State of the Economy

Part of the debate – in the House of Commons at 8:17 pm on 25 October 1988.

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Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Education) 8:17, 25 October 1988

It is a measure of the lack of inspiration that Conservative Members evidently derived from the Chancellor's speech that so few of them have bothered to stay for the whole of the debate. They are not queueing up to defend the Government's record. The hon. Member for Lancashire, West (Mr. Hind) gave a new slant to the doctrine of everything being for the best in the best of all possible worlds when he said that everything good that happens is a direct result of the Government's policies, while the bad things have nothing to do with the Government, but are all right anyway because they are the problems of success. He told us to look in our constituencies for that success. In my constituency the jobs of 5,000 car workers are going precisely because of complacency and under-investment in the economy for which we attack the Government. Conservative Members have no answer to us other than to recite a dull litany of things that happened in the middle ages.

The Government have persistently under-invested in education, training, science and technology. If everything is on course, why have next year's grants for research councils been cut by 6 per cent.? Why is money not being spent on building up our science and technology infrastructure? Why has the manufacturing trade balance collapsed by £17 billion since 1979? It is plainly ludicrous for Conservative Members to continue to dismiss these things as the problems of success. They are not the problems of success. They are the evidence of failure.

We are told that no improvement in the balance of payments can be expected until well into the 1990s. That means 20 or so more months of appalling trade figures. This is no temporary blip as the Chancellor would have us believe. It is a return to the bad, old-fashioned stop cycle of the stop-go economic policies which were so discredited in the past.

We have pathetically low capital investment in manufacturing, which is still less than it was when the Government came to office, and barely 3 per cent. higher than it was during the deep recession of 1980. Some Conservative Members have vaunted high interest rates as the solution to all our problems. What will be their effect on the welcome but none the less limited recovery in capital investment during the past 12 months? They threaten to stop it dead in its tracks.

The high interest rate regime is a double-edged sword in the control of inflation. The hon. Member for Eastbourne (Mr. Gow) said that he agreed with the Chancellor, he agreed with the hon. Member for Wolverhampton South-West (Mr. Budgen) and he agreed with himself, that high interest rates would reduce inflation eventually. At what cost? How many more jobs will go unnecessarily through the deliberate choice of this crude weapon as a means of attempting to bring down inflation? Workers with any sort of bargaining position—there are plenty of them—will exert it to recoup the cost of higher mortgage repayments. The 9·2 per cent. rise in average earnings and the high rewards offered to some skilled workers in the south demonstrate the scope for that possibility.

Higher interest rates are intended to reduce demand, but any such reduction will be revealed in lower domestic production, whereupon we shall have higher unit costs and falling productivity. The only thing that can rescue the Government from the lower productivity and wage inflation caused by high interest rates is a switch from domestic to export production, but the dismal balance of payments figures that I mentioned offer no evidence of any hope that the Government have done anything like enough to restore Britain's international competitiveness to make that a reasonable or viable strategy. The consequence of the high interest rate anti-inflation strategy will be inflation in the short term. Putting prices up is a curious way in which to bring prices down.

Conservative Members have not considered the mismatch between demand for and the supply of labour in different parts of the country. It is as absurd as it is callous that overheating in parts of the south has been allowed to coexist with continuing recession in many other parts of the country. The Government are directly responsible for that. They deliberately reject regional policy. They have cut regional grants by £700 million since 1979. For the south, they reject any housing policy that could secure some decent low-cost accommodation, thus contributing to a ludicrous price spiral for housing.

We have the obscenity of rapidly increasing house prices, a doubling of homelessness and slashed public housing. Far from doing anything to redress the imbalance, the Chancellor aggravated it in this year's Budget by channelling tax cuts to the wealthiest people in the south-east at the expense of the rest of society. It is little wonder, therefore, that there is escalating development pressure in the south-east, which imposes even more strain on our roads and other transport network and green belt than it does on the political credibility of the Secretary of State for the Environment.

Confronted by those constraints and the Government's inability to do anything about them, it is no wonder that Conservative Members have been so dull and unimaginative in their defence of the Chancellor's dull and unimaginative speech. At the Mansion House last week he said that the supply side revolution had been accomplished, but that much vaunted revolution has simply not materialised. We have witnessed an old-fashioned short-term consumer boom, which will be followed by an old-fashioned short-term economic stop.

One aspect of the debate has not received much attention today. It is what sort of economic growth we are talking about. In a fine maiden speech, the hon. Member for Kensington (Mr. Fishburn) rightly referred to the importance of economic growth and its contribution to society. In debates such as this the House should consider what sort of growth we are talking about. It is high time that we challenged some of the outmoded indicators that are taken for granted as measures of economic achievement.

We cannot go on—the public do not want us to do it—including the production of pollutants as a positive economic output. It is counted in the Government's statistics as a good thing, but expenditure on cleaning up the beaches, which falls to the public sector, is counted as bad because the Government define public expenditure as bad. Nor can we continue to allow the manufacturer who produces five widgets and a lot of pollution to retain a competitive advantage over one who produces, at the same cost, four widgets and no pollution. If any credibility is to be attached to the Prime Minister's green conversion on the road to Brighton this year, we must look to the Government to come forward with proposals that put the cost on pollution. At present that is not reflected in market prices. There should be a tax on pollution, as well as regulations.

The Labour party recognises the contribution made by the market and competition to effective economic performance, but we also recognise what many Conservative Members have yet to learn, that economic performance embraces and is determined by a great deal more than that which the market can measure or that free enterprise can deal with.

The dead seals washed up on our shores, the hole in the ozone layer and the greenhouse effect are not reflected in market prices until it is too late. The market failures in the transport crisis that is evidently affecting the south will not be solved by further applications of the same free-for-all philosophy that clogged things up in the first place.

When it comes to pollution control and environmental protection—as with health, training, education and housing—the market, left to its own devices, messes things up. Moreover, it messes things up worst for people who have been denied the wealth that Conservative Members have so shamelessly channelled to the few. It messes things up and imposes the worst environment, just as it imposes the worst standard of living on the people who most need the increases in child benefit which the Chancellor and the Prime Minister seem determined to resist.

As people increasingly recognise the values of collective action, democratic planning and a sense of equity, which seem to have deserted the wilder idealogues on the Conservative Benches, and realise that we need to act together for a better and more just world for the future, and that we need to act in the interests of the whole community and not simply the smallest, richest part of that community, they will turn to a party which embodies those decent values and which can put them into practice in a way which the Government plainly have not, cannot and will not. The Labour party will.