Charter for Budget Responsibility

Mark Garnier Excerpts

Tuesday 13th January 2015 Commons Chamber

[Steve Baker]

I am well aware of that, but it was necessary in the context of the hideous mess left by the hon. Gentleman’s party. It is always the same and this is the essence of the problem: there is no kindness whatsoever in making to those in need attractive promises that subsequently cannot be kept. That is not kind; it is cruel.

[Mark Garnier (Wyre Forest) (Con)]

My hon. Friend is making a powerful speech. Does he agree that the chaos that could be brought about by a lack of fiscal discipline would result in huge uncertainty for public sector workers, who will not be able to rely on their jobs if balanced books are not maintained, because they will lose them? More importantly, for the thousands—possibly millions—of households across the country who were encouraged to pick up an extra £1 trillion-worth of household debt in the Brown bubble in the lead-up to the financial crisis, the uncertainty of unbalanced books could result in much higher interest rates and imported inflation as a result of reduced currency. An enormous amount of pressure would be put on those households as a result of chaos through ill-discipline.

[Steve Baker]

My hon. Friend is, of course, right. He and I sit on the Treasury Committee and we have heard from the Debt Management Office about the factors propping up the current level of borrowing. Not only has borrowing been back-stopped by the Bank of England, but bond market traders are aware of the Chancellor’s and the Government’s intention to balance the books, have confidence in it and, therefore, will keep lending to us. The situation, however, is precarious and the Labour party would put it in danger.

VAT cannot really go up. If it went up further, it would hit the poorest hardest and that would be wrong. On income tax, perhaps Labour would reduce the personal allowance. The truth is that the top 1% already pay a quarter of income tax. How much further can we go? My right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) said that the 50p rate was pointless, I think—I will have to check whether that is what he said, but it is pointless. It is an act of spite to pretend that the rich will pay through their income tax; all they will do is adjust their behaviour. We put up capital gains tax and the revenues from it went down. My right hon. Friend the Member for Wokingham (Mr Redwood) has explained that in detail on his blog.

The truth is that the evidence shows that in this country there is a hard limit to how much the public will pay in taxation. Depending on how we measure GDP, it is somewhere between 35% and 40% of GDP. If we are committed to balancing the books, we have to take overall Government spending down to the level that people will pay in tax, and there is a historical limit.

Labour Members have been rather hysterical about the Government consumption chart, which shows us going back to the 1930s. This is about balancing the books. I believe that Labour Members want to put up capital spending, and debt interest is already forecast to overtake education spending. There is a really tough problem here. The truth is that hysterics on either side of the argument will not do. For example, wealth taxes will not work. Opposition Members seem to think we will get the rich to pay, but Denis Healey said of a wealth tax:

“I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle.”

The truth is that there is very little chance of getting out of the mess we are in without taking extremely difficult decisions. Unlike turning around a commercial company, we cannot cut to the bone once and then build back up; reducing the deficit has to be taken gently, and we have done it at an appropriate pace. The Chancellor has the right plan, and I shall certainly back him tonight.