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The Economy

That totally ignores the other side of the balance sheet. The banks will have to be, and should be, reprivatised in—I do not know—about eight or 10 years’ time. As the right hon. Gentleman knows perfectly well, when they are, all those assets will be realised. So the debt liability is completely different from the debt accrued as a result of previous deficits. The right hon. Gentleman, who is probably one of the most financially sophisticated people in the House, should surely realise that distinction. The obsession with the legacy of debt seems to be inhibiting Conservative Front Benchers in taking what seems to me to be simply a realistic view about the need for a fiscal stimulus. The view that they take—that one should not have a fiscal stimulus over and above the automatic stabilisers—is so extreme. I do not think that any other country in the developed world now takes that view. I managed to unearth only two from the International Monetary Fund: the first is Argentina, which is in the middle of a financial crisis, and the second is Switzerland, which is not allowed to have a fiscal stimulus for constitutional reasons. The Conservatives are arguing for a policy of complete abstinence when it comes to additional fiscal stimulus. That seems utterly wrong during a crisis of this kind. Most of the burden of fighting the recession is being carried by monetary policy. That is absolutely right; we are seeing the implementation of the ideas that Mrs. Thatcher, as she then was, brought in with Professor Walters and the others—of concentrating on interest rate cuts, expanding money supply and letting the exchange rate float. Fundamentally, that is how the British economy is being driven and that is right. However, it seems entirely sensible to put on top of that a modest fiscal stimulus, and I do not understand why the Conservatives have locked themselves into a completely reactionary position. The fiscal stimulus is small—less than 1 per cent. of GDP—and the Conservative party is completely unique among parties in the developed countries of the world. Moreover, its position is blinding the party to the real criticism. The proper criticism was tellingly made by the hon. Member for Uxbridge (Mr. Randall) from his standpoint as a business person: it was that the value added tax cut was entirely the wrong way to do it. The Chief Secretary to the Treasury has tried to give a defence of it, but I do not think anybody believes it. It would have been much better to have used the money in targeted public investment. Everybody can make up their own list, but we, for example, argued for social housing, home insulation programmes and public transport—things that could be mobilised quickly. At the end of that investment, we would have had an asset. That would have been a better approach. It is much better to criticise the Government from the standpoint that the VAT cut was a wasteful, foolish way of giving a stimulus than to say that we should not have any kind of fiscal stimulus at all. That is the dividing line.