Richard Fuller
Main Page: Richard Fuller (Conservative - North Bedfordshire)Department Debates - View all Richard Fuller's debates with the HM Treasury
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Darren Jones
I was always enamoured of your arguments, Madam Deputy Speaker, as I continue to be today. I look forward to the prospect of many interventions from Members across the House as part of this important debate, and I encourage the shadow Chief Secretary to intervene.
Richard Fuller (North Bedfordshire) (Con)
I am grateful for the opportunity to intervene. Can the Chief Secretary to the Treasury confirm whether the OBR validated his £22 billion claim?
Darren Jones
The OBR was very clear, as Members will see in its publications in the House of Commons Library, that the spending plans announced by the previous Government were—to quote the chair of the OBR in his evidence to the Treasury Committee—a “fiction.” The OBR forecast provided to the Government made it clear that had the in-year spending pressure been reported transparently, the last forecast under the previous Administration would have been “materially different”. That shows that the lack of transparency on in-year spending was a secret held by only a few Ministers in the last Government, and neither the public, Parliament, we in opposition nor the OBR knew about that problem. That is why this Government have already legislated to bring forward additional strengthened powers for independent checks and balances and transparency, and we have committed to sharing in-year spending pressures with the Office for Budget Responsibility so that we never end up in a situation like the one we inherited.
The Chancellor’s autumn Budget put the public finances back on track, and we will keep them there. Our commitment to sound public finances is non-negotiable. Our new charter for Budget responsibility, underpinned by the new fiscal rules, ensures a more transparent fiscal framework and provides a stable foundation for growth. Today I will outline the changes that we have made to the charter for Budget responsibility, as published in draft at the autumn Budget 2024 and laid before this House last week.
Fiscal rules are a key part of the UK fiscal framework. At the autumn Budget in 2024, the Chancellor confirmed the Government’s fiscal rules as set out in our manifesto, which will play a vital role in unlocking investment. These rules will put the public finances on a sustainable path and prioritise investment to support long-term growth. They consist of two rules: the stability rule and the investment rule.
The stability rule aims to move the current Budget into balance so that day-to-day spending is met by revenues, meaning that the Government will borrow only for investment. We will meet this rule in 2029-30, until that becomes the third year of the forecast. From that point on, we will balance the current Budget in the third year of every Budget, held annually each autumn. This will provide a tougher constraint on day-to-day spending so that difficult decisions cannot be constantly delayed or deferred, as they were under the last Government.
I am sure the House would recommend that the Government should live within their means. That means that public services have to be able to live within their budgets, and it means that tax revenues have to pay for day-to-day spending. Never again will we end up in the position the country ended up in under the last Government, when every week and every month the country borrowed more and more in order to pay the day-to-day bills. That is why when hon. Members on the Opposition Benches complain about the debt burden this country is having to deal with, they should look in the mirror, because they built up that debt burden. The people responsible for filling up the country’s credit card just to pay the bills every month, even in advance of the pandemic, were Conservative Ministers. That will never happen under a Labour Government because of our clear fiscal rules. It is why for the first time in 17 years we are doing a zero-based review of all public spending, not once done under the last Administration but done in the first spending review of this Labour Government.
Secondly, our investment rule requires the Government to reduce net financial debt, defined as public sector net financial liabilities, as a share of the economy. Public sector net financial liabilities is an accredited official statistic, produced by the Office for National Statistics since 2016; based on international statistical guidance, it has been forecast by the OBR since that time. The Institute for Fiscal Studies has noted that the metric offers a
“more complete picture of the Government’s financial position, while removing some of the perverse incentives associated with a narrow focus on PSND”—
public sector net debt.
This rule keeps debt on a sustainable path while allowing the step change needed in investment by targeting a measure of debt that captures not just the debt that Government owe, but financial assets that are expected to generate future returns. By targeting net financial debt for the investment rule, the Government are prioritising investment to drive long-term growth while getting debt falling as a share of the economy.
The move to net financial debt will be supported by a comprehensive set of guardrails to give confidence that there are rules around the investments the country can make. Like our stability rule, our investment rule will apply in 2029-30 until that year becomes the third year of the forecast, and from that point onwards net financial debt will fall in the third year of every forecast.
The move to net financial debt means that at the autumn Budget the Government were in a position to confirm public investment that will be £100 billion higher over the forecast period compared to the previous Government’s plans. I am pleased to say that in its autumn forecast the OBR confirmed that the Government are on track to meet both fiscal rules two years early, in 2027-28, displaying the Government’s commitment to sound finances.
The Chancellor has asked the OBR to produce a forecast on 26 March, which will assess us against these rules once again. Our commitment to these fiscal rules is iron-clad. The UK has changed its fiscal rules in the past more than any other country, but this Government know that stability matters. That is why the new charter sets out clearer circumstances under which the fiscal rules can temporarily be suspended through a new strengthened escape clause. The new escape clause requires a decision on suspension be supported by the OBR’s analysis so that the rules can be suspended only with sufficient justification.
As well as new fiscal rules, the updated charter for budget responsibility includes a set of wider reforms that ensure a more stable and transparent fiscal framework. Because fiscal responsibility is so central to this Government’s mission, the first piece of legislation passed in this Parliament was the Budget Responsibility act 2024. It delivered our manifesto commitment to introduce a fiscal lock. I do not think Members on either side of the House need reminding of what happens when huge unfunded fiscal commitments are made without proper scrutiny and key economic institutions such as the OBR are sidelined. We will not let that happen again. The fiscal lock therefore guarantees in law that from now on every fiscally significant change to tax and spending will be subject to scrutiny by the independent OBR.
The charter sets out the details of how the fiscal lock will operate. As well as the new guiding fiscal principles to move towards only borrowing for investment and to keep debt on a sustainable path, the OBR will monitor progress against a dashboard of key debt sustainability metrics to ensure the Government are taking a broad view of fiscal sustainability. A broader view will allow the Government to form a full assessment of the sustainability of the public finances and support us in seeking to improve sustainability over time.
We are also enhancing fiscal and economic stability by confirming in the charter today that the Government’s intention to move to one major fiscal event per year will be honoured, giving families and businesses certainty on tax and spending plans, as will the requirement on the Treasury to conduct regular spending reviews every two years and setting spending for at least three years, ensuring public services have certainty on their funding and that spending decisions cannot again be repeatedly delayed. In addition, it guarantees a three-year rolling budget for the OBR, to support its independence. We are further strengthening fiscal transparency and accountability by accepting all the recommendations of the OBR review of the March 2024 forecast for departmental expenditure limits, including to improve the spending information the Treasury shares with the OBR.
The OBR is widely recognised as providing independent, credible and high-quality analysis. It is a guarantor of economic stability. Going forward, the Treasury will provide the OBR with information on the in-year position, allowing it to forecast underspending and overspending against departmental expenditure limits where appropriate. This will ensure the unfunded pressures identified at the public spending audit never happen again. We are a Government who will consider the impact of our current spending decisions on future generations, and to show how the long-term health of the public balance sheet is bolstered by sound investments, the charter requires the OBR to report on the long-term impact of capital investment and other policies at fiscal events.
Finally, I turn to the welfare cap, which we are also debating today. The Government are retaining the welfare cap within our fiscal framework to support our ambitions to keep welfare spending sustainable in the medium term. The OBR will assess whether the new cap has been met at the first fiscal event of the next Parliament. The latest OBR forecast judged the previous welfare cap to be breached by £8.6 billion, following a trend of forecast breaches by the previous Government. This is clearly an unsustainable path for welfare spending. This breach underlines the inheritance left by the previous Government: a failure to control welfare spending and to bring forward radical reform, and, crucially, a failure by the last Government to support people to get the treatment or skills they need to return to work.
Richard Fuller (North Bedfordshire) (Con)
As the Chancellor scours the nation turning over every stone in her desperate effort to mitigate the damage from her choices in last year’s Budget of broken promises, it falls to the Chief Secretary to the Treasury to keep his face straight as he lectures the House on the importance of fiscal responsibility. He has shown the performative skills of one of the greats of the west end, but his mouthing of the words of economic stewardship, even as his audience of wealth creators get up out of their seats and leave the show, leaves few of us impressed. They know what the British public know: that this is a Treasury team and a Government who, day after day, create more problems and, day after day, demonstrate that they are clearly out of their depth.
Darren Jones
As the shadow Minister and, I hope, the House knows, I am a humble man and am always ears-open to advice, wisdom and feedback on how we can do things better. Given his opening remarks on fiscal stability, I wonder whether he has any reflections to offer the House from the time of his party being in government and, indeed, from his time in the Treasury under former Prime Minister Liz Truss about what went wrong and what we might do differently.
Richard Fuller
The Chief Secretary to the Treasury, like so many on the Labour Benches, loves to talk—almost fondly—about the former Prime Minister Liz Truss. Well, at least she knew her time was up after 50 days; we are stuck with the Chancellor for five years.
When it was noted a few months back that the entire Labour Cabinet could barely scrape together a year’s worth of business experience between them, it was thought to be just a curiosity. Little did we know it was an early warning sign of their lack of suitability for the task of managing the British economy: business confidence down, job losses up, consumer confidence in the gutter and Government debt spiralling further upwards—and they are just getting started.
There are, of course, potential benefits from the investments that are being announced today. We share a desire for a more competitive, less regulated economy based on a passion for free enterprise, but while Labour celebrates the exodus of millionaires from our country, we recognise that it represents a loss of skills, lower job creation, and the evaporation of potential future taxation to support public services. While Labour sees the attack on family farms and family businesses as a vital part of its warped class-war ideology, we recognise that putting family at the heart of enterprise is a critical piece of our nation’s proud heritage of freedom.
Daisy Cooper (St Albans) (LD)
The shadow Minister talks fondly about the importance of family farms. Where were his comments on that topic when his party was negotiating trade deals with Australia and New Zealand that have sorely impacted farms around the country?
Richard Fuller
My friend, the Liberal Democrat spokesman on economics, makes a fair point about the impact of trade agreements on family finances. However, as she knows, that is very different from the pain that farmers are feeling right now about Labour’s attack on the ability of families to pass on their farm to their children—it is different in scale and in type. It is a damaging policy by the Labour party that we know, or at least hope, that Labour will change in due course.
I am sure that today, the Chief Secretary to the Treasury is also engaged in a series of phone conversations with his departmental colleagues as, ahead of the March update on the OBR’s financial forecast, they review what it will mean for their departmental expenditures. As he has those difficult phone conversations, I say to the Chief Secretary that we stand ready to support effective steps on prudent financial responsibility.
Darren Jones
On the point of prudent financial responsibility—[Interruption.] I think the House is interested in a long and detailed debate this evening, so it is important that we dive into the details. On this issue of prudent fiscal responsibility, the hon. Gentleman presumably welcomes our fiscal rule that day-to-day costs will be met by revenues, as opposed to having to borrow money all the time to pay those day-to-day costs. That is something that consistently happened under the last Conservative Administration, which was a mistake in the context of fiscal responsibility, was it not?
Richard Fuller
I am aware that the Chief Secretary to the Treasury is interested in a prolonged debate today—I am not sure whether that is because of the content of the debate, or for other reasons. I would say gently to him that writing rules is different from following rules, so he will be judged by this House on how he meets the rules that he has set. My purpose today is to cover some of those rules, and I will have some comments on them, but first, although we will be having a separate debate on the welfare cap, the Chief Secretary to the Treasury made some points about it. My hon. Friend the Member for Faversham and Mid Kent (Helen Whately) will respond formally on that issue, so these are just my thoughts, really.
The welfare cap, of course, was introduced in 2014 by Conservative Chancellor George Osborne, who recognised the particular difficulties with forecasting and managing certain welfare budgets. At the 2014 Budget, he explained his rationale:
“Britain should always be proud of having a welfare system that helps those most in need, but never again should we allow its costs to spiral out of control and its incentives to become so distorted that it pays not to work. In future, any Government who want to spend more on benefits will have to be honest with the public about the costs, will need the approval of Parliament, and will be held to account by this permanent cap on welfare.”—[Official Report, 19 March 2014; Vol. 577, c. 785.]
George Osborne’s initiative has shown its value over the past decade, and it is right that the new Government are following its intent in principle and, one hopes, also in practice. Our task today is to listen to the explanations for the breaching of the welfare cap for fiscal year 2024-25 and the rationale for the particular limits that the Chief Secretary’s Government will set on the welfare cap for future fiscal years through 2029-30.
As the Chief Secretary said, in October, as part of the first Budget of the Parliament, the OBR provided its assessment of the status of welfare spending compared with the cap that was set in 2024. That assessment was an excess of £8.6 billion, which indicated a breach. With the country now spending over £156 billion on welfare every year and with the obvious pressures on public expenditure, there should be a determination to find savings in the welfare budget. Indeed, that was the intention of the Conservative party at the last election, with a commitment to reduce expenditure by £12 billion through better targeting of disability benefits, amending the levels of payments for those whose disabilities would not routinely be expected to lead to additional life expenses, overhauling the fit note process, and introducing tougher sanctions on those who shirk the opportunity to work and contribute to society.
But the Labour Government today appear to be set on a different course, with a pathway for the welfare cap that is up, not down, growing from this year’s cap of £137 billion to reach £195 billion by 2029-30. That is a 42% increase in the welfare cap. It is important to note that at the same point in the last Parliament, when the Conservative party set the rules on the welfare cap, that increase was limited to 15%.
Darren Jones
It is important. I think we should reflect on what some of the drivers are behind the increased spend in the welfare budget, because the evidence is very clear. For people who can be—and indeed wish to be—economically active but are in receipt of universal credit support and other forms of payment, the main reasons are being unable to get access to the treatment they need in the health and mental health services space or being unable to access training opportunities for the jobs that are available in the market. Without diving too much into the weeds, that is the issue about the difference between the approach to austerity in day-to-day resource spending—where we cut spending to frontline public services—and annually managed expenditure.
Richard Fuller
That is all very well, but the Chief Secretary is talking about the wrong budget. He is talking about increases to the health budget or changes to aspects of the DWP budget; he is not talking about why this Government are allowing an increase of up to 42% in welfare payments in this country. That is a different issue. It shows laxity on the part of the Government. Serious questions need to be asked, and I am sure will be asked, in the next debate.
Let me return to the charter for budget responsibility, which was established by former Chancellor George Osborne as part of the Budget Responsibility and National Audit Act 2011. On Second Reading, the Economic Secretary to the Treasury explained why the measure was necessary:
“We inherited the largest budget deficit in our peacetime history, we inherited a budget deficit forecast to be the largest in the G20, and we inherited the largest structural deficit in the whole of Europe.”—[Official Report, 14 February 2011; Vol. 523, c. 746.]
She did not have to make up numbers, as this Government have done, about some fanciful black hole; these were facts, and my former colleague, Justine Greening, was telling the truth to the nation.
Indeed, truth is the foundation upon which any charter for budget responsibility is based. Let me be clear: when the Chancellor said on 13 November 2023 that she was
“not going to fiddle the figures or make something to get different results”,
the fiscal rules included in this charter demonstrate that she was not telling the truth. In this charter, the Chancellor has changed the rules on the measurement of debt from public sector net debt, or PSND, excluding the Bank of England, to public sector net financial liabilities, or PSNFL. This fiddling of the figures opened the taps for the Chancellor to borrow more, even while our debt to GDP ratio stands at historically high levels following the pandemic and the Ukraine war.
The Guardian newspaper, which I am sure the Chief Secretary reads avidly, reported on 24 October 2024 that if my right hon. Friend the Member for Godalming and Ash (Jeremy Hunt), the former Conservative Chancellor, had acted similarly to the current Chancellor, his fiscal headroom would have ballooned from £9 billion to £49 billion, but he knew better than the current Chancellor.
The Chancellor has even had to create her own name for things, just so that she can claim she is getting debt falling. She said in her Budget statement that she will call PSNFL
“net financial debt, for short.”—[Official Report, 30 October 2024; Vol. 755, c. 823.]
The reality is that the proper measure of Government debt, as per the previous fiscal rules, is rising in every single year of the forecast. The OBR has confirmed that on the previous definition, which she had said she would keep to, the fiscal rules are being broken. At the last election, Labour said it would get debt falling, and the Government continue to claim that they are delivering that. They are doing nothing of the sort. Let us be very clear: debt is rising, and it is forecast to continue to rise. We will be spending nearly £50 billion more on debt interest over the next five years as a result of their first Budget alone.
There are also concerns about the rolling three-year targets for the rule that the current Budget should be in surplus and the rule that debt—the Government’s dubious definition of debt—should be falling as a share of the economy. Like the water and fruit for Tantalus, the rules permit these reasonable targets to remain just out of reach every time—they are always there but never met. To extend my similes, the charter rules are to the Chancellor and the Chief Secretary as St Augustine regarded self-control: “Grant me chastity and self-control, but not yet.”
The charter begins on shakier ground with a weaker Treasury team, but it remains an important part of our country’s fiscal framework. Under the rules of the House, the motion is not amendable, so we shall not oppose the measure. We do need fiscal rules, but we condemn the Government’s approach of fiddling the figures to add more borrowing. They promised that they would not, but, as so many times before, they have broken their promises once again.
Darren Jones
I thank right hon. and hon. Members for this afternoon’s debate. I will reflect on some of their questions and comments in winding up the debate.
To begin, I can provide assurance to the shadow Chief Secretary, the hon. Member for North Bedfordshire (Richard Fuller). He was concerned that the Labour party had misled the public. There could not be anything further from the truth. In the manifesto, the wording was very clear. We would have two fiscal rules: first, to bring day-to-day spending in line with receipts; and secondly, that debt would fall as a share of the economy. Those are our fiscal rules. Now, he is right that we defined debt at the Budget, but that did not change the fiscal rule. The fiscal rule is that debt should be falling as a share of the economy. That is the fiscal rule. [Interruption.] It is the fiscal rule; there is no debate about it. It is as clear as the letters on a page. As was alluded to in the debate, the Chancellor chose a well-established metric for debt—PSNFL, public sector net financial liabilities—which recognises the fact that a competent Government can invest in the country and get a return for the taxpayer.
Richard Fuller
The Chief Secretary to the Treasury is making a bizarre comment. The point is that the Chancellor stated in 2023 that she would not fiddle the figures. She has now changed the numbers. The definition of debt for public sector net debt excluding the Bank of England is different from her PSNFL. They are different. It enables the Chancellor to borrow more. That is fiddling the figures to achieve an objective. It is not the same, and she did not tell the truth when she said that she would not fiddle the figures.
Darren Jones
That is a very strong accusation, which I refute in the strongest terms. The Chancellor was very clear that debt would be falling as a share of the economy. That is the fiscal rule. As predicted by the OBR, we will deliver on that promise. It is right that the Chancellor chose at the Budget to define debt as public sector net financial liabilities. The big question is why. As the Liberal Democrat spokesperson, the hon. Member for St Albans (Daisy Cooper) said, it is because having a Government with stability and competence at their core means that we are borrowing not to pay for out of control day-to-day spending, which I think everyone in the House would agree is an unsustainable path to higher debt burdens, but instead borrowing responsibly within guard rails for investments, predominantly alongside the private sector, to enable, for example, infrastructure delivery across the country or investment in businesses, for example, through the national wealth fund.
The reason that the public sector net financial liabilities debt rule is important in that context is because it reflects the fact that, where Government have an equity stake or have provided debt for non-commercial terms, there is a rate of return. The taxpayer receives some of the benefit of that investment and growth in the economy, which I am sure we would all welcome. There is the important difference about the type of debt. Under the last Administration, debt was spiralling out of control because the last Government could not pay their day-to-day bills. Everybody knows, whether they are running their household finances or the country’s finances, that that is not a sustainable thing to do.
That has changed under this Government. Debt will be for productive investment only and day-to-day costs will be met by revenues. Yes, that means that public services have to live within their means, and often that means difficult discussions in the spending review that I have to conduct with Secretaries of State, to which the hon. Gentleman alluded. However, all of us around the Cabinet table recognise not only the non-negotiable nature of the fiscal rules, which are the foundation of economic stability, but the prize of the modernisation and reform of our public services. He will have heard the Prime Minister and other Secretaries of State talk about just that fact. There is a huge amount of opportunity to achieve better outcomes for people at lower cost, not just through basic technology but by improving the way we deliver public services. That means delivering services designed around the person and how they wish to interact with the Government. It means that people can receive support from different Departments and different functions, and they can receive the information they need at the time they need it.
Let me give one example. In the constituency of my hon. Friend the Member for Filton and Bradley Stoke (Claire Hazelgrove)—just north of my Bristol North West constituency—I visited a community diagnostic centre. The CDC programme began under the last Administration, but we have committed ourselves to it. The provider works in partnership with the NHS trust, charging exactly the same rate as the hospital for a diagnostic scan. The company involved does not make profits in comparison with the hospital costs; it is the same NHS tariff rate. People can have MRI and CT scans, gastroscopies, and other tests. The centre is attached to a branch of Asda and there is plenty of free parking.
I asked the owners, “Why are you able to charge the same rates as the hospital in my constituency while running this service more effectively?” They said, “We are open for 14 hours a day from Monday to Saturday and for 12 hours on Sunday, we sweat the assets more than a hospital can, and we have new bits of kit with AI that are more productive to use”—which is why the Health Secretary wants to roll those out across the NHS. They also said that the customer service was the key driver for productivity, because customers could book their appointments and move them if necessary, they could visit the centre after work, and they could go there between shopping trips. Essentially, the service has been designed around the patient. Patients turn up pretty much all the time, and they are never not able to do so. That is just one example of the way we are modernising public services.
Darren Jones
I thank the right hon. Member for his question, because he invites me to talk the House through our infrastructure strategy. For the first time, we are bringing together Government plans on economic infrastructure, housing and social infrastructure in the same place. It means that when we go through the spending review in the Treasury, working with colleagues across Whitehall, we will be much better than the previous Government at taking place-based decisions. In the past, it was a bilateral discussion between a Department and the Treasury, with no dots being connected between different types of infrastructure. That has led to the failure to capture the growth potential in different places.
We will take a different approach and make sure that infrastructure investments relating to public investment are capped by the numbers set out in the Budget. That is the spending envelope that we have, and we have to prioritise those investments, but they will be based on driving growth and opportunity for people in the places in which they live.
My hon. Friend the Member for Reading Central made a great point about the Oxford-Cambridge growth corridor, the role of connecting some of our great universities, and unleashing the opportunity that exists between them. As I said to the House earlier, the living connectivity arrangements between Oxford and Cambridge are basically non-existent. By connecting these two hubs of innovation and investment, the opportunities are endless.
Richard Fuller
I have to be careful, because I have a significant constituency interest in this issue, but I want to ask a more general question about the role of infrastructure investments and the fiscal rules. East West Rail’s proposal to complete the railway line had a benefit-cost ratio of 0.3 in its last business case: building it would basically lose 70p of every pound of taxpayers’ money. Does the Chief Secretary to the Treasury regard that as a loss? If not, will there be a business case that shows that the project has a benefit-cost ratio that does not lose taxpayers’ money?
Darren Jones
That is a great question. All these infrastructure opportunities will go through both value-for-money assessments and growth assessments. The argument that we have been making today is that initiating projects such as the East West Rail line in a co-ordinated way with private capital, universities and our house building plans lifts the growth opportunities that come from those projects. That is why Patrick Vallance has been appointed as the champion of the growth corridor. We will take a whole-corridor view on the investments and the opportunities across different investments, regardless of whether they are public or private, but they will all have to go through value-for-money and growth assessments.
The infrastructure strategy will be a 10-year strategy. It will give a long-term view on economic, housing and social infrastructure, but they will be underpinned by longer-term capital budgets. The capital budget that we will set in June will be for four years, until 2029-30, but the normal approach, as set out in the charter, will be that the capital budgets will be for five years. As the House knows, we have committed to doing the next spending review every subsequent two years. In 2027, when we conduct the next spending review, we will have the 10-year infrastructure strategy but also pretty much 10 years of capital budgets being allocated for those projects. That is a hugely important signal to investors.
We are working with industry and investors on what the biannual pipeline might look like, so that we can publish in real terms the investable propositions, but also so that businesses know that work is coming if they invest in their supply chain or their workforce. That is a crucial part of unlocking investment in skills and training in our country. Much like we have just seen in the water industry, which has agreed a longer-term investment settlement, suppliers are already telling us that they are now able to invest in staff, training and capabilities, because they know that the flow of investment will be coming over a period of time. We are seeking to do that across a range of infrastructure in order to unlock the investment that this country needs.