The hon. Member for Richmond, Yorks (Mr. Hague) spoke about his predecessor, Sir Leon Brittan, who is continuing to play a prominent role in public life. He spoke well of Sir Leon; he spoke also of other distinguished former Members of the House whom some of us had forgotten were still his constituents. I urge the hon. Gentleman to remember that when he comes to seek their advice he will be dealing with a two-edged sword, and that he accepts only advice that, after consideration, he considers worth pursuing. He spoke with clarity, and his interesting speech was well received by the House.
Of late there has been a tradition of rather more controversial maiden speeches than we used to hear—a tradition that has extended to the toleration of such speeches. The hon. Member for Richmond, Yorks returned to an earlier and, I think, more acceptable tradition, and perhaps because of that he won greater acceptance today. I am sure that he will come to enjoy the rough and tumble of the House, and I hope that his first contribution will provide an easy entry into it.
The most depressing part of the Red Book is the forecast for the balance of payments deficit. The whole year is expected to produce yet another devastating £14 billion. That is more serious than any previous balance of payments crisis. We do not now have the large number of manufacturing industries that provided us in the past with the capacity to turn from home trade to export. The main example was the motor car industry, but there have been many others. In my constituency there were many small to medium-sized companies, paying well above the national average, with unemployment below the national average. We lost one third of those skilled firms between 1979 and 1981. They had the capacity to produce for export if they found that the home market was not able to take their goods, but that has now changed considerably.
I have been asked—as, perhaps, have other hon. Members—what is the relationship between the £14 billion public sector debt repayment and the £14 billion balance of payments deficit. The unknowledgeable assumed that there was a strong connection; others, with a little more understanding, realised that the two had no relationship. Some, with even greater understanding, recognised that there was after all a close relationship between the two: it is the £14 billion deficit that makes it impossible to spend the £14 billion debt repayment sum. The Chancellor of the Exchequer, with money to spend, is unable to spend it because of the external problems that he faces.
The Chancellor can justifiably be criticised for his failure to deal with the economy's long-term prospects. He can fairly be censured for failing to deal not only with the balance of payments but with the problems of manufacturing industry, and the lost advantages of North sea oil, which we are unlikely to regain because we are once more on a level field, with our advantages lost.
The Chancellor can also be censured for his failure to control the short term. It is more than six months since fears of a credit explosion—frequently expressed—were finally confirmed. Two years ago, on 10 February 1987, the Financial Times was able to say that more was required of the Chancellor than high interest rates, that monetary policy had flitted from one rationale to another in the past few years like a bee in search of honey, and the task was not helped by continuing to trivialise a major deviation from the Chancellor's own target for the economy. It also said:
The Department of Trade and Industry said that outstanding consumer credit from finance houses, retailers and credit card companies, totalled £23·7 billion in December 1986.
That was over two years ago; there is nothing new in it. What is new is the failure to react to it. This was not a blip, and the action that the Chancellor took was inadequate and slow in its effects.
The right hon. Member for Yeovil (Mr. Ashdown) talked about stop-go. At least in the days of stop-go we could he sure of the results. They would be dramatic and immediate: purchase tax or VAT increases, a raising of the tobacco duties, increases in taxes on alcohol, petrol prices raised, spending on roads cut. We can see from the state of the roads today that cuts have been made in good times as well as bad, although North sea oil has been abundant.
All those announcements about tobacco, alcohol and petrol took effect at 6 pm on the day of the Chancellor's statement. The result was a highly visible and dramatic appreciation of the change in our economic fortunes. After a few weeks, patterns of spending changed and the economy promptly slowed down. On this occasion, we talked about measures in the autumn. The months went past—we had Christmas and the new year, and now we are in March—and still we have not seen any such effect.
I was once a frequent critic of sudden changes, mainly because of the damage done to our manufacturing industry, which took the brunt of such measures. The present position is different. With the decline of our manufacturing base, the burden of immediate measures would be carried rather more by importers and retailers. There was therefore a strong case for action in the autumn. The Chancellor, however, ruled it out, to the disadvantage of industry and house buyers and ensuring that our economic problems would outlast the year. Failing to administer the short sharp shock was, I believe, a tactical error of the worst kind—waiting for something to turn up —and we shall have to live with the consequences.
Of even greater importance than the tactical failure, however, has been the Chancellor's failure to plan for the long term. He had the opportunity to use the breathing space with which North sea oil provided our balance of payments to help industry and promote training, and to equip the nation to deal with the major problems lying ahead. With the startling growth of world populations, we are destined to be just one of a number of smaller countries. Many more have populations in excess of 100 million, and industrialisation is on the increase elsewhere.
In 1979, with the prospect of the cornucopia of North sea oil, our position appeared enviable and compared favourably, if not with that of Germany and Japan, certainly with that of France and Italy. We were the only country in that group with self-sufficiency in oil. We even had an exportable surplus. Our position could hardly have seemed more attractive, but oil in itself is not enough: only if it can be used sensibly is it a real and lasting benefit. Iran and Iraq have used their advantage disgracefully, Mexico has wasted it, and Britain has squandered it. Meanwhile, Japan and Germany strode on without it.
On the other hand, France and Italy almost seem to have benefited from not possessing this valuable mineral. Those two countries have manufacturing sectors that are highly successful, whereas we have turned, traditionally, to our financial sector that produced rewards that were directly contrary, in a number of cases, to the interests of our productive industries.
The high pound that the City smiles benevolently upon and that the Bank of England believes is crucial to our economic well-being is the deadly affliction of those companies that manufacture. The truth is that, in the long term, manufacturing growth is so much more important than North sea oil. This oil produces so many billion pounds a year which, for a given output, even if its price remained high, would not increase with time. If, however, manufacturing industry is nurtured and encouraged, it grows at a compound rate that leads to an accelerating level of prosperity. That cannot be found in any other kind of industry. Furthermore, that prosperity is enjoyed by all employees and in all the different regions of the country.
Manufacturing industry, however, has been hit very badly. The fact is that 13 per cent. interest rates and an over-valued exchange rate is the recipe that brought about the disasters of 1979 to 1981. The position is not quite so bad now; there was a 17 per cent. interest rate then. That ruined the domestic market, and a $2·40 pound ruined the export market. We hear nonsense about there being no problems with an over-valued exchange rate. If we are interested in the commercial future of our country but rule out price—the dominant factor in selling our goods—we are being absurd. Price is crucial.