Budget Responsibility Bill

Lord Sikka Excerpts

2nd reading & Committee negatived & 3rd reading
Monday 9th September 2024 Lords Chamber

[Lord Sikka (Lab)]

My Lords, this Bill produces comfort for Chancellors, even though the OBR acknowledges that there are shortcomings in its work. Right at the outset, can the Minister explain why the Bill does not permit the OBR to publish forecasts at its own volition or at the request of parliamentary committees? Why that particular restraint? The OBR’s reports are promoted as apolitical, but that does not mean that it is free from institutional biases. Neither the Treasury nor the OBR makes a distinction between capital and revenue expenditure. Both are lumped together to produce a forecast of government spending and debt, which is of little use in charting the long-term course of the economy. Does the Minister agree that these items should be separated?

The OBR forecasts government debt, but asks no questions about the composition of the debt. For example, government debt includes Treasury bills and gilts held by the Bank of England’s asset purchase facility, which amount to £643 billion. It is really a hangover from the quantitative easing period and should not be part of the government debt. The left hand of the government creates the money, then the right hand buys the Treasury bills with it, and, somehow, £643 billion turns up as a government debt. I cannot see any economic logic to this, and it really constrains the Government’s policy options. I hope the Minister can explain why the Government are content for this overstatement of their debt: it ought to be looked at.

The OBR asks few searching questions and rarely steps beyond the conventional. With apologies to the philosopher Bertrand Russell, I am reminded of the story of the inductivist turkey that became famous for its forecasting abilities. It collected daily data, noting the times when the flock was fed and watered. Soon, it began to predict when the daily feeding and watering events would occur. Everybody was in awe and it became a celebrity.

The OBR of the turkey world checked the calculations and confirmed that the predictions were accurate, but some had different questions. They wanted to know why they were fed and watered every day; why they were weighed every day; why they were caged; and why it was that some were taken out and never seen again. Such questions were not the flavour of the day, and the critics were whipped into silence. The rulers decided that the inductivist turkey should receive a specially minted gold medal. The next day, it was Christmas.

So it is here: key assumptions and wisdom are not questioned by either the OBR or the Treasury because they are all intoxicated with getting the forecasts right. The entire life of the OBR has been accompanied by policy failures: the flatlining of the economy; cuts in real wages; falling living standards; investment strike by the state; crumbling infrastructure; and people dying while awaiting a hospital appointment. The OBR never looks at the multiplier effect of the Treasury assumptions or the composition of the government debt but Chancellors are still comforted because, somehow, the OBR has said that everything is okay.

If the authentication of financial forecasts by so-called independent parties is so desirable, why do the Government not apply the same logic to other arenas, such as pensioner poverty, child poverty, income and wealth inequalities, mental health and social care targets? Perhaps, when he is replying, the Minister can explain the political indifference to the social squalor created by relying on forecasts.