The linked long-term benefits are well known to the House, and do not include unemployment benefit. The right hon. Gentleman began his speech with some courteous remarks about my new job, and I thank him for them. Let me return the compliment by wishing the right hon. Gentleman the success that he deserves in his campaign for the leadership of the Labour party. We all understand that that is what his speech today was really all about.
Unfortunately, my duties at the Treasury prevented me from hearing the earlier speeches made by the two front runners in this interesting contest, the hon. Member for Islwyn (Mr. Kinnock) — the acceptable face of the Official Monster Raving Loony party—who promises to complete the job started by the right hon. Member for Blaenau Gwent (Mr. Foot), and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who possesses a formidable appeal to those for whom Wilsonism is the wave of the future. However, despite his somewhat shop-soiled speech today for those of us who value reason and principle, the right hon. Member for Bethnal Green arid Stepney is our man.
As Secretary of State for Trade, the right hon. Gentleman successfully fought the good fight against import controls and more recently we were reliably informed that he was the only member of the shadow Cabinet to object to the extremist manifesto on which his party was to fight the general election. Of course, he has now given his powerful support to the case that the Government have been making for democracy in the trade unions. So, all in all, the right hon. Gentleman certainly has my vote—although why anybody in his right mind should want the job is another question.
There is always a tendency in the first Gracious Speech debate of a new Parliament for right hon. and hon. Members on both sides of the House to refight the battles of the general election and to rehearse once more the speeches that served them so well and so often on the hustings. That is understandable and we had an example of that today from the right hon. Member for Bethnal Green and Stepney. However, what really matters now is the future. Let me, however, say just this about: the election. The result on 9 June—however unpalatable it may have been to Opposition Members—was a clear and unequivocal vote of confidence in the Government's economic policy. Throughout the campaign the economic policies of the other parties were deemed by the electorate to be so unconvincing that they were hardly ever the subject of serious debate. The alliance failed to convince the electorate that it had anything to propose that had not been tried, without success, over and over again since the war. The Labour party, among its other disabilities, conspicuously failed to answer the questions about trade union power that had destroyed its Government in 1979.
Only the Conservative party was able to present a credible and coherent economic policy to deal with the realities of life as they are understood by the people. That is why we were re-elected and that is why we are resolved to continue those policies that have begun to get Britain back on its feet. In contrast to the right hon. Member for Bethnal Green and Stepney, I should like to pay the warmest possible tribute to my predecessor as Chancellor, my right hon. and learned Friend the present Foreign Secretary, who launched those policies in 1979 and whose courage and whose steadfastness in carrying them through during four difficult years richly earned the success that eventually attended them, including, among other things, the lowest rate of inflation for 15 years. I am keenly conscious that few Chancellors of the Exchequer since the war have left that office with their reputations enhanced. My predecessor is emphatically one of that select few.
The Government's economic objectives have not changed in any way since we first took office. Our sights are set on sustainable non-inflationary growth. Our resolution to achieve that objective is unwavering. Our policies have been consistent with achieving it, and they are proving successful. They have earned respect at home and abroad and we intend to persist with them. The essence of these policies is simply stated, and I shall use this first debate of the new Parliament to do that. There will be plenty of complications on the periphery to occupy us later; this is the occasion to reaffirm the essential elements.
First, having achieved a notable success in reducing inflation, we shall continue to set a framework of sound financial policy. The heart of our approach will therefore continue to be the medium-term financial strategy. As the right hon. Gentleman mentioned, I was associated with its conception; I was there at its birth and I shall be proud to see it through its mature years and ensure its longevity.
Secondly, we shall continue to strive to bring about a more dynamic economy — by the introduction of competition where it has hitherto not existed, by improvements in the working of markets and by encouraging the development of a more flexible and responsive economy. The problems with which we have to grapple are far from simple but we will be able to tackle them with renewed vigour in this, our second term. Reinvigorating the supply side is an essential complement to our financial policies if we are to secure the benefits in terms of increased output, which our success in reducing inflation leaves us poised to achieve, and I wish to comment on both these key areas of policy.
The medium-term financial strategy provides the essential framework of financial discipline, and the heart of the strategy is continued downward pressure over the years on both monetary growth and public sector borrowing as a proportion of total output. Monetary and fiscal policy have to go hand in hand. The ranges for monetary growth have been adapted to reflect changes in velocity, due in part to changes in saving behaviour and structural changes in the financial system, and I think that everybody would agree that our monetary strategy has been operated flexibly and sensibly in the light of changing circumstances.
The medium-term financial strategy has been extended to embrace narrow as well as broad monetary aggregates, and in interpreting movements in these aggregates account has been taken of other financial indicators such as the exchange rate. But although the form has changed in these respects—and may have to change further in the future as the monetary system continues to evolve — the substance remains unchanged: to maintain the general thrust of a monetary policy designed to reduce inflation.
To achieve the objectives of the medium-term financial strategy has not been, and will not be, easy. The policies on which we embarked in 1979 have required tough and sometimes unpopular decisions. I think in particular of the 1981 Budget which, in the depth of the worst recession since the war, substantially increased taxation to reduce the public sector borrowing requirement by about £3·5 billion.