Orders of the Day — The Economy

Part of the debate – in the House of Commons at 9:02 pm on 29th November 1988.

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Photo of Mr Nicholas Bennett Mr Nicholas Bennett , Pembroke 9:02 pm, 29th November 1988

The hon. Member for Western Isles (Mr. Macdonald) said that Conservative Members were sitting sullen faced and were fair-weather friends to the Chancellor. I wish to place on record the fact that I support the Chancellor in what he is doing now, as I did in March. I do not believe that the Chancellor has it wrong in having to temper the economy slightly because of the large balance of payments deficit. Some of us are determined to defend the Government's record, believe that we have it right, and that the economy is still strong.

Of course, the Labour party has a considerable problem. My hon. Friend the Member for Esher (Mr. Taylor) said that the hon. Member for Dunfermline, East (Mr. Brown) knew no economics. He certainly knows no economic history, because those Conservative Members who remember the last Labour Government will recall the appalling record left to us in 1979. We will take no lectures from the hon. Member for Dunfermline, East or from his right hon. Friend the Member for Leeds, East (Mr. Healey, who has been noticeable by his absence from every economic debate since he left office as Chancellor of the Exchequer in 1979.

All the indicators as to the prosperity of our economy show just how well off people are. Since 1979 the man on average earnings has had a 27 per cent. increase in his take-home pay, after taking account of price rises. A man on half average earnings is 20 per cent. better off in real terms and pensioners, whom the Opposition often use as a pawn in their campaigns, are 25 per cent. better off.

One has only to look around Britain today to see the prosperity. Some 67 per cent. of people own their own homes, which is a larger percentage than in any other European country. That is the mark of wealth creation and the wealth of interest in home ownership that ordinary people have. I am delighted that this party has been the party for a home-owning democracy in spite of the objections from the Opposition, who when we started to sell council houses objected and said that the tenants would not buy them. Yet eight or nine years later 1 million tenants own their own homes and have a stake in our society.

The Opposition have complained about the increase in mortgage rates, but only a few weeks ago they were complaining about the increases in house prices. They should make sure that they look at both sides of the coin. Of course mortgage rate increases are not welcome to any of us who own our homes and who know about the problems of our constituents.

Labour Members have complained about the north-south divide and the fact that house prices in the north are cheaper than in the south. They then complained, however, when house prices started to go up. Now that we are taking measures to ensure that house price increases slow down, as they are doing, they complain about that.

The Opposition have also complained that, in recent months, working people have had a certain amount of money taken from their pockets. Of course everyone regrets that mortgage rates have gone up, but we should also remember that the Labour party has voted against every tax cut since 1979. If it had had its way, we would have a tax rate of 34p in the pound. For Opposition Members to complain about people having to pay extra in mortgage interest is rich when they have objected to any cut in people's income tax rate since 1979. Those cuts have put money in people's pockets. I find it astonishing that Opposition Members can look us straight in the face.

The Opposition have complained about inflation. I concede that the inflation rate has run between 6 and 7 per cent. and that is unacceptably high, but there is not one month in this Parliament when it has come within a mile of the Labour party's record when it was 9 per cent. at its lowest rate. How dare the Opposition lecture us about inflation when, in five years, the Labour Government never got the inflation rate down to anywhere near what the Chancellor of the Exchequer has achieved.

Concern has been expressed about the effect of interest rates on small businesses. I have grave concern for the small businesses of my constituency and the family farms which suffer when mortgage and interest rates increase. The Labour party has failed to recognise, however, that 80 per cent. of the increase in the balance of payments deficit has been caused by demand from the consumer. Therefore, it is obvious that if interest rates, which affect the mortgage rate, are increased, that has a quicker and more effective dampening effect on consumer demand than any other measure.

Today business liquidity means that industry is much better able to stand up to an increase in interest rates than it ever was when the Labour party was in office. Opposition Members should consider their party's record before they lecture us.

The hon. Member for Dunfermline, East called for top taxpayers to have their tax cuts taken away. That policy equals cutting off one's nose to spite one's face. Opposition Members have not noticed that all the evidence, international and national, suggests that, when taxes are cut, the tax yield increases. That is true in this country where the top taxpayers, instead of paying 24 per cent. of the total tax yield, now pay 29 per cent. That is true of the far east, Japan, and the United States, and of every country where taxes have been cut. Conversely, in Belgium and Ireland where taxes have been increased, the tax yield has fallen. That is a recipe for disaster.

A tax-cutting policy has been successful, but tax increases would have the opposite effect. It is strange that, even after all the international evidence, Opposition Members continue to believe that theirs is the right policy.

I believe that tax cuts are a moral imperative. We are talking about the earnings of individual people. The state does not own people's earnings. The Opposition believe that the public are only entitled to pocket money which can be taken away from them at the whim of the state. In 1947, Douglas Jay put it better than anybody else in the "Socialist Case" when he said that the men in Whitehall knew best. Some 40 years on, the Opposition still believe that, despite nationalisation and all the disasters of state control. They still believe that the Government can put their hands into people's pockets and control their money. It is no accident that it is in those countries where the state controls people's earnings, their jobs and their homes that political freedom is largely negated. Contrast this with countries where people keep their own money and they have democratic freedom as well.

We must remember that we have a problem with the balance of payments—2·75 per cent. of gross domestic product. But I remember that, under the Government led by my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) and the previous Labour Government, it was 3·8 per cent. of GDP in 1974. In fact, in four out of the five years of the previous Labour Government, there was a balance of payments deficit at a far higher percentage of GDP than there has ever been under this Government. Let us remember that. When we consider the Government's record, we should contrast it with the alternatives that have been put forward in the past few years and support the policy of my right hon. Friend the Chancellor.