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Fiscal Responsibility Bill

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 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 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