Autumn Statement Resolutions

Debate between John Redwood and Simon Clarke

Monday 21st November 2022 Commons Chamber

[Mr Clarke]

It is precisely because I do not believe that the mini-Budget was disastrous and ill-thought through. I believe very firmly in the merits of a lower tax, higher-growth economy. Indeed, that is why I sit on the Conservative Benches and he sits on the Labour Benches. It was the lack of alignment with our spending plans, which would have been addressed through a spending review. That would have allowed us to set out the runway—if you like—to the landing zone that the Government were intent on delivering. It was the lack of ability to model the benefit of robust supply-side reform and lower taxation properly that was, I think, at the heart of what went wrong.

[John Redwood]

Did my right hon. Friend notice that the week before the mini-Budget was presented, the Bank of England and the Federal Reserve Board were deliberately driving down bonds on both sides of the Atlantic, wanting rates higher, and that the Bank of England hit the market more when it announced that it would start selling bonds worth £40 billion into a falling market?

Delivery of Public Services

Debate between John Redwood and Simon Clarke

Tuesday 28th June 2022 Commons Chamber

[Mr Clarke]

I agree with my hon. Friend. It is crucial that the NHS continues to reform and, frankly, become more fit for a technological age, as well as for one in which we can anticipate these problems ahead of time. We should act to improve the use of all the technologies, which will mean that we get more value for taxpayers’ money. With an ageing society that is plagued by so many avoidable and preventable conditions, we need to be able to catch them in time, and that planning and foresight will be crucial for the future.

[John Redwood]

When I asked representatives of the Health Department how many chief executives there were in NHS England, they said that they did not know. Has my right hon. Friend had any more success than I have in finding out how much senior management there is, how it is aligned with the interests of patients and how wisely it is going to spend the extra money he is giving it?

[Mr Clarke]

My right hon. Friend is right to say that with this budget for the NHS comes a responsibility for that organisation to be absolutely open and candid—in a way that, frankly, it has too often not been—about where its resources are deployed, and certainly to avoid funding a culture of managerialism at the expense of the patients. We have had recent success in securing some of the data that we have been looking for, but this is a subject where ongoing pressure from across the House for greater transparency is welcome. Certainly if there is any data that we hold that my right hon. Friend would like to see, I will do my best to facilitate that.

Charter for Budget Responsibility and Welfare Cap

Debate between John Redwood and Simon Clarke

Monday 10th January 2022 Commons Chamber

[John Redwood (Wokingham) (Con)]

Could my right hon. Friend comment on what difference, if any, he thinks it makes that a significant proportion of that debt is now owned by the Bank of England, which is 100% owned by the Government on behalf of the taxpayers?

[Mr Clarke]

The Bank of England has obviously helped to underpin our wider response to the crisis that we face. Clearly, it does have a bearing on the relevant significance of debt, but it would be simply irresponsible to leave ourselves exposed in the manner in which we risk being if we fail to constrain the borrowing, which risks otherwise becoming an unacceptable burden and which would leave us very vulnerable. A 1% rise in interest rates would cost the Exchequer £22.8 billion in 2025-26. That is a meaningful level of exposure and one which we want to take action to address.

[Mr Clarke]

My hon. Friend is absolutely right. We are certainly not saying that we are in an untenable situation, but we are saying that it is important to meet our fiscal rules and to get debt falling as a percentage of GDP. As Conservatives, we believe that and we have won elections four times in the past 12 years on that basis. It is important that we continue to uphold that.

[John Redwood]

Further to that point, is my right hon. Friend not quoting a gross figure for the impact of a rise in interest rates, and quite a bit of that would be credited back to the Bank of England, which, in turn, could pay it back as a dividend to the Treasury?

[Mr Clarke]

I think it remains the case that we need to make sure that our debt-to-GDP ratio is more sustainable than it is at present, and I do not think colleagues would significantly demur from that. I take the point that, obviously, there is an interaction—some of these interactions are of a relatively circular nature—between the Bank and Exchequer, but none the less, it is important that we control our public debt. Indeed, we were able to respond to the pandemic as comprehensively as we did precisely because of the fiscal space created since 2010. The fact that we faced two once-in-a-generation shocks in just over a decade highlights why we must have the buffers to provide support when it is needed most and why we must act to rebuild those buffers, so that we are ready for any future shocks. In its most recent “Fiscal risks report”—not an easy one to splutter out—the OBR said:

“In the absence of perfect foresight, fiscal space may be the single most valuable risk management tool”

that we have.

The third and final reason we need to keep our debt under control is simple: our public finances are the legacy we leave for future generations, and the decisions we take now will have a material impact on the lives and livelihoods of our grandchildren. They will help or hinder their future ability to tackle long-term challenges, from climate change to an ageing population, or indeed to seize the opportunities that lie ahead.

The charter for budget responsibility contains new fiscal rules to guide us back to fiscal sustainability in a fair and responsible way. The rules will ensure that we get debt down over the medium term. They will allow us to deliver a significant uplift in capital investment, in turn driving economic prosperity, but without burdening future generations with borrowing to fund our day-to-day spending. The new rules require that underlying public sector net debt, excluding the impact of the Bank of England, must as a percentage of GDP be falling. The current budget must be in balance, which means that everyday spending must be paid for through taxation. Both rules must be met by the third year of every forecast period, giving us the flexibility to respond to events in the near term, such as omicron, while credibly keeping the public finances under control.

Finally, a third rule will ensure that public sector net investment does not exceed 3% of GDP on average over the forecast period. This rule will allow the Government to deliver on our ambitious plans for investment over this Parliament, with the highest sustained levels of PSNI as a proportion of GDP since the late 1970s. With this rule, we are delivering on plans to invest more than £600 billion in gross public sector investment over this Parliament to spread prosperity across the UK. The £4.8 billion levelling-up fund is part of that. An unprecedented investment package of £5.7 billion for eight English city regions to transform their local transport networks is also part of it. On top of these commitments, the UK Infrastructure Bank is now open for business and is expected to support more than £40 billion of infrastructure investment. Crucially, the rule also mitigates the risk of increasing debt to an unsustainable level. Our fiscally responsible approach supports growth while keeping debt under control.

Combined, these rules will guide responsible decision making. The International Monetary Fund has noted that

“Countries that have followed a debt rule have typically managed to reverse a jump in debt...significantly faster than other countries”,

and it recently assessed that the

“new fiscal rules have anchored fiscal policy well”.

Thanks to our support for the economy and early responsible decisions to strengthen our public finances, in its October forecast, the independent Office for Budget Responsibility confirmed that the rules were met. The current budget is in surplus and underlying debt is forecast to fall in the current target year, 2024-25. The rules will guide fiscal policy for at least this Parliament and will be reviewed at the start of each Parliament to ensure they reflect the economic context and mean that we can deliver for the British people.

In addition to the rules in this charter, we will go further, becoming one of the first countries to formally consider the broader public sector balance sheet in our management of fiscal policy. The OBR will now forecast broader measures, including public sector net worth, which it says provides a fuller picture of fiscal sustainability and allows for more sophisticated analysis.

The charter also retains the welfare cap in order to keep welfare spending on a sustainable path and to support the other rules in strengthening the public finances. Since the cap was last set at Budget 2020, the covid pandemic has had a significant impact on the medium-term outlook for welfare spending. To reflect that and to align with the updated fiscal framework, the level of the cap is being reset in line with the latest forecast. That leads to an effective increase of £10.5 billion in the cap by 2024-25.

Budget: Pre-announcement of Provisions

Debate between John Redwood and Simon Clarke

Tuesday 26th October 2021 Commons Chamber

[Mr Clarke]

It is important that we consider all the measures that have been trailed in the round. It is clear that the wider announcements that have been made are entirely accurate. The national living wage is to rise by £1,000 a year, which will take the benefit for a full-time worker on the national living wage to £5,000 since 2016. That is a substantial increase. It beggars belief that the Labour party can stand there and say that a 6.6% increase in the national living wage is somehow not enough. It needs to be considered in conjunction with all the other announcements that have been made, including the £500 million household support fund, the energy price cap and all the action that we have taken to freeze fuel duty and to keep bills low. We are acutely conscious of the pressures that face households and we take action to modify them.

On public sector pay, which the hon. Lady asked about, I am delighted that we will be returning to the normal processes that adjust public sector pay in the light of all the pressures that exist. It will be for the relevant pay review bodies to discuss that, in conjunction with the Government, in the normal way. I am not going to pre- empt that work, but we will work closely with them to make sure that what is announced is right. The Chancellor will have further details on that in his speech.

On the cost of energy, the energy price cap is protecting households, with up to £100 a year off their bills. That is the right thing to do. We all recognise that that is a priority for all our constituents.

On business rates, we will get the upshot of the fundamental review of how we can get the future of business rates right. The Labour party has committed to abolishing business rates, without any clear idea of how it would fund that. Indeed, the disconnect between what the Labour party has committed to and what it has actually identified the funding for is somewhere in the region of £400 billion of commitments with £5 billion of savings to pay for them. That is not a responsible way to run the economy.

What you will be hearing from the Government Benches tomorrow, Mr Speaker, is a clear plan to make sure that we can not only balance the books but take our economy forward in a way that works for the benefit of all our communities. That is obviously the priority for my right hon. Friend the Chancellor and for me.

[John Redwood (Wokingham) (Con)]

This is not the first Government who have wanted more than one day’s news out of a Budget, but the right way to do it is for all Ministers to observe complete Budget secrecy, for the Chancellor to announce the tax changes and the block totals on spending and then, in the days that follow, for Cabinet Ministers to come to the House to announce the detailed spending plans and subject them to our scrutiny. If that was right for all previous Governments, why is it not right for this one?

[Mr Clarke]

I thank my right hon. Friend for his question, and I completely share his assessment of the importance of this House, of which both the Chancellor and I are acutely aware. In 2013, the then Chancellor, George Osborne, asked the permanent secretary for Her Majesty’s Treasury to conduct a review of the practice of the release of Budget information under embargo on Budget day, and he set out a series of recommendations. His central conclusion was that the Treasury should introduce

“a ban on the pre-release of the core of the Budget…that is: the economic and fiscal projections, the fiscal judgement and individual tax rates, reliefs and allowances.”

We have observed that stricture in full and I am obviously totally committed to continuing to do that.