Office for Budget Responsibility (Manifesto Audits)
Debate between Baroness Morgan of Cotes and Jacob Rees-Mogg(9 years, 10 months ago)
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Nicky Morgan
Let me say for the last time that if the right hon. Gentleman wanted to pray in aid evidence from a conversation that he had last week, he should have put it in writing and presented it to the House, or placed it in the Library.
If we ask the OBR to recruit additional staff, what will they do between elections? I do not know whether Labour Members have considered the fact that what they propose would involve a radical change in the rules governing civil service contact with the Opposition. I do not know whether they have fully explored the primary legislation that would be required to make this happen, just as I do not know whether they have considered how the demands of Opposition parties would be balanced against other Government priorities.
Jacob Rees-Mogg
I am extremely grateful to my right hon. Friend for giving way, because I think that the shadow Chancellor has just proved the Government’s case. These references to private conversations are politicising the OBR in exactly the way that frightens the Government. I think that the shadow Chancellor is hoist with his own petard.
Nicky Morgan
As always, my hon. Friend has summed up the position brilliantly and eloquently. I was particularly impressed when he intervened on the shadow Chancellor and forced him to admit that the purpose of the Opposition’s proposal was to stop the shadow Cabinet making spending commitments left, right and centre.
I was referring to other Government priorities. I am thinking of, for example, Budget preparations. The time when those preparations are being made is one of the busiest times of the year for the OBR, during which specialist and other staff resources are already occupied.
As I have already said today, what I will not do is stand here and say that the problems are insurmountable, or that a solution could not be found in future. However, if we want to ensure that the OBR’s independence and influence are preserved, the issue merits much fuller and much more careful consideration than is represented by the Opposition’s proposals. That brings me to one of the most important points. We need to remember that the OBR is a very young organisation. We believe that it is doing an excellent job—as, clearly, does the shadow Chancellor—but it has not, as yet, been subject to any major review.
It was announced in last year’s autumn statement that, as required by legislation, the OBR would launch an external review of its publications during the current year, and that its findings would be published in September. The Government have also announced that following the outcome of that review, and following the general election, they will hold their own review of the OBR. I think—I am sure other Members will agree—that until those reviews of the OBR’s current responsibilities have been completed, we should not throw extra responsibilities at it. I consider it sensible for us to wait until after the OBR’s review, our review, and the OBR’s first general election before considering this issue further.
Unlike the Labour party, I do not want to pre-empt the OBR’s review, but I think it safe to say that, through its creation, the coalition has changed the way in which Budgets are made for ever and has created an independent office that has restored public confidence in the numbers that underpin the Budget. In its first four years, the OBR’s independent forecasts have supported the credibility of our long-term fiscal plans. Between now and the general election, the OBR should remain focused on doing that job. It should remain focused on ensuring that, as we fix the mess left to us by the Labour party, the numbers underlying our long-term economic plan are correct. That plan is making a real difference.
Section 5 of the European Communities (Amendment) Act 1993
Debate between Baroness Morgan of Cotes and Jacob Rees-Mogg(10 years ago)
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Nicky Morgan
I have read previous debates and know that the hon. Gentleman is assiduous in attending such debates and in following these matters. The language used in titles of various EU programmes is not a matter of choice for this Government. Perhaps a better word could be used, but it has not been selected by the Government. I take his remarks on board. I think all of us know that the eurozone has not been as strong as even those of us outside the eurozone would like it to be—it is important for our businesses and our exporters—but I will come on to show that things are looking better. The recovery taking place in the rest of the European Union is slower and it is important that we are fully aware of, and the European Commission fully monitors, the economies of other eurozone countries, even though—let me make it clear again—the Government have no intention of joining the euro.
The convergence programme explains the Government’s medium-term fiscal policies as set out in the 2013 autumn statement and in Budget 2014, and also includes Office for Budget Responsibility forecasts. As such, it is drawn entirely from previously published documents that have been presented to Parliament. With the Budget on 19 March and Easter recess timings as they were, I appreciate, as I have already mentioned, that the timetable for this debate has been particularly tight. Against this backdrop, the Treasury has made every effort to provide early copies of the convergence programme document in advance of today’s debate. The document makes clear that this year’s Budget reinforces the Government’s determination to return the UK to growth, and reiterates the Government’s No. 1 priority: tackling the deficit. As we have already heard in interventions, there are differing views on the value of submitting stability or convergence programmes, especially for the UK, given that the Government have ruled out joining, or preparing to join, the single currency.
The document forms part of the European semester process, which provides a broad framework for the co-ordination of the monitoring and surveillance of member states’ fiscal and economic policies, including necessary structural reforms across the EU. The positive value of the European semester is that it is a useful means to encourage other member states to grip the urgent growth challenge across the EU.
Budget 2014 set out the Government’s assessment of the UK’s medium-term and budgetary position. The UK economy is still recovering from the most damaging financial crisis in generations. We had the biggest bank bail-out in the world, the biggest deficit since the second world war and suffered the deepest recession in modern times. In the face of such a daunting economic challenge, it is essential to have a clear and comprehensive plan.
In 2010, the Government set out clear, credible and specific medium-term consolidation plans to return the public finances to a sustainable path. Our plan makes clear that we will fix the economy and deal with the deficit, cut tax to encourage investment, back businesses, control welfare and invest in skills. We are putting that plan in place. We have adhered to it and we are delivering results with it. The Government’s fiscal strategy has restored fiscal credibility, allowing activist monetary policy and the automatic stabilisers to support the economy and ensure that the burden is shared fairly across society.
Jacob Rees-Mogg (North East Somerset) (Con)
I am extremely grateful to the Minister for outlining the excellent economic policy that Her Majesty’s Government have so successfully been following. I wonder whether she can give me the assurance that no part of that policy has been changed in any way to meet the requirements of European convergence.
Nicky Morgan
I am certainly not aware of any changes. In fact, I think it would be fair to say that we have led the way in Europe and the eurozone in showing exactly how important it is to return to growth and the actions that need to be taken. It is interesting to see other European countries watching what this country has done and following some of the policies that we have put in place so assiduously. It is, as I have said, very important that they return to growth for the sake of our businesses and exporters, too.
The long-term economic plan has protected the economy through a period of global uncertainty and provided the foundations for the UK’s economic recovery, which is now well established. Since last year, economic growth has exceeded forecasts and has been balanced across the main sectors of the economy. Inflation is below target and the deficit has been reduced year on year. More than 1.5 million private sector jobs have been created. Employment is at record levels and interest rates are near record lows, helping to keep costs down for families and businesses. The Government are also making significant progress in reversing the unprecedented rise in borrowing between 2007-08 and 2009-10. The deficit has been cut by a third, as a percentage of GDP, over three years, and is projected to have fallen by a half, as a percentage of GDP, by 2014-15. The OBR also forecasts public sector net borrowing to reach a small surplus in 2018-19. The independent OBR has judged that the Government remain on track to meet the fiscal mandate one year early.
The Government’s consolidation plans have been central to the reduction in the deficit, with £64 billion of the £80 billion spending reductions in spending review 2010 already implemented. The Government are continuing to take action to improve financial management and spending control. Departments remain ahead of their consolidation targets and are again forecast to underspend by £7 billion in 2013-14. The OBR judges that fiscal consolidation has not had a larger drag on the economy than it expected in June 2010, and the UK’s fiscal vulnerabilities argue strongly in favour of maintaining our commitment to deficit reduction. The OBR forecasts that the underlying structural deficit is falling, but it is falling no faster than previously forecast, despite higher growth.
The persistence of the structural challenge supports the Government’s argument that economic growth alone cannot be relied on to eliminate a structural deficit. As my right hon. Friend the Chancellor has said, the job is not yet done. More work will need to be done to tackle historic weaknesses, including low productivity, poor skills and inadequate infrastructure. The deficit is still one of the highest in the developed world and the UK needs to continue to deal with its debts. We are on the right track. The deficit has already been cut by one third. Budget 2014 is fiscally neutral, despite lower borrowing across the forecast period, with an overall reduction in tax funded by a reduction in spending. We have set out our fiscal consolidation plan and it is vital to stick to it in future years.
Budget 2014 announced that the Government are cutting income taxes and freezing fuel duty to help hard-working people to be more financially secure; creating more jobs by backing small business and enterprise with better infrastructure and lower job taxes; capping welfare and controlling immigration, so that the UK economy delivers for people who want to work hard and play by the rules; and delivering the best schools, skills and apprenticeships for our young people. The OBR has revised the UK’s growth forecast upwards and it is now among the highest in the EU.
As the Chancellor said, the job is not yet done and the same is true for the rest of the EU, which is the UK’s most important trading partner. Some 45% of our exports are destined for the EU, and seven of the UK’s top 10 trading partners are EU member states. Without sustainable economic growth, the EU will be unable to repay its debts, create jobs or maintain its standard of living. Much of the answers to these problems lie with national-level reforms, such as creating flexible labour markets. Clearly, the European semester has a key role to play in encouraging member states to make ambitious reform commitments. The UK has an interest in making sure those reforms happen. An ambitious EU-level reform agenda is also a key part of this equation and an essential counterpart to national-level reforms. While I can understand that some may be cautious about encouraging the UK to do more, an EU growth agenda would make a major contribution to growth across the EU as a whole and benefit the UK. Recent European Councils have underscored the strong commitment of Heads of State or Government to supporting growth and competitiveness. I know that the Prime Minister has been driving forward this agenda, along with leaders from a substantial group of like-minded member states.
Some would claim that we cannot have EU economic growth without EU spending growth. I disagree. While some areas of the EU budget, such as spending on innovation and research and development, have the potential to support growth, this in fact represents only 13% of the total EU budget. However, deploying EU-level policies in support of economic growth, such as the single market, regulatory reform and EU-level free trade agreements, can achieve maximum growth impact at the least cost.
Nicky Morgan
My hon. Friend is absolutely right. As we are a part of the EU and contribute, as a country, to the EU budget, it is absolutely right that some of that money comes back to this country—or to particular parts of this country—and we see the benefit of that financial contribution. He mentions his area of the country, and I know that EU funding in the midlands has been particularly valuable in supporting vital work on things such skills and apprenticeships.
Jacob Rees-Mogg
I wonder whether my hon. Friend should be a bit careful about welcoming EU spending in this country because it was our money in the first place and it is not necessarily being spent in the way that Her Majesty’s Government would wish to spend it because it has to meet the requirements of the European Union. Therefore there is the risk of getting inefficient spending out of our own net contributions. We risk wasting money and having a bigger deficit by dong this through a third party, rather than through the actions of our own Government.
Nicky Morgan
My hon. Friend is right, and he tempts me down a particular path—to say whether membership of the EU broadly benefits this country. I am sure that we could have a whole debate on that, and I know that he could go on for hours and hours on that particular subject. [Interruption.] We will not do that, Madam Deputy Speaker; I take your guidance. Of course, this Parliament is getting less money because the previous Government gave away at least a percentage, if not half, of our rebate. Over the course of this Parliament, this country will receive about £10 billion less from the EU than we would have done had we stuck to the rebate arrangements agreed by a previous Prime Minister—probably the best part of 30 years ago.