This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today.
As there still is great public anxiety on the subject, will my right hon. Friend undertake this afternoon to look at the subject again and reassure the House and the nation that the Government will look twice at the dangers of imposing any additional forms of taxation on pension funds or lump sum payments?
I recognise the concern about this subject. I refer my hon. Friend to the statement that was made in the House, in response to questions, by my right hon. Friend the Chancellor of the Exchequer. As my hon. Friend will be the first to appreciate, I cannot say anything more at the present time, but I do urge him to look at that statement by my right hon. Friend.
Three weeks ago the Government were against the idea of increasing interest rates to defend sterling, but they did increase them and it did not work. Two weeks ago the Government scorned the idea of intervening to defend sterling, but they did intervene and it did not work. Can the Prime Minister tell us what she is going to do now?
I recall the right hon. Gentleman saying on 15 January that he was absolutely against speculation against the pound and that he thought it was "irresponsible and irrational". If that is what he thought then, I hope that that is what he thinks now, and that he thinks that the action that has been taken to stop this is right and well judged in the circumstances.
I do think it irresponsible and irrational, but it is the right hon. Lady who believes in the market system and not us. Her response again today will impress nobody, either at home or abroad. It is the right hon. Lady who has surrendered policy-making entirely to the whims of the market. The result is chaos, a crisis of confidence and a huge rise in interest rate burdens on both business borrowers and home buyers. Is the right hon. Lady going to change her policies in the light of that experience, or will she go on with the same mixture of panic and paralysis that has brought us to this mess?
I am not quite sure whether the right hon. Gentleman is objecting to what we have done or saying that we should have done nothing. In fact, the action that my right hon. Friend took was to maintain the financial strategy that has brought inflation lower for a longer period than any other Government have done previously and which, in spite of the effects of a coal strike—[Interruption.]—for 10 to 11 months last year has kept the current account in surplus.
The right hon. Lady's strategy is coming apart at the seams, and she knows very well that it is coming apart at the seams. What we want is a real strategy to give proper growth and recovery to our economy, and all we are getting from the Government, especially now, is dithering and, again this afternoon, dodging. That will only mean more on the dole and more in debt. We have not a crisis of confidence in the country but an absence of confidence in the Government. Are the Government willing to change their policies, and will the Prime Minister really help by chucking out the Chancellor?
The action taken has been such as to impose financial discipline on all sections of the economy, including the Government. I remind the right hon. Gentleman that gross domestic product is at its highest ever level. I hope that he is pleased about that. Fixed investment across the economy is at its highest ever real level. Retail sales are at their highest ever real level; they have increased by 4 per cent. in volume. Profits increased by 20 per cent.—[Interruption.]—in the first three quarters of 1984. The Government's record on inflation is second to none. If the right hon. Gentleman listens to what is being said about unemployment, he will understand that the most important thing in tackling unemployment is to keep down inflation.
As interest rates have been increased to a level that must put at rest any fears that there may have been about inflation, and as the markets are now offering the best opportunity ever seen for our exporters and business men to do business abroad, what reason have we to complain?
As my hon. Friend will be aware, markets are opening up because of the strength of the dollar and the weakness of sterling compared with the dollar. He will be aware also that it is vital to stay competitive on wage costs. The people who can benefit most from that are those who are best able to take advantage of the present exchange rate. My hon. Friend will know that our wage costs are rising and that the Opposition support every wage claim. At the same time, the wage costs of our competitors are either remaining stable or decreasing. If the Opposition want to improve the prospect of employment, they must help to keep down unit wage costs.
As, in part, sterling's problems stem from uncertainty over oil prices, and as over-production at a time of depressed demand leads to a disorderly market, will my right hon. Friend confirm that the Government have reserve powers to limit production and depletion in the North sea? Will she consider using these to underpin the light crude oil price and so help to bring back stability to the oil market?
The policy that we pursue is really the same as that of the United States. We do not have powers to restrict production in the North sea, but we have powers to purchase 51 per cent. of that production at whatever is the market price. I think that we must stick to that.
When will the Prime Minister recognise that the rest of the world does not share her rosy view about her handling of the economy and that it is possible that the rest of the world is right and she is wrong? Since she spoke on "Woman's Hour" and said that the pound was undervalued she has had to increase interest rates to their highest level for 150 years. Will she explain to the House why it is that the pound does not do what she tells it to do?
I note what the right hon. Gentleman says about interest rates. He will note that interest rates in real terms are not as high as they have been in the United States, and I am often urged to follow the course of the United States.
In view of the shambles in which the Prime Minister finds herself, does she not think that it is now appropriate for her to dispose of the Chancellor of the Exchequer, in the national interest? As she cannot find a satisfactory alternative, will she say whether the promised tax concessions will be implemented in the Budget? If they are, will that result in more new real jobs, in her terms?
I think that the hon. Gentleman must await the Budget. I remind him that the Government have raised the thresholds of personal taxation by 16 per cent. That means that income that is tax-free has been increased by 16 per cent. The previous Labour Government lowered thresholds.
Does my right hon. Friend accept that, although the high interest rates that have had to be introduced are a worry and a difficulty for industry, business in Britain will, nevertheless, support the Government while they continue to keep inflation down? Indeed, business would probably send the Government a message saying that they must try harder in dealing with inflation, because inflation destroys both large and small businesses.
I agree with my hon. Friend. It is always a disappointment to have to raise interest rates, but the effect would be far worse if inflation were allowed to increase again. On 7 February 1978 the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said that
in terms of promoting employment opportunities throughout the country … nothing is more important than containing inflation."—[Official Report, 7 February 1978; Vol. 943, c. 1271.]
Is the Prime Minister aware that, at the weekend, all over Scotland there was snow, and temperatures at well below freezing, old people suffering from hypothermia and pneumonia, and yet still there was no exceptional weather payment? How much longer must the north of England and Scotland suffer these arctic conditions? How many more old people must die before the right hon. Lady changes her mind?
This question is asked on every occasion, and on every occasion I give the hon. Gentleman and his hon. Friends the same reply: this matter is under review. The main heating benefit is the regular heating amount paid. The heating amount paid to pensioners under this Government far exceeds the amount paid under any previous Labour Government. This Government have everything to be proud of in the way in which they have looked after the heating allowance for pensioners.
I comment on the proposed celebrations of VE day. Does my hon. Friend recall that the war started with the cruel dismemberment of Poland and that, in what followed, Polish pilots helped to defend this island and Polish troops fought with distinction alongside our own troops? Yet, when the war was over, those Polish troops found that they had lost their homeland. I ask my right hon. Friend, most respectfully, whether she will ensure that Polish veterans living in this country, and Czechoslovaks who shared the same fate, will have an honoured place in any parades or church services?
I gladly join my right hon. Friend in paying tribute to what Polish troops did in wartime and to the gallant way in which they fought throughout the war. We shall ensure that his point is taken fully into account.
Has the Prime Minister seen the estimates that, if the coal strike ends, consumption of oil will decrease by between 500,000 and 1 million barrels a day? If the right hon. Lady is so good at predicting what will happen to the economy, will she predict what will happen to the price of oil in that event? And what will be the effect on the pound?
Does my right hon. Friend accept that, of the factors affecting sterling, many — such as the value of the dollar, the price of oil, the world recession and the size of the United States' deficit—are completely outside the Government's control? Does my right hon. Friend accept also—[Interruption.]—that the majority of my constituents, many of whom do not vote Conservative, think that she has done and continues to do an outstanding job?
I agree with my hon. Friend, and all reasonable people would agree with him on the facts. The price of oil is outside the control of the Government. Total production is far too small to have an effect on the price of oil. The rise in the dollar is also outside the control of the Government. We have done all that we can about that by taking part with the G5 nations in co-ordinated intervention. We are left with two problems, which are the decisions that have been taken about the price of oil and the coal strike.
Will the Prime Minister explain to the House why real interest rates in this country are now double those in Germany? Is it not a reflection of a complete lack of international confidence in her and her Government?
No, Mr. Speaker. If the hon. Gentleman will study the international comparisons he will find that West Germany has run a strict financial policy for many years. Therefore, it has brought its inflation down further than ours. In West Germany it is 2·1 per cent. He will also find that it has kept its public expenditure under control and that it made considerable sacrifices for two years. West Germany has—[Interruption.] I wonder whether the hon. Gentleman is interested in the reply or whether his hon. Friends are just interested in shouting. He asked me about West Germany, and I pointed out that its inflation is lower than ours through a strict financial policy. In answer to a previous question, I pointed out that it keeps its wage costs down. Its unit wage costs are lower than ours. It has kept a strict control of public expenditure. In the past two years West Germany has cut unemployment and maternity benefits and delayed pension increases. With that strictness over the past two years, and some of the sacrifices made by her people, it is not surprising that the deutschmark should have risen against sterling.
Yes, Mr. Speaker. As you may know, Mr. Speaker, early today we asked for a statement from the Chancellor of the Exchequer on the Government's economic policy, and such a statement was refused. In view of that, the Prime Minister's utterly inadequate responses on that matter, which is of central importance today, and because of the Government's bungling economic policy as evidenced by manufactured trade and output figures, unemployment figures—[Interruption.] interest rates figures and the current turmoil, I wish to give you notice that we shall be tabling a motion censuring the Government for their utter mismanagement.