Budget Resolutions and Economic Situation

Mark Garnier Excerpts

Wednesday 8th July 2015 Commons Chamber

[Mr Tyrie]

That was a very interesting short speech. The hon. Lady made some important points, which I will not have time to address, with almost all of which I profoundly disagree and with which—this is the point I was trying to make—I think a large proportion of the House now disagrees.

The new Committee has a heap of new things to look at as a result of this Budget: the Green Paper on pensions and savings, the £12 billion of cuts to the welfare bill, the living wage, the new fiscal target, the shake-up of Sunday trading laws, the inheritance tax threshold changes and the avoidance measures, among much else. We will do our very best to report back to the House on these issues, and as soon as we can.

The plain fact, which I think is widely—almost universally—accepted, is that the backdrop for this Budget is dramatically better than it was when the Chancellor stood up and the right hon. and learned Member for Camberwell and Peckham replied exactly five years ago. The Chancellor deserves a great deal of credit for having brought about that transformation in the country’s economic fortunes.

I think, though, that it is worth mentioning a few risks in the economy. The first, which I consider very important and to which the Chancellor alluded, is the euro crisis and the Greek problem, which has the potential to turn from a manageable challenge into a major catastrophe. Were Greece to default, the United Kingdom could not take for granted the relatively compressed bond yields that help to keep our debt service costs low. The second is the bursting of the stock market bubble in China. Thirdly, we shall have to adapt to the moment when interest rates start to rise, because it could prove a shock for those who have become too used to the idea that they can remain at an artificially low level.

That is without taking account of quantitative easing—£375 billion of it—which will have to be unwound. I want to put down a marker about QE, on behalf of Parliament. When it is unwound, it may make a profit or a loss, and that profit or loss will need to be examined by the House and the Treasury. It is a matter for us, and not exclusively for the Bank of England. Any losses that are borne by QE do not score against the Bank’s balance sheet; they score against taxpayers. I think it extremely important for the House to be closely involved when big decisions are made about QE.

[Mark Garnier (Wyre Forest) (Con)]

Does my right hon. Friend agree that one of the biggest vulnerabilities of the economy is household debt, which is currently greater than the national debt at slightly under £1.5 trillion?

[Mr Tyrie]

Yes. We have a long way to go before we can fully restore a savings culture in this country. The savings ratio is still unacceptably low, much lower than it has been historically. There is a great deal more to do, and I think that the pensions and savings reform Green Paper will have a role in that.

Since my hon. Friend has—indirectly—raised this issue, let me add that, during the last Parliament, the Treasury Committee briefly examined the question of whether pensions could be treated like individual savings accounts. The idea did not find much favour in the press at the time, but I personally think that it merits careful consideration.