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Fiscal Responsibility Bill

My Lords, I begin by offering my commiserations to the Minister. He has had a distinguished career in the City, as I have more reason than many in this House to know, and he has been sent here today to take the fig leaf and defend the indefensible. It is more than indefensible; it is also disreputable. In the progress of this Bill, there will be damage to the reputation of the country abroad and damage to the reputation of Parliament at home because both those audiences, whether abroad or at home, believe that it has no contact with reality. Along the way it will also do some damage to the reputation of the Labour Government, but that is something which I can regard with equanimity. I shall come on to the disreputable nature of the Bill, but before doing so I would like to dwell for a moment or two on the way that the Government—I emphasise that it is the Government—have handled the proceedings of the Bill so far. On Second Reading, the Chancellor of the Exchequer placed great emphasis on the importance of the Bill. He said: "““There is no doubt that we face a huge challenge as a country. There will be difficult judgments over the next few years. I have said before that some tough decisions will have to be taken ""…That is why it is important that we get it right … This Bill will help us to achieve that””.—[Official Report, Commons, 5/1/10; col. 71.]" I read that as a ringing endorsement which emphasises the central nature of the economic issue to the country’s future—who would demur from that?—and the role of the Bill in tackling it. It is therefore surprising that having emphasised the Bill so much, the Government should allocate only four hours and 45 minutes for its discussion in Committee—that is very short—and a further 45 minutes immediately after for Third Reading. The Bill began at 1.35 pm on 20 January and finished by 7 pm. For major legislation, that is quite a short time. The Bill is organisationally disreputable from the Government’s point of view. When you read the Hansard report of the Second Reading and the Committee proceedings, it is astonishing how little support for the Bill there is from the Government Back-Benchers; they either do not believe it or do not agree with it, or possibly both. Indeed, two of the three speeches made from the Government Back Benches at Second Reading were opposed to the Bill. In Committee, only one Back-Bencher, Mark Todd, the Member for South Derbyshire, felt able to make some vague noises of support. He said: "““I am puzzled by the reasons for using legislation in this way … I can see some value in at least facilitating an orderly debate on a subject … There is no common view of the data set on which we base our understanding””.—[Official Report, Commons, 20/1/10; col. 335.]" By any stretch of the imagination, that is lukewarm support. Therefore, for the Government then to have a whipped majority of the size that they had, it is not surprising that the public regard the proceedings in Parliament with a degree of cynicism. Turning to the Bill, my noble friend Lord MacGregor referred to Richard Lambert and the description of it being the fat man who after Christmas joins the gym. I saw this description in a leader in the Times and still thought it was apposite—either the Times heard Mr Lambert or Mr Lambert read the Times; I do not know which. The FT put it even better. It said that the Government believe in the ““announce and it will happen”” approach to government. The Bill is disreputable because it is deceptive. It is deceptive about numbers, about accuracy, about relevance and about sanctions. How the Minister, for whom I have the greatest respect, could read out paragraph 3 of the Explanatory Notes about transparency, stability, responsibility, fairness and efficiency with a straight face, I do not know. Let me deal with the deceptive nature about numbers, transparency and accuracy. Over the past few years we have had fascinating debates on the make-up of government finances. I recall my noble friend Lord Saatchi trying at some length to discover whether PFI projects form part of the public sector borrowing; not huge clarity was achieved. Of course, it is not only the PFI; there are also the public/private partnerships, Network Rail and the bank bail-outs. However, there is, I am afraid, a much larger elephant in the corner of the room because the Prime Minister, when he was the Chancellor of the Exchequer, drove a stake through the heart of private sector final salary pension schemes. Such schemes, I am sure, would have had a difficult time because of increasing longevity, but he did for them finally. He did so in three ways: he robbed the private sector pension schemes of billions by tax changes; he then created a private sector regulator with extensive and quite arbitrary powers; and, finally, he developed the perfect storm for pensions—low interest rates, so that the discounted value of liabilities was high, and low asset values, so that the value of assets held to discharge those liabilities was very low. Meanwhile, in the public sector, where there are extensive inflation-proof final salary pension schemes, nothing was done. Preparations were undertaken but the union paymasters said no and everything was abandoned. The deficit in public sector pensions is truly terrifying; it runs to hundreds of billions of pounds—some people have said £1 trillion. I refer the Minister to the Evening Standard of Monday 1 February, which stated: ““Black hole in London councils’ pension funds grows to £10 billion””. That is only London councils’ pension schemes. To make the Bill credible, we need greater clarity and transparency about assets and liabilities. Members of the House will have received the briefing from the Institute of Chartered Accountants in England and Wales and it is worth putting on the record two of the points it makes. The briefing states: "““However, significant problems with the transparency and accountability of UK public spending decisions remain to be addressed … In particular, sustained commitment is required behind the Whole of Government Accounts (WGA) initiative. WGA promises to provide robust, audited information across the public sector. WGA will make information more transparent and more accessible … It will be the only source of information where the public sector’s assets and liabilities are brought together ‘on balance sheet’””." We need to find a way to improve transparency and accuracy if the Bill is to have any value. Secondly, the Bill is deceptive about effectiveness. When he introduced the Bill, the Minister said that the levels of uncertainty about our economic future are receding. However, let us suppose that his hopes—and probably all our hopes—are dashed and we face a double-dip recession. A large proportion of government spending is in the automatic stabilisers—social security payments, employment benefits and so on—and the idea that in a recession these could be reduced or removed is laughable. What will the Government do? They will abandon the Bill—the whole thing—just as they abandoned the golden rule. For years the Prime Minister lectured us about the golden rule and its sacrosanct nature. Now, coyly, paragraph 6 of the Explanatory Notes states: "““In the 2008 Pre-Budget Report the Government announced that it would temporarily depart from the golden rule and the sustainable investment rule until the global shocks had worked their way through the economy in full””." The noble Lord, Lord Peston, said that the answer to this Bill was to have some shame. There appears to be no shame in abandoning this central tenet that the then Chancellor, now the Prime Minister, has lectured us on over the years. This legislation will go the same way. The Bill is also deceptive about sanctions. As my noble friend Lord Lawson said, statute law is only of value if it is enforceable. Unenforceable laws merely bring the law itself into disrepute, and Clause 4(3) gives the game away. I have said that the Bill is deceptive in many places, but there is one group that the Bill is meant to deceive but has not deceived—those people who the Chancellor needs to buy all the gilts he will have to sell over the next few years. Unsurprisingly, they are not deceived and confidence in the Chancellor and the Government can be measured in two ways—exchange rates and interest rates, both of which, in the three short weeks since Second Reading, have moved against the Government and will lead to a much more expensive and difficult time in the future. The Bill is the latest and one of the most egregious examples of cavalier government by new Labour. Initiative after initiative has been trumpeted with headline-grabbing announcements, all too many of which have run into the sand because little, if any, thought has been given as to how they should be implemented or what their consequences would be. As the Financial Times put it, ““announce it and it will happen””. Sometimes initiatives have even been recycled and relaunched with further trumpeting, but to no greater effect. The Labour Party has said that it wants to dominate the agenda for years to come. Well, I think it has succeeded in this, albeit not quite in the way it intended, because the next Government will spend five or 10 years trying to repair the damage that it has left behind. This Bill is perhaps a fitting epitaph for a man who claimed to have abolished boom and bust and ended up delivering the biggest bust of all.