To ask the Chancellor of the exchequer if he will make a statement on the current level of inflation.

My right hon. Friend the Chancellor has asked me to apologise to the House for his absence today. He is attending the annual meeting of the IMF and the International Bank for Reconstruction and Development in Bangkok.

The answer to the hon. Gentleman's question is that the 12-month all items retail prices index inflation rate was 4.1 per cent. in September—the lowest level for more than three years—and, since August, is below the European average for the first time in four years.

I thank the Minister for that reply. All sensible people welcome the decline in the high and unacceptable rate of inflation, but the price that has been paid for that has been enormous in terms of the erosion of our manufacturing base. I do not ask to be forgiven for referring in particular to the position in Scotland, where it could be argued that in previous recessions some of our old basic declining industries were impaired. But now we see the impairment of our high technology manufacturing base. That is an unacceptable fact. That loss should be halted as soon as possible. What are the Chancellor's proposals on that?

Of course, I understand the hon. Gentleman's anxiety. As he rightly says, we should all welcome the news on inflation because plainly it is a condition precedent to full economic recovery, and in particular to the reduction in unemployment, that we should have a climate within which British industry can expand and compete on favourable terms with that on the continent. The fact that today our inflation rate is within 0.2 per cent. of the German rate is extremely good news to those who look for economic recovery. The hon. Gentleman will welcome the fact that the unemployment figures published today are encouraging in Scotland.

Has not the prestigious Item club made it clear that in the unlikely event of a Labour Government's being elected, the current levels of inflation would be doubled within a short period? Would that not be a tragic end to the great successes that we have achieved in lowering inflation in the past 18 months?

As time goes on, people will look more and more closely at the Opposition's policies, and on issues that worry them about our handling of the economy they will ask where the Labour party would differ and what would be the consequences. The Item club is the last in a long list of forecasters who on every key indicator show that the Labour party's policies would make the position worse.

As the Government's policies were responsible for high inflation in the first place, there is clearly no room for self-congratulation. How many people will lose their jobs? How much further will unemployment rise? How much further will manufacturing industry be eroded and undermined as is happening in the west midlands, which suffered badly enough 10 years ago and is now hit by the second wave of recession? Do the Government intend to do anything whatever about unemployment?

The hon. Gentleman suggests that the Government invented inflation. When he was a Back-Bench Member supporting a Labour Government, inflation averaged 15 per cent. The long run average for inflation under this Government has been less than half of that and is well in touch with our European competitors. British industry has come well through this recession. Export volumes are 5½ per cent. up on the year to the end of August. We are well set for a recovery which will undoubtedly take people back into jobs. Before the hon. Gentleman smiles too much, may I say that I am sorry that that is a matter of sadness to him? He knows full well that the last time there was a peak in unemployment in the 1980s, it was followed by more than three years of continuous falls in unemployment, totalling 1½ million. There is no reason why that success should not be repeated, if there is a Conservative Government.

Is it not a remarkable achievement that, contrary to the forecasts of pessimists, since sterling joined the exchange rate mechanism just over a year ago the United Kingdom has enjoyed stable exchange rates, lower inflation and lower interest rates? Is not that the only recipe for sustained economic growth?

Yes, indeed it is. The ERM disciplines have proved to be well worth while for this country and the Government are committed to them. The evidence is there for all to see.