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Lord Tunnicliffe: My Lords, I agree entirely with the right reverend Prelate. We have looked at research to see whether any of the various voting systems have a significant impact on voter involvement and we do not believe that that feature is significant. However, we believe that it is important to restore confidence and that the alternative vote system will require candidates to reach out to the whole electorate in their campaigning.

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That will be an important step, but the relationship between the constituency and its Member is the way forward.

Lord Dubs: My Lords, of course the constituency link is absolutely crucial, but does my noble friend agree that there is a further big advantage to AV in that it prevents the need for tactical voting and therefore produces a better result, particularly in those constituencies where up to now tactical voting has sometimes determined the outcome and sometimes has not quite worked?

Lord Tunnicliffe: I agree entirely with my noble friend, but add a word of caution. We believe that AV has much to recommend it, which is why we should set it in front of the British people in a referendum. It will be for them to decide.

Earl Attlee: My Lords, if the referendum is such a good idea, why was it not provided for in the Bill as originally drafted in the House of Commons?

Lord Tunnicliffe: My Lords, I really do not know the answer to that question.

Haiti: Natal Care


11.28 am

Asked By Baroness Tonge

Lord Brett: The Department for International Development has contributed £300,000 to the World Health Organisation for early warning surveillance and £1 million to the organisation, Action Against Hunger, to include support for mothers and babies under one year old. We continue to monitor the overall health situation and remain ready to address gaps through existing partnerships with the United Nations and non-governmental actors.

Baroness Tonge: My Lords, the Minister must know that even before the earthquake, Haiti had the highest rates of maternal and child deaths in the western hemisphere. Reports from the UNFPA tell of women giving birth in the streets and, as a consequence, dying for lack of obstetric care. When the emergency period in Haiti is over, and following the initiative of the White Ribbon Alliance and the All-Party Group on Population, Development and Reproductive Health, would the Government consider taking the lead on maternal health in the health sector in Haiti, rather like they championed education in Rwanda after the genocide?

Lord Brett: My Lords, we are making substantial assistance available in response to the humanitarian crisis following the emergency and the reconstruction crisis. We are working through the United Nations co-ordinator in Haiti and with the United Nations organisation responsible for health. In that context, we see our role as examining and filling the gaps we find in areas of need that are not covered. In that regard I will take on board the noble Baroness's points.

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Baroness Rawlings: My Lords, we know that Her Majesty's Government do not invest in private charities, but are they aware of the highly successful tent programme of the Cornish charity ShelterBox? Each shelter box contains a 10-person tent, blankets, water purification and cooking equipment, tools and a stove. Have the Government any plans to emulate its very successful package to send to Haiti?

Lord Brett: My Lords, at the moment in Haiti we are moving out of the emergency and rescue phase into the emergency prior to reconstruction phase. There is a major problem just over the horizon called the rainy season, which will arrive in about five weeks' time, to be followed by the hurricane season. That is why we have a ship en route there, to provide not only the tents, which have been largely supplied by many international bodies, but much more substantial housing. Plastic tents will not survive the rainy season, and certainly will not be helpful in hurricanes, and the Government are addressing that area of concern, again, through their partnership with the United Nations. I will take on board the points the noble Baroness makes because there is certainly a continuing need for all forms of assistance. We can be proud of what we are doing so far but there is much more to be done.

Lord Judd: Does my noble friend agree that this tragic problem is one symptom of a terrible reality in Haiti as one of the poorest countries in the world? Is it not therefore essential that the British Government give a lead, not only on this but on the generation of social infrastructure in general within Haiti and the overcoming of poverty? Will not effective international co-operation be absolutely indispensible if this is to be achieved?

Lord Brett: I agree that we should be part of the team that gives the lead. However, on this issue, there are countries with a much closer affinity to Haiti-Canada, for example, which has a major aid programme for that country, and the United States. The United Nations is now there with a number of agencies and we should play our part. Our historical involvement in the Caribbean has been with the English-speaking countries and, prior to this disaster, we have not had an ongoing presence within Haiti. How long we will be there remains to be considered in conjunction with our international partners. We will be there as long as is necessary for the rebuilding of that country and for the stabilisation of the Government and their ability to govern.

Baroness Northover: My Lords, UNICEF has identified the situation in Haiti as the most severe child protection emergency. How can we make sure that there is assistance not only for vulnerable women and children in the current situation in Haiti but, as others have said, for ensuring their protection in the future? Is this not an argument for setting up a long-standing organisation such as UNRWA, which has a very good record in the Palestinian territories in this regard?

Lord Brett: The noble Baroness makes an important point. It is for the UN family to work to ensure that the right kind of agencies continue to have an ongoing process. As someone who has worked in the system, I

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have to confess that sometimes there is almost a competition to provide assistance and people fall over themselves. Alas, it is not the most efficient system. Having a single leadership, through a resident co-ordinator or a special envoy, which is what is happening in Haiti, is a much more useful approach. The point made by the noble Baroness will, I am sure, be taken on board when we decide internationally the best way of assisting Haiti in its reconstruction and beyond.

Baroness Knight of Collingtree: My Lords, when emergencies in which we have a moral responsibility to help are over, how, with the best will in the world, can we take on responsibility for difficulties of this kind in all countries which have them?

Lord Brett: The noble Baroness also makes a good point. The answer is that we cannot; we can do it only in concert with others, whether it is through the European Union, which will have a major part to play in assisting reconstruction within Haiti, or in the emergency tasks that we take on board. For example, we are looking at providing substantial support for the provision of durable shelters using locally salvaged materials and materials supplied by the Dominican Republic. Alas, road contact between Santo Domingo and Port-au-Prince may be a victim of the rainy season. We can be proud of what we are doing as a Government; we can be proud of the support that we have in both Houses; and, most of all, we can be proud of the British people, who have given more than £70 million for this task. Therefore, I think that we can respond.

Lord Roberts of Llandudno: My Lords, what is the Government's approach towards cancelling Haiti's debt and what action have we taken?

Lord Brett: I know that your Lordships implore Ministers to be brief in their answers. The answer is that we have already done it.

Fiscal Responsibility Bill

Main Bill Page
Fiscal Responsibility Bill
Explanatory Notes

Second Reading

11.36 am

Moved By Lord Myners

The Financial Services Secretary to the Treasury (Lord Myners): My Lords, I am pleased to open the debate on the Fiscal Responsibility Bill. I intend to provide a general overview of the key provisions of this important Bill and the background to it.

As my right honourable friend the Chancellor explained in the other place, the Government have set out consolidation plans to halve the deficit over a four-year period and put debt on a downward path. The Fiscal Responsibility Bill enshrines these targets in law, ensuring that the deficit is reduced at an appropriate and sensible pace that allows us to protect the economy and maintain key public services.

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Whatever the economic circumstances, Governments need rules and objectives for their fiscal policy. As part of the Government's reforms to macroeconomic and fiscal policy in 1997, we established a new fiscal framework with two clear fiscal objectives, which have been maintained since. The first is over the medium term to ensure that public finances are sound and that spending and taxation should impact fairly within and between generations. The second is over the short term to support monetary policy to help smooth the path of the economy. The objectives that we set out then remain today.

Between 1997 and 2007, the Government operated according to two fiscal rules, designed to deliver the following objectives: to balance the budget, excluding public investment, over the economic cycle; and to keep government debt at a prudent level. Those two rules were appropriate for the challenges that we faced at the time. Over the 10-year economic cycle, we balanced the budget and significantly increased investment in public services.

Those were sound rules for the time, but we are now operating in a completely different environment, and economic policy here and in other countries has adapted. Just about every country has been hit by a severe financial crisis, resulting in the worst global economic recession for decades. Borrowing and debt have risen in most countries, ours included. The recession has had a profound impact on the public finances, here and in most countries. This has resulted in a significant increase in government borrowing and public sector debt.

As my right honourable friend the Chancellor set out in the other place, we have had to be flexible in our response to these changing global circumstances. The Government had a duty to support the economy when the economy was weakened. The support provided has helped to limit the severity of the downturn and its impact on businesses and individuals.

There were costs to stepping in. However, not to allow borrowing and the deficit to rise to help people and businesses would have meant greater pain, more job losses and more damaged lives. As we look to the future and levels of uncertainty recede, the Government believe that it is appropriate to strengthen the fiscal framework. The UK is not alone in doing this. As Governments around the world work together in response to the downturn, many other countries are also looking at their respective fiscal frameworks. For example, Germany has introduced similar legislation, and the IMF has highlighted fiscal responsibility laws as a way to support fiscal adjustment by strengthening institutional arrangements.

The Fiscal Responsibility Bill should be viewed alongside other elements of the fiscal framework, in particular Section 155 of the Finance Act 1998 and the Code for Fiscal Stability, a revised draft of which was published on 19 January. The Finance Act 1998 sets out five key principles-transparency, stability, responsibility, fairness and efficiency-and the code explains how they will be applied to fiscal policy. The Fiscal Responsibility Bill effectively takes some matters which would otherwise be in the code and elevates them to primary legislation. The key example is that fiscal plans now and in the future must be set out in

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law. The code will be retained as part of the strengthening of the framework; in particular, it will provide important information about the nature of the Government's fiscal plans.

The Fiscal Responsibility Bill sets out the Government's first fiscal plan as a duty in primary legislation, which the Government are required to meet. It further requires that the Government set out future legislative fiscal plans for delivering sound public finances to be approved by the other place, and places a duty on the Government to meet those plans. This Bill gives Parliament a clear role in both setting and monitoring the Government's medium-term fiscal plans. Fiscal plans must be approved before they become law, and this Bill gives a new level of scrutiny to the Government's medium-term fiscal plans and means that Parliament should be able to hold the Government to account for them. The Bill represents a strengthening of the fiscal framework in response to new challenges. It will bind the Government and ensure that they deliver on the tough decisions to more than halve the deficit over four years and get debt falling.

Clause 1 imposes three duties on the Treasury: first, to ensure that government borrowing as a share of GDP falls in every year to 2015-16; secondly, to ensure that government borrowing is at least halved as a share of GDP over a four-year period to 2013-14; and, thirdly, to ensure that government debt as a share of GDP is falling by 2015-16. These three duties are in line with the Government's fiscal judgment, which was set out at the time of the Pre-Budget Report. In 2010-11, government borrowing starts to fall and continues to do so each and every year thereafter. Borrowing will fall to 5.5 per cent of GDP by 2013-14, so that we more than halve from the 12.6 per cent of GDP reached this year. With further consolidation thereafter, debt as a share of GDP is projected to fall in 2015-16. This is the sharpest reduction in the budget deficit for any G7 country. There is no power in the Bill to amend the duties in Clause 1. They can be changed only through new primary legislation.

Clause 2 requires that the Government must continue to have a legislative fiscal plan after 2016. It also makes provision to give the Treasury the power to add, by order, further duties to the Government's fiscal plan. Noble Lords will note that the Government published a draft order on the day of the Pre-Budget Report, requiring that borrowing, as a share of GDP, is reduced to 5.5 per cent or less by 2013-14. This goes further than halving the deficit in four years.

As we emerge from the global downturn we now need to ensure sound public finances.

Lord Lamont of Lerwick: I do not know whether the Minister noticed that the Chancellor of the Exchequer was quoted in the newspapers the day before yesterday as saying that Greece must reduce its deficit to 3 per cent within two to three years in accordance with what was agreed at ECOFIN. Why does what applies to Greece not apply to us?

Lord Myners: I am afraid that I did not see the newspaper interview to which the noble Lord, Lord Lamont, refers and therefore cannot comment on it. Quite clearly, however, there is a commitment contained

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in this Bill and in our financial plans significantly to reduce the deficit. As I was saying, there can be no disputing the need to move towards ensuring sound public finances; this Government are clearly committed to achieving that outcome.

As growth resumes, and the economy is better placed to support tightening, fiscal policy will shift towards consolidation. Well timed and planned fiscal consolidation will support economic growth during the recovery. The Government's judgment is that tightening fiscal policy too much in 2010-11 would present risks to the recovery and a deterioration of the fiscal position. The Government are cautiously confident about the prospects for the economy and believe that it will be able to support a more rapid tightening in 2011-12, and subsequently. Growth will help us to reduce our borrowing and debt.

Clause 3 sets out the reporting requirements on the Treasury, which must report through regular progress and compliance reports. Those will be produced alongside Budgets and Pre-Budget Reports. Reporting at those times allows the reports to be set in the right context. Progress reports must set out the progress which has been made towards compliance with the plans. The reputational costs of not being on track are, clearly, significant. Compliance reports must set out whether the plan has been met. That must be based on information available at the time. If plans have not been achieved, the Government must set out why they were not met. The reputational costs of not meeting the targets are, clearly, significant.

Noble Lords will have noted that the revised Code for Fiscal Stability, published on 19 January, sets out that the Treasury must also report on what it will do to remedy the situation. Compliance reports will be made at the Pre-Budget Report after the target end date. This assessment is necessarily retrospective, so that out-turn statistics can be used rather than forecasts. All reports must be laid before Parliament; that is the means by which the Government are held accountable to Parliament.

Clause 4 makes it clear that it is Parliament alone to which the Government are accountable for the approval of, progress towards and compliance with their fiscal plans. At present, Parliament has no direct say in medium-term fiscal policy-that is, spending and taxation brought together-beyond the year ahead. However, fiscal policy, by its nature, is largely accomplished through setting medium-term targets. The Bill requires the Government to set out their fiscal plans for a reasonable period ahead into the medium term, establishes statutory requirements to report on those plans and gives the House of Commons the right to approve or vote down those same plans.

I note the amendment before the House. Although I shall respond in detail in my closing speech, perhaps I may explain that the Bill gives Parliament a new role in both setting and monitoring the Government's fiscal plans. It is right to give Parliament a formal, statutory role in holding the Government to account for their fiscal plans; that is what the Bill does. Furthermore, the Bill's provisions mean that there will be more, not less, scrutiny of fiscal policy in the future. That is a significant evolution of the extent to which the Government are held to account for their medium-term

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fiscal policy. Parliament is the right body to hold the Government to account for their plans for tax, spending and borrowing.

Fiscal policy is, ultimately, a judgment that brings together all taxation and public spending decisions that have an impact on the public finances. That is a particularly difficult judgment in the present climate. It is for that reason that the Government believe giving Parliament a role in holding the Government to account is beneficial. The Government's approach is to strengthen the existing fiscal framework and to enhance accountability to Parliament.

As my right honourable friend the Chancellor made clear in the other place, the Government expect to see growth in the economy this year, and that will pick up in 2011 and 2012. As growth accelerates, we must ensure that we have sound public finances. These are absolutely essential to economic stability, prosperity and the long-term health of the economy. An enhanced fiscal framework through this Bill will support this task and Parliament is being given a new role to hold the Government to account. I commend this Bill to the House. I beg to move.

Amendment to the Motion

Moved by Baroness Noakes

11.50 am

Baroness Noakes: My Lords, I shall start by dealing with the Bill-I thank the Minister for introducing it-and then shall move to my amendment, which raises rather different issues from those raised by the Bill itself.

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