Let us turn to the other big Treasury Bill: the fiscal responsibility Bill. I congratulate the parliamentary draftsmen who gave the Bill its title on their sense of

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humour. We must at least give the Chancellor credit for keeping a straight face when he tells us that a Government who have tripled the national debt and run up the largest budget deficit the country has ever known will be introducing a fiscal responsibility Bill. I have looked around the world for precedents for such a Bill, and I have asked for research to be done. I can tell the House today that I have found one precedent. The paragon of financial rectitude and transparency that introduced a fiscal responsibility Bill is Nigeria.

What Britain needs is an entirely new fiscal regime, with an independent office for Budget responsibility, so that the figures are not fiddled and Ministers are held to independent account for the promises they make. That is what the Conservative party will introduce in government. Instead, what Britain gets today is a Bill that has invited mockery and ridicule before it has even been debated; a Bill that proclaims to the country that the Government will halve the soaring budget deficit, but does not say how; a new law that achieves a constitutional first of imposing no legal sanction on the person who is likely to break it. No other Chancellor in the long history of the office has felt the need to pass a law in order to convince people that he has the political will to implement his own Budget.

As one commentator observed this week, there are only two conclusions. Either the Chancellor has lost confidence in himself to stick to his resolution, and is, so to speak, asking the police to help him, or he fears that everyone else has lost confidence in his ability to keep his word, but hopes that they might believe in the statute book if not in him. Neither is much of a recommendation for the Chancellor of the day.

Mr. John Redwood (Wokingham) (Con): Was there not one important point behind this idiotic Bill? The Labour Government are now saying that they need to either cut spending or increase taxes to the tune of £100 billion. Does my hon. Friend think that Government Back Benchers have realised what that means?

Mr. Osborne: My right hon. Friend makes a very good point. I do not think that Government Members have begun to wake up to the mess of the public finances or what will be required. Let me be a little generous: I think the Chancellor is beginning to realise, because, every day, Bank of England and Treasury officials are telling him the real situation. However, he has a big problem: he has not convinced in any way his next-door neighbour, the Prime Minister, who is still intent, as his conference speech revealed, on coming up with new, uncosted spending pledges, instead of dealing with the very serious problem that this country faces, and recognising that public spending must be cut.

Mr. Andrew Pelling (Croydon, Central) (Ind): It is probably more important to be concerned about Opposition Back Benchers rather than Government Back Benchers, bearing in mind that the hon. Gentleman will likely have the Chancellor's responsibility in a few months' time. But is it not also important to be cautious about the timing of public expenditure cuts, given the fragile economy that he has described? Is one way out to go for growth, by pursuing a Reaganomics-type approach of having lower taxes, rather than higher ones?

Mr. Osborne: I am not a believer in Reaganomics. I am a fiscal conservative, as is the leader of my party. The best comment on the matter that I have read recently came from Richard Lambert, the CBI director general:

"History tells us that these are really difficult nettles to grasp but if you grasp them in a clear and bold way, then the pain lasts for a shorter period than if you just limply grab hold of them...Our strong instincts are that the risks of going too soon are less than the risks of waiting too long...Two full parliaments of chancellors being responsible just seems too much to expect."

I agree with what he says.

To return to the fiscal responsibility Bill, who on earth does the Chancellor think that he will convince with that piece of legislative fiction? Are economists convinced? No, as one former Monetary Policy Committee member has said:

"Fiscal responsibility acts are instruments of the fiscally irresponsible to con the public."

What about the markets? The verdict of one leading City analyst is that

"the government's plans for legislation to cut the deficit are not convincing and are probably just camouflage-a sort of 'fiscal figleaf'-for the lack of genuine action in the upcoming PBR."

What about the public? Surely they will want to know what happens to the Chancellor who breaks his own law. Will he be fined? Will he be imprisoned? No, he will not. The Prime Minister only wants to kick the Chancellor out; he does not want to lock him up.

This fiscal responsibility Bill will have exactly the same effect as the amazingly similarly named code for fiscal responsibility which his predecessor, the Prime Minister, introduced when he was Chancellor. That was the code that gave us all that nonsense about golden rules, prudence with a purpose, and 40 per cent. debt-to-GDP ratios, and all the while the national debt has been allowed to triple. No one was there fixing the roof when the sun was shining.

The Minister for Further Education, Skills, Apprenticeships and Consumer Affairs (Kevin Brennan): We are all in this together.

Mr. Osborne: We are all in this together, as it happens, and the sooner the Government understand that point in the last few months they have left in office, the sooner they can start to salvage some of their reputation. A big choice faces the Chancellor of the Exchequer: is he going to stand up to the Prime Minister of the day? Is he going to be like Roy Jenkins and do the right thing even if it is politically inconvenient? Is he going to be Roy Jenkins or not?

The Chancellor of the Exchequer (Mr. Alistair Darling): I wonder whether I can ask the shadow Chancellor a question in the light of what he said about Richard Lambert's remarks, which he quoted with approval. Do I take it that it is his policy to eliminate the deficit in one Parliament?

Mr. Osborne: My view is shared exactly by Mervyn King, who told the Select Committee that there would have to be, in the next Parliament,

"a really significant reduction in the deficit, the elimination of a large part of the structural deficit".

That, he said, would have to take place "over the lifetime" of the next Parliament,

"which is the period for which a government is elected. Beyond that is a statement of intent and hope rather than a plan for which someone can be held accountable."

My views on the issue are the same as those of the Governor of the Bank of England. I have no idea whether they are the same as the Chancellor's views. Perhaps he will intervene on me again. I should like to know, just as a matter of interest, whether the Chancellor of the Exchequer of this country agrees with the Governor of the Bank of England.

Mr. Darling: The hon. Gentleman quoted Richard Lambert, who, he said, had expressed the view that the deficit should be eliminated in the space of one Parliament. I asked him whether he agreed with that. My position is quite clear. I think that the amount of borrowing must be reduced by half, but what concerns me is that we do not get ourselves into a position in which we seriously damage the economy by removing support in a way that would harm businesses and enterprise. The hon. Gentleman seems to be saying that he would go further than what I am proposing. I simply ask him to clarify that.

Mr. Osborne: If the Chancellor's concern is about seriously damaging the British economy, I wish he had had that concern a couple of years ago.

I agree with the Governor of the Bank of England. That is who I agree with. The Chancellor, very strikingly, has not said publicly that he agrees with the Governor of the Bank of England. So we have someone in charge of monetary policy and someone in charge of fiscal policy, but we have no idea whether those two people agree with each other.

I suspect that this fiscal responsibility Bill was not the idea of the Chancellor of the Exchequer at all. I suspect that the Chancellor would happily be rid of the ridicule that he will invite when he takes the Bill through Parliament, but the Prime Minister will not let him, because, as we all know, it was the Prime Minister's idea, cooked up in the bunker in No. 10. It bears all his hallmarks: form over substance, spin over reality, passing a fake law instead of having the courage to deliver what you promised.

The fiscal responsibility Bill is like so much of the rest of this Queen's Speech. The Government are trying to make illegal what they have so far failed to promise and deliver. The Bill is there to create a feeble dividing line. The issue with which we must deal is the budget deficit, which is larger as a proportion of our economy than the deficits in the United States, France and Germany-even larger, now, than those in Ireland, Iceland and Hungary, the three countries that have been most exposed to the credit crunch.

How much longer can the Government ignore the growing clamour of concern from the international markets and, indeed, domestic businesses which believe that we are risking Britain's international credit rating? How great does the spectre of higher taxes, higher long-term interest rates and higher unemployment have to be before the Government change course?

We know that there is a fierce battle afoot between the Chancellor and the Prime Minister. The Prime Minister appears to be pursuing a policy of scorched earth and poison pills. The Chancellor may live in a

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terraced house next to the Prime Minister, but he has become the semi-detached member of the Government. We look to him to protect the nation's interests against this Prime Minister, who is clinging to survival.

Rob Marris (Wolverhampton, South-West) (Lab): The hon. Gentleman has courageously said that he agrees with a policy of eliminating the Government deficit within one parliamentary term. The leader of his party has said that he is against big government. Will the hon. Gentleman give us an idea of what size he thinks government should be-that is, what Government spending as a proportion of GDP should be-in, say, five years' time?

Mr. Osborne: I am not going to set some artificial target for the size of government as a proportion of GDP, not least because it will depend on the size of the GDP, which may alter every year. It may shrink, which is what we have seen it do in the last two years. I am pretty clear about the fact that the current level of over 50 per cent. is unsustainable, and I would imagine that most Labour Members agree with that.

Let me correct the hon. Gentleman. What I said was that I agreed with the Governor of the Bank of England, who has said that there needs to be

"an elimination of a large part of the structural deficit"

that

"takes place over the lifetime of a parliament".

Let us look at what the international community is now saying about the Government's plans. According to the verdict delivered by the Organisation for Economic Co-operation and Development this week,

"an announcement of concrete and comprehensive plans upfront would enhance macroeconomic stability"

in the United Kingdom, and would strengthen the recovery. The director general of the CBI has said:

"The UK's rating must be put beyond doubt".

I should like to hear from the Chancellor, when he stands up to speak, whether he thinks that it is a matter of Government policy to try to protect that credit rating. I should like to know whether he thinks that it is a top priority for the Treasury. That is the issue that is being discussed out there in the international market, and by domestic businesses deciding whether to invest in this country.

Mr. Henry Bellingham (North-West Norfolk) (Con): Does my hon. Friend agree that the key point in relation to public confidence is the interest that the country will be paying on its national debt? The rate was 5 per cent. last year, and it may rise to 9 or 10 per cent. We are talking about over £65 billion, and that is surely something that the Government must address.

Mr. Osborne: My hon. Friend is absolutely right. A growing issue in British politics will be the amount of Government money that is being used just to pay the interest on this debt. That amount is larger than the schools budget. Labour Members may remember that when they stood for election to Parliament in 1997, the phrase "the bills of social failure" was used to refer to the amount of money that the Tories were spending on unemployment benefit, debt interest and the like. According

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to that definition, the "bills of social failure" are far higher now, under this Labour Government, although there are low interest rates at present because of the monetary policy action taken by central banks. When and if the rates start to climb-and some of the long-term rates have already begun to do so-those bills will become even larger. That is why dealing with the deficit is a prerequisite for the building of a strong and lasting recovery, and providing a platform of stability for other policies for growth.

Yes, we need lower and simpler business taxes instead of the Government's corporate tax regime, which is driving companies abroad. Yes, we need to get Britain working, and we have the reforms to do it-devised by the person who used to advise the Prime Minister. The Government's policies have left one in five young people without work. And yes, we need to sweep away the red tape that strangles our small businesses.

What happened, in the Queen's Speech, to the radical regulatory budgets that the Prime Minister told us would

"transform the culture of Whitehall"?

They have been completely abandoned. What happened to the Regulatory Policy Committee that Lord Mandelson set up with such a great fanfare? It has not met for seven months. The Business Secretary has not found any space for it in his diary between the shooting weekends. [Interruption.] I know all about Peter Mandelson.

We should be sending a message loud and clear: "Britain is open for business. If you invest here, create jobs here or set up businesses here, we are on your side." We need another enterprise revolution, yet there is nothing in the Queen's Speech to bring it about. "An end to boom and bust", the Government promised, and we have had the greatest boom and the deepest bust. "Leading the world out of recession", they promised, and now a recovering world leaves Britain behind. "Better prepared", they have claimed for the last year, and now we face the largest deficit crisis in the developed world.

All Labour Governments leave office with unemployment higher than when they entered office, and leave the economy in a greater mess. This Labour Government have done it in horrific style. The sooner we get rid of them the better; the sooner we can change our Government, the sooner we can have a lasting recovery.

1.10 pm

The Chancellor of the Exchequer (Mr. Alistair Darling): We have just listened to 30 minutes of the shadow Chancellor's customary political knockabout, but we have not heard very much in the way of any specific alternative proposals he might have, which is a pity because this occasion is an opportunity for us to discuss the future of our country. This debate is taking place at a critical time, because the decisions we take now and over the next few weeks and months, particularly on the economy, will determine our future for the next five, 10 and 20 years. It is therefore very important that the debate is about how we can ensure that this country can prosper in a globalised economy, and how we can secure sustainable growth over the long term, because that is one of the best ways of restoring health to our public finances and creating jobs in the future.

Our approach has three strands. The first of them has been to take action to help people and businesses in order to ensure that the recession is less painful and less deep than it otherwise would have been. The Conservatives have always made it clear that they have been against each and every such step and proposal. Secondly, as I made clear in the pre-Budget report 12 months ago, in my view it was essential that as recovery was established we reduced the deficit. I set out a plan then, which was confirmed in this year's Budget, to halve the deficit over four years, because I believe that is a reasonable thing to do, but we must do it in a way that protects front-line services and does not damage the economy. Crucially, the third strand of our approach-I thought we might have heard more about this from the Opposition today-is to ensure growth, because that is very important for shaping our future.

At every stage, the Conservative party has made the wrong call. Too often, it has played politics rather than dealt with the real issues we faced. It was calling for austerity, rather than having the ambition to go for sustainable growth. Interestingly, although the hon. Member for Tatton (Mr. Osborne) managed to utter the word "growth" three or four times today, in his keynote conference speech just a few weeks ago he did not utter the word once. That is odd given that we read in the newspapers at the beginning of this week that growth is the new Conservative party mantra. Warm words will never achieve growth. What is needed to ensure we achieve it are specific proposals.

Mr. Graham Stuart (Beverley and Holderness) (Con): I am sure the Chancellor is serious in trying to deal with the critical state the country is in, but is he not disappointed that fellow members of his Cabinet see this Queen's Speech as an opportunity not to tackle the serious issues he raises, but to create dividing lines-to introduce legislation designed not to improve the state of the country, but purely to try to recover the Labour party's position?

Mr. Darling: The measures outlined in the Queen's Speech will not only improve our quality of life, but will help us make some of the long-term decisions that are needed, such as in relation to energy, and also in relation to the Bill that I shall discuss shortly, and which we will debate next week, to strengthen the responsibilities of the Financial Services Authority. These are important policy areas, but we do not have to create dividing lines, because they already clearly exist. I have just made the point that there is a big difference between the Labour and Conservative parties. We believe that the Government have a responsibility to help people and businesses as we go through one of the deepest ever recessions, but the Conservative party does not; it would have done nothing at all in response to recent events. I believe the Government can make a positive difference to the rate of growth that we achieve in the future, but the Conservative party does not agree. There are clear differences, therefore; the differences of opinion are blindingly obvious, and it is the people who must make a choice.

Stewart Hosie (Dundee, East) (SNP): I am bemused by those comments. Let me read out some quotations from The Herald. They appeared under the headline, "Mandelson warns of austerity 'for next decade'", and are dated 15 July: