Finance Bill

My Lords, I know about that, but I would not even have done that, which shows how terribly right-wing I am compared with the noble Lord. The classic example of a correct policy under which some people suffered is the abolition of the corn laws, which goes back a long way in the history of his own party. I strongly believe that the abolition of the corn laws was a great step forward, but there were some people who suffered. Rightly, it would never who occurred to those who wanted to do it that they ought to compensate the losers in order to do that. It is not my view generally that if you are keen on reform you always have to compensate the losers. It is a sad state of affairs, but sometimes reform matters more. What do I also say to my noble friends and right honourable friends in the Government? For the next couple of years the public expenditure side must be kept very tight indeed. The thought that I had is that public expenditure should be indexed by the same index that the MPC is targeting; namely, 2 per cent. I know that the relative price effect will cause that to mean that public expenditure will really be squeezed and that will affect all sorts of deserving people, for whom there is no shortage of pressure groups, whether they are our soldiers, our nurses or our policemen. They have all got to be told, first, simply, ““No way””—but if departments want to help them, they must be told to find it within their own budget. It will be indexed by 2 per cent and the departments will have to find the real transfers and take the tough decisions. Without that, I see no hope of any policy having any chance of success in the immediate future. But that policy would work within a fairly short period of time. What is the task of the MPC? As we know, the MPC’s target is an inflation target; as far as I know from the history of the MPC, and I was in it from the beginning, the subject to that bit has never been allowed to weigh in their minds in any particular way. I disagree with the noble Lord, Lord Marlesford, in that I believe that the economy requires loosening on the MPC’s side, but only if the fiscal side is tightened. In other words, the right policy mix—and again, this is in response to the noble Lord, Lord Higgins—is to have a much tighter fiscal side, which enables the monetary side—well, it is not really the monetary side, because it is not really money. In fact one thing is that despite all the efforts put in to find the measure of the money supply that correlates with inflation—and we are talking about millions of pounds of research money—no one has yet found the measure that works, including those most committed to it. It is strange, but they cannot find it. My general feeling is that the MPC must wait for a while, until the Treasury demonstrates absolutely that it will not validate inflation on its side or add to inflation expectations. In that case, the MPC can then move—and I hope that that happens sooner rather than later. We must take the income cut without delay because of the oil price rise; there should be no shilly-shallying about the MPC moving when the time is right. But what will really restore confidence is the Treasury talking a very tough story on the fiscal side. Oddly enough, to go a little into politics, if the Treasury were to start talking in that way, that would really restore business confidence and would therefore enable the MPC to do what it needs to do. It would also put the Opposition on the spot and give the Government a chance to fight back—and I intend to put them on the spot now. Instead of the airy-fairy stuff we hear from Mr Cameron, let alone the Liberal Democrats, about what the Conservatives will do some time in a never-to-come future, I should like to know what they would do today. Would they drastically tighten up the fiscal position and then tell us which bits of public expenditure they would cut? I should like to hear also from the Lib Dems what they would do, rather than pretending that eventually there will be efficiency gains. The thing about efficiency gains is that you cannot spend them until you have them, which is a bit too late. So my view is that, by following my realistic policies, the Government would gain politically and the Opposition would eventually be forced to tell us exactly what they would do to get the economy right.