Autumn Statement

Part of the debate – in the House of Commons at 7:46 pm on 13th February 1991.

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Photo of John Battle John Battle , Leeds West 7:46 pm, 13th February 1991

Many will regard today's cut of 0·5 per cent. in interest rates as amounting to a half-measure. It is a half-hearted gesture, and it serves to remind us of other half-hearted gestures announced by the Prime Minister. I refer to the Government's half-hearted gestures towards haemophilia HIV victims and in respect of cold weather payments. They are concessions extracted from a Government under pressure and aimed at creating the illusion of action, rather than designed to tackle the root structural problems of society.

The Government are being panicked into doing the least they can get away with. It is a style of gesture politics that attempts to present an image of competence. The economy may grind to a halt, the manufacturing sector may go to the wall, and vital services may dry up—but the Government hope that, if they can maintain that image of competence, they can cling on.

There is universal consensus that the illusion is rapidly being shattered. Today, the Chancellor blithely announced that the price will be worth paying. Who will have to pay that price? Who will suffer that pain, because pain is not always evenly distributed? Often, it is the poor, low-paid and unemployed who must pay the highest price.

On 17 January, I tabled a question to the Secretary of State for Social Security on the subject of poverty. He replied that the Government have pursued policies aimed at creating a competitive and thriving economy—because we believe that is the best way of helping all the people of this country.—[Official Report, 17 January 1991; Vol. 183, c. 591.] The Government's policies have manifestly failed to achieve those aims. We are left with the Government's burnt-out belief in the trickle-down theory. The Government's own figures, which were squeezed out of them in a written answer published last July, show that, in respect of households of below-average incomes, the poorest 10 per cent. saw an increase in their incomes of 0·1 per cent. between 1979 and 1987, compared with an average increase of 23 per cent.

The number of people living on less than half the average income has risen from 4·93 million in 1979 to 10·5 million now, according to Government figures. The reality is a growing gap between rich and poor which demonstrates who is paying the price for the Government's economic failure. The poor have been punished by the Government's economic strategy, which is not an economic policy at all, but is proving to be an economic strategy for hardly anyone.

Even the World bank suggested at its January meeting that tackling poverty should be a top priority and proposed that loans should be offered for labour-intensive projects and investment in human capital, especially in agriculture, manufacturing and improvements to infrastructure. That international strategy is certainly not shared by the Conservative Government. Instead, the Government are deliberately allowing unemployment to rise. Roger Bootle, the chief economist at Greenwell Montagu, recently predicted that unemployment will rise to 2·7 million by the end of the year, and to more than 3 million by the end of 1992, according to the Government's lowest possible figures approach.

The Association of British Chambers of Commerce expects one in five manufacturing jobs to go. In my area, Leeds Chamber of Commerce, in its most recent survey, showed that a quarter of all firms surveyed expected their work forces to decrease within the next three months. At the February meeting of the World Economic Forum, Britain was singled out as the only major economy where recession was likely to be deep and protracted.

There is a significant difference in this recession because it is not merely manufacturing which is paying the price. The service sector is contracting—the Oxford economic forecasting unit suggested in a report that it will contract by 2 per cent. this year. In practice, that means that even the Midland bank branch in my constituency is closing. If the truth is that inflation will be hauled down, it will be because unemployment is driven up by Government strategy to bring inflation down.

Unemployment is again emerging as the instrument of economic strategy which the Government will use against inflation. In my area, it has risen to 7·8 per cent., according to Government figures, but in reality, according to the unemployment unit figures, it is somewhere in the region of 12·2 per cent. It is worth reminding the Government that, every time unemployment rises, there is a cost to the Treasury. For every 100,000 unemployed, it gets a bill of £300 million in social security costs. If unemployment rose to 2·9 million, the extra cost to the Government would be about £2,700 million.

Rather than going round the country shutting job centres, which is what is happening in my area at present, the Government should do more. We should nail the myth that people are pricing themselves out of work, because it rings hollow in Yorkshire—the region where wages are the second lowest in Britain. Recently, one company there negotiated a wage cut with its staff before it tragically went into liquidation. There was bargaining for a reduction in wages, so it is certainly not wage levels that are pricing people out of work.

The truth is that it is not a question of, "If it's not hurting, it's not working." That has been a throwaway slogan, and it reveals not that it is Government policy to stop the recession, but that Government policy is the recession. The effects are being felt hard on the ground.

The Sunday Times carried an article over Christmas entitled, "Top Business Men Desert the Party". It cited the fact that prominent business men were refusing to give money to the Conservative party because they blamed Government policy for the recession. The chairman of one company, Anglia Secure Homes—the country's second largest provider of old people's homes—replied to Lady Beaverbrook's invitation to the February ball at Grosvenor house in the following words: After a decade of hard work and commitment to free market ideology, I find in financial terms I am back where we started, to a future almost entirely reliant on a group of politicians deciding when to drop interest rates. That sums it up.

When the Prime Minister tells us, as he did recently, that the pain is "regrettable but necessary," he is really saying that the economy is not in an inevitable crisis, and that this is not an act of God or fate, but that our problems are caused by Government-steered policy. It is a little late in the day for the Government to cry that the Gulf crisis has caused the underlying factors. The crisis in the economy and the recession are based on deliberate Government actions, for which they must be held responsible because they are directly responsible.

The Government have increased the uniform business rate and that is why factory and producer prices are up. The recession has been induced by the Government because inflation has been built into the structure with the poll tax, the uniform business rate, the 1988 Budget, which gave away £6 billion in tax cuts to the rich, and the property boom which was engineered by liberalising the banking system.

The Government have lost control over economic management. That is why, as soon as the Prime Minister dares to go to the country, the people of Britain will return a Labour Government and will prove that that illusion of competence is gone for ever.