Budget Resolutions

Lord Clarke of Nottingham Excerpts

1st reading: House of Commons
Thursday 1st November 2018 Commons Chamber

[Mr Kenneth Clarke (Rushcliffe) (Con)]

I have listened to many Budget speeches but when I listened to this year’s I was taken by surprise, in a rather cheering way. I came here expecting that we were going to hear how the Chancellor had solved the problem of raising some taxation to help pay for the very welcome £200 billion given to the NHS. I sat there listening to him deliver an excellent speech, cutting taxation and increasing public expenditure. It was an open and expansive Budget based on a courageous Budget judgment that I had not seen coming—I welcome that and wish it every success. It was of course based on spending all the unexpected surprise of the extra tax revenues that the Office for Budget Responsibility forecasts had produced—or had already delivered—and on spending everything anticipated in the forecasts in order to keep us on track to eliminate debt.

I welcome bold decisions, and I hope this one succeeds, but I am afraid I am going to express a little caution, as someone needs to, even in the Chamber of the House of Commons. I have seen many Budgets and the reaction is quite predictable: all my right hon. and hon. Friends have joined in welcoming every piece of good news, as I do. The money for health and social care was very much needed, and I welcome what has been done for small businesses and city centres—I could go on, but my seven minutes does not allow me to cover all the good news in the Budget. But somebody has to express caution, but I do not do so as a party pooper; I am not going in for all the gloom and foreboding of the Institute for Fiscal Studies and Standard & Poor’s, the rating agency. But as the Labour Opposition are in my personal opinion so completely useless on an occasion like this—all they do is greet an expansive and popular Budget by saying, “Oh, it’s nothing compared with the vast sums we would spend in future”—it is probably as well that we do express some caution.

All I would like is for my right hon. Friend the Chief Secretary, who I believe is going to wind up the debate, to reassure me that we are proceeding with some care. Many political judgments involve taking risks. Very few political judgments and policy judgments give an obvious answer, which is fine. A courageous Minister takes some of those risks, but they do have to be aware of them and to anticipate what they would do if they started to materialise, and I hope my right hon. Friend will be able to do that.

The reasons for my reservations are, simply expressed, that the very welcome news about the tax revenues recently may not last. We have had windfall revenues in the past, and nobody quite understands why we have these windfalls now, so I think a little caution is called for before we start anticipating that they are going to carry on in that way.

As for forecasts, I never spent the money in forecasts, because all economic forecasting, at any time, is extremely fallible and extremely difficult. I do not think I know of a time when it has been more impossible than now. I have only seven minutes, so I am not going to be able to dilate about Mr Trump’s trade wars, problems of Chinese debt, the emerging problems in many emerging markets, the reckless nature of the Italian Government they have elected and, above all, the uncertainty of Brexit, which dominates us. All this makes the task of economic forecasting almost impossible, so we should not spend the money it looks as though we might be getting without having at the back of our minds some idea of what we are going to do if it does not work out.

[Sir Edward Leigh (Gainsborough) (Con)]

My right hon. and learned Friend is right to pour cold water on economic forecasts. What did he think of the Treasury forecast before the referendum which warned that if we voted for Brexit, there would be an

“immediate and profound economic shock”?

[Mr Clarke]

The Treasury took some welcome measures to ease that shock, stepping in with an emergency cut in interest rates and expansionist measures to mitigate the problem. One problem with forecasting is timing. If we get a hard Brexit, I do not think my hon. Friend will be dismissing quite so lightly the forebodings of the Treasury. I agree that some of the leading figures in the remain campaign turned the whole thing into a bit of a farce by talking about Budgets putting up taxes and so on in two or three months’ time, but I did not echo that and nobody else did. Also, it was not as bad as most of the quite dishonest arguments being put forward by the leave campaign about the millions of Turks who were coming here, but I will leave that to one side.

The Brexit deal will have consequences for our immediate economic future. I want a soft Brexit, if we have to leave. I want no new barriers to our trade and investment and no new customs arrangements; I want regulatory convergence and open borders to continue with our major market, but we may not get there—no one knows. I have added in all the other uncertainties in the global economy at the moment. We are all being sustained by an American boom, which may be quite short lived, as these fiscally induced booms usually are. Recession is not impossible in the next two or three years, and we have to make sure, first, that we avoid it and, secondly, that we are prepared for the warning signals when they come.

So I hope I can be persuaded that the Chancellor has retained some firepower in case the economy risks going off, and I hope he will manage expectations. We are all enjoying this Budget, but the key public spending decisions are going to be in the public expenditure round in 2019 and 2020. Nobody should be led to expect that vast sums are necessarily going to be forthcoming then, and we need to manage expectations.

What slightly worried me were what I thought were presentational errors made in the run-up to this Budget. Had I been Chancellor, I would not have agreed that £200 billion for the health service should be announced on an inconsequential date a few months ago and then have been left with the Budget to explain how we pay for it. If we had put the two together, the health service spending would have been the highlight of this Budget, because it is a very welcome and very important decision. The public were braced to pay something towards it. The first reaction is that some other taxpayer should pay, but we could have given ourselves more firepower and maintained our direction on debt by raising some taxes towards it. But they are the only reservations I raise.

Budgets often are popular at first but they are forgotten by Christmas—even mine. What matters is where the economy is in two or three years’ time, and I hope the Chief Secretary will tell me that the Government have not lost sight of that.