Charter for Budget Responsibility

Steve Baker Excerpts

Wednesday 11th May 2011 Commons Chamber

[Kerry McCarthy]

The Bank of England’s forecasts have not always been as accurate as one might have hoped, but that proves my point: there could well be conflict between the Bank’s forecasts and the OBR’s forecasts. It is therefore right to ask what the Government would do in such circumstances. Would such a disagreement discredit the Bank of England’s forecasts? Will the OBR be seen as the ultimate arbiter on such matters, or will the Government be able to pick and choose whichever forecast suits their purposes?

Chapter 3 of the charter and the Government’s objectives for fiscal policy are obviously at the core of the document. Some of the provisions in the charter might not be entirely necessary, however. For example, it places the Treasury under a duty to prepare a Budget report for each financial year, which one would hope would happen without it being told to do so. We acknowledge, however, that including the Government’s fiscal mandate in the charter and consequently requiring any modifications to be laid before the House is a welcome step. We hope that it will enhance Government accountability, although that should not be taken as an endorsement of the Government’s economic policy or of their fiscal policy objectives.

Regrettably, given that economic growth has flat-lined under this Government and that forecasts have repeatedly had to be downgraded, it remains to be seen whether the Government are meeting their stated objectives—particularly that of supporting confidence in the economy. Nevertheless, we approve of the idea of working towards maintaining confidence in the economy. The charter rightly acknowledges that achieving that must be the responsibility of the Government and not of the OBR.

The second objective, that of promoting inter-generational fairness, is much more contentious, and it has been challenged here and in the other place. It is not at all clear from the document what the Government mean by the term, although from the Minister’s comments tonight and on previous occasions, I assume that it refers to passing debt from one generation to another, rather than to passing on wealth, advantage and opportunity from one generation to another. If that is indeed the case, and the objective refers simply to inherited debt, it would appear that the Government under this Chancellor’s leadership have an exceptionally narrow conception of fairness which does not chime with most people’s understanding of the world.

We should not be surprised by that, however, given the Government’s record on fairness to date. A Government who choose to take £7 billion of much-needed support from children in their first Budget and comprehensive spending review—three times the amount that they thought appropriate for bankers to pay—who choose to target women for spending cuts, who choose to penalise people on lower incomes, and who choose the regressive measure of increasing VAT can hardly be considered fair.

Earlier today, many of us met constituents supporting the Hardest Hit campaign for people with severe disabilities and chronic illnesses, and I would ask the Government to explain to them how making people with disabilities and chronic illnesses pay the price for the financial crisis is fair. One of the constituents I met today is registered blind and has a guide dog, but she has been told that she is not eligible for the higher rate of disability living allowance. She used to work for a bank, and she wants to know why she is paying a bigger price for the financial crisis than her former bosses in that industry.

[Steve Baker (Wycombe) (Con)]

I am surprised that the hon. Lady does not realise that the financial crisis is the product of deficit, debt and debasement—in other words, Government policy.

[Kerry McCarthy]

The financial crisis was global and it started in the US. Is the hon. Gentleman suggesting that the banks did not play a role in creating that financial crisis and that people such as my constituent, who are struggling to get by on disability living allowance and a modest income, were responsible for it?

[Steve Baker]

I know that the crisis originated in the banks, but it did so because of currency debasement, which was a result of deficit spending—a Government policy.

[Kerry McCarthy]

We cannot get into a whole debate about macro-economic policy. Needless to say, I disagree with the hon. Gentleman’s analysis of how the financial crisis occurred. The point I was making—the intervention was not particularly relevant to it—was that this Government’s action in reducing the deficit too far and too fast is hitting people at the bottom end of the income scale far harder than it is hitting people such as bankers. If the Government were to adopt our suggestion of introducing a banking bonus tax again this year, as we did last year, they would not have to make cuts that hit people at the bottom so hard.