Fiscal Responsibility Bill

I beg to move, That the Bill be now read the Third time. I thank all hon. Members who participated in the Committee stage today. The Bill is short, and we have had sufficient time to scrutinise its key provisions. As we debated on Second Reading and in Committee, the Government have set out consolidation plans to halve the deficit over four years and put debt on a downward path. The Bill places obligations on the Government to cut the deficit at an appropriate and sensible pace, as well as allowing us to protect the economy and maintain key public services. Every country has been hit by a severe financial crisis, resulting in the worse global economic recession for decades. That has had a profound impact on the public finances and resulted in a significant increase in Government borrowing and public sector net debt. We have had to be responsible but flexible in the way in which we have dealt with those changing circumstances. That is why the Government provided a fiscal stimulus to support the economy and help people and businesses—a measure that the Conservative party opposed. Of course, there were costs to stepping in, but not allowing borrowing and the deficit to rise to help people and businesses would have meant greater pain and more job losses. However, the Government have always made it clear that support for the economy must be followed by steps to rebuild our fiscal strength. It is our judgment that tightening fiscal policy too much in 2010-11 would risk the recovery and be likely to cause the fiscal position to deteriorate. We believe that the economy can support a more rapid tightening in 2011-12, and growth will help us reduce our borrowing and debt. As we look to the future, the Government believe that it is appropriate to strengthen the fiscal framework. Other Governments around the world are considering similar measures. The Bill enshrines consolidation plans in legislation. It requires the Government to have at all times a legislative fiscal plan, approved by Parliament, for delivering sound public finances, and places a binding duty on the Government to fulfil the plan. Some have claimed that placing those plans in statute is a distraction. As we have debated, legislation will provide certainty and stability for business, and the Bill will bind the Government, to ensure that they deliver the tough decision to more than halve the deficit over four years and get debt falling. The UK is not alone. As Governments throughout the world work together on the response to the downturn, many other countries are also examining their fiscal frameworks. Indeed, the International Monetary Fund has highlighted fiscal responsibility laws as a way of supporting fiscal adjustment by strengthening institutional arrangements. As I have said previously, Germany already has similar legislation on its statute book. The fiscal plan for delivering sound public finances must be approved by Parliament before it becomes law. As I said, the Bill places a binding duty on the Government to meet that plan. We believe accountability to Parliament is important. Giving Parliament that new scrutiny role in relation to progress and compliance with fiscal plans is innovative and new for the Government. I contrast what the Government are doing—we are willing and prepared to be open and responsible to Parliament—with the policies of the Conservatives, who want to set up an office of budget responsibility, which would, in effect, be an unelected quango. They would diminish the role of Parliament in such important decisions, but we do not believe that that is the right thing to do. Under the Bill the Government will be required, through regular progress and compliance reports, to account to Parliament for their actions. The progress reports, which will be produced alongside Budgets and pre-Budget reports, must set out progress that has been made toward compliance with the plans. If targets are not met, the Treasury must explain why not to Parliament. I think it right that that is the method of accountability. The Conservatives say that we could hive off economic forecasting to a separate office, while presumably relying on those forecasts, but who would be responsible if the forecasts turned out to be wrong? Who is to blame if policy is wrong because forecasts are wrong? Would it be the new office of budget responsibility or the Government? Why should Parliament not hold the Government to account for those actions? That is why setting up a new office or body and separating forecasting from policy consideration and delivery, rather than going down the legislative route that we have proposed, is the wrong way to go.