The Economy

Opposition Day – in the House of Commons at 3:56 pm on 24th July 1990.

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Photo of Mr John Smith Mr John Smith , Monklands East 4:02 pm, 24th July 1990

I beg to move, That this House deplores the mismanagement of the economy which has resulted in crippling interest rates, damagingly high inflation, and the largest balance of payments deficit in history; condemns the neglect of investment in the public sector and in public services, which has damaged the economy and diminished the quality of life of the nation; urges the Government to adopt a strategy for economic recovery which promotes innovation in industry through the application of science and technology and the promotion of new products and processes, which realises the potential of the whole of the United Kingdom through an imaginative and sustained regional economic policy, and which, by means of a thoroughgoing commitment to the improvement and expansion of education and training, aims to develop to the full the skills of the people; and concludes that if the decline in the economy and in public services is not halted and a programme of recovery embarked upon, Britain will continue to fail to reach the levels of economic success and social progress enjoyed by other nations in the European Community. On the verge of the summer recess, we look back on a parliamentary Session that has been bad news for the Government. Perhaps the announcement last week, that the plans for improving community care had to be shelved for years because of the poll tax, was symptomatic of a Session in which the Government have become increasingly entangled in snares of their own making. As the Chief Secretary has already warned his colleagues, there will be fierce struggles over the summer between the Treasury and other Departments because inflation has disrupted the Government's spending plans.

As I look at some of the disappointed faces on the Government Back Benches, I am reminded that yesterday—[HON. MEMBERS: "Not many."] Indeed, there are not many of them, because some hon. Members are concealing their disappointment elsewhere. Yesterday we had the diversion of yet another ministerial shuffle, a rather purposeless rearrangement of the chairs on the middle and lower decks. With no disrespect to the feelings of those included—or of those excluded—that was small beer compared with the other changes that we have seen over the Session.

It all started in a different tone when the Chancellor of the Duchy of Lancaster addressed his first Conservative party conference as chairman. Last October, under the banner The Right Team for Britain's Future", the right hon. Gentleman had stirring words for the delegates: this is not the time for fretting, this is not a time for poring over opinion polls. This is not a time for being faint-hearted. The fight is on. And, in the words of Henry, before Agincourt, 'he which hath no stomach to this fight, let him depart."' That is just what they have done. The first to depart was the right hon. Member for Blaby (Mr. Lawson), trailing Sir Alan Walters, that other family concern of the Prime Minister, in his wake. The process ended just a few days ago with that spectacular display of teamwork which marked the exit of the right hon. Member for Cirencester and Tewkesbury (Mr Ridley) from the Cabinet. In between, it is worth noting that so right was that team for Britain that only nine months later we have a new Chancellor of the Exchequer, a new Foreign Secretary, a new Home Secretary, a new Secretary of State for Trade and Industry, a new Secretary of State for Employment, a new Secretary of State for Wales and even a new Chief Whip. So imbued was the team with the spirit of Agincourt that four of them have left the Government completely, demonstrating a novel facet of the new concern for family life.

Bad though the personnel position is, demonstrating the confusion and disarray in the Government, the Government's main problem and the nation's main concern is their woeful mismanagement of our economy. We hold the Government to account for bringing Britain to a position in which we are the worst of all performers among the leading industrial nations. The facts are clear and they cannot be seriously in dispute. I take the OECD as a objective source. I understand that the statistics for the individual countries which that organisation deploys are approved by individual member Governments.

Let us look at the growth league. The growth in real gross national product for 1990 predicted for Japan is 4·7 per cent. That for West Germany was 3·9 per cent., now revised upwards to 4·4 per cent. The figure for France is 3·1 per cent.; for Italy 3·1 per cent.; for the United States 2·3 per cent.; and for Canada 2 per cent. For the United Kingdom, it is 0·9 per cent., against an average of 3 per cent.

Let us consider the league table for the projected increase in investment in 1990. The figure for Japan is 10·2 per cent.; for Germany 6·6 per cent.; for France 6·5 per cent.; for Italy 5·7 per cent.; for Canada 4·1 per cent.; and for the United States 3·2 per cent. For the United Kingdom, it is minus 1 per cent.—a negative projection for investment in the United Kingdom, against an average for the G7 countries of 5 per cent.

What about inflation? We are top of the league with 9·8 per cent. The figure for Italy is 5·7 per cent.; for Canada 4·5 per cent.; for the United States 4·4 per cent.; for France 3 per cent.; for Japan 2·7 per cent. and for West Germany 2·3 per cent. Britain has an inflation figure of 9·8 per cent. against an average of 4·3 per cent. Those facts show our position among the G7 countries.

Photo of Mr Philip Oppenheim Mr Philip Oppenheim , Amber Valley

Will the right hon. and learned Gentleman give way?

Photo of Mr John Smith Mr John Smith , Monklands East

I shall give way to the hon. Gentleman in case he wishes to challenge.

Photo of Mr Philip Oppenheim Mr Philip Oppenheim , Amber Valley

As the right hon. and learned Gentleman is so keen on OECD figures, he will be aware that the latest set shows that, during the 1980s, productivity in British manufacturing rose at the fastest rate of any industrial country and that manufacturing output in Britain rose by one quarter—the best performance in Europe. That compares with the experience under the last Labour Government, for which OECD figures show that manufacturing output fell and that during the 1960s and 1970s, our manufacturing output and productivity rose more slowly than those of all other European countries.

Photo of Mr John Smith Mr John Smith , Monklands East

First, let me correct the hon. Gentleman on one fact. Productivity in the manufacturing sector did not fall under the Labour Government. However, it is interesting that the hon. Gentleman takes much the same line as the Government appear to do in their amendment. They look back to what they claim as some credits during the 1980s. There was a one-off improvement in productivity caused by running down the work force at the beginning of the decade, but the problem is that it is not sustained productivity. If I were the hon. Gentleman, I would not pursue the point about productivity because the figures are already turning against the Government, and will continue to do so.

I noted that the hon. Gentleman did not challenge any of the OECD figures on Britain's relative position on growth, investment and inflation—three important criteria.

Photo of Mr John Smith Mr John Smith , Monklands East

No doubt the hon. Gentleman wishes to correct me, so I shall give way to him.

Photo of Mr William Clark Mr William Clark , Croydon South

I am grateful to the right hon. and learned Gentleman. I am sure that he wishes to be fair. If we are to compare like with like on inflation, the underlying rate of inflation in Britain is 6·9 per cent., not 9·8 per cent.—[Interruption.] It is. Indeed, it is unfair to take different arithmetical calculations in the retail price index than other countries that do not include mortgage and housing costs. Surely the right hon. and learned Gentleman agrees with that.

Photo of Mr John Smith Mr John Smith , Monklands East

I intend to deal with precisely that point during my speech. If the hon. Gentleman or the Government think that there should be some other means of assessing the rate of inflation, they should make representations to the official committee that regulates the basis on which the RPI is composed. I understand that the Government put to that committee the questions of both mortgage interest and the poll tax, and the committee said that they should be included, as most of us think they should be.

As Conservative Members would judge other Administrations on the basis of the RPI figures, I hope that they are prepared to be judged on that same basis. The whole reason for the exercise is because the hon. Gentleman, like his colleagues, is acutely embarrassed that inflation is knocking 10 per cent.

There has been a steady increase in inflation since 1988 —two years of remorseless increases. I shall remind the House of the Government's technique with economic problems. From their foundation, the Government have always been about hype rather than reality; about presentation rather than achievement. When inflation had almost doubled in 1988, the former Chancellor of the Exchequer told us not to worry because it was just a blip, a temporary phenomenon. The Government's first approach to the problem is to claim that it does not exist. Unfortunately for them and for us, inflation has continued to blip upwards, until it is now knocking 10 per cent.

The next technique is to rejig the figures, and that was most blatantly shown in the perpetual readjustment of the unemployment figures in the Government's favour. We had another example of that yesterday, which my hon. Friend the Member for Oldham, West (Mr. Meacher)—the shadow Secretary of State for Social Security—drew to the attention of the House on a point of order only a few minutes ago. The Government surreptitiously had to admit that their figures for poverty in Britain were hopelessly out of line with reality. I remind the House that, once again, the Government's defence was to say that increasing poverty did not exist in Britain, although Opposition Members knew from their constituency experiences that increasing poverty was precisely what was happening.

The Government not only claimed that the trickle-down from those whom they favoured at the top benefited the poor, but that their relative position had improved. The trouble with using statistics to belie reality is that reality has a disconcerting habit of breaking through. That is what happened in the new figures that were so shamelessly and covertly issued last evening. They revealed the extent of the Government's error and the fact that the living standards of 10 million people in Britain have declined while the Government have been in office.

All the figures to the contrary that were issued previously, and which were the basis not only of criticism but of justification of the Government's position, have turned out to be bogus. At the very least, a Minister should come to the House as soon as possible to explain why the Government have misled both Parliament and the nation for so long, and why it has taken them three years to admit that. Those of us familiar with the Government's techniques are not surprised by the way that they have dealt with the matter.

The handout from the Department of Social Security last night stated: Net incomes of the population as a whole rose by about 20 per cent. in real terms over the period 1981–87. The incomes in the lower income groups also rose in real terms, but less rapidly. The actual figure for the average was 20 per cent., but for those in the lower income groups it was 2 per cent. What a euphemism for the difference between 20 per cent. and 2 per cent. to say "less rapidly". That shows the technique, the Government's sleight of hand and how they choose to deploy their statistics.

Photo of Mr Conal Gregory Mr Conal Gregory , City of York

The right hon. and learned Gentleman will recall that, under the Labour Administration, inflation rose to about 27 or 28 per cent. Does he share the view of the Leader of the Opposition, who, when asked on "The World at One" how he would control inflation, said: To cut a long story short, we don't know.

Photo of Mr John Smith Mr John Smith , Monklands East

The hon. Gentleman has a selective memory. Under this Administration, inflation reached 22 per cent. and, in case he wants to blame the last Labour Government, his party doubled VAT from 8 to 15 per cent. We have persistently and consistently set out our policies to control inflation, which we believe are an important objective of Government policy. We are not in a mood to take lectures from a Government who have so lamentably failed to control inflation.

The statistics on inflation and the balance of payments show once again that the Government's first reaction when things start to go wrong is to claim that it is only temporary, a blip for inflation. The Prime Minister told us, the first time that the balance of payments deficit for the month was more than £1 billion, that they were freak figures. Almost every month, those freak figures have reasserted themselves. Every month has been a freak month since the Prime Minister announced that that was the explanation for our deteriorating balance of payments.

The next stage is to misrepresent the figures—the exercise on which the hon. Member for Croydon, South (Sir W. Clark) was embarked. Because the high RPI is embarrassing, two other versions are being introduced—RPI minus mortgage interest and RPI minus mortgage interest and the poll tax. Those two alternatives are being trailed across the scene. The hon. Gentleman selected the first alternative, and with a bit of encouragement he would probably adopt the second.

In the first version for which the Treasury produces figures, mortgage interest is struck out as though it did riot exist, as though it were not paid and were not afflicting families in this country. Unfortunately for the Government, the figures are still embarrassingly high—too high for presentation—so what do they do? They fiddle the figures again. They briefed and encouraged willing participants in the press to devise a new method of assessing it—RPI minus the poll tax.

The Government know that the official committee which regulates the basis of the RPI thinks that mortgage interest rates and the poll tax should be included. If the Government have nothing to do with this, I hope that they will take the opportunity to criticise the Sunday Times and the Institute of Fiscal Studies and tell people not to believe them.

Photo of Mr Robert Sheldon Mr Robert Sheldon Chair, Public Accounts Committee, Chair, Public Accounts Committee

The Government are not only trying to fiddle the figures downwards but have succeeded in fiddling the RPI because it does not take account of exchange rate changes, which would have put it well over 10 per cent., and perhaps up to 11 per cent.

Photo of Mr John Smith Mr John Smith , Monklands East

I am grateful to my right hon. Friend for a wise and apt observation, which adds to the strength of the attack that we are making on the Government on this point.

The Government cannot exclude mortgage payments, because the public cannot exclude them. Other countries include different housing statistics because they are organised on a different basis. There is a different pattern of house ownership in comparable countries, with much more rented accommodation, but they take account of them in their prices index and do not strip them out, as the Government propose.

To try to remove the poll tax from the RPI is the worst example, because rates were always included in it. What is embarrassing for those who argue that the poll tax should not be included because it is alleged to be a tax is that they called it the community charge. They want to call it the community charge, and when we say "poll tax", they wince and say "community charge" back at us. If it is a charge, it is a charge and it should stay in the RPI.

Photo of Mr John Smith Mr John Smith , Monklands East

It is a short debate; I must get on.

The Chancellor is adopting a new approach, a wholly new wheeze, the "proximate" rate of inflation. That applies solely to our relationship with other European Community countries. Proximate is not exactly precise; it gives the Chancellor a certain amount of flexibility and movement, because he has only approximately to meet his figures.

That is just as well in relation to the so-called Madrid conditions for joining the exchange rate mechanism. I remind the House that inflation had to come down to the Community level before Britain could contemplate joining the ERM. As inflation is now higher than it was when those conditions were outlined, the Chancellor has a bit of a problem, so that is why we are into the "proximate" dodge.

The Chancellor cannot dodge the fact that inflation is higher than it was when the conditions were set. When we consider the Government's record over the decade, we go back to their early days and to the setting out of the medium-term financial strategy of happy memory. We hear little about it today. The truth is that there is now no effective strategy. The medium-term financial strategy did not even rate a mention in the Chancellor's Budget speech.

The Government are now involved in a new stratagem—the STES, or short-term election strategy. The plan is to maintain high interest rates—as indeed the Government must—until Britain joins the ERM and then, in the period of lower interest rates which may occur following entry, to encourage a boomlet to coincide with the election at a time when, for statistical reasons, the headline RPI is falling, although the underlying rate may be rising.

The Government do not reveal that all the economic commentators who have speculated on this outturn of events—which they note will be a politically favourable scenario for the Government—point out that not long afterwards the problems get worse, and that every economic indicator goes in the opposite direction, contrary to the national interest. Why? There is a simple reason: because the underlying problems will not have been tackled by that device. That is the heart of the matter and, I hope, of our debate.

The Government have not tackled the underlying problems of the British economy, although their hype proclaimed until relatively recently that they had overcome them. The Government started the decade with the bonus of North sea oil. Eleven years and £91 billion-worth of North sea oil revenue later, we are at the bottom of the G7 leagues for growth and investment and the top for inflation.

There was a period when Conservative Members almost believed their propaganda. On 26 April 1988, speaking in the debate on the Finance Bill, the Chancellor, who was then the Chief Secretary, said: During the 1960s we praised and envied the German economic miracle. In the 1980s the situation has been precisely reversed."—[Official Report, 26 April 1988; Vol. 132, c. 214.] Note the careful words "precisely reversed". There can be only one meaning for that—Britain now has the economic miracle, and Germany has to learn from the British model.

This reminds us that the fascination with West Germany goes back some time before the inglorious seminar at Chequers which received extensive publicity recently. That seminar revealed some curious attitudes to West Germany, with an obsession with German history and a patronising and insulting identification of so-called German characteristics and habits. The habits relate to the economic success and the characteristics to the foreign policy fears that the Government detect at every hand. These characteristics were identified, in the careful hand of the Prime Minister's perpetual private secretary, as angst, aggressiveness, assertiveness, bullying, egotism, inferiority complex, sentimentality". Many might think that, with the exception of sentimentality, all those characteristics could be applied with some appropriateness to the present British Administration and its head.

In the record of that seminar, was there any substantial reference to the German economic success, still less to how it had been achieved? Going through what I am sure was the full record, I noted that any notion that Britain had overtaken Germany was not mentioned in those private discussions. That was for the House of Commons. When one gets down to the real discussions at Chequers, one does not delude oneself with any of that nonsense.

The seminar did not spend time considering that matter, because the Chancellor's claim is absurd. If we have precisely reversed the position with West Germany, why is its projected growth rate for this year 4·4 per cent., while ours will be lucky to reach 1 per cent.? Why is its inflation rate 2·6 per cent., while ours is 9·8 per cent.? Why are its interest rates 8 per cent., while ours are 15 per cent.? Why has its growth in output since 1979 been twice ours? Why is the percentage of its work force who are skilled 62 per cent.—according to the European Commission—while our figure is only 38 per cent.? Why did a British balance of payments deficit of under £1 billion in 1979 become a balance of payments deficit of £9 billion today?

The Government have been hoist by their own petard: they chose Germany as the comparison, but the most cursory analysis confounds their claim, and reveals that the weakness of the British economy is alarming in comparison with German success. I hope that the Government, in their slightly more subdued mood of recent months, will appreciate the point.

To establish that, it might be sensible for the Prime Minister to organise another seminar at Chequers—this time, to examine German economic achievement; this time, not to patronise but to learn. In the course of such an examination of the experience of West Germany since the war, the seminar would learn that the keys to a modern successful economy are—as Opposition Members maintain—to initiate supply-side policies, to increase investment in research and development, education and training and regional economic development, and to give proper and sustained priority to manufacturing industry.

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury)

Surely, when the right hon. and learned Gentleman mentions the German success in interest rates and inflation rates, he should not omit from the list the existence of an autonomous central bank with a responsibility for price stability?

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

I do not believe the superficial analysis of the position indulged in by the hon. Gentleman and his colleagues. The German success in countering inflation has been achieved over a much wider front than the existence of an autonomous bank. It has much to do with popular culture and a partnership economy—

Photo of Mr David Shaw Mr David Shaw , Dover

Are you in favour of that?

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

No, I am not in favour of having an autonomous bank. I do not know why the hon. Gentleman is in any doubt about that, as we have stated clearly that we are not in favour of an autonomous bank in Britain or in Europe. On that, we disagree with the hon. Member for Berwick-upon-Tweed (Mr Beith) and his colleagues. It is taking superficiality to excess—I know that that has long been a habit of the Liberal party, but it should not persist in it—to think that there is a casual connection between an autonomous central bank and a low rate of inflation. After any serious analysis, I do not think that that idea can be maintained.

Photo of Mr Ian Gow Mr Ian Gow , Eastbourne

Should the proposed Chequers seminar examine the contribution that socialism has made to the German economic miracle?

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

I think that it should. I am grateful to the hon. Gentleman for adding an interesting extra half-hour to the discussion. It would he constructive for the Prime Minister and her colleagues to examine the success of the SPD-led coalition Government Germany, during whose time in office a great deal of German economic success and social partnership was achieved. If the hon. Member for Eastbourne (Mr. Gow) gets any more bright ideas, will he speedily communicate them to me? I feel almost like writing to the Prime Minister, saying that this is not my suggestion but that of her former Parliamentary Private Secretary, and that it must therefore be treated with some respect.

When we compare West Germany's investment in research and development with that of Britain, we discover what a state Britain is in. West Germany spends £432 per employed person, compared with £265 in the United Kingdom; in industrial development, its Government funding for research and development is 61 per cent. higher than that of the United Kingdom; its investment in pure science is 135 per cent. higher, its spending on transport and communications research is 194 per cent. higher; and its spending on environmental planning is 225 per cent. higher.

Worst of all is the comparison on training. Germany really does invest in training: more than 2 million people in West Germany are constantly in training. That is why it has technicians and craftsmen who are paid well because they produce well and sustain a productive and competitive economy.

More than 70 per cent. of engineers in West Germany have recognised qualifications, compared with only 40 per cent. in Britain after 11 years of Conservative government. Only 30 per cent. of our work force have recognised qualifications equivalent to at least one O-level, compared with 70 per cent. in West Germany. I hope that Conservative Members will ponder that—only 30 per cent. of our work force are qualified to the standard of one O-level. How are we ever to compete with the new circumstances in 1992 if we neglect education and training on that scale? I do not need to go into the figures in more detail.

Photo of Mr Nigel Forman Mr Nigel Forman , Carshalton and Wallington

The right hon. and learned Gentleman has an important point about education and training. I notice that the Opposition motion refers to education and training as an Opposition commitment. To what extent would the right hon. and learned Gentleman finance that expansion of education and training, to which he attaches such importance, from taxation or borrowing? If it is the latter, as I suspect it would be, what would be the implications for interest rates?

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

The hon. Gentleman is making a valiant effort in that respect, but he must know that we have made it absolutely clear that our spending programme will be related to the capacity of the economy to sustain it. For education and training, I believe that that is an absolutely fundamental investment which must be made by this country. I suggest that the hon. Member for Carshalton and Wallington (Mr. Forman) should read an editorial which I believe appeared in The Independent yesterday, which attacked the Labour party for not promising to spend more than we had announced.

It is absolutely crucial that the investment is made. We will consider how best that investment can be made when we become the Government in the light of the economic circumstances that we inherit. If the concern of the hon. Member for Carshalton and Wallington for education and training is genuine, what does he think about the record on that over the past 10 or 11 years? Does he believe that it has been a good deal for Britain to neglect our investment in education and training so that we have the most demoralised teaching force ever this century, and when our industrial training is pitiful when compared to training in other countries? As an important part of our investment programme, we must finance education and training which will at least raise us to the level of our industrial competitors.

In addition to education and training, we could add as a subject for the seminar the value of social cohesion, indicated by German support for the social charter which the Government always attack. Our most successful competitors embrace and endorse the social charter. It is not even a matter of political controversy. The German Chancellor, head of a CDU-led coalition, went to the German trade unions and told them that he would support their claim for a social charter. Would that our Prime Minister espoused something in the national interest like that. The value of partnership between management and the trade unions in creating a successful economy might also be studied with profit at the seminar.

However, I fear that such a process of self-education is unlikely to happen, demonstrable though its advantages would be. I fear that, in the spending cuts in store over the summer, regional investment which has already been cut by 70 per cent. over the decade will once again be the victim of the foolish priorities of the disastrous Department of Trade and Industry. I fear that the cuts of £190 million in the training budget at a time when our training is pitifully inadequate will not be restored.

Now that the hon. Member for Carshalton and Wallington, who has been asking me about expenditure on education and training, has been liberated to some extent by changes in the Administration—although I commiserate with him on the fact that he has not yet joined it—will he use his freedom to ask the Government why they cut the training programme by £190 million? Why on earth, at this stage in our development, we should be contemplating cutting one penny from the training programme is hard to understand. I hope that that cut will be restored.

On 31 May 1990, the Financial Times published some comparative figures with regard to publicly funded training for employed adults, which show how disastrous is Britain's record on training. I will pick the figures at random. The figure is $1,000 per trainee in France, $3,500 in Germany, $5,000 in Greece, $1,000 in Japan and $600 in Spain; but it is $400 in the United Kingdom. We are not only bottom of the league again, but we are bottom by a very long shot.

Why is it that, every time we look at international comparisons, Britain is at the wrong end of the league? It is at the bottom of the league when we should be at least halfway up, and it is at the top of the league when we should be half way down. It will not do for us to enter the 1990s unless we secure an economic base that can sustain our standard of living and finance our hopes of social progress.

Photo of Mr Michael Grylls Mr Michael Grylls , Surrey North West

Will the right hon. and learned Gentleman give way?

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

I have given way enough.

The Government claimed that they made a breakthrough to a competitive and productive economy in the 1980s. Anyone who looks at any of the statistics can see at a glance that that manifestly has not happened. One thing is certain—it had better happen in the 1990s, or there will be no economic future for this country.

I do not believe that that can happen under a Government with such a lamentable record for the 1980s. However, it will occur under a Government who recognise the problems we face, but who believe that, with effort and determination, we can overcome them; who face reality—even awkward reality—rather than seek to abolish it by statistical sleight of hand; who recognise the problems but are prepared to develop opportunities; and who, by adopting the policies outlined in the motion, can create a better economic future for this country. The Conservatives have failed. It is Labour's chance in the 1990s.

Photo of Mr John Major Mr John Major , Huntingdon 4:35 pm, 24th July 1990

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: congratulates Her Majesty's Government on the improvement in economic performance over the last 10 years, with the United Kingdom's growth of output, manufacturing productivity, employment and investment since 1980 exceeding that of almost any other major European Community country; and endorses the priority the Government attaches to reducing inflation, in order to safeguard and build on these achievements. For all its customary charm, the speech by the right hon. and learned Member for Monklands, East (Mr. Smith) had a familiar ring. Perhaps a touch scaled, it is an old favourite that the House has heard on a number of occasions. It is no wonder that the right hon. and learned Gentleman delivers it so well, for he has delivered it so often. None the less, as ever, we enjoyed it. Despite that, it was an empty speech because it was empty of the alternatives that he and his colleagues would bring into operation were they in government.

If the right hon. and learned Gentleman wishes to be taken seriously as a potential Chancellor, he will need to produce in some detail policies that, when examined, can be seen to be capable of being carried out and to add up in economic and political terms. The right hon. and learned Gentleman will achieve nothing if he continues to condemn the disease and also condemn the cure, which he should know must involve monetary policy of the sort that we are using at the moment.

The right hon. and learned Gentleman has no policies to curb the central problem that exists at present—the problem of inflation. Neither does he have any policies to prevent it from recurring in future. All that he has to offer are the same old traditional recipes that have been handed down from generation to generation in his party—looser monetary policy and looser fiscal policy, that is lower interest rates and higher spending. Where does the right hon. and learned Gentleman think that that would leave him and his party? That is the classic recipe for the debt and devaluation that have been the legacy of every Labour Government.

I was intrigued a few weeks ago to listen to the leader of the Labour party when he appeared on "Panorama". He said then that, when monetary policy was loosened at the end of 1987 in the wake of the stock market crash, "We"—that is, the right hon. Gentleman and the Labour party—"were saying steady, steady." In retrospect, it would certainly have been right to say, "Steady, steady." However, I was not sure whether that was how I remembered the Labour party's posture at the time, so I had a brief look to see what the right hon. Gentleman was advising at the time, and I certainly did not find "steady, steady" among the right hon. Gentleman's pronouncements. Indeed, I offer a prize to anyone who can find the term "steady, steady" used in any context by the right hon. Gentleman at that time. I found what I had expected to find. Then, as now, the right hon. Gentleman was arguing for lower interest rates and described the modest cuts we had made as "inconsequential". He told us: This is a time for judgment, and that judgment should be a big cut in interest rates."—[Official Report, 29 October 1987; Vol. 121, c. 446.] No "steady, steady" there.

Perhaps, I thought, the right hon. Gentleman leads a collegiate team and is remembering the words of his colleagues, so I checked those too. I found that his hon. Friend the Member for Dagenham (Mr. Gould) spoke in the House on 5 November, but he did not say "steady, steady" either. He said:

If the Americans were to follow the Chancellor's monetarist advice, and if the interest rates and taxes were to be raised or social security benefits were to be cut, it could only bring the threat of worldwide recession so much closer."—[Official Report, 5 November 1987; Vol. 121, c. 1154.] It is clear what the hon. Member for Dagenham had in mind. He was not saying "steady, steady"; he wanted a reduction in interest rates too. I then wondered whether the Leader of the Opposition had remembered the words of his right hon. and learned Friend the Member for Monklands, East—that pillar of fiscal rectitude. I checked and I found it as I remembered. The right hon. and learned Gentleman did not say anything in the House that I could find, but he went to Paris to talk to the OECD on 13 November 1987. Did he tell the OECD that things should be taken "steady, steady"? Did he heck. He called for A stimulation of the economy by cuts in interest rates". Just to make sure that there was no doubt that the right hon. and learned Gentleman wanted to loosen policy he said it again the next day at Airdrie:

Now is the time for cuts in interest rates to stimulate the economy". So much for "steady, steady". "Steady, steady" is fiction, fiction. In retrospect we all acknowledge that it was the relaxation of monetary policy that helped cause the difficulties.

Photo of Mr John Smith Mr John Smith , Monklands East

As we are trailing over the years since 1987, let us look to the Budget of 1988. Will the Chancellor tell us—given that the situation was so obvious in 1987—what on earth was the justification for the huge tax cuts in 1988, which were attacked by me and my right hon. Friend the Leader of the Opposition, but which the right hon. Gentleman defended?

Photo of Mr John Major Mr John Major , Huntingdon

I believe that the right hon. and learned Gentleman has just taken economic advice from the leader of the Labour party, and if that is so, he has just made a material mistake. The underlying problem that generated many of the difficulties that we faced was, in retrospect, a relaxation of monetary policy because of fear of a recession. One could see that, with credit growth of £40 billion in the subsequent year, the problems were not caused by the cuts in income tax that amounted to only £4 billion, as a supply-side measure. The figures do not remotely add up and I suggest that the right hon. and learned Gentleman should get a new and better economic adviser than his right hon. Friend.

Photo of Mr John Smith Mr John Smith , Monklands East

With the benefit of hindsight, can the right hon. Gentleman tell us whether the Government were right to let a credit boom rip to the extent that he has just described? If so, what on earth was the justification for making tax cuts in such a situation?

Photo of Mr John Major Mr John Major , Huntingdon

Does the right hon. and learned Gentleman not realise that one of the things that generate a credit boom is lower interest rates, which he was precisely calling for? The reduction of taxation was on the back of a huge fiscal surplus in 1988—a point which the right hon. and learned Gentleman and his right hon. Friend have momentarily overlooked.

Given that the Leader of the Opposition has criticised us for causing inflation, the uncomfortable truth is that, judged by his words and those of his colleagues, he would have made bigger mistakes on monetary policy than anyone else. The problem of the credit boom would have been materially worse. I suspect that the right hon. Gentleman has remembered that only latterly, but it is about time that he admitted that he was wrong in 1987. The uncomfortable truth—

Photo of Mr Neil Kinnock Mr Neil Kinnock Leader of Her Majesty's Official Opposition, Leader of the Labour Party, Member, Labour Party National Executive Committee

As a matter of history, it is important to refresh the Chancellor's memory, as I believe that he is trying to offer the view that the difficulties, to which, presumably, he will own up, only began with the relaxation of policy in response to the slip in the stock markets in the back end of 1987. The right hon. Gentleman should understand that, before the 1987 election, in order to make a contribution to try to win that election, policy was greatly slackened with the intention of tightening it up after the election. The Government, however, were taken by surprise and made an utterly incompetent response to the events on the stock markets. Until now I thought that the Chancellor was a candid man; if we are to have a story, let it be the whole story.

Photo of Mr John Major Mr John Major , Huntingdon

I shall not only provide the whole story, but remind the right hon. Gentleman of the other element he has overlooked.

Just before the November stock exchange crash, in August, my predecessor, my right hon. Friend the Member for Blaby (Mr. Lawson), unexpectedly increased the interest rate by 1 per cent. because of concern about the growth of credit. That was a considerable shock and surprise to people, but he acted so because he wanted to restrain what he thought might be an incipient growth of credit. If the Leader of the Opposition would also care to come to the Dispatch Box again to give me chapter and reference of when he said "steady, steady" in 1987 I shall happily give way. [HON. MEMBERS: "Come on."] I should be happy for the right hon. Gentleman to advise the House on that.

Photo of Mr Neil Kinnock Mr Neil Kinnock Leader of Her Majesty's Official Opposition, Leader of the Labour Party, Member, Labour Party National Executive Committee

I shall do so on the understanding that my reply will be given in exchange for the right hon. Gentleman's readiness to get on with addressing the present problems. He is the Chancellor and we want to know what he will do about dealing with the problems, because that is what will most interest the British people, business and anyone else concerned about the future of our economy.

The right hon. Gentleman will recall that, in 1987, and definitely as we came up to the Budget of 1988, which he has defended, we proffered urgent counsel that everything possible should be done—it should also be done now—to assist the supply side of British industry. We included in that the reduction in interest rates and the avoidance of the type of tax cuts the Government were then making. That was the policy for stability, steadiness and production, but instead the Government pursued their policies that have resulted in a disastrous balance of payments deficit and an inflation rate of 10 per cent. "Steady, steady", John.

Photo of Mr John Major Mr John Major , Huntingdon

That was an amazingly skilful reinterpretation of events, as one would have expected from the right hon. Gentleman. If he will forgive me for saying so, it was more slippery, slippery than "steady, steady". Let me be sufficiently unkind to quote again what the right hon. Gentleman said: This is a time for judgment, and that judgment should be"— as Leader of the Opposition, his judgment is important— a big cut in interest rates."—[Official Report, 29 October 1987; Vol. 121, c. 446.] That is what the right hon. Gentleman said in October 1987.

Let us leave it to stand on the record between us whether that judgment was "steady, steady" or slippery, slippery. [HON. MEMBERS: "What about inflation?"] I am about to deal with that, because the uncomfortable truth for Governments of whatever complexion is that inflation does not respond to soft options. It certainly does not respond to speeches. It takes tough measures, which are inevitably unpleasant, to defeat inflation. There is no choice in my mind about the necessity to defeat inflation.

It was difficult and often painful and unpopular measures that brought inflation down at the beginning of the 1980s. I understand that monetary policy is often unwelcome to people, but that is how every other major industrial country deals with inflationary pressures. That is why we are using interest rates and that is why the Leader of the Opposition should know that we shall continue to use them. We shall use them for one simple overriding reason: they work. No one should doubt that, and that is the only recipe for getting inflation down.

Photo of Mr John Smith Mr John Smith , Monklands East

The Government will ruin industry.

Photo of Mr John Major Mr John Major , Huntingdon

So the right hon. and learned Gentleman would not use monetary policy, but let inflation rise. That is excellent.

The evidence that interest rates will work is indisputable. It is now there to be seen in the housing market, which has cooled down. It is evident in the high street and in sales of new cars. In recent weeks, it has been evident in slower money growth, in the easing of capacity constraints in industry and in a better export performance.

Photo of Mr John Major Mr John Major , Huntingdon

Imports are down. They are higher than I would wish them to be, but they are down, and in the past 10 months, exports have grown five times as fast as imports. When did that happen under a Labour Government?

Perhaps the real concern in the Opposition's mind is that the policy is working. In this, unusually, they are right. No doubt that is why the right hon. and learned Member for Monklands, East is so concerned and agitated. But it is perfectly true that although the policy is working, its job is not yet done. I readily concede that the inflation rate is still too high and, because of the time that it takes for policy to have its full effect, it may move a little higher yet before it begins to turn down. But turn down it undoubtedly will, towards the end of this year and on through next year—although perhaps a bit more slowly than we had hoped.

We are determined to keep a tight policy in place to secure this fall in inflation. There should be no doubt about that. I have made it clear before—and I willingly do so again in view of what the right hon. and learned Gentleman said—that this policy is not a short-term attack on inflation. It is not a question of bringing inflation down by a few per cent. and then letting up. There will be no pre-election boomlet of the sort sketched out by the right hon. and learned Gentleman. The policy is a long-term attack on inflation. First, we must get our inflation down to our competitors' average level. Then we must get it down further still, then down to the level of the best and onward down beyond that. That is clearly the policy.

Perhaps I may attract the attention of the right hon. and learned Member for Monklands, East. [Interruption.] I shall endeavour to do so, and I shall certainly give way to the Leader of the Opposition if he wishes me to do so.

My remarks about inflation do not mean that I am unaware of, or insensitive to, the difficulties that high interest rates cause. I am fully aware of the feeling that they arouse and I do not ignore them or weigh them lightly. But there is another consideration which any Government are bound to take into account and which, in my view, is decisive: the damage that inflation does if it is permitted to entrench itself. If it entrenches itself and goes unchecked, it can cause long-term damage to the economy, as we saw only too clearly in the 1970s when the Labour party did, indeed, leave it unchecked. The legacy of that was acutely painful.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

Has Mr. Leigh-Pemberton made any representations to the Government about a pre-election boom?

Photo of Mr John Major Mr John Major , Huntingdon

I think that the conduct of monetary policy, and economic policy generally, is a matter for the Chancellor of the Exchequer and not for the Governor of the Bank of England, however distinguished. Moreover, Mr. Leigh-Pemberton's discussions with me, whatever they may contain, are a matter for Mr. Leigh-Pemberton and me and not for the hon. Gentleman. [HON. MEMBERS: "Steady, steady."] I am entirely steady and, as I have been reminded of the matter, I still look forward to the Leader of the Opposition telling me the time and the place at which he voiced that extremely interesting proposition.

I know that some people who are struggling with high interest rates may think that nothing could be worse, but the banana republic rates of inflation in the 1970s were definitely worse. To return to that at a time when—once inflationary problems are stripped away—the prospects in every other respect are extremely promising would be quite unforgivable. Under the right hon. and learned Gentleman's prescriptions, of course, a return to high inflation would be inevitable, for reasons to which I shall come in a moment. If the right hon. and learned Gentleman will forgive me for saying so, the leopard has certainly not changed its spots, even if it has developed a Scottish accent.

I find it truly astonishing that the right hon. and learned Gentleman argues for a let-up on inflation—that is implicit in what he says—on the grounds that that is what business wants and needs. That is the way in which the Labour Government acted and we saw what that did to the condition of British industry. The success that British business men and women have made of their enterprises in the past decade has represented the clearest possible rejection of the misguided economic policies and industrial strategies that the Labour party left to us in 1979. Individual business men and women have shown beyond a doubt the results that can be achieved if Governments spend less time interfering, less time regulating and less time feather-bedding them.

It was precisely because the Labour Government neglected their real duties that business and commerce entered the 1980s in such a fragile and pathetic state. Contrast that with the resilience of the economy today: even with interest rates in double figures for two years, business starts still exceed stops by a massive margin, week after week. That is the clearest illustration of the revitalisation of British industry. We have more people in work than ever before. We have managed to halt decades of decline in our share of world trade, actually increasing it in the past year. None of those points managed to find a place in the right hon. and learned Gentleman's familiar speech, but I offer them to him for the future.

The strong growth in exports over the past year, itself a result of strong investment in recent years, is, in my judgment, the best possible omen for the long-term future of the British economy. I note that the right hon. and learned Gentleman made no acknowledgement of that performance, although I am sure that he would welcome it. Our performance did not fit in with the picture of doom and gloom that the right hon. and learned Gentleman sought to paint. As I said a moment ago, in response to a sedentary comment, in the past few months, British exports have been growing five times as fast as imports. In fact, exports have been growing faster than imports for the past 10 consecutive months.

For the future, the prospects opening up in the single market in the next few years will massively increase the opportunities for British firms to trade abroad. There is still more to come as we free up the areas that remain for the completion of the single market. There is still a considerable amount to be done to achieve that. It is in no sense a remit that we can put on the back burner. Britain is determined to make sure that the laggards in the Community—and we are not among the laggards when it comes to implementing Community directives—keep up with implementing the single market measures and do so with all possible speed.

We face even more far-reaching questions as we consider proposals by our Community partners to enhance economic and monetary integration beyond what has become known as stage 1. There is not a shred of doubt in my mind that at present that is the most important issue facing the whole Community. But so far, the debate in Europe has not fully covered the many important issues at stake, and in the months to come, we are determined to ensure that it does.

There are undoubtedly significant points of disagreement within the Community about how we progress beyond stage 1. But I believe that there are some important areas of general agreement. First, we agree that it is desirable to move forward together—if we can.

Secondly, I believe that it is generally accepted that to make a premature attempt to introduce monetary union while levels of inflation in the Community are as disparate as at present and before we have much more flexible markets would be to risk great strains and tensions.

Thirdly, I think that we all share the ultimate aims of greater price and currency stability and more fully integrated economies.

We think that it is essential to bring out the key criteria that we should be aiming to meet as we examine options. We believe that it is desirable to achieve a greater economic convergence on the performance of the best in the Community. We must also respect the principle of subsidiarity which—to avoid doubt in anyone's mind—specifically means that nothing should be done at Community level that could better be done at national level. Above all, there is an overriding need to ensure that any future arrangements have a strong anti-inflationary character.

The proposals that we have developed, which are now being studied across the Community, will, I believe, meet those criteria, and we shall be advancing them very forcefully throughout the coming months. The United Kingdom's proposed approach centres on the creation of a new anti-inflationary currency, which we have called the hard ecu, and which would be managed by a new Community institution, a European monetary fund.

We believe that the hard ecu would provide an attractive common currency for the whole Community. It would be for people, businesses, and Governments to choose whether and how much they wished to use it. Our approach is new and different in one important respect from the parallel currency proposals that were examined and rejected by the Delors committee: it has been designed in a way that would strengthen, not weaken, the anti-inflationary forces in the Community. It could not lead to extra money creation. We believe that that is essential, since the concern that a parallel currency would lead to undue growth in the money supply is a legitimate one, which we share.

First, the new currency would be part of the exchange rate mechanism, but, by definition, it would never be devalued at exchange rate mechanism realignments against any European Community currency. It would therefore set a stiff standard of competition for national monetary policies and would reinforce monetary discipline.

Secondly, the hard ecu could be purchased only by surrendering national currencies. Thirdly, the requirement on national central banks to buy back national currency from the European monetary fund would oblige them to run a tight ship. This is a novel requirement which was not considered when previous parallel currency ideas were floated.

Photo of Mr John Major Mr John Major , Huntingdon

And rejected for good reasons—that absent from the proposals were many of the features that are included in the proposals that we have now put forward. It was right to reject those ideas.

Our proposal avoids falling into the trap of blurring responsibilities for monetary policy. Responsibility for the hard ecu would clearly lie with the European monetary fund, while national monetary authorities would still retain overall responsibility for their own currencies. In particular—this is a point that I shall be making very clear to my colleagues in other European nations—our proposals respect the roles of national Parliaments and, as such, are entirely in tune with the overwhelming consensus in this Parliament, as expressed in our debate on these matters last November.

Photo of Mr David Howell Mr David Howell , Guildford

Is not my right hon. Friend right to emphasise that the scheme he is outlining is for the whole Community? Would not the alternative idea of a single Eurofed currency certainly exclude some countries whose convergence with the Community's monetary policy had not been fully achieved, which would lead to the divisive two-tier Europe that most good Europeans do not want?

Photo of Mr John Major Mr John Major , Huntingdon

I agree entirely with my right hon. Friend. It would either exclude some Community countries or, if they were included, create considerable economic turbulence within the Community. On that basis, therefore, they would clearly in reality be excluded, as my right hon. Friend said.

Photo of Mr Brian Sedgemore Mr Brian Sedgemore , Hackney South and Shoreditch

Does the Chancellor agree that if there were to be genuine competition between the pound and the hard ecu, the hard ecu would need to have the same legal status, the same access and the same ability to be transferred, which would lead to the hard ecu having to be made legal tender? Will the Chancellor confirm that in answer to me he said that the hard ecu would not be made legal tender?

Photo of Mr John Major Mr John Major , Huntingdon

The hard ecu does not have to be made legal tender in any member state of the Community. If, however, it were to be adopted, many states might choose to make it legal tender. Provided that it were accepted by the parties who consented to a transaction, the hard ecu could perfectly legally be utilised without formally being made legal tender. I suspect that the hon. Gentleman and I may be able to debate this matter at length at the meeting tomorrow of the Treasury and Civil Service Select Committee. I much look forward to that bi-annual encounter.

On the point of our debate last November, there seems to be some common ground between us and a number of Opposition Members. I find it not surprising, although perhaps a little sad, that there is little common ground between us anywhere else. There is certainly no common ground between the parties on public expenditure. Despite the appearance of rectitude and virtue that the right hon. and learned Member for Monklands, East seeks to establish, shadow Ministers vie with one another almost daily to pile up more and more spending pledges.

The hon. Member for Derby, South (Mrs. Beckett) made a valiant effort, but her claim that Labour has only two spending commitments—increased child benefit and higher retirement pensions—is, frankly, ludicrous. She says that other spending proposals would be fulfilled only when the money was there. She knows, as everybody else knows, that she has no chance whatsoever of convincing the country of that while the leader of her party, the shadow Chancellor and assorted colleagues implicitly and explicitly commit themselves to extra spending in nearly every speech that they make. The right hon. and learned Gentleman referred to the restoration of cuts, but he must surely realise that to restore something means that expenditure must be increased from its present level. Even today he referred to the restoration of expenditure.

The hon. Lady's trenchant message clearly has not got through to her spending colleagues in the shadow Cabinet. With the solitary exception of the armed forces—and how well we understand that—all Labour spokesmen shadowing a spending Department have promised massive increases in expenditure for their client groups. They have not told us, of course, where the money is to come from. In essence, however, it can come from only two places. It can be funded by increased borrowing, with inevitably higher interest rates, or by increased taxation. We know some of the bad news already. The Opposition are pledged to phase out the married couple's income tax allowance. That would make every married couple in the country worse off. Labour would abolish the upper earnings limit on national insurance, thereby making nearly 3·5 million people worse off.

Photo of Mr John Smith Mr John Smith , Monklands East

Where does the Chancellor get that from?

Photo of Mr John Major Mr John Major , Huntingdon

I get it from the right hon. and learned Gentleman's own commitments.

That would add 9 per cent. to the marginal tax rates of nearly 3·5 million people. Labour would extend national insurance to what it has the temerity to refer to—rather inelegantly, I think—as unearned income: what the man in the Monklands high street might conceivably call savings. So much for the encouragement of thrift.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

Apart from the fact that there is no Monklands high street—the Chancellor ought to understand that it is a district, not a town—on the question of the upper earnings limit for employees national insurance contributions, what is the justification for asking everybody earning up to £18,200 to pay national insurance on the whole of their salary while those who earn more than £18,200 pay national insurance only on part of their salary, with employers having to pay it in every respect?

Photo of Mr John Major Mr John Major , Huntingdon

The progressive nature of taxation is in the income tax system, not in the national insurance system, and has been there from the moment that the scheme was first conceived. I apologise to the right hon. and learned Gentleman for having assumed that there was a Monklands high street. I now know that there is not, although the right hon. and learned Gentleman no doubt wishes that there were.

What is perfectly clear from the right hon. and learned Gentleman's policies is that his message to the individual is to spend now and pay later—just like Labour's policies would be as a Government. We know precisely where their policies landed us last time.

The fact is that, if Labour spends as it promises to do, it cannot tax as it implies. I hope that the right hon. and learned Gentleman will absorb that point. If Labour sticks to its tax pledge, its spending pledges are meaningless, for the two are wholly irreconcilable. If they are not irreconcilable, let the Opposition show us their arithmetic. If they cannot do so, we shall assume that the Opposition would do what they have always done: have their hands in taxpayers' pockets more often than taxpayers have their hands in their own pockets. That is precisely the way in which Labour Governments have always behaved.

The Labour party called this debate out of a mixture of timidity and desperation—timidity because it was too timid and nervous to call a censure motion, desperation because its fleeting hopes of last spring are disappearing before its eyes.

Photo of Mr John Major Mr John Major , Huntingdon

Yes, there is more of it. The hon. Gentleman, who clearly had an extremely good lunch, must know that in their heart of hearts the Opposition realise that they will not win and that they cannot win. The Opposition have seen their best days in this Parliament and they have now passed.

When inflation comes down, as it will; when, in due course, interest rates can prudently be brought down, as they will be; when 11 years' improvement to the economy brings more prosperity, as it undoubtedly will, the electorate will know where to turn. They will put their trust, once again, in a Government who believe in the market rather than in paying lip service to it; a Government who deliver freedom rather than just talk about it, and a Government who can deliver prosperity rather than seeking merely to redistribute it. That is why, after the next election, Opposition Members will be precisely where they are now—opposite—and Conservative Members will be on the Government Benches.

Photo of John Battle John Battle , Leeds West 5:10 pm, 24th July 1990

Despite the television coverage of our proceedings in the House and the need to cultivate our media personalities, a curious paradox seems to be emerging in our politics which could be encapsulated in the words, "Whatever you say, say nothing." That is precisely what the Chancellor has done today and it is precisely what the former Secretary of State for Trade and Industry, the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley), discovered to his cost from the article in The Spectator.

I was interested to note on the midday television news yesterday that, when asked to comment on the deteriorating trade figures, the Chancellor had nothing to say. The Chancellor does not seem to have a word to say either to those who have lost their jobs in the basic manufacturing, textile and engineering industries. I suspect that it is the silences, the gaps, the absences in Government statements, press releases and the words of Ministers, that show the real underside of the Government's economic policies.

Has the Chancellor nothing to say about the increasing unemployment that is becoming a daily experience with closures and redundancies in many constituencies? We now have the new Cityspeak, with redundancies being described by the euphemism "down sizing". For real people it means losing their source of income.

On 14 June the Department of Employment issued a press notice which said: The rise in unemployment is not unexpected". It went on to say that unemployment in Yorkshire and Humberside is falling. But according to the figures in the Library, at the same time the rate in my constituency was increasing. It had risen to 6·9 per cent. If we take into account the 30 changes in calculating unemployment figures, the real rate in my constituency is 10·4 per cent. —4,478 people without full-time work. That is double the Government's figures of 2,965, twice the rate that the Government calculate and, I assume, on which they base their policies.

Has the Chancellor nothing to say? Perhaps he has said nothing about unemployment because unemployment has never been a priority, an election issue, with the Conservative party in the past. The unemployed can simply be written off because they cannot determine the outcome of an election. Their stake in an election is too low. The unemployed do not matter. They can be made, statistically, to disappear.

I am interested that the Chancellor had nothing to say today about the increase in poverty. He gave not a word of apology for the fact that the Government have repeatedly used figures in the House against our arguments which they have now revealed to be completely wrong and misleading. Only yesterday, a document entitled "Households Below Average Income 1981-87" was published which showed that the number of people living on less than half average income rose by 50 per cent. to 7·7 million in the two years 1985-87.

When they are discussing a policy for the family, I hope that the Chancellor will remind the Prime Minister that in 1981 the number of children living in households on below average income was 1·8 million. In 1987, it was 2·4 million—20 per cent. of children. If we were to look at the facts of poverty, we might start to have policies for the family which address that issue rather than the rhetoric that we have heard in recent weeks.

The facts in the document "Households Below Average Income" show that, in 1979, 9·4 per cent. of the population had incomes below half the average. In 1987, 19·4 per cent. of the population had incomes below half the average. The poorest 10 per cent. saw their real incomes reduced by almost 6 per cent., and that in the face of the overall average going up some 23 per cent.

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

To put the figures in context, will the hon. Gentleman say what the average incomes were in the two years to which he refers, and what the real increase in average incomes was during that period?

Photo of John Battle John Battle , Leeds West

The hon. Gentleman will be aware that the average income was £239 a week, well above the incomes of many of my constituents. They would be glad to be on the average income. The Government base their calculations on averages, but some Conservative Members do not seem to realise that, if incomes at the top go up, they will pull that average up at precisely the same time as the incomes at the bottom are going down. They have a Heineken theory of economics. It is as though the adverts have taken on real life.

The document "Households Below Average Income" shows beyond a shadow of doubt that there has been no trickle-down effect in our society, by which with wealth generated in our economy is supposed to reach the poorest. The Government used to claim—the hon. Gentleman might care to reflect on this—that the incomes of the poorest 10 per cent. grew faster than those of the rest of the population. Then, in a footnote to a written parliamentary question, it was revealed that the statistical basis of that calculation was wrong and that the incomes of the poorest 10 per cent. did not grow as fast as those of the rest of the population.

It may be of interest to hon. Members to know that annexe 1, table d, of "Households Below Average Income" shows that the real income of the poorest 10 per cent. between 1979 and 1987 was—wait for it—minus 5·7 per cent.; in other words, a reduction in income, not an increase, as my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) made plain. How can we hide that behind the euphemism that their incomes are increasing less rapidly? They are decreasing, yet the Government's press release which accompanied the publication of that document yesterday claimed: More people had below half the average 1987 income, reflecting a wider income distribution. What a euphemism for the fact that the rich are getting richer and the poor poorer. At last the Government acknowledge the fact, but the next Labour Government will be looking for policies which address that fact.

We effectively have two Budgets. We have the real Budget and we have a statement on benefits some time in advance of that each winter which has always reduced the incomes of the poorest. Yet the Chancellor has the nerve to tell us today that £4 billion of public money was given back in tax cuts and that is now seen to have been a mistake by the former Chancellor of the Exchequer.

Yesterday, the first edition of the new Treasury bulletin was published, for which we are grateful. In the foreword to that document the Chancellor says: It is important for public debate that we have accurate statistics and accurate information. I urge the Chancellor to insist that such accuracy should apply to press releases, answers to written questions and answers at the Dispatch Box. It is all right for Mr. Jim Hibberd, who works for the Treasury, to point out in that bulletin that there were misleading indicators which clearly underestimated the buoyancy of the economy. That underestimate may have misled the former Chancellor of the Exchequer. It also resulted in millions in Britain paying the price for this Government's economic policies and in the rash, tax-cutting, classic Tory, old-fashioned methods which unleashed the consumer boom for which this Chancellor is now having to pick up the pieces.

I noticed that the Treasury bulletin also said that there would now need to be "judgmental revision". I hope that that does not mean that we shall be told that the Government will make judgments about unemployed people. I also hope that that does not mean that the decision will be, as was suggested by one of the institutes, that the unemployed should no longer receive unemployment benefit and that people should take out private insurance against times when they might lose their jobs. There would, in other words, be no unemployment benefit as a basic national social security cover. The Treasury is forcing people to pay the price for the decisions of the previous Chancellor.

Over the past 10 years, we have experienced the sustained and systematic statistical abolition of poverty, unemployment, low pay and housing need. Blindness has been deliberately fostered in Government policy to the very existence of the unemployed and of the poor as real people. There has been an insistent silence when appeals have been made to tackle the increasing structural poverty in our society. There have been denials that the divisions have been increasing.

The Treasury bulletin says: There are clearly very different stories". I hope that Conservative Members will listen carefully to some of the stories that they may hear in the recess from their constituents who struggle to pay their mortgages, struggle to pay the poll tax and struggle to find homes that are appropriate to their needs. The poor should not be derided as freeloaders, as one Minister referred to them recently in a televison interview on the poll tax. It may not occur to Ministers when they say that people on rebates are freeloaders that they receive a rebate precisely because their income is too low to enable them to pay their own way. The Government should raise their incomes and we might then tackle the problem of rebates. I remind Conservative Members before they go on television and castigate the poor as freeloaders that the poor are all means-tested before they have access to those rebates.

It is fair to point out that the Chancellor did not refer to the unemployed or to the poor. However, he also says nothing about the report in the Financial Times yesterday that, according to the latest surveys, Britain's managers are all on course for a 13 per cent. rise in total pay. The Chancellor says nothing about the fact that former state-owned organisations reacted to their newly found private status by awarding large increases in earnings to their best-paid directors. In four of them—Enterprise Oil, British Airways, the British Airports Authority and Jaguar—the directors all received an initial year's increase in salary of 100 per cent. The Chancellor says nothing about the recent report on City fringe benefits, which include that special perk of a cheap 5 per cent, mortgage. This year alone, for 200,000 people it is estimated to be worth £380 million. The Chancellor says little about how the £91 billion benefits of North sea oil revenues of the past decade, which the Government had at their disposal, have been squandered.

The Chancellor has nothing to say about the recent regional inequality. The regional trends survey published this month showed a widening of the north-south division in terms of regional differences in income, share ownership and the growth in second jobs. The number of people with second jobs increased massively in the south-east—between 1981 and 1988 it increased from 162,000 to more than 300,000. The increase in second jobs is far smaller in Yorkshire and Humberside. The increase in income disparity between 1985 and 1988 was 30 per cent. per head in the south-east, 32 per cent. per head in the south-west and 24 per cent. in Yorkshire and Humberside. If we use an index under which national average income is taken as 100 in 1988, the south comes out at 117, and Yorkshire and Humberside at 89·9, lowest of all and only just above the figures for Northern Ireland. The region that I represent is a low-wage, part-time job area and the Government's policies are intent on keeping it that way.

The Chancellor may be quietly trying to lay the ghost of Professor Sir Alan Walters. The new Treasury bulletin says that the Central Statistical Office will be shifted from the Cabinet Office to the Treasury. The Prime Minister may be quietly undermining that strategy by ensuring that one of the Chancellor's new junior Ministers is a member of the "No Turning Back" group. What characterises that group is that it has a classic formula for turning its back on whole sections of the British population.

When a Government adopt a policy of "whatever you say, say nothing", I am reminded of a comment that was shouted out by Conservative Members about the phrase in the United States election, "Watch my lips". That is the say nothing politics and the ultimate in economic and political body language of 1988. What happened? Last month, President Bush carried out that long-awaited U-turn. He acknowledged that he needed to increase some taxes to bring his runaway budget deficit under control. There will now be new taxes and it is interesting to note that they will be indirect taxes, which are precisely the taxes about which this Government forget to tell the people. They have increased indirect taxes to almost double the level that they were when they came into office.

The people of Britain should be reminded that the overall tax burden of personal tax under this Government has risen from 34 per cent., which it was under Labour, to 37 per cent. of personal income. Yet the Chancellor has nothing to say about the fact that people are paying more tax now. The Government still deny that the Tories tax people; that is not even to be whispered.

The time of the monetarists and of the Chicago school has come and gone. I hope that, when we have a new Chancellor in a Labour Government, the policies of this Government will be rejected and that those who have been marginalised and left out of the Budget will be included.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield 5:26 pm, 24th July 1990

I congratulate my hon. Friend the Economic Secretary on his appointment to the Treasury Bench. I met one of his constituents last night who was bathing in the reflected glory. His constituents have every right to be proud, as he will make a most valuable addition to the Treasury team.

I also congratulate my right hon. Friend the Chancellor of the Exchequer on his speech. I congratulate him especially for one reason. He succeeded in ensuring that the Leader of the Opposition finally conceded that, in late 1987 and early 1988, the Opposition called for substantial cuts in interest rates. I recall that a motion on the Order Paper at that time set out that demand. Everything that the right hon. and learned Member for Monklands, East (Mr. Smith) says now should be seen in that light. There is no credibility in his position now because of his position then. If we had followed his policies then, we should have been back to the 27 per cent. or 28 per cent. inflation that we had in 1975-76. We should have had a complete re-run of the record of the previous Labour Government. We should address ourselves to that record and to the right hon. and learned Gentleman's words at that time, and not to the hot air earlier in this debate, with little specific information about what he would do to address the country's current problems.

Although the right hon. and learned Gentleman rather pooh-poohed this, there is an important point about the construction of the retail prices index. When the index looks at housing costs, it concentrates on mortgage interest and not on house prices. If house prices were included in the index, we should have had an earlier sign of the inflationary problems to come. Rising house prices are in themselves a useful early sign of coming inflationary problems. If we gave more weight to house prices in the RPI, that would give a better impression of inflationary trends in the economy.

Another important reason why we should address that problem is that the figures that the right hon. and learned Gentleman quoted, as the Chancellor said, are not comparable. Rates throughout the rest of the EC show that the inflation indices of other countries are compiled on a different basis, a subject which the Public Accounts Committee examined recently and to which, in due course, the Retail Prices Index Advisory Committee will have to return.

We must consider the construction of the index in relation to the community charge. The reference on the community charge was made to the advisory committee before transitional relief was announced in the autumn of last year. As a result, the decision to take no account of transitional relief was made not by that committee but by the Central Statistical Office.

It is wrong not to take account of transitional relief, because it is not an income-related relief. It is available automatically to people, regardless of their income, depending on the rateable value of their homes under the previous arrangements. I hope that Treasury Ministers will examine that point, because the committee will soon be publishing a report recommending that the matter be referred to the RPI advisory committee.

I am glad that the hon. Member for Leeds, West (Mr. Battle) has taken part in the debate, because he was unwell recently and was unable to attend some of the Standing Committee meetings on the Finance Bill. I am pleased to see that he is better. He said that Conservatives did not care about unemployment. To suggest that a Government who have presided over a larger increase in the number of jobs in the economy do not care about people without jobs is absurd.

We also share the concern that the hon. Gentleman expressed about people on low incomes. What better solution is there to unemployment or low incomes than to create more jobs? More people now have jobs, providing them with a standard of living that they have not previously enjoyed.

Photo of John Battle John Battle , Leeds West

I thank the hon. Gentleman for his kind remarks.

Although the Government claim that the total number of jobs has increased, that may be because part-time jobs are included in the statistics. Is it not a fact that the total number of unemployed people has been consistently high under Conservative rule, higher than was ever the case under Labour? In other words, there are more people unemployed now, even though more people may be working in part-time jobs.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

I would not dismiss part-time jobs as of no value. They are not normally the sole source of a household's income. Indeed, a second earner normally has the part-time job, and such jobs provide a considerable improvement in the standard of living of the avarage family. In the last 10 years, average earnings of the average man with two children have risen by about 30 per cent. That has been an outstanding achievement, especially compared with the situation under the last Labour Government, when the increase was only 1 or 2 per cent. over six years.

I am sorry that the hon. Member for Leeds, West derided the performance of some privatised companies. Privatisation has made a tremendous contribution to the supply side of the economy in recent years. A major improvement during those years has occurred in productivity. The Library recently published a background paper which examined British manufacturing productivity. A table on page 1 showed that, from 1980 to the third quarter of 1989, manufacturing productivity in the United Kingdom rose by 28·5 per cent. whereas the figure for West Germany, about which the hon. Gentleman made such a song and dance, was 13 per cent.

I appreciate that we are still some way behind, but we have narrowed the gap considerably. One example—admittedly an outstanding one, but it is worth considering the best—is the record of the British Steel Corporation, and that document looked into its performance. There are three reasons for the huge increase in manufacturing productivity. The first is the restructuring of British industry, so that it is more efficient. The second is the much higher rate of capital investment—and the main source of funds for that investment has been retained profits, with profits now back at levels not seen since the early 1960s. The third is the degree of improved capacity usage.

That record has been aided and abetted by the many supply side changes that the Government have made in the last 11 years. For example, we have not interfered with business. We have got off the backs of business and have allowed management to manage. I believe that to be the main reason for privatising companies—getting rid of unnecessary bureaucratic regulations.

Also important has been our low corporation tax regime since 1984. That has been attractive for investors at home and abroad. Another factor was drawn to my attention at lunchtime by a business man who said, when I told him that I would speak in the debate, "Don't forget to mention the massive improvement in industrial relations in Britain in the last 11 years, and the fact that we have had a record low number of days lost through strikes."

All those factors have enabled British industry to operate so much more efficiently that we have such a good record on productivity. We have much increased profitability and, as the Chancellor said, we have a good export story to tell. Figures for the last year show that, although we still have a large trade deficit, the trend is now in the right direction. While the volume of exports is rising at about 12 per cent. per annum, the volume of imports is rising at about only 3 to 4 per cent.

What should we do to maintain the momentum in the 1990s? We must maintain our attractive tax regime and not fiddle with it, because it has encouraged much inward investment. We must continue to examine Government regulation, deregulate where possible and make further supply side changes to make the economy more efficient.

I agree with the right hon. and learned Member for Monklands, East that we need to invest more in education and training, although he should not pretend to the House that it is somehow a short-term solution. I fully support the introduction of the national curriculum, but that is only just getting under way and the first school kids to have gone right through the curriculum will not emerge from our schools for another 10 years. So it is wrong to pretend that the investment will pay off in the next year or two. It is important that the curriculum is adequately resourced, and I hope that that will receive attention in the context of the current public expenditure round.

Most important—this is why the Chancellor paid such attention to it—is the need to get inflation down. That is why I support the tough monetary policy that he has adopted in the last year. In my view, it must be supported by an equally firm fiscal policy.

There are signs, to which my right hon. Friend referred, of a slowdown in the economy. This is a difficult time for public spending, but it is vital that it is kept under firm control. The only Departments that should be allowed a real increase are the Department of Health and the Department of Education and Science, for the reasons I have given. There is room for cuts to be made in the expenditure of other Departments' budgets, such as the Ministry of Defence, the Department of Trade and Industry and the Department of Energy.

The Labour party is always trying to pretend that, in some way, the period 1964 to 1970 was a fine time for public spending, and that since then we have done nothing but cut public expenditure. A significant table in the Autumn Statement sets out trends in public spending over the last quarter of a century. In 1973-74, in real terms, spending was £150 billion, at 1988 prices. In the following year—the first year of a Labour Government—it shot up to £169 billion, an increase of over 10 per cent. in one year.

In every successive year from then on, public spending was cut, and by the end of Labour's period in office it was back down to £165 billion, £4 billion less than it had been five years previously. That was the starting point for this Administration—£165 billion—and this year public spending is £192 billion. That gives the lie to anybody who suggests that in overall terms this Government have cut public spending. They have not. However, what they have succeeded in doing—this is the trick—is to decrease public spending as a proportion of our national income. At the low point under Labour, it was about 48 per cent. of GDP; today, it is 38 per cent.

We should be quite clear about Labour's policy. The right hon. and learned Member for Monklands, East has said that his only spending commitments are to increase child benefit and to increase pensions. However, when asked on "Panorama" where he would find the money for the extra spending commitments, the Leader of the Opposition said that any other spending commitments must depend on the economic situation and on securing economic growth. He was then asked, "That is all very well, but how are you going to secure economic growth?" The answer was, "Ah, well, we must invest more money in education, training and the infrastructure." If that is not public spending, I do not know what is.

The Labour party must make up its mind about what comes first: are we to have more spending followed by economic growth, which is fuelled by that spending, or are we to have the growth first—and if so, where will it come from? The right hon. and learned Gentleman has not answered that question. As long as he fails to do so, his policies have no credibility.

Photo of Mr Jacques Arnold Mr Jacques Arnold , Gravesham

Has my hon. Friend noticed that the hon. Member for Kingston upon Hull, East (Mr. Prescott) has said that £3 billion will be spent in the early days of the next Labour Government, which he foresees, on the high-speed rail link, which would be financed totally by borrowing, which he seems to believe will have no effect on the capital position, let alone on the revenue costs?

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

My hon. Friend is right to draw my attention to today's spending commitment from the Labour party—another £3 billion on the high-speed link—

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

I do not know—presumably from the channel to London. I think that that is what is suggested, but it is £3 billion—

Photo of John Battle John Battle , Leeds West

Where is the money coming from?

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

That is the question that the Labour party should answer. There are only two possibilities: either the money is borrowed, in which case interest rates rise, or taxes are increased. There are no other sources of revenue for a Labour Government or for any other Government. It is about time that Opposition Members had the honesty to recognise that and to tell the country how they will finance all their projects.

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury) 5:42 pm, 24th July 1990

Although the debate began with good-humoured contributions, it seems to be degenerating into an exchange of insults about who will spend what. The hon. Member for Beaconsfield (Mr. Smith) did not really refer to the purposes—and perhaps the achievements—of the Government's economic policy on a broader canvas. If one were looking for some examples of what one thought the Government had been trying to achieve—it is not an easy task—one could pick out certain things.

The hon. Gentleman did refer to the improvement in industrial relations that was brought about when the Government took on some of the measures that we have been pressing on them for years—such as holding postal ballots before strikes and putting unions more effectively under the control of their members through that postal ballot system. However, he could also have turned his attention to the reassertion of the role of private enterprise as the primary engine of economic success in the public mind.

That is one of the most useful things that has happened in the lifetime of this Government. However, there has been a signal failure to tackle the monopoly prevalence in our system. Indeed, the Government have converted public monopolies into private monopolies by the way in which they have carried out their privatisation policy, and have failed to address the consumer protection issues or the social issues, to which the hon. Member for Leeds, West (Mr. Battle) referred, without which the success of private enterprise seems hollow to the people who do not have the means to purchase the goods that are produced.

There seems to be no sense of the Government having any continuing overall purpose to their economic policy, which is a strange thing to have happened after so long. However, perhaps it is not all that surprising, when one considers the way in which the Government are bogged down in their economic failures and the consequences of their mistakes. No one can look at the trade figures, the inflation figures, or the balance of payments figures without seeing a history of failure, which owes its existence to a series of mistakes made by the Government in their economic management, which is the focus of this debate.

The Conservative party now likes to place much emphasis on the failures of the former Chancellor of the Exchequer. There is always somebody previous who is responsible for inflation. It used to be the previous Labour Government or the preceding Conservative Government—the Heath Government—but now the former Chancellor of the Exchequer is recognised as having made mistakes. Some of the most significant mistakes were made in the 1988 Budget, some of which the right hon. Member for Blaby (Mr. Lawson) has now admitted. He has admitted, for example, that it was a mistake to stage the ending of multiple mortgage tax relief until the August of that year because, along with the expansion of the credit, the right hon. Gentleman added another engine of increase.

There is a whole series of mistakes, of which the major one must be the tax cuts themselves—

Photo of Mr John Major Mr John Major , Huntingdon

I do not recall the hon. Gentleman mentioning those matters as mistakes at the time. I do not recall him criticising the reductions in interest rates in late 1987, and I expressly do not recall him criticising the four or five-month period in which people could keep multiple mortgage interest relief—for the very good social reason, which the hon. Gentleman should understand, that it enabled young people who were purchasing to complete the transactions into which they had entered.

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury)

The right hon. Gentleman must look at the record. He will then find that I did indeed criticise his predecessor on that count. Interestingly, when his predecessor appeared before the Select Committee on the Treasury and Civil Service to explain why that had been done, he did not give the good social reason that the right hon. Gentleman has just advanced. The right hon. Member for Blaby said that he had been advised by the Revenue that the computer system could not cope with the change as rapidly as he had intended to make it. He did not have a social reason: he had a technical and administrative reason. I pointed out the effects of that measure and of the other measures in the Budget at that time.

However, the present Chancellor himself has made mistakes. In a debate only last week, the hon. Member for Eastbourne (Mr. Gow) pointed out that the Chancellor should have raised taxation in his last Budget, and said that, by not doing so, he had made the current inflationary problems worse. The Chancellor has been slow—his predecessor was also slow—to take any of the voluntary steps to dampen credit that should have been taken, but he has now advised the banks that they should stop their high-pressure circulars that encourage people to take out loans that they cannot afford. That could have been done long ago.

Alongside those management mistakes, it has also been a mistake on the Government's part constantly to encourage high expectations of the Government's success. Even now, the Chancellor seems to have private meetings with Conservative Members, at which he tells them that things are not really going all that well, that it will be a tough winter and that the public expenditure round will be extremely difficult; but he does not often say such things in public.

The Government's practice—this applies even more to the right hon. Gentleman's predecessor than to himself—has been to lead people to believe that everything is fine and that they can reasonably take out large borrowings, because everything will get better and interest rates will come down in due course, although they will have to be kept high for a little longer. All those expectations, which are generated by rosy economic statements, do not help to bring about the self-discipline for which the Chancellor is asking and which he knows the economy requires.

Perhaps the most remarkable errors of all are those that the Government are making over Europe. The Government seem incapable of any clear, settled or united policy towards Europe. The plans for the hard ecu, which the Chancellor has devised with the assistance of Mr. Butler and others, has the singular merit that it enables one set of people in the Conservative party to believe that it will never lead to a single currency, a European central bank and full monetary union, and another set of people in the Conservative party to believe that it is a constructive and significant step along that road, which I suspect is the Chancellor's own view.

The right hon. Gentleman is assisting the Labour party in the same respect, because a number of Labour Members take the same view of the conditions that the Labour party has set down for joining the exchange rate mechanism. I believe that it was the hon. Member for Great Grimsby (Mr. Mitchell) who said that he was quite satisfied with the Labour party's attitude to the exchange rate mechanism, because the conditions were such that they could never be satisfied. He is probably right, because the condition that the whole exchange rate mechanism should become a reflationary process, which is effectively one of the four conditions, will not be satisfied. Those conditions also have the merit that they can mean different things to different people.

Photo of Mr John Major Mr John Major , Huntingdon

I am grateful to the hon. Gentleman for making that point, which in essence is entirely right. People must understand that the specific circumstances under which the Labour party has said that it will join the exchange rate mechanism would mean nothing other than the destruction of the exchange rate mechanism itself. It is a piece of flimsy oratory to cover the fact that the Labour party has no policy. The hon. Gentleman may be right in his implicit criticism that I should have made that point earlier.

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury)

I hope that the right hon. Gentleman recognises the beam in his own eye, or that of the Government. Setting up structures which mean different things to different people makes a wide political impression.

I was fascinated by the response from the Leader of the Opposition during Prime Minister's Questions the day after the Chancellor's plan was unveiled. He said to the Prime Minister: I have read the speech. I wonder whether the Chancellor explained to the right hon. Lady that if the idea that he put forward were accepted, with the European Monetary Fund and the hard ecu, it would be the final.surrender of monetary sovereignty by Britain".—[Official Report, 21 June 1990; Vol. 174, c. 1107.] I was most intrigued by that, as it was not clear whether the right hon. Gentleman was saying to the Prime Minister, "How outrageous it is that you, the Prime Minister, should even contemplate the surrender of monetary sovereignty which I, as the Leader of the Labour party, would never contemplate"; or whether he was simply pointing to an obvious inconsistency in the Prime Minister's attitude. I suspect that, when he said that, he thought that the Labour party would never contemplate such a move in any circumstances, so the ambivalence surrounding the Labour party's attitude to Europe is similar to that of the Government.

It is carried through in their attitude to a European central banking mechanism, which is part of the all the plans put forward so far, except that proposed by the Chancellor. The right hon. and learned Member for Monklands, East (Mr. Smith) made Labour's position quite clear in his response to my earlier intervention. He said that the Labour party would have none of that and did not want an independent autonomous central bank. He is at one with the Government in that. There are stages in serious prospect in the minds of our major partners in Europe which neither the Conservative party nor the Labour party is prepared to contemplate. They are key elements in European monetary union.

The refusal to accept what is happening in Europe seems to sow the seeds of downfall for any policy pursued by the Conservative party or the Labour party as long as they retain those prejudices. I do not understand what role the Government or the Labour party envisage for Britain in future. I do not believe that the rest of Europe will accept the Chancellor's plan. It has been accepted by many of our European partners as evidence that he is in earnest about trying to find a basis on which Britain can play a part in the future economic development in Europe, and he has dragged the Prime Minister into that testimony of earnestness. However, I shall be most surprised if his plan is preferred to the proposals in the minds of the Germans, the French and our other European partners.

What will the Chancellor do if our European partners decide to go ahead and we are left out? The obvious conclusion is that we will remain in the second division, eventually to be joined by Hungary and Czechoslovakia in years to come, when they become supplicants to join the European Community, and that we shall remain outside the major developments in Europe. That would be disastrous for Britain. It would be disastrous for Britain's industrial position and for the hopes of the City, which could reasonably expect to be the financial capital of Europe when financial and monetary union is achieved. It would leave Britain in a very much weaker position.

Within that argument about our future there has suddenly broken out the row about what we think about the Germans—a most extraordinary episode. The remarks subsequently disowned by the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley), which seemed to be fuelled by a mixture of malevolence and jealousy against a nation that has succeeded where Britain has failed, were given substance by that extraordinary Chequers seminar and the assortment of prejudices drawn up there.

Why was there no serious analysis about what has made Germany a successful economy in the post-war years? The writings of the commentators on what has happened in Germany show common agreement on a number of key elements. Some of those elements are political, such as having a decentralised system of government with centres of power away from the capital and the consensus produced by a fair electoral system which ensures that Governments have to carry wider support than that of their own party. Some of them are about economic decision-making, in particular having a central bank which has an autonomous responsibility for price stability and therefore effective control of monetary policy.

That is not a superficial claim about the German economy. No serious economist would not regard that as having played a major part in Germany's success in fighting inflation. Yet today the Chancellor made it clear that the Chancellor of the Exchequer and not the Bank of England will have responsibility for monetary policy in future. Can he or the official Opposition pretend that Britain can demonstrate that it has been more successful by leaving the control of inflation solely in the hands of the Government than has a country which has given its central bank a major role in the control of inflation? Of course they cannot.

Among the other features which have been important in Germany's success is the record of training through the education system and in employment. The hon. Member for Beaconsfield referred to the budgets of Government Departments. He should remember that the Department of Employment's budget was one of the casualties of the last public expenditure round. Just when we should have been increasing expenditure on training, it was cut.

In Germany, trade unions have played a more constructive role than has traditionally been expected or encouraged in Britain. I took part in a discussion in Germany in which a Labour Member asked, "Surely what you say will happen in East Germany will not happen because the trade unions will insist that they do not suffer all those job losses as the firms are made more efficient."

The German officials to whom we were putting those questions were amazed, because the idea that a trade union would not understand the need to increase efficiency had not even crossed their minds. In Germany, the trade unions traditionally have operated a more progressive approach to industrial change, and that has been a major factor in Germany's success. Germany has also recognised the need for essential public investment in the transport system, for example.

We are not learning the lessons of German success. Instead, we are complaining about that success. Decentralised government, a fair electoral system, an autonomous central bank with responsibility to deal with inflation, training, investment and constructive trade unions do not form a package that the Government or the Labour party can accept in its entirety. They should be part of a package of change for Britain. They have long been part of the policies of my party. That is why our approach to Britain's economic policies has proven marks of success.

Why do those who believe that leaving the field open to German dominance in the European Community poses a danger to Britain persist in supposing that the proper response is to keep Britain on the sidelines, to resist the development of the policies that I have described and to leave Britain in Europe's second division? That would be a recipe for economic failure.

Photo of Mr John Browne Mr John Browne , Winchester 5:57 pm, 24th July 1990

I congratulate my right hon. Friend the Chancellor on a quite outstanding speech and support him and the Government's policies in the proposals submitted to our European partners on economic and monetary union. As the Chancellor said, they are based on the so-called hard ecu. Our economy has been and will be vitally affected by currency and interest rates.

At the outset, I declare a financial interest that may be affected by European monetary union or the strength or otherwise of the European economy. At the heart of European monetary union lies the political and economic integration of Europe. Economically, the forces are for integration in economy of scale and flow production, and the lowering of customs barriers. These factors force us towards economic integration.

But the key to integration is political. The political elements often hold back for understandable reasons, such as the protection of jobs and prices, and even for cultural reasons. These are two competing forces—one to integrate and one to hold back. Political integration is all about sovereignty, but sovereignty is an emotional matter of the heart. We must ask why politicians would willingly yield sovereignty. I submit that the answer is similar to that given by entrepreneurs when they yield equity or sovereignty in their companies—that it is survival. The survival of Europe must mean the yielding of sovereignty. It is a question of how far and how much at any time.

European monetary union is mainly dependent on the outlook for Europe. What are Europe's prospects until the turn of the century? The evolution of the 1990s in Europe has been already dramatically affected by one man, Mr. Gorbachev—or Gorby, as he is known at the grass roots. He has unlocked the static trench warfare of the cold war and has challenged the world to mobile competition. Gorbachev has issued the world a new challenge which, unusually, is not of war but of peace. He proposes to change the nature of peace itself, from the peace of nuclear deterrence under which we have lived for 45 years, to a peace of detente. It is to swap mass mutual destruction for the hope of mutual trust.

Mr. Gorbachev's new challenge has successfully removed the bogey man from the strategic scene. It has also had other interesting consequences, which will crucially affect the future of Europe.

First, it has heralded the end of the second world war. I sometimes find it hard to remember that the losers of the hot part of that war were Japan and Germany.

Secondly, it has catapulted Europe back to the centre of gravity in world politics. The main question is, what Europe? Is it a Europe that ends in Berlin, or a Europe that ends in Moscow? Thirdly, Gorbachev's new challenge has catapulted Europe back on to the centre stage of world politics. But it is an uncertain Europe. It has changed so much. The two clenched fists—the Warsaw pact and NATO—have now opened. At one time they faced each other antagonistically, with great forces for union within their membership. Now, individual nations wish to do more of their own thing.

Mr. Gorbachev has also lit the fire of freedom throughout central and eastern Europe. When the Governments of the west lit the fires of freedom in the western economies, the problem that had to be faced was greed. With the lighting of the fire in totalitarian states, the problem that must be faced is revolution.

Europe is at the centre of a world stage that is showing signs of an ominous growth in trade blocs. I am thinking especially of the United States and Canada, of Japan and China, and of the European Community. There is potential for those three trade blocs to become isolated from each other. However, there is the counter force of globalisation. The lesson of Chernobyl is that to love one's country is no longer anywhere near good enough in itself. If we really love our country, we must watch and take interest in what is happening in neighbouring countries.

Fourthly, Mr. Gorbachev's new challenge has exposed a change in the super-power structure. In 1945, Great Britain was replaced as a super-power by Russia. Now, 45 years later, Russia itself is being replaced as a super-power. The question is, by whom? Will it be the new Europe or the new Germany? The new Europe is big—some 350 million people and an economy of $4 trillion accounting for about 20 per cent. of the world's free trade. What is more, that trade is balanced, with about $400 billion of exports and $400 billion of imports a year. That is a powerful bloc.

What form will the new Europe take? Economic and monetary union is crucial to that decision. Will it be a Europe of member sovereign states; will it be a Europe of one federal state; or will it be a Europe dominated by a single member state?

Germany is a country of about 100 million people. Even the Romans failed to conquer it. The praetorian guard was heavily Germanic. It was the protector of Europe for many years under the Teutonic Knights. The West German miracle is a modern example of the strength and vibrance of the German nation.

What has Germany already achieved and what will it possibly achieve now that it is united? What will it achieve as a member of the EEC and adjacent to central European and Soviet Union markets? A major force has suddenly erupted within the EEC. The vital question that the whole of Europe must answer, including the Germans, is how Europe can best assimilate Germany in the longer-term interests of Europe in general. At the heart of that answer will lie our policies towards European monetary union.

I beleve that the headlines of history will record this time as one of legend, of great opportunity and of risk, of unprecedented change, and of uncertainty—almost the fog of a sudden peace. At a time of such great uncertainty, risk and opportunity, the House and many like it throughout Europe are being asked to make a dramatic decision about something that is dear to us and to the hearts of our constituents—the future of our national sovereignty. In this uncertain world, we are being pressed to go ahead with European monetary union or a single European currency, yet that proposition is being put to us before the establishment of a single European market, let alone a single European economy.

We are being asked to join the exchange rate mechanism. It is clear that it is dominated by the deutschmark. An illustration of that is the Government's action in the wake of the financial near-crash of October 1987, when there was a risk of a resultant economic crash. The Governments of most western nations correctly injected a great deal of cash into their systems. It is easy with hindsight to say that that was incorrect, but at the time we all believed that it was correct. That cash injection was highly inflationary. Germany, with a much more disciplined economy, brought its inflation under control much more rapidly than we did, and it started to drop deutschmark interest rates. However, Britain had shifted its focus from the Unites States dollar to the deutschmark, and to keep the sterling-deutschmark parity we also started to drop our interest rates. Economically, it was far too soon and inflation kicked up yet further and brought the Government under great strain. It even called into question the future of the Prime Minister. The "Thatcher factor" in the value of sterling should not be underestimated.

The vital lesson of that example was that the interests of the deutschmark are not always or necessarily the same as the economic interests of the other member countries. While joining a deutschmark-dominated bloc may be seen as anti-inflationary on the surface, we must question whether that is true in terms of members' individual economies. The answer is far from clear and can often lead to an inflationary impetus in a domestic economy within the EEC. The ERM is certainly no panacea for sterling or the United Kingdom economy.

European monetary union is the ultimate surrender of sovereignty. History shows that the old Saxon capital of England, Winchester, was taken over by the Normans in 1066 or thereabouts. Winchester and London were then the joint capitals of England. When the Treasury and the mint were moved from Winchester to London in 1240, London became the undisputed capital. There is a lesson in that, because where the mint, the Treasury and the money go is where sovereignty goes.

At this time of uncertainty, we must question how much sovereignty we should yield, particularly as European monetary union is based not on gold, which is supranational, but on paper currencies, which are geared to politics and over which politicians have influence. There is not even a single European market, let alone a single European economy, and paper currencies tend to reflect the political aspects of economies. Before we reach that stage, is it wise to contemplate moving to a single European currency?

The deutschmark is strong and reflects an extremely strong German economy. If the economies of less competitive nations of the EEC are exposed to the full gale of German economic competition in one sudden blast, many companies, even entire industries, will be blown away, causing massive unemployment in some regions, and Britain will become a region. There could be massive unemployment and much suffering. It is in the interests of member states to bide their time not only to allow members to grow more competitive but to adjust our economies. In other words, we need an economic shield, an economic greenhouse, such as we use for young plants. The Government discriminate quite heavily in favour of small and new businesses in terms of employment legislation and tax, and we should do that in Europe. We need time to allow for the evolution of European currency and to avoid European currency revolution.

We are at a crossroads in Europe. We face the options of an EEC of sovereign nations, a federal state or a state dominated by a single country. We are an amalgam of widely disparate economies reflecting different strengths and weaknesses, and until the disparity of EEC nations is resolved we should avoid any sudden or abrupt move to a single currency.

The EEC is young, it is not yet a single market and it is facing uncertainty. It needs time to develop, by evolution rather than revolution. At the same time, there is pressure to do something because, if Governments do not do so, the grass roots may take the initiative and select their own single currency, which is likely to be the deutschmark.

The British proposal for evolution based on the hard ecu is good. It is non-inflationary and I particularly welcome the buy-back provisions for the central banks. It allows time for EEC members to adjust to the international competition of a single market and to harmonise or converge their economies in the single market of 1992. It will allow for politically humane economic adjustment within EEC countries and it offers the flexibility which any prudent person or banker would demand when facing an era of such change and uncertainty. Most important, it is in the best interests of Europe in general.

The British proposal should be adopted by all EEC members and I wish my right hon. Friend the Chancellor good luck in persuading his colleagues in the EEC to adopt it.

Photo of Mr Joe Ashton Mr Joe Ashton , Bassetlaw 6:14 pm, 24th July 1990

I shall make an astounding revelation for tomorrow's Financial Times by saying when interest rates will change. There will be a full 1 per cent. cut at 3.30 pm on Thursday 11 October, and it will be announced at the Conservative party conference.

Photo of Mr Joe Ashton Mr Joe Ashton , Bassetlaw

Mine is the day before, and it is the Prime Minister's two days afterwards, when she will be 65 and ready for the old-age pension.

It will be announced then because the only economic plan is to get the Tories elected at every election and it does not matter a damn what happens in between. If they have their eyes set on October next year, they will try to reduce interest rates by 5 per cent. between this October and next October to give them a chance in the general election. I think that they have left it too late and that they will have to wait until 1992, but that is obviously their plan. Let us not hear any nonsense from Conservative Members; the Government are rigging the economy.

That put us in the mess that we are in now. Immense numbers of credit cards were given out in 1985 and 1986 to get the Tories elected in 1987. Anyone, whether they were unemployed, had tuppence in the bank, could not read or write or had a long history of bad hire purchase payments, was allowed to walk into Debenhams, Marks and Spencer or Rackhams and take on a credit card.

Newspapers sent 17 and 18-year-olds to see how much they could borrow. They bought £10,000-worth of high-fashion clothes, and that was all geared to the Tories winning the 1987 election. Industries were sold off, British Gas was sold to Sid, who never bought a share in his life, and we were allowed to believe that he was becoming rich. People were allowed to take on massive mortgages until it all collapsed.

What happened when we were younger? There was no such thing as a credit card, but we had normal, old-fashioned hire purchase. You could not borrow more than a certain amount of your wages and had to pay a deposit to show that you had cash to start off with. It was paid back over two years a little bit at a time, and you could not get one thing without paying for the first. If you wanted a fridge, you had to wait until you had paid off the carpet. That system discouraged people from getting into debt.

When I bought my first house, I could borrow two and a half times my annual income and had to have 10 per cent. to put down. That worked, house prices increased with wages and we did not have a rocketing boom as in 1986 and 1987. People could afford to buy a place to live.

What happened? The Tories removed controls in 1986 and people were allowed to borrow £50,000 or £60,000 when they were earning only £10,000. The two-and-halftimes annual income limit for borrowing on mortgage went through the window. People were allowed to borrow three, four or five times their annual income. No wonder house prices rocketed.

I shall reveal another secret of the universe. Everybody wants to know the magic moment in time when house prices take off. It is about three months after the Prime Minister buys one. If hon. Members want to buy a house and see its price double, they should wait until the Prime Minister buys one. They all do it. Harold Wilson bought one in 1969, Denis Healey bought one in 1977, the Prime Minister bought one in 1985 and within months prices rocketed.

Photo of Mr Joe Ashton Mr Joe Ashton , Bassetlaw

I am sorry; I am limited for time.

The Tories are always attacking the Labour party for the inflation of the mid-1970s. That inflation was caused not by the Labour party but by oil prices, and they know it. They kept on blaming the Labour Government until it stuck in people's minds. The Arabs fought the Israelis, the price of oil trebled and it caused inflation in every country in the civilised world. It was not just the Labour Government. We reacted to that inflation with the co-operation of the unions and with an incomes policy until we reduced inflation from 25 per cent. to 8 per cent.

The Government cannot blame other countries, because we have had the benefit of oil. Inflation, which is much higher than in other countries in Europe, must have been caused by the Government. It was caused in 1985, 1986 and 1987 by indiscriminate borrowing from anyone, for anything, at any interest rate. Gullible people borrowed.

Many people were encouraged to buy their council house. I am not knocking that, because the authorities in Bassetlaw sold council houses long before the Tories thought of it. Many people paid £6,000 for a house worth £20,000, but then the loan sharks came knocking on their door, asking, "Do you realise that your house is worth £20,000 and that you owe only £6,000 on it? Why don't you borrow with an additional loan?"

Cedar Holdings used that approach on many people in mining areas who bought National Coal Board houses. Some gullible people thought that they could borrow £2,000 or £3,000 and that it did not matter if they could not pay it back. They thought that, somehow, the difference between the £6,000 and the £20,000 would be reduced a little. They thought that they could not be turned out of their house. Many families were turned out of their houses because they did not realise that they had to make repayments each month to Cedar Holdings and similar companies.

There was a Niagara of debt. Obviously, such a debt will mean that more people will demand bigger wage rises, especially given the massive profits made even today by many firms. The Government complain about inflation, but they do nothing about bringing down prices and controlling inflation. They do nothing to alter the rate of VAT. Why is there a flat rate of 15 per cent? Why do not the Government cut the VAT on British fish and chips to 4 per cent. and increase the VAT on Japanese microwaves to 25 per cent? In that way, we might save a few jobs. That might be a better way of functioning. I offer those ideas because new thinking is needed, and nothing comes from the Government.

Photo of Mr Conal Gregory Mr Conal Gregory , City of York 6:21 pm, 24th July 1990

We have the opportunity of an important, wide-ranging debate on the economy. It might be prudent at the beginning of my short speech to remind ourselves of the economic indicators which have been the success of our strategy.

Britain has had some eight years of sustained economic growth, averaging over 3 per cent.—a period unmatched since the second world war. The growth rate in the United Kingdom has been faster than that in France, West Germany and Italy. In the 1960s and 1970s, Britain was at the bottom of the growth league of the major European states.

The average family of a husband, wife and two children have seen the real value of take-home pay increased by one third under the Conservative Administration. Under Labour, there was an increase of 0·6 per cent. That is not a comparison which I should like to take with me into the next general election if I were a Labour parliamentary candidate. Fortunately, I shall not do so, because I shall be proud of our record. Industry is more effective and more competitive than ever. Manufacturing productivity has increased by 60 per cent. In the three months to May there was an increase in production of 1·5 per cent. on the previous three months.

Any hon. Member can see that, with such a catalogue of success, a prosperous economy is necessary to ensure investment in British Rail, which is the highest for 29 years; an increase of more than 60 per cent. in road building, after allowing for inflation; almost 350 major hospital schemes finished since 1979; and a real-terms increase of almost one quarter in benefits for the family. An expanding economy needs innovation and new companies. I praise the net increase in business start-ups. Between the end of 1981 and the end of 1988, business start-ups exceeded stops by 238,000, with an average net business start-up of 1,600 each month last year. What a contrast with the Labour party.

The Labour party's policy document "Looking to the Future", which in many ways is a misnomer, as it looks to the past, contains 81 spending commitments. The hon. Member for Kingston upon Hull, East (Mr. Prescott), who is not in the House at present, gave another major commitment today, making it 82. Even allowing for the 81 commitments, Midland Montagu has calculated that Labour's pledges will cost £50 billion—equivalent to doubling the basic rate of income tax. That is the message from this debate, apart from the great address by my right hon. Friend the Chancellor. That is a scandalous amount, as I hope the hon. Member for Derby, South (Mrs. Beckett) will confirm.

There are two taxes about which the ordinary man or woman must be concerned. The first is Labour's savings tax, which would penalise the thrifty. It would be levied on the investment of anyone who has more than £3,000 in a piggy bank, or £5,000 a year for pensioners. The second is Labour's jobs tax, which would be a cost on the payroll. It would punish British industry and increase unemployment. Fixed capital expenditure in my region of Yorkshire and Humberside increased from £346 million in 1979 to more than £606 million by 1987. Private sector manufacturing investment increased by £1,981 million in 1979, when we took over from Labour maladministration, to £3,288 million in 1987—staggering figures.

We should nail four Labour myths, the first of which is that rising inflation shows that the supply side of the economy is in poor shape. In fact, inflation and the trade deficit are symptoms of excess growth in demand. British industry is now more efficient, and is producing and exporting more than ever before. As John Banham of the CBI said: We enter the 1990s with the supply side of the British economy in incomparably better shape than at any time in our history. The second myth is that credit controls are the best way to curb inflation. We frequently hear that statement made by the right hon. and learned Member for Monklands, East (Mr. Smith). Credit controls could easily be avoided by borrowing overseas. To be effective, they would have to cover 85 per cent. of all borrowings in the form of mortgages. In the 1970s, credit controls failed to prevent inflation reaching Labour's figure of 27 per cent.

The third myth is that Britain has under-invested. British investment has risen faster than investment in the other European countries to which I referred earlier.

The fourth myth is that British industry cannot compete in world markets. Britain exports more per head of population than Japan. In the 1980s, Britain held on to its share of world markets after decades of decline. Over the three months to March, exports rose by 6 per cent. compared with a year earlier, while imports rose by just 2 per cent.

How can one understand a leader of a major party who says that 14 out of 15 taxpayers would not have to pay more under Labour? I am, of course, referring to the Leader of the Opposition. He meant, being sloppy in his language, that 14 out of 15 basic rate taxpayers would not have to pay more. The 1981 pledges will mean that everyone will have to pay more. He referred to social security pledges of £2 billion, but he meant £3·3 billion.

Labour is as hostile as ever to denationalisation. Labour is still wedded to clause four of its constitution which its marketing jargon now describes as "social ownership". Does Labour really believe that it will take back British Airways—which, 10 years ago, was rated lower than Romania Airlines—British Telecom, the British Airports Authority and National Freight? Am I going to go back to the constituents of York and say to those employed in British Rail Engineering Ltd., in station catering and Travellers Fare, in British Gas and Yorkshire Water that their profit in the future will be taken from them and that we will face the socialist threat to reimpose the dead hand of the state?

The message is stark. Labour mismanaged the economy. Its proposals make no sense. The right way forward is Conservative control of the economy and our vision of a country in which the individual has freedom and in which investment comes through enterprise.

Photo of Mr Stuart Randall Mr Stuart Randall , Kingston upon Hull West 6:29 pm, 24th July 1990

The only thing that I have in common with the hon. Member for York (Mr. Gregory) is the county area that we both represent. I think that his perception of how well the economy is being managed by the Government is extraordinary.

The motion before us is a good motion. It is accurate in the way in which it refers to the "mismanagement of the economy" and the "quality of life", and says that we need more innovation as well as regional policy.

To obtain a reasonable measure of the Government's performance in handling the economy, one should talk to business people. I regularly do that, and I know that they are all fed up with the Government. They are people who have traditionally always supported the Government, but I now find that, certainly in Hull—

Photo of Mr Stuart Randall Mr Stuart Randall , Kingston upon Hull West

That is for sure. If a Tory were to be elected in Hull, I think that he would be lynched and hung from a lamp post. The business people of Hull are waving a red light: they are saying that they are not happy with the way in which the Government are managing the economy, especially the way in which they are dismally failing to come up with a policy to provide industry in our region with the right skills and education to ensure that we can be innovative.

Hull contains a number of hi-tech companies, notably Kingston Communications. The Chief Secretary to the Treasury and I have discussed this topic in the past; we are very proud of the way in which that company has brought high technology into our area. I would like similar companies to come to our region, but that will not happen unless there is a good skilled work force.

I wish to discuss the motion in the context not solely of my constituency and its region, but also within that of the EC. No one would dispute the fact that our performance, compared with Germany's in particular, is nothing short of abysmal. Our balance of payments and balance of trade, and all the major economic indicators, are remarkable. They augur badly for Britain in the 1990s, unless the British economy is fundamentally reshaped to mould it into a form that will make our industry innovative and competitive—and, above all, equipped with the appropriate skilled people.

Terrific neglect has resulted from the Government's "hands off" ideology, and their view that we should not intervene in industry. The Department of Trade and Industry is now a shell organisation with no role to play. I believe that Government should manage their affairs to help industry to perform effectively. That light touch could remove many of the bottlenecks that are currently inhibiting the performance of the British economy and British industry in comparison with our European competitors. Until we do that, the quality of life of the British people will deteriorate. The gap between rich and poor has already widened since the Government came to power, and I condemn that totally: it is not something we should be proud of.

Over the weekend, I discovered that 400 eye operations will no longer be carried out in my constituency, because of the poor performance of the national health service. To enter an eye clinic in my district health authority, one must now wait for 10 to 12 months. In our region, the performance of the economy is crucial to ensure that industry generates the wealth that will enable us to provide the services that are necessary to secure an effective and efficient public sector that will improve the quality of life of the people of Britain. That is what we are after.

The motion that my right hon. and hon. Friends have tabled today encapsulates many of our concerns about the way in which the Government have miserably mismanaged the economy of Britain.

Photo of Margaret Beckett Margaret Beckett Shadow Chief Secretary to the Treasury 6:35 pm, 24th July 1990

It is just two years since, in July 1988, the rhetoric of the economic miracle—used so much by the Government—was at its height. Those were halcyon days, when inflation was running at 4·6 per cent., interest rates were at 10·5 per cent. and the balance of payments was heading for what was then thought to be a worrying deficit of some £12 billion at an annual rate. In those days, it was within memory that the Government had been talking of achieving nil inflation, repaying the national debt and other grandiose schemes.

Even as recently as July 1989, there was still optimism. As my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) pointed out, the problems were said to represent a mere blip. Inflation was then running at 8·3 per cent. and interest rates at 14 per cent., and the balance of payments was heading for an even more worrying annual deficit—then expected to be some £18 billion, although the outturn was worse than that.

Today, when the Government have been in power for 11 long years, we have before us the record of their economic policy as it now stands: headline inflation at 9·8 per cent., interest rates at 15 per cent., mortgage rates at their highest ever and a balance of payments that is again heading for a yearly rate of some £18 billion—although, so far this year, the outturn has been worse than it was for the same period last year. Yet the Government still want us to believe that those are temporary difficulties, because we have had an economic miracle.

Certainly, the events that have passed before our bewildered eyes have been, if not miraculous, "wonderful"—in the sense that they are full of wonder. We have seen the squandering of what—in today's terms—would be £91 billion of income from the North sea. We have seen the disappearance—with nothing but three election victories to show for it—of the proceeds of the sale of the family silver. Speaking from memory, I think that that is about £40 billion or £50 billion of taxpayers' money lost. We have seen about £20 billion of savings made at the expense of pensioners, with total savings nearer £30 billion if we take account of other social security cuts. The Government have cut earnings-related benefits, while not just retaining but increasing earnings-related national insurance contributions.

In those and a variety of other ways, there has been a substantial movement of substantial resources. What have we to show for it? We have a worse-trained work force than any of our major competitors, one of the poorest records in research and development and in investment and one of the most rundown systems of transport—and one of the most uncaring, unthinking, unlistening and arrogant Governments we have ever had. The Government have been re-elected three times through the ruthless manipulation of resources that should have been used to secure the future of the country, but instead have been used to try to secure the future of the Conservative party. If I may paraphrase John Fitzgerald Kennedy "ask not what you can do for your country—ask what your country can do for you."

We have also seen a decline in the Government's probity. The Secretary of State for Health spends as much—for the second time—on propaganda to sell his health service reforms as he is prepared to spend on a drug abuse programme that was saved from the cancellation of the community care programme. What sort of a sense of priorities is that? The Government have repeatedly sold off public assets at knockdown prices, to the benefit of their friends—for "friends", of course, read "large contributors to Tory party funds".

The fruits of growth have been steadily diverted into the pockets of the wealthy; but there has still been an overall increase in the tax burden. A two-child family on average earnings is £300 a year worse off when against their income tax cuts are set the increases in national insurance contributions and value added tax. That is the other side of the coin. That is without the costs of a mortgage, the poll tax, electricity, gas, water and fares, and all the things that have made such a family between £11 and £34 a week worse off under this Government.

What about the future? Well, we heard very little about that from the Chancellor. Over the lifetime of this Government, there has been no serious investment in the future, and none is planned now. In fact, further cuts are planned, for example in the training budget, the importance of which is universally acknowledged—universally, that is, except among the ranks of the Government.

Unfortunately for the Government, the future stops at the next general election. The factors which interest the Government about the future involve the level of mortgage interest rates, the level of inflation and, to a lesser extent, the balance of payments. There has been much talk lately—we have heard a little tonight—about the inadequacies of our measurement of inflation through the retail prices index. Of course, we have heard that before; the right hon. Member for Blaby (Mr. Lawson) invented the new tax and prices index, only to discard it when it inconsiderately started to show higher levels than the retail prices index.

Over recent months, as the RPI has slowly but inexorably risen, we have been told that what really matters is not the headline rate of inflation but the underlying rate once mortgage costs have been stripped out. We were told that that is a better approximation to the way in which the rest of the European Community measures inflation. Indeed, the hon. Member for Beaconsfield (Mr. Smith) repeated that today.

As a matter of fact, that is not really true. Other members of the European Community include measures of housing costs in the way in which they measure inflation. A number of studies recently into how they measure inflation have revealed the differences between the way we do it and the way they do it. However, the sad fact is that it does not matter how we measure inflation: once any measure of housing costs is included, our inflation is still many points ahead of our competitors.

The Government's measure of the underlying rate of inflation, which they have been talking about for so long, simply left out the cost of mortgages. Unfortunately, that figure is rising as well. Last month, it was 8·1 per cent., and that was the highest rate for eight years. Therefore, last month the Government redefined the underlying rates of inflation. This time they left out the poll tax cost as well as mortgage costs. That gave a figure of 6·9 per cent., but unfortunately that was still three points above the ERM average for inflation.

Now we know what the Government mean when they say that they will bring inflation down no matter what it takes. They mean that they will do that no matter what they have to take out of the index to make inflation appear to come down. Inflation, like unemployment, can be as high as it likes. This is a resolute Government; we all remember their resolute approach. The Government had to change the unemployment statistics 30 times to get them down to a reasonable level, and if they have to change the inflation statistics 30 times to get inflation down to a reasonable level, they will do so. They are not afraid.

I can offer the Government a new index. They desperately need a new one, because they are not doing very well with the one they have. I suggest that they have an index which I call the NBG index—the "not by Government" index. That index would enable the Government to leave out what the Governor of the Bank of England has called the administered price rises, which he correctly identified as directly due to political decisions.

The Government are already leaving out mortgage interest rates and the poll tax. If they adopt my index and deal with inflation as it is not influenced by the Government, they can leave out the cost of the electricity price increases which they forced through as a result of privatisation. They can also leave out gas price increases and the fare increases upon which they insisted. They can also leave out the rent increases which they insisted upon. They would then have a very low inflation figure.

Why are the Government so anxious to get the figures down? Whatever they leave out of the index, people cannot leave those things out of the household bills which they must pay. We all know how good the Government are at selling their case. Although all this sounds good, any changes to the figures can have only a limited impact while people must still pay their bills.

Of course, the figures matter for two reasons related to entry into the exchange rate mechanism and to the election. The first reason is that they are part of the Madrid conditions that inflation must be lower. When the Madrid conditions were set, inflation was at 8·3 per cent. and the underlying rate was 5·9 per cent. Far from getting nearer to the Madrid conditions, we are actually moving away from them. The gap between the ERM average level of inflation and our own is the widest that it has been for a decade.

Secondly, the inflation figures are also important because of the Chancellor's definition that inflation in this country must be proximate to that of our ERM fellows for us to enter the mechanism. Whenever we have asked the Chancellor to define "proximate", he has said that it means what it says. I think that it was the Red Queen in Lewis Carroll's books who said that something meant whatever she wanted it to mean. That is an excellent definition of "proximate" as the Chancellor uses it.

It is not the record, but the forecast for inflation, interest rates and the balance of payments that so worries the Government and makes them so eager to secure entry to the exchange rate mechanism sooner rather than later. We have heard much lately of the golden scenario, in which the rate of inflation, interest rates and the balance of payments deficit all come down. That was scheduled for the spring and summer of 1991. Unfortunately, the one-club golfing has been slow to take effect. Interest rates have been used as the mechanism since 1988, and the window in which the golden scenario is to occur has been receding steadily—from the summer of 1991 towards the autumn of 1991 and perhaps to the spring of 1992.

Horror of horrors, that will never do. The Government need that window of six months when things are improving to manipulate things for the election so that they can convince the general public that things are looking good for longer than just the period of the election. It must all be carefuly timed. Entry into the ERM is necessary to bring the figures within the proper scope before the Government can hold the election. Of course, the nature of the improvement in the figures is causing the Government so much concern.

The universal prediction is that the improvement in inflation, in interest rates and in the balance of payments, will be temporary and that the improvement will last at the most six or perhaps nine months. As soon as the squeeze has been lifted, gradually and steadily things will deteriorate again.

In essence, we are on a roller coaster. We are on the long steep slope and we are gradually approaching the top. We will then run at roughly the same level for a little while and then, as the excessive mortgage increases and the poll tax figures are taken out of the main figure, inflation will fall dramatically. However, having done that, it will start slowly but inexorably to rise once more.

After the election, the people and the Government will face some harsh choices. I have a very interesting question for the Chief Secretary to the Treasury and it is one which people continually ask. The Government in power will face harsh choices. The Chancellor says that the Conservatives will be in power. What are the Conservatives planning? We have said that we believe in prudent control of spending. We have set out the need for investment and we have said what we think the needs are.

What are the Government's plans? Are they still in favour of income tax cuts? If so, how much will they cut public expenditure to go with it? Where will the cuts fall? Will they fall on training, transport, education or health? We want to know what the Government are promising after the next election.

That is the truth that the Government seek to hide from the electorate. The Government have mismanaged the economy. They know it, we know it and the country knows it.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames 6:48 pm, 24th July 1990

The surprising thing is not that we are having this debate but that we did not have it some weeks ago. With some less than brilliant economic indicators, we might have thought that we would have a full-scale economic debate, not a half day just at the end of the Session. We would have thought that such a debate would be led by the alternative Prime Minister, the Leader of the Opposition, who does not seem to want to speak on the economy these days. That is not very surprising after his disastrous appearance on "Panorama", explaining the Labour party's tax policy.

We have heard a certain amount from hon. Members and from the hon. Member for Derby, South (Mrs. Beckett) about competence. Of course, "competence" is not a word which comes naturally to mind when one thinks of the Labour party, either out of office or in office. Competence, for all his endearing features and fine qualities, is not the Leader of the Opposition's strongest suit. Was it competence when the Leader of the Opposition made his remarks about 14 out of 15 working taxpayers, and the shadow Chancellor had to rush out a statement correcting his leader? One could almost hear the right hon. and learned Member for Monklands, East (Mr. Smith) saying, as Hardy used to say to Laurel, "That's another fine mess you've gotten us into."

We have heard much in recent debates and in Treasury questions about the Government's errors in forecasting.

Of course, forecasting always involves judgments about human behaviour. Will people borrow more? Will they save less? If they run down their savings, at what rate will that happen, and how quickly will it feed into consumer spending?

I discovered that there is an infallible guide to the future. We would have done very well if we had got rid of our statisticians and the Treasury model. We should have relied on the predictions of the Labour party. What the Labour party says will happen is always a good guide to what will not happen. In fact, going right back to the early 1980s, Labour Members have an infallible record of forecasting. There is practically not a single year in which they have not got it precisely wrong. We would have done very well just to follow the opposite of their advice right from the early 1980s.

In 1981, they sided with the 364 economists—recovery was just not going to happen; it was impossible. In May 1983, the shadow Chancellor said that inflation would go into double figures. A year later it was 5·1 per cent. In November 1984, the shadow Chancellor forecast a slump. In 1985, we grew faster than any other major European country. In October 1986, the hon. Member for Dunfermline, East (Mr. Brown) predicted that unemployment could not fall. Since then, unemployment has halved. At the time of the stock market crash, the Leader of the Opposition told us that we should cut interest rates further than we did. If we had followed that advice, inflation today would be far worse.

I criticise the right hon. Gentleman not just for his judgment but for pretending on "Panorama" that that was not actually what he said. To call his words on "Panorama" incompetent is perhaps the politest thing that one can say about them.

Opposition Members have put their case—we have had high interest rates, high inflation and a large current account deficit. As my hon. Friend the Member for York (Mr. Gregory) said, we should note the selectivity of the statistics and the indicators. Opposition Members do not tell us that we have had the fastest growth rate of any major EC country in the past decade. They do not tell us that we have had the fastest growth of total investment of any major country other than Japan. They do not tell us that we have had the highest level of profitability in British commerce since the 1960s. They do not tell us that our level of unemployment today is well below the EEC average. They do not tell us that this year we have had the lowest number of stoppages in industrial relations for 35 years.

The right hon. Gentleman made a number of comparisons with Germany—one was misleading and one was incorrect. On the misleading one, the right hon. Gentleman told us that, this year, output growth would be less in this country than in Germany. That is true on a one-year basis, but it is not true if we look— [Interruption.] Opposition Members scoff. In six out of the past 10 years, German output growth was below ours. They did not tell us then, "You are doing very well compared with Germany." The right hon. Gentleman got it totally wrong. In the 1980s, output in the United Kingdom grew by 2·7 per cent. per annum compared with 2 per cent. per annum in Germany. The right hon. Gentleman did not get it right, and in another respect was misleading.

Of course inflation is too high—far too high. After all, our present rate of inflation, which we hope is about to peak, is about two thirds the average rate that was achieved under the previous Labour Government. Two thirds of the average rate under the previous Labour Government is far too high for us.

We might take the Opposition's criticisms of the rate of inflation more seriously if they had acknowledged some of our success in getting down inflation over the past decade. Since 1983 the differential of inflation between this country and the EEC has actually narrowed. We do not hear a word from the Opposition about that. We might take them a bit more seriously on inflation if they had not actually elected as deputy leader of their party a man who had the grand title of Secretary of State for Prices and Consumer Protection when inflation rose to more than 26 per cent. They pretend to care about inflation, but their spending plans show that they are merely arsonists dressed up in firemen's uniforms.

We might take Opposition Members more seriously if the Leader of the Opposition did not keep telling us that the way in which to deal with inflation is to increase spending and to cut interest rates. To do the right hon. Gentleman justice, when he says "cut interest rates", he does not mean some time in the future, he means now. Of course, to cut interest rates now would have a cosmetic effect on the retail prices index. But that would be at the cost of setting off another surge of borrowing. Just when inflation is coming under control, it would inflate house prices and set off consumer spending yet again. The position of the right hon. Gentleman and the Labour party on inflation is incredible. I find it incredible, but, as P. G. Wodehouse used to say, there are limits to every man's imagination.

Despite the Leader of the Opposition's gaffes, the right hon. and learned Member for Monklands, East has been trying his best in the City to tell us that Labour has changed. He promises us prudent control over public spending, but for years he has been telling us and the nation that we should spend billions more on hospitals, schools, roads, training and education. For years he has been accusing us of being miserly with education and social spending. For years the Opposition have been encouraging public sector workers to seek the moon in pay settlements. For years they have been encouraging Labour councils to spend more, more and more. The truth was told us by the hon. Member for Bolsover (Mr. Skinner). We know that he does not represent only the beastly tendency in the Labour party. During Treasury questions, he shouted, "Just because we haven't got any money doesn't mean we won't spend it." He speaks more truthfully than Opposition Front-Bench Members.

The Labour party has yet again relaunched its policy document. We have all been waiting to hear what the big idea is in that policy document. We now know what the big idea is. The big idea is our idea. Opposition Members are all in favour of the market. The Leader of the Opposition tells us that he favours market forces and competition and that he wants to take steps to make the market work. In the profile to the policy document, he said: Helping to make the market work means creating the conditions for enterprises to be more successful, enabling them to take a greater market share at home. Ten years ago—was it the same man?—he said: The answer to the weakness, injustice and rottenness of capitalism is not more of the same. That is like trying to clean a wound with handfuls of filth. That is the language of the Leader of the Opposition. Can anybody really believe that anyone who said that about the market is really a convert to competition, open trade, free enterprise and the market system? We know that the right hon. Gentleman has changed his mind on the European Community and unilateral disarmament, but those words show what his convictions are and what he really thinks about the market system and free enterprise.

Opposition Members are not convincing when they use phrases such as "the market". They do it because the intellectual case for, and the experience of, their political philosophy has collapsed throughout the world. They do not believe in it and we know it. They know themselves that they do not believe in it. The Labour party is an organised hypocrisy and we intend to expose it.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 211, Noes 309.

Division No. 311][6.59 pm
AYES
Abbott, Ms DianeDavies, Rt Hon Denzil (Llanelli)
Adams, Allen (Paisley N)Davies, Ron (Caerphilly)
Allen, GrahamDavis, Terry (B'ham Hodge H'l)
Alton, DavidDewar, Donald
Anderson, DonaldDixon, Don
Archer, Rt Hon PeterDobson, Frank
Armstrong, HilaryDoran, Frank
Ashdown, Rt Hon PaddyDuffy, A. E. P.
Ashley, Rt Hon JackDunnachie, Jimmy
Ashton, JoeDunwoody, Hon Mrs Gwyneth
Barnes, Harry (Derbyshire NE)Eadie, Alexander
Barnes, Mrs Rosie (Greenwich)Evans, John (St Helens N)
Barron, KevinEwing, Harry (Falkirk E)
Beckett, MargaretEwing, Mrs Margaret (Moray)
Beith, A. J.Fatchett, Derek
Bell, StuartFearn, Ronald
Benn, Rt Hon TonyField, Frank (Birkenhead)
Bennett, A. F. (D'nt'n & R'dish)Fields, Terry (L'pool B G'n)
Bermingham, GeraldFisher, Mark
Bidwell, SydneyFlannery, Martin
Blair, TonyFlynn, Paul
Blunkett, DavidFoot, Rt Hon Michael
Boateng, PaulFoster, Derek
Boyes, RolandFoulkes, George
Bradley, KeithFraser, John
Bray, Dr JeremyFyfe, Maria
Brown, Gordon (D'mline E)Galbraith, Sam
Brown, Ron (Edinburgh Leith)Garrett, John (Norwich South)
Bruce, Malcolm (Gordon)Garrett, Ted (Wallsend)
Buckley, George J.George, Bruce
Caborn, RichardGilbert, Rt Hon Dr John
Callaghan, JimGodman, Dr Norman A.
Campbell, Menzies (Fife NE)Golding, Mrs Llin
Campbell, Ron (Blyth Valley)Gordon, Mildred
Campbell-Savours, D. N.Gould, Bryan
Cartwright, JohnGraham, Thomas
Clark, Dr David (S Shields)Grocott, Bruce
Clarke, Tom (Monklands W)Hardy, Peter
Clelland, DavidHarman, Ms Harriet
Clwyd, Mrs AnnHattersley, Rt Hon Roy
Cohen, HarryHaynes, Frank
Coleman, DonaldHeal, Mrs Sylvia
Cook, Frank (Stockton N)Henderson, Doug
Cook, Robin (Livingston)Hinchliffe, David
Corbett, RobinHoey, Ms Kate (Vauxhall)
Cousins, JimHogg, N. (C'nauld & Kilsyth)
Crowther, StanHome Robertson, John
Cryer, BobHood, Jimmy
Cummings, JohnHowarth, George (Knowsley N)
Cunliffe, LawrenceHowells, Dr. Kim (Pontypridd)
Cunningham, Dr JohnHoyle, Doug
Darling, AlistairHughes, John (Coventry NE)
Hughes, Robert (Aberdeen N)Powell, Ray (Ogmore)
Hughes, Roy (Newport E)Prescott, John
Hughes, Simon (Southwark)Primarolo, Dawn
Illsley, EricRadice, Giles
Janner, GrevilleRandall, Stuart
Jones, Barry (Alyn & Deeside)Redmond, Martin
Jones, Martyn (Clwyd S W)Rees, Rt Hon Merlyn
Kennedy, CharlesRichardson, Jo
Kinnock, Rt Hon NeilRobertson, George
Kirkwood, ArchyRobinson, Geoffrey
Lambie, DavidRogers, Allan
Lamond, JamesRooker, Jeff
Leadbitter, TedRoss, Ernie (Dundee W)
Leighton, RonRowlands, Ted
Lestor, Joan (Eccles)Ruddock, Joan
Lewis, TerrySalmond, Alex
Litherland, RobertSedgemore, Brian
Lloyd, Tony (Stretford)Sheerman, Barry
Lofthouse, GeoffreySheldon, Rt Hon Robert
Loyden, EddieShore, Rt Hon Peter
McAllion, JohnShort, Clare
McAvoy, ThomasSillars, Jim
McCartney, IanSkinner, Dennis
Macdonald, Calum A.Smith, Andrew (Oxford E)
McKay, Allen (Barnsley West)Smith, C. (Isl'ton & F'bury)
McKelvey, WilliamSmith, Rt Hon J. (Monk'ds E)
Maclennan, RobertSmith, J. P. (Vale of Glam)
McNamara, KevinSnape, Peter
McWilliam, JohnSoley, Clive
Madden, MaxSpearing, Nigel
Mahon, Mrs AliceSteel, Rt Hon Sir David
Marek, Dr JohnSteinberg, Gerry
Marshall, David (Shettleston)Stott, Roger
Marshall, Jim (Leicester S)Straw, Jack
Martin, Michael J. (Springburn)Taylor, Mrs Ann (Dewsbury)
Martlew, EricTurner, Dennis
Meacher, MichaelVaz, Keith
Meale, AlanWalley, Joan
Michael, AlunWardell, Gareth (Gower)
Michie, Bill (Sheffield Heeley)Wareing, Robert N.
Michie, Mrs Ray (Arg'l & Bute)Watson, Mike (Glasgow, C)
Mitchell, Austin (G't Grimsby)Welsh, Andrew (Angus E)
Moonie, Dr LewisWelsh, Michael (Doncaster N)
Morgan, RhodriWilliams, Rt Hon Alan
Morley, ElliotWilliams, Alan W. (Carm'then)
Morris, Rt Hon A. (W'shawe)Wilson, Brian
Mowlam, MarjorieWinnick, David
Murphy, PaulWise, Mrs Audrey
Nellist, DaveWorthington, Tony
Oakes, Rt Hon GordonWray, Jimmy
O'Brien, WilliamYoung, David (Bolton SE)
Orme, Rt Hon Stanley
Parry, RobertTellers for the Ayes:
Patchett, TerryMr. Ken Eastham and
Pendry, TomMr. John Battle.
Pike, Peter L.
NOES
Alexander, RichardBiffen, Rt Hon John
Alison, Rt Hon MichaelBlackburn, Dr John G.
Amery, Rt Hon JulianBlaker, Rt Hon Sir Peter
Amess, DavidBody, Sir Richard
Amos, AlanBonsor, Sir Nicholas
Arbuthnot, JamesBoscawen, Hon Robert
Arnold, Jacques (Gravesham)Boswell, Tim
Ashby, DavidBottomley, Peter
Aspinwall, JackBottomley, Mrs Virginia
Atkins, RobertBowden, A (Brighton K'pto'n)
Atkinson, DavidBowden, Gerald (Dulwich)
Baker, Rt Hon K. (Mole Valley)Boyson, Rt Hon Dr Sir Rhodes
Baker, Nicholas (Dorset N)Braine, Rt Hon Sir Bernard
Baldry, TonyBrandon-Bravo, Martin
Banks, Robert (Harrogate)Brazier, Julian
Batiste, SpencerBright, Graham
Beaumont-Dark, AnthonyBrown, Michael (Brigg & Cl't's)
Bellingham, HenryBrowne, John (Winchester)
Bendall, VivianBruce, Ian (Dorset South)
Bennett, Nicholas (Pembroke)Buchanan-Smith, Rt Hon Alick
Benyon, W.Buck, Sir Antony
Bevan, David GilroyBudgen, Nicholas
Burns, SimonHannam, John
Burt, AlistairHargreaves, A. (B'ham H'll Gr')
Butler, ChrisHargreaves, Ken (Hyndburn)
Butterfill, JohnHarris, David
Carlisle, John, (Luton N)Haselhurst, Alan
Carlisle, Kenneth (Lincoln)Hayes, Jerry
Carrington, MatthewHayhoe, Rt Hon Sir Barney
Carttiss, MichaelHayward, Robert
Cash, WilliamHicks, Robert (Cornwall SE)
Chalker, Rt Hon Mrs LyndaHiggins, Rt Hon Terence L.
Channon, Rt Hon PaulHill, James
Chapman, SydneyHind, Kenneth
Chope, ChristopherHolt, Richard
Churchill, MrHordern, Sir Peter
Clark, Hon Alan (Plym'th S'n)Howard, Rt Hon Michael
Clark, Dr Michael (Rochford)Howarth, Alan (Strat'd-on-A)
Clark, Sir W. (Croydon S)Howarth, G. (Cannock & B'wd)
Clarke, Rt Hon K. (Rushcliffe)Howe, Rt Hon Sir Geoffrey
Colvin, MichaelHowell, Rt Hon David (G'dford)
Conway, DerekHowell, Ralph (North Norfolk)
Coombs, Anthony (Wyre F'rest)Hughes, Robert G. (Harrow W)
Coombs, Simon (Swindon)Hunt, Sir John (Ravensbourne)
Cormack, PatrickHunter, Andrew
Couchman, JamesIrvine, Michael
Cran, JamesIrving, Sir Charles
Critchley, JulianJack, Michael
Currie, Mrs EdwinaJanman, Tim
Davies, Q. (Stamf'd & Spald'g)Jessel, Toby
Davis, David (Boothferry)Johnson Smith, Sir Geoffrey
Day, StephenJones, Gwilym (Cardiff N)
Devlin, TimJones, Robert B (Herts W)
Dicks, TerryJopling, Rt Hon Michael
Dorrell, StephenKellett-Bowman, Dame Elaine
Douglas-Hamilton, Lord JamesKey, Robert
Dover, DenKilfedder, James
Dunn, BobKing, Roger (B'ham N'thfield)
Durant, TonyKing, Rt Hon Tom (Bridgwater)
Dykes, HughKirkhope, Timothy
Eggar, TimKnapman, Roger
Emery, Sir PeterKnight, Greg (Derby North)
Evans, David (Welwyn Hatf'd)Knight, Dame Jill (Edgbaston)
Evennett, DavidKnowles, Michael
Fairbairn, Sir NicholasKnox, David
Fallon, MichaelLamont, Rt Hon Norman
Favell, TonyLang, Ian
Fenner, Dame PeggyLawrence, Ivan
Field, Barry (Isle of Wight)Lee, John (Pendle)
Finsberg, Sir GeoffreyLeigh, Edward (Gainsbor'gh)
Fishburn, John DudleyLennox-Boyd, Hon Mark
Fookes, Dame JanetLester, Jim (Broxtowe)
Forman, NigelLilley, Peter
Forsyth, Michael (Stirling)Lloyd, Sir Ian (Havant)
Forth, EricLloyd, Peter (Fareham)
Fox, Sir MarcusLord, Michael
Franks, CecilLuce, Rt Hon Richard
Freeman, RogerMcCrindle, Robert
French, DouglasMacfarlane, Sir Neil
Gale, RogerMacKay, Andrew (E Berkshire)
Gardiner, GeorgeMaclean, David
Gill, ChristopherMcLoughlin, Patrick
Gilmour, Rt Hon Sir IanMcNair-Wilson, Sir Michael
Glyn, Dr Sir AlanMcNair-Wilson, Sir Patrick
Goodhart, Sir PhilipMadel, David
Goodlad, AlastairMajor, Rt Hon John
Goodson-Wickes, Dr CharlesMalins, Humfrey
Gorman, Mrs TeresaMaples, John
Gorst, JohnMarland, Paul
Gow, IanMarlow, Tony
Grant, Sir Anthony (CambsSW)Marshall, John (Hendon S)
Greenway, Harry (Ealing N)Marshall, Sir Michael (Arundel)
Greenway, John (Ryedale)Martin, David (Portsmouth S)
Gregory, ConalMaxwell-Hyslop, Robin
Griffiths, Sir Eldon (Bury St E')Mayhew, Rt Hon Sir Patrick
Griffiths, Peter (Portsmouth N)Meyer, Sir Anthony
Grist, IanMiller, Sir Hal
Ground, PatrickMills, Iain
Grylls, MichaelMiscampbell, Norman
Hague, WilliamMitchell, Andrew (Gedling)
Hamilton, Neil (Tatton)Mitchell, Sir David
Hampson, Dr KeithMoate, Roger
Monro, Sir HectorSoames, Hon Nicholas
Montgomery, Sir FergusSpeller, Tony
Morris, M (N'hampton S)Spicer, Sir Jim (Dorset W)
Morrison, Sir CharlesSpicer, Michael (S Worcs)
Morrison, Rt Hon P (Chester)Squire, Robin
Moss, MalcolmStanbrook, Ivor
Moynihan, Hon ColinStanley, Rt Hon Sir John
Mudd, DavidSteen, Anthony
Neale, GerrardStern, Michael
Nelson, AnthonyStevens, Lewis
Neubert, MichaelStewart, Allan (Eastwood)
Newton, Rt Hon TonyStewart, Andy (Sherwood)
Nicholls, PatrickStewart, Rt Hon Ian (Herts N)
Nicholson, David (Taunton)Stradling Thomas, Sir John
Nicholson, Emma (Devon West)Sumberg, David
Norris, SteveSummerson, Hugo
Onslow, Rt Hon CranleyTapsell, Sir Peter
Oppenheim, PhillipTaylor, Ian (Esher)
Page, RichardTaylor, John M (Solihull)
Paice, JamesTebbit, Rt Hon Norman
Patnick, IrvineTemple-Morris, Peter
Pattie, Rt Hon Sir GeoffreyThompson, D. (Calder Valley)
Pawsey, JamesThompson, Patrick (Norwich N)
Porter, Barry (Wirral S)Thorne, Neil
Porter, David (Waveney)Townend, John (Bridlington)
Portillo, MichaelTownsend, Cyril D. (B'heath)
Powell, William (Corby)Tracey, Richard
Price, Sir DavidTredinnick, David
Raffan, KeithTrippier, David
Raison, Rt Hon TimothyTwinn, Dr Ian
Redwood, JohnViggers, Peter
Renton, Rt Hon TimWaddington, Rt Hon David
Rhodes James, RobertWakeham, Rt Hon John
Riddick, GrahamWaldegrave, Rt Hon William
Ridsdale, Sir JulianWalden, George
Rifkind, Rt Hon MalcolmWalker, Bill (T'side North)
Roberts, Sir Wyn (Conwy)Waller, Gary
Roe, Mrs MarionWard, John
Rossi, Sir HughWardle, Charles (Bexhill)
Rost, PeterWatts, John
Rowe, AndrewWells, Bowen
Rumbold, Mrs AngelaWheeler, Sir John
Ryder, RichardWiddecombe, Ann
Sackville, Hon TomWilshire, David
Sainsbury, Hon TimWinterton, Mrs Ann
Sayeed, JonathanWinterton, Nicholas
Scott, Rt Hon NicholasWolfson, Mark
Shaw, David (Dover)Wood, Timothy
Shaw, Sir Michael (Scarb')Woodcock, Dr. Mike
Shelton, Sir WilliamYeo, Tim
Shephard, Mrs G. (Norfolk SW)
Shepherd, Richard (Aldridge)Tellers for the Noes:
Shersby, MichaelSir George Young and
Sims, RogerMr. David Lightbown.
Smith, Tim (Beaconsfield)

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments):

The House divided: Ayes 300, Noes 191.

Divison No. 312][7.18 pm
AYES
Alexander, RichardBatiste, Spencer
Alison, Rt Hon MichaelBeaumont-Dark, Anthony
Amery, Rt Hon JulianBellingham, Henry
Amess, DavidBendall, Vivian
Amos, AlanBennett, Nicholas (Pembroke)
Arbuthnot, JamesBenyon, W.
Arnold, Jacques (Gravesham)Biffen, Rt Hon John
Ashby, DavidBlackburn, Dr John G.
Aspinwall, JackBlaker, Rt Hon Sir Peter
Atkins, RobertBody, Sir Richard
Atkinson, DavidBonsor, Sir Nicholas
Baker, Rt Hon K. (Mole Valley)Boscawen, Hon Robert
Baker, Nicholas (Dorset N)Boswell, Tim
Baldry, TonyBowden, A (Brighton K'pto'n)
Banks, Robert (Harrogate)Bowden, Gerald (Dulwich)
Boyson, Rt Hon Dr Sir RhodesGregory, Conal
Braine, Rt Hon Sir BernardGriffiths, Sir Eldon (Bury St E')
Brandon-Bravo, MartinGriffiths, Peter (Portsmouth N)
Brazier, JulianGrist, Ian
Bright, GrahamGround, Patrick
Brown, Michael (Brigg & Cl't's)Grylls, Michael
Browne, John (Winchester)Hague, William
Bruce, Ian (Dorset South)Hamilton, Neil (Tatton)
Buchanan-Smith, Rt Hon AlickHampson, Dr Keith
Buck, Sir AntonyHannam, John
Budgen, NicholasHargreaves, A. (B'ham H'll Gr')
Burns, SimonHargreaves, Ken (Hyndburn)
Burt, AlistairHarris, David
Butler, ChrisHaselhurst, Alan
Butterfill, JohnHayes, Jerry
Carlisle, John, (Luton N)Hayhoe, Rt Hon Sir Barney
Carlisle, Kenneth (Lincoln)Hayward, Robert
Carrington, MatthewHicks, Robert (Cornwall SE)
Carttiss, MichaelHiggins, Rt Hon Terence L.
Cash, WilliamHill, James
Chalker, Rt Hon Mrs LyndaHind, Kenneth
Channon, Rt Hon PaulHolt, Richard
Chapman, SydneyHordern, Sir Peter
Chope, ChristopherHoward, Rt Hon Michael
Clark, Hon Alan (Plym'th S'n)Howarth, Alan (Strat'd-on-A)
Clark, Dr Michael (Rochford)Howarth, G. (Cannock & B'wd)
Clark, Sir W. (Croydon S)Howe, Rt Hon Sir Geoffrey
Clarke, Rt Hon K. (Rushcliffe)Howell, Rt Hon David (G'dford)
Colvin, MichaelHowell, Ralph (North Norfolk)
Conway, DerekHughes, Robert G. (Harrow W)
Coombs, Anthony (Wyre F'rest)Hunt, Sir John (Ravensbourne)
Coombs, Simon (Swindon)Hunter, Andrew
Cormack, PatrickIrvine, Michael
Couchman, JamesIrving, Sir Charles
Cran, JamesJack, Michael
Critchley, JulianJanman, Tim
Currie, Mrs EdwinaJessel, Toby
Davies, Q. (Stamf'd & Spald'g)Johnson Smith, Sir Geoffrey
Davis, David (Boothferry)Jones, Gwilym (Cardiff N)
Day, StephenJones, Robert B (Herts W)
Devlin, TimJopling, Rt Hon Michael
Dicks, TerryKey, Robert
Dorrell, StephenKilfedder, James
Douglas-Hamilton, Lord JamesKing, Roger (B'ham N'thfield)
Dover, DenKing, Rt Hon Tom (Bridgwater)
Dunn, BobKirkhope, Timothy
Durant, TonyKnapman, Roger
Dykes, HughKnight, Greg (Derby North)
Eggar, TimKnight, Dame Jill (Edgbaston)
Emery, Sir PeterKnowles, Michael
Evans, David (Welwyn Hatf'd)Knox, David
Evennett, DavidLament, Rt Hon Norman
Fairbairn, Sir NicholasLang, Ian
Fallen, MichaelLawrence, Ivan
Favell, TonyLee, John (Pendle)
Fenner, Dame PeggyLeigh, Edward (Gainsbor'gh)
Field, Barry (Isle of Wight)Lennox-Boyd, Hon Mark
Finsberg, Sir GeoffreyLester, Jim (Broxtowe)
Fishburn, John DudleyLilley, Peter
Fookes, Dame JanetLloyd, Peter (Fareham)
Forman, NigelLord, Michael
Forsyth, Michael (Stirling)Luce, Rt Hon Richard
Forth, EricMcCrindle, Sir Robert
Fox, Sir MarcusMacfarlane, Sir Neil
Freeman, RogerMacKay, Andrew (E Berkshire)
French, DouglasMaclean, David
Gale, RogerMcLoughlin, Patrick
Gardiner, GeorgeMcNair-Wilson, Sir Michael
Gill, ChristopherMcNair-Wilson, Sir Patrick
Gilmour, Rt Hon Sir IanMadel, David
Glyn, Dr Sir AlanMajor, Rt Hon John
Goodhart, Sir PhilipMalins, Humfrey
Goodlad, AlastairMans, Keith
Goodson-Wickes, Dr CharlesMaples, John
Gorman, Mrs TeresaMarland, Paul
Gorst, JohnMarlow, Tony
Gow, IanMarshall, John (Hendon S)
Grant, Sir Anthony (CambsSW)Martin, David (Portsmouth S)
Greenway, Harry (Eating N)Mayhew, Rt Hon Sir Patrick
Greenway, John (Ryedale)Meyer, Sir Anthony
Miller, Sir HalSims, Roger
Mills, IainSmith, Tim (Beaconsfield)
Miscampbell, NormanSoames, Hon Nicholas
Mitchell, Andrew (Gedling)Speller, Tony
Mitchell, Sir DavidSpicer, Sir James (Dorset W)
Moate, RogerSpicer, Michael (S Worcs)
Monro, Sir HectorSquire, Robin
Montgomery, Sir FergusStanbrook, Ivor
Morris, M (N'hampton S)Stanley, Rt Hon Sir John
Morrison, Sir CharlesSteen, Anthony
Morrison, Rt Hon P (Chester)Stern, Michael
Moss, MalcolmStevens, Lewis
Moynihan, Hon ColinStewart, Allan (Eastwood)
Neale, GerrardStewart, Andy (Sherwood)
Nelson, AnthonyStewart, Rt Hon Ian (Herts N)
Neubert, MichaelStradling Thomas, Sir John
Newton, Rt Hon TonySumberg, David
Nicholls, PatrickSummerson, Hugo
Nicholson, David (Taunton)Tapsell, Sir Peter
Nicholson, Emma (Devon West)Taylor, Ian (Esher)
Norris, SteveTaylor, John M (Solihull)
Onslow, Rt Hon CranleyTebbit, Rt Hon Norman
Oppenheim, PhillipTemple-Morris, Peter
Page, RichardThompson, D. (Calder Valley)
Paice, JamesThompson, Patrick (Norwich N)
Patnick, IrvineThorne, Neil
Pattie, Rt Hon Sir GeoffreyThurnham, Peter
Pawsey, JamesTownend, John (Bridlington)
Porter, Barry (Wirral S)Townsend, Cyril D. (B'heath)
Porter, David (Waveney)Tracey, Richard
Portillo, MichaelTredinnick, David
Powell, William (Corby)Trippier, David
Price, Sir DavidTwinn, Dr Ian
Raffan, KeithViggers, Peter
Raison, Rt Hon TimothyWaddington, Rt Hon David
Redwood, JohnWakeham, Rt Hon John
Renton, Rt Hon TimWaldegrave, Rt Hon William
Rhodes James, RobertWalden, George
Riddick, GrahamWalker, Bill (T'side North)
Ridsdale, Sir JulianWaller, Gary
Rifkind, Rt Hon MalcolmWard, John
Roberts, Sir Wyn (Conwy)Wardle, Charles (Bexhill)
Rossi, Sir HughWatts, John
Rost, PeterWells, Bowen
Rowe, AndrewWheeler, Sir John
Rumbold, Mrs AngelaWiddecombe, Ann
Ryder, RichardWilshire, David
Sackville, Hon TomWinterton, Mrs Ann
Sainsbury, Hon TimWinterton, Nicholas
Sayeed, JonathanWolfson, Mark
Scott, Rt Hon NicholasWood, Timothy
Shaw, David (Dover)Woodcock, Dr. Mike
Shaw, Sir Michael (Scarb')Yeo, Tim
Shelton, Sir William
Shephard, Mrs G. (Norfolk SW)Tellers for the Ayes:
Shepherd, Richard (Aldridge)Sir George Young and
Shersby, MichaelMr. David Lightbown.
NOES
Allen, GrahamBuckley, George J.
Anderson, DonaldCaborn, Richard
Armstrong, HilaryCallaghan, Jim
Ashdown, Rt Hon PaddyCampbell, Menzies (Fife NE)
Barnes, Harry (Derbyshire NE)Campbell, Ron (Blyth Valley)
Barnes, Mrs Rosie (Greenwich)Campbell-Savours, D. N.
Barron, KevinClark, Dr David (S Shields)
Beckett, MargaretClarke, Tom (Monklands W)
Beith, A. J.Clelland, David
Bell, StuartClwyd, Mrs Ann
Benn, Rt Hon TonyCohen, Harry
Bennett, A. F. (D'nt'n & R'dish)Coleman, Donald
Bermingham, GeraldCook, Frank (Stockton N)
Bidwell, SydneyCook, Robin (Livingston)
Blair, TonyCorbett, Robin
Blunkett, DavidCrowther, Stan
Boateng, PaulCryer, Bob
Boyes, RolandCummings, John
Bradley, KeithCunliffe, Lawrence
Bray, Dr JeremyCunningham, Dr John
Brown, Ron (Edinburgh Leith)Darling, Alistair
Davies, Rt Hon Denzil (Llanelli)Marshall, David (Shettleston)
Davies, Ron (Caerphilly)Marshall, Jim (Leicester S)
Davis, Terry (B'ham Hodge H'l)Martin, Michael J. (Springburn)
Dewar, DonaldMartlew, Eric
Dixon, DonMeacher, Michael
Dobson, FrankMeale, Alan
Doran, FrankMichael, Alun
Duffy, A. E. P.Michie, Bill (Sheffield Heeley)
Dunnachie, JimmyMichie, Mrs Ray (Arg'l & Bute)
Eadie, AlexanderMitchell, Austin (G't Grimsby)
Evans, John (St Helens N)Morgan, Rhodri
Ewing, Harry (Falkirk E)Morley, Elliot
Ewing, Mrs Margaret (Moray)Morris, Rt Hon A. (W'shawe)
Fatchett, DerekMowlam, Marjorie
Fearn, RonaldMurphy, Paul
Field, Frank (Birkenhead)Nellist, Dave
Fields, Terry (L'pool B G'n)Oakes, Rt Hon Gordon
Fisher, MarkO'Brien, William
Flannery, MartinOrme, Rt Hon Stanley
Foot, Rt Hon MichaelParry, Robert
Foster, DerekPatchett, Terry
Foulkes, GeorgePendry, Tom
Fraser, JohnPike, Peter L.
Fyfe, MariaPowell, Ray (Ogmore)
Galbraith, SamPrescott, John
Garrett, John (Norwich South)Primarolo, Dawn
Garrett, Ted (Wallsend)Radice, Giles
George, BruceRandall, Stuart
Godman, Dr Norman A.Redmond, Martin
Golding, Mrs LlinRees, Rt Hon Merlyn
Gordon, MildredRichardson, Jo
Gould, BryanRobertson, George
Graham, ThomasRobinson, Geoffrey
Grocott, BruceRogers, Allan
Hardy, PeterRooker, Jeff
Hattersley, Rt Hon RoyRoss, Ernie (Dundee W)
Haynes, FrankRowlands, Ted
Heal, Mrs SylviaRuddock, Joan
Henderson, DougSalmond, Alex
Hinchliffe, DavidSedgemore, Brian
Hoey, Ms Kate (Vauxhall)Sheerman, Barry
Hogg, N. (C'nauld & Kilsyth)Sheldon, Rt Hon Robert
Home Robertson, JohnShore, Rt Hon Peter
Hood, JimmyShort, Clare
Howarth, George (Knowsley N)Sillars, Jim
Howells, Dr. Kim (Pontypridd)Skinner, Dennis
Hoyle, DougSmith, Andrew (Oxford E)
Hughes, John (Coventry NE)Smith, C. (Isl'ton & F'bury)
Hughes, Robert (Aberdeen N)Smith, Rt Hon J. (Monk'ds E)
Hughes, Roy (Newport E)Smith, J. P. (Vale of Glam)
Hughes, Simon (Southwark)Snape, Peter
Illsley, EricSpearing, Nigel
Janner, GrevilleSteel, Rt Hon Sir David
Jones, Barry (Alyn & Deeside)Steinberg, Gerry
Jones, Martyn (Clwyd S W)Stott, Roger
Kennedy, CharlesStraw, Jack
Kinnock, Rt Hon NeilTaylor, Mrs Ann (Dewsbury)
Kirkwood, ArchyTurner, Dennis
Lambie, DavidVaz, Keith
Lamond, JamesWalley, Joan
Leadbitter, TedWardell, Gareth (Gower)
Leighton, RonWareing, Robert N.
Lewis, TerryWatson, Mike (Glasgow, C)
Litherland, RobertWelsh, Andrew (Angus E)
Lloyd, Tony (Stretford)Welsh, Michael (Doncaster N)
Lofthouse, GeoffreyWilliams, Rt Hon Alan
Loyden, EddieWilliams, Alan W. (Carm'then)
McAllion, JohnWinnick, David
McAvoy, ThomasWise, Mrs Audrey
McCartney, IanWorthington, Tony
McKay, Allen (Barnsley West)Wray, Jimmy
McKelvey, WilliamYoung, David (Bolton SE)
McNamara, Kevin
McWilliam, JohnTellers for the Noes:
Madden, MaxMr. Ken Eastham and
Mahon, Mrs AliceMr. John Battle.
Marek, Dr John

Question accordingly agreed to.

MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved,That this House congratulates Her Majesty's Government on the improvement in economic performance over the last 10 years, with the United Kingdom's growth of output, manufacturing productivity, employment and investment since 1980 exceeding that of almost any other major European Community country; and endorses the priority the Government attaches to reducing inflation, in order to safeguard and build on these achievements.

Photo of Martin Smyth Martin Smyth , Belfast South 7:31 pm, 24th July 1990

On a point of order, Mr. Speaker. Your attention will not yet have been drawn to the tragedy in South Armagh this afternoon when three members of the Royal Ulster Constabulary, serving the community, and a Sister of Mercy were done to death in a bomb explosion allegedly caused by the IRA. I believe that the House will join me in paying tribute and extending sympathy to the families bereaved and at the same time suggesting that investigative journalists might do a better job for the community if they exposed the perpetrators of such crimes instead of disguising them.

Photo of Mr James Kilfedder Mr James Kilfedder , North Down

Further to that point of order, Mr. Speaker. I extend my sympathy and that of the people whom I represent to the relatives of the three police officers and the nun who were brutally murdered this afternoon. The one message from this House and from Northern Ireland is clear—that decent people everywhere, regardless of religion, condemn those murderers.

Photo of Mr John Major Mr John Major , Huntingdon

Further to that point of order, Mr. Speaker. I was not aware, until the hon. Member for Belfast, South (Rev. Martin Smyth) spoke, of the events of this afternoon, and I should like to say, on behalf of the Government, how much we regret the senseless and apparently ceaseless murders, and to offer our warmest sympathy to the bereaved and their families.

Photo of Mr Stan Orme Mr Stan Orme , Salford East

Further to that point of order, Mr. Speaker. I was in Dublin this afternoon talking to members of the Dail and I know that they will join this House in condemning what has taken place. It is outrageous and must be opposed.

Photo of Simon Hughes Simon Hughes Opposition Deputy Chief Whip (Commons), Shadow Spokesperson (Education)

Further to that point of order, Mr. Speaker. My right hon. Friend the Member for Yeovil (Mr. Ashdown), who not only speaks for the party but is our spokesman on Northern Ireland, had to leave early and he asked me to associate him and our party with the sympathies of hon. Members from Northern Ireland.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

I am sure that what has been said will be felt by hon. Members on both sides of the House, and thank the hon. Member for Belfast, South (Rev. Martin Smyth) for having raised the point of order with me.