Orders of the Day — The Economy

Part of the debate – in the House of Commons at 8:55 pm on 29th November 1988.

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Photo of Nigel Griffiths Nigel Griffiths , Edinburgh South 8:55 pm, 29th November 1988

Today, in the face of another devastating and effective critique of the Chancellor's strategy, the right hon. Gentleman's credit ran out. It was foolish of him to claim that the Opposition motion does not refer to inflation when it specifically regrets the way in which current policies have pushed up mortgage rates and other prices and charges". Some of us had previously only suspected that the Chancellor was an economic illiterate. If the recent price rises do not constitute inflation, the Chancellor must explain what does.

The truth is that the term "inflation" is now as embarrassing to the Government as the term "unemployment" has been hitherto. It will have come as no surprise to the House today to hear the Chancellor attempting to modify the definition of "inflation"—no doubt the first of many—so that he could achieve a reduction in the same way that the Government changed the methods of recording unemployment to mask its real level.

If the Chancellor is right in saying that the real level of inflation is less than the Treasury figures because mortgage rises are included, how will he explain that to the millions of families in London who are now paying £20 a week more for their mortgages than they were at this time last year? How can he say that that is not inflation? For the 100,000 home owners in Edinburgh, and almost 1 million throughout Scotland, the rise in mortgage rates since the Budget has burdened them with an average monthly increase of £30. For thousands of home owners in my constituency and others, the rises so far this year have added £1,000 to £2,0000 to their annual repayments. The next mortgage rate increase will be a direct result of the Chancellor's 1 per cent. increase last Friday. That will deal a crippling blow to hundreds of thousands of home owners. The Chancellor will add another record to his collection—the record number of mortgage defaults, although in fact he already holds that record.

The Chancellor will live to regret his failure today to take action to help mortgagors. Many of the poorer home owners cannot live with that. Indeed, it is not only home owners who have suffered since the March Budget—tenants have had to bear rent increases of more than 8 per cent., almost twice the March rate of inflation, and electricity price rises of 9 per cent. That has also hit industrial and commercial competitiveness. The householders who have been hardest hit by the price rises that the Government have forced on consumers are the 10 million senior citizens who spend a higher proportion of their income on fuel than do the remainder of the population.

One of the 14,000 senior citizens in my constituency telephoned me this morning to comment on the latest pronouncement emanating from the Parliamentary Under-Secretary of State for Health, who said at the weekend that fuel costs were low and that state benefits meant that old people should have no problems keeping warm. This latest advice is part of a series of advisory notes, including advice to pensioners to start knitting to beat the winter chill and to sell their assets so that they can take out health insurance in the private sector.

Like the Chancellor. the Under-Secretary is out of touch with reality. As Age Concern has said today, the reality is benefit cuts, with senior citizens waiting months for any cash help. The reality is that the Help the Aged's winter warmth line has received more than 1,000 calls in the past 10 days from people who cannot afford to heat their homes. The reality is that pensioner couples should have had in their hands every week £18 more from this Government to spend on their fuel bills, but the breaking in 1980 of the link between pay and pension rises has allowed the Chancellor an extra £5 billion this year alone. Last Friday the Chancellor said that from next October £200 million of that would go back to the pensioners.

Today, the Chancellor had the chance to state how he would use the remaining £4·8 billion that he has taken from the pensioners to help them. However, as we know, the Chancellor has already given that money to help those on top earnings. He has not invested in our senior citizens or in industry. Indeed, the right hon. Member for Old Bexley and Sidcup (Mr. Heath) said that industry was destroyed in this country in the 1980s—and all to no purpose. It is no wonder that the Chancellor declined to take any interventions today, especially from his hon. Friends. He knows that, however cogent the arguments and no matter how scathing the criticism of him by the Opposition, it is nothing to the criticisms coming from his own side. He knows that when his right hon. Friend, the former Prime Minister, criticised the Chancellor's "insensitivity to other members of the Community", he was referring to the EEC, but it is equally true that the Chancellor is insensitive to the needs of our own community.

The nine increases in interest rates since the March Budget have made it impossible for the business community to finance investment by borrowing. The millions of men and women languishing on the dole know the real price of the Government's economic failure.

The Chancellor has recently received some bad news and some very bad news. The bad news came in the widespread criticism of his policies by his right hon. Friends the Members for Guildford (Mr. Howell) and for Brentford and Isleworth (Sir B. Hayhoe). The very bad news is that he now has some support from the City—from those very people who less than a month ago he was castigating as making forecasts that were even more inaccurate than his own.

Today, the Chancellor had two opportunities. One was to announce an investment programme for training and for industry, to stop almost limitless credit eroding our home economy, to take action to reduce interest and mortgage rates and to help businesses and people. The other was for the Chancellor to help himself by giving a convincing defence of his financial strategy. He has failed, and the country is paying for his failure.