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Fiscal Responsibility Bill

If the noble Lord wants the real answer to that question, I advise him to go as fast as possible after this debate to the Library, where he will find remarks made earlier in the week and last week by the president of the Bundesbank. No one could claim that his words were political in the context of what is happening at the moment in Greece. If an immediate Budget is followed swiftly by a public expenditure White Paper and a form of the MTFS, as described by my noble friend Lord Lawson, who put it together in 1980, further action is a necessity. As I said in part in my reply to the noble Lord, Lord Peston, first and foremost it should be carried out to avert a potential UK gilt strike. Sovereign debt contagion is lethal. We are experiencing the tensest spell in the gilt markets since the 1970s, and the markets will need to be certain that a British Government have the willpower—to use the word of my noble friend Lord Lawson—to slice our dangerous deficit. We have already witnessed pressure on Greece, where plans to cut the deficit are frankly implausible. In principle, Greece must raise $50 billion by 30 June to avoid default. Portugal lacks a consensus on austerity and the green light is still shown to the regions for mounting up further debts. Spain could of course be in the firing line soon. We hope and pray that these nations are acting as our proxies until polling day. After all, according to PIMCO, we are resting on a bed of nitro-glycerine. Questions over our creditworthiness have also been raised by Fitch. Standard & Poor’s, another agency, has amended its outlook of the UK from stable to negative. Of course, the chief executive of the Debt Management Office, an important figure, voiced concerns a fortnight ago. Last week the Institute for Fiscal Studies concluded that reductions in public expenditure would have to reach 18 per cent to 24 per cent in some non-protected departments to pacify the markets. Even if the next Government, whatever their hue, take action, the risks of inflation are clear and present, as I have twice sought to persuade your Lordships. Inflation overshot Bank of England forecasts for the whole of last year in every single month. Andrew Sentance, an MPC member, as well as Spencer Dale, the Bank of England’s chief economist, have delivered warnings that inflationary pressures are lurking, in spare capacity, oil hikes, commodity prices as well as asset bubbles in the Far East. This leads to the question: can interest rates remain so accommodating if UK inflation breaks barriers? It also prompts the inquiry about whether we should retain the present measure of CPI. Whatever the consequences, however, the post-election Chancellor must insist on strict ceilings for inflation. Otherwise, bond yields will go haywire and the cost of borrowing will hamper our recovery. I was pleased to read recently that the shadow Chancellor has brought anti-inflation rhetoric back into the picture. Our fiscal deficit runs at more than 13 per cent of GDP. It is worse than the Club Med countries. Everywhere, markets are querying the willpower or ability of the British Government to repay their debts. They are unimpressed with this Bill; it is an object of their scorn. As Buster Keaton would have put it in his great vaudeville days, it is about as much use as handing a comb to a bald man.