Budget Responsibility and National Audit Bill [Lords]

Sheila Gilmore Excerpts

Monday 14th February 2011 Commons Chamber

[Sheila Gilmore (Edinburgh East) (Lab)]

I seem to be fated—this is the second time in two weeks—to be the last Back Bencher to contribute to a debate. Tempted though I am to continue to speak until as close to 10 pm as allowed by the need for wind-up speeches, I shall resist temptation—I can see my colleagues’ looks of horror. For those of us who are far from home and whose potential valentine is 400 miles away, we have nothing better to do than speak in this debate.

More seriously, it will be useful to have independent forecasts; indeed, it already has proved useful. In the short life of the Office for Budget Responsibility we have seen some figures that even this Government, who have professed a desire to be transparent, might not have been too happy about. Several of my hon. Friends have referred to figures such as the forecasts for unemployment and for economic growth. Had it not been for those reports, the Chancellor and other members of the Government might have been tempted to be a little more optimistic and gung-ho. We saw a little of that even last year when some Ministers talked about economic growth in the second and third quarters. We might have thought that everything was now motoring forward, but the OBR was able to tell us that that was not quite the case. The OBR’s forecasts may not always be palatable, even to the Government who have set it up.

I appreciate, Mr Deputy Speaker, that you have not wanted people to discuss the economy generally, but it was clear from the context in which this debate was put by the Economic Secretary that we cannot entirely avoid doing so. She made it clear that the OBR’s remit is determined by the Government’s view of the economy and what needs to be done to deal with it. She said that deficit reduction was the priority and the context for the OBR, but the question of how to do that remains. How do we reduce the deficit, how fast, and what are the implications of reducing it too fast? The Opposition believe that the actions that have been taken in order to fit the framework set for the reduction of the deficit in this Parliament may be counter-productive. The deficit may in fact rise, because if unemployment rises, demand falls and the economy does not grow, tax revenues will fall even further—and that was part of the reason for our current position. If that happens, we will see the deficit grow.

[Alec Shelbrooke]

As the hon. Lady has said, the OBR will indeed stop a Chancellor saying, “Growth is going to be this amount, and therefore I will borrow this amount,” while knowing full well that growth might not be so high and he might not be able to repay it. Surely that was the problem in recent years, and it is hoped that the OBR will stop such mistakes from being made again.

[Sheila Gilmore]

Our views of when it is appropriate to borrow and what the Government should do about the economy are clearly different. Emotive words have been used in this debate, including the term “mountain of debt”. Coalition Members are fond of saying that interest payments on borrowing are wasted. They are also fond of domestic analogies, and we hear a lot about the national credit card being maxed out, but there is another domestic analogy that we might use. When we pay our mortgage payments, we do not say that that is money wasted—it is money being invested for the purpose of acquiring a home.

When I was the convenor of housing for Edinburgh city council, 40p in the pound of tenants’ rents went on debt repayment. Sometimes the local newspaper and council opposition members would say, “This is terrible mismanagement”, but it was not mismanagement—it was an investment in building homes over many years and improving homes with such luxuries as central heating and double glazing.

[Stephen Williams]

The hon. Lady is talking about debt being run up for investment. Of course the previous Government put most of that debt off the balance sheet of the Treasury completely and into private finance initiative schemes. They ran up debts to fund current expenditure on public services, and that is why we ended up in a crisis.

[Sheila Gilmore]

The hon. Gentleman is wrong about that. Up to the point of the recession, most of the borrowing was for investment in schools, homes, roads and transport projects. Yes, there were some PFI schemes, and I was interested to hear the hon. Member for Elmet and Rothwell (Alec Shelbrooke) castigate such schemes, because it is my recollection that PFI was a favourite mechanism of the previous Conservative Government, who introduced it. Many of my colleagues in the Labour party were less than enthusiastic about it even during the years of the Labour Government.

I am trying to make the point that there are different ways of looking at the economy and at what the appropriate policies are. I was interested in a brief debate in the Treasury Committee about whether the OBR should look at other policies: should it look at the policies of an Opposition what might be? Outwith that, why should it just look at the particular ground rules that the Government have set out? Those rules will represent one view, but there might well be other views and policies that could lead to different results. The Government appear to have rejected the view that the OBR should look at anything other than Government policy, on the grounds that that would not make it politically neutral, but we need real transparency and a proper debate in the country about the best way forward.

[Andrew Griffiths (Burton) (Con)]

I have been listening to the hon. Lady’s analogy. She does not like talk of the credit card being maxed out, and thinks it more akin to taking on a mortgage to purchase a home. Does she not agree, however, that having to pay £120 million a day in interest alone is actually more akin to using a credit card to pay the mortgage every month?

[Sheila Gilmore]

Clearly, I do not agree with that. These two analogies are interesting ones, in that they show the different viewpoints of the different sides of the House. They are both legitimate viewpoints, and it is right that we pull them out and have this debate, because there is not just one way of coming to a conclusion on what we should do.

If the OBR is to develop in the future, one option is to look at different ways of arriving at the ends we all want. There is no suggestion, despite what Government Members say, that Labour Members think it right to run a very big deficit on an annual basis. We have never said that; we have said that we want to reduce the deficit. However, we differ with the Government over the speed at which that is done. That will determine all of these forecasts and where we go from there. If we have those different viewpoints, would it be helpful—other people might think it is not—for a truly independent OBR to be able to look slightly wider than the tramlines that the Government are setting down and about which we have heard so much? Should we be able to forecast only on that basis? It would be interesting to consider whether alternative policies could lead to a different and—I would hope—better outcome.

I do not want to add anything else because I can see that some people here have somewhere far more interesting to go. I hope that some people receive red roses and chocolates tonight in celebration of the day.