My Lords, the financial crisis and global downturn have had a profound impact on the public finances, particularly tax receipts, in the UK and in other countries. Discretionary fiscal stimulus was introduced to provide support when the economy was weakest, limiting the severity of the downturn. As the economy is forecast to emerge from recession, borrowing in the medium term is projected to fall markedly through government consolidation measures announced in and since the 2008 Pre-Budget Report. The Fiscal Responsibility Bill will enshrine these consolidation plans in legislation.
I am very grateful to the noble Lord for that reply, but I am afraid that I do not really believe it. Will the Fiscal Responsibility Bill contain a schedule to show us exactly where the public debt will be reduced and what public spending will be taken from what departments and when?
My Lords, the Bill is quite clear in what it intends to do. It will make these measures taken by the Government directly answerable to Parliament. That is the way in which we will consolidate the decisions that have been taken in the past year and a half, which have a long-running perspective to them in terms of government borrowing. A code related to the Bill will spell things out in more detail, but the Bill is clear about the responsibility of the Government to report and to stick to these measures.
The terms of the Fiscal Responsibility Bill would mean that, if there were a recession in five years’ time, it would be illegal for the Government to increase public expenditure to combat unemployment. Does the Minister agree that this proves that the Bill is just a case of political posturing and that it is not worth the paper it is written on?
No, my Lords, it is a reinforcement of the Government’s intent with regard to their public borrowing plans for the future as we emerge from this deep recession. If the noble Lord is suggesting that we are likely to see in the near future anything like the recession that we have had over the past two years, his judgment is very different from that of everyone else concerned with the British economy and the international economy in terms of recovery from this recession. The Bill makes clear the Government’s strategy for emergence.
Is the Minister aware that—in addition to a deficit that is getting on for £200 billion this year and is projected by the Treasury, somewhat optimistically, to be another £200 billion next year—if the £200 billion of quantitative easing that has occurred is going to be neutralised and not turned into inflation in the future, another £200 billion of gilts will have to be sold to mop it up? Has he made any judgment as to whether the financial markets are prepared to buy gilts on that scale and, if so, at what price?
My Lords, of course the Government are concerned about the market response to government projections, but the noble Lord will have rejoiced that the market looks very calm, if not supportive, as far as the decisions taken last week are concerned. The noble Lord is right: of course we face challenges with regard to the future. No one underestimates the problems of reducing this substantial debt, but it is quite clear that the Government are determined to do so and will be increasingly answerable to Parliament to guarantee that they do.
My Lords, the Minister referred to a code when he responded to my noble friend Lady O’Cathain. The code to which he is referring under the Fiscal Responsibility Bill is in fact the code for fiscal stability, which has been required ever since the 1998 Finance Act and did not stop the Government wrecking the economy of this country. The Minister then said that the Bill would make the Government answerable to Parliament. In what way will being answerable to Parliament under this Bill help to avoid the mess that we are now in?
I wonder whether the noble Baroness is broadening her geographical perspective in suggesting that the decisions taken by this Government wrecked the economies of the United States, Germany and all other advanced countries over this recent recession. It is quite clear that we have been facing a worldwide phenomenon of crisis in all the significant economies. What is interesting is that we approached this crisis with a lower level of debt than most other countries.
Given the seriousness of this economic crisis and its impact on Britain, would it not be logical for the opposition parties to sign up to this legislation? It is straightforward and simple. It is a clear message and it ought to be important for anyone who aspires to government.
Do we really need a Bill at all? Surely what we need in this country are a responsible Government who put the country before party-political considerations and a free Parliament of people who are concerned about their country and will hold the Government properly to account.
My Lords, we are all concerned about our country. The noble Lord may take a certain independent stance but I hope that his independence is not trammelled by the fact that he will have noted that unemployment levels during this crisis have been the lowest in the developed world.