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Government Economic and Social Policy

Part of Orders of the Day — Opposition Day – in the House of Commons at 8:07 pm on 9th June 1993.

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Photo of Austin Mitchell Austin Mitchell , Great Grimsby 8:07 pm, 9th June 1993

Today's debate has had the feel of a debate on a no-confidence motion. The hon. Member for Hertsmere (Mr. Clappison) seemed to approach it as such when, in his sweetly sanctimonious way, he defended an imaginary Government. He said that all the problems were caused by the Labour party and that, after 14 years in opposition, the faults were all those of the Opposition. That is an amazing achievement for the Opposition.

It feels as though we are discussing a sort of no-confidence motion. However, we are discussing a statement of obvious fact. The Government deceived the people at the last election. They concealed the mess, and now that they face the mess that they created they do not have the foggiest idea how to get out of it because they are suffering from a crisis of leadership. This shambling decrepit Government are going nowhere. To use an image from Scarborough, the Holbeck Hall Government are sliding slowly into the sea while the Chancellor plays his jazz piano in the bar room to alleviate the suffering of the hotel residents.

Today's debate has not been great, but it has been revealing. Particularly illuminating was the hurt, doubt, misery and pain on the face of the ex-Chancellor, the right hon. Member for Kingston upon Thames (Mr. Lamont) at the way in which he was treated for following his Prime Minister's policies to the letter. I offer him an old adage, when it was said of Harold Macmillan in 1962: Greater love hath no man than this, that he lay down his friends for his own life. That is what happened to the former Chancellor.

Equally revealing was the Prime Minister's vapid performance—it was low level stuff and he showed no dignity. It reminded me of his speech at the last Tory party conference when he was expected to rise to the occasion and give the Tory party a lead. He sank to it and told his followers, "When a child's got to go, a child's got to go —we need more toilets on the motorway."

I drove to Banbury this morning and thought that I saw the Prime Minister's monument as I approached Banbury because on the M40 I saw a huge sign in yellow and black stating, "Emergency WC". I thought that the Prime Minister's vision had been realised on the M40. That shows the height of the Prime Minister's thinking. He is the man who has to lead us out of the mess that we are in. Everyone can make his own judgment about the Prime Minister's stature and whether he is up to the job. The embarrassed faces of those behind the Prime Minister when he made his speech today showed that the prevailing consensus in the Conservative party is that he is not up to the job as the Holbeck Hall hotel slips into the sea.

I want to be open with the hon. Member for Hertsmere about the Labour party's faults. The problems are not all of the Prime Minister's making—he inherited a mess. He won the prize of power just as that power turned to dross and has had to cope with the disasters that arose from the misguided policies of the 1980s. As my hon. Friend the hon. Member for Cannock and Burntwood (Mr. Wright) said, the Government came in promising what they would do, and did it.

The Government claimed to have performed a miracle through their policies. That claim was about as valid as the hyped up profits created by creative accountancy and lax accountancy standards in this country in the companies operating in the 1980s. Creative public relations laid claim to the Tory miracle. The 1980s were an enormous wasted opportunity—the benefits of North sea oil have been thrown away by the Government. The only benefit that we gained was the huge credit bubble of asset inflation. Asset prices rose and more credit was allowed—the one stoked the other in a sort of North sea bubble which began with an enormous depression produced by the Government's economic incompetence and ended in another severe depression.

Those depressions decimated large swathes of manufacturing industry in this country. It is the industry that we live by, the manufacturing that pays our way in the world and which alone can generate growth and support our services and standards of living. Most of our trade is still in manufactured goods. Whatever the Minister may think about the financial sector, we depend essentially upon manufacturing. If we do not produce, we cannot consume or maintain our standards of living.

Manufacturing has been closed down more rapidly here than in any other advanced industrial country. In the 1980s we lost more jobs in manufacturing than any other manufacturing country, and a larger share of our own market-40 per cent. of our domestic market in manufactured goods is now taken by imports, double the proportion in France and Germany. All this is the product of Government policies throughout the 1980s.

Now, at the end of the period, the Prime Minister has to clear up the mess. It was concealed in the 1980s by North sea oil and by the £30 billion privatisation receipts. There was no need to increase taxes; the tax base could be narrowed because of the revenue from privatisation. Now those revenues are drying up because we are reaching fell-off-the-back-of-the-Government end of privatisation. Now that North sea oil's contribution is set to attenuate, we have to clear up the mess—an horrendous trade deficit that will reach record levels when the figures are published in six months' time; and a public sector deficit which is at crippling levels. The burden of debt grows apace on both counts.

Such growth as the Government are achieving—they are achieving some—results from the competitive devaluation into which they were forced—to our shame —by the men in red braces, not the men in red ties, who I wish had forced them into it. But the Government are putting back on their straitjacket in the form of the Maastricht treaty, which effectively will compel them to go back to the exchange rate mechanism. So their pathetic recovery has a finite time to run, because they have no idea what to do next.

The Government think that the market will provide. All the market does in this sort of extreme situation is compound decline: it compounds prevailing trends. Those trends are towards peripheral decline in this economy, and that will be highly damaging.

I can offer the Government an agenda. First, they must let the pound fall further. Any country with a balance of payments deficit as large as ours must let its currency fall. There is no other way of closing the deficit. The pound has come down by 16 per cent. since devaluation, since when it has risen again by 7 per cent. The result, as an article by Edward Balls in the Financial Times last week showed, is that we are still less competitive than we were in 1987. The pound has further to go. It must come down if we are to boost exports and win back the markets that we have lost.

As part of this process, interest rates must come down too. They are still higher in our economy than in the American and Japanese economies. Industry will not invest at these rates; we cannot stimulate the economy at these rates.

My third piece of advice to the Government is: do not worry about the deficit, as the hon. Member for Southend, East (Sir T. Taylor) is always telling us. It exists for good Keynesian reasons. There is no point in trying to cut it back at this time. Nor should we attempt to fund all of it. Why go to the trouble, expense and burden of debt of funding the whole deficit? We should require the banks to buy and hold Government debt. Why should they not? They have the money to do it.

Moreover, although this might hurt the vested interests of the City and the fees and Commissions earned there, we should ask whether we should fund the debt at all. Why not require the Bank of England to give the Government ways and means advances—without charging interest on them at market rates, as it does at the moment? The advances should be free of interest to the Government. That would have no inflationary consequence, because inflation is not a monetary phenomenon—it is caused by pressure on resources.

At the moment, resources are slack. The banks enormously expanded credit in the late 1980s, then suddenly contracted it at the end of the decade. That gap in credit has to be made good. Why should we not use public credit, with advances from the Bank of England on which we do not pay interest and so do not build up a burden of debt? These advances could be used to stimulate the economy and to do the work that must be done to achieve economic growth.

I am not an expert on these matters, but the idea must be looked at. The only things stopping us trying the approach are the vested interests of the City and its desire to manage Government debt and to keep on creating that debt.

Fourthly, we need a sensible industrial strategy— investment in training and infrastructure. Now is the time for that. I have to admit that Opposition Members have not understood that supply side measures do not generate their own demand. Clearly, there is no point in training unless we also stimulate demand so that there are jobs for the people whom we have trained. In that way, an expanding industrial sector will be ready to benefit from the competitive advantage that we give it.

At this early stage in the life of a Government I am afraid that we are at a turning point. We have been there before—politics and politicians treading water, and no clear direction for the nation and the parties to move in.

We were in the same situation in 1961–62, when the Macmillan Government began to falter, just as this Government are faltering. Again, in 1978–79 the Labour Government whom I was elected to support and did support began to falter in the same way. At both junctures, a new impetus and dynamism emerged, in 1978–79 in the form of Thatcherism, with its easy answers which have now failed, and in 1962–63 in the form of the Labour party's planning for the white heat of technology.

The worrying thing about today is that we are treading water but no impetus has yet emerged. It will certainly not emerge from the Government, who have run out of options and policies. All that could possibly emerge from the Government is a new impetus from the new Chancellor, who is something of a wild card and who may have the makings of a Maudling. He is unpredictable. But it will be nothing more than a new tune played by the jazz pianist on a fairly decrepit piano.

There will be no new ideas from the liberals either. They are essentially a collection of protests, a bucket to spit into, not a coherent party. I thought the leader of the party made a brilliant speech today. The problem with the liberals is that they do not have debates within the party, only conflicts in the leader's head, which is a rag-bag of policies from which he plucks out and offers whatever happens to be fashionable. Then he puts it back again.

It is only a few months since the liberals were telling us that the answer to all our problems was to move to the narrower band of the exchange rate mechanism at a rate that is now agreed to have been grossly overvalued. Nevertheless, the cry was, "Narrow bands now, narrow bands now." I can remember that cry coming dramatically from the lips of the liberal's economic spokesman.

I am disappointed that no alternative has yet emerged from the Labour party. That could be a question of the party; it could be a question of my temperament—an obtuse Yorkshireman used to bull-at-a-gate tactics, wanting to get on with it, to get the boot in now and to provide the sort of opposition that the leader of my union, the General and Municipal, wants us to provide. I must accept that the Scottish method is cannier, slower, more cautious, more intellectual. We are in a policy purdah at present. It is certainly sensible to develop new policies for new situations. That was what happened between 1959 and 1962, when the Opposition finally emerged with a powerful range of new policies. That is an understandable phenomenon. It is just that my natural Yorkshire bloody-mindedness wants us to do more now.

All three parties are obsessed with Europe, European approaches and methods and the problem of Maastricht, but those issues are remote from the considerations of most of our people who sense an overwhelming national failure. They sense that the nation is faltering, is not going anywhere, and that its industrial base is not strong enough or viable enough to provide jobs, generate growth and improve the lot of our people. It is not providing a platform for work and skills and the growth that is needed to improve people's lives.

There is a sense of national failure and it will not be solved by endless talk about Maastricht, about putting Europe at the heart of everything that we do or about putting Britain at the heart of Europe. It will be solved only by addressing the fundamental problem that our manufacturing base has shrunk too much to be viable. Unless we widen and deepen it, make it competitive and generate skills, Britain will not survive as a nation of which we can be proud.