UK Parliament / Open data

Fiscal Responsibility Bill

Again, I understand my hon. Friend's point. However, we still need to take action to ensure that we have fiscal consolidation in this country. The more that we can have growth, the better it will be as it will give us the opportunity to reduce the deficit still further. He is right to say that if we see public sector job reductions as a result of the measure, that will have consequences in communities and for our economic output. We need to consider all that in the round in making our decisions about how best to act, and I want to reassure my hon. Friend that it is certainly the Government's intention that we should do so. Let me move on briefly to address the issue of flexibility. A number of hon. Members sought to suggest that there was no flexibility in the Government's consolidation plans. That is not correct. In the event of a significant and sustained economic shock on the scale of that which we have seen over the past 18 months to two years, we would quite obviously want to consider what path of fiscal policy would be appropriate for the economy. Subject to progress being made in reducing borrowing every year, there is flexibility on the profile for halving the deficit by 2013-14. So, for example, if growth is lower and the impact of the automatic stabilisers is greater, there is the flexibility to accommodate that so long as there is progress on reducing borrowing. On the amendments, I first want to agree that the structural deficit is an important fiscal aggregate, so the hon. Member for South-West Hertfordshire (Mr. Gauke) has a point. One of the key ambitions of the Bill is to provide certainty, as he knows, about the future path of fiscal policy, and targeting a structural measure of the deficit when there is such uncertainty about the position of the economy and the size of the output gap runs counter to that ambition. We are trying to target overall borrowing, which is a directly observable national statistic that is measured independently by the Office for National Statistics. Not even the hon. Member for Stone disputes that. Furthermore, amendment 2 would reduce the extent of the plans to tackle the deficit. The hon. Member for South-West Hertfordshire needs to think very carefully about pressing the amendment to a vote. The pre-Budget report forecasts—on the basis of the forecast for overall borrowing falling to 5.5 per cent. of GDP in 2013-14, which is the Government's target—that cyclically adjusted borrowing will fall by almost two thirds, far more than the Opposition's amendment requires. Opposition Members are saying that they want to move faster, but amendment 2 would not do that. That is not to say that I would advise my hon. Friends to support it, either—I do not think that that is the right course of action.
Type
Proceeding contribution
Reference
504 c349 
Session
2009-10
Chamber / Committee
House of Commons chamber
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