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Fiscal Responsibility Bill

No, my Lords, I certainly do not agree with that and nor do the Government agree with what is implicit in the remarks of the noble Lord, Lord Lea. The Government say that the fiscal tightening should start in a year’s time—not now—and there will still be a substantial gap then; the 10 per cent gap will not suddenly have disappeared by then. I am afraid that the noble Lord is mistaken. The idea that much needed fiscal retrenchment might be inflationary should, in any case, have finally been put to rest by the experience of 1981, when no fewer than 364 economists, some of them quite distinguished, wrote to the Times to warn that fiscal tightening in the depth of the then recession would condemn our economy to a self-perpetuating downward spiral. Of course, nothing of the sort occurred. However, there was a substantial tightening, rightly introduced by my noble and learned friend Lord Howe in his 1981 Budget. So far from activities spiralling downwards, shortly afterwards the economy began a prolonged period of expansion. Today, as current events in parts of the eurozone remind us, there is above all the crucial dimension of confidence. That is even more important in the UK. If, in our present alarming and unprecedented fiscal predicament, a new Government are not seen to grasp the nettle of fiscal responsibility from the moment they take office, confidence both at home and overseas will be shattered, with potentially disastrous consequences. This is not a matter of spelling out an itemised list of savings now, any more than we did before we took office in 1979. If they have not already done their homework, which I trust they have, my friends in the other place who will take the responsibility after the election may be assured that Treasury officials will have done theirs, and will present them with a list of options to choose from. No, it is a matter of iron resolve and the courage to be hugely unpopular in the short term. This Government have lost all credibility—that most vital of assets for any Government—which this farce of a Bill will do nothing whatever to restore. Sadly, once again, in the eyes of the world we in this country have become what we were in the 1970s, a second-rate nation. The task of rescuing our country from this fate now has to be embarked on all over again. The success or failure of the next Government in discharging that task will be determined to a very large extent by the decisions that they take, not merely in their first 100 days but in their first 50 days.