Fiscal Responsibility Bill

The hon. Gentleman's last point is absolutely right. That is why I have been critical of the Labour Government's £800 million cut to the Scottish budget, and why the Scottish Government and the Scottish National party have argued for a further year's re-profiling of capital expenditure to protect the economic recovery and not allow it to be threatened in any way. I have argued time and again that we must have a sustained and sustainable recovery before we start the fiscal consolidation. As I have said, if people think that tackling the deficit and, subsequently, the debt will be difficult from a position of sustained economic growth—and it will be—it will be impossible from a fragile position of weak recovery, of no recovery at all or of a double-dip recession. So the hon. Gentleman's last point is absolutely right. Another reason that I have specified principles and flexibility in my proposals is to encourage a debate. Other countries have been through this, and I have cited the New Zealand example because it was successful. It allowed flexibility but it gave that country a clear direction of travel. When it was considering all the options, New Zealand's finance and expenditure committee looked at the fixed, straitjacketed, time scale-driven approach that the UK Government are taking. The committee said:""There is no solid theoretical justification for any particular fiscal target that can be maintained over a period of time. Judgements on the appropriate level of fiscal aggregates vary over time and depend on the economic circumstances currently prevailing."" Having looked at the UK and other countries, the committee went on to say:""Other countries' experience of legislated targets suggests that there are substantial risks attached to their use. In particular, rigid adherence can seriously distort decision-making and, unless carefully handled, minor variations from target can result in significant but unnecessary damage to credibility."" That is a very real danger with this Bill. If the Chancellor or a future Chancellor were to come back at some point and say, "It didn't work, so we're just going to ignore it," their credibility would disappear completely. The committee's third observation that was of interest in this context was that the""inherent inflexibility"—" that is, of fixed targets—""makes it difficult for fiscal policy to respond appropriately to the inevitable volatility of economic circumstances."" That reflects precisely my argument about the inability to use either the automatic stabilisers, which would be ludicrous, or, more significantly, an additional fiscal stimulus, should the economy deteriorate and the situation worsen to the point at which a fiscal stimulus was required. We need the flexibility for a simple reason, which is also the reason why I think that a principles-based approach is much better than the rigid approach adopted by the Government. If we faced a significant downturn and any Government were determined to stick rigidly to what they had planned, it would not simply be a question of the absence of automatic stabilisers or of a fiscal stimulus. Any adherence to the Government's short-term, fixed-time-scale approach would involve an absolute requirement for deep, savage, real-terms cash cuts there and then. I hope that I have argued, briefly, the case for a principles-based approach that works, that takes seriously the issue of deficit and debt, and that would remove the political dividing line which, as we know, this is all about. I look forward with interest, although with no great expectation, to the Minister's response.