Balanced Budget Rule — [Graham Stringer in the Chair]

Part of the debate – in Westminster Hall at 4:03 pm on 23rd January 2019.

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Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury 4:03 pm, 23rd January 2019

Of course I will do better. At the end of the day, it is about priorities. As Marion Fellows said, the Tories have spent the money in the wrong way. The hon. Member for Southport effectively accepts that. We have had £15 billion wasted on the introduction of universal credit by the Tory party, so let us get a little bit real.

I am sick to death of talking about how useless the Tory party is, so I will speak about Labour’s fiscal credibility, which I am sure will get a certain amount of unanimity in the Chamber, and the issue of balancing. [Interruption.] I am happy to deal with it. We could have discussed the issue in a mature and grown-up way with adults in the room. Yanis Varoufakis wrote a book called “Adults in the Room”, but there are not many in the Chamber today. I suggest Members have a read of that book; it will show them what happened to Greece.

Following discussions with our advisers, including Professor Joseph Stiglitz, on 11 March 2016, the shadow Chancellor announced a fiscal credibility rule, which has five key elements. I am happy to set that out in the symposium that hon. Members are here to attend. First, Labour committed to closing the deficit on day-to-day spending within five years. Secondly, we committed to excluding investment from that commitment so that we can borrow to invest, which is important. Thirdly, we undertook that Government debt as a proportion of trend GDP would be lower at the end of a five-year parliamentary term than at the start.

Fourthly, we committed to giving the Monetary Policy Committee of the Bank of England the power to suspend the rule if it determines that interest rates are not having their usual effect due to the lower bound. That would allow stimulus action to step in when monetary policy is ineffective. Fifthly, we would shift the reporting requirements of the Office for Budget Responsibility so that it reports to Parliament, rather than the Treasury, and ensures ongoing Government compliance, to which the hon. Member for Dundee East referred. All the facts are there, so let Parliament have them. The elements of the rule mean that a Labour Government would not need to borrow to fund our day-to-day expenditure.