Purpose of the Bill
Put the government's deficit reduction plan on a statutory footing, in order to half the deficit over 4 years and put debt on a sustainable path in the medium term.
Main benefits
- This legislation and the detailed provisions of the bill will be set out in the Pre-Budget report alongside the Chancellor's fiscal forecast.
- The new legislation would provide a firm and binding statutory basis for the government's consolidation plans, creating a duty to meet them. It constitutes a major change to the structure of fiscal policy; especially through giving Parliament power too approve multi-year fiscal plans. Accountability and scrutiny is through Parliament rather than in any new external body.
- Legislating now demonstrates our commitment to sustainability and adds focus to our plans. It's important that businesses and investors have certainty about the government's fiscal plans, in order that they can make long-term plans about decisions with confidence. The Fiscal Responsibility Bill provides this.
Dods commentary
Responding to criticism that public sector investment through vast borrowing and debt is unsustainable, the Fiscal Responsibility Bill seeks to demonstrate the government's commitment to prudent fiscal measures law. Through binding themselves into a legislative commitment to halve the deficit over 4 years, the Labour government is launching a counter-attack on one of the Conservatives potentially most damaging claims of financial mismanagement.
The Bill seeks to encourage public trust and to take away any uncertainty about the economic environment for businesses and investors in the long term. Key provisions within the Bill relates to the government's ability to approve multi-year fiscal plans, however the main details will be announced during the Pre-Budget Report currently scheduled for December 9 2009.
The Conservatives have responded, saying that Labour is in a 'debt' crisis and they have put forward alternative cost savings measures. The main aims of the Conservative policy are "reducing the cost of government without harming front line services, concentrating benefit spending on the poorest and most vulnerable, ensuring that the burden is shared fairly, tackling the pensions time bomb while ensuring a decent standard of living in old age".
Shadow chief secretary to the Treasury Philip Hammond said: "Once the liabilities of the bailed out banks are included, our true national debt is now significantly larger than our national income, adding to the risks facing the economy and the burden on future generations."
The Liberal Democrats have criticised the Labour government’s track record with regards to debt, saying "Gordon Brown allowed the economy to get out of control by building an economy on both public and private debt, his policies fuelled a housing bubble which has now burst, and millions of people are now paying the price for this with their jobs".
On the issue of spending the Liberal Democrats have said they are prepared to identify "lower priority" spending so that front line services can be protected.
Progress
House of Commons:
1st reading: 8 December 2009 (no debate)
2nd reading: 5 January 2010
Committee sitting: 20 January 2010
3rd reading: 20 January 2010
House of Lords:
1st reading: 21 January 2010
2nd reading: 10 February 2010
Committee negatived: 10 February 2010
3rd reading: 10 February 2010
Royal Assent: 10 February 2010
Dods Parliamentary Communications Ltd