Charter for Budget Responsibility

John Hemming Excerpts

Wednesday 26th March 2014 Commons Chamber

[John Hemming (Birmingham, Yardley) (LD)]

It is often said that a week is a long time in politics, but in one sense that is wrong. Dealing with Government finance and the economy takes multiple years, so the problem that we had in 2010 will take at least eight years to resolve. People who interview me every so often say, “Oh, we have more cuts this year,” but those decisions were made in 2010 and they were driven by Government policy in the previous years.

I shall quote a few comments about Government policy from 2005 to 2010 because they are relevant to this debate and the issue of budget responsibility in the long term. One person said in his memoirs:

“However, we should also accept that from 2005 onwards Labour was insufficiently vigorous in limiting or eliminating the potential structural deficit.”

That was Tony Blair, who was Prime Minister at the time.

Lord Turnbull, who at one stage was the Cabinet Secretary, the chief civil servant, noted that excessive borrowing started to be a problem from 2005. He said:

“It kind of crept up on us in 2005, 2006 and 2007, and we were still expanding public spending at 4.5 percent a year”.

His argument, essentially, was that the Labour Government should have been aiming to put money aside in the good years. He cited examples of other places that began to accumulate surpluses for a rainy day—places such as Australia.

The Government were borrowing £2,500 on behalf of every person in the country so that, in effect, a baby would have borrowed £45,000 by the time it reached the age of 18. That had to be brought under control, but it cannot be done immediately. It is important that we properly manage Government finances. If anyone can be bothered to read the charter for budget responsibility March 2014 update, they will find on page 10 that if the welfare cap is found to be breached, there are three options, one of which is to

“explain why a breach of the welfare cap is considered justified.”

Members can vote against the motion only if they do not believe in the Government managing and knowing what they are doing. I would be worried if there was a scheme whereby somebody came and said, “I need benefits. I’ve got no money,” and the Government said, “We’ve run out of money. We have no money to give you jobseeker’s allowance.” People will still have entitlements, but if we spend more than we intend to spend, the Minister will, as an absolute minimum, have to explain why.

I worry still about how the Government manage finances. I have asked questions, for example, on tax credits, to try to work out how many effectively fraudulent self-employed schemes there are, often run by people who are recent migrants. People set up nonsense scrap metal businesses that exist not as businesses, but to qualify for tax credits, but the Government cannot give that information. That is bad. We should be able to analyse the figures.

We need a good benefits system that ensures that there is a solid and straightforward safety net so that if people end up in difficulty, there is a way of rescuing them and keeping them from destitution. However, to argue that we should not try to manage the total costs is nonsense. Hence, I am not surprised that the official Opposition are backing the motion. Anyone who believes in having the money available to look after people believes in managing the accounts and knowing what is happening, and if we spend more than we expect, as an absolute minimum the Minister should explain why.