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20 Jan 2010 : Column 332

It is nonsensical to introduce a Bill on fiscal responsibility without defining net borrowing. It is rubbish. The explanatory notes refer to the golden rule, the second fiscal rule-the sustainable investment rule-and I ask the Economic Secretary to acknowledge the nonsense that all that represented in the first place, and the complete failure even to fulfil the criteria that the Government set for themselves. It is a dreadful indictment of the Government-and, indeed, their epitaph-that they have buried our finances under a mountain of debt. They have totally failed to manage the British economy in anything like a responsible manner. The very notion of a Bill on fiscal responsibility flies in the face of everything that they have done.

Mr. Tyrie: When trying to assess the credibility of this measure, is it not worth bearing in mind what happened to those fiscal rules? The first time they were tested, the goalposts were moved and their credibility was undermined, and they were withdrawn altogether at the first sound of serious gunfire.

Mr. Cash: Absolutely. I would simply add that the House is sometimes accused, by the public, on the "Today" programme and by Jeremy Paxman or whoever it may be-I saw my right hon. Friend the Member for Wokingham on his programme only yesterday-of Punch and Judy politics, of engaging in an absurd charade or piece of theatre in the Chamber, and of simply trying to knock the other chap off the perch. However, the Bill demonstrates that the public most urgently need this House to examine legislation. The complete failure of the Government to meet their responsibilities is demonstrated by the production of a Bill of this kind.

We must look at what the Prime Minister did from 1997 onwards, when he was Chancellor of the Exchequer.

Kelvin Hopkins (Luton, North) (Lab): Will the hon. Gentleman give way?

Mr. Cash: I will in a moment.

Every single thing the Government have done by way of fiscal activity is down to the Prime Minister, whether as Chancellor of the Exchequer or Prime Minister. The failures of the British economy and the failure to be fiscally responsible lie very largely at his door.

Mr. Redwood: My hon. Friend makes a very powerful case. Does he agree that one problem with the Government is that they quote only one fifth of the state's debt and obligations that they have built up, ignoring the other four fifths, which includes the banks, private finance initiatives, nationalisations and pension liabilities, which they seem to think will vanish?

Mr. Cash: I was waiting for that. My right hon. Friend and I, and my hon. Friend the Member for Braintree-I wish more people would join our chorus-have demonstrated over and over again that the figures the Government produce are simply not true, basing what we say on Office for National Statistics figures, evidence and material from House of Commons researchers, who are quite brilliant and who understand such things perfectly, and our own researches. That is the problem.

It is essential for the British public to know the truth when they cast their votes in individual constituencies at the next general election. That is why my right hon.
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Friend the Member for Wokingham, my hon. Friend the Member for Braintree and I-doubtless my hon. Friends the Members for South-West Hertfordshire (Mr. Gauke) and for Runnymede and Weybridge (Mr. Hammond) will be doing this as well as we get nearer the general election-will be telling them the truth. In that way, when they cast their votes and exercise that freedom of choice, they will know they are making a decision about the Government's past record and what will be required to put things right after the general election. Putting things right is a question not merely of fiscal responsibility as set out in the Bill, but of the bottom line regarding the country's finances, which Standard & Poor's and Moody's will be looking at in order to make a judgment about the Government's credit rating.

Kelvin Hopkins rose-

Mr. Cash: I will certainly give way to the very honourable Gentleman.

Kelvin Hopkins: I thank the hon. Gentleman for his comment but he may not think I am so honourable when I have made mine.

Conservative after Conservative seems to be trying to drive the Government to cut public spending and drive us further into recession, simply to help them at the election. When people go into the ballot booth at the coming general election, they will want to know which party will cut spending and cut their jobs. Could the hon. Gentleman not suggest that fiscal responsibility may mean ensuring that public expenditure is not cut, so that jobs are not lost?

Mr. Cash: I am extremely grateful to the hon. Gentleman for that. He is a good friend and we have a lot in common, despite what he just said. The differences between us can be encapsulated quite simply. The words "cuts in public expenditure" give him a nervous twitch. He does not like them under any circumstances-that is an understatement.

Mr. Pelling: Will the hon. Gentleman give way?

Mr. Cash: Let me finish my reply to the hon. Member for Luton, North (Kelvin Hopkins).

It is not that we Conservatives do not think that cuts are necessary, because we know they are. However, we emphasise that the fiscally and economically literate and responsible course to adopt is to engage in policies that will generate growth. It is only through the growth of small, medium-sized and bigger business that we will be able to find the money to pay for the public expenditure and resources-health, education and other things-that the British people will, quite rightly, be voting on. Without that growth, it will not be possible to have those things.

If the Government try to rig and distort the economic data on which economic judgments are made, for the reasons my right hon. and hon. Friends and I have given, we will not get the true picture. Therefore, we will end up with greater public expenditure problems, because we will not be facing the truth. It is essential that we do not put all our emphasis on theoretical rubbish such as stability and growth pacts, which have been broken in every country in Europe, subject to sanctions that nobody has ever applied-that is all Euro junk. Rather, we must have an absolutely crystal clear assessment, on proper accounting principles, of what will enable our economy
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to function efficiently, with real fiscal responsibility, and not a piece of paper and the vague rubbish with which we are dealing. We must have real bottom lines, accounting principles and responsibility.

Mr. Pelling: Just before the hon. Gentleman responded to the hon. Member for Luton, North (Kelvin Hopkins), he was referring to rating agencies. Is the artificial construct of the Bill more likely to create a crisis if the targets within it are not met? Would that further undermine the prospect of retaining the triple A rating?

Mr. Cash: The hon. Gentleman is absolutely right. I could not emphasise that more strongly. What my right hon. Friend and I have been saying about debt is directly related to our credit ratings. If we lose that status in the international bond market, we are in very dangerous waters. That is why it is so essential that the underlying truth of the overall debt-net debt-is explicit, that we concentrate on it, that we get the figures right, and that we tell the British people the truth.

The 2009 pre-Budget report, which sets out the Treasury's forecasts, is the basis on which our economy is being run, but it is like 'Alice in Wonderland', as my hon. Friend the Member for Chichester said. The crucial point is that public sector net borrowing is forecast to peak at 12.6 per cent. of GDP in 2009-10 before falling in every subsequent year, reaching 4.4 per cent. in 2014-15. The crucial point is that public sector net borrowing is forecast to peak at 12.6 per cent. of GDP in 2009-10 before falling in every subsequent year, reaching 4.4 per cent. in 2014-15. Of course, Labour will not be in government then-at least, I sincerely trust that it will not. The public sector net borrowing-based on those invented figures, which bear no relationship to the truth of the economy and are certainly not fiscally responsible-for 2008-09 is shown as 6.6 per cent of GDP or £95 billion, which jumps to £177.5 billion or 12.6 per cent. of GDP in 2009-10, which is the general election year. For 2010-11, the figures are almost the same and then-dramatically, as if to try to convince the British people, although they are unlikely ever to read this garbage-they fall suddenly to 9 per cent., then to 7 per cent., then to 5 per cent. and finally to 4 per cent. by 2014. That is a Houdini-style attempt to try to prove something that simply cannot be proved.

2.30 pm

According to the Government's figures, they will pledge to halve public sector net borrowing from £177 billion in 2009-10, without any reference to the actual performance of the economy, the facts or the figures, to £82 billion. However, the Government's difficulty, as my right hon. Friend said, is that the actual figures are dramatically more. He rightly mentioned Network Rail, the public sector pensions, which will cost £1 trillion, and nuclear decommissioning. The latter figure has not yet been identified, but we know that it will be substantial, especially if we go down the nuclear route, as we will have to do for the sake of our energy supply. Then there is the whole question of the bank borrowing.

So for 2008-09, net borrowing as a percentage of GDP is shown as 6.6 per cent. or £95.1 billion, but the actual amounts of net debt are £617 billion or 43.9 per cent. of GDP. We are told that the source of the Government's figures is the ONS, but a note is added that says that the figures exclude

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Imagine if company accounts were written up in the same way, for example, by Cadbury, which is owned by sort of cousins of mine. It was a fantastic company for many years. Indeed, it has been a bad week, because the Abbey National, which was founded by my great-grandfather, has now had its name excised and is called Santander. Now Cadbury is disappearing. I do not know what is happening to this country, but many sound businesses, through which we have prospered for generations, seem to be in trouble. But that is nothing compared to the trouble of this Government.

By excluding these so-called financial interventions, the Government are presenting a completely distorted picture. I challenge the Minister to deny that. I have asked other Treasury Ministers, including the Chancellor of the Exchequer, and the Prime Minister, if they can give us a definition of net debt and come clean on the total borrowing by this country. Financial interventions seem to mean lying to the British people about the real level of debt, so we cannot possibly endorse this Bill. It is not fiscally responsible: it is fiscally irresponsible.

Mr. Todd: I had not expected to catch the Chair's eye this afternoon, but someone suggested that I might have something to say- [ Laughter. ] I do not have huge sympathy with legislation based on rhetoric, but as the hon. Member for Chichester (Mr. Tyrie) drew attention to the precedent of the Climate Change Bill, it is worth reflecting that that was passed virtually unanimously by this House. He may have been one of the honourable exceptions who did not stride through the Lobby to endorse it. I was not, as I felt that my constituents had made their feelings clear. I expressed my doubts about legislation using targets for which a Government could not possibly be accountable and for which no obvious answerability could be provided. I sometimes bow to the views that are expressed to me by constituents and I did so on that occasion. The hon. Gentleman may have done that, or he may have held his nose-

Mr. Tyrie: I voted against the Bill.

Mr. Todd: In that case, I congratulate the hon. Gentleman on his consistency. However I would be surprised if other Conservative Members did not vote for it.

I am puzzled by the reasons for using legislation in this way, so I have considered what value it might have. I can see some value in at least facilitating an orderly debate on a subject, which is something that a Bill will achieve. We are at least discussing the goal of reducing our debts, the possible targets that might be set and the time frame in which that goal might be achieved. That is the substance of clause 1, which we are now discussing. That is worth while, and whatever emerges from this process-although I would be surprised if the Bill were to make it to the statute book before the election-might have garnered some value from the process itself, as opposed to the eventual outcome.

The second element is the discussion of the framework for reporting on this important subject to Parliament and thus to the public at large; that comes up in a later clause. Discussion of how best that might be done has some value too, because I suspect that there is a degree of consensus that how we do it now is not perfect.

I shall not dwell on some of the flaws in the Bill, one or two of which have been touched on already. There is no common view of the data set on which we base our
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understanding, and it is useful to have the debate on that issue, although I do not agree with some of the views that have been expressed, most notably by the hon. Member for Braintree (Mr. Newmark), who is not in his place today. His sweeping view of the public sector borrowing figures is not one that I share.

Mr. Redwood: It is wonderful that one Labour Back Bencher does have the time to talk about the odd £100 billion in cuts that are the subject of this Bill. As one who has done some work on this issue, I can tell the House that I simply applied company accounting principles, laid down by the Government, to the state's accounts. Why should they not apply to the country's accounts as much as to the companies that are made to follow them?

Mr. Todd: The most obvious answer is that a country is not a company. One of the difficulties in company accounting is the assumption that the company might not exist in perpetuity- [Interruption.] Well, this particular Government might not, but who knows? It is for the electorate to judge. However, this country, and its governing system, will continue to exist. Some assumptions have to be made in company accounting-for instance, when valuing pension liabilities-and one of those assumptions is that the company might cease to exist. That is perfectly reasonable. However, to apply that to public sector pensions is unrealistic and assumes somehow that this country might cease to exist at some point in the future and that all the liabilities would be paid up. If this country ceased to exist, that might be the least of our problems.

Mr. Redwood: If that is the case, why does the public sector decide to fund some of those liabilities inadequately? On the hon. Gentleman's argument, it should not be funding any of them.

Mr. Todd: That is a fair point, but it is not quite the methodology that is to be used, although I do not want to be drawn into a lengthy discussion about something that I am not sure is directly germane to the clause.

Mr. Cash: Will the hon. Gentleman give way?

Mr. Todd: I have not answered the previous question yet.

The principles of how we fund public sector pensions were established many years ago. Many have pondered on how to change the system, because many of us recognise-I think-that many of the pensions are paid on the basis of those who are retired now, so there is a major generational problem within the current methodology, which it would be good to confront. I do not think, however, that the Bill is intended to confront that problem, so I shall not discuss the matter further. However, perhaps the hon. Member for Stone (Mr. Cash) will tell us more.

Mr. Cash: I am extremely grateful to the lone white knight who has come forward from the Labour Benches-as was the case on Second Reading as well. Clearly the Government and their Back Benchers are deeply embarrassed by the Bill, but I will not belabour that point. I admire the hon. Gentleman for coming forward so late on to try to defend the situation. However, on
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the point made by my right hon. Friend the Member for Wokingham (Mr. Redwood), we come back to the problem of applying proper accounting principles, to which I referred. I am also glad that my hon. Friend the Member for Braintree (Mr. Newmark) has come in at this crucial moment, because his figures have just been questioned by the hon. Member for South Derbyshire (Mr. Todd). However, we have touched on an important question. I know that the hon. Gentleman understands that-

The First Deputy Chairman of Ways and Means (Sylvia Heal): Order. I wonder whether the hon. Gentleman could get to the point of the intervention, which, as he knows, is meant to be brief. May we have the intervention?

Mr. Cash: I accept your strictures, Mrs. Heal.

Proper accounting principles are based on the truth-that is what accountancy is about. The question is whether that is being done in the Bill under the definitions given.

Mr. Todd: I am not an accountant, but I have never considered accountancy to be purely about the truth or facts. In the companies that I have served, and at times helped to run, I never regarded accountancy as an art form. I certainly felt that a significant amount of interpretation and working out of reasonable assumptions are built into the process of accountancy-it is not based purely on hard data.

Having pointed out that difference, however, perhaps I can return to the core of my remarks. I did not want to dwell on some of the flaws that might be in the Bill, but I shall touch briefly on one final one, although it will probably set off some further interventions. I have been a bit puzzled about how the Bill relates directly to the economy at large. The targets and time frames are set without a direct relationship to economic cycles or events-the classic example of the latter being 9/11. Such events can have a major effect on our economy, and have to be taken into account when using economic instruments to achieve appropriate outcomes. Public sector debt is an important part of our economy, as is public spending on an ongoing basis, but I am puzzled about the methodology of fitting the Bill into the management of the economy on an ongoing basis. However, wiser minds than mine have decided that that is the right way to proceed.

As I said, the Bill provides a reasonable basis on which to hold reasonably intelligent debates on some of these matters.

2.45 pm

Mr. Redwood: I would like to assure the hon. Gentleman that the minds to which he refers might be more powerful, but they are clearly not wiser.

Mr. Todd: How kind of the right hon. Gentleman to say so. Others have judged otherwise, though.

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