Clause 1 — initial duties

Part of Oral Answers to Questions — Prime Minister – in the House of Commons at 2:45 pm on 20 January 2010.

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Photo of Mark Todd Mark Todd Labour, South Derbyshire 2:45, 20 January 2010

The right hon. Gentleman is nodding. That was a perfectly reasonable political objective and one that I supported, because of the problem of reassurance and-as much as anything else-unfamiliarity. The fiscal rules provided at least some framework for reassuring the wider financial community that the new Labour Government would follow a clear structure and not make ad hoc and irresponsible decisions.

The design of the rules, however, was imperfect even then. The difficulties with them were exposed when the crisis hit, but to be honest, as those who have looked at the Treasury Committee's comments on such matters over the years will know, many felt that they had imperfections even before the crisis hit. Part of the problem is that they tend to look in the rear view mirror. One is constantly looking at the past rather than setting public spending and economic priorities based on the future and projections. The past has some value in informing us, but it throws up difficulties, for instance with defining where economic cycles begin and end. We started to get into that in the middle of this decade. That could have been addressed using a better tool set, focusing more on the future.

Any Government ought to be thinking about that. I say "any Government" because there was a second reason for having the fiscal rules in place that had nothing to do with the arrival of a Labour Government-the memory of a Conservative Government that went through vast levels of deficit and borrowing in the early 1990s. As much as anything else, the measures were meant to demonstrate a difference and send out the message that we would pursue our economic policies within a published framework, within a clearly understood reporting mechanism, and within a set of rules that appeared to have been set with a degree of objectivity.