraordinary—perhaps Opposition Members will reflect on this—is that their shadow Chancellor is setting them against reform of the regulation of banks and reform of the structure of the banking industry. That is what he has just done. What we are going to do is to have an open debate about the structure of banks. That debate is happening in the United States of America, in the newspapers of this country and in parliamentary debates here. The only place it was not happening was in the last Government under his chancellorship.

We think that the sensible approach, in order to resolve these issues—[Hon. Members: “Answer the question.”] I am answering the questions—every single one of them. We think that the sensible approach is to set up an independent commission under Sir John Vickers to examine these issues and to take into account the different, strongly held views. For example, John McFall, who was the Chair of the Treasury Committee in the last Parliament, has in recent days put his name to a report that calls for structural reform of the banks. The shadow Chancellor might want to ignore his views, but I want to listen to them and to take them on board as part of an independent commission, and that is exactly what we are going to do.

When it comes to the international context, I think that all of that will enable us to lead the debate. Of course, we have to agree this at an international level, where some of the macro-prudential tools are. As the shadow Chancellor knows, there is a debate taking place in the G20. We hope, in the Seoul summit in November, to have come to firm conclusions on the capital, liquidity and leverage requirements. When we have come to those agreements and when we have international agreement on what those standards should be, we will need a regulatory system here, at home, that is fit for purpose, so that they can be implemented.

Office for Budget Responsibility

Debate between George Osborne and Lord Darling of Roulanish

Monday 14th June 2010 Commons Chamber

[The Chancellor of the Exchequer (Mr George Osborne)]

With permission, Mr Speaker, I should like to make a statement on the Office for Budget Responsibility, which the Government created on coming into office.

This morning, for the first time in British history, we have opened up the Treasury books and allowed the publication of an independent and comprehensive assessment of the public finances. From now on, Governments will have to fix the budget to fit the figures, instead of fixing the figures to fit the budget. I should like to thank Sir Alan Budd, the members of the budget responsibility committee and all their staff for the impressive work that they have done in short order. A copy of their report has been placed in the Vote Office and in the Libraries.

There has been some interest in whether the OBR would publish all the relevant underlying assumptions and judgments driving the forecast. Today’s report does more than that: there are more than 70 pages of detailed material, much of which has never been published before. For the first time ever, the Government are publishing the assumptions that lie behind the estimates for average earnings, property prices, interest rates and financial sector profits, and, crucially, a five-year forecast for annually managed expenditure. That includes a forecast for the amount of debt interest that we as a country will pay over the coming years.

The creation of the OBR has already impressed the international community and been praised by the International Monetary Fund and the G20. We will now move to put the OBR on a statutory footing with legislation that was included in the Queen’s Speech. From now on, Members of Parliament sent to this House to scrutinise how the Government spend taxpayers’ money will have access to honest and independent figures.

Let me now turn to those figures and what the OBR has uncovered. First, there are the forecasts for growth in the economy. The OBR is forecasting that growth will reach 1.3% this year and 2.6% next year. In future years, the OBR’s forecast is for growth of around 2.8% in 2012 and 2013, and then 2.6% in 2014. Sadly for our country, the forecasts for growth are lower in every single year than the figures announced by the previous Chancellor at the time of the last Government’s Budget in March. He told us that growth would soar to 3.25% in 2011, and then to 3.5% in 2012. When those forecasts were given, neither the Bank of England nor 28 of the main 30 private institutions producing forecasts for the UK were offering such an optimistic central view of the economy; we can only speculate as to why such rosy forecasts for a trampoline recovery were produced only weeks ahead of a general election.

I turn to the OBR’s forecasts for the public finances. The latest outturn data show that public sector net borrowing for last year was £156 billion. The OBR is forecasting that it will be £155 billion this year. It is the highest budget deficit of any country in the European Union with the exception of Ireland. It is £10 billion less than the forecast given only a month before the end of the last fiscal year, but I can tell the House that, based on the OBR’s figures, that £10 billion advantage that we start with decreases to only £3 billion by the end of the Parliament.

The reason for that is that the cyclically adjusted current balance, commonly known as the structural deficit, is forecast to be higher in every single year than what this House was told in March. That is perhaps the most important figure in the report, because the structural deficit is the borrowing that remains even when growth in the economy returns. It is the structural deficit that is a key determinant of whether the public finances are sustainable. This year, the structural deficit is forecast to reach 5.2% of GDP—that is, £9 billion higher than we were told in March. Next year, the structural deficit will be £12 billion higher than we were told before the election.

The OBR’s forecast sees debt rising as a share of GDP throughout the Parliament—and the interest on that debt, which we as taxpayers have to pay, also grows every year. Let me be the first Chancellor in modern history to give Parliament those numbers for the coming years. The OBR forecast is that this is what Britain will have to pay for its debts: £42 billion of debt interest this year, rising to £46 billion next year, then £54 billion, then £60 billion and reaching £67 billion in debt interest payments by 2014-15. Over the course of this Parliament, more than a quarter of a trillion pounds will come from the pockets of taxpayers simply to service the debts left by the previous Government.

The figures produced by the OBR also give us a new insight into the spending plans that we inherited as a Government. They show that, given the OBR’s assumptions, the previous Government would have had to find £44 billion of spending cuts in departmental budgets to deliver their published plans. I can confirm that I have found no evidence at the Treasury for how even a single pound of that £44 billion was ever going to be achieved.

There are two other very important considerations that relate to these pre-Budget forecasts and understate the situation that we inherited. First, these are central forecasts with a fan chart around them to represent the great uncertainty that exists, rather than Treasury forecasts based on an arbitrary reduction in the trend level of output. As a result, they understate the increase in the structural deficit and the reduction in growth. Secondly, and crucially, these projections have been based on recent market interest rates, which are about a third of a percentage point lower in Britain than at the time of the general election. As is widely acknowledged, that in part reflects investors’ confidence that the new coalition Government will take action to deal with the deficit. As a result, as Sir Alan points out in his report:

“In present conditions the likely result is that these economic forecasts are biased upwards”.

That is absolutely crucial to understanding today’s figures, because if we followed the fiscal path set out by the previous Government, that would, again in Sir Alan’s words in the report,

“lead to higher interest rates and so lower economic activity”

than forecast today.

Let me conclude with this point. The independent report published today confirms that this coalition Government have inherited from their predecessor one of the largest budget deficits in the world, forecasts for growth lower than the country was told at the time of the election, a larger structural deficit than had been previously admitted, and a debt interest bill larger than the schools budget.

It is indeed worse than we thought. The public would not have known any of this if we had not set up the Office for Budget Responsibility. Next week, I will return to the House to explain what we will do about it. In the meantime, I commend this statement to the House.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I thank the Chancellor for his statement. My thanks would be more heartfelt had I not received it just 25 minutes ago. There was a time when statements were supposed to be in the hands of the Opposition an hour before the statement was made, and then 45 minutes. I do accept, before the Chancellor says it, that in my time there were occasions when he did not get as much notice as he wanted. All I would say, in the nicest possible way and in the spirit of consensus, is that if we could try to get these statements in the Opposition’s hands rather earlier, that would be very helpful.

Turning to the substance of the Chancellor’s statement, I welcome the measured approach taken by Sir Alan Budd, and his colleagues in the Office for Budget Responsibility, in presenting his report this morning. Higher borrowing by the Government, as the OBR acknowledges today, continues to support the economy. Indeed, without it, there was a grave risk that a recession could have tipped into a depression; that is why the expenditure was necessary in this country and in other countries across the world. However, as I have said repeatedly, borrowing needs to come down as the economic recovery is established. Has not the OBR forecast that borrowing will be £30 billion lower than I anticipated in my Budget, and does not that flatly contradict the Prime Minister who said last week that

“the overall scale of the problem is even worse than we thought”?

Does not the report say that borrowing is lower not just this year, for which the OBR forecasts borrowing at £8 billion lower than I did, but in each and every one of the next five years? Borrowing is down by more than £30 billion in total. Can the Chancellor confirm whether he and the Prime Minister knew what the OBR’s borrowing forecasts were prior to the Prime Minister making his speech last Monday? If he did not, he was just plain wrong; if he did, he owes us an apology. At the election, the Chancellor and the Prime Minister said that they had no need to raise VAT. Now that borrowing is in fact lower than they thought, is that still their policy?

Turning to growth, the OBR has confirmed my forecast for this year, but it has set out a lower growth forecast for future years—just 2.6% next year. This change is driven partly by what Sir Alan has today labelled “recent events”, particularly events in Europe, where growth is sluggish at best. Is it not the case that what is happening in Europe, our largest export market, will impact on growth here in the UK? Does not that reinforce the need to put in place measures to secure growth here and in other countries in Europe? Does not the Chancellor agree that the impact of action taken across Europe to reduce deficits runs the risk of depressing demand and setting back the recovery unless accompanied by measures to stimulate growth? Does he not accept that growth is essential to cut borrowing? Japan provides an example of what happens if one gets this wrong—recovery is choked off, growth becomes stagnant, and debt rises.

It was because the private sector was weak as the global crisis hit that the public sector stepped in to support our economy. Sir Alan Budd and his colleagues understand that point, because Sir Alan says in his report, at paragraph 3.20:

“Private sector demand contracted sharply in the recession, while government spending contributed positively to GDP growth.”

So much for the claim that our spending was irresponsible and unnecessary. In the same paragraph, he goes on to say:

“For this year”—

2010—

“it is government consumption and inventory accumulation that make the largest contribution to growth.”

In other words, without it there would not have been growth this year. The risk of taking large sums out of the economy is that the recovery will be derailed. Is it not also the case that confidence is being affected by the scaremongering that we see from the Prime Minister and the Chancellor? The Chancellor will have noticed the survey of business confidence this morning showing a reduction in business confidence. That shows that what he is saying is, unfortunately, having a very real impact on the economy.

The Chancellor asked us to focus on the structural deficit. However, he will have read Sir Alan’s very clear statement, at paragraph 4.40 of the report, that

“forecasts of cyclically-adjusted aggregates are subject to particular uncertainty.”

In other words, there is a great deal of uncertainty about what the structural deficit is. But if the Chancellor does take the estimate of structural borrowing from today’s forecasts as the barometer of success, he needs to be clear with people what that means. Will he confirm that it is still his policy to remove the entire structural deficit over this Parliament? If so, will he confirm that, on the numbers published today, he would need to find £118 billion by 2014-15? That is £118 billion of spending cuts, tax rises or both, which will affect millions of people and businesses in this country.

Since the Budget, there has been slightly faster growth at the beginning of this year. There is lower borrowing as tax receipts have come in higher than previously thought. Far from providing political cover for the Conservatives and Liberal Democrats for cuts and tax rises next week, does not the report remind us that growth is still fragile, the recovery is not yet secured and growth is essential, not only to cut borrowing but to secure jobs and a lasting recovery?

[Mr Osborne]

The report reminds us of the complete mess that the economy was in when there was a change of Government.

Let me deal with the right hon. Gentleman’s points. First, I apologise that he received the statement only 25 minutes before it was delivered. I was following the normal practice that had been established in the Chancellor’s private office. Despite having been on the wrong end of that for three years, I note his complaints about the very first statement, and I will look into that.

Let me answer directly the right hon. Gentleman’s question, towards the end of his remarks, about the fiscal mandate. It will be set in the Budget. There is no credible fiscal mandate in place in Britain because we have inherited from the previous Government a commitment, which most of the rest of world does not believe is a serious and credible effort to reduce the deficit. The fiscal rules never amounted to very much either when the crisis came, but we will put in place new fiscal architecture.

The right hon. Gentleman talks about borrowing and economic growth. I remind him that the whole point about the structural deficit is that it is not the part of the deficit that reduces as growth returns. According to the OBR report, it is increasing above the estimates that were given in the March Budget. That is striking given that the out-turn for borrowing last year was, indeed, lower than the Chancellor forecast just three or four weeks, as far as I can tell, before he received the out-turn numbers. He gave a figure in the Budget and out-turn numbers were lower. It is therefore all the more striking that the structural deficit—the crucial part of the numbers: the black hole in the public finances—is higher by a significant amount than he forecast. Of course, we are all concerned about the situation in the eurozone, but 28 out of 30 independent bodies that look at the British economy did not believe that the figures that he gave in the March Budget were accurate. Indeed, we pointed that out at the time. [Hon. Members: “You haven’t answered a single question.”] I did not think that the right hon. Gentleman asked many questions; I have answered both of them.

The right hon. Gentleman makes a point about spending cuts and so on. He pencilled in £44 billion of spending cuts. Until a single member of the Opposition provides us with a clue as to how they would even have begun to achieve those £44 billion of cuts, they will not be taken seriously. The leadership contenders are busily taking their party leftwards into the margins of British politics. They are not addressing the central issue about their fiscal plans, which were not credible. Where would the spending cuts have come from? We are prepared to answer that question. Until they do, they are not contenders for being taken seriously in British politics.

Let me remind the right hon. Gentleman of what one of his Ministers, Paul Myners, said. This was the man whom he appointed—or at least agreed to have appointed—to the Treasury, and the man who sat with him in all those meetings over the years. He said:

“There is nothing progressive about a Government who consistently spend more than they can raise in taxation, and certainly nothing progressive that endows generations to come with the liabilities incurred by the current generation.”—[Official Report, House of Lords, 8 June 2010; Vol. 719, c. 625.]

That is the truth about the Labour party’s position.

The right hon. Gentleman says, “Apologise”. He is the person who should apologise. More to the point, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), wherever he is, should come here and apologise for the complete economic mess in which he left the country.

--- Later in debate ---

[Mr Osborne]

It would probably have to be published, if it were—[Interruption.] Well, just the contents.

As I noted from the remarks of the shadow Chancellor, it is interesting that we have not actually heard from the Labour party about whether it supports an independent OBR. It opposed that when in government—

[Mr Darling]

indicated dissent.

[Mr Osborne]

It was repeatedly opposed by Treasury Ministers when I proposed it. Indeed, one of the most vocal and eloquent opponents was the shadow Education Secretary—I know that the shadow Chancellor has not always got on with him—who put the arguments on why Labour was opposed. If the Labour party wants to change its mind, we are all ears.

Oral Answers to Questions

Debate between George Osborne and Lord Darling of Roulanish

Tuesday 8th June 2010 Commons Chamber

[Mr Osborne]

I congratulate the hon. Gentleman on the pun—but this is a very serious national challenge, which whoever won the election was going to have to face. The 11% budget deficit will not disappear. A very large part of it is structural, and so will not automatically reduce as growth returns to the economy. We want to make sure that all political parties, including his, and the brightest and best brains across Whitehall and the public sector, as well as voluntary groups, think-tanks, trade unions and members of the public, are all engaged in the debate and discussion about how, collectively, we deal with the problem. After all, it is our collective national debt.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

First, may I welcome the Chancellor and his team to the Front Bench? I hope that he will join me in sending our good wishes to my right hon. Friend the Member for East Ham (Mr Timms), who remains a member of the Opposition Treasury team and who I am glad to say was in very good heart when I saw him a couple of weeks ago. He is looking forward to returning to the House at an early opportunity.

Unemployment is high today, but it is half what it was in the 1980s. Repossessions in the past couple of years are half what they were in the 1990s. Our economy is growing and our borrowing is coming down. Does the Chancellor accept that all of that is because we, in common with other countries—yes, as part of an international consensus—were prepared to take action to save our economy as we went into recession? Every one of those measures was opposed by him when he was shadow Chancellor.

[Mr Osborne]

It sounds as if we are rerunning the general election campaign. First, may I pay tribute to the work that the right hon. Gentleman did over three years, I think it was, as Chancellor of the Exchequer? He did the job in very difficult times, with the best of motives. Although we did not always agree with each other, as he has just made clear, he was always very courteous to me. I also thank him for the fact that I inherit from him a far more functional and less chaotic Treasury than the one that he inherited from his predecessor.

I make the point to the shadow Chancellor that the situation that we inherited from his Government—I do not say that he is solely to blame for this—is an extremely critical one. We have a very large budget deficit at a time when, as I have said, countries around the world are having to look at sovereign credit risks. We are having to deal with that, and with rising unemployment and growing inequality in our country. Regional disparities are growing as well, and we have to deal with those problems.

The right hon. Gentleman talks about the international consensus. He surely must have noted how, in the month since the general election, the EU, G20, the IMF, the OECD, and of course our own Governor of the Bank of England, have all warned us about the consequences of not dealing early with our budget deficit, and not accelerating the reduction in the budget deficit that he proposed in his March Budget.

[Mr Darling]

I agree that there are many issues that need to be resolved, in this country and others. No doubt we will return to them when the debate on the Gracious Speech resumes.

I want to ask a specific question about the Office for Budget Responsibility that the Chancellor is about to set up. When that body makes its recommendations, will he undertake that it will publish all the underlying assumptions that lead to them? Will he ensure that its deliberations, rather like those of the Monetary Policy Committee, are open and available for all to see?

[Mr Osborne]

I should have joined the right hon. Gentleman in wishing the right hon. Member for East Ham (Mr Timms) a speedy recovery. I understand that he has now sworn in, which is fantastic for everyone here concerned. The fact that he was assaulted in his constituency surgery doing his job as a constituency MP makes the incident all the more chilling, and we all wish him very well.

Let me deal specifically with the right hon. Gentleman’s question. We have set up the Office for Budget Responsibility on a non-statutory basis because we need to pass legislation to make it statutory. The model that we have followed is the approach taken by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) when he set up the Monetary Policy Committee. Sir Alan Budd will be available to answer questions from the Treasury Committee on exactly the kind of points that the right hon. Gentleman raises—such as the underlying assumptions. It is ultimately up to him how he publishes his information, and I do not want to prejudge that, but the purpose of the exercise is for people to have confidence in official figures and growth forecasts, and confidence means transparency. I am sure that the spirit of what the right hon. Gentleman says will be taken on board by Sir Alan.