The Real Economy

HC Deb 02 December 1987 vol 123 cc955-95 4.39 pm

Mr. Bryan Gould (Dagenham)

I beg to move, That this House condemns the high level of real interest rates, the proposal to make large increases in electricity charges and the other burdens already inflicted, or to be imposed in the future, on British producers and exporters by Government policy; and calls upon the Government to reverse its priorities so as to put the real economy first.

Mr. Speaker

I announce to the House that I have selected the amendment in the name of the Prime Minister.

Mr. Gould

Over the last eight years, the Labour party has had two major criticisms of the way in which the economy has been run. The first was that, for reasons of dogma and because of avoidable mistakes of policy, the economy was being run at a level below its true potential; as a consequence, massive resources of labour and capital have been needlessly wasted. The second criticism was that provision for the future strength and capacity of the economy was wholly inadequate.

The economic events of 1986, particularly towards the end of the year, showed all too well that the Government recognised the force of our first criticism, because they relaxed monetary policy, reduced the exchange rate, allowed public spending to increase and, not surprisingly, provided exactly the stimulus to the economy that we predicted such policies would produce. As they had run the economy at a very low speed, it was not surprising that they have not found it difficult to achieve the acceleration that we have seen over the last year.

The problem that we now face is that the force of our second criticism is not abated. Because that criticism remains, the short-lived boom is unsustainable. Indeed, if anything, the boom gives even greater weight to our criticism about inadequate investment for the future. If, at the top of the so-called boom, we are still investing 8 per cent. less in manufacturing industry than we were in 1979, and if the investment that we put into research and development, training and infrastructure is still appalling by international standards, what chance have we of making adequate preparation when all the forecasts are for a slowdown in growth?

We have been saved from the immediate consequences of these failures by the accident of North sea oil. Oil revenues and their benefits to the balance of payments have been used to cushion us from the harsh consequences of the loss of market share in the rest of the economy. If the oil were to last for ever, this would still be a foolish thing to have done. It would have been a mistake and would have meant falling into a trap which the Norwegians and the Dutch have managed to avoid. Since oil production and oil revenues have already passed their peak, the waste of that opportunity is nothing less than criminal negligence.

Of course, the Government will point out that some of those revenues have been invested in overseas assets. But that offers us nothing more than a future Tory Britain as a remittance economy, having lost its power to produce for itself and having to eke out a living on the back of a wasting legacy. That failure to use the uncovenanted and unprecedented bonus of North sea oil to strengthen our industrial economy—the real economy in which people live, work, and make and sell real goods and services— is the main burden of our criticism of Government policy. That mistake has arisen because, unlike the Norwegians, the Dutch and others who have managed the benefits of major natural assets much better, we handed over to the financial establishment and to monetarist constraints the whole business of managing that great benefit to our economy.

Indeed, the point is wider. If we conduct the inquiry which has so often been pursued by people on both sides of the political divide and by outside commentators into why Britain has done badly over such a long period by comparison with our more successful rivals, while many other reasons have come and gone and many explanations have been offered and disproved, we find that the main reason is the continuing preoccupation of British policy making with the interests of those who hold assets, deal in money and make their living from shuffling around bits of paper and the consequent burden of the penalty suffered from that priority by those who live and work in the real economy.

That is the leitmotiv of British economic policy making. It goes back a long time. It is not a strictly party point that I make. The hangover of an imperial economy where we got used to living on assets and the return we could get from investments is perhaps over 100 years old. We fell out of the habit of making our living by manufacturing and selling things, and we still run the economy on those terms.

Japan, Germany and other more successful economies have a hard-headed appreciation of what is needed to give their industries a competitive edge to enable them to sell competitively and productively in the major international markets. On the other hand, we continue to run our economy in the interests of financial orthodoxy, heaping upon industry the interest and exchange rate burdens which make it so difficult for it to compete. No wonder, therefore, that it is constantly remarked by outside and foreign observers that in the British economy it is the financier and the accountant who rule over the engineer and the production manager.

Mr. David Howell (Guildford)

rose—

Mr. Gould

I shall give way later.

Time and again priority has been given to the gold standard, to the parity of the pound or to some arcane monetary measure. At one point, sterling M3 was the keystone in the arch of monetary policy. Who now remembers what sterling M3 was? Who even knows at what rate it is rising?

Mr. Nicholas Budgen (Wolverhampton, South-West)

At 22 per cent.

Mr. Gould

The hon. Member for Wolverhampton, South-West (Mr. Budgen) says it is 22 per cent. I congratulate him; he is probably the only person on the Conservative side who has bothered to follow that figure.

Monetarism is essentially an extreme form of the bias in favour of the money economy at the expense of the real economy. It was a doctrine based on the view that all that Government had to do was set certain monetary targets which would have an immediate and beneficial effect on monetary aspects of the economy and would do no damage to the real economy. We and the Government know from bitter experience—we are prepared to point it out, but they are unwilling to admit it—that the truth was the reverse of that prediction. The impact of monetary measures on the monetary aspects of the economy was diffuse, but they had an immediate and damaging effect on the real economy.

We went through the experience of 1980–81, with the tremendous loss of nearly one fifth of our industrial manufacturing capacity. There were huge falls in investment, employment and manufacturing output. There was a huge deterioration, from which we still suffer, in manufacturing trade. All of that we know, but in this debate we do not want to go over those admitted facts.

There is another important question. When such damage was being done to industry and to the real economy in the name of now discredited and esoteric economic theories, where was the Department of Trade and Industry? Where was the great Department whose responsibility it is to maintain and promote the health of industry and of the real economy? Why was no voice raised from the Tory Benches against the madness that was being implemented in the Government's name in the cause of monetarism? The fact that there were so many Secretaries of State for Trade and Industry and that they came and went so quickly is in itself an indiction of how little attention was paid to their views. Whey did they stay silent, one after another, as that tremendous damage was done?

I remind the House that one fifth of manufacturing industry was wiped out as a consequence of that ridiculous monetarist ratchet, which set such tight monetary conditions, high interest rates and overvaluation of the exchange rate that huge portions of industry simply could not survive. Where was the voice from the Department which is responsible for protecting the interests of industry and of those who live and work in the real economy?

Mr. Kenneth Hind (Lancashire, West)

The hon. Member talks about the lack of a voice from the Department of Trade and Industry over the past few years. How does he square that with the fact that in the past two years Skelmersdale in my constituency, a regional development assisted area, has let 2 million sq ft of empty factories, pump-primed by the Department of Trade and Industry? How does that fit in with his argument?

Mr. Gould

My response is that it is almost entirely irrelevant to the point I am making, but since the hon. Member for Lancashire, West (Mr. Hind) raises it, I ought to try to reconcile what he has said, which is no doubt true —anecdotal evidence is always useful—with the report presented this week which states that further cuts will be made in the regional aid programme. The Government have continually run that down, to the great disadvantage of the regional economy.

One Secretary of State after another has succumbed to the monetarist nonsense that only markets matter. That all sounds rather outdated in the aftermath of the stock market crash, but that view was taken and still prevails in the Department, and I am certain that we shall hear it again this evening. The only industrial policy the Department has is that there is no need to have an industrial policy. That might have been tolerable, although it would not have worked or been helpful, if the market place to which the Department of Trade and Industry consigned industry had been at all congenial, but it had already sold the pass on the way in which the market place was to be influenced and defined. It was being influenced and defined not in the interests of manufacturing industry but in the interests of the financial establishment, which had got its hands on the levers of power, and in the interests of the money markets, which had persuaded the Chancellor of the Exchequer that they were all that mattered.

Nowhere is this point more important than on interest rates, which remain so much higher than most of our competitors — almost three times higher than in Germany. The consequence of excessively high interest rates, as no hon. Member can be unaware, because on this issue industry has been very forthright, is that burdens are imposed on industry which make it more difficult and expensive to borrow and invest, and operate as a major deterrent to the investment which is required. It is a tax on investment. Almost every commentator on the economy would recognise that we desperately need investment, and anything which deters that and acts as an disincentive is very much to be deplored. Nevertheless, we have very high interest rates, with all the consequent effects on exchange rates.

Interest rates are important in practical terms. The CBI, the Engineering Employers Federation and other industry representatives are very clear about what high interest rates mean to them. Interest rates are also significant for what they tell us about Government policy and priorities, because they fulfil many economic functions. First, they strike a balance between the interests of owners and users of money and between the interests of financial establishment and the real economy. Our high interest rates, which are much higher than elsewhere, show the Government's willingness again to give priority to those who own and sell money and the Government's disregard for the interests of those who need to use that money to invest in the real economy.

Mrs. Kellett-Bowman

The hon. Member refers to financial markets and the real economy. I come from the north-west, one of the most beautiful parts of the country. We are working like mad to develop our tourist attractions, which are among our biggest money earners. and are creating more jobs than any other sector. The hon. Member has left that out entirely, but that is just as much the real economy as anything else.

Mr. Gould

If the hon. Member for Lancaster (Mrs. Kellett-Bowman) fully understood her local and regional economy she would know that high interest and exchange rates are extremely damaging to the tourism to which she is rightly attached. Therefore I make the point, for those who clearly do not understand it, that the real economy, while embracing manufacturing industry as an extremely important component, is not the same thing as manufacturing industry. It does not exclude the very valuable services provided and sold in international markets and markets at home. There is a distinction between the real economy, which makes and sells real goods and services, and the money economy, which is interested simply in maintaining the value of assets and earning a reward for the sale and use of money. That is the important distinction, and I am sorry that the hon. Lady has betrayed her ignorance in that way.

Interest rates, quite apart from striking a balance between the owners and users of money, also serve the function in economic theory of settng the price we are prepared to pay to forgo current consumption to make future investment. If interest rates are set very high, that shows that we are reluctant to forgo current consumption and unwilling to make long-term future investment. The high interest rates that the Government have set—and on which, as far as I am aware, the Department of Trade and Industry has been notably silent for eight years—promote and encourage the very short-termism of which the Chancellor has occasionally been so critical.

High interest rates compel and signal, and are the instrument and symbol of, a preoccupation with the short term. The priority given to money making, rather than making goods and providing services, has given industry and economic policy its short-term perspective. After all, the specialisation of a company which produces a given product or sells a given service will lead to investment, machinery, innovation, new products and the development of a skilled work force—all necessary to improve the market for that real product or service. But if a company's identity is based largely on the making of money, it has very little commitment to long-term investment. Its expertise lies in identifying the specialist activities of others, from which it can make a quick return before passing on. That is why we have those great monuments to short-termism and unwillingness to invest —the cash mountains of GEC and conglomerates such as the Hanson Trust—and that is why in the modern economy the banks, asset-strippers and takeover merchants are making all the running. That is why their voice prevails in the CBI and we hear so little about the real interests of industry.

Mr. Phillip Oppenheim (Amber Valley)

The hon. Gentleman has just been very disparaging about two great manufacturing companies. It is not good enough for someone who has probably had no experience of what he calls the real economy, and has never had any experience of running a business, to be so rude and disparaging about two companies which have probably done more for manufacturing than all of the Labour party's efforts in the past 80 years.

Mr. Gould

The intervention of the hon. Member for Amber Valley (Mr. Oppenheim) does him more credit for his loyalty than his common sense, because the statement I made about GEC and the Hanson Trust has been made by people of all political persuasions and by virtually every economic commentator.

If high interest rates are the instrument or badge of short-termism, as I believe is indisputable, and it is clear that they are so damaging to our economic future, why do we have them? That is a very simple question, which I have asked on many occasions, and I have not yet had a proper answer.

Sir Peter Tapsell (East Lindsey)

Will the hon. Gentleman give way?

Mr. Gould

I am glad to give way, because when I raised this question a couple of weeks ago, the hon. Member for East Lindsey (Sir P. Tapsell) assured me that we need not have them and that they would be reduced. I am sorry to say that so far his prediction has not been borne out.

Sir Peter Tapsell

Although I have had little experience of the real economy, I have had 30 years' experience of short-termism. I earned my living as something of a foreign exchange dealer in that time. Although I agree with the main thrust of the academic case that the hon. Gentleman puts forward, which is, as he may remember, what I argued from 1979 to 1982, the trouble at this moment is that, with the American dollar almost in a state of free-fall, we could be faced at any time with an increase in American interest rates to try to cope with that situation. I have no doubt that the delay of a fortnight on my advice to cut interest rates further has been due to that fact. The worst thing that we could do is to cut interest rates tonight and have to put them up again next week in pursuit of rising American rates.

Mr. Gould

I fear that the hon. Gentleman's intervention takes me into realms of economic policy, into which I should dearly like to follow him, but they are beyond the scope of the debate. In a moment, I shall say a word about the need to cut interest rates and the impact on the exchange rate.

Let me return to the subject. Again, the Department of Trade and Industry has a certain responsibility in such matters. It is responsible for the well-being and general health and strength of British industry, yet it remains remarkably silent on such an extremely important matter.

Why do we have such high interest rates? Surely it is no longer the case—it may once have been—that we have high interest rates to control the money supply. No one believes that any longer, do they? No one worries about sterling M3 rising, as has rightly been said by the hon. Member for Wolverhampton, South-West, at 22 per cent. a year. That is not a matter of any great concern to anybody. Indeed, all the evidence is that, in any case, high interest rates were notably ineffective in controlling the money supply. In some senses, they even stimulated more lending. When companies had liquidity problems, they sometimes made them borrow more. They have certainly done nothing to curtail consumer credit or asset inflation. There is no longer any monetary ground, one assumes, for having high interest rates.

Surely the only other reason—the hon. Member for Wolverhampton, South-West raised a good point — is that high interest rates prop up the pound. The so-called strong currency requires interest rates that are nearly three times as high as those of competitor economies and 3 million unemployed to hold them where they are. It is hardly a strong currency if it needs that sort of support. At least interest rates are effective to prop up the pound. Nobody doubts that high interest rates keep the pound where it is at present.

Mr. John Maples (Lewisham, West)

rose—

Mr. Gould

I shall not give way. I have frequently given way, and I intend to proceed.

Is it really the Government's policy to burden British industry and the economy with high interest rates, as has been suggested, to raise the parity of the pound against the dollar to $1.80? Where does it end? Does it end at $1.85, $2, or are we to return to the days in 1980 and 1981 when one fifth of British industry was wiped out? Have we learnt nothing?

Does the Minister not hear the cries of pain and alarm from the textile, engineering and chemicals industries? Does he not understand that, as the pound rises on the back of high interest rates against the dollar, the future of British manufacturing and the future of billions of pounds' worth of exports to the American market are at stake? Does he not understand that, as the American market becomes closed to us, if we allow the measure to proceed, others who also find it more difficult to sell to the American market—for example, the Japanese, Germans, French, Italians, Taiwanese and Korens—will become yet more ferocious predators elsewhere in the international market, and will make it even more difficult for British industry to compete?

Is it really the Government's policy to raise interest rates or to keep them at their present excessively high levels, as the Chancellor said, to keep the rate against the deutschmark stable? Is that really what is required when we now import twice as many manufactured goods from Germany as we can sell to it, and when we are now on course for an annual deficit of £7.2 billion of manufactured trade as against the Germans this year, worth nearly 750,000 jobs in British industry?

The consequences for the exchange rate of the high interest rates with which the Government have saddled British industry are nothing more than a tax on exports and a subsidy to imports. What does the Department of Trade and Industry have to say on the matter? Where have been the arguments and statements in support of British industry? Where have been the Cabinet rows? Where is the voice raised to save British industry from such matters?

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke)

I am trying to follow the hon. Gentleman's analysis in response to the intervention that was made by my hon. Friend the Member for East Lindsey (Sir P. Tapsell) a moment ago. Do I correctly understand that the Opposition's policy is that we should reduce interest rates to go in for a competitive devaluation with the dollar at the moment? Does the hon. Gentleman understand the implications of that policy for raw materials costs in this country, among other matters? Does he not think that that policy smacks of short-termism—rather reckless short-termism—in the present financial circumstances?

Mr. Gould

Nothing in the right hon. and learned Gentleman's intervention flows from what I have said. I shall be interested to hear his view on whether he thinks that it is a good idea to maintain interest rates at their present level, which are nearly three times higher than German rates, when the consequence is that the pound rises inexorably against the dollar and destroys the competitiveness of British industry. That is the question. If he wishes to comment on it, I shall be delighted to hear from him. I am more interested to hear what intervention he is making on any level—wherever—to ensure that the damage, which is predictable and well known in view of our experience, is averted.

Mr. Dennis Skinner (Bolsover)

My hon. Friend will make a valuable case about lowering interest rates to get unemployment down, to rescue the manufacturing base and do all the things that he wants to see done. He should not necessarily assume that lowering interest rates would result in a higher exchange rate for the pound. If sterling were much higher against other currencies such as the dollar, the deutschmark and everything else, we should not assume that that is a bad thing. The fact that the West German and Japanese economies have manageed to do what they have done with surpluses of $120 billion between them at present is not due to their rates falling in relation to the dollar and the pound.

Mr. Gould

I agree with my hon. Friend. The position on interest rates and exchange rates is by no means a sufficient precondition for economic success. However, it is a necessary precondition. My hon. Friend mentioned the German performance. Of course, the real exchange rate as against the deutschmark has risen in this country since September last year, well into double figures. That is the situation. Again, British industry and all those who work in it and whose jobs depend on it should be well aware that a loss of competitiveness threatens jobs and output.

Sir Peter Tapsell

rose—

Mr. David Howell

rose—

Mr. Gould

I shall not give way. I shall proceed. I am now proceeding to a different point.

If the Minister and the Department of Trade and Industry are silent on interest and exchange rates, and have been silent for eight years, they have also been silent on electricity charges. Recently, the Government announced the introduction of quite unnecessary increases in electricity charges, amounting to 15 per cent. over the next two years. It is difficult to know which is the more absurd, the real reason for the increase or the one that the Government have given.

Mr. Edward Leigh (Gainsborough and Horncastle)

rose—

Mr. Gould

I shall not give way. I have only just begun on this point.

The Government have told us that they need to raise prices to finance the expansion of the capacity of electricity generation. For years past, the Government have used the electricity industry and indeed, other energy industries as milch cows — as sources of hidden forms of taxation revenue. If there were to be a case for investing large sums in future capacity, what happened to the money that was filched from consumers over all the years when the Government imposed quite unnecessary charges on domestic consumers?

Mr. Leigh

rose—

Mr. Gould

I shall not give way on this point.

The true reason for the Government raising electricity charges is, yet again, our old friend privatisation. They are basically fattening up an industry so that it can be made to look attractive to private buyers. What is now being privatised is the right to overcharge domestic and industrial electricity consumers, and to do so in perpetuity, just as industry and consumers have had to pay excessively for the privatisation of other industries.

Mr. Leigh (Gainsborough and Horncastle)

Will the hon. Gentleman give way?

Mr. Gould

No, I will not.

What has the Department of Trade and Industry said about its failure to stimulate and encourage investment in research and development, infrastructure and training? These are not so much sins of commission as sins of omission. The burden imposed on industry by crumbling infrastructure can certainly not be ignored. Does the Minister pay no attention to the pleas that have been made for many years now by the CBI and the Engineering Employers Federation? Or does he just block his ears and smile sweetly at the Chancellor? In a memo to the National Economic Development Corporation on 1 October this year, the CBI wrote: If business is to have the infrastructure it needs to reduce its costs, cuts in public capital spending must be reversed. Does the Minister endorse that position? Does he take the CBI's view of the need for that form of public spending? Has he told the Chancellor so? If he has, he has been notably ineffective in getting the message home.

What about research and development? As we all know, Britain's record is appallingly poor by international standards. The Minister may well have seen the recent article in the National InstituteEconomic Reviewwhich shows that in 1983 our industry-financed spending on research and development was less than half that of Germany, one fifth that of Japan and one eighth that of the United States. Of the 10 countries analysed, only Italy spent less per capita than the United Kingdom. The role of Government in the decline of research and development spending is crucial. The recent answer given by the Minister himself showed that the United Kingdom is the only one of the major seven countries to have experienced a decline in public funding of research and development.

The real burden on our economy is a Government who do not know or care. We have a Chancellor who can say, of a turnround in our manufactured trade since 1979 amounting to £13 billion-worth of goods, that it is neither here nor there. We have a Chancellor who, in the interests of developing a low-tech-no-tech economy, abolished capital allowances in 1983–84. We have a Department of Trade and Industry which has no sense of its own responsibilities but sits back complacently while British industry is again placed on the rack. We have a Department whose only idea of an industrial strategy is to encourage employers to return to Victorian practices which, as the Equal Opportunities Commission pointed out, will very unfairly disadvantage women workers and all those others in the labour market whose position needs protection. We have a Department that can publish a White Paper in which it talks about building business and boasts about a measure permitting "casinos to redeem cheques". That just about sums up the Government's industrial strategy, their futility and triviality and their lack of ability to get to grips with the real needs of British industry. If we are to face the future with confidence, we desperately need to remove that uncaring, unknowing irresponsible Government from the back of the real economy.

We need a proper industrial strategy that understands the needs of industry and provides it with an environment in which it can prosper and the help and encouragement to make the investment that we desperately need. We need a strategy that recognises the proper and crucial role of the Government as the provider of services and investment help, as a partner in the national enterprise and as an agency that makes up for the now admitted deficiencies of the market.

Sir William Clark (Croydon, South)

Will the hon. Gentleman give way?

Mr. Gould

No, I will not.

We need a Government who are prepared to intervene in the interests of the real economy. [HON. MEMBERS: "Oh, no".] Oh, yes. I know that the very word "intervention" provokes all sorts of Pavlovian responses from Conservative Members.

We have had an interventionist Government all right. They have intervened consistently to hold up interest rates and to impose charges. They have intervened in foreign exchange and equity markets. They are always prepared to intervene in the interests of the money economy, but they are never prepared to take any action to help those who live and work in the real economy.

If we are to succeed, we need to follow the successful example of countries abroad, which understand the importance—

Mr. David Howell

Which ones?

Mr. Gould

The right hon. Gentleman asks me which ones. The clear answer is Japan, Germany, Italy, France, the United States—virtually any advanced economy that has done better than us in recent years. Those countries have done better because they realise the great value and importance of co-operation between Government and industry. Opposition Members are not alone in making that point. Increasingly, the leaders of British industry understand the importance of co-operation — that the Government can be their partner and an encouragement to them. However, they are increasingly aware that they are unlikely to get such help and encouragement from the present Government.

The next Labour Government will create such a partnership, not just in the interests of industry but in the interests of all those who make their living by working in factories, providing real goods and services and selling them into the international markets. That is where the wealth of the country lies. We should recognise the importance of the real economy and the disadvantages that we suffer if we give priority to the money economy. Those are the matters on which a proper industrial strategy rests, and that strategy will form the basis of the programme of the next Labour Government.

5.15 pm

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke)

I was surprised to hear of the subject chosen for this debate, because it was first described to me as a debate on the burdens imposed by Government on industry. Until recently, that was a regular theme of this Government's policies in a number of areas, including my own Department of Trade and Industry.

Given the Labour party's past and the policies that it has advocated, it is strange to hear Labour Members talking about lifting Government burdens on industry. It is rather like hearing an orthodox rabbi make a speech on the safe consumption of pork. This is certainly a new subject for the hon. Member for Dagenham (Mr. Gould). The hon. Gentleman is, of course, a revisionist in the Labour party. He is trying to turn it in new directions and open up new horizons, which was no doubt the purpose of his speech. He has already begun to talk about share ownership and to refer in friendly terms to private enterprise. He is gently booed at party conferences for raising such subjects. Today he has given us a thoughtful, academic and at times, I thought, eccentric contribution. He has tried to explain and rewrite a little the history of the past few years to prepare the ground for an analysis of what a future Labour Government would do. It is not policy yet. Various groups in the Labour party are embarking on a two-year voyage of discovery so that they can decide what they can say to give themselves an industrial policy for the next election.

The hon. Gentleman will have to start again. His rewriting of history was rather extraordinary. No doubt, from the Labour party's point of view it is important to explain the history of the past eight years and to explain why Labour lost its third successive election, especially as it lost because the electorate perceived that the economy was booming at the end of its years of criticism. The theory that the hon. Gentleman is putting out to his followers is that the economy picked up before the election because from 1986 onwards we began to follow Labour party policies and relax monetary controls and so on. The hon. Gentleman knows that the economy was in a very healthy state at the end of that process, when we were in fact being criticised for the very consistency of the policies for which the Government have been noted throughout our eight years of office.

The hon. Gentleman said that the boom was short-lived and went on to describe present problems. He still talks about relaxing monetary policy and lowering interest rates. He cited Germany and Japan as successful economies that we should seek to emulate. I would not have said that either presented a model of relaxed monetary policy to follow in the world economy. One has only to look at the pressure that they are under from the rest of the world at the moment. The hon. Member for Bolsover (Mr. Skinner) who is independent, and always aggressive in all directions, bowled his hon. Friend's middle stump when he said that it was eccentric to claim that the industrial success of Germany and Japan depends above all else on Government decisions to reduce interest rates. Plainly, that is not the root cause of their success.

The worst thing—it demonstrates that the revision-ism is not yet complete—is that the analysis given by the hon. Member for Dagenham (Mr. Gould) of the present state of British industry and the outlook for industry could have been written in 1979, 1980 or 1981. It is the kind of description that the Labour party gave of manufacturing industry and the economy when we went through a period of extremely dramatic change and economic difficulties. That analysis does not relate to the present situation.

The hon. Member for Dagenham has the new duty to shadow the Department of Trade and Industry. I wonder whether he ever has a look at the CBI's quarterly industrial trends survey. One of my hon. Friends has already asked whether he meets many managers in the manufacturing industry and the service economy. If he did so, he would know that, at present, confidence in the British industry is at its highest level. We are in a period when manufacturing output has been rising strongly and manufacturing employment has even started to go up again. Manufacturing investment is also doing well and is not dropping, as the hon. Member for Dagenham has claimed.

If the hon. Member for Dagenham believes that the present level of manufacturing investment is somehow affected by interest rates, he should turn to the back page of the last CBI quarterly survey. Leaders of industry were asked what factors were likely to limit capital expenditure over the next 12 months. Of those who responded, 1 per cent. talked about the inability to raise external finance and 8 per cent. mentioned the cost of finance. Those were the only limitations mentioned against a background of rising investment in industry.

Mr. Gould

As the right hon. and learned Gentleman has raised the question of manufacturing investment—I assume that is what he is talking about and we must be precise about that—will he tell us where that investment stands now, in relation to 1979? Is that investment rate higher or lower? Throughout: the Government's period of office, has investment ever been higher than the 1979 rate?

Mr. Clarke

The hon. Gentleman knows that this type of exchange has been taking place across the Dispatch Box for the past eight years. The economy went into a serious recession for two years, but, since then, it has been steadily growing. Manufacturing investment is rising extremely strongly, yet the hon. Gentleman has implied that it is falling. The hon. Gentleman can no longer ask about manufacturing output, because we are about to rise above the peak reached in 1979. The 1979–1987 comparison was worn out in the previous Parliament and to make such a comparison is increasingly dangerous. Certainly the present situation does not support the hon. Gentleman's assertion that manufacturing investment is in decline— the truth is precisely the opposite.

The hon. Member for Dagenham referred to research and development. We all agree that that is something to which British industry should pay more attention. However, the level of expenditure on R and D in British industry is rising strongly—the hon. Gentleman should know that, because he has seen the latest figures. He also knows that the Government spend £4.5 billion on R and D of one kind or another to stimulate such work in this country. The hon. Gentleman may leap to his feet — those who lobby for R and D often do, and it is fair enough — and point out that that Government investment is lower than the percentage invested by some other countries. However, our contribution represents a higher percentage when compared to the contributions made by Germany and Japan — the hon. Gentleman's favoured nations and those which he regards as the models for our economic performance.

I find it a little rich for the Labour party to attack us on training, especially given my previous responsibilities. The Opposition say that we have not encouraged industry and the economy to pay enough attention to training. Certainly we need a better trained work force, but it is also true that industry is paying much greater attention to that training. Expenditure within industry for all training is rising rapidly. In the teeth of opposition from the Labour party, the Government have stimulated that growth enormously as a result of the policies of the DTI and the Manpower Services Commission. Such opposition is apparent whenever we try to stimulate the training of the intractable unemployed, the long-term unemployed and the young.

Mr. Kevin Barron (Rother Valley)

Can the Minister tell me why the only organisation in south Yorkshire that is skill-training people from school is the local authority? There are also a few people being trained at British Steel. The fact is that skill training has been taken away from areas such as south Yorkshire as a result of Government policy.

Mr. Clarke

If the hon. Member for Rother Valley (Mr. Barron) is referring to skillcentres, I am afraid that I do not know the present state of affairs regarding those centres. However, employers in south Yorkshire are expending money on training as they are elsewhere. The MSC is also expending money on training in south Yorkshire. The skillcentre may have closed down, but that represents only one aspect of the training policy.

The hon. Member for Dagenham also spoke of cuts in capital spending. I did not rise to ask him to specify what forms of capital spending he meant. Certainly, major capital programme spending has increased. We took over a roads programme that had been cut by the previous Labour Government. That programme was demoralised because of the Labour Government's constant concessions to the anti-road lobby of the National Union of Railwaymen. Expenditure on roads is now up by 30 per cent. in real terms compared to the level achieved by the previous Labour Government—and that expenditure is rising strongly. Hospitals expenditure has also risen after it had been cut by the previous Labour Government. The Opposition want us to build council house estates, and that represents the only source that they can find to back their continued allegation of cuts in capital spending.

The real economy, with which this motion is concerned, is now doing extremely well—it is doing better than it has for a generation. The outlook for industry is better than most managers can remember in their lifetime. We are well placed to withstand the buffeting of the international climate should that climate become more difficult. If things remain on course, we are well placed to continue to prosper, as we have one of the fastest rates of growth in the developed world. It is important to sustain that growth. When I consider the Opposition motion I welcome their apparent—I believe it has turned out to be passing—interest in the burdens and penalties that can be imposed, sometimes mistakenly, by Governments on those trying to manage British industry and expand our real economy.

If the hon. Member for Dagenham is truly engaged on a course of revisionism and is trying to plot a new course for his party he should devote his time to considering what burdens Government policies can impose on the real economy. He should contrast present achievements with the record achieved when his party was in power. Many of our activities have been spent removing from industry the daily burdens and penalties which were strongly enforced by the Labour Government.

Throughout his speech the hon. Member for Dagenham did not mention the word "inflation" — it still appears to be something which he regards as an irrelevance to managing the real economy. We have discussed peaks and we should remember that inflation reached a peak of 27 per cent. per annum in August 1975, under a Labour Government. That is a real burden on anyone trying to make a living in the sensible market place. The rate is now 4.5 per cent.

Mr. Gould

rose—

Mr. Clarke

I must persevere a little further before I give way.

The hon. Member for Dagenham did not mention taxation—because, again, the Labour party apparently does not regard that as any kind of burden on industry or management. However, the hon. Gentleman should go out and talk to managers and consider the past effects of taxation on the real economy of the country. He should consider the effects that were suffered when the basic rate of income tax was 33 per cent. — it stood at that rate when we were elected. The present level of taxation is 27 per cent. and my right hon. Friend the Chancellor has said that we will reduce taxation to 25 per cent. as soon as we can prudently do so.

Under the Labour Government, the highest rate of personal taxation was 83 per cent. The taxation rate on investment income for individuals was at the ludicrous level of 98 per cent. — now it is 60 per cent. Under Labour — the party now interested in reducing the burden on business—corporation tax was 52 per cent.; we have reduced that level to 35 per cent.. The small companies rate of corporation tax has gone down from 42 per cent. to 27 per cent.—[Interruption.]

Mr. Gould

rose—

Mr. Clarke

It is no good interrupting me.

The Opposition have rushed here to rescue industry from higher electricity prices — I shall return to that matter shortly. I believe that the burdens I have outlined would be reimposed by the Labour party—we would be back to the situation before we won our first election.

The national insurance surcharge had a certain effect on industry's pay bills and its capacity to employ people —it was a tax on employment that we have abolished. We have restructured the rates of national insurance contributions for the lower-paid in comparison to the rates that existed when we took office. That restructuring has removed another disincentive to employment that the Labour party left behind. We have abolished three other taxes—investment income surcharge, development land tax and capital transfer tax on lifetime gifts. Their abolition has played a part in stimulating the investment about which the hon. Member for Dagenham claims to be concerned. We have reorganised the system of capital allowances, so that profit rather than tax efficiency is the driving force for investment.

The hon. Member for Dagenham did not mention pay. When Labour was in office, it sought to impose on industry its view on pay and pay structures. It sought to impose the pay structure that it thought each and every business should have and towards which each and every management should strive. I will not go over the long, appalling history of officials in the Department of Employment trying to impose ridiculous pay norms on businesses of every size across the country each year, so that no management could properly reward productivity and success and manage its business as it wanted. They wound up with "black lists" of companies which were struck from Government procurement if they dissatisfied the then Chief Secretary. That was a burden on industry that they were clinging to in 1979.

Talking about burdens, if, under the last Labour Government, a business which was unable to set its own wage rates, which was actually operating under this crushing burden of taxation and facing horrendous levels of inflation, wanted to adjust its prices in the market in which it was struggling for survival, the Government said that it needed the permission of the Price Commission, to which its proposals had to be submitted before it could respond to that market. If someone wanted to expand his business under the last Labour Government, actually believed that he was successful and wanted to expand, he could not go and buy a site and develop a factory: he had to apply to the Minister for an industrial development certificate.

Hon. Members should go round the wastelands of the black country and Birmingham nowadays, where industrial development certificates were refused, year in, year out, by Labour Ministers who thought that they knew best where industrial development ought to be located, and see the levels of unemployment there.

Mr. Budgen

rose—

Mr. Clarke

It is extraordinary effrontery on the part of the Opposition Front Bench to talk of burdens on business. Quite apart from the Government, their allies in the trade union movement were totally free from legal restraint. So if any industry struggled to improve its productivity, it was hindered by its inability to deal with trade unions which were buttressed by sweeping legal rights, unaccountable to their membership and used to getting their own way by confrontation before negotiation, usually with the assistance of a Minister if it looked as though they were not succeeding in obstructing the management.

Mr. Robert N. Wareing (Liverpool, West Derby)

While the Minister is expressing concern about the viability of firms and taking some credit for the fact that the Government have removed a number of obstacles—he referred, for example, to reductions in corporation tax— will he be referring in the course of his speech to the difference between the number of bankruptcies in 1979 and the figure every year since his Government have been in power?

Mr. Clarke

The rate at which new businesses are being created is increasing. About one third of new businesses fail. If the number of new businesses rises, so will the number of failures. Nevertheless, the net growth of new businesses is rising strongly. We are seeing more start-ups nowadays than we have for many years.

I will turn from the history of the last Labour Government because I think that I have probably made my point. Beginning as the hon. Member for Dagenham did, by going over his account of history, it is an extraordinary change of circumstances for the Opposition to come along and criticise us for placing burdens on business, seizing, as far as I can see, on electricity prices. When they were in office, they imposed burdens on firms which prevented them from increasing productivity, raising their prices and setting their own wages; they crushed them with taxation and faced them with inflation when they tried to earn a living.

Mr. Gould

I am grateful to the Minister again. I am not at all surprised that he should seek to take refuge in events of a decade ago. None of that covers up what was, no doubt, an unintentional slip of the tongue when he referred to the peak of 1979. The fact that he concedes that point throws some doubt on his analysis of the experience of the 1970s. Surely the real point, the one that we are still waiting for him to answer, is what view he takes, as the Minister for the real economy, on questions such as interest rates, or the CBI's insistence that public capital spending cuts have to be reversed. Those are the burdens of which industry is currently complaining.

Mr. Clarke

I will turn from history, of course, as the hon. Gentleman invites me to do; but he made frequent references to 1979. He takes a slightly mandarin view of history, because we cannot talk about the period before 1979 and we cannot talk about the present. The year 1979 was the pivot of the hon. Gentleman's analysis.

The background of the hon. Gentleman's speech is not just that history, but also the fact that, at the last general election, the Labour party advocated to British business, which had to decide whether it should turn to Labour or not, the repeal of the trade union legislation, the setting by Government of minimum wages for employees, Government-directed capital investment on which the then shadow Chancellor waxed lyrical, higher taxation and the ending of nuclear power which would have put up industrial costs and reduced jobs in a number of industries.

It is quite astonishing that the hon. Gentleman should be talking as though, six months ago, he had fought on a platform that was intended to lift burdens from business and bring about an expansionist economy. The record that he must now improve on is very much better than the one before. Productivity is the key measure of how the economy has been able to perform under our stewardship compared with his.

Mr. Budgen

rose—

Mr. Clarke:

I will give way to my hon. Friend in a moment.

I just want again to point out that, in 1973–79, in a period of very close interventionism, which the hon. Gentleman conceded he still espoused, average productivity rose by 1 per cent. per annum for the whole economy and by 0.75 per cent. for manufacturing industry. But in 1979–87, taking the period that the hon. Gentleman likes, average productivity has risen 2 per cent. per annum for the whole economy and 4 per cent. per annum for manufacturing industry. It is that which has made us one of the most competitive economies in the 1980s and made us one of the least competitive economies in 1979.

Mr. Budgen

Will my right hon. and learned Friend accept my sincere thanks for reminding the House how dreadful and how interventionist a Socialist Government can be? Will he explain to the House why the Government now propose to amend the Local Government Bill to allow local authorities to impose social clauses in their contracts and to interfere in exactly the same way that the Labour Government used to interfere? Does it not show that the present Government are arrogantly supposing that they will rule for ever and that they have completely forgotten the way in which those social clauses, with the encouragement of a Government of a different complexion, could be used again to the vast disadvantage of British industry?

Mr. Clarke

To divert ourselves just for a second to the clauses that my hon. and learned friend the Member for Folkestone and Hythe (Mr. Howard) is steering through the House, and with which my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) disagrees in part, the clause about whose details he argues seeks to stop local authorities imposing political conditions on those companies which wish to tender for contracts with them. It is, in my hon. Friend's opinion, perhaps regrettable that there is a restatement there of the race relations legislation, which we are not, in any event, proposing to repeal. But, as far as I can recall, we are not actually suggesting that the imposition of political patterns on contractors should be allowed. We are working in the general direction, at least he will concede, that he would wish.

Let me return to other burdens. There was one subject that I thought the hon. Gentleman the Member for Dagenham was going to raise and which I will just touch on briefly. If the hon. Gentleman really wishes to take the Labour party on this voyage of discovery into lifting the burdens and penalties on industry, as he says, he might reconsider the question of deregulation. To paraphrase what he said at one point, he knows perfectly well that deregulation is one of those things which still sets off a Pavlovian response in everybody on the Left wing of the Labour party, and, as far as I can see, across most of the Labour Front Bench as well. In the next debate, we shall probably hear the honourable Leader of the Opposition in a totally non-deregulating mood.

The logic of the Opposition motion and the logic of our activities is that Government burdens on industry need to be lifted. Proper standards of health and safety, proper commercial practice, basic minimum standards of employment law and other necessary things, must be imposed, but this must be done without wasting management's time or inhibiting its ability to manage, to the benefit of consumers and employees. We must, in particular, encourage small businesses and start-up entrepreneurs to devote the necessary time to their businesses rather than taking up this valuable time by giving them questionnaires to fill in. We have cut down the number of questionnaires that used to go out by about one third, and we have eased the detailed regulations of employment protection law on small businesses without detriment to anyone.

One thing that the hon. Gentleman might consider is having a look at the new procedures that we have set up right across Whitehall to make sure that, whenever a new regulatory requirement is to be imposed on business, we now first examine its likely impact on business costs and management time and assess that against whatever benefit is likely to accrue.

The objectives of deregulation policy are that business costs should be taken into account in all our decisions, that awareness of the needs of enterprise should be embedded into the public service culture and that outmoded regulation requirements should be removed. Regulatory requirements of all kinds are usually urged upon us by the Opposition. If they look at our economic policy, and, in particular, the performance of the small business sector, they will see that we need to cut red tape, to apply regulations in a sensitive manner and to reduce bureaucracy.

I shall not enter into the deregulation of markets, upon which we have so successfully embarked. We remember the battles conducted by the Opposition against the deregulation of express coach services and buses, the ending of the opticians' monopoly on spectacle frames and other things, all of which, in the end, brought great benefits to consumers, and, in most cases, greatly increased employment and activity in industry and in the professions.

Another thing that we should look at which is topical, if the Opposition are looking at burdens on business, is rates. The Government are proposing to reform the rating system for industry in order to lift a real burden from industry in various parts of the country. Business rates have now been regularly increasing over many years by much more than the rate of inflation. By 1985, if we leave out North sea operations and look at the land-based economy, British firms were paying as much in business rates as in corporation tax. But there are differences between rates and corporation tax even. Rates have to be paid in good times and in bad, regardless of a firm's profitability. The trouble with rates is that they vary widely from year to year at the whim of the local authority.

The hon. Gentleman said that he is concerned about the costs being imposed on industry, but he should recall the increases of more than 60 per cent. imposed this year by Labour councils in Ealing and Waltham Forest. The hon. Gentleman does not seem to believe that that has a burdensome effect on small businesses in parts of London. In fact, Labour local authorities in London, to which he is allied, tend to drive out small businesses and deter start-up businesses on a grand scale by the business rate that they impose.

Mr. Neil Hamilton (Tatton)

It is not only in London and southern England that that has occurred. Is my right hon. and learned Friend aware that 1,000 jobs have recently been moved out of Manchester into leafy Cheshire by the Refuge Insurance Company, which has been driven out of Manchester by the high rates imposed upon it by the Left-wing Labour authority there? Does he share my astonishment that Labour Members of Parliament in the Manchester area are not welcoming with open arms our proposal on the unified business rate?

Mr. Clarke

Manchester is only one of many great northern cities which would benefit. Manchester city council is hostile to private industry and business and drives them out of the city that it purports to serve.

Let us go further north, to Newcastle upon Tyne. A firm there is now paying twice as much in rates for basically the same services as a firm in Croydon. My hon. Friend the Member for Croydon, South (Sir W. Clark) is in his place. Jobs have been driven in the direction of his constituency by the Labour party in Newcastle. A major clothing retailer pays more per square foot in business rates in Newcastle than in Oxford street. The national non-domestic rate will remove such random distortions of competition. As my hon. Friend the Member for Tatton pointed out, in the vast majority of cases business in the north and in inner-city areas generally will benefit greatly from the new national non-domestic rate. I am not sure, but I think that the Labour party remains opposed to that.

The combined effect of there valuation and the national non-domestic rate will transfer about £700 million to businesses in the north and the midlands. In Newcastle upon Tyne, business rates will be reduced by 32 per cent., in Manchester by 37 per cent. and in Liverpool by over 30 per cent. That policy will help lift the burden from business and industry in the regions and the inner cities, which the Opposition purport to be committed. I trust that the hon. Member for Dagenham will say that he applauds our decision to bring in a national non-domestic rate which will save business from such anomalies and the vagaries of Left-wing Labour authorities.

Mr. Gould

I am sure that the Minister is well aware that the CBI disagrees with almost everything that he has said. But if he is right when he says that rates impose such a burden on business, for which there is virtually no evidence, what is he to say to businesses and communities in inner-city areas such as Paddington and Westminster in London, which desperately need help rather than additional burdens and which will clearly have to pay higher rates if a uniform business rate is brought in? If the Minister is right, that that will cripple them, what will he do to help them? He is supposed to be the Minister responsible for inner cities, is he not? Perhaps he will tell us something about that as well.

Mr. Clarke

The hon. Gentleman contradicts himself in successive sentences. He says that there is no evidence that rates impose a burden, then he quotes as a critic of our proposals the CBI, the main burden of whose representations is that even our new proposals leave too high a rates burden on the commercial and business sector. I think that the Labour party is still defending the old system, largely imposed by the Labour party at the highest levels, of which nobody is in favour. The idea that the hon. Gentleman is now about to launch out on behalf of those businesses that will be affected by rating revaluation in Kensington and Westminster and other parts of the south is an interesting proposition. He obviously thinks that it is right that one should pay more in the high street in Newcastle than in Oxford street for retail premises. He obviously thinks that it is right that one should pay more in Manchester than in Cheshire. If he adheres to that position, far from lifting the burden on businesses and industry, he will drive businesses out of Labour-dominated areas at an even faster rate.

Mr. Nigel Griffiths (Edinburgh, South)

Will the Minister give way?

Mr. Clarke

No, I must get on. I have given way generously.

Let me deal with the particular questions raised by the hon. Member for Dagenham — particularly energy prices. The Opposition could not think of a subject for this debate, so they thought of burdens on industry and the increase in electricity prices. The new financial targets were announced by my right hon. Friend the Secretary of State for Energy on 3 November for the reasons that he stated. As everybody appreciates, it cannot be denied that we are embarking upon a major period of investment in generating capacity and in new power stations in Britain.

The hon. Gentleman says that the resulting increase in prices will have damaging effects. He should look at successive CBI surveys; they have all shown that electricity prices in the United Kingdom compare favourably with those in the rest of western Europe. Far from it being the case, as he lightly asserted in his speech, that we had successfully been using electricity as a milch cow in raising burdens in past years, the rate of return has in fact been dropping. The effect on the customer is that, even after the increase that is now being contemplated, electricity charges will still be less in real terms than they were six years ago. That is after the charges that we have announced. Large users in the United Kingdom—I am not talking about housewives, scared on their doorstep about their electricity bills—pay among the lowest electricity tariffs in western Europe.

Mr. Leigh

Will my right hon. and learned Friend comment on the interesting thesis of the hon. Member for Dagenham (Mr. Gould) that we are merely fattening up the industry for privatisation, when electricity prices increased under the previous Labour Government by 170 per cent. for the domestic consumer and 130 per cent. for the industrial consumer? Did they want to fatten up the industry for privatisation, or was it incompetence?

Mr. Clarke

The previous Government were fattening up the bills rather than the industry. They were not contemplating privatisation but were feeding Government expenditure. The allegation of it being used as a milch cow is much better aimed at the previous Labour Government, who increased real-terms costs and had to attempt to keep up with inflation. If my hon. Friend wants to know more about the comparison between our record and that of the previous Labour Government, electricity prices rose 30 per cent. more than inflation while they were in office. The largest price increase under this Government will be lower than the smallest price increase that we ever had under the previous Labour Government.

Mr. Barron

Will the Minister give way?

Mr. Clarke

I know that the hon. Gentleman is closely concerned with energy matters, and I shall give way in a moment.

The supply of gas to contract customers is of serious concern to some high users in the industrial world. It is now the subject of a reference to the Monopolies and Mergers Commission by the Director General of Fair Trading. We have received complaints about British Gas pricing policies from the Gas Consumers Council and from a number of important individual consumers and companies. The hon. Member for Dagenham claims that privatisation will destroy things. When British Gas was; privatised, the powers under general competition law were applied to the contract gas market to ensure that its position was not abused. The reference to the MMC shows that those powers are not a dead letters and when we have had the MMC report—in about nine months' time—we shall see whether action is called for.

However, the general position on past and contemplated prices is satisfactory for British industry. It is not easy to find evidence that British industry is disadvantaged compared with its competitors abroad. In fact, the effect on business costs of the prices in contemplation will be tiny if a price increase for electricity of from 8 to 9 per cent. takes place. That will increase industry's costs, on average, by one sixth of 1 per cent. So the move is not as indefensible or damaging as the hon. Gentleman claimed.

Mr. Barron

The right hon. and learned Gentleman spoke earlier about what the CBI reviews have had to say on the matter of energy costs to industry. Will he comment on what the Director General of the CBI said about that earlier this year? He said that he did not see why intensive energy users and many industrial users generally should face the steep increases.

Mr. Clarke

I would quote the CBI's own surveys in answer, and cite the examples that I have quoted to show that large users, whom we accept need special attention, are not badly discriminated against—as compared with their rivals — by the pricing policies of the energy companies — but when they make complaints, as, for example, about gas pricing policy, we have powers to refer to the MMC, and we use them.

On the matter of interest rates, the main point made by the hon. Member for Dagenham throughout was to ask why the Department of Trade and Industry did not speak out more often about these things. By way of a basic constitutional point, within the Government it is the Treasury that acts as spokesman on these matters, and it is not customary in a Conservative Government for one Department to rampage around campaigning against others. When the right hon. Member for Chesterfield (Mr. Benn) was in government, a different system, I know, prevailed.

As has been pointed out, interest rates are not, as the hon. Member for Dagenham believes they are, plucked out of the air and imposed regardless of their consequences on quite a few other economic indicators in the economy. They have an effect on the general level of inflation, which is important to industry. They have an effect on the exchange rate, and it cannot always casually be assumed, as it was by the hon. Gentleman, that as long as the exchange rate goes down against the dollar, that is advantageous to British industry.

We have already had two reductions in interest rates in the past few weeks in response to present circumstances, but my right hon. Friend the Chancellor of the Exchequer has always made it clear that he desires to keep interest rates down as far as practically possible while maintaining downward pressure on inflation. Frankly, if, in the present uncertainty in the financial exchange markets, it came to a judgment between the abilities of my right hon. Friend the Chancellor to manage the financial affairs of this country—to choose the proper interest rates and to maintain some stability in international exchange rates—and the abilities of the hon. Member for Dagenham, based on the theory that he espoused in his speech, I believe that most people in business would feel much more confident in the Chancellor's abilities. Right now, he is riding the crest of a wave because of the reassurance that he gives the industrial and commercial community at a time of some uncertainty. As far as I could see, the hon. Gentleman's whole argument favoured a downward pressure on interest rates—indeed, limitless reductions in interest rates. His speech was remarkably reminiscent, in its long analysis of interest rates, of Hugh Dalton after the war, rather than of a vision of social policies for the future.

I think I have touched on most of the hon. Gentleman's points; and I have touched on many other things that he did not mention in the area of burdens on industry. The hon. Gentleman must understand that, in an enterprise economy, a great deal of business success depends on management having the ability to manage, the liberty to take commercial decisions and the time to manage its business free from Government restraint. Management needs open access to reasonably liberal markets without Government policies intervening to distort those markets, in which people have to make judgments.

If the hon. Gentleman accepts all that, he is making progress, but he has a long way to go. If he tries to sell to the Labour party the theme of lifting burdens on industry and management, in addition to all the other themes that he tried to urge on it at the party conference, from the point of view of the national interest I wish him success. I do not think, however, that he has a snowball's chance in Hades of success with the movement in which he now finds himself.

Several Hon. Members

rose—

Mr. Deputy Speaker (Sir Paul Dean)

Order. This is a short debate and many hon. Members wish to speak, so I appeal for short speeches.

5.55 pm

Mr. Kevin Barron (Rother Valley)

I support the motion, which concerns the ever-growing burden on industry. I want to speak specifically about the newly proposed electricity increases, although at this stage it is not clear exactly how much and where they will take effect. There is no doubt, however, that industry will be paying more for electricity in April next year.

The electricity price increase is not only a direct attack on industry and on domestic consumers, but is a tax on energy. The Government have stated on numerous occasions that they would avoid putting VAT on energy charges at all costs. They have said that in the House and elsewhere, yet one can only describe the likely 10 per cent. increase as a tax on energy—it is some form of VAT through the back door. The Secretary of State for Energy justifies the position, as the Minister mentioned, by saying that new plants for electricity generation need to be built —presumably starting in 1988–89, the year in which the increase starts. If the proposed increase is required for that purpose, that is a sad comment on the pricing mechanism that has been used and on the way in which the electricity supply industry and the Government have run the industry during the past eight years. If that reason is to be taken at face value, they obviously got things very wrong.

On Tuesday this week at the nuclear forum I put it to Lord Marshall that the pricing mechanism of long-run marginal costs that had been used by the industry had obviously failed. Lord Marshall's reply had little to do with the need for new investment for generation; he merely said that the rate of return on investment should be higher than the current average of 2.75 per cent. It is worth asking why the Government have set those levels of return. First, there is no need for it to be higher. The rate of return took into account the paying off of debt to the country that had to be cleared by 1991. Indeed, the electricity supply industry would then be debt-free. Secondly, it took account of all likely future investment in generating capacity up to the year 2000.

If we examine the industry's medium-term investment plan, published in September 1986—Ministers are now saying that it is out of date, but the ink has hardly dried on it yet—we see that it included a projection of the likely requirement of generating capacity up to the end of the century, and on that basis it had already taken into account capital expenditure within the current pricing structure. The plan states: CEGB capital expenditure for the seven years 1986–87 to 1992–93 shows a small increase compared with the previous MTDP… expenditure forecasts also reflect the latest planning assumptions to meet future plant requirements up to the year 2002. So it is not good enough for Ministers to say that they have to put on the increases to pay for future generation. That is not true, and I wish someone would stand up and tell the real truth.

In announcing the proposed price increase to the House on 3 November, the Secretary of State for Energy could not explain why or how the planning assumptions and forecasts made by the industry about future generating capacity had changed since 1986. The plan went on to say that the tariff increases over the same period, that is, to 1993, would be below the general rate of inflation. This was based on the assumption that there is no significant increase in the industry's financial targets.

The Government have now decided that the industry's rate of return should be increased, but on any assessment that should not be necessary. Electricity is a service industry that makes substantial profits, and without this massive price increase it planned to be debt-free within the next couple of years. Why should the Government push up the rate of return if not purely for the benefit of the Treasury? Even if we accept the need for industry to have a high rate of return, we should examine more closely the figures that we are given. The rate of return of 2.75 per cent. that the Government pose is based on current cost accounting. Most industries use historic cost accounting methods. On the historic basis, the current rate of return is 14 per cent. That is the return on historic cost accounting without charging one penny extra to industrial or domestic consumers from next April.

The CBI has questioned this use of current cost accounting. The CBI asked: Why has the target return for the electricity supply industry been fixed at 4.75% "— I understand that that will be the rate in two years— in current cost accounting terms which is the equivalent of 16–18% in historical terms? Perhaps the CBI's question could be answered by the Minister who replies to the debate. The director-general of the CBI commented: even in markets where companies face considerable market, technical and competitive risks, returns of this order are not being achieved and electricity faces no such risk. In the end we are left with two propositions and my hon. Friend the Member for Dagenham (Mr. Gould) gave one of them. They are the two propositions about why the Government have felt the need to force the electricity price increase on industrial and domestic consumers. In the short term, one reason is to get money into the Treasury. That is a form of indirect taxation and will presumably pay for more tax cuts in the years to come. In the longer term, it is clear that the increases are about fattening the industry for privatisation. Even the CBI has its doubts about the wisdom of that procedure.

The CBI's director-general, Mr. Banham, said: By the time the industry is privatised it will have a completely clean balance sheet. Some of the debt could be privatised as well Few manufacturers would consider putting up prices to pay for future capacity. It is quite obvious that even industry itself believes that it is wrong for the Government to do what they are now doing. The Minister knows quite well what they are doing. The day after the statement of 3 November in the House, the Chancellor of the Exchequer told the House that there was no way that any electricity price increase was to swell the coffers of the Exchequer. He said that it was certainly not a tax.

I wrote to the Chancellor, but to date he has not replied to my letter. I asked where the money would go in the year 1988–89 when this massive increase will go on. Lead contracts for new generation take between five and 20 years, depending on the type of plant, and will obviously not take that money. Where will that money go in that first year when this massive increase averaging 9 to 10 per cent. goes on, if not to the Treasury coffers? If it does not go there, it will gather dust elsewhere. It is obvious where that money will go and no hon. Member should be kidded about that. It will go to the Treasury to be used as a bribe to the electorate prior to the next general election.

Mr. Neil Hamilton

I am amused by the degree of importance that the Opposition are giving to the CBI, which is now their new-found friend. I do not see any objection to the hon. Gentleman's analysis, even if it were correct—which it is not. As the taxpayer is the investor in the electricity industry, it seems perfectly right that any dividend from that industry should go to the taxpayer. That dividend would be given to all taxpayers.

What does the hon. Gentleman say about the proposition, advanced by the Labour party in the last Parliament and before that, that there was a need to keep electricity prices up in order to support the inefficiencies in the coal industry? All it was seeking to do was to bankroll the National Union of Mineworkers. The hon Gentleman will remember that Lord Marshall said that if it were not for the need to purchase coal from British Coal under the monopoly agreement electricity prices could have been more than 10 per cent. lower—

Mr. Deputy Speaker (Mr. Harold Walker)

Order. This is a short debate and interventions should be brief.

Mr. Barron

What Lord Marshall said and what has been said recently about the price of coal and about the savings that could be made are not true. In June last year, when the new joint understanding between the coal industry and the CEGB was drawn up, there was an immediate 7 per cent. reduction in real terms in the price of coal. By the end of 1990–91, when the joint understanding finishes, there will be a real reduction in the price of British coal to the CEGB of 18 per cent. The hon. Gentleman should ask the newly privatised British Gas whether it will be able to say in the years to come that it will sell energy 18 per cent. cheaper in real terms. Everybody knows quite well that that will not be the case.

The hon. Gentleman mentioned tax dividends by the Exchequer. There are more than 92,000 domestic cut-offs of electricity each year and many of the people who are cut off never pay a penny in income tax because of their low incomes. I would much sooner reduce the number of cutt-offs and ensure that those people did not have to pay tax through an increased tariff and would be better defended to go through winters and not be cut off.

The House has been grossly misled by Ministers talking about the new electricity price increases and the need of the industry for new generation. A hole has been blown in that argument by the projections of the industry itself, and nobody with any common sense and who has any knowledge of the industry can defend that argument. When he is winding up, the Minister should tell us exactly the reason why we are to have an increase averaging 9 or 10 per cent. in electricity prices next April. He should come clean with the people, including people in poverty households, and say that the increase will be stopped now in order to protect industrial and domestic consumers. The increases are unnecessary, except to fatten the coffers of the Treasury or the calf ready for privatisation.

6.6 pm

Mr. Richard Page (Hertfordshire, South-West)

My heart goes out to the Opposition because of their struggle to find topics for Opposition Days that, at the end of the debates, do not result in them holding a bloodstained foot in one hand and the proverbial smoking revolver in the other. Today they could be accused of being a little smarter than usual because they have chosen a subject that is a little more difficult to interpret and to tie down. They have given themselves just a little more room to manoeuvre. I worked and struggled to find out what the Opposition meant by the burdens imposed on the real economy by Government policies.

Mr. Austin Mitchell (Great Grimsby)

Interest rates.

Mr. Page

I shall shortly deal with interest rates. At first I thought about unemployment. Then I looked at the employment figures and discovered that the numbers of people in work today is almost identical to the number in work in 1979.I found that the number of people going into work has increased for the last 16 months and that vacancies are higher than they have been for a long time. I thought about the gross overmanning in British Steel and British Leyland and in all the other nationalised industries that were being propped up in the period before 1979, and I said to myself, "Well, that is not too bad." I looked at the growth in the service sector and thought that, obviously, the Opposition would not have a go about unemployment.

Next, I looked at inflation today and at the roller coaster of inflation that we had in the past when it was 26 per cent. plus. I am grateful to the Labour party because if the Labour Government had not run the economy in the way that they did in 1976, I would not have won the by-election in Workington, where we found that the taxes for every working man had gone up because of inflation and that savings had been eroded. The inflation rate now is 4.8 per cent. That is a credit to the Government, and I came to the conclusion that the Opposition would not be having a go at the Government about inflation.

Then I thought about the public sector borrowing requirement. I looked at that and looked again to my time in Workington and remembered at that time it was 9.3 per cent. of gross domestic product. It meant that out of every £5 that the Labour Government were spending they were borrowing £1. I thought that the Labour party would not be foolish enough to have a go at the size of the present PSBR, particularly bearing in mind that this year it will amount to about 1 per cent. of gross domestic product or maybe even zero as the year goes on.

I thought that the debate might be about the total amount of gross domestic product, but a trip to the Library quickly proved that GDP is now 117 per cent. compared with 102 per cent. in 1979. I started to analyse the components that make it up. Output of the production industry is up — my right hon. and learned Friend touched on that matter. As to exports, I discovered that the CBI, which has been prayed in aid by Labour Members with great enthusiasm, concluded in its latest survey that 84 per cent. of directors thought that their companies were doing well, or very well, and were optimistic at their prospects.

Over the past quarter, exports have increased by 10.5 per cent. [Interruption.] Manufacturing industry in Britain is beginning to improve—[Interruption.] If the hon. Member for Blyth Valley (Mr. Campbell) wants to intervene he should do so and stop shouting from a sedentary position. I thought that the Labour party would not have a go at our exports, bearing in mind that for the first time, on a consistent basis, exports are increasing. When we took office in 1979, the export figures that were championed by the Labour party were lower than those for 1974. There had been a consistent decline in exports over the past decades, but under the Government they are beginning to increase.

I wondered whether we would be debating small businesses. I thought about the record of the Government on small businesses—what we have done with the enterprise allowance scheme, how we have started small workshops and the lower rates of corporation tax—and I thought that the Opposition would not be daft enough to have a go about those matters.

The truth finally came out, as I watched the acceptable smile on the face of the tiger, the hon. Member for Dagenham (Mr. Gould), who advanced the case for the Opposition. He produced a melange of economic and political arguments that did not come together. He made great play of the fact that we invest so much abroad. It is true that we have the largest overseas investments of any nation in the world—about $170 billion, which is just ahead of Japan—but what he did not mention was the $5 billion that returns to Britain from those investments. That return must be an exceptional and smart investment.

The hon. Gentleman spoke about the wiping out of one fifth of British industry, but he did not mention the overmanning and poor productivity record of British industry.

Mr. Rhodri Morgan (Cardiff, West)

As to the hon. Gentleman's statement about overmanning, which apparently he attributes to the period before 1979, will he comment on the authoritative National Economic Development Council survey of two and a half years ago that compared Britain's and Germany's manufacturing industry? It demonstrated that, with the same machinery, German productivity was 60 per cent. higher than comparable production runs of British firms. Is he trying to imply that even today British industry is overmanned by 60 per cent.?

Mr. Page

The hon. Gentleman has quoted figures from two and a half years ago. If he had worked in British industry, as I have, he would know that it had the equipment but that it was not using it. It was limiting its production runs, and I have had personal experience of working on production lines when the use of automatic machinery was limited under trade union agreements. Thus, it was not effectively used and overmanning was artificially maintained. If the hon. Gentleman looks at the productivity figures of the past two or three years he will notice, as my right hon. and learned Friend said, that they have increased by 4 per cent. per year and are continuing to do so.

If the hon. Gentleman now visits the Ford plant at Saarlouis in West Germany and compares it with the one at Dagenham, he will discover that in Britain Ford has caught up in productivity, which is one of the reasons why it is investing in Britian. At last, it will receive an adequate return and its machinery is being used to its full capacity. I shall not labour that point because I realise that other hon. Members wish to speak.

The hon. Member for Dagenham mentioned imports but did not mention the opportunity that they give the British manufacturer. The number of cars that are being made by British manufacturers and supplied and sold into the British market, compared with the numbers of imports, demonstrates how the economy is beginning to react to these opportunities.

Right at the end of the speech of the hon. Member for Dagenham the truth came out—it was almost slipped in—in the statement, "We need a definite industrial strategy." In those words all was revealed. The Labour party wants a return to the National Enterprise Board and to playing with our industrial companies. I make a plea to my hon. Friend the Minister; leave management to manage; leave industry to industrialists; keep politicians out and allow our economy to continue to grow.

6.15 pm

Mr. Malcolm Bruce (Gordon)

I share the surprise of the Chancellor of the Duchy of Lancaster at the choice of the subject for debate. The debate has fallen into a predictable pattern. It is sad that a matter as important as British industry should degenerate, in a very short debate, into Labour and Conservative Members trying to score points rather than trying to find common ground that will improve what is, I concede, an improving position.

The Chancellor did not want to be reminded of the consequences of Government policy between 1979 and 1981—nor would I if I were a Conservative Minister, because it was a catastrophe and history will record it as such.

I readily accept that we cannot continually criticise the Government year in and year out given that we have moved on from those days and that there is evidence of significant recovery in many sectors of the economy. I should have thought, to the extent that it is true, that it would have been welcomed by hon. Members. It does not do any hon. Member credit to appear to want to belittle genuine recovery.

We are entitled to question, in a constructive manner, the Government about certain aspects of their policy to obtain a change of attitude that might enable us to get more out of our economy in the coming years. There is no doubt that the Chancellor of the Exchequer regards the rate of interest as the only mechanism in which he will actively intervene. It is the only instrument of the economy on which he states he has a policy. The consequence of that policy is a genuine burden on industry. It is fair for the Government to say that they have lifted other burdens, but it does not stand up if the burden is not a real one.

Given the interest rates of 9, 10 and 11 per cent., the rate of return that is required when inflation is low is relatively high. High interest rates aggravate matters for manufacturing industries that are involved in competitive trade—whether it be in exporting or in sectors where they are vulnerable to imports—particularly when dealing with a country such as West Germany, which is considering reducing its interest rate to 2.5 per cent. which is a negative inflation rate. That gives German companies a considerable advantage, particularly in sectors of common trade.

The other problem that was raised—the Chancellor of the Exchequer regards interest rate policy as the mechanism to respond to this —was high or unstable exchange rates. With the collapse of the dollar there is a worry that the pound will rise against the dollar, thus repeating some of the problems of 1979, 1980 and 1981. It is sensible to avoid that happening again, particularly when we are experiencing some recovery. The Government should state more clearly what action they will take independently and, more important, in co-ordination with others to ensure some degree of stability and predictability within the exchange rate, which is vital for British manufacturing industry involved in overseas trade.

The House will be aware that the Liberal party amendment has not been selected. The only reason that I allude to the amendment is that it repeats our consistent and insistent plea for the Government to recognise that we must become a full member of the Exchange Rate Mechanism of the European Monetary System. It is deeply depressing that the Government claim to be in favour of membership, but never get round to becoming a member. In the past two weeks we have had the unedifying spectacle of the Chancellor of the Exchequer and the Prime Minister falling out over that issue. Clearly the Chancellor of the Exchequer was about to decide that the time was right for membership, but he was sharply reminded by the Prime Minister that she would not join the system. She will never join it as long as she remains Prime Minister. She does not want to become so closely involved with the European Community.

I believe that the British economy is an essential part of the European Community. We are interdependent. It is extremely unfortunate that we continue to take a very negative attitude towards full membership of the exchange rate system as it would help to bring down interest rates and stabilise the exchange rate.

It was interesting to note that the debate was opened by the hon. Member for Dagenham (Mr. Gould) from the Opposition Front Bench. As far as I can see, his only surviving Left-wing credential is that he remains anti-European Community. The debate was opened for the Government by the Chancellor of the Duchy of Lancaster and Minister of Trade and Industry who in his utterances daily becomes more hostile towards everything to do with the European Community. Many people in British industry regret those attitudes. They believe that they have been seriously misled by the Government who said that they wanted to take advantage of the opportunities of a widening internal market.

I want to refer to the additional burden of electricity costs, to which reference has already been made. Indeed, I want to refer more widely to energy costs. There is no doubt that energy costs are significant for certain sections of industry. It was facile and insulting for the Chancellor of the Duchy of Lancaster to say that the Government's calculation is that the average cost for industry would increase only by 2 or 3 per cent. and that that was not an excessive burden. The right hon. and learned Gentleman and everyone in industry is aware that the average hides very wide variations and includes industries in which energy costs account for 15 or 25 per cent. of manufacturing costs. The burden in that context is very serious in terms of competitiveness, and that is wholly unjustifiable. Across the board, the CBI estimates that energy costs will amount to £1 billion in industry. The impact on certain industries is far more serious and it is outrageous that the Government will not recognise that.

Hon. Members have mentioned the reference of British Gas to the Monopolies and Mergers Commission for over-pricing. All hon. Members involved during the debates on the Gas Act 1986 explained that that was inevitable. We are exactly where we predicted we would be, and we will still have to wait for an investigation which could take many months.

Many industries have been unable to gain access to competitive supplies of gas and the monopoly has been abused and exploited. The gas industry has not changed. The people who ran it in the private sector are running it in the public sector and they are using exactly the same unimaginative old criteria. They are basing the price of gas not on the investment or rate of return, but on the relative price of oil, which has nothing to do with the price of gas. As I represent an area in the north of Scotland, I hope that the investigation into industrial gas prices, coupled with the likely privatisation of electricity, will be used as an opportunity to give people in the north of Scotland a competitive advantage on energy prices.

The Government claim to believe in markets and competition. I find that increasingly difficult to believe because they have done more than any Government to promote huge monopolies which have ripped off the consumer rather than benefited him through competition. We are constantly told in the north of Scotland that we have the cheapest electricity in the United Kingdom because we have hydro power and because, in association with the South of Scotland electricity board, we have a substantial amount of nuclear power which we are told is cheap. If such energy is cheap, I want an absolute assurance that the increases imposed in the electricity industry in England and Wales will not be extended to Scotland. If and when privatisation goes ahead, I want the assurance that our industries will have the opportunity to gain access to cheaper and competitive electricity which will provide a cost advantage.

I could give many reasons why industry should locate in the north of Scotland. However, there are disadvantages in terms of transport and access to the market. Access to cheap energy would be a great compensating factor and that should be properly conceded to us to give us the opportunity to promote new enterprises on the basis of competitive energy prices.

The reforms that are being introduced for business rates—which are an acknowledged burden to industry—have not been spelt out in sufficient detail to reassure many people in business and especially those in small businesses. They believe that the consequence of the uniform business rate is that it will increase the costs for small businesses in remote and relatively poor rural areas because they do not have a rich tax base. That causes real concern. The disparities and anomalies which that will create will have a minor ripple effect, perhaps not comparable with the rating revaluation, but businesses will be hard hit by the proposals. It is extremely unfortunate that the Government have not consulted more widely with business to explore the alternatives.

It is all very well to claim that the business rate should take account of a business's ability to pay. I fully appreciate and acknowledge that, and I agree that many hard-line Left-wing Labour councillors have ignored it to the great detriment of their economies and the people living in their communities. In spite of that, every business absorbs services and generates costs within the local community and there must be some contribution to those regardless of whether they are making a profit. I accept that some of that should be profit-related.

At the end of eight years in power, the Government have some reason to claim that, in spite of their earlier catastrophic mistakes, we are beginning to see some recovery in industry. I do not believe that the Government deserve as much credit as they choose to take, but that is the stuff of politics. There are still burdens on industry that the Government could lift and there is still a division between the impact of the Government's policies on industry and industry's requirements.

It was suggested that we do not understand the full responsibility of the Department of Trade and Industry because it shares its role with the Treasury. One of the reasons for Japan's success is that its Ministry of Trade and Industry is dominant over the Treasury. If that was the position in this country, we might have a successful manufacturing industry that could take on Japan, instead of which we are currently enjoying a recovery which must go on for a few years before I am convinced that we are on the right road.

6.28 pm

Mr. Quentin Davies (Stamford and Spalding)

I know that time is short and I will endeavour not to speak for too long. It is very important that this matter is discussed seriously because people in British industry and elsewhere in the country will listen to what we say. Therefore, I hope that I may do a modest service to the House if I make a number of comments on the speech made by the hon. Member for Dagenham (Mr. Gould).

The hon. Member for Dagenham dealt with the subject in an extraordinarily frivolous way. He made a number of basic errors in his appreciation of the present position which I believe should not pass without comment. He said that the economy had been running at a low speed until 1986. That is apparently the main burden of the Labour party's complaint against the Government since we came to office in 1979.

That was an extraordinary remark, because the one salient feature about this country's economic performance over the past few years is that, astonishingly, since 1982, year after year, we have consistently had the fastest rate of growth in Europe. That has been the case in only one other year since the second world war—in 1963–64. Indeed, it has been the case in very few years during the last century. One can count them on the fingers of one hand.

If the hon. Member for Dagenham knew more about economics than I suspect he does, judging by his speech, he would know how extraordinarily difficult it is to sustain a higher rate of growth than one's competitors over that length of time. The fact that we could do so without running into balance of payments or other constraints shows the remarkable dynamism and flexibility of the supply side of the British economy during the past few years.

The hon. Member for Dagenham also complained about the level of investment. Of course, I have not been able to check with Hansard, but I think that he said that the level of investment in training and in research and development is too low at 8 per cent. per annum. I think that he was confusing it with fixed capital formation in this country, which is 8 per cent. of GDP.

Mr. Gould

I am sorry to say that it is the hon. Gentleman who is confused. The only time that I mentioned the figure of 8 per cent. was to point out that manufacturing investment remains 8 per cent. below its 1979 level. It may be as well if the hon. Gentleman remembers that figure.

Mr. Davies

I take the hon. Gentleman's correction happily. However, if he knew a little bit more about what is happening in industry, he would realise that there has been an interesting secular change during the past two years. Investment in fixed capital formation and in hardware—we know that the Labour party has a fetish about investment in hardware, and always has had—has become relatively less important in expenditures that are related not to current sales but to future sales, which is the way in which I prefer to define "investment". Investment in software has become ever more crucial. Because of accounting conventions, software is written off as a current expense but it is just as important, if not more important, for the long-term productive capability of industry.

Anybody who does not understand that important shift between investment in hardware and investment in software, but simply looks journalistically and superficially at the figures, as does the hon. Gentleman, shows a low level of understanding about what is going on, and what should be going on, in British industry.

I am afraid that the hon. Gentleman's position gets even worse. We heard several times that interest rates are the great burden on British industry and that our interest rates are three times higher than those in Germany. That suggests that the hon. Gentleman must have been talking about nominal rates because, although our nominal rates are not quite three times higher than those in Germany, they may be close to that figure.

However, we also heard an interesting and slightly discursive academic lecture about the importance of interest rates balancing the interests of lenders and borrowers, of savers and investors and of interest rates as a price mechanism establishing an appropriate equilibrium between current and postponed consumption. We know all that. The hon. Gentleman obviously read the first part of his textbook on elementary economics, but he did not read on to discover the important and vital difference between real and nominal interest rates.

All that theory makes only the slightest sense if the hon. Gentleman was talking about real interest rates. But they are not higher than in Germany. That sort of confusion could not possibly pass in modern industry, which has increasingly strong, rigorous and professional standards in its use of concepts, language and planning. The hon. Gentleman would be laughed out of any board room, in any self-respecting company, for making such a confusion between real and nominal interest rates.

Mr. Allan Rogers (Rhondda)

Will the hon. Gentleman give way?

Mr. Davies

No, I fear that I have too little time to give way. I am sorry. I am also sorry that the hon. Member for Dagenham spoke for rather a long time, leaving but little time for Back-Bench Members who wish to comment on his speech. However, he was wise to do so because if I had the time, I would be inspired to make a great many more not very flattering remarks about his speech.

I turn now to another matter which is important to the interests of the House and to the reputation and standing of the so-called revisionist wing of the Labour party, with which, I believe, the hon. Member for Dagenham wishes to identify. It is important that the hon. Gentleman gets this matter straight. Again, I am quoting from memory, but I believe that at one point the hon. Gentleman said that no one talks any more about M3, which shows that no one is interested in the money supply. That was an extraordinary elementary mistake. I am sorry to hear a Front-Bench spokesman fall into the trap of the most vulgarised and will journalistic monetarism that I have ever come across and to equate one of the many monetary aggregates with the money supply.

I am sorry to have to give the hon. Gentleman a lecture about elementary economics, but I must tell him that the money supply has existed, exists now, and will always exist, that it will always have an important effect on the real economy and will be intimately related to interest rates. From hearing his speech, I doubt whether the hon. Gentleman knows the difference between an IS-LM curve and a map of the London Underground. Nevertheless, I assure him that the money supply will always exist and that it must always be taken into account by any responsible Government.

It is a superficial and dangerous trap for anyone to equate the general concept of the money supply with one particular aggregate. It is perfectly true that it is no longer the case that anybody takes M3 seriously as a proxy for aggregate demand in the economy. The reasons for that are technical, and perhaps the hon. Gentleman would benefit from a lecture on that subject. However, I do not have the time to give it to him.

Suffice it to say that it is related to technical changes in the banking markets, to the relatively high level of real interest rates throughout the world economy during the 1980s, and to the fact that many financial resources that were previously kept on current account are now kept on deposit account which, I advise the hon. Gentleman, is included in the M3 figure. What is more, many savings are placed on deposit accounts, which have had a high real rate of return during the past few years, which previously would have been invested in instruments that were not included in any monetary aggregate because they were not considered to be part of liquidity.

Suffice it to say also that M3 is one of many aggregates. It is important to consider the sum of aggregates. To decide that because one aggregate no longer effectively tracks aggregate demand we should throw over the whole concept of watching what goes on in the money supply—that was the basis of what the hon. Member for Dagenham seriously suggested this afternoon—is to fall into an error that would be a howler if it were made in the classroom. It is a disgrace when it comes from a Front-Bench spokesman and when it is used in a speech that pretends to set out to the Government the sort of sound, rigorous and professional policies that we need to provide the right climate for British industry in the future.

6.38 pm

Mr. Chris Mullen (Sunderland, South)

I shall be brief, because time permits me to make only one point. There have been many references to the alleged success of the economy under this Government. We should spend a few moments to reflect on why this is so. It is not due to any miracle of economic management, to the rigours of market forces on productivity or to the Government's claim that they have lowered taxes which, incidentally, they have not. If there is any one single boost that the Government have given to the economy it has been because the Government have had North sea oil revenues. No other Government before have been able to lay their hands on so much windfall revenue, and perhaps no future Government will be able to do so.

In case any hon. Member is in any doubt about that, I refer the House to the figures to be found inHansardof 24 July 1987 in a written answer at column 568. I have totted up the figures only roughly, but the Government have received £12 billion in royalties,£30 billion in petroleum revenue tax, £11 billion in corporation tax and £4.3 billion in supplementary petroleum duty. If there is any one factor that has enabled the Government simultaneously to preside over 3 million unemployed and to cut taxes, that, rather than any miracle of economic management, is the true explanation and they know it.

What troubles me, and I am sure many people, is what will happen when North sea oil revenues run out, when the music stops and revenue from these instant one-off privatisation sales is all gone. What will the Government do then? Will they invite the Labour party to form a Government to clear up the mess? I suspect so. When they have blown all public assets and all public revenue, there will be nothing left to invest in manufacturing industry. That is the prime reason for the mess which they have got us into.

6.40 pm

Mr. Tony Blair (Sedgefield)

This has been a short but useful debate and I congratulate my hon. Friends the Members for Rother Valley (Mr. Barron) and for Sunderland, South (Mr. Mullin) on their speeches. The hon. Members for Hertfordshire, South-West (Mr. Page) and for Stamford and Spalding (Mr. Davies) also contributed. What the speech of the hon. Member for Stamford and Spalding lacked in humility was certainly made up for in eccentric indignation.

The hon. Member for Gordon (Mr. Bruce) appeared surprised that we had chosen this subject for debate. I can think of nothing more opportune than to debate the burden of interest rates on industry. Obviously, one alliance habit will survive into the merged party and that is the nauseating line of trying to score party political points off opponents by accusing opponents of scoring party political points. I have always noted that about alliance Members and it seems that will survive in the phoenix that rises from the ashes.

The Government's response has been entirely predict-able. They say that there is better news on output, but fail to mention that it is only now creeping past 1979 levels. They say that there is better news on investment, yet fail to realise that investment is still below 1979 levels and worse than any of our competitors. They say that there is better news on exports, but fail to mention imports and that we are heading for the worst balance of trade deficit in our manufacturing history. They say that there has been some improvement in unemployment, but fail to realise that that is not nearly significant enough to make a real impact on the problems of the regions, inner cities and other areas.

Moreover, the recognition that, whatever the terms of the debate six weeks ago, the past six weeks have been an eternity in the life of the world economy and that arguments that may have been relevant then are not relevant now, was entirely absent. Whatever position is taken, it is beyond dispute that, because of the stock market collapse and what has happened to the world economy in the past few weeks, even the progress that we have made from the depths of recession is now potentially at risk. What was missing from the long speech of the Chancellor of the Duchy of Lancaster was any attempt to explain what the Government response will be to the potential risk of recession arising from the collapse of the markets in the past few weeks.

We know that billions of pounds have been wiped off stocks and shares throughout the world. That has a recessionary impact. We know that if the United States cuts its budget deficit that will have a recessionary impact. We know that the main and immediate effect of a falling dollar is for the United States to shut out our exports from its markets. We know, too, that there is no way in which this country can avoid the cold recessionary winds that will blow around the world.

In the LondonEvening Standarda few days ago, Stanley Kalms, the chairman of Dixons—[Interruption.] Perhaps the London Evening Standard is now to be treated like the bishops and. apparently from this debate, the CBI. They are no longer the Government's friends. Mr. Stanley Kalms, Coloroll. one of Britain's fastest growing companies, and Fisons, a £1.5 billion company, have all been saying that it is nonsense to assume that we can insulate ourselves from pressures from abroad. We look to the Government for a sign that they recognise that and have a strategy to deal with it. Yet we did not hear one word about that when the Chancellor of the Duchy of Lancaster opened the debate. Perhaps we shall when the Minister replies.

Many of the gains which the Government say British industry has made in the past few months have resulted from the increased competitiveness of British industry, resulting from the fall in the exchange rate some time ago. The Bank of England admitted that in its recent Bank of England Quarterly.We have the potential for recession, our exchange rate is appreciating against the dollar and the deutschmark, and the experiences of 1979 to 1981 could be repeated if we are not careful, yet while the world economy moves on, our Government's policy remains static.

Other countries have not been gripped by the same paralysis. Japan has introduced a package of public expenditure, tax cuts and interest rate cuts. West Germany is introducing £7 billion-worth of tax credits and will reduce interest rates tomorrow. Other countries' actions seem to indicate some acknowledgement of the potential for recession. We cut our interest rates by 1 per cent. which only compensated for the election rise in interest rates. Over the past few weeks we have heard nothing except messages from the Prime Minister and the Chancellor of the Exchequer to President Reagan and Secretary Baker.

Over the past few days I have studied some United States' newspapers to see what has happened to those messages from our Prime Minister and the Chancellor. They may have been scoring headlines here, but they have not rated the footnotes where it matters, which is in the Washington press and the rest of American press. Therefore, now the Government are blaming the Americans. As the Daily Mailtold us only a few days ago, now it is all the Americans' fault. Having been unable to blame their traditional enemies—the public sector, trade unions, the Labour party and the workshy unemployed—the Government have been reduced to blaming their friends. That shows their desperation.

The Government say, "Let's wait and see what the United States does and what response it has to these changing circumstances." With respect, the United States' response is obvious—it is looking after the United States. I do not blame it for that; I simply say that we should be doing the same for ourselves. Clearly, the United States has decided to compensate for any reduction in domestic demand by pumping liquidity into the system by lowering interest rates. Indeed, as an official of the Bundesbank put it the other day, "It is all very well expecting us to support the dollar, but every time we go and buy a dollar, the United States goes and prints another."

The anti-recessionary measures which the United States is taking will simply visit the recession on our country, unless we take avoiding action now. It is essential that we do. When the Minister replies, will he tell us why we are not reducing interest rates? The CBI, the Engineering Employers Federation, the trade unions and home owners all want that. Only the Chancellor, the Prime Minister and perhaps one or two people in the City are opposed to it.

As my hon. Friend the Member for Rother Valley pointed out, interest rates are a burden on industry, as is the hike in electricity prices. According to the CBI,£900 million will be added to industry's costs because of these electricity prices. The Labour party even has the chairman of the CBI, David Nickson, on its side, which is the ideological equivalent of the right hon. Member for Old Bexley and Sidcup (Mr. Heath) supporting the Government. Even Mr. Nickson is saying that the Labour party is right and that electricity rises are wrong. Again and again, when our Government have the chance to support industry, their deliberate policy is not to do so.

We have tried for a long time to find out from the Government what their strategy is for industry. We have not yet been told, and we want to be told when the Minister winds up the debate, what their strategy is for dealing with potential recession. All we are told by the Secretary of State for Trade and Industry is that there will be a new set of priorities for the Department. What is virtually impossible to find out is whether that amounts to any more than the activities of a philosophy seminar. Every time that we try to pin down the noble Lord on exactly what he means, we are given a mixture of words that seems to mean nothing. What we can glean, however, is the insight that the Government intend to adopt a hands-off, no-intervention, opting-out policy. What they want for the individual in education and housing, they want for the Government in industry.

The problem that British industry now faces is not the need for the Government to stand back and to abrogate the role of public policy-makers. We need the Government to work in partnership in industry, to help to meet the recessionary pressures and help it to expand. Anyone who looks at the difficulties that British industry will continue to face over the next few years must conclude that, however well the Government say that they have been doing, the key is to expand, and to take the country into the 21st century with a manufacturing industry that can make it pay its way. The Labour party knows that; it is the Government who do not. That is why we shall support the motion tonight.

6.51 pm

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher)

In the nine minutes available to me, let me first thank my hon. Friends the Members for Hertfordshire, South-West (Mr. Page) and for Stamford and Spalding (Mr. Davies). Let me also say to the hon. Member for Rother Valley (Mr. Barron) that I will carefully examine his remarks, and ensure that he receives a reply from either my office or my right hon. Friend the Secretary of State for Energy.

The hon. Member for Gordon (Mr. Bruce) made an interesting observation about the need—which always seems to be expressed by the Liberal party—for consensus. To a certain extent, in a way that he may not like, I agree with the hon. Gentleman. If we had to have a consensus, I should like to consider the consensus that the German Chancellors of the Exchequer delivered for their economy throughout the post-war period. If I have a favourite economist and a favourite Chancellor of the Exchequer, the economist would be Euchen and the Chancellor of the Exchequer would be Erhard. Germany developed a social market economy in four crucial years, on principles established between 1948 and 1953, in which it said that its economy would be based on the pursuit of sound financial policies and on the importance of open markets and competition, and that nothing in the social market economy should damage incentives to work.

Those principles sound very familiar to my other favourite economist, the current British Chancellor of the Exchequer. They should also sound familiar to the Liberal party and the Labour party, but they do not. Their colleagues in Germany, the Social Democratic party, adopted those principles in 1959. If there is a tragedy in British post-war economic history, it is that the British Labour party could never bring itself to adopt the same principles. It has too dogmatic a view to espouse them.

We have heard a good deal about the real economy. The real economy employs 21 million people, distributed across various sectors: 14.5 million are in the service sector and 5 million in the manufacturing sector. I wish that the hon. Member for Dagenham (Mr. Gould) would say to the 2.3 million employees in the financial services sector that they matter too. They make a contribution to our balance of payments. They are not simply the sellers of money or the money makers, who the hon. Gentleman seemed to believe are not true servants of our economy. The hon. Member for Bolsover (Mr. Skinner) bowled him middle stump. He pointed out to his hon. Friend that an appreciating deutschmark and an appreciating yen have not been the enemy of their efforts to continue to improve their market share in the world markets. Other non-price factors are of great importance.

I do not believe that Opposition Members have read carefully the latest CBI survey. If they had, they would have asked themselves what a manager in the real economy looks for when assessing his business prospects—the confidence factors, and the decisions that he should be making for his company. The first thing he looks at is his order book, and the news on order books is excellent. Our manufacturing sector grew by an almost unprecedented 6 per cent. last year, and is projected to grow at a faster rate than the general level of growth in our economy. Opposition Members who represent constituencies with predominantly industrial employers should celebrate that fact, and endorse it. We believe that the trend can be continued.

I should like to answer the questions put by Opposition Members in the terms in which they were put. They have shown tonight that they have a quasi-Stalinist approach to economic history and policy making. I say that because, like Stalinists, they enjoy the rewriting of economic history. Certain events which may have happened did not happen. Certain events can be expunged from the record, and forgotten.

Let us go back three years, when, at long last, the Leader of the Opposition seemed to say that the Opposition had an economic policy. He said: Although our motivation and measures would differ from that of the United States President, our method for recovery—of expansionary budgets, of extending credit and of public expenditure—would differ only in the way in which we would insist that systematically, it applied to our whole country. Six or seven weeks ago, the hon. Member for Sedgefield (Mr. Blair) said: The origins of the crash of 87 …lie in the mismanagement of the major economies of the West. The United States has spent money borrowed from abroad on other people's goods. It is in deficit … It was the structural imbalance which was bound to lead to disaster. That is what the hon. Gentleman said in The Times. In The Guardian, he said: Above all there is the US trade deficit. There is more than a little hypocrisy in the rest of the Western world's attitude to it. In my view, there is more than a little hypocrisy in the Labour party's ambivalent attitude to the deficit and the way in which it affects our economy here.

The hon. Gentleman says that we should reverse our priorities. The House will know well what our priorities are; they have been stated many times by my right hon. Friend the Chancellor of the Exchequer. Our priorities are reducing public expenditure, taxation and inflation. The Labour party, we know, would increase public expenditure, depending on which promises we believe, by between £10 billion and £30 billion. There is no way that that level of public expenditure can be sustained without increasing interest rates; yet that is at the heart of the motion.

The Opposition may say that they would increase taxation to cope with that expenditure. Would they wish to increase taxation on profits? On past form, yes. Would they wish to increase taxation on personal incomes? On past form, certainly. If we had not abolished the tax on jobs, it would now be costing us £4 billion per annum. However, if the Opposition rejected that option, they would have one alternative. They could print money, lots and lots of it. As we know, inflation is the father and mother of unemployment. We will not impose any of these burdens on commerce and industry. We reject that proposition.

The hon. Member for Dagenham has put forward a few non sequiturs. He too should be reminded of what he has said recently. In March of this year he said that the Labour party has been forced to rummage around in a sort of historical junk shop where the only ready-made ideas are a clapped-out, reactionary dogma, which was barely relevant in the 1930s, let alone in the 1980s. In January of this year, he said that the Labour party's policies are long on dogma and jargon and short on common sense and realism. It is for the hon. Gentleman's own reasons in his own words that I ask the House to reject the motion.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 214, Noes 267.

Division No. 91]	[7 pm
AYES
Abbott, Ms Diane	Fyfe, Mrs Maria
Adams, Allen (Paisley N)	Galbraith, Samuel
Allen, Graham	Galloway, George
Alton, David	Garrett, John (Norwich South)
Anderson, Donald	Garrett, Ted (Wallsend)
Archer, Rt Hon Peter	George, Bruce
Armstrong, Ms Hilary	Godman, Dr Norman A.
Ashdown, Paddy	Golding, Mrs Llin
Ashley, Rt Hon Jack	Gordon, Ms Mildred
Ashton, Joe	Gould, Bryan
Banks, Tony (Newham NW)	Griffiths, Nigel (Edinburgh S)
Barnes, Harry (Derbyshire NE)	Griffiths, Win (Bridgend)
Barron, Kevin	Grocott, Bruce
Battle, John	Hattersley, Rt Hon Roy
Beckett, Margaret	Haynes, Frank
Beith, A. J.	Healey, Rt Hon Denis
Bell, Stuart	Heffer, Eric S.
Benn, Rt Hon Tony	Hinchliffe, David
Bermingham, Gerald	Hogg, N. (C'nauld & Kilsyth)
Bidwell, Sydney	Holland, Stuart
Blair, Tony	Home Robertson, John
Boateng, Paul	Hood, James
Boyes, Roland	Howarth, George (Knowsley N)
Bradley, Keith	Howells, Geraint
Brown, Gordon (D'mline E)	Hoyle, Doug
Brown, Nicholas (Newcastle E)	Hughes, John (Coventry NE)
Brown, Ron (Edinburgh Leith)	Hughes, Roy (Newport E)
Bruce, Malcolm (Gordon)	Hughes, Sean (Knowsley S)
Buchan, Norman	Hughes, Simon (Southwark)
Buckley, George	Illsley, Eric
Caborn, Richard	Ingram, Adam
Callaghan, Jim	Janner, Greville
Campbell, Ron (Blyth Valley)	John, Brynmor
Campbell-Savours, D. N.	Jones, Barry (Alyn & Deeside)
Canavan, Dennis	Jones, Martyn (Clwyd S W)
Carlile, Alex (Mont'g)	Kilfedder, James
Clark, Dr David (S Shields)	Lamond, James
Clarke, Tom (Monklands W)	Leadbitter, Ted
Clay, Bob	Leighton, Ron
Clelland, David	Lestor, Miss Joan (Eccles)
Cohen, Harry	Lewis, Terry
Cook, Robin (Livingston)	Litherland, Robert
Corbett, Robin	Livingstone, Ken
Corbyn, Jeremy	Livsey, Richard
Cousins, Jim	Lloyd, Tony (Stretford)
Crowther, Stan	Lofthouse, Geoffrey
Cryer, Bob	McAllion, John
Cummings, J.	McAvoy, Tom
Cunliffe, Lawrence	McCartney, Ian
Cunningham, Dr John	McCrea, Rev William
Darling, Alastair	Macdonald, Calum
Davies, Rt Hon Denzil (Llanelli)	McFall, John
Davies, Ron (Caerphilly)	McKay, Allen (Penistone)
Davis, Terry (B'ham Hodge H'l)	McKelvey, William
Dewar, Donald	McLeish, Henry
Dixon, Don	McNamara, Kevin
Dobson, Frank	McWilliam, John
Doran, Frank	Madden, Max
Douglas, Dick	Mahon, Mrs Alice
Duffy, A. E. P,	Marek, Dr John
Dunnachie, James	Marshall, David (Shettleston)
Dunwoody, Hon Mrs Gwyneth	Marshall, Jim (Leicester S)
Eadie, Alexander	Martin, Michael (Springburn)
Evans, John (St Helens N)	Martlew, Eric
Ewing, Mrs Margaret (Moray)	Maxton, John
Fatchett, Derek	Meacher, Michael
Fearn, Ronald	Meale, Alan
Fields, Terry (L'pool B G'n)	Michael, Alun
Fisher, Mark	Michie, Bill (Sheffield Heeley)
Flannery, Martin	Michie, Mrs Ray (Arg'l & Bute)
Flynn, Paul	Millan, Rt Hon Bruce
Foster, Derek	Mitchell, Austin (G't Grimsby)
Fraser, John	Moonie, Dr Lewis

Morgan, Rhodri	Skinner, Dennis
Morley, Elliott	Smith, Andrew (Oxford E)
Morris, Rt Hon A (W'shawe)	Smith, C. (Isl'ton & F'bury)
Morris, Rt Hon J (Aberavon)	Snape, Peter
Mowlam, Mrs Marjorie	Soley, Clive
Mullin, Chris	Spearing, Nigel
Murphy, Paul	Steel, Rt Hon David
Nellist, Dave	Stott, Roger
Oakes, Rt Hon Gordon	Strang, Gavin
O'Brien, William	Straw, Jack
O'Neill, Martin	Taylor, Mrs Ann (Dewsbury)
Orme, Rt Hon Stanley	Taylor, Matthew (Truro)
Paisley, Rev Ian	Thomas, Dafydd Elis
Pendry, Tom	Thompson, Jack (Wansbeck)
Pike, Peter	Turner, Dennis
Powell, Ray (Ogmore)	Vaz, Keith
Prescott, John	Wall, Pat
Primarolo, Ms Dawn	Wallace, James
Quin, Ms Joyce	Walley, Ms Joan
Radice, Giles	Wardell, Gareth (Gower)
Randall, Stuart	Wareing, Robert N.
Rees, Rt Hon Merlyn	Welsh, Andrew (Angus E)
Reid, John	Welsh, Michael (Doncaster N)
Richardson, Ms Jo	Wigley, Dafydd
Roberts, Allan (Bootle)	Williams, Rt Hon A. J.
Robertson, George	Williams, Alan W. (Carm'then)
Robinson, Geoffrey	Wilson, Brian
Rogers, Allan	Winnick, David
Rooker, Jeff	Wise, Mrs Audrey
Ross, Ernie (Dundee W)	Worthington, Anthony
Ruddock, Ms Joan	Wray, James
Salmond, Alex	Young, David (Bolton SE)
Sedgemore, Brian
Sheerman, Barry	Tellers for the Ayes:
Sheldon, Rt Hon Robert	Mr. Frank Cook and Mr. Ken Eastham.
Short, Clare

NOES
Adley, Robert	Butcher, John
Alexander, Richard	Butler, Chris
Alison, Rt Hon Michael	Butterfill, John
Amess, David	Carlisle, Kenneth (Lincoln)
Amos, Alan	Carrington, Matthew
Arbuthnot, James	Carttiss, Michael
Arnold, Jacques (Gravesham)	Cash, William
Arnold, Tom (Hazel Grove)	Chapman, Sydney
Aspinwall, Jack	Churchill, Mr
Baker, Nicholas (Dorset N)	Clark, Dr Michael (Rochford)
Baldry, Tony	Clark, Sir W. (Croydon S)
Banks, Robert (Harrogate)	Clarke, Rt Hon K. (Rushcliffe)
Batiste, Spencer	Conway, Derek
Beaumont-Dark, Anthony	Coombs, Anthony (Wyre F'rest)
Bellingham, Henry	Coombs, Simon (Swindon)
Bendall, Vivian	Cope, John
Bennett, Nicholas (Pembroke)	Cormack, Patrick
Benyon, W.	Couchman, James
Bevan, David Gilroy	Cran, James
Blaker, Rt Hon Sir Peter	Critchley, Julian
Body, Sir Richard	Currie, Mrs Edwina
Bonsor, Sir Nicholas	Curry, David
Boscawen, Hon Robert	Davies, Q. (Stamf'd & Spald'g)
Boswell, Tim	Davis, David (Boothferry)
Bottomley, Peter	Day, Stephen
Bottomley, Mrs Virginia	Devlin, Tim
Bowden, A (Brighton K'pto'n)	Dickens, Geoffrey
Bowden, Gerald (Dulwich)	Dicks, Terry
Bowis, John	Dorrell, Stephen
Boyson, Rt Hon Dr Sir Rhodes	Douglas-Hamilton, Lord James
Braine, Rt Hon Sir Bernard	Dover, Den
Brazier, Julian	Dunn, Bob
Bright, Graham	Durant, Tony
Brittan, Rt Hon Leon	Eggar, Tim
Brown, Michael (Brigg &Cl't's)	Emery, Sir Peter
Browne, John (Winchester)	Evennett, David
Bruce, Ian (Dorset South)	Fairbairn, Nicholas
Buchanan-Smith, Rt Hon Alick	Fallon, Michael
Buck, Sir Antony	Farr, Sir John
Budgen, Nicholas	Favell, Tony
Burns, Simon	Field, Barry (Isle of Wight)
Burt, Alistair	Fookes, Miss Janet

Forman, Nigel	Macfarlane, Neil
Forsyth, Michael (Stirling)	MacGregor, John
Forth, Eric	MacKay, Andrew (E Berkshire)
Fowler, Rt Hon Norman	Maclean, David
Fox, Sir Marcus	McLoughlin, Patrick
Freeman, Roger	McNair-Wilson, M. (Newbury)
French, Douglas	Madel, David
Fry, Peter	Major, Rt Hon John
Garel-Jones, Tristan	Malins, Humfrey
Gill, Christopher	Mans, Keith
Gilmour, Rt Hon Sir Ian	Maples, John
Glyn, Dr Alan	Marland, Paul
Goodlad, Alastair	Marshall, John (Hendon S)
Gorman, Mrs Teresa	Marshall, Michael (Arundel)
Gow, Ian	Martin, David (Portsmouth S)
Gower, Sir Raymond	Mates, Michael
Grant, Sir Anthony (CambsSW)	Maude, Hon Francis
Greenway, John (Rydale)	Mawhinney, Dr Brian
Gregory, Conal	Maxwell-Hyslop, Robin
Griffiths, Sir Eldon (Bury St E')	Mayhew, Rt Hon Sir Patrick
Griffiths, Peter (Portsmouth N)	Meyer, Sir Anthony
Grylls, Michael	Miller, Hal
Gummer, Rt Hon John Selwyn	Mills, Iain
Hamilton, Hon A. (Epsom)	Miscampbell, Norman
Hamilton, Neil (Tatton)	Mitchell, Andrew (Gedling)
Hampson, Dr Keith	Mitchell, David (Hants NW)
Hanley, Jeremy	Moate, Roger
Hannam, John	Monro, Sir Hector
Hargreaves, A. (B'ham H'll Gr')	Montgomery, Sir Fergus
Hargreaves, Ken (Hyndburn)	Morrison, Hon C. (Devizes)
Harris, David	Morrison, Hon P (Chester)
Haselhurst, Alan	Moss, Malcolm
Hawkins, Christopher	Moynihan, Hon C.
Hayes, Jerry	Mudd, David
Hayhoe, Rt Hon Sir Barney	Neale, Gerrard
Hayward, Robert	Needham, Richard
Heathcoat-Amory, David	Neubert, Michael
Heddle, John	Newton, Tony
Hicks, Mrs Maureen (Wolv' NE)	Nicholls, Patrick
Hicks, Robert (Cornwall SE)	Nicholson, David (Taunton)
Higgins, Rt Hon Terence L.	Nicholson, Miss E. (Devon W)
Hind, Kenneth	Oppenheim, Phillip
Hogg, Hon Douglas (Gr'th'm)	Page, Richard
Holt, Richard	Paice, James
Hordern, Sir Peter	Pawsey, James
Howarth, G. (Cannock & B'wd)	Peacock, Mrs Elizabeth
Howell, Rt Hon David (G'dford)	Porter, Barry (Wirral S)
Howell, Ralph (North Norfolk)	Portillo, Michael
Hughes, Robert G. (Harrow W)	Raffan, Keith
Hunt, David (Wirral W)	Rhodes James, Robert
Hunt, John (Ravensbourne)	Rhys Williams, Sir Brandon
Hurd, Rt Hon Douglas	Rifkind, Rt Hon Malcolm
Irvine, Michael	Rossi, Sir Hugh
Irving, Charles	Rowe, Andrew
Jack, Michael	Ryder, Richard
Janman, Timothy	Sainsbury, Hon Tim
Jessel, Toby	Shaw, Sir Giles (Pudsey)
Johnson Smith, Sir Geoffrey	Shaw, Sir Michael (Scarb')
Jones, Gwilym (Cardiff N)	Shephard, Mrs G. (Norfolk SW)
Jones, Robert B (Herts W)	Shepherd, Colin (Hereford)
Jopling, Rt Hon Michael	Skeet, Sir Trevor
Kellett-Bowman, Mrs Elaine	Smith, Tim (Beaconsfield/
Key, Robert	Speller, Tony
King, Roger (B'ham N'thfield)	Squire, Robin
King, Rt Hon Tom (Bridgwater)	Stanbrook, Ivor
Kirkhope, Timothy	Stanley, Rt Hon John
Knapman, Roger	Stevens, Lewis
Knox, David	Stewart, Andrew (Sherwood)
Lamont, Rt Hon Norman	Stradling Thomas, Sir John
Lang, Ian	Sumberg, David
Latham, Michael	Summerson, Hugo
Lawrence, Ivan	Tapsell, Sir Peter
Lawson, Rt Hon Nigel	Taylor, lan (Esher)
Lee, John (Pendle)	Taylor, John M (Solihull)
Leigh, Edward (Gainsbor'gh)	Taylor, Teddy (S'end E)
Lennox-Boyd, Hon Mark	Tebbit, Rt Hon Norman
Lilley, Peter	Temple-Morris, Peter
Lloyd, Peter (Fareham)	Thompson, D. (Calder Valley)
Luce, Rt Hon Richard	Thompson, Patrick (Norwich Nj
Lyell, Sir Nicholas	Thorne, Neil

Thornton, Malcolm	Wheeler, John
Thurnham, Peter	Whitney, Ray
Townend, John (Bridlington)	Widdecombe, Miss Ann
Trippier, David	Wiggin, Jerry
Trotter, Neville	Winterton, Mrs Ann
Twinn, Dr Ian	Winterton, Nicholas
Viggers, Peter	Wolfson, Mark
Waddington, Rt Hon David	Wood, Timothy
Wakeham, Rt Hon John	Young, Sir George (Acton)
Waldegrave, Hon William
Waller, Gary	Tellers for the Noes:
Walters, Dennis	Mr. David Lightbown and Mr. Alan Howarth.
Wardle, C. (Bexhill)
Warren, Kenneth

Question accordingly negatived.

Question, That the proposed words be there added,put forthwith pursuant to Standing Order No. 30 (Questions on amendments), and agreed to.

MR. DEPUTY SPEAKERforthwith declared the main Question, as amended, to be agreed to.

Resolved, That this House commends the success of the Government's economic strategy which has so transformed the climate for enterprise; applauds its policy of lifting burdens on business; notes that confidence among businessmen is high and sustained; and believes that British producers and exporters are as a result in a strong position to compete effectively in international markets.