MPs say chancellor has continued to use statement like a second budget, an approach favoured by Labour
George Osborne should make good on his pledge to make the spring budget the date when tax decisions are made and stop using the autumn statement as a vehicle as a second fiscal package, a committee of MPs said today.
In their report on the 2012 autumn statement, the backbench Treasury committee criticised the chancellor for going back on his commitment to restore the budget to its central role in economic and financial policy making. The statement Osborne delivered last month contained an array of measures, including the scrapping of an increase in fuel duty, designed to boost the economy.
Andrew Tyrie, chairman of the Treasury select committee (TSC), said: “The autumn statement is not, nor should it be, a second budget. In recent years it has come to read like one.
“The case for two budgets is weak. An additional one can create uncertainty and carries an economic cost. Only in an emergency would it be likely to carry long-term benefit. The primacy of the budget as the main focus of fiscal and economic policy making should be re-established.”
In the report Tyrie also said he would be asking Mark Carney, the incoming governor of the Bank of England, about whether there was a better alternative to the current monetary policy when Carney appears before the TSC next week. It also questions whether certain areas of public spending, such as the NHS, should be protected from cuts.
Osborne said on arriving at the Treasury that he would abandon the “twin budget” approach favoured by Labour in which the chancellor had two set-piece occasions each year to announce tax and spending decisions.
But the poor performance of the economy in the past two years – a period that has seen the economy flatline rather than grow by the 6% expected in the coalition’s emergency budget in June 2010 – has led to a re-think.
Osborne’s fourth budget will be delivered on 20 March and yesterday the chancellor hinted that he would announce further steps to boost growth while sticking to the government’s austerity plan.
“Britain faces a difficult economic situation,” he said on BBC Breakfast. “We have got problems at home, built up by this unbalanced economy, problems in our financial sector and the debts we have built up. And, frankly, we have got problems abroad with many of our export markets deep in recession in Europe.
“We have got to do the things in the short term that will help – and we are investing in apprenticeships, unemployment is falling at the moment.
“But we have also got to do the things that will help tomorrow and in the future, and… [Monday’s] high-speed rail announcement is part of an economic regeneration package.”
The chancellor believes that the Treasury’s tough approach to tax and spending provides the scope for the Bank of England to boost growth through low interest rates and quantitative easing. Carney, the Canadian central bank governor who will succeed Sir Mervyn King at Threadneedle Street in July, hinted in Davos at the weekend that he was prepared to use other “unconventional” methods of ensuring that the economy emerged from its slowest recovery from recession on record.
Tyrie made it clear that the Treasury committee would be quizzing Carney closely on monetary policy options when he appears before MPs for the first time next week. “The Treasury committee will question Dr Carney on whether he thinks that there may be a better monetary policy for the UK than the current one.”
The Bank of England is confident the funding for lending schemes – which provides cheaper funding for banks provided they pass the benefits on to their customers – is leading to more plentiful credit at lower interest rates. But the Treasury committee said it was concerned that the money was leading to higher mortgage lending rather than helping cash-starved small and medium sized companies.
MPs were also worried by the government’s policy of ring-fencing important areas of public spending – the NHS, schools and overseas aid – from cuts, because of the impact it has on other departments, which face bigger reductions as a result.