Fiscal Responsibility Bill

I think the hon. Gentleman is in danger of returning to the debate that we have just had. As I said then, the fiscal consolidation plans that the Government have announced, involving £57 billion, have already been taken into account in the growth forecasts produced at the time of the Budget and the pre-Budget report. The first principle of the hon. Member for Dundee, East is to ensure that debt is""reduced to a prudent level"." Of course we support that intention; it is necessary for sound public finances. Indeed, this is why the Bill is all about giving the Treasury duties to secure sound public finances. I point the hon. Gentleman in the direction of the Bill's long title. It is in connection with the importance of putting debt on a sustainable path that the third duty in clause 1 is to have debt falling by the end of the plan. The hon. Gentleman's second principle is to""seek to maintain a balanced budget"" in the medium term. Again, that is reasonable, subject to circumstances. The public finance projections in the pre-Budget report show that the cyclically adjusted current balance will return to zero in 2017-18. The hon. Gentleman's third and fourth principles relate to fiscal insurance against unforeseen factors and managing fiscal risks. The Government agree that these are important, which is why the code for fiscal stability states:""The principle of responsibility means that the Government shall operate fiscal policy in a prudent way, and manage public assets, liabilities and fiscal risks with a view to ensuring that the fiscal position is sustainable over the long term."" Each Budget and PBR includes a description of the key risks to the public finances, so I would argue that the hon. Gentleman's principles are already followed. Furthermore, I would argue that the duties to secure sound public finances are consistent with the principle. Securing sound public finances is all about putting the public finances on a path such that they are able to withstand unknown future shocks. It is consistent with our medium-term fiscal objective to ensure sound public finances and to ensure that spending and taxation impact fairly within and between generations, which, again, is what the hon. Gentleman seeks to achieve. The hon. Gentleman's final principle is all about stability of policies. Once again, I have great sympathy with it. It is reflected in the Government's key principle of stability, whereby so far as is practicable,""the Government shall operate fiscal policy in a way that is predictable"." That is why, as part of our reforms to fiscal policy in 1997, we introduced new fiscal objectives, as required by the code for fiscal stability. The objectives we set out then remain in place today. I very much agree with the spirit of the principles as set out in the hon. Gentleman's new clause, but I believe that they are already adequately embraced in the Government's current fiscal framework. The right approach in current circumstances is to build on those principles and to set out binding targets for consolidation that enhance certainty and confidence. Setting out quantitative targets in legislation will help businesses and investors make long-term plans, with assurance about the fiscal position and the financing environment. I know that the hon. Gentleman believes that the balance of risks is against consolidating before the recovery is entrenched, and I suspect that that is one of the reasons why he tabled his amending provisions—to provide the Government with a greater degree of flexibility. We also accept that there are risks in consolidating too soon. That is why, as I explained before, we continue to support the economy in the financial year 2010-11. It is important to support growth, which will make it easier to lower the deficit and pay back debt. That is a key point that I have put to my hon. Friends and to the House more generally. As the Chancellor said, however, support for the economy must go hand in hand with steps to ensure sound public finances once the recovery is established. In our judgment—it is a matter of judgment—the economy will be able to support a more rapid tightening in 2011-12. That is why we have set out plans to do that; the Bill is designed to ensure that we meet them.