Charter for Budget Responsibility

Debate between Steve Baker and David Ruffley

Tuesday 13th January 2015 Commons Chamber

[Mr David Ruffley (Bury St Edmunds) (Con)]

I am rather excited by this debate on fiscal responsibility. This is not to say that I am an anorak who should get out more. My happiness resides more in the fact that those who support the motion will be committing to balanced budget economics. Anyone voting for the motion will not just be saying that they believe in balanced budgets; they will be voting for that.

In the new world of transparency the public will be watching who votes for what, and they will rightly hold everyone who votes for the motion to account for the two propositions contained in the charter. The first is the fiscal mandate. As the Chancellor spelled out—there is no confusion—we will balance the current budget by 2017-18. The second is the supplementary debt target, which means falling debt as a share of GDP by 2016-17.

How will we do this? The Conservatives are clear. It means that for the first full two years of the Parliament we will continue the public spending reductions, so that total managed expenditure will fall at roughly the rate that it has been falling in this Parliament—about 1% overall in real terms. That is equivalent to about an extra cut of £1 in every £100 being found in the next forecast period. Any business in my constituency asked to find a cut of £1 out of £100 would do it standing on its head, especially if it knew that that was vital to the survival of the business.

Specifically, we know that £30 billion of fiscal consolidation is required to deliver the fiscal mandate. So Members who vote for the motion tonight are absolutely committed to finding £30 billion. The Conservative party thinks it can be done as follows: £13 billion of that £30 billion by cuts to departmental expenditure limits, excluding the protected budgets for schools, the Department for International Development and health, and a further £12 billion from annually managed expenditure—the welfare budget. I shall not speculate, as I am not in the Government, but we might be looking to find those £12 billion-worth of cuts by, yes, restricting child benefit, maybe to two children; yes, perhaps restricting the top-heavy housing benefit budget and consider saying that those under 21 or under 25 should have their housing benefit curtailed. Finally—one of the biggest exemplifications of social justice that the current Treasury has come up with—yes, tough anti-avoidance rules. The Labour party in 13 years never dared introduce a general anti-avoidance rule. We are saying that those who have the broadest backs cannot be allowed aggressively to exploit tax loopholes. That will find £5 billion.

Our numbers add up. After those first full two years of consolidation, we would have flat real-terms settlements—flat, not further cuts. The result of all this, as we know, is that we would run an overall surplus, not just a surplus in the third year on current budget. Why is that important? Why did the Chancellor say it? The Chancellor said it because he understands that we have to start paying down debt. If we do not pay down debt, it will mean further tax increases and inevitably spending cuts further down the road for the next generation.

This is an ethical proposition, not an ideological one, as the Chief Secretary—I hate to say it—has branded these Conservative plans, and the Labour party as well. We need not waste any time on the Orwellian invocations of “The Road to Wigan Pier”. That is childish point-scoring. This is not ideology. It is about paying down debt.

[Steve Baker (Wycombe) (Con)]

In the Red Book there is a chart showing debt interest in 2015-16 overtaking the education budget. Does my hon. Friend agree that there is an extremely practical problem of making sure that debt interest does not consume all the tax revenue that we might otherwise spend on services?

[Mr Ruffley]

My hon. Friend makes a trenchant point. Do we want burgeoning debt interest under the policies of the Opposition parties to eat away at front-line services? The money, as we know, has to come from somewhere.

I am not clear where the major Opposition party stands on this. The £30 billion is what anyone who votes for the motion today must account for. It was not clear whether the Leader of the Opposition acknowledged that figure on Sunday, but he made a stab at how the Labour party might fiscally consolidate. There was the reintroduction of the 50p tax rate for high earners; we know that that raises less than £1 billion. There has been reference today to restricting pensioner benefits to very well-off pensioners; we know that that raises less than £0.5 billion. Labour Members are not even remotely in the ballpark in coming up with a £30 billion consolidation in anything they have said today inside or outside the House.

This leaves us with two possibilities in relation to Labour Members who are going to vote for this proposition today. The first is that they are voting for it in the full knowledge that they have no intention of balancing the current budget in year 3. I am a kind and generous individual, and I do not think they would do anything as dishonourable as to vote for something they had no intention of honouring. They are not going to get the money from spending cuts most of which they admit they will not pursue, and they will not guarantee our spending reductions. That leaves us, I am afraid, to conclude that the iron law of modern British politics still obtains: dogs bark, cats miaow, and Labour puts up taxes.