Fiscal Responsibility Bill

I and my colleagues tabled amendments 4 and 5. To follow on from the observations of the hon. Member for Chichester (Mr. Tyrie) on the last group of amendments, there is indeed an Alice in Wonderland quality to the Bill—it is extraordinary that we are all being invited to spend a whole day discussing it. I said in my last contribution that when I was doing a radio interview recently a Labour MP said to me, "What do you mean we don't take the deficit seriously? We are bringing in a law to deal with the deficit," as though passing legislation and having a positive set of policies and a desire to implement them were one and the same. Clearly they are not. The very same Labour MP, in the same radio debate, maintained that the principal party of opposition to the Iraq war was hers as well. The whole Labour party is now in a state of complete denial about its position in politics, and nowhere is that more true than with regard to the enormous budget deficit that it has presided over. It told us that it had abolished boom and bust, that Britain could enjoy continuous economic prosperity and growth, and that the normal economic cycle that had applied throughout history no longer applied under the current Prime Minister. That has now emphatically been proven not to be the case. Clause 1 has three specific duties. In an intervention a couple of hours ago on the right hon. Member for Wokingham (Mr. Redwood), I perhaps caused some confusion by mentioning the aspect of the Bill that has attracted the greatest attention—halving the deficit in what people assume will be the lifetime of the next Parliament, if it runs a typical length of time. However, there is the added inflexibility of the requirement to reduce the deficit year on year, through to 2016. There is therefore no scope for making adjustments based on exceptional circumstances. That should concern us all. On Second Reading, I raised a matter with the Chancellor, and I am afraid that I did not get a good response. His response was evasive—I do not mean that he was disrespectful to the House, simply that he followed the logical consequences of his position. I gave two examples. First, I asked what we would do in the case of a massive additional threat to our national security. I hope that that is unlikely, but it is not impossible—we must have some sort of contingency plan and provision for an event of that magnitude. At the end of the second world war, Britain's cumulative debt was 250 per cent. of GDP. Our public finances were in a truly frightening position, but the judgment was made—I suspect that everybody agrees that it was the right judgment—that it was worth putting ourselves in such straitened circumstances because the prize of winning the war was so great and the downside of losing so immense. We had to put normal economic considerations to one side to protect the freedom and independence of our country and all the values that we hold important. Obviously, I hope that nothing that serious happens between now and 2016—or, indeed, ever—but were something serious to happen to us as a country, how could we possibly proceed with the assumption in the Bill that the deficit would be cut year on year, and cut in half by 2014? My other example, which is perhaps more likely, was about re-entering recession between now and 2014 or 2016, depending on which of the two time scales in the Bill applied. What would happen? Plenty of eminent economists believe that there is a risk of a so-called double-dip recession—that we will not recover as the Government forecast, that there is genuine potential for the structural damage to our economy to prove lasting, and that growth will be weak and even negative. If there were some wider international dimension—we all acknowledge the international dimension to the recession out of which the world is now pulling—that caused shock waves throughout the developed world and economies, it is possible that, even if the Government or any subsequent Government acted with great fiscal restraint, we would still be thrown into another recession, due not to the decisions made in the House or by Ministers, but perhaps to seismic events in one of the big economies elsewhere. In that case, the measure, which requires us to halve the deficit—not simply the dimension covered by amendment 1, which the Government defeated—would put us in a ruinous position if we abided by it while trying to grapple with serious world events.