Charter for Budget Responsibility
Debate between Ed Balls and Jacob Rees-Mogg(9 years, 4 months ago)
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Ed Balls
In a second; not in the middle of a sentence. That 0.2% a year improvement in the underlying growth of the economy would, by the end of the period, bring in £15 billion a year more in tax revenues. So the trend of growth has gone in the wrong direction under this Chancellor and the key for the next Parliament, as well as spending cuts and tax rises, is to improve the underlying growth of the economy. If we can do that, we can bring in the revenues. If, on the other hand, we fall short in the next Parliament under the same Chancellor in the same way as we have in this Parliament, that would lead to over £110 billion in extra borrowing. If we are going in the wrong direction on growth and wages, the revenues do not come in and the deficit does not come down. We have got to improve the underlying growth potential of the economy. The right hon. and learned Member for Rushcliffe and I agree on that, but I do not think that this Chancellor understands the point.
Jacob Rees-Mogg (North East Somerset) (Con)
Is not the shadow Chancellor making the Chancellor’s case for him: that the first thing to do is get fiscal stability, and then we get a growing economy and tax revenues come through? Tax revenues are always a lagging indication of economic performance, and they will come through because of what this Chancellor has been doing.
Office for Budget Responsibility (Manifesto Audits)
Debate between Ed Balls and Jacob Rees-Mogg(9 years, 10 months ago)
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Ed Balls
I agree with my hon. Friend, and that is why we support the role that the OBR plays. The Government proposed an independent OBR, a reform that we supported, and in that spirit we want to extend its role, as happens in other countries. It is not unreasonable, and it would exactly help with the issues of trust to which my hon. Friend refers.
Jacob Rees-Mogg (North East Somerset) (Con)
I am not entirely unsympathetic to what the right hon. Gentleman asks for, but is not the fundamental problem that even a shadow Chancellor as powerful and influential as he is does not have complete control over the shadow Cabinet, or even of his leader, who make spending promises that are not part of the finance and budgeted proposals made by the shadow Chancellor?
Ed Balls
I could ask the hon. Gentleman why on earth he thinks I want to have this independent audit: to make sure it is all done through the proper process. Perhaps I should say that. Actually, the shadow Cabinet has been exemplary in not setting out uncosted promises that cannot be delivered. We have made no claim to abolish inheritance tax. That is not a commitment in a manifesto that we have to renege upon. Nor have we made a commitment to abolish tuition fees. So the hon. Gentleman raises some issues here.
Jacob Rees-Mogg
My hon. Friend is extremely wise in his observation. The OBR, which is a non-party political body, has said in response to a request from the shadow Chancellor, a man of the greatest dignity who should be taken seriously by Members from all parts of the House, that if that is the will of Parliament, it will do it.
Ed Balls
I shall test the hon. Gentleman’s support for my integrity. In March, the head of the OBR told the Select Committee that if the proposal was agreed across parties by early summer, he would be content to proceed, which he confirmed to me last Friday. Is the hon. Gentleman, unlike the Minister, content to accept my word that the views of the head of the OBR in March are still the same today?
Economic Growth
Debate between Ed Balls and Jacob Rees-Mogg(11 years ago)
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Ed Balls
I do not want to prolong this argument, but I must explain to the hon. Lady the term structure of interest rates. The 10-year bond yields are the accumulation of market expectations of three-month interest rates added up every three months over 10 years. Why are our long-term interest rates so low? It is because people think that short-term rates are going to stay low because the economy is flat on its back. People would have to be economically illiterate to think that our long-term interest rates were driven by market confidence at a time when we are being downgraded by the agencies. Our long-term interest rates are low because our economy is not growing.
Jacob Rees-Mogg
I look forward to debating many issues with the right hon. Gentleman. The markets show confidence in this Government’s policy by keeping interest rates low. This is not purely to do with an expectation of where short-term rates will be; it is about confidence in the creditworthiness of the British Government under this Chancellor.
Ed Balls
I have to say that that is a deluded view of the way in which credit ratings work. Let us not forget that in 2007 these same credit rating agencies were saying, “Stick with Lehman Brothers” and giving America a triple A rating despite all the sub-prime lending. That is the reality. The fact is that the credit rating agencies are downgrading Britain because our economy is not growing. That is the fundamental problem.
I will give the hon. Gentleman a bit of ground, however. It is true that the Labour Government left a longer-term interest rate structure than other economies. We had far less foreign currency borrowing and more index-linked borrowing than other countries. That helped, but the fundamental thing was that we did not join the single currency. In Spain, Italy and elsewhere, we see a currency risk premium, which relates to the central bank’s ability and willingness to stand behind sovereign debt. That is not an issue here. Our interest rates are low, and they have fallen because our economy is not growing. The market is therefore reflecting expectations of continuing stagnation. I am afraid that that is the reality—aside from the political rhetoric of the Chancellor.
Jacob Rees-Mogg
In my previous intervention, I was careful to talk about the markets, not the credit rating agencies. It is the markets that count, because they reflect people investing their money. I agree with the right hon. Gentleman that the credit rating agencies got the whole of the pre-crash period wrong, but it is the markets we need to bank on.
Ed Balls
Unlike the Chancellor, the markets do not pay a huge amount of respect to the credit rating agencies. The hon. Gentleman agrees with me on that. That is why, two or three years ago, it was so ridiculous for the Chancellor to say, “Trust me. I’ll keep us as a safe haven because I’ll keep the triple A credit rating.” We told him, in 2011 and 2012, that the plan was not working, that the economy was not growing and that the deficit was not coming down, but when we told him to change course, he said, “I can’t do that because the credit rating agencies will downgrade us.” Well, they downgraded us anyway, because the economy was not growing.
Jobs and Growth
Debate between Ed Balls and Jacob Rees-Mogg(12 years, 7 months ago)
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Ed Balls
I will make some progress before giving way again. I am always very happy to take interventions. It is clear that the Chancellor has a good whipping operation in place today, although good whipping is something he knows quite a lot about.
A year ago, we warned that a global hurricane was brewing and that it was exactly the wrong time to rip out the foundations of the house but the Chancellor disagreed and recklessly decided to raise taxes and cut spending further and faster than in any other economy. The evidence is clear that his plan has not made the British economy better able to withstand the global storm and that by going too far and too fast he has left it badly exposed. Families and businesses up and down the country are asking how many more businesses must go bankrupt, how many more families must see their living standards fall, how many more young people will have to lose their jobs, how much more unemployment and misery and rising child poverty must we see. How much more evidence do the Government need before they finally change course?
Jacob Rees-Mogg (North East Somerset) (Con)
Will the right hon. Gentleman give way?
Jacob Rees-Mogg
I am grateful to the shadow Chancellor for giving way, but I wonder whether he has got it the wrong way round. With a global storm brewing, the right thing to do was ensure that the gilt market was secure and that we could carry on borrowing cheaply, which has ensured that a recovery will eventually come. He can no doubt find something I said in 1830 and quote it back to me, but that is not really the point.
Ed Balls
I am not sure about 1830, but if the hon. Gentleman was in the House in 1930—he might have been—he will know the dangers of very low bond yields accompanied by rising national debt, rising unemployment and economies locked in stagnation. I do not know whether he was around at the time, but some forefathers and foremothers certainly were. Let me quote the director of the National Institute of Economic and Social Research, the think-tank of the year, who said:
“The reason people are marking down the gilt yields is because they think that the economy is weak.”
That is the truth.
Let me make a prediction. I do not expect the Chancellor to announce a change of course today, but will we hear him repeat his boast made this time last year that the British economy’s recovery is on track? I doubt it. Will he repeat the Prime Minister’s deeply complacent boast that Britain is out of the danger zone? I doubt that, too. Will he describe Britain as a safe haven that is immune from the global storm? Will he repeat his naive forecast that cutting public jobs will boost private confidence and create more private jobs? Even this Chancellor cannot fly in the face of the facts. Employment has fallen in the past 12 months. On the day when unemployment has risen again, will he give any indication that he understands at all how hard things are for families up and down the country? Is he so out of touch that he really believes that a £1.40 a week council tax freeze can compensate for a £9 a week rise in VAT?
Civil List
Debate between Ed Balls and Jacob Rees-Mogg(12 years, 10 months ago)
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Jacob Rees-Mogg
I would most certainly not be recommending that IPSA comes anywhere near our sovereign.
When the Crown Estate was granted in 1760 by George III, at the same time as he gave up his claim as King of France, the monarchy was in deficit and it needed extra money to fulfil the functions that were being fulfilled. Some of those functions were greater than those now paid for by the civil list. That is all certainly true, although Parliament would vote excess resources to pay for things such as the Army, so my hon. and noble friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) was not entirely fair on the point about paying for the Army.
Now the Crown Estate is in substantial surplus and I think that the Chancellor, in his proposals, which in many ways are very good, may be being somewhat canny, because the next sovereign would be able to cancel this arrangement and say, “I should like £200 million a year, thank you very much.” There is no requirement on a new sovereign to agree to hand the Crown Estate over in return for a civil list. The hon. Member for North Durham (Mr Jones) said that this is taxpayers’ money and not the Crown’s money, but it really is the Crown’s money because, on becoming King, the Prince of Wales or any other sovereign could simply rescind the agreement and claim it back. The Crown Estate is the sovereign’s property, which the sovereign gives to Parliament to help to pay for the costs of the nation; it is not taxpayers’ money that is being handed over. [Interruption.] Does the right hon. Member for Morley and Outwood (Ed Balls) want me to give way?
Jacob Rees-Mogg
No, he is going to let me carry on. As a result of what I have described the Queen is paying a higher rate of tax than anybody else. We should remember that and I hope that the Chancellor will be generous. I would like the 15% provision to be increased because we want to have a glamorous monarchy that befits the status of our nation. We are a great nation, a noble nation and a nation that has had power across the globe in the past. We have one of the finest histories of any country in the world. When I see the coronation coach being pulled through the streets of London, I want to see it being pulled by the finest horses that money can buy and I want to see it gilded with the finest gold that can be bought. I want Her Majesty to have as a jubilee present the finest window that can be funded by Members of Parliament. That is the status of monarchy that we want and I urge the Chancellor to remember that. Even though I know that we are in this time of austerity, that we are all in it together and that the Opposition spent all the money, maxed out the credit card and so on, we should look after Her Majesty.
Amendment of the Law
Debate between Ed Balls and Jacob Rees-Mogg(13 years, 1 month ago)
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Ed Balls
I have not been silent at all. I said that there was a global financial crisis, which meant that our deficit and our debt rose, as it did in America, France, Germany and Japan. It is a good job that we went into the crisis with a lower national debt than we inherited, and a lower level of national debt than France, Germany, America and Japan. It is a good job that we did not listen to the Conservative party, or our debt would have been higher, our unemployment would have risen and we would still be in a depression.
Jacob Rees-Mogg
Thank you. I am grateful for such widespread support.
May I draw the shadow Chancellor’s attention to page 8 of the Red Book? He referred to private sector debt, which rose from 200% of GDP to 450% of GDP when the Labour Government were in office. That fundamental instability led to our troubles. It was great while debt was rising—it led to full Government coffers—but it got out of control and that is the root cause of the problem.
Ed Balls
As I said, the OBR says that subdued consumption outlook requires households to dip into their savings again in 2011, so the savings ratio continues to fall back from its post-recession peak. It also says that the savings ratio is now forecast to be historically low. Household debt as a percentage of income rises every year from 2010, even though it fell in 2009-10. Those are the facts.
Yesterday we needed a plan from the Chancellor to help hard-pressed families facing the squeeze, to get people back into work and to get our economy growing again. That is what we needed, and that is what we did not get. There was no change to a deficit reduction plan that is faster than that of any other major economy in the world. It pushes growth down and unemployment up. The Chancellor fails to realise that cutting too deep and too fast will make it harder to get our deficit down. He also failed to understand that while he gives the banks a tax cut this year, ordinary families are being hit hard now. It was a smoke-and-mirrors Budget.