Amendment of the Law

Part of Budget Resolutions and Economic Situation – in the House of Commons at 6:14 pm on 10th March 1992.

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Photo of Sir Ray Whitney Sir Ray Whitney , Wycombe 6:14 pm, 10th March 1992

It is a great privilege to follow the speech of the right hon. Member for Plymouth, Devonport (Dr. Owen). As he said, it was likely to be his last speech in the House. It is a privilege because all hon. Members recognise his distinguished career and the contribution that he has made to British political life over a number of years. I know that the right hon. Gentleman will not take offence, but there is some irony in the light of that privilege. I was a public servant in the Foreign and Commonwealth Office when the right hon. Gentleman was Foreign Secretary. The reason I decided to make the extraordinary leap from the warm bosom of the Foreign Office to the hurly-burly of political life was that I was appalled at the state of Britain under the Labour Government of which the right hon. Gentleman was a distinguished member. I often say that the right hon. Gentleman himself was responsible for my coming to this place.

I was happy to agree with much of what the right hon. Gentleman said. However, in his criticism of the policies that were followed by my right hon. Friends in 1987 and 1988, the right hon. Gentleman was luxuriating a little in the benefits of 20:20 vision which the advantage of hindsight gives to observers. I say that as someone who can honestly claim that in January 1988 I was one of those—there were not many of us—who were warning about the dangers of relaxing the fiscal stance, whereas my right hon. Friend the Member for Blaby (Mr. Lawson) was under pressure from Opposition Members to reduce interest rates to relax the stance still further.

The indicators that were available to the Treasury and to my right hon. Friend suggesting that the air was going out of the balloon were inaccurate. That shows that Chancellors of the Exchequer, of whatever political complexion, need better indicators, but that matter is for the past.

I agree with the right hon. Member for Devonport about the undoubted difficulties that there will be in achieving a single currency. I am positive about Europe and optimistic that we can achieve that happy state in a relatively short time, but it will undoubtedly take a number of years. There will undoubtedly be the difficulties to which the right hon. Gentleman referred. The facile Labour party, having twisted its policy on Europe six times, has now leapt into the single currency issue. That is another manifestation of its unfitness to govern.

The right hon. Gentleman is absolutely right to suggest that this is a responsible, prudent Budget and that the tax changes which have been announced and which seem to add about £1·6 billion to the PSBR should be well regarded by the financial markets and should give the opportunity for a further reduction in interest rates, which is badly needed. I hope that the right hon. Gentleman is right, and I endorse his sentiments.

Undoubtedly, Britain faces a difficult economic situation, as does the rest of the industrialised world. When all the political cant is swept away, right hon. and hon. Members must recognise that, if they are to treat the present difficult situation with the gravity and responsibility that it deserves, it does no good to pretend that it is just a British problem. Sadly, the problem may be exacerbated if we cannot make proper progress in the Uruguay round of the GATT negotiations, as my right hon. Friend the Chancellor of the Exchequer pointed out. From my humble position on the Back Benches, I strongly endorse my right hon. Friend's argument. I urge some of our European partners, particularly our friends in the French Government, to consider their policies and attitudes carefully and take account of the needs of the world trading community.

It is not only the European Community that has to make a move; America and other countries involved in the negotiations must also do so. We all have a responsibility, particularly the Heads of Government of the G7 nations who, when they last met under the leadership of my right hon. Friend the Prime Minister, gave a personal pledge that they would do all in their power to ensure that the Uruguay round was successful. That pledge has yet to be honoured.

It is against that background that we should decide whose hands are required on the tiller of the nation's economy at this difficult time—with the Budget and an imminent general election. I have no doubt that today's events and what has been said in the House, by Opposition and Government Members, make that answer crystal clear—as has the Government's overall sound record of economic management since 1979.

My right hon. Friend the Chancellor was faced with an extremely difficult problem. As many of my right hon. and hon. Friends continually and rightly stress, it is true that conditions have now been created for the economic recovery that we so badly need. Inflation is down to an encouraging level, and the forecast given by my right hon. Friend the Chancellor of further reductions in inflation is greatly to be welcomed.

The interest rate cuts—we have already had eight in 18 months—are also to be welcomed. In addition, the rise in company and personal savings has set in place the conditions for recovery. Now we need the restoration of confidence, which means a general election and a Conservative victory. I have no doubt that my right hon. Friend's Budget will contribute mightily to that.

As for my right hon. Friend's judgment, all of us with an instinct for financial rectitude will consider carefully the fact that we have a public sector borrowing requirement of £14 billion this year, which will move to about £28 billion next year. In order to be satisfied that that is the right policy, one has to take a close look at the facts. I am absolutely convinced that it is the right policy, and a glance at the record of past years serves to highlight that.

Try as they might, politicians can never eliminate the trade and business cycles. We are in the dip of a particularly severe trade cycle. It is due to the depth of that recession that we must take a flexible approach to public sector funding and borrowing, albeit always within the tight parameters of a responsible fiscal stance. Our achievements since 1979 give us every right to take credit for adopting the proper approach.

The Hansard report of 6 March, at column 322, makes it clear that, from 1984 until this financial year, there was no net borrowing requirement. That is the background against which to judge that our country's finances are strong enough to take the £28 billion public sector borrowing requirement now in prospect. It is interesting to compare that figure of £28 billion—if it is reached—to the sort of figures to which we grew accustomed in the years of the Labour Government.

In terms of 1991–92 prices, in 1974–75 the public sector borrowing requirement reached £38·9 billion and the next year it rose to nearly £40 billion, before the International Monetary Fund had to step in and help the then Labour Government back on to the path of the straight and narrow. Therefore, it ill became the Leader of the Opposition, in an extraordinary and lamentable response to my right hon. Friend the Chancellor, to talk about bribing and borrowing to bribe. Such remarks came from the leader of a party which now proposes a shopping list of £37 billion more of expenditure, which boasts and glories in the fact that it intends to increase taxes and which would clearly increase interest rates and destroy jobs and the economy. Therefore, there is no doubt that the Labour party is incompetent to handle the economy. That has for long been demonstrated by its abysmal record when in government and, again and again, by its pathetic policies—despite the fact that it changes them all the time.

The Labour party's incompetence was underlined this afternoon when, not having had the benefit of a briefing from his colleagues, the Leader of the Opposition was not clear as to whether the Labour party would reject the imaginative and extraordinarily helpful decision by my right hon. Friend the Chancellor to produce the 20 per cent. tax rate. The Leader of the Opposition left the House with the impression that the Labour party would eliminate that 20 per cent. tax. The 4 million people in this country whose total tax payable would be reduced from 25 per cent. to 20 per cent. would be interested if it turned out that the Labour party did intend to eliminate that 20 per cent. tax. When discussing the tax equation, the Leader of the Opposition seemed to have no understanding of our experiences since 1979, which show that lower tax rates result in a higher tax take, a higher tax revenue. That proposition, which seems simple to most of us, seemed beyond the grasp of the Leader of the Opposition.

The decision that the country should take is clear at any time, but particularly at this extremely difficult time of economic challenge for this country and for all other countries of the developed world. The idea that the economic tasks that we face can be left to the Opposition to solve is unthinkable; such tasks must be left to my right hon. Friend the Chancellor.

I greatly welcome all the measures put forward by my right hon. Friend, particularly the help given to pensioners on low incomes, the provisions on savings, inheritance and business rates and the help for the car industry. All those policies add up to a great package, which must be added to the significant additional spending set out in the autumn statement. I have great pleasure in congratulating my right hon. Friend the Chancellor and his colleagues on what they have achieved, not only for the Conservative party but for the country.