Charter for Budget Responsibility

Debate between Kit Malthouse and Richard Drax

Monday 6th February 2023 Commons Chamber

[Richard Drax (South Dorset) (Con)]

If I might paraphrase, Treasury officials have Ministers by the short and curlies, which is perhaps not the best position for them to be in.

[Kit Malthouse]

My hon. Friend puts it in a pithy way, as he often does. It is not so much that there is some kind of trap or problem here; it is that a situation has evolved—probably more by accident than by design—whereby the OBR has been drawn into the machinery of the Treasury and therefore acquired an authority and an effective veto, in a way that is perhaps not helpful.

The reason that is a problem is that economics is an inexact science—if we put three economists in a room, we will have five opinions. Economics is not delineated in the way chemistry is; it is as much an art as it is a science, and much of it is actually psychology. So if the OBR is to be so involved in policy making, it is important that we understand the economic basis of its assessments. For example, do the people who produce these now Treasury —but actually OBR—forecasts appreciate, understand and believe in the Laffer curve? Do they think that if we reduce taxation, income will rise? That sits at the heart of the argument the Conservative party has had over the last few months about corporation tax. If we cut it, will we collect more money? Seemingly, the forecasts say not. Those are the kinds of judgment that anybody forming economic and fiscal policy must make.

There are also more fundamental issues—about, say, the operation of capital. If the head of the OBR is going to be so involved in policy formation—if there is to be a negotiation between the Chancellor and the OBR on an iterative basis—will that person be operating on the same ideological basis in terms of capital versus labour? Are they a Keynesian? Are they a monetarist? What is the impact of those kinds of belief system? Drawing the OBR into the Treasury machine therefore creates some difficulty for an organisation that, as I know the Minister will agree, has value because of its independence and its alternative view of what the Treasury is trying to do.

The second issue I want to raise is about the mandate. The previous charter contained a point about balancing the budget within three years; that is omitted from this charter. As the Minister said, things have changed, so that has been dropped. When we are effectively chasing a ratio as measured against GDP, we are chasing a moving number, which may make our lives more difficult. For example, if we are chasing a debt-to-GDP ratio, and our GDP is falling, we have to work ever harder to hit our target. The things we have to do to hit that target may also, paradoxically, reduce GDP even further, so we end up chasing ourselves down a spiral against a moving target. That is why, in last year’s charter, which has changed, the idea of balancing the budget within three years, and ensuring that our expenditure did not exceed our income, was quite helpful; it meant that there were two absolute numbers over which we had some control.

Fortunately, in its February forecast, the Bank of England says that if there is a recession, it will be shallower than we thought, which is good. That is not least because last year’s Budget represented a mild fiscal loosening in its initial stages, although not so much later on, with the energy price cap and all the rest of it. That may have helped with aggregate demand, making the recession less severe. However, if GDP does fall, the ratio that the Treasury is chasing will worsen, unless there are significant spending cuts or yet more tax rises, both of which may exacerbate the fall in GDP. That is why I am nervous about the mandate. The objective of reducing debt against GDP is absolutely right, but I ask the Minister to guard against the issue that I have raised.

Finally, I want to say something about the longer term. As politicians, we often focus naturally on a three to five-year horizon. We do that because, guess what, there are elections in a three to five-year horizon, and it is a horizon that is understandable and controllable. However, as the Minister will know, there are significant long-term issues for this country, which are driven by demographics and the nature of our economy. He will know that there are alarming reports that look way into the future, and if he has looked at the significant work done by my hon. Friend the Member for Wycombe (Mr Baker) before he was a Minister, he will know what I am talking about.

To take an example, the Government Actuary’s quinquennial review of the national insurance fund basically says that it will run out of money in about 20 years’ time. Indeed, the rise in the pension age that we have just put through may mean that that period will be shorter, unless there is significant Government intervention in the form of more money going into the fund, which will basically mean tax rises. In addition, the OBR’s financial stability report from last year—it now does a long-term financial stability report—forecasts that, on the current trajectory, although our debts will start to fall in the short term, by the time we get to the middle of the century, they will be well above 200% of GDP and heading towards 270%, and we will be running at a deficit of 10% of GDP.

These long-term trends are driven fundamentally by demographic issues. As a country, we are growing older. We have fewer workers per pensioner, and we are not replacing ourselves from a birth rate point of view, and that will cause an enormous problem. Other countries are in a worse situation. In Japan, on current rates, the population will have halved by the end of this century, which will be economically catastrophic for the country. Unless we start chasing our tail—raising taxes to pay more in welfare and Government spending—we will be in big trouble, which may exacerbate our GDP issues. When we put together the whole cocktail of forecasts—short, medium and long term—they scream out at us to think about the model we are operating.

The wealth of this country was built on three great leaps forward in growth. We had the industrial revolution. That was followed at the end of the 19th century and the start of the 20th century by mass industrialisation, and since the ’70s we have had the IT revolution. In some of those periods, particularly the last, growth was quite turbulent, but throughout them, there was a very high average level of growth; 3%, 4%, 5% or 6% a year was not uncommon. We stand on the verge of another technological revolution—a great leap forward with automation, artificial intelligence, the way we do things and the green economy. We are on an ellipse of scientific discovery. Life sciences are a particular passion of mine, because there are a number of companies on the verge of curing cancer.

If we are to capture this upswing in human ingenuity, we have to think about the model of our economy and the operation of capital within it, and whether we have the right fiscal measures to encourage the kind of buccaneering capitalism that took advantage of those three previous upswings. We did less of that in the third period, the IT revolution. We went through a period of what I suppose we could call centre left or socialist Governments, and it was not de rigueur until the ’80s to be an entrepreneur. We sat on the operation of capital and, as a result, we missed the swing. That is why we do not have an Apple, a Microsoft, a Facebook or a Google. We have some companies coming, and we had some nascent companies. Some Members will be old enough to remember Acorn. For a while it was going to be a great world-beating company, but it fell by the wayside.

The Minister thinks about these issues carefully, and is conscious of the need to energise capital in a way that will build the businesses, products and jobs of the future. I urge those on the Treasury Front Bench to reflect on the longer-term issues that I have raised, and to recognise the kind of straitjacket that we are putting ourselves in. That, and the debts we incurred during covid, may well mean that we miss the next upswing in the world economy, unless we are willing to take risks with the mandate. There has been much debate in this House, and certainly in the media, about going for growth, but if we miss this upswing in growth, we really will miss a huge opportunity for the next generation of our fellow countrymen.

Police Grant Report

Debate between Kit Malthouse and Richard Drax

Wednesday 9th February 2022 Commons Chamber

[The Minister for Crime and Policing (Kit Malthouse)]

I am grateful to all Members who have contributed to this debate. It has been useful and I know that police officers up and down the land will have particularly welcomed at this difficult time the tributes to their bravery and commitment to the work they do to keep us all safe. I add my gratitude to them.

There were two key themes coming out of the debate. As the hon. Member for Croydon Central (Sarah Jones) said, the Bedfordshire “massive” are, as usual, present for these debates, as they have been every year for the last few years, and the Dorset posse have been pushing me hard on the funding formula. I am pleased to confirm that work is under way. The technical oversight group has been appointed and has a chair. We expect to go to consultation this summer and I will begin my parliamentary engagement, shall we say, in late spring, so Members should look out for an invitation to a meeting winging their way quite soon. I explained what might happen with the formula.

I would just caution those calling for a funding formula review. This is a very complex process, as those who have been involved in funding formula reviews in the past will know. There are two things to bear in mind. First, all cannot have prizes. There will undoubtedly, proportionately or otherwise, be a redistribution from one to another in a funding formula. Secondly, when particular indicators are pushed, such as tourism, there may be unintended consequences. For example, I get a strong lobby on tourism and visitor numbers from south-west Members, but if that were to be part of the funding formula what would that say about funding for London? How much of the overall cake would then be absorbed from forces across the land to deal with visitor numbers in London? We deal with that in London through a capital city grant and obviously there would be a consequence to that being part of the funding formula. I do not necessarily want to dwell on that point, but I ask Members to think carefully about unintended consequences before they make a contribution towards the consultation.

[Richard Drax]

London is a metropolitan area and far easier to police. Dorset is a massive rural area with fewer police. The point is that rurality is not taken into account in the funding formula.

[Kit Malthouse]

There is, actually, in the current funding formula a sparsity indicator, but nevertheless these are exactly the sorts of issues we will have to deal with in future and they are certainly something I want to focus on.

The other broad issue which a number of Members mentioned was dealing with a specific problem in a specific geography that may emanate from elsewhere. A number of Members, particularly those from Bedfordshire and Dorset, mentioned county lines. It is worth remembering that we are spending significant amounts of money on dealing with county lines in London, west midlands and Merseyside, where the vast bulk of the exporting drugs gangs come from. Money spent in London on intercepting and dealing with those gangs will pay benefits in Shaftesbury, Luton and other parts of the country. We make that investment in those forces, but on behalf of the whole country. That is a part of our having to see the whole of policing expenditure as a system, whether that is the National Crime Agency—which is no doubt doing work on the Dorset coast—the Metropolitan police doing work on county lines, or indeed the British Transport police, with whom I am very pleased that my hon. Friend the Member for South Dorset (Richard Drax) met. We are funding its taskforce on county lines, which is doing extraordinary work intercepting young people with knives, drugs and cash on the rail network, gripping it in a way that it has not been gripped before.

Reopening Local Police Stations

Debate between Kit Malthouse and Richard Drax

Wednesday 27th October 2021 Westminster Hall

[The Minister for Crime and Policing (Kit Malthouse)]

It is a great pleasure to appear before you, Ms Fovargue, I think for the first time. I am grateful to you for presiding over our proceedings. I congratulate my hon. Friend the Member for South Dorset (Richard Drax) on securing this important debate. I know that he recognises that I do not, as a number of Members have said, have much sway over the doings of police and crime commissioners or the devolved Governments.

I have no more ability to get the SNP Government to address the issue raised by the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) than I have to get them to sort out the Edinburgh children’s hospital debacle. Indeed, I have less power than the Secretary of State for Levelling Up, Housing and Communities to deal with Croydon’s disastrous finances, controlled, of course, by the party of the hon. Member for Croydon Central (Sarah Jones). As far as London is concerned, the Mayor of London is in a much better position than me to make a decision about police stations in the capital, given that the mayoralty’s budget is significantly greater than the entire Home Office policing budget—approaching something like £19 billion.

I do recognise this issue and the important part that police stations play in people’s perceptions of safety in their local area. I know that my hon. Friend the Member for South Dorset will agree that the police estate should not be set in aspic; there are buildings that are old and unsuitable, there are those that are in the wrong place and those that are inefficient or expensive to run. Often in the past we have found the police housed in Victorian buildings and custody suites that are not suitable for the modern day. Like all services—and like us in this glorious building in which we live—the police need to modernise their estate.

Very often that estate is not well disposed. When I became deputy Mayor for policing in London we inherited a chaotic estate of property across London. Dozens of buildings of all shapes and sizes that had accumulated over the decades—over two centuries of policing—meant that we often had, even here in Pimlico, two police stations that were broadly 10 minutes’ walk from each other, both fully operational with front counters. Therefore, some rationalisation, efficiency measures and decisions made locally about the best way to dispose of the police estate are obviously necessary. Quite rightly, that is the job of the locally elected police and crime commissioner, in conjunction with the operationally independent chief of police.

Having said that, I do recognise the role that police stations play in people’s sense of place. However, I think my hon. Friend the Member for South Dorset said a couple of interesting and conflicting things in his speech. He said that he wanted police officers to mix more with the community, and that a police station would allow them to do that. He also said that he wanted to reopen police stations and get police back on the streets. Those two things may not necessarily achieve the same aim.

I will illustrate this to him with a story. Many years ago, when I was London Assembly member for West Central—which included Westminster, Kensington and Chelsea, and Hammersmith and Fulham—we had a horrible murder in Shepherd’s Bush. It was a dreadful murder; we were fighting knife crime across the city at the time. The then borough commander, a chap called Kevin Hurley, a chief superintendent who went on to be police and crime commissioner in Surrey, held a public meeting that I attended. During the public meeting there was a row of people at the front who said that the problem is that Shepherd’s Bush police station is not open 24 hours a day. Kevin said, “I’ll tell you what, then—I will reopen Shepherd’s Bush police station 24 hours a day if you tell me which four police officers you want me to take off patrol to man the front desk?” At which point, everybody said, “No, no, no. We don’t want you to do that. We would rather they were out on the street.” Which is exactly what my hon. Friend the Member for South Dorset wants. Kevin then said, “Maybe what we should do is leave the lights on so it looks like it is open 24 hours a day—would that be enough?” They all thought that was a fantastic idea.

This illustrates quite neatly what my hon. Friend is talking about, which is the importance of a sense of presence. A police station, historically, has said something about police presence in an area. However, I know that he does not want the police sitting in a police station for longer than is necessary—he wants them out on the street.

[Richard Drax]

My right hon. Friend is generous for allowing this intervention. What I am saying is that we need both. I quite accept that if they are manning the police station waiting for people to come in, they will not be on the streets. I want—and constituents want—both. That is the point. The point is about priorities, and I can think of many things that I would like to scrap to pay for it.

[Kit Malthouse]

I understand, but overall what we want is a greater sense of presence by whatever means it is delivered. I hope my hon. Friend will see that as we progress with the police uplift. We have announced today that we have now recruited more than 11,000 police officers across England and Wales—a gross recruitment of 23,000 police officers to backfill retirement, so we can do something to reinforce that sense of presence.

My hon. Friend is right that alongside that sense of presence we want officers that have an intimate knowledge of their local neighbourhood. A critical issue for us is the connection between the police and public that comes from the relationship that they have in their local neighbourhoods. We tried to address that in London all those years ago by insisting that police officers serving on neighbourhood teams spent at least three years on them, rather than a year or 18 months before moving on. That meant that they could develop good knowledge of the area and the kinds of relationships to provide the reinforcement that both my hon. Friend and I want to see.

My hon. Friend referenced the revolution wrought in New York by a former mayor and police chief. Rather than investing in bricks and mortar, they flushed lots of cops out of the police stations and on to the streets, to the extent that it was very hard to go 50 yards without seeing a police officer dealing with the type of crime mentioned by my hon. Friend. I hope we will see more and more of that as the number of police officers increases.

In order to get there, we need more resource. I hope my hon. Friend will have seen—I am surprised that the hon. Member for Croydon Central did not mention this—that today’s Budget gave policing a remarkably good settlement. The Chancellor has agreed to generously fund the continuation of the uplift, so that we will get to 20,000 police officers and then, critically, maintain that number. By the time we get to the end of the programme in 2024-25, there will be an additional £540 million for policing. We have also given greater flexibility to police and crime commissioners so that they can add up to £10 to the precept every year for the next three years, which should raise something approaching three quarters of a billion pounds for them to invest in policing.

As we grow and expand, all police and crime commissioners and chief constables will need to review their estates, making sure that they are properly disposed and in the right place and that they have the capacity to cope with the new police officers coming on board. As my hon. Friend said, the ability to base themselves locally is important, because we want to minimise travel time to and from their place of work.