Budget Responsibility Bill

Debate between Nigel Huddleston and Andrew Griffith

Committee of the whole House
Wednesday 4th September 2024 Commons Chamber

[Nigel Huddleston]

Thank you very much, Madam Chair. May I first take the opportunity to congratulate you on your election? I promise to try not to try your patience over the coming weeks, years and so on, but we will see how things go.

I wish primarily to speak today to amendment 9 and, of course, consequential amendment 10, which effectively seek to ensure that the fiscal lock proposed in the Bill should also include any changes to the fiscal rules and would require the Office for Budget Responsibility to produce a report on their effect on public finances. The Office for Budget Responsibility was of course constructed by a Conservative Chancellor following the poor forecasting record of the previous Labour Government. Between 2000 and 2010, the then Labour Government’s forecasts for economic growth were out by an average of £13 billion, and their forecasts for the budget deficit three years ahead were out by an average of £40 billion. Their forecasts therefore lacked credibility, and to re-establish confidence and credibility the OBR was created by the Conservative Government.

Labour lacked economic credibility in the past, and I am afraid it still lacks it now. The facts simply do not stand up the false claim that the Government have inherited the worst economic circumstances since the second world war; they transparently have not. Contrary to the rewriting of history that the current Labour Government are attempting, when we took over from Labour back in 2010, inflation was 3.4%. When they took over from us, it was 2.2%. The annual deficit is half what we inherited in 2010, unemployment is about half what it was in 2010, and we handed Labour the fastest economic growth in the G7. The dominant political and economic narrative since the second world war is in fact, as has been widely commented on, that every single Labour Government end up with unemployment higher at the end of their time in power than when they took over from the Conservatives preceding them.

The British public should not be taken for fools. Just because Labour keeps claiming something, that does not mean that it suddenly becomes true, which is why clarity over plans and rules is so important. The fiscal rules are of course restrictions on fiscal policy set by the Government to constrain their own decisions on spending and taxes. The fiscal rules set by the previous Government said that the debt to GDP ratio should be falling within a five-year horizon, and that the ratio of the annual budget deficit to GDP should be below 3% by the end of the same period. Labour’s manifesto for the election proposed the following fiscal rules: balancing the current budget, so that day-to-day costs are met by revenues, and that debt must be falling as a share of the economy by the fifth year of the forecast. On the surface, therefore, the debt rules appear to be broadly the same under the new Government. The Government have even said that they have an “ironclad” commitment to reduce Government debt. It is therefore critical what definition of debt is used for the fiscal rules. Clearly, any changes to the fiscal rules are financially significant decisions because they affect how much the Government can borrow and spend.

On Second Reading, the Exchequer Secretary to the Treasury said:

“Our fiscal rules are non-negotiable.”—[Official Report, 30 July 2024; Vol. 752, c. 1263.]

Great, but why then has the Chancellor repeatedly failed to rule out that she will change the definition of debt in her fiscal rules to allow, presumably, for massive borrowing? The Government cannot run from the scrutiny that they should be subjected to if they are considering making such a change. We believe that our amendment requiring an OBR report on changes to the fiscal rules is entirely consistent with the Government’s stated policy intent, and should therefore be fairly uncontentious. After all, on Second Reading, the Chief Secretary to the Treasury said that

“the announcement of a fiscally significant measure should always be accompanied by an independent assessment of its economic and fiscal implications, in order to support transparency and accountability.”—[Official Report, 30 July 2024; Vol. 752, c. 1211.]

We agree, and not accepting our amendment would be contrary to those goals, because clearly changing the fiscal rules would be a fiscally significant measure in anybody’s book. Furthermore, the Chief Secretary said that

“fiscal discipline and sound money is the bedrock of our plans.”—[Official Report, 30 July 2024; Vol. 752, c. 1213.]

Well, changing the fiscal rules would be changing the foundations and that bedrock.

Transparency and clarity are important in relation to the public finances, because Ministers should never forget that it is not their money that they are spending; it is the public’s money. The public have a right to know how their money is being spent, and government is about making difficult choices with limited resources. With Government spending being above £1.2 trillion per year, the British public recognise that the Government clearly have choices. It is not an endless supply of money, but it is a very, very large amount. In the last few weeks, the new Labour Government chose to spend the public’s money on pay settlements for their union friends rather than on supporting pensioners. Those settlements are estimated to cost about £10 billion. They also chose to spend £8.3 billion on a public energy company and £7.3 billion on a national wealth fund, so far from inheriting a £22-billion black hole, they have actually just spent £25 billion creating one within their first few weeks of coming to power.

[Andrew Griffith (Arundel and South Downs) (Con)]

My hon. Friend is making a fantastic speech on the importance of being responsible with our public finances. Much of the Bill is concerned with responsibility and transparency. Does he know whether the Government published an impact assessment when they took away the winter fuel allowance?

[Nigel Huddleston]

I thank my hon. Friend for that point. My understanding is that the Government have not published an impact assessment, as would normally be the case for something with such a significant impact. I think that speaks to the whole narrative that we are hearing from the Government: claiming one thing when the facts speak differently. As I said, far from inheriting a £22 billion black hole, they have actually spent, or committed to spending, an additional £25 billion. That is a choice that they made, so the claim that the Labour Government are having to take the winter fuel allowance away from millions of pensioners as a response to unexpected financial constraints simply does not stack up against the facts, or indeed the words of the Chancellor herself, who on 25 March 2014—yes, a decade ago—said:

“We are the party who have said that we will cut the winter fuel allowance for the richest pensioners and means-test that benefit to save money”.—[Official Report, 25 March 2014; Vol. 578, c. 174.]

That is a direct quote in Hansard from the current Chancellor, so no, the Government’s restriction of winter fuel payments is not a response to financial circumstance; it is a long-established, clearly stated Labour policy intent—a deliberate policy choice, but a policy that they conveniently forgot to tell the public about in the run-up to the last election.

I hope, however, that the Government can be straight with the public on this point about the fiscal rules, accept the amendment that we are proposing, and provide assurance to all Members and the outside world that there is no sleight of hand here. We want the Bill to work as they say it is intended to, and to include financially significant decisions, such as on the levels of Government borrowing and the fiscal rules. I would therefore appreciate it if the Chief Secretary to the Treasury confirmed in his wind-up that the Government do not intend to change the definition of debt in their fiscal rules or practise some accounting trick to hide the level of Government borrowing, and that they do indeed wish to be clear and transparent about the public finances. If Labour Members vote against our amendment, it will merely prove that they are planning to change their fiscal rules in the Budget to borrow more money, increase debt, and run away from independent OBR scrutiny—the very opposite of the stated intent of the Bill.