I beg to move,
That this House notes that the last Government left a golden economic legacy of low inflation, steady and sustainable growth and falling unemployment; that, since the General Election, there have been 17 tax rises and 6 increases in interest rates, leaving the typical family £1,000 a year worse off; that the economy is becoming dangerously unbalanced, with manufacturing in recession, the claimant count rising and the savings ratio falling to its lowest level since 1990 as a result of the Government's attack on pensions and savings; further notes that, at the same time, inflation has risen to its highest level for six years and believes that the Chancellor's decision to abandon control of public spending and to reverse his plans to repay national debt risks adding further inflationary pressure; concludes that the Government has created boom and bust at the same time; and deplores the Government's mishandling of the economy.
For the avoidance of doubt, I declare my business interests as set out in the register—all companies with an interest in the well-being of the British economy.
I have here a fax from the Chancellor of the Exchequer, which my office received at four minutes past 2 o'clock this afternoon. It reads thus:
As President of ECOFIN, I must appear before the European Parliament's Economic and Monetary Affairs Committee at the beginning and at the end of the UK Presidency to give a report on the Presidency, and to answer questions from members of the Committee.
The Committee has arranged to meet today at 3pm in Brussels"—
four minutes before I received the fax, given the time difference. That was clearly a very urgent appointment. It says much about the Chancellor that it was more important to him to appear before the European Parliament—not even the whole European Parliament, but one of its committees—than to appear before the House of Commons to defend his handling of the British economy. We appreciate that the meeting might be only one of the few European meetings at which he is still welcome, but it is lamentable that he has failed to show up to defend what he has done.
On a point of order, Madam Speaker. Just in case the House is being misled, the right hon. Gentleman should clarify whether the Chancellor is speaking to a committee of the European Parliament, as he suggested, or to the Finance Ministers of all member states. The right hon. Gentleman led us to believe that the meeting was of some minor European Parliament committee. I think that he is misleading the House.
That is not a point of order; it is a matter of argument. I am sure that the right hon. Member for Horsham (Mr. Maude) will make the position absolutely clear.
Because of the central importance of the Treasury and of the Chancellor in the Government, on his decisions are placed the hopes and fears of millions of people. It is for that reason that the House must examine carefully what he has done, how it has affected the economy and how it matches the solemn pledges that he and the Prime Minister made, to secure their election.
I start with a prediction about the course of the debate. Madam Speaker, you should expect a succession of interventions—
I shall give way to the hon. Gentleman in a moment.
No one should expect Labour to talk much about today's economy and about its prospects over the next few years. I predict that today the Chief Secretary will pound out the Chancellor's familiar mantras, and will do everything that he can to avoid talking about the current economy.
It is strange that while Labour was basking in the glow of the golden economic legacy that it inherited, it cheerfully took the credit for all that occurred.
The right hon. Gentleman alluded to "pre-programmed Labour Back Benchers". I wish to reassure him that I am a pre-programmed Back Bencher. However, from a fax addressed to the right hon. Francis Maude from Andrew Tyrie MP, which came to my office not long ago—I presume by mistake—it is apparent that the right hon. Gentleman had raised questions with the hon. Member for Chichester (Mr. Tyrie) on the very point of the economic legacy. For example, he asked:
Are we saying that the public finances are strong or not?
The answer was:
Yes. Our legacy.
The right hon. Gentleman then asked:
If yes, is this because we left them strong, or because Brown has been an Iron Chancellor?
It continues in the same vein.
How does the right hon. Gentleman have the gall to come before the House and talk about the "golden economic legacy" and question the Government's programme, when he does not seem to know about those matters and has to question junior Conservative Back-Bench Members?
I am delighted that the hon. Gentleman raised that. He has referred to a document that was produced before the Chancellor came to the House two weeks ago, to set out what the real state of public finances is. I shall deal with exactly the questions that the hon. Gentleman raises. He might not find it quite so enjoyable when I do.
It is worth reminding ourselves just what the legacy was—not in dry numbers, but in terms of what was said about it. Labour Members may not remember this, because they have short-term memories, but it is worth reminding ourselves of what the International Monetary Fund said in 1996. It stated that
recent economic performance
in the UK
has been enviable. Since 1992, output growth has rebounded, unemployment declined markedly and inflation been brought down to the lowest levels in a generation. The strong overall performance is a product of sound economic policies—the unfettering of market forces initiated in the 1980s and the medium term and stability oriented cast imparted to fiscal and monetary policies".
That was then, but what about now? Now that the trickle of bad news threatens to turn into a torrent, do not expect to hear so much about it today. If the Chief Secretary talks about it, I predict that it will all turn out to be somebody else's fault.
Let us start by recalling what Labour promised. Let us look at the early pledges. Labour said that it would
set…rules for government spending and borrowing; ensure low inflation;"—
that is a good one—
strengthen the economy so that interest rates are as low as possible.
Those are the only pledges that the hon. Lady supported.
What do they mean? What did the Labour manifesto say? In fact, it said:
We will provide stable economic growth with low inflation, and promote dynamic…business and industry at home and abroad.
Then there was that unequivocal promise not to raise taxes. I shall quote directly from the Prime Minister.
The hon. Lady will probably want an opportunity to listen to the Prime Minister's words. He said:
We've no plans to increase taxation at all.
We are all becoming familiar with the way in which the Prime Minister says the first thing that comes into his mind at the Dispatch Box, whether it is true or not, but what does the Chief Secretary think he meant by those words? Which of those words is in any way ambiguous? Is it "we"? Is it "have"? Is it "no"? Is it "plans"? Is it "increase"? Is it "taxation"? How can the Government claim that that was somehow a non-operative promise? [Interruption.] If any Labour Member wants to explain how that pledge is compatible with the fact that the Government have raised taxes 17 times, I shall give way.
I thank the right hon. Gentleman for giving way. He seems to have some difficulty in mastering his new brief. Will he explain why, under the Conservative Government, this country suffered the two worst recessions since the second world war and the slowest period of growth?
It is nice to know that the pre-programming works. I said to the hon. Lady that I would give way if she was going to talk about the Prime Minister's pledge, which has clearly been broken time and again, but Labour Members do not want to talk about today's economy or the pledges that they made and then broke.
The Government's performance has turned out to be rather different from what the pledges suggested. Inflation has risen, interest rates have risen, the pound has risen, taxes have risen and unemployment has begun to rise. At the same time, the balance of payments has fallen, manufacturing output has fallen, investment growth has fallen, productivity has fallen and savings have fallen. The Government claim that they have cut welfare spending, but every welfare reform that they have introduced has cost more, not less, and will bring more people into welfare.[Interruption.] I hear the sounds of dissent, but Labour Members should look at their plans—every reform will cost more and bring more people into welfare. What a dismal record of failure.
We know what the Chief Secretary will say; he will say, "It's all someone else's fault." The promise on inflation was not only a pledge, but in the Prime Minister's handwriting. It is a pity that the Government have missed that pledge 12 months out of 13. The Government inherited inflation at 2.5 per cent., and it is now at 3.2 per cent. That is an increase not of 10 or 20 per cent., but of no less than 28 per cent. We shall be told not to worry, however, as that is someone else's fault—it is the fault of the Bank of England, or of British businesses, which are, we are told, paying their staff too much.
Does the Chief Secretary have any idea how ridiculous he and the Chancellor make themselves when they—who do not have a day's business experience between them—strut around lecturing Britain's most successful companies on how much they should be paying their excellent staff? Do they not understand that, in the real world—not the cloistered world in which they move—people who face an increase in the cost of living because the Government have raised taxes on cars, houses, pensions, mortgages and marriage will ask for more pay? In the Government's never-never land, inflation is the fault of Marks and Spencer, which pays its staff too much.
The Chief Secretary may not have noticed that the Government are railroading through legislation to force many other companies to pay their employees more. We look forward with keen interest to hearing how he will reconcile lecturing Marks and Spencer on paying its people too much with ordering many more companies to pay their staff more.
On the very point of inflation rates at the factory gate, does the right hon. Gentleman agree that, in terms of RPI(Y)—the underlying inflation rate, which does not take account of taxation and interest rates—the rate is down on average? RPI(Y) was at 3 to 3.5 per cent. between 1995 and 1997, but is now going down.
We have actually got someone to talk about what is happening today. The problem is that the hon. Gentleman took the wrong measure. The Government have failed to meet the Chancellor's chosen measure and target, and that is what they have to explain.
So far, we have had six interest rate rises, and the Governor of the Bank of England is predicting another this month, but that is someone else's fault, too. Does not the Chief Secretary realise that, by raising taxes, the Government have increased the cost of living and created pressure on earnings? Does he not understand that, by attacking savings, they boost spending? As interest rates have been pushed higher than they need have been, the pound has reached levels that cause intense pain to manufacturers and exporters.
The Government have committed themselves, in dogmatic principle, to scrapping the pound at the earliest opportunity, but do they have to choose such a painful way of setting about it? Is it surprising that we now hear talk of an ancient phenomenon that I barely recollect from my distant youth in the days of the previous Labour Government—the spectre of stagflation? We all thought that that word had disappeared, but it is reappearing among economic commentators—the spectre of stagflation again stalks the land.
Is not the truth that the real reason for the interest rate increases was that the previous Government played politics with interest rates and refused to raise them in the last year before the general election to stem inflation, and so forced this Government to take the necessary action and give that power to the Bank of England? Is not the real reason the Tories' failure when they were in government?
It is always someone else's fault; it is never the fault of this Government. It has nothing to do with them; they are merely the Government and they merely take the decisions. How have they managed that with the balance of payments figures heading sharply into the red—just the faintest whiff of a balance of payments crisis? With our economy turning down and the European economies starting a gradual recovery, this should have been the time at which the balance of payments turned decisively in our favour, but it is doing the reverse.
What has happened to our export-led recovery? Last week, the Confederation of British Industry figures showed export orders for May and June at their lowest for 15 years. The Government have blown it already—after only a year, they are frittering the legacy away and it is all coming apart. Therefore, it is not surprising that manufacturing is already in recession, with falling production in the past two quarters and jobs lost day after day.
I have already given way several times, so I shall continue for a while. Day after day, jobs are lost, investments are cancelled and businesses are going bust.
The hon. Gentleman should listen to these figures, as he might want to talk about the effect on his constituency. I am talking about business failures the length and breadth of the country. Small business failures are up nearly 25 per cent., and that is from new Labour, which claims to be the party of new business. However, for those small businesses, which have failed because of the Government's policies, the party is over now.
Will the Chief Secretary tell us today whether he still stands by the growth forecast set out in the Red Book? Does he still believe the figures that he and the Chancellor put in it? Will he guarantee that Britain will not go into recession during this Parliament? More and more commentators are asking not whether we shall have a hard landing but when. Let us hear now what the Chief Secretary has to say about that.
What did the Government say about savings? Oh yes, they said that one of their tax principles would be to promote savings and investment. They have made a difference, and for the many, not the few, they have made the situation much worse. In the Red Book, the Chancellor predicted that the savings ratio would fall to 9 per cent. during this Parliament. He must be feeling pleased with himself as he has nearly got there already. The figures show that the ratio was already down from 10.1 to 9.1 per cent., just in the first quarter of this year. Is that what the right hon. Gentleman meant by an early pledge? To cut savings by 10 per cent. at the point in the cycle when the Chancellor should be encouraging saving took some doing. In case the Government have forgotten, yes, we told the right hon. Gentleman so.
Surely the Chancellor should have been able to work out that, if one raises a £5 billion-a-year tax on pensions and follows it with an attack on tax-exempt special savings accounts and personal equity plans, it will tend to discourage people from saving.
In case the Chief Secretary still clings to the old Labour belief that it is greedy and selfish to save for one's own and one's family's future, does not he understand the relationship between saving and investment? Even the current Treasury Ministers could not exclude entirely from the Red Book—it was tucked away in an appendix on page 94—the tell-tale number that shows growth of private investment falling in each of the years ahead.
Before the general election, investment-led growth was one of Labour's mantras, but investment and growth are both slowing down; it is all coming apart. That is not surprising, when one remembers what the Government have done to taxes. They said that they would not put them up at all—no ifs, buts or caveats—but they forgot to add—[Interruption.] Labour Members might want to listen to this, because their constituents will hold them to account. The Government forgot to add to their pledge, "unless you have a pension, a car or savings; and unless you are married, have a house or own your own business". It is not surprising that the average family is £1,000 a year worse off since May last year.
Not everyone, however, is average. We all remember the Chancellor's famous photo-opportunity at the children's party on the eve of the Budget. He may not realise it, but at children's parties these days everyone has to have something to take away: it is the party-bag culture.
That famous party was held at the house of Mr. Gavyn Davies, one of the partners at Goldman Sachs. He is a lucky chap and did very well in the party-bag handout: a change in capital gains tax will leave him £16 million better off. What about the small business man and the farmer? There was no special treatment for them. They were clobbered by the Finance Bill. What was that phrase about help for the many, not the few?
I make no apology for the Conservative party voting against tax increases, and I am grateful to the hon. Gentleman for pointing out the central difference between the Labour and Conservative parties: we believe in low taxes, Labour in high.
I am not surprised that the right hon. Gentleman tried to misinterpret what I said; he has done it before and no doubt he will try to do it again. I said that his party had voted for tax increases amounting to 3p in the pound—and he knows it.
The hon. Gentleman is totally wrong. The fact is that the Government have repeatedly increased taxes since the general election, in complete breach of their clear pledge not to do so.
We heard all the tough talk about spending, but that is all that it is: talk. We now know from the summer spending statement that the Chancellor never meant it. One does not need to rely on a hostile commentator to make the point. On the Chancellor's own figures, spending is due to increase by 2.75 per cent. a year for the rest of this Parliament, and by more than 3 per cent. if we count back in the numbers that the Government have fiddled out.
Last week, Mr. Irwin Stelzer, Mr. Murdoch's economic guru, wrote:
Then came the numbers that belie the rhetoric, the Chancellor's parliamentary statement setting out his public spending plans for the next three years. Off with this New Labour facade, on with an Old Labour suit…Little wonder that the monetary policy committee of the Bank of England feels it must keep raising interest rates.
No doubt that is why the Chancellor has been summoned halfway across the globe next week to account for himself—another unbreakable appointment—when he addresses the Murdoch empire in, appropriately enough, Sun valley.
For all the brave talk of reducing debt, what do we find? Even on the Chancellor's own most lavish spending option, the Red Book in March showed a debt repayment. In his Budget statement, the Chancellor was at his most thunderous on the subject:
Stability also requires a commitment to prudence in fiscal policy. The Chancellor is above all the guardian of the people's money.
By 2000, the Budget is forecast to be in balance.
He also said:
To balance the Budget for one or two years and then let it run out of control in the years that follow is simply to fail those who depend on public services … So this, more than ever, is the wrong time to…compromise our commitment to long-term fiscal stability."—[Official Report, 17 March 1998; Vol. 308, c. 1009.]
In a moment.
That was March; this is now. The Government now plan, even on their hugely optimistic growth projection, to repay not a single penny of debt. They are committed to a permanent Budget deficit. For all their talk of a balanced Budget, the Chancellor will not reach balance even in a single year. In every year at the peak of the cycle, the Government will add relentlessly to Britain's national debt. Compare that with the same point in the cycle 10 years ago.
That is all looking into history. If the right hon. Gentleman wants to examine history, the right time to consider is the same point in the cycle 10 years ago.
I should like to finish my point because of what the Chief Secretary said.
At the same point in the cycle 10 years ago, the then Government were repaying debt at the rate of £40 billion in today's terms. They were also increasing spending in real terms on priority services, and cutting taxes. Today, it is tax, tax, tax, and spend, spend, spend. Labour cannot be trusted with the public finances, and admits it.
The right hon. Gentleman suggests that the Government are being profligate. Does not he agree with figures in the House of Commons Library showing that over this Parliament, and allowing for the Government's increase in expenditure, public service expenditure will increase by less than half the increase during the previous Parliament? What spending increase would the right hon. Gentleman allow, and how deep would the cuts be if he were in control of policy?
Perhaps it is a mistake to rely on Government figures, but that is what I am doing. The Government's figures provide for an increase in public spending of 2.75 per cent. above inflation over the rest of the Parliament, and, if the numbers that they have fiddled out are counted back in, it comes to more than 3 per cent. The Chief Secretary to the Treasury and the Labour party have claimed to find a magic potion, an elixir, that will provide the secret of perpetual motion. It was Labour who said that the circle could be squared so that we could have absolute fiscal rectitude and increased spending. Labour said that the way to do that was to cut welfare spending, but the Government have, on their own admission, failed to do so.
The right hon. Gentleman suggests that we look back 10 years to the glorious work of the previous Government. However, he will recall that interest rates were exactly the same as now, inflation was 4.2 per cent, as it is now, and there was substantially greater unemployment than there is today. Within a year, the right hon. Gentleman's Government managed to double both interest rates and inflation, and made no serious inroad on unemployment. Does he accept that we should take no lessons from a party that wants us to look back to that?
I merely make the comparison that Labour Members invited us to make. At the top of the cycle, we had strong public finances. This Government are not even planning, on their own optimistic growth projections, a Budget that gets into balance in a single year. It was all phooey about repaying debt and getting back to a balanced Budget. They do not even do it in a single year.
I have given way often and am drawing to a close.
We always said that Labour cannot be trusted with the economy. After only 14 months, it is coming apart. Its economic policies are in disarray and the public finances are unravelling. In a moment, the Chief Secretary will begin the old familiar rant. He will chant that we will have no more stop-go or boom and bust. He will do it not once but time and again, in the inane new Labour belief that if a mantra is repeated often enough, it becomes more plausible. When Labour dreamt up the phrase, "No more boom and bust," it must have meant no more boom followed by bust, because we have boom and bust at the same time. Boom-bust, stop-go, stability, security, and the long term were just mantras.
No, I am coming to an end.
Those phrases were just mantras to persuade people that Labour could be trusted with the economy and the public finances. It is time for Labour to take responsibility for its actions and stop blaming everyone else. This is the Government's strategy. These are their choices and decisions. As the economy flags, it will be the Government's fault. It will be a downturn made in Downing street.
I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
notes that the Government inherited an economy in which the current Budget was in deficit by £21 billion, inflation was set to rise because of the failure of the previous Government to take the necessary action on interest rates and nearly one in five households of working age had nobody working; recalls that the previous Government presided over a boom and bust economy with interest rates peaking at 15 per cent. and the two worst recessions since the war, doubled the national debt in the 1990s, doubled unemployment during its time in office, worsened inequality and failed to tackle the weaknesses in the British economy; commends the actions of the Government in its first year, which has established a credible framework for monetary policy that has led to the lowest long-term interest rates in 33 years, set two clear fiscal rules which provide for both prudent public finance and strong public services in the years ahead, taken action to reduce government borrowing such that the current Budget was in surplus by £1 billion in 1997–98, supported British business through cuts in corporation tax and small
business tax to their lowest levels ever, launched the New Deal, the biggest employment programme for decades, reformed the tax and benefit system to tackle the unemployment and poverty traps and invested in education and skills; and notes that Britain now has a government which will ensure that the country does not return to the boom and bust and 15 per cent. interest rates of the late 1980s and early 1990s and instead has an economic policy based on stability, enterprise, employment and fairness.".
I am grateful to the right hon. Member for Horsham (Mr. Maude) for telling the House that he was about to come to the end of his speech. I congratulate him on getting in what might pass as a soundbite just before he sat down.
On a point of order, Madam Speaker. The House should not take lightly the absence of the Chancellor of the Exchequer. In a parliamentary democracy with an unwritten constitution such as ours, there are unwritten rules that Ministers accept their responsibility to Parliament. When the Opposition table a motion naming the Chancellor and complaining about a range of Government action and he chooses not to attend, it shows an arrogance to Parliament that we should not accept. Is there any way in which we can oblige the Chancellor to appear before us if he behaves with such insouciance?
That point was made earlier by the right hon. Member for Horsham (Mr. Maude). I am sure that both his remarks and those of the hon. Gentleman have been noted by the Government.
I was going to allude to the shadow Chancellor's reference to my right hon. Friend the Chancellor. The Chancellor and I discussed at length which of us should reply to the Opposition. He was upset that, in his capacity as representing Europe and the European Finance Ministers, he felt that it was appropriate to attend the European monetary affairs committee, which is traditional at the beginning and end of each country's presidency. The previous Government would have done that when they held the presidency. We believe that the Government should honour our international obligations.
The Pavlovian response of the Conservatives every time that Europe is mentioned is interesting and instructive. They cannot conceal their hostility to anything to do with Europe or any idea that a Minister of the Crown might represent Britain in Europe and thereby further our interests there. They really cannot stand it.
Instead of spending about seven minutes skirting around the subject as he taxied to the end of the runway, so to speak, before delivering his attack on us, the shadow Chancellor really ought to have considered whether the point was worth the trouble he went to. My right hon. Friend is doing precisely what the country would expect him to do: representing Britain in Europe—which is what the Conservative party did not do.
In all seriousness, cannot the Chief Secretary understand that it is not just a question of a Pavlovian response to Europe? Some of us are Euro-sceptics, some are not; but most of us believe passionately in the sovereignty of the House of Commons. That is such an essential element of all our proceedings that if Ministers are not prepared to respect it, democracy in this country is at risk.
I can assure the hon. Gentleman that he will see and hear plenty of my right hon. Friend the Chancellor in the Chamber in the not-too-distant future.
I want to deal first with the points that the Conservative motion raises—in particular, with this golden economic legacy which keeps reappearing. I then want to deal with the measures that the Government have taken, and with the one glimpse that we have had of where Conservative thinking, if that is what it can be called, is taking us.
The Tories have done this before. For 18 years, they tried to delude us into thinking that they had achieved economic success. Today, they carry on with that by claiming that they left something called a golden economic legacy—this, as my hon. Friends have pointed out, from the party which used to proclaim the economic miracle of the 1980s, which became the economic disaster of the 1990s. This is the party which delivered two of the deepest recessions since the war. The United Kingdom was one of the most unstable of all the industrialised countries. And there was a legacy of boom and bust: 15 per cent. interest rates, and interest rates in double figures for four consecutive years. There were 1 million home owners with negative equity, and record repossessions.
The right hon. Member for Horsham tells us that the right period of history to look at is 10 years ago. It is indeed an instructive time to look at, as my hon. Friend the Member for Slough (Fiona Mactaggart) said. After 1988, when the then Chancellor Lawson started his unsustainable boom, within two and a half years inflation had doubled to nearly 10 per cent., and interest rates had risen to record levels. There were 22 tax rises to try to contain the debt that the previous Government began to pile up. Is that a golden legacy? Are these people in any position to lecture us?
The Government's intention to abolish boom and bust has already been surfacing. Do the Government think that the economy is in an upswing or a downswing—or has Labour abolished the business cycle?
As we have often made clear, we are putting in place measures to ensure long-term, sustainable stability—that is what the Conservative party never managed. The Tories talk about unemployment. They are remembered for the mass unemployment of the 1980s. They left us with a country in which one household in five containing people of working age had no one in work. They talk about tax rises. This is the party which doubled VAT in 1979, having said that it would not. The Tories put VAT on fuel in 1993, having promised not to.
The golden legacy was a national debt that doubled in six years to more than £400 billion, costing us £25 billion a year to service. The Conservatives left us with a borrowing requirement of some £23 billion, a figure which we have had to get down.
Today, the Conservatives are at it again. I note that the Conservative attack was unveiled, it seems exclusively, to a national newspaper—but the bogus claims are the same as they always were. The Tories claim that a middle-income family will be worse off. It is a spurious calculation; the structure of the family chosen is far from typical, and it has changed since its last outing. A few weeks ago, the family did not smoke; now it does.
The Conservatives complain about the increases in road fuel duty, but they introduced the fuel duty escalator at 5 per cent. When the right hon. and learned Member for Rushcliffe (Mr. Clarke) introduced it, he said:
Any critic of this Government's tax plans who claims also to support the international agreement to curb carbon dioxide emissions will be sailing dangerously near to hypocrisy."—[Official Report, 30 November 1993; Vol. 233, c. 939.]
The tax rise faced by the family in the article includes rises in tobacco duty, which we have continued to impose because we, like the previous Government, believe that we should discourage smoking as a matter of public policy. It was the Conservative party which introduced that tax increase: are Conservatives now saying that they will reduce or do away with the duty, that they want to encourage smoking, and that they want to continue to damage the environment? How are they going to pay for that removal? What is their position? If they are going to criticise those measures, let them tell us what is the alternative.
As ever, the Conservatives have been highly selective. They might have told the family about some of the other measures in our Budget: the increase in child benefit for the eldest child worth £130 a year for 5.5 million families with children; the reduction in employee national insurance contributions, worth £66 a year; and the working families tax credit and the child care tax credit. All those measures will benefit families and help to make work pay. The measures in the last Budget will mean an average increase in disposable income for many families of about £100. As usual, the Tories have not given the full picture.
In the spirit of cross-party co-operation, for the moment at least, I shall give way to the hon. Member for Kingston and Surbiton (Mr. Davey) first.
The hon. Gentleman and his colleagues have been asking a series of parliamentary questions about those figures, and we answer those questions as quickly as possible. We have no difficulty in making available to the House the position on tax and spending.
My right hon. Friend is dismissing the Tory claims in a characteristically robust manner, but, while he is on the subject of income and rightly showing that families have by no means been disadvantaged over the past year, will he take this opportunity to condemn the increase in income of directors of Yorkshire Water, which might act as a signal to other companies? Is it not disgraceful that people who already receive a very substantial income have increased it by at least 30 per cent? Should not that be condemned? Why not show those greedy pigs the real way by introducing another windfall tax?
My hon. Friend makes the point that people sitting in boardrooms are in no position to lecture those on lower incomes about the need for restraint when they do not show restraint themselves. The right hon. Member for Horsham, who was kind enough to declare his interests, which he said were in the national interest, defended some of the people who have awarded themselves exceptionally high increases. My position and that of the Government is that people sitting in boardrooms must show exactly the same restraint as they expect others to show.
In the newspaper article, the Conservatives complained about two items relating to taxation that I find interesting. First, they criticised our decision to reduce the rate at which married couple's allowance is given. That is odd because, in 1993, Norman Lamont, who was then the Chancellor of the Exchequer, said that that allowance was something of anomaly and that, because of the need to raise extra revenue, the rate was to be reduced. Given the Conservatives' action throughout the 1980s to reduce the married couple's allowance, it is curious that they should now criticise such action.
The same applies to the cuts in MIRAS, about which the right hon. Member for Horsham complains. I read what he said in 1994, when he was out of Parliament, having lost his seat in 1992. He said:
In one of my first speeches in the House of Commons… I argued for the full abolition of mortgage interest relief. As Financial Secretary in 1991, I was proud to take through the Finance Bill that among other things restricted relief to the basic rate.
Yet I believe it now could and should be abolished, and there would be barely a squeak of protest."—
presumably, not a squeak from himself. He added:
The sooner it happens, the better.
What is his position? Would he abolish mortgage interest relief, or was that idea suitable only when he was outside the House? He should tell us his view.
I shall take the right hon. Gentleman at his word. He has given a solemn pledge in saying that the sooner MIRAS is abolished, the better. Now we know that that will be the Conservative party's policy at the next election.
In a moment.
I wonder whether the right hon. Member for Horsham stands by something he said last week which completely
undermines his complaint today. He told a Conservative party gathering that
measured in any way you like, taxes are lower in Britain.
How on earth can he complain as he has done today? He cannot have it both ways—either taxes are lower, or they are not. The right hon. Gentleman might have thought long and hard before making his remarks last week or his remarks today, because he has used two different arguments in two weeks.
I am grateful to the right hon. Gentleman for drawing attention to the good legacy, which the Government inherited from us, of taxes that are much lower than those elsewhere in Europe, and I am delighted that the Government have not yet managed to narrow that gap as much as they no doubt plan to do. The gap is narrowing not because others are reducing their taxes, but because the Government are increasing our taxes.
We have honoured our promises on taxation. In particular, we have made sure that where we have increased taxes, we are directing help where it is needed; for example, through the working families tax credit to families on low incomes for whom we want to help to make work pay.
Does my right hon. Friend agree that, far from narrowing, the gap between the UK rate of corporation tax, which businesses pay, and the European rate has widened since the election?
It has, and I would be less than fair to the right hon. Member for Horsham if I did not commend him for having pointed that out to his audience last week. He said that corporation tax was low, which we achieved through our reform of the corporation tax system.
We have taken other steps to help to put the economy on a stable footing. We have set out two clear fiscal rules that will provide prudent public finance and strong public services in the years ahead. We have taken action to reduce Government borrowing, and we have put in place a more credible framework for monetary policy, which has been praised by the OECD. We have the lowest long-term interest rates for more than 33 years, as the right hon. Member for Horsham knows well. He said last week that the UK's
long-term rates are very low. Indeed our 10-year rate is lower than Germany's.
We remember that, 10 years ago, we were being lectured by the Conservative Government and told that they wanted to surpass Germany's achievement. Yet it is under a Labour Government that the UK has the lowest long-term interest rates since before England last won the world cup.
Professor Buiter made several comments. I strongly believe, as do most commentators, that the Government's commitment to fiscal prudence will be of the utmost importance in the years to come because, time and again, successive Governments—Conservative and Labour—have found that any attempt to expand the economy has been undermined by capacity constraints. All too often in the past, an increase in public spending has had to be reigned back as soon as the economy begins to turn the other way.
We believe that stability is the essential foundation for public services and long-term economic growth, which is why, among other actions, we cut borrowing, gave the Bank independence—which has achieved those long-term interest rates—and significantly tightened the fiscal stance by some 2.5 per cent. of national income. We have taken action to tackle the long-term weaknesses in the British economy by supporting British business, making cuts in corporation tax and setting up the new deal—
If hon. Members can contain themselves, I will give way in a moment.
The new deal is the biggest employment programme in this country for decades. Taken together, the tax cuts and the structural reforms will stand this country in good stead for the future. That essential foundation is necessary if we are to support the public spending that hon. Members on both sides of the House want.
I am grateful to the right hon. Gentleman, who rightly identifies me as not being a Euro-sceptic. Given that the Government are committed to endeavouring to join the euro some time at the beginning of the next century, will he clarify what effect that will have on the fiscal balance?
Fiscal prudence sounds of virginal character, but, in reality, there will be some tough decisions on the fiscal balance if there is a single monetary zone in Europe. There will be problems with, for example, trying to ensure that mortgages do not explode as interest rates fall when we join the euro. Will he abolish MIRAS? Will he raise taxation as a lever to control the balance of the economy in a fixed monetary zone? He is avoiding all those questions.
It is not the Labour Government who want to abolish MIRAS; the hon. Gentleman should have a word with his right hon. Friend the Member for Horsham. The steps that we have put in place are good for the British economy, whether or not we join the single currency. Those fiscal rules are essential for this country and its long-term economic development. We would be adopting this fiscal stance and rules whether or not there was any question of joining the euro after a referendum.
Not just now, if the hon. Gentleman does not mind. I want to make some progress, and many hon. Members want to take part in the debate.
I want to explore the Opposition's approach to public spending, which appears to be confused and contradictory. It is not clear whether they believe that we are spending too much or too little; and, if we are spending too much, what would they like to cut. What taxes would they like to put up? We know that the Tory Front Bench has moved to the right. As we have seen this afternoon, it is more hostile to Europe than ever before.
This week is the 50th anniversary of the national health service—one of the greatest achievements of the Labour Government of 1945. In the view of many people, it was the foundation of the welfare state. Yet look at what the shadow Chancellor has said—we must assume that he speaks for all the Tory party, because we know that it is united now. In 1995, he said:
There is a powerful case that the growth of the Welfare State in the first half of this century went a long way towards destroying a flourishing movement of private provision of education, health, pensions and housing.
He said that at the Hayek memorial lecture—where else? It highlights the difference between the new right-wing Tory party and the Government.
The NHS embodies our values. It is more efficient, effective and fair to contribute to a health service that is there when we need it, on the basis of need and not on the ability to pay. I should be interested to know how the right hon. Gentleman squares that with what he said in 1995.
I shall let the right hon. Gentleman intervene in a moment. In 1995, he was saying that the growth of the welfare state in the first half of the century went a long way to destroy what he described as
a flourishing movement of private provision of education
The clear implication is that he would like to return to that. Indeed, I have read some of his other speeches, in which he gives the distinct impression that the Conservative party is still wedded to private provision in education and health, and that public provision would
simply be residual, for those who could not afford to pay. That is the precise inference that I take from his speech—a position from which, I believe, he has never departed.
The right hon. Gentleman has obviously been studying my speeches at great length, which is terrific, but he must not draw improper conclusions from them and certainly must not misrepresent them. The fact that the private provision and the mutual provision—the self-provision—of many of those services was harmed by the introduction of the welfare state in the first half of this century is incontrovertible. If he can provide evidence that that is not the case, let him do so. [Interruption.]
As the Economic Secretary to the Treasury and many of my other hon. Friends are saying, thank goodness for that in the health service, because a national health service to which everyone contributes, and which exists on the basis of need, not ability to pay, is the hallmark of a decent, fair and just society. If the right hon. Gentleman disagrees, I shall just have to put up with that.
I do not know whether the right hon. Gentleman was complaining or complimenting me on reading his speeches, but I read some more, and I noticed that, at the Tory party conference last year—probably the best place for such a speech—he made an interesting observation:
when a right of centre party moves to the right it can become more popular.
I suppose it is worth trying anything in the Conservative party. That seems to conflict with what Michael Portillo told the same conference; he seemed to suggest that he wanted to regain the centre, and that the Tories should be more compassionate.
I wonder what the shadow Chancellor's position is on public spending. Last year, at the Tory conference, he said:
There is no moral content in voting for more public spending.
I wonder whether that is the view of the entire party. Let us hear it from someone more on the wing of the Conservative party than the hon. Member for Esher and Walton (Mr. Taylor).
It is flattering of the right hon. Gentleman to spend so much time on the Conservative party's policies, but the sad fact is that he is Chief Secretary; he is in government. Now that he is in the public expenditure section of his speech, surely it is fair for him to say something about the implications of his public spending plans. Does 2.75 per cent. growth in spending mean higher taxes? If not, does it mean higher borrowing? Does higher borrowing mean higher interest rates? Let us have some answers on the implications of his expenditure policy.
I had always thought that one point of an Opposition day was to examine what the Opposition had to say, and I was thoroughly enjoying doing so. Only a week ago, my right hon. Friend the Chancellor set out our position at length in the Economic and Fiscal Strategy report and when, shortly, we set out the conclusions of the comprehensive spending review, the difference between the Government and the official Opposition will be clear for all to see.
However, I want to explore the point that the shadow Chancellor made when he said that there was
no moral content in voting for more public spending.
I wonder whether everyone in the Conservative party is fully on board, because it seems to me that one or two Conservative Members are off-message. The shadow Chancellor says that we have gone soft on public spending, but, given what some of his colleagues have said on health, perhaps he should tell that to some of his colleagues.
The hon. Member for Rutland and Melton (Mr. Duncan) said:
The key point is that spending under this Government is less than it would have been had the Conservative party stayed in office."—[Official Report, 16 June 1998; Vol. 314, c. 183.]
So there would have been more spending under the Tories! It is not true, of course, because we have increased spending on the health service.
The shadow Health Secretary, who surely could not be accused of having no moral content in what she does, said:
The effect that underfunding has had on the health service is now visible"—[Official Report, 16 June 1998; Vol. 314, c. 140.]—
so she wants more money to be spent.
When we announced £2½ billion more in the education service, the right hon. Member for Charnwood (Mr. Dorrell)—who, sadly, is no longer on the Front Bench—said,
Today's announcement of extra money…represents a sticking plaster"—
so he wants to spend more public money.
The former chairman of the Tory party, the right hon. Member for Sutton Coldfield (Sir N. Fowler) agrees that there should be more public spending. He said that
there is an unanswerable case for more police on the ground".—[Official Report, 15 June 1998; Vol. 314, c. 3.]
He wants more spending—despite the fact that we are still dealing with the spending plans fixed by the previous Government.
The shadow Chancellor says that there is too much public spending, whereas his colleagues say that there is too little. As my hon. Friends have pointed out, the shadow Chancellor—I know that he is new to the brief—really should have a word with his Tory colleagues serving on the Committee considering the Finance Bill. They voted for no less than £6 billion of extra spending—which is 3p on tax. They make the Liberal Democrats look a model of fiscal responsibility. The Liberals want to increase tax by only 1p to cover their modest list of promises—
In one moment.
The Tories have already committed themselves to 3p. I shall certainly give way to the guilty man. Although I was not there myself, I understand that, because of a breakdown in relations between the Whips, the right hon. Member for Wells (Mr. Heathcoat-Amory) was dragged back, to appear in his nightgown and hat to participate in an all-night debate. Perhaps that is why he voted for so many spending commitments.
The Chief Secretary was a Committee member, but—as he has just reminded us—he could not be bothered to turn up. As I was a member and did turn up, may I remind him that, yes, we did vote and speak to reduce the tax rises in the Finance Bill? We make no apology for that. If he wants to characterise that as a tax or expenditure increase, I can only say that he has not understood the content of his own Bill.
The right hon. Gentleman still has to deal with the point that, if he votes for measures costing £6 billion, he will have to tell us what taxes would go up to replenish that revenue or, alternatively, what expenditure he wants to cut. However, he cannot do either, because it is a tax-and-spend policy without the tax.
No; I want to make some progress.
When one examines what the Conservatives say on public spending to one audience and what they say about it to another audience, their confusion and contradiction become apparent. The shadow Chancellor wants to move the Conservative party to the right—to make it even more popular than it is today. He seems to be hostile to the welfare state—which, he says,
erodes the bonds of duty and compassion that hold society together.
I believe that the welfare state reinforces those bonds and that compassion.
The shadow Chancellor says that there is no moral content in voting for more public spending. So his colleagues have no moral content? However, although they want to spend more, they will not tell us how they will pay for it. It is all very confused and very contradictory.
As I told the hon. Member for West Worcestershire (Sir M. Spicer) a moment ago, the Government will state our proposals in the not-too-distant future. Step by step, we are implementing our manifesto promises. We are modernising the welfare state; making work pay; reforming the labour market; and promoting enterprise and business success.
We have a fair tax system. As we have seen, today's tax claims by the Tories fall apart when we examine their actions in government and their comments in opposition. Again, the shadow Chancellor said that
measured any way you like, taxes are lower in Britain.
The Government are providing investment and reform, and sustainable and affordable public services. We are providing £2.5 billion for education, and £2 billion for the national health service. We are investing in transport. We are taking the tough decisions that are necessary for the future.
We shall publish soon the conclusions of the comprehensive spending review, which will set out the Government's priorities for this Parliament and beyond. It will offer the United Kingdom a new direction, standing in stark contrast to the divisions, confusions and contradictions that represent the Conservative party today.
Listening to the shadow Chancellor's opening speech, one rather got the impression that the Tories were not only expecting a downturn, but positively hoping for one. One really does wonder whether it is the job of the Opposition to try to talk the country into economic problems rather than to help it to get out of them—particularly as, contrary to their motion, the Tories contributed to creating some of the problems that we are now facing.
The Liberal Democrats are not surprised by the current state of the economy. I remind the House that, last July, my right hon. Friend the Member for Yeovil (Mr. Ashdown) warned the Chancellor:
Instead of shackling businesses, he should have restrained the consumer, in order to prevent the higher interest rates, higher inflation and less competitive sterling that will surely follow."—[Official Report, 2 July 1997; Vol. 297, c. 325.]
In November 1996, when responding to the last Tory Budget, my right hon. Friend said:
Within three months, interest rates will go up…if they do not, the only reason will be the fact that the Government have an election coming. Within a year, tax cuts will be reversed, and within 14 to 18 months inflation will be rising sharply again."—[Official Report, 26 November 1996; Vol. 286, c. 183.]
All those predictions have come true.
The principal reason for the present situation, which makes the Tory motion so cynical and absurd, is the decision of the previous Government to keep policy so lax before the general election, as the hon. Member for Watford (Ms Ward) rightly said. The previous Government cut personal taxes in spite of record consumer windfalls, a matter which was discussed in the House and in the Treasury Select Committee, and which the then Chancellor chose to discount. They kept interest rates down in spite of buoyant consumer demand, and they refused to accept the advice of the Bank of England about the risks to inflation.
It seems a long time ago now, but there was regular speculation about the Ken and Eddie show. The argument was about who was right—Ken or Eddie. It is unfortunate that the right hon. and learned Member for Rushcliffe (Mr. Clarke) is not here because at this point, he usually makes an ebullient intervention claiming that he is always right, always has been and always will be. He presumably believes that the Bank of England was always wrong and that the Government were always right.
The fact is that the results of keeping policy too easy two years ago are now coming through in high inflation, wage pressures and capacity constraints. The previous Chancellor was clear that policy worked with a lag, and that the success or otherwise of his policies would have to be judged after the passage of time. Well, time has passed and the results are now clear—Eddie was right and Ken was wrong. The Tory motion draws attention only to the legacy of the party's own policy failure and the bad old days, when interest rate policy was determined by the short-term priorities of politicians and not by the long-term interests of the country.
I find it astonishing that when operationally independent central banks are in place the world over—in almost every country in the free world—it is only the British Conservative party that wants to go back to the political manipulation of interest rates. That gave us entry into the exchange rate mechanism at the wrong moment—Black Wednesday—and the inflationary pressures under the previous Government, yet the Conservative party wants a return to the right of politicians to meddle in the short-term, day-to-day management of the economy and so damage the national interest.
In this context, the current Chancellor is to be congratulated on giving operational independence to the Bank of England and on his code for fiscal stability which, we hope, will entrench sensible rules for public borrowing. Both those changes should provide greater economic stability, lower inflation, lower interest rates and higher employment. Certainly, that is the justification for putting them in place.
As I argued on behalf of the Liberal Democrats before and during the last general election, long-term interest rates have already fallen directly because of expectations of lower inflation, which has resulted from the operational independence of the central Bank. If we secure lower levels of public borrowing, it means that when shocks to growth do occur—continued steady growth cannot be guaranteed—there is greater flexibility for fiscal policy and less risk of destabilising policy adjustments.
We welcome the changes—not surprisingly, as most of them were in our own manifesto. [Interruption.] They were, and I welcome the fact that the Labour Government have implemented policies that were in our manifesto. Indeed, it demonstrates that it is possible for an Opposition party to be influential. The only thing that was slightly odd was the inability of the Labour party during the election to acknowledge that it intended to do what we had specifically promised, but that does not in any way devalue the fact that we welcome the decision to move forward. Labour Members are happy to tease and challenge us, but, on occasion, it would be nice for the Government to acknowledge that there has been some agreement and congruence of policy, and not to try to manufacture a difference of opinion that does not exist.
As my hon. Friend the Member for Kingston and Surbiton (Mr. Davey) has said, one slightly worrying factor is that, on all the main series of statistics, the Government are clearly trying to manufacture discontinuity so that it will not be possible to monitor the progress of this Government and the performance of their predecessors in a like-for-like way. That is disturbing. They wish to rewrite history and draw a line at 1997.
I know that the hon. Gentleman is trying to stop other people from pointing out differences between the parties, but this is important. May I ask him his opinion? The hon. Member for Kingston and Surbiton (Mr. Davey)—50 per cent. of the Liberal Democrat party representation in the Standing Committee—made an important comment on the Finance Bill. He said that the Liberal Democrats wanted to consider equalising the income tax allowance with the capital gains tax allowance, moving it up to £6,800, which would cost £17.5 billion, equivalent to 8p on the rate of income tax. Is that Liberal Democrat policy?
The Liberal Democrats are trying to ensure that both the capital and income tax systems fall equitably and fairly according to ability to pay. We wish to lower the burden on people who have low capital gains and low income. That is a perfectly reasonable policy.
Apart from the discontinuity of statistics, there have, of course, been some controversial reactions to Government policies. Some have argued that the Bank of England, given its operational independence, has put up interest rates too sharply. Others say that the rise has come a bit too slowly. Personally, I take the latter view, but the important thing is not to second guess the authorities each month, or to criticise each twist in decision making.
There will always be controversy. Indeed, with a Monetary Policy Committee of nine members all expressing their opinions in public, we know that that debate will be carried out openly. It will be months or even years before the clear outcome of those policies can be determined, but the important thing is that monetary policy is now being run to meet the Government's inflation target, not the previous Prime Minister's re-election target, as happened two years ago. That has to be a welcome development.
Although the Chancellor has deservedly been praised for this new framework, particularly the monetary framework, he cannot entirely escape blame for our current economic problems. Although the post-election period has seen a big change in the structures, there has been much economic policy continuity, too. What was known as Clarkeism has given way to Brownism. As The Economist has argued, there is an element of continuity. I think that my hon. Friend the Member for Kingston and Surbiton described that as Clownism in the conduct of policy.
On fiscal policy, the deficit has come down, but the same relaxed approach to the taxation of consumption has continued. On the single currency, I get the feeling that the commitment to eventual EMU entry is shared more widely in the present Government than has been made public. Nevertheless, the wait-and-see strategy, or what I described once as the wait-and-wait-and-wait strategy, lives on. As a result, we suffer from the overvaluation and instability of the pound; that strategy is a substantial factor in that.
Of course, for the first two years of this Parliament, the Government's spending plans have remained fixed, preventing new measures to invest in education to start to tackle the skill shortages that are pushing up wages and threatening to abort the recovery. Education is vital not just for the quality of our society, but for our economic well-being, yet, on the Government's own figures, the proportion of gross domestic product that is spent on education has fallen from 4.9 per cent. before the election to 4.7 per cent. after, despite the fact that the Prime Minister said that education spending would increase in real terms as a percentage of GDP year on year under Labour—clearly a broken promise.
On that issue, I feel that both the Prime Minister and Treasury Ministers cannot go on getting away with trying to pretend that Liberal Democrat policies and priorities should be frozen in aspic as of 1 May last year, while Government spending and Government information are updated. We have, of course, made it absolutely clear that, on the basis of our commitments and the revisions that we have applied to those in the light of information that has become available since the general election, this party supports very much more substantial investment in education—and in health as well—than anything that the Government have pledged.
I do not like to interrupt this congruence of policy to which the hon. Gentleman has referred, but I cannot let him get away with what he has just said. What is undoubtedly true is that Liberal Democrat policy is not frozen in aspic—if, indeed, that is what people do with aspic—because every time we announce an increase in spending, the Liberal Democrats call for even more. We are spending more now, despite the fact that we said that we would hold to the inherited expenditure totals in the first two years. We are spending £2.5 billion more on education, educational maintenance and new building than the Liberal Democrats promised. It is true to say that, since then, they have upped the ante, and I expect that they will continue to do that. The difference between us and them is that we have to finance it and we are capable of financing it. I doubt whether the hon. Gentleman is.
I must take absolute issue with the right hon. Gentleman on education. Our commitment on education is several times what the Government have so far pledged—[Interruption.] No; it always was. The commitment to put the equivalent of 1p on income tax for education over the entire Parliament is a substantially bigger commitment than the Government have made. That is a fact on which I stand firmly.
On the updating, the Chief Secretary to the Treasury is right. Of course, I accept that it is not credible to make pledges unless we are prepared to demonstrate where the money should come from, but, in the light of the improving finances that the Government have benefited from, we have certainly said that some of that money could and should have gone into health and education, whereas the Government have stuck to a policy of keeping the squeeze on those services in the first two years and then throwing substantially more money at them later, which we believe is damaging and may yet prove inflationary.
Already, the inflationary figures on which the Chief Secretary's forecasts are based have proved to be unrealistically low. He is running at a higher rate of inflation than the Chancellor's first Budget forecast and the inflationary pressures are upwards. If that continues, what will be the real effect on the commitment on expenditure on public services? Perhaps I could put it the other way around. At what point will the Government recognise that they have to review what their commitment will deliver? The argument is about not just who will spend more money—that is sterile and unproductive—but what we wish to deliver.
I accept that the Government are right to identify specific outputs or inputs, such as reduced class sizes and reduced waiting lists. Our contention is that, first, those have not been delivered and it may be difficult to deliver them. Secondly, they are modest aspirations which we wish to improve on. We have identified the fact that most people would like class sizes to come down well below 30 throughout the primary school sector, not just in the first three classes. Most people want hospital waiting times to be shorter, not just waiting lists. Those are all things that will require resources and the motivation of highly qualified, highly skilled people, who will not be retained in the public services if they face pay cuts year on year, which is this Government's policy.
Does the hon. Gentleman accept that the latest figure in the national accounts for quarter one GDP, year on year, is up 2.9 per cent., which is above the long-term GDP trend of about 2 per cent? The economy is booming above and beyond the rate set of 2.75 per cent. for public expenditure, which was mentioned by the Opposition. The problem is keeping the economy on a stable, growing footing, not the problems that the hon. Gentleman mentions.
The hon. Gentleman is right in the sense that, at the moment, the economy is doing well. There are clear concerns on the horizon about whether that can be sustained. There is so much that the Government can do; there are things that are outside their control. Our contention is that it would have been wiser to have a more even flow of funding into public services, rather than to keep the stranglehold on—and then attempt to push money into them perhaps faster than they can absorb, and when the economy may be experiencing greater inflationary pressures.
The Chancellor is very keen to squeeze boom and bust out of the management of the economy, and he has adopted policies that he believes will lead in that direction. We agree with him on that. Unfortunately, his policies on the public services run the risk of creating a bust and boom that may prove equally unsustainable. Our critique of the situation bears some examination, and I stand by our record.
To tackle our economic problems, we must invest more in education and training. Without that, each recovery burns itself out on higher wages and inflation. The pressures are appearing already, despite still high unemployment, particularly in certain regions.
The Chancellor has made grave mistakes on fiscal policy. He raised taxes substantially and predictably after the election. Had the Conservatives won the election, I suspect that taxes would have gone up in the same way, although they did not say that they would do that either. Sensitive to the promises made on tax, the Chancellor has put the burden almost wholly on hard-pressed businesses and on savers rather than on high-spending consumers. The only consumer tax rises have been modest. The balance that the Chancellor has struck has not helped to bear down on inflation, which is his main problem.
One of the tax changes that the Government introduced was the windfall tax. Its key objectives were to ensure that we had a better-trained work force and to give people opportunities. The Liberal Democrats opposed the tax. They want the spending, but they oppose the means. Does the hon. Gentleman support the spending, and how would his party have raised the money?
It is fine for the hon. Gentleman to say that, but I can reverse the challenge. We were committed to putting money into education and putting 1p on income tax, which his party opposed. As a consequence, education has been chronically underfunded. There is a legitimate debate between parties about priorities. We have made ours clear and the Government have made theirs clear. Some of the new deal spending from the windfall tax is not delivering all the results that were promised, not least because the situation is changing under the Government's feet.
I am conscious that the debate finishes at 7 o'clock, so I shall bring my remarks to a close soon. Relying on interest rates, which is the consequence of the Chancellor's fiscal stance, has forced the pound up further and unbalanced the economy even more. The one issue on which I agree with the shadow Chancellor is that we are creating a boom and a bust at the same time—a boom in the consumer sector and a bust in manufacturing. The Government's economic policies are undermining our wealth-creating base. A clear commitment to the single currency would have helped the Government and our exporters by stabilising the pound at a more competitive level and easing pressures on interest rates. It is not too late for the Government to take such issues on board.
Where the Chancellor has genuinely put the economy first, he has done well. The operational independence of the Bank of England is the best example. Where politics have come top, economic policy has been blown off course. There has been no fiscal tightening for the consumer, to avoid frightening new Labour voters. There has been no stability for the pound, to keep Mr. Murdoch, sweet. There has been no extra investment in education, to stick to Tory spending levels for political reasons. The Tories are not in a strong position, given their record, their pre-election economic policy and their lack of an agenda since the election. However, the Chancellor has to strengthen his nerve if he is to tackle the problems head-on. He must adopt a less relaxed fiscal policy, make a real commitment to education and deal with exchange rate stability, which he always refuses to talk about. Those issues must be addressed if we are to secure sustainable, long-term growth, which Liberal Democrats and the Government want and the country needs. The Liberal Democrats have set out their policies. The Government have acknowledged and adopted some of them and would do well to consider others to help secure the stability, long-term success and prosperity that we all want.
The Opposition have called the debate in the hope of re-creating themselves in the public eye. They want to rewrite history, pretending that the Tory Government created a golden age and a dynamic economy. Maybe they are even pretending that they created a fair society. They seem to be hoping for collective national amnesia on a grand scale. They hope that we shall all join them in the land of make-believe. I am afraid that they are away with the fairies; they are in never-never land. Tory Britain was never how they say that it was, and they will never get the British people to believe them.
Let us look at the reality of what the Tories did to the economy when they were in power. The defining moment of the previous Tory Government was 16 September 1992—Black Wednesday. The Chancellor, the Prime Minister and the Government panicked. They took interest rates up by 2 per cent., immediately followed by a further 3 per cent. rise. While they were losing their heads, they were losing billions of pounds for this country. They provided management schools round the world with a text book case of how to cause chaos, then how to make it worse.
Then, in the 1993 Budget, the Tories were desperate to make up the money that they had wasted. They started raising taxes and put VAT on fuel, when Britain had more winter deaths among old people from hypothermia and cold-related illnesses than any other European country. That showed Tory priorities. Then they declared a beef war with the European Union over its response to the BSE crisis that their mismanagement had created. They called the war off a month later with nothing gained, leaving British beef farmers and taxpayers paying the cost for years. The Tory Government brought the dreaded words "negative equity" into common parlance, which haunted middle-income families. One thousand homes a week were repossessed during the last months of their Government.
During the Tory years, Britain's manufacturing base declined from 58 to 28 per cent. of the economy, and the Conservatives took no effective action to restructure, reskill and stabilise industry. While the right hon. Member for Huntingdon (Mr. Major) was Prime Minister, more than 8 million British people experienced unemployment at least once. Job insecurity became endemic. That is what people remember about Tory Britain.
Another first: until the right hon. Member for Huntingdon became Prime Minister, all the Governments in the history of the United Kingdom had borrowed a cumulative total of £190 billion. Despite receiving £120 billion from North sea oil and £80 billion from asset sales, the Government of the right hon. Member for Huntingdon added more than £180 billion to the national debt in less than six years. That is a phenomenal and appalling achievement—truly one to remember. British taxpayers have to spend £25 billion a year on repaying the interest on that debt alone and they are still feeling the consequences.
The Tories were in government for 18 years and gave us the most unstable economy in the developed world, growth rates below those of every other European country and the two deepest and longest recessions in post-war history. The right hon. Member for Horsham (Mr. Maude) was querying boom and bust. He could not remember what it meant. The Tories had boom and bust, constantly changing policies, repeated rows over Europe, no plans, no strategy and no vision. When business was asking for urgent action on the skills gap, the previous Government reduced the training budget by£34 million in real terms. When business was asking for investment, they crossed their fingers and hoped that something would happen. When business was asking for action on transport, they came up with the cones hotline.
Just before last May's election, The Economist said of the right hon. Member for Huntingdon:
his chief problem is that he leads a party which has taken leave of its senses.
This afternoon, that party is in its proper place: on the Opposition Benches. It has a new leader, but it is the same party. Who are the Tories in opposition? They are newborn babes; they have no recollection of the mess that they created. They are innocents who bear no responsibility for Black Wednesday, the skills gap, the investment gap, the doubling of national debt, the billions of pounds that were wasted and the millions of people out of work.
When it comes to the present economic strategy, what do these people say? They look at our public spending review and say that we must cut public spending. They look at our Finance Bill and say that we must increase public spending. They oppose reforms to close tax loopholes, but say that we must do more to close such loopholes.
I would be very happy to send the hon. Gentleman a list of the many more than 20 occasions on which Tory amendments would have increased public expenditure and reduced Government income.
We do not know—who does?—what the Tories say about Europe; that changes by the minute. In opposition, as in government, the Tories do not know where they are going; they have no coherent plan, no vision and no agreement among themselves. On top of that, it seems that, in the Finance Bill Committee, they could not add up. They were not credible as a Government and they are not credible as an Opposition. If they hope that the electorate will not notice, Conservative Members, like their new leader, will catch a cold.
By radical contrast, this Government are putting in place an overall economic strategy with discipline and effectiveness. Our central economic objective is high but stable growth with greater job opportunities, so that everybody can share in higher living standards. We are rebuilding the economic infrastructure, creating new partnerships between Government and industry to address the problems of instability that we inherited and to build prosperity. Our policies are clear. We are securing economic stability by ensuring low inflation and sound public finance. We are encouraging work, providing employment opportunities for all and making work pay. We are raising productivity by improving skills, increasing investment, ensuring that markets are accessible and competitive and encouraging research and development.
I will not give way at the moment.
Current economic indicators show that our strategy is already beginning to take effect. Public sector borrowing, excluding the windfall tax, was £5.9 billion in 1997–98—down to 0.7 per cent. of gross domestic product. Next year, it is projected to be £1.3 billion—0.2 per cent. of GDP, compared with the massive borrowing of 8 per cent. in 1993–94. Despite increases in short-term interest rates, long-term interest rates have fallen sharply since the Government introduced the new policy framework in May. The rates are now at their lowest level for more than 30 years. Real personal disposable income is up by 5 per cent. on last year.
I should like to comment on some examples of the effectiveness of the Government's management of the economy that are particularly important to my constituents. Over the past year, I have discussed priorities with the Confederation of British Industry, the Federation of Small Businesses, chambers of commerce and business people in my constituency. Business people in small and medium businesses right through to multinationals know that people are the key to success. They all recognise the drag on business, profitability and growth caused by the skills gap.
The Tory inheritance meant that, in Britain, less than half the number of students attained good grades at GCSE than in France or Germany. We were 42nd in the education league. Thousands of young people were trying to find jobs without basic literacy and numeracy skills. Such young people have the right to decent education and a decent opportunity in life. This Government—my Government—are tackling the skills shortage with imagination and vigour. Our careful and coherent plans for managing the economy are inclusive, and they draw on the experience and expertise of business. The new deal for young people has been designed with the active support and co-operation of industry and business. It is already working to give young people a step up the skills ladder.
My hon. Friend will be interested to know that, in Croydon, only on Friday, I spoke to an audience of more than 100 businesses that are interested in the Government's new deal. That is symptomatic of the new partnership between the Government and business to get our people back to work.
As my hon. Friend would expect, I am very pleased to hear that. Indeed, I heard the same message in a business breakfast this morning.
We know that the new deal is effective because 60,000 young people have joined it since January. Indeed, we are already receiving an enthusiastic and interested response to today's launch of the new deal for over 25s. We are also investing £100 million in opening 40 centres of technical excellence. We are training 20,000 people to tackle the millennium bug which, as one of my constituents said, is one of those normal problems that will not go away, which small and medium businesses need the Government's help to tackle, and which the previous Government ignored.
We are creating a culture of lifelong learning with an infrastructure that helps people access knowledge and skills. In addition—an issue that is brought up constantly by my constituents who are business people—we have committed £2.5 billion extra to education, and will increase that spending year on year as the economy grows.
That brings me to another area of exceptional importance to many of my constituents. After the Warrington bombing, local people worked hard to support a framework for peace in Northern Ireland. They have raised £1 million in the past three months to build an international peace centre for young people from north and south Ireland and England. A peaceful future for Northern Ireland really matters to us. The £315 million invested in the renewal and modernisation of Northern Ireland, which the Government have allocated to build economic and political stability, get people back to work, equip them with skills and create an infrastructure for a modern economy, effectively shows the Government's priorities. Economic growth and social cohesion are working together to build a better present and a better future for the people of all these islands.
The House has just heard a most powerful, fluent and charmingly delivered speech from the hon. Member for Warrington, South (Ms Southworth), to which I listened with great interest. It used to be a tradition in the House that one replied to the previous speaker, so I shall deal first with one or two of her points.
The hon. Lady is quite wrong in thinking that none of us Conservatives has a recollection of events leading up to British entry into the exchange rate mechanism and those flowing from it. I was strongly opposed to, and argued strongly against, joining the ERM. During the two years that we were in it, I continually urged that we should leave. To this day, I regard so-called black Wednesday as one of the most fortunate events in post-war British economic history. However, throughout the late 1980s, day-in, day-out, the Labour party strongly urged the then Conservative Government to join the ERM. I remember Neil Kinnock, then Leader of the Opposition, and John Smith, then shadow Chancellor, urging in the twice-weekly Prime Minister's Question Time—Prime Ministers used to come to the House twice a week—that Britain join the ERM.
I may say in an aside to the Liberal economic spokesman, the hon. Member for Gordon (Mr. Bruce), that the Bank of England was also strongly in favour of our joining the exchange rate mechanism, as was much of the City of London and the great international firms. In other words, exactly the same people who were then in favour of our joining the ERM are now urging us to join the single European currency, and for the same reasons.
One of the extraordinary things about the highly intelligent remarks of the hon. Member for Warrington, South is that she seems not to appreciate, given the very things for which she was criticising the Conservative Government in the past—I fully recognise that it was a terrible mistake for us to join the ERM—that her Government are now seriously contemplating making exactly the same mistake again.
Is it not the case that, when the Conservative Government went into the exchange rate mechanism, they went in at too high a rate and with a take-it-or-leave-it attitude that meant that we had no friends in the arrangement when the crisis arose? If anything, that was an example of the way in which the Conservative party dealt with the European Community throughout its period in office. The disaster that followed was the sort of disaster that would follow any policy that the Conservative Government took up, with that sort of bullying manner.
I fully accept—events demonstrated it all too clearly—that we joined the ERM at the wrong rate of DM2.95 to the pound. However, there will never be a right rate at which to join any fixed exchange arrangement. The essence of international currency markets, as we have seen in the relationship, for example, between the yen and the dollar in the past month, is that currencies can fluctuate dramatically from day to day and week to week. That is one of the great safety mechanisms in the international trading community. When we remove that mechanism, we are in serious trouble.
That is one of the reasons why the whole of Asia is now in chaos. The countries involved were operating on quasi-fixed exchange rates throughout so they did not devalue and did not change their exchange rates until they were in a desperate situation. In my view, that is exactly what will happen in the European Union in the course of time.
Does the hon. Gentleman accept that the high level of sterling is a symptom of international business confidence in the British economy? Given what his colleagues have said about getting the exchange rate down, how would he suggest reducing the confidence of the international business community in the British economy so as to push down exchange rates, which it appears the Conservative Opposition want to do by some sort of whim?
I am being delayed in getting on with what I really want to say. However, I am much more interested in the subjects that are being raised.
It is true, to some extent, that the great strength of sterling today is due to the high regard that the international community has for the state of the British economy at present, as a result of 18 years of Conservative government. However, it is not true that the whole British economy is very confident at present. The exporting element of the economy has a lower confidence than at any time since 1983, as the latest CBI report proves.
Much of the strength of sterling is due to the fact that people are anxious about the future of the euro. A great many rich Germans have been moving out of deutschmarks into the Swiss franc, the United States dollar and sterling. To a considerable extent, the strength of sterling is due to anxieties about the euro by the international community.
The other thing, while I am on this subject—having referred to it, I shall conclude on the question of the past, as it were, and the euro—is that it is not possible to say what would be the right rate at which to join the euro, if the Labour Government eventually decide to join and the British people are unwise enough to vote yes in a referendum. At the moment, the exchange rate with the deutschmark is significantly higher than when we joined the ERM. It was 3.02 this morning, not 2.95. No one who looks at these matters has ever seriously considered that we should join the euro at a higher rate than 2.65, and many would put it at 2.60, or even lower.
As my hon. Friend the Member for Esher and Walton (Mr. Taylor), who does not always share my euro-sceptic enthusiasms, mentioned earlier, we are talking about a problem that the Labour Government seem not to have considered. Certainly they do not discuss it in public. If they decide to join the euro and they are to avoid the mistake that the Conservative Government made of joining at much too high a rate, how will they get sterling down from DM3 to the pound to 2.60 without greatly increasing inflation? They would have to reduce interest rates—the experts guess that it would involve a reduction in interest rates of 3 or 3.5 per cent. It is said that that would involve a huge increase in income tax to offset the inflationary pressures that would ensue. Even if we decided in theory that we wanted to join the euro, it seems to me that there are almost insuperable technical problems just about that aspect of it.
Is it not the case that, in the middle of May, the exchange rate slipped from DM3.10 to the pound to 2.90 due to the agreement of leaders in Europe to set a date for the start of the new currency? Is it not therefore obvious that, if the currency is successful following its launch at the beginning of next year, the rate for the pound will converge down towards 2.65 anyway?
I do not think that anything is ever certain about the movement of currencies. I have earned my living in this sector, often with some difficulty, for 40 years. If one even knew what the exchange rates of the world were to be tomorrow, one could become another Soros overnight. It is absurd to project forward months ahead what would be the possible rates at which the great currencies would relate to one another.
I turn to the terms of the motion of censure that my party has rightly put on the Order Paper. The Chief Secretary advanced the rather curious and, I should have thought, entirely novel constitutional proposition that an Opposition censure motion was an opportunity for the Opposition to set out their policies. I have listened to a great many Opposition motions over the past 40 years in the House and it has never seemed to me that that was the object of the movers of such motions.
I have always thought that a censure motion on a Government was exactly what it said, and that it set out the criticisms that the Opposition of the day have of the Government. The Government are then expected to defend their policies and answer in detail the criticisms that have been made. There has been no attempt to answer our criticisms in detail and the Chancellor of the Exchequer has even pushed off to continental Europe. It is extraordinary. It is not surprising that the Chief Secretary wants us to start behaving as though we were the Government, which I have no doubt that we shall be again in a few years' time.
When the economic historians come to study the reasons for the failure of this Government, I believe that they will point to the origins of the failure arising on the fourth day of the Government's life, when they suddenly announced the new arrangements for the Bank of England. The whole of that episode will be of great fascination to political and economic historians. That immensely important decision, incidentally, reversed at a stroke a Labour Act of Parliament, not a Conservative one. It reversed the Bank of England Act 1946, which was introduced by the post-war Labour Government.
The decision was taken furtively and in a tremendous hurry. The policy was not in the Labour party's manifesto, and, in the campaign before 1 May, no Labour Front Bencher said that such a decision would be taken. Indeed, I understand that it was not even discussed and approved by the Labour shadow Cabinet before 1 May. However, it was one of the most important constitutional and economic decisions of this century—indeed, since the reign of Charles II, as anyone who knows the history of the Bank of England will accept—and it was taken in what David Smith, the economics editor of The Sunday Times, described yesterday as a frenetic hurry. It will have tremendous implications for the duration of the Labour Government and will, I believe, have very adverse effects on the British people.
The effect of giving the Bank of England independent operation on interest rates is—as I have said repeatedly in the House from the moment that it was announced—to separate fiscal and monetary policy. The hon. Member for Gordon (Mr. Bruce) pointed out that a number of major countries separate fiscal and monetary policy, but sometimes the number is exaggerated—Japan does not separate the two, although I do not want to use Japan as an example for us to follow. People are usually thinking of the United States and Germany, but we should consider the effects of that separation on those countries' recent economic history.
Nye Bevan, who was the best speaker that I have heard during my time in the House, was fond of saying that one did not have to look into the crystal ball when one could read the book. Recent books show that the United States ran a slack fiscal policy and a tight monetary policy in the 1980s, and that Germany did so in the 1990s, after the Berlin wall came down. The slack fiscal policy in Germany required a tight monetary policy as a counterpoise, which was the cause of all our difficulties as a member of the exchange rate mechanism. The fact that interest rates had to be high in Germany meant that they were inappropriately high in Britain at a time when we were entering deep recession, which—or the reverse—is exactly what might happen if we were in a single European currency. An economy can be organised much more efficiently if elected Ministers are responsible for both fiscal and monetary policy.
Is it not the case that, immediately after the Monetary Policy Committee took control of interest rates, long-term interest rates fell? That fall, which was the result of the policy about which the hon. Gentleman complains, had a direct impact on one of the longest-standing problems of the British economy—the lack of investment.
Treasury Ministers have often made that point, but I do not think that they understand—any more than I think that the hon. Gentleman understands—the significance of long-term interest rates. It is perfectly true that long-term interest rates in this country are exceptionally low—they are at 6 per cent. In the United States, however, which has a totally different system and is not preoccupied with the things that we are discussing, long-term interest rates are 5.5 per cent.—that is almost a post-war low. One can, this afternoon, buy the 30-year US long benchmark bond on a 5.6 per cent. yield. In Japan, which also faces a totally different set of circumstances—it is in technical recession, perhaps moving into slump—long-term interest rates are even lower.
There can be a variety of reasons to explain the fact that long-term interest rates are low. People may fear a recession and savers may not be spending. There are many influences on long-term interest rates, and it is a great mistake to make deductions of the kind that the Government make from the fact that our fixed interest yield curve is more or less flat and that our long-term interest rates are low—one would have to make a close and scholarly comparison between Britain and the United States if one wanted to draw such academic conclusions.
The fact that the Government sacrificed control over monetary discipline—they can no longer determine it—means that the Chancellor can pursue a laxer fiscal policy than he otherwise could. I suppose that he was so keen to give the Bank of England independence over interest rates because he knew that, sooner or later, political pressures would force him to increase public expenditure, contrary to the pledges that he gave before the general election—he wanted to be able to blame another body for the increase in interest rates. There have already been six increases in interest rates since the general election, as the motion points out, and there are undoubtedly more to come. The effects of those increases are serious and extremely damaging to our exports. Indeed, I fear that sterling will become even stronger and that the high pound will persist for many months. The impact of that on the green pound will have a tremendously bad effect on British agriculture. We always talk about this problem in terms of exporting, but I represent an agricultural constituency and I know that farmers are having a desperate time as a result of Government policy.
The Chancellor has now announced a 2.75 per cent. increase in public expenditure per annum, but, when he is challenged on it, he says what I have heard Chancellors say time and again over the years—the deja vu that I experience in listening to him and the Chief Secretary is uncanny. Last Thursday, in response to a supplementary question, the Chief Secretary said:
When the Tories … accuse us of going on a spending spree or of having too loose a fiscal policy, they really must tell us, what do they want us to cut? Are we spending too much on health, too much on education, too much on transport? They must answer those questions."—[Official Report, 25 June 1998; Vol. 314, c. 1161.]
No Opposition have ever answered those questions, but I tell the House who has—first, between 1964 and 1967 under the Wilson Government, they were answered by the international community, which forced the 1967 Callaghan devaluation of the pound, and secondly, between 1974 and 1976, when Lord Healey was Chancellor, they were answered by the International Monetary Fund, which told the Labour Government how the show was to be run.
I am sorry that the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who was a Treasury Minister at the time, is temporarily not here, as he could confirm that, after the IMF had told the Government what to do, the quartet of Labour Treasury Ministers imposed the most savage cuts on all the public services. The Chief Secretary asks what services Opposition Members would cut and reads out all the popular public services on which the Liberals ask him to spend more. Those were precisely the services—health, education, transport and so forth—that the IMF cut most savagely under the last Labour Government. No new hospitals or roads were built: new building was cancelled—the whole thing.
I hope that we shall not have to listen for another three or four years to Treasury Ministers saying, whenever they increase public expenditure, "What would you cut?" I have never been one of those Conservatives who opposed public expenditure in principle. I am a Keynesian—I believe in public expenditure when it can be justified. One has to be careful not to increase public expenditure too quickly or out of line with GDP indexes. Indeed, until his extraordinary statement on the matter a fortnight ago, I thought that the chief message that the so-called iron Chancellor had for the country was that public expenditure had to be kept under the tightest possible control. However, because of a few minor revolts by a few Labour Members whom the Government are now trying to strike off their candidates list, that iron Chancellor was panicked almost overnight into announcing that restraints would be considerably eased. We shall wait to find out how long it is before the IMF starts to take an interest.
The shadow Chancellor said the other day that we have boom and bust at the same time, which is true. The Organisation for Economic Co-operation and Development said only last week that our latest increase in interest rates might well tip this country into recession, and I share that view. On 27 November last year, in a supplementary question to the Chancellor of the Exchequer, I asked:
Has it occurred to the Chancellor of the Exchequer that by 1999 the danger of inflation may be rather less than the danger of deflation?"—[Official Report, 27 November 1997; Vol. 301, c. 1082.]
That is my view, and I said that before the Thai baht collapsed and before the chaos in Indonesia and the economic crisis in Asia. The dangers of deflation are demonstrably much greater now than they were in November, and the latest increase in interest rates by the Bank of England was a mistake.
The Bank will make further mistakes, which brings me back to my opening remarks. I do not have much confidence in the new Monetary Policy Committee that has been set up to run such affairs instead of the elected Government. Members of the MPC are mostly respected economists, but they do not have wide business experience—certainly not in exporting—and they are not at all preoccupied with employment levels as far as one can tell.
When the Chancellor announced the new Bank of England set-up, he said that its chief obligation would be to keep inflation at 2.5 per cent. If Labour Members are right that he felt when he came to office that he had inherited from the Conservatives far too lax a monetary policy and that an inflationary danger was building up so that a 2.5 per cent. inflation target had to be announced, surely he must have understood the implications. If one suddenly introduces a 2.5 per cent. target at the beginning of an inflationary splurge—this is what Treasury Ministers are now trying to pretend that they thought—one is, in effect, asking the Bank of England to take severe monetary measures indeed, which will dramatically affect employment levels. It is worth remembering that the level of unemployment under every one of the five previous Labour Governments has been higher when they left office than when they took it, and I am certain that that will again be the case.
Does the hon. Gentleman recall the effect of Conservative economic policies on manufacturing employment between 1979 and 1981, particularly in Liverpool, which I remember well at the time? They destroyed 24 per cent. of manufacturing jobs and one sixth of all jobs in Liverpool.
I remember that clearly because I resigned as a Treasury Front-Bench spokesman on the issue and spent the period from 1979 to 1981 attacking Lady Thatcher's Government and Lord Howe's chancellorship precisely on the grounds that their monetary policy was far too tight. I publicly described the 1981 Budget on the day that it was delivered as being economically illiterate. When Sir Alan Walters was eventually appointed as her economic adviser by Lady Thatcher, his first report to her confirmed exactly what I said and she changed her policies.
Getting things wrong once is not a good argument for getting them wrong a second time. We made great mistakes over the exchange rate mechanism and excessive monetarism, but, apparently, this new Government have learnt nothing. They are the Bourbons of modern times—they have learnt absolutely nothing—and, as the Talleyrand of the House, I am trying to remind hon. Members that we faced some of those problems before, and the wrong answers were given. For goodness' sake, do not let us do so again.
One of the great problems is that people develop a commitment to a general theory. During my time in the House, the theories have changed. First, we had socialism, then corporatism, then monetarism and now we have Euro-federalism. One of the great advantages of an Oxbridge training, which is under considerable attack from Labour, is that it develops in one a mood of intellectual scepticism at an early age. I was deeply sceptical about all those four "isms". We really should aim for a situation in which all "isms" are "wasms" and in which we concentrate on good, sound Government by experienced Ministers rather than thinking that all the world's problems can be solved by one theory.
Finally, every Government ought to aim at four things simultaneously. I am thinking of the 1944 all-party White Paper at the end of the war. People go on as though the Labour Government invented everything after 1945 and one would not think that there had been a Beveridge report on the social services, a Willink report on the health service or anything of the sort. George Isaacs and Nye Bevan did a good job, but a lot of work was done for them beforehand. They inherited the blueprints for the post-war welfare state, including the educational structure, which was based on Rab Butler's Education Act 1944, and it was built on plans that had been drawn up under Churchill's wartime Government, largely by Conservative Ministers.
The 1944 White Paper on employment stated that one must aim simultaneously for stable prices, a high level of employment, a healthy balance of payments and an expanding economy. If one gives a particular instruction to the monetary authorities—now the Bank of England—as this Government have and tells them that they have to give a 2.5 per cent. rate of inflation overriding priority, those other three aims will all be put at risk and this Government will come to the ignominious end that I am longing to see.
It is perhaps in the nature of debates on a censure motion, but Ministers will be grateful to the hon. Member for Louth and Horncastle (Sir P. Tapsell), and the faces of Opposition Front Benchers show that they were not too keen to hear his relatively interesting contribution.
The Government are hoping to achieve long-term economic stability. Businesses share that aim; they want to avoid boom and bust, with the peaks and troughs of economic activity. I think that everyone in the House will understand the analogy of a small ship that does not want deep, heavy waves, because there might be the occasion when one rides the crest like a surfer and has super-success but, more often than not, businesses will be wiped out when the wave crashes down.
Between 1991 and 1993, nearly 70,000 companies were liquidated: wiped out. In the same period, there were 170,000 business failures.
The popularity of the new Labour Government among business people is as high as it has ever been.
Stability in the economy is a great aid to planning. Certainty is essential when we plan long-term investment in new technology, in research and development, or even in people. That is why I welcome the news that long-term interest rates are at historically low levels. We must acknowledge the fact that there will be some variation in our economy. We are not operating in a closed economy. The essence of good government is to avoid economic shocks and destabilisation.
The motion refers to
6 increases in interest rates",
but those increases have raised the base rate only 1.5 percentage points, from 6 to 7.5 per cent. As regrettable as that may be, we should consider what happened when the Conservative Government were in charge of the economy. In one day alone, they raised interest rates first by 2 per cent., and then by a further 3 per cent. The base rate was in double figures for four consecutive years; in 1989, it peaked at 15 per cent., remaining between 13 and 15 per cent. throughout 1989 and 1990, yet Conservative Members have the brass neck to criticise the Labour Government, under whom interest rates have peaked at only 7.5 per cent.
In Worcester, business has welcomed the new Labour Government. On our first anniversary, BBC Television came to find out what Worcester woman, Worcester man and Worcester business people thought. Mr. Noel Duffy, finance director of Dolphin Computer Systems, said how much he applauded what the Government were doing for business.
A stable economic environment will be essential in addressing the fundamental problems that we inherited from the previous Government. The most obvious problem is that economic growth is more often than not associated with wage-push inflation. That effect is caused partly by skills shortages, as workers can bid for higher wages when they know that their skills are in demand and there is no competition from other skilled workers.
The Government are addressing that serious supply-side problem. A Japanese-owned manufacturing tool company, Mazak, has its European headquarters in Worcester. It has great difficulty in explaining to its Japanese owners that, when it takes on new workers, productivity does not immediately go up and it takes six months before there is any noticeable increase. That is because the workers who are being taken on do not have the skills or education standards of their German or Japanese counterparts.
I am pleased to say that the Government are addressing such problems. The university for industry will enable people in work to train and to develop their skills, and will give access to the best possible management practice. Individual learning accounts will enable people to take the time to bring themselves up to speed with new skills. That is good for their motivation, for the business, which will benefit from greater productivity, and for the economy as a whole. The new deal will give quality training to unemployed people and bring them back into work, not only making work pay for them but making taking on workers pay for businesses.
We have endeavoured to improve education standards across the board, with nursery provision for all four-year-olds; the pledge on small class sizes for five, six and seven-year-olds; a focus on literacy and numeracy; and encouragement for more young people to go into further and higher education. That is all absolutely essential if we are to solve the problems that we inherited.
For many years, the economy has been troubled and unable to grow without causing the bust part of the business cycle to come into play. We intend to tackle that problem through a stable economic plan and I hope that, after 20 years of Labour government, we shall be able to look back on what will truly be a golden legacy.
It is incredible that the Chancellor has chosen to be elsewhere for such an important debate. That shows some contempt for Parliament, and may say a great deal to businesses that have been looking to him for leadership. Everywhere, we see signs that the economy is in severe difficulties, but he cannot be bothered to come to the House.
Over the past few weeks, report after report, including the most recent one from the Organisation for Economic Co-operation and Development, has warned of real danger in the economy, yet the way in which the Government and their Back Benchers have responded this afternoon shows complete contempt for the warnings that have been offered. The economy is in real peril. While the Chancellor fiddles, the economy burns.
It is an extraordinary fact that inflation has almost doubled in the past year, yet Government Members want to talk about history. The reality is that the economy requires leadership and attention today, but the Government are deaf to all pleas. Mortgage interest payments have increased by almost 30 per cent. since the Government came to power, but they are deaf to our arguments. We have seen excise duties increase by nearly 20 per cent., but Labour wants to talk about tax rises under the previous Conservative Government. We have seen dramatic increases in council tax bills, but the Government choose to ignore the consequences.
It is hardly surprising that the result of all those increases is that wage settlements have increased. The average family must pay nearly £1,000 more a year because of the Government's tax increases, and the only way to fund that is to ask for more money. Meanwhile, the Governor of the Bank of England tells us that the economy is closer to overheating than it has been for a long time. Do the Government pay any attention? No. They prefer to talk about history than take responsibility for dealing with the economy now.
The Governor is not alone. Other members of the Monetary Policy Committee say the same. Soon—probably on 9 July—interest rates will rise once again. The inflation target has been missed 12 times out of 13—a pretty impressive record. Yet the Government prefer to talk about the time before they came to power instead of taking responsibility for their appalling economic choices over the past year. That is why headline inflation is up from 2.4 per cent. last April to 4.2 per cent. today.
I have listened with interest to the hon. Gentleman's arguments, but my right hon. Friend the Chief Secretary said that in the Standing Committee on the Finance Bill, the Conservatives supported increases in taxation and expenditure equivalent to £6 billion. That would add £6 billion to the public sector borrowing requirement, and that is what the Conservatives supported. How does that fit in with the Governor of the Bank of England's concern that the economy is overheating? To put £6 billion more into the economy would surely add to overheating, and would add to, rather than reduce, pressure for increased interest rates.
The reality is that running the economy requires prudence. The Chancellor likes to borrow the language of prudence, but shows none. There are areas in which the Finance Bill should be amended, and we shall debate them over the next two days. However, the action that should have been taken by the Chancellor—the United Kingdom's Chancellor, alas—has not been taken. He pretends to be an iron Chancellor, but he is in reality in the vein of old Labour Chancellors. He wants to spend, spend, spend.
The UK faces two futures. In the first, and better, our economy will soon give way to a very hard landing. In the other, more worrying scenario, which we can read about in every newspaper and every forecast, our economy is on course for recession. In either case, there will be a downturn, and that is bad news for Britain. Both scenarios were created in Downing street by the Chancellor's poor choices and bad judgment. He may not want to be here today, but they are his fault, arising from his decisions, for which he must bear responsibility. The Chancellor does nothing but allow the economy to slide into downturn or recession.
I shall not. I have given way once to the hon. Gentleman. If he wishes to make a speech, the House will look forward to hearing from him.
The Chancellor wants to wear the clothes of prudence, and wanders round the country telling us how prudent he is. In truth, however, he is about to set off on a huge spending bonanza that every commentator says should not happen. Soon, the Chancellor will preside over public spending of nearly £1 billion a day, and it will be upward from there. Why does he claim prudence? Why not admit to being a giveaway Chancellor? He has been dazzled by his legacy, and by the tax revenues that he has received. In February, he let himself believe, from what his Treasury officials said, that his Budget would balance. In true Labour speak, with the help of the spin doctors, out he went to claim that that was all his doing because of his prudence.
As the Chancellor has claimed to be prudent in the past, he must accept responsibility now for what he has done. Consumer spending has been, and remains, out of control. The march of consumer spending has been closely followed by a battalion of pay rises. If the Chancellor had asked what had really gone wrong with the economy, and what was the real reason why tax revenues were going up, he would have learnt that they were consequences of the market's marching ahead, and had nothing to do with him. The economy is overheating, and it has been for a long time. He has refused to take the right action. He should have reined expenditure in, but he is about to let it go. The economy is overheating, and the Chancellor is in the kitchen stoking up the flames.
Monetary policy can, of course, be used to rein in the economy, but the consequence will be higher interest rates. Tell that to a single person in manufacturing, exports or farming, the people who suffer the consequences of the Government's disastrous interest rate policy. The Chancellor claimed that he would end boom and bust, but he inherited a boom and the evidence suggests that he is taking Britain towards being bust. Our balance of payments plunged into the red for the first three months of this year; after a year and a half of surpluses, the deficit for the first three months of 1998 was £3.2 billion. Is that prudent? Of course not. The trade deficit has widened by £500 million, and our exports are falling. Earnings from Britain's stock of overseas assets have declined by £600 million.
The Government seem complacent. They tell us about history, and will not accept responsibility for their policies of the past 14 months, which are driving Britain headlong towards recession. Industries, businesses and farmers are going bust, but the Government arrogantly deny that anything needs to be done. They pretend that everything is fine. The consumer boom continues, not funded by exports as our recovery was, but because spending is being funded by a massive plundering of savings. To the left of him, to the right of him, in front of him and behind, the Chancellor is surrounded by people who say that the economy is in trouble. Yet he cannot be bothered to come to the House to answer legitimate questions.
The Chief Secretary has shown the same contempt for what we say, but what we say is what others are reporting all over the country. The latest evidence from the OECD warns that rising inflation, tight labour market conditions and upward pressure on earnings will mean a bumpy landing and a "serious challenge". Where is the leadership from the Chief Secretary, which would show that the Government take that challenge seriously, or even that they recognise it? All we hear from Government Back Benchers is what they read on their pagers, readings that tell them that everything is fine.
The hon. Member for Worcester (Mr. Foster) talked about businesses in the midlands doing well, but today's Dun and Bradstreet report shows that all is not well. Perhaps the hon. Gentleman would do well to learn from the mistakes that were made by the Conservatives when we were in government. It is vital to listen to businesses on their problems, and businesses are screaming with the pain of the Labour Government's policies.
The truth is that, as the Financial Times said, Britain is stumbling towards recession. The reality is there to be seen if people are prepared to look, but the Government continue to paint another picture. They talk about getting rid of boom and bust, but they are the ones bringing back the bust to this country. As my right hon. Friend the Member for Horsham (Mr. Maude) said, the spin doctors tell them that if the mantra is rehearsed often enough, people will come to believe it. The problem is that the same people will soon join the unemployed. This month, for the first time in years, the number of unemployment benefit claimants rose. It rose because of this Government's policies. It is the fault of the Chancellor and the Government. If they believe that soundbites are a substitute for policies, this country will come undone.
The number of claimants rose by 1,000 in May, but it went down by 35,000 in the quarter to May. In the first quarter of this year, business investment went up 10 per cent. and the annualised growth rate was 2.9 per cent. against a trend rate of 2 per cent. Things are growing; people are investing. We are in a boom and things are looking good. There is pressure in the labour market because people are getting jobs. That is not a recession but success.
I am grateful for that intervention. As every newspaper points out, under the new way in which the Government wish to calculate the unemployment figures, one could argue that this month was as good as the previous one. Under every other method of calculation, more people are losing jobs than for years. That will not be assisted by the minimum wage, which the Government introduced for perfectly honourable reasons. No one wants people to live in bad conditions. A minimum income yes, but a minimum wage is a guaranteed route, as shown by what has happened elsewhere in the world, to throwing people on to the unemployment scrap heap. That is not the right way forward for a prudent Chancellor. When the Government took power from the Conservative party last year, they inherited falling interest rates,falling unemployment and falling inflation, yet today they are rising. If the hon. Gentleman seriously thinks that the economy can be in a better condition because of those appalling reversals in our economy, he should think again.
What will happen when the impact of the problems in the Asian market starts to hit this country at the end of the year? Presumably the Chancellor will blame someone else, because he believes that it is always someone else's fault. The Chancellor and the Government must learn what the Conservative party learned painfully last year. Ultimately, when they are in No. 10, they are in charge. The Government must recognise that they must take responsibility. It is a reckless Government who continue, as do this Government, not to recognise the signs of economic disaster, yet the Chancellor refuses to face the problems.
If there is such havoc in the economy, why do the international markets demonstrate such confidence in the Government and their policies that the pound has risen since the day they took office?
That intervention is extraordinary. The reality is simple. If one continues to push up interest rates in the way that the Government have allowed policy to be prosecuted, the pound will rise. The consequence for manufacturing, farming and the service sector, which is beginning to suffer, is disaster. If the hon. Gentleman went around the country and heard people's worries, he would learn that the so-called encouragement of investment because of high interest rates is not so good for Britain. That is what we are talking about: the right thing to do for Britain.
Only last week, the Financial Times reviewed the Government's policy and said:
The economy lies stranded in treacherous territory. Every indicator…says that the business cycle cannot be wished away.
However, the Government believe that if they practise the mantra of the day, it can be wished away. While the Government continue to believe in spin doctoring as a substitute for policy, Britain moves from a possible to a probable recession.
The Chancellor says that he wants a strong, competitive pound. He has a strong pound, but it is not competitive. Ask anyone in manufacturing or business whether they believe that sterling at its current level is the right thing for Britain and they will say no. The villain of the piece may be sterling, but the father of the villain is the Chancellor. He may wish that long-term policy frameworks could banish short-term problems. An independent Bank might allow him to lay the blame for high interest rates elsewhere today, but tomorrow the country will blame him. The sums show that Britain is teetering on the edge of a serious recession. The party is over.
It does not behove the hon. Gentleman to say that. It shows ruthless disregard for the evidence. It is not our evidence, but that of every commentator. Labour Back Benchers fail seriously to address what people who have worked in business say. Most Labour Members have pursued honourable professions, but few have worked in or run a business. That lack of experience is beginning to tell in the way that they run the economy.
Tomorrow, Britain will face real problems. Inflation is at its highest level in six years. On 9 July, interest rates may rise again. The Government continue to be complacent. The Chancellor goes elsewhere and pursues his interest in Europe. That is fine, but the problem is that Britain still needs to be run by its national Parliament here. His absence is serious and shows utter contempt for running the economy in a responsible, proper way.
While Rome burns, the senators of this Government are at play, spending here and there and clocking up their new plans for the future. It is totally irresponsible, given the condition of the economy. Ultimately, Britain will pay, and pay heavily. The next rise in interest rates will force all those who have to borrow to pay even more dearly.
Next year, two futures lie ahead. Either the Chancellor will be here telling us about his package of cuts and postponements or he will not be here at all. To save his own skin, the Prime Minister, a man who likes to be characterised as tough on crime, tough on the causes of crime, will find the villain of this crime. The Chancellor may find that he has different responsibilities.
I am glad to follow a speech so full of bonhomie, wit and joviality. It was interesting to hear an attack on the Government, because attacks have been conspicuous by their absence so far.
I have listened carefully to the debate. The shadow Chancellor, who is not in his place, did not get to grips with what is going on. His main beef seemed to be the absence of the Chancellor. As we are debating a motion in the name of the Leader of the Opposition, perhaps it is important that he is not here. Where is he? That is equally pertinent. What a flagrant abuse of democracy. What contempt for the House of Commons.
I did not realise that. Of course I apologise if the right hon. Gentleman is indeed incapacitated, but the deputy leader of the Conservative party has also signed the motion and he is not here either. Lots of people who signed motions today are not here, so it is a little hypocritical to start criticising others for their absence.
This idea of a golden legacy is a wonderful piece of revisionism—the rewriting of history. Some golden legacy it was: interest rates at 15 per cent., inflation at 10 per cent., public sector borrowing and national debt costing, because they doubled in six years, £25 billion in interest payments—[Interruption.] The Tories do not like to hear about that—which is intriguing—but the public know it.
The Conservatives seem not to realise that they lost the election because of their abysmal failure to manage the economy. People looked at their claim to a golden economic legacy and laughed at it.
The hon. Gentleman mentioned revisionism. What did the leader of the Labour party mean when he said, in 1996 during the lead-up to the election, Labour had no plans to raise taxes?
The hon. Gentleman knows full well that the Labour manifesto set out my party's plans and policies on taxation and spending in black and white, whereupon we were elected by an overwhelming majority. We are keeping every single one of our pledges—a concept with which the hon. Gentleman is unfamiliar. That is why his party lost the election: it could not keep its promises, meagre though they were.
It has been interesting to see, in the Standing Committee scrutinising the Finance Bill, the amendments the Conservatives have tabled. As we have heard, they do not deny that they were going to abolish mortgage interest tax relief—earlier, my right hon. Friend the Chief Secretary hammered that point home. We have also seen in Committee the Tories committing themselves to reducing public sector income by astronomical amounts. Where would they find the savings? From putting up taxes—even income tax? From cutting vital public services? Or from adding to the national debt?
Taken together, Conservative amendments proposed in the Standing Committee amount to a staggering £5.8 billion in reduced spending. With their proposed amendment to the social security bill of £1.5 billion and their commitment to abolish capital gains tax, at a cost of £1.3 billion, they would leave an £8.5 billion black hole in the national finances and wipe out the public sector debt repayment that the Chancellor has proposed for 1999–2000.
Does my hon. Friend agree that if we followed the advice of the Conservative party and increased the public sector borrowing requirement by as much as £8 billion, we would only repeat the mistake made by the Chancellor of 10 years ago—a mistake that led to the boom of the late 1980s and the bust of the early 1990s?
My hon. Friend is correct. It is clear that the Conservative party has learnt nothing from its defeat as it continues to table profligate amendments to the Finance Bill, espousing reductions in tobacco tax and bingo tax, for instance. The Tories have not as yet proposed any reductions in income tax—it will be interesting to see whether they do. We want to know where all the money will come from.
There is a limit to how much one can stand of this nonsense. It is the Labour Government who have raised taxes although they said before the election that they could fund all their spending programmes by reducing spending on social security. The fact is that they are spending a mammoth amount more on social security, not cutting it. When will the hon. Gentleman apologise for misleading the public during the election about how Labour would fund its spending pledges?
That was a brave attempt by a stalwart member of the Finance Bill Standing Committee to defend ill-thought-out Conservative amendments. He deserves full marks for trying. The hon. Gentleman should know that the Government are reducing the welfare sector's consumption of public money over the lifetime of this Parliament by means of initiatives such as the working families tax credit and welfare to work, which will take people off benefit and into work, thereby reducing social security expenditure. It is that sort of fiscal prudence which will ensure sound long-term public sector finances.
The hon. Gentleman's reading glasses are obviously tinted a certain shade of blue. Not all the reports predict such doom and gloom. The Chancellor has done a remarkable job of striking the right balance between the sort of depression and recession being experienced by Singapore, Indonesia and Korea—in the space of one year their economies have shrunk by between 8 and 20 per cent.—and the enormous rates of growth, perhaps unsustainably high, in America.
Why is a booming economy in America not a problem for inflation there, whereas in this country, uniquely, inflation is rising and has hit 4.2 per cent; indeed, the underlying rate is well above the Chancellor's target? How does the hon. Gentleman explain that dichotomy?
Perhaps it has something to do with the national minimum wage in America. Perhaps we need to look into how the Americans operate it in such a way that their inflation stays low. It proves, at any rate, that it is not impossible to combine a minimum wage and low inflation.
I want to reiterate a point I made earlier about the Liberal Democrats' spending commitments. The hon. Member for Gordon (Mr. Bruce) did not deny the Liberals' commitment, made in the Finance Bill Standing Committee, to a policy of, effectively, an extra 8p on income tax. That derives from the £17.5 billion involved in equalising the personal income tax and capital gains tax allowances.
The hon. Gentleman pulls his fantasy claims out of the air, but fails to explain his party's policies or what they would cost. For example, the Chancellor is on record as proposing a 10p income tax rate. If that were introduced tomorrow, it would cost billions.
I am sure that any proposals the Chancellor introduces will be fully funded and costed, just like all the other Government proposals so far. The hon. Gentleman said:
We should consider making the income tax allowance and the CGT allowance the same…In the next few weeks and months, my party will put on record the cost of our proposals for an increased income tax allowance."—[Official Report, Standing Committee E, 16 June 1998; c. 799.]
We await that announcement with bated breath. I look forward to hearing how the Liberal Democrats propose to fund their commitments—it always appears easy for them to spend, spend, spend in a way that the Conservative party is learning to do, but they never say where the money will come from and that is what we need to hear. A bit more responsibility from Opposition Members would not go amiss.
On fiscal policy, it is important to highlight the way in which the Government have been working towards reducing the national debt and the public sector borrowing requirement, so ensuring that that burden around the necks of taxpayers is reduced. The hon. Member for Louth and Horncastle (Sir P. Tapsell) claims to be a Keynesian; I wonder what Keynes would have to say about the astronomic levels of national debt created by the Conservative Government. I was interested to hear Opposition Members' rather contradictory arguments on that point.
And, boy, we certainly had recessions—not just one, but two. We are glad that the hon. Gentleman has reminded us of that.
I also want to highlight the way in which the Government have chosen to prioritise capital and infrastructure investment. That announcement, made in the past few weeks, has not yet been fully appreciated: the state—the great oil tanker—has begun to be turned around. Year on year, taxpayers' money was consumed at the expense of investment in capital infrastructure in schools, hospitals and transport networks.
Capital infrastructure helps to improve the quality of the economy and helps business by ensuring that we have long-term infrastructure available throughout the economy to support the industrial capacity we need for future generations. The Government's well-placed policies to give tax breaks through the working families tax credit and the lowest ever corporation tax rate are also welcome; and the acclaim with which many in the business community have greeted the Government's policies has been alluded to.
In monetary policy, the Government have struck the right balance by depoliticising interest rates and passing decisions to the Monetary Policy Committee of the Bank of England.
The hon. Gentleman was not listening to me—it might be useful if he made his own speech. My point in respect of monetary policy relates to the depoliticisation of interest rate decisions and their removal from the scope of political intervention of the sort seen under the Conservatives. In the run-up to the election, they took great risks with the economy at the expense of long-term investment in their attempt to front-load the economy and make it appear as sweet as possible to the electorate. They failed abysmally and, as a consequence, the new Labour Government had to clear up the mess they left.
Does my hon. Friend agree that the reduction in the savings rate is a symptom of a buoyancy and confidence in the economy which, as the motion tells us, we last saw in 1990, during the boom years of the Lawson era? It is a symptom of confidence and it is not necessarily linked with tax changes, as has been spuriously argued.
Given the hon. Gentleman's comments about how right it is that the House is no longer in charge of setting interest rates, will he applaud the Bank of England if, on 9 July, it puts up interest rates for the seventh time, with the result that mortgage rates rise for many of his constituents and mine?
The hon. Gentleman falls into the trap of the previous Government. Politicians have always tried to make decisions about technical and important economic indices, but I prefer to leave such matters to the intelligent and informed views of the members of the Monetary Policy Committee of the Bank of England, who are in a far better position to take such decisions than I am as a politician.
The hon. Gentleman likes to think of himself as an expert on such matters—I am sure that his ambition is to be Chancellor one day. He has been impressive as a member of the Finance Bill Standing Committee, making many long and intricate speeches—and he certainly has the braces for the role. I am sure that the country prefers experts to make decisions on such important matters, and the Chancellor's depoliticisation of monetary policy has been widely acclaimed. However, it is not wholly outside the realm of the Government to influence monetary policy; it is important that we deal with inflation and try to achieve targets when and where we can.
Something that has disappointed me most as Member of Parliament for a Yorkshire constituency is the ridiculous boardroom excesses of companies such as Yorkshire Water. This week, the board of directors of Yorkshire Water awarded themselves a 30 per cent. pay rise. Kevin Bond, the chief executive, has, in one year, awarded himself a 69 per cent. increase in salary, taking it to £298,000. The salaries of the board of directors now total almost £1 million, with increases of 69 per cent. at the helm and 30 per cent. as a whole—but what are they going to say to Yorkshire Water's employees when they come seeking pay increases for the new year? Are the directors going to tell the employees that they are not important? Are they going to give them 30 or 69 per cent. pay increases? It will be interesting to see what they do. It is vital that company directors across the country act responsibly, recognise that they must set an example and show pay restraint.
As the hon. Gentleman has such high moral views on the subject, will he comment on the remarks made earlier today by my right hon. Friend the Member for Horsham (Mr. Maude)? Having castigated those involved in the water industry, what is his response to Mr. Gavyn Davies's reaping a £16 million benefit from changes that the Labour Government have made to capital gains tax? Does the hon. Gentleman applaud Mr. Davies for doing that, or does he think that he should hand the money back, as he would have those working in the water industry do?
The hon. Gentleman lists in the Register of Members' Interests a shareholding in Sainsbury and, although he might no longer do so, the shadow Chancellor, the right hon. Member for Horsham (Mr. Maude), has declared a directorship in Asda. I should be interested to know what were the pay awards to the directors of those companies. [HON. MEMBERS: "Answer."] Perhaps the shadow Chancellor will tell us what pay was awarded to him as a director of Asda—
Thank you, Mr. Deputy Speaker. It is important that company directors set an example by showing restraint. The same applies to all people in a position of responsibility.
Throughout today's debate, we have watched an Opposition who have not got their act together. They attack the Government for not spending enough in some respects, but say that we spend, spend, spend in others. It is difficult to know whom we should believe. We have had an interesting look at the history of the Conservative party in office, and the House has been reminded of the exchange rate mechanism debacle. That has been very instructive in reminding us of the mess that the Conservative party created. It is clear that the legacy that it calls golden is an outrageous, appalling mess, and it is left to us to help to clear up the problem and put the economy on a sound footing, ensuring that we focus on the long-term interests of the people and businesses of the country.
In this debate, Government Members, particularly the Chief Secretary to the Treasury, have talked about every period of economic history except the past year. They were willing to debate every policy except their own. It seems that, after only a year, Labour Members are already terrified about talking about what the new Government have done. We can understand their embarrassment, but it does not excuse the failure of the Chancellor of the Exchequer to answer the debate or at least be present to answer for his policies.
We understand the Chancellor's discomfort, because he has created two economies in this country. We heard in the debate about the boom economy affecting the City, the service sector and consumer expenditure, but there is another economy for manufacturing and exporting, which is going into recession. That ought to worry Government Members. Instead of making platitudinous remarks about how everything is wonderful in their constituencies, they should start to take note of the letters that we know they are receiving from businesses in their constituencies which tell a different story.
We know that Labour Members are receiving those letters because businesses have begun to copy them to Conservative Members on the Standing Committee on the Finance Bill. My hon. Friends will confirm that we are receiving letters from businesses exasperated by the failure of Labour members of the Committee to speak up about the gathering recession in their constituencies.
Does my right hon. Friend agree that it was extraordinary during the Committee stage of the Finance Bill that Government Back Benchers had letters from their constituents that were copied to Conservative Members, but they consistently failed even once to speak on behalf of their constituents and simply allowed themselves to be railroaded by the Government Whips?
My hon. Friend was a member of that Committee, and he knows that the Forum of Private Business copied to us letters written by businesses represented by Labour Members, who were entirely silent about the difficulties that those businesses faced as a result of tax increases. It was up to us, as it always will be, to defend the interests of working Britain.
The reason for that distortion and the two economies that the Government have created is that this country has not one economic policy, but two. Indeed, one could almost say that we have two Chancellors, or a single Chancellor in two disguises. One Chancellor is panicked by the broken promises on waiting lists and class sizes into reverting to the tax and spend policies that Labour Chancellors always follow.
If the hon. Gentleman will forgive me, I will complete this point.
The other Chancellor is a stern monetarist. He is in favour of higher interest rates, a tightening of monetary policy and suppression of wage rises. However, that policy is not working, for the reasons so well outlined by my hon. Friend the Member for Louth and Horncastle (Sir P. Tapsell) in a notable speech. He showed that one cannot have a sensible economic policy that pulls in two directions. There is a mismatch between monetary and fiscal policy, which we pointed out last year and which is causing damage.
The mistakes were first made almost exactly a year ago in the Government's first Budget, in which they broke all their promises on tax, as has been amply demonstrated. The average family are now enduring an extra burden on their budget of £981 a year because of the tax and mortgage increases that they have suffered. However, not only have there been 17 tax increases, but the Chancellor deliberately took the opportunity to target savings. He carried out a £5 billion a year raid on pension funds, which is exactly what the economy did not need. The economic damage will be with us for many years.
The right hon. Gentleman made the charge, which has so often been repeated, that the abolition of advance corporation tax was a hit on pension funds. The aim was to give an incentive for profits to be put into investment and research and development rather than distributed, so that the economy would be put on a proper foundation. Nothing could demonstrate more the difference in economic policy between Conservative and Labour Members. We are concerned about the real economy, and Conservative Members' sole concern is manipulating money.
The hon. Gentleman makes that remark from the comfort of a protected parliamentary pension scheme. That sophistry does not go down well with the millions of pensioners and contributors to pension funds, all of whom know perfectly well that there was a £5 billion a year hit on their savings by a Government whose rhetoric was all about the need to build up long-term savings and increase personal self-reliance. They will never again trust the Government on savings. My economic point is that that is exactly what the economy needed least.
One does not need to be an economist to know that if one taxes savings, there will be less savings. The Government figures support that. I hope that the hon. Member for Bexleyheath and Crayford (Mr. Beard) will at least heed the Chancellor's Budget statement. Page 91 clearly shows that the savings ratio is due to fall this year, next year and even further the following year. Instead of building up savings, the Chancellor is predicting that there will be a further drop in savings. He has made that worse with his botched attack on TESSAs and PEPs—the most successful savings vehicles of all time—which the Government are simply abolishing.
The Bank of England is now left with the job of salvaging something from the anti-inflation strategy. Its only response can be to put up interest rates, which it has had to do again and again. There have been six rises since the general election. The Bank is now required by statute law to give overriding priority to the Government's inflation target, which is being missed month after month. Policy will not work as long as there is a mismatch between the tax and spend policies of the Treasury and the monetary policy enforced by the Bank of England.
That tale of two economic policies gets worse.
If the hon. Gentleman will forgive me, I will not give way, because I am conscious of the time.
A new chapter has been opened in that tale of mismatch. Two weeks ago, the Chancellor announced a dramatic further loosening of expenditure policy. Expenditure is now due to rise by at least 2.75 per cent. above inflation each and every year. The rise is greater if all the fiddles and changed definitions are added in—a point which my hon. Friend the Member for Witney (Mr. Woodward) made well in his speech.
What is particularly shocking is that the Bank of England, which is supposed to be in charge of counter-inflation policy, was not even told of that development. The Governor said rather lamely that he had been informed by the Treasury that nothing in the Chancellor's statement would affect the economy for two years. That is untrue—the Governor was misled. The brakes come off expenditure from 1 April next year. Either the Treasury representative on the Monetary Policy Committee was kept in the dark or he failed to inform the Bank of England about what the Chancellor had in mind.
Frankly, there is already enough confusion about interest rates, without this further failure to co-ordinate monetary and fiscal policy. We already know that, at its May meeting, the MPC voted 7:1 against raising interest rates, but in June it raised interest rates. Now, the Governor of the Bank of England has signalled a further increase. The Bank of England is not to blame. It has been given an impossible task—trying to make sense of the Government's economic policy, which is muddled and contradictory.
There have been two economic policies, one pursued by the Treasury and the other by the Bank. That has created two economies, one in boom and the other in bust. The Government's achievement is that they have done both at the same time. That is why the inflation target is being missed month after month. The Chancellor's only response is to blame firms for paying workers too much— and that from a Government who are trying to intervene in the labour market to get those same firms to pay other workers more.
In the non-boom parts of the economy, it is an entirely different story, as I am sure Labour Members truly know. Unemployment is rising, and there is a yawning and growing balance of payments deficit. Bankruptcies are up 10 per cent. in this quarter over the last quarter, and investment is down. Again, Labour Members only have to read their Chancellor's statements on investment. We have heard a great deal about the need for investment, but I refer hon. Members to page 94 of the Red Book, which shows that investment in the whole economy is falling this year compared to last, is due to fall again next year and is due to fall even further in the year after. With business investment, the fall is even steeper.
If Labour Members do not believe the Treasury's statistics, I refer them to Goldman Sachs, which said in its recent circular that
the rise in net capital spending to 1.4 per cent. of GDP by the year 2001/02 is less than the average of 1.6 per cent. of GDP achieved during the last Parliament.
After all the huffing and puffing, future investment will be less than we achieved in the last Parliament.
It is not just the economy today that is going wrong; the Government are storing up problems for the rest of this Parliament. I believe that, in their hearts, Labour Members believe that. That is why, in the debate, they have talked about everything except the past year. Apart from the feeble attempts to justify their record in their constituencies, their bleepers have quite clearly told them, "Keep off the economy."
I am sure that both sides of the House know—certainly the country does—that the Government inherited the strongest economy in Europe, with steady growth, stable inflation and falling unemployment, all confirmed by the statistics. It took considerable determination by the Chancellor to mess up that legacy, but he has done it in less than a year. He has done it through a series of policy mistakes, all of them preventable and all of them pointed out to him at the time. All our warnings have turned out to be true.
Hon. Members who served on the Finance Bill Committee will remember one particular moment when it was shown, again by their constituents, that the abolition of retirement relief and its replacement by a highly complex and probably unworkable system of tapering capital gains tax was highly regressive. It is all very well if one is a partner in Goldman Sachs and enriched by, it is estimated, £16 million simply by one clause in the Finance Bill£but it is not quite so rosy for small entrepreneurs planning for retirement, especially as they would have had to pay no capital gains tax under the Conservative Government's provisions.
The reality is always different from the rhetoric. The reality is that the Finance Bill that we will be discussing tomorrow and the next day is in practice highly regressive. It was an interesting glimpse of new Labour priorities that the Government make the rich very rich and the smaller entrepreneurs—
Yes, the Government did. The hon. Gentleman voted for this regressive provision and he will be getting letters from small businesses in his constituency. If he wants anything done about them, all he has to do is pass them over to us.
The golden economic legacy has turned into a boom-bust economic derailment. It is not surprising that the Chancellor has chosen to address a committee of the European Parliament rather than defend his policies in this House. That is a disgraceful affront to the privileges and rights of the House—but, in his absence, we judge him and, in our motion, we condemn him. I invite the House to vote for that motion.
I deeply regret that my right hon. Friend the Chancellor is not present this afternoon, because he could not possibly believe just how bad the Opposition have been. The debate had made being savaged by a dead sheep seem like a stimulating experience.
The right hon. Member for Horsham (Mr. Maude) began his attack on the Government's economic policy by saying that my right hon. Friend the Chancellor was addressing a committee of the European Parliament. As my right hon. Friend the Chief Secretary pointed out, there is a Pavlovian response from Conservative Members at the mere mention of the word "Europe". What galls them even more is that, after 14 months in government, Britain at last has a respectable position in Europe. The Government are acknowledged by the British people to be carrying out their responsibilities in Europe. It is a measure of the extent to which this country was undermined by the previous Government that we had a beef ban.
The Opposition are thoroughly ashamed of their record; otherwise, why would they be so frightened of our going back over their record of 18 years in government? I can tell hon. Members who are new to the House that, in 1997, the previous Government were very fond of casting minds back to 1979. Is it not interesting that they were prepared to count back 18 years, but object to our counting back 18 months. We have to live with the consequences of their economic incompetence, which was so graphically exposed by my hon. Friends earlier.
I will come to the hon. Gentleman later. After all, he is giving seminars to his Front Bench on whether the public finances are sound.
It is no wonder that hon. Gentlemen and hon. Ladies—in fact, no hon. Ladies took part in the debate; perhaps they have too much good sense in these matters—are ashamed of the previous Government's record. We have only to look at their performance: whole economy investment fell by 16 per cent. from its 1989 peak to its 1993 trough; business investment fell by 20 per cent. from 1989 to 1993; manufacturing investment fell by 27.7 per cent.; labour force survey unemployment rose by almost 1 million, but they laughed at rising unemployment—[Interruption.]
Thank you, Mr. Deputy Speaker. I am not surprised that Conservative Members do not want to hear about their record in government. It was a shameful record. Indeed, it is clear from some of the performances that they have learnt nothing from the arrogance of their years in government. They should have come to the House tonight and apologised for the state in which they left the economy. They talk about the golden legacy, but it is fool's gold. We are now having to deal with an economy that has inherent structural problems caused by the incompetence of the previous Government.
Talk of a golden legacy is nonsense. Thanks to the boom-bust policies of the Conservative party—policies which have damaged growth, held back investment and cost jobs—in the past 20 years we have had the two deepest recessions, and one of the largest booms, since the war. We must set the economy to rights, because it affects ordinary people.
Let us consider some of the structural problems that have been caused by the performance of the Conservative party. Productive investment has fallen. We badly need to boost productivity in our economy, for the simple reason that, from day one of the Conservative Government in 1979, government was characterised by short-termism and a lack of attention to the fundamentals of the economy.
I thought that we were not supposed to look back. The last Labour Government was 18 years ago, and we are now setting right the errors of the Conservative Government. [Interruption.] As Conservative Members want me to talk about the Labour Government's performance, I am happy to do so. Gross domestic product growth in the first quarter of 1998—[Interruption.]
Thank you, Mr. Deputy Speaker. Shouting is usually the way in which Conservative Members try to get through these arguments; they want to introduce irrelevancies because they do not want to talk about facts.
Perhaps the right hon. Gentleman should have another seminar from his hon. Friend the Member for Chichester (Mr. Tyrie) about the impact on productivity of the previous Government's performance. There is a fundamental requirement to make basic structural changes in the economy. Structural changes are about improving education and skills, and about putting back to work people whom the previous Government abandoned on the dole queue. From their patrician standpoint, the Conservatives do not care about the ordinary people who were thrown on the scrap-heap by their policies. Labour Members lived daily with the consequences of their economic performance.
Less than two years into a Labour Government, GDP growth in the first quarter of 1998 was 3 per cent. higher than a year earlier. Whole-economy investment in the first quarter of 1998 was up 8.6 per cent. on a year earlier. Over the same period, business investment was up 10 per cent. In March, employment was up 429,000 on a year earlier. The International Labour Organisation figure for unemployment in April was 264,000 lower than a year earlier.
Conservative Members do not like those facts; they have gone quiet because they cannot deny the impact that we have had on the economy. With our long-term policies, we shall restructure the economic policies and economic performance of the country. We want to do that partly because we want to ensure that the people of the country enjoy a much better life style.
There was an interesting vignette as the Chief Secretary was talking about the national health service. This is a week of extreme importance to Labour Members, as we mark the 50th anniversary of the national health service. Fifty years ago, the Conservative party opposed that national health service. During earlier exchanges, my right hon. Friend pointed out that the shadow Chancellor had said that the national health service—and the welfare state—was responsible for a downturn in private provision of medical services. Yes, it was—and thank goodness, because, where I come from, before there was a national health service, young and old people died. Day in, day out, we lived with the consequences of the objections that the Conservative party has to public funding of the health service.
In 1998, the Government are proud of the national health service, and our policies are designed to ensure that we will maintain—[Interruption.]
That noise was a measure of the contempt that Conservative Members have for the national health service and for ordinary people.
I shall discuss some of the arguments that have been made.
No; I want to make progress.
The shadow Chancellor failed to take into account his hon. Friends' performance in the Committee of the Finance Bill. They utterly failed to acknowledge the responsibilities of a responsible Opposition. Conservative Members, who cannot even decide whether they support higher public expenditure, would have spent £6 billion more than the Government.
In the seminar provided for the shadow Chancellor, he could not make up his mind whether the country's finances were in a good position. He has yet to respond to the challenge that the Chief Secretary made to him about MIRAS. As Financial Secretary to the Treasury, the right hon. Gentleman condemned mortgage interest rate relief. He repeatedly refuses to address the key issues for the people of this country.
I am grateful for some of the things that the hon. Member for Gordon (Mr. Bruce) said in recognition of Government economic policy, but we differ on some points. Listening to his colleagues' performance, in the Committee on the Finance Bill and elsewhere, one would conclude that they want £17 billion of additional expenditure. They know how to spend, but not how to tax. The hon. Gentleman asks us for fiscal tightening when the Government are tightening the economy by 2.75 per cent. and yet, whenever we introduce a measure requiring fiscal tightening, the hon. Gentleman's colleagues vote against it. He must decide which side he is on.
What about all the other measures? The hon. Gentleman wants reports to Parliament; he wants to delay implementation of measures that the Government have introduced for fiscal tightening.
If we study Conservative Members' performance during the passage of the Finance Bill, we see an Opposition who do not even know how to oppose. As a Government, they did not know how to govern; as an Opposition, they do not know how to oppose. They are as useless as an Opposition as they were as a Government.
No; I will not. In the debate, there were a number of—[Interruption.] The hon. Gentleman has not even been in the Chamber all day. At one point, there were only five Opposition Members in the Chamber, two of whom were from the other Opposition parties. Indeed, I began to think that something might be going on elsewhere in the House.
My hon. Friend the Member for Warrington, South (Ms Southworth) made sound points about Conservative Members' performance. She made the telling point that 1,000 homes a week were being repossessed as a consequence of Conservative policies.
The hon. Lady should not criticise the Conservatives, as the current Government are in danger of emulating them. In the past year, in Scotland, house repossessions have increased by 16 per cent., and half of that increase took place in the last quarter.
That is the representative of the party whose Treasury spokesman, on Friday, defined its economic policy as hoping for the best—the fingers crossed school of economics. The only growth industry in an independent Scotland would be the selling of lucky white heather. That is the economics of the Scottish National party.
In a speech that reminded us of the great divisions in the Conservative party, the hon. Member for Louth and Horncastle (Sir P. Tapsell) spoke about the effect of the establishment of the Monetary Policy Committee on long-term interest rates. In April 1997, long-term interest rates were 7.6 per cent; today, they are 5.87 per cent. For someone who has been an hon. Member for 40 years, he should be well aware that that is a very good indicator of the future of British business.
The hon. Member for Witney (Mr. Woodward) complained about the Government's "spending bonanza".
Perhaps he would care to have a conversation with the hon. Member for Rutland and Melton (Mr. Duncan), who said that
spending under this Government is less than it would have been had the Conservative party stayed in office."—[Official Report, 16 June 1998; Vol. 314, c. 183.]
Conservative Members cannot even make up their minds on the nature of their attack on the Government. I therefore commend to the House outright opposition to the ludicrous motion tabled by Conservative Members, who have not even deigned to provide this debate with some rational argument.
The policies that the Government are pursuing to ensure long-term economic stability will set right the structural problems that have been created by the economic illiteracy and incompetence of the previous Government. It is no surprise that they are so horrified at the prospect of our alluding to their record in Government.
|Division No. 316]||[7 pm|
|Ainsworth, Peter (E Surrey)||Gill, Christopher|
|Amess, David||Goodlad, Rt Hon Sir Alastair|
|Ancram, Rt Hon Michael||Gray, James|
|Arbuthnot, James||Green, Damian|
|Atkinson, David (Bour'mth E)||Greenway, John|
|Baldry, Tony||Grieve, Dominic|
|Bercow, John||Gummer, Rt Hon John|
|Beresford, Sir Paul||Hamilton, Rt Hon Sir Archie|
|Blunt, Crispin||Hammond, Philip|
|Body, Sir Richard||Hawkins, Nick|
|Boswell, Tim||Hayes, John|
|Bottomley, Peter (Worthing W)||Heald, Oliver|
|Brady, Graham||Heathcoat-Amory, Rt Hon David|
|Brazier, Julian||Hogg, Rt Hon Douglas|
|Brooke, Rt Hon Peter||Horam, John|
|Browning, Mrs Angela||Howard, Rt Hon Michael|
|Bruce, Ian (S Dorset)||Howarth, Gerald (Aldershot)|
|Burns, Simon||Hunter, Andrew|
|Cable, Dr Vincent||Jack, Rt Hon Michael|
|Cash, William||Jackson, Robert (Wantage)|
|Chapman, Sir Sydney (Chipping Barnet)||Jenkin, Bernard|
|Johnson Smith, Rt Hon Sir Geoffrey|
|Clappison, James||Key, Robert|
|Clark, Rt Hon Alan (Kensington)||Kirkbride, Miss Julie|
|Colvin, Michael||Laing, Mrs Eleanor|
|Cran, James||Lait, Mrs Jacqui|
|Curry, Rt Hon David||Lansley, Andrew|
|Davies, Quentin (Grantham)||Leigh, Edward|
|Davis, Rt Hon David (Haltemprice)||Letwin, Oliver|
|Day, Stephen||Lewis, Dr Julian (New Forest E)|
|Dorrell, Rt Hon Stephen||Lidington, David|
|Duncan, Alan||Lloyd, Rt Hon Sir Peter (Fareham)|
|Duncan Smith, Iain||Loughton, Tim|
|Emery, Rt Hon Sir Peter||Luff, Peter|
|Evans, Nigel||MacGregor, Rt Hon John|
|Faber, David||McIntosh, Miss Anne|
|Fabricant, Michael||MacKay, Andrew|
|Fallon, Michael||Maclean, Rt Hon David|
|Forth, Rt Hon Eric||McLoughlin, Patrick|
|Fowler, Rt Hon Sir Norman||Madel, Sir David|
|Fox, Dr Liam||Major, Rt Hon John|
|Fraser, Christopher||Malins, Humfrey|
|Gale, Roger||Maples, John|
|Garnier, Edward||Maude, Rt Hon Francis|
|Gibb, Nick||Mawhinney, Rt Hon Sir Brian|
|May, Mrs Theresa||Steen, Anthony|
|Moss, Malcolm||Streeter, Gary|
|Nicholls, Patrick||Swayne, Desmond|
|Ottaway, Richard||Syms, Robert|
|Page, Richard||Tapsell, Sir Peter|
|Paice, James||Taylor, Ian (Esher & Walton)|
|Paterson, Owen||Townend, John|
|Pickles, Eric||Trend, Michael|
|Prior, David||Tyrie, Andrew|
|Randall, John||Walter, Robert|
|Redwood, Rt Hon John||Wardle, Charles|
|Robathan, Andrew||Waterson, Nigel|
|Robertson, Laurence (Tewk'b'ry)||Wells, Bowen|
|Roe, Mrs Marion (Broxbourne)||Whittingdale, John|
|Rowe, Andrew (Faversham)||Widdecombe, Rt Hon Miss Ann|
|Ruffley, David||Wilkinson, John|
|St Aubyn, Nick||Willetts, David|
|Sayeed, Jonathan||Wilshire, David|
|Shephard, Rt Hon Mrs Gillian||Winterton, Mrs Ann (Congleton)|
|Shepherd, Richard||Winterton, Nicholas (Macclesfield)|
|Simpson, Keith (Mid-Norfolk)||Woodward, Shaun|
|Soames, Nicholas||Yeo, Tim|
|Spelman, Mrs Caroline||Young, Rt Hon Sir George|
|Spicer, Sir Michael|
|Spring, Richard||Tellers for the Ayes:|
|Stanley, Rt Hon Sir John||Mr. John M. Taylor and|
|Mr. Tim Collins.|
|Adams, Mrs Irene (Paisley N)||Cann, Jamie|
|Ainger, Nick||Casale, Roger|
|Ainsworth, Robert (Cov'try NE)||Chapman, Ben (Wirral S)|
|Alexander, Douglas||Chaytor, David|
|Allan, Richard||Chidgey, David|
|Anderson, Donald (Swansea E)||Chisholm, Malcolm|
|Anderson, Janet (Rossendale)||Clapham, Michael|
|Armstrong, Ms Hilary||Clark, Rt Hon Dr David (S Shields)|
|Ashton, Joe||Clark, Paul (Gillingham)|
|Atkins, Charlotte||Clarke, Charles (Norwich S)|
|Austin, John||Clarke, Rt Hon Tom (Coatbridge)|
|Ballard, Jackie||Clarke, Tony (Northampton S)|
|Banks, Tony||Clelland, David|
|Battle, John||Clwyd, Ann|
|Bayley, Hugh||Coffey, Ms Ann|
|Beard, Nigel||Cohen, Harry|
|Beckett, Rt Hon Mrs Margaret||Coleman, Iain|
|Begg, Miss Anne||Connarty, Michael|
|Bennett, Andrew F||Cook, Frank (Stockton N)|
|Benton, Joe||Corston, Ms Jean|
|Bermingham, Gerald||Cotter, Brian|
|Berry, Roger||Cousins, Jim|
|Betts, Clive||Crausby, David|
|Blears, Ms Hazel||Cummings, John|
|Blizzard, Bob||Cunliffe, Lawrence|
|Blunkett, Rt Hon David||Cunningham, Rt Hon Dr John (Copeland)|
|Borrow, David||Cunningham, Jim (Cov'try S)|
|Bradley, Keith (Withington)||Dalyell, Tam|
|Bradley, Peter (The Wrekin)||Darling, Rt Hon Alistair|
|Bradshaw, Ben||Darvill, Keith|
|Breed, Colin||Davey, Edward (Kingston)|
|Brinton, Mrs Helen||Davey, Valerie (Bristol W)|
|Rt Hon Nick (Newcastle E)||Davidson, Ian|
|Brown, Russell (Dumfries)||Davies, Rt Hon Denzil (Llanelli)|
|Bruce, Malcolm (Gordon)||Davies, Geraint (Croydon C)|
|Buck, Ms Karen||Davis, Terry (B'ham Hodge H)|
|Burden, Richard||Dean, Mrs Janet|
|Burgon, Colin||Denham, John|
|Burnett, John||Dobbin, Jim|
|Byers, Stephen||Donohoe, Brian H|
|Cable, Dr Vincent||Doran, Frank|
|Caborn, Richard||Dowd, Jim|
|Campbell, Alan (Tynemouth)||Drew, David|
|Campbell, Mrs Anne (C'bridge)||Dunwoody, Mrs Gwyneth|
|Campbell, Menzies (NE Fife)||Eagle, Angela (Wallasey)|
|Campbell, Ronnie (Blyth V)||Eagle, Maria (L'pool Garston)|
|Edwards, Huw||King, Andy (Rugby & Kenilworth)|
|Ellman, Mrs Louise||Kingham, Ms Tess|
|Ennis, Jeff||Ladyman, Dr Stephen|
|Etherington, Bill||Lawrence, Ms Jackie|
|Fatchett, Derek||Leslie, Christopher|
|Fearn, Ronnie||Lewis, Terry (Worsley)|
|Fitzpatrick, Jim||Liddell, Mrs Helen|
|Flint, Caroline||Linton, Martin|
|Flynn, Paul||Livingstone, Ken|
|Foster, Rt Hon Derek||Lloyd, Tony (Manchester C)|
|Foster, Don (Bath)||Lock, David|
|Foster, Michael Jabez (Hastings)||Love, Andrew|
|Foster, Michael J (Worcester)||McAllion, John|
|Foulkes, George||McAvoy, Thomas|
|Gapes, Mike||McCafferty, Ms Chris|
|Gardiner, Barry||McCartney, Ian (Makerfield)|
|George, Bruce (Walsall S)||McDonnell, John|
|Gerrard, Neil||McFall, John|
|Gibson Dr Ian||McGuire, Mrs Anne|
|Gilroy, Mrs Linda||McIsaac, Shona|
|Godman, Dr Norman A||McKenna, Mrs Rosemary|
|Godsiff, Roger||McNulty, Tony|
|Goggins, Paul||Macshane, Denis|
|Golding, Mrs Eileen||Mactaggart, Fiona|
|Gordon, Mrs Eileen||McWilliam, John|
|Grant, Bernie||Mahon, Mrs Alice|
|Griffiths, Jane (Reading E)||Mandelson, Peter|
|Griffiths, Nigel (Edinburgh S)||Marsden, Gordon (Blackpool S)|
|Griffiths, Win (Bridgend)||Marsden, Paul (Shrewsbury)|
|Grocott, Bruce||Marshall, David (Shettleston)|
|Grogan, John||Marshall, Jim (Leicester S)|
|Gunnell, John||Marshall-Andrews, Robert|
|Hain, Peter||Martlew, Eric|
|Hall, Mike (Weaver Vale)||Maxton, John|
|Hanson, David||Michie, Mrs Ray (Argyll & Bute)|
|Harman, Rt Hon Ms Harriet||Milburn, Alan|
|Harris, Dr Evan||Miller, Andrew|
|Harvey, Nick||Mitchell, Austin|
|Heal, Mrs Sylvia||Moffatt, Laura|
|Heath, David (Somerton & Frome)||Morgan, Ms Julie (Cardiff N)|
|Henderson, Ivan (Harwich)||Morgan, Rhodri (Cardiff W)|
|Hepburn, Stephen||Morley, Elliot|
|Heppell, John||Morris, Ms Estelle (B'ham Yardley)|
|Hewitt, Ms Patricia||Mudie, George|
|Hill, Keith||Mullin, Chris|
|Hinchliffe, David||Murphy, Jim (Eastwood)|
|Hoey, Kate||O'Brien, Bill (Normanton)|
|Home Robertson, John||O'Brien, Mike (N Warks)|
|Hood, Jimmy||Olner, Bill|
|Hoon, Geoffrey||Öpik, Lembit|
|Howarth, Alan (Newport E)||Osborne, Ms Sandra|
|Howarth, George (Knowsley N)||Palmer, Dr Nick|
|Howells, Dr Kim||Pearson, Ian|
|Hoyle, Lindsay||Pendry, Tom|
|Hughes, Ms Beverley (Stretford)||Pickthall, Colin|
|Hughes, Kevin (Doncaster N)||Pike, Peter L|
|Humble, Mrs Joan||Plaskitt, James|
|Hutton, John||Pope, Greg|
|Iddon, Dr Brian||Pound, Stephen|
|Illsley, Eric||Powell, Sir Raymond|
|Jackson, Ms Glenda (Hampstead)||Prentice, Ms Bridget (Lewisham E)|
|Jamieson, David||Prentice, Gordon (Pendle)|
|Jenkins, Brian||Primarolo, Dawn|
|Jones, Mrs Fiona (Newark)||Prosser, Gwyn|
|Jones, Helen (Warrington N)||Purchase, Ken|
|Jones, Ms Jenny (Wolverh'ton SW)||Quinn, Lawrie|
|Jones, Dr Lynne (Selly Oak)||Rammell, Bill|
|Jones, Martyn (Clwyd S)||Rapson, Syd|
|Jowell, Ms Tessa||Reed, Andrew (Loughborough)|
|Keeble, Ms Sally||Reid, Dr John (Hamilton N)|
|Keen, Alan (Feltham & Heston)||Robinson, Geoffrey (Cov'try NW)|
|Keen, Ann (Brentford & Isleworth)|
|Khabra, Piara S|
|Roche, Mrs Barbara||Sutcliffe, Gerry|
|Rooker, Jeff||Taylor, Rt Hon Mrs Ann (Dewsbury)|
|Ross, Ernie (Dundee W)|
|Rowlands, Ted||Taylor, Ms Dari (Stockton S)|
|Roy, Frank||Taylor, Matthew (Truro)|
|Russell, Bob (Colchester)||Temple-Morris, Peter|
|Russell, Ms Christine (Chester)||Thomas, Gareth R (Harrow W)|
|Ryan, Ms Joan||Timms, Stephen|
|Salter, Martin||Tonge, Dr Jenny|
|Sanders, Adrian||Touhig, Don|
|Savidge, Malcolm||Trickett, Jon|
|Sedgemore, Brian||Truswell, Paul|
|Shaw, Jonathan||Turner, Dr Desmond (Kemptown)|
|Sheerman, Barry||Turner, Dr George (NW Norfolk)|
|Sheldon, Rt Hon Robert||Twigg, Derek (Halton)|
|Simpson, Alan (Nottingham S)||Twigg, Stephen (Enfield)|
|Singh, Marsha||Tyler, Paul|
|Skinner, Dennis||Vaz, Keith|
|Smith, Rt Hon Andrew (Oxford E)||Vis, Dr Rudi|
|Smith, Angela (Basildon)||Walley, Ms Joan|
|Smith, Rt Hon Chris (Islington S)||Wareing, Robert N|
|Smith, Miss Geraldine (Morecambe & Lunesdale)||Watts, David|
|Smith, Llew (Blaenau Gwent)||Whitehead, Dr Alan|
|Soley, Clive||Wicks, Malcolm|
|Southworth, Ms Helen||Williams, Alan W (E Carmarthen)|
|Spellar, John||Willis, Phil|
|Squire, Ms Rachel||Wilson, Brian|
|Starkey, Dr Phyllis||Winnick, David|
|Steinberg, Gerry||Wood, Mike|
|Stevenson, George||Woolas, Phil|
|Stewart, Ian (Eccles)||Wright, Anthony D (Gt Yarmouth)|
|Stoate, Dr Howard||Wright, Dr Tony (Cannock)|
|Stott, Roger||Wyatt, Derek|
|Strang, Rt Hon Dr Gavin|
|Straw, Rt Hon Jack||Tellers for the Noes:|
|Stringer, Graham||Mr. Jon Owen Jones and|
|Stuart, Ms Gisela||Jane Kennedy.|
That this House notes that the Government inherited an economy in which the current Budget was in deficit by £21 billion, inflation was set to rise because of the failure of the previous Government to take the necessary action on interest rates and nearly one in five households of working age had nobody working; recalls that the previous Government presided over a boom and bust economy with interest rates peaking at 15 per cent. and the two worst recessions since the war, doubled the national debt in the 1990s, doubled unemployment during its time in office, worsened inequality and failed to tackle the weaknesses in the British economy; commends the actions of the Government in its first year, which has established a credible framework for monetary policy that has led to the lowest long-term interest rates in 33 years, set two clear fiscal rules which provide for both prudent public finance and strong public services in the years ahead, taken action to reduce government borrowing such that the current Budget was in surplus by £1 billion in 1997–98, supported British business through cuts in corporation tax and small business tax to their lowest levels ever, launched the New Deal, the biggest employment programme for decades, reformed the tax and benefit system to tackle the unemployment and poverty traps and invested in education and skills; and notes that Britain now has a government which will ensure that the country does not return to the boom and bust and 15 per cent. interest rates of the late 1980s and early 1990s and instead has an economic policy based on stability, enterprise, employment and fairness.