Fiscal Responsibility Bill

I hope to speak to the amendments and new clauses in a fashion that makes sense in the short time available. Apart from amendment 6, which I shall describe separately, this is a package of amendments and new clauses that seeks fundamentally to replace the duties that the Government sought to impose on themselves with a set of principles, according to which the deficit and then the debt would be tackled and reduced. Amendments 9 to 14 would amend the section on progress and compliance reports to align them with the principles that I have set out in new clause 14. Amendment 15 would remove the requirement to report on the duties in clause 1(3), as I am seeking to replace those duties with principles. Likewise, amendments 16 and 17 would remove references to "duties in section 1". New clause 15 would allow duties to be imposed, but only in so far as they are framed with reference to the principles set out in new clause 14, which is the key new clause, as it lays out the principles that I believe should be adhered to, rather than having the arbitrary political dividing lines, cuts and time scales—the straitjacket to which others have referred—set out in the Bill. However, before I address that point more fully, let me briefly describe amendment 6. It was tabled with the purpose of preventing the Government from taking any action or imposing any further duties—or damaging cuts, as we call them—if the principles of fiscal responsibility set out in new clause 14 are already being adhered to. In a sense, amendment 6 is a stand-alone amendment. Because of the way in which amendments can be debated and called in this place, it made sense, if I chose to push it to a vote, to table it in such a way that it could stand alone. The key provision in the group, however, is new clause 14, and that is what I should like to concentrate on. It contains five principles, which, as I said on Second Reading, are closely based on the principles that the New Zealand Government introduced in their Fiscal Responsibility Act 1994. The first principle is about reducing debt to a "prudent level". It is important that we should allow the Government of the day to specify what is or is not prudent, depending on the circumstances that they face. There must be a degree of flexibility, which is a theme running through all our debates today. The second principle says that once debt is reduced, the Government should""maintain a balanced budget on average over the medium to long term."" That would not prevent any Government from implementing the steps that they believed were necessary to achieve the long-term objective of having a prudent level of deficit and prudent debt levels, but it would mean that that would happen, on average, over the medium to long term, rather than arbitrarily specifying one economic cycle or one Parliament, which is what the Bill does and what everybody in the House—and, I suspect, everybody viewing this debate from the outside—knows is simply an artificial dividing line. The third principle says that the Government should""achieve and maintain a level of net worth that provides a…buffer against unforeseen future factors."" That point is vital and takes us back to our earlier debate about how the Government will use the statistics to measure their performance. They have talked about public sector net borrowing and public sector net debt, or PSNB ex and PSND ex, and state in the draft fiscal stability code that that""excludes temporary effects of financial interventions but accounts for any permanent costs to the taxpayer."" It is right and proper that any Government should pay attention to the totality of the economic circumstances. The fourth principle calls on the Government to "manage fiscal risks prudently". That is common sense—one would not have imagined that we needed a piece of legislation to do that, but then nor would one have imagined that we needed a fiscal responsibility Bill to tell the Government that the deficit and debt levels are too high. The fifth principle is that the Government must""pursue policies…consistent with a reasonable degree of predictability about the level and stability of tax rates"." That is incredibly important, because the tax system, tax rates and tax certainty are a vital component of fiscal stability and fiscal responsibility. Those principles are important, because we need to have a prudent level of debt, as well as a prudent level of deficit, which feeds the debt. However, they might vary depending on the circumstances, and the flexibility that I have described will almost certainly be required.