Budget Responsibility Bill debate: key issues and Parties stances
On 30 July, the House of Commons debated the Budget Responsibility Bill, granting the bill a second reading without a vote. The government argued that the Bill would prevent any future government from bypassing the fiscal lock by updating the charter for budget responsibility without Parliament's consent.
Darren Jones, Chief Secretary to the Treasury, began the debate, telling MPs that the bill ensures proper scrutiny of fiscal plans through five key measures: Office of the Budget Responsibility (OBR) assessment requirement, OBR independent assessments, the definition of “fiscal significance”, emergency exemptions and parliamentary accountability.
On the emergency exemptions, Jones explained that the fiscal lock does not apply to temporary measures responding to emergencies, such as the COVID-19 pandemic. Temporary measures are defined as those intended to end within two years, allowing the government to act ‘quickly’ in crises. He argued that this bill guarantees “every fiscally significant change to tax and spending” will be subject to scrutiny by the OBR.
Gareth Davies, Shadow Exchequer Secretary, expressed his support of the OBR, but raised a number of concerns about the bill’s definition of ‘emergency’ and the new reporting requirements. He said that clarification is needed on what constitutes an emergency and it is unclear if the OBR’s new reports need to be published. He continued: “If this requirement does not apply, are the government happy to give the OBR the power to decide whether its costings are published?”
Davies argued that the potential impact of the bill is so “limited and specific” as to lead some to wonder whether “this is the prioritisation of gimmicks over governing”.
Stella Creasy (Lab) supported the bill while also emphasising ‘transparency’ and parliamentary scrutiny of regulations.
The Lib Dem Treasury spokesperson, Sarah Olney, also welcomed the bill, describing it as a “symbol of strengthened fiscal responsibility and transparency”. She praised the government for its intention to “rebuild trust” with the financial markets, businesses and financial sector, but wondered if “a GDP measure alone adequately capture the impact of a spending or taxation measure on the economy”.
She repeated her wish to “make the tax system fairer by asking some of the wealthiest companies in the world [banks, oil and gas producers and tech giants] to pay their fair share”.
While supporting the bill, Dave Doogan (SNP) suggested that it is no “silver bullet” and does not prevent fiscal ‘incompetence’ from the current or future Chancellors. He continued: “It will not fix the credibility of Chancellors who, for example, on taking office say they did not know about the £20 billion black hole in the previous government’s fiscal plan that they were adopting, even though they were warned about it repeatedly”.
Doogan criticised the government for not being ‘honest’ with the public and argued that they are “seeking to create a counter-narrative or counter-reality to uphold the belief that the cuts and tax hikes that Labour will soon visit upon businesses and communities… have been done to Labour by the Tories, rather than done to the people by Labour.”
Bobby Dean (Lib Dem) emphasised the important role of parliament scrutiny along with the OBR’s role and argued there are many ways to fund the investment for public services including raising capital gains tax and reversing tax cuts for banks.
Jim Shannon (DUP) believes in the necessity of the OBR's ‘opinion’, arguing that they should provide a “reasoned view” on matters such as raising taxes to fund projects like the Gaelic Athletic Association's Casement Park. He stated that raising taxes for such purposes “does not instil confidence in the financial future of the nation”.
Luke Charters (Lab) said the bill protects “knee-jerk reactions and fantasy Budgets” and treats “taxpayers’ money with respect”.
Alan Mak, Shadow Economic Secretary, reminded the MPs that a Conservative government created the OBR in the first place and the party is “keen to safeguard its reputation for independence and focus”. He claimed that the purpose of the bill is to “distract everyone ahead of Labour’s tax rises in the autumn Budget”, quoting the Resolution Foundation which has described the policy’s impact as “relatively small”. He argued that the bill is “full of unanswered questions” and provides the OBR with “more powers” than ministers.
Winding up the debate, the Exchequer Secretary to the Treasury, James Murray, explained that the fiscal lock will prevent the “sidelining of the OBR by giving it the power to start an assessment if the government announce fiscally significant policies without one”.
In an emergency situation, Murray argued that it would not be appropriate to hold back the response until a forecast could be produced and said the government would take ‘rapid’ action. He confirmed that the OBR reports will be published.
The Exchequer Secretary welcomed support from Olney and responded to her questions about the definition of “significant”, by saying: “The threshold set out in the draft charter for budget responsibility… is 1% of GDP in any single financial year”. He conclude that the bill “is a key step in fixing the foundations of our country as we set out to get the economy growing and to make families across Britain more secure and better off”.
You can read the full debate here.