|Previous Section||Index||Home Page|
"Fiscal responsibility acts are instruments of the fiscally irresponsible to con the public."
"the government's plans for legislation to cut the deficit are not convincing and are probably just camouflage-a sort of 'fiscal figleaf'-for the lack of genuine action".
"it's...like...saying I'm going to join the gym and that means I'm fit already."
Ms Clark: The hon. Gentleman has quoted a number of people who have no doubt made statements for their own reasons, but does he accept that many other economists and financial institutions do not take the same view? For example, HSBC's global head of fixed income strategy has said that the chance of the UK's defaulting on its debt is zero. Does the hon. Gentleman not accept that the repeated accusation from the Opposition Benches is ill founded, that we are at no risk of losing our triple A status, and that Britain is still very stable? Does he not accept that by continually trying to run Britain down and suggest that our economic position is worse than it is, Opposition Members are doing no service to anyone?
"The greater the uncertainty over fiscal consolidation, the greater the danger that businesses and households will become risk averse...leading to atrophying economic activity".
"The empirical evidence from the UK and elsewhere suggests that successful fiscal consolidations share two features: i) decisive action and ii) a focus on cutting public expenditure rather than tax increases...The plans laid out by the UK Government in the PBR have neither feature and, as such, do not represent a credible fiscal consolidation".
"The PBR fails to establish a credible and detailed route back to fiscal sustainability for the UK in coming years".
Mr. Jeremy Browne: Was not the hon. Member for North Ayrshire and Arran (Ms Clark) talking about two separate issues? There is a discussion to be had about Britain's creditworthiness and about whether the Conservative party is talking down our economic recovery prospects, but that bundle of issues is completely separate from the issue of whether a Fiscal Responsibility Bill is desirable.
It is possible to decide to be fiscally responsible without the need for a Fiscal Responsibility Bill, and it seems to me that it is desirable to be fiscally responsible, although not in the way that the Conservatives suggest. I believe that we, as a country, need to demonstrate a desire and an ability to get to grips with the deficit. However, the question of why on earth the Treasury needs to establish a legal framework rather than just getting on with doing the job that it is paid to do is completely separate from that.
Mr. Gauke: The hon. Gentleman makes a helpful intervention; there are two separate points there. If the Bill is intended to provide reassurance to those institutions that lend to us, or to the advisers to whom they listen, the evidence so far is pretty clear: it will not work. Have the Government set out a credible fiscal policy? Again, I think the evidence is pretty clear that they have not provided anything credible.
I return to the remarks of the Governor of the Bank of England last night, particularly his quoting of Ben Bernanke stating the need to set out a strong commitment to fiscal sustainability in the long term. The Governor went on to say that the Chancellor had made it clear that the spring Budget provides the opportunity to do precisely that. Implicit within that is the fact that the Government have not so far set out a strong commitment to fiscal sustainability. The whole point of the Bill is, supposedly, for the Government to demonstrate such a strong commitment, but nobody is convinced.
Ms Katy Clark: The hon. Gentleman has provided a range of quotations from different individuals and organisations, many of which were directly responsible for getting us into this mess in the first place. There is an irony in the fact that what is being said here today, and what was said on Second Reading, revolves around what the market demands, but as a result of that, ordinary people in this country will have their services slashed.
Mr. Gauke: I am grateful for that intervention, which repeated a point made on Second Reading by the right hon. Member for Holborn and St. Pancras (Frank Dobson). Let me go through this carefully in a way that the Government may find helpful.
At the moment, we are spending a lot more than we are receiving in tax receipts. I assume that the hon. Lady does not believe that we should stop the borrowing, but we cannot simply confiscate people's assets; we have to persuade them that if they are going to lend to us, they will get their money back. If we do not have credible fiscal policies, the markets-I know that the hon. Lady is not a fan of the markets-will either not be prepared to lend to us or will do so only at a higher rate because of the perceived risk. It is one of the great ironies of those on the left that they are so dismissive of international finance yet pursue policies that make this country so dependent on such finance to fund their very high levels of public spending. So there is an issue about fiscal responsibility. My point is that the Bill does not persuade the markets; if it does not do so, what is the point of it?
Perhaps I am wrong. Perhaps if we had a consultation, as new clause 1 suggests, some people might come along and say, "This is a jolly good idea; we are much happier to lend to the British Government because they have a Fiscal Responsibility Bill." I am somewhat sceptical about that happening, but perhaps it would.
Mr. Love: An important point has to be made here. I think that the public will agree with the view of Government Members and some Opposition Members that if we were to cut off the fiscal stimulus, the best that could be expected is that it would undermine future growth prospects, increasing our deficit. The worst-case scenario, however, is that it would throw us into a double-dip recession. Either way, we will increase the amount of debt that we have to fund into the future.
Mr. Gauke: The hon. Gentleman makes an interesting point. It is not particularly relevant to the argument that I am trying to make, but I shall respond by making two comments. He presumably supported the withdrawal of the VAT cut at the beginning of the year. That cut was the big part of the Government's discretionary fiscal stimulus and they consider that withdrawing it was the right thing to do. We did not support the cut in the first place, as he knows. I simply make that point to him before he expresses too much certainty on the issue of the withdrawal of fiscal stimulus measures.
My second point relates to where the real risk lies. The Conservatives' view is in line with what a number of commentators have said and what the spokesman for one of the credit rating agencies, Fitch, said this morning. We think the real risk is that if this country does not have credible fiscal policies, it runs the risk of its credit rating being downgraded-that is clearly being looked at-and of paying more for its debt. If we pay more for our debt, we will end up with interest rates rising, and that will choke off the economy. So, there is a relationship between fiscal policy and monetary policy-this is exactly the point that the Governor of the Bank of England was making last night-and a judgment has to be made as to when one withdraws the fiscal stimulus and when one tightens these things. Our view is that we need to get on with it.
Stewart Hosie: There is indeed a question as to when one withdraws the fiscal stimulus, but this debate is taking place within a vacuum. The International Monetary Fund is clear about this matter: the UK is the only G7 country to be fully withdrawing its fiscal stimulus package in 2010. Irrespective of the view taken by the Conservatives or the Labour Front-Bench team, the idea that the stimulus package is still in place is completely false.
Mr. Gauke: The hon. Gentleman is right to caution against a simplistic understanding of the fiscal stimulus, but I should point out that the UK is borrowing more than any other G7 country and is in a worse position than any other G7 economy. We need to do more to rectify that.
Ms Clark: The hon. Gentleman referred to the Fitch report that has just been published. Does he accept that it also acknowledged that the UK has exceptional access to long-term financing and that the UK started from a lower debt base than most triple A-rated countries?
Let us consider the reasons why we need consultation on this matter. Normally, we begin our scrutiny of a Bill with evidence sessions; if proceedings were not being taken on the Floor of the House, we would be able to invite along representatives of the credit rating agencies, City economists and other economists to find out what they thought about the Bill. Given that this Bill is so much about trying to move the perception of Britain's public finances in a more positive direction, hearing what those witnesses had to say would be hugely valuable and extremely helpful. We opposed the programme motion because of that, and I suspect that the hon. Member for North Ayrshire and Arran (Ms Clark) might have done so, too. I think that a great opportunity has been missed.
The fact that we have tried to rush through this Bill in the course of one day-we have only an hour and a quarter left of the Committee and we are still dealing with the second group of amendments on clause 1, notwithstanding the limited number of contributions from Government Members-demonstrates that we are not able fully to do it justice. Is the Minister able to tell the Committee whether the Government consider this to be a money Bill? If that is the case, the House of Lords will not have the opportunity to give it the full level of scrutiny that it requires.
This Bill has not had sufficient parliamentary scrutiny. It is important to know what the wider world thinks about it. All the evidence so far suggests that it is a waste of time. New clause 1, which would give an opportunity for full consultation on the Bill, for a report summarising those consultation responses to be put before the House, and for Members to be given the opportunity to debate in Committee of the whole House whether to bring in the Bill, would be a valuable addition. It would ensure that we do not implement legislation that serves no purpose, that persuades nobody and that undermines the credibility of this place and the Government's policy on addressing our deficits. I hope that we will get the chance to vote on new clause 1.
Stewart Hosie: It is instructive that 18 new clauses and 21 amendments have been tabled to this six-clause Bill. That speaks volumes for the attempts made by all parties to make this hopeless Bill into something that is useable and desirable and that might deliver some end result from whatever perspective people look at it. Many more of my amendments and new clauses are in the next group, so I shall be brief on new clause 16. I shall also keep any general remarks for the debate on Third Reading, if we have time for one, as I hope then to catch Mr. Speaker's eye.
New clause 16 is specifically concerned with commencement. It is extraordinarily important that, before any duties imposed by order by the Treasury on the Treasury are carried out, there is absolute clarity about their impact, particularly on GDP growth and, frankly, public services and jobs. It is important that that should be in the Bill, because the Government, in the shape of the Chief Secretary to the Treasury, have failed to give us the information that we have asked for in previous debates, not least in the debate on the pre-Budget report on 7 January. He was asked questions that were directly related to the impact of the measures in this Bill and the duties that will be imposed to achieve the swingeing cut of £40 billion in 2013-14. The hon. Member for Croydon, Central (Mr. Pelling) asked,
"what is the estimate of the reduction in economic growth that will result from the proposed reductions in spend in the pre-Budget report?"
"The growth forecasts that we have set out are the basic answer to that question."
"a degree of uncertainty about the future path of growth for our economy",
and so on, and so forth. Of course, the basic answer to the question asked by the hon. Member for Croydon, Central was not the growth forecasts that had been set out-they are, if they are to be believed at all, the result of the combination of all the measures announced over a number of Budgets and pre-Budget reports that will impact on the total public finances in the next few years.
"tell the House what the suppression of gross domestic product growth will be as a result of £57 billion being taken out of the economy-£20 billion as a result of tax rises and £40 billion as a result of spending cuts."
"I am trying to avoid taking the House through what would be a quite complicated economic equation, which no one will be surprised to hear I have not brought with me this afternoon. The hon. Gentleman is looking at only one side of the argument."-[ Official Report, 7 January 2010; Vol. 503, c. 303-4.]
I have no doubt that it would have been a complicated formula, but I suspect the answer would have been very straightforward. The Chief Secretary ought to have been-and I hope that tonight the Minister will be-in a position to say that removing £40 billion from the economy by 2013-14 will result in suppression of GDP growth of 0.25 per cent. or 0.5 per cent., or perhaps that the formula reveals that that is the right thing to do and that that action alone will have a positive impact on GDP growth and jobs and services, although frankly, I doubt that.
Mr. Cash: I have enormous sympathy with the hon. Gentleman's objectives in this regard. The Chancellor has previously suggested-such as in the pre-Budget statement-that he thinks that if this Bill were enacted, it would require some adjustment in the light of future circumstances, which makes even greater nonsense of it. In light of the Chancellor's comments, does the hon. Gentleman agree that a report such as he is suggesting should be debated and voted on so that we are able to make a judgment about whether the Treasury should make an order in this regard?
Stewart Hosie: Yes, on balance I suspect that it would be right for such a report to be placed before the House, or both Houses, to be considered and voted on, but let us first take one step and secure the information before we get to the difficult bit of forcing the Government to debate and justify the information that as yet they are not even prepared to provide.
Mr. Pelling: As the Government are asking us to support the Bill, is it not important that they provide information on the expected impact on economic growth? If the argument were that the impact would be minimal, we might be more inclined to support them, but we need information that will enable us to make a sound judgment on how to vote.
Stewart Hosie: That is absolutely right, and it is the fundamental case that I am trying to make. Nobody believes this Bill will deliver anything. It will not deliver the degree of fiscal consolidation that the Conservatives want, and in my view it goes far too fast and far too deep and risks economic recovery-and in so doing risks making the task of tackling the deficit and then the debt more difficult. The Bill therefore satisfies nobody. We should at least have information in advance that enables us to determine whether the duties that the Treasury wishes to impose on itself are even sensible.
The big picture is that the 2 per cent. increase in Government consumption last year provided the stimulus to the economy, while household consumption was down 3.5 per cent., business investment was down 22 per cent. and gross fixed capital formation was down 17 per cent. We may reach the technical end of a recession, but growth will be slow, faltering and fragile, and there will be huge risks, particularly from unforeseen shocks, which could occur at any time. I am certain that, before the Government take any action that could weaken the economy or its ability to recover, they must provide a proper assessment of the impact on GDP growth of the actions that they intend to take.
Stewart Hosie: I am about to finish. I am conscious that it is almost 5 pm and we are only on the second group of amendments relating to clause 1, and I have a great deal more to say on the next group.
Given that the Government have conceded that there would be a £57 billion reduction, two thirds of it in cuts to public expenditure-some £40 billion-we need to know precisely what impact the duties that the Treasury will impose upon itself when it makes those cuts will have on services, on jobs, and crucially in the context of the Bill, on economic growth.
|Next Section||Index||Home Page|