There is a truthful answer and a bogus answer. The truthful answer, as the hon. Member knows, is that politics is a series of messy compromises. The other answer is that there was some advantage in being inside the system and getting the kind of information which one could subsequently leak, which ultimately led to my being sacked by the then Prime Minister. I hope that that satisfies the hon. Member. That is as plain as I can put it.
The more interesting statement by Christopher Johnson, group economic adviser to Lloyds Bank — again it is something I put to the Chancellor when we were questioning him although one would not think so when one reads the Treasury report— is that there has been an enormous price to pay for monetarism. By inference I think we are entitled to say that there will continue to be an enormous price to be paid for monetarism. Basically the price that has to be paid is lost output, lost income and high unemployment. He put it very succinctly, and I shall quote just this short paragraph:
Monetary policy has not achieved its targets for the growth of the money stock, but it has, by means of high interest rates, led to recession, and thus to a lower demand for labour, of which rising unemployment is the main indicator. Each one percentage point increase in unemployment has led to about two percentage points off wage inflation, which has in its turn slowed down price inflation. This corresponded"—
this is the critical point—
to a sacrifice of about 2 per cent. in GDP in 1980, and again in 1981.
If we pause to reflect on that, we see that it is an astonishing sacrifice that the whole nation should on average be 4 per cent. worse off simply because the Chancellor is obsessed with a series of monetary and financial targets which have no logical base.
The hon. Member for Carshalton and Wallington (Mr. Forman) has encouraged me to quote from the last torrid attack on monetarism that came in October when a Bank of England panel met to discuss two very important papers which the House would be unwise to ignore. There is a list of economists which I shall not take up the time of the House to read out; it is an important group of economists. At the beginning one of the participants tried to define monetarism in language which everyone could understand by saying:
Money causes prices. Money does not cause output. Nothing else causes prices or output.
There then follows a fairly orthodox economic paper by Professor Arthur Brown, using fairly orthodox economic techniques. He was examining the book by Friedman and Schwartz on monetary trends in the United Kingdom— the work on which the whole theory is based. At the end of his argument, Professor Brown asked one question: do Friedman and Schwartz make their case that United Kingdom experience supports a simple quantity theory, with money supply controlling prices and output controlled by other factors entirely? He answered it thus: "In a word, no".
Then we have the paper of Professor David Hendry and Mr. Erickson of Nuffield College. Theirs is a paper which uses entirely different and highly sophisticated economic techniques. It says that, in effect, Professor Friedman actually cooked the books. One of the basic ways in which he did that was by averaging out the data, and in doing so he distorted it. The same evidence that Professor Friedman has used to support his theories can be used to discredit them. Professor Hendry concluded with perhaps one of the most modest remarkable statements ever made by academics, who are very loth to use anything other than the most language. He said:
We actually believe that there is a need to take the 'con' out of economics.
What we have witnessed over the past decade, and what has made our country so poor, is an academic con trick. The bulk of the rest of the world has given up that academic con trick, but somehow the monetarist experiment still continues in Britain, although it is here that the evidence is strongest in disproving that experiment.
I said that there were three factors in the breakdown of the international monetary system: the response to the oil crisis in 1973; the floating exchange rates and free trade no longer enabling the countries of the Western world to return towards full employment; and the acceptance of monetarist doctrine in our society. But we have to add to those three factors three others which are still present and which have contributed to the long-term economic decline of our country, which the Chancellor and the Government refuse to recognise.
First, we lost an empire and we lost privileged markets.
Secondly, until very recently we have conducted our economy in a way which favours commercial and City enterprises rather than industrial enterprises. Until very recently we have always had to sustain interest rates which have been above those in many other countries, in order to attract hot money to Britain.
Thirdly, there has been the persistent failure—it still persists—of governments and trade unions to respond to the way in which capital can be moved about the world by transnational companies. I have tried to avoid jargon in my speech, but the effect is that capital basically dominates labour rather than capital working for labour.
Fourthly, our country suffers—and I see nothing in the Budget or the Finance Bill to deal with the matter— from the industrial consequences of our being a manufacturing nation which despises its manufacturing base. I have always thought that there were two reflections of that; indeed, I am a victim of one of them myself. The first is that people who go to Oxford and Cambridge, instead of getting out and working as plant managers in industry, tend to go into the Civil Service. That has distorted the kind of value that we have got out of our university system.
That is mirrored exactly at another level. When I was Member of Parliament for Luton, West, young people were always encouraged to enter local government or to become bank clerks rather than to become fitters in industry. I do not know why; there cannot conceivably be the same job satisfaction in being a bank or insurance clerk as there is in being a fitter in industry. Those parallel measures have damaged our economy. If we add the three basic reasons for the breakdown of the international monetary system and those four basic reasons for long-term decline—each hon. Member can add others—to what has happened in the post-war years, we can begin to see the problem that must be solved. Until we see it, we cannot get a Finance Bill to solve it.
Since the war, the booms have become smaller, and the slumps deeper, and each time we have started from a base of much higher unemployment. Each time we start from that higher base it will more difficult to get out of each succeeding slump. Manufacturing industry especially has taken a series of ferocious knocks. Since 1979 the decline has been awesome; indeed, from 1979 to 1981 the decline in manufacturing output, employment and investment was greater than the decline between 1929 and 1931.
The Financial Times recently reported the Chancellor as saying that everything would be all right. Although some people were saying that when the oil ran out, we could not sustain our growth, and that, because we would get into balance of payments problems if we tried to achieve economic growth, there would be 5 million or 6 million unemployed, instead of 3 million or 4 million, the Chancellor said that that was wrong. He said that our large overseas investments would make up for the losses in oil revenue. But no one in his right mind who has studied the proportions of profits remitted to the United Kingdom can believe that, in the 1990s, those remittances will make up for the phenomenal loss of oil revenues. We must sustain a manufacturing base, because the bulk of our exports is in finished manufactured goods, although for the first time in 1983 we became net importers of finished manufactured goods. We must sustain exports in order to pay for our imported food and raw materials.
What sort of Finance Bill should we have had? First, we should have had a Budget, a Finance Bill and a balance of revenue and expenditure that involved the injection of more money into the economy. To use the Prime Minister's crude shopkeeping terms, we should have borrowed more. The Prime Minister believes that borrowing is an original sin; she says that it is wrong to earn a pound but to spend a pound and a penny. That sounds good on television, and it may be the way to run a shop in Grantham——