Fiscal Responsibility Bill

I beg to move, That the Bill be now read a Second time. We are debating the pre-Budget report more fully on Thursday, so this evening I will confine my remarks to the Bill. Every country in the world has been hit by a severe financial crisis, resulting in the worst global economic recession for decades. Inevitably, borrowing and debt levels have risen as revenues have fallen. We are affected by that; so is every other major economy in the world. Like other countries, we are now taking steps as we emerge from the recession to secure growth while reducing the deficit, but as I have said on a number of occasions, we have got to do that in a way that does not risk wrecking the recovery and damaging the economy, and our ability to secure growth over the medium and long term. The deficit reduction plan to halve the deficit over a four-year period is a very important part of that strategy. The Bill will set out obligations to cut the deficit at an appropriate and sensible pace, and it will allow us to protect the economy and maintain public services, upon which growth and members of the public depend. That is an important part of what we are trying to do. Whatever the economic circumstances under whatever Government, we need rules and objectives to govern fiscal policy. Between 1979 and 1997 during the previous Conservative Government, there were many different targets. Between 1980 and 1997, monetary policy targets changed 14 times and there were at least five different fiscal policy objectives. In fact, I believe that there was no clear and consistent objective of fiscal policy. The result was the lack of a clear objective and overall coherence, which meant, among other things, that we had interest rates peaking at 15 per cent. in 1990, instead of half of that, recorded over the 12 years since 1997.