Fiscal Responsibility Bill

I am pleased to have an opportunity to contribute to this debate, on what is the first parliamentary day of the new decade. It is also the first parliamentary day of the final year of this Parliament and, I hope, of this Government. Change will undoubtedly come this year, in that it has to be an election year. As previous speakers have noted, the election is at the heart of this Bill. That observation has not been confined to politicians in this Chamber, as it has been made by outside commentators as well. In its commentary on the pre-Budget report, Goldman Sachs wrote:""The UK press has concluded that the relatively slow pace of tightening, which doesn't begin in earnest until 2011, reflects politics more than economics—there's a general election next spring."" We will have to wait and see whether Goldman Sachs is right about the spring, but the sentiment reflects what the Bill is all about. I want to add my voice to those who have spoken in the debate and declared this to be an utterly feeble Bill. The only support for it has come from those on the Government Front Bench. It is one of the thinnest pieces of legislation that I have seen since I arrived in the House nearly five years ago, and it has quite properly been ridiculed—by the shadow Chancellor in particular, but also by every speaker other than the Chancellor himself. No other issue is more significant, or a greater plank in the Government's own election planning, than sorting out the public finance deficit that this country faces after 13 years of Labour mismanagement. There is no bigger issue facing the country, or for voters to consider at the coming election. No difference between the Government and the Opposition is more striking than their respective approaches to dealing with this matter: the Government are clearly divided, and the Opposition are clearly united. We could not have illustrated that better had we, as the potential Government in waiting, planned today's debate and set out the approach to be taken by Labour Members to supporting their own Government's legislation. They have not followed that approach. I said earlier that, apart from the Chancellor's, only one speech had been made from the Labour Benches, but now there have been two. Both speakers have said, in terms and at the outset of their remarks, that for very different reasons they would not be supporting the Bill. There has not been a single speech in support of the Bill. That shows more clearly than we could ourselves the truth of the shadow Chancellor's allegation in his remarks that there is division at the heart of Government over how to tackle the deficit. As we have all acknowledged, I think, that is the critical issue that the country faces at present. So given that lack of interest, I have to ask why the Government business managers have decided to rush the Bill through the Committee stages on the Floor of the House. The obvious answer may be that they need to get the Bill through quickly to have it on the statute book ahead of a general election, which may be called in early or late spring. But that is too simplistic an answer to my question. I think the simple fact is that the Bill will not be handled in Committee, where evidence sessions could be taken, because the Government are incapable of finding anyone to call as a witness to support the Bill. The evidence sessions would merely give grist to the mill of the Government's opponents on their own Back Benches and on the Conservative Benches in pointing out what a perfectly frivolous and ludicrous piece of legislation we have before us. In short, we are not dealing so much with solutions to a credit crunch. The Government are trying to deal with solutions to a credibility crunch. The Government have form on the issue of fiscal stability. In his famous, or should I say infamous, Mansion House speech in 1997 the present Prime Minister, then Chancellor, set out his fiscal rules—his first attempt to provide an aura of credibility for his approach to the public finances. He said:""We will introduce tough rules for government borrowing."" A year later, he told us:""I will never let the deficit get out of control. We will not spend money we have not earned."" Well, we all know what happened to those fiscal rules. The goalposts were moved as soon as it looked like they might be missed. The commentators at the Institute for Fiscal Studies spelt out in their 2007 budget briefing:""The perception that the Chancellor has moved the goal posts and has delayed the tax raising measures and cuts in spending plans that we and other independent commentators had been saying would be necessary until after the 2005 election undermines the credibility of the fiscal framework."" The measures were obviously dropped. What is the impact of that lack of credibility when it comes to dealing with the current state of the public finances? We have heard from other speakers this evening about the impact within the market. The right hon. Member for Birkenhead (Mr. Field) drew analogies with the run-up to the second world war, clearly with an eye to securing an impact in the media. The impact of the lack of credibility is extremely significant. It is not just the credit rating agencies, which have put the UK sovereign debt on informal credit watch. It is not just the market commentators, who are saying that the Bill will do nothing seriously to address the debt-to-GDP ratios, which must fall faster. The Governor of the Bank of England himself has said that the deficit needs to be reduced much faster than is proposed in the Bill. Apart from the commentators, the markets themselves are telling us that we are getting perilously close to an apocalyptic scenario. Let us look at the three market measures that are most regularly used to compare this country's public debt with that of our international comparators. We can see that the UK is in a perilous position. In the gilt market—which includes the impact of currency, so the measure is not the most directly relevant—the yield on medium-term gilt is up 43 basis points since 1 December 2009. There has been a similar increase in the US, yet in Germany the figure has risen by less than half over that period. We can look at inflation-linked bonds, which remove the differences in inflation between countries. Since 1 December 2009, UK medium-term inflation-linked bonds have risen by 23 basis points to almost 3 per cent.—2.96 per cent.—which indicates an inflation risk over the risk-free rate.