This is how the government describes the Budget Responsibility Bill, which is the first Bill described in its King's Speech publication:
Let's be candid about this Bill. It is a little bit of student politics, at best.
Every Budget since 2010, when the Office for Budget Responsibility was created, has been accompanied by an OBR report, except that by Liz Truss and Kwasi Kwarteng. There have been no exceptions. And no one seriously believes that their mistake will be made again.
In that case, this Bill does, at best, score very cheap points. Labour should really prove that it is better than that.
And what does an unfunded commitment mean? In the current context, it can only mean that quantitative easing will be used.
When was quantitative easing last introduced? In March / April 2020.
Why was it introduced? To fund the furlough and other schemes required to tackle Covid.
What was the timescale for the introduction of quantitative easing? Days at most.
Would that be possible again if we had a similar crisis? No, because the Office for Budget Responsibility generally reckons it takes ten weeks to report.
So what does this Bill do? It outlaws another emergency use of quantitative easing in the event of a national crisis. People would have to die whilst waiting for the Office for Budget Responsibility to forecast, wildly inaccurately, what the consequences might be so that the use of quantitative easing could be described as 'costed'.
Seen in this way, this proposed Bill looks to be totally irresponsible because it constrains what the government can do in an emergency.
No doubt the Bill will include provisions to address this point, but in that case, this looks even more like a bit of student politics.
If Labour wants to be taken seriously when in office, it really should start behaving as if they're grown-ups.
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This smacks of being scared of making decisions that might do some good.
We can’t do this because the OBR says no.
Already Labour is on course to lose the next election.
@ John Fairhall. Exactly! Take this following article about the Bank of England attempting to do the politicians’ job by taking a sledge hammer to crack a nut of the politicians’ own making. Both Putin, Covid (supply chain reduction) and Brexit have been the main causes of high inflation in the UK yet the Tory politicians failed to take sufficient action to protect the incomes of the majority of the workforce, disabled, pensioners, etc. to cope with these inflationary pressures. Now Labour politicians are following in their footsteps. The general election will indeed prove to be a damp squib delivering little of the necessary changes to sort this country out!
https://www.theguardian.com/business/article/2024/jul/18/uk-jobs-market-wage-growth-interest-rates-ons
Oh, I VERY much hope that Starmer’s Faux-Labour Nu-Nu-Labour Hostage Party (as in bound hand and foot and gagged by the BoD, JLM and LFI, 3 racist – for their contempt for Palestinians – and antisemitic – for their “right kind of Jew/wrong kind of Jew trope – bodies) is Pasockified to irrelevance in 2029 – preferably before.
He lied his way into the Leadership, and almost the first act of his Premiership is to send his Foreign Secretary off to shake hands with Netanyahu, a war criminal, and buddy up to Israeli President Herzog wirh promises to try and block the ICJ arrest warrants against Netanyahu and Gallant.
Sir Keir “Zionist without qualification” Starmer is on record as saying that for him Israel comes first. I don’t think he cares about anything else.
The Labour Party has suffered a coup by a Right Wing Zionist 5th column, turning it into a clone of the Likud Party – look at how much money has been given to the majority of the Cabinet by Israel (See https://www.declassifieduk.org/israel-lobby-funded-half-of-keir-starmers-cabinet – RIchard has already commented on the need to regulate such donations)
I want Faux-Labour to shrivel into irrelevance via Pasokification, so the REAL Labour Party can revive.
Or better still, that new Left Vision that Richard has asked the Left to work towards, so as to prevent the UK slipping into Fascist Right Wing populism when Starmer’s hodge-podge dog’s dinner fails – as we know it will.
We live in an era of ‘outsourcing’ government functions- E. G. private prisons, parts of the NHS , asylum seeker housing.
We now have: An independent Bank of England. An OBR censor of govt spending.
We seem to be outsourcing government itself.
Fascists love outsourcing it’s really good for watering down democratic accountability! Take a look at the Bank of England – exhibit No. 1 !!!
As you say, it is cheap politics, promising not to do something they were never going to do anyway, and will have to weasel out of if they need to in the event of an unexpected demand (such as pestilence, famine, war, or other disaster).
Rather than just giving a commitment and sticking to it, they are going to “enshrine” that commitment in law to send a political message to the markets.
It can only apply to them! So it is clearly designed to bind their own hands, nothing else. So it must be aimed at progressive thinkers like you Richard. Reeves is establishing Treasury orthodoxy and power over all other departments!
The next goverycan simply repeal the act in a one line bill in less than 24 hours, as the previous government did with the fixed term parliament act. Which this one doesn’t intend to resurrect….
So more of the same, with falling voter share, hardly a long term strategy.
Agreed
Just this morning I was thinking that it is the provision of furlough for Covid which is the most obvious and readily understood example of how government creates money; an argument which can be used to discredit Labour’s “fiscal rules.”
This bill is merely a quick way to squash the discussion altogether by foregrounding the Truss / Kwarteng budget fiasco rather than using furlough as an example to illustrate how government created money can work. Instantly, money creation to address inequality is off the agenda.
In short, without saying it explicitly, by default Labour adopts the mantra “MMT is irresponsible.”
Agreed
This bill sounds so ‘computer says no’. Apparently, we will not even be able to respond to a military invasion without calculating the cost. On the other hand, it would also have ensured that Brexit would not have happened without an Economic Impact Assessment, so not all bad. As usual, the devil will be in the detail.
…”reinforce market credibility” (in bold type). What does that really mean? NOTHING.
Credibility is a by-product of good government… never the aim itself
In my 40 years experience trading government bonds (only as a “hobby”, now)… “credibility” is not gained by meaningless Acts of Parliament. Government bond traders are not blind, we are citizens, too – we use the NHS, we catch buses and trains, we send kids to school etc. A “credible” government is one that can deliver these services properly…. there was even an article in the FT from Fund Managers saying that the market could take more gilt issuance (borrowing) if it was used sensibly. Forget the gestures – just do your job.
Spot on
These people actually believe their own marketing. No one else does.
You are wrong, the speech refers to PERMANENT changes.
QE was a temporary policy which was unwound via QT (which you said would never happen).
These details are important.
QE has lasted 15 years, so far
QT has unwound a small part of it
How wrong can you be, troll?
Do you not understand the difference between QE was expected to be temporary and the practice that QE has lasted somewhat longer than originally intended (although is still not intended to be permanent)?
Calling people trolls purely for pointing out your errors is indicative of your arrogance and inability to admit where you are wrong.
No wonder you are so unpopular!
QE cannot be reversed: the BoE admits that will never happen now
So I was right
And I think 2 million social media views this month pour doubt on your claim on popularity. If with no one else, I am very popular with you trolls, and maybe there is good reason for that.
Mr Davies,
£895Bn of QE was issued.
1) Over what timetable do you expect £895Bn of QT to be undertaken, and in what time period will it be fully completed?
2) “Permanent” is a pliant word. It is not clear what precisely you mean by “permanent” when we are talking about money issue; which is subject to constant taxation and redemption. Please provide a clear explanation.
“no one seriously doubts that their mistake will be made again”
I have a feeling this should have read …
“no one seriously BELIEVES that their mistake will be made again”
Or have I misunderstood?
Corrected.
The prospect of having to rely on the state pension, which is unfunded, is – as you imply – truely terrifying.
Millions are
“Economic stability is the foundation..blah blah” – events dear boy, events. As pointed out, Brexit, Covid, Ukraine… events keep jumping out like jack-rabbits and LINO think a bit of managerialism & “teacher gave me a gold star for my economics proposals” will cut it in the real world – really?
Or is this performative?
Starmer on the cat-walk struting his stuff in the latest fashion………. “fiscal responsibility” –
“darhlink its this seasons new black – look at him as he wiggles along dragging his fiscal responsibility – I hate him”
(Rowson – in the unlikely event you read this – feel free to use).
Richard wrote: “…this proposed Bill looks to be totally irresponsible because it constrains what the government can do in an emergency.”
What indeed? The UK Labour Gov (by knowingly or otherwise imposing delays on an emergency process) seems to have forgotten 2008. Famously Britain’s largest bank, RBS-Natwest, was within 45 minutes of going bust, which could have initiated a huge collapse of commercial banks in the UK and the impoverishment of tens of millions of citizens, but swift action by the then Labour PM and Chancellor ensured, using QE, that such a disaster was averted. Are they serious that the entire UK economy might have to wait for days/weeks while the OBR vets whether Labour’s “Fiscal Rules” (a matter of choice not an economic requirement) have been met? Madness prevails.
There is a cop out clause in the Bill, which has now been published. It says it does not apply in an emergency. They define an emergency, at will. It makes the whole thing utterly meaningless.
You can bet your last pound if Scammer & Co were in office pre-Covid they too would have ignored the pre-pandemic advice like the Tories because it would have meant government spending! Similar health implications as child poverty! It’s back to the 19th century with Scammer & Co!
https://www.theguardian.com/uk-news/article/2024/jul/18/hancock-and-hunt-failed-to-prepare-uk-for-pandemic-covid-inquiry-finds
The bill is now available
https://publications.parliament.uk/pa/bills/cbill/59-01/0001/240001.pdf
It states that:
(4) Subsections (1) and (2) do not apply in respect of a measure which—
(a) is intended to have effect for a temporary period only, and
(b) is in response to an emergency.
This is explained in the Charter, which is also available
https://www.gov.uk/government/publications/draft-charter-for-budget-responsibility-text-on-the-fiscal-lock/draft-charter-for-budget-responsibility-text-on-the-fiscal-lock
It states that the OBR can “produce a forecast without being commissioned by the Chancellor unless measures are temporary and in response to an emergency.” It explains this as follows:
“A measure or combination of measures is excluded from the costing if it is both temporary and in response to an emergency. A temporary measure is a measure intended to end within two years. Alongside any such an announcement, the Treasury will make clear why it considers the situation to be an emergency and the OBR will have the discretion to trigger the fiscal lock and prepare a report if it reasonably disagrees.
Following a temporary response to an emergency, the OBR may continue to produce ongoing analysis in line with the BRNAA, but the policies would only be captured in the next forecast once commissioned by the Chancellor in the usual way. In an emergency it may be appropriate for the Chancellor to commission a forecast, or request analysis, from the OBR to follow the measures that need to be announced or implemented more quickly than such analysis can be produced.”
So, in other words, it’s utterly meaningless, not least because they will define if there is a crisis
Can an OBR forecast be called out as accurate for relying on bs data and methodology? I think IFS pronounces are also similarly deficient.