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Fiscal Responsibility Bill

I have a whole speech to make and am glad that the noble Lord is at least sitting through it. Not everyone who has spoken seems to have felt the need to hear me. And now I have lost my place. We have been reminded that we are in a difficult position because the Speaker has certified this as a money Bill, which is a judgment I find difficult to comprehend. But the Speaker’s word is law and he has no need to justify what he says explicitly. The result is that we cannot amend the Bill, particularly in the direction in which I should like to go, which is my reference to the noble Lord who has just intervened. I should certainly like it to be tougher. But the fact that we cannot amend it is our problem. I do not know what the noble Lord’s honourable friends and right honourable friends in another place were doing in their failure to bring the Government to account on this Bill, but perhaps we will learn about that from another speaker. However, the Bill draws our attention to progress reports and compliance reports and, above all, it reinforces accountability to Parliament. We should remember that we are still part of Parliament. I therefore assume that when the Bill becomes law, we will be able to deal with the accountability side via our Finance Sub-Committee of the Economic Affairs Committee. In that committee, we could examine all the detailed points. Again, as it is a money Bill, the other place does not have to take any notice of us, but it cannot stop us saying what we have to say. The noble Lord has asked about penalties, a matter which also bothers me. However, if the Government fail in their public expenditure commitments, the Prime Minister and the Chancellor will at least have to suffer the shame and indignity of living through it being pointed out. My difficulty—and this is my response to the noble Lord opposite—is that I cannot conjure up any other penalty for failing to hit the financial targets, and I have not heard anyone offer anything better. That is true of Parliament and the world generally. Is the right solution—I say this as a joke—to include in the Bill a provision stating that if the Government do not meet their financial targets, the Chancellor and the Prime Minister must pay the excess out of their own pockets? That seems a bit much. It would also be incompatible with our constitution, unwritten as it is, to say that they must automatically resign. So I agree that the issue of penalties is a problem. I shall never be a Minister, let alone a Chancellor, but I would be ashamed if I had to live through putting out figures and then not achieving them because I was at fault. The commitment that the Government are making in the Bill is not trivial. The objectives of economic policy are full employment on a sustainable growth path and a low and stable rate of inflation. The optimists claim that all of those are compatible and achievable while the pessimists deny that they are. The pessimists say that except in the long run, when we are all dead, we have to select one objective above the others. I have always been inclined to the optimistic end of the spectrum. But recent economic experience has moved me away somewhat. Everyone, including all the speakers today, supports fiscal responsibility; by which they mean reductions in the annual fiscal deficit and the government debt-to-GDP ratio. That requires a combination of public expenditure cuts and taxation increases. However, in speeches in your Lordships' House, Peers always add a proviso when speaking of public expenditure. Without exception, they say: ““I am totally in favour of cuts in public expenditure””, except for whatever area is dear to their heart. That is true of farm subsidies, university finance, medical research, various parts of the NHS amounting to the NHS in toto, homecare for the elderly, poverty eradication and child support. The list is endless. I ask myself this: who except for me is in favour of public expenditure cuts, with no ifs or buts? In the cases I have referred to, Peers uniformly will tell us that if this bit of medical research is not done or the number of university places is cut down, the world will come to an end. I would say that if we do not get public finance in order, that is what will cause the world to come to an end. I want to make another clear party political point. I long to hear anything from the Leader of the Opposition in the other place that gives any sort of indication of what he would actually cut. I know that he is desperate to win the general election and become Prime Minister, but if he really believes in fiscal responsibility—and let us not forget that we are talking about tens of billions here—he owes it to the country to say where he will find those tens of billions. Until he does, I for one am finding it impossible to take any advice from noble Lords opposite. I feel strongly that in producing the fiscal outcome we want, the right path is on the public expenditure side. I do not favour—with one exception which I am about to mention—the path of vast tax increases. Although we can talk about marginal rates in certain areas, we have broadly the right average level of taxation to GDP. But if there have to be some tax increases, the obvious place to look at is VAT. I would remove all the existing exemptions from the payment of VAT. The exemptions distort the price system. They do not and never have made any fiscal sense. Of course, if any Government did that the cries of pain would be deafening. My last point is to disagree totally with the noble Lord, Lord Lawson, who I think was most irresponsible in his remarks, quite apart from giving us a misleading account of the past. The technical problem on public expenditure cuts is one of timing. The Government have to convince everybody that the cuts will definitely be made, which is the purpose of this Bill, but that they will not come into effect before the recovery is well under way. Although the recovery itself must be led by private investment and exports, we have to bear in mind that some of that will itself depend on public expenditure. We are therefore obliged to appreciate how difficult economic policy-making is, and let me say that I am extremely glad that I am not in charge of it. In conclusion, what I would advocate is a suggestion made by my noble friend Lord Barnett, who has been the Chief Secretary. I mention this specifically to my noble friend Lord Myners. All government departments should be told immediately that they must plan to cut their expenditure for the next fiscal year. I would suggest a figure of 5 per cent. I have pulled that figure out of a hat, and if someone does not like it, I would say, ““Let us try 10 per cent””. That would focus minds, and if it were public knowledge—I am talking now about the next fiscal year, which the noble Lord, Lord Lawson, deplores—that would give confidence to the markets and others who have to take major decisions on these matters.