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Finance Bill

I am grateful to my hon. Friend. I was going to address that point later, and I will come back to it, but given the enthusiasm in all parts of the Committee for me to address it now, I shall do so. Clause 9 will move the date at which we revert to 17.5 per cent. VAT back from 1 December to 1 January. If the clause does not stand part of the Bill, that date will remain 1 December. I shall elaborate on what that means, and I hope that the concerns that my hon. Friend raises, and the Minister's concern that there is no Conservative amendment on this point, will be addressed. The Liberal Democrats tabled an amendment to bring the date forward, but it was not selectable, as is customary in these circumstances. However, we have an opportunity to do what we can to deal with the matter as quickly as possible. I return to my points in a more methodical way. The hon. Member for Taunton was absolutely right to ask his two questions—first, whether in November 2008 we could afford the fiscal stimulus that consisted of the VAT cut, and secondly, if we could afford a discretionary fiscal stimulus, whether that was the right way to go about it. It is worth my being precise about where there is a difference between the Government and the Opposition, because there is a tendency to point to dividing lines and caricature our positions, and the differences between us can be exaggerated. First, we recognise that there is a place for automatic stabilisers. We recognise that tax revenues will reduce in the course of a recession and that expenditure will increase on certain things, particularly benefits. We have not argued that our fiscal policy should be such that we do not allow the automatic stabilisers to apply. The difference between the Opposition and the Government is about the discretionary fiscal stimulus, not the automatic stabilisers. Secondly, let us not exaggerate the significance of fiscal policy in addressing a recession. It is not the sole, nor even the principal, means of addressing a downturn. If I may, I shall quote what the hon. Member for Twickenham (Dr. Cable), who is highly regarded in these matters, said in the debate on 31 March. I did not say that he is rightly highly regarded, but he is highly regarded. He stated that,""what is actually happening is that the Government are very carefully following the doctrines of Milton Friedman and we have, in essence, a monetary response to the crisis, which is absolutely right, provided it is effective and gets money into the economy."—[Official Report, 31 March 2009; Vol. 490, c. 815.]" We supported the reductions in interest rates and recognised that addressing a downturn is essentially about monetary policy.