My speeches in the Charter for Budget Responsibility and Welfare Cap debate, 10 January 2022

John Redwood – (Wokingham) (Con) – Could my right hon. Friend comment on what difference, if any, he thinks it makes that a significant proportion of that debt is now owned by the Bank of England, which is 100% owned by the Government on behalf of the taxpayers?

Simon Clarke (Chief Secretary to the Treasury) – The Bank of England has obviously helped to underpin our wider response to the crisis that we face. Clearly, it does have a bearing on the relevant significance of debt, but it would be simply irresponsible to leave ourselves exposed in the manner in which we risk being if we fail to constrain the borrowing, which risks otherwise becoming an unacceptable burden and which would leave us very vulnerable. A 1% rise in interest rates would cost the Exchequer ÂŁ22.8 billion in 2025-26. That is a meaningful level of exposure and one which we want to take action to address.

John Redwood (Wokingham) (Con) – Further to that point, is my right hon. Friend not quoting a gross figure for the impact of a rise in interest rates, and quite a bit of that would be credited back to the Bank of England, which, in turn, could pay it back as a dividend to the Treasury?

Simon Clarke (Chief Secretary to the Treasury) – I think it remains the case that we need to make sure that our debt-to-GDP ratio is more sustainable than it is at present, and I do not think colleagues would significantly demur from that. I take the point that, obviously, there is an interaction—some of these interactions are of a relatively circular nature—between the Bank and Exchequer, but none the less, it is important that we control our public debt. Indeed, we were able to respond to the pandemic as comprehensively as we did precisely because of the fiscal space created since 2010. The fact that we faced two once-in-a-generation shocks in just over a decade highlights why we must have the buffers to provide support when it is needed most and why we must act to rebuild those buffers, so that we are ready for any future shocks. In its most recent “Fiscal risks report”—not an easy one to splutter out—the OBR said:

“In the absence of perfect foresight, fiscal space may be the single most valuable risk management tool”

that we have.

The third and final reason we need to keep our debt under control is simple: our public finances are the legacy we leave for future generations, and the decisions we take now will have a material impact on the lives and livelihoods of our grandchildren. They will help or hinder challenges, from climate change to an ageing population, or indeed to seize the opportunities that lie ahead.

The charter for budget responsibility contains new fiscal rules to guide us back to fiscal sustainability in a fair and responsible way. The rules will ensure that we get debt down over the medium term. They will allow us to deliver a significant uplift in capital investment, in turn driving economic prosperity, but without burdening future generations with borrowing to fund our day-to-day spending. The new rules require that underlying public sector net debt, excluding the impact of the Bank of England, must as a percentage of GDP be falling. The current budget must be in balance, which means that everyday spending must be paid for through taxation. Both rules must be met by the third year of every forecast period, giving us the flexibility to respond to events in the near term, such as omicron, while credibly keeping the public finances under control.

Finally, a third rule will ensure that public sector net investment does not exceed 3% of GDP on average over the forecast period. This rule will allow the Government to deliver on our ambitious plans for investment over this Parliament, with the highest sustained levels of PSNI as a proportion of GDP since the late 1970s. With this rule, we are delivering on plans to invest more than ÂŁ600 billion in gross public sector investment over this Parliament to spread prosperity across the UK. The ÂŁ4.8 billion levelling-up fund is part of that. An unprecedented investment package of ÂŁ5.7 billion for eight English city regions to transform their local transport networks is also part of it. On top of these commitments, the UK Infrastructure Bank is now open for business and is expected to support more than ÂŁ40 billion of infrastructure investment. Crucially, the rule also mitigates the risk of increasing debt to an unsustainable level. Our fiscally responsible approach supports growth while keeping debt under control.

Combined, these rules will guide responsible decision making. The International Monetary Fund has noted that

“Countries that have followed a debt rule have typically managed to reverse a jump in debt…significantly faster than other countries”,

and it recently assessed that the

“new fiscal rules have anchored fiscal policy well”.

Thanks to our support for the economy and early responsible decisions to strengthen our public finances, in its October forecast, the independent Office for Budget Responsibility confirmed that the rules were met. The current budget is in surplus and underlying debt is forecast to fall in the current target year, 2024-25. The rules will guide fiscal policy for at least this Parliament and will be reviewed at the start of each Parliament to ensure they reflect the economic context and mean that we can deliver for the British people.

In addition to the rules in this charter, we will go further, becoming one of the first countries to formally consider the broader public sector balance sheet in our management of fiscal policy. The OBR will now forecast broader measures, including public sector net worth, which it says provides a fuller picture of fiscal sustainability and allows for more sophisticated analysis.

The charter also retains the welfare cap in order to keep welfare spending on a sustainable path and to support the other rules in strengthening the public finances. Since the cap was last set at Budget 2020, the covid pandemic has had a significant impact on the medium-term outlook for welfare spending. To reflect that and to align with the updated fiscal framework, the level of the cap is being reset in line with the latest forecast. That leads to an effective increase of £10.5 billion in the cap by 2024-25.

John Redwood (Wokingham) (Con) – Let me return to the subject of the debate, the charter for budget responsibility. I will not follow the Opposition into a debate on the general state of the UK economy, which I am sure we will have other opportunities to discuss.

I see this as the Maastricht rules tribute debate. Every year under the Maastricht treaty, whether under Labour, coalition or Conservative Governments, we used to have a debate. We had to look at the two fiscal rules, which of course both came from the European Union: rule one was that the budget deficit had to be 3% of GDP or less; and rule two was that we had to either be below 60% of GDP with our state debt, or we had to show how we were going to get down to 60% of GDP with spending cuts or tax rises. The UK normally favoured the tax rise route, rather than the spending cut route.

That was characterised by the Opposition parties of the day, once the Conservatives or the coalition were in office, as austerity economics, although they would never accept that the cause of the austerity was the rules designed in Brussels. They would point out, when I made that point, that, “Oh well, because the UK is not a member of the euro there are not the same penalties imposed if the UK fails to comply.” The fact was, however, that the whole UK economic machine—Bank, Treasury and officialdom—believed they were very serious commitments and that, as they were treaty commitments, the UK had to keep to them. So when we finally got out of the EU, I was one of those voices saying to the Government, “Let’s scrap all that. Let’s not have those Maastricht tribute debates”—although I think we had one even after we left—“and let’s have our own UK framework.” That is what we should be debating tonight.

The Government have come up with a charter for budget responsibility, which I welcome, but reading the detail, it has a familiar ring to it. What are the two main rules in the charter? One is that we must keep the budget deficit down to 3% or below. It has been repackaged in relation to investment, but it is basically the 3% Maastricht budget deficit rule. The second rule is that, by the third year, debt should be falling as a percentage of GDP. Of course, our debt is well above 60%, and it will be quite a long time before we get back to 60%, if at all. It is now built into the framework as a regular review item, although it has the extra twist that it is a three-year average, so there is a bit more scope for flexing things.

I think we can do better than this Government. We could come up with an economic framework geared to the modern needs of an independent country, and I would suggest that our charter should embed two great aims of economic policy. The first aim that it should definitely embed is controlling inflation. It is right that the so-called independent Bank of England—this House regularly changes the rules and shows that it is actually in charge of the Bank of England—is charged with the duty of keeping inflation down to around 2% on average. I have no problem with that as a target, but the Government need to adopt it as a target as well, because as Ministers must well know, we cannot do all of the heavy lift through monetary policy—we cannot do it all through interest rates or quantitative easing. We also need to have a sensible fiscal policy.

Above all, the Government, who control such a huge chunk of the economy, need to manage their own affairs well, in terms of productivity, sensible real wage growth and so forth, and they have a duty to follow an anti-inflation strategy for the public sector directly under their control as a back-up to what the Bank and monetary policy are trying to do. I think that we should embed the inflation policy more firmly in the charter and that the Treasury should have to tell us how it is contributing to controlling inflation. It will be very topical this year, because clearly inflation is considerably above where we would all like it to be and there is no immediate sign that it is about to drop down, although I think it will drop down towards the end of the year, unless policy is particularly foolish.

The second criterion or objective that I would put in the charter is a growth objective. Labour made an entirely fair point by saying that what matters is growth. The faster the growth—as long as it is not inflationary—the more we would solve our deficit and debt problems. Our economy and our figures are incredibly sensitive to the growth rate. In the first half of the current financial year, we had very fast growth. It was a recovery phase and things were going fairly well from the covid lockdowns. As always, the OBR and the Treasury completely misjudged what favourable impact growth has, so they overstated the deficit for the first six months of the year by a whopping £50 billion. The deficit tumbled by £50 billion more, with no tax rises. But there was a huge tax rise—it was called tax on growth. More people went to work, and more people earned higher wages, bonuses or salaries. More people spent more money, so there was more VAT. So income tax receipts, VAT receipts and other receipts in the economy greatly outperformed the OBR and Treasury forecast, demonstrating that, if we can go for growth, we will make much better progress on the debt and deficit, which we need to do, than if we go for austerity economics, slowing the economy with tax rises and a too abrupt monetary deceleration.

I urge the Government to look again at whether they can improve on the objectives in the charter, to reflect on it and to see how an independent Britain can have a growth policy. If the Government established a growth target—they would not always hit it, but they could establish it—it would start to inform the actions of every Government Department that has a bearing on the strength of our economy, new jobs and all the rest of it. That is what we want. We want a Whitehall that is positive about Britain, not one that is trying to hold it back. We want a Whitehall that thinks Britain can achieve things—can invest here, have more jobs here and substitute for imports—rather than a negative Whitehall that says, “Gosh, there is too much borrowing, What can we cut? What can we tax? What can we stop?” We want less stopping and more positive going. We want more ability, generated by a growth policy, to show that an independent Britain can produce more of its own energy, grow more of its own food, catch more of its own fish, and make more of its own personal protective equipment and of its own medical requirements.

David Linden (Glasgow East) (SNP) – That speech would perhaps have done even better with “Jerusalem” on in the background. The right hon. Gentleman speaks about growing more food, but can he tell me who is going to pick that food from our fields?

John Redwood (Wokingham) (Con) – It will be picked by people paid decent wages, and if that requires wages to go up a bit, I have no problem with that. It will also be picked by the growing mechanisation of agriculture. Our agriculture is not as fully mechanised in a lot of farms as it is possible to do when there are better capitalised farms, like those that have been growing more food elsewhere. How pessimistic that was—why is the hon. Gentleman not proud of the United Kingdom, Scotland or wherever, thinking that we can achieve more and do more? Why do we always have to be stopping people doing things, and saying that nothing is going to work and so let us import all our vegetables from Spain, all our flowers from the Netherlands and all our energy from Russia, Germany or the Netherlands or wherever because we are not able to do it here in Britain? It is just not good enough. We have this huge opportunity. We have a very talented people. We have many natural resources. We have a perfectly good temperate climate for growing most of our own food. So, Government, get on with it. Having a growth target would help energise a Whitehall that still seems to be very disappointed in the country it is trying to govern and seems to be trying to hold it back.

One other thing that the Chief Secretary mentioned in his remarks, which is mentioned briefly in the text we are debating tonight, intrigues me. It says that balance-sheet items are being worked on but have not yet reached a state of development where they can be shared with the rest of us. How long does it take? Why do the officials to the Government not know the asset and net asset position for the country? I believe there are some figures we can get from public sources that show that we do have some guesses about all that, but is it not rather important that when we debate the state of the nation’s finances, we understand the balance sheet as well as the income account and that we know whether the public sector is adding value and long-term wealth or not? If it is, why do we not claim some credit for it? If it is not doing enough of that, we need to ask the difficult questions about the wisdom of the investments, the productivity of the schemes and all the things that go into making that a success.

I did ask the Chief Secretary about a balance-sheet item. I think it actually makes a difference if you have bought in your own debt, because you owe the debt to yourself. I am not asking for anything imprudent to be done. I understand why we have gone through this rather tortured process, as has the European Central Bank and the Federal Reserve Board, and as, for many years, has the Bank of Japan. But we should not then fool ourselves into thinking that we have a worse problem than we have. The fact is that all these countries and currency areas spent a lot of money and created a lot of money to buy in debt over the pandemic, and we have got away with it, with a caveat that we have a little too much inflation. That debt is purchased; it is now both an asset as well as a liability of the state, so it is wrong to think that it is just a liability. The new argument is, “We owe the Bank of England and if the short rates go up, we owe the Bank of England more interest and so forth”. Yes, but it gets the receipt. If we want to do the transaction, the Treasury pays the Bank and the Bank can pay the Treasury back, because the Treasury owns the Bank. If I had bought in my mortgage from a mortgage company, I would probably just forget the whole thing. However, on Bank of England and Treasury logic, every month I would pay interest to myself because I still owe the mortgage, but then I could take that money back and spend it because I own the mortgage company and it is no longer a proper debt.

I think we have to understand that something different has occurred with quantitative easing, and I do not think we should go on doing it. It is normally very inflationary and very dangerous. In the strange circumstances of a covid lockdown in which a huge amount of demand and activity were taken out of the system, we could get away with it; indeed, it was right to do it, and I supported the Government at the time and praised them for the stimulus they offered. However, that has gone, and we now need to have sensible finances. To run those well, I strongly recommend a firm inflation target—inflation is a little too high at the moment, and needs to be taken very seriously—coupled with a much more optimistic growth target, because that is the way to grow the balance sheet and get the debt and the deficit down.

 

 

My Question to the Defence Minister about following the Ajax Noise and Vibration Review as to whether remedial costs will not fall on the taxpayer

Sir John Redwood (Wokingham) (Con): Thank you, Madam Deputy Speaker. The Minister says that there is a robust fixed-price contract, which is great news. Is he guaranteeing to the House that the very considerable remedial costs will not fall to taxpayers in any way?

 

Minister of State (Jeremy Quin): To confuse John Spellar with my right hon. Friend John Redwood is not a mistake that I would dare to make, Madam Deputy Speaker.

My right hon. Friend is right: this is a ÂŁ5.5 billion firm-priced contract. I am very clear that we have a contract that says that 589 vehicles will be delivered that will meet our requirements for a price of ÂŁ5.5 billion. That contract is very, very clear. I see no reason why this House or the taxpayer should pay more money to General Dynamics to produce 589 vehicles, when we have a contract for it to produce 589 vehicles to our requirements for ÂŁ5.5 billion.

My support for the Government’s new policy to ensure that the Post Office properly apologises and compensates every post master wrongfully convicted

Sir John Redwood (Wokingham) (Con): I am grateful to the Minister for changing the policy. I have been a long-standing critic of past Governments and Ministers for not telling the Post Office to apologise and pay up, and I encourage him today to ensure that the Post Office apologises properly, and pays up quickly and generously.

 

Parliamentary Under Secretary for the Department for Business, Energy and Industrial Strategy (Paul Scully):

My right hon. Friend is absolutely right. We will ensure that we lean into the Post Office to ensure that they deliver all compensation schemes quickly and equitably so that we can get this issue sorted out. The Post Office has acknowledged that it has done wrong, but the inquiry will detail the questions that it needs to answer over the next few months.

My intervention in the Armed Forces Bill supporting the Government’s effort to improve home ownership for armed forces service personnel

Sir John Redwood (Wokingham) (Con): I will be supporting the Government, as they have made welcome progress on creating better conditions and support for our armed forces, but I would like to press the Minister on housing. When we wish to recruit and retain the best people in the future as we have in the past, it is important that we provide something better on housing than we traditionally have. It is a disgrace if armed services personnel, after providing substantial service to our country, cannot afford to buy a house of their own, and instead have to scramble to get rented accommodation, which they often find difficult.

I hope the MOD can do more through its potential and current schemes to promote home ownership, and to promote buying property nearer home base, for example, so that people leaving the armed forces have a property of their own. If service personnel are not able to do that, a surrogate scheme is needed so that when they leave the armed forces after holding important jobs and earning reasonable money, they are not debarred from the private housing market and they do not come to see their service career as a gap in making those contributions and building up savings in a house of their own. They should have as much opportunity to own their own property as the rest of the community.

Yes of course we need an expeditionary service and service personnel may need to serve in a variety of places abroad, but that should not get in the way of either having a home of their own with their family or having the wherewithal to have a home of their own when they leave the armed services. I hope my hon. and gallant Friend the Minister will sympathise and do more to make sure it can be true. I do not think we need a legal requirement, but we need a firm pledge of intent from the Government.

My interventions during the Health and Care Bill

Sir John Redwood (Wokingham) (Con): I am grateful to the Minister. Will he confirm that the amount of tax that is going to be raised in the immediate future, in national insurance and then in a separate tax, will make up a relatively small minority of the total costs of public social care?

Will he also confirm that none of these measures addresses the issue of the hotel costs that people need to pay when they go into care homes?

The Minister of Health (Mr Edward Argar): My right hon. Friend is right to highlight that this is talking about personal care costs, so he is right in his point on that.

Did I see the hon. Member for Hornsey and Wood Green (Catherine West) rise earlier?

…

John Redwood: Will the Minister give us a brief comment on the recruitment of chief executives and senior management to the boards? Will we be using people who already have senior NHS jobs, meaning that there will be no redundancy and transfer costs, or will there be quite a redundancy bill because we want to change personnel?

Edward Argar: I think my right hon. Friend is talking about executive posts. Yes, there will be processes in place to ensure that employment rights are respected. There will be some roles that are completely new and there will be a competition, but I would expect that those with a significant track record and experience would therefore find themselves in a strong position. I will not prejudge any of those individual decisions.

 

…

John Redwood: I am grateful to the Minister. Will he confirm that the amount of tax that is going to be raised in the immediate future, in national insurance and then in a separate tax, will make up a relatively small minority of the total costs of public social care?

Will he also confirm that none of these measures addresses the issue of the hotel costs that people need to pay when they go into care homes?

Edward Argar: My right hon. Friend is right to highlight that this is talking about personal care costs, so he is right in his point on that.

My Question to the Government about NHS England Funding – Announcement to Media

Sir John Redwood (Wokingham) (Con): Given that in the last two years very large sums of money have been spent on test and trace, establishing a successful vaccine programme, Nightingale capacity and other one-offs for the pandemic, how much of that money will become available to spend on the other work that is now so desperately needed in the NHS?

Minister of State (Mr Edward Argar): My right hon. Friend will know that by far and away the overwhelming majority of that money was one-off spending to tackle the pandemic in its most acute phase. We will need to continue to spend some of that on therapeutics, vaccinations and similar.

On other things, such as the significant increase in infrastructure and understanding that we have built in test and trace and in testing and diagnostic capacity, I am looking at how a long-term legacy can be born of that and how we can transition the learnings and infrastructure from that to continue to deliver for patients in more normal times.

My Question to the Government about Large Goods Vehicle Drivers – Driving Licences

Sir John Redwood (Wokingham) (Con): To ask the Secretary of State for Transport, by what date his Department expects the backlog of HGV licence applications to be cleared.

Parliamentary Under Secretary of State (Ms Trudy Harrison): The Driver and Vehicle Licensing Agency (DVLA) is prioritising applications for vocational driving licences, including those for HGV entitlement. There is no backlog for provisional vocational licences and these are being processed within the normal turnaround time of five working days.

The DVLA has significantly increased the processing of vocational licence renewals and has moved more staff into this area. Given this, the DVLA expects to be processing applications for both provisional vocational licences and renewals within normal turnaround times by early November. The large majority of those applying to renew an HGV licence can continue driving while their application is being processed.

My Question to the Government about NHS Waiting Lists

Sir John Redwood (Wokingham) (Con): To ask the Secretary of State for Health and Social Care, if he will provide details of how the NHS plans to reduce waiting lists.

Minister of State (Mr Edward Argar): We intend to publish the elective recovery delivery plan in November 2021.

We have committed further ÂŁ1 billion this year to the existing ÂŁ1 billion Elective Recovery Fund, with more than ÂŁ8 billion in 2022/23 to 2024/2025. This could deliver the equivalent of nine million more checks, scans and procedures and allow the National Health Service to deliver the equivalent of 30% more elective activity by 2024-25, compared to pre-pandemic levels.

We will also establish a new ÂŁ700 million Targeted Investment Fund, which includes ÂŁ250 million to enable cutting edge technologies and ÂŁ250 million to increase operating theatre capacity and improve productivity in hospitals.

My interventions during the debate on the Environment Bill, 20 October 2021

Sir John Redwood (Wokingham) (Con): As there is a lot of concern about this on both sides of the House, can the Minister give us some encouragement about what pace of change we can look forward to under her proposals? I think people want some reassurance that this is going to be tackled quite soon.

The Parliamentary Under Secretary of State for Environment, Food & Rural Affairs (Rebecca Pow): I thank my right hon. Friend for that, and honestly, people are coming up to me left, right and centre about this.

I feel as strongly about it as everybody else, so I am so pleased we have got this into the Bill. I have to say that a lot of it is thanks to working with my right hon. Friend the Member for—[Hon. Members: “Ludlow.”] I have been to Ludlow, but I have a lot of data in my head!

I think my right hon. Friend Philip Dunne would agree that we have worked unbelievably constructively to get what was going to be in his private Member’s Bill into this Bill, which is absolutely the right thing to do. I hope we are demonstrating that this is happening quickly.

For example, we are requiring water companies to put in monitors above and below every storm sewage overflow to monitor the data. They will have to start that right now, because the sewerage plans coming forward in the Bill are already under way.

…

Sir John Redwood: Is the Minister saying that if this change goes through, another HS2-type assault on ancient woodland would not be allowed, whereas the last one was?

The Parliamentary Under Secretary of State for Environment, Food & Rural Affairs: What it will mean is that, yes, there will be much more credence given to the value of ancient woodland.

At the moment, ancient woodland does not necessarily win, because one can have the infrastructure, or whatever it is, if one can demonstrate that there are wholly exceptional reasons for getting rid of the ancient woodland.

This approach will really strengthen the position: it is a really big commitment to ancient woodland, which is like our rainforest. We have to do something about it—and we are, which I hope will be welcomed.

…

Sir John Redwood: Is there a possible compromise? The Minister said that the regulator could set and enforce targets and extract penalties; would that be a way forward? Could we get the Minister to come up with some tough regulatory targets that fall short of the absolute guarantee of a legal statement?

Chair, Environmental Audit Committee, Chair, Environmental Audit Committee (Mr Philip Dunne): There will be targets—there are water-quality targets in the Bill anyway—and the Minister referred to the guidance that she is on the point of finalising for the next pricing review period for Ofwat.

My Committee, the Environmental Audit Committee, is currently conducting an inquiry into water quality, and we will make some recommendations to strengthen that guidance, so there are tools that can be used.

That does not, though, get away from the fact that in my view there should be a primary legislative duty on water companies, to persuade them to treat this issue with sufficient seriousness.

My intervention during the debate on the Coronavirus Act 2020 (Review of Temporary Provisions) (No. 3)

Sir John Redwood (Wokingham) (Con): A lot of us feel that this legislation should now just lapse, because there has been a material improvement in the situation.

There are other powers should things go wrong, and this House could grant powers in the space of a few hours if there were a new and unpleasant crisis. Why do we have to have these powers hanging over our head when there does not seem to be a need to use them?

The Secretary of State for Health and Social Care (Mr Sajid Javid): What I can tell my right hon. Friend is that there are provisions that we hope to keep in the Act, subject to the House’s will today, which are still necessary.

For example, there are provisions that protect NHS capacity with respect to temporary registration of nurses and other healthcare professionals.

There are similar provisions for the care sector; there are also provisions that provide support packages for those whose jobs may have been hit or who have to take time off work to meet the self-isolation requirements. There are provisions in the Act that I think are still necessary; I will speak about some of them in just a moment.