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Fiscal Responsibility Bill

My Lords, that was an uncharacteristically political speech by the noble Lord, Lord Hodgson of Astley Abbotts. Perhaps I can reply in kind. He mentioned the elephant in the room and alluded in that connection to the ““union paymasters”” of the Labour Party as regards pensions. That is peanuts when compared with the reliance of the Conservative Party on the City of London, which can do no wrong. It is because of that fact that David Cameron is now wriggling on the end of a hook. The hubris of the City of London, after all, caused the biggest hole in the economy since 1931. Since Lehman Brothers, we have been in what I would call a ““Roosevelt moment””. The fiscal balance, after all, can only improve as growth improves. We all know that the real agenda of the party opposite is first to get elected and then to make ““savage cuts””—as the widely used expression goes—from May onwards. The Conservatives are now being very careful, running scared as they are, about saying that. On whether we need savage cuts, Sir Samuel Brittan wrote last week: "““My own view is that there is little case for action just yet. But the cat may jump in either direction … In any case, I would base policy on the state of the economy - real growth and inflation - rather than on a narrow view of the government's own finances, and avoid like the plague the draconian spending cuts and tax increases set out as ‘options’ by the Institute of Fiscal Studies””." I turn to remarks made yesterday by the Nobel Prize-winning economist Joseph Stiglitz, who generally takes the line that the Prime Minister, whom he met yesterday with the Chancellor, should ignore what he calls ““fiscal fetishism””, defy the markets or even extend the fiscal stimulus. I am not a paid-up member of the Joseph Stiglitz fan club, but he is surely right to warn that financial markets were like a ““crazy man”” that could not be appeased with cuts in public spending. He said: "““You're dealing with a crazy man. You're asking what I can do to placate a crazy man? Having got what he wants he will still kill you””." He rejected the idea recently put forward by David Cameron that some symbolic trimming of the budget deficit in the current year might regain the confidence of the financial markets. He said that it was ““unconscionable”” for the ratings agencies to threaten to downgrade Britain’s creditworthiness, given their poor record in the crisis. He also said: "““Fiscal fetishism is really dangerous””." He believes that if financial markets refuse to buy British government bonds, or gilts, the Bank of England could buy them instead—that is the case for extending quantitative easing if the circumstances arise—because, as has been said, a premature withdrawal of stimulus is more likely to produce a double dip. I cannot see why the party opposite, which has over the years bought into having frameworks of targets and supported Gordon Brown, when he was Chancellor, in a whole range of medium-term targets, now purports to believe that the targets in the Bill are not conscionable. Earlier frameworks were supported. I mention the example of the Maastricht criteria, which seem now to be supported with some numbers and guidelines. On that basis, the European Union—meeting, I think, today or tomorrow—will wish to toughen up its relationship with Greece. Toughening up a relationship begins with having some numbers. I am not sure that there was any legal significance—I do not remember; I stand to be corrected if I am wrong—in the famous five economic tests for joining the euro being supposedly written on the back of a cigarette packet. This Bill is a lot more nicely written out, but no one doubts that those were important criteria to have written down.