Budget Resolutions and Economic Situation

Graham P Jones Excerpts

Wednesday 16th March 2016 Commons Chamber

[John Redwood]

I do not think that there is very much difference. All economic forecasters experience difficulties in getting their forecasts right, but some of us are more humble about our expectations than these official forecasters. I think that the danger of having an official forecast is that too much credibility is given to it, and big decisions are then made on the back of it. When official forecasters are zinging the forecasts around every three or four months, it becomes difficult for any Chancellor to run a stable medium-term policy involving, for example, important spending items that matter a great deal to our constituents.

I urge the Chancellor to be a little more sceptical about the wisdom and virtue of the OBR forecasts. The one thing of which we can be sure is that, over the period during which we have had the OBR, it has always been wrong, but what is stunning is the degree of the error. The OBR itself kindly points that out to us on page 234 of its very readable book, saying that, on average, it has revised the underlying borrowing forecast by £46 billion for the review period in question on each occasion. Given that the figure is an average, it is clear that the forecast revision has been considerably higher. The OBR tends to make its biggest revisions in autumn statements, but it has given us quite a whopper on this occasion. When a Chancellor must face a £46 billion revision every time he has to do the sums, it makes the task of stable economic management much more difficult. This is one of those instances in which an idea that was intended to produce more stability has proved to be destabilising.

The same can be said, I am afraid, of the current Governor of the Bank of England. The Governor of the Bank of England is meant to provide stability and wisdom, but we have now heard four different mantras from this Governor about when interest rates are going to rise. That is a very important statistic, which informs the forecasts of the OBR.

First of all, the Governor said that interest rates would probably go up when unemployment fell below 7%. When it tumbled rapidly below 7%, the Governor changed his mind. I am glad that he did, but the fact remains that he changed his mind. He then said that when real wages started to go up, interest rates would probably go up as well, and I am pleased to say that almost as soon as he had said it, they started to go up. Then he changed his mind, in that he had apparently not meant what he said.

The Governor then said that the turn of the year, 2015-16, would be a witching hour, when interest rates might have to go up. Well, we roared through the end of the year and the beginning of the new year, and they did not go up. Again, I was pleased about that, because I think it might have been unhelpful if they had. However, that shows that people and institutions who should be good at providing stability can be very destabilising and very misleading, and it is all noise that the Chancellor has to deal with.

The one good thing about all this is that when these ridiculous forecasts are made by the OBR and the Governor of the Bank of England that we would be worse off if we left the European Union, we can completely ignore them. We know that those people are always wrong about the things in which they are meant to specialise, so why should we believe what they say about something that is more important?

[Graham Jones (Hyndburn) (Lab)]

Will the right hon. Gentleman illuminate us on the section of the Chancellor’s speech that dealt with the European Union? Will he share his thoughts with us?

[John Redwood]

I think that I am doing that now. The Chancellor quoted the OBR, and the one thing that I disagreed with profoundly in a very good Budget was the OBR’s forecast on what would happen with Brexit. [Laughter.] It is not funny. Labour Members might learn something if they listened. They have obviously closed their ears to any idea that an independent Britain could be rich, prosperous and free, but many of us think that we will be more rich, prosperous and free if we leave the EU.

--- Later in debate ---

[Andrea Jenkyns]

I am sorry; I will move on.

I have worked in schools as a music teacher, so education is very important to me. Improving our schools so that our children get the best education in life is essential, and the opening up of opportunities for young people is a subject that is close to my heart. The reforms announced today are excellent and will give every young person the chance to succeed. In my constituency we have some excellent academies—Morley, Outwood and Woodkirk, to name but a few. That is why I am delighted to hear that we are providing more money, so that by 2020 every school in England will have become an academy or be in the process of conversion. We are going to shine a particular focus on performance in the north and look at the case for teaching some form of maths to 18 for all pupils. We are introducing a national fair funding formula, from which 90% of schools will benefit, and ensuring that we will see those benefits by the end of this Parliament.

What is important to me is that we will invest £20 million a year into new funding of the northern powerhouse schools strategy. That new funding will ensure that rapid action is taken to tackle unacceptable divides that have seen educational progress in some parts of the north lag behind the rest of the country for too long. In support of that, Sir Nick Weller will lead the preparation of a report into transforming education across the northern powerhouse.

The difficult choices made by this Government mean that we are now able to make decisions that benefit everybody, beginning by raising the tax-free allowance so that more people can keep what they earn. For the sixth consecutive year, drivers will see historically low prices at the pumps maintained, thanks to the Chancellor’s decision to continue the freeze on fuel duty, which has done so much to relieve the burden on families and businesses. As the Chancellor said, that landmark decision will save the average motorist £70 a year, which is a significant amount for families. In constituencies like mine, which have seen an historical under-investment in public transport, cars are a vital lifeline. This cut in duty will make it easy for my constituents to get around, to go to work and to shop, and I welcome it wholeheartedly.

For far too long, previous Governments neglected investment in the north. By contrast, under this Government, this Chancellor is making good on his promises to pump investment into the northern powerhouse, which will see historic improvements to our transport links. The M62, which passes through the heart of my constituency, is to be upgraded to a four-lane smart motorway. So often I talk to constituents who get stuck in the horrendous traffic that builds up on the M62, and my team commute down the road every day. I am totally behind the measures to unclog that vital link.

It is not just the roads that are being kick-started. The new High Speed 3 link from Manchester to Leeds will cut journey times for people from my constituency to travel between the two cities. I look forward to seeing more detailed proposals for the route and stations for that link, which will be a welcome boost to the economy in Yorkshire and the north-west. Britain is a nation of builders. The north is the beating heart of Britain’s industry and I am proud that the north will be building once more.

The Chancellor is also supporting our communities through the landmark decision to freeze duty on beers, spirits and most ciders. I know that residents in my constituency will welcome that this weekend, when they visit the annual Morley cricket club beer festival. As the Budget document tells us, changes to beer duty have already protected 19,000 jobs, and these further changes will continue to support our brilliant breweries. That will protect our local pubs, which are so often the heart of the community, and support the Scotch whisky industry.

Whereas some Members on the Opposition side of the House want to divide us along our internal borders, this Government are committed to supporting one nation, with measures that will benefit the whole country.

[Graham Jones]

Will the hon. Lady try to explain or give her version of the section of the Chancellor’s speech regarding the EU?

[Andrea Jenkyns]

A very good question. I am very supportive of what the Government have done. After all, it is the first time in 40 years that we are getting this referendum. I think that is all that matters. We have put it in the British public’s hands to decide on the future.

The floods over Christmas and at the start of the year were devastating to so many people, homes and businesses across the country. My constituency was lucky; we escaped major damage, with most of the affected areas being farmers’ fields. However, I am delighted that the Government have committed more money to our flood defences, including £35 million of new funding for phase 2 of the Leeds flood alleviation scheme. Leeds was hard hit in the recent floods. Many of my residents commute there every day, so that is welcome news. Thanks to our strong economic recovery, we have the tools available to help those affected by the floods.

We found out yesterday that the shadow Chancellor had previously listed his great influences as Marx, Lenin and Trotsky. With a new musical about the Leader of the Opposition coming out next month, I hoped he would not be singing the same tune. Unfortunately, it looks as though the Opposition are more of a tragedy than a comedy. The response from the Leader of the Opposition to the Chancellor’s statement confirmed that the Labour party should never be trusted with the nation’s finances. He said that we were not on the side of small businesses, yet we delivered tax cuts. He criticised the reduction of corporate tax rates, yet that will help businesses to grow and invest more into the economy, helping working people and the country as a whole and creating more jobs. Where the Government are setting out a clear plan for the future of the British economy, the Opposition are stuck in a Marxist dream-world where economic realities do not apply. They should never be given the opportunity to hold the levers of power again.

This is a Budget of opportunity—[Interruption.]